German is a rich language and has some terms that are also used in English, such as “Zeitgeist”, “Angst” and “Schadenfreude”. This could also be true for “Zeitenwende”.
Two years ago, we wrote about some key innovations that are changing our societies for the better. Since then, a sense of insecurity and a feeling that things are getting much worse is on the rise, at least in traditional media sources. In this article, I am describing some key trends that may result in a Zeitenwende. It is important to emphasize that this is not a top-down political science analysis, nor a global top-down investment analysis. It is an attempt to summarize some bottom-up observations into a picture that makes sense.
Political Institutions in the “Democratic West”
Living in Germany, it is very hard to avoid the constant deluge of negative world news and common reactions to them: “how could they”, “how evil”, “don’t they have any morals” and “if only they had our institutions”. The German bubble is one of moral hubris and a lack of inward reflection.
The success of many institutions in the Democratic West was stellar since WW2 and culminated with the end of the Cold War in 1990. With the dawn of the new millennium, we have become more lethargic, allowing for exponential bureaucratic growth, creating ever new laws to perfect what is already pretty good. We, as a society, rested on our laurels and attempted to find new purposes in life. This often led to imagined problems (see below) or even hubris, such as to think world government can control the planet’s climate (N.B. better fixed through innovation, not regulation).
On the political side, the new purpose was actually a decades old plan from the Left: the “march through the institutions” by the revolutionaries of ’68. It was a resounding success and became highly visible in the last 10 years. Especially in Germany, with the total control of education and the near total control of traditional media, the corridor of acceptable public opinion has narrowed considerably. Since there is a lively debate within that corridor, democracy seems to be working on the surface.
The problems started somewhat earlier, but became very obvious under the Merkel regime (2010 Euro crisis, 2012 Fukushima nuclear fallout, 2015 refugee crisis) and accelerated with the climate and then Covid crises. Even if you disagree and think Merkel had a positive impact, you cannot ignore the growing number of Germans outside of the societal consensus. In the 50s to 80s, voter turnout for the Bundestag was routinely around 90%, whereas the average of the last 20 years was 75%. When you add this loss of 15% to the likely vote on Feb 23, 2025 (source Wikipedia: Bundestagswahl 2025 – Wikipedia) of 25% considered “undemocratic”, i.e. AFD plus a number of smaller parties, then 40% of voters are no longer represented. Is that a well working democracy, when an increasing part of the population no longer feel they are allowed to participate for fear of social sanctions?
Lasting societal shifts are much more difficult to pinpoint and can usually only be determined years after the fact. The 40% mentioned above indicates that it is already happening and arrogance has always been the downfall of empires. We can all learn from an excellent analytical book by one of the world’s most successful hedge fund managers, Ray Dalio Principles for Dealing with the Changing World Order | Book by Ray Dalio | Official Publisher Page | Simon & Schuster
Traditional Media vs Social Media
People don’t want to be informed, they want to feel informed. – Roger Ailes
This quote is an accurate summary of our “filter bubbles” and “echo chambers”. Although bubbles have always existed, they have become more accentuated with the rise of social media. This is both a danger and an opportunity.
Traditional media (TV networks, newspapers, magazines) have undergone a dramatic contraction in subscribers over the last 30 years. Staff budgets have been cut accordingly leading to less thorough research and more alignment with the Zeitgeist. The result is a decay in journalistic quality and the rise in uncritical propaganda. In the US, levels of trust in traditional media are down to 31%, a record low, compared to 70% in the 1970s. So far, so bad.
The good news is that the number of good journalists has actually increased with the advent of social media. The best are truly independent as they can make a living by monetizing their following. Of course, sensationalism sells, but the discerning consumer has been able to tell the difference between tabloids and quality media. It is the same for social media. It just takes more effort due to the multitude of contributors. So far, so good.
Freedom of speech versus freedom of reach
The biggest danger of social media are the big centralized platforms. Their algorithms have the goal of maximizing “engagement”: the more eyeballs, the more advertising revenue. On the political side, outrage sells best. At the dominant Facebook, Google, Microsoft, Apple and Netflix political donations by employees and the companies have gone 90%+ to the Democratic Party. Therefore, the result has been an increasing bias towards the political left.
But change is afoot. The latest CNN study into political preferences of users at X shows a well-balanced 48 to 47% Democrats/Republicans. Two years ago it was 65 to 31%. Facebook also seems to be transforming. Zuckerberg recently admitted to influence by government agencies on Facebook’s algorithms during the 2020 election cycle. It may be an opportunistic move by him personally, but it is the most recent indication that maybe it pays to be more politically neutral.
Everyone has to find their own way in this new media landscape, but with a little bit of effort and attempts to peak out of one’s own bubble people will greatly enrich their own lives.
Statistics
30 years ago, most western economists and global strategists started second guessing the spectacular Chinese economic statistics. In many cases it turned out to be justified and some hedge funds came up with alternative measures of growth. Unfortunately, many government statistics in the “Democratic West” have also fallen to political propaganda purposes. In the US, economic performance indicators are routinely revised downwards (later, when no one is looking). On both sides of the Atlantic, inflation baskets are routinely adjusted, hiding the negative wealth effects on the individual level. Of the big global economies, Germany probably had the most diligent and accurate statistics. The useful monthly reports of the Statistische Bundesamt, now Destatis, were legendary. When you read their publications nowadays, the headlines and analysis no longer correlate with the underlying numbers and revisions are more frequent. In a fast moving world, sound bites appear more important than discovering actual trends.
These days, the most accurate statistics come from independent sources like hedge funds (proprietary, so difficult to obtain) and financial bloggers. The latter often have a negative bias just to be contrarian to government statistics, but they certainly add to a more accurate picture.
Finally, the best antidote to all the doomers is humanprogress.org who amass data and then generate their own statistics of global trends: Ten Global Trends Every Smart Person Should Know | HumanProgress.org
Failure of industrial policies
For 30 years, the biggest contributor to global growth was China. Their enormous wealth creation was largely the result of deregulation and the introduction of large economic freedoms in most industries. This unleashed the Chinese entrepreneurial spirit. The government investments have a much spottier track record. Even though high-speed rail and airports are truly impressive, especially the speed with which they are built (n.b. China built over 90 new airports in the 14 years it took Germany to build the new Berlin airport), there has been a massive misallocation of resources such as building whole cities that are never lived in. So why does the West not learn from the Chinese mistakes?
Governments routinely waste tax money on industrial projects on both sides of the Atlantic. Trump’s 2017 “Buy American” initiative led to limited investments. Biden’s misnamed “Inflation Reduction Act” continued that path, while actually creating inflation and breaking international trade treaties just as Trump did (and will do?).
Germany also has a - let’s be polite - patchy history and has recently reached new heights of government waste. The increase of the CO2 tax at the pump leading to €5bn intake was earmarked for carbon offset projects. A year later it turns that 46 of the 48 projects, mostly solar in China, cannot be accounted for. Other billion Euro subsidized investments such as the Northvolt battery plant and Thyssen’s green steel have failed this year. It appears that central planning plus ideology are a potent cocktail for investing failure. In addition, Germany is also perpetuating the energy crisis that started back in 2011 with Merkel’s decision to retire all nuclear plants.
On this latter issue, technology companies with massive power needs for AI datacenters are taking matters into their own hands in the US. Microsoft is looking to revive the Three Mile Island nuclear plant and Meta is aiming to install up to 4GW of nuclear capacity by early-2030s.
Another industrial engineering success story happened in an area that was almost exclusively operated by government agencies: space exploration. With its 128 launches this year, SpaceX delivered 87% of worldwide upmass to space. While often being portrayed as Elon Musk’s boastful hobby, SpaceX actually accounted for 38% of all mutual fund assets invested in private companies and is responsible for these funds’ net gain on their private-company investments. Absent SpaceX, mutual funds have collectively lost about 1.3% on their private positions. SpaceX’s valuation reached $350 billion in the most recent financing round.
Deregulation
2025 may well become the year of the DOGE. In tech circles, Musk is already crowned as the GOAT, with his successes in Tesla, SpaceX, Boring, X and now X-Ai. Navigating through government agencies requires political skills which Vivek Ramaswamy, entrepreneur turned politician, and veteran politician Ron Paul should be able to provide to facilitate helpful reform.
This year was certainly the year of the radical Argentinian experiment. What Milei has started there not only takes a lot of courage, but also seems to deliver results (inflation down by factor 10, fiscal surplus, government debt risk spread down by 75%, a.o.). His approval ratings are still around 50% despite a recession. Another amazing turnaround story of a “basket case” is El Salvador. While much smaller, it was one of the poorest and most crime-ridden countries, when Bukele took over 5 years ago. The recipe there, was anti-corruption and enforcing the rule of law.
I would like to highlight two other areas where the consequences of excessive regulation has had more dire consequences. (1) In health care with its ballooning regulations, the growth in administration above the growth of actual medical services is adding additional cost layers. This is making procedures less accessible, in turn leading to worse outcomes. (2) Billions of people in tropical regions—who would benefit the most from air conditioning—will soon be able to afford it, but just barely. This means that any international regulations that increase the price of AC have an immense human cost.
May the Doge deliver.
Education
is a key component for the long-term development of a society, but the public system remains largely unchanged for over 100 years. In addition, resources are not allocated efficiently to yield best results. For example, US public schools grew by 96% in students from 1950 to 2009 and teachers by 252%, which is positive since it gives a much better students per teacher ratio. However, the administrative staff grew by 702%! In addition, teaching methods have not kept up with technological advances and insights into child psychology.
The original success story for alternative learning is Sal Kahn. He started as a Youtuber 16 years ago with short math tutorials and now Kahn Academy has more than 8 million subscribers and covers a variety of subjects for over 50 languages worldwide. Nowadays, there are countless alternatives complementing or even replacing traditional classroom learning. Individual content/tutoring are obviously more effective and is now possible on a large scale through technology.
Having recently visited New Hampshire, we were blown away by the number of different schooling choices including many voluntary homeschooling initiatives. Even in Germany, where homeschooling is illegal and private schools are highly regulated, new innovative approaches are starting to gain traction:
The return of capital in the form of human capital
Terms such as “capitalism” or “socialism” often trigger emotional responses that hinder a considerate analysis. In addition, we live in a topsy turvy world:
How can you call a system capitalistic when the state controls over 50% of GDP (Germany)?
When a handful of investment banks control most of global finance and simultaneously thrive on financing governments, do we have capitalism or rather Wall Street socialism?
The same can be observed when chief executives have strong ties to policy makers and use revolving doors: is that capitalism or C-suite feudalism?
A more objective yardstick would be the involvement of the state in the economy. But what matters most to each individual person are their personal and economic freedoms. The most comprehensive study is performed by the Cato Institute, published on an annual basis: Human Freedom Index: 2023 | Cato Institute
It is this combination of personal and economic freedoms that makes everybody a capitalist.
Health Care
I will save this topic for another day, as changes in this field are slower. However, they are likely to have the biggest impact of all on humanity longer term.
Conclusion
(1) It is not a matter of belief, nor a question of whether you think it is good or bad, but we are entering a technological supercycle (by convergence of multiple emerging technologies). Please see “Breakthroughs” article from 2 years ago: Top Breakthroughs in 2022
(2) What is a matter of belief, and a question of whether you think it is good or bad, is the Zeitenwende. History books will reflect on this maybe only in 30 to 50 years. Given the observed changes I have demonstrated in this article, I personally believe it could be much earlier. Maybe soon we will say the fallout after the GFC of 2008, ZIRP & debt bazooka, fear of wars and of climate and of viruses, etc., was the basis of this transformation.
One thing is for certain though. It will not be a straight line. It is difficult to predict in what way, but a backlash by conservative forces (within the Democratic West, likely a strange coalition of the Modern Left and Neo-cons) will come. However, we now have enough independent investigative, in addition to citizen journalists to uncover malfeasance. The genie is out of the bottle.
We are not betting on top-down political change. This is not about somebody new moving into the White House or No10 or the Elysée or the Bundeswaschmaschine. Technology has made subsidiarity - the principle of addressing social and political issues at the most immediate or local level capable of resolving them - a reality. It feels like the Arab spring. May it end better!
The HanseaticHunter
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