How to Embrace a More Volatile New World at the Beginning of a Long Cycle? - Huxiu.com#
Population: In the future, the main growth of the global population will come from Africa, India, and Southeast Asia, with about 50-60 years of space. Population development and technological diffusion often go hand in hand. So, at present, it seems that human technological progress has not reached a major halt.
Interest rates: Wars and deglobalization will push interest rates higher, and the expenditure on security and war will bring more fiscal expenditure needs. This means that the baton of the economy is slowly shifting to the government, and in the future, what will unite voters may not necessarily be economic growth, but security. This is also a self-reinforcing logic.
Technology: It seems that both China and the United States have decided to increase investment in AI. My experience is that technological revolutions are accidental at the beginning but require a lot of government support in terms of promotion. So if China and the United States increase their investment in AI, there will be less doubt and more blind faith. ⤴️ ^eec8e29b
- The diffusion of capitalism and the increase in fairness are in countries such as Indonesia, India, Mexico, and Nigeria on a global scale, and from east to west domestically;
- From the market to the government, more government-backed industrial funds, more visible hands. The so-called Long Main St, Short Wall St, long physical assets, short financial assets; ⤴️ ^160cc5ac
Emerging markets, physical assets, AI, see if there is any way to combine these three things to create a business model. ⤴️ ^efbf3dcb
Emerging markets, physical assets, and AI. ⤴️ ^c3cf8d4f
How to Embrace a More Volatile New World at the Beginning of a Long Cycle?#
This article discusses the beginning of a long cycle and how to embrace a volatile world, including viewpoints and trends in population, interest rates, and technology.
• Population growth mainly comes from Africa, India, and Southeast Asia, and human technological progress still has room for development.
• Wars and deglobalization will lead to higher interest rates, and governments will have a greater say in security and war expenditures, shifting the baton of the economy to the government. In the future, what will unite voters may not be economic growth, but security. This is also a self-reinforcing logic.
• Both China and the United States have decided to increase investment in AI, which will be one of the directions for industrial breakthroughs.
At the beginning of this month, BofA released a report called "The Longest Pictures," which was a grand narrative feast. The report is over 150 pages long, but there are some charts that I think are worth sharing.
Here I want to say a few more words. The correct decision is a combination of two things: accurate data input and the right analytical method. Unfortunately, the analytical method is closely related to one's worldview. For example, when it comes to income inequality or the Gini coefficient, wealthy people often have a higher tolerance for it, while ordinary people often despise it.
A person's past experiences determine their current views, and their current worldview determines how they use data. Objectivity is a very difficult thing. People who grew up in difficult times are often more anxious and pessimistic about taking risks, while those who grew up in prosperous times are more willing to take risks. So sometimes, most people cannot understand each other, and there is no universal truth.
When I was young, I always pursued truth and knowledge, but now that I have grown up, I understand deeply: what you think is good is right, and what you think is right is good.
This report contains many charts spanning 100 years, exploring long-term trends and opportunities in the 2020s. My own experience is that every era has its own opportunities, and there are always successful and unsuccessful people. There is rarely an era without opportunities.
To be frank, many of these charts, rather than being used for investment, are more like guides for entrepreneurship and career choices... The greatest investment in life is actually oneself. The industry you join is equivalent to buying an ETF of that industry, and the country you work in is equivalent to buying an index of that country. This must be thought through clearly.
Returning to the topic, let's start with three charts: population, interest rates, and technology. These are often the first indicators we look at when assessing country risks and long-term prospects.
People are the sum of all their social relationships and the fundamental embodiment of productivity. Therefore, the 200 years of rapid population growth have also been 200 years of increased efficiency.
It took humanity 1,800 years to grow from 100 million to 1 billion people, and then 200 years to grow from 1 billion to 8 billion people. The explosion of technology is synchronous with the explosion of population.
From this perspective, humanity still has opportunities in the next 50 years. Speaking abstractly, capitalism still has many areas to expand, from Europe to North America, from North America to East Asia, and from East Asia to Africa and Southeast Asia.
The current global population is about 7.9 billion, and based on current birth rates, the global population is expected to reach its peak in about 60 years, with an estimated 10 billion people. During these 60 years, the largest population growth will come from Africa, India, and Southeast Asia.
Meanwhile, the increase in life expectancy is astonishing. The average life expectancy of humans was 32 years 100 years ago, and now it is 72 years. Whether life expectancy will continue to double every century is still unknown.
These are all data, and now I will share my feelings. Let's not talk about such a long story, let's talk about my own experience in China this year. Well, let's put it this way, the international terminal of Pudong Airport and the airports in Changsha, Chengdu, Kunming, and Nanning give completely different impressions. Many cities in the western region have shown good development this year.
From my perspective, in the future, we will see a narrowing of the wealth gap both globally and within countries, accompanied by an influx of low-income areas and an outflow of high-income areas.
In other words, if you want to start a business or create a career now, it may be better to focus on the common prosperity of low-income groups in some third world countries or western China than to stay in Beijing, Shanghai, Guangzhou, or Shenzhen.
Some readers on Zhihu may remember that I once shared Smelkin's interest rate paper, and then I said that the Soviet Union was like a tower, its destructive innovation to the world was epic, and no country has ever done capitalism as badly as it did. The example I gave at the time was that in order to cope with the threat of the Soviet Union, the United States had to continuously increase fiscal expenditure and use interest rate hikes to curb the inflation caused by fiscal policies.
At that time, I said that China's impact on the United States from 2000 to 2008 was not significant enough. But in the past two years, we have seen the manifestation of this impact.
To cope with the pressure on the supply chain from China, the United States must engage in completely non-market-oriented redundant construction and fiscal investment. This is the interest rate hike caused by the clash of civilizations, and the government must intervene to make non-market investments.
So, as I mentioned before, as long as the competition between China and the United States continues, deglobalization and wars continue to occur, the suppression of inflation by interest rates is only a temporary solution.
The main change brought about by this increase in interest rates is that the market's right to allocate liquidity is weakened. In the past, when interest rates were lowered, banks decided which projects to invest in, and VC and PE determined the direction of industrial development. In the future, I estimate that we will see more decisions coming from the government, industrial policies, and security demands. This will certainly lead to a decrease in efficiency, but it is the cost of fairness and security.
In other words, I do think that countries such as Indonesia, India, Nigeria, and Mexico face more challenging development environments than China. China follows the logic of attracting foreign direct investment (FDI) under low global interest rates, while these countries may have to rely on debt financing.
From my perspective, I will closely monitor which of these four countries can prove their fiscal expansion capabilities first. Currently, they are all relatively average, and these countries seem to be imitating China in its early years, trying to attract foreign investment, but attracting foreign investment in times of low interest rates and times of high interest rates are completely different.
From this perspective, because China's interest rates may be lower than those of the United States, logically speaking, India and Indonesia may have more hope for FDI.
Regarding interest rates, I think there are two key points:
Wars and deglobalization will lead to higher interest rates;
Higher interest rates will strengthen the government's voice worldwide. They will gradually take back the rights given to the market over the past 40 years, and this retraction will occur in both China and the United States. This also means a decrease in efficiency and an increasing possibility of stagflation.
Technology is always the most difficult aspect to judge in economic analysis. It is a perennial challenge to determine how much of total factor productivity is brought about by technology. It can be seen that BofA believes that the latest technological driver is AI, and I agree.
From an industry perspective, the development of AI is indeed entering an explosive period. Of course, this judgment is always the core issue. Technology is the primary productive force and the most difficult to judge source of productivity. My experience is that many technologies can reduce costs and increase efficiency as long as you invest enough money. Therefore, judging technology depends on whether major powers have a consensus. For example, in 2012, when I didn't know what it meant, Zollikofer said in a report he cooperated with the State Council: New energy is a consensus between China and the United States.
Today, I think as long as China and the United States both see AI as a direction, I won't care about its short-term issues or whether it can reduce costs and increase efficiency in the long run. These are all breakthroughs that can be made. People's habits are easily transformed. Ten years ago, there were no USB ports on hotel bedside tables, but today everyone thinks it's only natural.
==Population: In the future, the main growth of the global population will come from Africa, India, and Southeast Asia, with about 50-60 years of space. Population development and technological diffusion often go hand in hand. So, at present, it seems that human technological progress has not reached a major halt.==
==Interest rates: Wars and deglobalization will lead to higher interest rates, and the expenditure on security and war will bring more fiscal expenditure needs. This means that the baton of the economy is slowly shifting to the government, and in the future, what will unite voters may not be economic growth, but security. This is also a self-reinforcing logic.==
==Technology: It seems that both China and the United States have decided to increase investment in AI. My experience is that technological revolutions are accidental at the beginning but require a lot of government support in terms of promotion. So if China and the United States increase their investment in AI, there will be less doubt and more blind faith.==
So, from this perspective, there are several directions to consider in the future:
==-== ==The diffusion of capitalism and the increase in fairness are in countries such as Indonesia, India, Mexico, and Nigeria on a global scale, and from east to west domestically;==
==-== ==From the market to the government, more government-backed industrial funds, more visible hands. The so-called Long Main St, Short Wall St, long physical assets, short financial assets;==
So, if you ask me, what is worth considering at present, it would be ==emerging markets, physical assets, and AI, to see if there is any way to combine these three things and create a business model.==
There are also some other trends:
American workers are uniting and striving for higher wages, which will stimulate investment in AI to some extent.
When the government expands its voice, companies and residents are the two entities it can unite.
When the government unites residents, such as Biden standing with striking workers, it is the government and residents working together against companies, which is one outcome.
When the government unites large companies, such as Italy in the past strictly prohibiting worker strikes, it is the government and large companies working together against residents, which is another outcome.
- A more volatile world.
Looking back at history, the low volatility of the past 40 years was actually a historical accident, not a historical inevitability.
- American exceptionalism.
In terms of valuation, America's advantage over the rest of the world has exceeded the highest point of the past 70 years. Now, look at the current US dollar index, and you will feel that it is possible for the US dollar to fall below 90 one day after American exceptionalism ends.
American exceptionalism is actually a judgment of values. If you think that China and the United States will engage in competition in the future, then there will be no American exceptionalism, because this is a competition that punches each other, like two boxers fighting. The hidden meaning of American exceptionalism is that the United States is a boxer, while others are elementary school students. I don't quite believe this.
In summary, I think that from the current standpoint, it is difficult to predict and grasp the short-term fluctuations of investment and the market. But if we talk about what countries, industries, and technological innovations should be paid attention to at present, I think it is these three: ==emerging markets, physical assets, and AI==.
Of course, technology inherently carries uncertainty. If you only want to consider countries and industries, I think it would be emerging markets and physical assets. The 2020s may be the beginning of an end, the end of the globalization + low interest rates + peace + neoliberalism frenzy from 1980 to 2020.