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09 August 2017

A Fanfare of Strumpets

This article was written by John Wolff. All views and opinions are strictly his own.

I was glancing through a list of the fifty most valuable metal mines in the world based on extraction and reserves at today’s prices, and struck by how many of them were not in existence 45 years ago. I mention 45 years because that is when a book called ‘The Limits to Growth’ was published in 1972. Although it was an academic tome, it caused quite a stir and sold several million copies.

I was introduced to it by a small client of ours called George Rapp. George’s father Leo had come to the UK as a German Jewish refugee before the war and established a steel and nonferrous semis stockholding business. George inherited the business which required him to follow LME prices. This lead him into taking modest speculative positions for his own account.

However, George was a very different character from your average client. He was really an academic, more at home in the world of university lecturers. He had a great love of language and plays on words. Not only in English. He spoke eight languages. When listing them he had a great throwaway line at the end – “Ah yes, there is one more. Now what is it? Oh yes. I was rather intrigued with a minor Danish poet, so also learned Danish.”

He was entertaining, eccentric, extrovert, and impossible to embarrass. Sometimes he would come on to the LME during the morning kerb prior to lunch. In those days, the kerb was still conducted by the dealers standing up round the large ashtray in the centre of the ring enjoying a cigarette while trading. (When trading was quiet the latest jokes would be told. It was remarkable how quickly very topical jokes would fly round the City. I always regretted the change to sitting for dealing on the kerb, because the dealers were no longer in close enough proximity to exchange stories.)

George, entirely against the rules, would go and stand among the dealers chatting away, totally oblivious to the fact that he was neither an authorised dealer, nor even a member of the LME. He also stood out because he had rather individual views on what a City suit, shirt and tie should look like. 

Knowing his character, I invited George to write a lighthearted chapter on speculating on the LME for the first edition of Wolff’s Guide to the LME in 1976.

He wrote it under the pen name R.E.Dart (trader spelt backwards). George moved in the milieu of  London leftwing intelligentsia. They would not have much approved of his trading, but he was not afraid to pull their leg in his opening paragraph:

“Much of the attack against the speculator seems designed to suggest that here is another ‘unacceptable face of capitalism’, which is a roundabout way of implying that capitalism has acceptable faces and to some that could be a much more debatable assertion.”

His love of words meant that he enjoyed our unusual market expressions. Describing a straddle position he wrote: “You now have, as they say, two legs – a long leg and a short leg. This game is full of zoological absurdities.”

It was not surprising to me, then, that George with his academic background was familiar with the Club of Rome. They had been founded by an Italian academic in 1968. He gathered other intellectuals around him and they published ‘The Limits to Growth’ in 1972, to which George was keen to introduce me. Their concern in its broadest form was the sustainability of the earth. If we kept on producing and consuming at an exponential rate, how long would it be before we ran out of agricultural products, fish, oil and other raw materials?

The authors did not invent the word exponential, but it became much better known after publication. They wanted to point out that in areas such as population and consumption, the thing to be concentrating on was precisely the effect of exponential growth. 

Compound interest in an example of exponential growth, but one I enjoy more is the legend of the poor servant of the Grand Vizier Sissa bin Dahir. He presented his master with a beautifully crafted chess board. The Vizier was so touched he asked the servant what he would like in return. The servant said his family were hungry, so could he have some rice, one grain of rice for the first square of the board, two for the second square, four for the third, and so on. The Vizier agreed. Well over a million grains were needed for the 21st square and a million million by the 41st.

The book’s subject matter was wide ranging, and included some of the LME metals. In some cases their prognostications were alarming and pessimistic.

The Club still exists and reports now include articles on soil erosion and world government. 

With the benefit of it now being the year 2017, we can measure their original forecasts. They turned out to have varying degrees of accuracy, but it is the forecasts on LME metals which will interest Lord Copper’s readers most, and those they got very wrong.

This is what they predicted in 1972:

The world would run out of copper in 21 to 48 years. That is somewhere between 1993 and 2020. I don’t see much sign of it!

Aluminium would last a little longer, 31 to 55 years, so we would run out somewhere between 2003 and 2027. Current prices and stocks don’t seem to point to that happening either. (But if you still believe it, buying a ten year call option might be fun.)

Where did they go wrong?

Firstly, but not most importantly, their computer programming was faulty, which reminds me of one of my father Freddie’s stories when on a business trip to New York in the early sixties.

He was taken in to see the new computer room at Bache. Those were pioneering days in computers and Bache were ahead of the game among the brokers in installing one. “But what happens’ my father asked “if you feed in the wrong information?”

“Buddy” the computer operator replied “If you feed in crap you get out crap.”

However, by far the main misjudgment by the authors of ‘The Limits to Growth’ was in failing to allow for man’s ingenuity and creativity.

We have not run out of copper or aluminium because man has continually developed new technology enabling him to mine in difficult terrain where it was not possible  before, to discover new ore deposits that were not previously dreamed of, to recycle more, to treat waste material that was not previously treatable, and not least in the evolution of what one might call miniaturisation. For example, the original calculating machines on our desks used to contain several pounds of metals. Now, they are part of  our mobile phones. And you used to need a brief case to carry the early mobile phones around in; now they slip in to your pocket. In the field of armaments, it used to take thousands of tonnes of copper and zinc to make cartridge shells to bombard a city. Today one missile weighing perhaps only 120 tonnes has the same effect.

My main point is that you can’t put man’s ingenuity into a computer programme. Maybe that is just as well otherwise life would be very predictable and there would not be much for Lord Copper to write about.

Man is so innately creative that in every era he seems to somehow be able to invent what helps him to live in that particular period of time.

Finally, a bon mot from George Rapp. 

It was George who first told told me the witty anecdote with the double play on words about the four solicitors who took their favourite barrister out to dinner to thank  him for successfully pleading a case for an important client.

After the port had gone round the second time, one of them suggested it might be fun to come up with the most appropriate collective noun for prostitutes.

The first said, “How about a Fanfare of Strumpets?”

“No,” said the second, “I think it should be a Volume of Trollopes .”

“I rather prefer,” said the third, “a Jam of Tarts.”

“I think I trump you all,” said the senior partner, “with an Anthology of Prose.”

The barrister thanked them for their hospitality and commended his learned friends on their suggestions but thought there could only be one answer: “a Firm of Solicitors.” 

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