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To investors,
There has been a lot of talk recently about the issues across the United States. We have seen incompetent leadership at the local, state, and federal level. This weakness was exposed first by the virus, then the economic shock, and finally by the handling of police brutality. But is the United States really spiraling into demise? Or are we simply seeing a repeat of history that is less concerning when you understand our past?
To answer this question, we must first ask ourselves “what does the demise of a country actually look like?”
There are many opinions on how nation states spiral into obscurity or ruin, but one of the best explanations I have heard comes from Yuri Bezmenov, a former Russian KGB official who defected to the United States. In this television interview from 1985, Bezmenov explains that there are four main steps to ideological subversion (h/t Marty Bent & his newsletter for finding this)
This subversion is defined as “actions designed to undermine the military, economic, psychological, or political strength or morale of a governing authority” or “the undermining or detachment of the loyalties of significant political and social groups within the victimized state, and their transference, under ideal conditions, to the symbols and institutions of the aggressor.”
The four main steps to ideological subversion are:
Demoralization - This process can take 15 - 20 years (approximately a generation) and involves the intellectual reprogramming of young people to become sympathetic to ideas that gravitate closer to socialism and communism. The idea is to cement ethos, ideals, and frameworks into the minds of people who will one day become the leaders of a nation’s government, corporations, and military. As this new generation begins to take leadership roles, the older generation begins to cede control to a subset of the population that has different ideas.
Destabilization - This stage of the process is intended to change a country's economy, foreign relations, and defense systems. The driving force is a larger and larger government, which continues to promise a variety of social welfare benefits. It ultimately doesn’t matter if they successfully deliver on their promises, because the mere promise of a stronger social safety net becomes too much for the demoralized generation to resist.
Crisis - This stage is the shortest in terms of timeline, meaning it could be merely weeks long. There is a catastrophic event that takes place and leads to social unrest dividing the nation. The division of the population presents an opportunity for a significant shift in power and control at the government level. Past examples would include the overthrowing of the government in Egypt and Libya in the last decade.
Normalization - This is the final stage of the cycle. It is the process of citizens accepting communism/socialism as the selected way of life. They no longer fight the new model, but rather believe that it is the standard of governance for everyone around the world.
There are people much smarter than me who will spend their time debating which stage of demise the United States is currently in. That holds little to none of my interest. Instead, I am intrigued by two questions — (1) has there been an ideological shift in American’s mindset over the last few decades and (2) what can we do to prevent the downfall of our country?
The first question is actually the easier of the two. We can look to the last 4 - 5 months as an example of how our mindset has shifted. The United States, along with the rest of the world, was hit with the coronavirus. Our reaction was to attempt to prevent every single death in the population. This reaction was driven from the top down and saw citizens succumbing to a government that violated the constitution on multiple occasions (example of state supreme court rulings here and here).
On the economic front, most of the capitalist on Wall Street turned out to be socialists. They immediately ran to the government and began demanding bailouts within days of the government mandated shut down being put in place. These people included investors, corporate executives, television talking heads, and politicians. It seemed like everyone saw the government as a free money tree and they wanted a piece. There was no outcry when the government interfered in the markets, nor was there an uproar when circuit breakers were tripping multiple times a day. The era of a capitalist, free market in America are long gone.
Lastly, the recent violation of civil liberties has occurred with relatively little pushback. We have seen everything from curfews implemented to quell the freedom of assembly to armed men & women of the government beating unarmed citizens in the streets. There has been a complete breakdown in the adherence to the United States constitution, including employees of the state applauding their colleagues as they get criminally charged with felony assault.
In my opinion, it would be safe to argue that there has been an ideological shift in the American population. It is unclear when this shift started, but the response to the recent health, economic, and civil liberties crisis proves that the United States is less democratic, free, and capitalist, than it once was.
Which brings us to the most important question — what can we do about it?
The simple answer is education. In Yuri Bezmenov’s interview from 1985, he states that the two solutions lie in educating our nation on the importance and advantage of a free, capitalist society, while also cutting off all economic relationships with communist or socialist nations. He talks about suffocating these countries with ideological variance by cutting them off from the global economy and forcing them into a world of self-sufficiency.
I don’t think it is possible to cut economic ties with these economic giants in the day and age of the internet. There is too much complexity. We are also highly dependent on our trading partners, which was revealed during the coronavirus outbreak. Instead of focusing on the second solution, we should double and triple down on the first - education.
The information diet of our young people is essential to ensuring the continuation of ideals and ethos of the American way of life. We must teach them what it means to be free. We must show them what happens to a country when it transitions to communism and/or socialism. There has to be education around the suffering of citizens in other countries after these transitions take place. Young people must be taught that standing up for freedom, democracy, capitalism, and civil liberties is not only important work, but it is their duty as American citizens.
This sounds like an ideological education, right? It is. The internet has presented the ultimate gift and curse. It has ushered in an era where ideas compete in a free market. There is very little censorship on the internet and if you want to learn something, it is usually at your fingertips. That means that the ideologies that we want our children to possess must be taught with as much enthusiasm and excitement as the ideas being taught by those who want to see a different world.
Yuri Bezmenov highlighted the importance of the idealogical battle between democracy and communism, the battle between capitalism and socialism — he said that there is no where else to defect to. America is the last democratic, capitalist society. We should make sure we don’t ruin the great thing that we have.
-Pomp
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See important disclosures here
THE RUNDOWN:
A ‘Misclassification Error’ Made the May Unemployment Rate Look Better Than It Is: When the U.S. government’s official jobs report for May came out on Friday, it included a note at the bottom saying there had been a major “error” indicating that the unemployment rate likely should be higher than the widely reported 13.3% rate. The special note said that if this “misclassification error” had not occurred, the “overall unemployment rate would have been about 3 percentage points higher than reported,” meaning the unemployment rate would be about 16.3 percent for May. Read more.
Latest Satoshi Nakamoto Candidate Buying Bitcoin No Matter What: Adam Back’s name has surfaced again in the crypto community’s favorite guessing game: Who is the anonymous creator of Bitcoin who went by the pseudonym Satoshi Nakamoto. In mid-May, YouTube channel Barely Sociable, with nearly 400,000 subscribers, released a 40-minute video claiming that 49-year-old Back is Satoshi. The video has since raked up nearly 300,000 views. Read more.
SEC Moves to Freeze Assets of Alleged $12M Crypto Investment Scam: The U.S. Securities and Exchange Commission moved Friday to freeze the assets of a cryptocurrency mining and multilevel marketing scheme that it claimed bilked investors of $12 million. Unsealing its complaint against Utah resident Daniel F. Putnam, his businesses MMT Distributions and R & D Global and associates Angel A. Rodriguez of Utah and Jean Paul Ramirez Rico of Colombia, the SEC claimed the three had lied to investors and misappropriated their funds. Read more.
Elon Musk Tells SpaceX Employees That Its Starship Rocket Is the Top Priority Now: SpaceX launched astronauts for the first time barely a week ago but CEO Elon Musk does not want the company resting on its laurels. Instead, Musk urged SpaceX employees to accelerate progress on its next-generation Starship rocket “dramatically and immediately,” writing Saturday in a company-wide email seen by CNBC. Read more.
Airlines Got $25 Billion in Stimulus; Industry Still Expected to Shrink: Federal stimulus money for airlines is keeping them afloat through the coronavirus pandemic, but it’s not proving to be enough to sustain the industry at its pre-pandemic size. Carriers say they will have to shrink, with fewer planes flying, fewer flights and fewer employees come Oct. 1, after restrictions related to their stimulus money expire. Airlines will likely need to park 20% of their planes and cut their pilot workforces in equal measure, Cowen analyst Helane Becker estimated in a recent research note. Read more.
LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE
Daryl Morey is the General Manager of the Houston Rockets of the NBA. He is a strong proponent of analytical methods, having created the true shooting percentage statistic, and co-founded the annual MIT Sloan Sports Analytics Conference. This episode was a lot of fun and Daryl is one of the most analytical people I know. Promise you’ll learn something.
In this conversation, Daryl and I discuss:
The latest NBA update
How the Rockets use advanced analytics to make decisions
Why Daryl spends so much time supporting civil liberties
What he thinks of SpaceX
Why he has been a proponent of Bitcoin since 2011
I really enjoyed this conversation with Daryl. Hopefully you enjoy it too.
LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE
We have started a new show exclusive to YouTube called Lunch Money. The goal is to cover current events in business, finance, and technology from the perspective of the every day citizen, rather than the talking heads on television. It is just as funny and entertaining as it is educational. Hope you enjoy it and make sure you go subscribe to the YouTube channel!
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