Did The Last Depression Ever End?
Stepping back and looking at the past 75 years, you can make a case that the last depression never ended.
Many of today’s financial problems stem from issues from the last depression that were never solved. The problems were simply pushed forward onto our generation and will continue to be pushed onto future generations.
Today, we are entering a new era. A crisis is upon us and not just the United States but the entire world.
It’s incredibly discouraging to know that people feel secure hanging on to cash in savings, receiving a steady retirement check from the company they work for, and a Social Security check from the government, reducing debt, cutting back on living expenses, and living a more simple life.
This way of thinking will not work in the post-corona economy.
My generation—the baby boom generation—and their kids have only known the biggest economic boom in history. The baby boomers do not know what depression is. For the most part, all we know are good times. The baby boomers were blessed by being born into a massive economic boom, a boom that began in 1971 when all the world’s money became Monopoly money. Many people in my generation made wheelbarrows full of money. After the crash of 2007, many of my generation lost their wheelbarrows of money. But worse than being out of money, they may be out of time.
I am afraid my generation and their kids are not prepared for the economic decline, a depression that I believe is ahead of us. If a person has only known an expanding economy, he or she may not be prepared for life in a deflation or hyperinflation economy.
Our educational system has failed millions of people—even the educated. Today, you control your future, and now is the time to educate yourself—to teach yourself the new rules of money. By doing so, you take control of your destiny and hold the key to playing the game of money according to its new rules.
In 1978, I made it to Xerox’s President Club as number one in sales. I had achieved my goal. I had learned to overcome my shyness and fear of rejection, and learned to sell, although I was still shy and fearful of rejection. But I had learned the number one skill of an entrepreneur: the ability to sell.
In 1978, I announced to the Xerox Corporation that I was resigning to start my own business, and thanked them for four great years of real education.
In our spare time, a friend who also worked at Xerox and I had been building our start-up business—the ﬁrst nylon and Velcro® surfer wallet company—across the street from the Xerox oﬃces in downtown Honolulu.
Our ﬁrst shipment of 100,000 nylon wallets had just landed in New York from Korea. It was time to start selling wallets. My friend and I were both excited and terriﬁed. It was all or nothing.
As I was leaving, Elaine the receptionist smiled and said, “You’re going to fail… and you will be back.”
Over the years, Elaine had seen many young hotshot salesmen like me leave to start a business, only to fail and return to Xerox. One of my sales managers was one of those hotshots who failed and returned.
My friend, who is still one of my best friends today, and I succeeded. We were successful beyond our wildest dreams. Nylon wallets were an international hit. We were featured in sporting goods magazines, running magazines, surﬁng magazines, and even Playboy. Money poured in. We had achieved the American Dream. We were millionaires. Then we crashed. We lost everything. It took me nearly eight years to pay my investors back, one of them my own father, poor dad.
It was a great, real education.
My reply to Elaine, on the day I left Xerox, was, “I will fail… but I will never be back.” And I never did return. I kept succeeding and failing. I will always keep succeeding and failing, no matter how successful or rich I become.
That is what Nassim Taleb calls “antifragile.” Just as our body needs challenges, stress, and adversity to stay strong, so does the human spirit. And our spirit lives in our hearts.
The Coddling of the American Mind and Nassim Taleb’s 2012 book Antifragile take the position that our schools are inadvertently damaging students’ futures by making them fragile, rather than preparing them for an unexpected black swan future.
Taleb asks us to distinguish between three types of people:
- Some people are fragile, like ﬁne china teacups. They break easily and cannot heal themselves, so you must handle them with care.
- Some people are resilient like plastic cups. They can withstand the great shocks of life. Parents usually give their kids plastic cups. The problem is, plastic cups do not beneﬁt from falls and rough handling because plastic cups do not learn, grow, or get stronger.
- Some people are antifragile. Antifragile people require stress, challenges, and hardship in order to learn, adapt, and grow.
Antifragile systems grow weaker, more rigid, and less eﬃcient when not challenged. For example, our muscles grow weaker and bones grow fragile, as do children’s, because children and human beings have antifragile systems.
If a person spends a month in bed, his or her muscles atrophy because complex systems are weakened when deprived of stress.
When neurotically overprotective parents and school teachers protect students from real life, they are hurting the student and the future of our world. On top of that, fragile people become violent people, defending their right to be protected from real life. Many people are resilient and strong. Again, the problem with strong, resilient people is they do not grow or learn and fall behind as the world churns on into the future.
Here is a quote, ancient words of wisdom that the authors of The Coddling of the American Mind use at the start of the book’s ﬁrst chapter, “The Untruth of Fragility.”
When heaven is about to confer a great responsibility on any man, it will exercise his mind with suffering, subject his sinews and bones to hard work, expose his body to hunger, put him to poverty, place obstacles in the paths of his deeds, so as to stimulate his mind, harden his nature, and improve wherever he is incompetent.—Meng Tzu Fourth century BCE
If you’re worried about the position your family is in during these uncertain times, now is your opportunity to become antifragile.
Rich dad often said, “Most family fortunes are gone in three generations. The ﬁrst generation earns it, the second enjoys it, and the third generation loses it.”
That is why he was teaching his son and me about real business and real estate. He did not want his fortune to be gone by the third generation. Rich dad called it “dynasty wealth,” wealth that is passed on from generation to generation. Rich dad also said, “Most poor and middle-class parents only want their children to get good jobs.”
James Rickards, in The Road to Ruin, tells a story of meeting a beautiful woman in Italy, whose family wealth was handed down for over 900 years. If you are familiar with Italy’s history, you know that hanging on to dynasty wealth for 900 years has been nearly impossible.
When he asked her how their wealth was passed on for 900 years, she replied: “That is easy. We invest in things that last.”
When he asked her what are investments that last, she replied: “Real estate, gold, and museum-quality artwork.”She did not mention cash, stocks, bonds, mutual funds, or ETFs.
This is another reason why Kim and I created the CASHFLOW® game, write our books, and teach. We want people to teach people, and parents to teach their kids so that more family dynasties are created in which families grow and pass on their wealth for generations.
Editor, Rich Dad Poor Dad Daily