The Soaring Twenties, Part Two
A Vision for the Future
This is Part Two of a series, I’d strongly recommend reading Part One first.
Well, that was a prophetic moment to post a newsletter.
The very same day I wrote that there will be a time where America will face a moment where the very survival of the nation will feel at stake, a group of rioters broke into the Capitol Building in protest of the 2020 election. It was jarring, but the momentum towards such an event had been building for months. The fallout has been massive: we saw the President kicked off Twitter, big tech companies exert their power in a historic way, and many Republicans scrambling over one another to distance themselves from Donald Trump.
In the last piece, I made an argument that there is a case for optimism for the 2020s. This may seem laughable in the light of what happened on January 6 and subsequent days, but crucible moments are what forge new beginnings.
To return to the Fourth Turning framework from the last newsletter, Howe and Strauss say that it begins when a catalyst occurs: a “startling event that produces a sudden shift in national mood,” starts a multi-decade Crisis, and ends the drift of the Unraveling.
September 11 felt like the end of many things. It was the end of post-Cold War drift and a new raison d’etre for America. The resurgence of patriotism, yellow “Support the Troops” ribbons, and a nation gearing up for a long war echoed WWII. I bet many readers of The Fourth Turning felt certain that this was the Crisis that America would surely come out on the other side of a stronger and more united nation, much like WWII, the Civil War, and Revolutionary War. Millennials would make a name for themselves in the War on Terror, much like their predecessor “Greatest Generation” of Heroes.
Yet a funny thing happened on this way to a reunited America: Iraq.
The Iraq War followed by the 2008 financial crisis clinched a sweeping lifetime Democratic majority amongst the Millennial Generation. Millennials will not grow conservative with age, whatever popular wisdom may say. This was not a foregone conclusion---indeed, on September 12, 2001, the safe prediction would have been wartime generation that grew up in a time of patriotic fervor leaning conservative. However, the Prophet generation of Boomers, led by George W. Bush (born: 1946) and Dick Fuld (born: 1946), fomented the start of the next crisis in America. Millennials realized that the Boomers in charge were negligent, incompetent, corrupt, and criminal. This backlash will resonate in American politics for the next half-century.
Millennial energy swept Barack Obama into office, with one of the biggest political mandates in recent memory: ~60 Senators, a relatively friendly Supreme Court, and widespread anger at Bush-era Republicans. But Obama, despite his oratory skills, was far from a revolutionary Hero or barnstorming Prophet. He was a practical and shrewd Gen X Nomad. No one from Wall Street faced significant consequences for their actions (except the guy who stole from elites) and he punted on climate to make sure a version of his healthcare plan was passed. He governed technocratically rather than ideologically, a fact that no doubt frustrated many on the left, leading to a schism in the party that Bernie Sanders almost rode to a primary nomination.
No remaking of America’s social order: instead, we stumbled towards the future, aimlessly fighting wars we didn’t believe in anymore as domestic strife ramped up: Occupying Wall Street, throwing Tea Parties, and protesting in Ferguson.
This culminated in the election of Donald Trump (born: 1946). To half the country, America was now under a Nazi neo-fascist and the #Resistance was born. To the other half, America was going to be “great again,” renewed in manufacturing, restrictive in immigration, and prioritizing “American” interests above all else.
The next three years lurched from crisis to crisis, some real, many imaginary, both sides digging in their heels and LARPing civil war. Every new day was potentially the “end of democracy” if you were watching the news. It’s long been forgotten, but 2020 kicked off with lingering fallout from an impeachment and breathless concern that Trump was about to instigate WWIII with Iran. Coronavirus concern was relegated to certain corners of Twitter that were castigated by mainstream media for being “racist” or “tech bros.”
In the end, when the real crisis came, Trump proved himself as incompetent as one would expect for a reality TV star charged with running the Presidency of the most powerful country on Earth. Lockdowns came too late and were implemented halfheartedly. America had two realistically effective choices: an East Asia-like total lockdown, complete with government police knocking on doors for protocol breaking until eradication of the virus, or the herd immunity approach of Sweden.
Instead, we (and the rest of the West) chose to split the difference and try to “flatten the curve.” Loose rolling lockdowns meandered along haphazardly without strategy, paired with inaccurate, misleading, and hypocritical statements from public health authorities. The vastly disparate effects of COVID-19 by age continues to be under-utilized for public health strategy. Nearly a year later, we’ve produced a miracle vaccine thanks to our private sector, but the failure of our government continues to reach new dizzying heights.
It was absolutely horrifying a few weeks ago to watch the CDC casually greenlight excess deaths from an elderly population before a quiet reversal due to political pressure. In May, people had been told they had grandma’s blood on their hands because they wanted to reopen the economy. Not “one death” was worth ending lockdown. Now, after a vaccine, it was okay for grandma to die because of politics. Governments like California had also apparently not planned for any sort of rollout, with millions of doses rotting as they dithered over distribution.
Truly extraordinary.
Now, I’m sure some of you reading this would say this wasn’t Trump’s incompetence alone, some of this was due to the CDC, WHO, Fauci, local government, etc. And of course that’s true. But ultimately, the buck stops with the CEO: that’s extreme ownership in action.
These failures came to a head with Biden’s victory and eventually the events of January 6. What the rioters were hoping to accomplish isn’t exactly clear, but what’s been more interesting is the aftermath. Trump got booted from Twitter and Parler got removed by every part of the technology stack. There are increasing calls for these prohibitions to extend to other right-wing media sources. Political pressure will widen from Facebook and Twitter to Apple and Google, ISPs, financial services, and in-person hosting services like Airbnb and hotels.
The events of the last year, starting with the pandemic, is the climax of the Crisis. All of the lesser problems we’ve been facing for the last few decades have culminated in this particular moment. Coronavirus accelerated or revealed the magnitude of America’s problems: the widening gap between elites and the public, institutional sclerosis, and social division.
“Through the Fourth Turning, the old order will die, but only after having produced the seed containing the new civic order within it...for a brief time, the American firmament will be malleable in ways that would stagger” the 1990s-mindset.
‘Everything is new and yielding,’ enthused Benjamin Rush to his friends at the climax of the American Revolution. So will everything be again.”-The Fourth Turning
We stand on the precipice of a massive change: there’s no going back to our Unraveling-era cultural drift. The long 20th century is over: the new millennium is about to begin.
So what happens next? I see two possible options.
Option A: Fragmentation into Federated States
I’ve long been bearish on a prospective new “Civil War” with blood on the streets. The reason is pretty simple: real wars require inexhaustible supplies of young men willing to die. We do not have that today. Sure, people will play-act on the streets of Portland, but the appetite for the vast quantities of death that war requires remains extremely low.
What could happen is cyberwar. This is where people are unpersoned not by machine gun, but by removal from society by technology. What if Internet service providers or banks or even electricity providers are pressured to not give accounts to certain “undesirables?” And the list of undesirables keeps growing to include mainstream conservatives? George W. Bush, who is now held up as a bastion of a ‘good Republican,’ was formerly Public Enemy No. 1. Mitt Romney was castigated as a racist and sexist. Currently, the majority of this energy is focused on the Capitol riots and those adjacent to it, but one could certainly foresee an extension.
Were this to really ramp up, there could be a renewed push for secession. Conservatives are often rightfully derided as “progressives driving the speed limit” but this kind of mass censorship would be impossible to swallow. McLuhan argued in 1969 that the very concept of nation-state was an artifact of the post-Gutenberg era. Electronic media, which culminated in the Internet, would inevitably lead to a return to decentralized tribal mini-states in the US and elsewhere across the globe.
If it gets to the point where there is serious discussion over if a city can host a Republican National Convention in 2024, or there is a move to censor even milquetoast conservative views, it’s over for America. Seventy million people voted for Trump and anyone who has ever looked at a county map of elections can attest to the fact that one-party rule by Democrats with no room for dissent is not viable.
“The prospect for great civic achievement---or disintegration---will be high. New secessionist movements could spring from nowhere and achieve their ends with surprising speed.”-The Fourth Turning
Hard to fathom twenty years ago, this is almost certainly the resolution if extremists in both parties continue to have their way. In some ways, this could be revitalizing as governmental bloat would certainly be reduced. The mini-states could serve as experiments for different forms of government and economy. Decentralization could spark new innovation and break institutional sclerosis. It would be a real-time manifestation of the localist dream, with all the possible benefits and drawbacks.
Many of the technology sectors I talk about later will still thrive in the breakup---or indeed, have a chance for the first time, like rearchitecting healthcare. However, the political damage would likely take many decades to sort out as each society attempts to build a new state. It would be fascinating to watch and there’s a distinct possibility of widespread innovation springing up in the end of empire.
Won’t secession lead to war?
I’m skeptical, but remain open to the possibility. If we go down this path for another decade or so, each side in America might be so sick of one another that they’re happy to split apart like a long-overdue divorce. Democrats, at least recently, have never been as in thrall to the concept of “American exceptionalism” as Republicans, which would take the sting out of a dissolution. They might be thrilled at the chance for a re-founding of America around new principles. Republicans might take a look at the direction of the country and see an America so unrecognizable to them they’re eager to leave. Of course, bloody conflict is always possible in the most dangerous version of this future. Either side might choose to try to impose their vision for America through physical force.
I’m rooting against this outcome, especially a violent conflict. The idea of decentralized mini-states experimenting with their own governments appeals to me philosophically and I’m a huge fan of charter cities. But sentimentally, I can’t quite let go of America. Maybe it’s just the immigrant in me who owes everything to this country: I love America and the promise of America. I don’t think it’s too late yet although it certainly feels more impossible day by day. I hate what I saw in the riots on January 6 and I also hate the draconian measures we’ve seen Big Tech companies taking in its aftermath. How we get out of this dreadful road to perdition is not clear, but I’m still optimistic we’ll find a way to not drive off the cliff.
Option B: Uneasy, but Strong, Bipartisan Consensus
In this scenario, Trumpism was a bubble that popped on November 3, 2020. There was initially a stage of “denial” as supporters posted about potential voter fraud and Benford’s Law. Countless lawsuits sprang up as the glimpse of the “new paradigm” that was promised by another reelection of Trump slowly slipped out of their grasp.
After the events of January 6, the Trumpist wing of the Republican party is careening straight towards capitulation. Abandoned by Mitch McConnell and other key Republican leaders, the energy will slowly dissipate over time. This section of the party will launch into diatribes about Big Tech---which the mainstream media will be all too happy to amplify as they search for a way to maintain the ratings and profitability of the Trump-era---but they will have no real grip on power or seat in the Republican party.
Statements like this from Trae Stephens, partner at Founders Fund and co-founder of Anduril, will be the norm from patriotic Republicans. While decidedly not Democratic or “woke” in their political views, their disgust at the excesses of MAGA will create a new spirit of bipartisanship as the energy of 2016-2020 fades. Somewhat surprisingly, members of the Squad have already come out against the expansion of national security power following the riots.
“Fresh from the press of history, the new civic order will rigidify around all the new authorities, rules, boundaries, treaties, empires, and alliances.”-The Fourth Turning
The Soaring Twenties could begin as a new America coalesces:
The Libertarian strain of the Republican Party will die if it wants to participate in the new civic order. This isn’t something I say with joy in my heart: I’ve long been sympathetic to Libertarian concepts as mentioned, but your job as an investor (and person) should be to see reality clearly and not be trapped in ideology. If Republicans go back to the Tea Party mode of the 2010s, they will lose every election for the foreseeable future. The former swing state of Florida that gave Trump such a resounding victory in 2020 also voted with a 60%+ majority to increase the minimum wage to $15/hr. Trump reminded Boomer voters that “unlike other Republicans,” he wouldn’t take away Social Security. Socially liberal, fiscally conservative politics is the prerogative of elites, but makes less sense to voters outside of wealthy coastal enclaves. There is a sizable, and underrated, large swathe of the population that is fiscally liberal and socially conservative. Politicians stuck in the old order and decrying $2000 checks are living in the past.
Following on to the prior point, MMT will reign supreme. One hopes they do not go to the extremely dangerous step of making the Fed’s liabilities legal tender, but there will certainly be a huge scale up in spending and stimuluses. Bitcoin will probably do extraordinarily well over the next decade as HNWIs and institutions look to hedge against inflation and as speculation reflexively drives the value up. Alternative decentralized financial systems could be built on protocols like Ethereum.
Could this lead to a complete blowup and devaluation of the US dollar? Yes. Predicting on what timescale it happens is very difficult. Japan has been limping along for multiple decades. The US has stronger demographics than China and Europe, is still at the forefront of frontier technology, and has the strongest geography and natural resource bounty of any powerful nation. These factors, particularly technological innovation and growth, could stave off collapse. In fact, that’s the future we must create because extraordinary levels of spending are coming no matter what. If we fail as technologists, a catastrophe is certain. Don’t be a doomer and opt out of the system. This is a new Foundation Age and it’s time to fight.
There will be a bipartisan “New Deal” to rebuild infrastructure and manufacturing here at home. The pandemic highlighted the danger of offshoring our supply chain. Both Republicans and Democrats will be eager to reach an agreement: Republicans for jobs and Democrats for green energy.
The electric battery supply chain will be brought to the US and infrastructure built nationwide for a newly electric, and hopefully autonomous, transportation system. Tesla and other technology companies will be crucial to continued American economic hegemony. Maybe we can even get back on track for flying cars?
3-D printing will be a vital part of re-onshoring manufacturing to the United States with the added benefit of zero carbon output.
A new energy resource, either in the form of vastly cheaper electric/solar, geothermal, or nuclear, will be shepherded to mass scale adoption. Economic growth comes from technological inventions that enhance the demand for natural resources and labor. If environmentally friendly---unfortunately, this is a branding battle for nuclear, even though the technology is significantly safer these days---Democrats will be on board and Republicans can trumpet increased manufacturing and labor demand.
Nanotechnology sounds like the stuff of science fiction, but we might not be as far off as you would think. The hype of 1990s nanotech blew up when Bill Clinton’s (born…you guessed it: 1946) $500 million fund was disbursed to academics rather than technologists. If young ambitious founders built and explored in this trough of disillusionment, the possibilities are limitless. Claytronics is another promising area of nanoscale technology.
The healthcare problem is extraordinarily complex and I’m still trying to figure out what plausible solutions are given it really seems like the entire system needs to be blown up and rearchitected. The fascinating direct pay ecosystem is one option to promote and the corruption of “non-profit hospitals” seem like an easy target for bipartisan consensus. Biotech, CRISPR, and other technologies offer great promise for improving health and longevity outcomes regardless of the system in place. The speed of the coronavirus vaccine illustrates how far we’ve come in these areas.
The 1950s and 1960s saw one of the greatest public-private partnerships ever in the Apollo space program. The new American High of the 2020s and 2030s will be the decades of space and Starlink. NASA has shifted into capital allocator mode: they know they can raise money easily and use space companies to research and execute ambitious missions. SpaceX has the potential to be the most important company in the world. As launch costs go down, space tech companies will proliferate, creating new sources of wealth through manufacturing and possible space colonization. Starlink will bring high-quality internet access to every corner of the globe, a technological precondition possibly surpassing the iPhone as a platform for new entrepreneurship (more on this in a future newsletter).
Institutions are renewed as ideological Prophet Boomers are replaced in senior leadership by pragmatic Gen X Nomads. There is a new focus on building and getting things done.
The most interesting areas to look at as an investor will be space, energy, biotech/healthcare, crypto, and Starlink-enabled companies. And perhaps, if the technology problem can be solved, nanotech. If you’re building a company in these areas, I’d love to learn more. Reach out to me on Twitter or pratyush.buddiga@gmail dot com
You may ask: what about the culture wars, censorship, etc.? I must admit the heavy-handed reaction of technology platforms after the Capitol riot has made me a bit more skeptical of this outcome. The initial reaction from Republicans tended to echo George W. Bush’s sentiments and Arnold Schwarzenegger’s calls for unity. However, the increasing calls for technological crackdowns may make conservatives wonder if they will have to rebuild an entirely separate technology stack to avoid the risk of deplatforming. This is not a formula for renewal of America.
The optimistic view is that the energy from this dissipates---as it so often does---over time, particularly after Biden’s inauguration and as vaccinations roll out. Those associated with the Capitol riots are effectively outcast from society, but the purge stops there. Victory over coronavirus and a reopening of America buoys a sense of revival as people look to rebuild the nation. Make no mistake, there will still be carryover from the culture wars. The left will continue to win on a broad scale here because of their overrepresentation amongst Millennials and Gen Z. Dissension on these issues will be quietly revealed with the building of alternative and private structures, but the appetite for loud public battles will reduce. Picking these fights will be crucial to candidates looking to draw differences during election years, but the scope and breadth of their impact will wane. This is probably the take I have the lowest conviction on: a lot of people, on both the right and left, are addicted to the culture war. It might be very hard to wean off that drug.
The most crucial aspect will be the consensus in terms of actual governing. As mentioned above, I don’t think the Libertarian strain that has shaped the Republican party since Reagan will survive. This creates the opportunity (and danger) of massive increases in government spending and new public-private partnerships. It’s a good reminder that the last time we had widespread “bipartisanship,” we got the Patriot Act and Iraq. Nothing is ever all-good or all-bad.
This scenario is largely being undervalued by people today as most suspect increasing fragmentation and further culture war ramp-up to only gain steam in the coming years. We shall see. I’m always willing to change my mind, particularly as we continue to see how the next year or two plays out. But there is some asymmetric upside here for those willing to bet on revival.
“Write the vision and make it plain on tablets, that he may run who reads it.”
Habakkuk 2:2
Most of all, it’s crucial to remember that history is not deterministic. What happens next depends on what we do. This is a hopeful vision of the future that can be built. It’s not Pollyanna-ish and I’m sure there are many on both sides of the political aisle who would take issue with various parts of what I see. I personally don’t love all of it. That’s the point. If we’re going to build a better America, it’s going to require coming together to build the future.
The vision is plain. Now let’s run with it.
Nutrition Tidbit of the Week: I just got a shipment of bison and elk from NorthStar Bison. The elk bratwurst was especially delicious. I’ve recently been avoiding chicken, even if organic, due to the prevalence of soy in their feed (h/t Justin Mares for pointing this out). This is just a good reminder to always know not only what you’re eating but what the food you’re eating is eating.
Book or Podcast of the Week: Mike Green is one of my favorite investors to follow. He recently had a pair of fascinating interviews on Smarter Markets and Money MBA, digging into various topics like Bitcoin, passive investing, why ESG is a copout, and much more. I always find myself reexamining my beliefs when I hear Mike speak. It’s especially fun when you have to confront the possibility you might be wrong about something you’ve long believed. These interviews were no exception. Highly recommend checking them out.