00:25:57 · Ryan Petersen
[00:25:57] S1: Yeah, like maybe thirty or fifty years or something like that. Hard to... It's really hard to say. I think the Chinese... The Qing dynasty was really failing to modernize, but it was possible to happen. I think in some of these cases, it's a question of leadership and how do you get a strong enough leader to... That's probably the more interesting counterfactual is what if there had been a great emperor born who could have reformed and modernized the way the Japanese did. The Japanese had similar problems. They tried to keep the foreigners out successfully for a long time. The Americans showed up with gunboats, forced to open their markets. They had a huge wake up call and said, we need to modernize. And they sent some of their best and brightest people to the West to learn about industrialization, to learn about the technologies, the structures, the military structures, the economic structures. And it's called the Meiji Reformation, Meiji something, basically the Meiji Dynasty. They put in these reforms that led to Japan becoming a superpower. Ultimately, it wasn't strong enough to do what their ambition was, which was to take over the whole Pacific. The Americans didn't let that happen, but they became a superpower in almost no time. And so, yeah, could that have happened earlier? I mean, I think that's a little bit of what's happened since Deng Xiaoping and more modern China's said, hey. We need to learn from the West and adopt these things and go. But it took, right, there's a hundred years or more in in there, hundred and fifty years from the Opium War to... Till Deng Xiaoping. It could've... Yeah. It certainly could've happened earlier, but probably more about leadership than it was if opium hadn't been discovered. I don't know that opium itself held them back. I mean, the industrial revolution was very real. And if you don't adopt the industrial... The technologies of the industrial revolution, you're probably gonna fail whether or not you get addicted to to opium.
00:27:44 · Ty Morse
[00:27:44] S0: Before we started, you mentioned the Forbes family, not the Forbes family with a magazine, but a different Forbes family. Go into that.
00:27:50 · Ryan Petersen
[00:27:50] S1: Oh, yeah. Well, we were talking about opium. I should have hit it when we were there. So most of the opium... There were... The... In the beginning, the opium was all traded by the British East India Company, the monopoly that we were talking about. Over time, though, they had competition and the early competition was actually from a couple of families' dynasties. One was called the Sassoons, a Jewish family from Baghdad actually, who got pushed out of Baghdad and settled in Mumbai. The Sassoon docs are still there in Mumbai. You can visit those. But the other big family that got into this was the Forbes family. And it is not, as you said, it's not related to the Forbes magazine, it's unrelated. But the Forbes family was Americans. So the Americans did the Forbes family and the Americans did about 20% of all the opium trading into China. They were based out of Boston. You hear this term, Boston Brahmins, a very wealthy Boston family. There's probably more than one, but the Forbes family was the big one. There's actually a museum I haven't been to it yet, it's on my bucket list next time I'm in Boston Their old family has... Their house has been turned into a museum of the China trade, and they were big collectors of Chinese art, antiquities, paintings, and and the like, and that's all on display there. But they traded about 20% of the opium. They they still are a very prominent family in The United States. They own this private island, which you can see on Google Earth. If you go to Google Earth, look at Martha's Vineyard, and then just to the west of Martha's Vineyard, between Martha's Vineyard and the mainland, there's this long skinny island. It's, like, probably a third the size of Martha's Vineyard. I mean, it's a very big private island, but maybe the biggest private island in America. That's just for the Forbes family. And the patriarch of the Forbes family is John Kerry. He's... The the family is still very powerful, and they... People think John Kerry made his money by marrying the ketchup, the Heinz ketchup fortune, but actually no, he had his own fortune long before that, the Forbes family. And I don't think China took lightly to the fact that Obama made him the secretary of state to negotiate with them because they have a long memory. Mhmm.
00:30:02 · Ryan Petersen, Ty Morse
I've never heard this written about, but I don't think, there was that famous incident where the Chinese did not, bring out the red carpet and Obama had trouble getting off of air force one because they didn't bring out, like, stairs. And I... My my personal conspiracy theory is that they remember the Forbes family trading all this opium into their country because we would not take kindly either if the cartels that were trading fentanyl into The United States also had a navy and showed up and took over our cities and, you know, started blasting the San Francisco Bay, like, we would not be very happy. We'd probably have a long memory for that as well. [00:30:40] S0: I would love to talk about the Jewish trading networks. And before we start recording, you were talking about how basically being able to trade on paper notes on trust versus actually hard currency and having to ship silver all over the place was a huge benefit. So tell me about that.
00:30:56 · Ryan Petersen
[00:30:56] S1: Well... And you know, global trade is... It's a multiplayer game, and it's this complex coordination problem where people have different incentives, information, sitting in different parts of the world. How do you communicate? And and, of course, before the invention of fiat and now digital payments, wire transfers, you know, a simple form of digital payment, you had you had to move physical goods. And that was... Physical gold, I should say, bullion. That was nontrivial. You'd you'd end up losing things to storms, you know, disasters, pirates, you name it. It's... Your own employees can steal from you. So being able to do trade without having to physically... The goods go one way, the gold going the other way, not having to move the gold the other way is a very big deal if you can avoid it. One important innovation, the most important innovation in this is called the bill of lading. It's a piece of paper that allowed to be served as title and you need to have security that you trust that the person authoring this bill of lading has in fact received payment for the goods. So I can accept the bill of lading on their behalf. That's very difficult to do, like to do this kind of long distance trust. And so ethnic minorities like the Jews had a big advantage in that they had these, a high degree of trust within their networks. Whether it's family ties or just community that you would trust each other. And so then if you got a signed document with a seal that you recognize as authentic and not able to be copied, then your counterparty has... Your trusted member of your network has received payment in Europe for the goods, then you don't need to ship the gold. You can accept the piece of paper that he has sent you to authenticate that and say, yes. Okay. I've trusted this. I mean, now we're trying to innovate on this with things like blockchain and stablecoin payments and other things, but it's largely an evolution of this old school system. And I would actually argue that I've seen it argued, it's not my argument, that the Jewish law was the foundation of capitalism and even further going further back than that, in Roman law, you could not trade a debt. So if I owe you money, I owe you money. You cannot sell what I owe you to someone else, and now I owe him money. I only owe you money. It's like an honor based system. My debt is to you.
00:33:25 · Ryan Petersen, Ty Morse
You can't sell that debt to someone else. And under Jewish law, Talmudic law, you could you could. You could sell the debt. And that's the foundation of capitalism in many ways. It's it's like now you could have equities and bonds and, you know, but that's literally a bond. You can sell the bond to somebody else and say, no. Now someone else can own it. And and similarly with trade, like this piece of paper, it can be sold. It can represent this. And the the Jews largely innovated that. At least I've seen that, that story told. [00:33:58] S0: There was no other culture throughout history that did this sort of bond trading?