The War of the Worlds mass panic myth

November 24, 2013

2013 marks the 75th anniversary of Orson Welles’s notorious War of the Worlds broadcast, in which his Mercury Theatre on the Air company enacted a Martian invasion of Earth. Welles was just 23 years old, a prodigy who would subsequently go on to direct and star in Citizen Kane.

The year was 1938. The radio had become a fixture in many homes. As well as providing music and light entertainment, it was the most immediate source of news for most Americans. And that news was not good. America was still in the grip of a severe economic depression while Europe was on the brink of a major conflagration, which the USA could easily find itself being dragged into. At the time programmes would often be interrupted with news flashes about this or that crisis – it had been barely a month since Munich conference had been held.

Orson Welles’s 62-minute CBS radio dramatisation brought H.G. Wells’s 1898 novel to life. He would use all kinds of trickery – constant interruptions, fake newsflashes, phony scientific authorities, bogus military analysts, eerie silences and roving reporters being zapped by a beast with tentacles – to scare his unsuspecting audience. What better way could there have been to create terror on the day before Halloween?

One of the stars of the show was Frank Readick playing Carl Phillips, the reporter on the spot who describes the invasion before becoming a victim himself. In preparation for the part he had watched that iconic footage of the 1937 explosion of the Hindenburg airship over and over again to. He wanted to capture commentator Herbert Morrison’s horror as the tragedy unfolded before his eyes.

The programme opened with the dance music of the fictional Ramón Raquello and his orchestra, adding a Spanish touch with “La Cumparsita.” In fact, it was the CBS orchestra under the direction of Bernard Herrmann. After announcing that there had been gas explosions on Mars, it was back to Ramón Raquello at the Meridian Room of the Park Plaza Hotel, situated in downtown New York. The show went on like this, with Welles gradually ratcheting up the tension.

Here a quote from the show that will give you a flavour of what Welles was up to:

Ladies and gentlemen, I have a grave announcement to make. Incredible as it may seem, both the observations of science and the evidence of our eyes lead to the inescapable assumption that those strange beings who landed in the Jersey farmlands tonight are the vanguard of an invading army from the planet Mars. The battle which took place tonight at Grovers Mill has ended in one of the most startling defeats ever suffered by any army in modern times; seven thousand men armed with rifles and machine guns pitted against a single fighting machine of the invaders from Mars. One hundred and twenty known survivors. The rest strewn over the battle area from Grovers Mill to Plainsboro, crushed and trampled to death under the metal feet of the monster, or burned to cinders by its heat ray. The monster is now in control of the middle section of New Jersey and has effectively cut the state through its center.

Only at the end of the transmission did Welles come completely clean

This is Orson Welles, ladies and gentlemen, out of character to assure you that The War of The Worlds has no further significance than as the holiday offering it was intended to be. The Mercury Theatre’s own radio version of dressing up in a sheet and jumping out of a bush and saying Boo! Starting now, we couldn’t soap all your windows and steal all your garden gates by tomorrow night. . . so we did the best next thing. We annihilated the world before your very ears, and utterly destroyed the C. B. S. You will be relieved, I hope, to learn that we didn’t mean it, and that both institutions are still open for business. So goodbye everybody, and remember the terrible lesson you learned tonight. That grinning, glowing, globular invader of your living room is an inhabitant of the pumpkin patch, and if your doorbell rings and nobody’s there, that was no Martian. . .it’s Hallowe’en.

 

There is a generally accepted version about what took place in the aftermath of the broadcast. Millions of dumb Americans were unable to distinguish between fiction and reality and the United States experienced a senseless outbreak of mass hysteria. This is how the incident has been portrayed in many academic textbooks, in Simon Callow’s sprawling biography of Welles and this year on a documentary from America’s prestigious PBS. Their documentary about War of the Worlds is part of the public broadcaster’s history series, American Experience. It is a beautifully crafted piece of television, but it is a shame that they missed the opportunity to set the record straight.

The mass hysteria never happened. The panic was so insignificant that it could barely be measured. No deaths have ever been attributed to the War of the Worlds broadcast. Had the hysteria that was supposed to be sweeping the country that night been real, there would surely have been more deaths and serious injuries. You would also have expected those responsible to be in deep trouble, but that was not the case; neither CBS nor Welles received any type of sanction. The Federal Communications Commission chairman Frank McNinch did obtain an informal agreement from the radio networks that fictional news “flashes” would not be used again. However, no new regulations were brought in.

In an earlier post I explained how our memories are not like video recordings; we are constantly recreating them. A similar phenomenon can take place at a societal level. And once these stories get out, they take on a life of their own. As memories of the show became more distant, its notoriety just kept growing. More and more people claimed to have heard it. As weeks, months, and years passed, the audience’s size swelled to such an extent that you could be led to believe most of America was tuned in to CBS that night.

Nothing could be further from the truth. According to one ratings survey, only 2% of listeners actually listened to the show. We must remember that Welles was up against stiff competition, namely Edgar Bergen’s Chase and Sanborn Hour, a light entertainment show, featuring a ventriloquist. It may be the case that some listeners did change stations during a musical interlude, but no scholar, however, has ever been able to pin down an actual number. I think we can safely say that were very few listeners around to be taken in by Welles’ broadcast.

A number of players did their very best to hype the story. Princeton academic Hadley Cantril claimed that about one million people had been “frightened” by the show. But frightened is one thing and panicked is a very different phenomenon. The audience may well have felt scared, but that doesn’t mean they ran into the streets screaming, convinced that the world was about to end. Newspapers too had a vested interest in playing up the story. Facing a significant loss of revenue that had been provoked by the emergence of radio, they seized the opportunity presented by Welles’ program to try to discredit radio as a source of news. Radio could just not be trusted. The newspaper industry’s trade journal, Editor and Publisher, had a stark warning:

The nation as a whole continues to face the danger of incomplete, misunderstood news over a medium which has yet to prove … that it is competent to perform the news job.”

Why has this myth just refused to go away? I think it speaks to the way we see the media as an all-powerful force. This story plays on our fears about how we can be so easily manipulated, like those totally unsubstantiated stories about subliminal advertising. Jeffrey Sconce argued that it’s not the Martians overrunning the Earth that we fear. What really terrifies us is the idea that the big media companies are invading and colonizing our consciousness. In the 30s the enemy was radio – today we face a new invader – the internet.

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Panic on the streets of Quito?

November 24, 2013

While researching this piece I found this in Wilipedia about a similar panic in Ecuador, I remain sceptical but here it is:

In February 1949, Leonardo Paez and Eduardo Alcaraz produced a Spanish-language version of Welles’s 1938 script for Radio Quito in Quito, Ecuador. The broadcast set off panic in the city. Police and fire brigades rushed out of town to engage the supposed alien invasion force. After it was revealed that the broadcast was fiction, the panic transformed into a riot. Hundreds attacked Radio Quito and El Comercio, a local newspaper that had participated in the hoax by publishing false reports of unidentified objects in the skies above Ecuador in the days preceding the broadcast. The riot resulted in at least seven deaths, including those of Paez’s girlfriend and nephew. Paez moved to Venezuela after the incident.


An extremely brief history of wearable technology

November 17, 2013

In 1975 Pulsar, a division of the Hamilton Watch Company, launched the first calculator watch. The Time Computer Calculator 901 had a numeric keypad and function keys on the face and could add, divide, multiply and subtract. If you were looking to push the boat out, the 902 model also offered percentages. The first 100 were made from solid gold and cost about $4000. Soon other brands entered the market. On the cover of the Police’s single Wrapped Around Your Finger, you can see Sting with a black plastic Casio calculator watch. In Back to the Future Marty McFly also sported one. And more recently, in the final series of Breaking Bad, Walter White bought himself one as a birthday treat. It has to be said, though, that these calculator watches never really caught on. They were always held back by the size of the buttons, which you needed a toothpick to press. But some modern technological developments could change all that.

Today I’m going to be looking at wearable technology. Its proponents want to interweave technology into everyday life, making technology ubiquitous and interaction seamless. Scores of companies are currently experimenting with embedding sensors and micro-computers into the things we wear. At the moment this technology is in its infancy, but according to a study by ABI Research due to the relative ease of compatibility with smartphones and other electronic devices, the wearable technologies market will be worth half a billion dollars by 2018.

This is all part of the evolution of the computer. We began with those computers that used to fill a big air conditioned room and which inspired IBM’s Thomas Watson to claim that there would be enough demand for five in the whole world. Then came the standard desktop computer. Now we have a plethora of mobile devices. Wearable computing is just the next stage. At the moment the two most important commercial applications are for fitness and health; they are excellent at monitoring. There are a lot of challenges with this technology, in terms of durability, washability and cost. Once these issues have been sorted out, this technology will move into other areas such as tourism, transport and lifestyle. Now I’m going to look at four products that are currently being tested:

The NAVIGATE Jacket

The NAVIGATE Jacket uses integrated LED lighting and haptic (relating to or based on the sense of touch) feedback to help wearers find their destination. It comes with an app which stores relevant destinations and uploads the directions to the jacket which then gives turn by turn directions. The wearer sees the instructions on the sleeves of their jacket, with lights indicating the distance to the next turn and the current stage of the journey. Vibrations in the shoulders alert the user when to turn and in which direction.

Google glass

Google Glass is a 50-gram wearable computer with an optical head-mounted display which displays information in a smartphone-like hands-free format and which can communicate with the Internet via natural language voice commands. A touchpad located on the side enables users to control the device by swiping through a timeline-like interface displayed on the screen. Sliding backward shows current events, such as weather, and sliding forward shows past events, such as phone calls, photos etc. This is Google’s vision for a mass-market ubiquitous computer. According to the product website with it you can:

Say “take a picture” to take a picture.

Record what you see. Hands-free.

Share what you see. Live.

Listen to your favourite songs from Google Play Music.

See directions right in front of you.

Speak to send a message.

Ask whatever’s on your mind.

Have your voice translated.

Indeed, it will even answer you without you having to ask. Sergey Brin has a dream:

My vision when we started Google 15 years ago was that eventually you wouldn’t have to have a search query at all, you would just have information come to you…

It is not yet on sale, but in June this year Pedro Guillen, Chief of Trauma Service of Clínica CEMTRO of Madrid, became the first doctor in the world to broadcast an operation through the use of Google Glass.

The iwatch

2013 was going to be the year of the smartwatch. Both Sony, with Sony Smartwatch 2, and Samsung and their Galaxy Gear smartwatch, have already launched their products. They are both designed as companion devices to smartphones. Now we are waiting for Apple to make its move. We still don’t know what Apple’s iWatch will look like, nor what it will do. It is rumoured that it will act as a central control hub for your entire home including heating and cooling, lights, sound systems, home theatre etc. Is Apple after control of our home’s electrical appliances?

Fundawear

In this blog I have already done a couple of posts on sex and technology in which I have looked at both sex robots and vibrators. So there was no way I was going to miss out on Fundawear, which is Durex’s first incursion into the area of connected devices. These undergarments have touch actuators in them which give haptic feedback. You put on special underwear that connects to a smartphone app. You can control the vibrations yourself with a smartphone as a remote, or they can be controlled by your partner’s device. This could be the perfect gift for couples in long-distance relationships. However, the thought of someone hacking into the system doesn’t bear thinking about.

All these devices do raise questions about distraction. You will often see me out and about in Madrid with my headphones and MP3 player. I will be listening to some course about the Inca civilisation or Greek philosophy. But these devices take distraction to a whole new level. We will have to regulate their use especially when it comes to dangerous activities like driving. We are demanding all these amazing functionalities, but we may need legislation that protects us from ourselves.

I don’t know whether you are convinced by these inventions. The medical applications do seem quite exciting. But, on the whole, I’m not particularly impressed. Then again I do have a strange attitude to technology I have so far resisted the temptations of the smartphone and I actually prefer a desktop to a laptop and the myriad portable devices that have emerged in the last few years. Give an e-book over a tablet any day of the week. Really we all need to decide what the right technological mix is for us. I am no Luddite – I just want to pick and choose the technology that is right for me.


Wearable technology : the videos

November 17, 2013

Google glass

Fundawear


Shanks for the memories

November 9, 2013

I have recently read David Peace’s Red or Dead, a 700-page novel about the legendary football manager Bill Shankly. The story goes from Shankly’s first week with Liverpool in 1959 to his premature death 22 years later. Peace became a successful writer while working as an English teacher in Tokyo. His previous works include the Red Riding Quartet, GB84 and The Damned Utd. The latter, his most successful novel to date, dealt with Brian Clough’s ill-fated 44-day reign at Leeds United.

Red or Dead’s first three words are “Repetition. Repetition. Repetition.” And we certainly get it in spades. This book is a symphony of daily life. Not only do we hear all about the training sessions and the matches, we also get repeated descriptions of Shankly laying the breakfast table, washing the dishes or cleaning the oven. On one page Bill is used 84 times and he takes eight pages to describe Shankly washing his car. Peace is trying to capture the methodical nature of the great Scottish manager. Here is a piece which captures the style of the book:

In the house, in their bed. Bill opened his eyes. Bill closed his eyes. And then Bill opened his eyes again. In the dark and in the silence. Bill stared up at the ceiling. The bedroom ceiling. And Bill breathed out. Bill had been dreaming. Only dreaming. In the dark and in the silence. Bill turned to look at the clock on the table beside the bed. The alarm clock. Ticking, ticking. In the dark. Bill got out of bed. Bill shaved and Bill washed. Bill put on his shirt. Bill put on his suit. Bill put on his tie. His red tie. His Liverpool Football Club tie. Bill went down the stairs. Bill went into the kitchen. In the light and in the silence. Bill saw the cloth on the table. The cutlery and the crockery. The salt and pepper pots. The jars of honey and marmalade. The butter dish. The two glasses of fresh orange juice. And Bill smiled. In the kitchen, at the table. Bill and Ness ate breakfast. A slice of toast and honey, a glass of orange juice and a cup of tea. And then Bill helped Ness clear away the breakfast things. Bill dried up the breakfast things. Bill helped Ness put away the breakfast things. And then Bill kissed Ness on her cheek. Bill went into the hall. Bill put on his hat. Bill went out of the front door. Bill went down the drive. Bill got into the car –

And Bill went off to work.

I found it compelling, but I can imagine it is not everyone’s cup of tea. But, this is not going to be review of the book. Instead I am going to look back at the 22 years covered by the author.

When Shankly took charge of Liverpool, they were in the Second Division. They had seen better days. Since their foundation in 1892, the club had already claimed four league titles, their first coming in 1901. However, after 50 years in the top flight, they had been relegated in the 1953-54 season.

Shankly wanted to bring the greatness back to Liverpool. He soon created one of the symbols of “the Liverpool Way,” the famous boot room. This small room, where the squad’s football boots were kept, became an informal coaches’ meeting room. It was here where Shankly and his assistants, Bob Paisley, Reuben Bennett, Tom Saunders and Joe Fagan would, with the help of whisky, discuss team selection, go over tactics and plot how to beat their next opponents. Shankly’s football philosophy was deceptively simple: “pass and move”, a style that became synonymous with the golden age of Liverpool. One particular training routine involved something called the “Sweat Box,” which was used to improve players’ short passing and touch.

The other aspect which marked Shankly’s reign was his relationship with the fans. He wanted to show the supporters they were the ones who mattered. The two were made for each other. His devotion to the fans really does come across in the book. In return, the manager and the team received the fervent support of the Liverpool fans. Shankly was and remains an idol on Merseyside.

Football really was very different in this time. European ties which ended in a draw were decided by replays. There was no away goals rule. And there were no penalty shootouts either. If the replay failed to provide a solution, then the result would be decided with a coin toss. Shankly himself is a rich source of anecdotes. My favourite has to be the 1964 club tour of the USA, when he bizarrely insisted on keeping English time. No American was going to tell him what time it was.

The first half concludes with his shock retirement on July 12, 1974. It was a decision he would soon come to regret. Many players and managers end up as alcoholics, drug addicts or living on the breadline. That was not what afflicted Shankly. He was a man without a hinterland, for whom football was the be-all and end-all. He just couldn’t cope without his daily fix. Now every day was like Sunday.

He tried to maintain his ties with the club of his life by turning up for team training at Melwood, but he cut a forlorn figure. Feeling unwanted, Shankly became embittered about the club. It was not the way this relationship should have ended. Kevin Keegan summed it up:

It was the saddest, saddest thing that ever happened at Liverpool.”

But I can also understand it from Liverpool’s point of view. Shankly had resigned, even though he had been begged him to stay on. It is also true that there had been an antagonistic relationship between Shankly and the directors. The board were also well aware what had happened when Matt Busby had retired at Manchester United. His long shadow undermined the successors; a club that had been champions of Europe in 1968 was relegated to the second division in 1974. Liverpool did not want to undermine Bob Paisley’s position. Their treatment of Shankly may seem disrespectful, and they probably should have found a way to keep him involved, but they wanted to look to the future. In part he was a victim of the ruthless single-mindedness that he himself had brought to the club. They would go to win four European Cups and ten league titles in the fifteen years after Shankly’s resignation. In this sense the board were vindicated. Would Liverpool have enjoyed the same success had Shankly continued? We will never know the answer to that counterfactual. He did a brilliant job in reviving a team that had been languishing in the second division. He was the architect of their success. However, maybe Bob Paisley, who is said to have been the one with the tactical nous, was the man to take them to the next level.

Bill Shankly’s retirement would be short-lived. Following a heart attack, on the morning of Saturday 26th September 1981, he was taken to Broadgreen Hospital, an NHS facility situated on the outskirts of Liverpool. He seemed to have stabilised and he did not appear to be in danger. However, after his condition suddenly deteriorated, he was transferred into intensive care. At 00:30 on the following day, he suffered a second heart attack and was certified dead less than an hour later. He was 68 years old. His wife Nessie was by his side.  At his funeral Canon Arnold Myers summed up the city’s mood: “Bill Shankly did not live for himself but for a team, a vast family, for a city, for an ideal.” After being cremated at the Anfield Crematorium on 2 October, his ashes were scattered on the Anfield pitch at the Kop end.

I wouldn’t go as far as David Peace, who describes Shankly as “a saint, one of the greatest men who ever lived”. But he was a great man and it is sad to contemplate the years after he retired. At least he was not around to see the decline of his beloved Liverpool. The team has never won the Premier League; their last league title was in 1990. Margaret Thatcher was still Prime Minister! He was also spared the two events that marked the club in the 1980s Heysel and Hillsborough. What would he make of the multi-billion pound global franchise that the Premier League is today? I think Shankly, a lifelong socialist, would be horrified by players’ salaries, ticket prices and some of the modern breed of owners.  Liverpool has not been immune to these trends. Five years ago, when Liverpool was owned by two American businessmen Tom Hicks and George Gillett, a banner appeared on the Kop with an SOS to Dubai International Capital, pleading with them to buy out Liverpool. Indeed, the Spirit of Shankly supporters’ group were in talks with the private equity arm of the Dubai government. Such is the fans’ desperation for trophies today. I am convinced that if Al Capone were alive today, he would be welcomed at more than one club.

I don’t think we should overdo the nostalgia for the football of yesteryear. I support some of the changes. In 2008 the Premier proposed holding league matches in Asia, Africa, Australia or America. Bill Shankly would not have approved and had he been involved, he most certainly would have stuck to English time.


Bill Shankly: a life in quotes

November 9, 2013

We are all familiar with these words from Bill Shankly:

Some people believe football is a matter of life and death, I am very disappointed with that attitude. I can assure you it is much, much more important than that.

But there is more to Shankly than that particular quote. Here is a selection I came across while researching this article:

_____

Fellows, your jobs are safe. Some managers bring their own people with them. Not me. I have my own system and it will work in co-operation with you. Shankly’s words to the training staff when he arrived at Liverpool in 1959.

 

At a football club, there’s a holy trinity – the players, the manager and the supporters. Directors don’t come into it. They are only there to sign the cheques.

 

Football is a simple game based on the giving and taking of passes, of controlling the ball and of making yourself available to receive a pass. It is terribly simple.

 

This city has two great teams – Liverpool and Liverpool reserves.

 

If Everton were playing down the bottom of my garden, I’d draw the curtains.

 

The socialism I believe in is everybody working for the same goal and everybody having a share in the rewards. That’s how I see football, that’s how I see life.

 

On resigning: It was the most difficult thing in the world, when I went to tell the chairman. It was like walking to the electric chair. That’s the way it felt.

 

My life is my work, my work is my life.

 

I’ve been a slave to football. It follows you home, it follows you everywhere, and eats into your family life. But every working man misses out on some things because of his job.

 

Since I came here to Liverpool, and to Anfield, I have drummed it into our players time and again that they are privileged to play for you. And if they didn’t believe me, they believe me now.

 

I have been received more warmly by Everton than I have by Liverpool. It is a scandal that I must write these words about the club I helped to build.

 

Basically as an honest man in a game that is sometimes short on honesty. That I’ve been working honestly for the people of Liverpool to try and give them entertainment. When asked by a TV interviewer how he would like to be remembered.

 

When I go, I’m going to be the fittest man ever to die.

 


Warren Buffett – the life and times of the greatest investor in history

November 3, 2013

If you have a spare $3.5 million, you could spend it on lunch with Warren Buffett. Now, you might baulk at the cost, but every year, Mr. Buffett, the most successful investor in history auctions off a lunch date with himself, with proceeds going to the Glide Foundation, a San Francisco charity for the homeless. Warren Buffett, who is known as “The Sage of Omaha”, is currently worth $53bn. Maybe some of his magic will rub off on you and the meal will be a bargain. Buffett is the chairman and CEO of Berkshire Hathaway, a multinational conglomerate holding company based in Omaha, Nebraska. In his 2012 letter to the shareholders, Buffett pointed out the company’s per-share book value has grown by an average of nearly 20% each year since 1965. That sounds awfully high to me, in Madoff territory. But, as far as we know, Buffett is not running a Ponzi scheme. To put all this in perspective, if you had taken $5,000 in 1965 and achieved with it the same annual rate of return as Berkshire Hathaway, today it would be worth $29.3 million. I don’t have an intuitive feel for all these numbers. As Einstein said “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” Despite all this wealth, Warren Buffett retains a modest lifestyle, living in the same house that he purchased in 1958 for $31,500. Who is this man and how was he able to become one of the richest men in the world?

Warren Edward Buffett was born in 1930 in Omaha, Nebraska, one of U.S. Representative Howard Buffett’s three children, the only son. He has had a somewhat unconventional personal life. He married Susan Thompson in 1952 and they had three children, Susie, Howard and Peter. However, the couple began living separately in 1977, when Susan moved to San Francisco to pursue a musical career. Before she left Susan had arranged for Buffett to meet Latvian-born Astrid Menks and the two began living together with the blessing of Susan. All three were said to be close and Christmas cards to friends were signed “Warren, Susie and Astrid.” Warren and Susan remained married until she passed away in 2004. Buffett then married Astrid, who was by then 60 years old.

Warren Buffett demonstrated a knack for business from childhood, buying his first stock at the age of eleven, three shares of City Service at $38 per share. After buying the stock, its value fell to $27 per share. However, Buffett held on to the shares until they recovered to $40. He then quickly sold the shares, which then proceeded to reach about $200 per share. This experience would be an important lesson for the young Warren. While still in high school, he was able to earn money by delivering newspapers, selling golf balls and stamps, among other activities. When he filed his first income tax return in 1944, Buffett claimed a $35 deduction for the use of his bicycle and watch on his paper round. In 1945, in his second year of high school, Buffett and a friend bought a used pinball machine for $25. They put it in a local barber shop. They later reinvested the profits from this machine to purchase two more. Within a year, they sold all three to a war veteran for $1,200.

In 1947 Buffett began studying in business administration at the Wharton School of the University of Pennsylvania. However in 1950 he transferred to the University of Nebraska–Lincoln where at the age of nineteen, he graduated. He then enrolled at the Columbia Business School because Benjamin Graham, an investor he greatly admired, was teaching there.

Then it was out in to the world of work. By 1962, Buffett had become a millionaire. He invested in and eventually took control of a textile manufacturing firm, Berkshire Hathaway. He initially maintained the core business of textiles, but by 1967, he had begun to move into the insurance industry and other investments. In the late 1970s, Berkshire Hathaway acquired an equity stake in the Government Employees Insurance Company (GEICO), which still forms the core of its insurance operations today and is a major cash cow that helps the conglomerate finance its other investments. In 1985, the last textile operations were finally shut down. Buffett now argues that purchasing Berkshire Hathaway was the biggest investment mistake he has ever made. If he had invested that money directly in insurance businesses, he would have made compounded investment returns of about $200 billion over the previous five decades. As well as wholly owning GEICO and Fruit of the Loom, and half of Heinz, they have significant minority holdings in American Express, Coca-Cola, Mars, Procter & Gamble, Tesco, Wal-Mart. Buffett became a billionaire in 1990 and in 2008 the richest person in the world. He is currently fourth on the Forbes Rich List, behind Carlos Slim, Bill Gates, and Amancio Ortega.

Warren Buffett engages in what is known as value investing. Value investors look for securities with prices that are unjustifiably low based on the company’s fundamentals. The value investor searches for stocks that he or she believes are undervalued by the market, stocks that are valuable but not recognized as such by the majority of other buyers. Buffett, however, isn’t concerned with the beauty contest that is the stock market.  He is not your common or garden speculator – he prefers to choose stock exclusively on their overall potential as a company he believes in investing for the long run – “When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.” If the price goes down, he will simply invest more because he believes in their prospects for the future. He is looking for ownership in quality companies that will be capable of generating earnings. He is interested in the profit margins, whether the company is saddled with excess debt and how long the company has been public – he prefers companies which have been listed for at least ten years. He does not suffer from neomania, favouring instead companies that have stood the test of time. Therefore, he avoids buying stock in new social media companies like Facebook and Google because he finds it hard to estimate future value. He is also wary of initial public offerings (IPOs) of stock, which he believes are almost always bad investments. Ultimately he likes a distinctive brand, something that sets the company apart from the competition.

Whether you agree with Buffett’s strategy or not, it has proved remarkably successful. He is one of the richest people in the world, with a net worth of more than $53 billion according Forbes in 2013. The proof is in the pudding. Or is it? There is a cognitive bias known as survivorship bias, “the logical error of concentrating on the people or things that “survived” some process and inadvertently overlooking those that did not because of their lack of visibility.” In Fooled by Randomness Naseem Nicolas Taleb put it like this:

“I am not saying that Warren Buffett is not skilled; only that a large population of random investors will almost necessarily produce someone with his track records just by luck.”

People look at the winners and discover the similarities with others who are successful. However, if you ever visit the graveyard of failed individuals and companies, you will find that many of those there possessed many of the same traits of the winners. Taleb imagines an eccentric (and bored) tycoon offering $10 million to the winner a game of Russian roulette:

“The problem is that only one of the histories is observed in reality; and the winner of $10 million would elicit the admiration and praise of some fatuous journalist (the very same ones who unconditionally admire the Forbes 500 billionaires).“

Taleb does not appear to be a big fan of Buffett. I think we can safely say that Taleb will not be getting an invitation to Omaha this Christmas:

“I have no large desire to sacrifice much of my personal habits, intellectual pleasures, and personal standards in order to become a billionaire like Warren Buffett, and I certainly do not see the point of becoming one if I were to adopt Spartan (even miserly) habits and live in my starter house. Something about the praise lavished upon him for living in austerity while being so rich escapes me; if austerity is the end, he should become a monk or a social worker—we should remember that becoming rich is a purely selfish act, not a social one. The virtue of capitalism is that society can take advantage of people’s greed rather than their benevolence, but there is no need to, in addition, extol such greed as a moral (or intellectual) accomplishment (the reader can easily see that, aside from very few exceptions like George Soros, I am not impressed by people with money).“

The other question is which came first, chicken or egg? His numerous followers hang on his every word. So, when Buffett invests in a company, is he seeing value that others are incapable of seeing, or does his interest mean that millions of others follow him blindly? I think it would be interesting if he deliberately invested his stock in some company with bleak prospects for the future, one which makes typewriters or a video rental company. Would the millions follow the messiah thus raising its value?

In the end though, I take a more positive view of Buffett than Taleb does. I do not go in for adulation, but after what we have seen in the last few years, it is nice to see someone who takes a long-term view. He represents everything that Wall Street is not. I don’t know how much is skill and how much is luck, but he does seem like a smart guy. What’s more he has other appealing traits. His philanthropy is legendary. In June 2006, he announced a plan to give away his fortune to charity, with 83% of it going to the Bill & Melinda Gates Foundation, the largest charitable donation in history. He is also one of that rare breed of billionaires who thinks they should pay more taxes. Warren Edward Buffett has become the acceptable face of capitalism.