For fun we’re going to do a prediction post. We’ll include an estimated time frame as well. We’re doing this to see how terribly wrong (perhaps right!) we are in terms of what is in store for the future. Our guess is that most of the predictions up front will be correct (timing off) while the ones toward the end are more extreme and less likely to occur. Feel free to leave your own predictions in the comment section (agree or disagree) and on top of that we can circle this post for a later date for review.
Higher Likelihood Predictions
Recession Within 2-3 Years of this Post: We anticipate seeing a recession within 2-3 years of this post. It has now been ~10 years since the last pull back and it is unlikely the market continues on the tear through 2020. Perhaps we see a pull back in 2021 so we’ll go ahead and include the third year to be safer on this less controversial topic. The good news is that recessions allow you to use excess cash to buy a lot of assets at a big discount. This is music to your ears since you only need about 1 year of solid savings to see outsized gains during the next pull back. For fun, we’ll go ahead and estimate the trough at -40% for the equities market from peak to bottom. The last one was massive at closer to 50% so we’ll be more optimistic and say 40%. While we’re more confident in a recession occurring in the next 2-3 years, we’re less confident in the magnitude since that is much harder to call. But. For fun there you have it.
Expensive City Rental Softness: More and more we are seeing openings for jobs (note not careers) that are location independent. It doesn’t require much more than a computer and internet access to do a lot of work these days. This could include customer service, consulting, tech positions and anything journalistic in nature. These trends will impact the more expensive cities as we’ll see the middle class leave. While the expensive cities will still be expensive, we anticipate seeing a “hollowing out” where the lower end employees eventually get some breathing room (again 2-3 years due to a pull back) and a natural competition for the top (no change for the 1% ever!). In some cases we would not be surprised to see an increase in housing prices outside of the main cities. Specifically, we’d expect prices to increase in the largest cities for tax free states (Texas, Nevada, Florida in particular). They won’t sky rocket due to a large inventory but they should go up.
Another Boost in Crypto: Despite the news cycle nothing has changed. People who bought in at the highs were just trying to get rich without knowing anything. This is exactly what is supposed to happen. It takes at least 6 months to a year before anyone can comprehend the basics, so anyone who bought during the 200% run within a month… Is gambling. This has been a fun roller coaster to watch because it has flushed out all the people who didn’t know anything about the space. They are becoming much more jittery. Unfortunately, they haven’t capitulated yet so there could be much more downside to come. The good news? in a few years it should pull through with another rally once again. Generally speaking, these declines last about 18 months. For fun we’ll say the next rally will be 2020 with 2022 being the “big year” of upside. Less confidence on timing, tons of confidence in the eventual result. As a side note, people valuing this in terms of fiat are certainly missing the entire point.
Slowdown in Traditional Sports: We’re not here to say what is right and what is wrong. We’re here to present a basic prediction and opinion. In about 10 years we anticipate that traditional sports will see slowing growth. If you look around, kids are not playing outside as much, they are spending their time staring at smart phones and computer screens. We all know what this means… eSports. To emphasize, we’re not suggesting someone should play video games, we’re suggesting that the market for eSports will become large and traditional sports will start to plateau. The market for sports have been on a tear for about 40 years and every single market eventually hits capacity. We’d expect a slow down and stabilization in sports in 10 years.
Smaller Families: Culture has changed quite a bit over the last 10 years. Hooking up, lots of cynicism, lots of angry people and very few with a way to afford a family. We’re guessing it’ll be a lot more similar to slow growth vs. the rampant growth we saw with the baby boomer generation. It is tough to justify having a kid when student loans are weighing down on your cash flow statement like 4,000 tons of bricks. We’re not saying that people should or shouldn’t have kids (people are going to do what they like) what we are saying is that the population growth should slow down. Once we figure out how to clean up the finances of the younger generation – set to fail by debt – we can reassess the future of population growth. We think the numbers will slow down within 5-7 years or so. People in the late 80s and early 90s made it out just barely but the latest numbers are gruesome.
Competition for Traditional Education and Student Debt: In another 10 years we think the weight will finally break the camels back. 10 years ago we looked for any investment product that would go up in-line with school tuition. We failed and now we know why…. It was incredibly lucrative! We always found it funny that going to college was pumped into the brains of every child and yet there was no investment vehicle to match the dollar for dollar increase (helping prepare for the future burden). It would have been an amazing investment vehicle and way to secure a college education. Since that ship has sailed, we think the college scam will also sail in about 10 years. Learning how to code does to require a four year degree and many of those four year degrees are expiring worthless (many baristas have 4-year degrees). Combine all of this together and we see a looming student debt bubble that pops combined with an alternative to the status quo system.
AI Job Replacement: Contrary to popular belief we do not believe low waged jobs will be the first ones targeted by AI. If the AI is actually good, why would they use it to replace a minimum wage worker? Instead they will go for the replaceable middle layer which ranges from accounting to excel sheets and paper work (lots of law as well). This will cause a shift in value from “processing” to “creative” work. This has been a theme here for a while where you don’t want to have any skills that can be taught to someone else. If someone else can learn how to do it quickly, then a robot will easily learn it as well. If a robot can learn it… you can fill in the rest! Instead AI will help replace mundane jobs that require no creativity, giving more and more value to people who actually combine skills in a new way. This will occur over the next 5 years or so. In fact, AI is already being used for a TON of online advertising. It is so prevalent today that *not* having it would hurt conversion ratios in a meaningful way.
Generational Wealth Transfer Boost: This one will be quite interesting to watch. There are many people who will inherit a large amount of money ($500K-$1M or so) with no background in financial literacy. This will either be a complete mess or it will save a lot of people who had very little to look forward to. Our guess is that this will spur on a lot of economic activity as inherited assets will likely be larger than the individual needs… leading to more consumption. The rough age range for this transfer is around 30-40 years old. In about 20 years they will see a large inflow of money and it will be interesting to see how they handle it. It will also be interesting to see if this trend continues where the wealth was created by a prior generation versus the current generation. How they manage the money will be interesting as well. And. We’re on the side that says they overspend.
Lots More Inequality: For better or worse we see this continuing. What technology allows people to do is maximize their value. While people complain that so and so is “overpaid” it is typically the middle layer that is overpaid for a position that could be automated. For proof of this look at the average corporation and take a good look at the middle layer. It’s a lot of politics, lots of busy work and lots of wasted time browsing Facebook, YouTube and Netflix. While every industry has downtime (even investment banking) your typical corporate job has an insane amount of it. Look at any org chart and you can replace three middle people for a single high quality employee (not even a problem to be honest). Since technology gets rid of inefficiency, we see a lot more barbell set ups with high payed employees and low paid employees at the other end. The middle gets hollowed out. While this is seems “bad”, this website isn’t tailored to the middle so it should be good news to everyone at the high-end of the pay scale. You’ll have a reason to work harder since you can monetize your time much more efficiently. We think this will be similar to AI and the wealth gap widens in about 5 years or so.
No Need to Leave Home and If so… It is Third Party: That is right. In about 5-10 years as well you won’t need to leave your home. We’re getting closer and closer with drones, 24 hour delivery and streaming content. In a few short years the latest technology will impact the largest cities and allow for near-instant delivery, incredibly fast internet and of course, consistent downloadable content. We’re not entirely sure what this means for square footage of real estate (likely smaller) but the implication is both positive and negative. On the positive side, you don’t have to wait and can simply order items when the timing is correct and have it delivered in 24 hours. The negative side? People will likely become less and less healthy as a result living most of their lives indoors in front of a computer screen. As all of these automated delivery services become scalable, the notion of owning a car would likely be erased as well. Who needs garages and parking lots if you’re simply jumping into self driving vehicles that are both safer and cheaper? No one! So get ready to live a much safer life in the future since we’ll get rid of one of the leading causes of death and reduce the need for “car insurance” in the future.
Extreme and Less Likely Predictions
Ability to live Past 100: Assuming you are well off we think people that are 40 or younger today can live to 100+ if they have a heavy bank account. There are a lot of advances being made in anti-aging and being able to afford the best health care would allow someone to live past 100. We doubt the average person will see any benefits from advanced technology (since it is expensive) and think this will be reserved for the elite who take care of their bodies. Thinking about this logically, a top tier professional athlete easily spends six figures on his health and “body maintenance”. This number should be similar for someone who is older (80+) looking to crack the century marker. As a quick hint, you’ll want to be a bit thinner, eating tons of vegetables and live a low stress life past age 70. Essentially, living long will be a choice along with economic resources.
Cloning and Gene Selection: Want to pick out your “best” DNA for your kid? Well that story is likely going to come true. In the near future, 20 – 30 years, you’ll be able to pick out your best genes and pass those along to your child along with choosing the sex of the baby. We already have the skills to clone animals and we’re only a few steps away from consistently choosing the best genetics. Sure there are no guarantees, but being able to avoid rare diseases and disorders would be a huge positive. We wouldn’t want to pass along our own OCD personality to anyone in the future anyway!
Virtual World Take Over: Forget about going outside to meet people, we already went through the online dating scene… now imagine a virtual world. It will be possible to meet people anywhere in the world and it will be possible for people to essentially create fake virtual lives for themselves. The cynical side wants to say that no one will have kids and they will live in this dopamine induced world. The more optimistic side says it’ll be a lot easier to meet people with your interests without the awkward internet meet up since you’ll have a visual presentation on day one.
The First Official Trillionaire: While family resources likely add up to a trillion dollars for the lucky few based on combined assets, we think there is potential to see the first “Trillionaire” in US dollar terms before the end of 2040 or so. We saw the computer age passed by the internet age and we’ll see a “Sovereign individual” pass the internet age resulting in another 10x in wealth ($1 trillion dollars vs. Bezos at $100B or so). It is certainly a big stretch since we’re talking about a 10 fold in total value but isn’t out of the realm of possibilities if continued wealth transfer continues to the select few.
Consumption Taxes: Another crazy one. We think governments will shift into a consumption tax model in the future. If there is inequality it is a lot easier to tax spending than it is to tax net worth. If someone simply has assets it is difficult to simply take them away. Alternatively. It is a lot easier to tax consumption. Increasing taxes on houses valued over a certain amount, fancy cars, fancy watches etc will all be targeted. This will help create a universal basic income in the future. Which leads us to the next big assumption of basic income!
Universal Basic Income: With all of the major trends listed above we think there is potential for a universal basic income in the next 30 years or so. The people who will be retiring in 30 years will likely see the emergence of a new basic income and this will be funded by consumption (not wage or wealth taxes). By creating a universal basic income we can now worry a bit less about getting by and focus more on creative work that’ll benefit society.
More Politics: We’ll go ahead and say it. People are sheep. People want to be led and very few have the ability to think for themselves. This is why people end up stealing ideas from other people and re-printing them in this endless echo chamber (hint hint we saw it during the election as well). There are people who are obsessed with power that will always go out there and run for a political position (the only type of people trying politics are naturally power hungry and believe they should have authority, otherwise they wouldn’t run, we can’t imagine boring with that!). Naturally, we don’t see politics dying any time soon and as usual we don’t care about them. We only care about them if we can make money off of it near-term. Then it goes back to being an irrelevant item (as all of you have noticed we don’t bother talking about it anymore after the money was made). Long-story short, we’re no where near the end of politics (unfortunately).
