New Directions – the Fourth Turning into the Third Industrial Revolution.

Today I want to tell a story – of how history rhymes, how human behavior can suddenly change, and how technology is set to enforce change. What’s to be positive about – how about everything?

A traveler in Ireland asked a local how to get to Tipperary – the local rubbed his chin, thought a little, then said “I dunno but I wud’na start from here”.

Who’d start here – we have enormous debts everywhere, we’re aging, we have malfunctioning political systems everywhere, bubbles in financial markets, global competitors and wannbee superpowers, scaring from a near-death financial crisis only 10 yrs ago. Global warming, pollution, water shortages, wars.

Oh, and taxation.

You know that old adage that history doesn’t repeat exactly, but it sure does rhyme. Well the current situation probably feels familiar.

But unless you’re a student of history, you won’t make the astute observations that Neil Howe and William Straus makes in two books, Generations and The Fourth Turning. They found that we follow a roughly 80 yr to 100 yr cycle of four 20yr periods, and each has a certain characteristic. From The Fourth Turning;

“Turnings come in cycles of four. Each cycle spans the length of a long human life, roughly eighty to one hundred years, a unit of time the ancients called the saeculum. Together, the four turnings of the saeculum comprise history’s seasonal rhythm of growth, maturation, entropy, and destruction:

The First Turning is a High, an upbeat era of strengthening institutions and weakening individualism, when a new civic order implants and the old values regime decays.

This cycle, that was the “American High” of the Truman, Eisenhower, and Kennedy presidencies.

The Second Turning is an Awakening, a passionate era of spiritual upheaval, when the civic order comes under attack from a new values regime. This time the “Consciousness Revolution”, stretching from the campus revolts of the mid-1960s to the tax revolts of the early 1980s.

The Third Turning is an Unraveling, a downcast era of strengthening individualism and weakening institutions, when the old civic order decays and the new values regime implants.

The authors argued that was the “Culture Wars”, an era that began with Reagan’s mid-1980s Morning in America and was due to expire around the middle of the Oh-Oh decade, 2005.

The Fourth Turning is a Crisis, a decisive era of secular upheaval, when the values regime propels the replacement of the old civic order with a new one.”

The fourth of these mini-cycles tends to be chaotic and calamitous.

It’s this thesis that drives Steve Bannon and can therefore to an extent, explain the election of Donald Trump. But it’s also a worldwide phenomenon and explains disruptions like Brexit and the Yellow jackets in France, all of which are common symptoms of a fourth turning. And their end brings rejuvenation and re-birth.

This is what the authors wrote in 1997.

“During each of these previous Third Turnings, Americans felt as if they were drifting toward a cataclysm. And, as it turned out, they were. The 1760s were followed by the American Revolution, the 1850s by Civil War, the 1920s by the Great Depression and World War II. All these Unraveling eras were followed by bone-jarring Crises so monumental that, by their end, American society emerged in a wholly new form. Each time, the change came with scant warning. As late as December 1773, November 1859, and October 1929, the American people had no idea how close it was. Then sudden sparks (the Boston Tea Party, John Brown’s raid and execution, Black Tuesday) transformed the public mood, swiftly and permanently. Over the next two decades or so, society convulsed. Emergencies required massive sacrifices from a citizenry that responded by putting community ahead of self. Leaders led, and people trusted them. As a new social contract was created, people overcame challenges once thought insurmountable—and used the Crisis to elevate themselves and their nation to a higher plane of civilization: In the 1790s, they triumphantly created the modern world’s first democratic republic. In the late 1860s, wounded but reunited, they forged a genuine nation extending new guarantees of liberty and equality. In the late 1940s, they constructed the most Promethean superpower ever seen. The Fourth Turning is history’s great discontinuity. It ends one epoch and begins another. History is seasonal, and winter is coming.

……… The next Fourth Turning is due to begin shortly after the new millennium, midway through the Oh-Oh decade. Around the year 2005, a sudden spark will catalyze a Crisis mood. Remnants of the old social order will disintegrate. Political and economic trust will implode. Real hardship will beset the land, with severe distress that could involve questions of class, race, nation, and empire.

Yet this time of trouble will bring seeds of social rebirth. Americans will share a regret about recent mistakes—and a resolute new consensus about what to do. The very survival of the nation will feel at stake. Sometime before the year 2025, America will pass through a great gate in history, commensurate with the American Revolution, Civil War, and twin emergencies of the Great Depression and World War II. Every Fourth Turning has registered an upward ratchet in the technology of destruction, and in mankind’s willingness to use it.”

We don’t know about you, but a lot of that seems prophetic.

So, does that mean it’s all predetermined, and we should start building our bunkers?

We’re not convinced – the historians admit the dates and lengths of these mini-turnings is uncertain – it could be a lot shorter this time.

Perhaps the beginning of the re-birth – the first turning – is here already.

And perceptions can be made to change fast, when presented with stark reality.

You may have heard the urban-myth/story of the two vessels conversing in thick fog near the coast of Canada, back in the 1990s;

• “American voice : Please divert your course 15 degrees to the North to avoid a collision.
• Canadians : Recommend you divert YOUR course 15 degrees to the South to avoid a collision.
• Americans : This is the Captain of a US Navy ship. I say again, divert YOUR course.
• Canadians: No. I say again, you divert YOUR course.
• American Captain, a little angry now, says “ This is the aircraft carrier USS Lincoln, the second largest ship in the United States’ Atlantic fleet. We are accompanied by three destroyers, three cruisers and numerous support vessels. I demand that YOU change your course 15 degrees north, that’s one five degrees north, or countermeasures will be undertaken to ensure the safety of this ship.
• Canadians: This is a lighthouse. Your call.

Even the most dogmatic views, convinced of the right course, can change when presented with an immovable object. Perhaps even a wall.

So, could Trump be good for society?

Well recall Ronald Reagan originally inspired concern and distrust – “was he mad? Was he a cartoon character?”

The result was that the Russians couldn’t be sure and folded. The Cold war ended, and the Berlin wall came down.

This strategy reminds us of another example from 1970s TV – Inspector Colombo played by a Peter Falk. His bumbling, scruffy manner confused the guilty into making errors and getting caught.

In both cases, Reagan and Columbo, the reality was there in plain sight – yet our social biases led us to see what we were expecting to see – in Reagan, a crazy man who might start WW3 – thankfully the Russians saw it too and couldn’t take a chance.

So, what is Trumps grand plan? – using the Reagan analogy, who are today’s Russians?.. because no one thinks it’s the Russians.

We’d suggest it’s the multinational corporations. The Apples, Googles, etc. These companies are bigger than most countries, with wealth stashed offshore, together to the tune of roughly $3trillion – completely legal. They are largely monopolies, and they have become essential to our very existence. They mostly have “.INC” at the end of their name, yet they pay little US tax and look to foreign markets for their future growth.

While far from un-American, their Americanism is difficult for many to recognize.

Multinationals have always been with us – eg The East India company and Dutch equivalent VOC ruled the world in the 19th century. But recall Rockefeller and Standard Oil grew too powerful and had to be broken up in the early part of the 20th Century.

MAGA really means Make Multinationals American Again – MMAA.

We suggest this strategy is being played out employing incentives and threats. The mixture of the two is designed to encourage these large corporations to “think American” again.

Using  coercion, the companies will voluntarily direct the resources and their long term strategy towards the retention of US superpower status. We touched upon this here when looking at the US/China race for tech superiority.

Alternatively, this can be viewed as “get rid of monopolies and constrain the multinationals while we still can.”Making the .INC dry

The Trump plan looks to us to be along the lines of this;

Incentives

• first they were incentivized to bring some of their $3trn parked offshore home, via a one off 10% tax amnesty.
• Then they will be invited to build out US tech infrastructure, to make sure US wins the tech race with China and Japan. Yes, Japan is in fact a major competitor and China knows it.
• The funds they bring home will be combined in a Public/Private Partnership, with the Governments funds, received from the multinationals in the tax amnesty.
• the leveraged structure (through borrowing) will embark on the end infrastructure project and service the loans through fees and rents.

Threats

• Regulation – many companies face global regulatory scrutiny, as their stewardship of their customer’s data and their relationship with offshore entities who want the data, continues to alarm
• “Older Brother” – The US government has the option to help and support select companies, when their dealings with foreign entities become fractious, using it’s power and clout much like a big brother might do. The new EU privacy laws hold make this a common occurrence.

So what infrastructure are we talking about? – roads, bridges? – No.

The robots, and drones, are coming, and it’ll take a lot of infrastructure to make it all work – 5G, drone ports and drone-traffic control, sensors on freeways for self-driving vehicles, etc.

And this technology, together with continued expansion of globalization, will impact most jobs and every citizen.

Think privacy, trade, security, property rights – everything.

Blockchain, machine learning and artificial intelligence, crypto currencies – these are no longer mere buzz words.

The AI’s have it

For example, Japanese institute AIST have developed a robot that takes stacked drywall sheets and fits them on a wall.

Even services are not safe – eg lawyers.

In a competition where the task was to review risks contained in five non-disclosure agreements (NDAs), the AI matched the top-performing lawyer for accuracy – both achieved 94%.

Collectively, the lawyers managed an average of 85%, with the worst performer recording 67%.

When it came to speed, the AI far surpassed the legal minds, taking just 26 seconds to review all five documents compared to the lawyers’ average speed of 92 minutes.

The speediest lawyer completed the review in 51 minutes – over 100 times slower than the AI – while the slowest took 156 minutes.

The there’s the judgement of AI – who will take on a babysitter that AI recommends?

The Robots are coming

The World Economic Forum thinks automation will accelerate sharply over the next seven yrs.

From a roughly 70-30 spilt between human and machine hours worked seen today, within seven yrs – 2025, it’ll be 50-50. Tempted to extrapolate?

Personally, we don’t see it going to zero-100, and the augmentation of machines with human “watchers” means it’ll probably peak  at 40-60 in the machine’s favor.

Got a chip “in” the shoulder?

By the way, anyone heard of  a company called Three Square Market, in Wisconsin ? Last year they (voluntarily) micro-chipped 80 employees. An idea pioneered by Swedish chip maker Bio-hax, which they are selling to every country – same thing happened in UK last year. Swedish companies have been faster on the uptake. But it’s coming to wrist near you.

Any idea what year the first “chipping” took place  in the US? – 2006, when the video surveillance company CityWatcher.com injected two of its employees in the triceps area of the arm with the VeriChip.

In China, “Beijing bets on facial recognition in a big drive for total surveillance”

Societies are still in “head in sand” mode . Artificial Intelligence (AI) wasn’t discussed at all in the 2016 Presidential debates. And so far, all the academics have come up with to allow people to get income, is “Universal basic income” – more handouts.

But the big issue will be security – cyber or hacking.

Supercalifragilisticexpialidocious

No matter how much one tries to think of something memorable and impossible to guess (your mother’s maiden name) for a password, it’s all in vain.

Last year Marriott Inc acknowledged to losing 500 million (raised down to “only” 383 million) customer’s data, including 5 million unencrypted passport numbers. The hack took place over many years.

In December scammers closed schools and govt buildings with bomb threats in exchange for bitcoin ransoms.

Seems to us, the big one is coming – these attacks are likely prep for bigger attacks, or perhaps warnings to Governments what’s possible, and easy to accomplish. Expect 2019 to be the year of the cyber threat.

This time it was schools. next time it could be the electrical grid.

Will it be China ? Russia.? Or just the old-fashioned mafia ?

So, after all that, how can anyone be optimistic?

Because there are clear benefits.

Few like working. By that I mean “work” – ask anyone if the job they love is work, and they will say no. When it becomes “work” it’s no longer fun.

Our grandfathers worked almost every hour possible. They slept, woke, worked, eat, slept. They went to church on Sunday.

Our generation works about half the hours our grandfathers worked – we actually know what leisure is.

We also live about twice as long.

And this is also true in the developing poorer World.

We can travel between twice and five times the amount of distances in the same time as that generation.

And of course, we pay an infinite amount more tax than they did.

It’s never been better to be alive, with very few exceptions.

Our children, nay, we, face a change in living standards of a similar magnitude.

Our children will probably work half the hours we did. And they may even live twice as long – imagine living healthily until you’re 160!

This is the carrot at the end of the stick of challenges that I’ve discussed today.

I don’t know the answers, but no one can tell me that this is impossible, since, as Art Berg said,

“While the difficult takes time, the impossible just takes a little longer.”

 

Afterthought – the Alt-view

Obviously any controversial, and off-piste view of the way the World works, will attract the common bile of the Internet. No less these theories.

So in the interests of fairness (and to protect us from some of that bile) here’s the most scathing, but intelligent critique we’ve seen.

“The Fourth Turning also, like an astrologer or fortune teller, plays fast and loose in shuttling between its big claims and specific evidence. Its contentions are vague enough that it’s easy to justify them with a handful of illustrative examples, with contrary cases simply omitted. It also mistakes symptoms for causes.”

”Autodidacts like Strauss and Howe—or Bannon—tend to fall in love uncritically with the seductive insights they stumble upon. They tend to disdain the reasons that more expert students of their subjects may offer for rejecting their overly simplistic claims. The penchant for grand explanatory theories frequently reflects an inflexibility of thought, a resistance to contrary evidence, an eagerness to fit everything into an all-encompassing system. But successful policy making depends on intellectual nimbleness and pragmatism, on being able to revise your ideas based on new events and information, on understanding history as a set of contingent choices. The type of person enchanted by The Fourth Turning’s overly neat diagrams and mechanistic arguments, who isn’t compelled to pick apart its glib generalizations, is not someone whose intellectual instincts encourage confidence.”

And please note, these are all just Inflated Opinions of the authors. They should not knowingly be construed as investment advice.