00:00:00.000Hello and welcome to Proconomics. Now in this episode I am absolutely delighted to be joined
00:00:18.880by James Cock, a very successful trader and money manager who has now produced something
00:00:25.500that we all need which is a coherent philosophy. James, thank you so much for coming on.
00:00:30.000dan thanks so much uh for having me on just by the way my name is james cox
00:00:34.820with an s oh yes sorry yes uh yes i get it the other way around everyone calls me dan tubs but
00:00:41.120i am singular um but yes yes you are legion sir um so um tell us a little bit about yourself in
00:00:49.560your background and how is it that you came to um distill down this into a into a philosophy
00:00:54.420sure so i'm british um i however i grew up in the middle east as a boy and as an adult i've
00:01:02.960lived most of my life in in the far east um so i've sort of watched british uh history unfold
00:01:10.520from far away um and it was during the 2008 crisis that i realized that there was something
00:01:17.600wrong with money uh i was a history teacher at the time and sort of worked out that you know
00:01:23.740this looks pretty inflationary, what they plan to do to help bail out the banks.
00:01:28.860So I took an interest in the history of money, Austrian economics, which I believe you're
00:01:33.140interested in. Perhaps we can discuss that later. And I took up trading and went down the sort of
00:01:41.960gold bug rabbit hole, followed by the Bitcoin rabbit hole, and ended up going full time with
00:01:48.140the trading, launched a fund in Singapore. But then COVID came. And, you know, that era was
00:01:56.480pretty crazy. I ended up renting a farmhouse in rural Portugal, and just sort of sitting there
00:02:02.560thinking, what on earth is going on? I believe I've watched, I mean, I've watched quite a lot
00:02:08.760of your shows. And I know that you were also sort of disturbed by government overreach during
00:02:14.520COVID um but one thing that really sort of perturbed me and I'd already experienced it
00:02:22.320when trying to explain to people how the monetary system works that they're just sort of not
00:02:27.240interested and I always thought that was a little bit odd given that you know most of us have to0.94
00:02:33.340work for money um but during COVID I remember in particular you had that BLM episode during COVID
00:02:40.660And you had over a thousand US scientists, many respectable guys from the CDC, stating that if a protest was in a cause of social justice, it couldn't spread COVID.
00:02:55.240And I just remember thinking, OK, you know, whatever this is, I'm I'm kind of done and started sort of trying to go through history, look through philosophy to explain why is it that there's so many people who are willing to not only abandon truth, but, you know, willingly blind themselves to to what's going on.
00:03:21.540um and amongst all of this you still have the the financial problems and other such problems
00:03:27.800cranking away so that inspired me to look into philosophies for some answers and what struck me
00:03:35.440as a historian is that you had philosophies since the 17th century since Descartes um about every
00:03:43.14017 years which I would suggest is a healthy and vibrant culture in which people are challenging
00:03:50.860each other's ideas and that went on you know almost like clockwork for centuries until
00:03:57.080ballpark 1970 where philosophy itself appeared to have stopped and you know being a historian
00:04:05.760I love my timelines that might come out later in this interview but I just thought how can this be
00:04:13.960especially given access to technology these days, it's never been easier to read new material and
00:04:21.840share ideas. So I started sort of getting more interested in philosophy and ended up writing my
00:04:28.700own. And, you know, it should cover all of the different domains, but I'm not aware that you're
00:04:35.980more interested in the sort of economics end of um of the discussion just fyi i've been a big fan
00:04:44.240of the lotus eaters cole benjamin and also our own show for a good couple of years now so well
00:04:51.180we know you have excellent taste then that's encouraging no very good um i mean i suppose
00:04:56.180one pushback that i could make is you know maybe um philosophy is the domain of the sort of you
00:05:03.020know 130 iq plus anglos um and and the phenomena in um the phenomena during sort of covid and the
00:05:11.060blm stuff is that for a lot of people it's it's a sort of biological base tier that you know the
00:05:17.640standing up against a crowd is something that generally only high testosterone men do
00:05:22.160a lot of human beings they simply decide um what is everybody else doing and it's all about not
00:05:30.000getting outside of the herd yeah i mean you've really hit the nail on the head i i would i would
00:05:37.920suggest you know it's not just for anglos if you look at the ancients most of the philosophies
00:05:43.960actually came from the east principally india and china we were somewhat of a backwater for the first
00:05:50.540cut two three thousand years um but to your point um yes it does require quite a lot of guts to
00:05:59.420stand up and say something different and one of the things that i've really dwelt on you know
00:06:06.200with this pursuit of truth that ever since the trial of socrates in athens uh when you went up
00:06:13.420against the sophists who are their calling card is that send us your son it's expensive but we'll
00:06:19.560will educate them in the ways of winning debates and he can go up the greasy pole but you've
00:06:24.760essentially got only two pursuits in any given debate one is the pursuit of truth and the other
00:06:30.180one's the pursuit of power um and i would add a little bit of nuance to what you were saying
00:06:37.480in agreement and support is that most people aren't psychologically predisposed to chase
00:06:44.500power for themselves, but most people are predisposed to align with power so they don't
00:06:50.000get hurt. And so during the COVID years, it was crystal clear to me that most people weren't
00:06:58.200considering what's true, but rather what does everyone else think? And then I'll form my
00:07:03.680opinion from there so that I fit in. And I've got a theory as to why perhaps you escaped
00:07:11.460that um if probably personally that would that be the high testosterone levels well it's the
00:07:18.220high testosterone and manliness but also intellectually you've had a career in private
00:07:24.900equity and finance and so for decades you've had it drummed into you the importance of the truth
00:07:33.160and if you had to choose between looking cool in a meeting and making or making a or losing a
00:07:40.500million dollars it's definitely the latter and if that involves putting up your hand and saying
00:07:45.580actually chaps I think I'm wrong on this one it appears to be x then you're just going to
00:07:51.920follow reality but you know a lot of professions don't have that engagement with reality anymore0.99
00:08:01.680you know if you're a farmer or a sailor or something that you're hard up against the
00:08:06.420coalface of nature you cannot stick your guns and you know wonder what everyone else thinks you're
00:08:14.300just going to have to run with it gets very expensive if you if you if you do just double
00:08:19.320down all the time and at least with finance is and i think you're right to talk about things like
00:08:24.200sailors and and farmers because at least with with finance you know the worst that happens is you end
00:08:28.480up losing all your money and all your investors money but you know if you're a sailor and you
00:08:32.220stick to your guns and you're wrong yeah i mean that's that's a little bit more existential
00:08:35.260that makes perfect sense to me so your book um and i've i've seen um i've seen good chunks of it
00:08:41.720and and and had a read um and that obviously led to to wanting to talk to you um is it out yet i
00:08:47.600believe it's called the the fourth axiom um now as i i sort of loosely understand it an axiom is a
00:08:54.220sort of fundamental principle that you just accept and then you move on from so in mathematics for
00:08:58.700example if if this thing and that thing are equal to a third thing then the first two things must
00:09:04.420also be equal to each other i mean i think that's my understanding of an axiom so if your book is
00:09:08.380called the fourth axiom what what are the first three before we get on to the fourth sure so
00:09:14.260there are different types of axioms most of them are mathematical um mine is with reference to
00:09:21.480philosophy um so the first three would be aristotle's law of non-contradiction uh which
00:09:29.000is a cannot be not a at the same time in the same way uh then descartes 1637 which is i think
00:09:37.060therefore i am which is possibly the most famous cogito ergo sum and then in my humble opinion the
00:09:43.980third would come in the 1670s with a dutch jew called spinoza um and his his whole work is
00:09:52.040axiomatic but underpinning it is whatever exists exists in itself or something else
00:09:58.560which probably sounds a little bit mysterious um axioms um you know there's no hard and fast
00:10:07.260law about what an axiom is i've got sort of five different definitions that uh might be acceptable
00:10:13.920um but my axiom if it is an axiom and maybe it's not is truth is beauty and it's pursuit
00:10:21.880an act of faith now that might sound a little bit mysterious the first time that you hear it
00:10:28.020um and it comes in in two parts truth is beauty pursuit is faith um anything that you want to
00:10:37.160to do will require any pursuits will require faith that there is a way to do it and you have
00:10:43.800to do that thing that could be finance or it could be maths or getting fit or playing the piano
00:10:49.680and the other aspect is you're going to have to believe that truth is beauty that there is some
00:10:55.900point in pursuing truth that there is a way to speak french or learn the piano or what have you
00:11:02.980that will be worthwhile so like any axiom there is some sort of metaphysical conceit
00:11:11.860now that sort of probably goes off into you know more theoretical realms that won't be interesting
00:11:19.960to listeners who i believe are more interested in the economics angle but those would be the
00:11:25.520axioms so far as i can see right obviously i i don't dare put myself in the same dizzy
00:11:33.020house as dacott or aristotle well i mean why not i mean they started somewhere they started with
00:11:39.000the first book so why not um one of the things i did like about it is um you you you write this
00:11:46.000philosophy the way that connects for me because you you write it as a you know sort of modern man
00:11:51.720and a finance man and so on so it's it's connectable um and in particular you've got this
00:11:56.160equation in there which is if i'm remembering it correctly i mean um known reach plus future reach
00:12:02.560um divided by idea cost uh plus belief cost i think it was i mean you're probably a little
00:12:09.400bit more fluid on it than i am on that um but but let's pick up on that what what makes one
00:12:14.600explanation better than another yeah so by the way you've got the equation exactly right
00:12:20.860oh good right so i started off um thinking through in terms of when you're doing history
00:12:29.020uh you're you're doing something that's uh called abductive logic so deductive logic would be maths
00:12:36.920two plus two equals four and then you've got inductive logic which would be science the
00:12:42.880litmus paper was blue i can't remember why the litmus paper was blue um but abductive logic is
00:12:48.900somewhere in the middle in that you don't have all the evidence and you can't run tests so what
00:12:56.360you're going to have to do is take the scraps of evidence that you you do have and try to create
00:13:03.880the hypothesis that's going to fit the best you can so in in this manner we're doing something
00:13:11.700that's far more like being a detective or a historian or an archaeologist and what you're
00:13:19.720trying to do is compare different theories or hypothesis or explanations so the next question
00:13:27.340if you're going down that route is so how would we determine what idea is better than another
00:13:33.160how is hypothesis B superior to A and I came up with the the truth equation which is exactly as
00:13:42.900you describe it and that's idea value equals known reach plus future reach as in how much
00:13:50.400explanatory power does it have divided by idea cost as in how much do you have to grasp in order
00:13:58.800to grasp the idea and belief cost how much of what you already believe would you have to abandon
00:14:04.780so essentially new assumptions so in short idea value would be explanatory power divided by
00:14:13.040new assumptions now in the book i do this through a story about astronomy how for one and a half
00:14:24.580thousand years we believed in the the way the planets moved could be explained by a book called
00:14:31.140the algamest written by a greek in ancient egypt called ptolemy and even when copernicus
00:14:39.860pointed out that actually i think the the sun is the center of the universe and not the earth
00:14:46.620nobody believed him in fact the vatican wasn't happy at all but then you've got kepler then
00:14:52.040you've got Galileo with his telescope and slowly in the 17th century people started to believe that
00:14:58.020the earth was not the center of the universe but the sun was and it wasn't until Sir Isaac Newton
00:15:05.180that the matter was kind of settled. Nevertheless I'm pretty sure that your readers are and listeners
00:15:11.840aren't so interested in astronomy but more interested in economics so what I was thinking
00:15:17.980might be quite fun is if we apply the truth equation to something that you're more familiar
00:15:24.520with which is economic theory um i believe you're quite a fan of the austrian school yeah so
00:15:31.540what i was thinking might be fun i'm a fan of the austrian school as well but what i was thinking
00:15:36.840might be quite fun is if i go into bat for marx and marxism and you go into bat for the austrians
00:15:45.340and have a sort of truth equation penalty shootout.
00:15:50.620The listeners can judge for themselves
00:15:52.820who they think has got the better idea.
00:18:01.020And secondly, within that process, you've got class struggles.
00:18:04.940So there's always the oppressor and the oppressed.
00:18:07.720So in feudal times, that was the baron. And in Marx's time, that baron and peasants, Marx's time would be the industrialist and the factory worker.
00:18:19.120And then you've got the economics angle, which is labor theory of value.
00:18:24.280The reason this glass case has value is because the labor that went into it.
00:18:29.400and then secondly um value surplus which is extracted from the worker in favor of the
00:18:40.600oppressor so you've got two parts uh you've got history and you've got economics each of which
00:18:47.740have you know some machinery in there so that there's sort of four key ideas that you would
00:18:52.200need to comprehend to really understand Marxism.
00:19:14.240I mean, normally it's set up, the way that I interact with it,
00:19:18.180it's set up in sort of opposition to the status quo.
00:19:22.200So this is going to sound awfully lefty now, but a deconstruction of why the current system isn't working.
00:19:28.840But I suppose you can take it back to a whole series of fundamental principles as well.
00:19:33.000And you can build it up from, well, you know, you can start off with a sort of seashells example of two people trading fish on a desert island.
00:19:42.380And you can logically build it up at every individual step.
00:19:46.320and and in response to something like um you know marxism of where where it's only the sort
00:19:53.840of labor that matters it's like well how you how useful is that labor being applied i mean if you're
00:19:58.520farming in the year seven it's a lot different to um farming in in 1977 when somebody's invented
00:20:05.600tractors because there has been innovation and there's been capital investment and so on and
00:20:11.180actually that capital investment raises the level of which your labour can be applied and that has
00:20:17.980to be compensated as well and thus it is appropriate that there is a split between capital and labour
00:20:24.340and you don't just simply assume that all capital is a sunk cost and then not going to develop from
00:20:29.980that point and therefore you only need to factor in labour. Sure, so in terms of idea cost you've
00:20:36.120got marxism with uh the two components of history which is uh historical materialism and also class
00:20:44.580oppression and also theory of value which comes from labor and the extraction of value from labor
00:20:52.980versus all you have to really remember for uh austrian economics is subjective theory of value
00:21:01.700really that something is worth what someone is willing to pay for it that's what i was trying
00:21:09.320to get at but yeah yeah and into that goes all sorts of uh different um calculations and
00:21:18.420um one of them is the the time value of capital accumulation you talked about tractors um but
00:21:26.260also the decentralization of information and knowledge and that's something that Hayek
00:21:33.280wrote about the use of knowledge in society in 1945 that you know the farmer knows best what
00:21:41.900his soil is going to produce next year than a central planner so in terms of idea cost
00:21:49.480Austrian economics is actually pretty simple compared to Marxism.