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You Can't Become Rich In Your Pocket Until You Become Rich In Your Mind | ||||
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Will the Last Investor to LeaveWE WILL BE ABLE TO SAY, WE WERE THERE AT THE BEGINNING Will the Last Investor to Leave the Twentieth Century Please Turn Out the Lights Revolution is not merely an acceleration of economic growth, but an acceleration of growth because of and through economic and social transformation. Eric Hobsbaum The person who tries to predict when each ocean wave will break on the shore gets nowhere, but the person who thinks about high and low tides well, he just might come up with a theory of considerable predictive power, wrote authors William Strauss and Neil Howe in their book Generations.1 Strauss and Howe were the first to define the unique personalities of four generational groups that can always be found in any given social and historic time period. Strauss and Howe belong to the school of cyclical theorists who recognized long ago that civilizations do not advance in a linear fashion but must be explained in terms of recurring cycles. Others who could be classified as cyclical theorists include Frank Klingberg and the Arthur Schlesingers, Junior and Senior. So we are far from being the first to study recurring historical trends, but as far as we know, other than George Soros we are the first to explain the behavior of the financial markets in terms of their cyclical historic and cultural contexts. Because we are breaking some new ground, it seemed prudent to test our conclusions about the future of investing against the body of work done by the academic cyclical theorists. What we found reaffirmed our conclusions about the present condition and the future promise of the financial markets. First of all, most historians are familiar with the peculiar fact that events pivotal to the development of the United States have occurred every 80 to 90 years. The cycles begin at the roots of American history. This remarkable pattern has inspired historians to look further into the rhythms of history, identifying other trends and events that occur with regularity. The body of work produced explains many aspects of the American experience, but Strauss and Howe have taken it a step further. They embarked on an ambitious effort to explain not only the existence of recurring cycles, but also the human behavior that creates them. What they learned offers important insights into what we can expect from the financial markets. To appreciate this, a basic understanding of the work of Strauss and Howe is necessary. In their book, Strauss and Howe have defined the four generational types, coexisting in any given period, as follows: Idealist Generationcomes of age inspiring a spiritual awak ening; fragments into narcissistic rising adults; matures into risk-taking rising adults and emerges as visionary elders during the next secular crises. Reactive Generation grows up as underprotected and criticized youths during a spiritual awakening; matures into risk taking, alienated rising adults; mellows into pragmatic midlife leaders and maintains respect (but less influence) as reclusive elders. Civic Generation grows up as increasingly protected youths; comes of age overcoming a secular crises; unites into a heroic and achieving cadre of rising adults; sustains that image while building institutions as powerful midlifers and emerges as busy elders attacked by the next spiritual awakening. Adaptive Generation grows up as overprotected and suffocated youths during a secular crisis; matures into risk-adverse, conformist, rising adults; produces indecisive, arbitrator-leaders during a spiritual awakening; and maintains influence (but less respect) as sensitive elders. In any given cycle these four basic types take on their own personality. In our present cycle these are described by Strauss and Howe as follows: A description of how these four personality types react to events is instructive in exploring the resistance we see today to the inevitable rise of a new dominant investment system. We will rely on Strauss and Howes descriptions and insert our own analysis of how the characteristics of each will affect the unfolding of the new investment culture. CIVICS/GIs These individuals fought World War II and have left such a colossal lifelong imprint on Americas political, social, and economic institutions . . . that they tend to see older and younger generations as ineffectual facsimiles of their own.2 This group comes of age believing that history does, or should, move in orderly straight lines. They detach themselves from new cultural trends but retain an active role in public affairs . . . [and] they seek institutional power and economic reward.3 ADAPTIVES/SILENT These types tend to respond ambivalently to anything they confront. 4 They might try patching our new theory together . . . with other competing theories to yield a consensus or compromise perspective. An instinct for leadership may not be [this] generations strong suit.5 Later in life, where they once took cues from Civic elders . . . now they adopt the agenda of younger idealists.6 CIVICS AND ADAPTIVES: TENDING TO RESIST THE NEW MARKET CULTURE The civics/GIs, who see history moving forward in a linear fashion, would not take to our idea that we are living through a cyclical replay of an investment pattern that occurred a century ago. Nor would they take to Divorcing the Dow and admitting that companies that they grew up with and indeed a whole way of doing business have outlived their usefulness. Some of these civics/GIs are still powerful figures, such as George Bush, Sr. Many more control vast amounts of wealth. We can expect this group to resist any effort to help the companies of the new dominant investment system prosper. It is more likely that this group would pull out the stops to support the companies of the old dominant investment system both politically and financially. The adaptive/silent group can be expected to follow the lead of the civics/GIs until the civics age to a point where they are beyond influence. This means that at first the adaptives will join the civics in their skepticism of the new business models and the companies of the new dominant investment system. Indeed, we will be well along in the formulation phase before they will be willing to admit that it even exists. But the tide will turn. The adaptives are flexible and culturally sensitive.7 They can eventually be expected to accept the new invest ment culture that will be readily adopted by the next two generational types. IDEALISTS/BOOMERS This group has no problem recognizing how other generations have personalities very different from [their] own. 8 This group believes that they are possessed of a unique vision, a transcendent principle, a moral acuity, more wondrous and extensive than anything ever sensed in the history of mankind. 9 This group was represented in the nineteenth century by Ralph Waldo Emerson and Henry David Thoreau. Typically they exert their most decisive influence on history later in life.10 Examples are Benjamin Franklin, Douglas MacArthur, and Franklin D. Roosevelt. Producing leaders of great moral authority, idealists impose their will sternly on people of all ages. . . . From the young, they seek personal obedience and respect more than public power or reward.11 REACTIVES/13ERS Todays reactives experienced the Consciousness Revolution of the late 1960s and 1970s from a childs perspective . . . and had to grow up fast in a world of parental self-immersion or even neglect. [They are] tired of gauzy talk about Woodstock.12 As they rise through adulthood they engage in social and economic entrepreneurship. They accept wide gaps in personal outcomes . . . [and] their ablest peers become societys most cunning, pragmatic, and colorful public figures military and commercial managers of great realism.13 These include George Washington, John Hancock, George Patton, and John D. Rockefeller. IDEALISTS AND REACTIVES: IMPLEMENTING THE NEW MARKET CULTURE To the idealist/boomer, the new market culture is a natural and obvious evolution. The new dominant investment system provides a way, at last, to reconcile the opportunities of capitalism with the cultivation of a healthy environment and a fair and vital society. For them, the ideas espoused in this book will immediately make sense, and the future will click into place. They will eagerly embrace, and want to know more about, the companies that represent the new class of dominant investments indeed, the idealist/boomers have created and are running many of them. The reactive/13ers will appreciate the new dominant investment system for the opportunities it presents for personal gain. These natural-born entrepreneurs will be eager to invest in Digital Dow2-type companies. Additionally, this group is the work force of these companies. Reactive 13ers were educated in, and are spending their careers in, the digital age. Acclimated to the digital marketplace, they see opportunities where older generational groups may not. As the formulation phase unfolds, they can be expected to come up with ingenious ways of taking commercial advantage of scientific advances. Their practical natures will have them creating solid institutions and supporting them personally through investment in the financial markets. The idealist/boomers and the reactive/13ers will create the success of the dominant investment system. In fact, that these two groups emerge when they do may explain the cycles of the dominant investment systems themselves. These two generational types developed the innovations of the last two incubation intervals the reactives in the nineteenth century and the idealists in the twentieth. It is natural for the characteristics of these two groups to be reflected in the personalities of the dominant investment systems they created. |
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