Secret History #2: How Societies Collapse

Okay. So, let's start class. I'm going to review very quickly what we did last class. So, last class we learned about monotheism, which is the idea of one true God. And as I said last class, this marked an intellectual revolution in human history. And with monotheism we developed three new ideas which are... and the nation-state.

It's important to note that these ideas have always existed in human history. But with monotheism, these ideas became the dominant paradigms and together they will give us modernity and create the world that we live in today. Okay, so that's what we discussed last class and remember last class we also discussed that this created a lot of problems for us. There are a lot of benefits but there are also a lot of... Okay. So we're going to continue the story of humanity today and today I want to focus on a very specific question.

Why do societies rise and why do they... Okay. And I know that these first few classes may seem abstract and theoretical, but that's because we're developing the theoretical models in order to better understand our world. So as we move on, we will start looking at very concrete examples. But for the first few classes, please be patient. We are going to develop the theory to understand the world. All right? So let's discuss societies, why they rise and why they decline.

Unfortunately we live in a world in... So there are lots of signs that the world is in decline. What are these signs? Shout out some signs.

So, also you have lower birth rate. And this is a very important sign, right? Because if you think about it, if young people refuse to get married and have babies, eventually the world is going to die off, right? So, this is actually a very important sign that the world is in decline. And we're seeing this happen throughout the entire world in all societies. The only exception is Israel and Georgia, but these are very small, rare cases. For most there's a rapid decline in birth rate. What are some other signs?

Okay, you see a lower standard of living. Okay. And all this means is inflation, right? So people make less money and they can afford less. Prices go up but people's wages go down. So that's another sign of decline. Okay. What are some other signs?

Society is less... If you walk on the street and you see a man on the street bleeding or hurt, you're less likely to help him. Okay. And this is very true not only in China but also elsewhere as well. So lower trust issues. What are some other...

This is true in China. Young people can no longer afford to buy a house. But it's also true throughout the world. Okay? It's really hard for young people to get by. Okay. All right. Also fiscal crisis, right? We talked about this, but the idea of fiscal crisis is the government cannot afford a lot of public expenditures. In the future, maybe 5, 10 years from now, pensions will be a huge problem for... Okay. So these are all signs of rapid decline. All right. Now, having done this, what I'm going to do now is go over some theories as to why this is happening.

Why is the world in... Okay. And there are lots and lots of theories, but I will present three theories to you that I think are interesting. Okay. The first is the idea of financialization.

And this theory is proposed by an economist, a French economist named Thomas Piketty. Okay. And he wrote a book called Capital in the Twenty-First Century. It is a fantastic book. You don't have to read the book, but if you have a chance, you should definitely pick it up because it is a very easy but very illuminating read. And what he argues is that what happens in society is that capitalism transitions from phase to phase to phase. In the beginning you have capitalism, meaning that what the society is trying to do is create goods that consumers want to buy.

This is an era of rapid wealth generation. Then you move into financial capitalism, which is a period of investment. Rather than build factories, you put the money into the stock market.

So you're trying to generate as much money as possible. But what we discussed last class that's very important is wealth and money are not the same thing. So in the first phase, in super capitalism, you focus on the generation of wealth. In financial capitalism you focus on the generation of money and then you move on to monopoly capitalism, which is where just a few companies control everything. And we live in an era of monopoly capitalism. And this happens because it is much more... for companies to be monopolies than to be in competition with each other.

Financial capitalism is looking to create as much money as possible, not as much wealth. And so a few companies come to dominate, become monopolies. And that's the age we live in today. Okay. Now why is this important? It's important because when we make this transition people are no longer focused on working hard. They're only focused on... All right. So let me give you an... let's just say I'm an entrepreneur and I want to make as much money as possible. Well, what I do is I build a factory.

When I build a factory, I'm creating real wealth because a factory requires you to hire workers. It requires you to build technology. It requires you to build goods that people want to buy. But after I build a factory and I make a lot of money, I want to take this money and let it grow as fast as possible. So, I put it in the stock market. Okay? And that's just how people behave. The problem is that if too many people do that, then no one's really working. No one's creating real wealth in the economy.

The other problem is that because of the way capitalism is set up, if everyone's putting the money in the stock market, the stock market grows too fast and the real economy does not grow that fast. Okay? And the difference is stark. Thomas spent a lot of time going over income tax, just looking at how much tax people paid. He did a lot of statistical analysis and what he discovered is the real economy in late-stage capitalism will grow about 2%. The financial economy will grow at 5%. Okay. And this is really key.

What this is telling us is that if you have a million dollars, you could choose to go and open a restaurant or you could choose to invest in the stock market. If you open a restaurant, you will make at most $20,000 a year. But if you were to put it in the stock market, you would make $50,000 a year. So, everyone's going to put all the money in the stock market, which allows for the stock market to increase. But the real economy is not improving and therefore you have all these issues arise.

Greater unemployment, greater debt, no one's really working. Okay, so that's the idea of financialization. And what Piketty argues is that this is just a natural cycle. This is just a natural byproduct of capitalism. We live in an age of late-stage capitalism.

Is this clear to you guys? Any questions before I move on to the second theory? All right, let's move on to the second theory, called elite overproduction. And this was proposed by a historian named Peter... And Peter Turchin spent decades looking at why societies rise and fall. He looked at the Roman Empire. He looked at the French Revolution. He looked at many different examples. And what he believed is societies fall, decline, collapse because of the idea of elite overproduction. Meaning you have too many powerful people competing for limited positions of... All right.

So to understand this, I'm going to talk about another experiment called Rat Utopia. And Rat Utopia was a series of experiments conducted by an American scientist named James B. Calhoun.

And what James Calhoun was trying to do in his experiments was trying to figure out what living in a world of abundance and wealth and security meant. After World War II, the world was divided between the United States and the Soviet Union. It was the Cold War, but it was also a time of increasing abundance due to technology and peace and the population was increasing. So, James Calhoun conducted these experiments to figure out what this meant for the world. So, what he did was this.

He had a room, okay, that was sealed off from the world. And in the room, he put in food and water and housing for a colony of rats, maybe like 10 rats at first, but they quickly became 400, 500 rats. And at first, the rats were really happy. But no matter how Calhoun configured the experiment, ultimately the rats always ended up killing each other. Okay. So what he discovered is if you live in a world of abundance and security, the end result is the rats always kill each other.

And he kept on doing this for 20 years. And he could never ever create a situation in which the rats lived peacefully. And he could never figure out why this was the case. And even today there's a huge debate as to why this is the case. But he had a theory. Okay? And the theory is this. The rats were not competing for food. They were really competing for status. All right.

So, let's think about this. Okay. In a state of nature, in the real world, rats compete with each other for mating rights, right? So, you see a beautiful rat and you fight over her. The rat who wins out is now the alpha male. And the alpha male can have as many female companions as he wants. Okay. And what do the other rats do in nature? What will the other rats do?

Not normal people, it's the children of the elite. But eventually the elite have too many children and there are not enough positions of power. Okay. Another way of saying this is that in China today there are too many graduates of Peking University and Tsinghua University...

Now I want to go to the third theory and the third theory is the idea of a civilizational life cycle, and this is proposed by a German scholar named Oswald Spengler.

And what he argues is that society, culture, civilization, it's no different from a person. As a person, as a human being, we go through a life cycle. We are born, we grow up, we mature, then we die, right? And there's no way around this. We all have limited life cycles. You can live to 100, you can live to 150, but eventually you'll die. And what Spengler also says is that this happens to society as well. And there's nothing anyone can do about this. So let's go over the life cycle for a civilization.

Okay. In the beginning you are in the village then you move to the town then you move to the city then you develop the mega... Okay, not all civilizations will go through the cycle but the successful ones will go through the cycle. Okay, you start off. So the Romans, right? The Ting dynasty, you start off in a village, then if you're successful in a village, you build a town. Then when you're in a town and you're successful, you defeat other towns and you build a city, they become a mega city.

Okay? And what Spengler says is at the height of the civilization, the civilization must now... Okay? So let's go over the theory. Well, in a village, life is pretty simple. People work hard, okay? They are united. They have a collective mentality. Everyone's helping each other. And also what's really important is lots of babies, right?

It's very common for mothers to give birth to 10, 11 kids in a village, right? And the reason why is kids are free labor. So you're incentivized to have as many children as possible. Okay? So this is the framework of a village.

But as you go up the civilization ladder, as you mature as a civilization, what happens is you have increased... Abstraction is just a fancy word for you're removed from reality. Okay? So when you're in a village, you understand everything, right? You understand, oh, the food that I eat comes from the seeds I implant, right? But when you're in a city, guess what? Those drinks you're drinking, you have no idea where they come from, right? The food you're eating, you have no idea where it comes from. It's all abstract to you.

It's all removed from reality. So in the village, people are engaged in working hard and in helping each other. But as you move up, people become much more individualistic, right? You're concerned about your own personal pleasure. You're concerned about how do I derive benefit from... Okay? So, another way of saying this is in a village, what keeps people together are emotions and tradition and relationships. But when you move to a mega city, what is it that holds people together? It's money, right? Money is the greatest... The problem with money is that it means we don't have to ever trust each other.

In a village, if you get sick, everyone comes and helps you, right? But in the city, if you get sick, you go to the hospital and pay the doctor. Your neighbors don't have to care. Your family doesn't have to help you.

What is New York? What is Paris? What is London? They're all mega cities. Okay. And that's why we have these... And what Oswald Spengler says is there's nothing anyone can do about this. It is a natural life cycle. All right. So these are the three major theories I want you guys to remember. Okay. Sorry, can you give the microphone? Yeah. Can you just speak to the fact...

So the external threats don't really matter. But that's a great question. Thank you for asking. Okay. Yes. In theory, oh my god, if aliens come, then humans would unite. No, that's not what would happen. Okay. What would happen is certain factions of humans would try to align with the aliens to conquer everyone else.

All right. All right. So, having gone through these three theories, what I'm going to do is combine them together to create a comprehensive, broad theory of why societies rise and fall. Okay. All right. And the problem with theories is they are simplistic and inaccurate and imprecise. So I warn you that this theory has limitations. But for our purposes, what we want to do is have a working framework and then when we apply this framework to concrete examples, we can better refine this framework. Okay? All right. So I warn you that there are a lot of problems with this framework but it is a useful tool for us to analyze society in the past.

Okay. All right. So I'm going to make generalizations about how society is structured. So at the core of society the very powerful people, these are certain families. Okay, these are the founding families of this... And there's not that many of them. Maybe 10, maybe 100, okay? But at most 100. So if you go back to the Roman Empire, the Roman Empire controlled most of Europe as well as Anatolia, Egypt, it was a huge area, but really there were only about 200 families that controlled the Roman Empire. Okay. All right.

So how these families express power, how they control power in society is through three mechanisms. Okay. Three pillars of power and these three pillars are finance.

Okay, finance we talked about last class. It's just central banking. Second pillar is religion. Religion is just what people believe. How to control what people believe. Now the religion of today is science and...

Okay? Every aspect of society that you can imagine is being controlled in some respect by this nexus of power. Okay. Also you have corporations, right? And then at the outer edge are the... Okay, the people, because they're so massive, the massive people, they're the ones who generate wealth for society. So this system is designed to create as much energy as possible through the people. Okay, energy because the harder the people work, the more wealth is generated in society. All right? So a metaphor that we can use is this.

Think of society as a corporation. The people are the workers, right? They're the ones who do the real work. The elite, these families are the... and these people in between, the middle class, are the managers. Okay, so again this is a very simple metaphor and it's not accurate but it's useful for analysis. Okay. So the families are the owners of the corporation, the people the workers, the people in between the managers, and we call these people the middle class. There have been other names for it in China before in history.

We call them the scholar-officials. Right? Another name for them is something called the professional managerial class, PMC. Also another name for them is the petty... Okay, again you don't need to know these names. For the purpose of simplicity, we will just call them the middle class. All right, does that make sense? Okay, so having gone through the structure of society, let's talk about what happens when society rises and falls. Okay, when it rises, the dynamic of these three groups, it's very interesting. When it rises, the families who own the nation are happy to let the managers control society.

And this is what we call democracy, right? And the managers are always providing feedback to the families and saying we should treat workers better. If we treat workers better then they will work harder.

Okay? And at this point, things are great. The people feel that they have a voice in the system. They're making good money. Everyone's really happy. But what happens because of elite overproduction is these families produce too many children who want positions of power. Basically, they want to spend money from the corporation. And now the corporation is in trouble. It's in debt. Okay. So, at this point, what happens is this. You would think the managers would say to the families, "Listen guys, we need to be more fair to the people." But what really happens in reality is they exploit the people.

Okay? The managers will now deceive. They will lie to the people. They will commit fraud. They will exploit the people. Why? The reason why is this. What the managers really do is something called... Okay, rent-seeking behavior just means they have a certain power that they want to exploit in order to extract wealth from other people. So for example, the more classic example is you own an apartment in Beijing, right? So you rent it out to someone who needs to live in Beijing and you collect rent. Well, this is true for a lot of people.

So if you are a lawyer, you collect rent because only you can work in the court system. So if you want to sue someone or if you have a contract dispute, you have to go to a lawyer. Okay? The lawyer is collecting rent and that's what the middle class, the professional managerial class, do. They are rent seekers.

Another way of saying this is, guys, if you go to a company, you know what the workers do, right? Do you know what the managers do? They really don't do that much. Okay. And this is true for the middle class. Like the managers, the middle class live very nice lives. And so when the company's in trouble, the managers are like, "Well, I have a very nice life. I have a very nice job, but I don't really do anything, so I'll probably be the first to get fired." So they have to show their worth.

They have to prove their worth. And therefore, they exploit the workers. Okay? Do you understand? They push the workers harder to generate more wealth. All right? So in the decline phase this is not really a problem but what happens over time is the conflict within the elite gets worse and worse, elite overproduction, and what will eventually happen is they will form into factions that compete against each other for... And when that happens then society becomes aligned into factions. The factions will bring in certain elements of the middle class which will then bring in certain elements of the people and now what happens is civil war or revolution and this marks the collapse of society.

What's really important for us to remember is this is a natural cycle and no amount of external threat will change that dynamic. Why? Because it's very common for these factions to align with... Okay? So there are foreign invasions not because some guy overseas is like, "Oh, this society is unstable. I'll come and invade." What happens often is a certain faction invites mercenaries into the nation as part of the power struggle. And then the mercenaries realize, you know what, we can stick this for... So when you reach the collapse phase, the society is much too insular, much too racked with infighting to care about external threats.

And that's why if there's an alien invasion, it really wouldn't change anything. All right. Is this clear to you guys?

Okay. So that's a model we're working with. All right. Any questions? Are you guys clear about this?

Okay. And that's why these families expand so fast. And also, who wants to marry into these families? Who wants to marry into them? Everyone. All right? And they have to marry into other families in order to maintain their power. Okay? So having children in a marriage is a way for the elite to maintain their power.

Okay. But that's a good question. Any more questions before I continue? Okay. So, let us summarize what we've learned so far and discuss what it is that allows societies to rise and fall. So, we'll look at three phases: the rise, the decline, and the collapse.

Okay? So when I say decline, I don't mean like things are getting worse. I mean things aren't improving. Okay. So rise is when things get better. Decline is when things are stagnant or getting slightly worse. Collapse is when society is about to fall apart. Okay. So if you look at these three particular phases of society, there are different... When society rises, it is first and foremost open. Open just means that you have room for social mobility in a society. If you're a poor person, you can make money. You can become wealthy.

Your talent is appreciated. It's a meritocracy. It's innovative. If you criticize society, people are like, "Thank you for criticizing us because criticism makes us better people." Okay, there's open debate. Now what's really interesting is most young societies are open societies. So for example, in the 1950s, the United States was a democracy, right? China was... But this is really interesting, in the 1950s they were both open societies. You could criticize leaders. In fact, you were encouraged to criticize leaders. China was as democratic back then as the United States. Okay. So, it's not about political systems. It's just about what state you are in social development.

So, if you're young, you're going to be open. You're going to be democratic. You want to learn. So, you will listen to criticism. Okay? That's the first great characteristic of a society on the rise. It's openness. But when you reach a decline phase, guess what? Society becomes... Okay, bureaucratic. Why? Because if we go back to this model, as a company loses more and more money, the managerial class is concerned with maintaining their jobs. So they become... okay? They have to prove their worth. So they create a lot of paperwork.

They make everyone follow the rules. Society becomes more and more... Then in the collapse phase, it becomes a... Okay. Before, the client is all following the rules. Now it's just rule by force.

I know there's... but there's another way of saying this. In the rise phase, what matters is the consent. Okay. So these three groups, the elite, the middle class, and the people, they're all working together to improve society. There's consent. But when you hit the decline phase, now there's deception.

And then when you hit the collapse phase, it's coercion. So let me give you an example. Let's just say we are in the rise phase, right? Well, we want to go to lunch. So, we discuss where we go to lunch. I want to go to McDonald's, but you guys want to go to Pizza Hut or KFC. We have to debate and then eventually we vote, and whoever, like, the majority wins. Okay, that's a consent phase. When we hit the decline phase, deception, I'm the teacher. So, I say to you, "Hey guys, let's go to McDonald's because Wong Fay will be there or Jack Ma will be there or it's free hamburgers today." Okay, I'm lying to you to get what I want.

And then in the collapse phase, I say to you, I'm the teacher and I will beat you up if you don't listen to me. Okay.

So the rise phase, what matters first and foremost is unity of the people. We're all working together. There's empathy. There's concern for others. I want to be your friend. We need to work together to make society better. Okay. But in the decline phase, it's really about stability.

It's about making sure that society maintains a status quo. Okay. When we reach a collapse phase, it is survival. Screw you. I want to live and if I have to kill you, I'll kill you.

So this is a map that shows us what happens when society rises, declines and collapses. Now what's really interesting about this is the timing. Okay, so if you actually look at society's timeline, it goes like this. Okay, there's a steep rise, the decline is slow and the collapse is sudden.

People think, oh, decline, you know, things get worse and worse, but you know, if we follow this trend we'll still be here. But actually the collapse happens really fast. Why? The reason why is this system cannot survive external shocks.

External shocks is a perfect storm of crisis. So another way of saying this is maybe society prepares for, okay, if there's a plague we'll do this. If there's a climate crisis we'll do this. If there's a drought we'll do this. If there's a war we'll do this. Okay. What society is not prepared for is these things happening all at once. The drought, the revolution. They all happen at once. It's a perfect storm. And that's what leads to the collapse because society is not prepared for this. Okay? And why is society not prepared for this?

Because when you hit the authoritarian phase, you're not allowed to criticize the system anymore. The problem are those who speak out. The problem is those who point out the problems of society. In the rise phase, those who criticize society are the heroes. They are appreciated. They are rewarded. In the collapse phase, those who speak out are the enemies of society. And therefore, society cannot be prepared for any external threats, which leads to its collapse.

Any questions? Okay. So this is the analytical model that we're working with, and again we're going to apply it to the present and then we're going to apply it to the past. Okay. So with this analytical model what we can do is make certain predictions about the future. So I will make these, and I expect these things to happen in the five to 10 years.

After 10 years or 10 to 20 years. Okay, I don't know the time frame. Okay, I expect these things to happen. Okay, the first thing that's going to happen in the western world is decline of democracy and freedom.

So remember, in the rise phase society is democratic and open and meritocratic, but as you move on it becomes more bureaucratic and ultimately authoritarian. Okay. So we will see the United States and Europe become much more authoritarian. You will see a collapse of democracy and freedom in these, and already we're seeing this happen in the United States where Trump is using more and more military to resolve... So that's the first prediction, and this is going to happen throughout the western world. Second thing is economic collapse, as people have less and less right to speak up, they feel less invested in the system.

They're less willing to work. Therefore, you have economic collapse. People don't believe in the system anymore. Okay? The system is in crisis. This will lead to immigration. The government is like, you know what? If the people don't want to work, screw them. Let's bring in immigrants to do the work. Okay? This is, let's replace our population. But the people are not going to sit back and take it, right? This leads to civil... people are now killing each other on the streets, and the government is like, you know what, if we continue to let them fight, eventually they're going to come after us. So what we'll do is send them off to like these stupid pointless wars overseas. Okay, so now you have stupid wars, stupid foreign wars.

And these are my five predictions for the world for the next 5, 10, 20... Okay, Europe and America will see less freedom and democracy. There'll be economic collapse, increased immigration, civil conflict, and then ultimately stupid foreign wars. And I'm not saying this happens in a sequence. I'm saying you'll see all five things. Okay? But they may happen in different order.

Any questions? Was this clear to you guys? Yeah. Thank... Is there any chance that the government tries to use a war to distract the people? Like they're trying to hide all of the collapse of the society and their...

But what I'm doing is I'm presenting a theory, a model that we can use to make predictions. And if these predictions work out, if it actually happens, then there's some accuracy to our model. Okay, we'll have to refine our model, but there's some accuracy to it. But hey, if tomorrow Trump, Putin, Xi all get together and say, "Let's be best friends," then I'm wrong. Right? Okay. So that's what we're trying to do in this class. We're not trying to argue what is right, what is wrong, what is just, because quite honestly, it doesn't matter, right?

Morality doesn't matter here. It's about power. We're trying to understand how the world... And when we do, and if we do that, then maybe we can work together and build a more just world. But first, we need to figure out how the world really works. Okay, any more questions?

Okay, great guys. So we will continue this story next class. I'll see you guys next class.