Howard Marks memo to Oaktree investors for the month of November 2016.
I’m starting this memo a week before Election Day. I promise to try to stay away from the merits of the candidates and the question of who will win, and instead confine myself to the important messages that we should take away from the election and the actions we should push for as a result. The outcome of tomorrow’s election won’t change these things as far as I’m concerned.
Of course, the big story of this election year has been the unprecedented, unconventional rise of Donald Trump. Trump threw his hat into the ring with a complete lack of experience in elected office or other public service, and without an established campaign organization. In fact, he had no established party’s ideology. He adopted some Republican elements but rejected others. And yet he has been able to attract a large group of voters, probably about 50 million strong.
He did this by assembling backing from an unusually diverse mix of elements. These included dedicated Republicans who weren’t about to vote for a candidate of another party; the many Clinton haters who’ve had 24 years to gel since Bill’s first inauguration; people who were attracted to Trump’s celebrity, reputation for business success, outspokenness and colorful manner; and supporters of the right. But this tells only part of the story.
The aspect I consider most important for the future relates to the Trump supporters – and some of the most active and vocal ones – who are motivated by an anger regarding “the system” that is neither purely emotional nor illegitimate.
Many are older, white, non-college-educated men who might be described as “demographically dislocated.” When these men were born, white males ran America; their communities weren’t mixed and becoming more so; and the cultural shifts occasioned by the civil and women’s rights movements, technological change and mass immigration were unimagined. Certainly the shift to the America of today – with all these things quite different – might be jarring and unpleasant to the people I describe.
At the same time, many Americans – and often the same ones – are experiencing the effects of job loss and diminished economic prospects. Fifty or even thirty years ago, men without college degrees could easily obtain good-paying jobs and the pride associated with being able to maintain their families at a good standard of living. One earner per household was enough, and one job per earner. Strong labor unions ensured adequate pay and benefits and protected workers from too-rapid changes in work rules and processes.
Now the number of unskilled jobs has been reduced by automation, foreign manufacturing and increased globalization of trade. Unions are much less powerful in the private sector (name a powerful union leader of today who comes to mind). Men of the sort described above – older, white and non-college-educated – are likely to have lost jobs, know someone who has, or seen the impact on their communities.
Importantly, until 2000, most Americans felt their children would live better than they did. Now this is no longer true:
Here’s a quote from Thomas Friedman in The International New York Times of June 30 that I used to sum up in “Political Reality” (August 2016). As I wrote there, I think it does a great job of capturing the situation:
What we have is a country – in fact, a world – that is changing rapidly and in ways that are unpleasant and disorienting for large segments of the population. The present is different from the past, and the future looks worse than it used to. Slower economic growth is producing less opportunity overall, and a number of forces are supplementing slow growth in diminishing the outlook. Rising income inequality is directing an increasing share of the gains to top earners. Older people lacking higher education are particularly ill-equipped to deal with the changes.
I think this is an apt description of conditions in the U.S., but it seems equally applicable to much of the developed world. In an opinion piece on October 26, starting from the German point of view, Joachen Bittner of the International New York Times described a broad group he called Wutbürgers, or “angry citizens.” I think they’re rising everywhere: