Investment: A History

What Lessons Emerge From the History of Investment?

Number One: You Can’t Plead Ignorance

Investors Today Should Use History to Help Them Avoid Five Archetypal Mistakes and Adhere to Four Principles — Know What You’re Buying; Understand Fundamental Value; Don’t Reject All Leverage; Allocate Your Assets Wisely

BOSTON, MA–(Marketwired – Feb 18, 2016) – Can the successes and downfalls of investors in Ancient Rome and Renaissance Europe teach anything to investors today? More than you might think.

So say Norton Reamer and Jesse Downing, authors of a new book, Investment: A History (Columbia Business School Publishing, February 2016). Reamer is the founder and long-time CEO of United Asset Management, and former CEO of Putnam Investments. Downing is an investment professional based in Boston.

Investment: A History is perhaps the first book to explore the entire history of investment — from lending and trade in the ancient world to ETFs in the 21st century — and why that history matters for investors today. What it finds is noteworthy: over the course of history the world has seen a dramatic “democratization” of investment — a broad diversification of investment opportunities and steadily increasing levels of savings in the hands of everyday people, allowing them to take advantage of those opportunities.

For thousands of years, the only people who qualified as “investors” were wealthy and politically connected landowners. Investment opportunities were few and available only to the power elite. Yet, in the blink of an eye, historically speaking, that world has been replaced by a far more democratic one, full of investments accessible to average people: stocks, bonds, mutual funds, pension plans, real estate, index funds and many other investment vehicles.

“It’s important to remember that ‘democratic’ does not necessarily mean equal. For example, some alternative asset classes remain unavailable to retail investors,” says Reamer. “But with the opportunity of democratization comes a responsibility to educate ourselves as best we can. We can no longer plead ignorance or opt out of investing altogether.”

Four Timeless Principles for Today’s Investors

“Investing used to be an activity pursued only by elites, but if more people understood just how much things have changed over the last 5,000 — or even 500 — years, they might be more enthusiastic about investment literacy,” says Downing. He and Reamer point to four basic investing principles that may help nascent and professional investors alike.

“First, focus on what’s ‘real’ by making sure you understand the real asset behind the piece of paper you’re buying. Next, keep in mind the fundamental value of an investment — the present value of the future cash the entity will produce over its lifetime. Don’t get distracted by valuation gimmicks or market gyrations,” says Reamer.

“The third principle has to do with leverage, or borrowing,” he continues. “Not all leverage is bad, and investors should consider using it intelligently. Finally, remember that every investment is an allocation of capital: a choice between competing priorities and opportunities. Successful investors make informed, deliberate choices as to where they put their money.”

Five Archetypal Investing Mistakes from History

“History also helps us understand that for thousands of years, investors have been making the same mistakes over and over again,” says Downing. “True financial literacy should include familiarity with the archetypal mistakes of investing history — not just the success stories. The recent history of the financial crisis and Great Recession indicate that many investors — even professionals — have not learned those lessons,” he adds.

ACA barely survived a Supreme Court challenge... but what many people fail to realize is that Social Security was also almost defeated in a 1937 Supreme Court case

Reamer and Downing point to five mistakes that have bedeviled investors for millennia: not diversifying enough; buying into asset bubbles; using leverage inappropriately; ignoring or engaging in conflicts of interest; and succumbing to emotional biases. “In all these examples, emotion clouds the investor’s judgment. Removing emotion as much as possible from investing decisions, large and small, can only benefit the investor in the long run,” notes Reamer.

Important Moments in Investing History You’ve Never Heard Of

Most people know that in 2012 the Affordable Care Act, or Obamacare, barely survived a Supreme Court challenge — by only a one-vote margin in a five-to-four case. But what many people fail to realize is that Social Security, a cornerstone of retirement for millions of Americans, was also almost defeated in a 1937 Supreme Court case. “It’s astonishing to think that this important institution almost didn’t survive,” says Downing.

“An interesting historical tidbit: the deciding vote in each of these cases came from a Justice named Roberts — John Roberts in 2012 and Owen Roberts in 1937,” says Reamer. “Many people also don’t realize that retirement as we know it is a relatively new concept. Up until 150 years ago — with the rare exception of Roman soldiers, who were sometimes given a grant of land to tide them over in their golden years — people worked until they died, or until their families had to take them in.”

Adds Downing, “Retirement, and Social Security along with it, have truly changed the world and the investment management business.”

More Lessons from Investment: A History

In addition to useful tips and warnings for investors, Investment: A History offers a comprehensive explanation of how we got to the investment landscape that we know today, and where we can expect to go from here. The book explores:

  • The past, present and future of alternative asset classes like hedge funds, private equity and venture capital.
  • Why the golden rule for 21st century investors must be: “Thou shall not plead total investment ignorance.”
  • The “democratization” of investing over the last 150 years, and how it has expanded the opportunities — and responsibilities — for everyday investors today.
  • How the U.S. government has improved in managing economic crises — from the Great Depression to the Great Recession and onward.
  • How Ancient Phoenicia inspired the “2-and-20” fee structure — and the complexities and nuances of fees paid to investment managers.
  • Why insider trading and forms of market manipulation were legal until the 20th century, and what’s next for regulation and enforcement.

Investment: A History endeavors to show just how dramatically the investment landscape has changed over the last 5,000 years — with a focus on the past two to three centuries — and how an understanding of that history can help navigate the complex world of investment. The authors have striven to fill the book with insights, interesting people, and enduring wisdom.




If you’d like to speak with Reamer or Downing, please contact Jesse Arno of Sommerfield Communications, Inc., at +1 (212) 255-8386, or More information, including videos with the authors and a timeline of the history of investing, can be found at