George Friedman on his new book... The Storm Before the Calm

welcome to off the shelf a book discussion by the conference board and today I will be speaking with George Friedman about his latest book the storm before the calm hello my name is Bertrand Eric I'm chief economist at the conference board and welcome to an other edition of off the shelf our book discussions at the conference board and today I have the pleasure to have a conversation with George Friedman George is the founder and chairman of geopolitical futures it specializes in geopolitical forecasting prior to 2015 Friedman was the chairman of the Global Intelligence company Stretford which he founded in 1996 Friedman is the offer of six books including the New York Times bestsellers the next hundred years and the next decade and he lives in Austin Texas but his rivers today here in New York and we going to speak with George about his latest book the storm before the calm towards welcome to our podcast series of the shelf it's good to be here ray so actually this is my second conversation with you George in just a few months we spoke back in November about the geopolitical forecast for 2020 and we then discuss your sobering forecast that 2020 might become a really difficult year because of increased economic dysfunctioning rising social tensions ongoing troubles on the trade side downward pressures on production and everything else today of course we will take a much broader look and a bigger picture and look at your latest book the storm before the calm however before we go to the big picture I'd like to briefly discuss where we are we're now sort of you know almost two months into the new year and at the time that it seems that the biggest short-term threat is actually coming out of left field as is so often the case with crises and that's the corona virus that was not on our agenda back in November and why we don't of course at this point know what exactly will happen the fact is that the situation is not under control and it worries enormous Lee from a perspective of global impact and the human costs that we're paying for that so the question I want to start with actually is whether these type of events like the corona virus totally unexpected weather that fits into the grand scheme of things or would you say this is just a short-term thing irrespective of the human cost which we don't want to play down in the grand scheme of things it doesn't play a big role well I'd say like stress viruses like this reveal the weakness of the system the issue here and I'm not an epidemiologist so I can't possibly tell you about current virus but when I take the look at the different impact on different countries I look at China what's interesting is the manner in which the system spasms it didn't know how to deal with it that first the apparently she knew about it or didn't know about it for two weeks and did nothing publicly because he was doing brilliant things privately then they began to cordon off entire cities so when you look how a natural disaster is handled by a government well it doesn't tell you much about the natural disaster but it tells you a great deal about that government our view of China has always been that was vastly overestimated in this modernity that it had had extraordinary period to economic growth but that it was a dead cat bounce that is it was so it lives in such poor conditions by Mao that they were going to grow and that as they grew massive dysfunctions within the economy and within the relationship with the economy to the government were revealing themselves well that really is a question of what is the relation for the government to the people and the coronavirus test that and we see what the government is it is falling back in its comfort zone of repression and that's China so yes it tells you a great deal and whether it speeds up the compression of China the decline of China you will that's important but China at tops China could not sustain itself at the level it was it was going as Japan had going backwards and the only thing that coronavirus does then for them is speeds up a process that we're even underway yeah so I think what you're basically saying yes an event like the corona virus is coming out of left field you can predict it but the way it's been handled the way it is relating to the institution's and the governors of the country that is something that you could see and that would face China at some point in time that's what you would have expected and it gives you a prism through which to look at what's happening right so the fact that the virus happens well I don't know where it goes or what it does the fact that I can tell something about the Chinese government that's important yeah well this is a good segue in what we gonna talk about which is the book the storm before the calm that America's dis court the coming crisis of the 2020s and the triumph beyond it's a huge topic but nevertheless first of all I have to say it was a fantastic book to read it's very well written it's consistently argued and it's a tour de force to cover more than two centuries including the tensions of today and an in-depth look towards the futures in about two hundred and fifty page so congratulations it's it's a major piece of work interestingly I want to start today with a quote from the last page instead of the first page this quote says the following America is a country in which the storm is essential to clear it away before the column because Americans obsessed with the present and the future have difficulty remembering the past they will all believe that there has never been a time as uncivil and tense as this one now I'm a European and having have lived there most of my life and but having lived for more than twelve years now in the United States that feels a little bit true quite often when you look at the discourse that we're having every day and I think you describe that specific characteristic of American society to the fact that America in contrast to countries in Europe or in Asia is an invented nation and there are three components to that invention as you describe it's the regime is the land and it's the people why are the aspects of being invented or paths being reinvented over time so important to understand Americans present and future we feel a moral obligation to an event our obsession with technology the obsession with the structures that we change in this is who we are because all of us came from a place that didn't want us there where we didn't want to be we are all Loen said well I have fifty million dollars I think I'll become a settler in the Midwest we came here because we'd failed Elser and we came and reinvented our lives and there was a huge degree of amnesia in that or changing memories where things were worse than they ever were there but we have a strange relationship to reality because you're moving away from it well as we succeeded the impulse to invent to reinvent is always there and all inventions and reinventions reach their endpoint and those of us raised within the context of one technology one regime one economic process feel an enormous loss when it leaves because that's what comforts us they always leave and they always change and so it must reinvent a new life and it's a period it's something within the American soul that is urgently trying to create something new and the tragedy of American life is that the thing that's created always becomes obsolete and when it becomes obsolete as this period has then there's rage there's sorrow and there's the conviction that this is the worst of all times this invented nation have something to do with American dream of which is everybody is talking about it if that's the case I mean to some people who say the American dream is that it doesn't exist anymore does that mean that we're actually seriously threatening the inventiveness of the American nation I don't think we're it's threatened I think the challenges I was there remember we've gone through this process of institutional change and social change many times and they all look alike so I don't think the inventiveness is changed but the desperation must rise remember we were driven by desperation when desperation isn't there we believe that we've reached heaven and then it comes again and we cycled between the two so the American Dream still exists it's just that sometimes it feels like a nightmare but the American Dream is what was created to tell the story of George Washington's great-grandfather he was a Catholic who was driven out of England by Protestants who came to North America and settled and wanted to recreate the life of an English gentleman and his dream was that my family came here and I wanted to go live in a place where no one was trying to kill him that was their dream but every one of us has come here with the dream and the charity of America so many of them succeeded but in that success there's always dread of losing it it is always this feeling of insecurity and it's a good one because it makes you careful it makes you aggressive doesn't make you Pleasant as Europeans will say but we are always looking at the European suspiciously you know wondering what exactly they're about and there's a vast difference between the two comments ya know very clearly so so you're talking then when you talk about invention you talk about the regime and land and people I wouldn't take a little bit of a deep dive into people which I think it's a very interesting part you you you talk you talk about sort of three maybe four parts characteristics of the people when it comes to American infants that's the call boy the inventor and the warrior and you stress the importance of subtlety here in that meeting that's that isn't necessarily always the characterization of American culture when you look at it superficially but again I want to quote what you're saying there's technology there's business and there's war they appear to be different but in American life the scientists the cowboy and the warrior and add to this the businessmen are part of a single culture can you explain that we live in a state of combat I tell the story of Gary Cooper in high noon and how his moral imperative is not to his community not to the nation it was himself he was afraid to die a coward and when we look at business there is a profound sense of self in the founder in the person who maintained its worst person crashed us so when you look at the United States and you look at the cowboy myth mm-hmm you look at the reality of the inventor of Thomas Edison of the Bill Gates Elon Musk with their vast versiv a letís and and when you look at the warrior who goes off to war for himself you see an interesting dimension of American life the sense of duty is to self and that feels business because businesses Adam Smith said had a selfish core this core is more than selfish some more complex is more interesting but in the end it's who you are in Europe they ask you where you're from they ask you many things here they start what do you do they want to know what work you do that defines who you are and that work is frequently combative but let me tell us a little bit that on the letter because what I quite often hear when I speak with Americans is the where do you come from also has to do with you know where do you or your dad or your grandparents come from or your parents or your great-grandparents and are they from Scotland or are they coming from Norway or from Italy or whatever so there is also a sense of identity that is still linking back to that old worlds but how does it then come together in a unique way here in America well that's the second question the first question is what do you do yeah and where do your people come from or so on well it's something that couldn't be asked in Europe because first asks do your parents come from anywhere else here all of us come from somewhere else there is no one even the Indians came from somewhere else they conquered tribes they enslaved them maybe we all share the common experience of coming here fleeing the past and then going to war if the wars business of the war is taking the West whatever it was Luann's war and yeah I mean you can ask that question you must because yeah my wife is of Australia I am from Hungary the two of us get along fairly well but there are differences that come out at various times we are both Americans we're both deeply committed to it and yet there retains in ourselves our homes yeah that's and that's perhaps an the uniqueness indeed of the American thinking around you know proper as an invention everything else yeah it is shared by places like Australia or some parts of Canada and New Zealand's the five eyes as we call it yeah it's not sure it by the British yeah you're listening to off-the-shelf a podcast series by the conference board today I'm speaking with George Friedman to speak about his latest book to storm before the calm let's take a quick break for some announcements from the conference board stay with us can you your team or your company benefit from insights such as the ones provided in this podcast they are immediately available when you join the conference board a membership-based think tank that delivers trusted insights for what's ahead reaching across industries and geographies we bring together our noted experts senior executives from the world's largest companies and nonpartisan practical research to help you address your most important business issues our membership packages are tailored to your organization's unique needs and budget to learn more about our offerings go to WWF randsborg and click join on the top bar to connect with one of our product specialists welcome back to of the shelf podcast series by the conference board today I'm speaking with George Friedman about his latest book to storm before the count George let's move a little bit to the core concepts in your book which is the existence of two critical cycles the institutional cycle and the social economic cycle and let's start with the institutional cycle as you say typically lasts about 80 years the first one was from the time of the Constitution until the end of the Civil War and then in the amendments of the Constitution the second then lasted until the end of World War two and the one we are currently in which you predicts to basically end towards the end of the present decade to 2020 and you basically argue that institutional cycles end and when they end it's because of the institutional arrangements especially the relationship between government and people that don't align any longer so basically is a breakdown in that relationship between government and people please can you help us explain what is bringing the current institutional arrangement to an end well the last institutional arrangement grew out of World War two I mean you're a world war two and you can look at the Manhattan Project just as a small example we discovered the extraordinary power of expertise we discovered expertise in technology expertise and management and many things and we after World War two we continued intruding on society but more than that we had governments of experts the strength of experts is they truly know a narrow field their weakness is they don't know the whole and this created two problems when they wrote the health care regulations they ran many many thousands of pages no one person understood all of them and no one person knows how to do it but each piece is perf the second problem is that because this government of expertise is created the first amendment has been violated the right to petition the government for it fixing grievances it is impossible for most American citizens to petition the government in any meaningful way yeah you're describing this example that then actually concede in the Lincoln movie that people are queuing up at the door of the President to basically bring very mundane issues to him and he would address them and that's probably not possible now but this is possible which is to say if you go to a tax office or if you go to the Social Security office or something you you meet a person and that person has absolutely no power that person is bound up by the complex regulations of the expert which he or she may not even understand and you are petitioning your government you have a grievance and there's no one you can reach now the corporations have their lobbyists they can petition the government very effectively NGOs have the mechanism of petitioning the government but I in a routine trivial matter having to do with some confusion over Medicare am taken to a person whose expertise is administering the complex for a set of regulations and there is no give so there what has fled from the system is common sense and the right of the government to confront citizens and say well we didn't plan for this but here's a solution they don't have that power because when there's expertise when the technocracy is it's called lays something out they have anticipated all things they think and they haven't and at this point the level of frustration with the government and their decisions is not nearly as serious as the fact that no one understands what has been decided and the problem rests of the fact that the old political bosses are gone they are no longer there to mediate there is no mediator and there's no give in the regulations and there's no clarity in the regulations and the government is creating a crisis with the public because of this yeah so you mentioned in this technocratic overreach of the government and and you mentioned it just is coming the need to bring common sense back so what is it that makes me feel living in the moment of the day that I feel like ok but this society has become a heck of a lot more complex than it was 250 years ago maybe that's not right what I'm saying but it feels like that it's extremely complex many more people many more traditions and so on and so forth if you now apply common sense it also feels the world becomes much more arbitrary you gave the example of the political bosses privileges and all those kind of things that actually make it more difficult for people to participate in a society so can we can we still work with a common sense today that is fair and gives people fair access to the the resources to improve the living standards the more complex something is the clearer the exits in the entrances have to be the fact that something is complex creates a moral imperative to simplify at least some aspect of it unless you belong to disk a technocracy where complex problems have to have complex solutions the Social Security Act which is a very complex act as a very serious Act was written in some dozen pages and it was very simple to understand the idea that complexity should breed more complexity is what we are doing but as we step back and take a look what is the result so if you give power to a clerk to settle a problem they will make mistakes but vast mistakes are being made now the the problem you have is where no one has Authority the Republic is lost because one of the foundations of the Republic is that authority is delegated for the use of the people and this is a very serious crisis and the higher up you are in the food chain that less you experience it so that when you look at the electoral map you find that the west coast went to Hillary Clinton the northeast went to Hillary Clinton between the Appalachians and the Rocky Mountains only three states went for Hillary Clinton right these are the deplorable well you have to go in and take a look at what's going on there they're facing a government that strikes them as irrelevant to their needs and this is where social breakdown comes from yeah and that's a good segue into your second type of cycles this is a socio-economic cycle the socio-economic cycle lasts about 50 years not 80 years and the latest cycle started as your argue are on the rise of the Reagan area with the economy transitioning to a change in the tax structure freeing up money for private investment a dramatic shift in the industrial structure from manufacturing driven economy to more services driven econ me and that in turn affected a dislocation of workers relating a little bit to the electoral map as it looks like today now this will feel very familiar to many but what is critical is that for the first time in the tune of 50 years history of the nation we see the socio-economic cycle and the institutional cycle ending at the same time and that doesn't give the reader a great level of comfort at least than me when I read this through will it not make the transition to the next cycle much more difficult because our ending at the same time these two different cycles it could but I don't think it will I think it'll make it easier when Ronald Reagan came into office he had two things he wanted to do okay one he had to do he had to do something about 18% interest rates the other he wanted to do was change the dynamic of the federal government well it wasn't time and he couldn't do it and he had to fix one without the other this is the first time in 250 years working address two problems simultaneously one problem the social problem are the consequences of the success of the Reagan era one of the aspects of it which is always financial is that the cost of money is near zero and so anyone who was a boomer and wanted to retire under 5% that banks are yielding I can't do it this is a social comedy but as long with that the industrial middle-class that had been so important to America life has been smashed the lower middle class now takes home it earns about 35,000 a year takes home less than $3,000 can't buy a home there is a massive dislocation going on the country that has to be dealt with and will be dealt with again as we always love to do is changing the tax structure there's a great deal of money in circulation reallocate it will be a bloody time of politics but one of the things it also must do is rationalize the government now people who talk about the regulation of you heard that as rationalization the criteria of rationalization is usability so there's the saying among I want to say it seen among technologists read the manual there is no manual there is no manual to read so we have to do we've gone as far as we can with the world over to model of the expertise there is no one overseeing who is not an expert who rose from one of these fields is another one who's looking at this entire thing and saying can this work the president is in no position to do that he doesn't know what he's advocated Congress has a staff of experts who are joined in with the others and it's very difficult to take a look at the healthcare situation and understand it in a democratic society is I have such a massive shift taking place without the public knowing of it or being able to petition the government and we have to remember they put that into the first amendment as one of the fundamental rights threatens the Republic so from my point of view dealing with these two issues simultaneously dealing with the management of the technocracy both in a social sense and a that's what institutional sense it gives us an opportunity now naturally we're Americans so we will scream at each other it will charge each other the high crimes and misdemeanors they'll be riots still be all of the things we had in the 60s and so on this is how we do it but out of this can come a new refounding the Republic so at the end of the book you say and that's what you're basically arguing here also in this podcast the current storm is nothing more than what is normal for this time in America's history in our lives but still I have this lingering question the American cycles may work again we may indeed sort of be able to actually take the opportunity and you the end of these two cycles to start a new area but what about the risk of the global cycle which is the end of American dominance in the world how about the risk of that overtaking as you say at the end of the book America has turned itself into an empire and we know what can happen to an empire so why is the global cycle not a major threat for us to start the two new cycles that were you predicting well an empire is not something you declare it is there we have the largest economy in the world we are the largest importer in the world which means tremendous political power comes to us we have the largest military this sort of power doesn't dissolve overnight when you look at empires as vast as we are and there hasn't been one when we look at the British or the Romans these last centuries not because they were virtuous not because they're Pleasant but because the challenge to them had to be as powerful as they were and so it is very difficult to imagine the American power dissolving I mean what could happen that the economy would no longer be this big what could happen that military would not be those big so I think this is a cause for internal cause crisis we don't want to be an empire we were the first revolution against Empire right we don't want to be in the Middle East we don't want to be in the South China Sea the American crisis over Empire is not that it might fall but as with our lives we walked away from who we were and try to find some youth sanctuary the American Dream is a world in which they can have all these things and not risk anything for it well it's all our dreams but they lived it our families lived it coming here and looking for that so there's the danger not from far about us it's very very interesting so a lot more to talk about but I really want to finish up our conversation as this podcast also really focus on the business audience so I want to talk a little bit about the role of Technology because it's it's a critical part of you narrative we already talked about the special role of inventor and business person in the American Society but the real tension today of course is the fact that digital to technology which is basically today seen SD general purpose technology akin to steam or electricity or the combustion ends in that that the digital technology doesn't seem to provide the payoff that has been promised to us and again you you speak of typical faces removing the technology cycl you argue we're already in sort of in the final phase of the cycle where technology continues to be important but it's really not as dynamic anymore and this is a view that's also put forward for example by economist Bob Gordon from Northwestern University but it flies a little bit in the face of the fact that many business leaders believe that the real gains from digital still have to come so why do you find yourself here on the pessimistic side and for example as to how full flourishing of digital could in fact be the start of the next social economic cycle and by would you not expect that to be the case well I'm not pessimistic I'm very optimistic there's a new technology coming and it's not digital well look the automobile became a commodity in 1915 when Henry Ford opened his factory by 1965 it was a mature technology it was being sold by marketing people and not by engineers there's very little to do with it it was 50 years later it is now 50 years since the microchip which I regard as the foundation of digital right microchip is introduced it's 50 years old and you see the marketing people to Apple desperately trying to find a new version or a new color or something to put an iPhone it has transformed American society it has been the inventiveness of the past half century and it will continue to be enormous ly important and now we get into what I call the Concorde to the the dc-3 went to Europe in 24 hours the constellation went to Europe in 12 hours the 707 went to Europe in six hours and so naturally we need to build something through Lowe in three hours and that was the Concorde but the cost of it the complexity of it and the fact that most people didn't need to get there in three hours meant that the airplane technology had reached the point there hasn't been that much change well but that's true for the consumer side of digital technology I mean do our phones and our tablets have to be even faster and then I have two three days 5g such a big deal compared to 4G but from a business perspective this looks really different it feels that a lot of companies say look this technology has a lot of opportunities that haven't been leveraged that could actually help us to raise productivity which is extraordinary low as you as you as you argue in your book so it seems that a lot still has to come so the argument is that we should all have invested in General Motors in 1965 because they were saying the same thing right look there are many things that will come from this and many things will make a great deal of money for entrepreneurs and businesses just as the automobile remains critical I mean this is not the end of it but the most important thing to look at is the growth of productivity of individual productivity slumped into 2000s right late 2000s and remains low the enormous burst and productivity that existed in 1990s in the late 1980s and over so yes your there's no question that there's many things that we can still do and will do the microchip will be with us for centuries but is this the radical new technology all I'm saying is is a good business to be in it's not high tech it was high tech so let's look towards the to the 2040s you know when the new Sachs is gonna start and one thing that you bring up towards the end of the book is the this era of the aging Society we're going to go into there's a lot of things we don't know for sure but one thing we know pretty much for sure is that advanced economies including the United States will want to have more of an aging population because birth rates just don't increase that rapidly in a relatively short period of time so the aging society is really sort of the core problem to solve in the next socio-economic cycle as you say it's a potential threat but it could be turned into a potential opportunities and what is the opportunity that you see there as a driver for this next socio-economic cycle so there are two sides to it first the aging population second the declining birth rates of younger people we are moving to a period where the older population will begin to have more political power than the younger in a Democratic Society now this is where technology comes in technology comes in when something's needed Thomas Edison's model he was a marketing guy not just an inventor right and he knew what we needed that's the combination of the inventor and the businessman exactly Harry Ford was that and so is Bill Gates and so it's jobs and all of them so what is it that we need now well this is a reality we can't legislate reproduction now we can't shoot the old I hope what has to be done is that the diseases of old age have to be mitigated and the old have to be kept productive so there are two areas that are emerging one derives from the microchip which is robotics which helps the old live but most importantly the the fundamental understanding of what old age is and how to mitigate it has to be attacked for economic reasons and so if I were to guess and I have never made any money in the stock market so I'm not a person to tell you but where do we go here well the problem the microchip solved was a problem of rapid communication and rapid and management of data was urgent the urgent question now is what happens to any country that has more old people than young people and there you have to solve that problem again through technology but as the microchip was radically different from the internal combustion engine so to the new technology will be radically different the microchip will be there but the exciting possibilities are also the desperately needed ones and those are where America excels there's so much in this boot George that I would love to talk about but I can just avoid asking you one little question a big question accurately but a short answer which I curates at the end of the book and we started with a real-time topic this podcast on the corona version want to end with real time topic which is the climate change issue and you do talk about it at the end of the book how does the climate change issue fit in here well I would begin by saying that I was raised with the population explosion where I was told that by 1970 this by the Club of Rome we would run out of resources to feed our people surprisingly the population explosion never happened we have population shortage I don't doubt that there is a problem with global warming but none of the models that are run on climate are very good we don't know much about climate so I don't know the interaction between global change global warming and climate change all the models that are highlighted always have catastrophic outcomes in even years of modeling I've never found any model that had only negative outcomes the positive outcomes might be hard to see or distance from the problem but they were there so like the population explosion before us much of the discussion of a very important topic has become religious in nature mm-hmm you know what do you believe mm-hmm well frankly I don't care what you believe I believe carrots true but it could very well be if the urgency that you're describing rif the aging society if that urgency and climate change and global warming comes alone that could actually become a driver in the next weekend yes but there's no possibility of the public taking the kinds of cuts and standard of living that would be necessary to do this there's a reason why in all these years we haven't done anything about climate change it's because no one is convinced the scientists aren't convincing they've convinced themselves and those who want to be convinced and they're not going to do it so the reason I didn't write on it was it's not going to happen I think we have a great topic for our next podcast but we have to stop here again George is a fantastic book the storm before the calm America's discourse the coming crisis of the 2020s and the triumph beyond your treatment thank you for joining us today and if you like this content then please check in on your podcast platform of your choice or go to our tcp website conference port where you can see many more series in podcasts that we have available the conference board my name is Bart our chief economist and at the conference [Music]

Channel: The Conference Board

Views: 110,652

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Keywords: George Friedman, The Conference Board, Geopolitcal, Economics, The Storm Before the Calm

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Length: 39min 58sec (2398 seconds)

Published: Wed Feb 26 2020