Hemispheres of influence
AN EPIC BULL MARKET IN MAGICAL THINKING HAS DOMINATED THE WORLD IN RECENT YEARS, FATTENED BY THE FRUIT OF MAGIC MONEY TREES.
Investors and policymakers have been gripped by delusions of control. However, as real world tectonic shifts drive us into a more inflation-prone and volatile era, Potemkin pretensions are crumbling.
With modern empires struggling over spheres of influence, a host of new risks and opportunities have emerged. But it’s your divided brain and its relationship to technology which may hold the key to navigating this era of historic change.
“REALITY IS THAT WHICH, WHEN YOU STOP BELIEVING IN IT, DOESN’T GO AWAY,” quipped sci-fi writer Philip K Dick.
Last year, reality finally caught up with magical thinking. Rolling shocks – from Russia’s invasion of Ukraine to China’s compound crisis and a historic energy hit – revealed a more inflation-prone and volatile world than most thought possible.
For policymakers and investors alike, events exposed a dangerous over-reliance on faulty models and abstract ideas divorced from reality. Delusions about the end of Great Power conflict and the stability of world order, for example. Or risks with the energy transition.
Fantasies about Chinese technocratic competence, or central banks’ imperium over inflation. Not to mention popular portfolio strategies predicated on permanently quiescent inflation. The list goes on.
Financial markets reeled, shedding over $30 trillion in value. As the shocks keep rolling, the bills for magical thinking are coming due. These ‘reality cheques’ bring with them immense investment challenges and opportunities. But they also raise a deeper question. Why, with more processing power and data at our fingertips than ever, was the world shocked by risks which were hiding in plain sight?
The answer points to one of the greatest structural risks and opportunities of all. Read on!