The Coming American Civil War, Thinking In Bets, Life Lessons
July 16, 2020
“Three Rules of Work: Out of clutter find simplicity; From discord find harmony; In the middle of difficulty lies opportunity.”
- Albert Einstein
“No problem can be solved until it is reduced to some simple form. The changing of a vague difficulty into a specific concrete form is a very essential element in thinking”
- J. Pierpont Morgan
“A man always has two reasons for what he does - a good one, and the real one.”
- J. Pierpont Morgan
A. The Coming American Civil War
Poll: 34% Of US Voters Think A Civil War Is ‘Likely’ Within 5 Years
More than one-third of Americans believe that a civil war will happen within five years, according to a new poll from Rasmussen. The poll, conducted on June 11 and June 14, found that 34 percent of registered U.S. voters believe that a second civil war is “likely” to occur in the next half decade.
Republicans are more likely to hold this opinion, with 40 percent of registered GOP voters answering that they believe a civil war is coming. According to the poll, 28 percent of Democrats and 38 percent of unaffiliated voters believe a civil war is coming.
The recent riots/protests in Minneapolis led to unrest across the country. We have not really seen anything like this since the anti-Vietnam war protests of 1968 and the civil rights marches which occurred through the 1960s. Today’s protests/marches/riots have quickly moved from a very specific issue, remembering George Floyd and correcting police abuses among the black community, to addressing issues such as racism and police reform.
Then the “movement” changed focus and moved to the entire economic system is being questioned.
Income inequality to wealth disparity and how they are tied in to racial inequities are being debated. Not just protestors in the streets, even at least one member of Congress is pushing the idea the entire system needs to come down.
VP Biden is offering to transform America and of course the fear on the political right is what he really means is socialism (the Bernie Sanders model) is adopted as America’s economic/political model. He may not mean it quite that way. But it may not matter how Biden thinks about it.
The real question is what do the people around him and his donors want?
Ten years ago, a George Mason University Professor, Jack Goldstone who is a sociologist and Peter Turchin who mathematically models societies, wrote a paper which came to the conclusion the US was headed for another civil war. Turchin and Goldstone’s model forecast that instability was rising in the US as it did in the 1850s just prior to the Civil War and societal stress would peak around the year 2020.
His Political Stress Index combines three crisis indicators, a weakening of the state, declining living standards and increasing intra-elite competition/conflict. Ten years later, they look prescient.
What are the most important signs to look for which would suggest a genuine turn in the country is being made?
Why is America a more attractive place to invest than virtually any other? What does America have that gives it such an advantage in attracting capital? A reserve currency? Low taxes? Dynamic entrepreneurs? Low cost manufacturing?
I think America’s main advantage in attracting equity capital is its shareholder friendly culture. The shareholder, the one who commits capital, gets paid first and the chain of title to corporate profits is pretty clear.
In contrast, the shareholder claim on profits in other countries can be 5th or 6th down the list, after employees, suppliers, local government etc. That is the difference. If capital goes where it is best treated, the US remains the best place for a global investor and that bring money into the Dollar, on a massive scale.
Remove that characteristic of the US capital markets and everything could change. Funding of the US debt may have to be done almost entirely domestically, which can mean massive money printing, capital restrictions, rate caps, much higher taxes until eventually the socialists run out of other people’s money.
B. Thinking In Bets
Wanted to improve my decision making, so read Annie Duke’s Thinking In Bets and thought it had some interesting parallels with Dalio’s Principles.
A few big ideas I got from the book:
Use Time Travel: Rather than predicting forward from today, work backwards from your desired result. If I want to be in a certain place by age 60, then what does my life need to look like at 59, 55, 50….Or you could use Charlie Munger’s technique of Inverting, ask yourself “what don’t you want to happen” and remove that path from your life. Assume you have failed. Why did things not work out? What went wrong? Where might you be fooling yourself? What would future you say about this decision? Have regret before the decision, rather than regret after the decision.
Life is Probabilistic vs Deterministic. Sometimes 20% probability events occur and 80% probability events don’t. You can’t know. You could make a great decision and get a bad outcome. Embrace uncertainty. Many things are possible. Have a process but also embrace serendipity.
All Decision Are Bets. When you make a decision you are betting on how the future will turn out. To make better bets make sure you version of the world is calibrated. Are you seeing events clearly or living in your bubble? Don’t see events as you wish they were, see them as they are.
Find People Who Want to Truth Seek With You. Be part of diverse group that help you seek truth better & faster. Seek dissenting opinions only from quality sources.
Tilt. Your brain will get hijacked. What future events could cloud your judgement, can you prepare for them today? How can you stop an emotional cascade from derailing you? Use Ulysses contracts to help tie you to the mast to make decisions automatic.
C. A Few Things Worth Checking Out
1. Bill Miller founded Legg Mason Capital and now manages money at Miller Value Partners. Bill is bull and he lays out the bull case for markets (which is rare) on both the Bloomberg Masters in Business podcast and Wealthtrack. I’m in his camp.
2. Life Lessons: 38 Lessons that took me 38 Years to Learn. Some good ones here (thank you Ben G):
a) Before agreeing to a new commitment, identify the trade-off that it will carry. Our ego tells us we can do it all. Reality reminds us that we can’t.
b) For being so simple, listening well is a much-underutilized superpower. The best way to have people listen to you is by first listening to them.
c) No one ever has a time management problem. They have a priority management problem. Train yourself to never say that you don’t have time. Say that it’s not a priority. And make sure you’re happy with that prioritization.
3. Great TED Talk about our future. What happens when biology becomes technology?
4. This is a non-consensus view and that too from GMO on why we shouldn’t be worried about profit margins.
5. Q2 hedge fund letters are trickling out. You can track them on reddit here.
6. Mehlman Castagnetti, a D.C lobbying firm put together a great deck discussing How 2020’s Crises Are Bringing the Future Faster. Three slides worth looking at:
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Ahmed - your posts are always interesting and on point. Unlike most of the other weekly emails - yours has good analysis and a point of view. It also uses a nice wide range of data sources. And very importantly- its a great balance of life and finance. Which is something we are all working on.... please keep it comin'!
A thing to ponder: the Strauss-Howe Generational Theory, which believes that the world runs in 80-90 year cycles, and the Secular Cycle by Peter Turchin et. al, which believes that it runs in 50-60 year cycles, can be synthesized into the Fate of Empire Theory by John Bagot Glubb, that an empire or country can only last 250 year, approximately 5 Kondratieff Waves (Socio-Economic Cycles) or 3 Saeculums (Institutional Cycles). Others like The Storm Before the Calm by George Friedman has noted this. Some would however consider this is crackpot.