Transcription
I'll tell you there are three things, uh, there. And it's always the same three things, by the way. It's it's basically tax, borrow, inflate.
We're treating public businesses, what the Fed does, what the president's office or the government does, all as this one unified populist force. Millennials are roping all of their lifeboats together because they realize if the entire S&P goes down, someone's got to save them. You know what I mean? It's actually pretty clever, and I think they're right, actually. This is called financial repression. And and this, we are going to have. We always do.
Leadership does not impart wisdom automatically simply because somebody said you were in charge. The challenge is going to be for them merging that with wisdom, right? So that you're not just doing things, you're doing the right things at the right time towards a society beneficial objective.
Conflict is the incubator of community. It happens every time.
You're watching Excess Returns. I'm Matt Ziggler, joined today by Dave Nodig, discussing the most popular video on Excess Returns. Dave's amazing, awesome, so good, very great rabbit hole with Neil How. You ready to do this, Dave? Yeah. Although I actually had no idea that we had good numbers. How little I pay attention to it. But that's great. Let's go. I've been thinking a lot about this interview. It's spent a lot of time resonant in my brain.
I think this is the thing about Neil How, like these ideas like set their way in and then they don't leave. That was my experience coming across. Even when I disagree with him. Yeah. Yeah. Exactly. They're just profoundly earwormed into your brain and you're just they're not going to leave. All right. I got to ask you a question. Since you did this interview, did you take any note of watching these clips? It was like all I could focus on the background there like is is like a stack of paper for towels. Is there some hor?
So the background on that interview is I had met Neil fishing in Maine at a David Co talk event years ago. Uh, and when we started it, when we were starting this up, I was like, I'm desperate to talk to Neil again about this because I hadn't talked to him in a couple years. We'd had a couple of email interactions since then. Um, and so when I paged him on this, he was like, "Sure, I'd love to talk about it," blah, blah, blah. And I sent him, you know, elaborate notes and everything. And then I think he was moving house literally while we were doing it. So we rescheduled a few times and all the boxes do suggest. And then when we got him on on screen, he was like, "Oh gosh, I can't mute. I can't blur out my background." Then I was like, "Trust me, I think the moving boxes show a level of commitment."
Oh, that's so good. I'm so happy that you actually had that story because I'm looking at this and I'm like, clearly something is getting moved. Something is happening here. So long as you're telling me it's not into a bunker, I'm good.
No, no, no. I don't get the I don't get the vibe that it was a bunk person.
Yeah. When Neil moves to the bunker, that's a s.
The disclaimer here because this is the other thing I love about you doing this interview is you and I both read this and we don't see anything doomer about it. Every time anybody else parades Neil out or puts him on something, it turns into this like doomer bear porn.
Well, because I don't think of it as I don't think of it as prediction. I think of it as explanation, right? So, I think of it as effectively a lens on history that helps us interpret the now a little bit better. Uh, and I think that his his core insights about how generational stuff work unparalleled. Unparalleled and useful. Let's dive into it. Jack Forehand, you're going to roll this first clip about tax taxing, borrowing, and inflating. Here we go.
As as the crisis intensifies, you know, it doesn't matter whether it's internal or external. Doesn't really matter what it is that what you le what you go to is toward public mobilization of resources against whatever dangers out there. And at that point, um, uh, then markets start getting harnessed to what society needs to do. Uh, and what do you need to do when you aren't as public director? I'll tell you there are three things. Uh, there and and it's always the same three things. By the way, it's it's basically tax, borrow, inflate, and and you know, you you tax where you can, but of course, you can't suddenly tax everyone for everything. You get people to invest in the future. You know, that's the bond drives. Uh, and then you inflate. And what people don't understand is that late in a crisis, inflation is always part of it because inflation is not a problem in that case. It is a solution. It's a burden sharing device. You take from all the creditors who have nominally, you know, denominated assets. You basically say, you know, we're asking a lot of other people who don't have your wealth. This is what you're going to do. You know, we're going to take that real wealth from you and we're going to do it through inflation. And that was done through World War II in the late '40s. And and if you look at why not just America but but most of the western world became more equal, you know, during the a little bit during the '30s, more rapidly during the '40s and and dur then the the first turning the American eye the '50s and '60s, a lot of it was a combination of of inflation, uh, crisis, you know, actually taking away people's wealth, obviously there's also just destruction, you know, and and and rapid, uh, uh, uh, economic restructuring in industries, um, and and also financial repression. And here I want to get to something that should be on the minds of all investors, right? Financial repression is not just enough to, uh, to say, "Yeah, we're going to have an inflation rate of of, you know, 12% even though your bond is only getting 4.5%." Which was the case during World War II, but we're going to force you not to sell that bond. In fact, we're going to require you to buy more of them if you're a bank or if you're various financial institutions. This is called financial repression. And and this, we are going to have. We always do.
All right. So, the public mobilization of resources, then the government takes control of tax, you borrow money about it, then you inflate your way out of it. This is a pretty powerful idea and kind of troubling how simple this is. What's your reaction to this?
I So the problem I have with this is not that I think he's wrong. I think he absolutely is right. I think we're kind of doing all of these things at once. And the the core insight here is that when you need to throw a lot of resources at something, a state can fix that problem.
Unfortunately, the way we seem to be doing it is sort of in the middle of a fairly set of manufactured crises as opposed to something that really, you know, galvanizes the entire country. We've chosen to tax our way out of our problems by tariffs. I mean, that's that's the income side of that, right? We've chosen to borrow our way out of the future by just continuing to spend on stuff we want to spend. Uh, and that's, you know, we absolutely are doing that. Deficits are going to be huge. So, in that case, we're we're putting the burden on the future. The taxes are putting the borrower, you know, the the burden on the poor right now. And then the third one, inflate. Well, I mean, we'll see, but that's borrowing from the far future really. I mean, that's setting us up. Uh, you know, I I had to do this math myself. I was looking at something that I had bought with my wife in 1990 and we just sort of like, what is what even is that in today's dollars? And it's a particularly good mark because the answer is 150%. So, if you made a h 100red,000 bucks then, you need to make two and a half now. So, we do this. So we're do we're taxing we're borrowing and we're inflating our way sort of in the middle of a manufactured crisis. That's that was my vibe.
So a same vibe on all of this at once and that was one of the parts that I thought was hard to unpack emotionally just like the vibe for it. But then also this idea from our friend Ben Hunt of markets as a political utility because it almost seems like part of the reason this is happening at front happening all at once happening all upfront all in our faces is because we're treating public businesses, what the Fed does, what the president's office or the government does, all as this one unified populist force. I don't feel like we have a good analog to that exactly in history. At least not in America or not in the way that it's being executed right now. What do you think about that?
Yeah, and I think particularly because I feel like we're setting up new systems kind of in a vacuum. To me, the move towards things like stable coins and uh, you know, central bank digital currencies. There's a lot of talk about that being the way we're going to fund the borrow side of this going forward. Everybody's going to have a stable coin balance. So, if I have 50,000 stable coins, that's going to be backed by treasuries. I didn't quite get that argument until I woke up and had somebody remind me that fractional reserve banking exists. And in which case, you know, if in fact I as a retail investor take $50,000 out of a depository bank account and I buy stable coins with it, in fact, I probably have doubled, triple, quadrupled the amount of treasuries I'm responsible for in that transaction. But still to that point, I there's not enough of that going on. And again, it seems to be sort of happening in a vacuum. We don't know why. It's not like there's a war that the whole country is behind. We need to do a thing or even the initial pandemic response where it felt like we were all going to rally together. It feels like the opposite. I I agree with this. I'm going to use the war line as my pivot because there's this adorable little phrase in this next clip about the little platoon, which made me think of the movie Platoon, but this is about millennials. Jack, roll this clip.
Millennials are completely different. So, millennials, it's all we got all band together. Um, uh, and they're all investing in target date funds. But that but that boat investing the S&P 500, but here's the difference. Gen Xers felt that the only way they could survive is by taking their life rafts and and and and sailing in different directions because the whole thing was going to sink. Millennials are roping all of their lifeboats together because they realize if the entire S&P goes down, someone's got to save them. You know what I mean? It's actually pretty clever and I think they're right actually. Uh, but but it's a very different collective, um, uh, self-identification. And I and I do think for Gen X the whole problem of maturing is how do you get a mature role as a, um, a leader of institutions as a cornerstone of the community when you've grown up thinking that you were past the end of history and not not only did no one care about you but the world would be better off if you just didn't take part. And I know a lot of exers and this is one of the reasons why they had a ve this very libertarian and and very often overtly sort of, you know, counterhippy or counter counterculture image. I I raised Michael J. Fox earlier as an example of this generation in the early '80s, but this generation has always leaned more Republican all of their life in every election than the electorate as a whole. And now this generation is the number one MAGA generation. They voted more for Trump than any other generation, right? So, they deem themselves to be beyond democracy, beyond all this idealistic crap. We're in this world of survival, and maybe from time to time, we need a strong man to come in, cut corners, and kick heads, right? But I do think there's also this issue of so who's going to be who's going to take care of, uh, you know, the the the little platoon, my family, my community, and many of this generation, uh, are raising their own kids the opposite of how they were raised.
Okay, I'm defending the millennial block as whatever exennial term bastardization of the original millennial coining that Neil How is at least in part responsible for here. But this this band together part versus Gen X. So we're going to get to Gen X next, which I know you feel more more in that.
A little more mind. Yes. Are you are you like birthright in the in the middle of this or are you at the margins like I am with?
I'm I'm actually a somewhat older Gen Xer, right? Because I'm I'm what am I 58 and a half? Something like that. I got about 18 months to 60 is how I'm thinking about it. That puts me on the older end of Gen X. I'm not a cusper. Like I'm not deliberately going to get confused with boomers at all. Uh, but you know, I was born in the summer of love 1967. That pretty much puts me as a core Gen Xer. So, I mentioned it before we played the clip and this this platoon thing and it sent me, you know, straight to pulling platoon quotes because this is what I was thinking of when I heard this.
Like you do.
Yeah. I mean, so number one, hell is the hell is the impossibility of reason is just a phenomenal quote, but I got to make that note for myself. But this is the one I was looking for. I think now looking back, we did not fight the enemy. We fought ourselves and the enemy was in us. And that's a Vietnam era statement about recognizing the enemy in us. But it's also this like opting out of the responsibilities of war and participating in war and whatever else by part of society. I feel like when I when I hear Neil talk about this and talk about millennials wanting to band together but also kind of like step out or around the part of the system that they're like, I don't know man, that's not my war. I I get I get that sense from a lot a lot a lot of my millennial peers.
Yeah, I think I think the the framing from Neil here for both Gen X and Millennial is a good one, which is like the ship sunk now. It's just what you're doing about the life rafts, right? So, I think both millennials and Gen X have that same quality that Neil calls being post, you know, at the end of history. Uh, you know, where we're inheriting systems that are broken and falling apart. And I love this idea that the Gen X version of this is all the rafts going in every different direction, right? Maximum species survival, everybody go explore, somebody will make it. Versus the millennial version, which feels very true to me that there's this pull all the rafts together and hey, if we're going to go down, at least we're all going down together and we won't we won't have the fear of missing out. We won't have the the loneliness of of missing the great move. That does feel true. I don't think that's the whole reason that target date funds and passive investing have been a boom. Uh, but I do think he's right that there is this this pivot right in in the millennial space that is different than what you got out of Gen X for sure.
How old or what what generation do you think uh Adrian Vite, Azie Mandas and Watchmen was? Was he a boomer the world?
Uh, I sort of got the sense he was a Gen Xer. So I I feel the the Gen X appeal of Watchmen, but then I also feel the idea of like like that type of ambition from Gen X to like burn the whole thing down or take that that war to it. There's something in the roar shackness of the rest of us or the people who are like, whatever this mess is in the world, we want to step away from it. I'm curious.
Yeah. I mean, sorry for introducing you.
No, no. I actually think Watchman's a really interesting metaphor there because folks like like Roshock and Voit are are kind of set up against each other in a sense, but they are of a type. They are of a generation that is opting out of the system and doing things their own way. That feels very much what like Neil's talking about here in Gen X. It doesn't mean good or bad. It just means outside the system, which is part of where, and maybe this is just teeing us up for this next clip. We're going to talk about Gen X elders and how they play into this. And I think that's it's kind of the point you're making. I think that's why I'm getting an echo of the Watchmen in my mind when I listen to this. Jack Forehand, roll the clip.
We're sitting here, you know, maybe we're in a business, maybe we're in politics, but more likely we're sort of late career, you know, 50s, 60s folks who are now increasingly being looked to to be elders for the millennials and the zoomers coming up behind us to to impart wisdom, to do all these things we expect elders to do. But to your point, as nomads, we haven't necessarily leaned into those kinds of responsibilities throughout our lives. How does this play out? I mean, if you look back at the lost generation, what did their eldership look like? And can we learn anything about sort of graduating into eldership as a Gen Xer from them?
Well, what they did was they were thrown into a world which seemed to be falling to pieces, right? I mean, this is a generation that that reached reach midlife at a time of both the Great Depression when nothing seemed to work economically, you know, unemployment double digits, GDP cratering, then and also huge transitions, enormous volatility in the markets. I mean, you know, the the America came back in 1935, '36 and then went to this huge vertiginous slide again in '37, at 50% decline in the stock market. It wasn't just downs, it was up and downs, it this roller coaster, right?
Um, enormous political transition. Of course, this was one of the great realigning series of elections, 1932, '34 and '36.
Which feels pretty pretty real now.
Yeah. Another series of realigning elections. In fact, I will tell you that many people are calling, uh, you know, 2016 through 2024 to be America's, you know, seventh great realigning election period. We've had them in every crisis and every awakening on queue, you know, since since, uh, you know, the 1790s. So this is right on schedule, right? I mean, the big transition this time is, uh, you know, working class kind of moving Republican and and and educating professional moving to the Democrats, right? So, but it's completely changing politics. And I think the enormous pragmatism of the honeybger style of the Trump presidency. Just rip everything apart, try everything, smash things against the wall, see what works, right? This is very This is kind of the soul of pragmatism. Uh, forget about what you've learned. They don't teach you how to govern the Trump presidency in graduate school. You know what I mean? It's not there at the at at Wharton, you know, and and so this is the style. And and when I look at those, uh, those, uh, signal chats, you know, what I mean, with JD Vance, Pete Hagset, you know, Europeans, they're just pathetic, you know, what I mean? And it's all like in caps pathetic. This is Gen X as America's leaders. Get used to it. Okay. I mean, get that.
Unfortunately, no longer the respectable man with the respectable language, the multi-syllabic phrases, right? No. No. This is shoot from the hip. Say exactly what you think. And if it doesn't work, hey, I'll try something else. First question. Gen X specifically. Have you seen Billy Idol lately? You know what he's like to?
I I saw Billy Idol play at a Who reunion tour three or four years ago, which I'm still trying to burn out of my brain because it's one of the few concerts I've ever left at intermission and just been like, I can't suffer through this anymore.
So, apparently, as of April 2025, he has a new record out.
Oh, good lord. I assume it'll do fund his long-term care insurance. I was going to make a dancing with myself joke about that, but now I'm not even going to try. I I will say, so if we're going to ignore that generation X, at least play to the hits, I will take a moment to plug how good the last X record was.
Oh, fair. Look, I very mixed feelings about, you know, Elder Gen X, which I'm pretty sure I mean, Billy Idol may actually be a boomer. I think he may just full full on be a boomer because he's like 10 years older than I am, for sure. For sure. Or at least he's aged that way.
He's at least been ridden hard and put away wet. Yeah.
Okay. Okay. So, the the the look back midlifers during the Great Depression. This whole part in Neil's explanation. Really really this one kind of hits me hard.
Go. I love the idea that we're sort of born out of our crazies. I mean, I think that's that feels very true. Uh, and that idea that you know you sort of need to understand, uh, where people come from to understand that kind of conformity that they come out the other side of those crises. I, you know, I think we may see some of that around zoomers coming out of the pandemic. I mean, that was clearly their foundational crisis of their coming of age window. So I think the, you know, long time to see how that actually plays out, but there's no question that's going to be the seminal moment for most of those folks, right? For for my generation, a lot of it was like the AIDS crisis and the end of the Cold War, like that was the thing happening in our faces and when I was 18, um, so, but but the difference is again, I don't it didn't have that polarizing quality. Um, but now the comment here about sort of what does Gen X look like as America's leaders, you know, I think the challenge here is I I understand the the stylistic appeal of Gen X as the zero BS leadership generation, like all that stuff about Hex Seth and the Signal Chat and all that. The problem is that would be great if we weren't drowning in Boomer BS at the same time, right? So, if in fact the whole cadre was Gen X, then in fact maybe we'd be getting a bunch of good stuff done. But the reality is the actual levers of power have now been held on to by these boomers and their BS. So the Gen Xers are kind of just the ones implementing stuff without the BS. So I I feel like we may be getting the worst of both both worlds, which not to keep dragging it back to this, this was that Watchmen echo for me. This is the point you just made about Rorshack and Vite as like foils to each other and the characters where it's this kind of produces the worst of both worlds until we get the worst possible outcome, which is a little unsettling, and that's probably what the doomers want to latch on to with some of these narratives.
Yeah. And and look, I mean look, I I try to generally be positive about things while still observing what seems to be in in the real world. The message that I got from this and and look, this was very selfish on my part interviewing Neil. I wanted to specifically talk to them about what I'm supposed to do. It's using this personal coaching, you know, very expensive personal coaching. Uh, who's Neil's time? Uh, and and look, I think there's some truth that that we as Gen X are going to be weird and idiosyncratic leaders. We're all going to be doing stuff in our own weird way, right? If you look around, you know, Jeff Bezos and Elon Musk and these captains of industry, a lot of them are Gen X, right? And they're all doing stuff in their weird, uh, you know, whatever I'm going to do it my way version of things, and that's fine, but that doesn't really bring a country together that gets stuffed up. So something I see you doing this and I thought about this a lot watching this interview the first time and then going back with these clips. Gen X leadership at its best, I feel like has this, I can go out and do this, whatever brazen latchkey kid type thing going on. We can go out, we can just do this. We can build the fort in the woods, guys. Let's go build the the dirt bike ramp or whatever else. And what what I see you and I see some of the others doing in the right way is when it may not lead to collaboration between a series of Gen Xers, but I see Gen Xers who are capable of saying, "Let's just go build it." And then dragging zoomers or millennials or other people along with them, saying, "I have the skill set to do this if you help me tell the story and get the people on board." Is that a superpower that isn't getting discussed enough?
I well, when people look, uh, as much as I have critical things to say about some of these people, I think Elon Musk is a great example of kind of the apotheosis of this, right? Where look, I can say lots of negative things about him, but his ability to get a bunch of other very smart and motivated people to rally behind a dream that seems impossible is incredible. Like you have to give credit where credit is due, right? SpaceX and Tesla only exist because he manifested them out of whole cloth. Now, I don't think he's a brilliant engineer. I don't think he's a brilliant scientist. I don't think he's a great maker. But what I do think he is is a great leader for a certain kind of endeavor. The problem is that is never sufficient. Like leadership does not impart wisdom automatically simply because somebody said you were in charge. Um, and so the challenge for him and for all of the other sort of, uh, peak leaders we're going to see out of the Gen X environment, which, you know, you have to look at people like a JD Vance or like even a Hakeem Jeff. I mean, you can look around both sides of the aisle. You can look around finance and industry. You can find these people. The challenge is going to be for them. Merging that with wisdom, right? So that you're not just doing things, you're doing the right things at the right time towards a society beneficial objective. I think we'll get there. I don't think the world goes to hell in a handbasket completely, but I think we're starting to see where that where that tension lies. There's something about it, too, and this shows up in Neil's work as you go through your quote unquote crisis period where having those personalities who are able to teach some of those, I'm going to call them hard skills because I don't want to call them soft skills. It's like teaching some of those hard skills to people outside of their generation becomes a binding thing that'll that they'll want to pass forward. That becomes a really critical part of having people who can communicate cross-generation with alignment towards these visions, dreams, whatever else.
Yeah, I think the where I think some of Neil's stuff breaks down in that regard is that, um, and and he says this elsewhere in the interview, like we have not actually had our crisis moment, right? We have not reached the crux of this climb. We can see a lot of the pieces on the table and see what might break and what might be the catalyst, right? I think a lot of people are like, well, I guess we're going to war with Iran. I mean, who knows? Pick a Tuesday. Uh, who what it could be. But it does feel like there's got to be something that brings enough people behind a common cause for a lot of that stuff to play out because right now it's being largely used for either pure economic gain and power collection or sort of partisan warfare. Neither one of which is particularly great for human flourishing long term.
Right? And this is again where it's like generational theory is descriptive. It's not prescriptive. So the crisis hasn't happened yet. Stop. You're you're reading, you know, the astrology section of the paper thinking you're going to find your spouse and.
Yeah. And as he points out, the the seculums are getting longer, like the boomers have held on to power far longer than expected. That changes the dynamic, which means it becomes unpredictable, right? So that's when we have to say now we can put a big grain of salt on top of what happened to the lost generation in the '30s.
Exactly. Exactly. All right, let's go. Little bit of a hard pivot, but if we didn't do this on Excess Returns, where else would we do it? Let's talk about passive investing. And I think this is one of the things where both of us have some extra thoughts here. Jack Forehand, roll the clip.
It's, you know, the endemic nature of sports betting, poly market, um, massive amounts of leverage, crypto. None of that feels like anybody being risk-averse to me. That feels like a lot of risk-taking behavior at the individual level. And I don't think it's true that that's just entirely folks under the age of 30. I think that I think that's a pretty broad trend that we've seen in investment markets and entertainment markets. How does that line up with that idea of the sort of increasing conservatism? I actually don't think it's not just, you know, it's I think it it is people over 30 is my my point. I think Gen Xers are setting the tone for that. But I also think there's a feeling among a lot of people, you know, particularly by the time we got to the late teens, you know, we got five or six years out of the out of the out of the great depress the great recession that that, you know, everyone's playing with house money. Um, you know, the stock market is up so much, uh, this is just paper money. I can play with it. Uh, I do see two big trends among millennials. One is we talked about it earlier, uh, target date funds and passive investing. That is not that is not taking risks that is making a very calculated judgment. I'm going to invest in the entire market and that serves two purposes. First of all, this is very important among millennials. I'm not going to envy my buddies because they're going to be investing the same thing I am. So, you know, we either all go down together, which is okay.
It's community investing.
Yeah. Well, it is kind of community investing and this is why everyone's worrying and I'm one of them. I've written about this subject a lot. I worry a lot about passive investing as basically disabling uh the role of active investing and actually serving what financial markets is supposed to do, is actually provide a good estimate of the value of of of firms, right? Um, and and I think to some extent in the last couple of years, we've even seen the entire world begin to invest in America because of this whole passive craze that we've gone on.
Yeah, and my whole career's been there, so I agree with you. We've had all sorts of unintended consequences from passive investing. Um, but I I do believe perversely it's the fact that everyone sees more strength in all duplicating each other. I mean, that's the weird thing about having, uh, you know, government as a backstop. I mean, you know that if you know Apple or Nvidia or Microsoft go down by 30% or 40%, you know that, uh, you know, Chairman Powell is going to have an emergency press conference and he's going to talk about the three, five things we're going to do right now to correct this. But if you have some little, if you're invested in some little company on the Russell 2000, he's not even going to notice you. Do you see what I mean? It's like it's like federal emergency insurance. You know, if you don't want just your house, if your house has to burn down, I'm sorry, but you want everyone, all your neighbors houses to burn down, cuz then you're going to get aid.
Mike Green is everyone's Gen X dad now, right?
Well, it depends. Like sometimes people call him a bully. Uh, that's that's not untrue either. Uh, but certainly the loudest voice we've got on passive investing and somebody I consider a close friend. So no offense meant to Mike at all. But yeah, he is the patron saint of discussions about passive investing. He is just eternally there. So I think this idea of community investing actually hit me really hard. And I think the part that I am I am extra stuck on is so in in real real job world, we talk about lots of stuff with private investments and private equity and private real estate and private credit and all these things. That I'm I'm constantly reminding people when I'm educating on these topics. It's like, oh, if you own a house, you're in private real estate. Real estate. If I if Dave lends me $5 for a a Hogy at the sandwich shop, he's in private credit. And if you own a business, if you own the Hogy shop, you are in private equity. And there's different variations of this. I think something that's really fascinating and we see some of it with Gen X especially in like business owners or entrepreneurial interests, see a lot more of it millennials and I'm seeing even more of it coming up behind us with the zoomers is passive investing solves the market, the political utility, public markets problem, and we do that communally. But then there's this whole other, I feel like active management just doesn't exist in public markets the way it used to because everybody's gone to other places where there's actual opportunities for capital formation and earning earning maybe some alpha. What do you think? Is that argument misleading or misled?
I think the decline of active management has multiple reasons. Um, I think from a sort of cultural and emotional perspective, I think the the desire for the outperformance, like the reason people used to go find the, you know, the Jeff Vinicks of the world, the the active manager who was going to go beat the market was because there was that desire to do something different and counter, you know, sort of counter to what the herd was doing. That I think that desire is human and I think it's just as there in millennials and zoomers as it is anywhere else. I think it doesn't get expressed in their fund selection anymore. It gets expressed in other communities, whether that community might be around crypto, whether it might be around sports betting. The one that I've been sort of dabbling in the corners of lately has been YieldMax, right? YieldMax are these products that give out ridiculous amounts of income by selling covered calls against Micro Strategy and stuff like that. You go to the Reddit for YieldMax and you feel like you have stepped into a clubhouse. It is very clearly its own community with its own sort of set of norms and rules, their own flare, their own like it is a community built around a brand of an ETF company. And I'm while I'm not a big fan of those products, I've been fascinated by that community building part of it. Um, now I think it's mostly built on sand. A lot of these people are sort of like thinking that they're going to retire off this income and that it's a magic money box. But put all of that to the side, watching how quickly these people glommed onto each other, and it's tens of thousands of people who are active in this forum, it's it's really quite impressive. Now, it's a little sad that it's around, you know, a fund brand and not around some, you know, beautiful moral high ground or something like that or beating children, you know. Yeah. Like being in the woods, you know, meaning in life, enlightenment, find something better than just yield. But I still think it's pretty cool to see how quickly the community formed around that common set of goals and ideas. Um, and I think we will see more of that. Um, so passive investing I think does live like you said, kind of it it's its own bucket. It's what sort of takes care of the utility component of investing and then all of this expressions of our individuality and our hopes and our dreams and our greed happen outside of that. I think you're right.
Yeah. There's like there was no Church of Bill Miller. I feel like in the heyday, right? And there's a church of YieldMax. And it's a really interesting thing to watch these. They mean something different now. And I think this is an important part and Neil's languaging helps add an important piece of context and color to this passive conversation.
Because it is a way bigger cultural shift.
But it's not but but again to my point, it's not new in the sense that like this set of desires is very much there. Think about Berkshire, right? Like historically the folks showing up at the Berkshire meeting were boomers. Like that's them.
But so like in a way, you know, if you if you tried to posit to me that the YieldMax Reddit forum was the new Berkshire shareholder meeting, like I'd have a hard time arguing against it on principle. I might argue against it on reality, but foundationally it's the same idea. A bunch of investors with a common goal who think they found somebody who's got the magic money box. There you go. Warren Buffett and YieldMax, but Adrian Vite and Roshack just for this generation. Perfect segue. Let's talk about global issues. This is this is a pretty wild clip actually. This is the geopolitical clip from Neil that probably deserves to be replayed a million times. Jack, let's roll this one.
Look around the world. I mean, I I'll just start at random, right? Look at Vladimir Putin who's completely rebuilding Russia around this militarized anti-western state. I mean, he's building a war machine. And suddenly in Russia, instead of the army being this horrible place where uneducated refuge goes, it's the time for heroes. You know what I mean? He's giving these huge benefits now to veterans, he's lifting the incomes of these rural communities, you know, and so there's this huge recasting going on. Uh, and the idea of of of some people in the White House that you know Trump can be suddenly brought over to the west and or distracted from Ukraine, I think is idiocy. I think he is this close to Xi right now. Right. The two need each other. Right. Xi needs Trump for for energy and for agriculture. Right.
You mean Putin? You mean Putin?
Oh yes. Say that again.
I got to say that. Xi needs Putin for energy and for for food stuffs, right? And and for strategic depth. I mean, he needs that. And obviously Putin needs Xi because everything from the giant.
Yeah. The the incredible power of his economy. Um, but think of all these rulers, right? These are all we would call them boomers. They were born after World War II. They were born after the great crisis that that we saw in all their countries. Um, I mean, take a look at, um, take a look at Narendra Modi in India to talk about another flash point. Now we have now we have Pakistan, India to worry about, right? Two nuclear armed powers. They're now lobbing artillery shells at each other. Uh, these again are are the seniors who were born after the last crisis. The crisis in India was obvious and partition of, uh, in 1947. Right? And then you have this, uh, you know, this post-catastrophe generation in China and throughout the western Pacific of of World War II and the Chinese revolution, right? Uh, horrendous time. Um, and and this is the new generation. And here's what they all have in common. Whether you're talking about Russia, Iran, India, China, I mean, you go around the world, nobody alive today was an adult during the last crisis. They have all passed away.
Which is kind of always true, right? And that's all was true. That's the amazing thing about the seculum, right? Is the era we're entering is exactly the era that no one any longer remembers, right? And and it's interesting because recently we've seen all these 80-year anniversaries, you know, it's 80-year anniversary of D-Day. I believe that was two days ago, right?
And and you had, you know, Hitler, I don't know, in a few days Hitler's going to shoot himself in the head, you know, in his bunker and all this stuff.
Um, uh, Eisenhower sends his victory telegram, just like an Exer. The victory telegram was only about 15 words.
That was that was it. The Allied forces have accomplished their objective at something 100. You know, that was boom. That was it. That's all that's all Eisenhower telegraphed back home. Uh, and then this, this obviously this August, we're going to have the 80th anniversary of Nagasaki, Hiroshima, the signing of the the the the treaty on the, you know, the deck of the battleship and all the rest in in Tokyo Bay. And so, it's funny though, we're all reliving this. We realize that anyone at this 80th anniversary who was age 20 at the time has to be a centenarian, right? We don't have a lot of them left. We have some.
They're they're I don't know, they're about 400, 500,000 left, but they're but they're departing about they're shrinking at about one-third every year, right? So this is but this is interesting, isn't it? Have to repeat it. So I have to tell you and this this whole idea of just the these leaders and how the self agency and identity of them is so big that it overshadows everything else. There's a part towards the end of the clip where he's talking about how it's they're part of the generation. This is the Putins, the X's, the Trumps. They're part of the generation that there's there's nobody left from the last crisis.
Right. Right. They're just past the greatest generation. They missed it.
They're just past. All right. So, as a again, like later millennial, whatever you call it. So, I'm I'm '81 is is when I'm born and I'm December 7th. So, on Pearl Harbor Day '81, on the 40th anniversary of Pearl Harbor Day, and my entire life, like that holiday has followed me and been this weird shadow of extra awareness to this thing. So, I've had this like lifelong fascination in it. You know, it's it starts as all great celebrations of birth should start with my dad telling me that the reason all the flags were at half-mast was because I was born. That might be right for the universe. That's just the level of humor I was raised on. Sign of affection.
I love it. I love it.
But there's something about the awareness and respect for that shadow. And when I think about that, it's like, do does the Xi and the Putins and the others do they respect that at all or is it just a how do you make sense of it? And maybe I'm asking to psychoanalyze them. I don't know. But it just it that really gives me pause when Neil says this.
I my vibe not just from Neil's conversation, but I think it is a notable observation that Trump, Xi, Putin, Modi, right? They're all of an age. They all have larger than-life personalities. They all clearly want to leave their stamp on their countries in a way that you cannot say about all of the leaders we've had the last 30 or 40 years, right? I never got the sense that Bill Clinton was trying to reinvent America in his image, right? He was just doing a job and having some fun along the way. And like that's clearly not what's going on with this current generation of geopolitical combatants, if you will. Um, which is a little bit scary. Um, I I think there's a, you know, your point about do they have that that I don't, what the word you use, that sort of reverence or that understanding and respect for, you know, what happened 100 years ago or 80 years ago when we, you know, all this stuff was going on. The honest truth is I don't think so.
Right, I think those folks, they all grew up. All boomers kind of lived in the shadow of the heroism of World War II and and the communist revolution and, you know, the change of politics in India, like what, you know, locally. They all sort of grew up in the shadows of these great achievements from the people that they knew, right? These were their mentors when they were 25 years old, right? They were not dead yet. Um, and so there's, yes, there's an understanding of it, but I also always gotten the vibe, you know, speaking very broadly about boomers, that there's this sense of wanting to re-re-grab that glory, right? Recreate it and define it for yourself. Like that seems like that's almost the thing. I'm, I'm at least as good if not better than this. So now, think about it. It's "Make America Great Again." It's not "Make America Great," right? That there's this inherent call to some past glory.
What would the Gen X version be? Is that the "Make America Great" part? Like, what? I don't, I don't even know what Gen X should be. "Make America Great or else." Or or else. "I'm going to be over here in the corner sleeping."
Yeah, there you go. "I got to go take a nap." "Make America..." dot dot dot. Go ahead and check that out.
It's like the, it's like the *Fast Times at Ridgemont High* version of global politics. I don't know, man. Just send the vibe out to everybody. Something happened. "Make America Jeff Spicoli again." Perfect segue. Let's go into our last clip.
This is, this is a good one to add. Conflict building community. Jack, roll the clip. Does this rebuilding, the sort of expplorosis, the burning through fire and rebirth where the wildflowers can bloom, does this have to be state-oriented? I guess that was the point I was trying to make about institutions. I look at something like the rise of Bitcoin, just to be really specific about it, as in a way its own stateless institution. Uh, do you, is there a path you see forward where these aren't hard-drawn lines on a map and are instead either culturally or ideologically drawn lines where we build institutions across borders, or is that just a pipe dream?
It's not necessarily state-driven. That's not the essential part of it. Here's the essential part of it, Dave. It's community-driven.
It's this intense community. The whole country becomes a band of brothers. That's what the society we learned. You cannot understand the American high. You cannot understand why we were the way we were culturally, socially, the suburbs, the huge middle class, everyone wearing the same gray flannel suit. I mean, everything you remember of the late '40s, '50s, and I'm not saying literally remember, but but our image of that period, you cannot understand it without understanding the crisis that scared the crap out of everyone that they had been through, right? Coming together was the only thing that saved them. And the generation which came of age in that, the what we call the greatest generation, that power of community is something they recall for the rest of their lives until the time they died. Whether it was in the 1970s, '80s, '90s, many of them were still voting for Ronald Reagan, you know what I mean? But my point is, is that that's what they could not stand about their boomer kids. Their boomer kids all wanted to be individuals. And they just thought, "Don't you realize what the only reason we were able to build all this crap for you spoiled kids is that we were together? We believed in community. We're willing to tax everyone for these interstate highways and all these sewer systems and all these public colleges which you kids didn't pay a dime to go to." I mean, I was at California at the time. I went, I went to UC San Diego, UC Berkeley. I think my my semester tuition was something like $25. I mean, that's all I paid. I mean, and and I mean, that's that seems like a late cycle problem because like even in the '80s, my college tuition now was like less than a car payment, you know?
Because we, we discovered markets. We thought they were beautiful, right? So anyway, uh, but but but here's my point is that the fundamental insight of so much of social science and and uh uh, you know, and this was this was Max Weber and this this was uh Emile Durkheim and this was even in America, we had William Graham Sumner and many, many others, right? But their fundamental insight, and they were all focused, by the way, on community. This is the time these huge cities were growing throughout Europe and America, and everyone was losing community. So the the fundamental subject of of the of the great first generation of social scientists was, where does community come from? And I would say their common conclusion, but one of the one of the axioms of social science, as Robert Putnam, you know, put it in in his book *Bowling Alone*, is that is that conflict is the incubator of community. It happens every time. Right. And the reason why these nation states are so powerful and embodied community is that the repeatedly in the entire modern era, these conflicts have always worked to the aggregation of power in the nation state. What doesn't kill you makes you stronger. I mean, you were pitching Bitcoin inside of this one. This what Neil brought this clip back to that conflict builds community. This this is a really, I I can't argue with this. I mean, every hard part of life, like that's where your friends show up, that's who your people are, that's you go reach back out for this. Why would this not be profoundly true at the cultural, national level? The only reason I, so, I I love this. Um, I do think my my poignancy on like, does this have to be state actors building this community, or is it going to come from other places? I'm very skeptical that any amount of conflict in this country, up to and including some sort of civil war or whatever, contested elections, you know, Gestapo in the street, I actually still don't think any of that is enough to be this kind of community-building catalyst where 65% of the country rallies around a particular version of what we want the future to be. And and because I'm not convinced about the state side, I am much, I'm more concerned about the corporate and the sort of financial side of this because I, you already see people declaring loyalty to, you know, an Elon Musk or a Bill Ackman or whoever with a fervor that you would normally expect them to bring to the Olympics, right? And that gives me some concern because I'm not sure I love the answer that the community we're going to rally behind is Amazon or something like that. Like that, you know, that leads directly into the kind of corporate statehood stuff and Starbase, Texas, and like, I don't really want that as the version of this that survives. But that's my concern, and I think it's, he didn't do a lot to calm me down on that concern. What do you think? Where do you think the community comes from?
I think the point you made about not, what did you say, 65% of the country rallying behind, like, one cohesive thing. I feel like it's 65 different 1% things is the best we're going to get. There's going to be 65...
Hopefully pulling in the same direction. Yeah.
Marginally marching in the same direction with the other, you know, 35% just meandering off into space and like on some weird subreddit. But like a bunch of smaller movements that are just kind of going in the same direction and then can be probably organized by a political party or something else to like motivate around some idea or whatever else or make sure in a in a true crisis those 65 1% groups become the thing that rose us out of complete disaster like we don't go over, you know, the waterfall edge because we go, "Oh, oh, look, yeah, that way." I think that's the thing that saves us. Or in the case where stuff just stays ugly for a while because we don't have a Ozymandias who's going to fake, fake destroy the world, hopefully we don't have that scenario. So we don't have the self-imposed reset. And that just means it's this gradual, boring, ravine, painful experience of just waiting for some of these leaders to just go away and see what comes in their wake. Your point about like the, the, you know, the, that I guess spoilers for *Watchmen*, a 20-year-old comic book, people haven't read it. Um, you know, the, the whole stick is that Veidt, Ozymandias, however you pronounce it, manufactures this giant crisis which kills gazillions of people. Like, I mean, it's a, it's horrific, but it serves as the thing that brings humanity together to rally against the aliens, right? That's the, that's the stick, right? And part of the reason it's a great book and an okay movie is that there's some ambiguity about that, like about whether that's whether he's actually right. And that's the thing that we're left to list to live with is the, "Maybe he's right. Maybe you do need to kill a billion people with some manufactured crisis in order to keep us from some even greater self-imposed human horror." Uh, I, I hope we're not in the middle of testing that out in real time, you know, but you never, you never really know. I thought, you know, hope is the thing.
People like feel Peter Thiel's talking about it like specifically, which is wild.
Which is the weird thing. Every time I get a whiff of, uh, is somebody going, "Ozymandias the world right now?" Peter Thiel. I start to go, "It's not Peter Thiel."
This doesn't make me feel good.
I find out that you have a weird cat.
You can't answer the question about whether you think humanity deserves to survive. That's a, that's, that puts you in a certain box. Yeah. Yeah, it does. I'm not feeling good about it. Not feeling good about that Rorschach test. No. No. Not at all. I think it's important to say these things. I think it's important to realize that conflict creates community at those micro scales. And remember that too. And I think back to the elder Gen X and what do we do? Running that through, through your entire conversation with them is all this opportunity is to figure out ways to reach out across generations and bind people together to these lessons. Yes, that is massive. That's community building. That's when that's the, the grandkids know the grandparents and they have the conversations and some of those lessons that get passed down that you can't, you know, you can't make the same jokes, you know. Yes, my dad could tell me the flags are all hats because it was my birthday. But you need, you need all these, you need all these layers of nuance and reaching across generation and when you start...
But also not just generation, like across, like groups, right? And that's that's that's where I'm that's why I'm not a doomer about this stuff because I actually think that that reaching out, you know, in this narrow context of the conversation here, I was talking about generations, but also, you know, you go to a big event like a Future Proof for financial advisors, and there's 5,000 people there who are all very different than you are, and it's all designed to have more conversations and try to build a community. So, I think there are hopeful things that we do as an industry and as a group of people, uh, that aren't necessarily just about elections and who's running everything, that can help get us used to this idea of like, "Hey, community is good." Like, just just that is kind of a revelatory statement for some people.
Yeah, community is good. And not just like in real life community. Community that extends beyond who are my followers on social media or whatever the thing is. Like understanding you can find rich relationships in the world across geography, across ages, across demographics. And hey, if going to work at GE in 1965 isn't the thing that's binding people together with the pension and the life and whatever else, well, yeah, private markets, and not the private equity versions, really. There's a lot of promise here because there's a lot of agency and ambition and what we can build to make in the world. That's a, that's a really non-doomer thing.
Yeah, I agree. I think, you know, ending this on community is the right way to go because it's the only hope we got. It's the only hope we got. Like, comment, subscribe, maybe even leave a comment with some hope. Maybe tell us we went too long or there wasn't enough Neil.
Or there wasn't enough *Watchmen*. Tell me there wasn't enough *Watchmen*. Tell me about what Gen X movie slogan for "Make America..." dot dot dot you would leave. Dave, thanks so much for doing this. Oh, and watch the original video if you haven't already, people. Thanks for having me, man. Thanks for watching.
Hi guys, this is Justin again. Thanks so much for tuning into this episode. You can follow Jack on Twitter @practicalquant. You can follow me on Twitter @JJCarbono and follow Matt on Twitter @Cultishcreative. If you found this discussion interesting and valuable, please subscribe in either iTunes or on YouTube or leave a review or a comment. Also, if you have any ideas for topics you'd like us to cover in the future, please email us at excessreturnspod@gmail.com. We would like this to be a listener-driven podcast and would appreciate any suggestions. Thank you.