A Hundred-Year Old House

1912 – 2012

I recently found this quite remarkable photo:


This in north east Italy in 1912, some 40 km south of the then border to Austria-Hungary. What’s happening is that electricity cables are being set up with a ladder on wheels. My main interest though, is the house in the background and the second fellow from the left who is my great grandfather (While being Swedish I have some Italian roots).

My great grandfather had the house built in 1909, and he must have done a pretty good job, because the house is still standing today relatively unchanged. I visited it two weeks ago and tried to take photos from the same angle. There is now a quite heavily trafficked road on the spot where the photographer from 1912 stood:


Nice work great grandpa!

When done right real estate can be a truly long term investment.  Even if one assumes –  following the lessons of the Herengracht index –  that the price of the house has more or less just kept pace with inflation since 1909 (with a temporary dip in 1944-45), the value in  housing provided over 100 years is immense.

Starting with the telegraph which came before electricity and is the black tube sticking out from the right of the house in the 1912 photo, to central heating and most recently internet broadband, the house has seen plenty of upgrades and modernisations.  However, in inflation adjusted terms, I don’t think the cost of any of the upgrades are on the same magnitude as the initial cost of building it in 1909.

So essentially my great grandfather managed to provide mortgage-free housing for  his descendants for 3-4 generations, and given the excellent shape of the house I don’t see why it wouldn’t keep going for another 100 years and 3-4 more generations.

In the long run we are all dead, but our houses will still be there

I’m thinking that if my great grandfather managed to build a house lasting over a hundred years back in 1909, I should be able to do the same in the Ivory Coast today.

It kind of raises the question of how to value and look at investments with a horizon longer than a lifetime. First  there is the financial way of looking at it. One can get the exact price today of one euro in 2112, by using the current market based discount factor. However, knowing that I most likely won’t be alive in 2112, is that one euro (or whatever currency will be used in 2112) still worth something to me today?

I guess my grandfather would have said yes to that same question if asked back in 1912 when he was 62 years old. And I am also thinking a euro in 2112 or maybe even 2212 has a non-zero value to me.  I think there are evolutionary reasons for wanting to provide for one’s offspring even after one’s death – a bit like the ideas in The Selfish Gene.

And regardless of descendants I think many people – me included – would take pleasure in knowing they are doing something that will leave a positive mark beyond their lifetime.  Not sure if it’s an ego thing, some sort of  wish for immortality, or a way of seeing the whole of humanity as one’s descendants, which genetically speaking I would think is a pretty correct way of looking at things.

Either way, if in 2112 a great grandchild of mine found this blog it would be pretty awesome, especially if there was still something left of my investments in the Ivory Coast (or elsewhere) that were useful to the grandchild.  Not sure of the longevity of blogs though, guess I’ll have to complement with more analogue media.

Much More on Rubber

I’m keeping on reading the story of rubber in the book “1493“. It’s quite fascinating, and by the end possible to link to the Ivory Coast without too much of a stretch. Some very long excerpts:

The importance of rubber and vulcanization

The impact of vulcanization was profound, the inflatable rubber tire – key to the adoption of both the bicycle and the automobile – being the most celebrated example. But rubber also made electrification possible: try to imagine a modern building without insulation on its wiring. Or imagine dishwashers, washing machines, and clothes dryers without the belts that transmit the motion of their engines to the appliance itself. Equally important but less visible, every internal combustion engine contains many pipes and valves that channel, usually under pressure, water, oil gasoline, and exhaust vapor. Unless the parts are manufactured perfectly, engine vibrations will cause liquids or gases to vent dangerously from the joints. Flexible rubber gaskets, washers, O-rings almost invisibly fill the gaps. Without them, every home furnace would be at constant risk of leaking natural gas, heating oil, or coal exhaust – a potential death trap.

“Three fundamental materials were required for the Industrial Revolution,” Hecht, the UCLA geographer told me. “Steel, fossil fuels, and rubber”. The rapidly industrialising nations of Europe and North America had more than adequate access to steel and fossil fuels. Which made it all the more imperative to secure a supply of rubber.

Rubber boom

Even in a time of crazy boom-and-bust cycles the rubber boom stood out. Brazil’s rubber exports grew more than tenfold between 1856 and 1896, then quadrupled again by 1912. Ordinarily such an enormous increase would drive down prices. But instead they kept climbing.

That rubber production went up an order of magnitude while prices tripled is the kind of thing that makes natural-resource economists rub their eyes in bemusement. “It’s pretty amazing,” said Michael C. Lynch, president of Strategic Energy and Economics Research, of Winchester, Massachusetts. “No wonder people were going crazy.”

The financial center of the trade was Belem. Founded in 1616 at the entrance of the world’s greatest river, it had a strategic location – but little ability to take advantage over it. So much sediment washed in from the Amazon that the harbour was shallow and treacherous. Worse, the currents and winds generated by the river’s vast outflow isolated the city from the rest of Brazil – incredibly from Belem it was faster to sail to Lisbon, a distance of 3,700 miles, than to Rio de Janeiro, a distance of 2,500 miles. In consequence the city’s population had never risen much above twenty five thousand. The rubber boom allowed it to become, at last, what Amazonian dreamers had long hoped: the economic capital of a vibrantly growing realm. Continue reading “Much More on Rubber”

Shipping Issues

Is this really happening?

Ok, so now that I want to ship two cars quickly to Abidjan before any import restrictions are put in place it seems Murphy’s law has stricken:

First I get this from the shipping company:

Good morning Martin,

Due to the strike action in Nigeria over the last while the vessels have in turn been delayed coming back to Europe therefore the sailing date will not be the 25.01.2012 as previously scheduled.

The next sailing will be delayed by a couple of weeks. I have not got the confirmed sailing date yet but should have it this week.

And then I see this on Bloomberg:

No Slower Steaming as Container Lines Run Like Clippers: Freight
Container ships can’t go any slower.

Shipping lines are running out of options to stop losses as sailing speeds reach their lower limit, exhausting a solution that helped restore profitability in 2010.

The global container fleet is now cruising near record-low speeds after slowing 11 percent from August when the freight rate market collapsed, according to data compiled by Bloomberg and Lloyd’s Register.


“Some of these container ships are now so slow that they’re close to the speeds of the old sailing ships. The clippers might actually have been faster.”

Slow-steaming, pioneered by A.P. Moeller-Maersk’s container unit, Maersk Line, helps carriers cut costs when times are tough. By sailing at lower speeds, ships need less fuel and can offset capacity stresses by using more vessels to make up for the longer sailing times.


Maersk Line says it may be able to bring its speeds down even further. The company cut its average speed to about 17 knots last year from 20 knots in 2008, according to Morten Engelstoft, Maersk Line’s chief operating officer. The company’s whole fleet currently sails at about 16-18 knots, he said.

“There is still some potential for slow-steaming, both for us and probably for the industry,” Engelstoft said in a Jan. 23 interview. “We are looking into the possibility of super slow- steaming. That would be 12-16 knots.”

The 19th-century clippers, the fastest ships of their time, transported tea to the U.K. and U.S. from China and India, according to the website of the U.K. Tea Council. The ships, which had three or more masts and dozens of sails, could reach a peak average speed of more than 16 knots.

Any spare room for two Toyotas?

Inevitable snags

Well, guess doing business is rarely entirely straightforward, and that the real test is how one handles the hurdles and snags that inevitably come up along the way.  In this case I have already changed shipping company to one that isn’t affected by strikes in Nigeria, so one down.

There is not too much to be done about the speed of container ships, but it only means the cars will arrive a couple of days later to Abidjan and that, hopefully, shouldn’t matter. The upside is that shipping stuff around the world is going to get cheap for – it seems – a good while going forward.

The Baltic Dry Index which tracks worldwide international shipping prices of various dry bulk cargoes has dropped sharply over the last month. It’s a bit of a bad sign for the world economy and for rubber prices, but it also opens up opportunities.

The Baltic Dry Index for the last 3 months


Omnipresent and omnipotent

The blog drogbascountry recently mentioned a world bank publication that described difficulties getting things through the port of Abidjan:

“The other major area with lots at stake, is the port of Abidjan. A real hub for many countries in West Africa, the port was the object of a first reform, which among other things led to the concession of the container terminal at the end of 2003. Despite the controversy of this move, the container port has become the highest-performing along all the African Atlantic coast, up to Durban, with a working speed of 23-30 containers an hour. But paradoxically, as a recent World Bank study showed on the sources of Ivorian growth, the port is one of the least competitive in West Africa because of harassments of all kinds, the costs of moving goods, and the obstacles to foreign trade. So, the container transit times are around 9-12 days, as opposed to 2 days at the port of Dakar. The overall costs of sending goods through Abidjan to Burkina Faso is 16% more expensive than from Lome [Togo] and 40% more expensive than Tema in Ghana. Overall, the port of Abidjan is estimated to be 35% more expensive than Lome. This situation is due to, among other things, the number of different hoops to jump through at the port and above all the omnipresence and omnipotence of the customs service.”

This is even worse than I thought and seems to be an area where the Ouattara administration is disappointing.

However, it’s not surprising that customs services are powerful in developing countries. When illiteracy is high, the informal sector large, and state institutions not capable of enforcing a complex all covering tax system, custom duties become a very important and easily collectable revenue for the state.   In fact, for most – if not all – countries in the western world custom duties were the largest source of income for the state up until the beginning of the 20th century.

Here are two graphs for the US:

Source: P. Krugman "The Political Economy of Trade Policy" Princeton
From the US Census of 1870. (Click to enlarge) Source: http://www.radicalcartography.net/index.html?9thcensus

Or to take an example closer to home, we have the toll paid by ships passing the Öresund straight between present day Sweden and Denmark:

King Eric of Pomerania introduced the Oresund Toll in 1429. All ships passing Helsingör had to pay duty to the Danish Crown (whether the cargo was going to or from a Danish port, or not). For centuries, the Oresund Toll was the most important source of revenue for the Danish Crown, furnishing the kings with relative independence of Denmark’s Privy Council and landholding aristocracy.   Source: oresundfilm.com

Kronborg Castle in Helsingör - built to collect the customs duty

I bet the Customs Service in Helsingör back in the day was just as omnipotent and omnipresent as the one at Abidjan port. Having big guns aimed at passing ships helped I guess.

19th century mixing with the 21st

So, how important are custom duties for the Ivory Coast today?  Looking at the Ivorian state budget for 2011, the total size is 3.05 trillion CFA francs (4.65 billion euro).  Of that the fiscal receipts are projected at only 1.216 trillion CFA francs (1.85 billion euro), the rest is rollover of debt, aid and various loans.

Projected income for 2011 from import duties is 343 billion CFA Francs (522 million euro) and from exports duties 210 billion CFA francs (320 million euro). So in total custom duties are 45.5% of total ivorian fiscal receipts for 2011.  Not quite like Denmark in the 15th century, but in line with the US in the second half of the 19th century.

When travelling in West Africa today, I find that you have this quite interesting mix of things that fit in the 19th century (e.g. manual craftmanship, horses and donkeys used for transport of goods) and others that are squarely 21st century like cellphones, skype and Canal+.  Guess customs can be put in the former category.

UPDATE: I have to add that while the 19th century elements can be fascinating for a visitor, west africans would be a lot better off if things were more 21st century and less 19th century. Which ever way one measures it, life on average in Europe’s 19th century pretty much sucked compared to  the 21st century.

This story from 19th century Sweden from the Brain Gain and a Historical Lookback post gives an example:

“I have worked in my profession”, says a poor shoemaker, “for 30 years and I can say that I have not yet managed to earn more than 1 krona [the Swedish currency unit] on average per day during the year.  I have usually worked 17-18 hours per day, but never managed to save enough to buy my own home. I am growing potatoes on a small plot of land on a slope close to where I live. I have still managed to raise seven children and now it’s looking bright even for me, because I’ve started to build my own home, not by my own earned money, but by money my oldest daughter, she is now 18, has sent home from America. She left when she was 14, and started sending us money already the first year. Since she turned 17 she has regularly sent us 10 dollar per month, and sometimes more, so that we in four years have received 1,500 kr from her. It’s with this money we now build our home.  But isn’t it curious that one can work hard a whole life here in Sweden and not manage to achieve as much as a young girl can save in a couple of years in America. I could never speak badly of America or the emigration, because I don’t know what would have happened to us if we hadn’t managed to bring the girl over there.”

Which I commented:

“This story has present day Africa written all over it:  Long working hours as self employed, subsistence farming, many children, strong family ties, reliance on remittances from abroad, children supporting parents, parents helping children moving abroad knowing they will not see them for years.”

Taxi and scurvy data

A small taxi experiment

One thing with the taxi business in Africa, unlike say electrical engineering,  is that everybody seems to have an opinion about it – and often contradictory opinions.  Here are examples of two comments I have received:

I would not recommend at all to start TAXI business […] Normally all people I know who ever sent a car to Africa have never seen a cent out of the business. Its very difficult to have a business in Africa and be successful.

Taxi’s are a profitable because everything can or could be be arranged: car papers, insurance, drivers license, repairs, etc.  A friend of mine […] is planning to convert it into a woro-woro. His only problem is the reliable driver. If you have one, he says, owning a taxi is most definitely a profitable business.

My take here, inspired by author Peter Sims, is that the world is a complex and changing place, and you can’t always figure out and plan everything in advance, so a good approach is to make a small, not too costly, experiment, see what happens, draw lessons, and adapt from there.

Here’s Peter Sims outlining this and other ideas in a pretty interesting 45 minute speech:

On board the Salisbury in 1747

Another great example that sometimes you have to make an experiment to get good data and figure out how things work, comes from the book Adapt by Tim Harford:

Naval surgeon James Lind wanted to find a decent treatment for scurvy, a nasty illness that leads first to spots and gum disease but then to open wounds, internal bleeding, and eventually death. The disease, which still afflicts malnourished people around the world, was then especially common among sailors. Various cures had been proposed. The Admiralty, which commanded the Royal Navy, favoured vinegar.

The Royal College of Physicians took a different view: in its expert opinion, sulphuric acid was just the tonic. Other suggestions included sea water, nutmeg, cider and citrus fruit.

In the spring of 1747, after eight weeks at sea on the warship Salisbury, Lind chose a dozen sailors out of the three dozen then suffering from scurvy. To make his test as fair as he could, he tried to pick men whose illness seemed to be at the same stage. Then he divided them into six pairs and gave each pair a different treatment. The pair being given oranges and lemons made a good recover; those taking cider, acid or brine did not fare so well. It was not a perfect randomized clinical trial by today’s standards, but it did the job. Scurvy, we know, is caused by lack of vitamin C, so oranges and lemons are a sensible treatment.  Ships started to carry greater stores of them, and many sailors on subsequent voyages owed their life to Lind’s experiment.

Lind’s trial highlights, however, some of the difficulties with collecting and reviewing evidence. For a start, if Lind had been tempted to rely on data collected by someone  else for some other purpose – which is quicker and cheaper than organising a bespoke trial – he might have come unstuck. Good data are often just not available: we know from Lind’s account that thirty or forty sailors suffered from scurvy and six men died during that voyage, but official records note only two illnesses. Sometimes there is no choice but to perform an experiment yourself.

Out of Abidjan port

Admittedly, figuring out the details of running a taxi business in Abidjan, seems a bit mundane compared to finding a cure for scurvy, but both endeavors face similar problems in obtaining reliable data.

For example, I tried everything to figure out how much it would cost to get a car out of Abidjan port.  Online there were many stories of problems and issues with getting a car out – including warnings of thefts of parts from cars parked in the port – but no hard official data on prices.  And people who had sent cars to Abidjan reported wildly different  costs, including a top mark of  4 million Cfa franc for a relatively new Mercedes brought in by a European guy with little experience of Africa and no knowledge of French.

The price, which includes getting Ivorian number plates, seems to depend on who you are, your negotiating skills, how expensive the car is, how old the car is, if you are using a “transitaire”, how long time the car stays in port, and well, luck.

I have now gotten my car out of the port, but since it’s  old there’s one more check that needs to be done – probably just a bit of “isomorphic mimicry”.  Anyhow, without the last check (which should be maximum 100,000 Cfa francs) and the payment to the “transitaire” it has so far costed 823,000 Cfa francs which breaks down as follows:

400,000 import duty

250,000 fee for the car being old

155,000 “aconnage”

18,000 storage fee for one day

So it means that in my case, getting the car out of Abidjan port will cost about three times the value of the car (450€) which is well, ridiculous, but I had budgeted with it costing twice the value of the car and it was a budget post I was very unsure of.  Even with this get-out-of-Abidjan-port cost, the figures for the investment still hold up fine.  As long as figures for profits, revenues, and repairs aren’t markably worse than budgeted, and the driver isn’t too dishonest, it should work out.  But that’s to be continued in future posts!

It’s still a breeze compared to back in 1497

How the envoy of Venice did it

I have recently gotten a visa card linked to my bank account in an Ivorian bank. I tried it today for the first time in an ATM in Europe, and despite everything that’s going on, my CFA Francs came out as Euros without any problems. Guess this is one more of these things that everybody take for granted, but when thinking about it, global banking networks are quite amazing.

Here’s a story from the Economist of how Venetian and Spanish ambassadors to England dealt with this same problem (and other stuff) back in the 15th century:

Living in England, as Cambrai had anticipated, was extremely expensive. The income of de Puebla, Soncino and the rest was much more precarious than this, and their letters home (though no doubt exaggerated for effect) tell desperate tales of poverty. They themselves were not on per diems but had been sent with a pot of money that had to be topped up somehow, usually by merchants from their own countries, who were somewhat elusive and set their own exchange rates.

Soncino’s lodging probably cost around a shilling (12d) a night, with meals included. De Puebla rented a suite of rooms at the Austin Friars, but was also renowned for staying “in the house of a mason who keeps dishonest women” where a seat at the slopped-down common table cost 2d a day. To supplement these pie-and-beer meals, he tried to cadge food at court. Henry VII, enquiring once why the Spanish envoy had come round yet again, was told: “to eat”.

In fact, the court was the only place where the envoys could supplement their diets or their salaries. Royal rewards (very rare, unless an actual treaty had been concluded) came in the form of purses of gold, accepted with craven gratitude and then, back in the lodgings, carefully checked, tooth-tested and weighed. (“The king gave him 300 nobles, neither seen nor counted by him”.) Dining at court, as Soncino and Trevisano did fairly often, allowed them to sample the king’s excellent French wines and to eat 60-course feasts, from “pottage-pig” through “larks ingrayled” to “castles of jelly”. But gastronomy had its price. Soncino’s Venetian friend complained that these meals lasted for hours, with much slower service than in Italy, and were sometimes consumed in total silence.

Getting the dispatches home was another matter. On average, letters reached Milan or Venice in about three weeks. De Puebla’s to Spain sometimes took twice as long. Messengers got drunk, mislaid the papers, or fell ill on the road. Ships were blown off course, or sank. Vital letters sent to Henry by Ferdinand and Isabella seem to have drowned with the envoy who carried them—or so they claimed later, though in truth they had never been mustard-keen to send them. Other letters still carry salt-water stains. Fretting in Madrid or Tortosa, the Spanish sovereigns often thought de Puebla was not bothering to write. When he protested that he was, copiously, they barked at him some more. (“None of your last has arrived. Please always send duplicates.”) This problem, of course, cut both ways: rulers waiting weeks for news, while envoys waited weeks for their instructions. It is a wonder, under these conditions, that long-term diplomacy could be carried on at all.

Venice back in the days

Is the Ivorian Franc coming to life?

Anyhow, previously on this blog I wrote about the issue of sending money to the Ivory Coast. Now the main concern is getting money out of the Ivory Coast.  The risks are that sanctions or Gbagbo actions will make it impossible/difficult to transfer funds abroad from accounts in the Ivory Coast.  Also, it wouldn’t be great if all my CFA Francs were converted into the new Ivorian franc backed by nothing and controlled by Gbagbo’s government.

Regarding rumours about the new currency, people in the know say that if the physical bills and coins of the currency have already been created, then the roll out is a matter of days.   However, it is unlikely Gbagbo had a new currency ready and waiting before the elections.

And, as I have been told, the whole work to create a new currency from scratch is a long process that takes at least 8 months.  The capacity to do this work does not exist in the Ivory Coast, so Gbagbo would need outside assistance.  And it’s easier to see countries that would actively try to prevent Gbagbo from issuing a new currency (France springs to mind) than countries ready to help him.

Guess if Gbagbo manages to pay for it, Angola or Zimbabwe could ask whoever prints their currencies, to print the Ivorian Franc, and then ship it to Abidjan.   Dictators can be pretty quick on acting on these type of things – it kind of helps not having any committees or parliamentary processes to discuss and evaluate things.  However, I wouldn’t be surprised if there is a western-dominated company behind the creation of the Angolan and Zimbabwean currencies, and a phone call from Paris or Washington might stop any plans of creating an Ivorian franc.

Prototype of the Ivorian Franc

A very long view on house prices

The Herengracht house index

One of my favourite pieces of academic research is a study of house prices along the Herengracht canal in Amsterdam made by real estate finance professor Piet Eichholz of Maastricht University. Thanks to outstanding dutch record-keeping,  Eichholz managed to construct the Herengracht house index covering house prices from the contruction of the Herengracht in the 1620s all the way to 1975 at first, and later extended to 2008.


Continue reading “A very long view on house prices”

The Merits of Meritocracy

I can’t seem to let go of the Swedish Emigration Investigation (or Commission might be a better word for it) from 1907 three posts ago. One theme in it, is that emigrants left not only due to the economic situation, but also due to issues such as dignity and human respect linked to class differences and the exclusion of the poor from the political system.  The english wikipedia page about the Commission (yes, there is one!) has the following little story:

Bitter experiences of Swedish class snobbery still rankled after sometimes 40–50 years in America. A man who’d emigrated in 1868 described the disparaging comments he had heard in his youth from the aristocrat in charge of the parish poor relief, which “gave rise to great bitterness and a large number, among them myself, emigrated to America, which I have never regretted. Here, you are treated like a human being, wherever you are.” Continue reading “The Merits of Meritocracy”

Brain Gain and a Historical Lookback

In 1907 the Swedish Parliament commissioned an investigation to try to reduce emigration to the United States. The original request included the following points:

  • That many emigrants would stay at home if they knew the hardships they would face in America.
  • A governmental information campaign on the dangers of emigration
  • Measures to stop and prevent promotion of emigration, claiming that agitators lure people into emigration using false information.
  • Many bitterly regret going to America where they find themselves in worse conditions than at home, and have perhaps spent all their money on the journey and can’t afford to go back home.
  • Many do not want to return due to misdirected ambition; they do not want to admit that they have made a mistake in emigrating. This explains why letters home from Swedes in America speak so highly of the new land.
  • Support to regretful emigrants by sending one of the Navy’s ships to New York to bring them home for free, under condition that they no longer be allowed to move abroad.
  • Talks about the significant economic loss of having able people in the age 15-35 moving abroad. And the even greater loss of spiritual capital, stating that it is known that it’s the energetic and intelligent youth that’s recruited for emigration. The most entrepreneurial leave for the New World, but the lazy and unproductive stay at home.

The thing is that I have heard all these points and arguments (perhaps except the one about lazy people staying at home) in present day Africa.   In 2001 Senegal even chartered a plane to bring home emigrants in France who supposedly were disappointed with their new lives in France, but could not afford to buy a ticket home, citing reasons similar to the ones above.  I can’t find any sources for it now, but I remember reading about it in Senegalese press.

In 2007 the Senegalese President Wade in a joint press conference with French President Sarkozy, said that Senegal would bring home all illegal immigrants in France, and expressed worries over brain drain. Continue reading “Brain Gain and a Historical Lookback”