President of the nations only finance museum with a mission to preserve and teach about our financial his trade. We are a smithsonian affiliate. Now our friends at the Coffee Business school have done it again. This time it is a book on investing. It is the history, written by Norton Reamer and Jesse Downing. Covers thousands of years. All the way through to Warren Buffett in the legends of today. Along the way will meet any of individuals, many products, themes from investing. Market learn about manipulation, Insider Trading, and fraud. This book is very well researched with a very comprehensive emily auger fame, so much so that it was just talking to norton a little while ago and he tells me they have 10 , so it will this is work. Norton has had a story career. He was a former ceo and chief Investment Officer of investment putnam investments. And he left to manage a holding withny for over 20 years, 200 billion in assets under management before it was sold. He is still active with a Consulting Firm called unicorn. ,is coauthor is Jesse Downing and an investment manager profesional. The book will be on sale after, so i encourage all of you to buy it, if you like what you hear, and the others would happy authors would be happy to autograph it for you. Speculation is as old as the hills. Today we will learn is investment is has ultimately kills as well. His old as the hills as well. Now i will turn it over to them. [applause] we are honored to be here in the center of finance and wall street. I must admit, i was not knowledgeable about the museum of American Finance until richard offered to be an endorser of our book. He is very active in this, something you very much for having this. I am probably the oldest author you ever heard, at 80 years old, and jesse may be the youngest at 25 years old. The book was put together by this group david mentioned of 10 Different Research associates. Most of them are harvard undergraduate economics majors, and it benefited from a lot more wisdom than the original author ever had in his possession. Let us talk about this now in an organized way. The Research Project that led to this book, investment, a history, began in 2010. Me interrupt already with an anecdote. We had trouble convincing the publisher of columbia Business School publishing to add a history, because i suspect he thought people would be more interested in investment than in history. But an amazing fact for all of the hundreds of thousands of books that have been written on investment over the years. Nobody, i mean nobody, has written a longterm history. We were astonished. And jesse admitted to me before became a research associate, he became a research on the because he did not think it was true. But weve bee verified it. On the point on, this book stands uniquely. I sold my last company to chris wiese in 2008 credit squeeze in 2008, with no wisdom on my part. The transaction occurred in august of 2008, 20 days before lehman brothers. [laughter] not because i figure that out, and not because credits we figure that out and out. [laughter] in 2010 i had a further to your commitment, and i discovered it was not taking all of my time. I came upon this idea of researching the history of investment. A book was not uppermost in my mind at the time. Learning more about a field to devoted over 50 years of my life was very much in my time, and in my mind. I began the project and i began by visiting with a harvard Business School professor by the name of david moss, who said to me, you need research associates, and boy was he right to the fact of the matter is i have never done research in any way before. I started with the Harvard Economics Department and i submitted to the secretary a request for a research associate, and they advised me to pay the going rate. Zero responses. Iti called her back and said you tell me what is the going rate . Shes attended 15 an hour. I said how about 20 an hour . It worked like a charm. [laughter] event, jesse was the second of these research associates, and hes the project and stuck with it so effectively that about three years later i asked him if he would become my coauthor, as they goodness he did as my friends and i have debated it over the more we cannot figure out if he is five times smarter than i am, or 10 times smarter than ibm. [laughter] friend said 100 times, but i dont that. Early on in the research we had a revelation. Literally there was nothing like a longterm history available. To relieve your minds of potential readers, this may be a misuse of a warrant, but the book is written logarithmically. 16 first chapter covers pages or so and about 3000 years. It gets more micro as he gets 20 president , which is more useful. Event, we came to feel understanding the history of the field is incredibly important in being able to protect future being an investor who wanted to thathat was going before, would be incredibly valuable in understanding what it is like in the future. In addition, significant changes have occurred over the millennia , that investing is been underway. There has been widening of Investment Opportunity over time that is remarkable. If this is a 4000 year history, the common man, and i do not just the common man, but Business People like ourselves, simply could not invest until the last 400 years. The time that investment as we define it has a list did it is not only been available to. Powerful elite let me talk about the highlights of what were going to try to cover. Number one, the overarching team of this book, and this may astonish you, is the democratization of investment. Democratization and equality are not the same. Were not saying all investors are equal. We are saying is now available to somebody, billion, and billions of people in the developed world, and we would not have had anything like that until 400 years ago or so. The second point we emphasize is the concept of retirement, unfunded retirement. Thes amazing to consider fact that funded retirement is no more than 150 years old at the outside. When roman soldiers were ready to retire, they decided they did not want them around rome so they gave them stipends and land far distant from rome. New,eal retirement is brandnew. It is an installer shooting to think about. And astonishing thing to talk about. The next thing is the roads in the fields. Kicking and tracked screaming into this subject because i do not think it was dominant in what has affected investment, but it is interesting. Section, we goor from ernie, to meet off, and ponzi. Jesse will talk about that in a few minutes, and very interesting area. And the fourth thing that we is the increase in sophistication. One thing is because of the investment area. That was not really born until about 1900. The second area, and was made a controversial to some of you, we think we have gotten a lot better, as a national economy, and managing Economic Policy for the benefit of investors. Grandson, we put an establishment in the book, about how everything was done wrong, and the time of the Great Recession, we may have been inadvertent, but almost everything was done right and then the outcome was very different. Lets talk a gunman about investment and why it is important. The commitment of resources in the hope of earning a return in the form of income gain or both. Remarkablyis pervasive and it is not just pervasive and economics. It is pervasive in culture, is pervasive in all kinds of institutions, and in the development of society. Without risking capital effort andaverage treasure, it is difficult to advance any type of program. The role of leaders, executives and so on is to make decisions that advance the students. The head of a museum is making investment decisions. Civilization and society depend on investment to improve. We have claimed that this is a basic element in society, not just a basic element in economics. Democratization for a moment now. If you study the history of realizent, you begin to that at the same time, especially during the 17th and 18th centuries, the political life was democratizing, including the American Revolution for example, investment life was also being democratized. Was leading to certain important developments that were crucial in that stage of things. , the corporate form was essential, even during this timeframe. You all heard of these joint Stock Companies that were the First Corporate form to exist. It had its limitations compared to modern corporations, but it was an important step forward. The second vital step forward with the Industrial Revolution, because for the first time it created sources of capital for every man, every woman in that sense. And before that time all the capital was in the hands of the nobility or the church or the military. Joint Stock Companies begin in about the 16th century. There was a Company Called the Muskogee Company which treated with the russian empire. Createdon company was which was changed to the Virginia Company thereafter because most of its effort were in the new world they do not produce a plot that they made an thert at it and some of early joint Stock Companies do not have all of the characteristics that we take for granted today. One of those was limited liability. Think about it for a moment how important the fact that the corporation has limited liability. Of this,he early age you were on the hook. That made for great suspicion between investors. They cannot want to do business without a lot of resources, because when it came around to pass the hat for losses, one person was going to be empty and the other people would be left with responsibility. Time, the joint Stock Company became more sophisticated, one of the first examples of the higher level of sophistication that you have heard of it is with the east India Company because it was one of the first times that management and ownership were separated. Not everybody, and if you buy stock today you know do not expect to run the Company Expects to invest in expect some videos to have responsibility and will run the company. The skeptics about the separation of ownership and management were impressive. Denounced joint Stock Companies and denounced the east india thatttee because he argued fiduciaries cannot be fully dutiful and completely concerned about the welfare of shareholders because the capital was not their own. We still have this problem today but we have gone to great efforts to improve situations. From oury, we believe, research, that he was much influenced by something you have all heard of, the south sea bubble, which was a case where that was of companies not in the interest of shareholders, eventually shareholders suffer the consequences and so did the promoter. Equity toant managers, to do stock options, we do performance fees in case of funds and reservations on that as well. We encourage managers to be invested in the business. An improvement, not all the problems have been solved. Now we talk about the Industrial Revolution. It was of course, a transformation that we all know about. Ran,gan in the 1760s and the First Industrial revolution. Basically until world war i. The first one involved textiles and iron production and things of that sort. The second one was much more sophisticated, and involves technological advance. Revolution has a bad rap in certain ways and earned it. Condition ing ratchet working conditions, urban squalor, working strife, but they all reflected the trajectory of the nonelites. For the first time, common people, business owners, factory workers, inventors, entrepreneurs were able to create and share in the economic surplus. They did not have access to surplus before. Revelation. Prior to industrialization, most of humankind, and this is for thinking about for a minute, lived their lives without the assumption that their standard of living would or could improve over time. I think, this is not her directly in our book, but i think you can look at 1000 years for the Industrial Revolution were the standard of living basically did not rise. It is interesting to me, and probably to you, there is some question being raised about that right now, about off we are done with that if we are done with that. My only thought is that is not right. We will continue to advance the standard of living, perhaps at a slower pace than we got used to for a while. Generational growth, we think, is still part of the outlook. The emergence of Public Markets was the third element. Companies, corporate form, Industrial Revolution, the emergence of Public Markets. That is incredibly important because for the first time, people became empowered savers, savers with their own money who could invest in some way, and they met investment opportunities. Creatinge effect of brokers or securities. Market,prices, that the and to lubricate the exchange of shares. It also created the opportunity to diversify. Think about how difficult it was to diversify your ownership of king before they were Public Markets. Investments, it was virtually an impossibility. Even for the very wealthy and very powerful, until Public Markets were created. But even with all of these advancements and improvements democratization of investment is far from complete. Just as there are countless constituencies in the world that remain marginalized, so also are there large numbers of people excluded from participating in the enterprise of investment. Ourselves intoe thinking that the work of democratization is done. It is not, hit has a long way to go. Now let me talk for a moment, before i pass to our key speaker , about retirement. I want you to think about retirement. Funded retirement, as i onlyated a moment ago is emerged 150 years ago. Most of history people did not expect to retire. You died at your workbench or in the field. When you could not work, you relied on your family to see through, not some funds you had created. There were no Financial Resources dedicated to providing security in the final years of life. Her were a few early steps. In english created for laws 1861. Or laws in 1861. There were always houses created in the united date. The presbyterian ministers created insurance and retirement in theor themselves 1700s. Saving societies began in the 1800s. But it was not until the rise of employment in urban areas, more employment inor the early 1900s that private Pension Funds began in earnest. Mostly funded by corporations , most funds that we know about survive depression. 1930s Social Security was created. It survived by a onevote margin in the Supreme Court in 1937, the same way that obamacare survived more recently. It is amazing to think about that. Starting in the 1970s, defined Contribution Plans in the form of 401ks at 403 bs grew rapidly. 403 bs grewd rapidly. It is probably a call crawl amount in other developed countries around the world. They are the singles largest impact of the democratization of investment. Phenomenal growth has raised questions because gradually over the last several decades, responsibility for funding your retirement has moved from corporate shoulders and government shoulders to our shoulders and that is raising some doubt about the efficacy of retirement funding despite the second number i just cited in the future. It is something to be thinking about and worrying about as well. Despite the vast sums devoted to requirement retirement there uncertainty about the adequacy of these funds in the future. Now let me step aside and have jesse come talk to you. [applause] thank you. Ng i was just saying the other day up, if three people showed i would be thrilled. Im very happy to see all of you today. I have a history of regulatory reform, and that sounds like a cure for a case of stubborn insomnia. So instead i will title it the history of malevolence in the Investment Business. As a wick worthwhile preliminary, the vast majority of these Investment Businesses today is highly ethical. It is only a few small bad apples the capture all the headlines. But it is worth looking at all those stories and learning something from it. Athave gotten better regulating pernicious behavior because democratization of had ament has also gradual leveling of the Playing Field between the affluent on those in need on the other. Is always with us. Many of the perpetrators have become household names. , party mader, mad off, on and on. Their brand of malfeasance is always around and always criminal. Only behaviors are not ones that are perfectly legal, but regarded as the prerogative of the wealthy. If you have y would you not manipulate the market . If you have information why would you not enrich yourself by trading on the . At . Today, fortunately these are illegal activities and this demonstrates the point remarkably. There was a war raged over the gary railway. And will stars one drew, a cattle driver, a steamboat business operator and whose little formal education belied his remarkable cunning. Biding his time for when the erie railway was in deep distress, he eventually forced his way on the board. Made his position personal profit center. He took a short position in the shares of the company, and then started a rumor that