• 00:00:31 How Mike researched and developed his theory of a market bubble in passive investing/ index investing? Are markets about information or transactions?
• 00:08:01 Is the bubble of investing just a (bigger) change of the NIFTY fifty or the NASDAQ bubble in the 2000's?
• 00:13:53 Does Mike's theory of passive investing predict higher volatility due to the changes in market structure?
• 00:19:22 Is our low productivity growth linked to inefficient capital allocation due to passive investing skewing investments? Is the Fed to blame for the asset bubbles?
• 00:26:57 Is the Fed's own forecast model broken now that markets follow a flow model much more than a valuation model?
• 00:31:01 Is our retirement model the problem or the solution? Is a future crash inevitable? Is the small enterprise dead forever?
• 00:39:13 How should contrarian investors position themselves? How committed can one be to an 'impending bubble'?
• 00:47:45 What is America's contribution to the world? Does China now have the better approach to capitalism? Can we ever come up with companies that do things cheap and better (instead of just better)?
• 00:55:05 Are societal changes solely to blame for changes in productivity growth?
• 01:01:01 Can longevity research (and the ability to live forever) change how the world will grow?
• 01:09:01 Should we always be 'smart investors' or is 'going with the crowd' often better? What are the dilemmas of the contrarian or cataclysmic investor? How do high profile investors deal with this?
• 01:21:10 What other bubbles does Mike see in today's market and how can retail investors trade against such a bubble formation (if they choose to do so)?
• 01:26:48 Will China start a hot war in Asia in the next 15 years? Will trade (and China's trading partners) matter? How is the chess board stacked towards such a war. What are China's incentives?

Mike Green has been a student of markets and market structure for nearly 30 years. Mike works with Simplify to create ETF products that give retail investors an edge. Before that Mike has worked with Logica Capital Advisers and Thiel Macro.

You may watch this episode on Youtube - #100 Mike Green (The gravitational force of passive investing on capital allocation and geopolitics).

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Torsten Jacobi: Mike, welcome to the Judgment Call podcast. Thanks for coming. We appreciate that.

Mike Green: Thank you, Torsten. It's a pleasure to be here.

Torsten Jacobi: Hey, so your claim to fame is really the passive investment bubble, and you also recently joined Simplify, one of the most interesting ETF creators out there. My first question is for listeners out there who haven't heard of this particular bubble that you've been describing for a couple of years now, what are the core tenants of your thesis there, and what do you think is wrong with passive investment? Because a lot of us think of this as a very safe and potentially very lucrative investing stone.

Mike Green: Well, I think this is one of the challenges that in terms of my theory and what I've observed about the market and how it's playing out is that for most investors, there's a natural attraction to being in a passive vehicle. Your objective is very much to just try to match the return of the market, and so it feels like it is the right choice, and you're seeking out lower fees, you're seeking out broad exposure, you're diversifying as you would expect, etc. And so it is a winning combination from the investor standpoint on an individual basis. The problem is, like many phenomenon, when you expand it and it becomes the dominant feature, it becomes a tragedy of the commons. And so the first place you have to start with passive investing is to understand that the basic theory behind it is predicated almost referred to as the efficient market hypothesis. And so the efficient market hypothesis was a theoretical construct that was created in the 1950s and 1960s, most closely associated with Eugene Fama. The idea is very straightforward. The prices in the market represent all of the information or the best estimate, the best intersection of information that exists across the market. And this is the idea that prices are set on a fundamental basis. So I as a single investor look at Microsoft, I make a forecast of the cash flows, I estimate what the future performance is going to be. I make some estimate in terms of what I expect it to be worth in the future, and then I compare that versus my cost to capital, discount that back to the present value and buy Microsoft. So the theory is that millions and millions, potentially billions of people doing this contribute to a market in which it is extraordinarily difficult to gain an information edge. And that's a really important component is that the expectation is that prices reflect information. There's an issue associated with that, which is that prices don't actually represent information, prices represent transactions. So when you look at a market, what you're actually seeing is not where the price is right now. It's where the last transaction happened. And it's a presumption that we're making that the next transaction is going to be close to that price. There are few events in history where we have seen that not be the case. The crash in 1987 would be a great example. The crash in 1929 would be a great example in the volatility space, the events of Allmageddon, February 5, 2018, where the next morning you woke up and the price of a security XIV had fallen 95%. We've seen this in a couple of different situations. That is a good indication of this phenomenon that it's not actually information, but it's transactions that are occurring. And once you recognize that that's happening, then you recognize that passive players violate the actual underlying philosophy of what a passive player is supposed to be. According to the work of Bill Sharp, which is used and cited for the rationale for why passive outperforms an aggregate, the idea is very straightforward. An active investor is one who transacts, who trades off the information. And a passive investor is simply one who holds all the securities in the market. The problem is that leaves no mechanism for how you get in the market or how you get out of the market. It's effectively a pure paper portfolio theory. If I were to track the market, which is what an index is designed to do, then I would meet that criteria. But the minute I begin to participate, I change the underlying structure. That's the flaw in the ointment, because now what we have is we've grown passive to the size, the passive investment strategies, the vanguards, black rocks, even the fidelity, Schwab's, etc., of the world who increasingly rely on S&P 500 indices or total market indices. They are every day in the market representing the lion's share of the net transactions, the buying that is occurring. And when that happens, you need to actually start to disaggregate and say, okay, what is the mechanism that these vehicles are trading off of? And they don't trade off of information. They trade off of flows. The rules for passive are incredibly simple. Did you give me cash if so, then buy? Did you ask for cash if so, then sell? Nowhere in there is there any information about the performance of an underlying security. And within the indices themselves, you also get an inversion of the traditional process of price formation. So one of the things that I did as I began to develop this theory was I went out and I surveyed active investors, people like myself, discretionary investors. And I asked them a very simple question. When you receive a new inflow or you receive an outflow, what is your propensity to invest given valuation? So a Schiller type valuation, zero times or one times earnings up to 100 times earnings, what's your propensity to invest or to sell stocks when you receive an instruction from your end investor? And what you found in that is as you would expect, the discretionary investor is more willing to sell at high prices or high valuations and less willing to sell at low valuations. They're more willing to buy at low valuations, less willing to buy at high valuations. When you run a system that is built on those rules, then it's a mean reverting system. As valuations rise, people become less willing to deploy capital, valuations retreat. Passive works in the exact opposite fashion. As valuations rise, the incremental marginal capital, because you're doing so on a market cap weighted basis. So how does something get to high market cap? It rose in price. If its price is not directly tied to the fundamentals, as is rising in price, its valuations are rising. And so you end up with the perverse dynamic where the market becomes very momentum weighted. Effectively, the dominant flow of capital is money coming in on a momentum weighted basis, which means that the largest companies receive incrementally more capital. The companies that have risen the most receive incrementally more capital. And those that are lagging behind really aren't receiving any significant marginal inflows. It gets even worse than that because as we begin to switch from the active managers, firing the active managers, discretionary managers, and replacing them with the index or passive managers, that signal becomes amplified. The value based or marginal forward return based process of the discretionary manager is under redemption, meaning the stocks that they like are getting sold, the stocks that they hate are getting bought back. And the passive players are dominating it. And in my analysis, this is what's going on in the markets today.

Torsten Jacobi: I wonder, and this is very fascinating. And the first time I heard this, I'm like, well, now it finally explains why value investing, and the whole idea of value is really rare, because it simply has made a ton of money the last 20 years. And that's kind of where I come from is where is this margin of safety, right? But where can I see low valuations that potentially rise in the future? And usually that's not what happens in the market. It's kind of a continuous trend following that we see out there. What I want to do is, is that a bit of a maybe bigger follow up to the nifty 50, right? So we saw this in the 60s, 70s, there is this information gap that you just talked about, there is market players on the market that see the whole market, right? They see all the investment opportunities. But there's a lot of people in a not so informed public out there who don't have the time for it. And they just go into the big names, right? They know that used to be Nasdaq in the 2000s. And we just want to be in Yahoo, we want to be in Petz.com, because it sounds good and we heard about it, right? That's the only reason we invest in it. We really don't care about valuations because we think about the future. And in the future, these companies will make a ton of money. And is it just on a bigger scale now that we see these valuations rise so much in the index investing that was kind of a theme that Warren Buffett gave us, I feel, and this will fall apart because the sharks, the smart investors so to speak, they are already circling passive investing and they will come down in it sooner or later, because it's just not such a smart idea to keep buying Apple the same stock, irrespective of the price.

Mike Green: So there's a lot to unpack in that observation, right? Everything ranging from people seeking out safety to Warren Buffett. Let's hit each of those in turn. So a recreation of the nifty 50 in the 1970s, right? The nifty 50 in the 1970s was a group of roughly 50 stocks that people basically just said buy at any price, right? They were the Polaroids, the Codex, et cetera, the world that represented effectively unlimited growth potential. I think that there's an element of that in that you see the market narrowing and concentrating, but the question becomes why, right? Is it because people are objectively looking at the top 50 stocks and saying these represent a unique feature and was that the case even then, right? We kind of hear these things filtered through history, right? What I would suggest was likely happening in the 1970s was that you had a broker approved list that they were able to go out and tell their investors. This was also a time period where there was a change in what's referred to as the ERISA rules, right? Which govern all of the retirement pension accounts, et cetera. And so there was in all likelihood an approved list that people didn't have to seek out approval on an individual basis to trade those names. And so the market naturally concentrates there, right? It's a little bit like if you have a teenage son and they need to come to you to get permission to go with their friends in a car, but they don't need to get permission from you to take the car and go out, right? What are they going to end up doing? They're going to end up driving their car to a parking lot somewhere, leaving the car there and then hopping in their friend's car, right? Because they want to remove the frictions associated with it. Ultimately, that I would guess is what happened in the 1970s, right? I spent less time actually studying that dynamic of the market than I have in other areas. Today, you have an even more concentrated variant of that where the money that goes into retirement accounts in the United States, primarily through 401Ks and IRAs, we've introduced a series of rules that make it very difficult for a corporation sponsoring a 401K, right? Which is a defined contribution plan or for a registered investment advisor offering investment alternatives to their clients. We've made it very difficult for them to do anything other than the cheapest, lowest cost index solutions, right? They're actually exposed to liability and being sued by their clients for putting them into products that violate what's referred to as the fiduciary standard, right? Which is a standard that says, ultimately, was their best interest at heart rather than something else, right? Now, whether they're actually guilty of violating that when they put money into something other than a Vanguard product or into a State Street product or into a BlackRock product, I'm very skeptical that that's the case. But having been through legal challenges myself at various points in time, the correct strategy is to avoid litigation risk, right? And so everyone is kind of being forced into these strategies, regardless of whether they think it's a good idea. And then the last thing that I would say on that is, when we talk about the dynamics of value investing or the Warren Buffett margin of safety type approach, the problem is that we know in history this worked, but it hasn't worked for give or take the past 10 years or 20 years, right? It's a little bit more in debate if we include the dot com cycle. But people are ultimately forced to say, am I willing to pay for this theory or do I want to believe my own eyes, right? And increasingly, people are opting out of that process, right? There's no reason why a human being whose job is to go to work and figure out mortgage applications or to conduct surgery on people who have a brain tumor or to be the nurse who's attending under those conditions, right? There's absolutely no reason for them to be involved in a discussion around the theories of the efficiency of markets and whether active managers can add skill, etc. They just opt out because it's a confusing question. And so we're trapped in this situation where the mechanisms that are supposed to provide a negative feedback loop, in other words, meaning dampening these effects, right? Not negative in terms of bad outcomes, but negative in terms of dampening are being eviscerated and we're being replaced increasingly by positive feedback loops that amplify these events.

Torsten Jacobi: Yeah, I find that I think this is this is just the other kind of this kind of this the other side of that coin is what the your theory predicts is because we have this this herd is impede into one direction, we would see higher volatility in events like we had last March than we would see otherwise simply because there's no discretionary, no smart virus left, right? Smart virus in our definition right now, they buy when the valuations are low and those are good investments are simply on the price. But what we see instead of passive investors who say, well, I don't I don't think there's something going on in the stock market. So I just shot up this buy algorithm that they usually have because as you say, they have no sell algorithm besides retirement, maybe, but generally there's only a buy mechanism. There's no there's no other side that works against this on selling securities. And so volatility is higher than we would see otherwise. And we a little bit of drawdown was 60% maybe in the S&P during March. It's it's pretty big, right? Even on a historic scale, it went down to what we saw in 1990 and 29, 1930s.

Mike Green: Yeah, so just very quickly, it wasn't 60% or anywhere close, it was more like 30%. But it felt awfully bad. And this more important the more important feature about what happened in March 2020 was the speed and from February 2020 to March 2020 was the speed of the fall, right? So barring the single day type events around a March 1980 or October 1987. This was by far the fastest and deepest market decline that we'd ever seen, right? The question is why did that happen? Or was it was it unique to the dynamics of COVID, right? And the fact that the world basically came to a stop and we weren't certain what was going to happen? Or was there something in the structure of the market that contributed to that? My analysis is that it's the structure of the market. And that helped me in the immediate aftermath, to turn around and say on March 26, I published a piece that said, look, I think the markets are going right back to all time highs are going to go faster than anyone thinks. And the reason why is X, right? It's because of the dynamics of market structure. It was you can think about it as simply as when the events of January and February began to occur, many of the thoughtful discretionary traders looked around the world and saw the headlines coming in that this pandemic was gaining steam and that places like Italy were already shut down, right? And shutting down. And they tried to sell the market, right? And tried to short the market, tried to do various things. Because there had not yet been any impact in flows and employment, right? So Paychecks were continuing to roll into passive vehicles. You had this opposite impulse where the market was pushed higher. I would argue in February, you saw people who were too early, right? So we all are familiar with the movie The Big Short, right? And you remember the pain that Christian Bale, Michael Burry experienced as he was early to this trade, right? Investor redemptions, people firing him, you have no idea what you're talking about, etc. You could tangibly feel that in the markets in late February. People are sitting there going, what in the world is going on? Why are markets making all time highs, even as we have this pandemic going on, followed by this incredible crash, right? That incredible crash was effectively a very small fraction of passive players experiencing sales for the first time, right? So the active managers tried to sell. The passive managers did not receive the same net buy order that they normally are receiving. And as a result, the market very quickly shifted into an imbalance that caused a collapse. That's my analysis of what ended up happening. And the scary part about what emerged is if you look at the reports that Vanguard and a few others have come out with since, trying to effectively allay the concerns around this issue of market structure. Vanguard will point out less than 1% of our clients actually sold into this event. Well, my reaction to that is, well, what if it had been 2? What if it had been 5? There is no solution to that when entities of that size try to sell.

Torsten Jacobi: Yeah, I would feel, I mean, given that it's basically just a buy program that BlackRock and Vanguard have right now, if money comes in, as you pointed out, if ever they want to sell more, then there's only the fact, there's nobody else, maybe some foreigners, maybe it's going to be Saudi Arabia who's going to buy that, because the price is so good. But besides that, I feel there is no entity left to absorb 10%, 20%, whatever they've accumulated. And I think this is a structural risk, but it's also, the question is a little bit, what is the actual yield on these investments in the future? And what I was thinking about, and I think this also is very interesting given your thesis, what do you see in productivity growth? So we all know that markets sooner or later go along with productivity growth. And the whole world goes along with this. The competitiveness of whole nations or whole places in the world goes along with this. What we've been seeing is relatively low productivity growth. And that's Peter Thielstein, someone you worked with very closely for a couple of years. And what a lot of other scientists pointed this out before, and researchers, what one of the thesis is, is that we are just investing in the wrong vehicle. So this is where the passive investing comes in. It's companies who might not give us a 10%, a 15% return on equity. No, those are companies who are already in layers and layers of that out there. And they're just scraping out 1%, a half a percent in growth. So our GDP growth also on our expectations of GDP growth have been going down so much. Because we're investing in wrong vehicles, we're putting the money, we are not efficient at research allocation and capital allocation, because we're just putting it in bigger and bigger vehicles out there. And we see this in the startup world quite a bit, where we see there is lots of demand in the really, really early stages, but then basically nothing until you're a unicorn and you go IPO of over $50 billion. Do you think that makes sense that it has such a strong impact on GDP growth?

Mike Green: Well, again, I think that there's multiple angles there. So first, when you talk about a stock market being tied to elements like productivity growth or earnings growth, etc., that's trying to link it back to the fundamentals. And I'll just give you a very simple thought experiment. What if the government made it illegal for you to sell a stock on a downtick? So in other words, you could or you could only sell a stock at a new all time high. So you've heard me talk about this. So that sounds like a great idea. We're going to change the rules of the stock market because we want the market to be at all time highs. And all that means is that the market stops functioning. And so the classical example of this is exactly Nazi Germany, where it was viewed that the performance of the stock market was an indication of the success of the Nazi regime. Therefore, rules were set in place that prevented the stock market from going down. When you did that, you broke the role of the stock market. So the role of the stock market, and this is one of the things that I also have spent some time talking about, is not to provide retirement to people. That's just not its objective function. The objective of a stock market is to facilitate the allocation of capital. And so when we change the function of the market, when we shift it away, and our regulator is the Federal Reserve, for example, changes the objective function of the market from trying to efficiently allocate capital and set the marginal cost of capital through the discretionary application of investment. And instead, we flip it to a utility that is designed to guarantee a certain level of retirement for people in our society because we refuse to engage in the process of underwriting a social safety net. Well, then we've broken it in the same way that the Nazis broke their stock market and it will increasingly fail in its function of allocating capital. So I absolutely agree with Peter on that, but I do think it's really important to understand that by changing the rules and by changing the structure of the market, changing the behavior of the participants, we're increasingly inhibiting the ability of it to allocate capital. The second point that I would make is that when you look at the technology unicorns, etc., they're increasingly not going through an IPO process. Unless you're an actual market practitioner professional in the space, you tend not to pick up the difference between the two. But for example, Palantir went public through a direct listing, meaning in other words, it did not seek out a pool of active managers who are willing to understand and invest in Palantir and agree to hold it and effectively underwrite and sponsor it. They didn't seek out an investment bank that was going to play that role. Instead, they directly listed it onto the exchange and basically said, here's what we think the valuation is, here's where we're going to list it. And when it shows up there and the advantage of doing a direct listing or of doing a special purpose acquisition company is it actually expedites the process of index inclusion. So more quickly, the vanguards and black rocks of the world have to start buying these names. It's a trick that is being played. Instead of seeking out the active managers who are losing assets, you're trying to get the passive managers to be forced to buy you as quickly as possible.

Torsten Jacobi: Yeah, it seems to me as a torrent of money started by the Fed who sets it artificially. It's a Soviet Union instrument. I can never understand why we set interest rates. I grew up in that part of the Soviet Union. I didn't like it. And we have this as the hub of our economy. We have a Soviet planning committee. I think it's 10 people who set interest rates that have a huge impact on what's going on in the whole country or basically in the whole world. And then also we started QE. We started all these programs to come up with an artificial liquidity and it's pumped into the same stream that we just described, this passive investment sooner or later. Because we know, as you said, if prices for securities drop too much, then retirement is broken. And then the whole U.S. is basically broken because we all rely, besides our house assets, we rely on a certain price of assets within a certain range. 10% is probably fine, but 50% real problem. Is there a way out or are we just mere in it until it goes all to zero?

Mike Green: I mean, that's a really hard question, right? Because you're asking me to predict a future that.... Well, with all humility, I do not have the answers. I have models that suggest what can happen, right? And so the way I try to approach these problems is I try to figure out the rules that the players are forced to play by. And then I will build agents that effectively mimic that behavior, operate under those rules, and then I'll set them loose. And I will either give them capital or take capital away. I'll allow them to trade with each other, etc., to create a fast forward simulation of what the constraints or the impact of a market can be. Now, by definition, I'm never going to capture all the features of the market. And so where it becomes really interesting is when you have something like passive that is so large that it'd be a little bit like trying to ignore the white polar bear that's trying to break down your door, right? Just pretend it's not there. It's not going to get you, right? It doesn't work. And so you're able to capture a large scale picture of it. The behavior of the Fed is similar, right? So what the Fed is doing is the Fed is increasingly moved from a model where they use interest rates to target inflation and accelerating or weakening economy. And instead, they're recognizing, again, referring back to the efficient market hypothesis, that the market based signals allow them to theoretically expand their information set by working through what's called the expectations channel. So under that model, if stock prices are falling, right, the information that is contained in the market tells you that the economy is weakening. If the market is rising, then the information that is in the economy is telling you the expectations are rising, therefore, the economy is strong, right? By targeting that indirect mechanism, they're trying to effectively get a jump on lagging indicators like unemployment, recessions, et cetera, right? Famously, if you look at the NBR declarations and recessions, they don't occur for 6 to 12 or even 24 months after the event, right? So it's pointless from a forecasting standpoint. The problem, of course, is if the Fed's model of how a market works is increasingly at odds with how that market works, right? So if it's no longer an expectations channel, and instead, it is a flows channel, and that behavior of the market is increasingly driven by the changing character of the holders moving from active discretionary managers to passive managers, if that's clouding the information that you're getting, right? It's like driving through a rainstorm, right? Your windshield is filtering information in a way that it can be confusing for you. You should lower your speed. Ironically, because there's increasing reliance on financial assets for retirement and for spending, particularly for the baby boomer generation, the Fed almost needs to react faster and faster and faster, right? So doing the exact opposite of what you would expect if you're driving in a rainstorm, right? That in turn, if I can predict the Fed's reaction function, and I know that the Fed is going to step in and the Fed is going to try to support financial assets, well, that tells me, as a professional investor, that I now have a Fed put, right? That the regulators are going to step in and support asset prices, well, that encourages me to put on more leverage, right? And to take a more concentrated position and hold less margin of safety because I know they're doing it for me. And in fact, if you have an asset like a US bond, right, that has, because of the Fed's reaction function, now has a negative price correlation with the risky assets, right? Because people expect that the Fed is going to cut interest rates on a risk off event. That would cause the price of the bond to go up, right? So that becomes the same behavior that I would expect from an S&P put. The difference is an S&P put loses money over time. The bond makes money over time as long as interest rates are positive, right? And so I now have a positive carry put. Well, if you run through the math of what the optimal portfolio looks like under a positive carry put, it moves to a levered portfolio. So instead of a 60 40, you move to a 150 100 portfolio. And when you move to a 150 100 portfolio, the demand for financial assets rises, it forces prices even higher than they otherwise would have been. And now we have another positive feedback loop that gets created, right? And so it's positive feedback loop after positive feedback loop that's propelling this thing higher. Eventually, the Fed is going to be forced to respond in one of two ways, either by directly buying financial assets on a risk off event, right? And that is, you know, just to form a closet nationalism, but all the rewards are being given to those who own the assets, or the Fed is going to have to try to get bond prices even higher by taking interest rates negative. And the problem with negative interest rates is it takes that put that I just described to you that says it's a positive expected value put, and it turns it into a negative expected value put, right? So when we cross that threshold, my expectation is actually that the system begins to break that levered portfolio has to be delevered. That's unknowable, right? I can't know that that's what's going to happen. But that's what my model suggests occurs.

Torsten Jacobi: I feel like we are what when you said that earlier, we didn't build a retirement model like Europe has done and a lot of countries in Asia have done that's run by the government. What I usually don't like about these models is they they just distribute whatever comes in, right? So whatever billions come in, they distribute it right away. So basically the idea is we can never spend more than we take in, which is great. But on the other hand, there's really no incentive to invest in something useful to invest in your own future. So I think the idea that we put our money into a potential economic growth should reward the US, right? So just just seeing that capital allocation should put us into one, two, three percent more GDP growth than anyone else in the world. And we are a bit like that, right? So our GDP, it has more volatility, but it's better than in Europe and it's better than Asia. So I think this is kind of a winner. And now we are dealing with the with the after effect of being on the winning side of that construction of society. And is there anything else for the crash? I mean, in the end, I think people get the message, I think they're smart enough to realize what's going on, but nobody has to worry about it as long as the asset is rising, right? It's kind of like the house prices. Yes, we heard worries about the big shorts that was out there, that message, but it was completely ignored because people had no incentive for this because for 30 years, they were only rising for 50 years. It's bad. The only way out of this is the big crash of whatever passive investments we're seeing. And people actually have losses. They have retirement portfolio and they say, I want to do this again. I got to get out of stocks now, stay in bumps, or I don't know, do my own startup, whatever the alternative for this is.

Mike Green: Well, so to me, the crash is not the solution. It is a symptom of the way the system is set up, right? And I would actually argue that the likely outcome from a severe crash becomes a loss of the role of markets. Effectively, we in hindsight, after the event, begin to make the regulatory changes that we probably should have done in advance, right? So if you see people's pensions destroyed or 401ks destroyed in a market crash, is it politically unacceptable to allow those consequences to emerge, right? Do we end up with money printing in the form that we had with the coronavirus? I think the template has been very clearly laid out. And people are very aware of that, which is part of the narrative around, well, eventually, the dollar is going to collapse. And therefore, you need to be in gold, Bitcoin, whatever else, right? Buy real assets. Again, the future is unknowable. I just can't emphasize that enough. But there are components of inevitability around that in systems dynamics as a phrase. It's called posiWid. The proof of a system is what it does, right? And so when we move to a system that directs savings and retirement assets towards the large publicly traded companies, right? And so even within the Vanguard Total Market Index, it is limited in its representation, basically, to companies over $100 million in market capitalization. And you can see a very pronounced effect when a company becomes eligible for inclusion, right? You saw that with the S&P 500 and Tesla, for example. When that system is set up that way, what it should lead to is a decline in the number of smaller companies and a decline in the number of privately held nonpublic companies, right? Because they have a much higher cost of capital than the subsidized cost of capital created by the inclusion, the creation of these rules. And so this is exactly what we're seeing. We're seeing a loss of dynamism in the small privately held business space and a concentration of resources at the large publicly traded space, right? The unicorn phenomenon, as you might highlight it, right? You cross that chasm and you effectively suddenly enter into a world in which almost unlimited capital is available to you. Tesla, again, would be a good example of a company that has been able to tap capital markets to obtain funds that otherwise couldn't have AMC, GameStop, et cetera. They're all doing the same thing. That's just the way the system is set up. And so it's likely to continue in that fashion. And the frightening thing for me, right? You mentioned the dynamics of warning about the housing bubble or warning about the crash in 2000, et cetera, is that people tended to learn bad lessons from that, right? So the lessons associated with housing were that, oh, well, housing prices got too high and therefore they crashed, right? Well, that's not actually what happened at all, right? The system was set up so that it encouraged fraud and it was the frauds, the first payment defaults that resulted in the structured products, the MBS, effectively failing versus expectations. And once those models were called into question, pricing model uncertainty played through and suddenly you could no longer lever your portfolios and sustain that demand, right? That's what the big short was really all about. We're now at a point where 10 years later, housing prices are much higher, right? And they're even higher in a lot of ways relative to incomes and rents, et cetera, than they were then. Why? Why has that been able to happen if that was so obviously a bubble? Again, it goes back to what's the structure of a market. The thing that worries me most is that throughout most of human history, the vast majority of people had no access to owning the means of production or owning their own house, right? If you were in the Western societies, you were a surf who existed on a thatch covered shack that the Lord of the Manor owned and you could be ejected if you refused to do the work that he wanted you to do, right? You had no mechanism by which you could gain ownership of that or get freehold status. The idea that you could have an ownership of your local factory was completely absurd, right? This is part of what spurred the growth of communism