Warning: non-graphic violence, central banks, and reality

Watch and LISTEN to the following video clip on a challenge fight between a Brazilian jujitsu instructor and a hapkido instructor.



This is not an endorsement of one martial over another. Admittedly, I am biased as Rorion Gracie was my first instructor, and his brother Royce, promoted me as I gained in skill level. Rorion is notable, as he single-handedly imported the now-popular mixed martial arts (MMA) industry from Brazil to the US in the 80's, before creating the Ultimate Fighting Championships (UFC) in 1993, now a multi-billion dollar industry. Of course, Royce, his younger brother, is famous for being a multi-UFC champion.

If you listened to the audio, you'll note that Rorion's narrative gives a brief background on how ground fighting strategies were often overlooked in most martial arts, rendering them useless in a real street fight. All those years of fancy strikes and kicks, while beautiful to spectate, were proven ineffective in 95% of street altercations, according to empirical data by law enforcement agencies. That's why the Gracie clan developed their ground-fighting techniques 100 years ago in Brazil, modifying traditional Japanese jujitsu. Their martial art was fact-based, even though it diverged from other traditional martial arts which had become diluted over the years, emphasizing the sport aspect more than the self-defense or combat aspect. They didn't need police data or market research--they developed Brazilian jujitsu in real-time, making evolutionary and incremental improvements along the way in scientific fashion.

Conventional wisdom in other martial arts (propagated by Hollywood and Chinese films) was that you could quickly end a fight with a strategically placed strike or a kick, assuming the defendant was even skilled, athletic, and flexible enough to execute the technique. Scientific data suggests otherwise--most street altercations start with a clench, and end on the ground, with the stronger opponent usually on top. So if you are weaker, lighter, and unathletic, you better know how to protect yourself on the ground, underneath your assailant. There are no style points in self-defense--the only criterion is survival--or not.

Why do I post this analogy? Let's connect the dots. If you read the previous blog post on infamous quotes, it will give you perspective and context on why our government and central bankers are choosing wrong-headed fiscal and monetary policies. Consensus economic theory among economists, legislators and bankers is that central banks can control economic cycles, mitigating or avoiding altogether booms and busts in the process. Central bank intervention--the thinking goes--can dampen the peaks and valleys. However, history shows that is about as far from the truth as one can get. It would benefit economists to do their homework a little better. Conspiracy theorists claim government economists DO know better, but since re-election is of primary importance, bailouts are more politically pragmatic.

Greenspan's easy money policies created a massive speculative bubble in technology stocks. When that bubble burst, fearing a deep recession, Greenspan artificially lowered interest rates to 1%, attenuating the recession, or so he thought. However, all he did was create another asset bubble--in this case, real estate and mortgages. We all know how that ended up.

Bernanke, with the help of Geithner and encouragement of Obama, Pelosi et al, is pursuing the same policies as Greenspan's--only exponentially larger. Indeed, it is ironic past critics of Greenspan are the same ones who are hailing Bernanke's tactics today (and they ARE tactics, unless you classify demolishing a country's currency and sovereignty a strategy), which are basically Greenspan's policies on steroids.

That Hapkido instructor was expert in his art, and I'm sure was a good instructor. But his widespread ignorance of the benefits of ground fighting put him at a huge disadvantage in a real fight, as he found out the hard way. On the ground, he ended up a fish out of water. By contrast, on the ground, Rorion Gracie thrived, and it was in his best interest to take it there. After all, who in their right mind would go toe-to-toe with Mike Tyson, attempting to exchange punches? Your only chance, in that particular case, is to execute a double leg take-down and pray you don't get knocked out in the process.

Likewise, despite endless academic and industry experience, most of our economists and bankers have pursued a popular, yet flawed economic model--see Keynes' quote on stock market crashes. Central bank intervention creates plenty of opportunities for distortions, corruption, and unintended consequences in our financial systems, to the detriment of our economy. For example, saving "too-big-to-fail banks" damages the balance sheets of smaller, healthy banks and tax-paying citizens. That is not a recipe for a successful recovery.

Like many popular martial arts, it looks good, but when the rubber meets the road, does central bank manipulation really work? In that video, Rorion actually gave that hapkido instructor 3 chances to prove himself and his art. Despite being defeated 3 times handily, he refused to believe what was becoming obvious to everyone there--that years of training had gone down the drain. Not to say hapkido is useless--quite the contrary, hapkido can be very effective against most people. But the glaring fact remained that it was in the best interests for him (and his students) that he had better learn ground grappling techniques in order to really establish himself an expert on self-defense. He had rejected other combat strategies for years--to his detriment, pursuing with tunnel vision an incomplete model. In the dojo, he was granted 3 chances. Out on the streets, a defender gets one and only one chance. How many of his students perished due to false confidence in their fighting skills? It's outright dangerous for a 12 year old black belt to believe he can punch his way out of danger against an attacker twice his or her size. I'd go further and say it's fraudulent for martial arts schools to propagate that line of thinking. Personally, I've seen many challenge matches where our blue belt fighters won against master black belts from other martial arts, including tae kwon do, hapkido, wrestling and karate. Attaining belts is one thing; learning true self-defense is another.

The problem isn't just adoption of Keynesian Economics by our leaders--it's the outright rejection and even lack of acknowledgment of other economic theories, like the Austrian School, which preaches fiscal and monetary responsibility. How many chances do this Administration, legislative body, and central bankers have? Who knows, but given the direction our leaders are taking us, and at this frantic pace, America's status as the world's pre-eminent economic power is in jeopardy. Similar to that hapkido instructor, our elected and unelected government leaders will need a large dose of reality to set in before we can turn this supertanker of our economy around.

RIP Helio Gracie

In one of my few non-financial or non-technology related posts, I just wanted to post a blog in honor of Helio Gracie, who passed away in Rio last night. Why is this important--in light of the fact that he didn't teach many of my classes, as he was more of an honorary professor at his son Rorion's Gracie Academy in Torrance, CA? Or the fact that I didn't know him well, but was taking classes with his famous sons Rorion and Royce far more often?

Simply put, the 95-year-old was a pioneer in every sense. As one of the original founders of the Brazilian jujitsu (BJJ) clan, he developed a unique fighting style which helped narrow the gap for the weak, small, and non-violent, enabling his students and followers to not only defend themselves, but also neutralize an aggressive opponent. At 120-140 pounds, he would regularly defeat the world's toughest men in the world, in a no-holds-barred challenge fight, with no rules, no gloves, and no regrets.

He often defeated opponents twice his size, in a then-unconventional fighting style that would leave opponents gasping for air, or pleading for mercy (by tapping out and declaring a loss). For 80 years, this fighting style was unknown to the rest of the world, until son Rorion raised the exposure on these underground cage fights with the creation of the Ultimate Fighting Championships, now a legitimate, multi-billion-dollar industry. Younger son Royce won 3 of the first 4 round-robin competitions, wearing down opponents despite disadvantages in weight and strength.

But as a true contrarian, Royce and the rest of the family clan continually beat their opponents, using BJJ's expert use of leverage and technique. David really could defeat Goliath--consistently. At the time, the world was shocked that these skinny Brazilian guys could subdued world-class athletes into submission. 16 years later, BJJ is now a staple of any mixed martial arts fighter, thanks to Helio Gracie, and by extension, his sons' teachings. BJJ was no longer a fringe martial art in the endless debate of which art was more effective than another--let's settle it in the ring or cage, and let the results speak for themselves. Well, BJJ spoke, and BJJ won the debate.

But Helio's impact to me is even more meaningful than learning the perfect armbar or rear naked choke. He represents the little guy who persevered into a world-beater, despite obvious disadvantages in size and strength, against a backdrop of ridicule and skepticism. He conquered the best fighters in the world at their own game.

Today, financial markets, societies and even the sovereignty of countries is at risk. If huge money centers have collapsed, what chance does the little investor have in securing his/her financial future? If the game is rigged to benefit the Goliaths--and even some of the Goliaths are bleeding, how is the David supposed to survive?

Helio Gracie has taught me a valuable lesson, and that's to approach life with vigor, independent thought, benevolence, and a thirst for learning and teaching--traits my own later father taught me also. Most importantly, he resonated with my refusal to accept conventional wisdom as truth.

If some deem you "too weak, too small, too dumb, too poor, too unskilled", do not accept that is truth--define your own path. Even if the bully outweighs you by 50 pounds, is stronger, quicker, and faster than you, you can still defend yourself and even teach him a lesson--if you have the patience and determination to learn and work to counteract his aggression. But the most important lesson of all is to somehow allow your defeated opponent to channel his aggression in a positive manner. But protect yourself at all cost. That applies in the real world of self-defense.

In the fun world of sparring, it teaches you that no matter how good you think you are, there is always someone better than you. Better to be humble in that instance. Respect your sparring partners; they could well be your best lifelong friends, and there is honor in tapping out, as well as tapping out your sparring partners. It's not so much an admission of victory or defeat, it is a show of respect for the other person.

In a tournament setting, when all eyes on you and your opponent, animal spirits take over--the fight or flight response. In that environment, there is only one option. And that's when the mind has to calm the body down, blocking out fears of injury, reinforcing strategies and endless hours of training. You tell yourself, despite attempts to moderate hyperventilation, "hey, stick to the game plan, you're prepared mentally and physically, believe in yourself, just go out and do what you do. By the way, have fun while you're at it."

Helio--thank you showing me the little guy can win if he sets his heart and mind to it. Thank you for setting me down the path of self-reliance and self-belief. Rest in peace.

Greg