Born in Cambridge in 1883. His father was a Cambridge logician and lecturer in economics, his mother later became mayor of the city — he was inside the establishment from birth. Eton, then King's College, reading mathematics; in the 1906 civil service examination his lowest mark was in economics, which he explained by saying he evidently knew more about the subject than his examiners. He joined the Treasury during the First World War to handle foreign exchange, attended the Paris Peace Conference in 1919 as its principal representative, resigned in anger and wrote a book attacking the treaty. For the next twenty-five years he was theorist, speculator, official and patron of the arts at once. He died of a heart attack on 21 April 1946, aged 62.
One: 5 June 1919 — get out, then open fire. At 36 he sat behind Lloyd George, one of the fastest-rising men in the British bureaucracy. He judged the reparations clauses to exceed Germany's capacity to pay, but in the Council of Four his opinion was not a variable. That day he wrote to Lloyd George: "I am slipping away from this scene of nightmare." The irreversible step was the next one — he withdrew to Charleston farmhouse, wrote The Economic Consequences of the Peace in two months, and sold a hundred thousand copies within months. The price was the permanent loss of official trust. What he replaced was not a job but the source of his standing to speak.
Two: the early 1930s — admitting that his greatest strength was, here, a liability. Through the 1920s he ran "credit cycling": forecasting the cycle from macro judgement and taking leveraged positions in currencies and commodities. Twice, in 1920 and 1929, it took him nearly to zero. In May 1938 he set down new principles for the King's College estates committee: hold only a few carefully chosen businesses you actually know something about, and hold them long. The hard part was not the position discipline; it was admitting that the macro judgement he was famous for produced no edge at timing. From then to 1946 his Chest Fund returned roughly 12% a year while the British market was broadly negative.
Three: 1 January 1935, in a letter to Bernard Shaw, he said the book he was writing would largely revolutionise, within ten years, the way the world thought about economic problems. Behind that was a choice: not a corrective paper, but a direct attack on the core assumptions of his own teachers, Marshall and Pigou. The price was that The General Theory is deliberately difficult and full of invented terms — he wanted to make it unreadable as a special case of the old system, and the result is that every school since has been able to claim orthodoxy.
Sources: Robert Skidelsky, John Maynard Keynes, 3 vols. (1983–2000); King's College Estates Committee memorandum, May 1938; letter to G. B. Shaw, 1 January 1935.Paris, spring 1919. The "grand scheme" he actually wanted — American credit to restart the European economy so that Germany could pay — was rejected by the Americans. He collapsed into bed and wrote his resignation letter. The real turn was not the resignation: a technocrat discovered that inside the room his voice did not count, and chose to rebuild his influence outside it. He spoke from that position for the rest of his life — outside the establishment, but impossible for it to ignore.
January to May 1920. He and friends formed a syndicate shorting the mark, the franc and the lira. The direction was entirely right; those currencies did collapse later. But in April and May they rallied first, margin calls blew up the position, he was personally about £5,000 in the red, and he stayed afloat on a loan from Sir Ernest Cassel — three months later the same position would have made money. What this taught him was not "don't short," but that a correct judgement plus a time constraint you do not control equals an error.
Sources: Skidelsky, vol. 1 ch. 16 and vol. 2 ch. 1; Roy Harrod, The Life of John Maynard Keynes (1951).For roughly half an hour before rising, he dealt with money in bed — reading brokers' cables and the morning papers, placing his orders by telephone, and only then turning to economics. The activity most easily contaminated by emotion was locked into the shortest, most fixed stretch of the day.
He held five or six jobs at once: bursar of King's College, chairman of an insurance company, editor of the Economic Journal, Treasury adviser, theatre proprietor. The roles powered one another: Treasury information fed his investment judgement, investment returns paid for art. He was not slicing his time into pieces; he made each job an input to another.
He kept a ledger for everything. He tabulated every holding of the King's College portfolio — and also kept a year-by-year statistical table of his own sexual life. The compulsion to quantify was both his method and his affliction.
In July 1936 he bought, at Sotheby's, the Newton alchemical manuscripts nobody else wanted, and having read them wrote that Newton was not the first of the age of reason but the last of the magicians. He habitually went looking for the part of an already-filed figure that does not add up.
Sources: Roy Harrod (1951); Skidelsky, vols. 2 and 3; "Newton, the Man" (1946).Eugenics was not a slip of the tongue. He served as a director of the British Eugenics Society from 1937 to 1944, and in 1946 still called eugenics the most important, significant and genuine branch of sociology in existence. He also wrote about Jews in disgusted terms in several places (Skidelsky documents the passages one by one), and in 1925 wrote that the class war would find him on the side of the educated bourgeoisie. His policies were designed for the many; his sympathies were never with them — and these things share a root: letting a trained minority optimise on behalf of the whole.
The Economic Consequences of the Peace may have both predicted the catastrophe and helped bring it about. In 1946 Étienne Mantoux answered it in The Carthaginian Peace: Germany's actual payments between 1919 and 1932 fell far short of its capacity, and the rearmament spending that followed proved that capacity existed. The graver charge is that the book dissolved the English-speaking world's will to enforce the treaty and gave appeasement its moral vocabulary. A book can be broadly right in its economics and disastrous in its political effect — he never seriously answered that layer.
He overrated his own powers of persuasion at the negotiating table. At Bretton Woods in 1944 his bancor plan, which would have obliged surplus countries to adjust too, was defeated by the Americans — the variable in that room was creditor status, not the quality of the argument. The loan he brought home in 1945 carried a commitment to sterling convertibility; it took effect in July 1947, and a month later Britain's reserves collapsed and it had to be suspended. What he was best at was persuading readers, and he spent his last years trying to persuade an opponent who did not need persuading.
Sources: Eugenics Review, 1946; Skidelsky, vol. 3; Étienne Mantoux, The Carthaginian Peace (1946); Benn Steil, The Battle of Bretton Woods (2013).One: when you are falsified, rewrite the model instead of patching it. Errors come in two kinds — a wrong parameter (adjust) and a wrong premise (demolish); most people handle the second as if it were the first. Two: your greatest strength, applied to the wrong setting, is a liability — macro judgement was a first-rate asset for writing theory and a pure liability for timing markets. Three: correct, plus a time constraint you cannot survive, equals wrong — for any judgement with leverage, a deadline or a review cycle attached, work out how long you can hold before you work out whether you are right. Four: make your roles power one another rather than drain each other in parallel — that is the real structure of a "super-individual." Five: authority does not travel between domains — a person can be first-rate in one place and utterly wrong in another, which applies to assessing any expert, models included.