In the midst of Silicon Valley’s technological revolution, Sam Altman spent $35 million experimenting with Universal Basic Income.

But why would a budding tech superstar, the man behind the rise of AI and ChatGPT, spend so much time and money on such a project?

The goal was to explore potential solutions for several societal and economic issues, including income inequality, job displacement due to automation, and AI.

The experiments failed, however their very existance is the canary in the coal mine.

They are alerting us of what is to come and suggesting that there are no easy solutions. Even throwing money at people will not be enough.

And this brings us to today's topic and, that we are speed racing towards a precipice.

Even though today’s Economy appears strong, we ironically face a dire economic situation riddled with deep-seated issues.

Here is a brief overview:

• Incomes: No real wage growth since the 1980s.

• Affordability: Real things of value, like housing, education, and healthcare, have become unaffordable. The average home in the US is now ~$420,000.

• Exploding Debts: To offset lower income and higher costs, all types of debt have soared (personal, corporate, Government)

• Automation & Tech: AI and Tech will continue displacing jobs and putting downward pressure on wages.

• Shifting Demographics: Americans are getting older, and there is no big young generation to take over.

• Infrastructure & Cost Basis: The cost to repair old and failing infrastructure is largely prohibitive. The result is that crumbling infrastructure acts as a drag on the Economy.

• Climate Change: The frequency and devastation of Natural Disasters, such as Wildfires on the West Coast, Hurricanes, and the future of Sea level rise, pose an enormous threat to our Economy. We need a way to build and fix infrastructure cheaply.

• Systemic Risks: Unlike the old Economy, today, everything is intertwined and interdependent, increasing the likelihood of a Black Swan event like COVID-19 and its impact on the entire system.

For many Americans, the long-term view is not good, and perhaps this is why so many of them voted for change.

In this article, we explore the depths of our current situation and how we can potentially come out ahead.

Here is what is coming:

1. Part 1: Population, Credit & Growth

2. Part 2: Headwinds vs. Tailwinds

3. Part 3: Solutions

4. Part 4: Incomes & UBI

5. Part 5: Black Swan Events & Risk

6. Part 6: Navigating Path Forward

7. Conclusion

By the end of this deep dive, you should have a clear understanding of where we are currently, what to look for, and how to navigate your way forward.

Part 1: Population, Credit & Growth

In previous lessons, we established that GDP Growth = Productivity + Population + Credit. This framework helps us analyze where future growth could come from in the face of these challenges.

We need to grow ourselves out of this mess. We did this in the 1940s and 1950s. Growth paid for our huge debts incurred during WW2 raised all of our boats and improved our quality of life.

But where could such growth come from today?

Let's examine each component of our growth equation.

1) Population & Demographics

It can't come from population growth.

The US has a demographic pyramid with two massive generations that can support each other: Baby Boomers and Millennials. However, after the Millennials, the following generations get smaller and smaller.

In the 1950s, we were in a Baby Boom, and today, we are in a retirement boom. About 10,000 Baby Boomers retire every day.

This shift from highly productive members of society to retirees who collect Social Security and Medicare puts an enormous burden on the system because there are more old people collecting payments than young people paying into the programs. As a result, these programs run bigger and bigger deficits.

Currently, these two programs account for 50% of Government spending and are growing yearly.

Unlike the 1950's, the demographics here are working against us. Immigration, which has historically helped the US stave off demographic decline, faces political headwinds with the new conservative Government focused on deportations and tighter borders. This makes population-driven growth unlikely in the near term.

2) Credit: Fiscal & Monetary Challenges

We have two remaining options to get out of this mess: Productivity Growth and Credit. Using credit as a solution poses significant challenges because it requires fiscal responsibility.

Tightening the Belt

The first way is to lower spending and increase taxes. Both of these are political suicide. Raising taxes is not popular, and neither is reforming entitlements.

The US Budget Deficit is $1.9 Trillion. The budget shortfall of Social Security and Medicare accounts for a large portion of the total budget deficit. So, even cutting these programs entirely does not solve the issue. At best, we can reform these programs, but reducing payments to retirees can have many negative externalities.

What about reducing the size of the Government?

How big is the US Government anyway?

In total, there are roughly 23 million government employees, and the majority of these employees are at the local level. This includes firemen, policemen, post office workers, federal highway workers, hospital workers, etc.

The Federal Government has only 2.9 Million Employees. To put this in perspective, Walmart has 2.1 million employees worldwide.

Over the years, local governments have grown; however, the growth looks bigger than it is. When adjusted for population growth, we are actually seeing a decline in their size.

Lastly, we can look at total Government spending. US Government spending accounts for 36% of GDP. To put these numbers in context, UK Government spending is 45% of GDP, Germany is 48% of GDP, and France is 58% of GDP.

The 3% Solution

In his analysis of debt cycles, Ray Dalio proposes the "3% solution" - reducing the budget deficit to 3% of GDP. This would mean cutting the current deficit by more than half.

According to Dalio, this approach would:

1. Naturally, lead to lower interest rates as market confidence improves

2. Create room for refinancing existing debt at these lower rates

3. Break the death spiral of borrowing to service existing debt

Implementing this solution requires a combination of increased tax revenue and decreased spending and lower interest rates. The critical factor, Dalio emphasizes, is timing - acting quickly while the economy is strong, which provides more flexibility and requires less severe measures than waiting until a crisis forces action.

Currently, the Department of Government Efficiency (DOGE), run by Elon Musk, is looking to solve this problem.

At best, what we can expect is a mixed approach where they address each category in a meaningful way:

Major Entitlements: Social Security & Healthcare (50% of US Gov Spending)

• Push out the retirement age to ~70

• Update qualifications on who receives benefits

• Reduce or eliminate some of the benefits for Medicare, Medicade & SS.

Discretionary Spending (50% of US Gov Spending)

• Reduce the number of Federal Employees and bring in AI and Automation

• Reevaluate all Government contracts and cut spending where it is excessive

• No sacred cows, be willing to cut Defense

Even if they can cut as much as 30% of the total budget, it's still difficult to see how they can make up for the $1.9 Trillion Budget Deficit without getting lower interest rates and increasing revenues and growth.

For this to work, cutting around the edges wont be enough and everything needs to fall into place just right. If they thread the needle, they can begin reducing the budget deficit, which can shake up the Economy, forcing the Fed to lower rates. They can then refinance debt at lower rates and continue cutting costs while finding ways to spur growth via de-regulation and technology.

Yet, this will be a balancing act because meaningfully reducing the size of the Government via austerity will shrink the Economy, raise unemployment, and can lead to a major recession that lowers tax revenue.

Alternative Credit Approaches

As demonstrated above, taking the responsible route is a difficult balancing act that most governments fail to land. This brings us to the most common solutions.

Currency Debasement

The most common way debt problems are solved is via currency debasement. By debasing the currency, we pay off the old debt with cheaper dollars. Knowing this, the smart money will continue to borrow and buy assets and one day pay off these debts with cheaper dollars. This makes me question if higher interest rates are in the cards for longer.

Monetizing the Debt

The third way is that the Federal Reserve buys the majority of the debt. In this scenario, the debt goes on the Fed's balance sheet. The Fed collects all of the interest payments and remits all of the profits back to the US Treasury.

This approach is often referred to as "monetizing the debt" or "central bank financing of government debt." In the short term, this can lead to a significant inflection of liquidity, which lowers interest rates, drives up asset prices, and leads to inflationary pressures. In the long term, it supports zombie companies and kills growth. To a large degree this is how Japan has solved its debt problems.

» Side note: Defaulting on the debt is not an option.

So far, all of these solutions are either working around the margins or acting as a band-aid.

There is really one way forward, and that is growth.

3) Productivity: Growing our way forward

This ideal option is what the US did in the 1950s and 1960s through a huge growth boom. For such a boom, the US would need to find a way to dramatically increase its productivity, leading to a budget surplus.

Typically, leaps in productivity growth are the result of a major, revolutionary technological advancement in at least one of these areas: Energy, Transportation and Communication.

Just think of the difference between sending a letter by mail versus sending a text message. Or the difference between having and not having electricity, or what life would be like if you had to take a horse everywhere instead of your car? Odds are you won't eat out as much.

Significant advancements in these areas can change the entire paradigm of how businesses are organized and how society is arranged around them.

Here are a few thoughts on the types of technology that could be revolutionary:

1. Energy: Cheap renewable and nuclear energy and increased battery capacity make the following possible:

   1. Energy for Software: Artificial Intelligence, Crypto & Blockchain, and any other businesses that require cheaper energy to become feasible, etc.

   2. Energy for Hardware: EVs, Robots, Manufacturing, 3D printing, etc.

2. Transportation:

   1. Robo-taxis and drones that transport people, goods, and services for pennies

   2. High-Speed Rail

3. Communication:

   1. AI: Deep personalization via AI agents

   2. AR & VR that contain multiple layers of information can generate a lot of value and increase productivity

   3. Crypto & the Blockchain, revolutionize our financial system and the ownership of assets and content on the internet

   4. IoT, Smart Homes, etc.

   5. Global Internet: Soon, the entire planet will have high-speed internet access via companies like SpaceX that will beam down access

4. Other General Purpose Technologies (GPTs)

   1. Scientific Research: AI is enabling faster data analysis, identifying patterns in large datasets, generating new hypotheses, designing experiments, and simulating complex scenarios

   2. Robots: Soon, we will be living like the Jetsons, with many families having their own personal Robot that does all of the house chores, runs errands, and can even babysit

   3. Biotech: We are on the verge of numerous biotech breakthroughs, such as anti-aging drugs and gene editing, that will increase our longevity and life quality

   4. Space: With the cost of going to space dropping by 90%, it will lead to potential advancements in scientific research, space tourism, resource extraction from asteroids, faster global logistics, and potentially even new technological innovations

Many of these technologies offer the potential to radically transform our Economy, and they are all coming at us at once.

The AI & Technology Revolution

This seems like our best hope. AI and technology are already reshaping the Economy and world. The Government is very tech accelerationist, pro-crypto, pro-AI, and pro-deregulation. We are seeing global Tech companies, like Facebook, increase their profits and market cap while decreasing headcount.

Tech contributes to growth via increased productivity; however, it is also deflationary as it can do more with fewer employees and creates a winner-take-all marketplace with many losers. In the next 5-20 years, we will also see robots that do many tasks like cooking, cleaning, chores, skilled trades, etc. This, too, will have a profound effect on our economic system.

Today, I am already using AI Agents to automate workflows. AI processes information well and applies intelligence and pattern recognition to produce predictably valuable outputs, which is very similar to what white-collar employees do. For a few hundred dollars, I can do what would have taken many thousands of dollars in employee costs, and I am not the only one.

Others like me have figured out how to leverage AI to work at scale, process information, create information, execute tasks, and develop applications, and this is just the beginning. Soon, AI will be able to transact on the Blockchain. The very notion of what a corporation is (a company is a way to organize labor towards a shared goal) loses some of its meaning and power when AI can replace much of this labor force.

In a more decent society, letting the robots do the menial work would be welcomed. However, in ours, this much creative destruction can be disorienting, confusing, and downright scary.

Nevertheless, everything has come together now, and our overall situation demands that we take advantage of this opportunity or pay the price.

Part 2: Headwinds vs. Tailwinds

Our situation is not just domestic; it extends to our place in the world and the shifting Global order.

Ray Dalio's analysis provides a useful framework for understanding our current position, identifying five major headwinds and the potential tailwinds that could offset them and how we can get to the 3% target.

Headwinds

1. Demographics: Aging population, fewer workers supporting more retirees

2. Debt: Historically high levels of Government, corporate, and personal debt

3. Internal Political Strife: Polarization hampering effective governance

4. External Political Challenges: Rising geopolitical competition

5. Climate Change: Increasing costs and disruptions from environmental changes

Tailwinds

1. AI & Robotics: Potentially transformative technologies

2. Scale of Innovation: Possibly bigger than the Industrial Revolution

Timing Considerations

• Are we in a situation similar to the 1920s, where great innovation led to a bust?

• Can we implement solutions in time to avoid crisis?

• Can tailwinds address all five headwinds? Some, like demographics, don't have quick or easy solutions.

Part 3: Solutions

1) Tech Acceleration: The Growth Multiplier

Now, let's talk about how technology can solve the growth problem and what needs to happen in order to make this possible.

Remember our basic equation: Growth = Population Growth + Productivity Growth + Credit

Immigration has allowed a steady increase in the overall population and without it, the US would be in a similar situation as other Western Countries. Nevertheless, we have a large Baby Boomer generation that is retiring which means that they are leaving a gaping hole in the workforce while burdening the younger generation with higher taxes in order to pay for their entitlements.

To offset the burden and increase the number of young, talented people, that can take on these jobs, I expect a revamp of the immigration policy making it easier for highly skilled people to migrate to the US. So, paradoxically, educated immigrants will be welcomed here, will be offered high paying jobs, while the low-end cheap labor immigrant labor will be reduced leaving these jobs for Americans.

Going forward, we can safely expect that the growth will not come from a baby boom, or from massive immigration, instead the US population will continue on its current trajectory.

So what will be needed, is tremendous productivity growth from tech, so much so that it replaces the need for a big population growth.

This can come from two areas:

1. Artificial Intelligence

2. Robotics / Automation

Sometimes I reflect on how well-timed these technologies are and how fortunate we are. Artificial Intelligence, Automation, and Robotics can further drive down prices making it cheaper to take care of our Baby Boomers.

2) AI Agents

AI Agents are autonomous intelligent systems capable of achieving goals by performing tasks without human intervention. You can think of them as AI Workers. They work 24/7, and companies don't have to pay them.

AI Agents are evolving rapidly and organizations are implementing them in roles that are repetitive (e.g., customer support), require data analysis (e.g., supply chain management) and other areas such as finance, healthcare, and as personal assistants.

Soon AI will help make many White Collar workers way more productive. This will decrease the costs of doing business while improving the outcomes. In the end, we will have better and cheaper products and services.

3) Robots & Automation

Would you pay $300 per month for a Robot that did all of your house chores including cooking, cleaning, running errands, buying groceries, taking care of your pets and even baby sitting?

These Robots are approaching reality. Today you can already purchase robots like the Unitree G1 that show the direction this technology is heading.

In the next decade, robots will be everywhere, working for us in our homes, at our offices, and on our factory floors.

Each of these robots represents a massive explosion of value. They are akin to adding an almost Free Employee to the Economy. As such, Robots can have a similar impact on the Economy as an increasing population without the costs.

With this in mind, we can update our basic equation:

Growth = Population Growth (Birth Rate + Immigration + Robots) + Productivity Growth + Credit

The net effect of AI and Robots alone can help solve the problems of affordability and help us rebuild our infrastructure.

Many of the essential things of value will get cheaper in the long run:

• Healthcare: AI can help bring down administrative costs, and AI Agents can make the time doctors and nurses spend with patients more productive, bringing down the cost of the entire healthcare system

• Education: Tech and AI are already on the path of making sound education accessible to everyone.

• Child & Adult Care: Robots that help the elderly are all but here, and not too far in the distance are AI Robots that provide child care services and education, which will be on par with going to a Montessori School.

• Housing: Currently there is a housing supply shortage of about 4 million homes which has driven up the prices. In the next decade or so we will see some downward pressure in the real cost of homes as baby boomers start selling their homes, in combination with high speed internet and high speed trains making smaller towns and cities more economically viable along with cheaper Robot labor and all of this can make housing more affordable.

• Smart Infrastructure: The cost of repairing old and failing infrastructure can be driven down, making it feasible for the US to take the next leap forward, 'smart infrastructure.' Here, the roads have sensors and AI chips that collect and process data and inform the vehicles on the road of what lies ahead.

Naturally, this type of technology poses a set of risks.

First, we need to be able to distinguish between AI bots and AI generated content versus humans and human generated content online.

Second, we need ways to protect our lives from being hacked. The last thing you would want is someone hacking your home, taking control of your Robot, and using your tech against you.

For both of these issues, Blockchain and Crypto offer a solution.

4) Blockchain & Crypto

Over the past few decades, we have seen many of our top institutions and companies get hacked. This includes companies like Chase, Capital One, Equifax, Target, Yahoo and even Twitter.

No centralized system is immune from getting hacked because all it takes to gain entry into their systems is a single point of failure.

This becomes especially risky for banks and financial institutions. Currently, nearly all transactions in our Economy are cleared by third-party institutions like Visa. This both adds a cost to doing business (Visa charges businesses 2-3%) and carries the baggage of systemic risk (e.g., Silicon Valley Bank).

This is where Blockchain and Cryptography come into the picture. Bitcoin, Ethereum, and other large and distributed blockchains offer security advantages because compromising them would require controlling a majority of the network.

This makes them ideal for processing transactions and storing data.

Blockchain is a peer-to-peer, 'trustless' system, which means that there is no third-party risk. There is no bank or institution to process transactions or store your money, so there is no possibility of a collapse that will take your accounts down with it.

And this technology, the Blockchain, can store all kinds of information and transactions. It can then be used in this novel way where:

• It can store any content or piece of information

• It can validate that a human created a piece of information/content

• It gives you immutable ownership rights to your digital property

• There is no 3rd party that can change the rules, take ownership away, or confiscate your digital property

• It is already built on a payment gateway allowing users to buy, sell, and rent their property

• Enables users to create contracts with each other that are executed programmatically

• Is borderless

• Has very low transaction costs

• Is immutable and highly secure

In practical terms, much of the financial system will be moved over to the Blockchain, which will unlock massive opportunities and value.

We will see this in real estate, where Title and Deed of a property are on the Blockchain, taking Escrow and Title companies and their fees out of the equation as this service will be done via a smart contract.

To take this a step further, large real estate projects (e.g., Freedom Tower) will be financed by selling fractional ownership stakes via a smart contract which automatically disperses profits to the owners.Then since all of the transactions related to the project are on the Blockchain, it will become very easy to determine value and have an automatic market for the shares of the building.

In other words, a real estate project can become liquid and be traded like a stock. Eventually, we will see all Stocks, Options, Contracts, and other Derivatives on the Blockchain.

This will be a big revolution in finance as it will give everyday people the opportunity to invest in almost anything.

However, the most significant revolution will be in brands and communities.

Right now Disney's market cap is ~ $200 Billion USD and out of that their Brand is valued at about $47 Billion. The Brand value is very hard to quantify and for this reason, it is vastly undervalued. The true value of all of Disney's content, their characters, stories, and the universes they build would probably be closer to $1Trillion however, they don't have a good way to capture the full scope of their Brand Value.

Soon, this will change.

Imagine a future where you purchase Disney's Frozen, which then gives you an exclusive NFT. These collectibles reward the biggest fans by giving them access to future products, communities, and experiences, which you can sell anytime on an open market.

Loved the Movie? Next time Disney is ready to launch a Frozen sequel, it can raise funds via its fans and give them exclusive perks and even a percentage of the sales. Every time someone buys or rents the film, you earn a bit. For the creator, this unlocks tremendous value and gives fans the ability to actively contribute to a creator and gain the benefits of co-ownership when the creator makes it big.

Lastly, an economic system that's on the Blockchain would give the FED a number of precision tools that can help drive growth. Through smart contracts, they can quickly incentivize certain economic behaviors and direct the stimulus to the parts of the Economy that need it most. For example, the FED can give a special high interest rate to the people who need to save, like college students, single mothers, etc.

These are just a few examples of how AI, Robotics, and Blockchain can unleash massive growth.

In summary, AI and Blockchain can increase productivity and capture value, while Robots can increase the number of workers in the Economy, akin to population growth, and crypto can bring liquidity to markets and increase the velocity of money.

Finally, this leaves us with one massive problem: income.

Part 4: Incomes & UBI

The problem of income inequality and the fact that wages have stagnated since the late 1970s is a real issue. Believe it or not, the most significant predictor of crime is not poverty, it's income inequality; it's being poor in a rich city.

The structure of our current system makes real wage growth very difficult. Globalization, Technology, AI, Immigration, and our tax laws all put deflationary pressures on wages. Our only saving grace is the large retiring Baby Boomer generation, which is leading to job openings and labor demand.

This means that there is a small window of opportunity right now.

Over the next decade or so, we might actually see wage growth in the US.

By 2040, two of AI's most significant challenges (Energy and Manufacturing AI Chips on scale) will be solved.

This gives us a golden era of opportunity to use AI to improve our careers, grow our wealth, and put ourselves in a great position before AI fundamentally transforms the nature of work and society. More importantly, by being involved and taking responsibility, we shape how AI evolves and how we address Ethical dilemmas.

In the long term, we as a society have to figure out ways to include citizens in the growth story and give them a stake in the system. When you own a part of the system, and it rewards you, you are far more likely to protect it and look out for its interests instead of wanting to burn it to the ground.

Margaret Thatcher did something similar back in the 1980's. She eliminated the government rental subsidies and instead offered the families that were renting an opportunity to purchase their homes below market value. In this way, instead of subsidizing low income homes indefinitely, these homes were purchased by the people living there which gave them an asset that increased in price and made them richer.

In a 21st-century version of this, Americans can be incentivized and given an ownership stake in the tech revolution. This can be done by the Government directly investing in technologies like AI and crypto and owning a piece of the proceeds, which then go towards balancing the budget. Another way might be by giving US citizens a dividend that reflects the growth of the Economy and then heavily incentivizing investing that dividend.

Universal Basic Income

Lastly is the topic of Universal Basic Income (UBI). This is a complicated topic that might come to the forefront as soon as the next election and will become a focus over the next two decades.

The core issue with UBI is that it fundamentally combats the meaning of money and what gives it value. Money is a medium of exchange due to people's belief in it and its scarcity.

UBI diminishes the scarcity of money, it adds more dollars to the system and then all that happens is that goods and services are repriced. A recent example of this is the inflation we are experiencing today which is, in part, a byproduct of the $5 Trillion stimulus package we received during the Pandemic.

So, if everyone in the US received $2K per month via UBI, then prices would rise proportionally.

The real solution needs to be targeted, nuanced, and fit within a personal growth framework and arc that helps people better themselves. A system that rewards you for improving, learning 'how to fish' and becoming independent, and empowering you on your path to becoming the best version of yourself.

In other words, to make Universal Basic Income work, it cannot be Universal or Basic.

Asymmetric Rewards

With all of this in mind, I urge you to consider ways you can help the system grow and put yourself in a position to have financial freedom.

With exponential technologies, the rewards can be asymmetric. Let's look at Bitcoin, which is sold as 'Digital Gold' and compare it to Gold itself:

• Bitcoin Price: $100,000 USD vs Gold Price: $2,650

• Market Cap: ~ $1.95 Trillion USD vs $15 Trillion USD

• Max supply: 21 Million Bitcoin vs. Gold Increases ~3% per year

Unlike Gold, Bitcoin is limited, digital, and can be easily transferred anywhere in the world in seconds. Furthermore, it has a network of 200 million wallets and 400K daily users, processes 270,000 transactions each day, and 22% of Americans own some. Lastly, it is growing 200% faster than the internet did.

Gold, Bitcoin, and Money are all founded on our shared beliefs about its value. In a world where money is freely printed, what Bitcoin represents is a pure version of 'scarcity' itself.

This leads us to the setup:

• If Bitcoin fails, it goes to $0

• If Bitcoin succeeds, it will reach ~$1 million in the next 5 years and surpass $3 million in the next two decades.

Asymmetric Reward: For every $1 dollar you risk, you can get back between $10 to $30

With this setup in mind, what is your affordable loss that is meaningful enough to make a difference in your life should Bitcoin succeed but meaningless should Bitcoin fail?

Part 5: Black Swan Events and Risks

The Pandemic was a Black Swan event.

Now, in complex systems like ours that have multiple wicked problems, Black Swans have become inevitable.

Why is this the case?

Because complex systems are interwoven and integrated, major failure at any one point affects the entire system.

This is like building a really high sand castle. At first, it is easy. You go higher and higher, and finally, towards the end, it only takes 1 grain of sand to bring down the entire structure.

Today, we have many grains of sand that can cause our structure to collapse.

These problems are in the domain of 'unintended consequences' and second-order effects. I will give you a few examples below to illustrate the size of the problem and then briefly share the most significant risk.

Power of unintended consequences:

• Leaded Gas: At first, leaded gas was a marvel that solved the engine-knocking problem. By the time we discovered it was a neurotoxin, leaded gas had already caused us to drop 824 Million IQ points while making us more violent. It was finally entirely banned in 1996.

• PFAS Chemicals: PFAS are the chemicals used in making Teflon non-stick pans, which DuPont created. DuPont created a nice business for itself worth a few billion dollars. Today, these forever chemicals are recognized as toxic, causing cancer, infertility, etc. Cleaning up PFAS would cost about $106 Trillion.

• Chlorofluorocarbons (CFCs): Initially hailed as safe refrigerants and propellants, CFCs were later found to be depleting the ozone layer, leading to increased UV radiation reaching the Earth's surface.

• Asbestos: Once widely used in construction for its fire-resistant properties, asbestos was later discovered to cause severe respiratory diseases, including lung cancer and mesothelioma.

As we create Exponential Technology, on the plus side we benefit from asymmetric rewards; however, the risks are also asymmetric.

Here are some of the biggest risks on the horizon:

• Environmental Catastrophes: The frequency and devastation of Natural Disasters like Wildfires on the West Coast, Hurricanes, and the future of Sea level rise pose an enormous threat to our Economy and way of life.

• AI & Energy: AI will require doubling, maybe tripling, the amount of electricity we create, which will put ever more pressure on our environment.

• Curse of Productivity: An increase in productivity also means an increase in pollution, trash, etc.

• Ecological Disaster: Currently, we are in Earth's sixth mass extinction event, also known as the Holocene or Anthropocene extinction, which is an ongoing extinction event caused by human activities.

• Radicalization & AI-Enabled Terrorism: Today, viral ideas can spread at the speed of light, potentially leading people to execute more sophisticated, targeted attacks on critical infrastructure like power grids.

Part 6: Navigating the Path Forward

To move forward successfully, we need a balanced approach that addresses all growth components while managing both headwinds and tailwinds.

Now, as an individual inside a large system, it's important that you are aware of what to look for on the macro level and implement the rights strategies on the micro level. This approach can give you the best odds of success regardless of what happens.

1) Key Metrics to Monitor Directional Progress

To determine whether the Economy is moving in the right direction according to our growth framework, focus on these critical indicators:

The Dashboard Approach: Key Metrics to Track

Fiscal Health Indicators

• Deficit-to-GDP Ratio: Movement toward 3% (Dalio's benchmark) indicates fiscal responsibility. This means increasing revenues and decreasing costs.

• Interest Payments as % of Federal Revenue: Declining ratio shows improved debt sustainability

• Bond Market Reaction to Fed Policy: Long-term rates should decline when the Fed cuts rates (not rise as we're seeing now)

Productivity Growth Signals

• Labor Productivity Growth: Rising output per hour worked above 1.5% annually

• Total Factor Productivity (TFP): 1-2% growth is generally healthy, and rates above 2% are often seen in rapidly growing economies.

Labor & Income Indicators

• Real Wage Growth: After-inflation wage increases across income percentiles

• Labor Force Participation: Rising participation rates, especially among prime-age workers

Technology Adoption Metrics

• AI Integration Rate: Increasing deployment of AI across multiple sectors

• Blockchain Transaction Volume: Growing usage for practical applications beyond speculation

• Robot Installation Growth: Rising deployment in manufacturing, services, and other sectors

For a holistic view, track these metrics quarterly and look for patterns rather than focusing on any single data point. The most crucial consideration is directional change—are these indicators collectively improving or deteriorating over time?

A healthy Economy will show balanced improvement across these categories.

Warning signs include:

• Worsening fiscal metrics without corresponding productivity gains

• Productivity improvements that fail to translate to wage growth

• Technology adoption that concentrates benefits rather than dispersing them

Pay particular attention to the synchronization between fiscal improvement and technology adoption. For our growth strategy to succeed, we need both fiscal responsibility (Dalio's 3% solution) and technological acceleration working in harmony.

2) Your Personal Window of Opportunity

Regardless of how our macroeconomic story unfolds, the next 5-10 years present a unique window of opportunity for individual action. Here's how to position yourself to thrive during this technological transition:

Develop Your Personal Strategy

1. Skill Positioning

• AI Complementary Skills: Develop abilities AI can't easily replicate: critical thinking, emotional intelligence, meta-understanding, prioritizing what's essential, integration of complex ideas, thinking outside the box, and creativity.

• Technology Management: Learn to direct, implement, and oversee AI and automation tools

• Industry Positioning: Identify sectors where human expertise will remain valuable despite automation

2. Asset Allocation for Asymmetric Returns [THIS IS NOT FINANCIAL ADVICE]

• Digital Asset Exposure: Consider a position in Bitcoin or other digital assets sized appropriately to your risk tolerance (affordable loss principle) [THIS IS NOT FINANCIAL ADVICE]

• Technology Leaders: Consider investing in companies leading the AI/automation revolution, not just following it

• Real-World Infrastructure: Consider investments in the physical infrastructure needed for technological transformation (energy, data centers, chip manufacturing)

3. Career Resilience

• Multiple Income Streams: Develop 2-3 income sources to reduce dependency on any single employer

• Learning Acceleration: Set aside time weekly to study emerging technologies in your field

• Remote Work Capabilities: Ensure you can work effectively across geographies

4. Capitalize on AI Before It Replaces You

• Personal AI Stack: Develop your own suite of AI tools that multiply your productivity

• AI as Collaborator: Learn to frame problems for AI to solve while you focus on high-value work

• Business Model Innovation: Consider how AI can transform your business or create new opportunities

5. Community Building

• Knowledge Networks: Join communities focused on understanding technological change

• Collaborative Projects: Participate in open-source initiatives or collaborative ventures

• Family Preparation: Ensure those close to you know the coming changes

3) The Affordable Loss Principle

[THIS IS NOT FINANCIAL ADVICE]

When considering investments in transformative technologies like Blockchain or AI:

1. Ask yourself: "What amount could I lose without a significant lifestyle impact?"

2. Determine the minimum investment that would be meaningful if returns prove extraordinary

3. Diversify your transformative investments rather than concentrating in one area

4. View these investments as options on possible futures, not guaranteed returns

5. Have a plan of when you will sell and how much is enough

Remember that adaptability, flexible thinking, and equanimity are the greatest assets during times of change. While technologies themselves will evolve in unpredictable ways, the principles of learning, calculated risk-taking, and diversification remain constant.

Conclusion

The next decade presents both unprecedented challenges and unprecedented opportunities. By leveraging the explosive potential of technology while managing its disruptive effects, we can navigate through our economic challenges and build a more prosperous future.

In the following two lessons, we will talk more about:

• The Exponential Age: The Age of AI Agents & Crypto

• The 6-Year Plan: Managing risk and asymmetric rewards

For some time now, I have really looked forward to sharing my view of Macroeconomics and how this relates to technology and demographics.

Above is an audio version of this article and below is very deep dive, with lots of data, charts, and analysis of the forces that have shaped America and the World from 1945 to present day.

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Intro to the Cycles

History may not repeat itself, but it sure does rhyme. It rhymes because demographics are destiny.

Consider how each generation comes into the world at a specific moment, faces notable challenges, and develops its own perspective on how things should work.

When that generation finally gains power, it implements solutions that make perfect sense to it based on its lived experience and what needs to be done.

These solutions work great... for a while. But then new challenges emerge, often as unintended consequences of the previous solutions. And so the cycle repeats.

To really understand this pattern, we need to look at two big pieces of the puzzle.

First, there are pure demographics—the number of people in each generation, when they enter the Workforce, get married and have children, and when they retire. This drives everything from economic growth to credit markets.

Second, we must understand how each generation's experiences shape their worldview. This includes how major events, like the Global Financial Crisis or 9/11, impacted different generations differently.

To understand how we got here, we will examine four distinct Eras and how each gave rise to the next.

• 1945-1973: Post-War Boom and the “Golden Age” of Capitalism

• 1973-1982: Stagflation and Economic Turbulence.

• 1982 to 2007: The Era of Globalization and Deregulation.

• 2007 to Present Day: The Great Recession and its Aftermath

This will give us a deep understanding of how the economic machine works, how we got to where we are today and where we are going tomorrow.

Without further ado, let's begin!

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1945-1973: Post-War Boom and the “Golden Age” of Capitalism.

WW2 pulled the United States out of the Great Depression. After the war, the US became the world's dominant industrial Economy and a major exporter of manufactured goods.

1. Population:

   1. Population Growth: The Baby Boom significantly increased the population.

   2. Economic Impact: Rising consumer demand as families grew, fueling the Economy.

   3. Cultural Developments: Traditional values dominate; emphasis is placed on conformity and stability.

2. Productivity Growth:

   1. The US experienced a period of economic prosperity after the war, driven by growing consumer demand.

   2. With European and Japanese industrial capacity largely destroyed, the US produced over 60% of the world's manufactured goods in the late 1940s.

   3. The US invested in rebuilding countries devastated by the war, creating new markets for American goods.

   4. American products like Coca-Cola became popular abroad, and the US promoted its culture through commercial airlines and hotels.

3. Credit:

   1. 1950's: Long-term mortgages and installment Credit were introduced to consumers.

   2. 1960’s: Big expansions of the Credit as Credit Cards were becoming widely used.

   3. Government debts grew

Here is the formula for understanding GDP:

GDP Growth = Population Growth+ Productivity Growth + Credit Growth

From the 1940s to the 1960s, we had a huge pollution boom, a productivity boom, and a top export of goods and services and saw a credit boom.

As a result, GDP exploded.

The US real GDP increased by approximately 185%, nearly tripling the size of the Economy during these 28 years.

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1973-1982: Stagflation and Economic Turbulence.

Imagine growing up in a quincuncial 1950s home where, on the surface, everything is perfect. You live in a well-mannered society with clear social order and codes of conduct in an ostensibly safe and homely environment.

However, there is a significant undercurrent of social anxiety and the threats of total destruction.

The threat of nuclear war hangs over this generation like a noose, and as the baby boomers reach young adulthood, many of them decide to ‘drop out.’

The threat of total destruction and the underbelly of discrimination and bigotry led to the counter-revolution and the hippie movement. All of a sudden, young people are asking questions related to sexism, racism, and war.

This has a profound effect on society, culture, and the Workforce. By the 1970’s many of the older baby boomers are off the college and the Workforce.

1. Population:

   1. Baby boomers were already the largest population and are now going through many of the same life events, such as

      1. College

      2. Getting a Job

      3. Getting Married

      4. Buying Home

      5. Raising Children

   2. Culture & Psychology

      1. On the surface, they were growing up in an ideal environment: a prosperous, safe, well-mannered society with clear social order and a homely atmosphere.

      2. However, they grew up during a baby boom, meaning they had to constantly compete with their peers and put themselves first.

      3. In their teenage years, the undercurrent of social anxiety and the threats of total destruction hung over this generation like a noose. The threats of nuclear war lead many to ‘drop out’ and focus on the pleasure of the moment. Others asked more profound questions about racism, sexism, and war.

      4. The counter-culture and feminism lead to Women’s Rights and Civil Rights.

      5. Many baby boomers feel smothered by rules, regulations, and high taxes, which limit their freedom and prevent many from doing what they want.

   3. Workforce

      1. Women’s Rights and Civil Rights Movements dramatically increased the overall size of the Workforce.

      2. More workers mean more competition for jobs, lower real wages, or higher unemployment.

      3. More workers meant more competition for goods and services, many of which were limited by supply.

2. Credit:

   1. The 1970s saw vast expansions of Credit, and both household depth and government debt grew.

   2. A huge population, high demand, and a giant workforce led to productivity growth and inflation in an environment where the dollar was fixed to Gold.

      1. Global and US economic growth far outstripped the production of Gold.

      2. The amount of Gold no longer accurately accounted for all of the value in the US economy and acted like an anchor.

      3. » Though Experiment: Imagine if a house cost one gold bar and there were an equal number of houses and gold bars. What happens if you build 2x more houses? You create more value (houses), but since the number of gold bars is fixed, your houses are now cheaper. This can lead to significant deflation because now, one Gold bar buys you two houses. Conversely, if you exchange Gold for dollars and print 2x more dollars, it leads to inflation as it takes more dollars to buy the same amount of Gold or other goods. As a result, a Gold Standard always ends up crippling a growing economy either through deflation or inflation.

   3. In 1971, Nixon removed the US from the Gold Standard to stop the looming gold run and the domestic inflation problem. Gold jumped from $35 per ounce to $800 in 1981.

3. Productivity

   1. 1960s: The 1960s saw robust productivity growth, considered part of the "golden age" of post-war economics.

   2. 1970s: Productivity growth significantly slowed down in the 1970s compared to the 1960s because

      1. Baby Boomers Entering Workforce

         1. The unions controlled pay rates, so pay didn’t go down; instead, prices increased.

         2. When prices went up, Unions demanded pay increases.

            1. This led to more inflation.

            2. This also froze new hiring and increased unemployment.

      2. Oil Crisis

         1. (OPEC) began pricing oil in terms of Gold instead of dollars

         2. During the 1973 Arab-Israeli War, OPEC imposed an embargo against the United States in retaliation for the US support of Israel.

         3. Due to politics and the re-evaluation of the dollar, oil prices rose by about 400%.

         4. Oil prices affect all prices because it increases the cost to produce and transport products.

By the late 1970s, the US had a full-blown economic melt-up. We were facing Stagflation, a mix of high inflation and high unemployment.

This environment had substantial knock-on effects, as banks no longer wanted to issue debt. Due to rising inflation, the dollars that repay the loan might be worth far less than the borrowed dollars. Credit systems were beginning to lock up, and liquidity was drying up.

Entrepreneurs were also in a pickle. Getting loans and starting a business was problematic. A combination of unions, high wages, high taxes, and high interest rates increased costs and reduced the benefits.

American capitalism was stuck in the mud, and something had to give.

Enter 1980’s & Reaganomics.

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1982 to 2007: The Era of Globalization and Deregulation.

In 1981, Ronald Reagan was elected as the 40th President of the US, winning a sweeping victory with 489 electoral votes and the message of “Making America Great Again.”

His plan is the natural solution to the challenges of the 1970s. We needed Banks to lend, entrepreneurs to start businesses, and the American economic engine to run again.

To this end, here were some of the significant changes that came to America:

• Deregulation & Free Market: Deregulation and reduced government intervention such as lifting price controls on oil and gas, easing restrictions on savings and loan institutions, and breaking up AT&T.

• Free Trade & Globalization: Reducing trade barriers, tariffs, and quotas on imports promoted a global marketplace. While Globalization opened markets and reduced prices, it also led to manufacturing job losses in the US.

• Weakening the Unions: Appointing officials who were less favorable to unions and promoting policies that favored management and deregulation led to a significant decrease in union memberships.

• Interest Rates: After solving the issue of inflation by using very high interest rates, the Fed lowered rates to spur borrowing.

• Taxes: The Reagan administration decreased the top marginal tax rate from 70% to 28%.

The end result was that Reaganomics provided a set of solutions that solved the problems the US faced in the 1970s. Inflation was defeated, banks were lending again, unions no longer had a stranglehold on businesses, regulations were eliminated, taxes were cut, and America was open for business.

Baby boomers ultimately got what they wanted: a deregulated, pro-business environment with lower taxes and more opportunities to do what they wanted.

In the 1990s, the economic policies initiated during the Reagan administration—particularly those promoting Globalization, free trade, and deregulation—were significantly expanded.

President George H.W. Bush and President Bill Clinton advanced these policies, leading to a deeper integration of the US economy with the global market.

Then, in the 2000s, George W. Bush further expanded on these neoliberal policies. Again, cutting taxes and deregulating banks led to the housing boom of the early 2000s.

Here are a few of the most impactful policies:

1. North American Free Trade Agreement (NAFTA): The implementation of NAFTA eliminated trade barriers between the U.S., Canada, and Mexico, boosting trade and investment but leading to job losses in US manufacturing as companies moved operations to Mexico.

2. Establishment of the World Trade Organization (WTO): The creation of the WTO formalized global trade rules, facilitating international trade while increasing competition for US businesses.

3. Financial Deregulation: The Gramm-Leach-Bliley Act repealed parts of the Glass-Steagall Act, allowing financial institutions to consolidate, which increased capital mobility and global investment opportunities.

4. Permanent Normal Trade Relations (PNTR) with China: Granting China PNTR status opened U.S.-China trade, enabling US companies to invest in China but also increasing imports that impacted US manufacturing sectors.

5. Expansion of Free Trade Agreements: The US promoted regional economic integration through agreements like APEC, encouraging businesses to expand in Asia but intensifying global competition.

6. Technological Advancements and the Internet Boom: Government support for technology spurred innovation and the Internet boom, enabling efficient global operations and developing international supply chains.

7. Reduction of Trade Barriers and Tariffs: Continued reduction of trade barriers and tariffs lowered consumer prices but increased competition, leading some US companies to relocate production overseas.

8. Support for Global Financial Institutions: Increased US support for institutions like the IMF and World Bank aimed to stabilize global markets and promote market-oriented reforms in developing countries.

9. Labor and Environmental Provisions in Trade Agreements: The inclusion of labor and environmental standards in trade agreements sought to address these issues but was often criticized as weak, raising concerns about their effectiveness.

10. Immigration Policies (H-1B Visa Expansion): Raising the cap on H-1B visas allowed US companies to hire more skilled foreign workers, enhancing the talent pool but sparking debates over domestic job competition.

Now let’s look at our Matrix: Population + Productivity + Credit

1. Population

   1. Baby Boomers (Established Adults): Advancing in their careers, accumulating wealth, and influencing policies.

   2. Generation X (Coming of Age): Entering the Workforce, navigating a changing economic landscape.

   3. Millennials (Children and Adolescents): Born and growing up during this period, are influenced by technological advancements.

   4. Population Growth: The US population grew 24% over the two decades, with millennials becoming the second largest generation.

   5. Culture & Psychology

      1. Economic Policies: Baby Boomers are now in leadership roles and are deregulating and globalizing the Economy.

      2. Cultural Shifts: We see a rise in individualism, materialism, and a 'Greed is Good' mantra of the 1980s (Boomers and Gen X).

      3. Technological Adoption: Gen X and Millennials quickly adapt to rapid technological changes.

      4. End of Cold War: After the fall of communism and the end of the Cold War, the US embraced the idea that promoting democracy worldwide would lead to global peace and stability, so it doubled down on Globalization.

      5. Geopolitics: The Democratic Peace Theory, which believes that democratic states never (or almost never) wage war on one another, led the US to a Geopolitical strategy that promoted the expansion of democracies.

      6. Rise of Terrorism: The Bush doctrine was an extension of the Democratic Peace Theory, as Bush believed that spreading democracy worldwide, especially in the Middle East, would address the root causes of terrorism and lead to long-term global peace.

2. Productivity

   1. Economic Transformation: The transition of the US economy from manufacturing to services between 1980 and 2007 led to significant increases in productivity as this shift involved companies moving higher up the value chain by focusing on activities that added more value per unit of input. Key drivers:

      1. Technological advancements allowed both manufacturing and service sectors to produce more with less.

      2. Shifting up the value chain meant focusing on high-value, knowledge-intensive activities that generated greater output per worker in the US and offshoring labor. Capital was allocated towards R&D, design, marketing, branding, and other professional services.

      3. Globalization and Outsourcing: By moving labor-intensive manufacturing overseas, US companies reduced costs and focused domestic operations on higher-value activities.

      4. Return on Capital Improvements: Companies directed capital toward higher-return sectors like technology and finance.

   2. 1980s: The US had modest growth influenced by recovery efforts and initial technological adoption.

   3. 1990s: Saw a significant acceleration driven by technological innovation, Globalization, and improved business practices, leading to substantial economic benefits.

   4. 2000s: Robust productivity growth averaging approximately 2.7% annually, driven by technological advancements, widespread integration of IT, Globalization, capital investment, and managerial improvements.

   5. Disinflationary pressure.

      1. This transition led to productivity gains in labor productivity (output per hour worked) and capital productivity (return on capital employed), contributing to economic growth and higher living standards.

      2. Technology and Globalization substantially lowered the cost of consumer products. The low prices made the average American feel more wealthy than they were, considering that their wages stagnated.

      3. Conversely, asset prices began to rise, and capital was rewarded more than labor for the first time.

3. Credit

   1. Consumer Debt: Total consumer debt in the US grew from approximately $355 billion in 1980 to about $2.7 trillion in 2007. Interest rates dropped from a peak of 20% down to the 3% to 6% range for much of the 1990s.

   2. Non-Financial Corporate Debt: Rose from approximately $1.2 trillion in 1980 to about $5.7 trillion in 2007.

   3. Fiscal responsibility efforts in the 1990s and technology-led growth led to a surplus of $236 billion in 2000, yet via tax cuts and increased spending the National Debt increased from around $907 billion in 1980 to approximately $9 trillion by 2007.

The US experienced a big boom in both the Economy and asset prices. The S&P 500 Index Rose from about $110 in 1980 to over $330 by the end of 1989 and then to $1500 by 2009.

US GDP increased by by 498% from 1980 to 2007

As we can see, Reaganomics offered a good set of solutions for the challenges that the US was experiencing in the 1970s. We went from high taxes, strong unions, high unemployment, and out-of-control inflation to a new economic era that heavily favored businesses and capital, which led to a new set of systemic weaknesses.

No solution is perfect. A good solution will transform the environment so much so that a new set of problems will emerge.

Here were some of the problems that were emerging:

1. Labor vs. Capital: In this new environment, money and capital are becoming more valuable than labor. In other words, you can make more money by having money in the market than by working.

2. Wage Stagnation: Despite this boom, real wages for middle—and lower-income workers did not keep pace with productivity gains.

   1. Net Worth: The medium's net worth increased about 155%, from $47K to $120K (in 2007 dollars); however, wages stayed flat. Even though wages remained flat, the cost of homes, health insurance, college, and retirement soared, increasing debt levels.

   2. Retirement: Most American’s retirements are now invested in the market via 401K, Pensions, etc.

3. Competition & Deregulation: A highly competitive environment, meaning that it was more complex and challenging to maintain good margins, and where there was little regulation meant that businesses were heavily rewarded for taking high-risk bets. This was especially the case in the Banking Sector.

Global Financial Crisis 2007

The Global Financial Crisis was like a needle pricking a large balloon. The balloon was our Economy, and it was about to blow up.

But how did we get here?

Here is a very brief summary:

1. Banks created new financial instruments such as mortgage-backed securities (MBS) and adjustable-rate mortgages (ARMs).

2. Repealing the Glass Segal Act allowed banks to consolidate.

3. Banks became involved in underwriting loans, collecting fees, and selling Mortgages via MBS.

4. Banks were heavily incentivized to give as many loans as possible and then sell the debt, thereby getting paid twice. This was considered a ‘good thing’.

This led to a huge property boom in the early 2000s. Depending on the market, housing prices grew 10% to 25% annually, and buyers, speculators, and flippers got rich.

The Banks saw that prices were going up, so they decreased their requirements until there were none left. Eventually, anyone could buy a house or two or five, and they could even do it with no money down.

In fact, Banks were so desperate to lend that they gave borrowers loans that were 110% of the home price, used creative financing like Adjustable-Rate Mortgages, and so on. Their goal was to sell to anyone willing to sign on the dotted line, even people who could not afford it.

And then one day…

The Market Crashed.

We discovered how big the bubble was. And what we saw was a complete collapse. The balloon had been pricked, and we were in free fall:

1. Stock market decline: The Dow Jones Industrial Average fell by 53 percent between October 2007 and March 2009, the S&P 500 lost 38.5% in 2008, and stock wealth fell by $7.4 trillion from 2008 to 2009.

2. Job losses: The US lost more than 8.7 million jobs; unemployment reached 11% in October 2009.

3. Wealth loss: US households lost about $19 trillion in net worth, and median household wealth fell 35% between 2005 and 2011. One in four households lost 75 percent of their net worth.

4. Housing market decline: Home prices fell by an average of 40%, and eight million homes were foreclosed.

The system was in free fall and needed bailing out.

Why?

Because almost the entire system could have collapsed, Baby Boomers would have lost their jobs, income, and life savings. This would have wiped it all out and made retirement impossible.

With this, we see the end of an Era, the end of Reaganomics, as we face a set of problems requiring a new system.

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2007 to Present Day: The Great Recession and its Aftermath

Like the 1980s, the Great Financial Crisis offered an opportunity to address the challenges of the day and the weaknesses of the economic system.

And with this massive need rose a candidate that ran on ‘Hope and Change.’

In 2008, Obama became President of the US and offered a hopeful vision of America. There was hope that Obama would reform the economic system, change how business was done, and resurrect the US economic machine.

As he entered office, the US faced significant economic headwinds, and quick decisions were needed to rescue the Economy. The biggest challenges of the moment were:

1. Liquidity

2. Bad Debt

Bad debt meant that the Banks in the US were insolvent and could no longer lend money, which froze liquidity.

To solve these issues, the Government:

1. $700 Billion Bailouts designed to keep troubled banks and other institutions in business

2. The Fed cut rates until it hit its target of 0% interest and left it there until 2015.

By and large, this solved the problems of the crisis; however, it did nothing to address the underlying foundational weakness:

1. Deregulation: which lead to the Global Financial Crisis

2. Consolidation of Power: Bank mergers made Banks too Big to Fail

3. Growing Income Inequality: Most families didn’t have enough savings to weather the storm.

4. Accountability & Perverse Incentives: No skin in the game

These weak characteristics of the new post-Reagan Economy led to the GFC and a weaker financial system. To make matters worse, many Americans felt the social contract was broken. The rich Bankers never paid a price for crashing the Economy. No one went to jail despite massive fraud. Instead, they received golden parachutes, paid for by the American taxpayer, while that same taxpayer lost their house and much of their savings.

The trust in elites, that they knew what was in America's best interest and how to navigate the Economy, was destroyed. What made matters even worse was the blatant fraud.

Here is an example:

• Some banks bought insurance policies on their mortgages, even after they no longer owned the mortgages, anticipating that there would be a default and that insurance would pay out.

• » Side note: This would be like a used car salesman selling you a faulty car, then buying life insurance on your family and profiting from the ensuing car crash.

After stabilizing the system, America continued with business as usual. However, the system's core foundational cracks remain unaddressed.

Instead, we doubled down and went back to the old ways, and this time, everyone knew that there was no real accountability and that, in the worst case, the Government would bail us out.

This leads to an increase in:

1. Stock Market & Asset Prices: A combination of low interest rates and quantitative easing leads to a massive stock market boom.

   1. The effect of Low Interest Rates means that companies can borrow money cheaply and use that money to buy back their shares, driving up the price and their owner's net worth.

2. Capital over Labor: Capital now makes way more money than labor.

   1. Taxes: The tax system rewards investors and stock owners by allowing them to compound the value of their investments annually and only pay 15% capital gains tax if or when they sell.

   2. Wealthy stock owners never sell; instead, they borrow against their shares and pay a small interest rate.

   3. Conversely, working for a living means paying a much higher tax rate.

3. Income Inequality: Investors and business elites see an explosion in their net worth.

   1. The top 1%: This class typically consists of business owners, corporate leaders, and celebrities, and they have become uber-wealthy.

   2. Top 10%: Professional class, engineers, doctors, SMB owners, high value add jobs, etc

   3. Bottom 90%: blue-collar workers, laborers, low-value add jobs

4. Technology Disruption: Technology started having a significant impact due to its ‘winner-take-all’ feature. It brought prices down, making the founders and employees rich while hollowing out competitors.

   1. For example, TurboTax put thousands of accountants out of business.

5. Business & Profitability: Most SMBs in highly competitive sectors compete on price, which leads to lower margins. The race to the bottom means that no one makes any money.

6. Rise of Brands & Tech: The only companies making real money are mega-brands like Louis Vuitton and Tech, which have lower costs, instant scale, and high-profit margins.

   1. Entrepreneurs like Elon Musk, who can organize great tech teams to solve real-world problems, are massively rewarded.

   2. Tech also has the advantage of offshoring profits and not paying income taxes.

7. Hollowing out of Cities: Once great industrial cities are left for dead, well-paid labor and blue-collar jobs are offshored or automated via technology.

8. Net Worth: Medium household net worth rose 101% from $95,471 in 2007 to $192,900 in 2024, representing a 4.21% compounded growth rate. Meanwhile, the cost of homes, health insurance, college, and retirement skyrocketed, leaving many worse off.

9. Increase Debt: Huge increases in debt on every level, from personal to corporate and Government.

Rise of Populism

The response to the Global Financial Crisis, the lack of accountability for institutions, and the failure to reform the Economy so that it works for the average person led to populism on both the Right and the Left.

In 2011, the Left had the Occupy Wall Street Movement, a left-wing populist movement against economic inequality, corporate greed, big finance, and money's influence in politics.

They stood for the 99% Percent and wanted the Top 1% to pay their fair share.

Does this sound familiar?

In 2016, Bernie Sanders ran on this platform. He stood with the workers, with the working class that was left behind all those decades ago. He wanted to bring them back into the fold, address the Economy's fundamental problems, and reform it so that it worked for the average American.

The Right also had its populist movement. The Tea Party Movement was a small government libertarian movement led by Americans sick of bailouts and out-of-control spending.

This movement later gave rise to Donald Trump, who became President in 2016 and again in 2024.

Trump’s first win was dismissed as an anomaly, and many within the political class disregarded its significance.

In 2024, Trump won convincingly, leaving the same political class lost. Many grappled and asked, 'How could he have won?' Yet it is obvious.

Americans want change.

The Dawn of 'A Technology' for the People

Last but not least, a technological revolution was born out of the Global Financial Crisis: Bitcoin and Crypto.

Bitcoin is a digital currency that addresses trust and stability issues by eliminating the need for corporate banks and centralized financial institutions.

It allowed anyone to transact with anyone else using a trustless system. A trustless system means that the participants involved do not need to know or trust each other or a third party for the system to function.

It solved the problem of trust using the blockchain. The blockchain is like a public ledger of all transactions, and it exists on millions of computers, which makes it secure. Through this structure, Bitcoin is transparent, anonymous, and trustworthy.

Last but not least, digital currency gives us the power and ability to do things that were previously impossible. We can now program money itself and turn currency into Software.

Fundamental Transformation of Capitalism

Since 2007, there has been an acceleration of digitizing the Economy.

Wherever there is value in using technology, technology will take the lead and fundamentally transform our Economy and society.

Just compare 2007 to 2024

1. Relationships

   1. 2007: People hung out in person. Dating was mediated through friend groups, work, school, etc.

   2. 2024: We spend more time online on Social Media apps than in person. We meet new people and date via apps.

2. Shopping:

   1. 2007: People go to Malls, Walmart, and local shops.

   2. 2024: Most people shop online via Amazon. Today, we see the death of Malls across America.

3. Local Businesses:

   1. 2007: Local businesses did services like tax preparation, accounting, legal, etc.

   2. 2024: The rise of Software as a Service (SAAS) has replaced entire industries.

4. Information

   1. 2007: We learned about the world through Newspapers, Radio, and TV. We also researched it in libraries by reading books, journals, scientific papers, etc.

   2. 2024: We learn about the world via social media apps, YouTube, and search engines, all of which use algorithms optimized to addict us. Research is done online via search engines, AI, and social media apps designed to show us personalized content that will keep us engaged.

5. Work

   1. 2007: Jobs were in person

   2. 2024: People, especially knowledge workers, can work from home

Part of the reason why tech has been so successful is because it fundamentally changes the rules of capitalism.

Here is what I mean:

1. Instant Scalability: Software can be instantly available to everyone. Compare this to a product like Coke that requires factories, transportation, sales, etc.

2. Lower Risk: Developing Software is much cheaper than building factories. It is iterative, easily malleable, and makes it easier to achieve product-market fit. So, it’s both cheaper to produce and easier to execute, making it far more likely to succeed.

3. High Margins: Since the product is digital, the profit margins are very high. For example, in 2018, Craigslist had a billion-dollar revenue and only 50 employees.

4. Monopoly of Mind Estate: Unlike traditional monopolies that controlled a market due to a strategic advantage, like Standard Oil, which controlled 90% of American oil refineries, today's monopolies are psychological. We use Google, which also has a 90% market share, not because there aren’t other good options, but because of Mind Estate. They have a place in our minds and habits and are the psychological default.

We are in the midst of the Fourth Industrial Revolution. We are experiencing significant changes, and technology companies are transforming the old Economy.

For example, Amazon was growing at 25% per year, and this growth is coming from somewhere. It's killed most department stores, the Mall, and almost everything in it. And this is just one example.

Let's look at our main metrics: population, Credit, and productivity, and where this leaves most Americans.

Population & Demographics

• The population grew from 301 to 334 Million, representing a 12% increase over 17 years.

• Net Immigration: With a declining birth rate, the modest US population growth is primarily due to immigration.

  • Diversity: Most immigrants come from Latin America, Asia, and the Middle East. The Hispanic/Latino population grew from 16% in 2007 to approximately 19% in 2024, while Asian Americans increased from 5.6% to 7.3%.

• Aging Population

  • US Median Age: Increased from 37.2 years in 2007 to 40.5 years in 2024.

  • Baby Boomers: The generation born between 1946 and 1964 has been retiring, about 10K people per day. These retirements are decreasing the labor participation rate and tax revenue while increasing Government spending.

  

• Culture & Psychology: How each Event Impacted the Generations differently

  • Global Financial Crisis

    • Baby Boomers: Feared that entire savings/retirement would get wiped out

    • Generation X: Navigating mid-career in a strained economy.

    • Millennials: Many graduated during the GFC and struggled with employment and student debt. The crash also scared many Millennials, who always see ‘another crash’ coming and didn't invest in the Economy.

    • Generation Z: Coming of age during recovery.

  • Covid 19

    • Baby Boomers: Delayed retirement plans and increased reliance on savings and healthcare resources due to prolonged economic uncertainty and healthcare needs.

    • Generation X: Faced job insecurity and career stagnation amid economic downturns while supporting their children and aging parents.

    • Millennials: Postponed key life events such as homeownership, marriage, and starting families due to financial instability and uncertainty.

    • Generation Z: Entered the job market during economic contractions, facing limited employment opportunities and increased competition for entry-level positions.

    • Generation Alpha: Experienced interruptions in early education and reduced in-person interactions, potentially affecting cognitive and social development.

• 4th Industrial Revolution & Rapid Change

  • Rapid digitalization of the Economy

  • Automation is taking blue-collar jobs.

  • Rise of AI that threatens white collar jobs

Productivity

• From 2007 to 2024, the United States saw a 40.3% increase in labor productivity, averaging 1.86% annual growth.

• Technological advancements, Globalization, remote work adaptations, and investments in education and infrastructure drove this growth.

• Software is eating the world, and we are seeing a digitization of the Economy.

Credit

• Consumer Credit:

  • Growth: Consumer debt increased from approximately $6.5 trillion in 2007 to around $15.5 trillion in 2024.

  • Components: Significant growth in credit card debt, auto loans, student loans, and mortgages.

• Corporate Debt:

  • Expansion: Non-financial corporate debt rose from about $10 trillion in 2007 to approximately $22 trillion in 2024.

  • Drivers: Increased borrowing for mergers and acquisitions, share buybacks, and capital investments.

• Government Debt:

  • Rising National Debt: The US national debt grew from $10 trillion in 2007 to over $32 trillion in 2024.

  • Fiscal Policies: Increased spending on stimulus packages, healthcare, defense, and social programs contributed to debt growth.

The US experienced approximately 74% real GDP Growth from 2007 to 2024, and the S&P 500 increased by 300%. At the same time, the National debt tripled, household debt nearly doubled, and corporate debt more than doubled.

The rising debt load has several significant economic impacts. It limits what the Fed can do during downturns. It also limits future growth because existing debt needs to be repaid, decreasing future spending.

In real terms, this means that many Americans make roughly the same amount of money, yet the prices for housing, food, healthcare, and education have soared. They need to save 50% more today for retirement than in 1980.

When they look at their pocketbooks, their children’s future, and the transformation of the Economy, they don’t see a way forward.

They see increased automation and job losses as technology takes their jobs. When factories return to the US, the jobs don’t come back. Instead, most of the work is now performed by robots.

And this is just the start. About 10% of the US labor force works in transportation. Self-driving cars, trucks, and AI, which can automate supply chain management, will displace many of these 16 million Americans.

In the next 18-24 months, we will see a flood of AI Agents who can perform high-cost repetitive tasks, such as cashiers, telemarketers, data entry clerks, and customer service agents. These types of jobs will start disappearing.

Many Americans see a decline in the American way of life: higher expenses, job instability, and no real way forward.

They feel like they live in a system that does not care about them, that threw them overboard 30 years ago, and one in which there is no future for them or their children.

Conclusion

So here we are in 2024, facing another set of transformative challenges. The system that solved the problems of the 1970s and 80s is showing its age, driven by massive demographic shifts, technological disruption, and the unintended consequences of previous solutions. While these challenges are significant, they're not random - they're part of a pattern we've seen before.

This brings me to my next lesson, "The Way Forward," where we'll explore what these changes mean for our future and, more importantly, what we can do about them. While the challenges we're facing are significant, they also present opportunities for those who understand what's really going on and are prepared to adapt.

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» Next Lesson 3: The Way Forward.

Dalio points out that history is not a linear progression but rather a series of repeating patterns. The only things that really change are the names of the people, their culture, and the technology used.

By understanding these patterns, we can better anticipate the future and navigate the complexities of our current world.

Below, this article is a summary of the video above, which includes all of the key insights and Dalio’s framework.

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History Repeats Itself

Events that seem surprising are often not novel but rather repetitions of patterns from the past. By examining the Dutch, British, and US empires, as well as Chinese dynasties, we can spot a recurring "big cycle" that characterizes the trajectory of these powers.

This cycle involves a succession of stages, from the establishment of a new order to its eventual decline, which provides a framework for understanding the present and anticipating the future.

The Cyles of Empire

The "Big Cycle" outlines the typical phases of an empire's rise and decline. This cycle can be divided into three main phases:

• The Rise: This phase begins after a major conflict establishes a new leading power.

  • Insightful Leadership: The new order is characterized by strong leadership, the establishment of effective systems and institutions, and a focus on education and innovation. These leaders often bring a new way of seeing the world and solving its problems and are capable enough to execute on their vision.

  • Competative: The country becomes more competitive in global markets and develops a strong military and financial center.

  • Demographics: They tend to have a large young population looking for opportunity and work.

  • Economic Power: The country's currency eventually becomes the world's reserve currency, giving it a significant advantage.

  • Growth: This period is marked by economic growth and prosperity.

• The Top: During this phase, the empire sustains its strengths, but the seeds of its decline begin to germinate.

  • Increased Costs: As the country grows richer, it becomes more expensive and less competitive.

  • Demographics: As people move to city centers, their costs rise, and they have fewer kids.

  • Complacency: When life is easy, people tend to become complacent and less focused on hard work.

  • Bubbles: Financial bubbles develop, and wealth gaps widen.

  • Diminishing Returns: The cost of maintaining infrastructure and rebuilding exceeds the value it produces, which means that in the long term, the cost of maintaining the empire begins to exceed its revenues.

• The Decline: This phase is marked by internal economic weakness, the bursting of financial bubbles, and the printing of money, leading to currency devaluation and inflation.

  • Internal Economic Weakness: The video explicitly states that decline comes from "internal economic weakness together with internal fighting or costly external fighting or both. This includes the bursting of financial bubbles, which leads to the printing of money

  • Internal Conflicts: The conflict between the rich and poor escalates, leading to political instability.

  • Currency Devaluation and Inflation: As the video describes, when a country prints a lot of new money, "that devalues the currency and raises inflation

  • Political Instability: Political extremism shows up as populism of the left or the right. Democracy is most challenged, and there is a move to a strong populist leader who will bring order to the chaos.

  • Foreign Investors Pulling Money Out: When the empire begins to run out of new lenders, those holding their currency begin to look to sell and get out rather than to buy, save, lend, and get in, and the strength of the empire begins to decline

  • Increase in Corruption & Poor Leadership

  • External Rivals Challenge the Weakened Empire: Internal conflict makes the empire weak and vulnerable to rising external rivals. This often leads to a great international conflict with the rising power.

  • Loss of Reserve Currency Status: When debts and currency holders lose faith and sell, that marks the end of its big cycle.

  • Eventually, the empire's currency loses its reserve status, marking the end of the cycle.

Key Concepts

Several key concepts are central to Dalio's analysis:

• Reserve Currency: A currency widely accepted globally, used for international transactions and savings, granting the issuing country significant borrowing advantages.

• Internal Order: The governing system within a country, often laid out in a constitution.

• World Order: The governing system between countries, typically established through treaties.

• Financial Bubble: Unsustainable rise in asset prices due to excessive borrowing and speculation.

• Wealth Gap: Unequal distribution of wealth that can lead to social and political conflict.

• Internal Conflict: Conflict within a country, often resulting from wealth gaps and political polarization.

• External Conflict: Conflicts between countries, often driven by competition for power and resources.

• Debt and Money Printing: Governmental practice of printing money to deal with debts, which often devalues the currency.

• Vital Signs: Eight indicators are used to measure an empire's power, and these are used as the "vital signs" to assess its health and stage in the "big cycle":

  • Education: The quality of education, including the teaching of knowledge, skills, character, civility, and work ethic, is a crucial factor.

  • Inventiveness and Technology Development: The ability of a country to innovate and develop new technologies is a key indicator of its strength.

  • Competitiveness in Global Markets: A country's ability to compete in the global market is essential for economic success.

  • Economic Output: The total value of goods and services produced by a country is a measure of its economic power.

  • Share of World Trade: The portion of global trade controlled by a country indicates its influence in the world economy.

  • Military Strength: A country's military power is a crucial factor in protecting its interests and maintaining its position.

  • The Power of Their Financial Center for Capital Markets: The strength of a country's financial system and its ability to attract and distribute capital is important for economic growth.

  • The Strength of Their Currency as a Reserve Currency: A currency that is widely accepted and used around the world as a medium of exchange and store of wealth provides significant advantages to the issuing country.

Insights into the Present

The world is currently undergoing a transition, with the US facing challenges from a rising China.

He points to the following factors:

• Internal Conflicts: The US is experiencing internal conflicts due to wealth gaps and political polarization.

• Debt and Money Printing: The US has accumulated massive debt and funds its deficit by borrowing and printing money, which is a pattern seen in declining empires.

• External Challenges: The US faces external challenges from a rising China, which is increasingly seen as a rival power.

• Reserve Currency Status: While the dollar remains the world's reserve currency, its status is being challenged as other currencies gain acceptance.

Empires can extend their longevity by paying attention to their vital signs and making necessary adjustments. Overall, a country must earn more via taxes than it spends and treat its citizens well.

Next Lesson: Demographics is Destiny

Exploring how Demographics over the past 50 years led us here.

In Lesson 3, we will do a deep dive into how demographics produced wholesale changes in our economic system, which ultimately led to our current economic situation and the core challenges we face today.

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Above, I am featuring Ray Dalio’s famous video “How the Economic Machine Works,” and below, I have integrated additional insights that include the massive role that demographics and liquidity play in our economy.

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The Fundamentals: Understanding Money & Credit

Below are a few core concepts we will use to understand the economic machine.

What is money?

In its essence, money represents two things:

1. Energy & Capacity for Work: Each dollar is like a unit of energy that initiates work. This is its value.

   1. When you save money, you are essentially storing your past productivity, creating a transferable token of value that can be used to hire others to do work on your behalf in the future.

   2. When you invest money, you deploy capital into productive ventures that have the potential to generate returns exceeding the initial investment, creating value through economic activity and growth.

2. Scarcity: Money retains its value due to its scarcity. There is a balance between the amount of money in the system and the costs of products, services, and financial instruments.

What are the two types of money?

1. Cash & Credit: Cash and credit are both types of money and are spent the same way. There are $3 trillion dollars of cash in the system and about $50 trillion dollars of credit.

2. Liquidity: Liquidity is the total amount of money in supply. When more money is in the system, more transactions occur, and we have an economic expansion. When the money supply shrinks, there are fewer possible transactions, and we have a recession.

How is money managed?

1. Monetary Policy: Central Banks, like the FED, manipulate the money supply by making money more or less expensive via interest rates and tools like ‘quantitative easing.’

2. Fiscal Policy: The Government (Congress and the President) can directly affect aggregate demand by putting money into circulation through spending or taking it out through taxes.

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Key Concepts

Here are a core list of economical terms:

• Transactions: An exchange where buyers and sellers trade goods, services, and financial instruments.

• Supply and Demand: The fundamental forces determining the price and quantity of goods/services/assets influenced by production capacity and costs, consumer preferences, income levels, and liquity.

• Demographics: Population size, age distribution, and growth rates significantly affect supply (labor force) and demand (consumption patterns). For instance, an aging population may reduce the labor supply and shift demand towards healthcare and retirement services.

• Inflation and Deflation: Inflation erodes purchasing power, while deflation can lead to reduced consumer spending and economic stagnation. Demographics can drive both.

  • For example, the large Baby Boomer generation drove inflation higher in the 1970’s. Today, prices for homes and assets are high mainly due to two large generations (Baby Boomers & Millennials).

• Productivity and Value Creation: Enhanced value creation by producing more output with the same or fewer inputs, fostering economic growth.

• Debt Cycles: Debt allows people and organizations to buy goods or services on credit or to invest in the future by purchasing financial instruments.

  • When debt is used to start a business or purchase financial instruments, it increases our productivity.

  • People can use debt to make big purchases, like a house or car, and improve their quality of life.

  • There is a limit to the amount of debt a person/organization can take on.

  • Debts decrease our disposable funds, which reduces future spending.

  • Less spending in the future means that there will be lower economic activity.

  • Economies experience short-term debt cycles (5-8 years) and are driven by borrowing and lending behaviors.

  • The long-term debt cycle refers to a timeline along which an economy experiences multiple episodes of growth and recession, with each episode accruing a gradual expansion of household debt until, ultimately, a severe depression resets the entire financial system.

Core Economic Concepts and Their Interrelations

Below is a set of relationships on a hierarchy. The top of the hierarchy has the biggest impact.

1. Demographics: The size of a population and demographics determine the supply and demand of goods, services, assets, and labor. A big population, like the Baby Boomers, will all grow up and go through the same life stages together, meaning that they will compete for the same universities, jobs, and houses, pushing up the prices for inelastic goods, services, and assets.

   1. Demographics drive the macrocycles and patterns.

2. Liquidity: The amount of money in the system drives economic activity and asset prices. Here is the general pattern of a debt cycle:

   1. When times are good, people and businesses start to borrow

   2. The credit increases the liquidity in the system, driving up economic activity and asset prices.

   3. This incentivizes people and businesses to borrow even more, further increasing prices.

   4. Too much liquidity can lead to inflation. When Central Banks notice a rise in inflation, they increase interest rates, which decreases liquidity.

   5. Less money in the system decreases spending, lowers incomes, increases unemployment, and pushes asset prices down.

   6. People feel worse about the economy, so they spend and invest less, which pushes prices down.

   7. This drag on the economy is a recession. To help the economy get out of a recession, Central Banks decrease interest rates, which increases liquidity in the system.

   8. Current Debt Cycle: The 2008 Global Financial Crisis reset everyone’s debts simultaneously. A large number of organizations throughout the world refinanced their debts at the same time, which now gives us a very predictable four-year debt cycle!

      1. GFC reset debts in 2008

      2. Many businesses refinance their debts every 4 years or so

      3. This produces a very predictable 4-year cycle where liquidity comes into the system and then out.

      4. As a result, markets perform better on Presidential Election Years (2024/2025, 2020/2021, 2016/2017, etc) as liquidity increases versus years when liquidity decreases (2018/2019, 2022/2023, 2026/2027).

3. Productivity and Value Creation: Over time, society is able to produce more output with the same or fewer inputs, fostering economic growth.

   • Technology tends to be deflationary, bringing the costs down and productivity up. This means less labor and lower costs for products and services.

   • Productivity is the way we pay our debts.

Demographics is Destiny

Demographics play a pivotal role in shaping the macroeconomy. Population size, age distribution, and generational dynamics influence the economy's supply and demand sides.

Population Size Effects

• Labor Force: A larger population increases the labor supply, potentially boosting production and GDP.

• Consumption Patterns: Diverse age groups influence demand for goods and services, shaping market dynamics.

• Dependency Ratios: High proportions of dependents (youth or elderly) can strain public finances and social services.

Generational Challenges and Solutions

Baby Boomers:

• Challenges: Aging population, increased healthcare and pension costs, potential labor shortages.

• Solutions: Encouraging later retirement, investing in healthcare technology, and promoting higher labor force participation among older adults.

Generation X:

• Challenges: Balancing work-life demands, managing debt from education and housing, and adapting to technological changes.

• Solutions: Flexible work arrangements, financial literacy programs, continuous education, and reskilling initiatives.

Millennials:

• Challenges: Student debt burden, housing affordability, delayed family formation.

• Solutions: Policy reforms for education financing, affordable housing projects, and fostering gig and remote work opportunities.

Generation Z:

• Challenges: Entering the workforce during economic uncertainty, climate change impacts, and mental health issues.

• Solutions: Sustainable economic policies, investment in green technologies, robust mental health support systems, and inclusive education models.

Impact on the Macroeconomy

• Consumption and Savings: Younger generations tend to spend more on education and housing, while older generations may save for retirement, influencing overall economic liquidity.

• Innovation and Productivity: Younger cohorts are often more adaptable to technological changes, driving innovation and productivity growth.

• Fiscal Policies: Demographic shifts necessitate adjustments in taxation, spending, and social security systems to maintain economic stability.

• Big Generations = increased prices of homes, assets, education, and health care.

• A young and dynamic population is what carries everything—from spending and productivity to workforce and economic growth. (USA in the 1950’s, India & Mexico Today)

• A middle-aged population is at the peak of their earning and spending power as they care for households and families. (China, Germany, & Canada Today)

• An aging population is a big drag on the economy as seniors leave the labor force, spend less, sell their assets, and need young people to support them (Russia, Bulgaria, & Japan Today)

• Demographics produce feedback loops. An aging population strains young people, as they have to support them via higher taxes and lower asset prices, making it hard to raise a family.

• A growing, productive population can boost GDP, whereas an aging population may slow economic growth.

What’s Next?

In Lesson 2, we will do a deep dive into how demographics produced wholesale changes in our economic system, which ultimately led to our current economic situation and the core challenges we face today.

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