It was the early 90s.
We had a Goldilocks economy.
We even had a budget surplus!
When you are at the top, the only way to go is down.
I was in my third decade of thinking about how the world actually runs - which boils down to attempting to understand human behavior. A critical part of my gaining whatever understanding I have comes from the realization that facts and truth matter very little. What humans feel about things determines the future. (And, as I will discuss later, that makes the future, plus or minus a black swan here and there, approximately deterministic - which enabled me to have a very high hit rate on my forecasts.)
I do not know whether I am related to the great 19th century statesman and orator, Daniel Webster. However, I was strongly influenced by a story about him in which he successfully defended the defendant in a trial and then successfully prosecuted the appeal on behalf of the plaintiff.
From that time forward, I have been determined to understand an issue such that I could argue it from either side.
I have spent a lifetime pursuing the goal of attempting to understand. I began by learning about the physical universe, based on my masters of electrical engineering degree. I then turned my attention to humans – to history, philosophy, religion and psychology - to attempt to understand human behavior. I have read hundreds of books on these subjects over the decades and have attempted to integrate the knowledge I gained into a conceptual framework about the way humans, in the aggregate, have created cultures, institutions, nations and empires. Since essentially all the many humans, cultures, institutions, nations and empires of history no longer exist, that conceptual framework must include an understanding of why almost all are gone, except for those which have been relatively recently created. (Interestingly, it is some religions which have persisted the longest. Hinduism, which has evolved over time, goes back into the mist of pre-history, Judaism perhaps began around 1800 BCE and Buddhism dates from the sixth century BCE.)
My studies and decades of work life gave me some success in my understanding of the physical world. However, I despair of ever understanding the incredible complexity and variety of human behavior. I did, however, begin to gather some broad generalizations that describe human behavior at a high level. These thoughts can best be considered as a framework within which to contemplate human behavior and therefore the evolution of human institutions. These thoughts revolved around the following principles.
Before I detail the principles, I would like to list fundamental, underlying axioms about the physical world:
Resources are scarce.
Over a reasonable timeframe, life is, at best, a zero-sum game. The ecosystem is bounded and the second law of thermodynamics exists. Until and unless we can incorporate other planets into our resource base, we are depleting a closed system.
Life is not fair. There are outsized returns to the strong, the swift and the cunning. And to the small and numerous, such as viruses and bacteria.
Humans have increased in numbers and in their ability and inclination to consume and transform resources to the point that they have become a plague species – a proposition we will explore further in this discussion.
An extraordinary amount of physical resources and energy are required for humans to keep reality at bay.
Following are my “laws” that provide a framework for thinking about human nature:
Humans are very creative, but will take all trends to their extremes. In pursuit of progress and novelty, each chain in a trend or process becomes the foundation for building the new and the novel in an endless progression. These extremes are not sustainable and facilitate the destruction of cultures, institutions, countries and empires. This profound tendency is captured in quotes, such as Eric Hoffer’s “Every great cause begins as a movement, becomes a business, and eventually degenerates into a racket,” and Karl Marx’s “history repeats itself, first as tragedy, then as farce.”
In a Jungian sense, everything we have created is a projection of our inner nature – governments, institutions, cultures.
All human endeavors and creations have “good” attributes and “bad” attributes. When creating a culture, it is important to determine what its values and goals are and to understand the implicit and explicit tradeoffs required in the decision-making toward achieving those goals. There is no decision that does not include tradeoffs.
The average human has an IQ of 100; half the human race has an IQ of less than 100. According to the Myers-Briggs classification of human communication (which may or may not be entirely valid, but is indicative), approximately 40% of humans think employing an analytical component, approximately 27% include a conceptual component and 10% include both. Not only do the vast majority of humans not understand complexity and nuance, they cannot understand complexity and nuance.
10-20% of people will and do believe anything, no matter how "obviously" erroneous.
You cannot do just one thing. Every decision can affect multiple people and institutions. Unintended consequences of every action are inherent in most human decisions.
The most important question in decision-making is, what are my goals and objectives? The second-most-important question is, compared to what?
Contrarianism is a useful rule of thumb. Whenever a large majority of a group strongly holds an opinion, it is either wrong or will change significantly.
The road to hell is paved with good intentions. Humanity’s desire for the good and the nice – for puppies, unicorns and rainbows – is at odds with the “brutality” of nature, variations in human behavior and the reality of the laws of thermodynamics.
Nature abhors a vacuum. When people have their needs met and have time on their hands, they will fill that time. Some will fill it with reading; some with video games; and some, particularly the well-educated, upper-middle-class-and-above, will fill it with the hoped-for purpose of social issues.
Humans will not agree, and are genetically and culturally disposed to be different in a significant variety of ways. This sets up a perpetual, unstoppable dynamic of change in culture and institutions and disagreement among its participants. This change is well expressed in the Hegelian, thesis, antithesis, synthesis (however, as a process, without teleology). Or in the concept of yin, yang and the resolution of opposites. At times, it is expressed in riots, revolution and war.
Because humans have differing and often opposite opinions, there is a social and political version of scientist Isaac Newton’s third law. His third law of motion is, “for every action there is an equal and opposite reaction.” The social / political equivalent is, every political or social act will meet resistance; the larger, more forceful or more meaningful the act, the greater the magnitude of the resistance.
History unfolds in cycles and not in straight lines. However, as Mark Twain is said to have noted, “History does not repeat itself, but it often rhymes.” This rhyming is the expression of a constant human nature in the context of a changing history, technology and social structure.
One of those historical cycles is from rational to romantic and back again. We are in a romantic age during which justification is primarily based on feelings and not facts.
Humans require and make myths. Myths are stories that need not be factually true, but which embody eternal truths. (The loss of traditional myths in the modern age and their replacement by politics represents a profound change in the foundations of human behavior.)
A quest for novelty becomes an increasing component of human motivation as income, security and leisure time increase.
In the short term, and often in the medium and long terms, denial and reality avoidance significantly contribute to peace of mind and quality of life, making them dominant in human thinking and behavior. Reality avoidance is primarily facilitated by wealth.
There are times when things fall apart and humans fall into dark ages and world wars. Although homo sapiens is a violent species, extreme collapse and widespread, extreme violence are the exceptions.
Not every problem has a solution.
As a result of this thought process and after having laid the groundwork in the 70s and 80s, I began developing a view in the early 1990s that the U.S. would enter a cyclical, and potentially a secular, decline in the early 2000s. I began an email list and later a website. You can join me at http://pastsellbydate.com to discuss and help to further develop these thoughts.
In the late 1990s, I read The Fourth Turning by Strauss and Howe, which expressed some of my thoughts much better than I could (although I was not, and am not, developing my thoughts in the context of generations as Strauss and Howe did). Strauss and Howe developed our mutual themes that trends lead to extreme excesses that must be resolved prior to a rebirth or regeneration, creating a new cycle – a new First Turning in their view. But also that the current Fourth Turning, which began in 2008 and should last about 20 years, will be a time of destruction of the old, and an exceedingly dangerous period of time. While not the way to bet, the probability of calamity and war increases during a Fourth Turning as the old is destroyed, cultures and institutions become unstable and the new is created.
The advent of the Covid-19 pandemic has created a Fourth Turning on steroids and arguably accelerated many of the trends that were already under way.
Our old world is necessarily being destroyed.
It is being destroyed because the United States, as the world's guarantor of commerce and peace, is crumbling underneath a deadly burden of debt and an existential loss of purpose at all levels of society.
It is being destroyed because of the Energy Crisis.
It is being destroyed because human interactions that dominated the millennia but have been generally dormant for 70+ years are reasserting themselves. War and mercantilism. Power grabs for resources and land. Only this time, with nuclear weapons added to the mix.
It is being destroyed because globalization is coming unwound, and globalization was another key basis for our prosperity.
But this is background to my journey.
It all began with my reading of history, looking at the rise and fall of empires, trying to see where the United States fit in the process ...
And with Medicare.
Plato understood ... our Founders understood, that democracy has many challenges. Plato actually placed democracy only fourth in his hierarchy of the five forms of government: aristocracy, timocracy (possession of property is required to hold office), oligarchy, democracy, tyranny.
Our Founders believed strongly that democracy could survive only when combined with civic virtue, a qualification we have ignored.
Aristotle said that democracies degenerate into depotisms.
Democracy can be frail. It can be unstable. It is subject to the call of the charismatic leader. But the most important challenge of democracy comes when its participants come to understand that they can vote themselves goodies. And then, they begin to demand goodies without cost.
When I read the Medicare Trustees' Report in the early 90s, it became clear to me that we were voting ourselves goodies while ignoring the cost. There was no good outcome from this process. Either the country would destroy itself through inflation trying to meet its obligations or it would renege on its obligations, leading the way to revolution.
The national debt in 1992 was $4.1trillion or 61% of GDP. In my wildest dreams I did not understand that the Fed would be overcome by hubris and turbocharge the decline. In 2021 the national debt was $29.6 trillion or 124% of GDP. Neither of these numbers include the massive, off-balance-sheet liabilities of Medicare and Social Security.
In 2021, the combined, unfunded liabilities (present value of 75-year negative cash flows) of Social Security and Medicare were $163 trillion, some five times the national debt.
And, I will not be discussing unfunded state and municipal pensions, which will also probably default.
In my mind, our fate was sealed. The task at hand was to try to understand the implications.