Substrate

Forecasts rely on knowing when something will occur. Expectations are an acknowledgment of what’s likely to occur without professing insight into when it will happen.

Find something that’s important to you in 2019 – social, political, economic, whatever – and with a little effort you can trace the roots of its importance back to World War II. There are so few exceptions to this rule it’s astounding. To me, the war is fascinating to study not because of what happened, but what it went on to influence. What are the other Big Things – the great-grandparents – of important topics today that we need to study if we want to understand what’s happening in the world? The three big ones that stick out are demographics, inequality, and access to information. As America’s offices diversify faster than its retirement communities, the minority-white labor force will be supporting the majority-white retirees. The point is that we can’t just look at how rich the top has become, or at how stagnant the bottom is. It’s the gap between the two that causes one group to push back against the other. It’s almost certain that the educational system will be upended. The current arrangement of needing a college degree in order to have a good chance at becoming and staying middle class, but taking on life-changing amounts of debt to do so if you don’t have family assistance, can’t last. I have no idea how it ends. But there’s practically no chance that in 30 years the story is, “Everyone just kept taking on education mortgages at age 18, tuition kept rising at double the rate of inflation, and it was all OK.” It’s going to break somehow. The range of political opinions has always been extreme, but what we’ve seen over the last decade is what happens when the warm blanket of ideological ignorance is removed. The world is driven by tail events. A minority of things drive the majority of outcomes. It’s one of the most important concepts in investing, where a few positions may account for most of your lifetime returns.