The Construction of Robert Capa


I went to the Democratic Convention as a journalist, and returned as a cold-blooded revolutionary.
– Hunter S. Thompson

Some people will say that words like scum and rotten are wrong for Objective Journalism — which is true, but they miss the point. It was the built-in blind spots of the Objective rules and dogma that allowed Nixon to slither into the White House in the first place. He looked so good on paper that you could almost vote for him sight unseen. He seemed so all-American, so much like Horatio Alger, that he was able to slip through the cracks of Objective Journalism. You had to get Subjective to see Nixon clearly, and the shock of recognition was often painful.
 – Hunter S. Thompson 

It is said that God is always on the side of the big battalions. 
– Voltaire 

There ain’t nothin’ more powerful than the odor of mendacity … You can smell it. It smells like death.
– Tennessee Williams, “Cat on a Hot Tin Roof”

Capa: He was a good friend and a great and very brave photographer. It is bad luck for everybody that the percentages caught up with him. It is especially bad for Capa. He was so much alive that it is a long hard hard long day to think of him as dead.
– Ernest Hemingway, hand-written note after learning of Capa’s death, May 1954

Unless you’re an avid photography buff, you’ve probably never heard of Robert Capa. That’s his most famous photograph at the top of this note, taken – as the story goes – in 1938 during the Spanish Civil War when Capa, embedded with a company of Republican volunteers, snapped a shot of a comrade right at the moment he took a Nationalist bullet in the brain. Capa landed with the Allied troops on the Normandy beaches at D- Day, rode with Patton’s tank column into Paris, spent 1948 and 1949 photographing the immigrants who built Israel, and died in 1954 while documenting the French retreat from a fort in Northern Vietnam. He was a personal friend of Picasso, Steinbeck, and Hemingway. He was Ingrid Bergman’s lover. Quite a life!


But in truth there was no Robert Capa. Or rather, “Robert Capa” was the invented persona of Andre Friedmann and his fiancée, Gerda Pohorylle. Friedmann was born in Budapest in 1913. He was smart, Jewish, and idealistic – three qualities that made him persona non grata with the Hungarian authorities. They assumed he was a Communist (although the local Communist Party wanted nothing to do with Friedmann, as his father was a tailor and thus he was too bourgeois for their taste), and after a particularly nasty beating at the hands of the political police he left Hungary for Berlin in 1931 at the age of 18. This, of course, was jumping from the frying pan into the fire for a young Jewish intellectual, but at least he was able to develop his talents for photography over the next 2 years before fleeing the rise of Nazism and relocating to Paris with Pohorylle.

Friedmann had a beautiful Leica camera (which he kept in hock at the pawn shop most of the time) and started taking photographs of the political events roiling France and Belgium. Fascism was by no means exclusively a German political development, and the streets of Paris and Brussels and Strasbourg were home to rallies and demonstrations by the Right and the Left alike. He had a phenomenal eye, and Gerda (who had changed her last name to Taro) had found a position in a photography agency where she could sell his work, so the future looked bright. But no one wanted to buy anything by this Friedmann fellow, and just changing his name to something non-Jewish wasn’t going to help. No, Friedmann and Taro decided, what they needed was a story.

Friedmann became the darkroom employee and Taro became the exclusive representative of “Robert Capa” – a rich, famous American photographer visiting Paris and bringing his unique American eye to the European scene. Moreover, because Capa was independently wealthy and didn’t really care about money, he would only sell his photographs for three times the going rate … a bargain at twice the price for a lowly Parisian newspaper seeking to print the work of this acclaimed artist. Of course, the plan worked. The photographs of Robert Capa became the toast of Paris, and money started rolling in for the young couple. In fact, a few months later Taro wrote to an American photography agency, claiming to be the exclusive representative of the world-famous French photographer Robert Capa, a ruse that worked just as well as the original.

At one point it seemed that the gig might be up when the publisher of Capa’s main Parisian outlet caught onto the act, but fortunately the publisher recognized the power of the Common Knowledge game … he was delighted that Friedmann and Taro had created the persona of Capa, because by then this by-line helped him sell more magazines. In fact, the publisher hired the plane that took Friedmann and Taro down to Spain to take pictures of the Civil War, and with the publication of “The Falling Soldier” in newspapers all over the world Andre Friedmann became Robert Capa once and for all.

Unfortunately, there’s not a Hollywood ending here. Gerda Taro (who probably was the actual photographer of “The Falling Soldier”, not Capa) was crushed by a tank in Spain a year after the photo was published, and afterwards it seems to me that Friedmann lost himself in the Capa persona. The post-Capa conversion photographs are all well and good, but it’s the pre-Capa conversion photos of life and politics in pre-WWII France and Belgium that really move me. I get the feeling that the constructed nature of Capa’s identity must have plagued him for the rest of his too-short life, that it became a very heavy weight, something to live up to rather than to live with. I mean … look at the movie star affairs, the suicidal professional risks, the Famous Artist “friends”. Are there any two human beings more self-consciously constructed or self-absorbed than Pablo Picasso and Ernest Hemingway? Look at Hemingway’s note on Capa’s death, where Papa makes a joke about Capa’s luck and can’t help himself but to scratch out a few words to make the prose more writerly. A great author, certainly, but a great friend? Not so much.

Still, I think there’s more to the Robert Capa story than a real-life example of the Emperor’s New Clothes and the Common Knowledge game, or a cautionary tale about losing oneself in a tangled web of identity invention. Three points …

First, Capa made no pretense that he and Taro were engaged in some sort of “objective” reporting of the conflicts they covered. They chose sides. Capa was with the Spanish Republicans, not Franco’s Nationalists. He was with the Allies, not the Germans. He was with the Chinese in 1938, not the Japanese. He was with Israel. He was with France. Moreover, he was an advocate for his chosen sides. There is a message in “The Falling Soldier”, and it’s intentional. The Capa persona might have been a pretense, but there is an honesty to the Capa work. It’s the same thing I admire about Hunter S. Thompson (also a pretty thoroughly constructed identity) … the guy may have been a dysfunctional nut job in most respects, but he sure could turn a phrase and you knew exactly where he was coming from.

Both Capa and Thompson were opposed to the anti-liberal, statist forces of their day and time. For Capa it was the Fascists of Spain, Germany, and Japan. For Thompson it was the Nixon Administration. For me it’s the theocracy of modern economic science, where our small-l liberal institutions have either been captured or are under assault by a particular brand of intellectual orthodoxy that cements its soft authoritarian control by a psychological persuasion of our social animal brains.It’s that last bit that bugs me the most … the way in which the value judgments that underpin monetary and fiscal policy are sold to us as an objectively or scientifically correct expression of our self- interest. It’s the sheer mendacity of the enterprise that galls me. As Tennessee Williams wrote, “There ain’t nothin’ more powerful than the odor of mendacity … You can smell it. It smells like death.”

Second, Andre Friedmann had to re-invent himself as Robert Capa in order to get his photos published. Talent wasn’t nearly enough to overcome a pervasive global environment of anti-Semitism, classist and nationalist prejudices, etc. etc. Today Friedmann could put up a website using Bluehost and WordPress for about the cost of one inflation-adjusted jar of developing fluid, come up with some semi-clever name like “F-stop Theory”, add a few artsy quotes, and bingo … global distribution to hundreds of thousands of viewers. Trust me on this. It can be done.

It’s all well and good to say that the more things change the more things stay the same, and for questions of human nature I’m in total agreement with that sentiment. But the fact is also that the tools invented by the human animal can create permanent and structural change in human society. The Internet is one such tool – maybe not on a par with the taming of fire but certainly on the top 10 list – as it has transformed every aspect of communication. Why is this important? For social animals like ants, termites, and humans communication is everythingFor better and worse, we are biologically and culturally evolved to respond to signals from other humans, and a tool that makes it possible for any one of us to signal every one of us is … breathtaking in its power. This is the singular thing that gives me any hope at all that the bloodless coup we have suffered in the form of NSA Omniscience and Central Bank Omnipotence can be reversed. There are independent and honest voices out there today, and there will be more voices tomorrow. Is there a lot of dreck floating around, a thousand comment cesspools for every David Rosenberg? Sure. But my faith as a small-l liberal is that so long as the voices can be heard, the competition of ideas and opinions will push the most useful of those voices to a place where everyone can hear them. And that’s how the pernicious dynamic of the Emperor’s New Clothes is broken … by an honest voice that’s heard above the crowd. The Internet makes that possible.

Third, and this has nothing to do with Capa himself, there’s an important market lesson to be drawn from the photograph and the war that made him famous. The story behind “The Falling Soldier,” at least as Capa told it, was of a brave but disjointed and unorganized assault on an entrenched Nationalist machine gun. Capa’s company of volunteers would send a couple of men over the trench and they’d get mowed down. Then the rest of the company would fire at the machine gun with their rifles, receive no fire in return, and so assume that one of their crack marksmen had knocked the machine gun out. At that point another cadre of Republicans would leap out from cover to charge the machine gun, probably shouting “Viva la republica!” or something like that, only to get mowed down as well. Wash, rinse, repeat. In many ways the entire history of the Republican defeat in the Spanish Civil War, particularly the history of the International Brigades, is encapsulated by this doomed assault on a professionally manned machine gun. The International Brigades and other Republican volunteers were a motley crew, under-equipped and under-officered, mostly ardent believers in some Leftist –ism like Trade Unionism or Communism or some such, willing to give their lives to prevent the spread of Fascism. If you’ve never read George Orwell’s Homage to Catalonia, you should. But what they lacked in training and materiel they made up for in conviction … and they got smoked. By 1939 Franco had wiped out all effective resistance, and 500,000 Republicans fled to France where they spent the next several years in internment camps.

The notion that individual conviction and bravery is a #MassiveFail when compared to a machine gun nest seems obvious and trite to us today. Strangely enough, though, when it comes to prevalent notions of market behavior it feels like we’re still in 1936. What I mean is that there is still a dominant belief in individual decision-making as the most effective route to successful investing, that if we could just learn a little bit more about Company X or Sector Y we will win the day. Is your individual knowledge and conviction level in Company X important for investing success? Absolutely, in exactly the same way that physical and psychological bravery is important for war-fighting success. Still more important, though, is the strength and cohesion of the groups that share your investment philosophy. Not your specific investment opinions, any more than one soldier has the same amount and type of instantiated bravery as another soldier in his unit, but the coherence of investment goals and operational practices across your fellow market participants in a particular market segment. This is the core insight of Adaptive Investing – that investment success requires a rigorous analysis of both individual AND group dynamics, and that modern evolutionary theory is a better place to find the tools for that analysis than modern economic theory. Ragtag crews, no matter how brave or informed, tend not to do very well in war or markets. If I’m going into battle or taking a market exposure … yes, I want to have personal conviction and information. But even more so I want to know if I have the intra-group and inter-group dynamics on my side. God is always on the side of the big battalions, said Voltaire, and that sounds like pretty good investment advice, too.

PDF Download (Paid Membership Required):

Whatever It Takes

A few observations on what to look for in the language of the FOMC announcement tomorrow from a game theoretic perspective. Ever since Mario Draghi ad-libbed the lines “whatever it takes” in his July 2012 speech in London, a speech that together with the equally fabulistic OMT program rescued Europe and the Euro from the clutches of Spanish and Italian sovereign debt woes, this has been the go-to phrase for any politician or central banker seeking to imply unlimited resolve in bringing the firepower of the State down on an unruly market.

epsilon-theory-whatever-it-takes-december-17-2013.pdf (66KB)

The Stuka

The Fed is now playing the Common Knowledge game openly and directly, making public statements through their media intermediaries to tell you how ALL market participants perceive reality, even though in fact NO market participant has a clear view of reality. Media intermediaries such as the WSJ’d Jon Hilsenrath are the equivalent of the Jericho Trumpet installed in WWII on the Stuka dive-bomber, an effort to turn a powerful tactical weapon into a strategic weapon through psychological means.

epsilon-theory-the-stuka-december-9-2013.pdf (791KB)

A Dogmatic Slumber


– George Orwell, “1984”

– Dave Eggers, “The Circle”

Beauty is no quality in things themselves: It exists merely in the mind which contemplates them; and each mind perceives a different beauty. One person may even perceive deformity, where another is sensible of beauty; and every individual ought to acquiesce in his own sentiment, without pretending to regulate those of others.
– David Hume, “Of the Standard of Taste and Other Essays” (1748)

I freely admit that the remembrance of David Hume was the very thing that many years ago first interrupted my dogmatic slumber.
– Immanuel Kant, “Prolegomena to Any Future Metaphysics” (1783)

All that is required for this enlightenment is freedom; and particularly the least harmful of all that may be called freedom, namely, the freedom for man to make public use of his reason in all matters. But I hear people clamor on all sides: Don’t argue! The officer says: Don’t argue, drill! The tax collector: Don’t argue, pay! The pastor: Don’t argue, believe!
– Immanuel Kant, “What is Enlightenment?” (1784)

There’s nothing to be afraid of. They were right. It’s painless. It’s good. Come. Sleep. Matthew.
– Elizabeth Driscoll, “Invasion of the Body Snatchers” (1978)

“And that’s my point,” Mae said, nodding to Stenton. “The technology has never been there before.”
– Dave Eggers, “The Circle” (2013)

I want to start this week’s note with an extended passage from Orwell’s 1984. Trust me, it’s worth it.

“What are the stars?” said O’Brien indifferently. “They are bits of fire a few kilometres away. We could reach them if we wanted to. Or we could blot them out. The earth is the centre of the universe. The sun and the stars go round it.”

Winston made another convulsive movement. This time he did not say anything. O’Brien continued as though answering a spoken objection:

“For certain purposes, of course, that is not true. When we navigate the ocean, or when we predict an eclipse, we often find it convenient to assume that the earth goes round the sun and that the stars are millions upon millions of kilometres away. But what of it? Do you suppose it is beyond us to produce a dual system of astronomy? The stars can be near or distant, according as we need them. Do you suppose our mathematicians are unequal to that? Have you forgotten doublethink?”

Winston shrank back upon the bed. Whatever he said, the swift answer crushed him like a bludgeon. And yet he knew, he knew, that he was in the right. The belief that nothing exists outside your own mind — surely there must be some way of demonstrating that it was false? Had it not been exposed long ago as a fallacy? There was even a name for it, which he had forgotten. A faint smile twitched the corners of O’Brien’s mouth as he looked down at him.

“I told you, Winston,” he said, ‘”that metaphysics is not your strong point. The word you are trying to think of is solipsism. But you are mistaken. This is not solipsism. Collective solipsism, if you like. But that is a different thing: in fact, the opposite thing.”

If there is a better example of the overwhelming power of Common Knowledge than the Collective Solipsism of 1984, I have yet to find it. As O’Brien patiently explains to Winston between torture sessions, Collective Solipsism is the voluntary abdication of empirical and independent thought by a large group of humans. It is the opposite of solipsism in its usual definition – a pathological egocentrism where reality is defined by an individual’s mental perceptions and conceptions – as Collective Solipsism annihilates the individual’s perception of reality in favor of some group perception of reality. This group perception is the foundation of a robust and equilibrium totalitarian state because everyone believes in the crowd-based reality they have constructed. In the end … Winston loves Big Brother.

The modern dystopia of Dave Egger’s The Circle is similarly based on the voluntary nature of stable totalitarianism. It’s a fascist corporatist state with a giant smiley face, full of “likes” and “friends” and really good healthcare plans, but a fascist corporatist state nonetheless. What Eggers captures wonderfully is the insatiable hunger and constant aggrandizement of a collectivist philosophy – any collectivist philosophy, even one with cool technology and efficient services – that believes we know your self-interest better than you know your self-interest.

The totalitarian worlds of 1984 and The Circle are so powerful in our imaginations because we have all heard the siren call of Common Knowledge and Collective Solipsism. It’s not only comforting to be part of the crowd watching the crowd in its experience of a social behavior … any social behavior, from a football game to an IPO … it’s fun. We like it. As social animals we are hard wired not only to participate in the crowd but also to believe in the crowd and enjoy the crowd. It’s our nature.

But it’s also our nature to think for ourselves and try to do better than the crowd, to strive for some sort of personal advancement or success in whatever way we define it, and this is the behavioral foundation of the two most powerful institutionalized social forces in our lives: the politics of liberal democracy and the economics of liberal markets. The ideas of small-l liberalism are a few hundred years old, but the way David Hume and Immanuel Kant expressed those ideas seem as fresh today as they did in the mid-18th century.


If you don’t know what Hume and Kant were all about … well, I can’t begin to do them justice here. Suffice it to say that they are two of the Mount Rushmore figures for small-l liberalism. Hume in particular is an intellectual hero of mine, and – like Kant – when I first read his essays I felt as if I were awakening from a “dogmatic slumber”. Hume is the red pill.

But Hume and Kant lived in a world that was blissfully ignorant of collectivism and media technology on a mass scale, a world that experienced tyranny and freedom in a “Red Dawn” sort of way, where tyranny is an occupying Russian army and freedom is a scrappy bunch of right-thinking Colorado teenagers.

There’s no question here about identifying the oppressors and the oppressed. There’s no conflict between the internal exercise of your freedom to think for yourself and your external behavior. There’s no omnipresent social media, no cacophony of commercial voices, no GPS chips, no algorithms that can predict your likes and dislikes better than you can yourself. It’s just faceless soldiers with AK-47’s trying to impose their will on Patrick Swayze’s external behavior. It’s a movie that would have made as much sense (more?) in 1784 as it did when released in 1984.


Our world isn’t “Red Dawn,” it’s “Invasion of the Body Snatchers.” Control over our behaviors isn’t as much physical as it is mental, not so much externally imposed as it is internally embraced. If you’re reading this note, the problem is not that you are in a dogmatic slumber and need to be woken up. The problem is that you know it’s in your best economic interest to act as if you’re still asleep. In a world overrun by pod people, the big losers are the people who can’t fake their pod-ness and ultimately get outed by Donald Sutherland.


I don’t know anyone who believes that open-ended QE and ZIRP-forever monetary policy does much of anything for job creation, even though that’s the ostensible rationale. I don’t know anyone who believes that Modern Portfolio Theory and its quantifications are anything more than rules-of-thumb or guardrails for portfolio construction and risk management. Actually, let me qualify that a bit. I know lots of academic and institutional economists – the clerics of our modern Church of Economic Science – who believe wholeheartedly in all of this as some sort of received wisdom from on high. I don’t know any practicing money manager who does. But by the same token I also don’t know any practicing money manager who doesn’t genuflect to these beliefs, who doesn’t mouth the words of our modern market catechisms. We all believe in the market-moving power of the institutions that promote these ideas, whether it’s the Fed or a mega-asset management firm or a bulge-bracket bank; very few of us believe in the ideas themselves. But so long as “everyone knows” that these institutionally promoted ideas are the only thing that really matters for investment performance or asset allocations, nothing will change in our behaviors. We will continue to act as if we are true-believers, too.

As much as it pains me to say this, Hume and Kant and Smith and the rest of the small-l liberal pantheon don’t have a whole lot to offer in our efforts to survive a pod people world. A voluntary acquiescence to the collectivist behavior demanded by the Common Knowledge game poses a huge problem for Hume and Kant and traditional liberalism. What if your independent use of reason and free will leads you to deny your independent use of reason and free will? What if the most effective way to act as if you believe that the Emperor is wearing beautiful clothes is to give yourself over to the crowd-generated reality and actually believe that the Emperor is wearing beautiful clothes?

A problem for Hume and Kant is a problem for each and every one of us, because all of modern microeconomic theory – ALL of it – and by extension all of macroeconomic theory, too, is based on the liberal idea of independent self-interested decisions. The more that assumption is off base, the more that we are captured by the Common Knowledge game and act on the basis of a crowd-generated reality rather than our direct individual assessment of the world … the more our entire edifice of modern Economic Science becomes a false teaching, a dogma. By false I don’t mean that the equations are miswritten or simply need another mathematical term appended. I mean that the entire enterprise of economic theory becomes less useful, a collection of prayers that we recite by rote because we must in order to pass, not because they have any intrinsic meaning to us. Modern economics is becoming an institutionalized superstition rather than an effective toolkit for the pursuit of life, liberty, and the pursuit of happiness. And that’s a shame.

Or at least it’s a shame from a liberal, individualist perspective. From the perspective of the institutions that promote these dogmas it’s all good. This voluntary and entirely rational participation in a crowd-generated reality makes the current social equilibrium even more stable, the current institutional control over the means of mental production (as Marx would call it) even more pronounced. Until some alternative conception of markets emerges that is more useful than current theory AND that alternative conception serves the interests of powerful institutions, nothing will change. The Copernican theory of a helio-centric solar system didn’t prevail because it was right; it prevailed because the secular powers of post-Reformation Northern Europe found it useful in their bloody fight with the Catholic Church.

The good news, though, is that I think there are powerful financial institutions today that are in fact deeply dissatisfied with the status quo and are actively seeking an alternative conception of market behavior. Partly this is a function of the fact that institutions are led by actual human beings, many of whom are genuinely concerned about the long-term health of liberal institutions like markets as they are hollowed out from within by the cancer of Collective Solipsism. Partly (probably more so) this is a function of the fact that there is a significant business opportunity for financial institutions that can provide a more useful and effective vision of how to think about investing today. Regardless of the motive, I see this hunger for a new perspective on markets every day in the responses I receive to Epsilon Theory, including responses from the Powers That Be in the financial world. Something big is brewing here, and I truly believe it’s going to make a difference. Help – or at least a meaningful alternative – is on the way.

Where should we look to find this alternative? I think we need to think about markets from a biological or evolutionary perspective rather than the traditional perspective of liberal thought. Hume and Kant might not have much to say about how a pod people world develops and how a population of non-believers can thrive in that world, but Charles Darwin and E.O. Wilson sure do. The best game theory research today is found in the fields of linguistics and evolutionary biology, not economics, and over the past six months I’ve written about how to use these ideas to understand better a wide range of market behaviors. Now I want to tie all this together in a concept that I call Adaptive Investing, a name that reflects the central dynamic of evolutionary theory, where populations of self-interested organisms take on persistent characteristics and behaviors in response to environmental challenges and opportunities. It’s a perspective that takes seriously both individual self-interest as well as collective imperatives, and I believe it will be useful for investors and allocators alike.

My goal here is to find a third way, some other path than either sitting out these markets until they return to “normal” or falling asleep in a dogmatic slumber and becoming a pod person. I think the former path – just sitting this out – is both wishful thinking and a luxury that very few of us possess. Maybe a reckoning of sorts is just around the corner, but I doubt it. In H.G. Wells’ War of the Worlds, the Martian invasion peters out when the aliens catch a cold and die off. Somehow I think it unlikely that the pod people will fall prey to the same sort of deus ex machina, and I’m certain that CNBC and Twitter and ETF’s and high-frequency trading are not going to be un-invented.


As for the latter path … sorry, once you choose the red pill there’s no going back. As Prisoner Six would say, “I am not a number. I am a free man!”

But all of the great historical observers of the human condition – whether it’s Gautama or Lau Tzu or Jesus or Marx or Hume – need to be interpreted in the context of how we live today, not parroted as some sort of talisman from the past. Like it or not, we live in a mass society where the technological and social inventions of the past 200 years challenge the concepts of liberalism in ways that Hume et al did not foresee. Political and economic institutions have already adapted to these innovations (they always do!) in order to protect their core interests. Now it’s our turn. I think that game theoretic applications of evolutionary biology and population dynamics can help in that effort, with actionable insights for how to think about investing, and that’s where I’m taking Epsilon Theory. I hope you’ll join me.

PDF Download (Paid Membership Required):