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 REASONS

to PASS
A Guide to Making
Fewer and Better
Investments

RALPH BIRCHMEIER
REASONS TO PASS
 Columbia University Press
Publishers Since 1893
New York Chichester, West Sussex
cup.columbia.edu

Copyright © 2023 Columbia University Press

All rights reserved

Library of Congress Cataloging-in-Publication Data

Names: Birchmeier, Ralph, author.
Title: Reasons to pass : a guide to making fewer and better investments /
Ralph Birchmeier.
Description: New York : Columbia University Press, 2023. | Includes index.
Identifiers: LCCN 2022018678 | ISBN 9780231207089 (hardback) |
ISBN 9780231556804 (ebook)
Subjects: LCSH: Investments. | Investments—Psychological aspects. | Confidence.
Classification: LCC HG4521 .B57 2023 | DDC 332.6—dc23/eng/20220509
LC record available at https://lccn.loc.gov/2022018678

Columbia University Press books are printed on permanent and

durable acid-free paper.
Printed in the United States of America

Cover design: Noah Arlow

 contents

PA R T 1 Principles and More

Introduction 3

1 Reasons to Pass: Investment Principles 14

2 Main Street Versus Wall Street: A Rigged Market? 42

3 Fundamental Analysis in the Digital Age 51

4 Indexing: A Viable Option 63

PA R T 2Reasons to Pass

Introduction 71

5 Minimum Market Capitalization 82

6 Financial Leverage: The Ultimate Killer 89

7 High–Fixed Cost Businesses 100

 vi CONTENTS

8 Accounting 107

9 Regulatory Uncertainty 117

10 Corporate Governance 129

11 Asset Liability Mismatch 153

12 Deep Cyclical Companies Near Cycle Peak 164

13 High-Cost Commodity Businesses 178

14 Cash Flow and Earnings Disconnect 187

15 Structurally Declining Businesses 197

16 Obsolescence Risk 205

17 Valuation: A Critical Protector of Capital and Returns 214

18 Lollapalooza Effect 226

PA R T 3 Reasons to Buy

Introduction 235

19 Screening 242

20 Growth Stocks 248

21 Core Characteristics of Successful Investors 257

22 Viable, and Buyable, Investment Opportunities 264

23 Selling Discipline 281

Conclusion 287
Index 295
 1
Principles and More
 Introduction

Becoming a successful investor requires answering two important ques-

tions: What is your investment disposition, and what is your circle of com-
petence? These primary considerations are behavioral, not analytical.
Consider the decision between two career paths: aeronautical engi-
neering or equity investing. The engineering route requires an undergradu-
ate degree filled with calculus, differential equations, analytical geometry,
and computer science from a university accredited by the Accreditation
Board for Engineering and Technology. A graduate degree comes next, fol-
lowed by licensing requirements. These steps to success are well defined—
challenging but attainable.
In contrast, the path to becoming an equity investor is anything but
well defined. As Warren Buffett cautioned in his 1988 Berkshire Hathaway
annual letter, “Our experience with newly-minted MBAs has not been that
great. Their academic records always look terrific and the candidates always
know just what to say; but too often they are short on personal commit-
ment to the company and general business savvy. It’s difficult to teach a new
dog old tricks.”
Many professional investors have earned finance undergraduate
degrees and MBAs from top schools, or have earned their CFA designation,
but paths to success vary widely. Philosophy majors often make excellent
 4 PRINCIPLES AND MORE

investors because they are taught to question convention. Management

consultants also can do very well because of their expertise tearing apart
corporate strategies. Lawyers deal with risks and operational complexity
and sometimes can convert their analytical skills into investment success.
Business managers have seen how companies work from the inside, giving
them other distinct advantages. No one educational or career path guar-
antees investment success. In his 1992 Berkshire Hathaway annual letter,
Buffett explained:

Though the mathematical calculations required to evaluate equi-

ties are not difficult, an analyst—even one who is experienced and
intelligent—can easily go wrong in estimating future “coupons.”
At Berkshire, we attempt to deal with this problem in two ways.
First, we try to stick to businesses we believe we understand.
That means they must be relatively simple and stable in character.
Second, and equally important, we insist on a margin of safety in
our purchase price. If we calculate the value of a common stock
to be only slightly higher than its price, we’re not interested. We
believe this margin-of-safety principle, so strongly emphasized by
Ben Graham, to be the cornerstone of investment success.

Couple this with the fact that valuation is simple in theory, not complex
like calculating the lift of a newly engineered wing design. Let me repeat,
valuation is simple. You calculate and forecast future cash flows available
to equity investors and discount them back to today, sum these present
values, and divide by shares outstanding. A basic accounting class and what
is affectionately called “baby finance” in graduate school will get you most
of the way toward gaining the skill set required to value most investments.
The trick with forecasting is that future free cash flows are hard to pre-
dict, with the primary problem being that the world is multivariate. Indi-
vidual variables are almost impossible to predict on their own, and their
interaction with each other adds complexity. Macroeconomic variables
include interest rates, gross domestic product (GDP), inflation, change
in consumer leverage, credit spreads, changes in taxation, and foreign
exchange movements. Microeconomic forces must also be anticipated.
What happens with new entry and exit, rivalry, technology shifts, regu-
latory changes, litigation, and corporate governance? Porter’s Five Forces
are a good analogy. Management actions and reactions—including mergers
 INTRODUCTION 5

and acquisitions, operational changes, capital allocation, and balance sheet

management—are unpredictable. Every one of these factors influences
future free cash flows.
As Charlie Munger puts it in layman’s terms in Poor Charlie’s Alma-
nack, “People have always had this craving to have someone tell them the
future. Long ago, kings would hire people to read sheep guts. There’s always
been a market for people who pretend to know the future. Listening to
today’s forecasters is just as crazy as when the king hired the guy to look at
the sheep guts. It happens over and over and over” (2005).
Even if free cash flows can be predicted perfectly, market sentiment
can vacillate widely from fundamentals, which inherently makes stock
prices unpredictable in the short to medium run. Bullish sentiment can
drive stock prices far ahead of fundamentals, as we witnessed in technol-
ogy stocks globally between 1998 and 2000. The China macro environment
was strong between 2012 and 2015, yet the Chinese equity market expe-
rienced severe underperformance. Growth stocks through 2021 had an
incredible ten-year run against value stocks. Some of the outperformance
experienced during this time was an overdue convergence resulting
from the fact that value stocks did quite well in the early and mid-2000s.
The divide at year-end 2021 between sentiment and fundamentals, however,
was the widest on record in favor of growth. These and many other examples
demonstrate the magnitude of short-term price dislocations, each of which
is driven by behavioral biases and cognitive errors. Valuation, indeed, is a
precarious exercise.

Target Audience and Conceptual Overview

The target audience of this book is investors who want to adopt particular
strategies. These lessons will find broad applicability, although they are best
suited for investors with the following dispositions:

1. Time Horizon—Fundamentally oriented investors seek assets that

are mispriced relative to their underlying fundamentals. Conver-
gence between price and value can occur slowly, making the strate-
gies endorsed by this book well suited for patient investors willing
to hold assets over the long run. Patience is an underappreciated
yet valuable temperament in investing.
 6 PRINCIPLES AND MORE

2. Market Timing—Few investors can consistently predict economic

tops and bottoms, the equity market, interest rates, or real estate
cycles. Fundamentals and valuation do poor jobs as factors pre-
dicting market vicissitudes in the short run. This book is heavy
on behavioral lessons and fundamental analysis. Practitioners of
market timing should look elsewhere as picking tops and bottoms
may be one of the most difficult assignments in all of investing.
3. Macro- Versus Micro-Investing—This is not a macroeconomic
book and offers no clues about how to predict the Fed’s next move
or German GDP. Predicting macro movements is really hard and
is tougher than evaluating microeconomic actions and reactions.
Most professional macroeconomists, steeped in years of study and
volumes of data, get the inflection points wrong. No economist
would have dared predict ex ante that Australia would go on a
twenty-five-year run of strong GDP growth without a recession,
and nobody predicted that the ten-year government yield in Ger-
many would drift negative for many quarters. The micro is in some
cases analyzable, and the emphasis of this book is determining
when the micro is analyzable and how that translates into a viable
investment.
4. Index Investing—This book is focused on the purchase of indi-
vidual equities, although its lessons are relevant for all asset classes
and asset allocation across time. Those interested only in low-cost
index funds will still find valuable insight relevant to asset alloca-
tion. Indexing is easy, in theory, and thus is appealing to those who
have an investment strategy looking for simplicity. The challenge
with indexing is selecting asset allocations, in which case the same
behavioral pitfalls can interrupt sound decision-making. Those
seeking guidance on how to flex asset allocation over time will find
enough nuggets of wisdom to warrant further reading.
5. Momentum Investing—Robust research indicates that chasing
price momentum works over the short run, defined as one year or
less. Stocks in an uptrend tend to remain in an uptrend on aver-
age for the following few quarters. Confirmation bias drives trend
investing because improving fundamentals are not often appro-
priately weighted right out of the gate. Rather, investors remain
skeptical in line with their original thesis as they seek other con-
firming data. After several quarters, the improving fundamentals
 INTRODUCTION 7

increasingly disprove the investors’ original thesis, which leads

to a capitulation, a rerating of the stock price at which point the
momentum effect wears off. Utilizing a momentum overlay on a
fundamental strategy makes some sense, although relying solely
on a momentum strategy is challenging because all investors have
access to the same price charts.
6. Concentration—Applied properly, a portfolio with twenty to forty
names in an investment portfolio has sufficient diversification.
Some investors focus heavily on massive diversification, relying on
many equity and bond funds spread around the globe to maximize
risk management. Some of this diversification is illusory as mate-
rial market downturns push correlations of most risk assets toward
1.0. Many investors build individual equity portfolios consisting of
one hundred or more names. These portfolios can still outperform,
although conviction invariably declines as one adds more names,
and analytical challenges make portfolio management more com-
plex when additional moving parts are introduced. It is really hard
to properly evaluate long-term structural risks of a large overly
diversified portfolio. This book advocates a small, high-conviction,
but still diversified portfolio.

Humility

The best defense (against overconfidence) is that of the best

physicists, who systematically criticize themselves to an extreme
degree, using a mindset described by Nobel Laureate Richard
Feynman as follows: “The first principle is that you must not fool
yourself and you’re the easiest person to fool.”
— C HA RL I E MUN G ER , I N VESTMEN T PRACTICES OF

L E A DI N G C HA RI TA B L E FO UN DATI O N S SPEECH , 1998

Human beings are not programmed to be humble. The average driver votes
themselves a seven out of ten, the same as the average investor’s self-ranking.
We are all mostly better looking than average and keen to demonstrate our
superior intellect. Overconfidence, humility’s evil twin, is prone to raising
havoc during the decision-making process, and it can have severe conse-
quences in the investment industry.
 8 PRINCIPLES AND MORE

Professional analysts presenting investment ideas to portfolio managers

must speak with conviction to be taken seriously at most investment firms.
Anything less is deemed lacking in confidence and will be discredited. Port-
folio managers speaking with clients must herald an authoritative voice about
why their investment thesis will prove correct. CEOs who speak with inves-
tors must express absolute confidence that their business plans will accrete
value for shareholders. This confidence becomes embedded in investors’ val-
uations, leading to bolder bets and reinforced conviction in their investment
idea and their overall portfolio. The historically high industry compensation
often triggers even greater self-esteem, catalyzing more overconfidence.
Benjamin Graham understood the inevitable consequences of this
cycle, and his words still ring true today: “Rarely does one find a brokerage-
house study that points out, with a convincing array of facts, that a popular
industry is heading for a fall or that an unpopular one is due to prosper.
Wall Street’s view of the longer future is notoriously fallible” (The Intelligent
Investor, 1973, chap. 11).
Indeed, the future is utterly unpredictable. Because many variables are
completely unknowable, extrapolation becomes the mental shortcut, caus-
ing investors to miss the turns. Why do humans have such reluctance to
accept their lack of “vision”? Behavioral factors, too many to count, push us
to seek fortune-tellers, economists, and market experts to shed light. We try
to avert ambiguity, and on this quest, we develop an illusion of control. Or
more likely, this illusion of control drives us to seek forecasters. Complexity
quickly overloads our Neanderthal brains, and heuristics built as defense
mechanisms against complexity are ill equipped to deal with the multifac-
tor ambiguity our modern-day world imposes.
Wall Street forecasts for the equity markets and the economy are struc-
turally too optimistic. This optimism is well aligned with incentives because
analysts get paid more when markets are strong. Aggregated bottom-up
stock forecasts are even higher than macroeconomic predictions. C-suite
executives overestimate future revenues and returns, which frequently
leads to disappointment. Acquisitions are often unsuccessful for acquirors
because companies overpay and because they overestimate benefits from
synergies. Households save less during economic peaks because they are
overly optimistic, tightening their belts only after recessions hit. Individu-
als upgrade to more expensive houses and cars than warranted in the good
times, levering themselves up irrationally in the process. Likewise, cor-
porate leverage increases during peaks even as risks are downplayed, and
managers favor aggressive expansion strategies or generous shareholder
 INTRODUCTION 9

distributions. Amateur and professional traders alike trade more actively

when markets are strong, hurting after-tax returns. This systemic lack of
humility leads to poor decisions and disappointing consequences for indi-
viduals, corporations, and investors.
Reality is different from overconfident perceptions. Philip Tetlock, a
psychologist and professor at the University of Pennsylvania, has made a
career of tracking the success rates of expert predictions, or rather, their
collective failure to predict future events with precision. Humility is not a
tendency broadly shared by professionals in any field. In Expert Political
Judgment: How Good Is It? How Can We Know?, Tetlock offers a clue about
how to get off the prediction hamster wheel: “We shall discover that the
best forecasters and timeliest belief updaters shared a self-deprecating style
of thinking that spared them some of the big mistakes to which their more
ideologically exuberant colleagues were prone” (2005).
Do not despair. The solution is surprisingly simple: stay humble,
always. The world is complicated and has too many moving parts. Have the
humility to admit what you don’t know, and then focus your investment
efforts on the small amount that remains. Certain unknowables will not
be material. Even high-conviction investments embed immaterial unknow-
ables. Rather, remain vigilant for material unknowables, accepting your
limitations, and then eliminate all investments so exposed. You will find
thousands of investment options, but take comfort in knowing that you
need only a handful to build a successful portfolio. Pass on the rest.

Principles Are the Bedrock

Principles are timeless, whereas plots capture a specific moment. Consider

that nonfiction and fiction works alike weave enduring principles into the
lens of the current environment. Reasons to Pass is no exception, and herein
I present modern-era case studies to support the reasons to pass discussed
in the conceptual overview. Although the reasons to pass may change over
time, the principles guiding your investment process will persist.
Ayn Rand’s Atlas Shrugged is one such example of a fiction work with
enduring principles. Rand weaves these principles into an intriguing tale
of businesses struggling against government overreach. Written in 1957,
she frames these principles through the lens of a railroad baron and a
steel tycoon. The morals are clear: property rights, proper incentives for
labor, and the unintended consequences of government should be carefully
 10 PRINCIPLES AND MORE

considered. Her philosophy of objectivism still resonates today, evidenced

by recent annual sales volumes up fourfold since the 1980s. She took more
than one thousand pages to capture her principles in full, calling this work
her magnum opus.
The Star Wars, Harry Potter, and Lord of the Rings franchises also weave
captivating stories with enduring principles. Although they are fantasies, each
is a dark versus light tale featuring an antagonist driven to expand power.
Institutional greed is the central theme of each. The Ministry of Magic is no
different than the Republic, which eventually morphs into the Empire. Prin-
ciples guide the behavior of every protagonist and antagonist, villain and hero.
Effective politicians articulate their principles to the voting public.
These principles define the foundation of their decision-making in the
nuanced world in which they will be asked to govern. Statements such as
“I am a progressive Democrat” or “I am a conservative Republican” do not
suffice, because they do not define the belief system within which these
politicians will frame specific decisions too numerous to list. When will
the military be called into action? How are trade-offs between an increased
social safety net and spiraling deficits weighed? We live in a world of scarce
resources. How will they balance the need for greater school lunch pro-
grams against equally critical services for people experiencing homeless-
ness or for military veterans? Principles come first, with specific legislation
second. A progressive Democrat in California running for national office
might begin with a mission statement that targets the principle of basic
equality for all, whereas a conservative Republican could begin their mission
statement with the principle of equal opportunity.
In his bestselling book The Intelligent Investor, Graham writes, “In
the old legend the wise men finally boiled down the history of mortal
affairs into the single phrase, ‘This too will pass.’ Confronted with a like
challenge to distill the secret of sound investment into three words,
we venture the motto, MARGIN OF SAFETY. This is the thread that
runs through all the preceding discussion of investment policy—often
explicitly, sometimes in a less direct fashion” (1973, chap. 20).
The Intelligent Investor is crafted from enduring principles. First writ-
ten in 1949 and laboriously updated through the fourth edition in 1973,
Graham cites examples such as National Presto to illustrate basic principles
underlying investing success. His principles are timeless—follow them and
be assured of a reasonable long-term outcome. He is rightfully credited with
surviving, then thriving, through the Great Depression, the most challeng-
ing investment terrain for equity investors in U.S. history. He created the
 I N T R O D U C T I O N  11

world’s first true hedge fund, generating outstanding performance until its
closure in 1958. He was a behavioralist at heart, understanding before aca-
demia the fallacies of the human brain. He was a prolific lecturer, and while
a professor at Columbia Business School, he taught thousands of inves-
tors how to analyze companies. His most famous student, Buffett, wrote
in his 1994 Berkshire Hathaway annual letter that “Ben Graham taught me
45 years ago that in investing it is not necessary to do extraordinary things
to get extraordinary results.”
Critics of Graham, those who consider his methods outdated and
primitive, abound. Many define his investment philosophy simplistically
as buying cheap broken-down stocks at a discount. Buy stocks at a highly
discounted price to book, without considering growth or quality, or build
portfolios of net-nets, companies whose market cap is below their working
capital liquidation value.
Confusion is understandable. Examples of attractive investment can-
didates in Graham’s literature are overweight asset-heavy companies, utili-
ties, and old-world industrials. He coined the phrase “value investor” and
was identified as the first value investor, but that definition became syn-
onymous with low price to book. The Russell 1000 Value Index, the most
followed U.S. value index, is differentiated from the Russell 1000 Growth
Index by price to book. Low price to book equals value, whereas high price
to book equals growth.
Even detractors of Graham agree that his work on equity analysis was
ahead of his time. They acknowledge that he gathered data not widely avail-
able to create reasonable formulas that worked in the first half of the twen-
tieth century, when companies were more capital intensive and industrially
oriented. Pointing to these formulas and outdated examples, these read-
ers assume little relevance to today’s “more sophisticated” investment era.
Many critics claim that Graham’s message was focused on buying cigar-butt
companies, those stocks cast on the ground trading at deep discounts with
a quick puff or two left before discarding the filter.
Those readers completely misinterpret his principles. I encourage a
thoughtful reread of his work, focused this time on his depth of thought
and his underlying principles, rather than on his formulas or so-called
antiquated examples. His principles, dispersed widely across his writings,
created the cornerstone of pragmatic and modern valuation and are as rel-
evant today as when first written in his 1934 work Security Analysis. These
principles have proven the test of time and remain the foundation of the
long-term-oriented fundamental investor. Focus on The Intelligent Investor,
 12 PRINCIPLES AND MORE

his personal magnus opus. It is thick on principles, with a host of chapters

intended to educate. Chapters 8, 14, and 20 are particularly illuminating.
The Intelligent Investor gets to the core of what it means to be a value inves-
tor. Interestingly, note that references to growth (or the lack of growth) are
spare. His principles are mostly growth agnostic.
Consider Graham’s fundamental principles:

1. Equities are not pieces of paper. They are pieces of ownership in an

underlying business.
2. Most underlying businesses can be valued. Value the business,
divide by shares outstanding, and you arrive at the intrinsic value
per share.
3. The intrinsic value is an estimate. You could be wrong because the
future is difficult to predict.
4. To protect from this uncertainty, only purchase equities at dis-
counts to your intrinsic value. This is the margin of safety, and it
protects the downside against these unforeseen events.
5. Stocks are not always efficiently priced in the marketplace. Oft
repeated, Graham coined the Mr. Market parable. He will be manic,
sometimes depressed, sometimes overjoyed. Be patient when
investing, letting Mr. Market bring you opportunities to both buy
and sell stocks.
6. When a material mismatch between price and value emerges, have
the conviction to act. Don’t worry if the crowd doesn’t respond. Do
your own analysis, draw conclusions, and then act independently.

Value Investors

But basically all investment is value investment in the sense that

you’re always trying to get better prospects than you’re paying for.
— C H A RL I E MUN G ER , DA I LY J O URN A L A NNUAL MEETING , 2019

Value investing is not bottom feeding on discarded low-growth stocks. It

is a state of mind—that is, looking for mispriced assets in an uncertain
world. The margin-of-safety principle is paramount, and this state of mind
often extends to other aspects of value investors’ lives. Living well below
their means, regardless of income, is a frequently observed trait shared by
value investors. This provides a financial cushion in the event the future
 I N T R O D U C T I O N  13

unfolds differently from expectations. Many drive conservatively, prefer-

ring a wider margin of safety to protect against unexpected human error.
The use of leverage is deployed prudently because value investors under-
stand the risks that come with a possible overextension of debt. Borrow
for education and other productive investments but not for consumption.
Personal growth initiatives make skill sets more valuable and thus provide
an additional intangible margin of safety against downside events. Delayed
gratification offers similar benefits. Save today and let the powers of com-
pound interest increase your life’s margin of safety.
Many well-regarded investors have provided the inspiration for this
book. These extraordinary capital allocators have benefited from Graham’s
teachings. Most are generous with their thought leadership and extensively
share their mental models that frame or have framed their investment
decisions. Many have written books, interweaving their principles with
investment successes. Unfortunately, their principles are often hidden from
plain sight because they are so widely dispersed across their literature—
leading to the risk faced by Graham—the risk of misinterpretation. Peter
Lynch, the famed portfolio manager for the Fidelity Magellan Fund, is
often pigeonholed into (1) buy what you know or (2) buy at low price-
to-earnings ratios. Marty Whitman, the founder and long-time portfo-
lio manager of the Third Avenue Value Fund, was reduced simplistically
to buying asset-heavy companies at fifty cents on the dollar. Bill Miller,
the former star portfolio manager of the Legg Mason Value Trust, is seen
as ebulliently optimistic about economic prospects and thus favors deep
cyclicals at distressed prices. Seth Klarman, the hedge fund manager at
Baupost, is reputed to be completely fixated on downside protection. Joel
Greenblatt of Gotham Capital blends high return on capital with moder-
ate earnings multiples. These investors have all shared their knowledge
extensively yet are boxed in philosophically. Each investing philosophy has
complexity not given fair justice by these stereotypes, and like Graham’s
writings, risk being misinterpreted.
Build the foundation and then the building. This book is titled Reasons
to Pass to illustrate the principle of uncertainty, an explicit acknowledg-
ment of the many unknowables that cannot be adequately quantified. Begin
with this premise, and then overlay the fundamentals. Consider this text as
one lens through which to view the world, equally applicable to doctoral
students developing their thesis as it is to college graduates collecting their
first paycheck as it is to those seeking greater clarity in their investment
decision-making.
Another random document with
no related content on Scribd:
 I don’t put inverted commas to all Mr. Gould’s words, having necessarily to mix up mine
7 with them in a patchwork manner; but I don’t know anything worth telling, whatever,
about—so much as a sparrow,—but what he tells me. ↑
Italics mine throughout. ↑
8
Nowadays the travelling is of course ‘notoriously safe’! but what shall we say of
9
the banking? ↑
The oldest windmill on record in this country (I speak under correction) stood in this
10parish, and was given by Bishop Seffrid to the see of Chichester about the year
1199. The largest watermill ever constructed in Sussex was that of Mr. Catt. ↑
[Contents]
FORS CLAVIGERA.
 LETTER LII.

I must steadily do a little bit more autobiography in every Fors, now,

or I shall never bring myself to be of age before I die—or have to
stop writing,—for which last turn of temper, or fortune, my friends,
without exception, (and I hope—one or two of my enemies,) are, I
find, praying with what devotion is in them.

My mother had, as she afterwards told me, solemnly devoted me to

God before I was born; in imitation of Hannah.

Very good women are remarkably apt to make away with their
children prematurely, in this manner: the real meaning of the pious
act being, that, as the sons of Zebedee are not, (or at least they
hope not,) to sit on the right and left of Christ, in His kingdom, their
own sons may perhaps, they think, in time be advanced to that
respectable position in eternal life; especially if they ask Christ very
humbly for it every day;—and they always forget in the most naïve
way that the position is not His to give! [90]

‘Devoting me to God’ meant, as far as my mother knew herself what

she meant, that she would try to send me to college, and make a
clergyman of me: and I was accordingly bred for ‘the Church.’ My
father, who—rest be to his soul—had the exceedingly bad habit of
yielding to my mother in large things and taking his own way in little
ones, allowed me, without saying a word, to be thus withdrawn from
the sherry trade as an unclean thing; not without some pardonable
participation in my mother’s ultimate views for me. For, many and
many a year afterwards, I remember while he was speaking to one
of our artist friends, who admired Raphael, and greatly regretted my
endeavours to interfere with that popular taste,—while my father and
he were condoling with each other on my having been impudent
enough to think I could tell the public about Turner and Raphael,—
instead of contenting myself, as I ought, with explaining the way of
their souls’ salvation to them—and what an amiable clergyman was
lost in me,—“Yes,” said my father, with tears in his eyes—(true and
tender tears—as ever father shed,) “he would have been a Bishop.”

Luckily for me, my mother, under these distinct impressions of her

own duty, and with such latent hopes of my future eminence, took
me very early to church;—where, in spite of my quiet habits, and my
mother’s golden vinaigrette, always indulged to me there, and there
only, with its lid unclasped that I [91]might see the wreathed open
pattern above the sponge, I found the bottom of the pew so
extremely dull a place to keep quiet in, (my best story-books being
also taken away from me in the morning,) that—as I have
somewhere said before—the horror of Sunday used even to cast its
prescient gloom as far back in the week as Friday—and all the glory
of Monday, with church seven days removed again, was no
equivalent for it.

Notwithstanding, I arrived at some abstract in my own mind of the

Rev. Mr. Howell’s sermons; and occasionally—in imitation of him—
preached a sermon at home over the red sofa cushions;—this
performance being always called for by my mother’s dearest friends,
as the great accomplishment of my childhood. The sermon was—I
believe—some eleven words long;—very exemplary, it seems to me,
in that respect—and I still think must have been the purest gospel,
for I know it began with ‘People, be good.’

We seldom had company, even on week days; and I was never

allowed to come down to dessert, until much later in life—when I was
able to crack nuts neatly. I was then permitted to come down to
crack other people’s nuts for them; (I hope they liked the
ministration)—but never to have any myself; nor anything else of
dainty kind, either then or at other times. Once, at Hunter Street, I
recollect my mother’s giving me three raisins, in the forenoon—out of
the store cabinet; and I remember perfectly [92]the first time I tasted
custard, in our lodgings in Norfolk Street—where we had gone while
the house was being painted, or cleaned, or something. My father
was dining in the front room, and did not finish his custard; and my
mother brought me the bottom of it into the back room.

I’ve no more space for garrulity in this letter, having several past bits
of note to bring together.

Bolton Bridge, 24th January, 1875.

I have been driving by the old road 1 from Coniston here, through
Kirby Lonsdale, and have seen more ghastly signs of modern temper
than I yet had believed possible.

The valley of the Lune at Kirby is one of the loveliest scenes in

England—therefore, in the world. Whatever moorland hill, and sweet
river, and English forest foliage can be at their best, is gathered
there; and chiefly seen from the steep bank which falls to the stream
side from the upper part of the town itself. There, a path leads from
the churchyard, out of which [93]Turner made his drawing of the
valley, along the brow of the wooded bank, to open downs beyond; a
little bye footpath on the right descending steeply through the woods
to a spring among the rocks of the shore. I do not know in all my own
country, still less in France or Italy, a place more naturally divine, or a
more priceless possession of true “Holy Land.”

Well, the population of Kirby cannot, it appears, in consequence of

their recent civilization, any more walk, in summer afternoons, along
the brow of this bank, without a fence. I at first fancied this was
because they were usually unable to take care of themselves at that
period of the day: but saw presently I must be mistaken in that
conjecture, because the fence they have put up requires far more
sober minds for safe dealing with it than ever the bank did; being of
thin, strong, and finely sharpened skewers, on which if a drunken
man rolled heavily, he would assuredly be impaled at the armpit.
They have carried this lovely decoration down on both sides of the
wood-path to the spring, with warning notice on ticket,—“This path
leads only to the Ladies’ 2 well—all trespassers will be prosecuted”—
and the iron rails leave so narrow footing that I myself scarcely
ventured to go down,—the morning being frosty, and the path
slippery,—lest I should fall on the spikes. The well at the bottom was
choked up and defaced, though ironed all [94]round, so as to look like
the ‘pound’ of old days for strayed cattle: they had been felling the
trees too; and the old wood had protested against the fence in its
own way, with its last root and branch,—for the falling trunks had
crashed through the iron grating in all directions, and left it in already
rusty and unseemly rags, like the last refuse of a railroad accident,
beaten down among the dead leaves.

Just at the dividing of the two paths, the improving mob 3 of Kirby had
got two seats put for themselves—to admire the prospect from,
forsooth. And these seats were to be artistic, if Minerva were
propitious,—in the style of Kensington. So they are supported on iron
legs, representing each, as far as any rational conjecture can extend
—the Devil’s tail pulled off, with a goose’s head stuck on the wrong
end of it. Thus: and what is more—two of the geese-heads are
without eyes (I stooped down under the seat and rubbed the frost off
them to make sure,) and the whole symbol is perfect, therefore,—as
typical of our English populace, fashionable and other, [95]which
seats itself to admire prospects, in the present day.
 Now, not a hundred paces from
these seats there is a fine old
church, with Norman door, and
lancet east windows, and so on;
and this, of course, has been duly
patched, botched, plastered, and
primmed up; and is kept as tidy as
a new pin. For your English
clergyman keeps his own stage
properties, nowadays, as carefully
as a poor actress her silk
stockings. Well, all that, of course,
is very fine; but, actually, the
people go through the churchyard
to the path on the hill-brow,
making the new iron railing an
excuse to pitch their dust-heaps,
and whatever of worse they have
to get rid of, crockery and the rest,
—down over the fence among the
primroses and violets to the river,
—and the whole blessed shore
underneath, rough sandstone rock
throwing the deep water off into eddies among shingle, is one waste
of filth, town-drainage, broken saucepans, tannin, and mill-refuse.

The same morning I had to water my horses at the little village of

Clapham, between Kirby and Settle. There is another exquisite rocky
brook there; and an old bridge over it. I went down to the brook-side
to see the bridge; and found myself instantly, of course, stopped by a
dunghill,—and that of the vilest human sort; while, just on the other
side of the road,—not twenty yards off,—were the new schools, with
their orthodox Gothic belfry—all spick and span—and the [96]children
playing fashionably at hoop, round them, in a narrow paved yard—
like debtor children in the Fleet, in imitation of the manners and
customs of the West End. High over all, the Squire’s house,
resplendent on the hillside, within sound alike of belfry, and brook.

I got on here, to Bolton Bridge, the same day; and walked down to
the Abbey in the evening, to look again at Turner’s subject of the
Wharfe shore. If there is one spot in England, where human
creatures pass or live, which one would expect to find, in spite of
their foul existence, still clean—it is Bolton Park. But to my final and
utter amazement, I had not taken two steps by the waterside at the
loveliest bend of the river below the stepping-stones, before I found
myself again among broken crockery, cinders, cockle-shells, and
tinkers’ refuse;—a large old gridiron forming the principal point of
effect and interest among the pebbles. The filth must be regularly
carried past the Abbey, and across the Park, to the place.

But doubtless, in Bolton Priory, amiable school teachers tell their little
Agneses the story of the white doe;—and duly make them sing, in
psalm tune, “As the hart panteth after the waterbrooks.”

Very certainly, nevertheless, the young ladies of Luneside and

Wharfedale don’t pant in the least after their waterbrooks; and this is
the saddest part of the business to me. Pollution of rivers!—yes, that
is to be considered also;—but pollution of young ladies’ minds [97]to
the point of never caring to scramble by a riverside, so long as they
can have their church-curate and his altar-cloths to their fancy—this
is the horrible thing, in my own wild way of thinking. That shingle of
the Lune, under Kirby, reminded me, as if it had been yesterday, of a
summer evening by a sweeter shore still: the edge of the North Inch
of Perth, where the Tay is wide, just below Scone; and the snowy
quartz pebbles decline in long banks under the ripples of the dark
clear stream.
My Scotch cousin Jessie, eight years old, and I, ten years old, and
my Croydon cousin, Bridget, a slim girl of fourteen, were all wading
together, here and there; and of course getting into deep water as far
as we could,—my father and mother and aunt watching us,—till at
last, Bridget, having the longest legs, and, taking after her mother,
the shortest conscience,—got in so far, and with her petticoats so
high, that the old people were obliged to call to her, though hardly
able to call, for laughing; and I recollect staring at them, and
wondering what they were laughing at. But alas, by Lune shore, now,
there are no pretty girls to be seen holding their petticoats up.
Nothing but old saucepans and tannin—or worse—as signs of
modern civilization.

‘But how fine it is to have iron skewers for our fences; and no
trespassing, (except by lords of the manor on poor men’s ground,)
and pretty legs exhibited where they can be so without impropriety,
[98]and with due advertisement to the public beforehand; and iron
legs to our chairs, also, in the style of Kensington!’ Doubtless; but
considering that Kensington is a school of natural Science as well as
Art, it seems to me that these Kirby representations of the Ophidia
are slightly vague. Perhaps, however, in conveying that tenderly
sagacious expression into his serpent’s head, and burnishing so
acutely the brandished sting in his tail, the Kirby artist has been
under the theological instructions of the careful Minister who has had
his church restored so prettily;—only then the Minister himself must
have been, without knowing it, under the directions of another
person, who had an intimate interest in the matter. For there is more
than failure of natural history in this clumsy hardware. It is indeed a
matter of course that it should be clumsy, for the English have
always been a dull nation in decorative art: and I find, on looking at
things here afresh after long work in Italy, that our most elaborate
English sepulchral work, as the Cockayne tombs at Ashbourne and
the Dudley tombs at Warwick, (not to speak of Queen Elizabeth’s in
Westminster!) are yet, compared to Italian sculpture of the same
date, no less barbarous than these goose heads of Kirby would
appear beside an asp head of Milan. But the tombs of Ashbourne or
Warwick are honest, though blundering, efforts to imitate what was
really felt to be beautiful; whereas the serpents of Kirby are ordered
and shaped by the [99]“least erected spirit that fell,” in the very
likeness of himself!

For observe the method and circumstance of their manufacture. You

dig a pit for ironstone, and heap a mass of refuse on fruitful land; you
blacken your God-given sky, and consume your God-given fuel, to
melt the iron; you bind your labourer to the Egyptian toil of its
castings and forgings; then, to refine his mind you send him to study
Raphael at Kensington; and with all this cost, filth, time, and misery,
you at last produce—the devil’s tail for your sustenance, instead of
an honest three-legged stool.

You do all this that men may live—think you? Alas—no; the real
motive of it all is that the fashionable manufacturer may live in a
palace, getting his fifty per cent. commission on the work which he
has taken out of the hands of the old village carpenter, who would
have cut two stumps of oak in two minutes out of the copse, which
would have carried your bench and you triumphantly,—to the end of
both your times.

However, I must get back to my bees’ heads and tails, to-day;—what

a serpent’s are like in their true type of Earthly Injustice, it may be
worth our while to see also, if we can understand the “sad-eyed
justice” first.

Sad-eyed! Little did Shakespeare think, I fancy, how many eyes the
sad-eyed Justice had! or how ill she saw with them. I continually
notice the bees at [100]Brantwood flying rapturously up to the flowers
on my wall paper, and knocking themselves against them, again and
again, unconvinceable of their fallacy; and it is no compliment to the
wall paper or its artist, neither—for the flowers are only conventional
ones, copied from a radiant Bishop’s cloak of the fifteenth century.

It is curious too, that although before coming to the leaf-cutting bee,

Bingley expatiates on the Poppy bees’ luxurious tapestry, cut from
the scarlet poppy, he never considers whether she could see it, or
not, underground—(unless by help of the fiery glowworms’ eyes)—
and still less, how long the cut leaves would remain scarlet. Then I
am told wonderful things of the clasping of the curtains of her little
tabernacle;—but when the curtains dry, and shrink, what then?

Let us hear what he tells us of the Rose bee, however—in full.

“These bees construct cylindrical nests of the leaves of the rose and
other trees. These nests are sometimes of the depth of six inches,
and generally consist of six or seven cells, each shaped like a
thimble. 4 They are formed with the convex end of one fitting into the
open end of another. The portions of the leaf of which they are made
are not glued together, 5 nor are they any otherwise fastened, than in
the nicety of their adjustment [101]to each other; and yet they do not
admit the liquid honey to drain through them. The interior surface of
each cell consists of three pieces of leaf, of equal size, narrow at one
end, but gradually widening to the other, where the width equals half
the length. One side of each of these pieces, is the serrated margin
of the leaf. In forming the cell, the pieces of leaf are made to lap one
over the other, (the serrated side always outermost,) till a tube is
thus formed, coated with three or four, or more layers. In coating
these tubes, the provident little animal is careful to lay the middle of
each piece of leaf over the margins of others, so as, by this means,
both to cover and strengthen the junctions. At the closed or narrow
end of the cell, the leaves are bent down so as to form a convex
termination. When a cell is formed, the next care of the Bee is to fill it
with honey and pollen, which, being collected chiefly from the
thistles, form a rose-coloured paste. With these the cell is filled to
within about half a line of its orifice; and the female then deposits in it
an egg, and closes it with three perfectly circular pieces of leaf,
which coincide so exactly with the walls of the cylindrical cell, as to
be retained in their situation without any gluten. 6 After this covering
is fitted in, there still remains a hollow, which receives the convex
end of the succeeding cell. In this manner the patient [102]and
indefatigable animal proceeds, till her whole cylinder of six or seven
cells is completed.

“This is generally formed under the surface of the ground, 7 in a

tubular passage, which it entirely fills, except at the entrance. If the
labour of these insects be interrupted, or the edifice be deranged,
they exhibit astonishing perseverance in setting it again to rights.

“Their mode of cutting pieces out of the leaves for their work,
deserves particular notice. When one of these Bees selects a rose-
bush with this view, she flies round or hovers over it for some
seconds, as if examining for the leaves best suited to her purpose.
When she has chosen one, she alights upon it, sometimes on the
upper, and sometimes on the under surface, or not unfrequently on
its edge, so that the margin passes between her legs. Her first
attack, which is generally made the moment she alights, is usually
near the footstalk, with her head turned towards the point. As soon
as she begins to cut, she is wholly intent on her labour; nor does she
cease until her work is completed. The operation is performed by
means of her jaws, with as much expedition as we could exert with a
pair of scissors. As she proceeds, she holds the margin of the
detached part between her legs, in such a manner that the section
keeps giving way to her, and does not interrupt her progress. She
makes her incision in a curved line, approaching the [103]midrib of the
leaf at first; but when she has reached a certain point, she recedes
from this towards the margin, still cutting in a curve. When she has
nearly detached from the leaf the portion she has been employed
upon, she balances her little wings for flight, lest its weight should
carry her to the ground; and the very moment it parts, she flies off in
triumph, carrying it in a bent position between her legs, and
perpendicularly to her body.”

Now in this account, the first thing I catch at is the clue to the love of
bees for thistles. “Their pollen makes a rose-coloured paste with
their honey;” (I think some of my Scottish friends might really take
measures to get some pure thistle honey made by their bees. I once
worked all the working hours I had to spare for a fortnight, to clear a
field of thistles by the side of the Tummel under Schehallien: perhaps
Nature meant, all the while, its master and me to let it alone, and put
a hive or two upon it.)

Secondly. The description of the bee’s tubular house, though

sufficiently clear, is only intelligible to me, though I know something
of geometry, after some effort;—it would be wholly useless to Agnes,
unless she were shown how to be a leaf-cutting bee herself, and
invited to construct, or endeavour to construct, the likeness of a
bee’s nest with paper and scissors.

What—in school-hours?

Yes, certainly,—in the very best of school-hours: [104]this would be

one of her advanced lessons in Geometry.

For little Agnes should assuredly learn the elements of Geometry,

but she should at first call it ‘Earth measuring’; and have her early
lessons in it, in laying out her own garden.

Her older companions, at any rate, must be far enough advanced in

the science to attempt this bee problem; of which you will find the
terms have to be carefully examined, and somewhat completed. So
much, indeed, do they stand in need of farther definition, that I
should have supposed the problem inaccurately given, unless I had
seen the bee cut a leaf myself. But I have seen her do it, and can
answer for the absolute accuracy of the passage describing her in
that operation.

The pieces of leaf, you read, are to be narrow at one end, but
gradually widen to the other, where the width equals half the length.

And we have to cut these pieces with curved sides; for one side of
them is to be the serrated edge of a rose leaf, and the other side is
to be cut in a curved line beginning near the root of the leaf. I
especially noticed this curved line as the bee cut it; but like an ass,
as often I have been on such occasions, I followed the bee instead
of gathering the remnant leaf, so that I can’t draw the curve with
certainty.

Now each of my four volumes of Bingley has five [105]or more plates
in it. These plates are finished line engravings, with, in most cases,
elaborate landscape backgrounds; reeds for the hippopotamus, trees
for the monkeys, conical mountains for the chamois, and a
magnificent den with plenty of straw for the lioness and cubs, in
frontispiece.

Any one of these landscape backgrounds required the severe labour

of the engraver’s assistant for at least three days to produce it,—or
say two months’ hard work, for the whole twenty and odd plates. And
all the result of two months’ elaborate work put together, was not
worth to me, nor would be to any man, woman, or child, worth—what
an accurate outline of a leaf-cutting bee’s segment of leaf would
have been, drawn with truth and precision. And ten minutes would
have been enough to draw it; and half an hour to cut it.
But not only I cannot find it in my old book, but I know it is not in the
grand modern Cuvier, and I don’t believe it is findable anywhere. I
won’t go on with Agnes’s lesson at guess, however, till I get some
help from kind Dr. Gray, at the British Museum. To-day, I must
content myself with a closing word or two about zoological moralities.

After having, to my best ability, thus busied and informed little Agnes
concerning her bees and their operations, am I farther to expatiate
on the exemplary character of the bee? Is she to learn “How doth,”
etc. (and indeed there never was a country in which more [106]than in
her own, it was desirable that shining hours should be taken
advantage of when they come)? But, above all, am I to tell her of the
Goodness and Wisdom of God in making such amiable and useful
insects?

Well, before I proceed to ask her to form her very important opinions
upon the moral character of God, I shall ask her to observe that all
insects are not equally moral, or useful.

It is possible she may have noticed—beforehand—some, of whose

dispositions she may be doubtful; something, hereafter, I shall have
to tell her of locust and hornet, no less than of bee; and although in
general I shall especially avoid putting disagreeable or ugly things
before her eyes, or into her mind, I should certainly require her
positively, once for all, to know the sort of life led by creatures of at
least alloyed moral nature,—such, for instance, as the ‘Turner
Savage’ which, indeed, “lives in the haunts of men, whom it never
willingly offends; but is the terror of all smaller insects. It inhabits
holes in the earth on the side of hills and cliffs; and recesses that it
forms for itself in the mud-walls of cottages and outhouses. The
mud-wall of a cottage at Peterborough, in Northamptonshire, was
observed to be frequented by these creatures, and on examination it
was found to be wrought, by their operations, into the appearance of
Honeycomb.”

The appearance only, alas! for although these creatures [107]thus like
to live in the neighbourhood of a Bishop, and though “there are none
which display more affection for their offspring,”—they by no means
live by collection of treasures of sweet dew. “They are excessively
fierce, and, without hesitation, attack insects much larger than
themselves. Their strength is very great, their jaws are hard and
sharp, and their stings are armed with poison, which suddenly
proves fatal to most of the creatures with which they engage, The
‘Sphex’ (generic name of the family) seizes, with the greatest
boldness, on the creature it attacks, giving a stroke with amazing
force, then falling off, to rest from the fatigue of the exertion, and to
enjoy the victory. It keeps, however, a steady eye on the object it has
struck, until it dies, and then drags it to its nest for the use of its
young. The number of insects which this creature destroys, is almost
beyond conception, fifty scarcely serving it for a meal. The mangled
remains of its prey, scattered round the mouth of its retreat,
sufficiently betray the sanguinary inhabitant. The eyes, the filament
that serves as a brain, and a small part of the contents of the body,
are all that the Sphex devours.”

I cannot, therefore, insist, for the present, upon either pointing a

moral, or adorning a tale, for Agnes, with entomological instances;
but the name of the insect, at which the (insect) world might grow
pale, if it were capable of pallor,—might be made, at least,
memorable, and not uninstructive, to the boys in the Latin [108]class,
by making them first understand the power of the preposition ‘ex’ in
the two pleasant senses of examen, and the one unpleasant sense
of ‘examiner’—and then observe, (carefully first distinguishing
between play with letters and real derivation,) that if you put R for
Right, before ex, you have ‘Rex’; if you put L, for Love, before ex,
you have ‘lex’; if you put G, for George, and R, for Rural, before ex,
you have ‘grex’; and then if you put S, for Speculation, P, for
Peculation, and H, the immortal possessor of Pie, before ex, you
have ‘Sphex’; pleasing and accurate type of the modern carnivorous
Economist, who especially discerns of his British public, ‘the eyes
and small filament that serves as a brain.’ [109]

[Contents]

NOTES AND CORRESPONDENCE.

“The Parsonage, Werrington, Peterborough,

March 4, 1875.

“My dear Sir,—I have no doubt you know better than I do what
Gospel is the more widely preached, for while you have been
wandering, freer than a bee, from place to place, and from church to
church, I have been ‘entangled’ from day to day in stuffy rooms
among ignorant and immoral people, in crowded parishes in London
and elsewhere; and on Sundays have listened chiefly to the
gathered voices of the same ignorant people, led by my own.

“But, not to move from the ground of ascertained fact, I have a right
to say that I know that the morality of the parishes best known to me
has been made better, and not worse, by the shepherding of the
Pastors.

“I have heard and read a good deal, in clerical circles, and clerical
books, of doctrines of ‘substitution’ and ‘vicarious righteousness’
such as you rightly condemn as immoral; but if all the sermons
preached in the English Church on any given Sunday were fully and
fairly reported, I question if a dozen would contain the least trace of
these doctrines.

“Amidst all the isms and dogmas by which Clerics are entangled, I
find the deep and general conviction getting clearer and clearer
utterance, that the one supremely lovely, admirable [110]and adorable
thing,—the one thing to redeem and regenerate human life, the one
true Gospel for mankind,—is the Spirit and Life of Jesus Christ.

“As to your terrible charge against the Pastors, that they preach for
hire, I need only quote your own opinion in this month’s Fors, that all
honest minstrels and authors, manifestly possessing talent for their
business, should be allowed to claim ‘for their actual toil, in
performance of their arts, modest reward, and daily bread.’

“Surely the labourer who spends his life in speaking salutary truth is
not less worthy of his hire than he who sings or writes it?

“The reward offered to most Pastors is ‘modest’ enough,

“I am very faithfully yours,

“Edward Z. Lyttel.

“John Ruskin, Esq.”

I willingly insert my correspondent’s second letter, but will not at

present answer it, except privately. I wonder, in the meantime,
whether he will think the effect of the ministry of Felix Neff on the
mind of the sweet English lady whose letter next follows, moral, or
immoral? A portion of whose letter, I should have said; its opening
touches on household matters little to her mind, to which her first
exclamation refers.
“How sorrowful it all is! Yet, I don’t feel so naughty about it as I did on
Saturday, because yesterday I read the life of Felix Neff, who went to
live by his own wish at that dismal Dormilleuse in the high Alps,
amongst the wretched people who were like very unclean animals,
and for whom he felt such sublime pity that he sacrificed himself to
improve them; and as I read of that terrible Alpine desert, with eight
months’ hopeless dreariness, and of the wretched food and filthy
hovels in which the miserable people lived, I looked up at my good
fire and clean room, with dear white Lily lying so soft on my lap, and
the snowdrops [111]outside the window, and I really did feel ashamed
of having felt so grumbly and discontented as I did on Saturday. So
good Felix Neff’s good work is not done yet, and he will doubtless
help others as long as the world lasts.”

The following letter is an interesting and somewhat pathetic example

of religious madness; not a little, however, connected with
mismanagement of money. The writer has passed great part of his
life in a conscientious endeavour to teach what my correspondent
Mr. Lyttel would, I think, consider “salutary truth”; but his intense
egotism and absence of imaginative power hindered him from
perceiving that many other people were doing the same, and
meeting with the same disappointments. Gradually he himself
occupied the entire centre of his horizon; and he appoints himself to
“judge the United States in particular, and the world in general.”

The introductory clause of the letter refers somewhat indignantly to a

representation I had irreverently made to him that a prophet should
rather manifest his divine mission by providing himself miraculously
with meat and drink, than by lodging in widows’ houses without in
anywise multiplying their meal for them; and then leaving other
people to pay his bill.