Second Black Swan – Bursting the Great Stuff Bubble

Whenever I see a holiday ad (say, for Chia products), or hear about the current economic mess, I think about Nassim Taleb. He is the author of The Black Swan: The Impact of the Highly Improbable. This prompts me to think about our most recent national Black Swan, which prompts me to wonder if a second Black Swan is waddling in the wings.

The recent Black Swan is pretty obvious. Everybody knows we are in a recession. Most experts seem to agree that the crisis was triggered by the bursting of the subprime mortgage bubble. This fits Taleb’s description of a Black Swan. It is an event of great impact, unforeseen beforehand, but appearing afterward as obvious and inevitable.

The second Black Swan that I wonder about is the bursting of the Great Stuff Bubble. Unlike the bursting of previous bubbles (the Tulip Bubble in 1630, the South Sea Bubble in 1711, the Stock Market Bubble in 1929, the Dot Com Bubble in 1999, etc.), which involved particular kinds of stuff, the Great Stuff Bubble would affect all stuff. Black Swan poop would cover everything.

(I also wonder if the Great Depression resulted from a pair of Black Swans, the first being the Stock Market Bubble burst, the second being a Great Stuff Bubble burst, not recognized at first, but monumental and devastating in its impact.)

Although Taleb says you usually can’t predict Black Swans (or extrapolate from history), consider this hypothetical chain of events:

Suppose…

Because of the recession, the country buys half as many Chia pets, ties, gloves, scarves, socks, sweaters, George Foreman grills, big screen TVs, etc as it did in previous holiday seasons. After the holidays, some people discover they don’t miss this stuff. Some people say, “Well, who needs all that stuff anyway?”

The drop in stuff-related sales further weakens the economy. There are more layoffs. People, who can buy even less stuff, begin to rethink the difference between necessary and unnecessary stuff. Although many people still cling to their stuff, many others, especially those who discovered they really didn’t need Chia pets and big flat screen TVs decide that stuff isn’t everything.

Society changes. Forced by circumstances, thrift becomes a virtue, at least among a big segment of the population (old hippies, real Christian conservatives, Unitarians, all libertarians). People hang on to old cars, old clothes, old appliances. Big houses are regarded by some as obscene. Lavish displays of wealth seem tacky. Donald Trump is sillier than before and Ralph Nader is sort of chic. Excess is out; moderation is in.

In this hypothetical scenario, we enter a new age of stuff awareness. Of course, this is when the second Black Swan becomes obvious, when the Great Stuff Bubble bursts. That is because all of the world’s industrial economies are based on the movement of stuff. Necessary stuff, unnecessary stuff – it doesn’t make any difference to the economic system.

However, the difference between necessary and unnecessary stuff is important to struggling consumers. A combination of ethical and practical considerations compels most people to cut back on what they perceive as unnecessary stuff. This varies between consumers, but the results are the same to the economy. Companies that make unnecessary stuff, whatever it is, go out of business or scale back.

At this point the story is almost over. The Black Swan, having pooped, moves on. The economy spirals downward, trying to find a new floor based on new distinctions between necessary and unnecessary stuff. We enter a second Great Depression.

What happens after this depends on the next flock of Black Swans, circling even now, invisible yet ominous. One could expect social unrest, perhaps wars. Perhaps a war brings us out of this Great Depression, like WWII brought us out of the first Great Depression, curing us of our consumer malaise, and reinvigorating our taste (and capacity) for stuff.