Is Life a Ponzi Scheme? Mark Johnston

Who knows what form the end of humanity will take? Will it come by extraterrestrial invasion, or by the erosion of the ozone layer, or by a large asteroid impacting the earth, or by mass starvation during a long nuclear winter, or by a bacterium running amok in the post-antibiotic age, or by a nomadic black hole sucking up everything in its path as it wanders toward us, or by a gamma ray burst from any one of the host of supernovas destined to occur within three thousand light years of the earth, or by the eruption of the massive volcano that now sits, waiting, under Yellowstone National Park? Or will it be as the apocalyptic literature of Judaism and Christianity describes it, with the last days consisting of the terrifying separation of the sheep from the goats? Even if humanity somehow avoids all this, and even if we escape the solar system before the inevitable heat death of the sun, eventually the universe will come to consist of a subatomic soup so thin that nothing recognizably human will be able to exist.

So we are doomed. There is no way around it. The hope is that doom is far enough away for humanity to flourish individually and collectively. The lights will eventually go out; the issue is just how brightly they will burn in the interim.

Here ignorance is not exactly bliss, but it is helpful. Unless you are professionally involved in existential risk assessment or in one of those fields, such as bio-warfare, where the resultant blowback could indeed wipe us out, it is wise to forget about our inevitable collective obliteration precisely because of its capacity to uselessly demoralize us. When it comes to the end of humanity, Spinoza’s advice to individuals concerning their own deaths seems even more pertinent: “A free man thinks of nothing less than of death, and his wisdom is a meditation not on death, but on life.”

But what if, as a brute psychological matter, we just cannot put the end of humanity out of our minds? There are two quite different cases in which the thought of our collective end might worry us: the case where we are demoralized because we really are, or take ourselves to be, in the last days, and the case where we are demoralized merely by the fact that there will be a last day.

While the first case is amply illustrated by a slew of end-time films from Deep Impact(1998) and Armageddon (1998) to Children of Men (2006) and Melancholia (2011), we have to look all the way back to Woody Allen’s Annie Hall (1977) for illumination of the second. There Allen’s character, the nebbish Alvy Singer, recalls a scene from his childhood.

Dr. Flicker: Why are you depressed, Alvy?

Alvy’s Mom: Tell Dr. Flicker. [Young Alvy sits, his head down; his mother answers for him.]

Alvy’s Mom: It’s something he read.

Dr. Flicker: Something he read, huh?

Alvy at nine: [His head still down.] The universe is expanding.

Dr. Flicker: The universe is expanding?

Alvy at nine: Well, the universe is everything, and if it’s expanding, someday it will break apart and that would be the end of everything!

Alvy’s Mom: Why is that your business? [She turns back to the doctor.]

Alvy’s Mom: He stopped doing his homework!

Alvy at nine: What’s the point?

Alvy’s Mom: What has the universe got to do with it? You’re here in Brooklyn! Brooklyn is not expanding.

Dr. Flicker: It won’t be expanding for billions of years yet, Alvy. We’ve gotta try to enjoy ourselves while we’re here!

It is clear what Alvy’s response to Dr. Flicker would be: How can we enjoy ourselves when we know the universe will break apart and bring about the end of everything we value? In Alvy’s nine-year-old mind, real enjoyment—the kind that would make life have a point—is not possible if we know, as we do, that everything human is eventually going to come to an end.

Alvy’s visit to Dr. Flicker is a classic piece of metaphysical slapstick. Alvy’s Mom even gives the canonical Spinozistic response: “Why is that your business?” The episode invites us to smirk at Alvy’s silly, precocious Weltschmertz. But would Alvy’s reaction be silly if his authoritative physics book had proved that the universe would break apart in six months? In that case, Alvy’s plaintive cry—“What’s the point?”—might elicit fewer laughs. With the destruction of humanity looming in the near future, he would seem to have a good reason to ignore his homework, and much else as well. What makes the first response silly and the second understandable, even reasonable? It is not an easy question to answer.

Is it just that in the second scenario Alvy also knows that he will die, all too prematurely, in six months? No it isn’t, or at least it need not be just that. Consider this “doomsday scenario”: you are authoritatively told that you will have a normal life span, but thirty days after your death the earth will be completely destroyed in a collision with a giant asteroid. Believing this, you are dismayed and demoralized; you lose confidence in the point or worth of many sorts of activities; you cease to find it reasonable to engage in many familiar pursuits; you become emotionally detached from many things, perhaps even from the simple pleasures that do not point beyond themselves to future fulfillments. This sort of demoralization is understandable independently of your reaction to the fact that you too will die. It is a response to another catastrophe taking place after your death. What are we to make of this sort of demoralization?

Do we need to believe humanity will continue after our deaths?

A great deal, if the philosopher Samuel Scheffler is right. His wonderful Tanner Lectures, recently published as Death and the Afterlife, attempt to extract several striking lessons from our supposed reaction to the doomsday scenario. In Scheffler’s self-consciously idiosyncratic use of the term, the “afterlife” is neither a supernatural continuation of this life, nor the result of a deeper naturalistic understanding of the kind of thing we are; it is what John Stuart Mill called “the onward rush of mankind,” the collective life of humanity after our individual deaths. Scheffler’s thesis is that the onward rush of humankind—the collective afterlife—is much more important to us than we are ordinarily apt to notice. But he ventures further, making striking comparative claims about what matters to us. After a subtle and nuanced discussion he concludes:

My argument has been that personal survival already does matter to us less than we tend to suppose, and that the survival of humanity matters to us more. In saying this, I am not underestimating our powerful impulses to personal survival or the deep terror that many people feel when contemplating their own deaths. Nor am I denying the importance of self-interested motivations in ordinary human behavior. My point is that despite the power of these attitudes, there is a very specific sense in which our own survival is less important to us than the survival of the human race. The prospect of the imminent disappearance of the race poses a far greater threat to our ability to treat other things as mattering to us and, in so doing, it poses a far greater threat to our continued ability to lead value-laden lives.

The argument for these conclusions begins with our supposed reactions to the doomsday scenario and to what Scheffler calls “the infertility scenario,” explored in P. D. James’s 1992 novel The Children of Men and in the Alfonso Cuarón film it inspired. The year is 2021. Human beings have become infertile; it has been more than twenty-five years since a human being was born. As the last die out, the prospect of human extinction is imminent. When we imagine ourselves inhabiting such a world, we anticipate feeling demoralized—psychologically unable to continue to value the things that have been important to us. Scheffler argues that the exercise of this ability is necessary for living what he calls “value-laden” lives. So we need to believe humanity will continue, and perhaps we need it to be the case that humanity will continue.

One of the many gems embedded in Scheffler’s lectures is a nicely observed contrast between our sense of catastrophic horror in the face of the doomsday and infertility scenarios, and our relative calm in the face of the fact that everyone now living will one day be dead. Few seem up in arms about this inevitable future scenario; there are no crisis meetings of world leaders to consider what to do about this impending disaster. While there are some notable exceptions, such as the author of Ecclesiastes, few see in the inevitable death of everyone now living a reason to believe that our worldly pursuits are vain or futile. But Scheffler—following P. D. James—maintains that finding ourselves in the infertility scenario would indeed undermine our confidence in the point of much of what we value and pursue:

In James’s vivid depiction, it is regarded as a catastrophe whose prospect precipitates an unprecedented global crisis and exerts a profoundly depressive effect on many familiar human motivations. . . . The implication [of the contrast] seems clear. In certain concrete functional and motivational respects, the fact that we and everyone we love will cease to exist matters less to us than would the nonexistence of future people who we do not know and who, indeed, have no determinate identities. Or to put it more positively, the coming into existence of people we do not know and love matters more to us than our own survival and the survival of the people we do know and love. . . . This is a remarkable fact which should get more attention than it does in thinking about the nature and limits of our personal egoism.

In their commentaries on the lectures, also included in Death and the Afterlife, Susan Wolf and Harry Frankfurt balk at Scheffler’s reference to the limits of our egoism. As they note, what Scheffler’s discussion actually discloses is not that we are surprisingly other-regarding, but that we have self-regarding reasons to avoid anything like the doomsday and infertility scenarios. For many of us, either of these scenarios would undermine the psychological conditions that enable us to value what we do. This undermining of our confidence in what we value would deprive us of the motivation to live value-laden lives. Each of us has a self-regarding reason to hope that this kind of personal collapse will not occur, so each of us has a self-regarding reason to hope that the scenarios will not come to pass.

Furthermore, whether that kind of reason translates into, or reinforces, a concern for distant future generations, as Scheffler suggests, depends in part on whether it is only the imminent versions of the infertility and doomsday scenarios that threaten our confidence in what we value. Each human being might simply have a self-regarding reason to hope that humanity continues for a few generations after his or her death. From the purely self-regarding point of view, horrible versions of global warming may be acceptable if they occur beyond the horizon of the next few generations. We would still need to exploit the limited resource of impersonal benevolence to motivate the protection of humanity over the long term.

Still, as Scheffler points out in reply to Wolf and Frankfurt, nothing much turns on the use of the term “egoism.” The remarkable fact—if it is a fact—that the coming into existence of people we do not know and love “matters more to us” than our own survival and the survival of the people we do know and love would still stand, and it would show that we are deeply psychologically vulnerable when it comes to the fate of our species, in a way that is independent of our attachments to particular human beings.

• • •

But is it a fact that anonymous others filling out the future of humanity matter more, or is it instead that we have come to care about those we know and love sub specie mortis—as mortals with that all-too-familiar finite form of life, the one that my Irish grandmother used to reductively characterize as embedded in the cycle of “hatching, matching, and dispatching”? In his third lecture and in his reply to Nico Kolodny, Scheffler emphasizes the psychological centrality of the view of our own lives sub specie mortis when it comes to articulating what is worth caring about, and he consequently struggles to assign any real value to the prospect of personal immortality.

Here Scheffler may have inadvertently highlighted an alternative, indeed contrary, explanation of his own central motivating contrast. In caring for those we know and love, we care for them sub specie mortis, but our concern for the human species is not of this sort; we don’t think of the species as having some familiar finite limit built into it, and so our contemplation of its imminent end presents a catastrophe of a different character from the catastrophes of our own deaths and the deaths of those we love. Those deaths, when they are not premature, are already partly accommodated by the way we have come to care about our fellow mortals as mortals. This fact does not mean that the anonymous others who fill up the future of humankind matter more to us than those we know and love.

Perhaps the human future is a kind of Ponzi scheme where the value of our own lives is always dependent on the well-being of future generations.

More generally, we should resist the temptation to infer that a mere necessary condition on our living value-laden lives matters more to us than the things we actually do value. Otherwise the same could be said, absurdly, of the Big Bang, the sine qua non of everything. Perhaps there is, to use Scheffler’s terms, a “very specific sense” in which the Big Bang (or the presence of oxygen, or the cosmological constant’s having roughly the value it does) is important to us, but this is just the sense in which it is a background necessary condition for everything we care about. Such conditions matter derivatively; their importance derives from their role as background conditions for the whole enterprise of valuing things. Comparing the importance of such conditions to the importance of what we care about is not at all a straightforward comparison. At the very least it is comparing things of derivative importance with things of non-derivative importance, things that directly matter to us. What then of the allegedly necessary condition of there being anonymous others who fill up the onward rush of humankind? What non-derivative value does that have for me, and how does it compare to the non-derivative value of the lives of those I know and love?

To answer that crucial question we must address another methodological worry about Scheffler’s comparative thought experiment. If we are to rely on the method of cases—the method of using our intuitive reactions to outré imagined scenarios in order to illuminate what we do and should care about—then we must proceed evenhandedly. In Scheffler’s thought experiment, the test cases aren’t controlled for distorting biases: the death of those we know and love is not imagined as vividly as the doomsday and infertility scenarios. We merely see that the death of all those we know and love follows from the fact that all who are now living will one day be dead.

A more evenhanded comparison would take the following form. In option one, all of your loved ones, indeed all the people you care about, have been placed in a high security prison, which will be bombed to total destruction in sixty minutes. In option two, you can save them—they will be released and live lives of normal lengths—but after all of them die their natural deaths, a doomsday device will wipe out humanity. Here the survival of humanity needs to be purchased at the cost of the imminent death of all those we know and love.

Now we are closer to a pair of cases that together might test the relative psychological strengths of our attachments to, on the one hand, those we know and love, and, on the other hand, to our reliance on the onward rush of humankind.

But we are not there yet. For, unless I am incredibly well connected, my loved ones, friends, and familiars will be massively outnumbered by those who turn up in the onward rush of mankind. As a result, even a low level of impersonal benevolence on my part might swamp my response to the pair of cases.

So the genuinely evenhanded comparison has to be something like this: I am deeply connected to a large tribe of people who presently constitute half of humanity. My tribe, however, has become infertile. Suppose that if my tribe is now totally destroyed, the others who remain will replenish the population to its present level after, say, four generations, and further suppose that humanity will continue to have a future for, say, another three generations after that. Would I prefer saving the present members of my vast tribe to the destruction of humanity a few generations after all my tribe members are gone? How do the extra generations of humanity weigh with me, when by hypothesis they are purchased explicitly at the cost of the obliteration of the large tribe of everyone I know or care about?

How would I react to the choice—or to the range of choices, since we can vary the parameters? I don’t know. I do know that in this kind of test situation there is likely to be a systematic difference between how I think I would react and how I would in fact react, a difference that, among other things, has to do with subconsciously putting myself in a good light. How would we react? Here, I am even more in the dark, since I don’t have any non-tendentious way of drawing the boundaries around “us.” I do know there are tribalists who would find the destruction of their tribe under these circumstances more demoralizing than the subsequent destruction of humankind. But what does that tell us about the relative importance of anonymous others filling out the onward rush of humankind? Here as elsewhere, the effectiveness of the method of using outré imaginary cases to test the relative weights of our deepest values seems to give out very near the point at which the cases are appropriately matched for a valid test.

• • •

As well as making a striking comparative claim about the greater importance to us of the anonymous others who will fill out the onward rush of mankind relative to the continuation of our own lives and those of the people we know and love, Scheffler endorses certain “dependency theses” involving necessary conditions on avoiding reasonable demoralization and on not forfeiting the possibility of leading a value-laden life. For example, he writes:

Our concerns and commitments, our values and judgments of importance, our sense of what matters and is worth doing—all these things are formed and sustained against a background in which it is taken for granted that human life is a thriving, ongoing enterprise. . . . Remove that frame of reference and our sense of importance—however individualistic it may be in its overt content—is destabilized and begins to erode. . . We need humanity to have a future for the very idea that things matter to retain a secure place in our conceptual repertoire.

He doesn’t say we only need to believe that humanity has a future, but that we need humanity to have a future. Which is it?

In fact it appears that Scheffler accepts both claims. At the beginning of his second lecture, he distinguishes what he calls “the attitudinal dependency thesis”—that things mattering to us depends on our having a belief in the existence of the afterlife in his sense—from “the justificatory dependency thesis”—that we are justified in attaching importance to things, or that there is good reason for us to care about them, only if there is such an afterlife. He then observes that his main conjecture, that people faced either with the doomsday or with the infertility scenario would lose confidence in the value of many of their activities and hence cease to value many things, provides direct support only for the attitudinal dependency thesis.

However, he offers an interesting argument connecting the two dependency theses:

Suppose that our activities ceased to matter to us because we believed that there would be no afterlife. Suppose now that an all-powerful being offered to make things matter to us again in either of two ways. Either the being could restore both the existence of the afterlife and our fully justified belief in it, or it could simply give us a drug that would induce in us a false belief in the afterlife. I take it that we would not regard these as equally good ways of making things matter to us. We might feel that if we took the drug, then, although our activities would in fact come to matter to us, we would be mistaken in valuing or attaching importance to them. There would not be good reasons for them to matter to us, and there would be good reasons for them not to. Perhaps we might express the point by saying that, if we took the drug, then our activities would seem to matter to us but they wouldn’t really matter to us.

That is not only an argument for the claim that we are implicitly committed to the justificatory dependency thesis, it is also strong evidence that he, Scheffler, is committed to it too. Throughout his discussion, the reactions Scheffler anticipates on our part are invariably his own reactions writ large. (That method will irritate believers in a personal afterlife, who from the outset are effectively excluded from community with “us.”) Scheffler clearly thinks our demoralization in the face of either the doomsday or the infertility scenario would be more than a typical psychological reaction; much of his discussion suggests that it would be a reasonable or justified response to the fact that the end of humanity looms. If things really matter only if we can be, in the light of all the descriptive facts, justified in believing that they really matter then we get a further result. Things really mattering depends on the end not being nigh. This “evaluative dependency thesis”—as Scheffler styles it—seems to amount to the claim that we need humanity to have a future in order for the very idea that things matter to “retain a secure place.”

If that claim can be established by Scheffler’s method, namely by reflection on the conditions of reasonable demoralization, then something stronger would seem to follow. We not only need humanity to have some future or other; we need it to have a certain sortof future for the very idea that things matter to “retain a secure place.” (Hence, perhaps, Scheffler’s own hopeful description of humanity as “a thriving and ongoing enterprise.”) There are many versions of the onward rush of humankind that might produce demoralization. If the future of humanity just came down to Mafia-like families battling it out on a galactic scale, or to our being fully pacified fodder for the hungry aliens, or to our universal participation in “reality” shows to the exclusion of anything else—in other words, if the human future did not contain some value-laden lives—then it would not provide the larger horizon of sustaining value that makes many of our present small efforts matter.

I am unsure whether Scheffler would endorse this stronger claim—that unless there is a human future containing some value-laden lives then the very idea that things now matter is threatened. The weaker claim obviously does not imply the stronger claim, but I find it hard to see how rejecting the stronger claim and holding to the weaker claim—that unless humanity has a future the very idea that things now matter is threatened—could provide a stable resting point. For each claim is driven by a plausible observation about how a certain sort of ostensibly reasonable demoralization indicates that our whole pattern of valuing gives significant hostages to futurity. Speaking for myself, I do not find the observation that drives the stronger claim less plausible. I feel just as demoralized, and in some moods even more demoralized, by humanity having a future devoid of value-laden lives as by humanity not having a future at all.

Letting the thought of the eventual end of humanity demoralize us would be a terrible mistake.

In any case, the stronger claim, however initially plausible it might be, is one that we should hope is false. For if it were true it would imply that the human future is a kind of Ponzi scheme where the virtual horizon of genuine value would have to recede forever if the human enterprise is to be valuable at all. It is a matter of the logic of the claim. I was recently at a dinner party where a philosophically inclined supermom announced that unless one has children who flourish, one can’t flourish oneself. I do understand the impulse, but the problem is that since we are doomed—since the human future will come to an end—her claim implies that no one has flourished or ever will. For, take the last human beings who have no children. Being childless, they will fail the condition for flourishing, but then so do their parents, and their parents, and so on back though all the generations of men and women. Call anything with that kind of implication a “Ponzi condition” on human beings living value-laden lives. A Ponzi condition is consistent with us living value-laden lives only if there is an infinite continuation of humanity.

The claim that human beings can live value-laden lives only if their future includes some human beings who live value-laden lives is just such a Ponzi condition. Since we are doomed— since the human future will come to an end—we can argue backward as before. Consider the last human beings, facing their imminent collective demise. Since they are not followed by a future in which any human beings live value-laden lives, they do not live value-laden lives themselves; but then the same is true of their immediate predecessors, and their immediate predecessors, and so on back through the whole history of humanity. Alvy Singer would thus be vindicated. Given the stronger claim, the fact that the universe is eventually going to break apart or come to consist of subatomic soup would imply that there is no point in doing one’s homework, or in pretty much anything else.What is the point of anything if there are no value-laden lives to be found anywhere in the history of humanity?

• • •

How are we to avoid this consequence? By recognizing that our actual pattern of valuing gives fewer hostages to futurity than Scheffler’s enlightening discussion, and even his weaker claim, implies.

As well as our longer term plans, future commitments and ongoing projects, many of which do presuppose some kind of continuing human future, there is simple human joy, the joy that comes from eating, drinking, sensing, moving one’s body, engaging one’s intellect, conversing, hanging out with friends and family, making love, raising children, playing games; enjoying nature, music, dance, and art; and telling and listening to stories. This kind of joy is wholly legitimate, a proper response to these activities, and also self-standing, in that it does not give hostages to futurity as a condition on its legitimacy.

Then there is the value of trying to find a reasonable way of living together in the here and now, and of being helpful to those now in distress.

Finally there is the continual effort—itself valuable—to appropriately value things as they are, which includes trying to being thankful (though perhaps not to anyone in particular) for what one and the rest of the human race have already been given. After all, there might have been no consciousness; the world might not have been intelligible either by way of sense or intellect; legitimate joy might never have arisen in the world; there might have been almost no accumulation of social and cultural capital; and our fellow human beings could easily have been much worse than they actually are.

The fact is that however the future of humanity goes, human life has already been a natural miracle. Indeed, it is against this established background that we find the great historical human evils to be atrocities—horrific violations of an existing order of appropriate valuing and caring.

Letting the thought of the eventual end of humanity demoralize us would thus be a terrible mistake. It is in large part because many human lives have been flooded with self-standing goods that humanity is not a Ponzi scheme. The kind of value that properly calls forth joy is not something that waits to be validated by the collective life to come. As a consequence, we already live in a rich ecology of value that surrounds us here and now, no matter what happens in the future. Take a look and see: both the weaker and the stronger claim seem refuted by manifestly legitimate joy, which is one form, indeed a highly valuable form, of the recognition of value here, already, in our lives.

Even in the last days our descendants might be sustained by a joyful thankfulness for all the goods that have filled human lives. No doubt this response will be muted by the looming horror, but this does not mean that it is the wrong response. Here there is an analogy with the thankfulness that can set in at the hour of one’s own death.

Alvy Singer’s real problem is that he is neurotically joyless and so unable to appreciate the true significance of the accumulation of joy throughout human history. Dr. Flicker was exactly correct, at least when the right emphasis is added: we gotta try to en-joy ourselves while we’re here. Spinoza, himself a great advocate of joy, would have said much the same thing, albeit in a different key, for he would have emphasized the purest joy that comes from the comprehension and intellectual love of Deus sive Natura (God; that is, Nature).

Even if just a few human beings come to approximate that, then this achievement, all by itself, may mean that the lights have by then burnt brightly enough for the human enterprise to have been worthwhile. After that, the rest of the human future would be a well-earned bonus.

The World this year

Syria’s use of chemical weapons in an attack that killed hundreds of people thrust the country’s civil war to the top of the agenda in Western capitals. But the resolve by some governments to punish the Assad regime with an American-led missile strike crumbled after the British Parliament surprisingly rejected such action. Russia brokered a deal, backed by the UN and America, under which Syria is destroying its chemical stockpile. The war rumbles on. The UN estimates that three-quarters of Syria’s population will need aid in 2014.

Civil strife enveloped Egypt whenMuhammad Morsi, its Islamist president, was ousted by the army after days of street protests against his government that were bigger than the anti-Mubarak demonstrations in 2011. A crackdown on the Muslim Brotherhood led to more bloodshed; most of its leaders were imprisoned.

Pakistan’s election marked the country’s first civilian transition of power at the end of a full five-year term. Nawaz Sharif returned as prime minister; he had last held the job in 1999. Bombings and mayhem continued unabated. At least 50 people were killed on the day that Mr Sharif held a press conference with David Cameron, Britain’s prime minister, that discussed security issues.

Although less frequent than in previous years, American drone strikes against militants in Pakistan were bitterly condemned by its government. Drone technology was also more widely talked about elsewhere for other purposes, such as distributing aid to rural areas and delivering packages. Iraq had its worst year for sectarian violence since 2008, with over 8,000 people killed.

The nutcracker

 A new governing coalition was formed in Italy, headed by Enrico Letta of the centre-left Democrats, after an election in which a quarter of Italians registered their discontent by opting for a new party led by a comedian. Mr Letta got on with the serious business of trying to reduce public debt. The fun ended for Silvio Berlusconi when he was booted out of the Senate, after having been definitively convicted of a crime for the first time.


 Cyprus became the fourth country in the euro zone to get a full bail-out, though only after an anxious week in which it had to resubmit a plan to restructure its banks. Ireland became the first country to exit its bail-out programme.

Pope Benedict shook the Catholic church by stepping down, the first pope to retire in 600 years. His successor, Pope F rancis, an Argentine Jesuit, shook the church further by saying it should worry less about sexuality and by moving to reform the Vatican.

Dell rebooted its business by agreeing to a $25 billion offer from its founder, Michael Dell, to take it private, but not before rebellious investors submitted a counterbid for the computer-maker. Dell’s was the largest buy-out since the start of the financial crisis in 2007.


China’s new leadership under Xi Jinping announced the boldest set of reforms for decades. These included more market pricing and a promise to abolish labour camps. China also further relaxed its one-child policy, in place since the 1970s, by allowing parents to have two children if one of the parents is an only child. In 2012 $2 billion-worth of fines were imposed on families that broke the one-child rule. China tried to stamp its authority on its region by imposing an air defence zone over a swathe of the East China Sea that covers islands contested by Japan. Japan and America ignored China’s demand that it should be notified about flight plans by sending aircraft into the zone without warning. In December China accused Japan of “malicious slander” for suggesting its zone was threatening stability.


Edward Snowden provoked a debate about government mass-surveillance programmes when he leaked classified documents about the activities of America’s National Security Agency. The extent of the snooping angered many, though Mr Snowden was accused of putting the security of America and its allies at risk. Some of those allies, including Angela Merkel of Germany and Dilma Rousseff of Brazil, were furious that their personal communications had been monitored.

Typhoon Haiyan unleashed some of the strongest winds ever recorded at up to 315kph (195mph), leaving at least 6,000 people dead in the Philippines.

Israel’s general election returned Binyamin Netanyahu to power. After two months of tortuous negotiations he formed a broad coalition government and appointed Tzipi Livni, who leads the Hatunah party, as chief negotiator with the Palestinians.


Joyful and triumphant

Among other big elections, Angela Merkel’s Christian Democrats won a third term in Germany and formed a grand coalition with the centre-left Social Democrats. She is the only leader in the euro zone to have been re-elected since the start of its debt crisis. Australia went through three prime ministers over the course of the year; the centre-right Liberals, led by Tony Abbott, won an election. Michelle Bachelet became Chile’s president again; her first term ended in 2010. Malaysia’s ruling Barisan Nasional coalition had its worst election showing since 1969; it still formed a government. And Uhuru Kenyatta was declared the victor in a presidential election in Kenya. His trial at the International Criminal Court on charges of orchestrating the ethnic violence that followed Kenya’s 2007 election begins in February.


In Bangladesh the collapse of a building that housed clothing factories killed 1,100 workers. They had been ordered to return to work despite warnings about cracks in the structure. It was South Asia’s worst industrial disaster in 30 years.

G3

The economies of the G3 – the US, Euro Area, and China – are collectively growing at 3.7% in

the current quarter relative to the same quarter last year, according to the Now Casting 

growth monitor. And G3 growth in Q1 2014 will be 4.15% higher than in the same quarter 

last year.

Over the past month the picture for the US has improved, and this improvement has been only

partially offset by a slight weakening in the data for the Euro Area and China.

 

E Trading

There was a time not so long ago when equities traded on electronic exchanges and everything else traded on OTC markets. We used to hear people argue vehemently that electronic trading would not work outside of the equities world. The belief was that the central order book could not handle large trade sizes. Algorithmic and high frequency trading changed all that. We learned that large trades could be sliced and diced into smaller orders that the central order book could handle easily. With exchanges offering lower and lower latency trading, a big order could be broken into pieces and fully executed faster than a block trade could be worked out upstairs in the old style.

Slowly the new paradigm is expanding into new asset classes. The 2013 triennial survey shows that electronic trading has virtually taken over spot foreign exchange trading and is dominant in other parts of the foreign exchange market as well (Dagfinn Rime and Andreas Schrimpf, “The anatomy of the global FX market through the lens of the 2013 Triennial Survey”, BIS Quarterly Review, December 2013). The foreign exchange market has ceased to be an inter bank market with hedge funds and other non bank financial entities becoming the biggest players in the market.

The next battle ground is corporate bonds. Post Dodd Frank, the traditional market makers are less willing to provide liquidity and people are looking for alternatives including the previously maligned electronic trading idea. McKinsey and Greenwich Associates have produced a report on Corporate Bond E-Trading which discusses the emerging trends but is pessimistic about equities style electronic trading. I am not so pessimistic because in my view if you can get hedge funds and HFTs to trade something, then it will do fine on a central order boo

Jordan Belfort You can see why Leonardo DiCaprio wanted to play Jordan Belfort

The courts at the tennis club in Manhattan Beach are full, and the pool is overflowing with bikinis. It’s a brilliant summer afternoon, and over at the juice bar, drenched in sweat after hitting for an hour or so, Jordan Belfort and I are parked on stools and talking about his Big Problem. It’s plagued him since he was a child. Even in prison, he couldn’t make it stop.

“I can’t sleep,” he tells me as the waitress arrives to take our order.

“Oh my God!” she says with a gasp. “You look just like Jordan Belfort!”

Belfort looks confused. He doesn’t know what to do. He’s never been recognized like this before.

“Actually,” the waitress goes on, “we just looked you up on the Internet. You are Jordan Belfort!”

Then the gushing starts. She tells him what big fans she and her friends are of his books, that she follows his motivational-speaking career on the web. Juice Bar Woman is a bona fide Jordan Belfort groupie.

“Can I get a picture?” she asks, and soon her smartphone camera is clicking.

The spotting is incredible for many reasons. The city of Los Angeles and its satellite communities like Manhattan Beach make up the celebrity mecca of the universe, and among all the hot stars and not-so-hot ones who can be spotted around here, the name does not quite register. Jordan Belfort? And Jordan Belfort is also a convict, one of a particularly loathed class—a white-collar crook who duped innocent investors to finance an insatiable greed. Belfort was convicted of scamming more than $100 million throughout the nineties to finance a hedonistic paradise. Stratton Oakmont, the firm he started, became a kind of cult. “It should have been Sodom and Gomorrah,” Belfort would later write. “After all, it wasn’t every firm that sported hookers in the basement, drug dealers in the parking lot, exotic animals in the boardroom, and midget-tossing competitions on Fridays.”

Belfort’s background in finance was limited. After dropping out of dental school, he sold frozen lobsters and steaks door-to-door; one of his first experiences in sales came from hawking ices as a kid. He proved to be a great talker and fearless mimic, modeling himself after his hero, Gordon Gekko, the ruthless corporate raider in Wall Street, a favorite film, and assumed what he called “a devilish alter ego.”

It was a truly epic scam, in which he used his powers of persuasion to screw investors and then train a small army to do the screwing for him. But eventually, Belfort sank his own empire. He spent some of his fortune on megamansions, only to have the government seize them. He purchased his own helicopter, only to almost crash it on his front lawn while flying it stoned. He owned a 166-foot yacht built for Coco Chanel, only to tell the captain to steer it into a storm and nearly kill himself, his friends, and his crew before the ship sank in the Mediterranean. Even with the hundreds of prostitutes he claimed to have hired, Belfort struggled to perform. He was taking so many drugs that his penis, as he writes, had taken the form of a “No. 2 pencil eraser.”

It was in prison that Belfort discovered his talents were transferable. His cube mate, or “cubie” (at his facility, there were no cells), was Tommy Chong of Cheech and Chong fame. Chong laughed so hard at Belfort’s stories he pushed Belfort to write them down and get them published. Employing the same zeal that made him a financial-industry tycoon, Belfort set out to become a writer. In prison, he studied Tom Wolfe’s Bonfire of the Vanities, taking notes on character development, dialogue, tone. He then applied the Wolfean techniques to his own tales, writing two memoirs that detail his quest for fortune and approval.

And, now as then, people cannot get enough of Jordan Belfort. He’s using the same skills, working the same stories, only this time, the gig is entirely legal. His ruthless rise and self-destructive fall was ripe for a big Hollywood production. Leonardo DiCaprio signed on to play Belfort, with Martin Scorsese directing. After many snags in production, The Wolf of Wall Street will finally be released next month and in time for Oscar season.

Back at the tennis-club juice bar, Belfort still can’t believe it: Leonardo DiCaprio playing him? During production, Belfort even coached DiCaprio personally on the stages of a ’lude high (“tingle,” “slur,” “drool,” “amnesia,” and on), with Belfort rolling around in DiCaprio’s living room. He laughs about it now, but before he went to prison, Belfort had become a kind of neurotic, Long Island version of Scarface. “I was in the midst of a cocaine-induced paranoia that was so deep I’d actually taken a few potshots at the milkman with a twelve-gauge shotgun,” he writes in his first book. After that, he nearly killed himself. “It looked beautiful, a purple pyramid,” he writes of morphine pills piled up in his hand. “I threw them back and started chewing.” The drugs. The greed. That always empty feeling. The Big Problem.

“From the time he was born, he never really slept,” Leah Belfort, Jordan’s mother, tells me in the kitchen of their two-bedroom apartment in Bayside.

“He can’t sit still,” Max Belfort, his father, says.

“We’d come into the room, and he’d be watching his fingers,” Leah says about Jordan’s infant years. “I’d say to Max, ‘He’s not sleeping. He must be dumb. What kind of dummy are we raising?’ ”

In the kitchen, the appliances look plucked from a fifties time capsule, and framed recipes for gefilte fish and matzo-ball soup hang above us on the wall. The product of Bronx tenements and night-school master’s programs, Belfort’s parents represent the immigrant dream of hard work and ambition. Max and Leah are both accountants, but Leah decided to choose another profession after retirement. She went to law school in her sixties, graduated from St. John’s University, and still does pro bono legal work. With a home that appears so steady, part of the Belfort mystery is how a nice Jewish boy like him could destroy himself with such gusto.

Consider the following list of ingredients he packed inside “a brown leather Louis Vuitton shower bag” on a trip to Czechoslovakia, according to his memoir: “a half-ounce of sinsemilla, 60 pharmaceutical Quaaludes, some bootleg uppers, some bootleg downers, a sandwich bag full of cocaine, a dozen hits of ecstasy, and then the safe stuff: a vial of Xanax, a vial of morphine, some Valiums and Restorils and Somas and Vicodins, and some Ambiens and Ativans and Klonopins, as well as a half-consumed pack of Heineken and a mostly consumed bottle of ­Macallan’s to wash things down.”

In his memoirs, Belfort describes his parents as pushy and overbearing. He calls his dad “Mad Max” and fears his chain-smoking, vodka-drinking fury; Leah appears as a Jewish mother on steroids, demanding he start studying for medical school from the cradle. Both Max and Leah have read most of their son’s memoirs. Max and Leah are at least proud that he didn’t let the misery go to waste: Teaching himself to write and turning his gonzo tales into page-turning books, they believe, are great accomplishments.

“It’s an enigma, really,” Max says about his son.

“I wanted to deny he was my child,” Leah says.

“That time we found him growing pot in the closet,” Max says. “Very, very entrepreneurial. He said it was a school project, right?”

“He said, ‘I’m going to get an A.’ He was trying to buy me off with the grade,” Leah says. “I said to him, ‘I’ve been manipulated by better than you!’ Then Max came home, and you gave it to him.”

“A lot of lectures,” Max says, shaking his head again.

Leah says, “He always wanted to be part of the older kids, and all the big boys were taller. Much taller than he. And all the girls were much taller. He tried to build himself up with a bodybuilder, but that didn’t make him taller!”

“Yeah, all those girls were taller than him.”

“Maybe that’s one of the reasons he tried to compensate,” Leah says.

“Like Mayor Bloomberg, right?” Max says.

“Or Napoleon!” Leah says.

“My chief insecurity is that I was a late bloomer,” Belfort tells me. “I didn’t go through puberty until later in the curve. I didn’t feel confident in high school. Ninety percent of my focus was hot girls. I thought if you got rich, you’d get the girls. A lot of guys think that. And it’s true—it worked for me. It worked really well. When I really hit it, I had all these gorgeous women throw themselves at me. But the problem with that stuff is, it doesn’t really change you.”

Belfort has the salesman’s look: a flash of white teeth, tan skin, all of which radiate a youthfulness that’s impressive considering his age (he turned 51 this summer) and former drug habit. “A testament to the regenerative qualities of the human liver,” he likes to say of himself, with a heavy Long Island brogue.

It’s another tennis morning for us, and this time we play at the private court of Jeff Tarango, his personal tennis guru. Tarango is not any tennis instructor. The former pro and commentator has been rated one of the top over-40 players in the world.

“Obsessive-compulsive talent,” Tarango says of Belfort. “He’s not autistic, but he could be. He just can go into that tunnel.” Belfort is so committed to improving his tennis strokes that he and Tarango play together every morning. Belfort wanted to play on weekends, too. His sessions are tutorials. Behind the baseline, Belfort props up his smartphone to videotape himself in action; later, at night, he’ll study his technique in bed with his fiancée, Anne Koppe. His intensity can be overwhelming, but it’s all part of his recipe for success, a life philosophy he’s now hit the road with in his new incarnation as motivational speaker for hire. “I believe in total immersion,” one of his creeds goes. “If you want to be rich, you have to program your mind to be rich. You have to unlearn all the thoughts that were making you poor and replace them with new thoughts—rich thoughts.”

After hitting balls, I trail him back to his home. He drives a Mercedes SL convertible and lives in an oceanfront mini-mansion on Manhattan Beach. I follow him through the garage and up the spiral steps into an expansive living room where the doors and windows are open to the view of the Pacific and the warm breeze comes and goes just so.

“Making money is so easy,” Belfort tells me. “It really is. It’s not hard to do.”

Belfort’s actual net worth is something of a mystery. He earned more than $2 million for the books and film rights (“I thought they were fucking crazy,” he says about actually getting published), five figures for speeches he gives, along with income from investments he’s made in Australia.

“I did really well with the mining industry,” he says. “I made some hits. Iron. Ore. Stuff like that.”

But he can’t keep it all. According to a judge’s order, half of everything Belfort earns must go to the $110 million he is obligated to pay back to the more than 1,500 investors he fleeced. It’s a hefty order to fill, and according to the government Belfort has been negligent in his payments. Belfort denies he’s hiding money from the government—a skill he once perfected on Wall Street—and currently the parties are working toward a resolution. Belfort says he’s not making a nickel off his story and has signed over all proceeds and profits to the government.

“I wanted to be above reproach with the whole thing,” he tells me. “I didn’t want people to think, Oh, he’s making money on the movie, on his crime. Like, ‘I don’t want the fucking money! Keep the fricking money!’ ”

“They never even call me,” he says, sounding insulted.

Waiting for Belfort in his living room are two assistants, both of whom seem to possess his requirements for employment.

“Let’s just say Jordan has a type,” one says.

Belfort’s lair here is like a high temple of the Shiksa Goddess. He laughs off his propensity for long blonde hair, blue eyes, and buoyant bosoms.

“I’m not going to lie,” he says as we make our way onto the deck. The water is sparkling on the crashing surf in front of us, and errant sounds of a volleyball game pass in the breeze. One assistant brings out a pair of cold beers, sandwiches, and chips.

Belfort spreads out on a lounger, his sunglasses shielding his eyes.

“I always felt if I had more, then I’d feel good,” he says. “I think the more I had, the worse I felt. We all have these holes, right? The problem is, there’s some ways we plug those holes that are sustainable. Going out and fucking twenty whores every night—it was fun when I did it, but that’s not really sustainable.”

Toward the end of his first book, Belfort describes his need for validation: how he and a friend are swimming in a pool, but the friend never comes up for air. Belfort pulls the friend out of the pool and proceeds to perform mouth-to-mouth resuscitation. Finally, the friend shows signs of life—by vomiting the hamburgers they were eating into Belfort’s mouth. When the medics arrive, one tells Belfort, “You’re a hero.”

“What a delicious ring those three words had,” Belfort writes. “I desperately needed to hear them again, so I said, ‘I’m sorry, I missed what you said. Could you please repeat that?’” Belfort then approaches his second wife (“with her loamy loins and brand-new breasts”) and “tried to find just the right words that would inspire her to call me a hero.”

No dice.

“Unfucking believable!” he writes. “She didn’t call me a hero!”

Belfort’s business model itself seemed based around ego-boosting. Instead of hiring seasoned stockbrokers or anyone with experience, he recruited naïve twentysomethings who would adhere to his ruthless sales creed: Buy or die. To motivate these young and wealth-hungry aspirants, Belfort would arrive to work in the same white Ferrari Testarossa that Don Johnson used to drive in Miami Vice and deliver not one but two boardroom speeches to them each day.

“From a moral perspective, he was a reprehensible human being,” says Greg Coleman, the FBI special agent who made the case against Belfort. A specialist in financial frauds and money laundering, Coleman has been an agent with the Bureau for more than twenty years. “Admiration would be the wrong word, but from the perspective of manipulating the market, he’s one of the best there is,” Coleman says of Belfort. Coleman also specializes in the behavioral sciences, giving talks inside the FBI on the psychology and interior motives of criminals.

“In a single word, it’s attention, a craving for attention,” Coleman says. “I think it’s the issues that cause the insomnia, not the insomnia that causes the issues.”

Coleman spent six years investigating Belfort. From the outset, what bothered Coleman most, he says, is that Belfort put so many of his friends and family members at criminal risk. When he started laundering money in Switzerland, for instance, Belfort cajoled his wife’s aunt, a retired schoolteacher in London, to be the front for bank accounts into which he illegally funneled millions to hide from other regulators chasing him. “There’s a difference between influence and manipulation,” Coleman says. “He’s a great motivational speaker, and he manipulated everyone around him with a Svengali-like trance.” After his arrest in the fall of 1998, Belfort, then 36, faced a sentence of more than two decades in prison. He did not protest the charges and take his case to trial. He did not keep his mouth shut and spare others.

“He cried like a baby,” Coleman says.

Wearing a wire, Belfort worked with Coleman and other federal officials to make cases against his partners and associates. By cutting a deal, Belfort hoped to persuade a judge to cut the lengthy sentence awaiting him and spare himself heavy prison time. Working with the government, Belfort also proved he’d mastered the art of being liked. Dan Alonso, a former federal prosecutor who handled Belfort’s case, was so impressed with Belfort’s speaking ability that he invited him to the Manhattan district attorney’s office, where Alonso is now a top official, to have Belfort give a speech to prosecutors. (“He’s a salesman,” Alonso tells me of Belfort’s performance, “and he sold himself well.”) Alonso and others lauded Belfort’s efforts during the investigation, and he only served two years and four months in prison. “A slap in the face,” Coleman says of Belfort’s punishment. Coleman was so upset with Belfort’s sentence he considered moving out of the unit that handles white-collar crime. “At the very least, he should have done a year for every year I investigated him,” Coleman says. That Belfort is now a celebrity, immortalized by his books and a performance from Leonardo DiCaprio, galls him.

“Crime pays,” Coleman says.

But Coleman can’t get enough of Belfort either. Agent and cooperating witness stay in touch, going out to dinner every so often when their schedules allow. “He tells a good story,” Coleman says of Belfort.

“He’d come back from playing tennis, and I’d crack up, man, because we’re in fucking jail,” Tommy Chong says.

“I was shocked,” Belfort says. “Everyone’s playing tennis and basketball. The Latins have their music blasting. I was like, Wow, this isn’t so bad.”

We’re at Chaya, the Asian-fusion restaurant in Venice, for a prison reunion. The dining room is roaring, and under the chandeliers and stagelike lighting, waiters pass plates of shishito peppers and soy-glazed black cod. Chong, then jammed up for selling bongs over the web, and Belfort, serving out his white-collar sentence, got close in prison. They shared their meals and stories, like the prison chef who cooked, in a microwave, delicacies that included fresh squirrels he’d trapped. “The Quaalude stories are my favorite,” Chong says.

Belfort recalls a night where he spent $1,000 on a rare ­Quaalude pill and vowed to savor the high. “I stick my finger down my throat. I wanted to get all the frickin’ food out of my stomach. Then I take a fuckin’ enema, shove it up my ass. I want to be completely clean, from top to fucking bottom.”

Across the table, Chong’s wife, Shelby, is cackling with laughter.

“He has to do everything the best,” she says. “Perfect. Number one.”

And the story goes on, just as Belfort tells it in the book: about learning that the Feds are following him while completely stoned, then driving out to use a pay phone at the local country club, only to fall backward and crash on the floor in his ’lude binge.

“I’m lying on my back and see the ceiling has cracks in it,” Belfort says. “I’m like, Why are the Wasps not paying for their ceiling? What a troubling thought that they don’t fix the ceiling in this Wasp heaven—maybe they’re running out of money. I try to stand. I can’t stand! I curl myself into a little barrel and fucking roll myself down the steps. I do the prayer to Jesus. Even an old Jew. Jesus, please God, just get me home one last time.”

“I love this!” Shelby says. The more Belfort reveals, the more laughs he gets. Especially in the story’s dénouement: totaling seven cars at one mile an hour

Banging into a car! Banging into a car!” Shelby howls. “Oh my God! Oh my God!”

“Was he the gold mine?” Tommy Chong asks. “Was he the gold-mine writer?”

“You do such a good setup,” Shelby says.

“You learned that from the early selling,” Chong says. “How to sell.”

Finally the conversation lands on his lack of sleep. Belfort tells us he’s seeing a psychologist now, trying to come up with a cure for his insomnia.

“Why can’t you sleep?” Shelby asks him.

“I hated going to sleep as a kid,” Belfort says. “I almost trained myself to fight sleep, and it eventually became a pattern.”

Shelby is confused.

“You make your real life so scary,” she says. “How could sleep be scary?”

The night is warm and clear. After dinner, I drive with Belfort back toward Manhattan Beach in the Mercedes. Top down, we pass the tattoo and taco shops on Lincoln Boulevard in silence. Finally, he breaks it.

“Did you like the stories?” he asks.

The stories were great, I tell him. He’d told them so well. It was the truth. Once he got rolling, all the laughing was infectious. He truly was a talent.

Belfort smiles to himself. For a minute, the compliment has perked him up, but the feeling soon fades. As the stoplights on Lincoln Boulevard pass by, I look back at him. He looks pale and deflated.

“Honestly, it’s just so exhausting,” he says.