The psychological state of emotion follows a cycle that changes society. Its driver is the aging of generations/archetypes. History creates and modifies them. Generations age and shape states. In this book, I use the cycles and the generations/archetypes found in Neil Howe´s and William Strauss´book ”The Fourth Turning”. it is a must read to anyone who is interested in this cycle. There are four types of generations and they progress through the same four stages of life and cycle from cradle to grave in their own order. Investing is so much about mass psychology that the cycle cannot be ignored. Generations and stages of the cycle affect the prices of asset classes and their returns. Both affect what kind of companies are most likely to succeed in certain stages. The cycle is intertwined with a long debt cycle. I will go through the basics of the cycle before telling about its impact on investors. The cycle has four different stages from the beginning until the end:
A High
An Awakening
An Unraveling
Crisis
The cycle lasts approximately the average lifespan. Life is divided into four different stages: childhood, young adulthood, middle age, and old age. They last an average of about 20 years. In addition, during the cycle, there are four different archetypes, which are almost always generated in the following order:
Prophets
Nomads
Heroes
Artists
I focus on the United States, its stages, and archetypes. In the
last few centuries, one archetype has never been born, and this
happened during the Civil War, when the Heroes did not have time to
be born. The focus on US cycles is due to two reasons: the first is
that it is the most important national cycle to the investors around
the world, and the second is that it is difficult to get accurate
information about China, even though it is almost as large an
economy. The US cycle is progressing almost as well as the whole of
Western Europe and this phase is likely to overlap strongly with
China.
Archetypes affect different stages and different stages affect
different archetypes. As the majority of one generation lives in
their last years, a new generation of the same archetype begins to
emerge. Prophets are the opposite of Heroes. The contrasts apply to
the Nomads and the Artists. The same contrasts fit the experiences of
generations at different stages of life. For example, parents leave
Nomads on their own in their childhood and Artists are guarded like
the Fort Knox. A new archetype begins to emerge shortly before the
new phase occurs.
The contradictions also follow different stages. Highs are close
opposites to the Unraveling and Crises are close opposites to the
Awakenings. The destructive power of Crises at the end of the cycle
is a necessary evil. It renews social structures and social
relations. Destruction is possible when almost everyone who has
experienced the previous Crisis has died. Each step is similar to the
same step in the previous cycle, although they are different. The
dominant archetype at each stage reflects their life experiences.
This leads to the progression of the different stages of the cycle.
The best signs of change in stages are the increased
intergenerational contradictions in the transition from one stage of
the cycle to another.
Archetypes/generations
The majority of the archetypes have their own common characteristics. In addition, each archetype has an impact on the others during different stages. Everyone in each sees similar events at the same stages in life. The majority of them think the same about families, the fundamental pillars of society, political leaders, and the future. Majorities of each archetype react to life events in a similar way. The biographies of the archetypes resemble each other.
Prophets spend their childhood less protected during the Peak.
They are selfish young adults in the Awakening. Their middle age goes
by cherishing moral principles in the Eruption. Old age is mostly led
by the Crisis. It is either a significant victory or a failure. Some
of them will survive until the new High, but their significance is
then minor. Their leadership moments during the crisis will have a
significant impact on the next cycle. The younger age groups see them
as selfish, proud, and cold-blooded. They focus on dreams, values
and spirituality. They affect the Heroes the most. Donald Trump
and Steve Jobs are examples of the Prophets.
Nomads spend their childhoods unprotected in the Awakening. They
are underestimated as young adults in the Unraveling. In a Crisis,
they are acting as middle-aged pragmatists and their role in
resolving it is being forgotten. The majority of them are forgotten
as the elderly, although some of them are in leadership roles at
High. Some survive to the new Awakening. Others see them as
pragmatic, immoral, and soulless. They focus on freedoms, survival,
and honor. They affect Artists the most. Jeff Bezos and Elon Musk are
examples of Nomads.
The Heroes spend their protected childhood during the Unraveling.
They help resolve the Crisis as young adults under the guidance of
the Prophets and the Nomads. They become brazen middle-aged people at
the top. During awakening, they play a strong role as the elderly.
Some of them will survive to the new Unraveling, but they will not
matter much. Others see them as selfless, capable, and machines. They
focus on society, technology and success. They have the greatest
influence on the Prophets. Mark Zuckerberg and Thomas Jefferson are
examples of Heroes.
Artists spend their overprotected childhood during the Crisis. Careful, young adulthood goes at the High. They are indecisive middle-aged during the Awakening and settle into the position of the younger generations as the elderly in the Unraveling. Some Artists will survive to the new Crisis, but they don’t matter much. Others see them as indecisive, open-minded, and emotional. They focus on professionalism, legal security and diversity. They have the biggest impact on the Nomads. They often have the best opportunities to invest and good pensions because they enjoy the wealth generated by the largest age groups. Their birth rate is low. They are particularly benefiting from rising house prices. Thomas Edison and Warren Buffett are examples of Artists.
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