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Reading Notes | Civilization, Modernization, Value Investing, and China (Part One)

The true journey lies not in seeking new landscapes, but in having new eyes.

Preface#

During the time around the Dragon Boat Festival, I have been reading Li Lu's "Civilization, Modernization, Value Investing, and China," which is truly an exceptional book. I have previously read many books related to history, politics, and economics, but they were all one-sided and fragmented knowledge. Now, through the author's perspective, the entire civilization system is established, and having a holistic view makes it much easier to analyze the parts.

His erudition, curiosity, and honesty towards knowledge are truly impressive. Here is an excerpt from Li Lu's resume:

He graduated from Columbia University with three degrees - a Bachelor's degree in Economics from Columbia College, an MBA from the Business School, and a JD from the Law School. He is the first student in Columbia's history to earn three degrees simultaneously and spoke as a student representative at Columbia's graduation ceremony in 1996.

The book contains a wealth of content, and merely transporting golden sayings would be too monotonous. Therefore, I will only organize and record three parts of the content along with my thoughts:

• • The three stages of civilization development and their evolution (this article)

• • Value investing is a process of self-discovery

• • Reading, thinking, and self-exploration.

This article mainly records and organizes the first part: the three stages of civilization development and their evolution. I will write two more articles to document the second and third parts, so please stay tuned.

Zero, Definition of Civilization and Stage Division#

Civilization is defined as all the achievements created by humanity using its own resources and those in the environment during survival and development. This is different from culture, which is used to distinguish differences between different regions and groups, while civilization is used to describe the commonalities of human development and to distinguish humans from animal ancestors.

The stages of human civilization development are divided into three parts: gathering and hunting civilization or 1.0 civilization; agricultural and pastoral civilization or 2.0 civilization; and technology civilization or 3.0 civilization, led by the Industrial Revolution.

One, 1.0 Civilization - Gathering and Hunting Civilization.#

The Earth has a history of 4.5 billion years, life has a history of 1.5 billion years, while humans have only a history of 150,000 years. The natural environment has a crucial impact on life forms. Harsh conditions only allowed Homo sapiens to live in the preferred areas of Africa near the equator. On one hand, due to climate change, and on the other hand, influenced by the original environment: from 60,000 years ago to 12,000 years ago, humans took tens of thousands of years to leave Africa, occupying the southernmost tip of South America, spreading across the entire Earth at an average rate of one mile per year. The first leap of human civilization was the leap out of Africa.

Although the way of life did not change significantly when humans left Africa, it marked the first leap of civilization, greatly reducing the possibility of extinction and increasing genetic diversity and adaptability. When survival conditions emerged in certain areas, the ability of humans to seize opportunities was fully formed, laying a solid foundation for new leaps.

Two, 2.0 Civilization - Agricultural and Pastoral Civilization#

Global warming is a gift from the Earth to humanity. In the fortunate region of the two river basins, the geographical advantages of natural resources nurtured agricultural civilization, leading to the second great leap of human civilization. Geography determines not only the natural endowments of a region but also the opportunities for communication with the most advanced civilizations, resulting in developmental disparities among different regions. Agriculture itself is an advancement of human civilization, and the energy and organizational capabilities that societies at this stage can harness and utilize far exceed those of 1.0 civilization.

Competition and assimilation. When agricultural populations enter regions still relying on gathering and hunting as their means of production, competition will arise. When two civilizations with vastly different strengths encounter each other, the advanced civilization will inevitably conquer the backward civilization. Although different regions have developed different lifestyles and cultures, from the perspective of civilization development itself, given enough time, advanced civilizations will ultimately spread to all accessible areas through colonization, imitation, and assimilation.

The ceiling and peak of agricultural civilization. The social development of agricultural civilization has a ceiling due to inherent bottlenecks: the energy generated by photosynthesis is limited by land area and output. Limited resources and nearly infinite population growth determine that population growth can ultimately only be digested and constrained by non-natural disasters. The iron law of agricultural civilization is its bottleneck. Overall, the disasters faced by humanity during the agricultural civilization era are mainly caused by five reasons: famine, wars caused by population movement, plagues, climate change, and regime failure.

Although agricultural civilization faces challenges, there have been at least three peaks over thousands of years, constantly innovating in response to challenges. Each decline and destruction period following a peak of civilization serves as a tempering process for the people of the time, allowing them to endure suffering and feel pain. However, pain often becomes a source of revolutionary thought. Confucius, Siddhartha Gautama, and Socrates had astonishingly consistent ideological directions during this stage. Their common characteristic is that they were all on the fringes of the civilization of their time, pondering the pain of ordinary people after the destruction of civilization, the struggles of marginalized individuals, and the groans of the lower classes.

The institutional innovations of the agricultural civilization stage first include the evolution from low-level management states to high-level management states. For China, from around 500 AD to about 1770 AD, China was approximately 1200 years ahead of the West. The establishment of the imperial examination system was one of the important reasons that propelled China to the forefront. This system largely resolved the administrative issues of a vast empire, ensured a long-term peaceful environment, formed a large-scale trade market, promoted technological exchange and widespread application, developed culture, and possessed the ability to cope with hunger, plagues, and invasions by foreign tribes, allowing China to lead the world for over a thousand years thereafter. (The second greatest institutional innovation of humanity is the imperial examination system, which allocates political power based on knowledge, learning, and ability.)

Three, 3.0 Civilization - Technology Civilization Led by the Industrial Revolution#

The discovery of the Americas and its epoch-making impact. The first humans entered the Americas around 15,000 years ago when the ancestors of modern humans left Africa and walked directly into the Americas via the Siberian continental shelf. However, after 12,000 years ago, due to the end of the Ice Age, global warming, and rising sea levels, this land bridge no longer existed. Columbus set sail, hoping to find Asia by sailing across the Atlantic, and accidentally discovered a completely new continent. He mistakenly believed he had reached India and referred to the locals as Indians. This discovery not only changed the history of Europe but also completely altered the trajectory of human history.

The formation of the economy of the Americas and the Atlantic established limited government protection, surrounding a global free market economy, and promoted the birth of the modern scientific revolution. The steam engine and Newton's principles of natural philosophy emerged in the same phase, marking the official start of the Industrial Revolution, where science and technology formed a virtuous cycle, influencing and promoting each other, allowing humans to master nature at an unprecedented level in a short time. The new type of free market economy around the Atlantic, together with the scientific revolution, provided fundamental conditions for the birth of modernization. (The free market economy based on modern technology is an institutional innovation that ultimately led humanity into a brand new stage of civilization.)

Humans, by nature, emotionally pursue equality of outcomes and rationally pursue equality of opportunities. The pursuit of equality of outcomes ensures that any progress in human civilization will ultimately spread to every corner of the Earth; societies that establish systems providing equality of opportunities will prosper, progress, and maintain long-term stability.

Through the mechanism of the free market, modern technology has led to an infinite increase in the variety of products and a decrease in costs, combined with humanity's infinite demand, thus creating modern 3.0 technology civilization. Through the mechanism of the free market, modern technology has led to an infinite increase in the variety of products and a decrease in costs, combined with humanity's infinite demand, thus creating modern 3.0 technology civilization.

The ancients said, "Reading ten thousand books and traveling ten thousand miles." Living in today's era, acquiring knowledge is relatively easy, but there are also downsides: the noise of the internet is increasing, filled with extreme viewpoints, and facts and truths seem less important. For us today, in addition to IQ and EQ, having strong self-discipline and seeking true knowledge from the internet is a significant challenge to our own abilities.

Endless entertainment and the pursuit of pleasure, dopamine and endorphin stimulation are probably not our ultimate pursuits. What do we need? What lies behind the bronze door? Is it a void? Before reaching the other shore, before arriving at the void, maintaining curiosity about the world, being honest about knowledge, and being humble yet filled with awe is perhaps the most basic pursuit.

For scholars throughout Chinese history, self-cultivation, governing the country, and managing the world—where have those scholars gone in today's market economy? They should not be the so-called experts, nor should they be the emerging AI creators of chatgpt. The great sound is rare, the great form is invisible. Fortunately, the author of this article and the related old-timers of value investing are such a group of people. I can call them the gentry under the market economy.

So what is value investing? Value investing was first formed by Benjamin Graham about eighty or ninety years ago. In value investing, the important leading figures today, of course, include the well-known Mr. Buffett. But what concepts does it encompass? It's actually quite simple. The philosophy of value investing consists of only four concepts. Remember, only four. The first three are concepts from Buffett's teacher, Benjamin Graham, and the last one is Buffett's unique contribution.

• First, stocks are not just tradable securities; they actually represent a certificate of ownership in a company, a partial ownership of the company. This is the first important concept. Why is this concept important?

• Investing in stocks is essentially investing in a company. As the GDP grows, the value itself will be continuously created during the sustained growth of the market economy. Therefore, as partial owners, our share of the value will also grow with the company's value. If we invest as shareholders and support this company, we will receive our rightful benefits as the company's value increases. This path is sustainable. What is the right path, and what is the wrong path? The right path is that what you receive is what you deserve, so such investment is a broad and righteous path. However, very few are willing to understand stocks this way.

• Second, understanding what the market is. Stocks are, on one hand, partial ownership, and on the other hand, they are indeed tradable securities that can be bought and sold at any time. There are always people making bids in this market.

• So how do we understand this phenomenon? From the perspective of value investors, the existence of the market is only for your service. It provides you with opportunities to purchase ownership and also gives you the chance to sell it for cash when you need money many years later. Therefore, the existence of the market serves you. This market can never tell you what the real value is. It can only tell you what the price is. You cannot treat the market as your teacher; you can only treat it as a tool to utilize. This is the second very important concept. However, this concept is almost the opposite of the understanding of over 95% of market participants.

• Third, the essence of investing is predicting the future, and the results of predictions cannot be 100% accurate; they can only range from zero to nearly one hundred. Therefore, when we make judgments, we must leave a large margin of safety. Because you cannot discern, no matter how confident you are, you must remember the margin of safety. Your purchase price must be significantly lower than the company's intrinsic value. This concept is the third most important idea in value investing. Because of the first concept, stocks are actually part of a company, and the company itself has value and intrinsic value, and the existence of the market serves you, so you can wait until the market price is far below the intrinsic value before buying.

• When the price far exceeds its value, you can sell. In this way, if your prediction about the future is wrong, at least you won't lose much money; often even if your prediction is correct, for example, if you are 80% or 90% sure, but because it cannot reach 100%, when that 10% or 20% possibility occurs, the result is still detrimental to your intrinsic value. However, if you have enough margin of safety at that time, you won't lose too much. If your prediction is correct, your return will be much higher than others. You should always require a huge margin of safety in every investment; this is a skill of investing.

• Fourth, Buffett, through his 50 years of practice, added a concept: investors can truly establish their own circle of competence through long-term persistent effort, gaining a deeper understanding of certain companies and industries than almost everyone else, and being able to make more accurate judgments about the long-term performance of companies than anyone else. Within this circle is your unique ability.

• • The most important aspect of the circle of competence concept is boundaries. An ability without boundaries is not a true ability. If you have a viewpoint, you must be able to tell me the conditions under which that viewpoint does not hold; only then is it a true viewpoint. If you directly tell me it is just such a conclusion, then that conclusion must be wrong and cannot withstand scrutiny. Why is the concept of the circle of competence important? Because of "Mr. Market."

• What is the purpose of the market's existence? For market participants, the purpose of the market's existence is to discover human weaknesses. What aspects of yourself have you not truly understood? What psychological and physiological weaknesses do you have? They will definitely be exposed in some state of the market. Everyone who has ever rolled in the market knows what I mean by this. The market itself is a combination of everyone. If you do not understand what you are doing, the market will definitely defeat you at some moment. This is why the stories heard in the market are all stories of people making money, while the final result is that everyone actually loses.

• People always hear different stories from newcomers because the old ones no longer exist. The market itself can discover your logic and almost all your problems. As long as you are not within your circle of competence, as long as your circle of competence is boundaryless, as long as you do not know your own boundaries, the market will definitely discover you at some moment in some form, and you will definitely be badly hurt by it.

Only in this sense is investing truly risky. This risk is not the ups and downs of stock prices, but the permanent loss of capital; this is the real risk. Whether this risk exists depends on whether you have this circle of competence. Moreover, this circle of competence must be very narrow; you must define each boundary clearly. Only within this narrow boundary is it possible to establish a true prediction of the future through continuous long-term effort. This is a concept proposed by Buffett himself.

The basic concepts of value investing consist of four.#

First, stocks are partial ownership of a company, not just a piece of paper that can be bought and sold.

Second, margin of safety. The essence of investing is predicting the future, and we cannot accurately predict the future; we can only obtain a probability, so we need to reserve a margin of safety.

Third, Mr. Market. The existence of the market is to serve you, not to guide you.

Fourth, circle of competence.

Investors need to establish their own circle of competence through long-term learning and then invest within the scope of that circle. This is the basic thinking framework of value investing, which is simple and clear in logic, not difficult to understand, and in investment practice, value investing is the only investment method I know that can bring long-term excellent returns to investors after risk weighting. Therefore, many people have some understanding of value investing, especially because the most famous practitioner in the value investing world is Mr. Buffett—his success over the past 60 years has attracted phenomenal attention worldwide. However, empirical research shows that among market participants, there may be fewer than 5% who are truly value investors.

Why are there many people who understand value investing, yet so few actually engage in value investing practice? Today, I mainly want to discuss why it is easy to know but difficult to act in the practice of value investing, where the difficulties lie, and why people encounter various problems in practice and are easily attracted to other methods after encountering problems.

In the four concepts of value investing#

• The first—stocks are partial ownership of a company, which is actually an institutional concept. If equity can represent partial ownership of a company, under a system where private property rights can be truly protected, then the use of private property can also be protected, and private property rights can be freely exchanged. If property rights cannot be freely exchanged, it is also difficult to become true rights. For example, cash is a property right because we can use it at any time and turn it into what we want. Therefore, the protection of equity exchange is an important indicator of whether a society protects private property. Whether this can be achieved is determined by the society itself and has nothing to do with investors. As long as a society allows such a system to exist, value investing will exist. Currently, such a system does exist in our society, and equity exchange is permitted; therefore, the point that stocks are partial ownership of a company is valid.

• The second—margin of safety is actually a methodological issue, and there is no significant ambiguity in the concept. What you pay is the price, and what you get is the value. Because the value is not very certain, you should buy it at as low a price as possible; I believe everyone agrees with this. Therefore, it seems that the main difficulties in the practice of value investing may come from the other two concepts: the assumption of Mr. Market and the construction of the circle of competence.

Regarding the assumption of Mr. Market, let's first review how Benjamin Graham originally described him—he said you can imagine the stock market as a particularly energetic, not very good at judgment, not very smart but not bad person, who wakes up every morning and the first thing he does is shout various prices at you, regardless of whether you are interested or not, he keeps shouting. However, this Mr. Market's mood is unpredictable; sometimes he is particularly optimistic about the future, and the prices he shouts are very high; sometimes he is particularly depressed, and the prices he shouts are very low. Most of the time, you can completely ignore him, but when he becomes neurotic, either extremely excited or extremely depressed, you can take advantage of his excessive emotions to buy and sell.

Today, I mainly want to discuss four issues concerning the difficulties of Mr. Market and the circle of competence.

• First, the stock market—about the issue of investment and speculation in the stock market.

• Second, what is the circle of competence? How to establish it?

• Third, the character of investors—both Warren and Charlie have mentioned that the most important concept for investors is "temperament." This term is not easy to translate into Chinese, so I define it as "character." What qualities and cultivation do value investors possess? How should these qualities and cultivation be developed? Fourth, if ordinary investors do not want to become professional investors, how should they protect and increase their wealth? I hope these four questions can cover most situations in the practice of value investing.

Two, The Stock Market: A Combination of Investment and Speculation#

When we invest in the stock market, we must first face the stock market. What exactly is the stock market? Who are the people in the stock market? What types of behaviors do they exhibit? What position do value investors occupy within it?
Let's first trace back to the history of the stock market. The modern stock market appeared about 400 years ago, and its history is not very long. Before that, there were not many business opportunities, and the existence of the stock market was not necessary. The biggest event that occurred during that period was the discovery of the New World 500 years ago, which brought rapid economic development to Europe for the next one or two hundred years. Along with the colonial era, some so-called modern companies emerged. How did the concept of a company come about? Because the colonial commercial activities and maritime trade at that time required a large amount of capital and were highly risky, the earliest colonial commercial activities were supported and funded by the wealthiest kings of European countries. However, soon the kings' money was not enough, and they had to form companies with nobles and others, leading to the emergence of the earliest modern joint-stock companies, which dispersed ownership of the company through equity. Because these companies developed rapidly and required a lot of money, the kings and nobles' funds were insufficient, so they sought ways to allow ordinary people's savings to also play a role, leading to the idea of further dividing equity. However, the problem is that ordinary people find it difficult to price equity. They do not understand how these companies make money, so the solution they came up with was to make the equity as small as possible, allowing them to join with a small investment and sell the equity at any time. This design caters to human nature's greed, laziness, and desire for shortcuts. Humans inherently want to take shortcuts, to gain without labor, to obtain the most benefits with the least effort, and are willing to take risks for this, which is why gambling has existed in almost all periods of history.

• The earliest design of the stock market catered to the gambling aspect of human nature, so once the stock market developed, it achieved great success. At that time, the two most important companies in the Netherlands, the East India Company and the West India Company, especially the East India Company, were in a long-term development phase. The money raised through equity financing was quickly used for the company's operational development, generating more profit returns for investors, thus forming a positive cycle. More and more people were attracted to the stock market and could buy and sell stocks at any time, creating another motive for trading. Those buying and selling East India Company stocks were not only speculating on the company's future performance but were more often speculating on the behavior of others buying and selling that stock. Speculative behavior made the early stock market very popular, leading to the development of more companies.

To understand why this company makes money, how it makes money, and how much it will earn in the future, as well as its competitive status and position in competition, I collectively refer to this process as establishing one's circle of competence.

• The next question is, if I am just starting to learn value investing, how do I begin (to establish my circle of competence)? How can I learn to analyze companies? I have looked at many different companies but do not know where to start. After a period of research, I feel that I understand a certain company to some extent, but I do not know if I understand enough. When is the right time to buy this stock? At what price can it be bought? The questions my classmates ask are very specific, and many people who have worked in this industry also have such doubts. So can I use the valuations given by sell-side analysts? From the sell-side perspective, what price can sell the stock is their real consideration, and they are not very concerned about whether the selling price is correct since it is not their own money. But if it is their own money, their mindset might be different. Therefore, the circle of competence is actually a core issue for investors.
  How can one establish a circle of competence?

• It is indeed different for everyone because everyone's abilities are different. Here, I can share how I started.

• I entered this industry by accident. About twenty-seven or twenty-eight years ago, I was a student at Columbia University, just arrived in the United States, and was burdened with a lot of debt (student loans). I didn’t know how to do business or make money, so I worried every day about how to repay my debts. Chinese students in the 1980s had no money, and suddenly going to the U.S. with debts in dollars seemed like astronomical figures. So I kept thinking about how to make some money. One day, a classmate told me that someone was coming to give a lecture at the school about how to make money, and this person was particularly good at making money. I saw that the poster said free lunch was provided, so I thought, why not go? Later, I went to a classroom about the size of ours today, which was different from the classrooms I had previously attended that offered free lunch and lectures. Generally, classrooms with free lunches have a long table that can seat twenty or thirty people, with lunch on the side, and the speaker sitting at the front. I went and asked where the lunch was. My classmate said that the speaker was called "lunch." Because the spelling of buffet and Buffett differs by only one T, and I had just started learning English, I didn’t distinguish between the two. I thought that since this person dared to call himself free lunch, he must have something to offer, so I sat down to listen. As I listened, I suddenly felt that what he was talking about was much better than the free lunch. Previously, my understanding of the stock market was like what was described in the play "Sunrise" (by Cao Yu), where those involved in stocks in Shanghai in the 1930s were deceitful, so I always thought that stock traders were all bad people. But this "Mr. Free Lunch" did not seem like a bad person at all; he was very smart and spoke interestingly. The principles he discussed were easy to understand, and for some reason, during the lecture, I suddenly felt that this was something I could do. Because I felt that I couldn’t do other things, but studying numbers was still feasible, right? After all, I came from China, and I should be good at math and science.

Historical Reflection on Rise and Fall Series - Notes on "Guns, Germs, and Steel" (Part One)#

"Guns, Germs, and Steel: The Fates of Human Societies" by Jared Mason Diamond (born 1937 / first published in 1996)

Jared Diamond is an American biogeographer, biologist, and author, born in 1937, who has taught at Harvard University and the University of California, Los Angeles. His research areas include biodiversity, ecology, and human evolution. He received his Bachelor’s degree from Harvard University in 1958 and his Ph.D. in membrane biophysics and physiology from Cambridge University in 1961. From 1962 to 1966, he returned to Harvard as a basic researcher and became a professor at the UCLA School of Medicine in 1966. In his thirties, he made several expeditions to New Guinea and its surrounding islands, studying the ecology and evolutionary behavior of birds in New Guinea. In his fifties, he began researching environmental history and served as a professor of geography and environmental health sciences at UCLA.

Diamond has published over 200 papers in magazines such as Discover, Natural History, and Geographic, and has received numerous awards, including the National Science Award, the Burroughs Wellcome Fund Award from the American Geographical Society, the Tyler Prize for Environmental Achievement, the International Prize for Environmental Harmony from Japan, and the MacArthur Fellowship. He is the only author to have won the British Science Book Prize twice. His representative work, "Guns, Germs, and Steel," explores the origins of inequality in human societies and the geographical causes behind it. Other works include "The World Before Yesterday," "Collapse: How Societies Choose to Fail or Succeed," "The Third Chimpanzee: The Evolution and Future of the Human Animal," and "The Rise and Fall of the Third Chimpanzee."

The first part covers the journey from Eden to Cajamarca (the author cites carbon-14 technology in archaeology as the basis for research conclusions).

1. Starting Line (Leaving Africa)

It took us over 7 million years to evolve from the third (fourth) type of chimpanzee (gorilla, chimpanzee, bonobo) to modern humans. The first humans to leave Africa were Homo erectus (whose fossils were discovered on Java, known as Java man), living about 1 million years ago (brain capacity is a key factor).

Later, Homo sapiens evolved, living in Africa and Europe about 500,000 years ago. The reason for their appearance on the Eurasian continent is simply due to the technological overcoming of land, sea, and extreme cold weather.

Subsequently, Neanderthals evolved, living between 130,000 and 40,000 years ago, and they were not fully human.

Then, after experiencing "punctuated evolution," Cro-Magnon (the ancestors of Europeans) were physiologically and behaviorally indistinguishable from modern humans, living about 50,000 years ago. They could make stone tools, invent ropes, build shelters, and produce art, such as the cave paintings of bison and wild horses in Lascaux Cave in southwestern France. About 40,000 years ago, Cro-Magnons arrived in Europe, using advanced technology, language skills, and intellect to kill or replace Neanderthals, with almost no evidence that the two species interbred. An important factor in punctuated evolution, the author believes, is the evolution of the larynx, which produced language, leading to a series of subsequent evolutions.

Then, the true geographical expansion of humanity began. The journey from Africa to the Eurasian continent was the easiest, followed by the epoch-making event of reaching Australia-New Guinea, which required boats. Then, through cold Siberia, they reached Alaska, crossing Canada to the American continent (the ancestors of the Americas were the Clovis people).

The biggest changes or obstacles encountered along the way, apart from building boats to cross the sea, included resisting the cold (sewing clothes). After reaching the New World, they conducted "transitional hunting" of large animals on the Australian and American continents. Why do large mammals in Africa and Eurasia still exist today while those in Australia and the Americas have almost all gone extinct? It is because they did not evolve alongside human ancestors with weaker hunting abilities; they faced modern humans who had evolved advanced technologies and had not developed the ability to fear or evade humans. The rapid extinction of large animals on these landmasses led to the lack of opportunities for humans to domesticate large wild animals as livestock, resulting in significant differences in the subsequent evolution of civilizations.

The second and third chapters of the first part are very interesting and highly readable.

The second chapter mainly uses the human development history of the Polynesian islands as a model to explore the main factors leading to differences in human societies. The indigenous people of the Polynesian islands settled there around 1200 BC after a small group of people sailed from the Bismarck Archipelago north of New Guinea, making the history relatively short and easier to observe and analyze.

The conclusion of the Polynesian island civilization evolution model is that the environment has a major impact on human economy, technology, political organization, and combat technology in a short time. The environmental variables in this region include at least six: island climate, geological type, marine resources, area, degree of terrain fragmentation, and degree of isolation. I understand that whether it is suitable for faster evolution from hunting-gathering civilization to agricultural civilization is a catalyst for civilization evolution. Under these objective conditions, the Hawaiian Islands evolved into the most advanced civilization in the region, forming the prototype of an empire.

The third chapter is a historical slice, telling the story of the key event of the Old World conquering the New World—the story of a ragtag group of over 200 Spaniards conquering the 40,000-strong indigenous tribe of the Inca Empire in Cajamarca. It is easy to understand that the direct causes of this event (and the subsequent series of conquests of the Americas by Europeans) include military technologies based on guns, steel, and horses, infectious diseases from the Eurasian continent, maritime technology from Europe, centralized political organizations (which facilitate social division of labor, resource allocation, etc.), and writing. These are all "proximate causes," and they are also the origin of the book's title. However, the later chapters will explore the "ultimate causes," namely why these advantages that directly acted were mostly on the side of Europeans and not on the New World.

The second part discusses the rise and spread of food production.

The development and progress of human civilization mainly experience three stages: hunting-gathering, agricultural civilization, and industrial civilization (modernization). Li Lu's paper refers to them as civilizations 1.0, 2.0, and 3.0. This part mainly discusses the process of evolution from 1.0 to 2.0.

Since the separation of modern human ancestors from apes about 7 million years ago, humans have spent most of their time in a hunting-gathering state. It was not until about 11,000 years ago that agriculture and animal husbandry (planting crops and domesticating livestock) emerged. As far as I know, 2.0 has not completely replaced 1.0. In 2023, when I traveled to East Africa, I learned that a tribe called Hadzabe still retains the tradition of hunting, and their favorite food is roasted baboon.

The author believes that the essential difference between 2.0 and 1.0 is food production, and this is an indirect prerequisite for civilization's development towards 3.0. Food production brought various advantages to groups, and with these advantages, white people ultimately occupied the Americas.

One advantage is that food production brings more calories, feeding more people. This is also a key condition that the author of the later published book "How Long Will the West Dominate" uses to measure the level of societal development.

Due to the higher efficiency of obtaining calories through food production (domesticating plants), agricultural groups gained the first military advantage: population. The domestication of livestock also interacted with food production, further enhancing social efficiency, resulting in a "settled lifestyle" (no longer needing to migrate in search of prey). After settling, surplus food could be stored to support monarchs, bureaucrats, and other full-time specialists and soldiers (those who do not farm), forming empires. Later, as the original land could not meet the growing population, the desire for expansion (invasion) arose. Another key military advantage was horses (think of the invincible Genghis Khan, cavalry vs. infantry). Equally important in conquest wars are the germs that evolved alongside domesticated animals in human society, such as smallpox, measles, and influenza, which were initially transmitted to humans from mutated strains of domesticated animal germs. In short: the presence of food crops and livestock fundamentally explains why empires, writing, and steel weapons first appeared on the Eurasian continent, combined with the military use of horses and camels, and the lethality of germs derived from livestock, the main chain between food production and conquest is complete.

The author believes it is necessary to find the origin, time, and specific crops or livestock domesticated to explain why the time of independent development of agriculture and animal husbandry varies so greatly across the globe. Using modern carbon-14 archaeological methods, it has been identified that the first domesticated plants, such as two-grain wheat and chickpeas, appeared in the Fertile Crescent (the two river basins) around 8500 BC. The domestication of cattle occurred in the past 10,000 years in India and the western Eurasian continent. So when did the means of food production emerge? There are five regions with detailed evidence: Southwest Asia (the Fertile Crescent), China, Central America (Mexico's central and southern regions and surrounding areas), the Andes in South America, and the eastern United States.

Investigating the origins of the earliest domesticated livestock follows a similar method. Non-professionals can understand.

The advantages of agricultural civilization compared to hunting-gathering civilization are obvious to modern people. However, for the people of that time, it may not have been so clear, and it could have been a choice between two lifestyles, each with its own advantages and disadvantages. The author specifically dedicated Chapter 6 to discuss this. In short, this was a very long and gradual process, completed only around 11,000 years ago, with five main factors: the decreasing availability of wild food, the increasing number of domesticated wild plants, the continuous improvement of food production technology, rising population density, and the population advantage of food-producing communities being sufficient to drive away or eliminate hunting-gathering communities. Therefore, the fate of civilization 1.0 can only be two: either replaced or change careers on its own.

I am very lacking in botanical knowledge. However, the author dedicated an entire chapter to describe how wild plants were domesticated, which is very interesting. In short, it is a matter of survival of the fittest; plants need to reproduce and must develop characteristics such as large, tasty fruits, high oil and fiber content, while their seeds must be hard, bitter, and not easily chewed, allowing them to be spread through the feces of animals and humans. Most importantly: they must be non-toxic. Plants reproduce through various methods, including genetic mutations (easily falling into human hands, such as peas), seed dormancy (not easily wiped out), and reproductive mutations (asexual reproduction of rhizomes and sexual reproduction of hermaphroditic species), to propagate their offspring.

The earliest domesticated plants were wheat, barley, and peas in the Fertile Crescent because they were easy to cultivate and reproduce. Next came fruit and nut trees, such as olive trees, fig trees, date palms, and pomegranate trees (propagated through cuttings) around 4,000 years ago. The third stage involved more difficult-to-cultivate trees like apple trees, plum trees, pear trees, and cherry trees (grafting technology developed in China), along with easier crops like rye, oats, radishes, leeks, and lettuce.

Interestingly, the author cites Darwin's classic "On the Origin of Species," pointing out that Darwin did not initially discuss "natural selection" in the book but referred to it as "human selection." The reason is that he took the most famous variants among plants (those beneficial for cultivation) for cultivation and sowing, and continued to do so. The principles of those cultivating crops are the best model for understanding natural selection and evolution.

The domestication of plants and animals means that human food is increasing, which also means that the population is becoming denser. Therefore, the resulting food surplus and (in some regions) the use of animal power to transport surplus food became the prerequisites for the development of settled, administratively centralized, socially stratified, economically complex, and technically innovative societies. Therefore, the ability to utilize domesticated plants and animals ultimately explains why empires, literacy, and steel weapons developed earliest on the Eurasian continent and developed later or not at all on other continents.

Only a few regions in the world developed food production, and the time at which these regions developed food production also varies greatly. Some neighboring hunting-gathering groups learned food production from these core areas, while others were replaced by food producers from these core areas. Finally, some groups, although living in ecologically suitable areas for food production, did not develop agriculture during prehistoric times nor learn agriculture; they continued to live by hunting and gathering until modern times eventually eliminated them. Those groups in regions with a leading advantage in food production thus gained a leading advantage on the road to guns, germs, and steel. The result was a series of long-term conflicts between affluent and impoverished societies.

Why did ancient groups abandon hunting and gradually begin to shift to food production?

• 1. The possibility of obtaining wild food decreased;
• 2. The possibility of domesticating wild plants increased, and the benefits gained increased;
• 3. The technology of food production has been relatively advanced compared to hunting and has been continuously improving;
• 4. Food production can feed more people. Therefore, in places favorable for food production, civilizations are more likely to develop and grow.

The main routes of this spread of food production were from Southwest Asia to Europe, Egypt, and North Africa, Ethiopia, Central Asia, and the Indus Valley; from the Sahel region and West Africa to East Africa and South Africa; from China to tropical Southeast Asia, the Philippines, Indonesia, Korea, and Japan; and from Central America to North America. Moreover, food production even became richer in its place of origin due to the introduction of other crops, livestock, and technologies from other origins. This is also the path of the origin and spread of civilization.

The third part discusses the transition from food to guns, germs, and steel. The emergence of agriculture marked the beginning of the formation of crowd infectious diseases. Agricultural societies have higher population densities and fixed living environments, which in turn maintain the existence of infectious diseases. The germs of Eurasia played a key role in the mass extermination of many indigenous peoples in other parts of the world.

The factors influencing technological innovation vary between continents, leading to differences in technological development across continents. The geographical location of societies determines the ease with which they can receive technologies from other societies. In summary, the timing of the start of food production, the barriers to the spread of technology, and the size of the population are three major factors that directly lead to the observed differences in technological development between continents.

Differences in area, population, ease of technology dissemination, and the timing of the start of food production exist between continents, and these differences have various impacts on the emergence of technology. The unique geographical conditions of the Eurasian continent turned its initial significant advantages into a massive leading advantage since 1492.

War or the threat of war played a key role in the merging of most (if not all) societies. War always causes social mergers in densely populated areas rather than in sparsely populated ones. The competition and mixing between food production and societies generated the direct driving force for conquest: germs, writing, technology, and centralized political organizations.

Fourth Part: Traveling Around the World#

Australia: Why did Australia not develop societies with metal tools, writing, and complex political structures? Why did more advanced technologies not flow into Australia from neighboring Indonesia and New Guinea? Why did Europeans colonize Australia instead of the indigenous Australians colonizing Europe?

China: A significant exception to the modern melting pot phenomenon is the most populous country in the world—China.

The ultimate factors for Europeans invading the Americas: 1. The long-standing advantage of human settlement time on the Eurasian continent; 2. The relatively effective food production caused by the rich resources of domesticated wild plants, especially animals, on the Eurasian continent; 3. The geographical and ecological barriers to communication and exchange within the Eurasian continent were not that difficult to overcome; 4. The complex societies in the Andes region did not invent writing and the wheel.

How did Africa become Africa for black people? European colonization in Africa is not related to the differences between European and African nations as some white racists believe. On the contrary, it is due to geographical and biogeographical contingencies, particularly the differences in area, axial orientation, and varieties of flora and fauna between the two continents. In other words, the different historical trajectories of Africa and Europe ultimately stem from the differences in their "immovable properties."

The author's viewpoints throughout the book are summarized as follows:

The different characteristics of the environments of each continent have influenced the trajectory of human society development. The most important differences include four aspects:

The first group of differences is the differences in the wild plant and animal species that can be domesticated on each continent.

The second group of differences is the differences in the speed of agricultural and technological dissemination and migration across different continents.

The third group of differences is the differences in the dissemination of agriculture and technology between continents.

The fourth group of differences is the differences in area and total population between continents.

Five References#

• • Li Lu, "Civilization, Modernization, Value Investing, and China"

• • Jared Diamond, "Guns, Germs, and Steel"