Why the Trends of Income Inequality & Redistribution of Wealth Could Reverse (w/ Trevor Noren)


TREVOR NOREN: My name is Trevor Noren. I’m the Managing Director at 13D Global Research
and Strategy. I cover disruptive innovation and contribute
weekly to our flagship publication, What I Learned this Week. Yeah, at 13D, our focus is not just providing
our clients with actionable investment advice, but also providing the predictive frameworks
that can help business leaders and asset managers figure out how best to allocate capital. No trend has been more influential over the
past 30 years than consolidation. We see it in almost every corner of the global
economy. Personal wealth is consolidated. Inequality is at its highest point since the
Great Depression in the US. The top eight wealthiest individuals in the
world now control as much wealth as the poorest 50%. We see it with corporations. 75% of US industries are more consolidated
today than they were in the mid90s. We see it in real estate. The top 25 biggest metro areas in the United
States accounted for greater than 50% of US GDP last year. We also see it with asset management. The top 10 biggest asset managers in the world
now control 34% of all assets under management in the world. History has been defined by the cycle of wealth
accumulation, shifting to wealth distribution from the consolidation of economic power,
shifting to the diffusion of economic power. We see this from the fall of the Roman Empire
to the French Revolution to the Gilded Age to the US post-Depression. The last cycle of wealth distribution lasted
34 years. It ended in the early 1980s and the average
American worker saw their wages double over that time. We believe that the combined forces of globalization,
digitization and postfinancial crisis central bank policy, quantitative easing has brought
us to a tipping point where wealth will shift from its accumulation phase to its redistribution
phase. Obviously, trend is long lasting and entrenched
as consolidation won’t shift overnight. It won’t also shift at equal pace throughout
the global economy, but on a week by week basis, we see evidence that the shift to diffusion
is accelerating. We see it in the rise of anti-trust and digital
regulation ambition from the EU to Australia to Asia to the US. We see it in the backlash against CEO pay
and shareholder primacy with some of the most prominent business leaders in the world calling
for greater corporate accountability in order to protect the stability of democracy and
capitalism and we see it in the rise of labor unrest. One example we often come back to in conversation
with clients is in the 2018 midterms, a young Democrat in Iowa named JD Scholten nearly
unseated 8-term Republican incumbent Steve King in one of the Redis districts in the
United States. When asked how he got so close, Scholten had
a simple answer. I talked about consolidation. One staggering stat in 2015, 85% of steer
slaughtered in the US were slaughtered by just four companies, farmers’ wages have been
squeezed by the consolidation of agriculture. Just in the three years leading up to the
2016 election, farmers’ wages fell more than at any point since the Depression. It’s not just farmers, I think across the
ranks of labor, people recognize that consolidation and concentration are not just an academic
issue, they manifest in the day to day lives of workers throughout the economy. Obviously, change is not just going to come
from politics but this shift to diffusion is not going to be propelled just by the political. We see three primary forces involved. There’s the cultural, what people choose to
buy, where they choose to live, how they choose to live their lives. Then there’s the technological. There are a lot of reasons we got to this
point of extreme consolidation, there was the disempowerment of labor. There’s the rise in the Borg standard, which
said, price was the only justification for anti-trust intervention. There was of course, globalization, which
advantaged large companies that were better able to shift their supply chains abroad than
smaller competitors. Then there’s QE, which inflated the value
of assets at the same time that fewer and fewer people owned assets, but more and more
we understand the role that technology has played the digital revolution. A handful of sector leaders and digital natives
have seized the vast majority of efficiency gains enabled by digitization, network effects
of entrenched power and because global governments have been slow, if not reluctant, to define
regulations to oversee the digital age, data aggregators have been able to act with utter
impunity. What we’re seeing now is the emergence of
enabling technologies that at least have the potential to start reversing that cycle from
3D printing to blockchain, to 5G and the IoT, even artificial intelligence. In our conversations with thought leaders
and of the research we do, we see a rising movement amongst innovators, a rising recognition
that consolidation has gone too far and they need to author technologies that enable the
diffusion of power. When the people that are going to define the
future have a consensus that the future needs to be less consolidated then that future becomes
near inevitable. We have three key fronts that will swing the
pendulum from wealth accumulation to wealth distribution, from consolidation to the diffusion
of economic power, and they’re the political, the cultural, and the technological. In What I Learned this Week, we’ve argued
for almost three years that the EU would be the table setter for global digital regulation. We’ve seen their ambition escalate over in
recent years, from the record fines of tech giants on anti-trust grounds to GDPR to the
recent copyright reform passed by the EU parliament which is a seismic measure. Margrethe Vestager was just recently promoted
from EU Competition Commissioner to Digital Tsar, which means she’ll oversee anti-trust
as well as the formation of digital regulation. She’s long been Silicon Valley’s European
nemesis, and she now possesses more power. The basic point is that Europe believes that
if they can define digital age, Europe believes that defining digital age regulation leading
the world on this front is a way to increase their soft power. The US, that is an interesting case. Regulators and politicians have been reluctant
to pursue digital regulation because they viewed the power of tech giants as being–
they viewed America as the greatest beneficiary of the power of tech giants. That worm is turning. There are 16 investigations ongoing, both
federal and state, into the market power of just four companies: Facebook, Google, Amazon
and Apple. California just passed a bill that would,
if passed into law, functionally forbid the dig economy within California. Donald Trump has spoken out regularly against
the power of tech companies. Pretty much, every Democratic presidential
candidate has an anti-trust agenda. The outcome of the 2020 election, both the
presidency, the House and the Senate will go a long way to determining how quickly and
what shape digital regulation takes in the US. We believe it will happen faster and be more
decisive than most investors anticipate. The cultural side will be pushed forward by
the young, specifically the millennial and Gen Z generations. We see in their buying patterns already that
they gravitate to two small local niche brands over big mass market brands. We see where they’re choosing to live. They’re migrating away from big cities and
into smaller communities. That may be a financial decision. That probably is a financial decision, but
it will still shape the culture of the US moving forward. Where we really see it acutely is how they’re
embracing attacks on the various systems that drove the consolidation of power. Cryptocurrencies are the clearest example
of this. They were a backlash against the power demonstrated
by central banks after the financial crisis and the power of the big banks themselves
that led to the financial crisis. We also see it with Gen Z and millennials
embrace of labor unions. In 2017, 250,000 people in the US joined labor
unions and of that 250,000, 74% are under the age of 35. Poll after poll shows that millennials have
a much more negative view of big corporations than they do have labor unions. The fact is, millennials are the worst off
American generation since World War II. You see it in the rhetoric of millennial politicians
as well as the politicians that millennials gravitate to. The idea of the rigged system, the system
that’s been rigged by the power of corporations, by the power of the wealthiest individuals
in the nation. Millennials and Gen Z will not be powerless
moving forward. Their earning potential will increase and
they will inherit more wealth than any generation that came before them. They’re already rising in the political ranks
and they will exert that power to fix the system that they view has held them back. I would say that the scars of their early
professional years certainly will heal. Every generation generally shifts their political
beliefs the more assets they accrue, the more they have children. No, my guess would be some of the ideas will
hold up and this gets to the timeline of this process. Millennials and Gen Z are inventing the technologies
that will define the future which gets ahead of where we’re about to go. Those technologies will have an influence
for years to come even after the potential political and culture of politics and the
culture of millennials and Gen Z shifts. Two core challenges facing innovators. Number one, too much power over the digital
ecosystem sits in the hands of too few companies. Number two, the technologies themselves are
too centralized creating vulnerabilities. We see the ladder with the increasingly large
data breaches that dominate the news. We also saw, tragically, in the aftermath
of Hurricane Maria in Puerto Rico. When the centralized grid in Puerto Rico failed,
it led to one of the biggest blackouts in human history that still hasn’t been fully
recovered from. What we’re seeing in the rebuilding of Puerto
Rico’s energy infrastructure is this shift towards micro grids, to localize solar power. Alternative energy in general can be and likely
will be a diffusion airy force. You will have more energy sources, and those
energy sources will be more localized. We’re also seeing diffusion in action with
the rise of software as a service companies. The migration of corporate data into the cloud
created an opportunity for software providers. The deployment of 5G and the IoT will dramatically
increase the scale and reach of that opportunity as enterprise data creation quintupled over
the next five to 10 years. You will of course big companies, Microsoft,
Google, Amazon, Salesforce and even Slack and Zoom that author technologies that can
be software that can be applied across enterprises. The fact is, region by region, sector by sector,
companies face idiosyncratic challenges that require idiosyncratic expertise from the people
writing the software, whether it’s healthcare, whether it’s agriculture, whether it’s construction,
software providers will emerge that have specific sector by sector and region by region expertise. A level of diffusion we did not see in the
era where consumer data centric companies were rising. In conversation to clients, we often reference
Flexport. It’s the only freight forwarding company of
its size founded since Netscape. It’s grown quickly and brought in a lot of
VC funding. Its success is predicated on the fact that
it has sector expertise in its written software that can help springboard a laggard industry
into the digital age and shipping has lagged substantially. Obviously, there are technologies emerging,
blockchains most importantly, that are going after decentralization and the diffusion of
power more directly. There’s also 3D printing, which could empower
local manufacturing that make them able to create at better scale and at higher quality. The fact of the matter is innovators recognize
that there’s both a profit, opportunity and a social responsibility to author technologies
that help shift the pendulum away from consolidated power in the digital world and beyond to more
diffused power. 5G, combined with the IoT, are poised to dramatically
spike the amount of enterprise data generated around the world. Throughout the past decade and a half of the
digital era, consumers have generated more data than enterprises have. Not coincidentally, the companies that have
risen to the greatest power have been consumer centric data companies: Google, Facebook,
Amazon. That, over the next five to 10 years, is going
to flip and the enterprise data opportunity is going to be greater than the consumer data
opportunity. The rate of growth of enterprise data creation
is going to outflank the rate of growth of consumer data. This is a huge opportunity for software companies
to provide whether it’s artificial intelligence technologies that can make sense of all that
data, or it’s platforms that allow for the right data entry. A lot of industries– and I’ve covered some
of them, healthcare, construction, shipping have lagged in their digital transformation. Software as service companies can springboard
those industries into the digital aid opening up efficiencies and reversing their laggard
digital path. A company like Google, they authored Search
as their primary. That is a need that all consumers have. Amazon houses everything anyone wants to buy. Well, that’s a service that meets the needs
of all consumers. Facebook, same can be said about social networking. Enterprises face much more idiosyncratic challenges
and need software that can provide insights very specific to those challenges. Meaning one company Microsoft, a behemoth
company, is unlikely if it’s not impossible to build expertise in shipping, in healthcare,
in construction able to meet the challenges the software demands of every one of those
sectors. Individual companies with very sector and
regions specific expertise will rise. That’s something we have not seen on that
scale during the consumer data, the era in which consumer data dominated opportunity. At 13D, our primary focuses is offering value
opportunities to our subscribers. Let’s start with the investor opportunity. There’s the opportunity to get in on the ground
floor of the companies that will lead the decentralization movement that will provide
the technologies that diffuse power, whether they’re in the private or public market. This phase of technology is still in its infancy,
and the upside potential is huge. As we argued with Flexport, the software as
a service opportunity, the explosion of enterprise data could allow springboard laggard industries
into realizing digital efficiencies. This, to our mind, is a tailwind for values
outperformance of growth. There’s two opportunities we see are pretty
clear. One thing to understand about this is this
is an enormous systemic shift, and the basic architecture of modern markets, the machinery
has been built around consolidation is a durable trend. Consider passive investing, when a small handful
of sector leaders and digital natives are greatly outperforming all other companies,
it makes it much easier for indexes to outperform active managers. The same could be said with the algorithmic
revolution in asset management. Algorithms depend on the past being indication
of the future. When you have a durable trend, like consolidation,
that relationship also becomes durable. When the pendulum shifts, algorithms can be
caught flat footed I think we’re seeing this already with flash crashes in the market with
the unexpected catching algorithms off guard. We saw this with the recent rotation, a violent
rotation from growth and the value. On a broader societal level, when the cycle
shifts from wealth accumulation to wealth distribution, it has always resulted in extreme
turbulence. War has often been the result. Obviously, we hope that’s not the case and
optimistically expect it not to be the case, but there will be significant political, economic
and market disruption. From an investment standpoint, this is a key
reason for our bullish case for gold moving forward. All that being said, I think a shift this
significant is really shapes the world. It has throughout all of history. It will be a tailwind for wage growth. It will be a tailwind for middle class spending
power. We will see how it unfolds but one way or
another, we believe it’s a durable shift to diffusion and it will reshape the world.

60 thoughts on “Why the Trends of Income Inequality & Redistribution of Wealth Could Reverse (w/ Trevor Noren)

  1. Income/wealth inequality is a feature not a bug. Pareto distributions (scale-free networks) are more stable and allow for infinite growth. There’s no justification for wealth distribution to be a normal bell curve — it’s supposed to be a power law curve, for everyone’s growth in absolute terms.

  2. IMO,
    He is being extremely optimistic.
    Wealth & Power never willingly relinquish
    neither wealth or power….
    until Forced to do so.
    The 0.1% is way too entrenched
    & totally ruthless.
    UPWARD wealth redistribution
    will continue.

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  4. Trickle down economics is one of the biggest fraud perpetrated on the working class. Republicans have successfully defended it with the shameless propaganda that anyone who challenges it is a communist

  5. Not sure his thesis around diffusion of software around specific industries makes sense in terms of platform synergy. It does not make sense for hundreds of new tech companies to spring up and run their own platforms with their own authentication, persistence, regulatory compliance etc compared to a giant like Microsoft spinning up a few dozen people to make a specialized product that integrates on their own platforms and uses their own common software services and regulatory/legal experts…

  6. YouTube, Facebook, Twitter are supposed to be decentralized yet they became centralized and are concerning, demonitising, deplatforming, shadow banning, etc. That must be stopped!!

  7. Growing gap and consolidation of wealth tends to create instability. Look at the trends in politics around the developed economies at this time.
    His thesis of technology to be a game changer may happen to some extent, but power does not capitulate nor abdicate too willingly.

  8. The 2020 election in the United States will probably be defined by massive overreach by Social Media companies attempting to influence the outcome and Trump will let the regulatory dogs loose after this event. The public will certainly support such an outcome.

  9. It annoys me that he keeps saying blockchain instead of saying bitcoin. Bitcoin is more important than the underlying blockchain technology.

  10. I think we should just admit that we are entering feudalism 2.0 instead of fantasizing about how wealth inequality might possibly reverse. When we go into a Mad Max scenario we will reduce wealth inequality.

  11. That "wealth diffusion" concept really peaked my interest. I know last time it happened, a hundred million people died and a lot of wealth disappeared. This time it sounds like it will be much better organised.
    Should I open an account and forward my details to the central banks in anticipation of a nice fat deposit, or just wait to hear from them?

  12. We also seen. blablabla .. We also seen balbalbal … We also seen blablabla …

    This robot is very impressive. He looks like human.

  13. It will end with a Bastille Day. Protesters have been attacking authority. They need to attack the wealthy directly. The word will get around. Who's next?

  14. Ha Ha Ha. He actually thinks Millennials will inherit wealth from their Boomer parents. Such a joker. The Boomers will spend every last penny, and they’ll do it out of spite. The generation that “had it all” will leave zilch to their kids.

  15. It's not going to get better it's going to get worse. Globalist policies will continue to push the wealthy up higher as they get a larger labor pool to play with and pay everyone involved less overall.

  16. The only "wealth distribution" that's happening right now is from the working class in the rich countries to the wealthy in the third world.
    It's called Globalization.
    The authoritarian and socialist UN calls it "Sustainable development". It's the systematic impoverishing of the working people of the West.

  17. The 4th turning of society … but likely won't result in an inversion of wealth inequality. Nice dose of irrational optimism though. Unfortunately we're heading further into a serf feudal system.

  18. The bottom 50% are in debt . In the US that's a combination of overspending, student debt, being young, and other sad reasons like medical. That's why I'm wealthier than the bottom 40% by myself.

  19. 99% of the population will never accumulate more than 10 millions dollars in their life. Why should they tolerate that a single individual goes beyond this ceiling?
    99% should claim that anyting above this amount is a fraud.
    Limit some billionaires to 10 millions and suddenly you generate 10 of thousands of millionaires.
    We need millionaires, we should get rid off billionaires.

  20. Jesus said we would ALWAYS have the poor with us…what do you gain if you own the entire worlds assets but lose your own SOUL? Time to make it right with your Creator…Death is guaranteed and final…then where will you be? Try reading the book of John in the NT Bible (ESV translation preferred). Merry Christmas.

  21. Am I hearing correctly? Is he saying that regulation will decrease concentration? Is he mad? Has he learned nothing of history?

  22. Whats this guy been smoking – QE makes the poor even more poor and the rich richer – what were seeing is the rich moving thier wealth whilst everyone else suffers and goverments erode democracy in the process

  23. I keep coming back to these ideas when I ponder globalism vs. nationalism (protectionism). Do you think I've set up a fair dichotomy? Do you see a way out without too many trade offs?
    – Globalism decreases wealth inequality over the world, but increases within countries. Creates efficiency, cheaper products and economies of scale. Increases costs of war. Decreases a sense of belonging to a group (individualism). Decreased democratic power (money is international, governments are national)
    – Protectionism increases the demand for labor (every country has to produce it's own goods), but will become poorer because no country can produce all its production needs. Increases sense of belonging. Political power closer to the people.

  24. Only reason why theres an income inequality is because poor people dont invest in the income generating assets they always buy the liability and complain they dont have enough money

  25. The world's ruling elites will not give up power willingly. The majority of people are of too low IQ to figure out how to organize against the ruling elites. No, I'm not a socialist though I do believe in trade unions. We are overdue for a Black Swan event. I see disease reducing the world's population whether this comes about naturally, or part of an out of control agenda 2030. Climate change will have a devastating effect on food production and the world economy. I'm not talking about global warming, but global cooling as we go into a mini ice age caused by reduced sun activity.

  26. The elite or lets say The DEEP STATE is as evil and destructive as anything in history and today's generation will not be allowed to get a upper hand in any matter of success unless they join the criminals controlling the system. JP Morgan one of the founding fathers of Federal Reserve system is now under racketeering charges for manipulating the price of silver. lets use this as a bellwether of any real justice in the US. 2nd amendment guarantees the right to bear arms and I'm afraid that maybe the only hope for the suffering middle class. The system is rigged to stop any peaceful way of resolving this global not just the US conspiracy.

  27. Awesome video… my channel is very small compared to yours did a very similar video… I think it’s super important to try and wake up all the zombified sheeple out there 🙏

  28. He doesn't at all understand that "software as a service" is nothing but another major step to spy on and control every part of our lives

  29. The elites forgot september 1792, it will happe again… All it takes is for enough people to be at a point where they nothing to lose.

  30. Statistics? The 7 men that founded the federal reserve OWNED 25% of the wealth of the World. (1913) what was the percentage of 7 men in the world?

  31. Hang on he said there will be redistribution then said even more industries will have monopolies like Google. How does that work? And doesn't increased use of automation and cloud computing (Software As a Service) reduce the number of jobs? How does help redistribution? Please explain.

  32. Block chain and bitcoin have already been taken over by powers who run the world. This was predictable as big corps like Microsoft and banks become involved and go public. Tech only goes mainstream once The powerful figure out how to control it. There’s now going to be Oracles with special powers to edit info in a block chain under the pretence of security. So they’ll be the ones to influence. Guess who’ll have the ability to do this? Block chain was intended to hold info in multiple locations have all control sit with the user. But this obv made the wealthy and powerful nervous. So as the 99% slowly adapt block chain and bitcoins they won’t know this until it’s too late. I’m now waiting for the technology that will finally prevent/circumvent the ability of any of the powerful to control it and truly have all control in the users hands.

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