It’s a mantra, it’s a belief, it’s a core strategy that has been integrated into most portfolios. Whether you’re an individual or an institution, this is sort of investment calling card today, to remove emotion, to systematise and to move away from human error and active management, …because as they say “our most recent experience is that indexes always win”.
Having watched my passive account get demolished last year, I’d like to examine this belief, rather than give you just a quick sort of reaction to that. Having interviewed some experts who have spent a lifetime in curating wealth for sovereigns and family foundations, I went back to ask about the results of some work that they’ve put in on this subject.
Ever since my Grandfather told me at age 7, that if I believed in myself, I should invest in my education and talent, wealth is a subject that has fascinated me on many levels. As a musician I was part of a mythology that we should be starving artists, but in fact most of us enjoy 5 stars, being driven to concerts and the patrons, our clients, are often wealthy.
Rather than giving you a soundbite or a paragraph or a written piece, I wanted to speak to you. For those of you that don’t enjoy detail, this is probably not going to be useful for you so you can turn this down now. But for those of you that are open-minded and want to look at wealth and investments from a different vantage point, I think you’ll find this unusual.
As a performer, on stage, the first we have to do is, we have to step back from the moment and remind ourselves where we are in the midst of a musical score. Applying that same principle to today’s economic forecast, let’s step back from the 2017 Year of the Monkey, the disruptive or gig economy and….remind ourselves where we are most likely to be situated in terms of the economic and business cycle.
Neil Howe and William Strauss wrote a book in 1997 called The Fourth Turning, where he talks about this part of the cycle that we seem to be in as winter, in terms of a season. Not as popular as Vivaldi’s Four Seasons, The Fourth Turning that was written in ’97 is even more relevant today than it ever has been. The scenarios that we see playing out before our eyes is exactly what Strauss and Howe described in this book.
We appear to be in what they called a Fourth Turning cycle, and a Fourth Turning cycle is a period of time where we tend to tear down the old order, the old institutions. They’re replaced with a new, more modern version of them.
It can be an extremely destructive or disruptive period for those who are highly dependent on, or benefit from the status quo, or the legacy systems and traditional order. However, this is a once-in-a-lifetime opportunity if you love change, if you love and embrace uncertainty.
In fact, as Michael Smorch pointed out, when you look back at most of the family fortunes, and he manages money for some of the wealthiest people on the planet, family offices, every single one of those family offices that he works for, the original money was made during a Fourth Turning cycle, when the old order broke down and the new system was being reconfigured.
That describes what we’re going through today, and if you’re somebody who embraces the change and steps and plays an active role in the reconfiguration of the way the world is tending, you win. But the first reaction of most people is that they withdraw, right? They try to find safety, they try to find some form of certainly.
For example, if your family is a major shareholder of a company, an old-order company like Monsanto, it’s obvious that if you do what your parents did with the stock and your grandparents did with these shares and you hold them, then your days are numbered as the world transitions away from the old system to the new food economy, one that lines up with clean food, with organic farming, and exposes the old order for what it is.
In this world of a new food economy, where Super Foods rule and supplements are a multi-billion-dollar industry, Monsanto loses their public image and pesticides, once hailed for improving crops and food supply are now associated with life-threatening toxic outcomes who are at potentially about to be acquired by Bayer.
This is the same phenomenon that we see breaking out all over the world. It’s the phenomenon that stands behind the Brexit vote. It’s the movement behind Bernie Sanders in America. It’s the force that stands behind Marine le Pen in France, and certainly what we’ve seen with Donald Trump’s victory.
This new world defined by major upheavals isn’t just confined to geopolitics.
If you have ever dealt with reputational threat or disruptive takeovers, then you know that there are three big concerns as public controversy can destroy a leader’s influence, seriously undermine your health, your career and your family’s future.
Knowing how to anticipate the patterns, respond well to your internal and company stakeholders, and continue to deliver the key outcomes with resilience requires grit, and knowing how to remove emotion, to systematise the way you outperform your peers and become the expert of risk who harnesses the forward-thinking power of risk that epitomizes great leadership.
As we experience ‘The Fourth Turning’ new thinking and new ideas are shifting fast. Is your organisation poised to handle the democratisation, demonetization and digitization that is globally shaping new realities? Are you hiring people with the knowledge of how to be hyper-aware of the deceptive cycles of exponential technologies?
Is your organization having the aspirational conversations that play an active game to reconfigure what is needed, to yield top-line growth and bottom line results or are you shielding and withdrawing?
Could it be that we are too immersed in growth of the organization and it is now time for leadership to be the person that we wish we had been?
It seems to boil down to the choice of the game, whether you are playing a finite one with wins, rankings, right or wrong OR an infinite game focused on expansion, advancement and driven by aligned values and purpose.
The investment that is active or passive, just like the game that we choose for life reflects our approach to relationships, work and the people we lead.
Money loves structure, order and appreciation…just like business. For exponential growth, conscious choices amplify the game, and will set your organization up to navigate the Fourth Turning!
