GM81: What If Everything You Believe About Markets Is Wrong? ft. Demetri Kofinas

What if the biggest risk in markets today isn’t volatility, inflation, or geopolitics - but the stories we believe to be true? In this unfiltered and thought-provoking episode, Demetri Kofinas joins Cem Karsan and Niels Kaastrup-Larsen for a piercing conversation that challenges how we process information, construct narratives, and make decisions in uncertain environments. This isn’t about market forecasts - it’s about how easily our thinking can be hijacked. From the corrosive incentives of financial media to the quiet ways conviction becomes cognitive quicksand, Demetri argues that investors today are drowning not in data, but distortion - misled by institutions built to entertain, not enlighten. Yet this episode is more than critique. It offers a path forward - one grounded in introspection, discomfort, and the discipline of intellectual honesty. For anyone managing capital - or simply trying to see clearly in a noisy world—this is a conversation that may shift not just your positions, but your perspective. Because the greatest edge in markets isn’t a model. It’s clarity when others are lost in the fog.

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Episode TimeStamps:

03:21 - Introduction to Demetri Kofinas

04:39 - The era of financial nihilism

11:44 - The birth of a radical optimism?

20:10 - The risk of not heeding the call

26:16 - The dark side of smoothing the business cycle

29:14...

Episode Transcript

(00:07):
When it comes to society, youneed to have common action. And in
order to have a common action,you need to have a common narrative.
And the danger about where weare today is that those systems of
common communication, andpublic communication, and control,

(00:27):
and common narrative, andpropaganda, have broken down. And
the leadership structuredoesn't understand how to use the
new systems. Wehaven't kindof figured this whole thing out.
And where we are, in Americatoday, is in a place of sort of disintegration
of the stories and collapsingof the institutions.
Imagine spending an hour withthe world's greatest traders. Imagine
learning from theirexperiences, their successes and

(00:53):
their failures. Imagine nomore. Welcome to Top Traders Unplugged,
the place where you can learnfrom the best hedge fund managers
in the world so you can takeyour manager due diligence or investment

(01:24):
career to the next level.Beforewe begin today's conversation,
remember to keep two things inmind. All the discussion we'll have
about investment performanceis about the past. And past performance
does not guarantee or eveninfer anything about future performance.
Also, understand that there'sa significant risk of financial loss
with all investmentstrategies, and you need to request
and understand the specificrisks from the investment manager
about their products beforeyou make investment decisions. Here's
your host, veteran hedge fundmanager Niels Kaastrup-Larsen.
As tectonic shifts in thegeopolitical and financial landscape

(01:48):
reshape our world, a newglobal macro reality is emerging.
And in our Global Macroseries, my co-host Cem Karsan and

(02:18):
I aim to decode what thismeans for all of us through the lens

(02:39):
of the sharpest thinkers outthere. Thereare moments in time
when the world seems to shiftbeneath our feet, when the foundations
we once believed were solidsuddenly feel like sand. Our institutions,
our money, our leadership,even our sense of reality are all
up for debate. And in thesemoments, you need people who can
make sense of the noise, whosee the larger arc of history as
it's unfolding in real time.That'swhy Cem and I are so excited
to welcome Demetri Kofinas tothe podcast, a voice I followed for
years, someone whose workdoesn't just report on the chaos,
but tries to understand itsroot causes. Today, we're not here
to talk about the news. We'rehere to talk about the end of one
world order and the uncertainbirth of the next. DemetriKofinas,
welcome to Top Traders Unplugged.
Thank you so much for havingme on, Niels.
You know, it's really not howI normally start my podcast, but
I thought in honor of youbeing on the show, I wanted to do
the same very consistent stylethat you do on your amazing Hidden

(03:01):
Forces podcast to make youfeel right at home. Did it work?
From the very beginning, Ifelt very comfortable here. So, thank
you.
Fantastic, it's great to haveyou on the show. Cem and I have really

(04:33):
been looking forward to thisconversation. Now,if I think back
on the many conversations I'vehad with Cem, over the years, as
well as the many episodes I'velistened to on your podcast, I think
it's fair to say that we allhave felt that something big has
been brewing in the world andthat things have been changing quite
dramatically, and also that wemay not be able to fully comprehend
where it's heading andcertainly not where it will all end.
So,for my part, at leasttoday, I would love to explore kind
of a single but urgentquestion, and that is, what happens
to a society when beliefs inthe system (financial, political,
and moral) collapses all atonce? I think that the three of us
have all been paying attentionto Neil Howe's work in terms of the
Fourth Turning, and have been,in some ways, holding onto this framework
to at least try to understandthe magnitude of what we're going

(05:05):
through right now. So,I'mreally looking forward to trying
to put words on some of theunderlying themes to help our audience
better appreciate thesignificance of these changes. Changes
that, quite frankly, only comearound once every 100 years or so,
some of which really startedtaking shape quite a few years ago,
actually, but are only nowbecoming more clear to the wider
public. So,Demetri, there areso many places we could start this
conversation, but I think agood place is to take a step back
to when you started talkingabout the term financial nihilism,
as I really think this issomething that a lot of people have
felt, but perhaps not beenable to really define for themselves.
When did you first realizethis wasn't just a financial phenomenon,
but also a cultural one? Andhow should people even think about
what this term means and whatit means to you?
So, early on, during HiddenForces (I launched the podcast in

(05:33):
2017), I did a number ofepisodes on crypto in the early days.

(06:00):
And I also did a number ofepisodes on Tesla back in very early

(06:29):
2018, I think, was the firstepisode that I did on it, or maybe

(06:59):
late 2017. And there wassomething that both of these… Well,

(07:22):
one of them was obviously astock. The other one was an industry,

(07:49):
if you could call it that.Whatthey had in common was that
community was very important.And community was a tool that was
also used, in the case ofTesla and in the case of a lot of
crypto projects, to buildequity value into the stock or into
the coins that were beingemitted. And there was also an important
role played by narrative inboth of those cases. Andwhat I noticed,
also, was that the story aboutthe fundamentals was less important.
And that was, I mean… Isuppose, actually, with Tesla, I
wouldn't actually throw Teslainto this mix. There are elements
of financial nihilism that waspresent in Tesla, but with Tesla
there was a strong sort offocus on the story - the story of
Tesla and what it couldachieve. Andthis is also true in
crypto. But in crypto, I wouldsay, is where I began to see a departure
from what we traditionallythink of as a tenuous but albeit
meaningful relationshipbetween the price of an asset and
the underlying company withwhich it's associated, or the income
flow. We saw a departure fromthis in crypto to what I later dubbed
financial nihilism, which isan investment philosophy that treats
the objects of speculation asthough they were inherently or intrinsically
worthless. Andthis isimportant because I don't think I've
ever seen something like this.And we began to see this also bleed
into equity markets in thepandemic and post pandemic period,
notably with GameStop, andalso with Hertz which was a company
that went bankrupt and itsstock went up. And it was kind of
like market participantsincreasingly (again, a minority of
market participants, but ameaningful number of them) began
to treat these markets asthough they were basically casinos,
and the equities as thoughthey were tokens or casino chips.
And that was, for me, kind ofnotable. And it was a departure from
anything I had ever read aboutin financial history. Andso, I guess
that was, for me, the startingpoint of financial nihilism. It was
this observation of aphenomenon where market participants
didn't actually believe in thething they were buying for the traditional
reasons that we think aboutit. Again,in the 1990s, we had a
huge bubble in stocks and intech stocks. But there was a story
there. There was an idea that,okay, these are going to grow into
their valuations and there's areal thing happening here. And there
was none of that. And that wasespecially true in crypto.
Yeah. And I've also heard youtalk about this kind of break between
value and price and wherethese things have just become completely

(08:11):
disconnected.
And I should also say, therewas something also that was very
unique, which is, again, Idon't know to what degree this is
true in the late 2000s, but inthe late ‘90s. But what I noticed
again, especially in crypto(because crypto was ground zero for

(08:32):
this), there was a strongself-awareness around narrative.
This idea that it's all just anarrative. It's all a story that
we tell. And if we can believeit hard enough, and convince other
people to believe it hardenough, the value of the thing that

(08:52):
we own will go up. Inthatsense, it was a kind of multi-level
marketing scheme, but therewas a level of sophistication and
self-awareness around thenarrative and the belief structure
that was, for me, somethingI'd never seen before.
I think this is incrediblyfascinating. It kind of dovetails

(10:08):
into some things that Nielsand I have talked about over the

(11:36):
years. Cryptoin particular,you know, I've said this before,
is really the embodiment ofits generation. If you think about
it, you know, this generation(meaning millennials on down) have
grown up in a time their wholelives… So, since 1982, when interest
rates peaked around 20%, theygrew up in a period of sustained
monetary policy dominance andincreasing inequality. And those
lower interest rates that theysaw for 40 years, secularly declining,
led to a technologicalrevolution and globalization. Andso,
this generation has grown upfor 40 years feeling that… By the
way, being labor, because theyare the youth, and by definition
youth is labor. You know,stuck in mom and dad's basement,
unable to afford a home, starta family. They're at 30% of the household
formation and wealth, at thistime in their lives, then baby boomers
were. So,that anger and theresulting nihilism, and the desire
for equality, that's whatcrypto's about – fairness. It's a
fair system. Paired with techbeing able to solve that problem
because all they grew up withwas tech solving all the problems
throughout that period, pairedwith a desire to catch up, and to
feel like the system isbroken, and it needs to be broken
by them in order to be fixed.I think it really just embodies this
whole 40 year period and adesire to, you know, almost like
a revolution to fix it by thatgeneration. So,I think you're spot
on when you talk about thatnihilism. It's an embodiment of the
revolution or the feeling ofrevolution or the feeling of a need
to change, at all costs,whatever it takes, and to catch up,
desperately, to catch upfinancially. And that's why I think
they pulled around… It's also,like a revolution, when you think
about Wall Street bets. Andit's the pooling together to fight
something bigger. That, Ithink, is very poignant. So, I completely
agree. AndI think you make avery astute point that this generation's
approach to investing, there'smore underneath it than just investing
and making money, althoughthey truly are intent to make convex
kind of bets and to try andcatch up.
Do you think that in some kindof ironic twist here, that financial
nihilism is actually givingbirth to a kind of radical optimism?
Because once you accept thatthe old system is broken, you're

(11:59):
kind of free to imaginesomething entirely new?
You know, not to avoid thatquestion. I'd like to come back to
it.
Okay.
But as Cem was speaking, I waskind of just thinking about what

(13:11):
is actually happening orwhat's been happening to us in these

(14:06):
years? And I feel like, youknow, there was a scholar of myth,

(15:10):
a famous scholar named JosephCampbell, who wrote A Hero of a Thousand

(16:14):
Faces, a famous book, and whowas also famously interviewed on

(17:09):
PBS by Bill Moyers back in the1980s, shortly before he passed away

(18:13):
of cancer. Andhe talked thenabout the need for… And he actually
recorded this interview seriesat the Skywalker Ranch, at George
Lucas’ Ranch, in California.And George Lucas was a huge fan of
Joseph Campbell and hismythological framework of the cosmogenic
cycle. And he asked him, do weneed… Or maybe Joseph had offered
it, and said that we need anew mythological framework that speaks
in the language of the presenttime. That this cosmogenic cycle,
one of his presumptions in hiswork, or one of the conclusions that
comes out of his work is thatthere's this great hero's journey;
this cosmogenic cycle. And itplays out across all religions and
all great stories and myths.And that we just need a myth that
speaks in our language, today,that conveys the cycle to people
and helps them make sense oftheir lives. Andhe asked them, is
Star Wars that mythology? Hegoes, no, no, because it's still
sort of stuck within that kindof paradigm. And I've said for years,
and I had done an episode backat the end of 2017, it was a monologue,
where I talked about this;that for me, the Matrix, in the late
1990s, was perhaps that sortof mythological framework. And it
is remarkable how consistentit is. Butputting that aside, what
I do believe is true is thatour myths no longer work.The stories
that we tell ourselves. Andwhat is a myth? I mean, Elizabeth
Vandiver, who's a greatscholar of mythology, who I studied
under, though again, in thecontext of the modern world, not
at university, but through theGreat Courses series, which was an
amazing sort of way to learnthese lectures, and she had a course
on mythology. And the way thatshe defined mythology was that myths
are the stories that a societytells itself about itself. AndI
think that our myths, thestories that we tell ourselves about
ourselves, have broken down.And the nihilism is a reflection
of that collapse. And so, whenit comes to financial nihilism, what
is the story that we have toldourselves about ourselves that has
bred the nihilism? AndI thinkthat's neoliberal philosophy. The
story that sort of the meaningof our lives is to make markets more
efficient, drive prices down,get global GDP up. And that no longer
works. It no longer works,maybe, because it never was really
going to work because itwasn't fulfilling on a deep level.
But also, it hasn't actuallymanifestly raised the income and
wealth of everyone in an equalmanner and in a way that is sustainable.
Soyes, of course it's raisedglobal GDP, but it's also resulted
in a discrepancy of wealth andincome in the United States. And
relative wealth and relativeincome matters. It's primarily wealth
that's the issue here, itisn't just absolute levels. And this
was, to Cem's point or Niels’,I don't know who mentioned it about
people living in theirparents’ basement. Andthen this
is also true, of course, whenit comes to the story that the United
States has told about itselfand its role in the world since the
fall of the Soviet Union, inthe late 1990s. We grew up, I grew
up, I was born in 1981, in aworld that celebrated international
institutions. TheUnitednations was a really important institution
in the 1990s. I love film andI always bring up film because in
some sense film is the sort ofthe myth maker. Hollywood has been
the myth maker for the Westernworld. Andagain, I think while we
talk about dollar dominanceand we talk about the dominance of
the American military, youcould make the argument the most
powerful force in America, themost powerful force of an American
empire is its soft powerconveyed through its cultural institutions,
and its cultural practices,and its languages, and its films.
And there was a movie thatI've referenced before, Independence
Day, that came out, I think itwas 1984, around there. And it was
the ‘United Nations’. Itwasn't necessarily the United Nations.
It was led by the UnitedStates, but it was all world coming
together. Andso, this ideathat the United States was a first
among equals, right? The sameway we talk about the Constitution
and the role of the presidentand the executive was the same way
we talk about America's rolein the world. And that we were going
to be the leader of a globalconfederation of democracies. And
that we were a beneficentpower and that we were there to sort
of right every wrong and bringpeople out of poverty through the
spread of capitalism and bringdemocracy to their otherwise backwards
countries. And I think webegan to be disabused of that.
Imean,some might draw the lineat the end of the 1990s in Bosnia,
but certainly with the illegalinvasion of Iraq in 2003. And I've
emphasized this point that itwas illegal in the sense that, whether
or not you believe ininternational law, I mean, certainly
you can make the argument theconcept of international illegality
is ridiculous, but it wasimportant because it was hypocritical.
It assaulted the veryinstitutions that we claim to want
to uphold with our militaryactions. Andso, I think there has
been a long process ofdegradation of the myths and the
stories that we've toldourselves about ourselves and who
we are and what our identityis. And that, I think, whether we're
talking about the Americanempire, and the support that there
was for American empire in2001, after the September 11 attacks,
or whether we're talking aboutglobal capitalism and international
financial institutions, Ithink this is what has bred the nihilism
that we have seen in recentyears. Andwe are now in the eye
of the storm. And the only wayto address that nihilism is to develop
new stories and new myths. AndI think that's what we're doing.
I think that's an incrediblyinteresting point, and I think tying

(18:41):
in Campbell's Hero's Journeyis really, really interesting because
it zooms us out to 30,000ft.If you think about Campbell's Hero's

(19:14):
Journey, there are three mainparts to it. The hero departs and
he leaves his familiar world,and then he's challenged. And through

(19:49):
that challenge and thatcrisis, he's transformed and then
returns back. Andit's thatcrisis part that is really the defining
part of the journey. You can'ttransform without crisis. And so,
if you think about, you know,for 40 years, we haven't had crisis,
not real crisis. Every crisishas been solved here in America.
The hero (if you want to pickAmerica as the hero) has not had
an opportunity to transform.Thisgeneration has lived through
a period of stasis, andthrough stasis comes entropy. And
so, I really think thisgeneration is due its crisis. It
hasn't had its crisis. Andthrough that, we will see if we transform.
But I do think that model isincredibly important to this story.
Well, we haven't heeded the call.
And maybe we haven't had anopportunity to heed the call yet.

(20:11):
I think the opportunity hasbeen knocking. So, there's a great
story… I actually used towrite these dreamy intros, but they

(20:32):
were just too difficult to doon a consistent basis, so I stopped
doing it. And there was anepisode I did with Jerry Colonna

(20:56):
where we literally… Theepisode was about The Hero's Journey.
And Jerry's a coach, and heworks with entrepreneurs and stuff.

(21:16):
And I was reminded of thestory of King Minos of Crete and
the story of the Minotaur. So,Campbell wrote about this myth. And,I
think, this speaks to exactlywhere we are in this country, I think,
or where we've been, maybe upuntil very recently. And he says,
“Often in actual life, and notinfrequently, in the myths and popular
tales, we encounter the dullcase of the call unanswered. For
it is always possible to turnthe ear to other interests. Refusal
of the summons converts theadventure into its negative. Walled
in boredom, hard work, orculture, the subject loses the power
of significant affirmativeaction and becomes a victim to be
saved. His flowering worldbecomes a wasteland of dry stones,
and his life feelsmeaningless. Even though, like King
Minos, he may, through titanicefforts, succeed in building an empire
of renown. Whatever house hebuilds, it will be a house of death,
a labyrinth of cyclopean wallsto hide from himself his Minotaur.
All he can do is create newproblems for himself and await the

(21:37):
gradual approach of his disintegration.”
Yeah. Not heeding the call isnot heeding the call.
Not heeding the call. And Ithink that for a long time in America,
and then. I want to let youspeak, Cem. I just wanted to raise

(22:07):
this point. I think for a longtime in America, we have not been
heeding the call. The parties,the Democratic and Republican parties,

(22:28):
had not been heeding the call.Andwe saw what happened as a result
of the Republican Party notheeding the call. It was killed and
decapitated and consumed byTrump and the Maga movement in 2016.
And I think we're going to seesomething similar with the Democrats
in this cycle going forward. Ithink that the Democrats are now
fully in that situation wherethey have to be reborn. And what
comes out of them we shallsee. AndI think the country is on
that same path as well. And Ithink perhaps now we're finally in
that situation where we areheeding the call, though we haven't
quite figured it out. We aregoing through the challenges and
trying to pass through the thresholds.
I subscribe to your view thatwe haven't heeded the call yet and

(22:53):
the biggest risk is notheeding the call. But I don't subscribe
to the idea that it is allfree will as a society, yes, we all

(23:31):
have free will as individuals.But I think there are hidden forces
that are forcing us, or thisgeneration, up until now, to not

(24:05):
heed that call. AndI'vepointed before to the Federal Reserve
and monetary policy, really upuntil this moment, to being when
we created the Federal Reserveto smooth the business cycle, to
not allow for enough energy,enough crisis, for that hero's journey
to be released.America'sfoundation depends on unanimity,
to pass laws and to createchange because they worry, the founding
Fathers worried that it wouldbe too easy to change things and
that autocracy wouldeventually entropy the system. And
as a result, our foundingfathers would be turning in a graves
if they knew we createdsomething like the Federal Reserve,
which was largely independentbecause every time there's a crisis,
we don't fix the crisis, orthe causes of the crisis. We just
smooth the business cycle. Andthe release valve is inequality.
I think it's interesting. Imean, there are a few things there

(24:33):
to really focus in on. Firstof all, I think that's a really interesting

(25:00):
observation about whether ornot we can actually apply the cosmogenic

(25:21):
cycle, and the hero's journey,to a society. I don't think we can

(25:46):
perfectly apply it, you'reright, because I think that there
are different dynamics in aherd. Herdsneed to be pushed in
a specific direction. And Ithink the conditions, I don't think
you can heed a call,preemptively heed a call the way
a hero has to heed the call.His world does need to become (however
Campbell described it) a worldof cyclopean walls to hide from him
his minotaur. You have to bepushed in that direction. I think
that's what history tells usabout societies. Asfar as the Federal
Reserve is concerned, it'sinteresting also to wonder out loud
whether or not it was actuallythe Fed that had been primarily responsible
for enabling this deferment ofhaving to reckon with reality. And
how much it was the nature ofthe international monetary system
and the recycling of dollarsinto the United States that is primarily
responsible. In other words,could the Fed have played the same
role that it did if the restof the world wasn't growing at such
a rapid rate and capitalwasn't flooding into the United States,
keeping interest rates low?So, I kind of wonder about that.
Idoagree with the generalidea that the Fed has transgressed
the boundaries that itsfounders would have initially thought
appropriate for it, and it hasabused its role as a lender of last
resort to have become,basically, a central planner trying
to manage the price of moneyacross the economy. And I don't think
that was ever the intention ofits founders. Ithinkthe intentions
of the founders of the FederalReserve saw it really as a mechanism
to smoothen maybe cyclicalperiods of illiquidity, and as a
lender of last resort, noteven to set interest rates, which
is a practice that began muchlater in the Fed's history.

(26:17):
I don't think it's bad or thatit's even necessarily gone too far.
I actually disagree. I thinkit's core founding principle, of
smoothing the business cycle,causes us not to have a crisis. I
mean we created it to avoid crisis.
But we had recessions, though,since the founding of the Fed.

(26:39):
No, no big crisis. 2008 shouldhave been a decade-long crisis. It
was a one year,one-and-a-half-year issue that we
papered over and never solvedthe problems of it. The greatest

(27:00):
generations crisis, the GreatDepression, the crises that necessitate
change, the Civil War, thethings that ultimately drive real
change in society. Wehaven'thad a constitutional amendment in
forever. Why, why do you thinkthat is? Because we haven't had that
need or the unanimity tochange the world we live in.
Well, so I think though, Ithink the intentions of the founders,
as you say, was to smoothenthe business cycle, but that also

(27:22):
required tightening duringperiods of exuberance. I think that's
where the Fed has failed inpractice because it is a political
animal and it has been tooslow to take the punch bowl away
during periods of booms andhas been willing to print like crazy
in anticipation of busts. So,maybe that's where it has failed.
If we smooth the businesscycle period. Whether we're doing

(27:43):
it better or worse, we are notallowing the underbrush to be cleared.
Yeah, well, again, that's whyI believe, and I've said this before,
and I tried to suggest it now,which was, I don't think the intention

(28:18):
of the founders was to set theprice of interest rates, which I
think is an important part.Yes, there was a desire to smoothen

(28:48):
the business cycle, but italso matters what tools do you deploy
in your effort to do that.Andsetting the price of money was
not actually one of thefounding core objectives of the people
who created the FederalReserve. That came later as a practice.
And so did things likequantitative easing, and so did things
like forward guidance. So,Ithink we've just gotten more and
more hands-on in managing thatbusiness cycle. And so, I guess where
I would fall on that is thatthe effort to smoothen the business
cycle, in principle, somehow,may not necessarily be the issue.
It's more a matter of howhands-on have you tried to be in
doing that? And maybe that'sreally the issue. Butanyway, I would
just say my general view isthe Fed should only play the role
of lender of last resort. Ithink it's absolutely important to
have a central bank that playsthe role of lender of last resort.
I didn't always feel that way.I used to be, I think, much more
of a libertarian. I thinkthere's an important role to be played

(29:09):
there. ButI think that thebig mistake is that the Fed has been
in the job of trying to setinterest rates. The Fed should be
out of that job. There's nogood reason to do that.
So let me try and move thingsalong a little bit. But staying with
the themes, you talked, bothof you, a lot about the crisis that

(29:35):
we've been through. Normallywhen there's a crisis, you would
think that someone would raisetheir hand, take responsibility,
be held accountable, and youwould expect some kind of consequence

(29:58):
for doing that. Now, I haven'tbeen through all the crises you mentioned,
but certainly some of them Iremember quite vividly. Butif there's
one thing I think, whetherit's failed wars or financial crisis,
we just haven't really seenany accountability. And when this
happens, I think thatsomething inside society starts to
kind of rot if people can getaway with stuff. So, I'm curious
to know what you think we'velost, both of you, in a sense, in
this vacuum of consequence?How does that play in?
Yeah, well, how can you havemeaning without consequences? If

(30:43):
your actions don't have anyconsequences, then where's the meaning?

(31:11):
Where can you find meaning inthat? Capitalism without bankruptcy

(31:40):
is like Christianity withouthell. AndI think that's also something
that we saw, really, in myexperience 2008 was unique in that
it shattered so many of themyths that we had about market failures
and about the consequences ofmaking imprudent decisions. And it
also taught us that, actually,what we thought were hard rules were
actually not, and that the Fedis fundamentally a political institution
and it's there to protect theruling class and the ruling elite.
Andwhen the system wasthreatened, the central bank didn't
just play an impartial,independent role to maintain the
system, it did more than that,and it saved particular actors. And
so, I think that lack ofaccountability, whether it was in
finance, whether it was withthe Iraq War - complete lack of accountability.
Imean,so many of the peoplethat were responsible for that debacle
continue to get plenty ofpress time today. They've just kind
of changed their skin. And Ithink that, when there's a lack of
accountability, it breedsnihilism. Because it brings us back
to that observation that Imade in the very beginning, which
is people kind of come torealize, oh, it's just a story. It
doesn't actually matter. Itdoesn't actually mean anything. There's
no substance behind it. Andwe'll just change that story and
come up with something else.So,I think that observation that
you make, Niels, aboutaccountability is integral to understanding
the growth of nihilism in our society.
The hero's journeynecessitates accountability. It necessitates
rising to the challenge andcourage, and courage. And so, without

(32:04):
that accountability, youcontinue to just entropy. You continue
to not… And by the way, it's anarrative, to your point. Without
that accountability, there isno narrative.
You stagnate.
You stagnate.
I mean, you stagnate. And thelife force in our society has been

(32:40):
draining. And I think thedanger is that when people feel that,
they feel a sense ofagitation, a sense of restlessness,

(33:15):
and you can feel that in oursociety. And it matters where it

(33:35):
is outwardly directed.Andthat is always a danger when
nihilism crops up insocieties. It's that it is directed
in the wrong places or thewrong stories, because, again, stories
are important. There'sanothergreat story. I don't want to go too
far afield here inphilosophizing, but Elizabeth Anscombe,
I can't remember her last nameexactly, who's a student of Wittgenstein's.
And I remember she tells astory about how he asked her once,
why do you think that peopleused to believe that the sun orbited
the Earth? Andshe said, well,because it looked that way from someone
standing on Earth. He goes,well, what would it have looked like
if the Earth was orbiting thesun? And the point I think that Wittgenstein
was trying to make is that itactually looks the same as it did
2,000 years ago to people thatthought it was a different process
entirely. The phenomenon wasthe same, but the framework we had
in our head, and the story wetold ourselves about what it was,
was fundamentally different.
So, the other thing that thisleads to, lack of accountability,
and all of that, is this kindof moral vacuum that we find ourselves

(34:06):
in, and also this kind of thisbasic question about who can we trust?
Because, you know, it's notjust that people nowadays don't really

(34:32):
trust the system, but it'salmost like we expect them to lie
to us. AndI think that's abig change, at least from when I
grew up, to now. And I wonderwhat the consequences of this… And
I know this is not reallydirectly related, but I just saw
a post, I think this morningor yesterday where someone was posted,
it's not like people aresurprised that their iPhones are
listening to them, but it'sthe fact that they don't worry about
it anymore. The fact thattheir phones are listening to what
they say. It'sthis kind ofcomplete crazy world that we're kind
of heading to or are in themiddle of.
Can you just elaborate whatyou mean when you say, ‘they expect’.
You said that we want peopleto lie to us, but we didn't used

(34:53):
to want them to lie to us.
It's almost like when you..Just take the media, for example,
or (I wouldn't say the Fedspecifically) institutions. I think
there's a difference betweenknowing that maybe they're not telling

(35:14):
us the truth and to, now, tohaving this feeling that every time
they speak they're lying tous. There's this little… It's a step
further in the wrongdirection. Whatdoes that mean? What
does it do in this wholecollapse of trust in the social contract,
I guess?
I don't know if you guys arefamiliar with Peter Pomerantsev?

(35:35):
I'm not.
No, I'm not.
Peter is… He's not a historianby training, but in effect, he's

(36:30):
a cultural historian and aphilosopher of sorts. He was a television

(37:23):
producer in Moscow in the2000s. And I believe he left Russia

(38:16):
in 2013. Andleaving Russiaand his experience in Russia inspired
him to write a book that hepublished in 2015 titled Nothing
is True and Everything IsPossible. And what he observed in
Russia during his time there,which coincided with the rise of
Vladimir Putin, was a societythat was in kind of narrative collapse.
They had lost their faith ineverything and their belief systems
were breaking down. Andso,what Peter observed when he came
back to his home country ofthe UK was that he was beginning
to see the sorts of thingsthat he was seeing in Russia happening
in the UK. And some of thosethings were the rise of all sorts
of charlatans, andconspiracies, and all sorts of things
to explain reality; all sortsof competing narratives, because
there wasn't one sort ofcommon story. AndI'm not talking
about necessarily the commonstory that sort of the Soviet Union
is on the right path tohistory, but I'm talking about even
some of the most basic storieswe tell ourselves. For example, in
the US we've seen in recentyears the rise of the flat earthers,
and flat earthism as aframework for explaining the shape
of the planet. It's one thingwhen we're in our daily individual
lived reality, the narrativeswe tell ourselves about the world
while important, veryimportant (and this is something
I've talked about on the showwith guests like Iain McGilchrist,
when we talk about the leftand the right brain), the schemas
that we construct to navigatethe world are very important in our
individual lives, veryimportant. And I would argue that
we wouldn't survive withoutthem. ButI would argue that they're
even more important when itcomes to the societal level, because
otherwise, how do we organizeourselves as a society if we don't
have common narratives andstructures to explain who we are,
what we're doing, why we'recoalescing together. Forexample,
if you show up at a footballstadium and you're with another 10,000
people all jam packed next toeach other, the only reason that
you're not freaked out isbecause you have a common framework
that tells you why the peoplenext to you aren't going to kill
you or run all over you. Thesame thing happens when you're driving
a car down the street. Youhave a concept that the other drivers
are going to adhere to thesignals on the road. They're not
going to cross over to yourdivide, to your side of the traffic.
Andso, I Think that what wesaw in Russia and what we're seeing
here is a breakdown of thosecommon belief systems, that common
structure of reality.
Demetri, I want to jump inhere because what you just said is

(38:41):
so important. I want tohighlight this. We were talking about
the hero's journey. Not tobring it full circle to that again,

(39:08):
but I think it's important.And we touched all of a sudden on
this idea that as anindividual, the hero's journey, that

(39:35):
to heed the call meanscourage. But as a society, what is
courage? It's summoningunity-of-will to heed the call. If

(39:59):
you sow disunity, if we sowchaos and nihilism, you can't get
a unity of narrative, a unityof belief, to summon the courage

(40:27):
societally to heed the call. Ithink that's so important. How do
we rise to the challenge as asociety, much like an individual

(40:55):
would, to embark on the hero'sjourney, to heed the call? AndI
think, by the way, it's not acoincidence that you're bringing
up Russia and Putin, becausethe KGB, actually, well documented,
had a clear ideology of sowingdisunity. Actually, well documented
in today's current situationthat there's lots of bots that are
used by Russia to emphasizeloud, opposing voices, to sow disunity.
I'm not saying this is in aconspiratorial way. Butthe reality
is, if you can sow disunity,if you can stop the hero from summoning
the courage, then you cancreate stasis and entropy and avoid
the hero rising to thechallenge. And I think that's such
a critical, critical,important idea right now. Therewas
a lot of work done, in the1960s, about social proofing. I'm
sure you've kind of followedthis. But at the end of the day,
you know, if you make a verysimple act that shows disorder, it
creates more disorder. And theline between chaos and order is very
thin. And so, one of thegreatest, most powerful ways to deal
with an adversary, in terms ofa society, is to sow disorder.
Yeah, I think you're actuallyonto something here. There's a book

(41:31):
by Thomas Rid, I had him onthe show years ago, called Active

(41:57):
Measures, which documentsSoviet counterintelligence and disinformation.
And one of the arguments thatThomas makes in his book is that

(42:37):
the Soviets and the KGB werefar less accountable to themselves

(43:00):
and to the sort of Sovietgoverning structures and therefore

(43:20):
to the public than the CIAwas. Now, whether or not that's true,

(43:46):
I think it is true. Butwhat Ithink is important is the argument
that I would make, which Riddoesn't make, which is that the CIA
and the US Intelligencecommunity, and in general, the way
we classify information, hasled to less accountability over the
years in this country. And so,I think that is another area where
we see this kind of loss ofconfidence in what is true. Andto
your point, Cem, which I thinkis really an astute observation about
the hero's journey and thecosmogenic cycle and how it relates
to societies, is thatcollective action is much more difficult
than unitary action. And ifyou want to cross the threshold and
heed the call, you need tohave an organizing principle, organizing
story that compels action. Andthat often takes much more of an
external intervention than ispossible when the unitary actor is
working. An individual cantake preemptive actions in a way
that's very difficult forsocieties to do. What did it take?
And a unified narrative.Andso, you look at World War II,
the leaders in the UnitedStates, Roosevelt, of course, understood
that we were getting closerand closer to a war with Nazi Germany
and with the Japanese. Andthere were steps taken to try and
prepare us for thateventuality. But for the public to
actually fall in line, it tookPearl harbor, and they fell immediately
in line. AndI think that'sthe important, I think, distinction
between applying it toindividuals and applying it to societies,
that when it comes to society,you need to have common action. And
in order to have a commonaction, you need to have a common
narrative. Andthe dangerabout where we are today is that
those systems of commoncommunication and public communication
and control and commonnarrative and propaganda have broken
down. And the leadershipstructure doesn't understand how
to use the new systems. Theyhave struggled to figure out how
to do this. Wesaw this, forexample, with the Twitter files,
and we've seen it with publiccampaigns, the politicians themselves,
too. And Trump has beenmasterful in using it. He understands
how to communicate directly tothe public. But we haven't figured
this whole thing out.Andwhere we are in America today
is in a place of sort ofdisintegration of the stories and
collapsing of the institutions.
Maybe our leaders have figuredit out, but that they're trying to
not have unity.
I think that's an interestingobservation. Trump, I do think, absolutely

(44:09):
benefits from a climate ofchaos. He's just operating in this
manner. And so, maybe for him,actually, he is a creature of the
time and isn't someone who isnecessarily going to foster the creation
of some common comment. Idon't know. I think it's a good observation,
though.

(44:30):
It depends on your goals.Right? If your goal is to bring unity
and to have the country riseto its challenge. And re-instill
the blessings of liberty toourselves and our posterity, then
you want the unity. But if youwant autocracy or you want to have
more power as an individual,maybe you don't.

(44:52):
Well, I think you do if youwant more powers. I think, again,
the dangerous thing abouttalking about Trump is getting all
the hate mail and all the…
I hear you, and I'm not tryingto be political. And, by the way,
we could be talking aboutBiden, we could be talking about
Putin, we could be talkingabout Xi.
I think it's an interestingobservation, though, because I think,

(45:14):
again, Trump, if you look athow he's operated in the private
sector, before he becamepresident, he enjoyed and benefited
from creating sort of climatesof chaos, suing his antagonists,
kind of going after them,being very aggressive. He's kind

(45:35):
of like a full court press.Trump operates a lot like a full
court press in basketball. Helikes to apply pressure and keep
the pressure on. Andthatisn't necessarily consistent with
what we're describing here.Though I don't know that that is
consistent with autocracy. Ithink, actually, if you want to be
an effective autocrat, if youwant to be a dictator or totalitarian
or a despot, you want tocreate common stories.
Once you are an autocrat. Buthow do you take a democracy and become
autocratic?
Yeah. I mean, I don't knowthat it's inconsistent with his objectives.

(46:04):
Anyway, we could probablyleave this point, but I don't know
that it's inconsistent withthe objectives of autocracy to try
and create a unifyingnarrative. I think you also want

(46:28):
to have a common enemy, whichI think, again, there have been opportunities
for this administration, inits previous iteration during the
COVID period, to focus in onantagonists or an enemy and use that

(46:55):
to congeal a popular narrativeand drive society forward. That didn't
necessarily happen. What thereason is, I'm not sure, but I certainly
think that the modes of… Ithinkmaybe the single most important
thing, and this is somethingI've harped on for years on Hidden
Forces, is around social mediaand technology platforms. And I think
that the nature of publiccommunication today is vastly different
than what it was when I wasgrowing up. Now,some people might
respond and say, well, yeah,Dmitri, but it wasn't always the
way it was when you weregrowing up. We didn't always have
three broadcast networks.We've gone through periods in society
where information wasorganized in a much more decentralized
fashion. And I would say, yes,that's true, but society itself was
more decentralized. And therewere no… this is important, we didn't
live in a world of nuclearweapons and mutually assured destruction.
Andso, the danger of ourinformation ecosystem decentralizing
and becoming more anarchic andchaotic, as the societies are at
the highest level of scalethey've ever been, to me is worrisome.

(47:17):
Yeah, I feel like technologycan always be a driver of both unity
and disunity, of growth orstasis. It's a magnifier. But I do
believe that the way it ismagnifying things currently, obviously,
is to sow disunity.
There was recently an articlein the New York Times titled Meta's

(48:04):
Digital Companions Will TalkSex with Users, Even Children. And

(48:28):
people can kind of guess whatit's about. But it was essentially,

(48:56):
you know, observing that thereare bots on Facebook and maybe Instagram,

(49:25):
and they can, as part of theiralgorithm (maybe not intentionally)

(49:51):
engage in sexual conversationwith kids. AndI think this goes
back to some of the samedrivers of nihilism that we talked
about earlier, which is like,who are we as a society? What is
it that we value? What mattersto us? This is a thing that comes
up a lot. This sort of like,we've seen a kind of depravity in
our moral frameworks as asociety. And we've seen all sorts
of rampant, depraved behaviormanifest on social media, and all
sorts of afflictions thatcoincide with the rise of social
media. Andthe response hasgenerally been to arguments for some
type of regulatory oversight.It has been kind of like, we can't
meddle with the free market,because once the government gets
involved, then it's like aslippery slope. And it really is
so ridiculous when youactually look at it. Because the
argument I've made is thatwe're not talking about the government
calling balls and strikes.We're talking about creating a regulatory
framework in which these typesof private actors can exist because
they amass so much power.Andis really the argument that we
fall back on that we reallycan't do anything to arrest the depravity
and to arrest the decline intodisinformation, because that's the
cost of liberty? Andpart ofthe problem, also, is that because
we're in this situation whereour systems of communication are
devolving and the commonnarratives that are devolving, it's
making the problem ofexercising oversight and regaining
control of a common narrativeever that more difficult. So, I don't
think that the solution is wejust kind of let the unraveling continue.
I don't buy that argument. Iunderstandpeople's hesitations about
exercising oversight, but Ithink one way or the other, that's
going to happen. And thequestion is, is it going to happen
in a manner that's in thepublic interest, or is it going to
happen in a manner thatfurthers the private interests of
a cabal of actors? AndI thinkright now, in the United States,
we are on the trajectory ofgoing down the road of creating a
government or creating asystem of rule that is to the benefit
of a few over the benefit ofthe many.
Yeah, I mean, I think at theend of the day, no government is

(50:15):
benefiting a few at the costof the many. That's survival of the
fittest. That is the naturalsystem. We take away government.
This is the problem withlibertarianism, like, at some point
we'd all like to just have nogovernment. Government's inefficient,

(50:38):
it constrains, blah, blah,blah. Let's go to the natural system.
Well, you know, nature is rawand tooth and claw. At the end of
the day you allow nature justto take control and, you know, all

(50:58):
the masses get subjugated atthe will of the few. That's why democracy
was created. That's why thefounding fathers of the United States
created this elaboratestructure. Because the natural system
is a dog-eat-dog world wherethe, the rich dominate, or the powerful

(51:22):
dominate. Andso, governmentby definition is to protect the weak,
to create some level offairness and justice and liberty.
And, by the way, your parentstold you since you were a baby, life
is not fair because it's not anatural construct, but we believe
it to be important.
Yeah. This is also anothermisunderstanding that a lot of people
have, which is that somehoweconomic systems are natural, whereas
that there is somehow anatural economic state. And that

(51:49):
anarchal capitalism orlibertarianism is closer to that,
and that's just not true.Those are the products of political
organizations. There'sareason why there's never been libertarianism
in China. And there's a reasonthat libertarianism showed up in
the United States where therewas a huge frontier and so much land
to be conquered and places forpeople to go out into the wild. It
matters, the world that youseek to create governing frameworks
in matters, and that willinform the nature of your economic
systems.
I think at the end of the day,if there is no government, in a system

(52:12):
with unlimited resources, yes,you can have libertarianism.
Exactly right. There's anexit. There's an exit valve.
But in a world of competition,in a world of constrained resources…
Good luck findinglibertarianism in a prison. There's
a reason why you don't findlibertarian governing organizations
inside of concrete walls.

(52:32):
And so, by definition,government is about making it such
that society can work togetherwithin a constrained environment.
Now the opposite is a problem,obviously. This is why we have the
pull between left and right,because if it's all control or all

(52:54):
fairness, then we're removingthe natural system completely from
everything. And we all knowthat's inefficient and impractical
and leads to, you know,ultimately autocracy in its own way.
We started this segment bytalking about, you know, Russia wanting

(53:39):
to sort of disunite the US. Ijust want to say I think there are

(54:14):
other actors that probablyhave been doing the same to achieve

(54:40):
that with the Western world.ButI want to try and take it, as
we sort of start slowly tohead towards the end of our conversation,
we've talked about all thethings where we're heading in the
wrong way and where thingsprobably are going to decline a lot
further, and where both of youhave talked about, we need that final
crisis that really breaksthings completely. And it really
takes me back to theconversations I've heard both on
other podcasts, but also theone we had, ourselves, on Top Traders
Unplugged with Neil Howe.AndI remember from that conversation
he really talks about. Yes,but it's really in that complete
despair disruption that thenext generation realizes this does
not work. We have to cometogether in order to rebuild. And
that's the first turning weget to. I'mcurious to know, you've
probably spoken with Neilsince I've spoken to him, Demetri,
but I'm curious to know howfar you think we have to go, still,
in the fourth turning? Whencould we hope for a first turning?
And if you have any ideas ofwhat that “journey” is going to look
like before we get there?Because I think there's a little
bit of time left, unfortunately.
You know, the short answer isI think, you know, I don't know.

(55:11):
I think that's the sort of thenature of questions like these. And
the, the fourth turningframework sort of resembles more

(55:41):
like fractals. It's more of apattern. And some of these cycles
can be elongated. Obviously, Iworry about what I think everyone

(56:13):
worries about, which is thatthere's some kind of war. Thatthe
privileged position that we'vebeen in for so many years in this
country, where we've lived inpeace while we've exported most of
the destruction and disunityto the rest of the world, will come
home. What I would say is thatwhat I would look for is (I would
bring us back to ourconversation about common narrative),
I would look for some kind ofsignificant crisis that would result
in people coming togetherbecause we're still in a place of
disunity in this country. Andso long as we're in a place of disunity,
we're not going to be in aplace of resolution. Now,can we
remain in a place of disunityand kind of go through this kind
of L shaped recession of sorts(to bring that to mixed metaphors)
and eventually kind of comeout of it, this sort of long deleveraging?
Can we do that, or does itrequire a crisis? Does it require
a kind of more V shapedrecession (again, to mix metaphors)?
And does that V shape requiremore than just an economic depression
or slowdown? Or does itrequire something more existential?
So,I think that it could be aways to go. But I also think that
the way that these crises workout is that eventually, when they
do resolve, they can resolvevery quickly.
I think people look at thistime that we're in now and they feel

(57:11):
like, oh my gosh, thisdisunity, this chaos. But that perception

(57:46):
is tied to the recent time. Iwould beg people to think about how

(58:30):
the greatest generation feltand the crisis that they went through.
Youknow, we talk about how wefeel like we're being pulled apart
the seams. How did the peoplefeel in 1969 with race riots and
you know, all of the VietnamWar? I don't think we're even close
to that yet. We feel likewe're not even close. So,you know,
crisis is a perceptionrelative to where you are, and think
a real crisis is coming. Thequestion is how deep it will be.
Andthe last thing I want tokind of say here is I do think we
can kind of time it a littlebit. Not exactly, because it is fractals,
and there's a lot ofuncertainty, and it's about path.
ButI do think the part that…You know, Neil Howe talks about generations,
he mentions time, and thathappens to tie this all back to our
idea of how different anindividual heeding the call is to
a statistical society heedingthe call and coming together, developing
the courage to respond to thecrisis at hand. I think that timing
is quite clear, to me ingeneral, as a decade at least, because

(58:57):
millennials overcome babyboomers. There'sa societal noise
that's happening because babyboomers are dying and millennials
are coming to politicaldominance. And this is what Howe
talks about. There's a cleartime frame for that. Youknow, in
2033, 2034, 2035, theoverwhelming majority of voters will
be millennials on down. And Ithink that's when you begin to get
that unanimity, a little bitmore of it. So,again, we can't say
the years, but you cangenerationally begin to see how this
generally plays out. So thatwould be my kind of view. And I do
think there's a crisis. Therehas to be. The question is, when
will we as a society heed thecall? AndI guess the last part,
to your last comment, is willthat lead to existential change and
the rollover of a society likea leadership globally in the thoughts
of Ray Dalio, that this is ahanding over of dominance relative
to another 80 years, and arefresh and a reinvigoration of the
system that's here.
It's a good comparisoncomparing 1969 or 1968 to today.

(59:25):
Because what we know about thetime from interviews and videos and

(59:48):
scholarly texts is that it wasa very turbulent time for society.

(01:00:11):
But there's a sense in whichthe turbulence that existed in the

(01:00:34):
late 1960s was more of abottoms-up turbulence. Ifwe think
of society as a kind of almostlike a petri dish with a container.
The petri dish was bubblingup. There was a lot of volatility
in society, in the grassroots,among the public. But the container
itself was integral. Which isto say, the political structure wasn't
at risk, and I don't know thatit necessarily felt at risk. I mean,
certainly there was volatilitywithin politics, but there was no
hemorrhaging of… The partiesthemselves were not being remade
and refashioned in the waythat we're seeing today. Andthere
was still a level of politicalstability such that only a few years
later, if you will recall,Barry Goldwater and the Republicans
came into the White House andtold Nixon that he had to resign
the presidency. There wasunity within the ranks of the elite.
Ithinktoday what's unique isthat it seems to be that there's
both chaos and disorder andvolatility within the body politic.
But we also see it within theranks of the elite. Andso that,
I think, if I were to again,as a non-scholar of history, I would
just say that my superficialreading of history is that that's
the key distinction, thattoday it's across the board. And,
importantly, there is disunityin the ranks of the elite such that
we don't quite know what ourpolitical system will look like and
how those changes willmanifest in the organization of our
society.
Yeah, I'd agree with that. Ithink there's more potential energy

(01:00:54):
in national debt and otheralternatives to the US and its ascendancy.
There are a lot of reasons, Iagree, to think this is more than
1969.
That's right. We're much moreinterconnected with the rest of the
world at the same time as thepresident of the United States and
the administration seem to betrying to break that system apart.

(01:01:17):
That also is something that'svery new.
Well gentlemen, this isfascinating. If this is the end of
one world order, then maybeit's also the beginning of another.

(01:01:49):
But that world won't be builtby AI or policies alone. It will
be built by people who careenough to ask the hard questions.

(01:02:21):
Not just people like Demetriand Cem, but people like you, our
listeners. Demitriand Cem, weovercame a lot of technical challenges,
but this has been a fantastic,very insightful, hopefully thought
provoking to manyconversation. I really thank you
for your time today. I reallythoroughly enjoyed that we had a
chance to discuss some ofthese very important questions. Beforewe
go, let me just encourageeveryone to follow and subscribe
to the amazing content thatDemetri produces on his Hidden Forces
podcast and of course Cem'shighly valuable Twitter feed that
everybody loves. Becauseasyou can tell from today's conversation,
we are living in a trulyglobal, macro driven world and it
is perhaps more important thanever before to stay well informed.
FromDemetri, Cem and me,thanks so much for listening. We
look forward to being backwith you as we continue our Global
Macro series. And in themeantime take care of yourself and
take care of each other.
Thanks for listening to TopTraders Unplugged. If you feel you

(01:02:41):
learned something of valuefrom today's episode, the best way
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(01:03:02):
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