The Anchoring Effect

Bitcoin and other crypto-related assets have been declining over the first two weeks of 2022. The Wall Street Journal attributes bitcoin’s recent move to the overall decline in the stock market and negative investor sentiment regarding potential Federal Reserve policy actions later this year. However, analysts seem confident that bitcoin should have strong support at the $40,000 level:

On Tuesday, bitcoin rose 1.7% to $42,407. Most observers say the $40,000 level for bitcoin is a line in the sand for the bulls, and they expect a churning trade in this range. “The price action of bitcoin is still likely to remain volatile as a result of a hawkish Fed,” said AvaTrade analyst Naeem Aslam.

Why is $40,000 a critical level? 

Perhaps that level is cited because it is a round number and because bitcoin has not traded below $40,000 in about six months. However, it is not as if the cryptocurrency hasn’t traded well below $40,000 in the recent past — it traded below that level for several months during 2021.

For whatever reason, $40,000 is a “line in the sand” for many observers who either plan to step in with buy orders at that level or expect other investors to do so. They have mentally anchored to $40,000 as a significant level for bitcoin.

Does this make any sense?


When looking at anything that seems irrational at first glance, we need to recognize that the world is an incredibly complex place and that it is not possible for most human beings to function without resorting to heuristics

Modernity has brought enormous material benefits to society but has also increased complexity exponentially over the years. Perhaps even more importantly, our perception of complexity has dramatically increased due to constant exposure to information flowing at the rate of a fully open firehose.

It is impossible to deal with the complexity of the world without adopting heuristics, which are approaches to solving common problems based on short-cuts. If we attempt to solve every problem we encounter by resorting to first principles, the quality of our decision making might improve but the velocity of the world would guarantee that we will fall hopelessly behind when it comes to getting anything done. As a result, we consciously or subconsciously adopt heuristics that might not be perfect but are usually good enough for our purposes.

One of the most common heuristics people adopt is the practice of anchoring to a well-known and easily accessible reference point. 

Anchoring is very evident in consumer behavior. When you arrive at a car dealership, the salesman wants you to anchor on the manufacturer’s suggested retail price of a car, not the true market value based on what customers are actually paying in negotiated transactions. Once you are anchored to the sticker price, the salesman can offer discounts that make the car seem like a great deal. In this scenario, technology has caused more and more customers to anchor on true market value because it can be easily found online. What was once hidden from view is now exposed for all but the laziest consumers to discover. This is great news for consumers but not a welcome development for car salesmen.

There are a number of different types of heuristics that I won’t go into (the Wikipedia article on the subject is actually quite good). My point in bringing up the subject is to recognize that heuristics and both essential and dangerous. In situations where the risk of being wrong is low, using heuristics can save a lot of time especially when you encounter the situation repeatedly. But we must be wary when it comes to using mental short-cuts for any decision that has significant consequences.


It is natural for the owner of any asset to wonder what it might be worth if it is sold. In the case of business ownership, a stark contrast exists between the mentality of an owner of a privately held business and the owner of shares of stock that are actively traded in financial markets. 

If you own a small business, you probably have only a vague sense of what it is worth, and your perception of value is almost certain to be based on how much money you have been able to make over time. If you own a restaurant and experience a few slow weekends, you are not likely to mentally change your vague estimate of what it is worth. But if business is slow for a year and shows no sign of turning around, you will start to slowly update the number that you have in mind. The same is true when business is booming — you will only slowly adjust your assessment of business value.

But the situation is completely different with actively traded securities. The owner of a share of common stock knows precisely what his or her shares are worth at any moment in time when markets are open, down to the penny. The vast majority of owners of common stock or any other financial asset will constantly update their mental model of the value of their investment purely based on the quotation provided by financial markets.

Does this make any sense?

It is obvious that the intrinsic value of a business cannot possibly change on a minute-to-minute basis and that security prices fluctuate far more dramatically than the underlying value of a business. 

Intellectually, most investors will acknowledge that this is the case and that it makes no sense whatsoever to anchor on quotations. 

But the vast majority of them will anchor on stock prices anyway. 

This is because anchoring is a powerful heuristic that is very useful in many contexts outside investing. Since heuristics are useful in general, they can easily be misapplied in situations where it makes no intellectual sense to do so. The fear of losing money and the thrill of making money are powerful forces to reckon with and with stock prices being so readily available, the mental short-cut of conflating price and value is taken by almost everyone.


In March 2020, stock prices plummeted as investors came to terms with the reality of the pandemic and the dire implications for business. In early March, I attempted to take a 30,000 foot view of the correction then underway to assess the actual impact of a temporary lock-down on business values. 

The point isn’t that I was right about forecasting the future course of the pandemic (no one was) but to emphasize that even though we need to anchor on something, we have the ability to choose what it is we will anchor to. 

I was not willing to use market quotes as an anchor point and determined to anchor on some logical assessment of business value. Coping with market meltdowns is impossible if you anchor to market quotes with no further context. This is almost always a recipe for panic selling, not rational behavior.

My largest investment at the time was (and remains) Berkshire Hathaway stock which was being pummeled by late March. I was getting poorer and poorer by the day based on market quotations, but was it necessary to anchor to quotes? Or was there a better way to measure the actual damage?

It is important to not bury your head in the sand when it comes to investing and it was clear toward late March that the world was not going back to normal anytime soon. Rather than anchoring on the quotation of Berkshire Hathaway, I attempted to examine how each of its major businesses would be impacted. 

Did the intrinsic value of my stake in Berkshire Hathaway take a hit in early 2020 due to the pandemic?

Of course it did because the pandemic had a major impact on the business results of the company’s investees as well as its wholly owned subsidiaries. But I came away from the analysis comforted by my assessment that operating earnings were unlikely to be negative or consume cash for extended periods of time:

Despite the inability to be precise, it seems to me that it is highly unlikely for Berkshire’s operating earnings to be negative or operations, in aggregate, to consume cash for any length of time. If there are quarters in which there are operating losses for the group as a whole, Berkshire certainly has ample cash resources to avoid any kind of financial distress.

Like everyone else, I had to anchor to something during that period of great uncertainty. I did not have the option of just not thinking about it, nor did I have the option of pretending that nothing had changed. 

The only recourse was to find something logical to anchor to. 

Anchoring to daily quotations not only makes little sense logically but would be self-imposed mental tyranny and allow random fluctuations to dictate my state of mind. I had to find an alternative, so I did the research needed to write that article much more for my own sanity than for the benefit of my readers.


Since I started this article with bitcoin, I should come back to the subject of cryptocurrencies and how investors are anchoring to price. 

Bitcoin owners are doing what investors in stocks have always done, so in that way their mental model of anchoring is nothing unusual. The difference is that, unlike a business, bitcoin has no underlying fundamentals that can be used to arrive at an estimate of intrinsic value outside of the immediate supply and demand dynamics setting today’s price. 

To be more precise, bitcoin has no fundamentals that I can personally understand well enough to estimate a value independent of its quotation.

The risk of making a statement like this is that it might attract angry comments from cryptocurrency investors who insist that there are fundamentals at work that I am glossing over. 

Fair enough. What are those fundamentals?

Bitcoin owners would likely state that the supply of bitcoin is capped at 21 million and that this amount can never be exceeded. If bitcoin continues to gain acceptance as “digital gold”, incremental demand as it goes mainstream will hit up against a firm supply limitation driving up the price. In contrast, the supply of nearly anything else can increase, including the number of shares outstanding of a popular common stock.

Bitcoin owners also often compare the market capitalization of bitcoin to gold and further note that, unlike bitcoin, gold’s future supply is not fixed. Gold is regularly mined, and a rising gold price is an inducement for more mines to produce more supply. If the price of gold gets high enough, people may even melt down jewelry further increasing supply. But no matter how high the price of bitcoin gets, there will never be more than 21 million coins in circulation in the future assuming the technology works as promised and cannot be hacked or otherwise compromised.

While these points might be valid, it is notable that the argument is still based on supply and demand dynamics, just taking a longer-term outlook. There is still no measure that is independent of supply and demand in the marketplace that we can use to estimate the intrinsic value of bitcoin. I can use the earnings and free cash flow of a business to estimate its intrinsic value. There is no parallel to earnings and cash flow for an asset like bitcoin. 

While I have tried to understand these perspectives and to keep an open mind, I remain unconvinced regarding the value of bitcoin and other crypto assets that have no cash flow or other independent means of assessing intrinsic value. 

But my lack of belief is only ancillary to the point I am trying to make: 

In order to hold any asset, my mind demands that I anchor to something.

I need to form an opinion regarding the value of what I am buying and what I own. In the case of some businesses, I can develop an estimate of intrinsic value which will be updated over time based on criteria that is entirely independent of the stock price itself. I can anchor to that estimate rather than daily stock price fluctuations. 

I have no such option when it comes to bitcoin or other cryptocurrencies. If I owned bitcoin, whether I like it or not, my mind would anchor to its daily price. If the stake was enough to be meaningful to my net worth, anchoring to the daily price of bitcoin would impact my daily state of mind. This is not my idea of a good way to live my life. 


I am not excluding the possibility that other investors might own assets like bitcoin and be able to develop an investment thesis that allows their mind to anchor to an estimate of value that is independent of the price itself. 

Bill Miller, who has fifty percent of his personal portfolio in bitcoin, is not someone who is blindly anchoring to its quotation. He must have some independent idea of the value of bitcoin that he is anchoring to. I am sure that he is not mentally tortured when bitcoin’s price fluctuates against him because he has formed an independent assessment of its value. 

But it is not wise to outsource your thinking when it comes to investing if you are picking securities yourself, nor can you achieve personal conviction or staying power by coat-tailing another investor, regardless of who that investor is.

When it comes to investing, the world is full of assets to own, and it is important to be cognizant of your own capabilities and psychology. What I think is universal, however, is that almost all human beings will anchor to something when it comes to the value of what they own. 

But we get to decide what to own and what metrics to anchor to.

If we are disciplined, adopt the right mindset, and only own assets where the fundamentals are personally well understood, we can then choose what we will anchor to rather than looking only at market quotations.

Anchoring on market quotations exclusively is a recipe for stress, misery, panic selling, and financial loss and therefore should be avoided at all costs. So, it seems logical that we should select investments where an anchor independent of market quotes is possible. This will vary for each investor based on their temperament, background, and analytical skills.

The Futility of Hatred

“Always give your best, never get discouraged, never be petty; always remember, others may hate you, but those who hate you don’t win unless you hate them, and then you destroy yourself.”

— Richard Nixon’s farewell address to White House staff, August 9, 1974

The fact that hatred can destroy is no secret. Ever since the dawn of humanity, continuous war has been the most obvious manifestation of mankind’s tendency to hate. Why is hatred so intractable?

Charlie Munger believes that just as man is born to like and love, we are also born with a tendency to dislike and hate. Modern civilization has channeled hatred in ways that can be less lethal, such as substituting elections for wars, but the underlying tendency never really goes away. We most likely inherited this tendency from our primate ancestors, and we can still see it manifested in monkeys and apes today.

It is obvious that hate has the potential to destroy. How many murders have been committed by people in an uncontrolled fit of rage? What is less obvious is that hatred almost always boomerangs in the end and negatively impacts the person doing the hating. A murderer who is apprehended and convicted of the crime will face decades in prison, often dying behind bars, and still has a chance of facing the death penalty in many jurisdictions. Sure, some murderers are never apprehended but do they really escape destruction in the end?

I am not aware of any religion that does not condemn cold blooded murder or promise consequences for such acts in the afterlife. But it isn’t necessary to delve into religion to understand how hatred can be corrosive to the person doing the hating. With some examination, it also becomes quickly apparent that hatred is destructive even when it falls far short of criminal activity. The mere act of hating other human beings unleashes highly dysfunctional psychological elements that can easily lead to destruction.

When I first read Charlie Munger’s speech on the psychology of human misjudgment in Poor Charlie’s Almanack, I could not help but think of former President Richard Nixon. Although President Nixon was in office when I was born, I was too young to remember his final disgrace and resignation in 1974. What I do remember in later years is the former President occasionally appearing in the news after engaging in various efforts to rehabilitate his reputation and honor. He was clearly trying very hard to appear rehabilitated and to improve his standing in the history books.

But I don’t think it really worked and I think that President Nixon almost certainly knew it wouldn’t work.

Can you image being President of the United States, resigning in disgrace, and then living nearly two more decades knowing that you’ve forever disgraced yourself and will forever appear in history books as the first President ever to resign from office?

I don’t have much sympathy for President Nixon’s plight since it was self-inflicted. He certainly harbored hatred for his political enemies, used the power of his office to battle them, and then covered up crimes committed during the Watergate scandal which ultimately led to his downfall.

No matter what you think about President Nixon, it is hard to not to see the poignancy of his words on hatred as he was leaving the White House. Those are the words of a man who realized his errors far too late.

Hatred is a corrosive force that robs us of our ability to think rationally:

“Disliking/Hating Tendency also acts as a conditioning device that makes the disliker/hater tend to (1) ignore virtues in the object of dislike, (2) dislike people, products, and actions merely associated with the object of his dislike, and (3) distort other facts to facilitate hatred.”

Poor charlie’s almanack, p. 459

Take political differences as an example of hatred in today’s society. The rise of social media and the resulting mob mentality has created an environment of intense hatred over the past decade. It is now common for people to not only disagree with friends and family members who do not share their party affiliation but to totally disassociate from them for no reason other than politics. We have divided ourselves into “red” and “blue” tribes that no longer merely represent political affiliations. I don’t think that it is hyperbolic to wonder whether our politics will eventually result in the murderous “Blue vs. Green” factionalism of the Byzantine Empire.

On a much more practical level, the world is too competitive to allow hatred to impact your dispassionate view of the facts. You may hurt your competitor with an irrational price war, but you also will undoubtedly hurt yourself. You will hurt the highly qualified minority applicant who you pass over for a job, but you will also harm your business by not hiring the best person for the job. Snubbing a longtime friend for posting a political opinion on Facebook that you disagree with may hurt your friend, but you’ve also deprived yourself of friendship.

It is one thing to intellectually understand that hatred is dysfunctional and quite another to decide that we are not going to hate others. After all, there are certainly people in this world who have done great harm, either to society at large or to us personally. Are we not justified when we hate someone who has caused pain and misery, especially when the action was personal and spiteful?

It is possible for two things to be true at the same time: We might be “justified” if we hate someone AND it is still in our best interests to refrain from hating.

Easier said than done, perhaps, but there are viable alternatives to hatred.

You can move from hatred to indifference.

If you have been treated poorly in a personal or business context, disassociate and move on.

Advice columnist Ann Landers had it right when she said that “hanging onto resentment is letting someone you despise live rent-free in your head.”

The only way to halt the boomeranging effect that hatred will have on your own well-being is to decide not to throw the boomerang to begin with.

Note to readers: This article is part of a series on Charlie Munger’s Psychology of Human Misjudgment.

The Revolution That Wasn’t

History does not repeat exactly, but it sometimes does rhyme. Those of us who recall the dot com bubble and the years leading up to the global financial crisis of 2008-09 often look at the crazy things that have been happening over the past couple of pandemic-stricken years and make comparisons to past episodes of market insanity. The reason history can seem to rhyme is that human nature does not change very much over time. The specific examples of fear and greed operating on asset prices are always different but the underlying psychology manifesting in crazy behavior is hardwired.

The story of Robin Hood dates back centuries, and everyone knows about how this legendary character stole from the rich to give to the poor. Robinhood, the company, released its trading app in 2015 with a stated mission of providing “everyone with access to the financial markets, not just the wealthy”. Through its free trading app and the ability to trade tiny fractions of a share of stock, along with easy access to margin, Robinhood indeed revolutionized investing, or more accurately, speculating. But as anyone even mildly familiar with history knows, not all revolutions are for the good and plenty have ended in tears.

What happens when a pandemic forces offices and businesses to suddenly close and stay-at-home orders short-circuit normal social interactions? Thankfully, the internet made it possible for many people to work from home, but 24/7 connectivity also served as a source of entertainment for millions of stressed-out people. While government stimulus checks were no doubt a lifeline for essential purchases, the infusion of funds extended far beyond the truly poor and gave bored people seed capital to be used for gambling purposes. With sporting events cancelled, the great casino known as Wall Street served as a surrogate.

The story of a period of unprecedented speculative excess is the subject of The Revolution That Wasn’t, a new book by Spencer Jakab, editor of The Wall Street Journal’s Heard on the Street column. Jakab tells the story of Robinhood, GameStop, AMC, and other meme stocks (also known as “stonks”) by examining the motivations of the individuals involved, the economics that make “free” trading possible, and the technical details behind the market gyrations. The book, which will be released on January 25, is essential reading for anyone who wants to make sense of the GameStop saga, especially the story of Keith Gill who at one point had made over $50 million on the stock. Although Gill was originally motivated by conviction derived from fundamental analysis, many of the speculators on Reddit were more motivated by “sticking it to the man” — meaning Wall Street billionaires and others who had short positions in GameStop.

The very notion of a buying stock more out of a motivation to harm short sellers than to actually make money is something that I found truly baffling when the crazy GameStop situation unfolded in early 2021. Speculators and investors have little in common in terms of how they operate but I’ve always regarded the ultimate goal of actually making money to be an area of common ground. However, as Jakab documents in some detail, a group of individuals congregating on the wallstreetbets subreddit were so enthralled with the idea of costing billionaires money that they often put that goal above a simple profit motive. Make no mistake about it, individuals such as Keith Gill who made a killing on the stock were revered among the wallstreetbets crowd, but the ability to have “diamond hands” and to keep buying to squeeze the shorts was clearly the paramount objective for many in the community. Solidarity with the goal of screwing over the shorts was the governing ethos of wallstreetbets.

Although I have a theoretical understanding of shorting stocks and the mechanics of derivatives such as stock options, I have never shorted a stock or purchased or sold an option in my life. The potential risk of unlimited losses and my distaste for misery has kept me on the long side and options have never appealed to me. In Chapter 9, Jakab does an excellent job of providing the background needed to understand what the wallstreetbets crowd was doing and how they created a feedback loop that resulted in GameStop’s stock rising into the sky like one of Elon Musk’s rockets. Jakab explains how options acted as a “force multiplier” when it came to exacerbating the short squeeze. If you aren’t familiar with what a gamma squeeze is and how this poured fuel on the fire, you’ll want to read this chapter to find out.

As a long-term investor who has traded less frequently over the years, I consider myself resilient to the worst elements of market psychology, but certainly short of immune. I did not freak out in March 2020 when the pandemic rattled financial markets and I did not grow euphoric in the surprisingly strong bull market that followed. Other than for entertainment purposes, I tune out most news stories about people doing crazy things, but in 2020, I did get curious enough about the Robinhood trading platform to open an account.

Using the Robinhood app was an eye-opening experience. I received a “free stock” which was worth about $5. To test the trading platform, I sold that stock and used the proceeds to purchase Bitcoin which I parlayed into $6.22 before closing my account in disgust. Everything from the confetti showing up after you place a trade, which has since been discontinued, to the promotion of margin trading and the ease of gambling with options militates against every sound principle of investing that I know of. And the results can be far more tragic than losing money: the platform showed highly misleading information to a twenty-year-old trader indicating that he had a negative $730,000 balance. After failing to reach Robinhood’s customer service, the young man committed suicide. Robinhood has since settled a lawsuit with the family.

How does Robinhood and other brokerage firms offer “free” commissions to customers? Brokerages receive compensation called payment for order flow in exchange for directing orders for execution. This practice is controversial because of potential conflicts of interest but it is not obvious that this practice itself harms customers. The real harm stems from the frenetic trading that occurs when transaction activity appears to be costless. Jakab cites a study that found that members of Generation Z open their trading apps 8.2 times a day and traded 147 times per year on average!

With that amount of frenetic trading and human psychology leading people to be fearful and greedy at exactly the wrong times, the decline in visible costs such as commissions pale in comparison to the penalty investors, in aggregate, suffer in the form of lower returns. The vast majority of individual investors cannot hope to beat passive index funds by picking stocks even if they follow a calm and rational approach. In my opinion, the individual investor’s edge is almost entirely a function of timeframe arbitrage — the ability of individuals who are accountable to no one other than themselves to look past the transitory headlines of the day and hold quality companies for years or decades. This advantage vanishes when individuals trade frequently.

The book concludes with a well thought out chapter offering some practical steps individuals can take to benefit from plummeting costs. It is now possible for individual investors to match the overall stock market using index funds or ETFs that charge just a few basis points per year. As Jakab notes, the only certainty with funds is their cost. He also makes a point that the YOLO (“you only live once”) crowd doesn’t seem to get: Losing money early in life can hurt badly. While taking risks when you are young enough to recover can make some sense, I don’t think that enough young people understand that gambling with a $1,200 stimulus check instead of investing it could cost them multiples of that amount in opportunity cost down the road.

Jakab concludes by pointing out that Wall Street isn’t evil or all-powerful. Armed with some basic knowledge and emotional control, there is no reason why individuals cannot greatly benefit from the revolution of lower costs that we have seen over the past several decades. There isn’t much of an excuse for being exploited by Wall Street, and if you really want to “stick it to the Wall Street”, I can see no better way to do that than to passively invest in index funds over a forty-year career while paying five basis points for the privilege.

Disclosure: The Rational Walk received a complimentary pre-release copy of the book.

James Madison: America’s First Politician

If you ask a random American on the street when the United States was born, it is almost certain that you will be told July 4, 1776. There is no doubt that the Fourth of July, celebrated across the country to this day, was a monumental event signifying the independence of the thirteen colonies from Great Britain, but I would argue that the true birth of the United States as a cohesive and unified country arrived more than a decade later when the United States Constitution went into effect in 1789.

The Articles of Confederation, formulated in the wartime environment of 1776 and 1777, was born at a time of urgent necessity as the thirteen colonies banded together to defeat the most powerful military force on earth. The weak central government that the articles created was intended to form a “league of friendship” between what most people thought of as thirteen fully sovereign states. Although the central government was expected to fund military spending and conduct foreign policy, its powers were strictly limited especially when it came to the imposition of taxes. After the war, it became abundantly clear by the mid 1780s that the Articles no longer fulfilled the needs of a young and growing nation.

It is impossible to overstate the importance of James Madison’s contributions to the political process of the late 1780s that led to the ratification of the United States Constitution. Although Madison was only in his mid-thirties during the Constitutional Convention, he was already a well-known figure on the political stage after his service in the Virginia House of Delegates and the Continental Congress. Although small in physical stature, quiet in demeanor, and often overshadowed by Thomas Jefferson, his fellow Virginian, Madison was a political genius. This is the subject of Jay Cost’s new book, James Madison: America’s First Politician. The biography covers the entire scope of Madison’s life, but Cost emphasizes aspects of Madison’s political genius that many readers might not be familiar with. In particular, he sheds light on the question of how Madison could have been such a stalwart ally of Alexander Hamilton during the formulation and advocacy of the Constitution only to become Hamilton’s political adversary during the 1790s.

Over the last two decades, I have read widely on Thomas Jefferson including Dumas Malone’s epic six volume biography along with several more contemporary biographies. Jefferson, despite all of his flaws, remains the Founding Father who I most closely associate with the ideals of the American revolution. But for all of his virtues, both intellectual and political, Jefferson was much more of an idealist than a pragmatist and, despite his polite and refined demeanor, could be highly bitter and partisan. This was especially evident when Jefferson served with Alexander Hamilton in George Washington’s first cabinet. Had Jefferson not been reserved and unfailingly polite in his personal interactions, it is not hard to imagine that Hamilton might have challenged him to a duel — that is how bitter their political rivalry was in the 1790s. But Jefferson played hardball mostly through surrogates, not personally, and it is quite impossible to imagine him in a fistfight, much less a duel.

As a Jeffersonian, I would often come across James Madison since he and Jefferson were not only political allies but best friends throughout their adult lives. Jefferson’s early influence on Madison cannot be overstated. Nearly a decade older, Jefferson was always the senior partner in their political alliance and Madison unfailingly deferred to him especially in the early years. I had long assumed that Jefferson’s service in France during the period in which the Constitution was drafted meant that Madison had fallen more under the influence of Alexander Hamilton and that Jefferson’s return to the United States to serve in the Washington administration caused Madison’s break with Hamilton.

This impression is not at all fair to James Madison based on Cost’s book. Madison was no one’s crony or sidekick, and his political philosophy, while naturally evolving over time, was broadly consistent from the 1780s through 1817 when Madison completed his second term as President. There is no doubt that Madison favored a much stronger federal government than Jefferson would have preferred and that Jefferson’s absence from the United States in 1787 deprived him of the ability to give Madison timely feedback as the Constitution was developed. It is true that transatlantic communication was agonizingly slow in the eighteenth century and weeks would pass before letters would arrive making collaboration between Jefferson and Madison impossible. Had Jefferson not been in France at this key juncture, it seems more likely that he would have been personally involved in the drafting of the Constitution, perhaps supplanting Madison’s role. It is difficult to replay history.

Examining the actual history that took place, Madison clearly wanted a strong central government, in many ways a stronger one than the one that eventually emerged from the convention. The political realities of the 1780s severely restricted how strong the central government could be, and the Constitution was a product of sometimes tortured compromise. Despite his own disappointment with the final draft in September 1787, Madison put his heart and soul into making the case for ratification. The Federalist Papers are a monumental series of eighty-five essays written by Madison, Hamilton, and John Jay over the months following the convention. To this day, the Federalist Papers serve as the key source of insight into the elusive concept of “original intent” since the authors meticulously explain the rationale for Constitution and argue in favor of its ratification.

The notion of “original intent” is interesting because from the very beginning there was heated debate over what the Constitution actually meant. This became apparent immediately after the Constitution went into effect in 1789 and George Washington’s cabinet became a war zone between Thomas Jefferson, as Secretary of State, and Alexander Hamilton, as Secretary of the Treasury. Much to President Washington’s discomfort, the political drama continued even after Hamilton and Jefferson both retired from the Administration.

America’s first political parties soon emerged with Jefferson and Madison founding the Democratic-Republican Party (which was known as the Republican Party at the time but is not the direct predecessor of today’s GOP) and Hamilton founding the Federalist Party.

Americans have been fighting over the meaning and intent of the Constitution ever since it went into effect. Today, we debate the original intent of the founding generation often without being cognizant of the fact that the founding generation itself never agreed on the extent of the powers the Constitution granted to the federal government and what was truly reserved to the states and the people. The Constitution was most flawed in its tolerance for slavery, an original sin only rectified by the thirteenth amendment which was ratified in 1865 after a long and bloody civil war.

Madison and Jefferson were simultaneously indispensable men during the birth of the United States and lifelong slaveholders. Cost doesn’t let Madison off the hook when it comes to the question of slavery noting that Madison did not seem to experience much cognitive dissonance between his political ideals of freedom and his ownership of human beings.

Our task in the early twenty-first century is to somehow reconcile these contradictions without “canceling” our entire history and heritage. Jefferson was the indispensable man behind the Declaration of Independence and Madison served the same role when it comes to the United States Constitution. They were flawed men, but also political geniuses and they embodied the ideals of the enlightenment.

Modern day Americans need to come to terms with the fact that we can simultaneously revere the ideals that animated the founding generation while also acknowledging their failures. Cost’s book is an important contribution toward developing this understanding.


For readers who are interested in James Madison but are undecided about reading the book, I suggest listening to Clay Jenkinson’s interview of Jay Cost on The Thomas Jefferson Hour, one of my favorite podcasts covering early American history. A brief excerpt from the book appeared in The Wall Street Journal in October.


After reading the book, it occurred to me that there is no prominent monument to James Madison on the national mall in Washington DC. Apparently, the only monument to Madison is the building bearing his name that is part of the Library of Congress. The building, which opened in 1980, has a modern style of architecture that I can only describe as nondescript. Years ago, I obtained my library card for the Library of Congress within this building. After I received my card, I immediately took the tunnel under Independence Avenue to … the Thomas Jefferson building which contains the spectacular main reading room.

It seems to me that James Madison deserves a more prominent memorial.

Remembering September 11, 2001

The haunting blue light illuminating the impact zone of the Pentagon came into view, making the headlamp I use for pre-dawn runs unnecessary. As I paused to pay tribute early on the morning of September 11, 2021, I heard taps being played on an unseen bagpipe somewhere near the memorial, a precursor of the ceremonies that would occur later in the day. Two miles into my twenty mile run on the twentieth anniversary of the terrorist attacks, it was still pitch dark as I continued running toward the Air Force Memorial and Pentagon City.

At some point between the tenth and twentieth anniversaries, the terrorist attacks of September 11, 2001 transformed from an event that took place relatively recently to an event that feels more like a part of history. Nearly a third of the population of the United States is under the age of 25, meaning that over a hundred million people in this country have little or no direct recollection of the attacks. They know of these events only through history books and media coverage, as well as what older friends and family members might share with them.

It is exceedingly difficult to explain September 11, what it felt like on that awful day, how everyone alive at the time knew that the world had changed forever, and the sense of national unity that pervaded the country in a way that is nearly unimaginable today. Like Pearl Harbor sixty years earlier, September 11, 2001 marked a turning point in history, a date that lives in infamy, and an event seared into the minds of everyone who remembers it.


My clock radio was set for 4:55 am, but my real wakeup time was always five o’clock, when I heard the CBS radio chime signaling the top of the hour. But on that day, I silenced the radio and slept another half hour. Then I started the coffee and took a shower. At the time, I lived in the rural outskirts of Sacramento, which is in the Pacific time zone, three hours behind New York and Washington, DC. I remember that I was shaving when I heard the first bewildered accounts of a plane hitting the north tower of the World Trade Center. In the seventeen minutes between 8:46 am and 9:03 am, I don’t think anyone understood what was really happening, but at 9:03 am, when the south tower was hit, everyone instantly understood.

For some reason, I kept listening to the radio and did not turn on the television, stunned at what I was hearing. Eventually, I got into my truck, drove through the rural pre-dawn landscape, through the small town of Penryn, and merged onto the interstate heading toward my suburban Sacramento office. I heard about the Pentagon a couple of minutes later, arrived at my office just as the sun was rising, and just sat in my truck, totally stunned for well over an hour listening to the radio. I recall almost nothing about the time I spent in the office that morning, only that I spoke to a few people there and eventually everyone decided to go home. It was only when I returned home in the early afternoon that I turned on the television and saw the horror unfold for myself, the towers collapsing, the people running for their lives, and it was unimaginably worse than I could have possibly imagined.

Unlike so many others, I did not know anyone who died or was injured in the attacks and cannot imagine the horror of not knowing if your friends, family, and coworkers had made it out of Manhattan or the Pentagon safely. There was nothing I could do but watch the news coverage for hours. The United States was under attack and the fact that it was happening nearly three thousand miles away did not make it feel remote.


America’s response to the attacks began at 9:57 am when passengers of hijacked Flight 93, after learning about the attacks on the World Trade Center and Pentagon through cell phone calls, decided that they would revolt rather than allow the hijackers to use the plane to attack Washington DC. Six minutes later, the plane crashed into a field near Shanksville, Pennsylvania. The likely targets included the United States Capitol and the White House.

In today’s fractured society, it is almost impossible to describe the unity of purpose that followed September 11, 2001. I was in my late 20s at the time and had never experienced the level of social cohesion that existed in the weeks that followed. The county was hardly united prior to that point and had just gone through massive political turmoil with the Clinton impeachment and the contested election of 2000, yet the attacks on the country overrode all of that for several months. I imagine that this level of cohesion existed sixty years earlier as well after the Pearl Harbor attacks. When a country is under assault by enemies, and particularly when punched in the gut by cowards in an undeclared war, as was the case in both events, people have a way of coming together.

It is also difficult to describe the prevailing sense that the other shoe was yet to drop. Talk of dirty bombs, chemical warfare, and biological warfare dominated the news. I cannot personally imagine what that was like for people in major cities who had to use public transit and work and live in large buildings in the days and weeks that followed. However, I do know that this fear existed for several years and was pervasive when I moved to the Washington DC area a year after the attacks. And it still existed when I started weekly commutes between Washington and New York City a few years later.


It is strange to try to explain September 11 to young people who have no recollection of it, as I discovered in late 2015 when I walked through the streets of lower Manhattan with my niece and nephew. I was simply unable to explain it, and just could not put the words together. During my work trips to Manhattan, I visited the site several times and followed the agonizingly slow process of rebuilding, and yet I could not articulate what had taken place. But it is important for those who have recollections, even those like me who were thousands of miles away from the attacks, to explain what happened, to articulate our recollections as citizens, and to ensure that September 11, 2001 is not forgotten.

People often take for granted the gift of life, the fact that for a brief time, we exist on earth and are blessed with all of the possibilities of life. That was taken away from nearly three thousand people twenty years ago and life was forever altered and tarnished for their loved ones. The same is true for the soldiers who have died or suffered life changing injuries over the endless wars of the past two decades, and it is true for their families. I find it repugnant when I see a lack of appreciation for the gift of life and for the sacrifices that have been made by those who have served. Through all the vicissitudes of life, one must never forget that we have something that so many others have lost.

As I continued my run from the Pentagon into Washington DC, the sun rose as I passed sights including the United States Capitol and the White House, both spared from attack by the heroes of Flight 93. I could not help but think about the fact that it will not be very long before a majority of Americans have no recollection of that terrible day. I have nothing particularly profound to share beyond what I have written here, but it is still better than writing nothing at all.


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