“A wise man seeks wisdom; a madman thinks that he has found it.”
- Persian proverb
“I believe that everything happens for a reason. People change so that you can learn to let go, things go wrong so that you appreciate them when they're right, you believe lies so you eventually learn to trust no one but yourself, and sometimes good things fall apart so better things can fall together.”
- Marilyn Monroe
“Be who you are and say what you feel, because those who mind don't matter, and those who matter don't mind.”
- Bernard M. Baruch
A. The Future of Humanity
Every now and then you read something that puts many things into perspective.
The recent RethinkX report on Rethinking Humanity (thanks David G) outlines how the five foundational sectors of the global economy – information, energy, transport, food, and materials – are being disrupted at an unprecedented speed and scale.
The disruption brought about by the advances in those five sectors will give us the choice to either a) collapse into a new dark age or b) move to a new Organising System that allows us to flourish in a new Age of Freedom.
They argue that we will need to rethink not just the structures and institutions that manage society, but the very concepts they are built on.
Representative democracy, capitalism, and nation states may seem like fundamental truths but they are, in fact, merely human constructs that emerged and evolved in an industrial Organizing System. In the new age, they may well become redundant.
I’ll summarise the big idea in this amazing 90 page report below which goes well with some of other books I have been reading recently like: Life 3.0 by Max Tegmark and Hacking Darwin by Jamie Metzl.
Let’s start from a 30,000 feet perspective, our civilisation is a complex adaptive system. Change in complex systems can be characterised by long periods of stability punctuated by short period of rapid change.
During periods of equilibrium, the system is dominated by self-correcting feed back and adaptations that act as a constraint on change.
Occasionally, a convergence of factors can amplify forces of change. These self-reinforcing feedbacks, can destabilise the system and push it out of equilibrium. The point at which this occurs is called the ‘rupture point’. The rupture point sees an expansion of possible outcomes (new possibility spaces)
Through out history we have seen the birth of foundational technologies that then changed the structure of society and ushered in a new age. From Agrarian city to the current Industrial Order.
If you were to dig into any of these “Ages”, you would see further: Orders and Waves.
Orders are inside Ages. We are still in the Age of Extraction. But have moved across Orders of Civilisation. From Egyptian to Industrial, where our technological capabilities have improved by an order of magnitude.
The Waves are specific technologies like Books, Steam Power, Internal Combustion Engine, Electricity, Internet.
What excites me and makes them think that we may make the leap to a new Age is that for the 1st time, five big forces are growing & converging with each other.
Which mean this is not a third or fourth industrial revolution as the mainstream narrative implies.
The emerging system of production, and the civilisation it will enable, will be based on fundamentally different drivers and attributes to those of the Extraction Age – a difference as profound as the shift from foraging to agriculture and cities, but condensed into a fraction of the time.
The creation-based system of production will be unlike any other in human history. The current, large-scale, centralized system will be replaced by an entirely decentralized system based on a model of resource creation, not extraction. A model of build-up, not breakdown. We will build what we need from the ground up at the molecular level, with an order-of magnitude improvement in cost and efficiency. The building blocks of this system – the bit (and qbit), photon, electron, molecule, and DNA (or gene) – are available and plentiful everywhere and can be recombined in infinite ways to create new products and services at essentially zero cost.
This new production system is based on increasing returns and near-infinite supply, as opposed to the diminishing returns and scarce, geographically-constrained supply of the Extraction Age. A creation-based system can produce near-infinite outputs once the infrastructure is built – limitless quantities of organic materials (food, clothing, and materials) produced from the genetic information held in single cells and the plentiful flows of energy produced from the sun, with just a few further inputs.
Such a system produces only what is needed, without the need to grow whole plants or animals or dig up huge quantities of raw materials to break down into useful outputs. Stocks of non-organic materials (e.g. metals) and capital will be needed to seed the system, but everything else can be created and sourced locally.
Based on the changes coming as we transition from an Age of Extraction to an Age of Creation, here’s what we need to watch out for:
What could the Age of Creation look like, if we manage to pull it off?
B. The Deficit Myth
When it comes to markets, I think this picture summarises our current reality well.
But there is a big change coming…….
This is the rise of MMT and deficit spending.
Stephanie Kelton recently released her much-awaited book, The Deficit Myth which will become the intellectual defence for continued deficit spending in the next few months.
Like the discussion about the Future of Humanity, and how we break with our past, deficit spending and MMT is also an idea that allows us to break from our past.
You can now feel the narrative shifting globally from a world where deficit spending was bad, to one in which it doesn’t matter - even in Germany.
For MMT, the main implication of this is that the metrics of financial health which apply to currency users (households and individuals), such as income-expenditure deficits or debt-to-income ratios, don’t apply to currency issuing entities.
Since currency issuing sovereigns can simply issue currency to discharge their debts, the only constraint they face is inflation. If inflation starts to accelerate, the government is spending too much. Subject to that sole constraint, any amount of government expenditure is acceptable, regardless of the deficit or debt burden.
So the question becomes, what is the limit to which the government can print the currency and deficit finance projects without causing inflation?
Quoting my friend Dylan Grice @ Caldwerwood Capital:
In short, MMT is a recommendation that policy makers press hard on the accelerator without knowing where the brake is. The problem is that no one knows when the brake will even be needed. It’s therefore entirely plausible that in the next decade, both MMT proponents and MMT critics will be proven right. No one has any idea where the ‘inflation limit’ to fiscal expansion lies. It’s entirely plausible that we are today seeing inflation’s low point, and that future historians will look back on the COVID pandemic as the event which unleashed inflation once again. But it is as plausible that in ten years time government deficits and debt levels will have exploded but that inflation will have fallen further still. No one has any idea.
As MMT goes mainstream, our playbooks need to adapt.
What if M2 continues to rise and velocity picks up too, since the money is directed to individuals pockets rather than bank reserves.
What if that stimulus keeps pushing up asset prices?
C. A Few Things Worth Checking Out
1. I re-listened to Brad Gerstner’s Invest Like The Best, which isn’t just about great investing, though he does that well. Brad speaks about a book that changed my life too: Essentialism: The Disciplined Pursuit of Less by Greg McKeown.
2. Great HBR article on the Things Killing Your Ability to Focus: Devices and Meetings. Their solutions: Add buffers between meetings, limit the number of people in a meeting, have a clean desk, schedule well, be mindful or meditate.
Here’s a schedule I use - which more simply means I use the morning for focused work, and afternoons for meetings and emails.
3. Thoughtful Adam Grant article on how jobs, firms and bosses may improve after the crises.
5. Hugh Hendry discussing his view on the Need for Chaos, and coming Inflation (paper on his website).