NEIL HOWE: Hello?
GRANT WILLIAMS: Hi, Neil, it's Grant. How are you?
NEIL HOWE: I'm doing great, Grant. How are you?
GRANT WILLIAMS: Good, good, good. Listen, I've been doing thinking about all the big changes that seem to be happening all around us right now. And I keep coming back to this idea of cycles in The Fourth Turning. I don't know if you're around next week, but I'm going to be in your neck of the woods, and I'd love to come and talk about you.
NEIL HOWE: Well, I'm home all week. Come on by and if you're up for it, we can take a little trip to DC, and I can show you what some other fourth turnings have looked like. There is plenty about the future, you know, that we can see from looking at the past.
GRANT WILLIAMS: All right, great. I'll see you next week.
NEIL HOWE: OK, look forward to it.
GRANT WILLIAMS: With every passing day, the world of finance seemingly becomes more complex and harder to figure out. Financial information is distilled into soundbites for an increasingly time-poor audience. When more than ever before, a deeper, less superficial understanding of the many factors affecting the global economy is required in order to fully understand both the risks and opportunities. In this series, my goal was to travel with people whose understanding of a set of financial situations dwarfs my own, and to take the time needed to dig beneath the headlines, and improve my knowledge of both the situations in question, and the investment implications that surround them. And the best way I know I'm doing that properly is by going On the Road.
In recent years, the world has seemingly been steadily pulled apart by forces either too subtle or too momentous to discern. Tensions have risen, conflict has increased all around us, and investing has become more complicated than ever. Much of that conflict seems to stem from a generational change, as the baby boomers begin to retire, and draw a curtain across their time in power, and the millennial generation begins to challenge the status quo.
Everything we see unfolding today was predicted by Bill Strauss and Neil Howe's masterpiece, The Fourth Turning. And so today, I'm traveling to Great Falls, Virginia, to spend the day with Neil, and to try and understand what the raging generational battle for power in America and beyond might mean for the world in the years to come.
Well, Neil, thanks for having me out to this fantastical corner of the world. It's so beautiful out here. Driving out here from DC, it reminds me of Connecticut, where I used to live. And I have such fond memories of the trees. And just the perfect time to come here to talk to you about the changing of seasons. Because so much of what's gone on in the world today is being built around politics, and you can see the generational forces at play. And I thought, who better to come and talk about this stuff because I'm trying to get a handle on it is very difficult. So thanks for agreeing to come to spend some time to kind of pick through this stuff.
NEIL HOWE: Well, Washington, DC, is an interesting city. Unlike many countries, our political capital is not our commercial capital. And so what it means is that you really don't have to drive very far outside DC. Were you amazed?
GRANT WILLIAMS: It was incredible. It's like, 25 minutes, and you're--
NEIL HOWE: And you're out in this bucolic wilderness out here.
GRANT WILLIAMS: So New York, not so much.
NEIL HOWE: Not so much. Connecticut, a little bit further away further away.
GRANT WILLIAMS: A little further away. But look, we're here in the center of the political universe at what is an extraordinary time to be alive and to be watching this whole thing unravel, perhaps unfold is a kind of term for it. So I really want to talk to you about the cycles of the generations, which you Will Strauss wrote this amazing book, The Fourth Turning, on which I've recommended and bought countless copies for people. I'm a big reason for that thing being on the best sellers list.
But it's such an important read. And so what I'd love to do is just get some background on how that project came about, how your interest in this whole thing developed, because it's extraordinary.
NEIL HOWE: Well, it dates back many years. I mean, you know, Bill Strauss and I, who co-authored Generations and The Fourth Turning, and a number of other books as well on different generations-- we actually did a book on generation x that came out in 1993 called The 13th Gen-- Abort, Retry, Fail-- an interesting one. And then a book on the millennial generation, Millennials Rising in the year 2000.
But the two of us met in the 1980s. And we started our first book, Generations, which was in some ways, the foundation book of this whole project. We had a different way of telling all of American history. It was an absurdly ambitious idea. We wanted to tell all of American history as a series of generational biographies. And we were amazed-- we looked, no one had ever done that before. No one had. You know, everyone tells history as the history of everyone in every age bracket every year, right? So it's typically midlife people, because they're the leaders and the parents, right? So it's typically people in their 50s. Well, in 1851, they were all doing this, 1852, they were all doing this, you know?
But if you think about-- and I often characterize this as looking at age on the y-axis and time on the x-axis-- we don't live horizontal lines. We all live diagonal lines, right? We grow older as time goes on. And no one had ever written a history following the diagonal, following the life as we actually live it.
GRANT WILLIAMS: Which is hard to believe.
NEIL HOWE: It is kind of amazing to believe. And so here's why it was so challenging. Because history is written about these different age groups, we had to like, break everything down and reassemble it. So we had to take for instance, Abraham Lincoln's generation. We had to look at, well, what were children doing in the 18 teens and '20s. What was youth doing in the late 1820s, you know what I mean? And what were old people doing in the 1860s and '70s or '80s. And reassembling all the parts in the one collective lifespan, what we call a generation.
And so what we found, after following this method, is that, yes, different generations have completely different collective experiences they learn completely different life lessons from what they've been through. Typically, one generation who's involved in a war, the next generation of children during the war and take a completely different set of lessons from that experience.
GRANT WILLIAMS: But was it war that tended to be the most common shaping force until I guess, the boomers?
NEIL HOWE: Say that the two most extreme kinds of moods that are very important in shaping generations would be on the one hand, not just wars, but constitutional crises. Things like the Civil War, where you're not just fighting a war, but you're also kind of reconstituting all of government, and settling enormous political issues that everyone's involved in.
And on the other hand, are something that we've had a whole school of historians pay attention to. And these are awakenings. These are religious and spiritual revivals. And moments at which we revive the culture.
So our story gives as much attention to the history of religion and culture as it does to the history of politics, and war, and nation reshaping from kind of the statesman point of view. But here's the next thing we found-- and that was the most exciting. It was the thing that kind of changed our book. Was that not only of these generations each different from each other. But that these differences followed a pattern. And that, to us, was incredible. Meaning that certain kinds of generations from a total pure personality point of view always followed other kinds of generations.
And that, in turn, when you think about generations obviously are shaped by their location and history what's happening-- so if there's a pattern of generations, that almost implies a pattern to history itself. And that connects it back to something that people of often observed about American history. Not just American history, but much of modern history, and certain areas going back even to the ancient world, as well, that there are interesting patterns of history.
One thing we see in American history, for example, is that we've seen this regime changing political sort of total wars for dominance in sort of the Anglo American history about every 80 to 100 years. In the American context of course, this goes from the Glorious Revolution to the American Revolution to the Civil War to World War II and the Great Depression and where we are today.
GRANT WILLIAMS: Right. But just going back to this project, when you talk about this great realization that history went in cycles, was this something that having found it then changed your entire outlook? Or is it something you were almost looking for and then found, and managed to look drop that onto history?
NEIL HOWE: It's interesting-- we weren't looking for it. Our original project was simply to write about how different generations lead the country differently as they become leaders, and endow the country with different things. Are concerned about different things. We did not go into this thinking there was primarily interested in any kind of cycle is this. The cyclicality, the rhythm of it was really serendipitous. It was just discovery.
If you look at how humans look at history, there are basically three different ways that people look at time, social time. One is chaotic. Anything can happen anytime. It's just random. There's no progress, there's no regression, there's no anything-- just prepare for anything. And that's a very obviously, kind of a nihilistic point of view. It's hardly a philosophy. It's just sort of that's kind of the dark side. That's what you don't expect, right? It's an acknowledgment of unpredictability. And I'd say from Generation X, I get a lot of that. Just skeptical of everything.
But I would say the two key ways of actually bringing order to history as opposed to acknowledging randomness, is thinking of history as a cycle and thinking of it as linear. And I would say that view of history as progressive is now a big competitor to the cyclical view. And I'm not-- I'm not opposed to progress at all. But here's one our central thesis of our book-- and we talked about this in Generations. We also talked to it again in The Fourth Turning.
And that is, interestingly, as we believe in linear history, we can iron out all those cycles. Weather cycle, forget it. I'll stay inside. You know, dark-light cycle-- no, we've got lights. You know, we'll just illuminate everything. So all of those nasty cycles we can smooth that with technology. But interestingly, what we found is the more we try to smooth them out, the more we often exacerbate the very kinds of cycles we're trying to solve. And I mean, a great example is the business cycle.
GRANT WILLIAMS: I was just thinking exactly that thing.
NEIL HOWE: There was no business cycle in pagan times.
GRANT WILLIAMS: Right.
NEIL HOWE: Well, why? Because business cycles are always technology. You're building things that last. You have a capital cycle that lasts over time. Your optimism at this point results in investment in that point. We didn't have this problem before you had industrial.
So in other words, our effort to build things that last over time actually give rise to cycles, right? We have traffic cycles. You have consumer products.
GRANT WILLIAMS: You have business cycles. We desire to smooth out those cycles. It's fascinating to me, because as I said, it's so clear when you look at history, that these cycles exist. And so what is it that drives us to try and smooth them out?
NEIL HOWE: Control. Hubris.
GRANT WILLIAMS: But particularly with reference to the business cycle, because this is key, I think. It's picked up pace since the '80s with the Greenspan Fed. This idea of hubris and control. And I've never met Alan Greenspan, but I've met plenty of people that have. And when you mention the word hubris, it's something that resonates with every description I've had of him as a person.
And this idea that we can control this. We can control a naturally occurring cycle that is built upon the hopes, and dreams, and mindsets of however many people there are inhabiting the Earth at the time are contributing to that business cycle. Surely, that's completely fallacious?
NEIL HOWE: Well, you know, I certainly think it is. And I say this-- the broader you construe the cycle, the more fallacious it is. In other words, there's some narrow sense in which you may be able to control the cycle. But typically, what happens is more broadly construed to give rise to-- because the very act of hubris means that you're very overconfident at doing that will lead to something else that will go wrong. Everyone fusses over the Fed-- the Fed and central banks. Well, the yield curve, the steepness, and the inversion is all the Fed.
No-- forget central bankers. Just look at the real dynamics of the business cycle. What happens after a recession? Lots of liquidity. Still lots of fear. Interest rates are certainly lower than year end. But suddenly, people being acquiring new confidence. People start issuing a lot of new long term debt, because they have new long term projects. They have projects during the most recent recession they weren't doing, they got to catch up.
So you can imagine quickly. And then people will invest in those things because near-term rates are really low. These rates are much bigger, they're going to make more money. And it looks like that's not going to change for a long time. So everybody locks in. And so you can imagine-- and as this thing begins to speed up-- so you know, more confidence begets more confidence.
You've got more people get employed, more people start spending. You get all these positive feedbacks. And then ultimately, you have credit expansion that comes along with it, then people begin to fear inflation that's coming along with that. That also pushes up the long end of the credit market.
So the point is that you can see how early on in the business cycle a steep yield curve is what you expect. Then go to the end of the business cycle. What happens? All that risk is built and all the instruments now. Everyone's already employed. And everyone begins to feel that today is actually much better than the future, right? And so everything begins to tip this way. And as it tips this way, of course, then banks go out of business, or they can't really do much because there's not they can't transform maturities anymore. So there's nothing really in it for them to land.
And I often tell people, one interesting way to actually track the steepness of the yield curve is a very simple indicator that the conference board tracks. And you could look at it on any Bloomberg terminal. It's just take what consumers think about the economy today minus what they think about the economy six months or a year down the road. Early in a business cycle, much better tomorrow than today. Late in the business cycle, much better today than tomorrow. And that exactly tracks this steepness of the curve.
Central banks just accentuated, which is actually a great case of us trying to stop the cycle by accentuating the cycle.
GRANT WILLIAMS: Exactly right. But this is really interesting. When you talk about that, and you describe the business cycle so simply as, clearly, we all kind of innately understand that that's how the whole thing works. The very idea and the hubris-- I mean, you picked the exact word-- of inserting a body to try and manage that to what? To soften the downturns. OK, but to your point, we've been through all these downturns, they always end in exactly the conditions you describe, which is the green shoot is the spring into the summer. It all happens.
So to this idea that we need that body in there to do that-- and more importantly, in the context of today, given what they've done, the damage they've done to that business cycle-- because what they've essentially established is all those conditions that you described happen at the end with low rates, and people were able to borrow money-- they forced that upon a world that wasn't really ready for it. Because it hadn't gone through that cleansing process post '08. How much damage do you think that does to the cycle?
NEIL HOWE: I'm kind of the amen chorus here. I mean, I think it accentuates it. And you know, Hyman Minsky, who became very popular, I think, after 2008 in the GFC kind of kept it in the closet for many years.
GRANT WILLIAMS: Paul McCulley brought him out the closet. As only Paul can.
NEIL HOWE: There you go. But I think he really put a lot of focus on the notion of confidence itself.
GRANT WILLIAMS: Yeah.
NEIL HOWE: And the notion of-- in other words, low volatility. And the idea of risklessness in itself encourages risk. And so you really see in that framework, almost the necessity of one aiding and abetting the other.
Now to go from this business cycle context to a larger generational context, you can see what the analogies are, right? Imagine an entire generation raised at a time without conflict, without risk. What kind of lives are they likely to lead? What would they assume that the prior generation didn't assume? And that's why generations are important. Our location in history shapes our attitudes, our behavior.
And the key for us is acknowledging how that shaping young is going to shape how that generation behaves the rest of its lives. And one of the fascinating keys here-- and this is really to bring into focus-- you know, boomers is that this kind of generation is so much of a pattern throughout history. Certainly through American history. These generations raised just after a crisis, invariably come of age during the great awakenings. And late in life as senior leaders take the nation into and through the next crisis. And that's how to tie history together. And by the way, it's a great way to teach history.
GRANT WILLIAMS: One of the big reasons that I wanted to come here to talk to you was the fact that we seem to be at another one of those junctures. You know, everything you've just described is in place. And as lovely as your porch is, and as beautiful as