This is a long overdue post. It will tie in a lot of stuff from the rise of socialism to the impact of brands (got a ton of emotional responses to that one). True to form we like to focus on smaller chunks of time, around 2-3 years since it’s more impactful. We’ve already publicly stated we’re not buying stocks anymore (just leaving what we’ve got there) and are building a bigger cash reserve. We’ve also stated that brands work… Many cannot see how these concepts are tied together but lets go ahead and get ready for this lengthy article (much longer than usual).
The Current State of America
This is focused on today, not yesterday or tomorrow. Essentially we saw the middle of America and the “working class” (notice we didn’t say low class, but working class) elect a completely different type of president. Naturally, we don’t care about politics and never really talked about it after making a good amount of money off of it. That said, the message was clear… the middle class of the United States was not moving up and to the right.
Now lets look around. The discount companies are at all time highs in terms of stock price. Look no further than Ross stock (ROST) or McDonalds (MCD). Then look at the middle/upper middle layer, Macys (M) or Nordstrom (JWN) and compare that to the ultra high end Kering (Euonext: KER). For those unaware (totally fine) Kering owns the high end: Gucci, Yves Saint Laurent, Alexander McQueen… and more. What do you see? You see a massive change in stock price around 2016-2017. During the retail meltdown (people moving online) you see that the luxury market continued to ramp higher.
So it’s time to tie it together. How is this possible? It is possible because the latest generation is being separated into two groups, the “new rich” and “the lower middle class”. The new rich have different styles/looks and several companies within Kering have figured it out. Since people got so upset about the previous article here’s a fun hint… around 5-10 people noticed we specifically mentioned the impact of Gucci (this was of course by design – feel free to look into why)
Hopefully the last few paragraphs were at least a bit convincing as you can see it everyday in the numbers. The stock prices don’t lie. If the middle market companies are suffering while the two companies targeting the lower end and higher end are flourishing… the picture is pretty clear. We’re seeing an economic separation.
How did we get here? The answer is technology of course. Due to changes in technology many jobs and tasks are being done by little lines of code. People just call it “Artificial Intelligence” since it sounds cooler this way, but software has been slowly taking away high paying jobs for years. 30 years ago when you were in school you were taught that “you won’t always have a calculator on you” or “hard math is the only thing of use”… here we are 30 years later and computers are taking over a lot of those hard math problems and you certainly have a calculator on you at all times. It’s quite interesting since the creators of high quality technology essentially “took all the value” into the hands of a smaller number of people.
Overtime this has only accelerated and the rich continue to get richer while the people left behind remain stagnant. Looking around, life doesn’t appear to be all that terrible for people in the lower middle of society, they still have access to tons of cheap entertainment, fast internet and many other amenities. That said. They are basically staying in the same general socioeconomic hierarchy year after year.
How This Plays Out Socially
No surprise that drug use and hook up culture is prevalent in the United States. If you see no real chance to move upward in society you’re going to be drawn toward hedonistic activities. This results in lots of alcohol (blacking out), drug use and casual sex. In fact this thought process goes all the way up to around the “upper middle class”. This is because the jobs/careers in that range are seeing the most pressure (people who make $200-350K a year are ripe for cost reductions, just like the middle management layer in any corporation). The people in the upper middle that didn’t quite make it fall down a peg and say “screw it” and also participate in this new culture. The rich on the other hand continue to make more… and live better lives.
Looking at this, it’s not officially a “black and white” divide between the rich and the “lower middle class” (we don’t say poor since you can still live a good life with $60-80K a year in a lot of places in the USA). That said. It’s moving in that general direction. Since we’re still in an environment where you can “move into the ultra rich”, this current environment is essentially the *platinum* age for making money. You have the VAST majority of the population from the people with little money all the way up to upper middle class doing the exact same thing… Giving up.
From a social perspective, what you’d expect to see if the above is true… is happening right in front of our eyes. If the prior paragraphs are true what you would see is 1) an increase in hatred towards people who have luxury items – from those that do not, 2) an increase in animosity for anyone who makes the next jump financially – from those that did not and 3) a decrease in overall happiness for your average person as they were unable to move up socioeconomically from where they started (notice, average in this case refers to where the person started on the socioeconomic ladder)
Beyond the hatred and animosity for people who make it, you’ll see more and more animosity for *smaller* gains. If you go from making say $50K a year to $500K a year, you’d typically see a lot of people say you changed or are a “jerk” now. This holds true throughout human history. That said, we’ve noticed that if someone even makes a *small* gain they *still* get a ton of negative reactions. This is startling. To avoid making anyone mad, just look at the people building their own personal brands on Facebook, Twitter, etc. As soon as they start to succeed even a little bit, the venom starts to flow. Not a good sign. It means that small to medium improvements are insulting (the majority are having a hard time mustering that)
The Platinum Age
With the bad news out of the way… There is still a good amount of time to make it. We’re certain that anyone who wants to can still get to $1 million over 10 years and this would get them *close* to $10M with a small amount of luck (assuming they start in their 20s). Since we’ve painted a picture of an economy that is currently separating, you definitely want to be on the right side of the equation. So best to make sure you attach yourself to the right people.
Read Between the Lines: Before deciding if you’re going to spend your valuable time with someone, make a decision on the type of person they are. If they are “happy when others fail” this is a miserable person and should be avoided. If a person is happy when other people fail, he/she is extremely likely to be happy if you personally fail as well. Other good tells include: 1) avoiding people who dislike the rich, if someone dislikes rich people then they are setting a psychological barrier that will *guarantee* they never become rich. If someone hates rich people, they would have to hate themselves to get rich. 2) attach yourself to people who are improving and cheer them along the way. If someone passes you or you pass them, there should be no animosity. That’s how life works. Ebbs and flows and the guys who make it to the next level are not going to “look down on you” if you are still trying to go somewhere. 3) avoid the people who appear to be doing the same thing for 2 years. This is enough time. If someone hasn’t improved at all in 2 years they are essentially giving up. It doesn’t need to be income it could be their interests for example. 4) don’t give any of your time to the people who get upset as you change. There is just no way you improve your life and stay the same. It doesn’t make any sense at all. They are also showing their cards: they disliked you deep down in the first place (or they are insecure, both are terrible).
Create Ownership/Equity/Scale: This has been beaten to death. And. Many people still don’t get it. Working for someone else does not lead to wealth. The percentage of careers that lead to wealth are so slim that you’re better off trying something small on your own. How many careers/jobs pay $1 million a year? Practically none. Also. The more you make the more the Company will try to automate/get rid of your high cost position. Hint Hint another reason why sales is recommended here as a “for now” career as human interaction is unlikely going to be automated over the next decade or so.
Keep Making Tweaks: Since this is arguably the easiest time in history to earn money online, you’ve got to keep making adjustments. It doesn’t matter which route you go down (the most basic and low chance of losing money route – personal brand/looks industry, or the higher risk higher reward route – product sales/affiliate marketing). Naturally, if you’re making good money already just go the product route. Anyway. Keep making tweaks and eventually you’ll break through financially to the “next level” if this is from $0 to $1,000 per month or $5,000 to $25,000… Who knows. The point is that you’ll have a project (you don’t need more than one) that is being worked on constantly to help you move into the “right side of the divide”
The Transition Age
At some point we will begin to go through the transition. We’ll reuse a similar photo we’ve used in the past below.
Just like the stock market, peaks and valleys in terms of opportunity also occur. Since the last decade or so has been nothing but amazing upside, sometime over the next couple decades will be a period of maximum pain. This will likely be driven by Artificial Intelligence as middle and upper middle class jobs/careers are eaten up. Before this happens you’ll notice increased contempt for the rich and the rich will naturally have increasing contempt for people trying to steal their hard earned money.
During the transition age you need flexibility. Like any cycle, there is always a good place to be. As this tension rises put more and more effort into diversifying your investments and having assets accessible without a third party (we all saw what happened in Europe). During this painful transition to Artificial Intelligence, you’ll have a large opportunity to become wealthier by simply investing into lower middle class goods (naturally if there is a wealth tax or a way to move money from the rich to the lower middle class, they will spend it).
Being honest here, it’s tough to figure out what this looks like since we’re still quite a way from seeing the real impact of Artificial Intelligence. That said, we’re quite convinced on the splitting of the “haves and have nots” since we can see that every single day. There will be capital allocators (ideally you, yes you reading this text) and then there will be people who are generating basic income working with robots instead of owning said robots.
How to Prepare
With the broad picture out of the way we can get back to the more valuable stuff, what to do now and explaining why our culture is changing so much.
Growth and Human Nature: Humans are naturally competitive. Even guys with no results and no talent will talk your ear off and give you advice on sports, dating and money if you let them. But. If you date beautiful girls, have a bunch of money, normal/good social skills and are in shape… You will be the target of many many haters. This is a good thing as people waste their time giving you more attention which can ideally be turned into more money. Now when you find the rare people who are happy for your success, we will bet a good amount of money that they can be trusted in general. Unsurprising that this is how it works. The conclusion here: the only people you should give any of your time to are the people who are supportive/happy for you.
Hyper Growth in Authenticity: Previously, you would see a photo or a video online and believe that it was real. This is officially dead for anyone who is well off. The well off people know how easy it is to fake an image and even a video. This will push down to the rest of society. That we are convinced of. This is why we’ve stated that starting your own services/brand using your own name is perfectly fine to make a living. These people with their own name out there will see hyper growth as they have an actual fan base. If you’re really out of options (no way to start a product company, no way to get into a high paying career) go down this path since you’re going to see a lot of growth. The value of real time messaging is going to go up. Reporting on the past is dying out.
Increased Value of Events: This is also occurring as we speak. Value of posting photos of rented Ferraris and homes? On the decline. Posting a video sitting court-side at a Knicks game, on the incline. One is easy to fake the other is significantly harder to fake particularly if you do it consistently. The “new rich” will be able to tell the difference. Spelling it out. If you’re smart, spend less money on “people” for all your ads/photos as you can have them rendered to look better for a fraction of the cost. Take all that money and spend it on real time items… as they say “Customer Acquisition Cost (CAC) is the new Rent”
In Person Image Value Going Up: Since nothing we see online is real anymore (software/AI eating into these arenas), your in person image value is going to go no where but up. Before going to any event ask yourself what type of impression you want to make. People can fight this as much as they want but that’s the direction we’re going. People are unhappy since they are not seeing much mobility so make sure you *don’t* send this message (that you’re not going anywhere as well) since it broadcasts the wrong message and is a self fulfilling cycle. Similar to avoiding overly negative/cynical people. Their beliefs are self fulfilling and these types are also (surprise) typically not well dressed.
Learn Any Skill That Makes Money: The rate of change we’re seeing is only accelerating, around 10-11 years ago people still took Taxis and used Blackberry phones. This means the way you currently earn money is likely going to see significant pressure at some point over the next 5-10 years. In some cases it won’t even be there. So. You have to learn a new skill to pay the bills ahead of time which allows you to “Double or Triple earn” accelerating your investment rate. Notice. Learning random skills is just not good enough anymore. Learn one skill that can earn you money before it is too late.
After re-reading the post it just looks brutal. People are having a hard time moving up the socioeconomic ladder the old way so they resort to a lot of hatred and resentment nowadays. The extremely good news is that everyone who reads this post has the highest percentage chance to jump the chasm in human history. This is the natural balance of life. If the old way doesn’t work anymore it means the new ways work the best and see hyper/parabolic growth. You know what to do. Figure out the new way and don’t look back.
While this was a different post than usual (more high level) it’s fun and feels like a cathartic release writing it out. Who knows if all of this ends up being right, yet the visible data points we’re seeing tend to suggest this. The ones who don’t make it become clearer as they become more and more resentful and negative (some of them are even violent in public). The middle tier brands are falling off. The low end is seeing growth… the high end is seeing growth… And… people are losing trust in videos/images/the news etc. Quite a crazy time to be alive… No worries… Won’t be doing a high level one in the near future!