Trusting Your Gut: This week, Paul Ford and Rich Ziade are joined by Michael Shaoul, the philosopher-manager of Marketfield Asset Management and expert on business cycles and the convergence of world events and geopolitics. Is the cycle of commercial real estate on its deathbed? Are shoes the only thing immune to downtrodden cycles? We discuss what happens when people tell you that you’ve got it all wrong, and exactly what you should do if you see a volcano at the company party.

 

Michael — 4:15: “There are multiple cycles that you learn to pay attention to. One of the things that I say is that when you look at cycles across decades or centuries […] the nouns and the verbs are always changing. It’s always something different, but the adjectives and the adverbs stay the same.”

Michael — 5:40: “Clearly we’re here in the middle of a great technology cycle. When it’s gone over its skis, when it’s no longer investible, when it’s outright dangerous, it’s a hard thing to notice. But if I went back to the early 1990s, language starts to change. Evaluation metrics start to change. You start valuing eyeballs rather than revenue.”

Michael — 6:45: “I don’t think I need to apologize to my children for not owning Bitcoin, but to me that’s what the end of one of these investment cycles looks like. You look like a moron for having not put an indiscriminate amount of cash to work in the space and everybody on the outside is kind of laughing at you and trying to pull you in.”

Michael — 8:20: “When I read your article on Blockchain, one of the things that really pulled it home to me because you were going back and talking about the late 1990s is how little fun is had towards the end of a cycle. It’s just miserable. There’s nothing genuinely creative going on, it’s all about the bottom line or the top line. Everybody’s expectations go beyond what is possible. It’s just a lot of stress and aggravation. Good luck keeping employees.”

Michael — 12:40: “I always say to people it’s okay to do something stupid and reckless with your money as long as you follow two rules: One is you put a small amount of money […] in it. Number two is you remember that you’re doing something stupid and reckless. The mistake people make is they think that they’ve found the answer and they overcommit.”

Paul — 13:00: “The people we know who are very into Blockchain who are kind of rational about it basically are like, hey, you’re going to the track. See what happens. But you don’t put your kids’ college funds in it.”

Michael — 16:50: “I publish my weekly thoughts on markets. […] I put together a sort of chatty weekly piece, just saying look, this is what’s happened in the last week and this is why it matters or this is why it doesn’t.”

Michael — 17:25: “[Macro] is a funny term. It’s like saying what does ‘technology’ mean? It’s a very broad term, so the way we look at it is we think at any given point in time [it is] the things which are worth focussing on. Obviously I’ll always talk about the S&P 500 in my job because that’s the starting point for whether it’s been a good week or a bad week as far as most people are concerned. We’ll focus on a particular sector we think is really in motion […] and ignore things that might be interesting but we feel 25 people have already written about.”

Rich — 19:45: “Technology is seeping into — or the world is seeping into — […] the formulas around valuing technology that come from really dramatically different places like foreign policy and security. If you had told me that 15 years ago that global geopolitics would affect Microsoft Excel…”

Michael — 24:20: “Gatsby is still, to me, a great book about cycles. It could only get written at that point in time, it’s another cycle on top of everything else.

LINKS

• Marketfield Asset Management
• Business Cycles
• “Bitcoin is Ridiculous. Blockchain is Dangerous” by Paul Ford, Bloomberg Businessweek
• S&P 500 Index
• The Go-Go Years: The Drama and Crashing Finale of Wall Street’s Bullish 60sby John Brooks
• Manias, Panics, and Crashes: A History of Financial Crises by Charles P. Kindleberger and Robert Aliber
• A History of Interest Rates by Sidney Homey and Richard Sylla
• The Great Gatsby by F. Scott Fitzgerald

Track Changes is the weekly technology and culture podcast from Postlight, hosted by Paul Ford and Rich Ziade. Production, show notes and transcripts by EDITAUDIO. Podcast logo and design by Will Denton of Postlight.

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