Never ignore the Fundamentals

When we are looking to explain things, we often dream up all sorts of theories. Economists are especially prone to this, since they have a new, imperfect science, and you can see just how flawed by their inability to spot or remedy a credit crisis.
But often when we look for fancy explanations we forget the very basics. Here are some examples of what I call basics.
First, so much starts with geography. Read Guns Germs and Steel by Jared Diamond. People from unreliable or dark climates tend to get up earlier and get things done. Why? Otherwise the harvest would have been ruined in times past. People from locally dominant states tend to have formal, flowery, language. Why? When they were in charge, they developed airs and graces and rules to keep their subjects in check. Why are the Dutch brusque? I have a linguist friend who claims it is because the Dutch language has so many ways of giving orders, so that when Dutch people translate they get stuck. I don't believe it - the geography came first, the language followed. My theory is about monopoly trading positions associated with the river deltas. People passing through could be asked to pay a toll. No point being polite as they had no choice. No point being flowery or a queue might form. Look at almost any trait of a people, and try to explain it geographically - you'll find you can usually succeed.
Next, look at fertility. Read a typically brilliant report in The Economist last week on this. National wealth depends first of all on how many citizens there are of different age brackets. As nations develop, economies diversify and families have fewer kids, and eventually life expectancy grows. The result is a golden generation, where there are lots of productive adults, but not so many unproductive old and young. No wonder these countries have the most rapid growth! More than anything else, this explains the Asian miracle. The Chinese miracle more than others maybe, since policy led to a steeper fall in fertility than elsewhere.
For us as individuals, look at our parents. Wow, parents have a big influence on how we develop. They are a massive part of our learning system just when the learning system is most acute. The old Larkin poen "They f*** you up, your Mum and Dad" is so true - although in a few cases they might actually have done a decent job. If you want to understand someone better, find out about their parents. If you are a parent, be in awe of your responsibility. Maybe leaving home before the kids are up and getting back after they've gone to bed isn't that smart a life move?
Finally, companies. For all the guff about CEO's and strategies, look at Porters five forces. Who have effective monopolies? Which sectors are inherently less competitive? Which sectors have such growth that the customers haven't worked out their power yet? That probably explains 90% of performance. Plot such trends forwards wisely, and you might make some money on the stock exchange, or be able to choose to work in a rewarding sector. (Oil and Gas is not bad, the competition is less fierce than most areas, for all we like to claim).
Maybe there are other equally important fundamentals. But the Economist reminded me, not for the first time, how easy it is to overlook them.