Update No. 250 – 15/01/16

The passions of life are stronger than the disciplines of the institutions. So it was said in Naples, where I spent three days & nights this week.

The fact that the per-capita GDP is around half of northern Italian cities such as Milan is absolutely unsurprising after you have visited both places. The influence of the bordering Swiss & Germans is unmistakeable in Northern Italy. You can almost feel the work ethic, productivity and the propensity for rule-following fade with every southward Italian kilometre.

I commented to my traveling companions this week how interesting it is that a culture can embed itself so deeply and widely. Naples has clearly been a wealthy and prosperous city at one time, but those days of prosperity are also very clearly in the past. Cultural fade I would hazard is responsible. The concerning thing is that the Neapolitans seem to celebrate the very culture that holds them back from a better lifestyle.

Like all cultures, the chaotic Neapolitan philosophy has developed over time and is now so deeply embedded as to be seemingly irreversible. I observed a traffic Police officer standing mouth agape with his ticket book in the middle of a busy intersection with innumerable offences going on around him. Doing nothing. He looked like he felt powerless. Like all cultures, if Neapolitans ever hope to experience the prosperity of their Northern counterparts, they will need to adopt a new, or somehow drastically alter their culture. In the same way New York meaningfully reduced its crime rate via a ‘zero-tolerance’ style period of law-enforcement, citizens of Naples would need to submit to an extended period of a similarly aggressive rule-enforcement policy as a ‘cultural circuit-breaker’. At least if they ever hope to reach a similar level of productivity and prosperity as Northern Italians.

The interesting thing about the lack of rule-following, particularly on the roads is how rapidly your own behaviour can degenerate through necessity in order to ensure you are not left disadvantaged. Game theory necessitates that you act, or are left squashed in the chaos. But as with any game theory action, if enough people pursue their own self-interest, eventually everyone is disadvantaged. We saw a Police officer driving beside us, steering his banged-up little Police vehicle with his knees as he sent a text or perhaps an email with both hands. Eventually, when a culture is fully embedded, even those that should facilitate societal order give-up.

I write this as we travel two hours north to Rome. As with the standard north/south rule I mentioned earlier, Rome will be slightly more organised, cleaner and more efficient, but it’s only two hours’ drive, so not meaningfully so.

The week was very good to us in relative terms again this week. Our advantage over the market is at a new high for FY2016 and consequently our advantage over the market has hit a new all-time high. I am aware relative performance doesn’t put food on the table, but as I repeatedly say, if we can generate outperformance in down markets, it positions us very well to provide sound actual results over the longer term – Tony Hansen 15/01/2016

EGP Fund No. 1 Pty Ltd. Up by 3.30%, leading the benchmark by 9.96% since July 1^st 2015. Since inception, EGP Fund No. 1 Pty Ltd is Up by 91.81%, leading the benchmark by 64.49% all-time (April 1^st 2011).