Transcription
Hello and welcome back to Sore Financially, where we discuss the macro to understand the micro. My name is Kai Hoffman. I'm the Jr. Mining Guy on Twitter and your host for this conversation. I have invited Neil Howe. He's a demographer, like, really simply put, but he's got a wealth of knowledge of what's going on globally on demography. I think it's a really interesting topic to discuss.
We had a guest on last week, Bill Smead of Smead Capital, and he said he's an optimist for the economy based on demography. So the timing is perfect to have Neil on. And he's an accomplished book author as well. You might have come across his work, "The Fourth Turning." He's also famous for and known for terming or coining the phrase "Millennial Generation" together with his co-author, William Strauss, who he's written the book "The Fourth Turning" with as well. And really looking forward to this conversation because we can pack so much into it, and we've never really had a demography discussion. So I might learn a lot here today.
So if you see me Googling while I'm chatting with Neil, that means I'm learning. I'm researching while we're chatting. That means I'm learning something, which I hope you take away as well. It's going to be super insightful. I know that because I just had a chance to chat with Neil before hitting that record button. Before I switch over to my guest, quick reminder: hit that subscribe button. It helps us out tremendously attracting fantastic guests like Neil onto the channel. Really appreciate that.
Now, without much further ado, Neil, it's great to have you on the program. Thank you so much for making the time.
Great to be here. Really looking forward to this 45 minutes. I promise you, like, we'll pack a lot into it. But to set the sort of the mindset and maybe the framework for this conversation, no, since it's the first time on Sore Financially for you, quickly introduce yourself and your work, and maybe where you're coming from.
Well, you know, since last year, I think a lot of people know me for "The Fourth Turning." We, Bill and I, Bill Strauss and I, wrote a book called "The Fourth Turning: An American Prophecy" back in 1997. And last year, in 2023, we wrote, or I should say I wrote, "The Fourth Turning Is Here: What the Cycles of History Will Tell Us About When and How This Crisis Will End." So that kind of gives you an introduction, Kai, as to what the book is talking about.
Absolutely. It's talking about long rhythms of history. And I should say, you introduced me as a demographer, but I will say that what Bill and I, I should preface this by saying William Strauss passed away about 10 years ago. So I've, you know, gone on to, you know, work without him, benefiting from our long collaboration together. We wrote actually a book back in 1991 called "Generations," which is basically a generational biography of America, kind of giving, you know, looking at each American generation, sort of providing a collective biography of each American generation from the early 17th century onwards, all the way through to the 13th generation, which would have been Generation X, and then to the Millennial generation, which, as you mentioned, Kai, we actually gave the name to in 1991. That was the 14th generation.
So, and believe it or not, back in 1989, we could already tell that this generation of little kids was going to be different, right? Sheltered, protected, confident, special, risk-averse, all of that stuff. We could already tell. And we've written a lot about all these subjects ever since. But let me just say that one thing we've written about a lot, which is really different from usual demography, and this is kind of the preface I wanted to say, is that most demographers, when you think about demography, it's people that talk about, you know, fertility, mortality, migration, morbidity. You know, they just crunch the numbers and they look at, you know, where the whole population's going, net additions, what the population will be 20, 30 years from now, that kind of stuff. Really interesting.
One of the very few things we know about the world 20 or 30 or 40 years from now, Kai, is how many people will be here and what ages they will be. And why? Because they've already been born. And we can count them. There is not much we can say about the world 20 to 30 years from now, you know, absent an alien invasion. We actually know their numbers pretty well. And that actually says something about the society.
Having said that, the work which I've done with Bill on generational change is a little bit different than what demographers do. It's looking at the process by which generations, raised as kids, as children and in their youth, are shaped by history, and then later on in their adulthood, as midlife parents and leaders, go on to shape history. Right? And this is what we noticed in the work we did back in the late '80s, early '90s, is that going back in American history, we can see that people were always aware of generational differences. Right? That a generation which comes of age during a war, the next generation who were children during that war, sees that event very differently, and they draw very different lifelong lessons from that event. Right?
So, and the contrast that we saw between the collective self-perception and the collective self-identity of different generations, between the ones just following them, the ones just before them, were not only very striking, but they actually followed a pattern. Certain kinds of generations always follow other kinds of generations. For example, the Puritan generation, which came to New England in the early 17th century, the 1630s, very idealistic, very much opposed to the, you know, corrupt institutions of their parents. That's actually why they came over to New England. Were followed by what was often called the Cavalier generation, much more materialistic, much more cynical, much more into the bottom line. They often wondered why their parents ever left England. Easier to get rich in England, right?
But how did you get that kind of following? Following the Transcendental generation. This was a generation of Emerson and Thoreau and Abraham Lincoln and Jefferson Davis, a generation of idealists, a generation of poets and feminists and commune founders. They were followed famously by the Gilded Generation, who actually fought the Civil War, a generation of metal and muscle. They didn't talk much, but they got big, painful things done. And interestingly, after a wild, cynical generation, they're often followed by a much more protective generation. For instance, after The Lost Generation, coming the very protected GI Generation, born in the early 20th century, who later became the what Americans call the Greatest Generation, who fought World War II, very high degree of social trust, high degree of propensity for collective behavior. I mean, this is the generation that really founded superpower America during World War II and in the American high that followed.
And then following the Gen Xers, we see the Millennials coming along. Well, okay, let's back up a little bit. What do we get from these patterns? Well, Bill and I noticed that there's an interesting rhythm through American history, and that is that America has endured these huge civic crises about once every human lifetime, about 80 to 100 years. We have these, the late 17th century, we had the Bacon Rebellion, King Philip's War, the Glorious Revolution. We had these enormous upheavals in the colonies, nothing else like it during the colonial era. And roughly 90 years later, we had the American Revolution, obviously giving rise to the Republic of the United States. And roughly a lifetime later, we have the Civil War. And a lifetime later, we had the Great Depression and World War II. And a lifetime later, here we are today, right?
And these are huge upheavals in our outer civic world. This is when we reform our political constitutions, our infrastructure, our economy, how we kind of collectively live together and rebuild the outer world. And roughly halfway in between these events, we have the Great Awakenings of American history. These are very different. These are focused much more on the inner world of values, religion. And very conveniently in American history, we label, we number these. We call them the First Great Awakening, the Second Great Awakening, Third Great Awakening. And this is when the more, you know, Puritan or what we call Prophet archetype generation comes of age. So a very civic-oriented generation comes of age during the outer world crisis, and a much more inner-focused generation, like Boomers, for example, Baby Boomers, famously born after World War II, came of age during the late '60s and '70s, a period which many historians call America's fourth or fifth Great Awakening, depending on when you want to start your count.
So I think this is a good introduction, Kai, for you. A basic rhythm of outer world crisis and inner world crisis, both shaping generations who grew up in them, and yet giving rise to generations who then go on to actually trigger these events. Do you see what I mean? And that has given rise to our writing, and most recently, this writing, well, most recently this book called "The Fourth Turning Is Here" because Bill and I predicted that we would be in this Fourth Turning come the late 2010s and going into the 2020s and early 2030s. We are here, right? I mean, just look around you. Look at the world. We have mounting geopolitical crises, which are usually coincident with the Fourth Turning. And we also have internal political crises in America. Roughly half of Americans think a civil war is likely in the next few years. Ten years ago, we didn't even ask that question. It never even came up on the radar screen, right? The tremendous tribalization, polarization of politics in America.
So this is characteristic of Fourth Turnings in American history, both internally, an enormous tribalization, polarization, and externally, an increasingly us-versus-them attitude about who we are in the world and who's going to prevail in the end.
Fantastic introduction, Neil. I've taken a lot of notes, but lots to follow up on, of course, as well. But I think we need to just back up a little bit because I think we need to explain the term "Fourth Turning" a little bit and what it means. Like, what's the first turning? Third, by the way? Let's start with the first, and then of course, we'll try to project a little bit as well, like where's this headed and how does it all fit together, right?
So think, think of these. I talked about a long human lifetime between crises. Well, think of that long human lifetime as four pieces, and each one of them is about the length of a phase of life, about the time it takes you to be born and come fully of age as an adult, maybe in the early 20s, right? So does that help? So that way, we're dealing with the, a long human lifetime is a bunch of seasons, right? So think of history as a whole as seasonal.
And think of the First Turning. We'll call this the spring season, Kai. Coming after the crisis, and that is a period in which institutions are strong, individualism is weak, conformism is valued. Everyone has a given role, what to do. Society feels very efficacious about what it can do collectively, but it feels very frustrated, or I should say, stifled by the prevailing conformity, personally stifled. And this really was a good characterization of the American high after World War II, just to give you a most recent example of this, right? This would have been the presidencies of Truman and Eisenhower and John Kennedy in America. And I think though that there were correlates of that, similar kinds of experiences in other countries too. And I should say, Kai, that this is not just an American thing. The Great Depression, World War II, were obviously global events. I mean, obviously all of East Asia, South Asia, obviously Europe, and the entire English-speaking world. So I think that in many ways, we're on very similar cycles. But that period was the First Turning. Society supplies a lot of order, and society wants a lot of order. Both the supply and demand for order are high.
The Second Turning, which we'll call the summer season, this is the Awakening. Remember I talked about the Great Awakenings? Well, that happens in the Second Turning. And that is when the children born after the great crisis begin coming of age. They are always, they always trigger an Awakening, Kai. This is an interesting pattern, right? Consider, I talked about the Transcendental Generation. These were the kids born after the founding of the American Republic, after the Constitution was put into action. They came of age in the 1820s and 1830s, an enormous period of cultural ferment in America. Well, okay, so what happens there? Well, obviously, we tire of the social conformity. Everyone wants to refine their personal authenticity. They want to throw off social obligation. They no longer want to do all these things for the good of the community, for the good of their parents, for the good of their family. They want to be self-actualizing individuals. And I think you can say that through an Awakening, we've become fundamentally a more individualistic society, both in the culture and the economy. And it's worthwhile to remember, in the 1970s, toward the end of the last Awakening, we had a period of deregulation and tax cuts. So both conservatives and liberals, you know, both joined this movement.
The Third Turning is the Fall season, the Autumn season. And it's much the opposite of the high. Individualism flourishes. Civic institutions are disrespected. People lose trust in them. And I think that's really what we experienced from the late 1980s all the way through to the GFC. It was a period when, unlike the high, where a lot of order was provided and a lot of the public wanted a lot of order, during the Awakening, people no longer wanted order, which gave rise to a lot of the arguments, right? Because institutions were still supplying order. But during the Fall season, society doesn't supply much order, and people don't want it either, right? So there's a certain consensus that a more individualized world actually works better for everyone. I think a leitmotif of that era might have been Francis Fukuyama's book called "The End of History," which basically said we're going to live in this globalized, individualistic world, governments would sort of fade away, and we'd all be just transactional market participants, going into a Starbucks and typing on our computer and transacting with people all over the world. And that was, I don't know, Kai, that was our vision of the future, right? All those big, bad institutions were going to fade away. And by the way, the microchip was going to overthrow dictators everywhere. Do you remember that? All the autocrats would be overthrown because, of course, they would never survive this new maelstrom. Well, that didn't turn out, did it?
That's because the next season is the Winter season. And in the Winter season, society continues not to supply order. That's the difference, Kai. People begin to want order. Ah, there we go. And that creates the cold front coming in. And by the way, it's always the youth generation that's at the forefront of this. And when you go around the world now, looking at countries, and I don't care whether you're looking at the Philippines or China or India or much of Europe, you see that the people often voting most for these powerful autocrats, these ethnocentric autocrats, are younger people who actually want a world in which we can actually create public things, which is sort of impossible after the Fall season. We've given up on all these civic institutions. And that's what we're in. That's what we're in today, Kai.
A lot of the book is about Fourth Turnings historically, how we move through them, what stages are they, when do we reach the climax? And particularly, I talk a lot about the rebirth of community through conflict. I mean, that's how it happens. Sociologists have been telling this ever since Weber and Durkheim back in the late 19th century. It's through conflict that we create tight community bonds. It might be great if it didn't happen that way, but history says that's how it does happen, right? You wonder how America became such a community-oriented society in the '50s? Well, it was after the experience of total war, right? And I don't think you get there without that. All of the total wars in American history have occurred during Fourth Turnings. And fourth turnings have always had a total war.
So now that's the sobering part, right? The great part is that if we can navigate it successfully, we get the Fourth Turn, we get the First Turning on the other side, which is renewed optimism about the long-term future, a much greater sense of community, greater economic equality, both in terms of income and assets, a greater ethos of public participation. Experts, you know, when people, when the experts tell people to do things, things they actually do them. You know, I, this is my, what I always often tell people on the Blue Zone. I mean, think of that. And also a more conventional culture. People feel much better about themselves as a community, and people reconnect with other people, people in their day-to-day lives. The single biggest malady that people have today is this feeling of complete disconnection, right? Everyone's lonely. Everyone experiences the pathology of living in a completely disconnected world of markets in which no one has that community. They may have some, they may have connection with their family. And I think definitely family closeness is coming back. I mean, an unprecedented share of young adults are living with their family today. But nonetheless, the family itself is powerless. And I think the yearning to rebuild community is giving rise to these great political tribes that we see that are so intense. You know, the Red Zone and the Blue Zone in America, for instance. But the history of Fourth Turnings says that sooner or later, one tribe wins. You know, sometimes having to compromise, obviously, with the other side. But it becomes a conflict which either both sides come together in some greater struggle somewhere else, or the struggle itself is between the two sides. We've seen plenty of examples of both happening, sometimes simultaneously, over American history.
And I think the interesting question about internal versus external struggle is probably something I highlighted most in the book because it's one of the most interesting stories of crisis eras in America. We forget, for example, that just before America went into World War II, supposedly as a completely united nation, we were among the most divided nations we've ever been in our history. During the New Deal, we had two groups of Americans. One group thought it was the Red Decade. The other thought it was the Fascist Decade, right? It seemed as though liberal capitalism had no future during the 1930s. And in fact, given the number of dictators that were taking over the world in the 1930s, that seemed a good bet. It was either Marxism or fascism that was going to win. It led to a very divided public and tremendous animosity, even violence, even in America during the 1930s, in terms of labor violence and so on. So it's interesting, right, that unexpectedly, the nation came together over the war, when no one would have predicted that. We're of course very isolationist at the time. No one would have predicted that. But figuring out those puzzles is one of the most fascinating parts of actually looking at these Fourth Turning periods. Again, these are generational periods. We're talking about periods of more than 20 years long that were the arena for action here.
No, Neil, like, this is like an amazing history lesson. Like, I could listen to you all day. I don't even want to stop you there, but really, really curious about the impact of technology on all of this as well, and whether it's sort of playing out as you've predicted back in 1991, when the internet wasn't really a thing, AI wasn't a thing. So I'm curious how that is factoring in, how is that messing with the circle, the cycles here? Not the circles, the cycles.
Well, the lesson we put out in the book is that I think we talked too much about how technology shapes us, because that's a very passive relationship. Technology is sort of accidental. You know, we invent the microchip, we invent social media, we invent the cell phone, and it sort of shapes us passively. I think the much more interesting question, and in some way, the more consequential question, is how do we shape technology? How does each generation, how do we shape technology differently in each turning? There's a question, right? So, you know, you might look at the American high. So had, you know, what was computer technology, Kai, during the American high? Remember, it was a huge mainframe computer at the top of an A-frame organization pyramid, right? That was the GI generation, right? Everything had to be a big institution, and all the data went to the top, and the computer put out all the answers, and everyone got their marching orders. You know, that was how the GI generation thought about things. Kennedy, Dean Rusk, General Westmoreland, you kids go to Vietnam. That's the answer to that question. And Rand did a study in 1967: How many computers would the world need? Their answer was seven. Seven. Well, you know, Westinghouse would need one, the Pentagon would need one. I mean, get the idea, right? These. So who came along and introduced the idea of the personal computer? Well, was it just accidental that happened during the Awakening? And it were two Boomers, Steve Jobs and Bill Gates. Why not individually? Why not have a separate computer on everyone's desktop? My point, Kai, is that this was not technology that was barring it. It was a different way of looking at the whole purpose of technology. You see, we're going with this.
And then, and then of course, once we had an individualized technology, that's when, you know, Reagan and Clinton and Obama and everyone was arguing, well, individualize it. It's over. Throw all the dictators everywhere in the world. Until we moved into another turning, right? And that was when we moved into the Fourth Turning. And suddenly, all these dictators and all their electorates were delighted by this new technology because the dictators could orchestrate violence on social media. They could monitor and surveil their citizens. I mean, suddenly we love the microchip. But you see, here's our problem. We think that the internet or the microchip or the cell phone is a thing which has its own volition. No, it's just an instrument that we shape to invite in a certain way into our lives. And I would say that the internet during the 1990s was an agent of individualism because that's where our head was at. That's what we wanted. Today, everyone searching for community. This is why the internet is now the servant of autocrats. Does that make sense?
Oh, absolutely, absolutely. No, I think that community aspect is really interesting. And you mentioned common enemy as well, like when Japan entered the war at Pearl Harbor, that really united the US and they moved together. And I feel like we're seeing something very similar with Russia and China right now. You need to give the public a common enemy to unite them. We're not quite there yet because it hasn't been as drastic as back at Pearl Harbor. The US hasn't been attacked. But I see it headed that way personally. And so, so that sense of community and moving together, is that something you see as well? Is that the, I'm quoting from your Twitter feed here, but "When will it end?" and "What will bring it to a close?" Is that a possible closing scenario for the Fourth Turning?
Well, the community is when you really start getting serious about acting as a national community. That's when you mobilize. That's when you do big things, right? That's not the end, that's the climax, right? But we're not there yet. We're not there. But remember, this is an era which is not going to come to an end until the early 2030s, right? So, you know, keep the timing in mind here. But if you wanted to ask, are we en route toward that? I would say, yeah, we seem to be moving in that direction.
One aspect too about these Fourth Turnings is that they always include a realigning election, when the political constituencies fundamentally shift. Every Fourth Turning and every Awakening has had one of these. In fact, they've occurred during an Awakening or a Fourth Turning. And I think what we've seen during the, I should just say, you know, kind of the Trump era, is again, one of these reshuffling of political alignments in American politics. And the last one, by the way, occurred during the Awakening. It was basically the movement of Southern Democrats into the Republican Party. The earlier one was during FDR, right? That was the New Deal coalition, which its own huge shifts of the electorate. But what's the Trump shift? It's the movement of non-college working-class Democrats into the Republican Party, and suburban, more affluent professionals into the Democratic Party, right? So that's the shift, fundamental shift. And I should say, already political scientists are calling this the seventh political realignment in American history. I think we're seeing it. It always comes in an Awakening or a crisis era. And I think we've already seen the one happening here, and it's creating a really new, interesting edge of volatility into American politics, right? To see suddenly this very populist Republican Party. I mean, no one would have expected that 15 years ago. It's like, what? I thought this was the party of Mitt Romney, you know, a guy who's a, I don't know, hedge fund manager, you know, what I mean? It's just a very kind of party.
Neil, like, I don't even know where to take this conversation because there's so many routes and avenues we can go down right now. Like, maybe the most pressing one, just based on context as well, the Millennial generation. We all have our prejudices for the Millennials, but I'm curious if the Millennial generation turned out the way you sort of predicted in your book in 1991, and anything that stood out from you that may be vastly different than you expected it to be.
Well, I think a lot of the things, pretty closely tracked where they came out. I mean, it's interesting because I just wrote this new book, and within the book, I talk about each of these generations, sort of their life story. And when I talk about Millennials, I think a lot of the things I talked about that shaped them growing up are very much the same things that Bill and I talked about back in our first book. And I think I mentioned them earlier: they were protected and special. You know, suddenly there was a huge moral panic over the ill treatment of children. Everyone thought, suddenly they're safe. Parents went out and bought minivans especially designed for kids with five different special seat belts to put them in their seats. We had suddenly child safety became a big issue across America. Fathers were present at the birth of their children. A lot of this we've seen before.
I think what Bill and I had the advantage of seeing the same dynamic in earlier generations in American history, we were able to recognize it. And we also recognized what kind of generation that would eventually result. It would result in an increasingly better-behaved generation, that is to say, lower crime rate, lower rates of social pathology. We've certainly seen that relative to Gen X. We would see a great new interest in credential achievement, and you just look at this generation doing everything to pass exams and get higher education credentials, particularly the women of this generation. Risk aversion, person, aversion to personal risk-taking, closeness to parents. I think we already talked about what large share of this generation is still living with their parents or living near them.
And so, just to jump in, like, one thought that popped in my head when you mentioned that is, is that for economic reasons, or is that really to feel close? Partly for economic reasons, but I think partly it's, you interview, there have been a lot of interviews, right? Millennials feel good about their parents. I mean, they really do. Personally, now, politically, they, a lot of them think their Boomer parents are completely ought to be just forcibly taken out of leadership positions because they can't organize themselves out of a shoebox. Boomers are just hopeless as political leaders. But personally, Millennials, for instance, are expert in the kind of the Beatles to Eagles discography, all of their great classic hits. I mean, Millennials worship all of the great artistic creations of Boomers. I know most of them I talk to know more about the music of that era than even I do, and I lived through it, Kai.
So this is a great contrast, right? I'll tell you, Boomers, when they were young, we couldn't care less about what our parents created in the culture. It was like, I don't know what it was, Benny Goodman, big band music. I couldn't care less. None of us cared about it, right? Millennials are very respectful of that. This is characteristic of these two types of generations. In other words, drawn to Boomers for values, but very much not drawn to Boomers for their actual practical skills at actually running big institutions. I think that most Boomers looked up at older people. We had the opposite impression. Our parents are really good at running big things, but culturally, they were a non-entity, right? It was like the Ed Sullivan Show. I mean, it was just, you didn't even want to talk about it. It was just so unspeakably bad, right? This is what's really interesting, generational archetypes, right? Is that they, we don't all grow old the same way. We grow old according to our own generational archetype. When we were born in that cycle really shapes what role we play in history. Boomers are going to play a very different role than their parents played. And we, what we do find, by the way, is that throughout their lives, Millennials have stayed very much in touch with their parents. They rely on their advice. It's not just that they're dependent on them for financial support, Kai. They, they text them every day. They, partly it's the risk aversion, right? Am I doing the right thing, Mom, Dad? You know, that kind of thing. It's not just money. It's, please help me, guide me through life. It's kind of dangerous out here.
One point, one I just wanted to emphasize about Millennials too was this point I made earlier, and that is that Boomers are essentially an order-destroying generation. We thought that the world had been organized institutionally too well by our parents. Institutions are too strong. I think, and this is an interesting point, but I do want to make it, that Millennials are fundamentally an order-seeking generation. They seek more order in public institutions and the way our society is organized. When it comes, for instance, let me give an example, a middle class, a strong middle class, with houses made out of ticky-tacky, remember that, Kai? They were all identical, little houses. And Boomers hated that, right? In the late 1960s, income inequality in America approached its 20th century low. All Americans seemed to be joining the middle class. There wasn't a lot of distinction in terms of different Americans. And we thought that Boomers thought that everyone had been homogenized in America. We desperately hated the middle class. It was like Pleasant Valley Sunday, charcoal burning everywhere. We thought it was hateful, and we thought that we'd be better off if different strokes for different folks, all the individuals would go off doing different things. I think the Boomers over their lifetime have been very indulgent and accepting of greater income inequality. I don't think it's really a problem for Boomers. It was the great nightmare of an Orwellian, identical, styrofoam America that we all be identical. What's interesting, Kai, is that Millennials, they look at the suburbs and they say, that sounds really great. You know, there's little different colored houses. We could all live. We'd be. And what happened to that middle class? How do I join up? And I have to tell them, no, Boomers, we got rid of it. We thought it was a bad idea. That's how I mean to understand that Millennials are an order-seeking generation. They thought that idea was actually pretty good. Dad, why did you get rid of it?
No, it's interesting. Like, I'm an elder Millennial, and my thought now is like, to continue that, you know, maybe that going down that rabbit hole on the Millennial generation. Like, do you see a bifurcation there? And the topic I'm thinking of is "wokeism." Like, it seems like there's a bifurcation happening even within Millennial society, I guess. Like, do you see that, or is that even the right assumption, or is that too narrow, like, narrow-minded, maybe? Is that too narrow-focused?
What's more order-seeking than "wokeism"? I mean, think of that to mandate how you can say things, make sure you don't offend anyone. I mean, think about this. Boomers love offending people. It was the favorite thing we did when they're coming of age. You know, I was like, "Up yours, Dad." You know? I think the whole emphasis on toning down the passions of the debate, making sure that no one is offended, is an extreme, you could even say a pathological example of Millennials wanting to bring calmness, rationality, and order to the unbridled passions of Boomers and Xers.
I also think, Kai, it's interesting. It's interesting that Millennials are a generation of trends. The early wave Millennials are a little bit more like Xers, you know, they remember the kind of the wide-open, freer range childhood and all that. I think as you get to late Millennials, you see much more the sheltered, risk-averse Millennials. I think it's definitely a generation of trends, from less ordered, less protected upbringing to more protected at the younger end of this generation. But that's the way it is with generations. Generations often are a generation of trends, moving first wave to last.
Super interesting, Neil. Like, we could, I could continue this conversation forever. But I do want to make the segway also like how it fits together with the economy, of course. Right? I mentioned Bill Smead, he mentioned in an interview that he's an economic optimist based on the demography, just of the US, for example. Over 50% of the population, 180 million people roughly, is below the age of 40 in the US. So that that hasn't really been optimistic. And let's really tie together the Fourth Turning and economic development. What are we looking at here? And what does the history tell you about maybe future economic trends?
Well, demography now, when you're looking at just the age structure of the population pushing economic growth, you're dealing with a very long time frame, obviously. You know, I will say it's exciting though, because we've seen such rapid changes in birth rates around the world. I would say that one trend we've certainly seen the last seven or eight years is the birth rates around the world, particularly in East Asia and even in Europe, are falling faster than we would have thought. It may well be, Kai, this is historic, that right now, as we speak, the what's called the total fertility rate of the world is at the replacement rate, 2.1. So that's, as you know, you measure total fertility rate, how many children would women need over a lifetime. 2.1 is the number needed to replace the population. It's unbelievable that we've arrived here so quickly. Most people in the world are definitely living in countries with a fertility rate below the replacement rate. Virtually all of Europe, of course, including Russia, and most of the populous Far East, certainly the United States, most of Latin America. You go around the world, really. The high fertility regions left, if you're really looking at even moderately high fertility, three and above, total fertility rate of three and above, you're really looking only at a few countries in Southern Asia and Sub-Saharan Africa. That's amazing. We wouldn't have predicted that even 10 or 15 years ago that we would see this decline so rapid.
Now, among these higher income countries, which tend to all be low fertility, America is, used to be a little bit higher. We're now kind of, I don't know, what are we relative to Europe? We're beneath France, we're beneath a few other high fertility European countries. We're definitely above Germany. We're certainly above all of the Mediterranean countries. We look pretty good demographically. We're obviously a very large country. This is probably, if you really want recent breaking demographic news, I think the big news recently, last three years, has been all about the enormous increase in the immigration rate into America. That's increased. It used to be around three or four per thousand. It's now around 10 per thousand, right? We're up at the levels of even approaching the levels of Canada, Australia. English-speaking countries historically have always welcomed immigration. It's always been a feature of sort of the English-speaking colonial countries around the world. But these rates are very high. And almost predictably, they're triggering a backlash. I would say the crisis and disorder on the borders and the high rate of immigration and the broken system of asylum is Donald Trump's biggest single issue. You know, going into the economy is also a really good one for Trump, and I think foreign policy is a good one for him right now. But immigration, number one. So I do think that this is obviously going to be prone to possibly sudden policy changes. But right now, that's the single biggest new thing happening to America demographically. Not so much fertility rise. Our fertility rate continues to decline. Now, post-pandemic, we're down. I think most recent count is, I believe, if 2023 comes in as scheduled, we're going to be down at around 1.63, 1.62. That's a lot lower than it was even 10 years ago.
So, so what are the implications there, maybe on a global scale for the economy? Like, coming back to Bill Smead, he said he's an economic optimist based on that. Like, what does that really mean? And what are the advantages? Maybe let's work that out.
The first thing you have to understand is this: that the entire high-income and emerging market world, by the late 2020s, will for the first time in history, and I'm including China, I'm including all of your BRICS, I'm including all those things, that their working-age population, let's just say age 20 to 60, age 20 to 65, will actually start shrinking. That's unbelievable. Ever since Adam Smith, the whole idea of the modern economy was growing numbers of people over time. I mean, that was part of the whole paradigm. And growth has its own qualitative dimension because it always means that you're doing capital broadening. You're always building new factories, new houses, and you're learning by doing as you invest more. It always means you're opening new markets. It always means there are new possibilities. You don't have to cut back in real terms in one industry to expand in another.
A population zero-growth world is one where, unless you have extremely high productivity rates, it's one where you actually have to cut in real terms the income from one industry to expand another. You understand, Kai, how the psychology of that is very different? We're much more averse to losing than we are to gaining a little bit more or less, right? And I think that is the single biggest issue about we experienced that by the way in the 1930s when a similar thing happened. The entire growth of the Western world economically came down, and also the birth rate came down. There was a lot of worry about this. How could you invent new products in a world where companies are actually losing markets? Everyone was losing market share. Everyone was losing. And people, when they're losing sales, they tend to go into cartels, right? They want government policy to stabilize their market. They want industrial policy. They want to divide up their market so that they're at least sure that they get this. People are much more willing to be engaged in zero-sum psy, I should say positive-sum transactions, when everyone's growing. When things are shrinking, everyone has a zero-sum mentality, right? I don't want to lose anything, right? That's the first thing. I don't want to lose.
And I think that to me is the biggest problem. It's the psychology of shrinking markets. I think it's going to be a huge challenge for progressive democratic societies. And I will say there's an economist, Ben Friedman, he talks about the moral consequences of demographic growth, a very interesting book he wrote. And I think he's really onto something. He says whenever we think of liberal democracy and liberal values, emphasizing individualism and sort of free, open-ended development of individuals and societies, we're always talking historically about economies that are experiencing high rates of economic growth. He said there really are no exceptions to that, right? So that's what I would think to think about, Kai. What is it in a world where we're not experiencing that? How will these progressive liberal democratic values continue to prevail? To foster what? How will our psychology change? I think this basic shift between zero-sum versus positive-sum thinking, which we actually find, I mean, if you do surveys, you actually find it's going down now among younger people today. Among Millennials, it's much more zero-sum thinking, whereas older people are much more positive-sum thinking. I think that that idea that we need to ensure outcomes, that's that.
What you start thinking of in zero-sum, right? I need to ensure the outcome. I, I'm not, I'm not comfortable with this open-ended outcome business, right? That's, that's exactly what we're seeing right now. It's protectionism, tariffs, you know, oning all over the world. Like I was think, border fences, border fences, everything, right? I mean, it, we are totally entering into that world. I, fourth turning is all about that. Again, I come back to this idea of order seeking, right? What does that mean in every dimension of our lives?
And I was interested because the, the European Union and the last big election we're talking about in June, you know, we're going to have that, no, you know, European Parliament again. But in the last election, um, uh, uh, I believe when was that, 2019, I think five years ago, right? I think it was 2019. Um, the, the, uh, the, the, all of the major parties' like slogans was, um, uh, "Europe that protects," right? Uh, "a Europe that protects." Think about that. A Europe that, you know, what are we protecting? Yeah, what are you protecting? But just think of the whole psychology of that. That is what that is a great slogan when you're trying to deal with zero-sum mentality and a, and an emerging generation which is actually becoming more risk-averse. This is what I'm talking about. A Europe that protects. Imagine 20 years ago, Europe. I remember back in the 19, early 1990s, Europe was all about breaking down new barriers, you know, do you remember that? It was all about, you know, going beyond and above and you just creating, I don't know, one world and doing very. But now it's like, maybe we can hang on to something here. I, I'm interested in your view, Kai, about that. This, this sense of protecting, the sense that we, we're trying to hang on to something. Where does that go?
That is a very good question. I think Europe is falling apart slowly but surely, um, and the idea of the European Union as well. Like it's too diverse, it doesn't make any sense, like in terms of like cultural, what do you call it, like cultural trends. Even like you get the north, you got the south, it's too diverse, like we're not pulling in one string anymore. And that's changing, right? So, and we've been shown that, uh, ideology, especially of the wealthier nations, is not helpful. Like it's, it's actually hurting the unity or the union, right? So that's what's breaking it apart. That's just my two cents on it. And we gave up on our strengths as well, like we sacrificed our strengths for, actually, I don't know what we sacrificed it for, honestly. Like I look at Germany, like being German with our energy costs and everything, we're sacrificing our industry, our market advantage. We used to be a powerhouse. For some reason, we're still number three in the world in terms of global GDP and output, but it's, it's declining and shrinking. You know, one, one problem Germany has is that you're in hugely export-oriented country in a world which is moving toward industrial policy. What the hell do you do with that? I mean, China's idea of getting out of this current funk that it's in is to cut prices and just try to expand. I mean, you know, it's the old formula and they're, they're doing it. And so you've got the US Treasury Secretary, you know, going to China and saying, hey, don't do that into our country. Well, they're gonna try to do it in your country, guy.
But my point is, is that is that everyone is, this is again, the 30s all over again, by the way. The last time we had a fourth turning was the 1930s and I see all of these trends we're seeing right toward autocracy, uh, we're seeing toward, you know, kids living with their parents because, you know, there's a limited supply of homes. We're seeing the growing, uh, interest in sort of, uh, uh, uh, zero-negative sum thinking and obviously the increasingly stormy geopolitical outlook, to say nothing of the fact that the, uh, you know, after a, a great financial crisis, a little bit like 2008, we're kind of living in the shadow of that. I see a lot of similarities with where America is. That was the last time we were all on a fourth turning. And I do think it's helpful to make, to make that connection. Um, we often think that, uh, uh, you know, we, we, you know, our lives might not replicate, uh, those of our parents, but it might be our grandparents or great-grandparents parents. We might be looking for parallels, right? And, and not so much what they did, but the challenges they faced and the options they faced, right?
You brought up the 1930s and that's maybe my second to last question here, Neil, because, you know, we, we're getting almost to an hour here, but, um, you brought up the 1930s and my question is, maybe Europe seems very undecided like in what it wants to do. It's losing competitiveness. Is it based on our history from the 1930s? Would you, if you like, is that having an impact? And I'm curious because it seems like it's hanging, like the, our history is hanging like a Damocles sword over us and we can't get away from it. Is that a true statement?
You know, look, the future is always open. Uh, the mood, I think, recurs. And I think the types of decisions, you're given the hand, the hand you're dealt, that can recur. How will you play your hand? That's, that's your choice. Yeah. Um, but I do think one thing that's very similar to the 1930s, obviously, is the, um, the, uh, fear and indecision, uh, of the West. Um, you know, the, the, uh, the West was profoundly divided. It had been so scarred by World War I, first and then obviously the Great Depression, that it was, it, it acted with no common voice. It had the League of Nations, which promptly, you know, all the major players left or played no interest in. So it was, I mean, right, that is the history, uh, you had when, when it came to, for instance, to the, to the, to the rise of Germany, and, and the rise of Hitler, I should say, there was absolutely no commonality at all, no common cause, uh, between the Czechs, the French, the, the British, the, the Russians. Um, everyone sort of went their own way, right? There was maximal confusion. And maximal confusion always plays into the hands of autocrats, right? Because autocrats know very well what they want to do, uh, and I think, I think we're in a similar mood today. You know, yeah.
Well, absolutely. Um, you brought up the depression. I, I just want to get the conversation, one with the last question, back to the economy. Do you see that happening? Hyperinflation, depression? Is that something it'll replicate? Is that just a trend that we'll have to face?
You know, a lot of that's going to depend on, you know, I, I think a lot about markets. I think how markets are changing. Uh, I'm actually doing a piece right now on the rise of passive investing, which I think is actually beginning to transform markets in a, in a kind of a momentum-driven way, right? Um, increasingly equity prices are being shaped by just more and more money pushed into all of these, uh, equities. Pro, right? I mean, who's actually doing the valuation task anymore in markets? Do you wonder about that, Kai?
I mean, well, it's the computers, the AI. Like I hear fund managers laid off left and right. Everyone just assumes that someone else is valuing the individual stocks. But increasingly, the active investor saying, I'm not getting in front of this locomotive. And as a result, this thing just kind of turns on its own. I do worry about that. I will say that in the context of the fourth turning, uh, economic volatility is typically very high. Uh, when it finally comes to climax in terms of, I talked about organized conflict, Kai. And in that context, obviously, there's no such thing as a, uh, recession or a depression. Uh, you know, the public is mobilized. Anything necessary to liquefy the economy. I don't care how much inflation goes into place, right? Inflation is also a good way of, uh, of, uh, uh, you know, paying off your debts if you're the public sector. Uh, I think we're going to see all of that. We always do, uh, late in fourth turnings. So inflation is definitely on my calling card, if you were to ask me.
Yeah, like, but the question is like, how severe will it get? Like, we're looking at 3.2% right now. We were at 9% in the US. So the question is like, how severe is it going to get? Are we going to see 40%?
Yeah, it, look, we don't know. Um, it used to be, are we gonna have a hard landing? Then it was a soft landing. And the big new, uh, dialogue now in, in, you know, our circles here is no landing at all. You know, it's gonna start accelerating again. We never actually touch the runway. So, uh, we're going from, you know, six rate cuts in '24 down to three, down to two, down to, it might be down to zero. And here's the thing, as inflation gets faster, if it does get faster, it's been reaccelerating. The core, core rate on the CPI has definitely been reaccelerating over the past six months. As it gets faster, the real interest rate actually begins to lower, right? I mean, the Fed sticks there at at 5.25, the real interest rate gets less and less. Pretty soon they may have to start hiking. I don't think people are talking about that. It is a possibility though. Um, it's on a knife edge. Uh, it could obviously, if employment suddenly drops, which is something we're certainly looking for, uh, then, then, you know, which is, you know, ever since we saw yield curves in BT and all the other long-term signals go, uh, then that's going to be a downturn in the economy. It's going to be a downturn to markets. If it starts going up, inflation will go up. But the kind of inflation I'm talking about, which is comes with public mobilization, is completely different. That's engineered inflation. That's inflation where, um, uh, you are basically saying, everyone go out and borrow, uh, bonds at 5% because we have a national crisis and, uh, we don't care if inflation is 15%, you know what I mean? Uh, it's basically another form of taxation, right? This is called financial repression. And every time we have a fourth turning, it always appears, particularly appears late in a fourth turning.
Neil, this was absolutely fantastic. I could have gone on for a couple more hours to be quite honest. Like there's so many aspects. Like I still want to, you know, follow up on. We, we'll do that maybe next time. But great appreciation of your time. Where, where can we find more of your work? Where can we follow you?
Um, we have a substack called Demography Unplugged. Uh, a lot of that is actual demography, believe it or not. Uh, but I also write, uh, pieces on all kinds of other subjects. As, as I think I mentioned, I am doing a piece on passive investing, uh, but I've, I've done all kinds of a lot of eclectic topics, including politics in the United States, a recent piece on demography in, in Israel, if you really want to take a look at an interesting case of a demographic anomaly, uh, and a lot of other subjects too.
Oh, fantastic. Like, by the way, I'm totally against passive investing because I'm coming from the, the mining space and I think passive investing is hurting mining in particular. Like money is not flowing into the right companies and the ETFs are buying the wrong companies in my opinion. So, if that's just my two cents on that topic.
I, I, I respect your opinion. Absolutely.
Neil, thank you so much for coming on. Like, truly appreciate your time.
It was a great pleasure and we, I hope to do this again very soon and see how the fourth turning is really playing out, maybe in half a year's time. I think be a good time frame to see where we're at, a little closer to the elections because, uh, right before the elections, actually. So, great, get exciting. So, absolutely fantastic. Everybody else, I really appreciate your time again. A bit of a longer episode, a very different episode again, as well. We, we were flying at 35,000 feet, looking at a lot of different macro trends. And I think it's really good to do that from time to time. Um, I was thinking about a, a SWOT analysis spreadsheet at one point, like where we could put and categorize each event, uh, based on, like, the fourth turning characteristics, like where does it fit in and how do you characterize that? It's really good to zoom out. Like the topic of order is a really interesting one and that resonated. Gave me a lot of food for thought here. Um, it seems, yes, we are seeking order. There's a lot of chaos. There's a lot, how would I say, cha, like unorganized, I don't know if that's even a word, um, in, in our world right now. And, uh, making order of it, it's, it's a really interesting characteristic of, of what Neil mentioned. So I hope you found this conversation insightful. I tremendously did. Uh, I'll definitely be following up. I have yet to buy Neil's book. I have to admit, but it's very high on my list now. I'll probably jump on Amazon right now and, and buy it for myself and, and read it over the coming weeks. Uh, definitely link to it down below. If you enjoyed this conversation, please leave us a comment. Um, we'd love to invite, invite guests like Neil back. So please subscribe to the channel. It helps us tremendously. Leave a like if you enjoyed this conversation. It helps us. Thank you so much. We'll be back with lots more here on S Financially.