Thread by @ren_heinrich

Yesterday I wrote a thread about how the world will change fundamentally in the coming years & decades and why it is important for you as an #investor to prepare for this.

In this thread I will go a level deeper and explain some of the backgrounds.

https://twitter.com/ren_heinrich/status/1482784879859445768

#History comes cycles.

The state of societies, nations, and empires follows the following pattern: Birth-Growth-Peak-Decline-Depression/Death.

Sometimes the pattern ends. Sometimes it restarts.

Western industrialized societies are now in the decline phase.

There are numerous examples in nature for this pattern playing out. The same is also true for human-built systems.

To get a better understanding, let’s compare an example from nature (a pack of wolves) with a human made system (the economy).

Let’s assume a group of wolves comes to an island which has a big population of rabbits (birth phase). Naturally, the wolves start to hunt and eat the rabbits.

Because there is plenty of food and no other predators or dangers around they have a lot of offspring (growth phase).

As there are more wolves, they need to hunt more rabbits to sustain their numbers. Rabbit population is slowly decimated. It becomes increasingly harder for the wolves to find enough rabbits.

Eventually, they start having less offspring due to a lack of food (peak phase).

Rabbits become even harder to find. The wolves start hunting squirrels. But these provide less nutrition. As time goes on, more wolves have to go hungry.

The weaker ones die earlier. There are only little offspring. The wolves’ population collapses (decline phase).

A lot of wolves die of hunger. Their number is down close to that of the initial group (depression phase). This gives the decimated rabbit population the chance to replenish.

After some time, the wolves find more food and have more offspring again. The cycle starts anew.

Now let's look at this process with the #economy as an example.

Humans find a new source of energy (coal). It makes existing processes more efficient, fuels the creation of new technologies and dramatically expands the possibilities of human activity (birth & growth phase).

The available energy is used to expand and maintain increasingly complex systems. But then coal runs out. Growth stagnates (peak phase).

Luckily, oil, a better source of energy is discovered. The growth phase continues.

As an energy source, oil surpasses everything that has come before and enables an unmatched expansion in industrial production, transport, food production, etc.

This allows for a population far in excess of the planet's original carrying capacity.

To keep the system running, new oil deposits are constantly being tapped. However, in order for these new sources to be exploited, more and more energy is required.

The point is reached where almost as much energy must be expended to extract new energy (peak phase).

As available high density energy dwindles, humans look to renewables to close the gap. But they have a much lower energy density.

As a result, the system can no longer maintain its complexity, and inevitably shrinks and becomes simpler (decline phase).

Let’s summarize.

The decline we are now experiencing is a natural process which has been repeated many times in human history.

Can we stop the decline phase? Only, if a new high density energy source similar or better than fossil fuels is found.

Possible but unlikely.

As an investor your advantage lies in understanding this truth.

It allows you to go your own way. Regardless of the circumstances.

On the way down there will be plenty of opportunities for you. But to seize them you have to understand what is happening around you.

Check yesterday's thread on this topic to get some ideas on how you can prepare for what’s to come as an investor.

And then think.

What other opportunities does a world in decline offer?

There will be plenty of challenges in need of a solution.

This does not only include material things.

For example, what can you do to fulfill people’s spiritual, mental, and emotional needs when times are tough?

Investing in these things won’t make you money. But maybe you’ll get something in return that is worth much more than that.

Reading materials:

John Glubb - The Fate of Empires
rexresearch.com/glubb/glubb-em…
Oswald Spengler - The Decline of the West
@Peter_Turchin - War and Peace and War
Howe & Strauss - The Fourth Turning
@RayDalio - The Changing World Order
principles.com/the-changing-w…