Here in Chicago, we had a truly historic last two weeks – the Cubs won the World Series for the first time in 108 years and we as a nation elected a man to the Presidency that appears to be the most pro-business candidate in decades. With two landmark events stacked just 7 short days apart, I couldn’t help it … I found myself feeling nostalgic.
As I poured over files full of old writings and articles, one rather onerous essay jumped out at me. It embodied the hopelessness of one of the darkest economic moments in recent history. It was written on September 25, 2008, and it reflected the bleakness that permeated the fabric of all things financial at the time. “Devastation… Economic Holocaust… a Perfect Storm … Fiscal Collision of Cosmological Proportion…” all words woven into an essay rife with ironically poetic imagery that painted a picture of economic mass destruction. We had witnessed in real-time the fall of the mighty beasts of Wall Street to a seemingly inexplicable fiscal disease – a disease that ate away at its victims from within. It was an insidious killer that lurked behind the veil of broker-speak terms like “ABCP”, “CDO”, “CMBS”, and “CRA” to elude detection. Never did these deadly acronyms deal an outwardly visible wound that let the “everyman” of that time know what was to come. In evaluating events and anticipating outcomes while watching history unfold, I posed the question, “Is all of this the sure harbinger of the extinction of a free-spirited, vibrant, American economy?”
Well, that is quite the interesting and grand question to look back on from where we stand today. There may be some rough road left ahead, but in fact the last few years have demonstrated the inherent resilience of the American free-market system. Even when put temporarily in a heavy-handed regulatory penalty box, it looks like we have made it through the worst. Eight years ago, I spoke of the ferocious, carnivorous dinosaurs of Wall Street that grew stronger and more imposing as they grew larger and more powerful -- appearing seemingly immortal, unstoppable and unchallengeable by any lesser beast. I noted how these giants outwardly grew unimpeded, but inwardly grew weaker and less effective with each passing day. Their bulk overwhelmed the strength of their skeletal structure, and with just one significant economically disruptive event, those bigger-than-life, unable-to-hide dinosaurs were on the verge of extinction. I contended that such was the natural course of things as it unfolded before our eyes. With that as my backdrop and much to my own surprise, I went on to predict the next events in the evolution of our economy in much the way it has happened.
Along came the Mammals
While the largest fell, small agile enterprises that had burrowed deep to survive the holocaust have emerged fully adapted to their new world. These nimble players have today begun their systematic dismantling of the “dinosaurs of the walking dead”. The old world financial organisms that grew so big and so numbed by the protections that only come with size (read “Too Big to Fail” and therefore garnering unfair protections from Big Brother) that even now they don’t seem to recognize that they are being slowly nibbled away at by their inventive little country cousins from the financial technology sector. The tides are changing. Swarms of those little fellows are standing at the cusp of great opportunity as they dismantle the fallen bodies of their once mighty adversaries.
The room to grow created by the economic casualties of the past has produced opportunities to posit new solutions and delivered enough pain to incentivize their adoption. These ingenious technologically creative organisms are rethinking old systems and breeding market efficiencies never before seen while growing enterprise values that are almost the stuff of fairy tales. Allowed to grow and allowed to thrive, this next-gen financial technology eco-system, when coupled with new tech-enabled financial instruments, can catapult us forward into a new economic era.
Last month, I wrote of the “Advent of an Economic Super-Cycle” that is just around the corner. Today, we find ourselves standing a few short days after a once-in-a-lifetime drama that was our historic U.S. Presidential Election of 2016. Its implications, although being debated among both political pundits and the masses, marks what I believe to be a true point of transition from the “Land-of-the-Lost” to the “Land of Eden”. This could be the harbinger of a time of prosperity, a time of fiscal security and a time of capitalistic exuberance as technological innovators innovate to improve efficiency and democratize access to capital. It may mark the place where economic dinosaurs are being fundamentally replaced by a healthier and more resilient community of capable entrepreneurial firms. In choosing a President that embraces the potential of a free market economy and its ability to do a better job than a small group of sequestered government officials in evolving to meet the needs of market participants, we have taken one more step toward the starting gate. We are just about ready to launch into our next global, tech-centric capital markets adventure.