“But he felt a deep foreboding that despite all the good around him and perhaps even somewhere within it there still resided something morbid.”
– Fyodor Dostoevsky
Over the past two weeks, I’ve reached the same conclusion of many individuals and the collective consciousness we call the stock market: We are likely in the beginning stages of a financial crisis that could rival the Great Depression.
The Fed printed a ton of money over the past few years, after a decade of historically low interest rates.
Much of that money flowed into startups and tech companies, who parked it at Silicon Valley Bank.
Silicon Valley Bank, sitting on a huge pile of cash, put it into “safe” investments: US Treasuries and agency mortgage-backed securities.1
Silicon Valley Bank invested this money into long-term bonds. The risk management team at Silicon Valley Bank…wasn’t great, as it appears to have not taken into account duration risk.
The Fed raised interest rates from ~0% to ~5% in the span of a year.
The investments that Silicon Valley Bank made were then underwater.2
Customers realized this and started to withdraw their funds, triggering a full-on bank run.
Arrivederci Silicon Valley Bank. Bonjuorno FDIC.
This happened extremely quickly. On March 9, 2023, Silicon Valley Bank depositors attempted to withdraw $42 billion. The bank run was triggered by triggered by Silicon Valley Bank’s extremely online customer set: startup founders and venture capitalists. For all of their talk of being contrarian, there may be no more interconnected and lemming-like group than VCs.
The narrative in some camps is already that tech companies and VCs are the baddies. This is the exact same thing we saw in the ’08 Financial Crisis: the vilification of the financial industry. We need a scapegoat.
But this can happen to any bank.
Reflexivity: Or, the Financial Industry Is Our Economy
“I live in a society, which is sufficient information for you to know that I’m structurally levered long to the stability of the banking system, much like you are.”
We are all dependent on our financial system. As software eats the world, our work becomes increasingly interconnected. A couple of regional banks failing may not matter to you — unless you realize that your payroll provider used one of those banks, so your paycheck won’t come through this week. Or you’re a small business owner, and someone you’ve invoiced has all of their funds tied up in a failed bank. Oops! Better write off that line item in your accounts receivable.
Back in the halcyon days of 2020 and 2021, as the COVID money printer went brrr, many people took out loans to buy houses at a 2% interest rate. Yes, banks have risk management departments. They can conduct all sorts of financial voodoo — hedge their exposure with swaps, slice and dice the loans into derivatives and sell them to another institution, etc. But those loans now yield less than Treasuries and the underlying asset value has declined significantly. And at the end of the day they are stuck on someone’s balance sheet.
So this sort of thing matters to Joe Sixpack, whether or not he is aware of it. And in 2023 (contrasted with 2008) we are increasingly online and interconnected. One bad earnings report can trigger a run on the bank. Perception drives reality and reality drives perception in a recursive loop. Our entire economy is just a colossal, scaly ouroboros.
Every Finance 101 class should be renamed “History of Finance”. A modern finance class should demonstrate that we are not rational actors in an efficient market, but that sentiment drives financial fundamentals reflexively. As I’ve written previously,
Reflexivity is the idea that our perception of circumstances influences reality, which then further impacts our perception of reality, in a self-reinforcing loop. Specifically, in a financial market, prices are a reflection of traders’ expectations. Those prices then influence traders’ expectations, and so on.
In financial markets and our economy, as in quantum physics, there is an observer effect. This is how we experience a bifurcated existence — we simultaneously have the best job market of the past 50 years and are worried about structural unemployment and hyperinflation.4
So the Fed can try to pump more money into the economy, but our economy is already a Saturnalia feast approaching the winter solstice. Maybe we can stuff a few more oysters down our gullet, but it’s only a matter of time before we need to visit the vomitorium.
This reflexivity is not limited to financial markets. Soros was a philosopher before he was a trader.
Things have gotten…weird over the past several years. At first, I thought this was a result of my transition to adulthood,5 and all of this was a part of understanding the complexity of the modern world. But now I’m not so sure.
Others have noticed this:
A forced wind-down of Credit Suisse, a run on US regional banks, the arrest of a former US President, the launch of GPT-4 … I was in the trenches in 2008, and I never felt like system-shattering events were advancing so quickly and (w/exception of GPT-4) on so little substance.
Here’s one more for those more conspiratorially-inclined. Recent rate hikes might be an attempt by the Fed to get people to buy Treasuries directly as opposed to keeping their money in banks. This could lead to the government issuing a CBDC and all of the potential spying and censorship inherent in this product.
Far-fetched? A few years ago I would have told you there is no way the people of the U.S. would allow this, given the distrust of government that comprises a large part of the American psyche. But now, I’m not so sure. We’ve already given up any sense of privacy when it comes to financial transactions.
Harari tells us that everything we call life, our entire societal fabric, is made up of shared myths and beliefs. These concepts — democracy, capitalism, religion — lose their power when we stop believing in them.
An acceleration in societal unraveling has been occurring since arguably the 2016 election6, but COVID in particular led to the cracking of many of our shared myths. Globalization as a force for good. Institutional trust. The stock market reflecting the health of an economy. Reliance on experts to tell the truth. Scientific knowledge.
Yet all of these phenomena are symptoms, not the affliction. We live in the apotheosis of postmodernism, an age where our collective consciousness has become conscious of itself and is throwing off the yolk of the postwar liberal world order.
It doesn’t matter what happens. It matters how we react — and these reactions are filtered through the lens of tribal association.
“Can you believe the Blue Tribe thinks that voter fraud isn’t a huge problem? Really?”
“Wow, glad I don’t associate with anyone in the Red Tribe. They don’t trust science.”
“I’m going to write a 5,000 word blog post to better solidify my place in the Gray Tribe hierarchy.”7
We see this play out in every current event. Within a few days of the Silicon Valley Bank crisis, Congress was rushing to control the narrative.
Nihilism as the Defining Philosophy of Our Time
So what can one do? The inevitable consequence of a world that lacks cause-and-effect rules, where the effect drives the cause — perhaps even a rational response to that world — is a collective shrug. And that’s what we’ve done. Nihilism is the defining philosophy of our times.
Nihilism is voting for a billionaire with populist rhetoric because no other politician will deign to lend validity to your problems.
Nihilism is making an 100x return buying shitcoins or trading SPACs and then losing it all.
Nihilism is becoming aware that LLMs — not in the future, but now — are smarter than you and will soon take your job.
Nihilism is understanding that hypergrowth tech companies are largely kayfabe. DoorDash, Uber, and the like may not make any money, but that was never the point. They just needed to convince a few VCs of the narrative of growth.
Nihilism is opting out of our democratic experiment because all politicians do is accumulate money and power while tilting at windmills with the gusto of Don Quixote.
Nihilism is comprehending all of this, predicting non-negligible odds of some sort of societal upheaval, buying Bitcoin, and then realizing that nuclear powers, not code, enforce property rights. Bullets and food will be the true medium of exchange if the world’s largest nuclear power and issuer of its reserve currency actually fails.
All of these are examples of the same phenomenon. Societal and economic forces have built up inside a pressure cooker that is now boiling over.
Nihilism has been a theme underpinning my writing, from Gamestop mania to war in Ukraine. Our mindset is perhaps best explored by the (outstanding) movie Vengeance.
Great monologue, massive spoilers for the film
Everything means everything…so nothing means anything.
I’m falling victim to this exact same mindset — at least in a small way — with this blog post. I need to be relevant. I need to have a unique take. I need to create something that will outlive me. I need to prove how smart I am through some onanistic intellectual exercise, when I should be spending time building a company, connecting with the people in my life, or just…surfing.
What am I even doing here?
The past few years of brrr-ing money printing and remote work boondoggle for the upper-middle class was one last hurrah before a huge economic and societal crisis. A Fourth Turning, if you will.
Last year when reviewing Strauss and Howe’s book, I was skeptical of the claims that generational cycles drive history. I wrote,
“[T]hese are bold forecasts that I suspect overfit to the training data, much more hedgehog than fox.”
But over the past year, I’ve become much more sympathetic to their cyclical views of history. What has changed my mind? The signs were there a year ago, but I’ve recently started paying more attention to:
Our pace of technological revolution, specifically with regards to AI.
The rapid deglobalization of the world in the wake of COVID, U.S.-China tensions, and Russia’s invasion of Ukraine.
More conversations I’ve had with individuals from across the political spectrum where I better understand the extent of political polarization and how everyone constructs their own reality and lives in their own filter bubble.
So if our society is currently undergoing a natural “unraveling” that will ultimately result in a society-shaping event at the scale of World War II, my bet would be on AI creating massive unemployment, which would be the necessary catalyst for a new economic paradigm.8
That said, that is just a shot in the dark. All I know is that our old myths no longer serve us. We are tearing them down and constructing new ones.
Here, people will be triggered by the phrase mortgage-backed securities. They’ll scream, “We learned nothing from the 2008 Financial Crisis!” But, as Ben Thompson says:
“Agency” is an important distinction: these weren’t the ugly subprime mortgages that were at the heart of the 2008 financial crisis; these were mortgages ultimately backed by federal mortgage programs.
“[W]hat if all this credit and liquidity creation threatens trust in the entire financial system, and leads to faster inflation, or even hyperinflation?…But note that both of the previous episodes led, in the short term, to a drop in inflation: the CPI hit 5% for the first time since the early 90s in 2008, just before the crisis. Banking crises are typically deflationary, so you can use the central bank interventions in their wake as a proxy for how deflationary they are when there isn’t a policy response. The Fed added $3.5tr to its balance sheet in the six years following the financial crisis, which was just enough to get inflation from the pre-crisis level of around 3% to the next decade’s average of 1.6%. Post-Covid, a $2.9tr in balance sheet expansion was also just enough to keep year-over-year inflation slightly above zero in the first few months of the pandemic.”
I have done a poor job of publishing my writing recently. Which is a shame, because writing is one of the highest-leverage and most impactful uses of my time. It’s a way to clarify my thinking and to learn publicly. By putting writing out into the world, I can point to a semi-permanent artifact to demonstrate my thinking and “expertise”, which leads to interesting conversations and opportunities.
That said, it’s also very time-consuming. Over the past few months, I’ve been heads down:
Building out the Data Science team at TRM Labs. Most of my time recently has been taken up with a project that I can’t say much about publicly. Suffice it to say this is something that the average person on the street has heard of, not just folks in the crypto industry.
Working towards a Master of Science in Computer Science. I’m not sure if I’ll stick with this program or not – there’s a huge opportunity cost in terms of time – but right now I’m enjoying diving into concepts at a theoretical level and honing my technical skills.
Doing a lot of reading, thinking, and writing about the most impact I can make with my career and life. A big part of this has been in-person engagement with people in the Rationality and Effective Altruism communities. In the wake of the FTX bankruptcy, it’s become a bit of a trend to criticize Effective Altruism, but I believe it is a largely misunderstood philosophy that provides a useful (though certainly non-exhaustive) framework for thinking about morality and my place in the world. More writing to come on this soon.
In any event, this blog post is a public commitment to publish here more frequently! I have many half-drafted posts that I will be releasing in the coming weeks and months.
Life isn’t fair. We’re taught this from a young age, but we still fall victim to the just-world fallacy. At some level, we continue to think that people will get what they deserve.
That successful startup founder? They got lucky, sure, but also worked hard and were smarter than the competition. And we’ll get there someday. So we tell ourselves that we’re on a journey, that it will all work out in the end. Trust Steve Jobs: You can only connect the dots looking backward.
No worries, right? Hakuna matata.
Image via Disney
The Little Agency We Have
Not so fast.
Saying things like “It’ll all work out in the end” or “Everything happens for a reason” is the secular equivalent of telling a homeless person “I’ll pray for you”. That’s nice, but what they really need is some money, or some food, or, you know, a home.
Fundamentally, this is nihilism gilded with a few upbeat, feel-good clichés. It denies our agency and responsibility for growth as a human being. Nothing matters, so I have no responsibilities to the world around me.
"Everything happens for a reason" = I neither recognize nor accept that my actions have consequences for which I am ultimately accountable
And we have so little agency to begin with! 99% of life is sheer luck: where you were born (both a specific country or city and at this point in history), your economic circumstances, your family, your genetic makeup. Perhaps 1% of the results you achieve in life can be attributed to your own decisions and hard work. So by espousing hakuna matata, we dispossess ourselves of the tiny amount of agency we do have.
No, not everything happens for a reason. Sometimes terrible things happen. Full stop. We need to pull our heads out of our asses and acknowledge this fact in order to do something about it.
Similarly, in The Lion King, only when Simba overcomes the nihilism of hakuna matata does he ascend Pride Rock to become an Überlöwe.
But I Crave Meaning
So why do we tell ourselves things like “If it’s meant to be, it’ll be”?
Here, Meursault has more to offer than Timon and Pumbaa. Timon and Pumbaa run away from life with their philosophy of nihilistic hedonism. Meursault may be apathetic, but through acknowledgement of life’s absurdity he fully engages with the world.
As if that blind rage had washed me clean, rid me of hope; for the first time, in that night alive with signs and stars, I opened myself to the gentle indifference of the world. Finding it so much like myself–so like a brother, really–I felt that I had been happy and that I was happy again.
America is in a state of decline. Our government is inept — ambitious public projects like the Apollo program and the construction of the Interstate Highway System are little more than a fading memory of a once-competent system. The culture wars have fragmented us. We live in different realities depending on partisan affiliation, leading to less understanding and tolerance of our neighbors. The stock market (at least until recently) has been roaring, but wages are stagnant and wealth is increasingly concentrated in the hands of a lucky few.
What is the solution to these problems? Many would take a rationalist approach:
Challenge the premise of these very questions. Are these problems really worse than they were in the past? Or is this just lazy storytelling without any data to back it up?
Launch and fund experiments that attempt to solve these pressing issues. (Grants programs, blog prizes, etc.) As a second order effect, gather data to become better at addressing other problems facing humanity.
Preach a gospel of tolerance. We can seek to understand others’ perspectives, as well their biases and incentives (as well as our own!). From a new place of shared understanding, address specific difficulties with targeted interventions.
A symptom of American decline
William Strauss and Neil Howe deal with these problems in a different way. The one-word summary of The Fourth Turning is “fatalism”. Our society is currently undergoing a natural “unraveling” that will cumulate in a World War II-scale conflict. Now is the time to prepare for that certainty.
If you want a data-driven argument backed by a great degree of research, look elsewhere. This is a book full of bold, plausible but unsubstantiated claims, and lots of dunking on Boomers (before it was cool).1
Strauss and Howe argue that time is a flat circle:
Over the past five centuries, Anglo-American society has entered a new era—a new turning—every two decades or so. At the start of each turning, people change how they feel about themselves, the culture, the nation, and the future. Turnings come in cycles of four. Each cycle spans the length of a long human life, roughly eighty to one hundred years, a unit of time the ancients called the saeculum. Together, the four turnings of the saeculum comprise history’s seasonal rhythm of growth, maturation, entropy, and destruction:
The First Turning is a High, an upbeat era of strengthening institutions and weakening individualism, when a new civic order implants and the old values regime decays.
The Second Turning is an Awakening, a passionate era of spiritual upheaval, when the civic order comes under attack from a new values regime.
The Third Turning is an Unraveling, a downcast era of strengthening individualism and weakening institutions, when the old civic order decays and the new values regime implants.
The Fourth Turning is a Crisis, a decisive era of secular upheaval, when the values regime propels the replacement of the old civic order with a new one.
People both shape and are shaped by history. So these turnings are driven by generational archetypes, as follows:
A Prophet generation grows up as increasingly indulged post-Crisis children, comes of age as the narcissistic young crusaders of an Awakening, cultivates principle as moralistic mid lifers, and emerges as wise elders guiding the next Crisis.
A Nomad generation grows up as underprotected children during an Awakening, comes of age as the alienated young adults of a post-Awakening world, mellows into pragmatic midlife leaders during a Crisis, and ages into tough post-Crisis elders.
A Hero generation grows up as increasingly protected post-Awakening children, comes of age as the heroic young teamworkers of a Crisis, demonstrates hubris as energetic midlifers, and emerges as powerful elders attacked by the next Awakening.
An Artist generation grows up as overprotected children during a Crisis, comes of age as the sensitive young adults of a post-Crisis world, breaks free as indecisive midlife leaders during an Awakening, and ages into empathetic post-Awakening elders.
The book gives examples of various Prophets, Nomads, Heroes, and Artists throughout history. Near as I can tell, Strauss and Howe take the most known historical figures from each generation, then call them out as exemplary of whichever generation they happened to fall into.
George Washington and Abraham Lincoln have to be heroes, right? Nope! George Washington was a Nomad (the best-known Hero of that time would be Thomas Jefferson) and Abraham Lincoln was a Prophet. But perhaps I’m being too harsh. These archetypes are meant to be a metonym for the generation as a whole, not indicative of individuals who are a part of the generation.
Strauss and Howe then give a vague appeal to “wisdom of the ancients” and cherry-pick examples from the past to demonstrate that a cyclical and generational interpretation of history is correct. Their narratives, while falling victim to selection bias, are compelling.
They emphasize Hero Myths: stories of a young hero and elder prophet. This generational combination shepherds society through a crisis. Think Luke Skywalker and Obi-Wan Kenobi in Star Wars or Frodo and Gandalf in The Lord of the Rings.
Myths involving young hero-kings and old prophets are universal in part because people are comforted to hear tales of the valor of youth tempered by the wisdom of age. Yet people of all eras know that such a mythlike symbiosis between young and old occurs only on occasion. In America, certainly, it has not been present for decades. The last time heroic youth and wise elders had this kind of constructive relationship was using World War II. The reason these young Hero Myths are so embedded in our civilization is because they explain events when the secular world (the domain of kings) is being redefined beyond prior recognition—in other words, in Crisis eras.
Prophet myths are the mirror image of Hero myths.
While the Hero Myth ends in the palatial city, the Prophet Myth starts there.
Consider Siddhartha escaping the pleasures of the material world and seeking spiritual redemption, or Jesus overturning the money changers’ tables in the Temple courtyard.
Perhaps the most convincing example of a generational myth The Fourth Turning highlights is the biblical story of Exodus. Moses and his peers were Prophets, who defied the worldliness of Pharaoh in Egypt to turn towards God during an Awakening. Their children (Nomads) were alienated young adults who worshipped the Golden Calf. They defied their elders and were lost in both time and space during an Unraveling, wandering in the desert between the worlds of Egypt and the Promised Land. Then came the Heroes: Joshua’s generation of soldiers who led the Israelites through the battles of a Crisis and into the Promised Land. This generation presided over a new High and then gave way to the Judges, an Artist generation that ruled at time of “political fragmentation, cultural sophistication, and anxiety about the future.”
Around this part of the book, I started to feel like I was part of a cult – one whose prophecy had failed. This book was written in 1997, midway through Strauss and Howe’s Third Turning. So I have the benefit of 25 years of history to look back on.
But back in the 1990s, Strauss and Howe had utter certainty in their theory, claiming:
In linear time, there would be no turnings, just segments along one directional path of progress…The 2020s would be a mere extrapolation of the 1990s, with more capable channels and Web pages and senior benefits and corporate free agents—plus more handgun murders, media violence, cultural splintering, political cynicism, youth alienation, partisan meanness, and distance between rich and poor.
Isn’t this exactly what happened? This appears to invalidate the book’s entire premise of a 80-100 year historical cycle. Do not pass go, do not collect $200.
On the other hand, some of the trends we saw in the 1990s have in fact reversed. Liberalism certainly appears to be declining. America is becoming more isolationist. Our political parties have completely flipped – the Trumpian Republicans of today would be alien to the Republicans of the 1990s.
Perhaps our society is unraveling.
But I digress. Having established their theory of historical and generational cycles, Strauss and Howe now dive deep into the past 100 years.
These 150 or so pages read like most business books: there is the kernel of an interesting idea and enough content for a 15-minute TED Talk, with a whole lot of filler to meet a minimum word count. Most readers will be familiar with the generations presented:
G.I. Generation (more commonly known as the Greatest Generation)
Strauss and Howe examine how these different generations have influenced and moved through the past three turnings in American history.
The First Turning was the post-World War II High of 1946-1964.
This was the most boring chapter of the book, with the exception of this notable zinger:
“Surrounded by such open-handed generosity, child Boomers developed what Daniel Yankelovich termed the “psychology of entitlement.” Landon Jones recalls how “what other generations have thought privileges, Boomers thought were rights.”
The Second Turning was the Consciousness Revolution of 1964-1984.
Here we have more quips, expanding the attack surface to Gen X in addition to Boomers:
Back in the High, being a good adult had meant staying married and providing children with a wholesome culture and supportive community. Now it meant festooning the child’s world with self-esteem smiley buttons while the fundamentals (and media image) of a child’s life grew more troubled by the year.
This Awakening period produced more examples of fatalism from Strauss and Howe.
Perhaps Vietnam’s civil war would have been a fixable foreign problem back in the High, but American intervention was doomed to failure in the Awakening.
Plausible theory. But this is but one factor to be considered. Solely focusing on the Awakening denies the agency of the North Vietnamese, the influence of the Soviets, and essentially anything other than the culture of the US at the time.
This section of the book also highlighted how we are still seeing the effects of 1970s policy today.
By the late 1970s, transfer payments from younger generations to G.I.s towered (by a ten-to-one ratio) over what remained of Great Society poverty programs.
There were also several quotes that made me think that Millennials and Boomers are more similar than they first appear, defying the ebb-and-flow generational theory presented in the book.
Where Silent beatniks had expressed angst in poetry, earnestly seeking audiences, Boomer hippies megaphoned their “nonnegotiable demands” without much caring who listened. In the new youth culture, purity of moral position counted most, and “verbal terrorism” silenced those who dared to dissent from dissent.
You could print that sentence verbatim in a conservative publication today! Also:
Rather than ask students to evaluate a book’s universal quality or message, teachers began probing students about how a reading assignment made them feel. Grammar was downplayed, phonics frowned on, and arithmetic decimals replaced by the relativistic parameters of New Math.
Strauss and Howe also present some interesting facts I wasn’t aware of:
The abortion rate skyrocketed; by the late 1970s, would-be mothers aborted one fetus in three.
At the same time,
The ascendant Zero Population Growth movement declared each extra child to be “pollution,” a burden on scarce resources.
Overall, Strauss and Howe raise some interesting points about the period. But their theories are incredibly US-centric and solely sociological, as opposed to economic. They note that real wages have been declining since 1973, but don’t address forces of globalization or anything that could account for it outside of their theory. Quite frankly, I think globalization hollowing out the US middle class presents a more compelling explanation for the societal forces at play than a generational theory of history.
The Elephant Curve: The best explanation of US economics and politics over the past 50 years
The Third Turning was the Culture Wars of 1984-2005.
Here, the book starts to warm up. The book was written midway through this Unraveling period. So this section both summarized what was going on in the early 1990s, as well as offered predictions for the coming decades.
Strauss and Howe’s definition of “Culture Wars” seems quaint, like a minor leagues version of the culture wars in American society today.
By the early 1990s, America’s niche group conflict came to be known as the Culture Wars, defined by Irving Kristol as a “profound division over what kind of country we are, what kind of people we are, and what we mean by ‘The American Way of Life.’” Three basic battlegrounds emerged: multiculturalists against traditionalists (the Sheldon Hackneys versus the William Bennetts), media secularists against evangelicals (the Murphy Browns versus the Dan Quayles), and public planners against libertarians (the Robert Reichs versus the Charles Murrays). The Culture Wars had as many combatants as America had niches, from the Nation of Islam to the Internet. As each group exalted its own authenticity, it defined its adversary’s values as indecent, stupid, obscene, or (a suddenly popular word) evil.
Finally, Strauss and Howe address some basic economics that could be contributing to societal unrest.
In 1955, most thirty-five-year-olds typically lived in bigger houses and drove better cars than their sixty-year-old parents. Now the opposite is the case. As entry-level pay and benefits have shrunk for young workers, top-level pay has skyrocketed for their aging bosses: Where a G.I. CEO earned 41 times the pay of an average worker, a Silent CEO earns 225 times as much.
The authors also display mild misogyny, but draw mostly correct conclusions about a Red Queen’s race in which two-income households are barely better-off than one-income households a generation ago.
Boomer men have largely accepted their female peers’ incursions. Without a second income, most of their households would fall below the living standards of the Silent at like age.
There are some predictive gems. For example,
In affluent suburbs, Boomer homes will buzz with offices, day care co-ops, food delivery, phone shopping, and other infrastructure around which will grow a new civic life, at times behind scurry gates. Those who love far from their parents and childhood homes will struggle toward their own definition of real community.
Accurate! The problem is that only about 25% of their forecasts are as on-target as this one. The others are just as bold, but entirely incorrect. Here’s one that is risible:
Colleges will be pressured into holding the line on tuitions and student indebtedness, faculties into putting teaching ahead of research, employers into creating apprenticeships, older workers into making room for the young.
As the book moves closer to the present, Strauss and Howe earn points for pointing out that the Greatest Generation kicked off a wealth transfer to elders that never ended. But again, their arguments could be strengthened if they factored in basic economics. In particular, the post-World War II era was a striking historical anomaly: a lack of global manufacturing competition allowed the US to have a robust blue-collar economy and high living standards. One could argue that we are now simply reverting to the mean.
Take the example of where people want to live. In a simplified model: Cities were crime-ridden in the 1970s and those with wealth lived in the suburbs. Then, yuppies moved to the cities, making them vibrant cultural centers and driving up rents. The stereotypical Millennial valued experiences over things, living in a cramped apartment but traveling to Europe twice a year. When COVID hit, this trend reversed – people moved back to the suburbs, valuing space to be outside and work from home over an urban lifestyle.
You could explain all of that with a sweeping theory of generational cycles. Or through an introductory class in microeconomics.
Generational cycles, or simply supply and demand? Image via CFI
Strauss and Howe also have a strong bias towards conservatism and traditional family values. They go on and on about no-fault divorce laws being overturned. This is something that, as a Millennial, I didn’t even realize was or could be a hot-button issue.
After a while, this section just started to read as [Silent/Boomers/Gen X] will [insert semi-vague astrological prediction here] followed by [snappy out-of-date cultural reference].
Gradually, the old wry detachment will give way to a jarring new focus. Boomers will at long last be ready to accept full responsibility for their own old age—and for the hard choices facing their nation. Increasingly, graying Boomers will “muster the will to remake ourselves into altruists and ascetics,” as Rolling Stone urged in 1990. “But let’s not fake it,” the magazine warned, the yuppie persona still in its rearview mirror. Or at the very least, advises Hillary Clinton, “fake it until you make it.” By the Oh-Ohs, this generation will be of no mind to fake anything. “There is no way to avoid the coming confrontation,” the Catholic Eye declared in 1992. “Fasten your seat belts—it’s going to be a rough ride.”
Sometime before the year 2025, America will pass through a great gate in history, commensurate with the American Revolution, Civil War, and twin emergencies of the Great Depression and World War II.
We’re running up against their deadline, so I find myself hunting for events that fit their framework:
A Crisis era begins with a catalyst—a startling event (or sequence of events) that produces a sudden shift in mood.
Once catalyzed, a society achieves a regeneracy—a new counter entropy that reunifies and reenergizes civic life.
The regenerated society propels towards a climax—a crucial moment that confirms the death of the old order and birth of the new.
The climax culminates in a resolution—a triumphant or tragic conclusion that separates the winners from losers, resolves the big public questions, and establishes the new order.
We will fall on hard times, and either emerge stronger as a society or crumble. Strauss and Howe claim that the product of societal disquietude will be compulsory military service and a rigid society – perhaps even a new American form of fascism.
The prospect for great civic achievement—or disintegration—will be high. New secessionist movements could spring from nowhere and achieve their ends with surprising speed. Even if the nation stays together, its geography could be fundamentally changed, its party structure altered, its Constitution and Bill of Rights amended beyond recognition. History offers even more sobering warnings: Armed confrontation usually occurs around the climax of Crisis. If there is confrontation, it is likely to lead to war. This could be any kind of war—class war, sectional war, war against global anarchists or terrorists, or superpower war. If there is war, it is likely to culminate in total war, fought until the losing side has been rendered nil—its will broken, territory taken, and leaders captured. And if there is total war, it is likely that the most destructive weapons available will be deployed.
They also (accurately) predict a decline in social trust.
The new mood and its jarring new problems will provide a natural end point for the Unraveling-era decline in civic confidence. In the pre-Crisis years, fears about the flimsiness of the social contract will have been subliminal but rising. As the Crisis catalyzes, these fears will rush to the surface, jagged and exposed. Distrustful of some things, individuals will feel that their survival requires them to distrust more things. This behavior could cascade into a sudden downward spiral, an implosion of societal trust.
Maybe we’re in the midst of a Crisis already! Since the book has been written, we’ve gone through: 9/11, wars in Iraq and Afghanistan, a financial crisis, and a global pandemic. But do any of these qualify as extreme enough to be a Crisis, on par with World War II or the Civil War? Consider the scenarios the authors lay out for the Fourth Turning:
Beset by a fiscal crisis, a state lays claim to its residents’ federal tax monies. Declaring this an act of secession, the president obtains a federal injunction. The governor refuses to back down. Federal marshals enforce the court order. Similar tax rebellions spring up in other states. Treasury bill auctions are suspended. Militia violence breaks out. Cyberterrorists destroy IRS databases. U.S. special forces are put on alert. Demands issue for a new Constitutional Convention.
A global terrorist group blows up an aircraft and announces it possesses portable nuclear weapons. The United States and its allies launch a preemptive strike. The terrorists threaten to retaliate against an American city. Congress declares war and authorizes unlimited house-to-house searches. Opponents charge that the president concocted the emergency for political purposes. A nationwide strike is declared. Foreign capital flees the U.S.
An impasse over the federal budget reaches a stalemate. The president and Congress both refuse to back down, triggering a near-total government shutdown. The president declares emergency powers. Congress rescinds his authority. Dollar and bond prices plummet. The president threatens to stop Social Security checks. Congress refuses to raise the debt ceiling. Default looms. Wall Street panics.
The Centers for Disease Control and Prevention announce the spread of a new communicable virus. The disease reaches densely populated areas, killing some. Congress enacts mandatory quarantine measures. The president orders the National Guard to throw prophylactic cordons around unsafe neighborhoods. Mayors resist. Urban gangs battle suburban militias. Calls mount for the president to declare martial law.
Growing anarchy throughout the former Soviet republics prompts Russia to conduct training exercises around its borders. Lithuania erupts in civil war. Negotiations break down. U.S. diplomats are captured and publicly taunted. The president airlifts troops to rescue them and orders ships into the Black Sea. Iran declares its alliance with Russia. Gold and oil prices soar. Congress debates restoring the draft.
The second-to-last option sounds like COVID and the protests/riots that ensued in the summer of 2020. The last bullet point is eerily similar to the current war in Ukraine. If Russia’s invasion of Ukraine kicks off World War III, I take back my criticisms of Strauss and Howe and am completely on board with their predictions.
But overall I’m still skeptical – these are bold forecasts that I suspect overfit to the training data, much more hedgehog than fox. In perhaps the biggest leap of faith the authors make, they claim that baseball players offer a lesson in seasonality and help to predict the Fourth Turning.
The national pastime—baseball—offers a similar lesson in seasonality. Each of the last four turnings produced an extraordinary player whose manner was much admired but, being preseasonal, did not yet define the rewarded norm. Lou Gehrig illustrated this before the last Crisis, Joe DiMaggio before the High, Jackie Robinson before the Awakening, Reggie Jackson before the Unraveling, and Cal Ripken now. Ripken’s Gehrig-like virtue is distinctly Fourth Turning. Yet while it is admired by many people, it is not the kind of in-your-face, high-stepping, free-agent behavior that still sells most Unraveling-era tickets.
I mean, come on.
What should we do to prepare for this looming Crisis?
Essentially, Strauss and Howe give some lightweight prepper advice here. This section of the book is remarkably simple and practical.
You can’t depend on the government to save you – you’re on your own. Save money, hoard resources, foster a mindset of self-reliance and frugality. Learn skills that will be useful in a Crisis era, like farming, hunting, and first aid. Then be generous in sharing those skills with your community. With a good reputation and a desirable, well-known skillset, you’ll be positioned to band together with a small tribe to ride out the Crisis.
This is good advice, even if a Crisis does not come to pass. In an increasingly specialized world, many of us lack basic survival skills. Promoting a culture of self-reliance is probably a good thing.
Beyond that, there’s not much to be done. Zooming out to the national level, Strauss and Howe show prescience here about how political parties have shifted over the past 20 years:
Neither of the two major political parties has been adept at seasonalist thinking. The Republicans were worse at figuring out what the early Awakening required, the Democrats worse at the early Unraveling. With the Fourth Turning roughly a decade away, each party now has it half right: Democrats have seized the saeculum’s autumnal instinct to harvest, Republicans the instinct to prune and scatter. Each party is usefully pressing for some preseasonal policies: Democrats wish to close the gap between rich and poor, reverse the decline of the middle class, and expand children’s programs—while Republicans want to de-fund time-encrusted bureaucracies, restore an ethic of personal responsibility, and promote traditional virtues.
Yet both parties are also harmfully postseasonal. In their quest for an ever bigger harvest, Democrats want to remove sacrifice ever further from the public lexicon. They seek entitlements for every victim, including the entire middle class, without caring whether all this guaranteed consumption is sustainable. If Democrats get their way, they would impose huge debts and future taxes on Millennial children. In their quest for ever more individualism, Republicans want to make public authority ever more dysfunctional. They seek to starve all government of revenue and are willing to shut down whole federal agencies to make their point. If Republicans get their way, they would prevent Millennials from forging a positive bond with government and limit the public resources directed toward the care and schooling of the neediest children.
Despite the doom and gloom, the book ends on an uplifting note. Yes, the Fourth Turning could usher in a Mad Max age. Or, we could emerge as a stronger, more robust society.
The Fourth Turning could spare modernity but mark the end of our nation. It could close the book on the political constitution, popular culture, and moral standing that the word America has come to signify. This nation has endured for three saecula; Rome lasted twelve, Etruria ten, the Soviet Union (perhaps) only one. Fourth Turnings are critical thresholds for national survival. Each of the last three American Crises produced moments of extreme danger: In the Revolution, the very birth of the republic hung by a thread in more than one battle. In the Civil War, the union barely survived a four-year slaughter that in its own time was regarded as the most lethal war in history. In World War II, the nation destroyed an enemy of democracy that for a time was winning; had the enemy won, America might have itself been destroyed. In all likelihood, the next Crisis will present the nation with a threat and a consequence on a similar scale.
Or the Fourth Turning could simply mark the end of the Millennial Saeculum. Mankind, modernity, and America would all persevere. Afterward, there would be a new mood, a new High, and a new saeculum. America would be reborn. But, reborn, it would not be the same.
Interestingly, this book is a favorite of Steve Bannon’s. Was the Trump presidency a symptom of the Fourth Turning, or something that aided in bringing it about? The authors of this book would argue that it is both.
Overall, The Fourth Turning is a thought-provoking read. It challenges our linear view of history and reminds us that there is no law of nature stating that society will march forward unabated toward greater wealth and technological progress. In fact, for most of human history this was not the case.
But the book was also much longer than it needed to be. You’re better off reading a summary, studying some economics, and reflecting on the ending epigraph, which is much more Lindy:
To every thing there is a season, and a time to every purpose under heaven: a time to be born, and a time to die; a time to plant, and a time to pluck up that which is planted; a time to kill, and a time to heal; a time to break down, and a time to build up; a time to weep, and a time to laugh; a time to mourn, and a time to dance; a time to cast away stones, and a time to gather stones together; a time to embrace, and a time to refrain from embracing; a time to get, and a time to lose; a time to keep, and a time to cast away; a time to rend, and a time to sew; a time to keep silent, and a time to speak; a time to love, and a time to hate; a time of war, and a time of peace. —Ecclesiastes 3.1-8
My personal favorite: Boomers are “a destructive generation whose work is not over yet.” ↩
We buy health insurance should we need an emergency appendectomy. We take out life insurance policies should we be hit by a bus tomorrow. But when it comes to the systemic risk of a collapse in the social order, we can’t readily buy an insurance policy. And we’d rather not think about the uncomfortable prospect of a future pandemic, an Artificial General Intelligence with misaligned goals, or other catastrophe. When it comes to some of the biggest potential perils, we by and large stick our heads in the sand.
Civilization is fragile. At all times, we’re about three days from riots: a few days without food on the shelves of grocery stores, or the time it takes for the drinking water supply in your house to be exhausted. And if the past two years of COVID lockdowns have taught us anything, it is that the government’s function is to facilitate social stability — not to help you. If stability means you live in a refugee camp, so be it.
I spent time in Argentina in 2013. I was surprised to find that there, nearly everyone who is upper or upper-middle class holds a second passport. In an economy that undergoes regular hyperinflation and faces capital controls, a second citizenship can be both a literal ticket out of the country, as well as a metaphorical ticket to a more stable banking system.
Could I too obtain a second passport as an insurance policy against some of these risks?
There is a phenomenon known as social proof. It’s the idea that if everyone is doing something—whether it’s buying a certain pair of shoes, seeing a particular movie, or criticizing some unfortunate individual—it must be right. So if no one else was trying to escape the country besides me, then it must be wrong.
The problem with that logic is that by the time everyone is doing it—after the next terrorist attack or economic depression or political clampdown or epidemic disease—it will be too late. And those who want to escape will be left trying to barter money, sex, connections, and everything else they have just for the privilege of living.
If you’re extraordinarily wealthy, getting a second passport is easy. Many countries, including Ireland, Spain, and Portugal, offer a fast track to citizenship in exchange for a significant investment in local real estate or an approved investment fund. However, those of us without a spare €1 million who don’t want to wait five years for full citizenship need to explore other options.
If you’re feeling bold, have a child in Brazil. The child is automatically granted Brazilian citizenship, and after one year of residency the parents can obtain Brazilian citizenship as well. Brazil also receives bonus points because it will not extradite its own citizens under any circumstances.
But I was looking for something a bit less extreme. I had heard of people getting Irish citizenship because their ancestors had emigrated from Ireland. However, this is only a possibility if your grandparents or parents were born in Ireland. Since my great-grandparents emigrated from Ireland, I was not eligible.
But I also have great-grandparents that emigrated from Italy. And Italy determines citizenship in a slightly unusual way. Many countries offer citizenship on the basis of jus soli (right of soil). You become a citizen of the country in which you are born.2 Others offer citizenship based on jus sanguinis (right of blood). This gives you the right to citizenship based on the citizenship of your parents. Most countries today (including the US) apply some combination of jus soli and jus sanguinis to determine citizenship.
Italy applies the concept of jus sanguinis broadly. Citizenship can be transmitted through any number of generations. So I was able to obtain Italian citizenship because:
My great-grandparents left Italy and became naturalized US citizens after June 14, 1912. (Had they become citizens before this date, I would not have qualified.)
My grandfather was born before my great-grandparents became US citizens. Thus Italian citizenship was passed on to him before it was renounced, and was passed on through his bloodline.3
If you’re going through a similar process, you should make a consular appointment as soon as you can. The Consulates have limited slots available for citizenship appointments, and are often completely booked 12+ months in advance. You should expect the process of obtaining documents, getting them translated, and having an “apostille” added (the equivalent of notarization) to take about six months. Budget $1,500 or so to be safe for all of the documents and the application fee for citizenship.
After roughly three years of on-and-off back-and-forth, I became a proud Italian citizen residing abroad.
Dual Citizenship Advantages
As previously mentioned, the main advantage to dual citizenship is to hedge against an economic or social collapse in one country. (Admittedly, the correlation between Western Europe and the US is strong, so an Italian passport is of limited utility. But something is still better than nothing.) However, there are a few other significant benefits, specifically to having an EU passport:
Live and work anywhere in the EU, visa-free. I love travel, and should I want to move to, say, Berlin, I could do so tomorrow. No visa or additional documents required for residency. This is particularly relevant since so many jobs have gone fully remote in the past two years. I also may be able to pay EU tuition rates for universities throughout Europe (though this varies based on country).
Unlock additional travel opportunities. With current COVID restrictions, an EU passport is much more powerful (at least in Europe) than a US passport. In more normal times, I’d love to travel to some countries where a subset of people don’t have the best assumptions about Americans. But I don’t think they have as many preconceived notions about Italians. Additionally, some countries (e.g. Brazil) charge a visa fee to US citizens, but not to Italian citizens.5
Pass the same benefits along to family. My future wife and children will have the same benefits of Italian citizenship.
Are there potential downsides to citizenship? Not many. Taxation treaties prevent paying additional taxes on income. I suppose should Italy go to war, I could be drafted. But in that case, I would renounce my Italian citizenship. A more likely scenario would be the US going to war, in which case I would have a backup country should I want to renounce my US citizenship.
Does this affect my day-to-day life at all? Not a whit. But I sleep slightly better at night knowing that should the worst happen in the US, there is another country in the world that would welcome me.
Interestingly, the city of Trapani in Sicily was by far the most efficient office to deal with, sending me my great-grandparents records via FedEx within a few days and not charging the $50+ postage fee. (The State of Ohio was the worst.) ↩
Unless you’re traveling all the time, this is not a good primary reason to get dual citizenship. I spent way more time and money going through this process than I saved ($160) when traveling to Brazil. But it’s a nice side benefit. ↩