Welcome to our new home on Beehiiv!

I moved my newsletter to this platform to provide you with a better reading experience and to expand our reach.

Why? Because I believe it's mission-critical to deepen our collective understanding of markets, the economy, and the forces that affect your wealth.

If you're a regular reader, I suspect you agree (why else would you put up with me?).

Please forward this piece to friends and family. That's all I can ask of you.

Thank you, Jonathan.

Before we get into today’s topic…

I wrote about financial bubbles on LinkedIn earlier this week.

It's short but I think it's important – as in, really important. I would love for you to read it.

At its core, a financial bubble is a wealth-redistribution process.

Note that I use the term "process," not "phenomenon."

Why? A process is a human device. A phenomenon suggests natural forces are at play.

Financial markets live on top of the economy, which itself lives on top of society. All three are human constructs. Therefore bubbles are human constructs as well, not natural phenomena. I learned that from Earl A. Thompson at UCLA over 20 years ago.

A bubble has an insider class and an outsider class. 

Insiders start with shares of "something" (like a company or another asset). The bubble creates an environment that motivates the outsiders to buy those shares from the insiders at economically silly prices.

Outsiders are in the business of providing exit liquidity to the insiders. They just don't think about it in those terms. I've talked about liquidity provision in the past, here and here. This tends to not be the profitable kind of liquidity provision, if you will. At least, that's what history teaches us.

And now, the main piece for today...

What Are We Going to Tell the Kids?

For the life of me, I can’t think of heavier words.

Every one of our darkest fears fits into those words.

May we all choose paths that keep to a minimum the number of times we have to use them in our lifetimes.

Let me rewind the clock and tell you what I mean.

In April 2008, I was what I wish everyone in their twenties could be: poor and happy as can be.

I had just finished my doctorate at Boston University. I was teaching at MIT for the semester, and my then-girlfriend—now wife—had a gig that would take us to California for a few days.

She worked with a family friend, Joline Godfrey, who had carved a niche for herself as an expert in helping the children of the wealthy make sense of the world they were being handed.

Moriya had recently left her high-powered restaurant job in NYC to make room for a meaningful relationship. Lucky for me. Working with Joline was Moriya’s sabbatical gig.

We flew to Santa Barbara and stayed in fancy tents.

I had not heard the word “glamping” yet but here we were. The excuse for having me come along was that I would teach these kids what I thought was the most important thing in economics.

I’m pretty sure I packed a suit and tie, which I dutifully put on to stand in a tent and teach a half dozen teens about pricing risk and managing uncertainty. God, I was young and stupid.

But Joline had another, wiser guest, Michael.

Michael was a musician and he "wrote a song" with each of the kids based on what they were dealing with on the inside. Each one of these kids had fears, sorrow, and confusion they wanted to face with their peers.

One kid sobbed while Michael sang a song about the kid's dad and his professional struggles. The dad had been a real estate developer in the Southwest, and the real estate bubble bursting pre-GFC was rocking that family's world.

By the end of the afternoon, it was clear that every one of the kids felt sincere angst. Nobody was just "feeling themselves" for being rich before adulthood.

The whole experience made one thing clear to me: Wealth makes some things easier. It also makes other things far more complex.

How are we going to tell the kids?

On to a happier version of the question: how, not what.

I recently caught up with Joline.

As I mentioned, she's been a family friend forever. She's still pushing the edge of what families can do to raise financially fit kids, even when the bounds of personal resources appear limitless.

I think I understand what drives Joline better now than I did then.

You see, since 2008, I've worked up close and personal with extraordinarily wealthy people.

When I was 27, I moved to New York City to join the family office of billionaire brothers. I had handled myself well enough during the interview to get the job. But I wasn't ready for what would come next.

On my first day, one of the brothers walked into my office, hoisted himself onto the credenza, and said "I'm glad you're here." I was so anxious. I couldn't see him. I couldn't see the person, the human being. All I saw was power and authority.

I regret not being more open and authentic then. That was a massive fail on my part.

There were a few times I should have walked into the brothers' offices to share what I thought about certain things as we were going through the financial crisis and its aftermath—literally the reason one of them had gone out of his way to say "he was glad I was there." I didn't honor that. Just to tell you that we're all a work in progress and to explain why I lean so hard into skipping all the "dear sir/madam," as my wife puts it.

Joline told me the following:

On average, kids are ready to talk about money about 10 years before the parents are.

• That's 10 years of missed opportunities.

• Ten years of messing up when it's safe.

• Ten years of leaning hard into family values and meaning.

Ten years of talking about what's important to you, and how money is just part of the equation—often a small part of it.

I guess my point is that if you're lucky enough to be intentional about this, one of the questions with the highest long-term payoff for you and your family this year may just be "How are we going to talk to the kids about this?"

Starting with "how" is empowerment. Starting with "how" means you are committing to figuring it out.

With any luck, you're not alone in this.

Joline recently wrote about how grandparents can be instrumental in this effort.

"Children lucky enough to have exposure to grandparents are grounded in roots, stories, and experiences that reflect who they are and where they've come from.

[…]

Grandparents are legacy carriers, values messengers, secret sharers, role models, and historians. They're standard bearers and safe haven; storytellers and moderators. Children may be beneficiaries of financial trusts, but more importantly, they're beneficiaries of their grandparents' intellectual, social, and human capital."

In addition to family members and friends (of the real kind), bring whatever tool works for your family to the task.

Watch meaningful movies with your kids. Not just the safe choices, the warm blankets, and the easy storylines. The whole point is to figure out:

• What you stand for as a family,

• How you think about life,

• And what your priorities are.

In our house, we've covered a lot of ground with movies.

We just watched "The Truman Show."

The kids got it.

They cheered for Truman to break free.

That's my wish for Truman, and for them too.

Life’s too fleeting not to pursue real and meaningful happiness.

If we do this right, I hope that when the time comes, I can confidently turn to my wife and say “the kids, they’ve got it. We’re good. I love you.”

That’s what I wish for you too.

Be well,

Jonathan