Neil Howe on Millennials, Secular Investing & 'The Fourth Turning" | Opto Sessions | Episode 65

price that's the number one technical indicator you do best by investing for the longer term if you can't explain what the business is doing then that is a huge red flag some technological change is going to put you out of business it really is a genuinely extraordinary situation welcome back i'm hayden brain and you're listening to watto sessions where we interview the top traders and investors from around the world uncovering their secrets to success in a bumper episode i speak to neil howe managing director of demographics at hegei neil was a renowned authority on social change an acclaimed best-selling author and america's leading thinker on today's generations who they are what motivates them and how they will shape our future vice president al gore called hal's first title generations the most stimulating book on american history that he's ever read while the boston globe is prepared to label how one of the great american prophets if predictions in his book the fourth turning come to pass nils also worked as a consultant and adviser for companies like blackstone the concord coalition and the global aging initiative at the center for strategic and international studies frequently featured on shows like usa today cnn the new york times and cbs's 60 minutes we were extremely lucky to speak to neil and i took the chance to quiz him on how his theory can be applied to today's financial markets enjoy the interview welcome to the show neil it's great to have you with us how's your week been so far uh it's been it's a wonderful hayden things are warming up uh the pandemic is getting better and this has been a very interesting year for a demographer as you can imagine a lot happening mortality and fertility and all the rest no yeah i can imagine and i think we'll get into a few of those interesting topics later on where abouts are you based i think you're in the us aren't you yes i'm in northern virginia right outside of washington dc uh hegei risk management our main office is in stanford connecticut uh kind of up where a lot of the wealth managers are but we do have a small office in boston and we have a small office down here in uh the nation's capital great all right then nice to set some context so yeah i'm just in uh south london um over in the uk at the moment um so let's let's get stuck straight into kind of one of the main topics of today's discussion and we like to do that first have a have sort of five minute conversation around one of the key topics and then i'll actually circle back to cover your background and what you do on a day-to-day basis but firstly is it true that like nature's four seasons the cycles of history follow a natural rhythm or pattern uh yes i think that is true of uh of of modern history uh and as you know uh i've written a number of books about it some of them with uh my my uh like co-author bill strauss and uh we we kind of sketch out how that works uh but the idea of the cyclicality and um in in great civic events great wars uh and and great uh cultural love peoples is is is not a new one i think what we do is tie it to a mechanism that explains it which is generational aging and and that's that's clearly something that we can explore but i in other words i think that the the timing of the of this long cycle is uh is governed by generational aging and that's what actually gives it uh a determinate rhythm rather than just being random yeah okay and yeah absolutely we'll get into into that but it's nice to nice to sort of set the context for the rest of the conversation so let's take it let's take a step back and just dig into your background so after receiving your degrees which i believe are in english economics and history as well you've worked as a policy consultant and advisor as well at various companies including blackstone concord coalition and the global aging initiative at the center for strategic and international studies uh so as part of all of that you're you're talking very broadly on demographics so i guess you're offering advice and consulting various companies within that very large space if you make it sort of less abstract i suppose for our listeners what specific topics would you be or are you typically advising on well you know historically when i wasn't so much advising uh you know investors it was more policy oriented i mean it had to do with the the costs of an aging society uh you know in this country it's social security and medicare and a lot of the transfers of course that's one uh that's one characteristic of sort of modern uh welfare states modern entitlement states as we have this large transfer of income from from working age people to to older people and of course that becomes very challenging as as fertility where it goes down and and and we become ever older right so that's something we're all looking forward to and what that does to the world i mean what that does actually in terms of of all of these demographic changes we're seeing not just in america but around the world uh even an emerging market and uh developing economies is is what kind of world are we going to look at um i did a book about 10 years ago called the the graying of the great powers demography and geopolitics in the 21st century which actually looks at some of the geopolitical implications of that and those are yeah those are big issues and we got into that and then at the same time as i i did all this a little bit more you might say long-term structural policy analysis i um i embarked on a really a second parallel career uh writing about uh generations and generational change and uh and rhythms of history right so that's that's the one you picked up on at the top of the at the top of the broadcast yeah um i think uh well one of your earlier books was generations i think al gore said uh it was the most stimulating book on american history that he had ever read so pretty pretty high praise from a pretty high profile figure there so let's dig into that before we move on to uh other books and namely the fourth turning which we definitely want to get into in due course what is that generations book all about could you summarize it for the listeners it's basically a a generational biography of america you know from the time of the i should say of historical america i mean the time is sort of old world settlers coming to the new world right in north america and it's a it's basically a series of collective biographies of each generation starting from the great migration uh from uh england to new england uh in the 1630s you know that's kind of when the story starts you know along the along the atlantic seaboard and it goes forward all the way to um when we're writing the book which was the early 1990s and what we found along the way is that is it even going way back into the 18th and 17th century is it generations i would have had a very distinct idea that they were different that is to say this is true of uh you know the days of john winthrop or or increase and and richard and cotton mather you know they all thought of themselves as living very different experiences not just because they were older but because they had always been different right so that one generation comes of age in a war the next generation you know the children during that war and they have a very different view of what that event meant and of course it shapes them differently and they grow older thinking and feeling differently we tend to think of this as a very modern phenomenon you know we talk about boomers and exerts like we just discovered this that's not true um uh this goes way back and the other thing we found is not only these generations very different but these differences follow each other in a certain pattern right in other words certain kinds of generations always follow other kinds of generations give an example we're all familiar probably all too familiar by now because boomers have been dominating the pop culture for so long right the boomers came of ages is very idealistic generation you know they wanted to teach the world to sing and they had all these great ideals for changing morality and culture and values and they were followed by the notorious generation x which has this reputation is very you know cynical pragmatic you know die yeppy scum generation who started coming in during the 1980s um and we would fascinate people to know that that contrast between ebullient idealism followed by a kind of cynical caustic generation right is a pattern that goes way back we've seen that same combination of the idealist the puritans were followed by the cavaliers i mean that goes back into the 17th century right um and you can see the same contrast if you look at the generations that came together in the uh in the constitutional convention uh the same contrast between an older but between you know an elder generation that was very sort of idealistic and and celestial and how they looked at the future and this much more localized pragmatic bottom line generation that was much more fearful about everything that could go wrong so my point is is that and there are other patterns as well right so that's what we wrote about and we we actually subtitled the book it was called generations a history of america's future and i think that the subtitle says something about the fact that we tried to apply these patterns to looking at where america uh was was going and if i might say just to anticipate a little bit where we went into the in the fourth turning which is a book we did about six or seven years later um we found that these uh these generational differences are very much aligned with the curious uh pattern that people have often found in looking in american history which is that uh and and i think actually in history many modern societies around the world but it's particularly striking in american history and that is that in america our huge civic moments of uh crisis and rebirth have all occurred at about an interval of a long human life that is to say oh about 80 or 90 years apart i mean we we had this um pivotal moment at the end of the 17th century which you know in europe was the war of spanish succession but in america it was the uh it was you know massive indian wars and and participation in in the glorious revolution which you know at that time we were british companies right so that was part of america as well at that time and that was a big turning point in america we became much more english actually after that point we became part of you know the empire so to speak and then about a a lifetime later we had the american revolution which i think is much more familiar to everyone right that was certainly a certain point uh for america and then about about again about uh 80 90 years later we had the american civil war uh which certainly was a turning point that was the great war of um of national unification in the united states you might say we stopped saying united states are we begin to say united states is you know what i mean we became a single and again a single word a singular word i should say um and then about uh about the same period later uh we had the the great depression and world war ii which was a big pivotal moment not just for the united states obviously but for much of the world um and and here we are again um uh hayden it's it's another 80 or 90 years later right and we see much of the same generational lineup in place and curiously and this is just the kind of follow-up to that roughly halfway in between these great um our with these great moments of rebuilding of the outer world you know the world of of politics and infrastructure and and the structure of the economy we have these uh these spiritual awakenings these these uh eruptive moments in their culture uh and interestingly in america we actually number these you know we call these the first great awakening the second graduation the third grade week we actually give these an ordinal you know uh account uh and many historians in fact call the late 60s and 70s america's fourth or fifth great awakening depending on when you want to start your account right so that's also interesting because all of this both the these uh these uh these civic crisis on the one hand and these spiritual awakenings on the other these transformations of the culture are all associated with the uh shaping of new generations and and these are these are events which are both shaped by older generations but in turn they obviously shape younger generations they're just starting out yeah absolutely and that sort of generational theory and shaping those different archetypes is very much part of your book the the fourth turning and kind of your theory there and it runs very much parallel to that theory so let's get on to that now and actually i've got another quote here by the boston globe that wrote if hal and strauss are right they will take their place among great american prophets so certainly some high praise there again this is really quite a yes or pivotal book for a lot of people um and uh having read some of it before the interview today there's some really fascinating concepts in there so firstly just for those listeners not familiar with with this theory what is the fourth turning well the fourth turning is that civic turning point right we talked about right i i mentioned that it's been it's been kind of a long human lifetime since since the great depression in world war ii the new deal all of the incredible public sector innovations the redefinition of citizenship that really went on in the 1930s and early 1940s uh and here we are again right and and i think everyone feels that we're you know entering something right something larger we're being able to redefine for example uh well we have the rise of populism uh not not just in america and in fact i wouldn't say even even primarily in america as i often remind people uh you know populism is on the rise all over the world and uh i would say even more in east asia and south asia uh in much of well europe and and southern europe and and latin america you could go on and on but this is this is partly because of course these generational changes we're talking about have have increasingly become global because since world war ii and the and the great depression which were global events right in other words they certainly impacted all of the developed world certainly um and including much of asia south and east asia right that this is now becoming uh and in the 1960s uh you know we we had uh we had the uh the age of aquarius and woodstock and then and then china had the cultural revolution right um well that was that was their awakening right um and we had the same thing in europe um you know we had the the red brigade and the body of mine out gang and you know euro terrorism and you know horrifying stories of the 1970s i i was actually there in europe at the time and i i recall the mood it was very different from today so my point is that the world is increasingly becoming wrapped up in uh in this cycle it's becoming a little bit more aligned right over time as these events become global and there we are um and i think what we wanted to do was not just talk about the periodicity but to work through causally how each of these generational archetypes takes part in these events you know what i mean and that that gets to what you introduce by talking about seasons uh which we which we call turnings right in in our book and you know we can talk a little bit about them and if you're interested and we could and and we can also talk a little bit about the economic implications of them too and the market implications and stuff yeah i'm interested to get into the investment and economic implications shortly but i'm keen to sort of get a better grip of the actual theory before then we apply it to to kind of real-life scenarios so if i mean again in my sort of very limited understanding of this theory you can break down each turning into force or sub phases uh i suppose let me kind of explain it so the entire cycle the entire this this period that lasts you know eighty or nine years we call a circular yeah yeah that actually comes from an etruscan word uh which was later adopted into latin uh but it basically meant literally a long human life uh and it's the way they used to mark time apparently in in in uh they um they took the the youngest person the person who was born at any time or they took a certain year and they looked at everyone who was born and the person who died last was was the end of the era so they actually took that and in that year then they looked at everyone born in that year and then they would take the person who lived the longest so basically literally it was an irregular period it wasn't like century it didn't come from the root meaning 100 right it was just sort of this long human life and we use that as a word a term of art in our book to talk about the the rough length of the cycle and we divide it into four parts uh meaning that you think about a person's life it has you know there's a period when they're when they're a child and their youth then they come of age and they become a young adult and so each of these is about 20 to 25 years you know maybe 22 23 years so you know it's it's each of these areas is about 22 23 years long uh and if you think of a person being well in the first period they're a child that second period they're a young adult third period they're kind of in midlife zena put their powers usually in politics and often in the economy and then of course there's there's elderhood in which they're sort of the the seniors right the senior advisors the people looking on and so on so you think about this and we we divide history up that way so we divide the circulum up that way and each in each turning um a new generation is being born a new generation is coming of age right every all generations is certainly moving up one notch you understand others so for example if you look at our most recent uh sacral since the end of world war ii consider that sort of an end point say 1946 and then look at the era the american high which would be this was the uh term which is typically applied to the the presidencies of of truman eisenhower john kennedy right right kind of up to the to the mid 60s so that period was one in which well who was being born well boomers were being born right we know that that's when boobers came along right they were just after world war ii well who was coming of age well that was the silent generation those were americans who remember world war ii and the great depression as children they didn't participate in it right they were just the the the kids are kept carefully you know hidden and protected right these were the this was shirley temple this is the little rascals right now we no longer have any major leaders in washington belonging to the silent generation except for a few very prominent ones joe biden born in 1942 he remembers uh world war ii as a kid um uh uh mitch mcconnell born in 1942 bernie sanders born in neck we have a bunch of them born right at the end of that generation right and pelosi you know the the head of the house so you got yeah you have these people who are of the silent church born late 1930s early phrase okay so that's that's we have left of them very different persona right we all know that about the silent generation they were protected as kids they were very risk-averse coming of age uh their first questions on job interviews back in the you know around 1950 were about pension plans um they they uh they were very well behaved as teenagers uh no one really paid much attention to them because everyone was talking about the generation just older than them that had done all these big heroic things right gone to war conquered the world and they became very much process oriented they became again not only risk-averse but also very much oriented for improving things making them better but not making any big waves right so we often have that association the the generation older than them of course was the what we call in america the america's greatest generation we call them the the name gi generation which uh is is a term obviously for for those who who enlist who served uh in the army but it originally meant general issue or government issue generation so that's what they were given extensive on their backpacks right and and in a way this was a very government-issued generation in every respect even in their politics this was a uh a hugely uh a democratic generation in terms of their party affiliation right they all came of age voting for the new deal uh and fdr and um you know all all this this galvanizing leader that would uh approve of the young union movement particularly the uh the cio uh and uh get the economy moving again and uh equalize incomes and and uh uh uh and get rid of all the old you know uh all the old scan patterns all the all the older individualists are standing in the way they were very much a community oriented generation in every respect and they hugely enlarged and empowered the middle class and in fact this generation by the time they started retiring in the late 1960s early 1970s when they were all retiring they were all you know all union yeah the biggest union generation in american history and they all you know retired from their unions and they all joined aarp you know that's kind of where they were and they by the way they knew they were entitled to their benefits right unlike older generations they knew they were entitled and they were they voted at a very high rate and they brought income and asset inequality in america to the lowest point ever in the 20th century right i mean that was the time when the middle class was very powerful in america and of course boomers hated it right this conformist homogeneous middle class how boring how suffocating well boomers ended up changing that didn't they so you had that and then you had older generations you had the lost generation that was uh that was in midlife uh the last generation provided the presidencies of of truman and eisenhower right and they were they went through world war one right and they were born in the 1880s late 1880s and 1890s and they were a um they were a devil may care generation they were certainly a a wasted generation during the 1920s they put the roar in the 1920s as young people right and they were enormously unprotected during the great depression a lot of them were completely wiped out and they were sort of the poor and impoverished old people of the of the uh you know late 50s and early 60s whom i remember as a kid you know these are the people that didn't want social security yeah they wanted their independence you know they didn't want a government and and so on and then fdr would have been the older um uh generation that represented um the uh the post-civil war generation and this would have been fdr you know franklin dale roosevelt henry stimson albert einstein i mean you think about many of the visionaries of that group they were what we call great champions they were the prophet archetype now in old age right so they were the ones who spearheaded the third great awakening the huge modernist revolt of around the turn of the century and this is a pattern old profit archetypes lead the country into and through the next crisis this always happens by the way hayden the generation born right after the last crisis is always the one that takes the country in their elderhood right as as seniors they take the country into and through the next crisis happens every time and then you think today you've got you've got x-rays you've got boomers um you've got the millennial generation and you know there's a whole story there yeah i think let's let's get into millennials in a second because i'm quite i mean as you say that their kind of influence and impact uh on on society in general is is kind of coming of age and happening kind of as we speak and that's kind of a live conversation as it were but just uh before we do move on to that so if we're focusing in on the fourth turning the turn that we're in currently now i just want to get a sense of kind of when that started was the catalyst for that 2008 the financial crisis like when did that kick off um well that's a good question we we don't actually know yet i i would say if i had if i had to wait your bed i would say yes i would say 2008-2009 uh which is a big turning point in attitudes toward you know income equality globalization populism you know we have a tea party movement coming along soon after that and a huge kind of ramping up and sort of uh partisanship or i should say polarization in american politics um although you could see a lot of that already in the 2004 election uh with um gw bush against against uh against murray and of course by then of course you had boomers really by then not only taking over the house which they did with newt gingrich back in the early 1990s but by the by the end of that decade in the early 00s they were kind of increasingly they dominated the senate right so that period of sort of boomer domination which still remains today by the way it's still in black yeah and and the exers that are joining boomers are not exactly much different you know in that respect at least so this is kind of the era we're in but you know you can date it differently i mean if you dated it forward from the from the birth date of the of the oldest millennial you might actually choose a somewhat later date if you chose 2008 and figure that turnings last about about 22 years 23 years you'd say well then this this whole era would be over in 2030. if you chose us someone later date you know we could be talking about the early 2030s you know we could be talking about something a little bit later but in any case we are definitely in it now right we're in the fourth turning and and maybe it's it's helpful to talk about you know i've been talking about generations but to talk about the character of each of these turnings themselves and how they're different right so in other words the first turning and this gets back to the seasons i mean you started this whole conversation right by talking about seasons right so let's get back to seasons so the first turning uh is this post-crisis era and in our history those have been very much like many americans today can remember the american high right older americans boomers certainly uh these are periods of um of conformity a great deal of national unity a great deal of social discipline a very strong sense of where society wants to go even though individualism and you know minorities are kind of pushed to the push to the side no one really cares too much about you know different points of view everyone wants to celebrate what they had in common vernon carrington used to call these the historian vernon perrin used to call these the great barbecues of american history the crisis is over let's all gather around and just celebrate what we have together and let's make um you know let's make institutions big and strong right because that's what we learned in their most recent crisis right we need strong national security we need uh we need you know political institutions to have definite obviously authority um and these are these are areas in which eras in which the country feels like it's more than the sum of its parts you know as individuals we may be weak you know particularly we're mighty right i mean that's the idea of america and that and and people don't mind being massed together i mean the idea of owning a uh uh cookie cutter home you know little boxes in the suburbs was just great because that meant that was one of the big crowd and together were really strong i mean there was a little mentality of you know a middle class or owning a union job and all that right so that was the american eye and that's typical of first earnings right that is the mood of the first turning and you can imagine a generation coming of age in that like the silent you can imagine what they're doing i mean they're like it's safe being careful right don't want anything before their permanent record so then you have the second turning this is more the summer we're moving from spring to summer now and this is more um this is the awakening right and this characteristically comes starting about you know 20 30 years after the end of the um after the end of the of the crisis and and spearheading it is the generation as young people spearheading as a generation born just after the crisis this has happened in every case of the awakens they've always been spearheaded by the generation that was born just after the last crisis the incredible uh transcendental awakening of the of the uh you know beginning in the 1820s raging in the 1830s into the 1840s a time of you know prophetic founders of religion like brigham young and the mormons and uh you just think of all of these uh uh splinter groups of radical protestant christianity uh methodists and baptists splinter groups of presbyterians just suddenly making all of america so much more religious again in in kind of um uh not calm and deliberative ways but in just kind of hysterical ways right giving rise all of these reform movements uh from temperance uh to abolitionism uh to health food fads to the sprouting of utopian movements all across america during the 1830s and early 40s 48 communes you know nathaniel hawthorne the novelist actually wrote one a satirical novel about one of them called blidesdale romance about all these young men and women and young men with their long flowing hair i mean it was basically a hippie backpack and but my point is is that and then you add the feminist movement too and all of these strains and which finally you know arose in the seneca falls conference the in the late 1840s but my point is is that is that you had all of these strains present in the second great awakening uh and and and you you you had them in earlier you know the first great awakening same way so that's the awakening right throwing off all of this social discipline and what does alex do it leads to a much more individualistic society right so that leads us into the fall season and that's the that's the uh what we call the unraveling right and the unraveling teaches just the unraveling is kind of the opposite is the high you know the high is everyone's very community minded the unraveling is that we we learn the lesson not that we ought to band together and build strong institutions but rather we all should individuate and take care of ourselves and that's why if you go into a bookstore over the last 30 or 40 years and you go into all of the best-selling books they're all about me myself and i you ever notice that i mean i can do anything you know it's all about me think about generation x you know it's all of the stuff they read and listen to is all i mean they came in age during that unraveling right and it's all about um uh it works for me that's my favorite extra expression it works for me you know i really don't care about where it's for you that's frankly immaterial to me right but but it works for me right and that's that's good enough so this is why we call xers a nomad architect right profoundly individualistic libertarian really in many ways in their underlying sympathies they don't trust big institutions at all they've been very late to participate in national politics um historically like as as nomad generations always are they're they're not particularly they will not i think become particularly strong politically and national life although eventually we'll get you know one or two extra presidents we did get one or two finally last generation presidents with truman and eisenhower but you can hardly say that that was as big a generation as all the g.i presidents we later had so so that's my point about them and that's really the unraveling well that gets to the fall season what comes after fall right that's the win right so that's the winner season that's the fourth turning right that's from the third journey to the fourth turning and that's the that's the civic crisis and history teaches that these third turnings eventually issue into fourth terms and the fourth turnings are when the civic authority revives uh people begin to coalesce around new institutions which people trust almost in desperation right and typically in the face of some urgent crisis that the nation has to solve because the forces are of division and frankly of of uh collective weakness it becomes a law that the entire society's existence i mean it becomes an existential threat right so at that point um uh we we galvanized and that's typically um that's often a traumatic crisis um you know all of america's total wars have occurred during fourth turnings and in fact every fourth turning has has featured a total war that's kind of a sobering lesson you could say i have a when total war i mean we we those are wars in which the last one world war ii we put our best and brightest scientists we rounded them all up and we had them design you know uh the most destructive weapon you could imagine they actually used it and i you know if we had had such a weapon available in the civil war i don't think there's much question whether we would have used it or not you know what i mean i mean that's the mood i'm talking about and and so this is a reason to be very cautious and to be very realistic about what happens during these eras but it could also be internal certainly the civil war right was an internal threat it also could be uh simply the breakdown of um economic and social order and i think the 1930s also had some of that in it right essentially that then i guess what we're saying is that because we're in a force turning an event or a series of events like the ones we've just discussed there is probable within the next phase within this next period whether that lasts to 20 30 or slightly beyond but what how that actually manifests itself obviously we can't necessarily predict exactly but but what we do predict is that the mood is changing in a way and this is the difference the this is a terminology i borrow a little bit from telcot parsons used to talk about he said that every every social system goes through four phases and he used to say that you know in the first phase you know there's a the system supplies order and society society supplies a lot of order and society wants a lot of order you know and that would be the first journey yeah and he said in the second phase society still supplies a lot of order but people no longer want it anymore so that's that's the second journey that's the awakening right so somehow you know the establishment is still acting like the establishment but people don't want that and in the third turning yeah the establishment isn't supplying much order and people don't want it either so that's kind of okay right uh and that's sort of you know that sort of uh morning in america with reagan or the 1990s right so suddenly we no longer have a very you know we we cut taxes we cut regulation and and no one really cares too much about what kind of music you listen to basically live whatever life you want and we're okay with that right so but then he said then comes the next the next phase logically right which is that you enter another area when suddenly society isn't supplying order anymore that people want ah that's the crisis you see what i mean yeah yeah look at the generation coming of age right just as boomers epitomized what the awakening was about millennials today millennials i said want murder and they're not getting it they're famously risk-averse uh they're not they're not doing anything risky i mean they're they're not committing crime they're not having sex they're not moving uh mobility has gone down by young people to a record low they're not starting their new businesses uh they're they're not they're not even moving out of their homes um and this is something we've been tracking now for about 15 years uh we have a higher fear of americans under age 35 living at home since 1940 for the gi generation at the end of the great expression so so this is this is a generation that wants the community to order life and they're not seeing it from exodus and boomers why we've been through the reasons why because these are individualistic older generations that don't believe in order right so that you understand now the problem and that's why it's important to track generations because age in place we hope you're enjoying the episode for interviews like this every thursday subscribe wherever you get your podcasts and while you're there make sure you give us a star rating and leave guest suggestions along with any other feedback in the review section now back to the show so if if we focus on millennials things i think there's such an interesting generation i'm probably being quite uh sort of self-obsessed by saying that given that i am one but i think particularly within the context that we've uh or that you've so eloquently described so far i think they're a really interesting generation to look at and from an investment or financial perspective as well i mean we talk about things like the great wealth transfer mooted to be to be underway right now i mean what what do you expect that transfer what impact do you expect that transfer to have on financial markets do you think this is going to be a seismic moment that that i think most predict it to be or you slightly sort of pessimistic about the impact of that of that transfer i actually actually don't think it's going to have much of an impact and i'll tell you why this is something i used to study and and if you look at the the uh you know sort of the genie coefficient or sort of the inequality of various kind of indicators across the population you know you go from more and more unequal right so if you look at consumption obviously consumption's unequal uh but it's but it's uh but you know even poor people have to eat and uh you know very rich people they're gonna save a lot of of their income right so i could consume as much but if you go from consumption to income it gets a lot more unequal right and if you go from income to wealth it gets even more unequal radically more unequal right but if you go from wealth to bequests well the inequality there is off the charts okay i'm just telling you so here's the problem with bequest is that there's a huge huge gap between the median bequest and the mean because right so for example if you're talking about what are millennials going to get from their you know boomer and exert parents when they pass away and you know god knows i mean that's going to be obviously drawn out over many decades right that process yeah but if you look at the the mean bequest it's going to be over a million dollars well that sounds good look at the median request it's maybe about 30 35 000 wow wow what's 35 000 you know going to do to change your life not much it's about enough to kind of sell the affairs of your parents maybe moving off the remaining furniture and that's kind of it right so my point is is that is that you have the the the very wealthy uh and and it's it's a small part of the population and most of that wealth is going to move from you know muffy and duffy senior to muffy and duffy jr you know what i mean i mean that's that's kind of where it's going so i don't think that really is going to transfer that that's not going to really change much of of the generation um yeah it's interesting i mean working for a financial company myself there is a lot of kind of talk and expectation around what this transfer might mean so to kind of put it in real terms and compare the meat well like look i i work i often work with family offices and i totally say what you mean and you know every every head of a family office their most traumatic moment is of course when the last surviving member of the older generation passes away and it goes down a generation right yeah uh because it's like oh my god you know they're not going to want me anymore so it's a little bit like the king dying you know long live the king you know my god who is it going to be um so it's it's almost like a problem of dynastic secession so you see millennials now starting to seriously save for retirement much earlier than boomers and exercise did and i think that this along with all the other kind of risk-averse aspects to millennials signals are very different added of this younger generation toward towards saving yeah i mean that that presents maybe a slightly more kind of positive outlook for kind of millennials financial security later in life than than is typically presented here in the uk i mean we've got a savings deficit i suppose caused by the aftermath of 2008 that still has has effects on on the the wider economy even even today and certainly has over the past five ten years but we've got massive student debt here in the uk which works slightly differently in the u.s granted but also we've got interest rates at record lows as well so there are macro factors at play here that don't necessarily set up millennials for a a kind of extremely positive retirement yeah interestingly you know low rates particularly low real rates actually can can cause people to save even more if your target's safe right and that's kind of the paradox right uh uh i mean i look at millennials they they think that uh you know and despite i mean we could also talk about you know the robin hood frenzy and the and the and the gamestop uh uh calls and you know all the other stuff that we've seen recently uh in the united states kind of post pandemic right but i think in general the the overall lesson if you look at millennials as a as a generation they tend still to be very risk-averse i mean they they they think stocks are risky one of the reasons why these uh target date you know etfs target date funds right and and stuff the dtfs are so are so popular is that they think that that's like a it's some sort of dedicated uh scientific you know expert instrument that you know doesn't have equities which of course is ridiculous right of course at that range it's you know i had to be stuffed with equities right but but my point is is that is that they kind of don't like the fact that the they don't they don't like to think of it as being equities that's my point they don't like to think that there's stocks in there everyone else stocks are risky but but i think that this idea of the the the kind of menu driven uh optimization orientation of millennials are wanting to get the most expert view and also the the herd equality of millennials remember being very much oriented toward how all the friends are doing to to to make sure they keep up with their community i think actually accentuates um you know some of what we're seeing just generally in in the economy with the growth of um you know with the growth of uh of sort of the the passive investing etf mentality which everyone wants to follow the hurt the the thing you hear all the time is from from millennials and frankly older generations too but i think particularly from millennials is i i don't care if i grow poorer with all my friends i just don't want to be left behind i mean do you hear that all the time it's like i i i don't want my friends to be rich without me that's like the worst thing right yeah but if we all decline together well that's that's that's not so bad right yeah i think i i think some of this and you kind of pointed to it then when you uh when you were saying kind of that lack of understanding about equities making up these etf products that they seem more happier to be exposed to the individual stocks themselves i mean there's there's a question of sort of financial literacy there and not understanding some of the jargon that is is part and parcel of the financial world i think that's a massive problem here in the uk again i think less so just given the sort of cultural trends that exist within the us but and and need i think there's a need there and a requirement there for society to to do a better job in educating millennials on on kind of why what just you know bettering their financial literacy across the board because i i totally agree with you there and i do find that in that respect millennials are you know a generation because of their because they've been protected by institutions and by their parents they're they're kind of you know open to be fleeced you know a gen xers were much more savvy in that way you know geneticists expected someone to want to rob them right and so they were very they were very skeptical they're very they were very you know they exers love taking risks i think exers believe they can managers very well maybe but too well uh but they but they're but they understand that these the people around them are not there to benefit them people around them just like they do right i mean they're all individuals who want their own advantage i think the problem and this is the problem with with um you know with companies like robin hood which actually in terms of the actual you know and people can argue about this but i've i've looked at all the data i can look at and i can just see that many of these services these you know these free these uh cause-free boat brokers that are popular among millennials actually don't offer them very good terms on trading you know relative some of the other services but they're but they're filled with hype you know they're highly branded and uh millennials just think well that sounds really great and i'll just dive into it yeah i mean it's almost a gamification of something that is more complex than what robin heard or whichever other trading platform you kind of wish to mention makes it i mean there has to be a level of kind of removing the jargon i think within the financial world at large i think that's important but to gamify trading in the way that some of these platforms have done isn't necessarily the best way to go about it that is introducing risk in quite a disguised way to a generation that as you rightly said i think doesn't necessarily want to take on much financial risk yes i think that's right um i i i think that's a good assessment yeah okay what because i've taken up a lot of your time already let's finish the conversation by just digging into some uh investment applications of all of this kind of context that we've talked about so far we've discussed some uh within the uh context of millennials but just broadly we've we've talked about a theory that tracks secular and historical trends and cycles and that as well if i put my sort of investment hat on gets me thinking about market cycles and i'm then thinking well is it possible to apply this theory to identifying investment trends and opportunities so for example can investors take cues from this as they might do the market cycle for you know is this something you you do uh hedgehog yeah i mean you know typically at age i mean we cover a little bit more limited things i mean we're talking about you know attitudes and and and uh you know attitude shifts and and and demographic shifts um you know in the immediate future you know looking around at that you know fertility changes mortality changes and so on and how that's affecting this of that industry i think in that in the in the broader kind of secular kind of time scale that we're talking about i think i think there are some some some some overall lessons uh you know one of them is that this coming decade is going to be a very dangerous one meaning that a lot can happen uh you know this is the old this is the old adage of um of uh you know lenin i mean you know vladimir not john won it but but this is the whole idea that that uh you know sometimes um decades go by and nothing changes right and and sometimes you know a single year happens and decades change you know what i mean you get you get that much change packed in to a tiny period of time and i think fourth turnings are when public history i mean the history of the economy and markets and and the whole sort of our world framework of our lives much faster than they usually do right and and i think that that means that this is a period when many things could become suddenly unrecognizable and i think we already see some of that not just with the rise of of populism around the world but also with just what we've seen even the response to the pandemic when we've seen you know fiscal and monetary uh stimulus applied on a scale uh that i don't think anyone's ever witnessed before right i mean we've got an entire year when probably everyone was on the go i mean everybody businesses uh individuals everyone was basically being carried by government i defy anyone to go back in any period of uh history and then see when that has actually happened you know in sort of the modern capitalist economy yeah i mean i was going to ask about the coronavirus earlier um to what extent does this theory like can that accommodate for anomalies like the coronavirus i mean we had the spanish flu obviously well you know it's look i mean that thing's always happening i think what the what the idea of turnings is is it doesn't it doesn't obviously you know uh predict what's going to happen but it's how we're going to respond to it i think that's what's more important yeah okay it started to suggest that you know whatever happens we will take a maximalist rather than a minimalist view on how we respond to it and i think that you see some of that maximalism come in with you know kobit koben19 and interestingly a very different kind of generational response to it which was kind of fascinated me we we looked at you know almost every survey you can think of about how people responded to it by age and what's really interesting is that millennials in the united states were almost uniformly in favor of following a more top-down um uh directed strategy of you know strict you know lockdowns you know following the scientists and um you know testing and tracing you know and really doing like the complete you know government job right whereas it was older generations who said no no no you know we can't heal this is the scandemic and this is just government trying to control us you know let us be you know it's not so bad we can just kind of go our own way and we don't need any of that kind of totalitarian stuff right it just fascinated me because you know you think about that and people didn't really comment at the time but how inverted that is from the usual age bracketed response right in other words if we had had this pandemic back in the 1970s say when older gis were still kind of running the country right and boomers are coming of age he would have found the opposite age mix in responses who would have been the gi saying okay let's just rev up those federal bureaus again and all put on our uniforms right i think we did this before during the war right and it would have been boomers saying hell no we're not you know we won't go you know forget it you know we're not going to obey all this crap yeah so my point is these inversions fascinate me when you suddenly see the opposite age response right the opposite pattern and age response and and it suggests to me that it's a key indicator of when you move from a post-war move to a pre-war you know what i mean a post-crisis move to a pre-crisis move that is when it's younger people who are demanding more that we impose you know social discipline and kind of national order right and it's older generations saying oh no no i think current arrangements are fine you know it's kind of like i think you know the way we've almost handled it let's just let individuals do what they want right that always works well yeah it didn't didn't work very well for the united states frankly according to any sort of objective uh international metric of response clearly uh and i think for for a good long while it didn't work very well for britain either right for that matter so i i think that um that these these fascinate me the response uh now at a broader scale uh it is true that great pandemics usually break out after long periods of increasing global mobility this is actually something that willie mcneill pointed out in his very early book uh called i think plagues and peoples he was the great emeritus uh historian at university of chicago and he pointed this out he said and i think right uh that all of the great plagues in american history have always occurred at the end of periods of great global mobility uh you look at the the antonine plague uh you know at the end of the first century a.d you look at the just you know the plague of justinia these are you look at the black death which occurred after you know we finally opened up the silk road you know thanks to the mongols right we suddenly had this this huge communication you know across asia to europe but these periods when we open things up are periods of maximum vulnerability and and you could say that has a that is a rough echo at least of of a of the idea that that pandemics are not completely written and that and that what you often see historically is that after a pandemic we kind of close down a little bit right you certainly saw that after the spanish flu by the way after you know it wasn't just everyone's bad memory of world war one but it was also the the enormous toll of the spanish flu which caused the 1920s to have that atmosphere certainly in america of complete turning away from foreign policy isolationism closing the immigration window which we really did definitively in 1922 and 1924 so basically we just no more immigrants right um and and that created a very different mood in america so i i think these things that there is also a longer-term relationship between openness and closeness and and and uh and pandemics you know participation in in that cycle yeah interesting and and to kind of return to my point about how we can make sense of this from an investment perspective um it i i'm kind of loathe to ask it but at the same time i'm intrigued to know whether there is or there are specific sectors or even asset classes that might tend to do better within a certain turning or a certain phase of returning like have you done that research to know whether that might be the case we've certainly looked at equities for instance i mean equities equities do best really in in first turnings and third tournaments in american history right meaning that these are the periods of when there's less um conflict right meaning you know like you think of in the american high and and the in the 80s and 90s well those are pretty good times for equities right but yeah that's true in earlier areas as well and and and i will say that generally though the in a in a in a first earning so it's probably the best of all periods for equities you know because you you have less you know you the booms and busts aren't as large so right even though the overall growth is the same i'd say that the the the worst turnings are the second turnings in the fourth turn so i mean the awakening i mean you think i mean what do you think of the with the 1970s well you don't think very good about any markets really ready either vote for stocks i mean it was it was it was kind of a disaster and in the early 1980s right we i think the all-time low in terms of any measure of sort of you know uh long-term sort of you know schiller's pe would have been i think when no matter how you measure it i think the value most of the evaluation metrics reached its all-time low and post-war america right around 1982 right and then someone came the long boom right which last throughout the entire third turning right right and that was good for both bonds and stocks now the the worst earnings of all uh and certainly the most turbulent are the fourth turnings and that's what we're in right now and it's and it's turning out to be a time of tremendous turbulence i would say a little bit more tactically the thing i'm most concerned about now is is um is accelerating inflation expectations there's no question about that uh and and so i you know i started recommending to people just informally i mean i you know i'm demographic sector so you know i don't do that kind of stuff for a living but i i i know on my on my podcast i told people starting about two months ago i said you know uh short tlt which is you know our our our etf here for you know long term fixed bonds fixed rate bonds uh nominal bonds which are you know 20 years and out right and that's that was that was a pretty

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Keywords: stocks, shares, stock price, share price, opto sessions, podcast, opto podcast, opto knowledge, opto, opto opportunities, interview, education, assets, asset management, investor, investing, investment, listen, learn, finance podcast, business podcast, business, finance, expert, #OptoTradingInterviews, opto investing, trading, learn trading, learn investing, strategy, investment strategy, author, al gore, writer, books

Id: nNVnphfPGEA

Length: 65min 10sec (3910 seconds)

Published: Tue Jun 01 2021