May 19, 2025 • 24 mins
What do Rome, Spain, and Britain have in common?
They each ruled the world — and then quietly collapsed from within.
In this episode of The Timeless Investor Show, we explore how three of history’s greatest empires fell — not from outside invasion, but from internal decay. From currency debasement and over-financialization to the erosion of civic discipline, the warning signs were always there.
More importantly, we connect these patterns to the modern world — and what today’s investors can learn about resilience, scarcity, and how to protect wealth when the system itself starts to rot.
If you’re an investor, a builder, or just someone trying to understand where this all leads… this one’s for you.
Articles referenced in the show:
How British Empire Financialized the World
The Empire that Lasted 1000 Years
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Transcript
Episode Transcript
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SPEAKER_00 (00:00):
What if I told you the most powerful empires in
history didn't fall in battle,they collapsed under the weight
of their own success?
Not from invasion, but fromdecay.
From wealth that becameentitlement, from finance that
overtook production, fromsystems that got so rich they
stopped being real.
Rome, Spain, Britain.
(00:23):
Three empires that ruled theworld, most of the known world
as we know it, and then,quietly, hollowed out from
within.
And if you're an investor today,especially in the West, you'd be
wise to study how it happened.
Because when the money starts tolose meaning, when finance
replaces work, and whenconfidence in the system cracks,
it's not just nations that willsuffer.
(00:44):
Your portfolio will too.
In this episode, I'm going towalk through the fall of three
great empires, and moreimportantly, what you can learn
from them as a modern investor.
Where did they go wrong?
What signals did they miss?
And how can we build resiliencewhile living inside systems that
might be quietly crumbling?
Now, you might be asking why anyof this matters.
(01:05):
And if you follow me, you followmy LinkedIn account, you follow
our sub stack, the TimelessInvestor Newsletter, you'll know
that we've talked about thistopic quite a bit.
We've covered Spain.
We've covered the Potosi minesand the fraud that kind of
destroyed the Spanish Piazza deOcho over time and eventually
led to the crown defaultingmultiple times.
(01:26):
We talked about Britain lastweek.
It was a relativelycontroversial post.
If you haven't seen it, go checkit out.
We talk about it a lot.
And it's really important tounderstand because it's not just
history.
It's risk management.
These things happen over andover again.
One of my favorite phrases is,and the wheel turns ever onward.
Life is a giant cyclicalmachine.
(01:49):
And these things, they will keeprepeating.
unless we learn the lessons ofhistory.
And unfortunately, one of thelessons of history is that
people forget.
The first generation buildssomething great and builds a
great country, a great nation, agreat business.
We have an old saying when I wasin private wealth at Goldman
Sachs that the first generationof wealth creators were the ones
(02:12):
that got it done.
And their children oftentimeshad been raised in that
environment.
They understood it.
And they continued the familylegacy.
But it's the third generation,the fourth generation, where
things really start to fallapart.
It's such a common thing.
I don't know the word I'mlooking for here.
It's such a common thing in lifethat there is a phrase in
(02:35):
multiple different societies toexpress the exact same
sentiment, right?
In three generations, like riseand fall in three to four
generations, in families, innations, like you name it.
And this is really importantbecause investors, all of us, we
live in systems, whether they bemonetary, political, or
institutional.
(02:56):
And the systems we live in shapeour returns more than our
individual skill.
Individual skill matters, butunderstanding the systems,
what's kind of, Ray Dalio talksabout this a lot, understanding
what's happening underneath youand the system you're in.
If the system is rottingunderneath you, even a great
investment can become worthless.
How do you protect yourself?
How do you recognize what'shappening?
How do you as a citizen of ademocracy do something about it,
(03:19):
vote the right way, do the rightthing, do the right thing
personally, teach your childrenthe right way?
I try to teach my children thesame things we're talking about
here.
How do you think about thesethings to create a better
outcome?
And it's not just aboutnostalgia.
I mean, Rome, Spain, and Britainwere all the dominant global
powers of their time, just likethe United States is today.
All three of them made the samemistake.
(03:41):
I think it took a slightlydifferent permutation in every
one of these situations, butthey mistook wealth for
resilience.
I don't want to say thisnecessarily for Britain because
Britain sacrificed greatly inmultiple wars, but in the Roman
case, for example, the commonRoman citizens were stopped
serving in the legion theyoutsourced civic duty service to
(04:02):
nation to to mercenariesbasically and the nation fell
apart again every empire has itsown tale but the tales start to
rhyme the more you kind of lookat them and walk through them so
let's start with the romanempire and we're gonna you know
the roman empire is one that wehaven't actually written a long
piece on we i wrote a piece twoweeks ago on the byzantine
(04:23):
empire which Those of you thatknow history know the Byzantine
Empire was just the continuationof the Roman Empire, right?
So Constantine the Great movedthe capital to Constantinople.
Now we know it as Istanbul.
And the Eastern Roman Empiresurvived for a thousand years
after the fall of the WesternRoman Empire.
And there's a lot to take awayfrom that story, but there's a
(04:44):
lot to take away from the storyof the Western Roman Empire as
well, right?
So I hit on one point.
As Rome grew more wealthy andmore powerful, The Roman
citizenry became entitled,became luxury addicted, no
longer wanted to serve in thelegions.
Part of what gave Rome itsstrength, and there's a lot we
(05:05):
can say about the negatives ofRome.
I mean, the Roman Empire waseffectively, and the Roman
Republic, was effectively anation that waged war for the
goal of creating more slaves,right?
I mean, the entire economy wasdriven by slavery.
So there was a constant need toexpand, to expand.
One could argue that when theRoman Empire stopped expanding,
its economy started to falterbecause it no longer had a fresh
(05:28):
influx of slaves coming into thecountry.
But there's a lot of otherthings to talk about here as
well.
Declining civic duty, risingdecadence, over-reliance on
mercenary armies.
At a certain point, Romans inItaly ceased serving in the
military.
And you started havingbarbarians on the frontier that
were the legions instead, right?
And obviously, these newentrants to the military might
(05:50):
not have had the same civicloyalty to Rome that Roman
citizens would have had.
And so when Rome ultimatelyfell, this is an important
point, right?
Another massive point that isthe case in almost every one of
these situations was thedebasement of currency.
So Rome had the denarius.
The denarius started out as asolid gold coin, and the Caesars
(06:15):
progressively figured out thatthey could debase the value of
the currency and spend their waythrough the currency by
continually debasing thecurrency.
And eventually, the denarius wasworthless.
You compare this to the exampleof the Eastern Roman Empire.
The Eastern Roman Empire didn'tdebase its currency.
We'll write a piece on this aswell.
(06:36):
hundreds of years, the EasternRoman Empire maintained a sound
currency.
And there's a reason, it's oneof the reasons it survived this
long.
So debasement of currency,rising decadence, the lack of
attention to civic duty,over-reliance on mercenary
armies.
I mean, there's many, manyfactors.
And I think the reality is wewill never in a 15 to 20 minute
(06:57):
podcast be able to analyze everyfactor that led to the decline
of the Western Roman Empire.
But these are huge, right?
So when systems inflate, Whenthe government consciously
debases currency and disciplineerodes, the collapse isn't
necessarily allowed, but it isslow and it is irreversible.
And unfortunately, as a proudU.S.
(07:17):
citizen living in the UnitedStates today, you can see some
of these things happening,right?
Let's talk about Spain.
The Spanish Empire is one of myfavorite historic examples.
People don't know this in theUnited States that much, but the
Spanish Empire at its height wasone of the most powerful empires
in the world.
all of Latin America, all ofCentral America, all of the
(07:39):
Western United States.
It had colonies all over theglobe.
It had extreme influence in theEast.
It was a massive nation.
The Spanish Empire fell prey toa couple big problems.
It had too much success.
It imported a dramatic amount ofwealth.
And somebody made a comment onetime, imported wealth from Latin
(07:59):
America is sort of a misnomer.
They stole and expropriatedwealth from the native people in
Latin America.
The point is, the Spanish had amassive influx of silver and
gold.
And that means that Spain becamean importing nation.
They imported goods fromelsewhere because they could
(08:20):
afford to buy it.
So they hollowed out theirdomestic industry.
They had imperial overreach,wars in the Netherlands, wars
with colonies in the New World,and they were financing it with
a continual flow of silver andgold.
Yeah.
(08:57):
they brought in so much wealththat domestic innovation sort of
ceased, right?
And the Dutch and the English atthe same time built finance and
shipping lanes while Spainbought status goods and started
to devalue their currency.
So here's the really fascinatingpiece of the Spanish decline
story.
So there was a mine in Boliviacalled the Mines of Potosí, and
(09:18):
I cover this in a differentSubstack article, which we'll
link in this show notes.
And the administrators of theMines of Potosí figured out that
they could debase the currency.
So they were creating Piazza deiOcho, which was the name of the
currency at the time, and theystarted to debase the silver.
And they were making a fortune,a fortune.
(09:40):
So they would debase it by 10%,20%, but they would sell it and
ship it as if it was a fullysilver coin.
And for a while, it looked real,it felt real, it acted real.
But eventually, merchantsstarted to notice that that the
currency was lacking in value,that it was short on silver
supply.
Now, this is a reallyfascinating anecdote because
(10:01):
most of the time when a nationgoes through a currency
debasement scenario, they aredebasing their own currency
intentionally to finance thegovernment.
That's certainly what'shappening today in the United
States.
This didn't happen in this case.
It was unintentionally debased.
But here's the thing thathappened.
The The debasement of thecurrency, they eventually
(10:22):
figured it out because somebodystarted melting down the coins
to actually figure out how muchactual silver was in those
coins.
And they realized that it hadbeen debased.
This created a lack of trust inthe entire Spanish currency
system.
Now, imagine if you're theSpanish crown.
You are relying upon shipmentsof silver and gold to finance
(10:43):
endless war, endless imperialexpansion.
and a domestic industry that ishollowed out at this point
because you can afford to justbuy everything you want.
Suddenly, the value of yourcurrency is called into
question.
And what happens when trust incurrency declines?
It is a disaster.
And that is exactly whathappened.
Now, the Crown took decisiveaction.
(11:04):
They sent people over to Potosiand they investigated
everything.
And it's actually an interestingside note.
The first round of people theysent were basically bought off
and convinced to get in on thisgreat money-making scheme.
But eventually, they figured itout.
And all of the perpetrators ofthe scheme were drawn and
quartered, which if you don'tknow what being drawn and
quartered is, look it up.
(11:25):
It's a horrific way to die.
So the crown took decisiveaction, but trust was already
gone.
So the story of the Spanishempire's rise and decline is
basically they had easy money.
They didn't reinvest ininfrastructure or productivity
or innovation.
So They had strength, but theirstrength was actually fragility.
(11:46):
You just couldn't see it.
And then the debasement of thePiazza de Ocho was the thing
that shattered the trust intheir currency.
And the crown ended updefaulting multiple times on its
debt obligations.
So we look back and we say,well, how did the Spanish Empire
end up losing all of thisterritory?
And the answer is simple, right?
I mean, it's simple.
(12:06):
Like Spain hollowed itself out,debased its own currency.
and eventually couldn't hold onto what it had achieved.
The third empire we talked aboutlast week is the British Empire,
the empire on which the sunnever sets.
And Britain is a reallyfascinating story because there
are many factors here, right?
(12:29):
I'm not going to try to act likethere's one factor that led to
the decline of the BritishEmpire.
But one of the trends that Ithink is responsible and
ultimately unhelpful is thatBritain started as a trading
nation, as a producing nation,and certainly as a colonizing
nation.
But as Britain grew, as itexpanded, as the British Empire
(12:52):
expanded, it became the centerof global finance.
The city of London was basicallythe World Bank.
And at some point, Britainshifted from production to
finance.
And finance is very lucrative.
I had a mentor, close friend ofmine, who once said that many
(13:14):
finance roles don't reallyproduce any value.
Think about that for a second.
This guy was very, very, verysuccessful in finance.
He said, the best and brightestin the United States go into
investment banking, but what doinvestment bankers do?
That's a really I mean, that's adeep question, right?
And the quick answer is theydon't really do anything.
(13:35):
They grease the skids oftransactions that would have
happened anyways.
Now, there might be someinstances where investment
bankers maybe put together aunique combination that no one
thought about, but most of thetime, they serve a role in the
system to allow transactions tohappen.
So if our best and brightest aregoing into investment banking,
because investment banking is anincredibly lucrative job.
(13:57):
I mean, I was at Goldman inprivate wealth, and I
remember...
I think I looked at someone'sopening salary right out of
college in the investmentbanking department.
It was like$250,000 to$300,000 ayear for a 23-year-old analyst.
That's where you start.
Imagine where you end in 40years.
They're making astronomical sumsof money.
But what do they do?
(14:18):
And that's the issue that theyran into is the British economy
became overly financialized,focused on making money with
money, which...
is very lucrative.
But you have to ask yourself,what does it do?
How is that helpful?
And obviously, some colonialoverreach.
But the general premise here isthat the British Empire was very
(14:40):
successful and sort of a victimof its own success.
And they failed to reinvest athome.
Industry hollowed out.
And so when World War I came,Britain was unprepared for it.
Now, some people have pointedout fairly that Britain
sacrificed greatly in World WarI and World War II to stop the
Germans, right?
(15:00):
And that is a fair point, andI'm not going to take anything
away from that.
What happened in the lead up toand the start of World War I is
that most of the world was on aglobal gold standard, which I
will also link in the shownotes, but was a period of
unprecedented prosperityworldwide.
And all of the belligerentpowers in World War I broke from
(15:21):
the gold standard at this pointand went to fiat currency.
The reason is quite simple.
It is impossible to finance awar if you are on a strict gold
standard.
You simply can't do it.
You have to tax your citizenryto pay for the war.
Now, the thing that you shouldrealize is citizens of a
democracy would never stand fora war that they had to actually
(15:43):
pay for.
The way governments pay for warsis to finance the war by
debasing the currency andsparking inflation.
They're basically taxing thecitizenry, but in a way that the
citizenry does not realize asdirectly as when they are
actually just taxed.
So the British financial systembecame massively indebted as a
(16:07):
result of World War I, and weknow what happened afterwards
because the war ended, Germanywas placed under a massive
reparations program, never wentback on the gold standard, The
British tried to go back on thegold standard.
They tried to couple it to whatit had been worth before.
They couldn't do it.
The economy started fallingapart.
But honestly, I think the endresult is they had underinvested
(16:29):
in production, in home industry,and were overly reliant on the
Robesie's empire.
And all of this sort of fellapart.
So look, let's talk about today.
So are we in the same cycle?
And I'm going to repeat my quoteagain.
The wheel turns ever onward.
The U.S., one could argue, is apost-industrial economy.
(16:51):
And I'm not going to sit hereand say that we need to onshore
all industry, we need to do allthis kind of stuff.
But I do think it's fair to saythat the U.S.
has become a country that isfocused on making money on money
more than necessarily focusingon productive industry, right?
We have great productiveindustry, don't get me wrong.
And I'm not going to sit hereand say that the U.S.
is directly headed down theexact same path.
(17:13):
But there is a dominance offinance, right?
I look at private equity as agood example.
What does private equityproduce?
Private equity, for those of youthat don't know, is the world of
acquiring private businesseswith capital and looking for a
monetary return out of it.
Most investment bankers doinvestment banking so they can
get into private equity.
(17:33):
But what does private equity do?
This is the private equityplaybook.
They will acquire a businesswith debt.
They will lay off a bunch ofstaff and they will cut costs to
the bone and then they will tryto flip it and sell it to
someone else or makecombinations or take that thing
public.
It is an exercise in financialengineering, more so than an
(17:54):
exercise in trying to createsomething truly new and dynamic.
Now, there's nothing wrong withthat.
There's nothing wrong withtrying to make money.
But the question is, are ourbest and brightest gravitating
towards industries that make alot of money through financial
engineering?
versus industries that arecreating things of real value.
Now, we have entrepreneurs inthis country that are making
(18:14):
things of real value, but youhave to ask.
We are exhibiting many of thesimilar traits to many of these
empires.
We have the overemphasis onindustrialization.
We are a nation of importers.
We import a lot of our materialsand goods.
We're over-reliant on ourtrading partners, which we're
kind of going through the painof right now under the Trump
(18:35):
administration with the tariffpolicies and all these things
that are happening.
And we're kind of seeing thepain of that.
We're also a nation that isdebasing its currency.
Now, it's not just us, by theway.
Everybody is debasing theircurrency.
Almost the entire world is on asystem of central banking and
fiat currency and steadydebasement of currency.
I saw a stat that since we brokethe gold standard with the
(19:00):
Bretton Woods Accord, the valueof the US dollar from 1971 to
today has declined 87%.
So...
I don't know what you can callthat except currency debasement.
So the question we have to askourselves is, what is the system
we're living in?
And I'm not going to sit hereand predict the fall of the
United States or the fall of theUS empire or any of these kind
(19:22):
of things.
I'm simply saying it's valuableto look at the cycles that have
come before and try tounderstand what's happening.
There are some big geopoliticalthings happening.
The rise of China, the rise ofthe East, the rise of the global
South.
There's a lot of thingshappening and investors need to
position themselves in a placethat is secure and safe.
And that to me leads to theargument for real estate and
(19:44):
real assets.
I'm not just going to say justreal estate, but I think real
assets are a hedge againstimperial decline.
So first of all, real estate andreal estate investing is the one
contraindicator, I think, to myargument against private equity.
Because technically, real estateis private equity, private
capital acquiring something.
(20:05):
The difference is that I thinkmoney that flows into real
estate is valuable for what itdoes.
So think about it this way.
When you look at a city likeBerkeley that makes ownership
difficult and restricts the flowof capital into a city, you can
see that the city's housingstock starts to deteriorate.
By contrast, When cities allowthe free flow of capital, you
(20:27):
can think of it like aperpetually rejuvenating machine
for the city's infrastructureand housing.
So real estate is a productiveindustry to be engaged in and to
work in.
It also supports businesses, ithouses people, and it meets a
tangible ongoing human need.
So even when empires decline,people will still need shelter.
That doesn't go away, right?
(20:49):
The second piece is that realestate is anchored in scarcity.
Land is and land and supplyconstrained economically
productive areas is a finiteresource.
That means housing in placeslike Manhattan, San Francisco,
London, Chicago, they becomemore valuable as economic
systems to stabilize because theland itself is scarce, real, and
(21:11):
hard to replicate.
They also preserve purchasingpower.
So we saw that in Spain and Romeand Britain.
Landowners retained their wealthIt was the urban wage earners
and savers who were wiped out bythe decline of the empire.
So owning real estate withpricing power and yield can help
investors ride out inflation,currency devaluation, or policy
(21:32):
instability.
There's a lot of other thingspeople look at, gold, Bitcoin,
whatnot, but real estate has...
some incredible value, and Ithink is a very strong hedge
against a lot of the scenarioswe're talking about.
There's a lot of contrapoints towhat I'm saying.
If we go into imperial decline,the economy goes into decline,
(21:54):
real estate will also be hurt.
Just to be very clear, it willalso be hurt because renters may
not be able to pay their usualrent.
Businesses may suffer.
So there's pros and cons to whatI'm saying, right?
And that somewhat leads topeople's argument for Bitcoin as
well, which I'm not going to getinto on this particular show,
but it's important.
So look, we have some reallygood stuff coming out this week.
(22:16):
I hope you've enjoyed thisepisode.
On Wednesday, we will bedropping another behavioral
finance discussion, looking atthe overconfidence bias and how
it affects real estateinvestors.
And this coming weekend, we'llbe releasing a real estate deep
dive.
So I hope you're prepared forthat.
If you've enjoyed this episode,I would ask that you please
(22:37):
share it.
Please, please leave us a reviewon Apple Podcasts, on Spotify,
whatever the system is that youuse.
It's very helpful to help theshow.
And if you haven't subscribedalready, please subscribe to our
sub stack, the Timeless InvestorNewsletter, where we do deep
dives into these sort of topics.
And Just really get into thegood stuff.
(22:57):
I think we've been striking areal note here.
Our Timeless Investor newsletterhas grown rapidly.
I started writing in February.
And as of today, May 17th, it isover 1,600 subscribers.
So we've gained about 1,600subscribers in basically three
months, which is awesome.
And it's also, I think,reflective of the fact that
(23:19):
we're writing some reallyinteresting stuff.
So I just want to say, you know,history doesn't repeat, but it
does rhyme.
And understanding the cyclesthat have come before us is
really, really important to justunderstanding what's going on,
right?
I mean, you can sound smart at adinner party, which is great.
You can hedge.
You can vote accordingly as acitizen.
(23:40):
You can understand the issuesbetter.
But also, like, you justunderstand intuitively or
instinctively or in a deep firstprinciples basis what is
happening to day and this wildsystem that we're living in and
that we're all subject to andthat we oftentimes have no
understanding of.
So I want to leave you withthat.
(24:01):
I want to thank you for joiningus for the show today.
I hope you found this useful.
We will be releasing a deepstudy on the Roman Empire as
well and its inevitable decline.
Thank you again.
Think well, act wisely, buildsomething timeless.
Thank you.
What if I told you the most powerful empires in
history didn't fall in battle,they collapsed under the weight
of their own success?
Not from invasion, but fromdecay.
From wealth that becameentitlement, from finance that
overtook production, fromsystems that got so rich they
stopped being real.
Rome, Spain, Britain.
(00:23):
Three empires that ruled theworld, most of the known world
as we know it, and then,quietly, hollowed out from
within.
And if you're an investor today,especially in the West, you'd be
wise to study how it happened.
Because when the money starts tolose meaning, when finance
replaces work, and whenconfidence in the system cracks,
it's not just nations that willsuffer.
(00:44):
Your portfolio will too.
In this episode, I'm going towalk through the fall of three
great empires, and moreimportantly, what you can learn
from them as a modern investor.
Where did they go wrong?
What signals did they miss?
And how can we build resiliencewhile living inside systems that
might be quietly crumbling?
Now, you might be asking why anyof this matters.
(01:05):
And if you follow me, you followmy LinkedIn account, you follow
our sub stack, the TimelessInvestor Newsletter, you'll know
that we've talked about thistopic quite a bit.
We've covered Spain.
We've covered the Potosi minesand the fraud that kind of
destroyed the Spanish Piazza deOcho over time and eventually
led to the crown defaultingmultiple times.
(01:26):
We talked about Britain lastweek.
It was a relativelycontroversial post.
If you haven't seen it, go checkit out.
We talk about it a lot.
And it's really important tounderstand because it's not just
history.
It's risk management.
These things happen over andover again.
One of my favorite phrases is,and the wheel turns ever onward.
Life is a giant cyclicalmachine.
(01:49):
And these things, they will keeprepeating.
unless we learn the lessons ofhistory.
And unfortunately, one of thelessons of history is that
people forget.
The first generation buildssomething great and builds a
great country, a great nation, agreat business.
We have an old saying when I wasin private wealth at Goldman
Sachs that the first generationof wealth creators were the ones
(02:12):
that got it done.
And their children oftentimeshad been raised in that
environment.
They understood it.
And they continued the familylegacy.
But it's the third generation,the fourth generation, where
things really start to fallapart.
It's such a common thing.
I don't know the word I'mlooking for here.
It's such a common thing in lifethat there is a phrase in
(02:35):
multiple different societies toexpress the exact same
sentiment, right?
In three generations, like riseand fall in three to four
generations, in families, innations, like you name it.
And this is really importantbecause investors, all of us, we
live in systems, whether they bemonetary, political, or
institutional.
(02:56):
And the systems we live in shapeour returns more than our
individual skill.
Individual skill matters, butunderstanding the systems,
what's kind of, Ray Dalio talksabout this a lot, understanding
what's happening underneath youand the system you're in.
If the system is rottingunderneath you, even a great
investment can become worthless.
How do you protect yourself?
How do you recognize what'shappening?
How do you as a citizen of ademocracy do something about it,
(03:19):
vote the right way, do the rightthing, do the right thing
personally, teach your childrenthe right way?
I try to teach my children thesame things we're talking about
here.
How do you think about thesethings to create a better
outcome?
And it's not just aboutnostalgia.
I mean, Rome, Spain, and Britainwere all the dominant global
powers of their time, just likethe United States is today.
All three of them made the samemistake.
(03:41):
I think it took a slightlydifferent permutation in every
one of these situations, butthey mistook wealth for
resilience.
I don't want to say thisnecessarily for Britain because
Britain sacrificed greatly inmultiple wars, but in the Roman
case, for example, the commonRoman citizens were stopped
serving in the legion theyoutsourced civic duty service to
(04:02):
nation to to mercenariesbasically and the nation fell
apart again every empire has itsown tale but the tales start to
rhyme the more you kind of lookat them and walk through them so
let's start with the romanempire and we're gonna you know
the roman empire is one that wehaven't actually written a long
piece on we i wrote a piece twoweeks ago on the byzantine
(04:23):
empire which Those of you thatknow history know the Byzantine
Empire was just the continuationof the Roman Empire, right?
So Constantine the Great movedthe capital to Constantinople.
Now we know it as Istanbul.
And the Eastern Roman Empiresurvived for a thousand years
after the fall of the WesternRoman Empire.
And there's a lot to take awayfrom that story, but there's a
(04:44):
lot to take away from the storyof the Western Roman Empire as
well, right?
So I hit on one point.
As Rome grew more wealthy andmore powerful, The Roman
citizenry became entitled,became luxury addicted, no
longer wanted to serve in thelegions.
Part of what gave Rome itsstrength, and there's a lot we
(05:05):
can say about the negatives ofRome.
I mean, the Roman Empire waseffectively, and the Roman
Republic, was effectively anation that waged war for the
goal of creating more slaves,right?
I mean, the entire economy wasdriven by slavery.
So there was a constant need toexpand, to expand.
One could argue that when theRoman Empire stopped expanding,
its economy started to falterbecause it no longer had a fresh
(05:28):
influx of slaves coming into thecountry.
But there's a lot of otherthings to talk about here as
well.
Declining civic duty, risingdecadence, over-reliance on
mercenary armies.
At a certain point, Romans inItaly ceased serving in the
military.
And you started havingbarbarians on the frontier that
were the legions instead, right?
And obviously, these newentrants to the military might
(05:50):
not have had the same civicloyalty to Rome that Roman
citizens would have had.
And so when Rome ultimatelyfell, this is an important
point, right?
Another massive point that isthe case in almost every one of
these situations was thedebasement of currency.
So Rome had the denarius.
The denarius started out as asolid gold coin, and the Caesars
(06:15):
progressively figured out thatthey could debase the value of
the currency and spend their waythrough the currency by
continually debasing thecurrency.
And eventually, the denarius wasworthless.
You compare this to the exampleof the Eastern Roman Empire.
The Eastern Roman Empire didn'tdebase its currency.
We'll write a piece on this aswell.
(06:36):
hundreds of years, the EasternRoman Empire maintained a sound
currency.
And there's a reason, it's oneof the reasons it survived this
long.
So debasement of currency,rising decadence, the lack of
attention to civic duty,over-reliance on mercenary
armies.
I mean, there's many, manyfactors.
And I think the reality is wewill never in a 15 to 20 minute
(06:57):
podcast be able to analyze everyfactor that led to the decline
of the Western Roman Empire.
But these are huge, right?
So when systems inflate, Whenthe government consciously
debases currency and disciplineerodes, the collapse isn't
necessarily allowed, but it isslow and it is irreversible.
And unfortunately, as a proudU.S.
(07:17):
citizen living in the UnitedStates today, you can see some
of these things happening,right?
Let's talk about Spain.
The Spanish Empire is one of myfavorite historic examples.
People don't know this in theUnited States that much, but the
Spanish Empire at its height wasone of the most powerful empires
in the world.
all of Latin America, all ofCentral America, all of the
(07:39):
Western United States.
It had colonies all over theglobe.
It had extreme influence in theEast.
It was a massive nation.
The Spanish Empire fell prey toa couple big problems.
It had too much success.
It imported a dramatic amount ofwealth.
And somebody made a comment onetime, imported wealth from Latin
(07:59):
America is sort of a misnomer.
They stole and expropriatedwealth from the native people in
Latin America.
The point is, the Spanish had amassive influx of silver and
gold.
And that means that Spain becamean importing nation.
They imported goods fromelsewhere because they could
(08:20):
afford to buy it.
So they hollowed out theirdomestic industry.
They had imperial overreach,wars in the Netherlands, wars
with colonies in the New World,and they were financing it with
a continual flow of silver andgold.
Yeah.
(08:57):
they brought in so much wealththat domestic innovation sort of
ceased, right?
And the Dutch and the English atthe same time built finance and
shipping lanes while Spainbought status goods and started
to devalue their currency.
So here's the really fascinatingpiece of the Spanish decline
story.
So there was a mine in Boliviacalled the Mines of Potosí, and
(09:18):
I cover this in a differentSubstack article, which we'll
link in this show notes.
And the administrators of theMines of Potosí figured out that
they could debase the currency.
So they were creating Piazza deiOcho, which was the name of the
currency at the time, and theystarted to debase the silver.
And they were making a fortune,a fortune.
(09:40):
So they would debase it by 10%,20%, but they would sell it and
ship it as if it was a fullysilver coin.
And for a while, it looked real,it felt real, it acted real.
But eventually, merchantsstarted to notice that that the
currency was lacking in value,that it was short on silver
supply.
Now, this is a reallyfascinating anecdote because
(10:01):
most of the time when a nationgoes through a currency
debasement scenario, they aredebasing their own currency
intentionally to finance thegovernment.
That's certainly what'shappening today in the United
States.
This didn't happen in this case.
It was unintentionally debased.
But here's the thing thathappened.
The The debasement of thecurrency, they eventually
(10:22):
figured it out because somebodystarted melting down the coins
to actually figure out how muchactual silver was in those
coins.
And they realized that it hadbeen debased.
This created a lack of trust inthe entire Spanish currency
system.
Now, imagine if you're theSpanish crown.
You are relying upon shipmentsof silver and gold to finance
(10:43):
endless war, endless imperialexpansion.
and a domestic industry that ishollowed out at this point
because you can afford to justbuy everything you want.
Suddenly, the value of yourcurrency is called into
question.
And what happens when trust incurrency declines?
It is a disaster.
And that is exactly whathappened.
Now, the Crown took decisiveaction.
(11:04):
They sent people over to Potosiand they investigated
everything.
And it's actually an interestingside note.
The first round of people theysent were basically bought off
and convinced to get in on thisgreat money-making scheme.
But eventually, they figured itout.
And all of the perpetrators ofthe scheme were drawn and
quartered, which if you don'tknow what being drawn and
quartered is, look it up.
(11:25):
It's a horrific way to die.
So the crown took decisiveaction, but trust was already
gone.
So the story of the Spanishempire's rise and decline is
basically they had easy money.
They didn't reinvest ininfrastructure or productivity
or innovation.
So They had strength, but theirstrength was actually fragility.
(11:46):
You just couldn't see it.
And then the debasement of thePiazza de Ocho was the thing
that shattered the trust intheir currency.
And the crown ended updefaulting multiple times on its
debt obligations.
So we look back and we say,well, how did the Spanish Empire
end up losing all of thisterritory?
And the answer is simple, right?
I mean, it's simple.
(12:06):
Like Spain hollowed itself out,debased its own currency.
and eventually couldn't hold onto what it had achieved.
The third empire we talked aboutlast week is the British Empire,
the empire on which the sunnever sets.
And Britain is a reallyfascinating story because there
are many factors here, right?
(12:29):
I'm not going to try to act likethere's one factor that led to
the decline of the BritishEmpire.
But one of the trends that Ithink is responsible and
ultimately unhelpful is thatBritain started as a trading
nation, as a producing nation,and certainly as a colonizing
nation.
But as Britain grew, as itexpanded, as the British Empire
(12:52):
expanded, it became the centerof global finance.
The city of London was basicallythe World Bank.
And at some point, Britainshifted from production to
finance.
And finance is very lucrative.
I had a mentor, close friend ofmine, who once said that many
(13:14):
finance roles don't reallyproduce any value.
Think about that for a second.
This guy was very, very, verysuccessful in finance.
He said, the best and brightestin the United States go into
investment banking, but what doinvestment bankers do?
That's a really I mean, that's adeep question, right?
And the quick answer is theydon't really do anything.
(13:35):
They grease the skids oftransactions that would have
happened anyways.
Now, there might be someinstances where investment
bankers maybe put together aunique combination that no one
thought about, but most of thetime, they serve a role in the
system to allow transactions tohappen.
So if our best and brightest aregoing into investment banking,
because investment banking is anincredibly lucrative job.
(13:57):
I mean, I was at Goldman inprivate wealth, and I
remember...
I think I looked at someone'sopening salary right out of
college in the investmentbanking department.
It was like$250,000 to$300,000 ayear for a 23-year-old analyst.
That's where you start.
Imagine where you end in 40years.
They're making astronomical sumsof money.
But what do they do?
(14:18):
And that's the issue that theyran into is the British economy
became overly financialized,focused on making money with
money, which...
is very lucrative.
But you have to ask yourself,what does it do?
How is that helpful?
And obviously, some colonialoverreach.
But the general premise here isthat the British Empire was very
(14:40):
successful and sort of a victimof its own success.
And they failed to reinvest athome.
Industry hollowed out.
And so when World War I came,Britain was unprepared for it.
Now, some people have pointedout fairly that Britain
sacrificed greatly in World WarI and World War II to stop the
Germans, right?
(15:00):
And that is a fair point, andI'm not going to take anything
away from that.
What happened in the lead up toand the start of World War I is
that most of the world was on aglobal gold standard, which I
will also link in the shownotes, but was a period of
unprecedented prosperityworldwide.
And all of the belligerentpowers in World War I broke from
(15:21):
the gold standard at this pointand went to fiat currency.
The reason is quite simple.
It is impossible to finance awar if you are on a strict gold
standard.
You simply can't do it.
You have to tax your citizenryto pay for the war.
Now, the thing that you shouldrealize is citizens of a
democracy would never stand fora war that they had to actually
(15:43):
pay for.
The way governments pay for warsis to finance the war by
debasing the currency andsparking inflation.
They're basically taxing thecitizenry, but in a way that the
citizenry does not realize asdirectly as when they are
actually just taxed.
So the British financial systembecame massively indebted as a
(16:07):
result of World War I, and weknow what happened afterwards
because the war ended, Germanywas placed under a massive
reparations program, never wentback on the gold standard, The
British tried to go back on thegold standard.
They tried to couple it to whatit had been worth before.
They couldn't do it.
The economy started fallingapart.
But honestly, I think the endresult is they had underinvested
(16:29):
in production, in home industry,and were overly reliant on the
Robesie's empire.
And all of this sort of fellapart.
So look, let's talk about today.
So are we in the same cycle?
And I'm going to repeat my quoteagain.
The wheel turns ever onward.
The U.S., one could argue, is apost-industrial economy.
(16:51):
And I'm not going to sit hereand say that we need to onshore
all industry, we need to do allthis kind of stuff.
But I do think it's fair to saythat the U.S.
has become a country that isfocused on making money on money
more than necessarily focusingon productive industry, right?
We have great productiveindustry, don't get me wrong.
And I'm not going to sit hereand say that the U.S.
is directly headed down theexact same path.
(17:13):
But there is a dominance offinance, right?
I look at private equity as agood example.
What does private equityproduce?
Private equity, for those of youthat don't know, is the world of
acquiring private businesseswith capital and looking for a
monetary return out of it.
Most investment bankers doinvestment banking so they can
get into private equity.
(17:33):
But what does private equity do?
This is the private equityplaybook.
They will acquire a businesswith debt.
They will lay off a bunch ofstaff and they will cut costs to
the bone and then they will tryto flip it and sell it to
someone else or makecombinations or take that thing
public.
It is an exercise in financialengineering, more so than an
(17:54):
exercise in trying to createsomething truly new and dynamic.
Now, there's nothing wrong withthat.
There's nothing wrong withtrying to make money.
But the question is, are ourbest and brightest gravitating
towards industries that make alot of money through financial
engineering?
versus industries that arecreating things of real value.
Now, we have entrepreneurs inthis country that are making
(18:14):
things of real value, but youhave to ask.
We are exhibiting many of thesimilar traits to many of these
empires.
We have the overemphasis onindustrialization.
We are a nation of importers.
We import a lot of our materialsand goods.
We're over-reliant on ourtrading partners, which we're
kind of going through the painof right now under the Trump
(18:35):
administration with the tariffpolicies and all these things
that are happening.
And we're kind of seeing thepain of that.
We're also a nation that isdebasing its currency.
Now, it's not just us, by theway.
Everybody is debasing theircurrency.
Almost the entire world is on asystem of central banking and
fiat currency and steadydebasement of currency.
I saw a stat that since we brokethe gold standard with the
(19:00):
Bretton Woods Accord, the valueof the US dollar from 1971 to
today has declined 87%.
So...
I don't know what you can callthat except currency debasement.
So the question we have to askourselves is, what is the system
we're living in?
And I'm not going to sit hereand predict the fall of the
United States or the fall of theUS empire or any of these kind
(19:22):
of things.
I'm simply saying it's valuableto look at the cycles that have
come before and try tounderstand what's happening.
There are some big geopoliticalthings happening.
The rise of China, the rise ofthe East, the rise of the global
South.
There's a lot of thingshappening and investors need to
position themselves in a placethat is secure and safe.
And that to me leads to theargument for real estate and
(19:44):
real assets.
I'm not just going to say justreal estate, but I think real
assets are a hedge againstimperial decline.
So first of all, real estate andreal estate investing is the one
contraindicator, I think, to myargument against private equity.
Because technically, real estateis private equity, private
capital acquiring something.
(20:05):
The difference is that I thinkmoney that flows into real
estate is valuable for what itdoes.
So think about it this way.
When you look at a city likeBerkeley that makes ownership
difficult and restricts the flowof capital into a city, you can
see that the city's housingstock starts to deteriorate.
By contrast, When cities allowthe free flow of capital, you
(20:27):
can think of it like aperpetually rejuvenating machine
for the city's infrastructureand housing.
So real estate is a productiveindustry to be engaged in and to
work in.
It also supports businesses, ithouses people, and it meets a
tangible ongoing human need.
So even when empires decline,people will still need shelter.
That doesn't go away, right?
(20:49):
The second piece is that realestate is anchored in scarcity.
Land is and land and supplyconstrained economically
productive areas is a finiteresource.
That means housing in placeslike Manhattan, San Francisco,
London, Chicago, they becomemore valuable as economic
systems to stabilize because theland itself is scarce, real, and
(21:11):
hard to replicate.
They also preserve purchasingpower.
So we saw that in Spain and Romeand Britain.
Landowners retained their wealthIt was the urban wage earners
and savers who were wiped out bythe decline of the empire.
So owning real estate withpricing power and yield can help
investors ride out inflation,currency devaluation, or policy
(21:32):
instability.
There's a lot of other thingspeople look at, gold, Bitcoin,
whatnot, but real estate has...
some incredible value, and Ithink is a very strong hedge
against a lot of the scenarioswe're talking about.
There's a lot of contrapoints towhat I'm saying.
If we go into imperial decline,the economy goes into decline,
(21:54):
real estate will also be hurt.
Just to be very clear, it willalso be hurt because renters may
not be able to pay their usualrent.
Businesses may suffer.
So there's pros and cons to whatI'm saying, right?
And that somewhat leads topeople's argument for Bitcoin as
well, which I'm not going to getinto on this particular show,
but it's important.
So look, we have some reallygood stuff coming out this week.
(22:16):
I hope you've enjoyed thisepisode.
On Wednesday, we will bedropping another behavioral
finance discussion, looking atthe overconfidence bias and how
it affects real estateinvestors.
And this coming weekend, we'llbe releasing a real estate deep
dive.
So I hope you're prepared forthat.
If you've enjoyed this episode,I would ask that you please
(22:37):
share it.
Please, please leave us a reviewon Apple Podcasts, on Spotify,
whatever the system is that youuse.
It's very helpful to help theshow.
And if you haven't subscribedalready, please subscribe to our
sub stack, the Timeless InvestorNewsletter, where we do deep
dives into these sort of topics.
And Just really get into thegood stuff.
(22:57):
I think we've been striking areal note here.
Our Timeless Investor newsletterhas grown rapidly.
I started writing in February.
And as of today, May 17th, it isover 1,600 subscribers.
So we've gained about 1,600subscribers in basically three
months, which is awesome.
And it's also, I think,reflective of the fact that
(23:19):
we're writing some reallyinteresting stuff.
So I just want to say, you know,history doesn't repeat, but it
does rhyme.
And understanding the cyclesthat have come before us is
really, really important to justunderstanding what's going on,
right?
I mean, you can sound smart at adinner party, which is great.
You can hedge.
You can vote accordingly as acitizen.
(23:40):
You can understand the issuesbetter.
But also, like, you justunderstand intuitively or
instinctively or in a deep firstprinciples basis what is
happening to day and this wildsystem that we're living in and
that we're all subject to andthat we oftentimes have no
understanding of.
So I want to leave you withthat.
(24:01):
I want to thank you for joiningus for the show today.
I hope you found this useful.
We will be releasing a deepstudy on the Roman Empire as
well and its inevitable decline.
Thank you again.
Think well, act wisely, buildsomething timeless.
Thank you.
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