Transcription
So what is your honest perspective about the UK at the moment?
The UK has a financial problem. Uh, the government has a debt problem and it doesn't have enough money for what it wants to do and what it can do. And so what you see is the nondom problem, people moving and so on so forth. And throughout history, when you have these sorts of things, then there's great clashes in people. Okay? And the UK has been in decline since the war. Even the development of the capital markets, can you raise capital there? All of these things are much worse than they are in the United States.
And it leads to clashes. You said, of course, you know, there are five big forces that create a big cycle that lasts about 80 years, give or take 50, let's say. And the five big forces are there's a money debt economy force. Okay, debts are spending power. So what happens is when you give somebody credit, they can spend and then, but it also produces debt and debt has to be paid back. And so what happens is if there's not enough income to pay back the debt, then you have um debt rising relative to income. It squeezes out spending. People don't want to hold the debt assets and so on. The UK is going through that and has gone through that and it's connected to the second force and we're all going through this in varying degrees.
The second force is the internal political and social force. In other words, like between the left and the right with wealth gaps and opportunities gaps. We have big wealth and opportunities gaps. So when you have big wealth and opportunities gaps, there's conflict, okay? Conflict between the left and the right. And when you get to the situation where you don't believe the system is working for you and you don't trust the system, then there are wars. There are internal conflicts over over that and so on.
So the third force is the geopolitical force. In other words, uh, there's a cycle that usually goes from one big war to another big war. So the last war ended in 1945-44 and we began a new order in 1945. And the way that works is that the winners of the war determine how the world order works. They draw borders. They say here's how it's going to work. And that's the new order. Okay? And that continues until there's a rising power challenging an existing power and the existing world order which typically is deteriorating at that time. And then you have international conflict. Okay, these orders, there's a monetary order, they all break down. There's an in internal political order, they all break down and and there's a geopolitical order. They all have this conflict and they work together.
The fourth force throughout history has been acts of nature. Droughts, floods, and pandemics, for example, have killed more people than wars. And acts of nature. Nature has a big effect. And then number five, force is man's inventiveness, particularly of new technologies. Okay? Because if you see that inventiveness that has raised per capita incomes, GDP per capita, any measures of living standards over a period of time and and so on. But it is also related to the first four that I said, those four four interact.
Now, when we go back to your UK case, okay, they have a financial problem. They and almost every country now is dealing with more of that internal political problem for the same reasons. Wealth gaps, opportunities gaps, what do we do? Who's got the power? I don't trust the system kind of thing. Okay. Number three is we are certainly in an international great powers conflict, right? And it certainly affects Europe and the UK as we're dealing with not only the Ukraine situation, but the Russian situation. And what does that mean? And that relates to the money thing because, okay, where's the money coming from to have defense or military expenditures and so on so forth. So that matters, right? The geopolitical matters. Climate certainly matters and then of course technology and inventiveness. So everything could be looked through at through that lens.
And so what does this mean for the UK if all other countries are going through this as well? Doesn't that just mean that all countries are going to suffer equally?
No. No. No. Because they're not all equal. Okay? Some are more in debt than others. Okay? Some people are more willing to hold their debt than others. Um, some means they they have more resources. Some are bigger and more powerful. Some are less powerful. They're different. Okay? They're all go in different conditions. Some countries have surpluses. Some countries, you know, are not in the middle of where they're having a war.
Are you optimistic about the the future of the UK at the moment?
No. No.
Because it has high debt. It has the social internal conflict. It it's affected by the geopolitical factors and in terms of inventiveness, it doesn't have the culture that other countries have like like the US.
Is that?
Yes. The culture and the capital markets to support that at a scale that it needs to be supported to play seriously in the game. And for anyone that doesn't know, capital markets mean basically the investor markets is way of saying?
Well, I mean, it gets you the money. In other words, you're a guy with, you know, what happens is um, we have to enable people. Okay. What what works is finding great people, talented people and identifying those who you want to bet on and enabling them. And that works. That's the most important force, much more important than money. Okay? Because you could see who's got the money and power and where did they come from? Where did Nvidia come from? Where did where do they all come from? Okay? There are guys like you, entrepreneur in a sense, who's been enabled, okay, by you because you have the talent and people want to bet on you and that's the capital market. So they give you money to help enable you because they want to bet on you and then good things happen.
But are you are you optimistic about the United States at the moment?
The United States is very much a big picture. No, I think it's very much in this issue that so if I go down my list, it definitely has this uh debt money economy problem. We can get into that. Okay. It definitely has the internal conflict power in which there's a fight between the left, you know, the hard left and the right due to wealth and values gaps and people not believing that the system will work for them. And so democracy is at risk because they don't believe this. They're not going to follow the rules in the sense they don't believe the rules are going to uh. Number three, it's of course the leading one side in this great power conflict of the world, right? In other words, yes, between the United States and the one side, let's say, and China and the allies, their allies on the other side. I mean, in the news, you just saw the meetings of Xi, Putin, Modi and that group over there walking down, you know, and okay. So now it should be pretty clear how the sides are lining up. Okay, you, it's always better to be in a place that's not in one of those wars, like stay out of wars. Um, and of course, climate has an effect and of course, then we have technology. The United States and China are in the big technology competitions. The others are really not in the game. They don't have the money that this innovation and talent in a sense to play at that scale. And so on. So we have a great, you know, technology war which can be used to create great advances, but at the same time could be used for great conflicts. And so now the question is going to be who wins the technology war because the winner of the technology war is going to win all wars. Okay? In other words, they'll win the economic war. They'll win the geopolitical war because technology and I'm not saying anything that hasn't repeated through history.
Give me that historical context if you can, just for?
The technology. For example, nuclear.
Yeah.
Nuclear won World War II.
And and does this cycle go back further than just?
Oh, no. It goes back. I that book. Okay. Um, in order to understand these things, because I have to bet on what's going to happen. I'm a global macro investor. I study the last 500 years of history and and it happens over and over again in all cases. So I could take the British Empire. I could take you through all the empires, the Dutch Empire before that, and all this, and it it happens uh all the time.
I watched your I watched your videos about this and it was truly fascinating how predictable this stuff is and the work that you've done to uncover this trend throughout history. I mean, it's almost for me it was almost irrefutable watching the evidence in in I think it's like a 40-minute video on YouTube where you show how this played out through empires. And it begs the question, you know, because when you live in the United States, when you're when you're in the present time, you almost never assume that the empire you're in could fall. You just don't. You don't see how it could happen. We're so strong. We're so great, you know, we're so that we're doing AI over here, have money over here, everything's good, the sun's shining. It's?
Inconceivable.
Of course, people always think that the future would be a slightly modified version of the present, and it's not. Okay. Watch over decades, but it's like watching a person grow.
Yeah.
Okay.
Yeah.
You know, you watch your kid or you watch a person at your age, any age, and that's what you see.
Yeah.
Okay. And you don't see the life arc.
Yeah.
Okay. But the life arc is in irrefutable.
But the U do you think it's conceivable that in the next 50 to 100 years the US could no longer be the dominant power globally?
Yeah.
Yeah. More than conceivable.
More than conceivable. What does what do you mean by more than conceivable? I mean that these evolutions always take place and they take place in a certain way and that um, if you look at the probabilities um and the paths and the symptoms, there is a challenge. The United States is facing a number of those challenges and we're at a moment where um, it's a question of whether the system and the people could can get control of the situations and deal with it strongly and well in a way where they are not fighting to the point of damaging each other and damaging managing the prospects for the future.
But I mean, the United States is very innovative. Got all these great innovative companies here. So surely?
Yeah. But you you can't make generalizations about the United States. And you can't make generalizations, by the way, about the markets either. um, what you see is um, 1% a small percentage of 1% of the population if you're looking at the breakdown of incomes and also you're looking at the innovation, the stock markets, which stocks are doing well, who owns those companies and all of that, about three million people in a country of uh 330 million people are really unbelievably doing great and you could pick the neighborhoods they're in and what they're doing. And then there's the top 10%, let's say, which is the people around them. And they're really, really doing great in that world. At the same time, the bottom 60% 60% of Americans have below a sixth grade reading level.
Wow. And that population in terms of um, the basics being productive, you have to be productive and be prosperous. So what what you need to have a su successful society is to have broad-based productivity and prosperity. Okay? And that's a problem. Okay? So, which America are you looking at? And are you watching the war that's happening between these?
It's a little bit complicated for me as a as a bit of an outsider because I see Trump saying he represents those people, but obviously Trump is a from the billionaire class himself. So, I mean, is he is he a savior for inequality? Is he correcting?
I think I think he sees a lot of the problem and he uh I think he sees the debt problem. I think he sees the internal conflict disorder problem and I think he represents uh the red, let's call it the red states. I mean, you look at a map and there's red and blue and you see where they are, okay? And he represents that and they're united behind him in terms of doing some things. Okay? So he represents, let's call it the red side, which is located where the maps shows red and then there are the blue and and he's um he views himself as somebody who needs to take charge and to do certain things. Others in that population would say those who let's say are not getting or having the food stamp program cut off or having other programs cut off that they're dependent on would say, uh, wait a second, that's not representing me. And so we have gone that population has gone to significant number behind him.
That are devotees. They're all in. Okay. At the same time, as we have the other side, which will have their devotees if you know, we're in New York City. Okay. And the up upcoming mayoral uh election will be an example of the two sides. Okay. And they will try to use the system, but there's a question, will the system have enough support to work? Okay. But that's what we have.
Just just to close off on this point of the UK in particular, if if you were to try and fix it, what would you be aiming at? I say this because we do have a millionaire exodus that's widely reported in the UK where I think this year we're set to lose 16,000 roughly 16,000 millionaires. Um, when you look at the big big countries like China, America, the UAE, the UK, we're losing more millionaires than anybody else. And I was wondering if you think it's fixable and if you were in charge of the UK, what you might aim at first.
It's diff, you know, first of all, if you go back to the basic problem, which is there's too much debt, there are deficits, there's differences in education and opportunity levels and so on. The most important thing that you can have is a strong middle.
Political middle.
Political middle to be analytically strong and also strong enough to get the people to do what needs to be done even if they don't want to do it to get to be productive. Now, that's an easy thing to say. It's not an easy thing to do. But you do need that strong middle and you do need to convey to people that you need to have the strong middle to change productivity and you know, and are you in it? Are are you in it? Are you patriotic and in it? And you know, but you look at history, how did the United States come to be the United States? People will go to the places that are better than them, then stay in the places that worse for them. This is fundamental, right?
Incentives.
Okay. So you have to make the place better. Okay. Now, I would say also, you can take pockets and they go into the pocket and let it spread out. But you also have to have this equal education or you know, you've got to strive for equal opportunity. But anyway, it's a difficult question that I'm afraid I'm incapable of um solving.
It was unnerving to hear the tone of your voice drop when I asked it. You seemed slightly um as if you you've kind of given up on the UK a little bit. Your facial reaction?
Well, I'm I'm just a I'm just a I'm a practical guy. I'm a realistic guy. I made my money. I'm in the business and it's my nature to try to be realistic and to bet on how things will transpire. And that's not healthy. The situation in the UK is not healthy. And the situation in the United States is very risky in many ways. It's what we're describing. So, you know, and then if you look where are people going, then then you see the places that have the qualities we're talking about. They're civil. They're creative. The people aren't at war with each other.
What happens next in history?
Well, usually there's a a big fight for control, political revolutions and things like that. The system breaks down because they don't trust the system. So will the legal system resolve that? Will the parliamentary system resolve that these disputes satisfactorily to the satisfaction of those people and the other people who have different points of view and the sides won't believe it. And this goes back this goes back to Rome. It goes back to Caesar, you know, the Senate. And you know, this goes back through history all the time, right? And in in the 30s, four major democracies chose to be autocracies. Okay, that happened in Italy, Germany, Spain, and Japan.
What's autocracy for anyone that doesn't know the word?
Well, it's it means a dictatorship essentially of a limited number of people at the top who are autocratic, which means that they are directing things rather than a democracy in which um, there's representatives of all different points of view that get together and follow rules to make decisions.
So the UK could become an autocracy as could the US. I guess?
Um, you're going to see a lot of pressure for that strong leader who will get control of things and make it work well and will and you're likely to see two different views as to which side, you know, the red and the blue sides, so to speak. You're likely to see that type of clash.
You said the US is playing a risky game itself. Is that from a debt debt perspective or otherwise?
From these things. Okay.
From the debt, from the internal conflict, from the changing world order, the geopolitical world conflict, you know, I don't know. We're playing with nuclear weapons and, you know, in wars and different places. And then, of course, climate and then the technology war. How we're doing that. If you love the D CEO brand and you watch this channel, please do me a huge favor. Become part of the 15% of the viewers on this channel that have hit the subscribe button. It helps us tremendously and the bigger the channel gets, the bigger the guests.