The Best of Times
I do think we live in The Best of Times and the current frustration, anger and insecurity is just fear leaving the system. Might sound too philosophical. But think about it: if you are one of the few that didn’t believe in homeownership-at-any-price, credit card debt, over-consumption and corporatism then things are pretty jolly at them moment. We are heading into a deflation cycle that will put price pressure on everything. Owning real assets will suck and being in cash will rock. Everything will get cheaper and that’s a good thing.
Lower prices is great for the younger, entrepreneurial and risk-taking generation. Cool ideas will be cheaper to bring to market. Real need, restrictions and scarcity will drive innovation. “Necessity is the mother of invention” - remember. This is what Joseph Schumpeter called “creative destruction”.
What built the country is crumbling, being outsourced or just not good enough anymore. And that’s a darn good thing as in it’s wake there will be better, smarter and cheaper solutions to solve our problems. It happened in the 1870s, in the 1930s, the 1970s and it’s happening now - big time.
But as humans we have a hard time to let go of what we know or once knew and embrace the future, the insecurity and change. We know what we have but not what we might get. We also suck at history in favor of mythology. The funny thing is that this is nothing new; it’s the natural evolution of humanity. Ebb and flow, growth and contractions, ups and downs.
It only sucks if you are over-leveraged at the wrong times as so many people were in the end of the last growth cycle. This is the real market economy, the real capitalism at it’s best. It’s the new normal. The problem is that we are falling in love with growth and detesting the contraction when we should do the opposite. Like every smart, young entrepreneur is doing right now. The surface might look crappy and the short time view miserable but the water is nice and the future brighter than ever. Embrace it and you’ll realize the we really live in the best of times.
The Age of Unrest
I recently read the fantastic book The Fourth Turning by William Strauss and Neil Howe. They hypothesize that American history can be divided into cycles of history - roughly 80-100 years (the length of a man’s life). The current cycle started around WWII and will end within the next 5-10 years to make way for a new cycle. Every cycle is divided into four turnings. The fourth turning (2005 - 2020) will be a period of civil unrest, financial crisis and lots of change.
Just as the period between the American Civil War and WWII had it’s unique characteristics and challenges, so does the current cycle and so will the next.
Robert Prechter makes a similar argument as a result of his studies in Socionomics (about human social behavior and social mood). He argues that we have been in a bear market since 2000 which will continue for another few years (bear markets are on average 16 years).
Bear markets are defined by periods of social unrest, lack of tolerance and anti-globalization. Prechter is predicting a stock market crash in 2010 that will make the previous look like child’s play.
“The bear market will bring back nationalism, racial exclusion and perhaps even religious conflict. Thinking technically about events, that is, observing what they reveal about social psychology, prepares you for those changes, whereas trying to predict the future from the events themselves leads you to the opposite, and wrong, conclusion.”
The above creates a great framework to understand what’s going on in society today. Why the Swiss wants to ban mosques, why nationalism is on the rise and why people are becoming less tolerant.
When I took time off from studying economics and business administration I choose literature, art and theory of science as my focal points. Very unconventional (most people would say crazy) but the latter taught me - through Thomas S. Kuhn among others - that scientific discovery is not linear but goes though paradigm shifts.
It starts with an anomaly that deviates from the previous way of thinking, analyzing and making decisions. An anomaly is the event that tells us to break the rules and to rethink. It’s part of scientific discovery and progression.
The web is a fantastic example of an event that challenged the way we think about business, living and working. Back in the 90s few people saw the web as a place to make money or have a career. Those were the fun days, the passionate days, the creative days. Once it became evident that the web would change the world, the MBAs marched in to create structure and profit. The fun ended. (I’m not against making money but have aversion towards personal greed.)
All the above is part of creating a bigger picture and trying to understand what is really going on in society today and why. The CNN sound bite details doesn’t really matter in major social paradigm shifts, having “keep it real” perspective does.
The unrest is due to change of the current rules. People are angry cause they were told to follow - for example - the financials rules (“buy-and-hold”, invest in your 401K and real estate et cetera) but now those rules are no longer valid. New rules are emerging and before the fog of war has settled it’s hard to understand what the new rules are.
I think we are going through a process of collective grief, initiated with denial back in 2007-2008, the present is infected with enormous anger and will be followed by bargaining, depression and acceptance. The current political blame game doesn’t matter. Was it Clinton or Bush’s fault that the financial markets crashed? Who cares? The dirty deed is done and nothing is going to change that.
There were clear events that pointed towards the financial crisis for people who cared enough to try to understand the bigger picture. But who wants to look at the forest when the trees are filled with hundred dollar bills.
The past few years have taught me that our lives have become too dependent on financial and individual success. We manifest any financial progress with taking on more debt. We celebrate celebrities that alter their appearance to be more bankable. We determine the social pecking order by what car you drive or what corporate title you have.
In the light of all this I’ve to say that I welcome the current change with open arms. The article “21 Things We’re Learning to Live Without” is just one great example of how we are slowly becoming human again.
“We keep being amazed at how having less stuff, with no deprivation, actually gives us better quality of life,” says Deborah Merchant. “We’ve gained emotional and spiritual maturity.”
But mostly I’m excited about all the cool new endeavors that are peculating under the surface of mainstream society. In every time of unrest or crisis there are people who are defying the conventional thinking to realize what they believe in. Sure, the real estate crash has made a lot of people renters again, but it has also enable a new wave of frugal and affordable entrepreneurship and artistic expression. Necessity is the mother of invention, bear markets and recessions fertile soil.
I think the next decade can be glorious if we accept the new brave world. A place that we can influence and design to our liking. I feel for the people that got defrauded and swindled by the government, financial institutions and mainstream “common sense” stupidity but I also salute the cool future that we could create as we are getting ready to accept change.
