Books and Trends

My friend Michael said the best math any of us can learn is the future cost of current decisions. He makes a good point. Good planning evaluates the impact of financial decisions across decades.

Our personal economy is a function of our own decisions and choices more than it is the macro environment. However, macro trends involving our culture, economy, and society, as well as the economies and cultures of countries around the world, can impact asset values and cash flows. Therefore, I’ve found it valuable to read what others are thinking regarding multi-decade trends. In this note, we look at several books which you may want to read.

THE STORM BEFORE THE CALM In this book George Friedman, geopolitical forecaster and author of “The Next 100 Years”, examines the cycles through which the U.S. has developed and matured. In Friedman’s opinion, American history must be viewed in cycles. In particular, the eighty-year institutional cycle and the fifty-year “socio-economic” cycle. This book, published in early 2020, suggests that both cycles are converging in the 2020’s, potentially causing upheaval and conflict. But at the same time, moving through these cycles will lead to increased strength, stability, and power in the world.

THE FOURTH TURNING In this book, published in 2009, Neil Howe and William Strauss explore the cycles of history and what they mean to 21st century America. They describe a High, or a period of confident expansion. This is followed by an Awakening, or a time of spiritual exploration and growth. Third is an Unraveling in which individualism triumphs over crumbling institutions. And the fourth turning is a Crisis, when society passes through a great and perilous gate in history. The authors analyze several centuries and cultures as they draw their conclusions about America. And they find that each cycle lasts about the length of a human life, 80 or so years. And within each of these cycles are four turnings.

END TIMES Author Peter Turchin bills himself as a complexity scientist and is one of the founders of the new field of historical social science referred to as Cliodynamics. This field of study focuses on mathematical modeling and statistical analysis of the dynamics of historical societies. The book suggests that the overproduction of elites causes war and political disintegration. Who are the “elites”? The definition varies depending on century and society. In the 20th and 21st century Turchin defines them as teachers and lawyers. Which is interesting given that he is a professor, most likely writing under the “publish or perish” rule of academia. He does offer fascinating insight into the ebb and flow of return on capital versus return on labor. His statistical analysis of these details in America over the last 200 years make the book worth wading through.

ACCIDENTAL SUPERPOWER Peter Zeihan, similar to George Friedman, is a geopolitical futurist. The first third of his book describes three major trends which have impacted the development of the world as we know it. Ziehan defines these trends as first, the development of agriculture, which he credits to the people groups who lived along the Nile delta. Second is the development of deep-water navigation, developed by the Portuguese and utilized by the Spanish. And finally, the technology revolution. Ziehan then describes some of the geographic elements and advantages incumbent in the U.S., and these natural benefits which led to Superpower status for the U.S. He also suggests why the U.S. will retain this status and evaluates the rest of the world and where they may fit.

LAYERED MONEY Nik Bhatia takes a 3000+ year look at money systems across the globe. He discusses the use of gold across the centuries, the lifespan of reserve currencies, the fractional reserve banking system, and more. His in-depth analysis starts the gold Florin coin and looks at the development of central banks, bank-issued gold certificates and finally, digital currency. And he does offer thoughts about cryptocurrencies as well as Central Bank Digital Currencies (CBDCs).

THE REVOLT OF THE PUBLIC In 2014, Martin Gurri took pen to paper (a very 20th century observation) and told how technology has categorically reversed the information balance of power between the public and the elites who manage the great institutions of the industrial age – government, politics, and media. And I would add the education and church establishments to this list. The full title of the book is “The Revolt of the Public and the Crisis of Authority in the New Millennium. An interesting take on how many citizens around the world are telling the ruling elite to “stick it in your ear”.

PRINCIPLES Through Principles and some of his other books, Ray Dalio takes a look at history and the world. And attempts to explain the themes which will govern our future. A few thoughts. I like his comments about his early life, as articulated in Principles. I don’t necessarily agree with his observations about governing themes. Primary among them global warming. It was just 50 years ago, during the last disruptive cycle, that so-called scientists were warning about the coming ice age. All this fear-mongering reminds me of economists, who have accurately predicted 47 of the last 3 recessions. And finally, Dalio is one of the smartest people I have ever read. If you read his stuff, bring your brain cells.

SUMMARY These books as a group have common themes. The authors have typically written several books. It’s easy to give way to fear of the future when we engage with some of these ideas. Paul had some good advice when he wrote to his protégé Timothy. He said we have not been given a spirit of fear but one of love, of power, and of a sound and disciplined mind. That’s something to remember as you wade through these titles and authors.