Given climate change and other risks, how should you invest for the next forty years?
Topics covered include:
- What predictions from the last forty years came true and which didn’t
- Why the next forty years will have a lot of similarities to the last forty years despite the promise of AI
- Why the scale and complexity of the world make big transitions away from oil, cement, and natural gas unlikely
- Why economic growth and consumption will likely continue leading to positive investment returns
- How should our portfolios and lifestyle be structured to build resilience
Become a Better Investor With Our Investing Checklist
Welcome to Money for the Rest of Us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it. I’m your host, David Stein. Today is episode 442. It’s titled, “Crisis-Proof Investing: Strategies for a Shaky Future.”
I recently received a question from a member of Money for the Rest of Us Plus, our premium membership community. He is looking ahead 40 years, and trying to figure out how to invest in an era where on one side there’s the potential catastrophic impact of climate change and on the other the potential catastrophic impact of a consumption disaster from attempts to cut carbon emissions, either through regulation, or through personal choice.
This member owns his primary residence, he’s based in Canada, and he’s in his early 40s. High net worth individual; has a sizable whole life insurance policy, his own business, and a large stock portfolio. 40 years is a long time. 40 years from now is the year 2063. I’ll probably be dead. I hope not. My kids will hopefully still be alive.
One of the early renditions of Money for the Rest of Us that I launched in 2012 was called The Next 40 Years. It was a website about a 40-year time horizon and figuring out how to invest and save for retirement over that time period. The website lasted about two months and I shut it down.
The Third Wave
40 years ago I was in high school. One of my teachers, who was well ahead of her time, decided she wanted to have a class to discuss the future. She invited 10 students to participate in this semester-long class. I agreed to attend, and we spent a number of months discussing Alvin Toffler’s book, The Third Wave. This was a book over 400 pages long, published in 1980, and it was about the future, the first wave being the agricultural revolution, the second wave the industrial revolution, and the third wave the information revolution.
Back in high school, I didn’t understand much of the book. In fact, I found it was boring, as did the other students. We spent a lot of time playing boggle, the word game, during class. Although we had some meaningful discussions about the future and what was going on in the early ’80s. 40 years later, as I read the book, I was amazed how much more clear it was.
Toffler wrote “The third wave brings with it a genuinely new way of life, based on diversified renewable energy sources, on methods of production that make most factory assembly lines obsolete, on new non-nuclear families, on a novel institution that might be called the electronic cottage, and on radically-changed schools and corporations of the future. Above all, the third wave civilization begins to heal the historic breach between producer and consumer, giving rise to the prosumer economics of tomorrow.”
Prosumer is a word Toffler made up. It means consumers who produce or do a lot more things for themselves in terms of production, and that’s where he talks about methods of production that could make factory assembly lines obsolete. He felt that we would have much more leisure time, and given the cost of services to produce things, that we would produce more and more as the work week got shorter.
He gives the example of a dress pattern, where the prosumer would buy a cassette tape with a program that would drive a smart electronic sewing machine. Even the clumsiest househusband, he wrote, with such a cassette could make his own custom-fitted shirts. Mechanically-inclined tinkerers could do more than tune up their autos; they could actually half-build them.
As with most long-term predictions, 40-year predictions, there was an element of truth. The rise of YouTube means we can do more things for ourselves if we choose to do them.
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