Philippe Gijsels | Shifting Economic Sands... Meditations On 'The Fourth Turning'

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The following is with Philippe Gijsels, the Chief Strategy Officer at BNP Paribas Fortis - he co-wrote a book last year called The New World Economy in 5 Trends - which within, reveals much of the new map we now inhabit, especially in light of the perplexing chaos of spearheaded by America’s sloppy leadership in the last weeks. 

Philippe is an erudite bookophile and a banker, a combination that seems not uncommon among the best investors. He and I have been speaking since last year in anticipation of recording this podcast today. I hope you enjoy it. 

I wanted to get the interview into the meat of the book as quickly as possible, therefore, took more liberties with editing than I usually do and have excised a part of the podcast to the end of the discussion. The excised component  was an explanation and brief discussion on the idea of Reflexivity. 

As always, you can navigate through the rest of the show through the timestamps.

Consider leaving this 5 stars on Apple or Spotify - nothing does more to drive the show to new viewers.


00:00 - Philippe Gijsels
02:54 - Understanding the Fourth Turning
11:38 - Serendipity in Innovation
14:40 - Interest Rates & Tolkien
20:52 - The Impact of Inflation on Individuals
26:49 - Wealth Inequality 
39:38 - The Shift to Multi-Globalisation
47:55 - The Future of Work and AI
56:23 - Europe's Role in a Multi-Globalised World
01:12:19 - The Commodities Bull Market
01:14:47 - Demographics and Economic Implications
01:20:46 - Serendipity
01:27:02 - Reflexivity in Economics and Markets

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Transcript

SPEAKER_01 0:00

The following is with Philippe Gisels, the Chief Strategy Officer for BMP Parabra Fortis. He co-wrote a book last year called The New World Economy and Five Trends, which within reveals much of the new map we now inhabit, especially in light of the perplexing chaos spearheaded by America's sloppy leadership in the last few weeks. I wanted to just read out this little excerpt of something that Philippe wrote in the last week of March 2025, as a way to, I suppose, introduce the themes of his book and then also this podcast. There are decades that nothing happens, and then there are weeks that decades happen. The last couple of weeks we're in that letter ballpark, big time. The magnificent seven are correcting and the dollar is sliding, raising questions whether we are witnessing the end of US exceptionalism. On the other side of the Atlantic Ocean, European policymakers start to realize that riding the waves of global change in the sidecar of US is no longer an option. Germany is preparing to start running deficit, not seen since the reunification to boost its investments in defense and infrastructure. Maybe in 10 to 15 years' time we will look back at this time in history as the moment that Europe took its fate into its own hands. However, it will not be a walk in the park. The road that the old continent will have to travel to be once again a voice on the world stage will be long, hard, and winding. On the other side of the Pacific Ocean, China is still struggling with its balance sheet recession. The Japanese experience teaches us that monetary stimulus does not work when companies and consumers will do anything to restore balance sheet after the real estate market crashed. The only way to get the engine of the second largest economy in the world running again will be through good old-fashioned Keynesian stimulus. There is a very big chance that this will be exactly the medicine that will be administered by the Chinese government in the coming months, probably after they've had a little bit more visibility and what exact measures by the Trump administration will be in their trade war with China. We both know how that has gone since. However, using visibility and Donald Trump in one sentence may not be the best of ideas. In short, we are looking at a world in which the only constant will be change and volatility. This volatility originates from the geopolitical as well as from the economic domain. So that is the end of the excerpt that I wanted to read, but I just thought it would be a great way to introduce the themes of the podcast. Philippe is an Aerudite Bookerphile and a banker, a combination that seems not uncommon among the best invested. He and I have been speaking since last year in anticipation of recording this podcast today. In the interview, I wanted to get to the meat of the book as quickly as possible, and therefore took more liberties with editing than I usually do, and have excised a part of the podcast to the end of the discussion in an effort to address the trends of the book more quickly. The excised component was an explanation and brief discussion on the idea of reflexivity. So I wanted to introduce it early, but then when I was editing it, realized we didn't get to the book quick enough. So that is at the end of the podcast. However, as always, navigate through the show with the timestamp. And please consider leaving this five stars on Apple or Spotify, because nothing does more to drive the show to new viewers. With that all out of the way, in the meantime, here is the great Belgium himself, Philippe Gisels. What is the fourth turning?

SPEAKER_00 3:01

Well, uh, that's already a very big question. The fourth turning or the fourth turning is here. It's actually a book by Neil Howe, and it's an update of a book that was already written about 25 years ago by Neil Howe and uh Mr. Strauss, who unfortunately passed away. And I think it describes very well the time that we're living in today. Uh the very complicated environment, all the geopolitical worries, uh the economical turmoil, uh the election of Donald Trump. So it's a book that that yeah we draw upon quite a bit, and like I often say, if you steal from one guy, it's it's um you can go to jail basically. If you steal from a lot of people, it's research. So we've done quite a bit of research in our book, and and yeah, in presentations for clients and so on, we talk quite a bit on this. Because if you read the book, it it's not always a happy story, because yeah, it talks about a period that's going to be extremely complicated. But in a way, it's also positive because after a foreturning, a first turning emerges, and that's a better, better environment. The new generation, the young wizards that I call them, will take over and then build a new world. But first, of course, the old world is being destroyed with all the institutions, the IMF, NATO, the World Health Organization. So that's typically something that you see in a foreturning. The main idea behind these turnings is it's always 80 years, four turnings together, and this is a fourth of four. In fact, is eighty years. Last one was a second world war. Um, and and then what happens is that things get so bad that people say, Hey, we're never going to do that again, and then you start building a new world, but I'm not predicting World War Three necessarily. But this is going to be a very difficult environment, and if you realize this, uh I think that you can prepare because what I do on a day-to-day basis is that various clients on the investment side are in various companies. So, how to position in a world like that, and that was also, in a way, uh, the starting point of the book that Kun de Leusma co-author and I thought the world was changing so profoundly, new trends, new things are emerging, and that we had to write about it. And that that was in a way the start of the book.

SPEAKER_01 5:09

It's quite an incredible cult classic in investment circles, isn't it?

SPEAKER_00 5:12

Yeah, yeah, indeed. I think when when we wrote the the book, basically it's a year ago and it was published in English, and I'm still very much behind whatever we write, and we wrote about uh the commodity super cycle, we wrote about gold going up, we not necessarily predicted the election of Donald Trump, but if you go back to the book of the fourth earning, well, typically happens, and I won quite a bit of bets over Christmas. I still have to collect the bottles. But what typically happens is that sitting presidents, sitting governments, uh sitting parties of whatever shape or form they are, left, right, up, above, whatever, they typically lose. We saw that everywhere. We saw that in Canada with Trudeau, we saw that in a lot of countries in Europe, and so it was no big surprise that Donald Trump was going to win. And and coming back to the book, and as you already can imagine, I'm a big fan of the foreturning in a way. I what I see when I listen to podcasts and I read uh insightful stories coming from all places in the world, also the US, the book is more and more mentioned in a way, because the foreturning concept is getting way stronger with some very interesting people. So I think everybody should read it. But I always say it's it's not something that you read at the beach during your holidays because it will depress you. It's not something that you read under the Christmas tree. I think Halloween is a very good time for that, but okay, Halloween is already uh a bit behind us. But it will not cheer you up. But if you realize that this is a phase, a moment in time, and after a foreturning, first turning emerges again, it gives you hope, but it also gives you a sort of a roadmap to to navigate these complicated times that that we live in today.

SPEAKER_01 6:51

And the idea is basically they looked back through history, identified these giant cyclical events that repeated after another and then just mapped it onto the current moment.

SPEAKER_00 7:00

Yeah, absolutely. Of course, the criticism that they draw immediately is that it's from an American perspective because they talk about the last foreturning that we had was the first and the second world war. They take that as one because it was close enough together. Yeah, you could could argue that the second world war was in a way a consequence of unfinished business of the first world war. But then another one is the Mexican war in the United States, another one is the civil war in the United States, and each and every time 80 years between them. And that's in a way generational, because what happens when you had the first world and second world war, you had a lot of destruction, a lot of death, a lot of of suffering, and then people say, hey, we're not ever going to do that again. And then you start to create the United Nations and then Europe and NATO and all these things, and that's typically what happens. And it was also in the previous periods, but the idea is the 80 years, 80 years is a long human life, and that means that everybody who suffered through the the war, the previous big war, they're old age or they're they're basically dead, and then people tend to forget and you start again. So, in a way, it's generational, but it tends to work very well. If you start reading this, you see a little bit the the roadmap of history, and then that does not necessarily mean because Mark Twain famously said um history does not repeat itself, but it often rhymes. It's not always one-on-one, but you see so many things that are similar that it cannot be no coincidence, so I can only um yeah, propose to everybody to read that book as well because it's it's a very good book.

SPEAKER_01 8:37

A good primer for yours. So you said something like um a hundred to one hundred and fifty books you give credit to as part of the research process, and you also do these uh wonderful fictional dialogues throughout the book. Are you sort of channeling an old philosophical way of communicating by creating these fictional dialogues?

SPEAKER_00 8:54

Yeah, that was something, and and there was a discussion with a publisher at a certain moment in time, because if you re read a book, write a book with with two people, obviously you will have too much, and and then it will be kill your darlings, and then you have to start to take things out in a certain moment in time. They said, Okay, we take the dialogues out, and I said if you take those out, because that's really who I am, what I want to do, in my mind there is no book, so we left them in. And I'm a bit of shy, I'm always joking. My colleague Cooney interviewed the still living economists, and I said, Okay, I will talk to the old ones but and the dead ones, but basically that's also going back in time and drawing a little bit on on history because that's so so fantastic, and there is a very nice anecdote. I have Keynes, an interview with Keynes in Brussels, I have one with with Schumpeter in Vienna, but the the one I like most is the one with with Ricardo and Maltus on Fleet Street in London. And um, as you know, there was a big fire in London in 1600, and so basically then uh they rebuilt St. Paul's and the pub, the old bell, where I have the fictional interview, basically was made by the Masons that rebuilt St. Paul's, so it has been there for ages. So that I thought was a very good setting to meet uh Ricardo and Maltes, who basically I'm we're absolutely sure they also lived there and they also were there, probably in that pub during their lifetime because Fleet Street back then was the place where all the journals were and and the newspapers were, so that was when the news came in. When the news came in, and uh these two guys, their friends, have been friends their entire life. Ricardo was a Jew, and then he was a very intelligent trader, he made a lot of money. And Thomas Maltus, we know from the Maltusian trap, he studied demographics and so on. He was more like a professor. And they were also on both sides of the aisle in politics from the opposite parties. One would be the be the champion of the industrialists, and the other one of the landowners. So, when there was a bill on the price of grain, they would absolutely be on the opposite side, so they were arguing all the time. And we interviewed them, and and of course, Ricardo is the guy from trade, and so it's somebody you like a lot. And there is a story that there was the Battle of Waterloo, and um Ricardo thought was absolutely convinced that Wellington was going to win against Napoleon, so he made a big position, he took a big position in bonds and equities, and he also took a position for his friend Maltus, but he was scared, as was usually the case, and he sold out just before the battle. Long story short, uh Wellington did win, and then he made about Ricardo made about two million pounds, which was an astronomical figure at that moment, and of course uh Maltus had nothing. That was a bit the story of their life, and then we sit there talking in the pub, and at a certain at a certain moment I say to one of these guys, Look, you um you have been on the opposite side on every idea, on every discussion your entire life, but you were always friends, and even after that, you're still friends, how come? And then one of them says to me, Yeah, you're also with Ari and with Kuhn as well, and you're also friends, right? So that's something that you have. And I went to London last time I was in London. I took the book and I went to the pub. So the book is in the pub, and I wrote in the book, thanks for letting me having this interview with these guys. There would no would not be any other place in the world where that that wouldn't have been possible, but here. So it's in the pub. And if you say the code 1666 of the fire, you can just see the book. So that's yeah, that's a little game that I play, but I find that amazing. These double doors. When I read books, I always like these double doors and connections to other dimensions, to other times. So yeah, that's a little thing that I did, and I I, as you can imagine, I enjoyed it a lot.

SPEAKER_01 12:40

So is it your favorite because of the parallel between your relationship with your co-author, or is there demographics a particular interest to you?

SPEAKER_00 12:48

Well, there is a lot of things. Uh Kun and I, we we we also tend to quarrel all the time. They they say I see Kun more than I see my wife because we've been on the road promoting the book a lot, and then you know we work at the same bank, so we do a lot of presentations for clients, so but we're always quarreling, and they they always say that you you look like an old married couple, something like that. So that's that's a relationship that we have. But also, and then I know from your podcast, you you're a book lover, and I see it behind you as well, a lot of stuff, and I getting older, I'm 55 now, getting older, you you and you're reading a lot, you you start to realize that a lot of things are very much connected. So you read one book and you get a reference to another book, and and and that's absolutely amazing. And then you see that the interesting people of old times, and today it's even more it's more easy it's easier through the internet and everything. We're even way more connected. I mean in Belgium, you're on the other side of the world. We're talking, so that's fantastic. But also in medieval times or in the 1700s or the always saw that there were groups of interesting people that somehow were connected from from the arts, from science, from from financing. So, in a way, you you start to see that these people are connected. And if you can find a connection like that, I I did not know before I wrote the book that that Maltus and I knew they they lived in the same time, Maltus and Ricardo, but I never knew they were so much connected and then their lives were intertwined like like this. And and when you find something like that, it's like the Velvet Underground or something like that, places where people come together of all walks of life and discuss, and and when you start to read that, that's why I love biographies very often, because then you also not get an idea about the people, but also the time that they live in, and you start to see this this all these connections, and I I find that that hugely uh fascinating.

SPEAKER_01 14:40

Me absolutely as well. Yeah, the sort of serendipity of intellectual curiosity is boundless, there is never enough to find.

SPEAKER_00 14:48

Yeah, absolutely. And the word serendipity, it's one of my favorite words. When you start scrolling through a book or whatever you do, and then you suddenly find something else that that's so fascinating that you drop all the rest and you start working on that, and you move on from idea to idea. I find it fascinating. And it reminds me of a book that's also one of the books that we mentioned in our book, where good ideas come from by Stephen Johnson. You maybe know it's already about 10, 12 years, maybe 15 years old by now, but it's still one of the best books I've ever read on innovation. And there is one chapter on serendipity. But there is also one thing, and that's something that we used in the book as well, about innovation and about AI, because everybody's talking about AI and quantum computing and all these things. And he says innovation is like uh a table. So you have a table, round table, and around the table you have uh smart people and the scientists and Nobel Prize winners and and and researchers and what have you, but also what we in our language and also in the French language call bricoleurs, people who have no formal degree in engineering or something, but just put stuff together. And sometimes these guys are the people who really invent things, and they're sitting around the table, and on the table there's what we call parts. Parts can be cubes, can be computers, can be microchips, can be chemical substances, but also can be research, can be books, so that's all the body of knowledge, intellectual knowledge but also physical things are on the table, and was innovation you let smart people play with these things, and you find things you do inventions basically. But the the important thing is the parts have to be on the table. Because if you go back to to uh Renaissance Italy, you had this guy Leonardo da Vinci who is one of the big geniuses in all history, and he drew basically helicopters and parachutes and submarines, but these things were only built two, three, four hundred years after his death because the parts were not on the table. And then you can ask yourself what parts do you need for AI? Well, there are a number of them, you need smart people as always, but you need especially a lot of computer power, and you need basically big data. Hey, we did not have that maybe ten or fifteen years ago, but now we have that, so then AI almost becomes invented automatically. And there's a big discussion going on always about who invented the steam engine. And if you I think there is a consensus now that it was invented independently by three groups of different people.

SPEAKER_01 17:20

To that point, uh, it's got several names. One of them is Batched Discovery, uh, but it came up in a conversation I was having with John Redfern, who's the CEO of Eva, which is a deep geothermal company in Canada. And I made this observation like, why is it the case that there are three or four companies now that's come up in the last five to ten years that all of a sudden can present products to the market that can dig deep enough to get the critical heat geothermal to actually have high output on the other end. So it's not just a marginal energy provider, but in fact a core energy provider. And he mentioned this batch discovery and gave some incredible examples of it, and then I looked it up later, and there's a whole Wikipedia page dedicated to it. But just from memory, evolution was was simultaneously discovered independently by two different people. The DNA strand was discovered, I think oxygen was discovered, and seemingly there is probably a long list that's added to that as well. But it's to your point, you know, the the the parts at some point all big they all an additional part was added to the table, and now the discovery is available.

SPEAKER_00 18:22

Absolutely. And you can see it a little bit as an escape room, because it's also that certain inventions you have to do in sequence. To have a plane or a car, you need a motor. For a computer, you need a semiconductor. So it's like you're you have this table, smart people around it. I always argue that they have to be diverse. The more diverse they are in culture, in what they what they what they have studied, whatever, the bigger yeah, absolutely, the more chance you have that you invent something. But that's not the end of it. You you invent your your thing, your AI, or whatever you want to invent, and then you go to the next room. There is a new table, but the things that you have invented are also on that table, and you start again. And that's basically evolution, that's progress, that's innovation. So a series of escape rooms where you each and every time uh end up with a table with with a puzzle somewhere that you have to solve, and then you can go to the next one. And if you can sum books are the same because books, if you read our book, yeah, I I've read that uh I've written that on the first page. I think all the people, and I forgot quite a bit of them, that that the the their ideas we used to build upon, and that's absolutely fascinating. You take everything there is and you take it try to take it just one little step further, and and that's the way you you move forward. So that's uh yeah, that's the way we try to do it.

SPEAKER_01 19:42

Um Philippe, let's let's turn to the book. So there's five big driving points each broken down throughout the book innovation, productivity, climate transition, multi-globalization, debt demographics. Hopefully we can get to a few of them, but the one trend to rule them all, why the Tolkien reference, and also what are you referring to here?

SPEAKER_00 20:00

Well, the trend to rule them all is about interest rates and about liquidity. If if I can go to the the foreword or or the the the summary that's at the beginning of the book, what's the main idea? Uh which has huge implications for investors but for companies, for for consumers, for somebody who wants to take out a loan for everything, is that with COVID and COVID was not the real catalyst because these trends would have happened without COVID as well, but it was clearly an accelerator. We have moved to a world in which inflation, and we see that in food prices, we see that everywhere, when I go when you go buying groceries or what have you, will be structurally higher, and it's not just COVID, it's all these other chapters that we talk about. And secondly, it also means, and that's the one trend to rule them all, in a way, higher interest rates. Because the world I operate in, the world I live in, the world of investments, interest rates are like gravity. So when when interest rates are low, even negative at a certain moment in time, it's very easy for all assets to fly. House prices go to the roof, equity markets go up, but also the prices of wines, of old timers, what have you, because it's like gravity. If you have no gravity or negative gravity, well all things can fly. And we've been in a world where central banks have been extremely dominant because inflation was not a problem. The central banks have inflation targets, usually 2%. Well, if inflation is below that, they can basically do whatever they want. Each and every time you have a crisis, 9-11, the wars in Iraq, the financial crisis of 2008, 2009, what have you. Each and every time the recipe was the same, just cut interest rates. And when interest rates are lower, yeah, you lower gravity. And you bring it down to zero. They brought it even down to negative levels. But now, with interest rates, inflation going up, the hands are tight. It's not so easy for the Fed or the ECB or Bank of Australia, or whatever, who sets the interest rates. Basically, to to to to lower them, and that makes that we're in a much more complicated situation. But the last, let's say, from 82 onwards, because that was the the last big cycle eighty-two until Covid. So you see, these are cycles of 30-40 years. Very often it was fairly easy. When you had a crisis, when you had a recession, whatever, you just had to buy equities. Because you know that central banks would come in, flood the world with liquidity, and everything went up. I remember Covid. And we were all in lockdown back at the moment, but we were recording videos and everything for our clients. Stock markets were absolutely killed, destroyed, they went down each and every day. But back then we said just buy this. We do not know exactly where the bottom is, but we know that central banks will come in, they will flood the world with liquidity, and everything will go up. And that was, with hindsight, a good call. That type of reasoning will become more complicated because interest rates will go up. But but the one thing, and that's of course from Lord of the Rings, one ring to rule them all, trend to rule them all, that was interest rates the last 30-40 years. Unfortunately, we will be living in a world where interest rates and inflation is higher, which makes life more complicated for companies because they will have to buy uh pay higher interest rates, their wages will go up faster, commodity prices will go higher and we'll be more volatile. So the environment that we will have, which is also typical for a fort-earning, by the way, will be more complicated for investors, these consumers, and everybody.

SPEAKER_01 23:30

Talk a little bit more granularly about what the implications of that might be to just the regular person, myself or someone listening to this.

SPEAKER_00 23:37

That's a very good question. Thank you for that. Um let's let's look at the somebody who wants to buy a house, a house for himself, its kids, grandkids, or whatever, want to buy a house. It's a very distinct possibility that the US economy will slow today, so that interest rates will come down some more. But if you believe our general conclusion, and I have a very big conviction on that, that we have moved to a world where inflation and interest rates are structurally higher for for many years to come, and then I talk about ten, twenty years, not two or three or five, ten, twenty, thirty years. Well that means if the market gives you an opportunity to finance your loan, let's say at fifty or seventy-five basis points lower than today, you should take it with both hands. Because I do not believe that interest rates will go back to zero or one. Not in our lifetime is maybe a big word, but not the next thirty, forty years. So that's something that the uh somebody who wants to take out a loan should do. When you're a company, you had a fantastic environment from eighty-two onwards, because if you're in an environment where interest rates gradually decline, every time that you had to refinance your debt, you could do it at a lower level. Now you will have a world where it will be at a higher level. So the same reasoning goes for a company as for an individual. If the co the market offers you the opportunity to if you have an investment project in two or three years' time, you should probably hedge already your interest rates. Make sure that you lock in the interest rates at these levels. If inflation is below zero or two, like we had a long time, and I know Australia inflation is a bit higher, but just add two percent, three percent to the inflation rate, well, it means that the wages that you pay to your your workers will go. So if you can hedge that inflation in a way, you should do it. I can imagine on the commodity side, I'm a big believer that we've started the biggest, and a lot of Australian people will like it because you're very big in mining. We are at that at the very first inning of what I believe, not only gold and silver, but a lot of commodities, copper and and quite a bit of others as well. Uh, we will be the biggest bull market in commodities that the world has ever seen. Because I think we have a lot of supply constraints uh going on, so it means every company that I talk to they hire some people for AI, and I can imagine I can really relate to that.

SPEAKER_01 25:58

Philippe, Philippe, rather rather than the market's perspective, I think you started off by saying it's gonna be much harder for us to buy a house because the interest rates in our mortgages is gonna go higher. Now I'm a participant in my labour market, whether it's in Brussels or London or Sydney, what other implications does this trend to rule them all have for how I'm thinking about my future?

SPEAKER_00 26:20

Well, uh when you're a worker, I would say, or you work for a company, I think this will be a golden age. Because unless we're totally replaced by robots, it will a certain moment maybe happen, but not in the next five to ten years. If you look at demographics, um I I would say that the the power of negotiating on your side of the world or on my side of the world will increase. Because in a globalized world, what's the reason why inflation, wage inflation was so low? After the fall of the burden wall, eighty nine, China in 2000 came in the World Trade Organization. So the world opened up, so it means that our economies were in direct competition with some of the emerging markets. So a company could each and every time say, Okay, look, if you're not happy with the salary we pay, we move the factory to I don't know what Bangladesh to say something. So that was that pressure basically. Now when the world gets closed up again, everybody brings this production home, supply chains get shorter, inventories get larger, the power to negotiate a better wage salary is going to increase massively. So that's the good news. Bad news is that of course deficits are huge, debts are huge everywhere, so taxes will increase as well. But the power is going to shift, I think, from the company side to the individuals again. And that's something also in the new world, we see. If you look at the the added value that was created, a lot of it went to the shareholders. And if you look at the percentage, I don't know it uh out of the top of my head, but it has been at at extreme levels in favor of the companies, a certain moment in time it will move back to the individuals. So that that's good news. Um, as an investor, if you want to invest basically your money, and that's that's a very important point, and I always talk about that with the example of a game of game of monopoly. He writes long, very interesting pieces which are very complicated from times to times, especially the chapter on debt that he writes about 50-60 pages which are well founded, which are extremely intelligent, but at a certain moment in time you say, What does it mean for me? Well, I at the end of only four pages in that chapter at the end is a game of monopoly. So in the game of monopoly, there are basically two scenarios possible. One is somebody holds the expensive streets, I think it's blue, green, yellow, and badge on the other side. When somebody holds those, by sheer luck, of course, well the game is quickly over. But I can imagine that you've been there and I've been there and everybody has been there. It's one in the morning, it's almost evenly divided, and just like in real life, some money goes back to the bank in the form of taxes, but each time you pass go, you get money from the bank. So money the bank gives more money to the players than the other way around. So at one in the morning, all the money is on the table, and there is no money left in the bank, so that's a problem. Then typically somebody smart, usually a woman, says, let's make little papers, and we write one hundred and five hundred and two hundred on them. We recapitalize the bank and we play on. We have another bottle of wine, another glass of beer, and we start again. The point is, three in the morning, the bank is once again empty, and the money is on the table. You're probably wondering where I'm going with this, but but this is a very important conclusion for individuals. In a game of monopoly, in investing and in life, it's not so important how much money there is on the table. Because all the money that we have in our pockets or that we have in our bank accounts basically has also monopoly money, just paper. So it's not so important how much paper or money there is on the table, it's important who owns the houses, the hotels and the streets. And if we take that logic one step further, who owns the companies, who owns the commodities, who owns the gold, the jewelry, the wine, the pigeons, the old timers, all the tangible stuff. And that's that's totally different mindset. If you have an inflation that's between zero or two, your money will lose value gradually. It will lose its value, but gradually, if you go two, three, four, five, that's the world we're going to to live in. If you have four percent of inflation for ten years in a row, you're absolutely sure that your purchasing power of your money is fifty percent lower. You cut in half in a time of ten years. And in that world, you need to own real assets, and that's extremely important for every individual.

SPEAKER_01 30:56

I really did love the monopoly example in the book as well. But now I've just hear you layer it all out. I'm thinking look at the gap that has occurred between the very rich and the working class. The wealth inequality, in a word. You just mentioned that with rising inflation, me and everyone listening to this, our mortgage repayments might get high if we decide we want to own some real assets. There is still an educational gap to really enter the investing market in the same way. And in a world of multi-globalization where even if even if manufacturing is onshore and therefore my job is in high demand and I can also negotiate a higher wage, the prices of everything is also going to go up because the very low prices of everything at the moment is because there is this very tightly wound, highly efficient globalized economy where each country can produce at their nearest competitive advantage and we end up with the cheapest product available. So it's quite a messy problem where we're left with higher inflation, which makes it more expensive for us to own assets, while in the meantime the monopoly money keeps increasing. So isn't the outcome of that rather just the rich, the asset owners will just continue to accrue more and more and more assets, become richer and richer and richer, and access to those same assets for the rest of us is going to be harder to get.

SPEAKER_00 32:13

Yeah, that's a very good point. And that's exactly the case when you you own all these assets, when you own gold, when you own equities, when you own a number of houses. Um saw the figure it was staggering. Uh Bill Gates, already is not a poor guy with all his uh equity in Microsoft. He owns about, I don't know how many thousands of acres of agricultural land in the United States. So these guys have been buying real assets, so that's that's absolutely for mere confirmation that these guys have the best advisors in the world. They're not very stupid themselves, so they know what they're doing, that they're accumulating assets, that that's the way to go. But I think you're absolutely correct that that for some people who just live paycheck to paycheck, it's it's very difficult, and they're faced with inflation. And inflation probably hurts the poor part of the or the poorer part of the population more than the rich part. So that that's probably going to increase, and that's probably a counter. And I thank you for the question because I did not thought about it like that. But is a force that drives in the opposite direction of what I say, that that typically it will be more equal. Now, this is also once again, and sorry that I come back to the foreturning all the time, so people should probably or should invite Neil Howe maybe for for your your podcast, he can explain this extremely well. But that's also something that you see in a foreturning. Um if if the inequality gets to an extreme, well, you get all kinds of strikes. Um I'm working from home today because I wanted to record the podcast with you, but it's once again a strike in Belgium. It's each and every day at the moment because the government is taking actions, they're reducing subsidies to the people, they're increasing taxes and so on. So it's everywhere around the world. That's something that we will see. And in a very extreme case, it's this can lead to revolutions. If you look at the French Revolution, and they always say they were unhappy with with uh Louis the Sixteenth and so on, and even more with his wife, and you know the story. But it was also a lot about the price of bread. The price of bread went up a lot, and it were were riots about the bread price that then all of a sudden are used by by opposite forces to basically to get the revolution going. But it was the price of bread that was probably the catalyst at a certain moment in time. And if you move to this more this more volatile inflationary world, yeah, you run the risk that that type of thing will happen. So it's it's to governments to to try to manage this, to understand this. As an individual, also understand where you have to position. For my clients, that's easy because they're very often they're they're they have quite a bit of money. So so we can take these positions. If you do not have the cash to invest in in real estate or whatever, you have a problem, and even buying your first home. I always I'm astonished when I look at the Australian real estate market. In Belgium, it went up quite a bit. But I always say, hey, in Australia, I say this literally to my clients, and even in Holland, which is just north of us, the Netherlands, they just laugh at our real estate. So I I still think that real estate with a nice loan against it is still a very good investment, especially in Belgium, other places in the world, it will be more expensive. But buying this first house without subsidies or the help of your parents, where I live in Leuven, Belgium is a university city, the prices are quite expensive as well. If I do not help my two kids, it will be very hard, even if they have a good job, to be able to buy an apartment or a house. And then, of course, you you get a class society where people who have money and have assets are able to help the children, and others are not. And what you also see on the demographic side, it's not in the book, but something that that did not find its way to the book, is that people start to marriage, have their marriage, to marry in their own group of people. You will not bar marry somebody from another class, now you stay in your own class, but you also want the parents of of of your the girl that your your son is going to marry to, or the the guy your daughter is going to marry to to be of the same, also be able to help them to to get a house. And that's a society that becomes fairly dangerous, I think. And and and that's exactly what you see again in all four termings.

SPEAKER_01 36:26

Yeah, and the thing that runs through your book as well, and that you just mentioned was when you don't have this social mobility or this economic mobility, it stifles so much of the culture. You know, people's idea about what their country is, what their dreams and aspirations might be for them to create innovation decreases, right? Quitting decreases, people don't take their jobs as seriously, see it merely as a paycheck. But I just wonder what you think about this, Philippe. I haven't been a pay-to-paycheck-to-paycheck worker since I was in my early 20s. I'm 30 now, Sydney, and I'm not even halfway close to owning a place where I want to live in Sydney, which means I will be renting for the foreseeable future, potentially for another decade, which means I might have kids and I'm going to be renting, which means I've missed out on this huge opportunity cost of 10 to 15 years of asset value increase from owning a real estate property. Now I'm in the markets, but like I am lucky enough to have stumbled across serendipitously this education early on, and just this might be a good thing to do. But the returns I'm going to get from my stocks aren't even close to the returns that I would get on having a real asset like a property in Australia.

SPEAKER_00 37:33

No, and Australia is extremely expensive. And you can laugh what I'm going to say now because it's really stupid what I'm going to say. But I always thought Australia, you're about 30 million people, I think. It's huge. So I always thought two, twenty. Twenty million. So I always thought a massive amount of uh of land. How can you have a real estate bubble? But if you start to read about it, if more people coming in from the outside, then you build houses, and then logically prices go up. Because I always say that if you have so much land, you can build. But if you do not build fast enough, yeah, prices will go up. Canada's the same thing, also a lot of land, but you also have it around the city. So yeah, that that that's a problem. That's a real problem.

SPEAKER_01 38:16

I totally agree. And I don't want to get bogged down in the idea of my particular issue or the Australian stock market, or rather, or the Australian real estate market, because these are just narrow examples. They're not broad explanations of what the rest of the world is experiencing. Sydney has an immense demand to live on a very limited of supply. So it makes sense why the houses are very much increased. It's not all structural factors. And it also does surprise me why we don't have more burgeoning cities up and down our East Coast. We have all this land and a very few amount of people. So I think over time, you know, if you look back in 40 years in Australia, there may well be two or three beautiful cities an hour or two north and south of Sydney that have a lot of innovation, a lot of young people, a lot of education, a lot of schools, a lot of great businesses, a lot of services, you know, and all the great things that make a fantastic city. I mean, you guys, you're sitting in, you're sitting in, what was it, Laverne, but you're sitting in Belgium at least. You guys have had, and by you guys I mean Europeans, thousands of years of this sort of spread. And that's why you have fantastic cities almost everywhere. Australia is barely 250 years old. So we're sort of just in the early age. But I I can see that coming up and down our East Coast. But let's let's let's let's move forward a little bit. A trend which you wrote about in the book, which has 100% played out, is not the de-globalization, but rather the multi-globalization. So, how did you foresee this or write about it without knowing about the devastating effects that Trump's isolationist tariff policy was going to have on its relationship with its allies and the rest of the world?

SPEAKER_00 39:48

Yeah, that that's a very good point. And I think that the short answer, and I will go um a little bit more into detail because it's a fascinating question. Trump is not cause, Trump is a consequence. Trump is a consequence of this fourth turning thing. And in a fourth turning, like we said at the beginning, brings about leaders that will do this type of thing. Getting more in isolation is something that you would typically expect in a fourth turning. So therefore it's a consequence. Therefore, I was not surprised that he was re-elected, basically. You see that all over the world happening. If you go back far into history, and now I'm maybe sounding too pessimistic, so please correct me a little bit with some optimistic views because we do not want to really depress all your audience. But it's a little bit a comparison with the Pax Romana. When Rome was the sole power in the world, Roman Empire ran for five, six hundred years, but I I would date that somewhere the first century before Christ until the first century after Christ, about two hundred. So Roman was Rome was unchallenged, was the strong had the strongest army, and there was a Pax Romana because there was peace. If there is one country absolutely more powerful than all the rest, well you have peace because they dominate. The reason for this multi-globalization that we call it, and we do not call it deglobalization because it's globalization in another way, is the fact that we had a unipolar world around the United States. After the Second World War, they became the sole superpower, and they ruled the oceans. And if you rule the oceans, you have two big oceans, one the Pacific and then the other the Atlantic, protecting the country. In Canada there is not enough people to be a challenge, and the war against, and that's what Kaplan writes about, by the way, in the Saudi of Mexico, that was war they won many, many years ago. So they're unchallenged, they have their fleet, they can invade everybody, and they cannot be invaded. So that's a good place to be militarily. And then they started to be the police force in the entire world with the Cold War. Everybody who did not go to the other side to the communism, they were allies, and they could do trade wherever they liked. No, America is that's what you see in a fourth turning, just moving back to its own shores. They get isolated, do not care too much about the Middle East anymore because they have their shale oil. So there is no interest for them to be too much preoccupied with the rest of the world. And then you have a second world power coming in, and that's of course China. China is nowhere near the amount of spending that the US does on its military, but they're an economic power, and they have great ambitions. They're not for nothing, they called them the Middle Kingdom, the kingdom where everybody has to pay tribute to, where everybody had to come in in ancient times. So they want that position again. Qi is very ambitious in that way. We had Mao, of course, and we had Deng Xiaoping, we had the other ones, but he really articulated a number of industries, AI and others, where they really want to be the leaders, and yeah, they're there's still they have huge problems, by the way, economically, because they have a balance sheet recession. We can go into that if you want later, but they have huge problems, but still China is is is a challenger to the world power. Then you have Russia, which is a military power still, it's not an economic power because their size is the size of Italy, so they cannot keep this weapon build-up running because it will ruin them for the second time, but okay, they're still there. And then you have all these countries in between, like Europe, that has to speak with one voice to mean something in the world, the old continent, which is extremely difficult in the world of a foreturning, because there you have to work together in a foreturning, that's very difficult to do. And then you have countries like the Mexico, okay, we will see how it goes about the tariffs, but it's well positioned, and India that's well positioned, some countries in Africa probably. So you're going to build some poles, and that makes for a complex world because it's not unipolar anymore, it's multi-globalized, Vietnam and other countries, so they will be built around a pole. But that means as huge consequences for trade, because Europe, where do we have to go? Are we still an ally of the United States? Or do we have to look toward China? Both are maybe the Difficult. Australia, the same story. China is economically very important for Australia. On the other hand, on the military side, you're still clearly United States. So countries will have to start to choose. This will create, this is geopolitical volatility, this will create volatility in markets by definition. So this world becomes more and more complicated.

SPEAKER_01 44:21

And so in this multi-globalization worldview, it involves the onshoring of a lot of manufacturing, less reliance on old places where it may be manufactured, mostly China. What does that then do to the labor market in these various places?

SPEAKER_00 44:36

Well, that depends. There will be winners and there will be losers, but it will at a lot of places in the West, it will create more power for the workers, probably. If you have no longer or less this easy option of um of yeah putting your production abroad, well it it will increase the negotiating power of the workers.

SPEAKER_01 44:58

And that's for the atoms, that's for the things that we consume, physical hard things that the computers I'm looking at, the glasses that I'm drinking water out of the house that I'm in right now. Okay, but another part that you write about is the the the productivity and the fact that the majority of the businesses are services-based. And services-based businesses that are running off software can still, in a multi-globalized world, hire remotely. So how do those two trends match?

SPEAKER_00 45:25

Because that doesn't make sense. Once again, a very good, very good point. For example, Donald Trump is extremely angry also with Europe, because he runs a big deficit on goods. If you look at services, because then you talk about the Microsoft and the Googles and so on as well. He runs a surplus. It's never talked about, but indeed that's still going to happen. Now, also in a multi-globalized world, it can become more complicated because you can imagine if China does no longer have access to US technology, that they will start to develop their own standards. So you will go in many industries, technology, to different standards for different blocks, and then of course Europe will have to decide again which standard are you going to use. That's an important thing. Second important thing, and it's like an arms race, it's going to be security, cybersecurity, because if you do services, they they can hack you wherever you you are, but they will have uh impact on all of these things. If quantum computing, which is probably still five to ten years away, matures a little bit, well, it will make all the internet security things that we have today, but also for banking and so on, that's a huge problem, make it almost obsolete overnight. So that's going to happen as well. So we talk, and I believe you're physically there, and I think you believe I'm here, but we could be two avatars talking in a way, because I do not know you personally, so I'm not even now who I talk to. I I give you all the credit and I hope you believe me a little bit. But sometimes we can start to create people that not even exist, and then in services, I think India, India we talk about in our book as well, is well positioned, young population, uh a lot of innovation and so on. But but if you go to these um AI agents, call centers, for example, that kind of stuff is extremely important in Asia. If you can start to work with avatars, you do not need people anymore. So even there you will have disruption in these services. So I think that that creating an environment where where your counterparties believe that you're real, and you will have to prove that you're real, will be very important. So yeah, services can be very global, way more than products can, but but I think with with cybersecurity, cyber attacks, and everything that's going to happen there, I'm not a big specialist in technology, I read a lot about it, but I think some very interesting and then potentially scary things can happen there as well.

SPEAKER_01 47:55

Your opening chapter, innovation and productivity, talks a lot about the quantum computing, the AI, and you just echoed a few of the points that are made there. But surely this future of commoditized work down to one agent where before a hundred people might have been doing it, anyone who's just an email shifter or a button designer, like aren't we wiping out 50 to 60% of the educated labor market with these innovations? And what where does that leave us?

SPEAKER_00 48:23

Well, that's that's of all the interesting questions you already asked, maybe the most complicated one. If you go back to history, typically a lot of people were against innovation because it indeed destroyed jobs, but you created new jobs. The process of innovation, let's take something extreme like the Industrial Revolution, or something created for a time, a long time, very often bigger inequality. That's to your point that you raised uh before. Now we have something, AI. The question, and I do not have the answer, the question there is is this a tool that's going to help us and make us more productive in what we do? Or is that something that's going to replace us? And they always say you're not going to be replaced by AI, but you're going to be replaced by somebody who uses AI, with the caveat that not everybody will have the same amount of access or the same possibilities, so that will increase inequality, clearly. But that would be the good outcome. This is the first time that we invent something. Some people call it the last invention, because AI will start to do the inventions for us, maybe, and in things like biotech and so on, where you will have massive opportunities, but has the potential to replace. Suppose that you go to a world, let's let's do some science fiction, and and and not even a lot of science, but let's go into the future 100, 200 years. Suppose we have robots with AI that can do all the things that we do in the household, that can do most of the factory jobs, that can even do inventions, can even be your partner to talk to. I was talking to a comp uh a programmer, I did not know it. My son showed me Maya. You talk about to Maya, and you have a woman version, and you have a male version, female version, and then you talk to her, and then she talks about quantum entanglement and about Peter Pennett, just like you're having a conversation with with with a real person, add a very nice, beautiful woman computer, robot to that. Well, it would be you could see that as a partner even. So these things are going to change massively, and then I come back to something I'm trying to process, and I'm going to process this long after that we have talked, and I will come up with with some some insights and ideas on that. But but what you said about inequality in a certain way, what we tell clients, but then of course these are world clients, people who have money who they say in a world like that, suppose that you go to a world where robots do everything, and where people are in a way reduced to consumers of things. What is important as an investor, what I always say, I've even written a little paper about that one, own the robots. You want to own the robots, because if the robots do all the work, then you want to own them. But the point is, then you have to buy the stocks, but to buy the stocks you need the money. So, a long story short, I do not know where this is going, but I have an open mind that AI could be something else than the previous industrial revolutions that we have had.

SPEAKER_01 51:21

I I'm completely open to the extremely optimistic worldview where every menial task is taken away, every dirty job that people don't want is taken away, and we just live in this culture of excess where we can just pursue our interests and do what we want and people are happy and so forth. But I just I just don't I can't I can't actually feel it. I can see it, but I can't actually feel it. If we look at some of these other massive technological innovations where people were echoing that same sentiment, like, oh, you're just going to destroy all these jobs, and therefore they create this anti-productivity narrative, this degrowth narrative. When the car comes around, everyone who's involved in the horse trade all of a sudden says, Well, I don't have a job anymore. What am I supposed to do with all my horses and all my feed and the people that grew the feed and the people that picked up the shit and everything else? And that was a big part of the economy, but nonetheless a part of the economy that could be retraded and go elsewhere. And then you look at maybe like agriculture, where these incredible fertilizers come around and these incredible machinery comes around, and now a farm that had a hundred people before needed to take care of it, now it's only two or three. Again, it's still a big part of the economy, but it's not the entire economy. But what do we do when robots can do the majority of our work, GPTs a thousand X more efficient than any one individual? We're not talking about 10, 15, 20% of the economy. We're talking about 80 to 90% of the economy. And if the answer is, well, you better own those robots, it's like, yeah, believe me, I'm gonna be owning those robots, I'm gonna do my best to do it. But, you know, I'm just one person. I think it drives further this massive, inescapable, looming cloud of growing wealth inequality, where the rich will continue to amass wealth and amass assets, and the rest will just have to endure. And on the other side of that is all of the downstream political and cultural consequences that we have also echoed, which is a totally degrowth narrative. So we just blow ourselves all up and then have to start the experiment again. Like it's just it's just hard for me to really adopt the optimistic mindset when it comes to this.

SPEAKER_00 53:20

Well, I'm not necessarily optimistic, I have an open mind to it, but I totally agree with everything you say about it. And you can imagine a world indeed where a large part of the population is in a way reduced to consumers. And then then you can can have uh even maybe get your income from the state because you somehow you will have to have money to to consume a little bit, people who are locked to their screens. There is a book, I don't know where's written it, but I have it somewhere here, about the makers and the users. You will have people who still write the code, if we still write the code, because AI can also start to write the code potentially, but but suppose there's still people who are dreaming up things in a way, maybe in collaboration with AI, maybe not even more, but then a large part that maybe has nothing to do because the robots will do all the thing. So, what are you going to do with that population? So it's it's going to be massively disruptive. And this is, that's what I say to clients as well, this is probably the biggest revolution that we've ever seen. This is way larger than the previous industrial revolution for all the points that you have mentioned. Also, this is not only about the magnitude of everything, but also the speed of change, because this goes so fast. So this risks to be extremely, extremely disruptive from a technological point of view, but also from a societal point of view, because this is going to disrupt quite a bit. And you always run the risk, and that is what I hope that somehow, if you I don't know what you want to call it, the intellectual elite or the rich or whatever you want to call it, take in mind if you make 80% or 70% of the population extremely unhappy, in what way or form you run the risk that you get something that that's similar to the French Revolution. At the end of the day, I'm optimistic and I'm not optimistic. The part I'm optimistic about is whatever we can create. What's innovation? That's also what Stephen Johnson wrote about. I talked about the table, but it's also about somehow manipulating all the molecules and all the atoms, and everything is here except from some stardust that falls on Earth each and every year. All the atoms have been here for all the time. What's innovation? Well, you you rearrange them in a way that creates a world for us that we like, and hopefully not destroying the environment in the process. But that's another story. But so we will be able to create things, we will have all the goods, all the but you need consumers for that. So so the the physical world, the creation of that, I'm absolutely convinced that we will be able to do things that we cannot even dream of today. But then of course it becomes a redistribution problem. Who owns everything that's created, who benefits from that? And if you're not able to do that in a way that satisfies the majority of the population, you have a real issue. And and that's the the the societal big question that there is. And I think the risk there, and once again in the forecasting, the risk there is is is is is huge.

SPEAKER_01 56:23

Absolutely huge. Let's turn it on to Europe for a second. They're probably the second biggest story in this multi-globalization world after the USA. How optimistic are you that there's an appetite for a broader cohesive union within Europe? And then how possible will it be? And are France and Germany still mum and dad to the rest of the continent?

SPEAKER_00 56:42

Yeah, that that's a good question. That's very close to home. I think. Well, first of all, in the fourth turning, it's extremely difficult to work together. Europe is still a collection of countries, it's still not really a union. Okay, you work together on a lot of things, but you have, for example, no fiscal union, you have not the unified capital market, so there is a lot of work to do. Uh how Europe typically works is we go from crisis to crisis, and only when we're forced to do something we do it. What I say to clients, I've been saying to clients over the last couple of weeks and months, maybe Donald Trump in the White House is maybe, sorry for my language, the kick in the butt that we need to get uh things done. The fact that we we've understood that with everything that's happening in Ukraine and what have you, that you can no longer rely on the United States like we used to. We could cannot be a passenger in the sidecar of the United States necessarily, so we'll have to gather act together. Now, putting this as well in perspective, I'm not against the United States, I'm a big fan. I've always been a big fan of the United States. When I was twelve or thirteen years old, my parents took me to the beaches in Normandy, where you had the landing of the Second World War, where all these American and Canadian people and others British people died on our beaches to liberate Europe from Nazism. So I've done the same with my kids when they were that age. I'm absolutely I've always been a fan of the United States. Let me make that clear. But as Europe, we can probably no longer rely on the United States, not in this time and age, maybe the next president or whatever, but as things stand today, it becomes more complicated. So they started to have a massive um investment plan in defense in Germany. Germany, of course, lost the Second World War. They did not have a big army anymore. Well, now they're going to put 500 billion into that. It's two Marshall plans that they put in. Two Marshall plans, it's bigger than they put in during the reunification. So the amount of money that's going to be put into Europe is absolutely passive. That's also maybe why the European stock markets are up, while the US stock markets have been down this year uh quite uh heavily from the top. But money is one thing. Okay, money is always difficult to get by, but but money is the easy part. All these other things that I talked about, uh capital union, working together on the fiscal side and so on and so forth, getting innovation running. Europe has not built a company of 100 billion market cap the size of Palantir for the last 30 years. And I'm not even talking about an Apple that is a market cap of 3,000 billion and so on, so even not 100. All the companies in the Foodsea are 100 to 150 years old. So that innovation you need to to basically get going. Regulation is an absolute nightmare. We have so many rules that it absolutely kills innovation everywhere. So that are things that you have to do. But I'm hopeful, even in a fortunate when working together is is extremely difficult. That everything that happens with with Donald Trump and the war in Ukraine and so on forces us basically to together act together. And like I say, we go from crisis to crisis. This is typically a crisis, and the only moment, unfortunately, that things get done in Europe is when you have a crisis. So yeah, as a European, as a Belgian, I hope this will play out um favorably. But but yeah, you can never be sure.

SPEAKER_01 1:00:06

As a European, as a Belgian, is there any part of the hairs on the back of your neck that stand up at Germany becoming the military force in Europe?

SPEAKER_00 1:00:15

Well, I hope, and um that's also once again a foreturning story. My father was born a couple of years after the Second World War. Luckily, without some exceptions, I've never seen a real war in my life and I hope to never see it. So uh I have a good I in Europe I think the war is a war is never forgotten. Two wars are never forgotten. But I do not worry too much that that all of a sudden Germany is going to be a military force and start a war in Europe again. I I think maybe I'm naive, but in my mind that's that's that's very difficult to consider.

SPEAKER_01 1:00:46

I think it's um an unfairly provocative question, one which I didn't really mean either, to be honest. No offense, Germany. Apart from those leading indicators, two Marshall plans re-armoring Germany, the European stock market pumping. What are the other leading indicators that we can latch on to, which is evidence of the US moving away from an ally of Europe to rather just a customer, but someone you don't rely on for anything?

SPEAKER_00 1:01:12

Yeah. I think that's very anecdotal in the sense that you do not really have an indicator for that, but you you see it in Yeah, what what what's caught my my my attention the last couple of weeks in this is that imports in the United States have have risen massively and and that has subtracted quite a bit of their their uh GDP because imports are subtracted from the GDP, and that's that's in a way very logical. Uh, because when you're an importer of tequila from Mexico, or you buy French wines or champagnes or something, and you know that they're going to be a terror of a levy of 25 or 50% on that, and you stock your entire warehouses as as much as you can. So that has clearly uh disrupted things. That has helped our economy because we have been on the other side of selling these bottles to them. But once that stops, I think you will have clearly an impact. And what do you look at? It's better in China, for example. You see it clearly in China, less in Europe, but in China you see that their percentage of GDP, that's consumption, consumption in China, has risen materially and the exports has decreased materially. So China is finally transitioning a little bit. Everybody's saying, oh, you export all your goods to the rest of the world, to Europe, to to to to to the US and other places. Well, I I think that that that transition is happening. So it's not only Donald Trump having this impact on Europe, but he is having on the rest of the world. And if you're if you think about it, if your percentage of own investments and consumption rises and exports decreases, it is I think an indication that this world is getting more less globalized or multi-globalized, and that everybody starts to move back to its own turf. Globalization goes in waves, eh? Also, the Second World War, obviously, you saw international trade declining massively, which is logical because you're busy fighting each other well, you're not trading a lot, probably. And this creates also massive opportunities, I think, because we've not talked a lot about commodities so far, but also one important thing in Europe is having access to critical minerals. We do not have a lot of critical minerals ourselves, we have to import quite a bit of it. Access to that is very important. United States, the rare herbs with China. China has almost a monopoly in in mining but also in refining a lot of these rare minerals. Well, the US will also try to have is act together the Critical Mineral Act. So I think that that access to minerals is extremely important for a lot of countries.

SPEAKER_01 1:03:52

Is there any appetite in your own heart or potentially in the Europeans you speak to to refold the United Kingdom back into the Union?

SPEAKER_00 1:03:59

Well, I think um that's a question, and it's still early days because the the fact that that they left the Union is is not too far in history yet. But I see the potential for them, I think, to come back. If you would do a referendum today in the United Kingdom, they would be in favor of being in Europe again. Of course, you cannot do that each and every month, but but that that's a potential, and I think also on the military side, because let's be honest, the strongest army in the Euro area, I will call it, is still at the army of the United Kingdom. I think there is still a possibility of that happening. I do not see that maybe in the next five to ten years, but but somewhere in our lifetime, I think it's it's very well possible that that it will be uh one one uh one block again, yes.

SPEAKER_01 1:04:47

Let's just spare a moment for commiserations to this wonderful decaying group of nations, which is the United Kingdom. Imagine the position that they feel like they're in now in a multi-globalized world where they don't have any specific outline to point towards just how desperate the future might look.

SPEAKER_00 1:05:05

Yeah, indeed. And what what I think, and once again I'm a big fan of the United Kingdom. I'm go to London on a very regular basis.

SPEAKER_01 1:05:12

I find Me too. I think it's wonderful.

SPEAKER_00 1:05:15

Fantastic uh fantastic city with a with a rich history, with the literature, with everything that they have. I think that they thought, and of course, but with but but with the the politics from the other side of the Atlantic changed dramatically, but thought that they would some way somehow be a preferred partner of the United States, and a lot of their trade would move to Europe and so on. So I think they have underestimated a little bit the impact of the economic consequence because I that they somehow would be an island, and if you think about it, why Europe has never been one country? Well, you had always the United Kingdom and you're always at the North Sea between them. So it it was the Romans did it for a while, they occupied the United Kingdom or England bank. Then but but that's maybe one of the reasons why it never became one country before like like you saw in the United States or something like that. But I think they misjudged and and they could not foresee, of course, a Donald Trump story. They misjudged their position in between the United States and Europe and and they would be a naval society like they've been for ages and they could do the the trade and so on. So I think in a way they misjudge misjud misjudge.

SPEAKER_01 1:06:26

I think with the UK it's just the narcissism of small differences. You know, they will claim more difference between an Englishman and a Scot than because we haven't spoken about climate transition or demographics. So I think we can do the climate really quickly because you know we have this climate cycle, and then we started digging up tons and tons and tons and tons of really carbon-dense materials, release it into atmosphere, and now the world is progressively getting warmer. But we don't have a second planet to sort of A-B test this on. So I just wonder how you think about how climate change has sort of fallen out of the discussion altogether. It is probably still our greatest existential threat, yet it almost feels like it's the trade-off isn't worth it anymore. We're just gonna continue as we are, and fuck it, if the planet dies, the planet dies.

SPEAKER_00 1:07:13

Yeah, that's that's that's a good point. In our book, we have two introductory chapters, which is a little bit under the hood, how we look at the world, and then we have the five chapters that we've been talking about, and there you could get the impression that they're all five in isolation, but of course they're very much connected. There is a climate change part where we indeed make the point, and then a lot of things that could be done need to be done, what happens if we don't, and so on and so forth. But there are also the other chapters about debt and and and and all these things, and of course, as a bank, as BNP Paribarfortes, we are extremely far ahead in in everything that we do, also in investments being climate neutral and CO2 neutral, and then so we look at this, we have products we we use and so on and so forth, but I've always said that we have to do it in a way that we do not disrupt society in another way, because if we take these measures as Europe and all the people get poorer, well, the appetite is in a way reduced, and that's once again in a globalized world, and we can close all the coal burn factories or plants or whatever we want, but if they keep opening them in China and India and other places, well, it's one planet, so it's not going to help a lot, and we can set the example, but if we destroy our industry in the process, well we we have an issue. And then, and there's the positive part on this we talk about the young wizards, we talk about the innovation, but eventually innovation needs to help us to overcome this. And I have an example in the book, and and then we draw on the work of Adam Rosenschweig, who is in my mind one of the best analysts there is on everything that's commodities. He has a concept, we all know return on investments, how much money you make if you make seven dollars or whatever on one hundred you have a return on investment of seven percent. He does the same in Eeroy, an energy return on investment. That means you have a tribe, you take you make spears, you're going to hunt the mammoth, you kill the mammouth, you cut them into pieces, you bring them to your village, you cook him, you eat him, you digest him, how much energy did that cost, and then how much energy you get out of this. That's an Eeroy. And the world has lived on an Eeroy of about five, so five hundred percent, you get five times more out of it than you have to put into it until the Industrial Revolution. And that looks like a lot. If I say to you, I have an investment for you and you make your money five times, you will be fairly happy. But an Eeroy of five is a world that you lived in until the Industrial Revolution. It means that your population does not grow very fast, you have a lot of famine, you do some inventions, you have some literature, you have some philosophers, you build some pyramids from time to time, but if you want to be a pharaoh or a king or an emperor, and you want to live on five million Eeroi, well it means that you have an army of slaves. So that's the world you lived in. You have one big city of one million people, one at a time, Rome, Athens, Athens did not come to that level, but but one big city, one in China or what have you, but that means that you pillage the rest of the world, and the rest of the world is not going to be happy forever with that one. Then you go, long story short, to the Industrial Revolution, you get to coal, that's an EROI of fifteen, then you get to oil, that's an EROI of twenty-five, and then you go to nuclear, that's an EROI of fifty. I've never mentioned a figure in the book because I did not want to start a discussion on this, because these figures I've mentioned so far are documented. There's big discussion on what the EROI of solar and wind energy, for example, is. But suppose it's lower than the twenty-five, well, that would be the first energy transition that you do in history to a lower EROI. And it means that you reduce basically the income of the people, because everything is energy, and that is in a fortunate extremely complicated. So the challenge, and I think we will get there, is that you will you invent the smart grid, you you have batteries of the future, you find ways to to make these technologies more performing and get as soon as possible the E-Roy up. And then you can do the energy transition without making your population poor and creating a new French revolution. So that's that's where we have to go. And there innovation is key, and therefore the chapter on innovation is is besides all the very justified arguments you made on AI and the inequality that's potentially going to create and all the difficulties, that's that's the the joker, that's the that's basically the wild card, because that's the one who has the potential to solve the other ones, and potential is important because if you misuse it, it will even get worse. But I think the key point is have to do this energy transition, but we have to do it in a way that we do not mess up all the rest.

SPEAKER_01 1:12:02

So so it sounds like business as usual until we discover an incredible innovation that brings our ERO back to 500%, something like that. Yeah, absolutely. Okay. Um what's the big trade here, Philippe? Give me your big, long, short, 15-year trade.

SPEAKER_00 1:12:19

Well, some people did not like this one because we talk about climate change, and then I say that the big trade is is commodities, which is not necessarily helping the environment a lot. But I'm absolutely convinced if you move from a world that's based on coal and gas and and oil to a world that's based on electricity, you will need a lot of these battery metals. You will need copper, you will need lithium, uh, you'll need cobalt, whatever. And and yeah, I think this is therefore I believe that the biggest bull market we have ever seen is going to materialize because demand is going up uh for these materials. But above all, it's a supply side thing. We have not opened enough mines because also because of the climate change and all the the difficulties you have in regulation and so on to do it. It takes about 10 to 15 years to open a new mine in the United States, for example. And yeah, if you do not do that, have a massive shortage in a lot of these commodities. If you look at calculations and they're well documented, it's not only our bank, but it's basically everywhere. That we need about 200 new copper mines, for example, the next couple of years. I would just not go to have them, so I would not be surprised. And the copper price is already going up for other reasons, but I would not be surprised if you see the copper price double or triple over the next five years or so. Well, yeah, and on the equities themselves, but the problem, and sorry for getting technical, but if you just buy um copper futures or what have you, uh futures a certain moment in time, we can go into more detail, but it's not a financial uh show today. But if if you have the thing is in contengo, so it means that the future price is higher than the the spot price today. Each and every time you have to roll this this future, it costs you. So if you have a contengo of 20%, for example, it means that the copper price has to go up twenty percent for you to be be break-even. Investing directly in the commodities is is not a good option very often. Lynsilver are an exception because they're the contengo is not as big. So it's a better idea to buy the companies that produce basically uh the materials. But the point is they're extremely volatile. If you own one company that owns one mine and it's flooded or they have a strike or or what have you, you it you're very vulnerable, so you indeed invest through a fund or an ETF where you you spread the risk over many companies. But I still think that's a very good investment going forward.

SPEAKER_01 1:14:40

And finally, potentially the most interesting of them all, demographics for late.

SPEAKER_00 1:14:44

Yeah, it's huge. Um it's very often an overlooked part of the equation, and and it's maybe the most important part. It's also something that's maybe in the entire field of economics the most predictable, because if you know how much people are born today, you know how much work is going to have in 20 or 25 years' time. We also move from a world where the you saw still a lot of population growth, that's going to top out, the population is going to age, and also on a relative basis is going to be a massive change. For example, the population, I've a chart somewhere in the book where we talk about the population in 2050 and then in 2100. For example, in 2100, the population of China is going to be cut in half, more or less all things being equal. The United States is going to stay more or less stable, depending on how much immigration you're going to have. Europe is going to be cut massively, and the only continent in the world where you see a massive increase will be Africa. Africa has one mil uh one billion people today, will have two billion people in 2050, and we'll have four billion people in 2100. So that's the only continent where the population will be growing, the rest of the world will it will decrease and will age with all the challenges involved. Russia, for example, uh the population is going to decrease as well, a lot of places in Europe. So it is going to be a totally different ball game with with the absolute uncertain element in the equation. Yeah, how much of the robots are going to take over part of the jobs or not? But but that's a totally different environment. In our mind, this is also hugely deflationary. Inflationary if your population ages, uh, inflation goes up because you have more people consuming and less people producing. If you do not fill that gap with robots, it's also um inflationary. So that's also one of the forces we believe that we will live in a world where inflation is structurally higher.

SPEAKER_01 1:16:48

Because the government needs to just produce more money to pay out all of their various pensions when there's less taxes. It's also a big problem.

SPEAKER_00 1:16:57

One one of the reasons why deficits grow through the roof. And for governments, the only way to solve this, because if you have the massive debt pile that we have in a lot of countries in the world, and the biggest pile is of course the United States. It's it's mind-boggling. It's thirty-six thousand billions of dollars of debt. They pay one thousand four hundred billion in in in uh interest rates to service debt each and every year, which is bigger than the defense budget, uh, and it's not a small army in the United States, so it gives you an idea. On top of that, they have a deficit of six to seven percent, which is not going down. So if you have that debt pile, you can do three things basically. You can try to grow and save your way out of this, grow faster and reduce all your expenses, but that's not going to happen in a forthright and because the prep or government who tries to do that will be voted out immediately. Second option is default, so let's hope you're not going there because that's fairly disruptive for the financial system. And the third one is let inflation run. Let inflation run at three or four percent instead of two. Sell that to your population as two because it's very easier. You say, Oh look, we we're going to we target two on average. If you make abstraction of the COVID, it has been below two for a very long time. So now we can be above two for a very long time in Australia, so is a bit more. But it's the same reasoning, let inflation run, but then of course, like you uh said correctly uh half an hour or so ago, that indeed makes it difficult for people to buy real estate, to to service their uh everything that they need to to buy to to to make a living and so on, so that that will increase inequality. Inflation is way harder for um the poorer part of the population than for the richer part. That that's absolutely clear.

SPEAKER_01 1:18:41

I also see if we just assume the demographic trends play out as they look like they will, is that it's pretty clear all over the world so many so many elections are determined by one candidate's immigration policy or the other. But no country is just going to go into the long good night and accept a dying population and a decrease in people year after year after year, and all of the horrific economic consequences downstream of that. And on the flip side, people are always going to want to go to where the opportunity is. So if Asia and the Middle East and Africa and Latin America are still producing way more babies than people that are dying, wouldn't we therefore also see much more immigration, significantly higher amounts of immigration than we've even seen over the last 30, 40 years, particularly in Europe or Australia or North America?

SPEAKER_00 1:19:28

And and managing this will be a huge challenge for each and every government in Europe as well. We have a continent Africa that's growing extremely rapidly, like I said, will be four billion people in 2100. A lot of parties, governments are elected on the immigration policy that they try to create, uh what they call um a fortress Europe where you try to keep everybody out. Yeah, it's it's complicated. It's extremely complicated. The fact that your own population is aging, costing more money and decreasing, and on the other hand, there is a no appetite whatsoever, or not a lot for immigration from somewhere else. Japan is also a case in point. There's almost no immigration there, so the Japanese population is slowly but certainly dying out. That's a huge uh huge question. I I do not know what the solution is.

SPEAKER_01 1:20:18

Yeah. Well, look, Philippe, honestly, I think we're gonna move on from some of the questions directly about the book, but I hope you have felt at least I really loved it and am just endlessly fascinated by all of the questions that you're posing throughout this entire book because it does paint truly a very broad, multidisciplinary worldview for which we might be moving into. Well, you cite Taleb as an author, without whose work, the book wouldn't have been possible. Um and so given his influence on you and also knowing how he feels about anything that even smells of prediction, how does the inserto echo through what you've written?

SPEAKER_00 1:20:56

Well, first of all, uh I have to start. We we talk about 2050, so you look twenty-five years in the future, and you know that everything you try to predict is going to be horribly wrong. So it's also what what um I said at the beginning somewhere that come to Talep in a Mr. Taleb in a moment, uh but but one of the other big influences is is Michael Covell, and with the trend following, you try to see a trend, you go with the trend, but you do not know how long it's going to last, you jump off when you can, and then the other one is Erin Morningstern, the Starless Sea and the Night Circus, which is more about the fiction side. So I always said the book has to be half Michael Covell, half Erin Morningstern, and then then it's going to be good. So that was the idea. Now, with with with predicting, it's always difficult, especially when it's about the future. So we talked about Ricardo and Maltes and them quarreling all the time. The book, you also see that we have a point of view that that obviously goes in the same direction about inflation, about the interest rates, and so on. But as you have read, we do not agree on everything. It's a discussion between Kuhn and me about this complex world, and it is also an invitation, in a way, for everybody to participate, what we're doing today. And that's one of the fantastic things about the book is that it is open doors. Um, this is the first podcast I've I've done in Australia. You talk to people, you reach out, you you put questions on the table and you discuss. And nobody knows the future, but we try to yeah, we try to, as we go, try to understand it a little bit better. And yeah, the world, the work of um of the works, of everything that that Mr. Taleb has done has indeed had a profound impact on me. It's very often about risk management, his book about anti-fragility, how you position in this crazy world, and is written long before Trump and so on, so it has been around for a while. The Black Swan is an absolute um absolute uh cla and not only for the Black Swan concept that's in the book. But I I love the work and thing he wrote about Mediocristan and Extremistan. Beautiful piazza with with some some coffee shops 100 years ago. Yeah, there's a small town, and you have an opera singer, you have a litter opera, and then and the opera singer is really horrible. But everybody goes to listen to him because there is no alternative. And then you start to have radio and so on, and you have the Beatles and all these things, and people start to listen to that, and and all of a sudden Ricardo is out of the job because they do not listen to him anymore. And the sleepy village is mediocristan, and then the world where everything changes through technology, and all of a sudden you get a rolling rolling who writes Harry Potter and he sells millions and millions of books, and for each rolling you have ninety-nine or one thousand or five thousand writers who only sell five books, and you have armies of people who have to package the books at a very low wage at Amazon. So that's that that's extremistan. And that idea really resonated with me, and that I also tried to bring once again um in the book, but also nice things like we talk about the black swan, but if somebody wins the lottery, you're happy for him. If your neighbor wins the lottery, you're not so happy. Or your brother-in-law makes more money than you and spoils Christmas. So these things are so good, I think, in the book of Talap. We all know the black swan, but there is so much more beef into that book than uh that I couldn't agree more.

SPEAKER_01 1:24:30

Mediocre Stan and Extremistan must be on his Mount Rushmore of the best uh contributions, the best ideas that he's had. The land of the predictable versus the land of the unpredictable. And it's funny because we're both operating within a domain of extremistan, new book publishing, the podcast publishing. Essentially, in both of these domains, 99% of all consumption is probably going to accrue to 1% of the output. 99% of all podcasts listened to today will be attributable to 1% of the podcasts. Same story with the books. And how do we therefore make sense of what we're doing in face of these insurmountable odds? It's just remarkable how pithy he is at communicating those sort of ideas.

SPEAKER_00 1:25:15

That's that's fantastic. It's not necessarily fantastic, but the world, that's one of his main views, I think. It's not only about it's not uh bell curve, but a lot around the averages. The the interesting things in our lives happen in the tails. It's uh with a statistical very difficult word, and I hope I do not lose half of the audience here, but it's laptocartosis, tail fatness. So the the tails in our world are way bigger than basically in a Gauss curve or or in a in a bell curve. So that's that's but that's also where the interesting things happen, of course, in the tails. And and what you mention or what you talk about is Pareto, and that when you indeed have websites that the 20% of the websites get 80% of the traffic or so on, or that 20% of the stocks produce 80% of the returns, that you see that over and over and over again. And probably that Pareto law is still very nice because it's probably way worse than he he wrote a couple of very nice books, Candide and other ones, that became bestsellers. But probably at that time there were other writers that were maybe just as good as Voltaire, but we never heard of them. So if you get into the in the flow and you get mentioned and you get attention, there's the halo effect once again. Success gets more success, and something that's absolutely unknown remains unknown. That that's that point. And then okay, why you do this? Well, you know, if you publish a book, you're not going to get rich if you're not rolling about writing a book. I think we're at thousand copies that that were sold now. Okay, that that's nice, but you're not going to get rich of that. But it's about distributing ideas. And each and every time that you make a work of art or you write a book or you do a podcast, of course you have a lottery ticket that it's always possible that your podcast or my book or one random work of art will make it, and because you have that possibility, you still try. You still try to get your message out. But but it's it's a crowded world out there, and it's a Pareto world, or it's a world that's even worse than Pareto, so yeah, chances that that you strike it big are possible, but not very likely.

SPEAKER_01 1:27:21

We don't know about the graveyard of losers who went across the way. Their greatest fictional stories ever written undoubtedly are just moulding on some back room in a bookshop somewhere in the world, but it didn't get onto that treadmill of notoriety and the Halo effect never was put on top of it.

SPEAKER_00 1:27:40

Dune saw I guess that I give away too much for my book, new book, but I have an idea with that, and I'm going to call it the library of unpublished books. So all the books that could have been published, all the ideas that are somewhere out there but were never written down. So that's something I'm um thinking about.

SPEAKER_01 1:27:58

Philippe, it it really sounds like you You're entering the next season of your life. Do you really want to be an author deep down?

SPEAKER_00 1:28:04

Oh, no, you're getting personal. Um I think that I've done quite a bit of things in my career. Um, it's always been finance, always been banking. But I if you see it behind me, uh just as you, I uh I've absolutely loved and adored books. One of the most gratifying things I've ever done uh has been in writing uh reading uh writing this book, basically. It it has opened so much doors. I got so much nice feedback uh also from the young wizards that that you talk about, and people that come up to you and they say, Okay, you you've really because that's that's not so what a financial book is supposed to do. It's to talk about market and so on. It's not about touching people, it's not about it it is in this this way it's a little bit atypical, I think. But if if a young guy or girl comes to you and says, I've read your book, and and and yeah, and it opened my eyes and it made me think that that that that it's the most fantastic, maybe not the most fantastic feeling, but one of the most fantastic feelings in the world. So uh yeah, maybe maybe uh I am supposed to be an author and another banker, but I love banking as well, because if you would come to a presentation that I do for clients, both on the investment side and then the as as on the corporate side, and I do quite a bit of them two under the year more or less, it would be not so unlike what we're doing today, because a lot of these stories, a Talep, Extremistan, Mediocan, they come up in in what we tell because at the end of the day it's also about storytelling. You you you convey your vision of the world, but you try to do it in a story thing. We started the book somewhere with around the campfire when we hunted the mammoth, and we look into the future when we can do everything virtually, but we drive that is the last epilogue. We drive with a car with one of the presentations, a flying car, a self-driving car, but at a certain moment in time people still have the need to see each other physically, sit around the campfire, tell stories, and if you do banking the right way, it should also be done like that. It's not only about GDP and about the the next quarter of a company, it's about understanding the world, understanding who we are, where we come from, where we go to, and and that are deep human needs, and and that's never going to change. I do not think it's going to change with AI either.

SPEAKER_01 1:30:20

I just wonder if you're maybe getting yourself in trouble with your bosses. I mean, you're in the C-suite at France's largest bank, chief strategy officer at BMP. How would they feel if they heard Philippe? He just wants to go off writing books, he's gonna start slacking with his job.

SPEAKER_00 1:30:36

Well, I'm not sure that I'm going to leave. I think it's it's quite compatible. I must also say that the bank in Belgium, because I'm based in Brussels, um, they they supported the book from day one. They did not interfere. So I of course I've not written something that that would hurt the bank, and I'm never going to do that. I had Kuhn and I we had our hands free to to write as we thought that we should write it. Um we presented the book to the press in Belgium, though we did the introduction, but they also bought quite a bit of books to distribute to our clients. So the support was there from day one. Because at the end of the day, that's what we try to do for our clients. And the day that a banker came into a company or or with an investor and they said something like, I will tell you the world works and you should buy this and this and this, that's no longer the way banking works. It's like like the idea of the book. You look at the world, we think that it will be more inflationary, we think interest rates are going to go higher. Do you agree with that? Don't you? What are your arguments? And if you agree, or when we come to a to a common view, how are we going to position? And and that's also very gratitude because in the first chapter I write somewhere, we have three windows on the world, and we have um the library that's behind me, and there's all the books and all the research and everything that we have. And I imagine the library of Erin Morningstern, the library under the ground in the Starless Sea. That that's the the way I look at the library. Then you have the coast that are the waves, that are the trends, that are our screens, or Bloomberg screens, uh, to see whether things are going up or go down, and what the waves are and what the trends are. And the third one, that's the nicest, that's what I call the Congress Center, when I have a presentation and we have a drink or a glass of wine or a coffee with the clients afterwards, and they are from the investment side, they're from companies, and there you have the possibility to a way to to somehow look at what you say, whether it's it's compatible with the real world. If I start saying I'm saying the Belgian economy is going fantastically well, but I talk to people from the port of Antwerp, or I talk to some of the big transporters in the East, and they say we're not transporting anything and our order books are totally empty. Well, maybe my view on the economy is wrong. So I'm absolutely extremely lucky to to have that kind of interaction, and then the most interesting part is not the presentation itself, but it's the conversations you have afterward.

SPEAKER_01 1:33:03

The first being, what is the role that serendipity has played in your life?

SPEAKER_00 1:33:06

It's huge. I did not realize it, let's say 30 years ago. As you grow older, you start, like I say, to see these connections between things and one thing leads to another. Um I have been extremely lucky that I've been able to I've always been in financial markets since I was twelve years old. So I've been able to turn my hobby into a profession, that's one thing. And I've had enough time to to read, read, read, and being able to be in contact with very interesting people. So that leads you to very nice adventures. For example, one uh client who is now a good friend of mine. He ran a technology business in Belgium and also in Silicon Valley, and uh he's a big fan of science fiction, and he's written also a book on science fiction, short stories in science fiction. And uh, I've done the foreword for his book, and I also talked about on this convention, 9000Con, where science fiction writers and people in that field are together. Well, that's a field that's totally or was totally strange to me. But you get there, you meet people, and all of a sudden you're in the fantasy and especially in the science fiction world. That's serendipity, and that are things that are going to find their way back to my next books. A guy, um Rick Fera, who has written um The Curiosity Score, who is a teacher at uh at the business school in London and does a lot of keynotes, he argues that that curiosity is one of the most important things for a company to have to to evolve. That's in a way serendipity. I met him by accident on a train coming from London. We were sitting opposite to each other at a table and we started talking. So that's that serendipity, and all of a sudden you get in connection with nice books, new ideas, and yeah, you use them. One extra piece of material that's on your table of innovation that you once again can use to in your work. So, yeah, serendipity in short has has been hugely uh important and then extremely interesting.

SPEAKER_01 1:35:00

And finally, a question I think you're particularly suited to answer what is one country you're particularly you're particularly bullish on?

SPEAKER_00 1:35:07

Well, I could be very um opportunistic and say Belgium, because that's where I live, and then I hope that the young wizards indeed will be able to to overcome this thing. I think that that in a way, and I I really believe that, without pointing to one particular investment, I think we will go through a time of massive volatility. Um there are enormous challenges, but I think that the opportunities to make it, whatever that means, um are even bigger. Um I think India is very well positioned, and I think, as I believe that commodities will be extremely important, critical minerals over the next couple of years, you will like it. I like Canada and I like Australia as well.

SPEAKER_01 1:35:48

Well, that is Belgium's first addition to the list, so great to slowly fill out the map there. Haven't been many European answers, though, to be honest. But look, Philippe, you heard me echo this earlier, but I'll just say it again. Absolutely love talking to you from the first time we spoke on the phone, and then discovering your book and just how broad and comprehensive your worldview is in thinking about how everything's happening. It is really the dream type of guest that, at least at this moment in my life, that I want to be speaking with about and on this podcast with. So thank you very much for all those things.

SPEAKER_00 1:36:22

Thank you, sir. It has been uh a privilege. I've been looking forward to this for for a very long time talking to you, and uh yeah, it uh fulfilled all the promises or all the hopes that I had. So um this is one of the you've asked questions, by the way. I've been done quite a bit of podcasts, nobody asked before, so that's uh that makes it interesting. And maybe in a day or two I will think I should have answered that question in another way or something like that. But that's that's the fun about podcasts, it's never prepared. So it's uh you speak from your heart, and uh that's what I always uh try to do.

SPEAKER_01 1:36:52

And here is that word about reflexivity, the exercise part of the podcast. This will run for about 10 to 15 minutes and then the podcast will end. Something I wanted to start with was this theme of reflexivity, because it applies throughout the various chapters, and I've heard it so many times, but I I still feel like I don't know what it means.

SPEAKER_00 1:37:10

Well, it is an idea, and it's from a guy that's not necessarily extremely popular in a lot of uh places around the world, but it's George Soros. He was one of the big traders uh before he went into politics and all kind of stuff back in the 80s. Uh his book, The Alchemy of Finance, had a big impression on me when he when he brought that out. It was eighty seven, eighty-nine, somewhere around that time, maybe eighty-five. But that was basically the idea of reflexivity, what what was put on the table. And what's the idea? Well, if you look at financial markets, stock markets for example, they should be a reflection of economic financial reality. So it means when the economy does well, when a company does well, basically the stock market should go up. So that's the normal way we think about stock markets or currency markets or bond markets or whatever you want to talk about. Basically, the market has to be a reflection of the economic slash financial reality. But what's reflexivity? Well, that's the other way around. That's the moment when the stock market starts to impact economic reality. And that's also what we can call the halo effect. Let's take a company, let's take an Nvidia, let's take a Palantir, let's take whatever you want. Well, when the stock price starts to go up, well, they start to have more money. They can give nice option plans to people, they can hire the best workers, everybody wants to work there. So basically, if the stock price goes up, well, they get all kinds of advantages in the real world they can use as well. Extreme case, I I think I've mentioned in the book, I'm not sure anymore whether it stayed in or not, but at a certain moment in time, during the internet bubble, you had AOL, and AOL was one of these communication companies that get caught a massive valuation by the stock market, and they were able to buy Time Warner, a real-time, real-life bricks and mortar company that had real value. But they used their stock price, which was with hindsight extremely inflated, but they could use that basically to buy something in the real world. And then at the end of the day, you had the AOL Time Warner. AOL proved to be worth nothing, but they owned Time Warner. So the most logical way to look at it is economic reality, financial reality influences the prices. But sometimes when the prices go crazy, that also starts to influence basically the reality of the economy and the markets. And a company can we call that a halo effect. You have this the CEOs or something that that get like the guy, Mr. Wang, that's now the the CEO, and then it's like a rock star of Nvidia. He gets such an aura and everybody wants to work there and so on, so he can do whatever he wants. And then after a while, because this also goes in cycles, somehow they lose their their their their the halo effect and and then and the the shining crown they have around their head, and then it goes the other way around. But it works in more than one dimension, I would say. I hope this is a little bit clear, but it's complicated maybe.

SPEAKER_01 1:40:18

Honestly, I I still feel like that's it's not so clear. I'm gonna read out a quote from your book which explains it, and then I'm gonna ask you to apply it to the real world with an example that I'll give. Our perception through our actions influences the price, and the price influences our perception. That's the reflexivity there. And meanwhile, halos are swung from one company to another, and the herd runs with every toss. That herd there is also, I suppose, this reflexivity, which isn't based in the core valuation of whatever it is that the market's determining. It's rather this these intangibles, the herd is running with every toss. A direct consequence of this is that markets are much more about performance in relative rather than absolute terms. Investors' behaviors influence prices in markets, but prices also influence investors' behaviors. So that's the reflexivity, it's uh infinite interaction. And I think maybe, correct me if I'm wrong, but I think that a perfect application of this might be Tesla's overinflated price stock because of its association with Elon Musk. Would you agree that that's a good indication of it? And if so, can you explain it through that?

SPEAKER_00 1:41:24

Yeah, absolutely. Um sorry that I've I start to think that I've made this way too complicated in the book because when you were reading this out loud, I was thinking I have written that, but apparently I have so have to run with that. But indeed, um Elon Musk is probably a good example if you look at the at the stock price of Tesla, and of course it has come down. So we can argue that maybe Elon Musk is starting to lose a little bit of his shining crown at the moment. But even at these levels, the valuation of Tesla is bigger than all the other auto companies together. And then, of course, you have a huge advantage because you can use your stock price. He's not going to do that, but he could buy General Motors if you wanted to. If you have an inflated stock price, you can use your stock price to buy other stuff. But also when you're a very sexy company with a very sexy CEO, well, you can attract a lot of good talent, a lot of good people. But then, of course, things go too far, and then the hurt, as you mentioned, plays a very good important role in that because it's eventually the hurt that drives the price higher. And they always say in stock markets it's about fear and greed. And that creates a little bit the fearful prices go down, they go too low. But then even companies that are fairly good or have good prospects can go out of business. And then on the other hand, you have when when there is greed, yeah, they start buying everything and then they get a massive market capitalization, then they can do whatever they want. And in my next book, I'm going to argue it's not really great or fear, but it's fear and envy. Because your barber or your cousin or your brother-in-law or your neighbor, they're all making money in the stock market and you're not. They're all in Tesla. They're all in Bitcoin. My wife always asks, and I always a little bit, I'm going to piss some people off now, but I'm always happy that it goes down a little bit because my wife always says, You're with your nose on the markets each and every day. How it's possible that we do not own Bitcoin. And then at a certain moment in time you capitulate and you you you you're forced to buy Tesla or or Palantir when it went from twenty to one hundred, and you cannot stand the pain anymore that that people are making money and you're not, and you get in. But that that's the market reality. But that creates a reality for these companies because all of a sudden they get a market capitalization that's huge. They can attract people, they can invest, they can raise money, they can buy competitors. So, yeah, the market can do strange things, and it really affects economic reality as well. And if I were to say which which way is the most important one, the stock prices have to be a reflection of economic reality. But I think the inverse, where the stock market influences economic realities is even more important in our world than it is. I hope it is a little bit clear.

SPEAKER_01 1:44:14

Let's move on, Philippe.