Chapter 20: How to Read Minds

Jesse Livermore, the legendary stock trader of the early twentieth century, didn't just study charts and ticker tape. He read Freud, Jung, and Aristotle. He understood that markets are not driven by numbers alone but by fear, greed, and ego: the raw material of human nature. Politicians, investors, and business people who want lasting success must study human nature, because every domain that matters—wealth, power, relationships—runs through other people.

Is Human Nature Real?

Some resist this idea. They want to believe that people are infinitely malleable, shaped entirely by culture, and that violence, jealousy, and competition are Western inventions rather than human constants. This is the myth of the noble savage, and it has been thoroughly dismantled.

The myth is Rousseau's, but the anthropologist Margaret Mead gave it scientific credibility. She claimed to have found island cultures where sexual jealousy was absent and violence unknown, places where free love replaced competition and conflict. Her work stood as settled science for decades. Then Derek Freeman went back to the Samoan islands Mead had studied and found the opposite: rates of murder and rape higher than in the United States, and men every bit as sexually jealous as anywhere else. Freeman's findings triggered a storm of criticism, but subsequent research substantially supported him. As the psychologist David Buss notes, male sexual jealousy turns out to be a human universal, and the leading cause of spousal homicide across every culture studied.

Buss frames the deeper point well: every psychological theory, whether Freud's sexual and aggressive impulses, James's catalog of instincts, or even Skinner's radical behaviorism, rests on some fixed account of human nature. Jonathan Haidt goes further: "The worst idea in all of psychology is that the mind is a blank slate at birth." Strip away the guns, the culture, the century, and people still compete, still deceive, still fight for status.

Why Study Human Nature?

Understanding human nature is the closest thing to reading someone's mind, and it gives you an edge in nearly everything you do.

Consider a fight. Even in a UFC title bout, both competitors walk in nervous. Attack immediately and aggressively, and you confirm their fear: this opponent is better than me. Doubt takes root before they've thrown a single strike. Start slow instead, and you let them settle into false confidence, which often costs you the match.

The same principle, reading what a person expects and using it against them, applies far beyond combat sports. Alfred Adler saw it as the foundation of a well-lived life. In What Life Should Mean to You, he wrote that "it is the individual who is not interested in his fellow men who has the greatest difficulties in life and provides the greatest injury to others. It is from among such individuals that all human failures spring."

James Madison understood this better than most. "What is government," he asked, "but the greatest of all reflections on human nature?" If people were angels, Madison reasoned elsewhere, no government would be necessary at all. Because they aren't, every constitution, every institution, every law is an attempt to organize human nature rather than transcend it. A government is human nature scaled up and given the power to enforce itself.

Power Before the Vote

Power does not come from the right to vote. The right to vote comes from power.

That ordering is not an accident of history. It follows from what people are: rights get conceded to those who can already impose a cost, and rarely to anyone else. A man voted because he held land, wealth, or arms, and the vote merely certified what he could already enforce. Democracy inverted the appearance of this relationship without changing its substance. When everyone can vote, no single vote carries much weight, and the diffusion of the franchise masks where power still concentrates: in organized factions, capital, and force.

Mary Ellen Pleasant worked this out for herself. She arrived in Gold Rush San Francisco a free Black woman at a time when California law barred her from testifying against a white man in court—no vote, no standing, no recourse. What she had was a read. Wealthy men said anything in front of the woman serving their dinner, because they did not think of her as someone who could act on it. So she took work as a cook and housekeeper in the households of the city's richest speculators, and let them keep believing it. She listened, and she invested what she heard: mining stock, real estate, loans to miners at ten percent. By the 1870s she was worth an estimated $30 million. Then she spent it—bankrolling John Brown, buying people out of slavery, and suing the streetcar company that wouldn't stop for her. She never got the vote. She got leverage, which is what the vote had been standing in for all along.

The history of politics therefore reads less like a story of progress toward equality and more like a story of shifting coalitions fighting over scarce resources. Arthur Schopenhauer saw the pattern clearly in war. "Does not all history show that whenever a king is firmly planted on a throne, and his people reach some degree of prosperity, he uses it to lead his army, like a band of robbers, against adjoining countries?" he asked in Counsels and Maxims. Conquest, he argued, is organized theft: the conquered once became slaves and worked for their conquerors, which is not so different from a population paying war taxes that represent the product of its own labor.

In any contest over a scarce resource, the side that organizes into a unified faction beats the side that does not. This is why humans keep collapsing into two opposing camps rather than many competing ones. But victory never settles the matter. Balaji Srinivasan has observed that winning coalitions almost always fracture once the external threat disappears. The U.S. and USSR, allies against Hitler, became Cold War rivals within years of victory. The U.S., triumphant after the Cold War, turned that energy inward and split into hyperpolarized camps. A sufficiently strong leader can delay the splintering, but the division of any victorious group into new left and right factions is close to inevitable.

Which Nations Break

The Teacup Test

A teacup does not benefit from a shock. This is the insight at the heart of Nassim Taleb's theory of fragility, which he and Gregory Treverton applied to nations in a 2015 paper. You cannot predict what will happen to a country, they argued, but you can predict how a country will respond to what happens. Some systems absorb chaos and grow stronger from it. Others shatter at the first real test. The difference lies in five traits: a centralized governing system, an undiversified economy (think Japan's dependence on automobiles or Botswana's on diamonds), heavy debt and leverage, a lack of political variability, and no track record of surviving past shocks. Countries that swing moderately between parties, the way the UK shifts between Labour and Conservative rule, prove more stable than those that appear rigidly calm. Stability is not the absence of change; it is the capacity to change without breaking.

Why Power Concentrates

A government's weaknesses are human weaknesses given institutional form, and the first of those is the appetite for control. Centralization is fragile because power concentrates naturally. Historian Will Durant observed that most governments have been oligarchies, ruled by a minority selected through birth, religion, or wealth. A majority, he noted, can rarely organize itself for unified action, while a minority can.

This is why unfiltered majority rule—one person, one vote, with no mechanism standing between a temporary majority and the levers of state—tends to fail. A majority that can vote itself anything eventually does, and the minority it outvotes has no recourse but force. Unchecked majority rule does not produce freedom. It produces tyranny with a wider franchise.

If concentration of power is unavoidable, the real question becomes how a society limits its damage. Karl Popper offered the clearest test: the quality of a democracy depends not on who rules, but on how easily bad rulers and bad rules can be removed.

The Unsolvable Trilemma

This tension points to a deeper problem that no ideology has solved. Steven Pinker called it the fundamental paradox of politics: no society can be fair, free, and equal all at once. Fairness allows those who work harder to accumulate more. Freedom allows people to pass their wealth to their children. But this collides with equality, since some will then inherit what they never earned. Choose any two, and the third gives way. Socialism, communism, and capitalism are less competing economic theories than competing answers to this trilemma.

Socialism and Communism

Beyond the scale at which kinship and reputation can hold people together, societies coordinate in one of two ways: through free markets or through physical power. Any ideology that rejects markets is, whether it admits it or not, advocating for power instead—which is why socialism, communism, and fascism all converge on a single endpoint: rule by whoever is willing to seize the most control.

The economic case against socialism is straightforward: equal outcomes kill the incentive to produce. Lee Kuan Yew, who took Singapore from a poor country with no natural resources to one of the richest countries on earth, put it plainly. When people receive equal handouts regardless of effort, everyone works less, and the country declines. It is only when people can keep a large share of what their extra effort earns that a society grows wealthier and its people prosper.

If the economics are this clear, why does socialism keep returning? Balaji Srinivasan offers the simplest answer: it is the lowest-skill path to leadership. In any functioning society, you can stand up and declare that 51 percent is oppressing the other 49, and it will work. Conflict draws attention, and attention is currency. Find an unjust-sounding axis, pit one faction against another, and you can install yourself at the head of a mob with minimal effort or ability. It works because of something fixed in people rather than something particular to an era: the appetite for a grievance that explains one's position, and the willingness to follow whoever supplies it.

George Orwell watched this from inside the movement itself. Writing in The Road to Wigan Pier, he observed that socialism in its developed form was a theory almost entirely confined to the middle class: not the greasy, overalled worker of popular imagination, but the snobbish young Bolshevik destined for a wealthy marriage, or the prim, teetotaling clerk clinging to a social position he has no intention of giving up. Orwell's sharpest line: "most middle-class socialists, while theoretically pining for a classless society, cling like glue to their miserable fragments of social prestige."

The Price of Free Money

In 2022, Business Insider revealed that the rapper Lil Wayne had received an $8.9 million grant from a pandemic relief program meant to save shuttered music venues and arts groups, and used it to fund two years of designer clothes, luxury hotels, and travel between nightclub appearances. His stylist spent over $8,600 in a single trip to a high-end boutique: a $1,990 Balenciaga sweater, a $405 Raf Simons cap, $950 Marni pants, all paid for by taxpayers. The program, signed into law in 2020 and championed by lawmakers on both sides of the aisle, was built on a simple assumption: give people free money, and they'll use it as intended. They rarely do. They take it, whatever strings were meant to be attached. The assumption was about people, and it was wrong about people. The program was designed for the citizens its authors wished existed, and it met the ones who actually exist.

The 2008 banking crisis ran the same play at a larger scale. Robert Rubin, a former Treasury Secretary, collected more than $120 million from Citibank in the decade before the bank went insolvent and had to be rescued by taxpayers. Nassim Taleb, in Skin in the Game, described the mechanism precisely: heads he wins, tails he blames uncertainty. Rubin never wrote a check to cover the losses; instead, in Taleb's accounting, "Spanish grammar specialists, assistant schoolteachers, supervisors in tin can factories, vegetarian nutrition advisors, and clerks for assistant district attorneys" absorbed his risk and paid for it. The public, already primed to distrust financiers, concluded that markets themselves were corrupt. They had it backwards. Free markets punish bad bets. Bailouts erase the punishment and hand the bill to someone else.

Minimum wage laws rest on a similar wish: that prosperity can be legislated into existence without cost. When California raised its fast-food minimum wage 25 percent, to $20 an hour, in 2024, Chipotle announced it would raise prices to cover the difference, and two Pizza Hut franchisees laid off more than 1,200 delivery drivers. The law did not eliminate low-wage work. It moved the cost—onto customers through prices, and onto the drivers who no longer had jobs at any wage.

The Modern Wealth of Nations

Wealth Is Made, Not Taken

For most of human history, the surest path to riches was violence. Stalin and Alexander the Great built fortunes on conquest, and every ruler who followed them lived with the same paranoia: someone, somewhere, was sharpening a blade or mixing a poison. Capitalism broke that pattern. Bill Gates and Mark Zuckerberg did not seize their wealth; they built something people wanted and exchanged it freely.

None of this is a claim that markets are pure. Corporations, as Nassim Taleb observed, do not feel shame, pity, or honor; they are structurally built to deliver the cheapest product that still meets specification. The economist Frank Knight saw all of this clearly and still defended the system, because he judged every alternative worse. Every attempt to replace markets with central planning has failed, and the test that matters is not theory but results. In capitalist nations, millions still live in poverty. But billions have escaped it, and that fact should not be buried under the exception.

The deeper misunderstanding is that wealth is fixed, a pie to be divided rather than grown. Steve Jobs didn't steal iPhones from anyone. Nobody had iPhones before he made them. Jobs and Wozniak did not have to make anyone poor to make themselves rich. They had to make something people's lives were better for having, or no one would have paid them.

The Competence Constraint

Elon Musk described the job of CEO without romance: you hire the smartest people you can find, and then they bring you the problems they could not solve. Running a company means inheriting its worst problems, because there is no reason to spend time on what is already going right. People who claim that with enough money they could have built Tesla or SpaceX miss what limits progress. NASA has a larger budget than any private space company and still trails SpaceX, because technology is not capital-limited; it is competence-limited. There is no factory that produces excellent engineers.

The smartest strategy, for a company or a country, is therefore to recruit exceptional minds. In the 1960s, Jamaica and Singapore left British rule with comparable economies. Jamaica bet on tourism and natural resources. Lee Kuan Yew bet on attracting the most capable businesspeople in the world to build in Singapore. He understood that human knowledge is the scarcest resource, and that a business is the most efficient machine for turning that knowledge into wealth.

The Open Society

That competition for talent depends on something more fundamental: a society open enough to let ideas fail. Karl Popper argued that no truth should be treated as permanent, because only a system that tolerates challenge can correct its errors and improve. This is what makes an open society a prerequisite for innovation. Free speech is not just a political ideal; it is an engine of knowledge.

The right to speak freely does not defend itself. As Naval Ravikant observed, without the First Amendment there is no freedom, and without the Second, there is no First. The premise holds for constitutions too: a government is made of people, and people holding unchecked power take more of it. The right to bear arms is a check against that tendency—a guarantee that no government can strip away speech and assembly without a fight. Disarmed democracies have protected speech for decades, so the short-run case is weak. The long-run case is not. Over a long enough horizon a capable and ambitious autocrat will find the opening, and by then the means of resisting have to already exist. Seeing this requires thinking in decades rather than news cycles, which is why most people miss it until the moment has passed.

Technology is what finally makes prosperity available to everyone, not just the clever or the connected. The historian Will Durant described the shift a century ago: the menial labor that degraded both master and worker would be lifted from human shoulders and harnessed to "the tireless muscles of iron and steel," freeing people for the work of the mind. It is not revolution but invention, he wrote, that liberates the laborer.

The Noble Loser

Rob Mather had already won at the safe game. Harvard, then consulting, then a business executive's salary, the kind of life most people spend their whole career chasing. At thirty-something he decided to start a charity, and instead of picking a cause that felt good, he ran the numbers like an investor. Heart disease was a rich-world problem. Cancer research already had money. Landmines were too political. Clean water needed a trillion dollars he didn't have. Then he found malaria: 500 million cases a year, 3,000 dead children a day, and a solution that cost five dollars a person—an insecticide-treated net. "Bloody hell," he thought, "why isn't more money being put towards this?" He didn't write a check and feel better about himself. He built a fundraising swim, then applied what he called the twenty-minute rule: if he wanted a million people involved, how would he get there in twenty minutes? He started with twenty phone calls to twenty well-connected strangers, each asked to find 5,000 swimmers. That effort became the Against Malaria Foundation, now rated among the most effective charities on earth, having raised over 700 million dollars, distributed more than 200 million nets, and saved, by conservative estimate, more than 100,000 lives.

Contrast Mather with what Rutger Bregman calls the Noble Loser: "the fool who thinks good intentions are enough, someone whose clear-eyed convictions put them squarely on the right side of history, but who achieves little in the here and now." The Noble Loser believes success itself is suspect, that ambition is dirty and failure is proof of virtue. It is not a moral failing so much as a predictable one. The desire to be seen as good is older and stronger than the desire to do good, and it is cheaper to satisfy.

The Belief-Behavior Gap

The deeper flaw is believing awareness counts as action. Psychologists call the gap between what people believe and what they do the belief-behavior gap: people who call factory farming cruel and still eat meat, who call flying destructive and still fly, who call taxes too low and never volunteer or organize. Politics gets treated as entertainment rather than labor. Most self-described political junkies vote occasionally and rant often, a habit researchers term political hobbyism, closer to following a sports league than building power. George Orwell diagnosed why: in private life, two and two make four, but political opinions never get tested against reality the way a household budget does, so people indulge contradictions they'd never tolerate anywhere else.

History offers a harsher version of this. During the Nazi occupation of the Netherlands, most Dutch citizens privately opposed what was happening to their Jewish neighbors, yet they did nothing to stop it. Public officials drew up the lists, police made the arrests, and the railways ran the trains. Historians call the postwar story of a nation united in resistance the resistance myth: convenient, comforting, and false. Sympathy without risk changed nothing. Arnold Douwes, one of the few who actually hid people, thought most of his countrymen were cowards dressed up as decent.

Modern protest often runs on the same fuel: outrage that spreads fast and demands little. The sociologist Zeynep Tufekci argues something shifted after Rosa Parks. "In the past," she writes, "a truly big march was the culmination of long-term organizing, an exclamation mark at the end of a sentence." Today's protests are more often the outburst itself, with no sentence behind them. The 2020 Black Lives Matter marches brought over 15 million people into the streets in weeks and produced little durable legislation. Patrisse Khan-Cullors, a Black Lives Matter co-founder, put it bluntly: organizing isn't "going online and cussing people out or going to a protest and calling something out." It's coalition-building, lobbying, fundraising, knowing which committee chair to call and which bill to amend, skills that take years to learn and rarely trend on social media.

Competence Before Conscience

The way out runs through capability. Build something valuable first, then point it at real problems. Margaret Thatcher said it best: "No one would remember the Good Samaritan if he'd only had good intentions. He had money as well." Katharine McCormick funded the birth control pill when no one else would write the check. Bill Gates funded a malaria vaccine when governments wouldn't. The lesson isn't that charity is worthless, but that competence has to come before conscience, or the conscience has nothing to work with.