A stagnated future lies ahead
Before I get to a more somber prediction, I would like to give a personal shout-out to GIFs, or JIFs, or however, it is you say it. No matter what it’s called, being able to respond to a text with a 2-second video from a show from the 90s makes all the crappy things on the internet almost worth it. Forget the trillions of wealth that have been created, memes and stupid videos are the information superhighway’s greatest source of value.
A lot of talk this week is about stagflation. Admittedly, it is not a term I have studied deeply so when this started to surface, I did get a bit curious. Here are some cliff notes of what I learned, and why it’s a big deal.
The “stag” implies economic stagnation, which is a fancy way of saying that that growth and unemployment will both go in the opposite direction that we all want them to go. In this case, stagflation means low growth and high unemployment. The “flation” part is the proverbial icing on the cake, meaning not only do we have low growth and high unemployment, but we also have high inflation. Good times indeed.
Now, without getting too deep (because frankly, it is boring), for the most part, economists consider this almost impossible to happen (any growth and high inflation usually lead to more jobs) and at a high enough level, they have mostly been correct…mostly. The most recent excepting is in the mid-70s when we had an oil crisis and crap hit the fan. Luckily my generation was born a few years later and by all indications, we saved the economy. (I read about this flawed thinking a while back).
Nevertheless, the impossible happened and the US absolutely experienced a period of stagflation. What’s not surprising is that in the 70s this was led by surging energy and commodity prices, a double whammy that is not unlike what we are seeing today, compounding with the complete disaster that is the labor and supply chain. Don’t get me wrong, I’m not an expert on such things, but the crazy amount of money-printing and government checks we are cashing simply cannot be helping the case.
If you deep dive, you will see some” experts” claiming that it’s nothing to worry about, while some claim it’s a serious issue. The truth is, no one really knows as it is a pretty complicated topic. However, what I think we all know is that we probably are at an interesting point.
My analytical side tells me that the economy is going to keep growing, mostly fueled by technology. No matter what data I look at, nothing indicates to me that this train is going to stop anytime soon. I’m still investing heavily in tech, and while I have pulled back some out of the public equity market, there simply remains no better place to put your money in the public markets today than technology.
My eyes, and maybe my gut, tell me that we are on the precipice of a 2-3 year sideways trend. It feels like the economy has peaked, although I cannot tell you why. When you combine the crazy bull run of the last decade, the ridiculous real-estate prices, the millions being thrown at technology, and the millions of open jobs that seemingly cannot get filled, it feels like we are about to hit the pause button. I think the US is still plenty strong enough to avoid anyt sort of recession, but a few years of treading water wouldn’t surprise me.
So what do we do if this is going to happen?
In a word. Build.
No matter what the next couple of years look like, one thing remains sure. The future belongs to those that build, and particularly those that build by going all-in on technology. In the mid-term future (~30 years), there will only be two careers, creators and engineers, and everything else will simply be jobs or tasks, which will be competing with technology (robots) and automation. That future is happening now if you look closely enough.
In particular, there are tons of opportunities in non-technical businesses (let’s call these unsexy businesses) where you can apply technology and instantly 10x it. To be honest, leveraging technology in businesses that are non-technical, to me is the easiest path to creating a multi-million dollar business today. It does not have to all be NFTs, Crytpo, and selling software. If you gave me $500K today to turn to $5M, I truly believe the less risky approach lies in digitizing traditional, unsexy, blue-collar businesses.
Either way, a good business owner and investor needs to find ways to win in any market condition. Whether you believe stagflation is occurring, or this bull run has another few years left in its tank, the answer is still the same. Start building now, or invest in those that do.
Photo by Hello I'm Nik on Unsplash