Neil Howe is many things: The author of several books, a Washington D.C.-area consultant, and an asset management executive at Hedgeye Risk Management.
He’s also the man who coined the term “millennial” back in 1991 as part of his wholesale invention of a new field: generational research. His book The Fourth Turning, coauthored in 1997 with William Strauss, provocatively argued that each generation has a specific role to play in the “secular cycles” of history—and predicted that a crisis era would engulf the United States from roughly 2005 to 2020. Derided as “pseudoscience” by the same media that happily appropriated his term for the emerging millennial generation, this modern-day Nostradamus has gained increasing caché, if not quite full adherence.
It has famously become a favorite book of Steve Bannon’s, but also notable business figures such as investment strategist Kiril Sokoloff. The New York Times recently acknowledged the theory’s increasing entry into pop culture in its Styles section, while its Books section tapped no less an authority to review it than Francis Fukuyama, the great political scientist who predicted “the end of history” when the Berlin Wall crumbled and the USSR fell.
About a decade ago, Howe recently told Fortune, he realized he would have to write a sequel, as his prediction called for a “catalyst” event around 2005 to trigger a “crisis era” that would ultimately result in a “great devaluation” in which “real hardship will beset the land, with severe distress that could involve questions of class, race, nation, and empire.” This period would climax in the 2020s as “authoritarian, severe, unyielding” elder leaders (not unlike Donald Trump) would face off against the millennial and Gen Z cohorts, with Gen X midlifers navigating between them. “It wasn’t too long after the GFC [Great Financial Crisis] that I thought this was definitely it," he said. “It came along right around the right moment—2007, 2008 was very close to what we predicted.”
In a wide-ranging interview, Howe talked to Fortune about The Fourth Turning Is Here, out July 18 as a solo effort, without his former coauthor (William Strauss died in 2007). He described how his theory has largely played out as he expected when he and Strauss set it down over 25 years ago, while remarking on how the younger generations of millennials and Gen Z (what he calls “the homelanders”) have surprised him. A proud Gen Xer himself, he reveals how he sees his cohort aging like a fine wine, while the “severe, authoritarian” boomers that he warned about are aging just as expected.
Howe also explained why he’s worried about the state of the economy, why he’s leaving the DC suburbs for a rural, mountainous area in West Virginia, and why he’s skeptical about President Joe Biden’s actions on student debt. But when the fourth turning is complete, he added, none of that will matter.
An ‘iconic’ millennial: Taylor Swift
Howe and Strauss’ fourth turning theory labels the millennials as the “hero” generation, destined to confront the boomers in a struggle over the direction of the country’s economic and political future. This does not mean they’ve had an easy time of it, though.
As he looks back on the millennial narrative, Howe sees a generation that fully trusts in the ethic of meritocracy, while putting itself through an extraordinary amount of schooling, testing, and examination. The generation with the most student-loan debt also embraced AP tests and extracurricular activities to an unprecedented degree, and forsook party drugs for “smart drug” stimulants instead. They leaned on each other for support, with Howe noting the vogue for “volunteering,” the plague of “FOMO,” and the thirst for social media and digital surveillance where they all tracked what each other were doing.
“The struggle to achieve, behave, fit in, risk-manage, and please others—all at the same time—is pushing Millennials toward an optimizing, menu-driven, even perfectionist approach to life that often leaves them chronically stressed,” Howe writes in his new book. As economic reality refuses to line up with millennial self-application, he concludes that they grow skeptical of capitalism, and “many regard the unbridled marketplace as a child-devouring Moloch.”
He cites the figure of Taylor Swift as a classic “mainstream … millennial brand.” When asked about whether she sums up the millennial combination of perfectionism and anxiety, Howe simply said that she’s “iconic.”
Apart from working with the best songwriters and being one of the music industry’s wealthiest superstars, Howe said that “everything is perfectly arranged and staged” in Swift’s public persona.
Howe noted her carefully stage-managed live shows, her astounding financial success, and even how she re-recorded her catalog to reclaim ownership of it. It’s “her way of getting out from the chaos of the marketplace,” he said. It shows her attitude of “I'm going to own it all. It's all going to be under my control.”
Fortune 500 led by Gen Xers that can ‘think outside the box’
Howe’s theory holds that Gen X was the jaded and cynical generation that raised Gen Z, and during the fourth turning they will emerge as crucial leaders in a crisis. As it so happens, the Fortune 500 list for 2023 revealed that Gen X is in fact now in the driver’s seat for corporate America.
“They're very resourceful, very pragmatic,” Howe says of his own generation. “They don't really count on much, they expect they have to do everything themselves, and to think outside the box.”
The economic and cultural analysis underlying his vision traces back to childhoods in the 1970s when “latchkey” parenting arose, then a labor market in the ’80s and ’90s marked by an upper tier, hogged by the larger boomer generation, and an increasingly tenuous lower tier with fewer and fewer training programs and welfare benefits. “Most Xers welcomed a less regulated economy,” he writes, “figuring that—since the rules were rigged against them—fewer rules were better.” More darkly, he adds that because Xers both assumed and were told they “they had no future, each figured his or her only chance was to take risks and be different.”
Certainly, the entrepreneurial bent of the Gen X cohort, especially in Silicon Valley, has been plain to see for years, as Howe reels off a list including Marc Andreessen, Jeff Bezos, Peter Thiel, and Sheryl Sandberg. “Thanks to Xers,” he argues, “U.S. corporations have returned to the top of the world (by market cap) and small business has joined the military in high public esteem.”
With a time of crisis now upon us, Howe told Fortune that Gen X will be “a pretty good generation to have” in leadership. Noting they have been slow to move into the top CEO position, with the notable exception of Silicon Valley, he said he expects that to change as they’re well-suited for the fluid, chaotic crisis era upon us. “They sort of put together a solution which is not the one prepared for them. I mean, they expected for there to be no rules.”
There is a wealth of evidence in financial markets that a historic regime change has indeed occurred. In 2022 and 2023, the greatest coordinated hiking of interest rates by central banks worldwide has just occurred, fighting the biggest inflation surge since the early 1980s, leading many to declare an end to the “era of easy money” or “everything bubble” in place since the Great Financial Crisis.
More broadly, the White House has adopted the media portmanteau “Bidenomics” and joined it to Biden’s long war on “trickle down,” the reigning philosophy since those same 1980s, also known as “Reaganomics.” A commercial real estate crisis dubbed “apocalyptical” by some industry professionals is leading many investors, CEOs, and billionaires to predict a correction that borders on a total revaluation of the sector.
The world of capitalism also promises to look very different under Bidenomics, with an embrace of industrial policy growing out of the decoupling with China that began under President Donald Trump and becoming a pillar of Biden’s economic policy. The industrial policy under Reaganomics, of course, was to have no industrial policy, which de facto rewarded the financial sector and an increasingly globalized world. That does not appear to be an option with China and the U.S. determined to compete.
Gen Z says no to the ‘rabbit hutch’ world of ‘hustle culture’
And then there’s Gen Z. Howe says they look at millennials’ constant attempt to achieve new things and say: no thanks.
“They don’t think a lot of this ‘hustle economy’” culture, he says. “Just hustling around and affording your rabbit-hutch apartment isn’t really building a future,” he added, commenting on how rent inflation has forced millennials into group-living arrangements reminiscent of the mid-20th century. Gen Z is benefitting from a historically tight labor market, he said, noting that their reservation wage has increased, and what they really want is “something that’s going to help them for the long term.”
The “fascinating” thing he’s seen in his research is how “late wave” millennials and Gen Z are avoiding college. “We've seen a huge drop in enrollment. particularly in the non-prestige colleges.” He chalks it up to younger Americans wanting a different kind of learning and a different kind of job experience, although he did not touch on the remarkable inflation of college tuition that has made it simply unaffordable for huge swaths of middle-class Americans.
“They want to do something that's relevant right now. They don't like the idea that a lot of millennials had, with life indefinitely on hold,” en route to becoming the most educated generation ever. He thinks there’s a new movement afoot: “I want to do something right now. I want to make money right now. I want to actually be paid for my worth right now.”
Howe writes in his new book that Gen Z has “no memory of a prosperous or confident America—that is, of living in a country that isn’t either plunging into a recession or struggling to get out of one.” With an innate understanding of the dangers and pitfalls of the American economy and culture, Gen Z has learned to “stay close to home, follow the rules, and don’t upset older people who are doing their best to take care of you.” And their Gen X parents, he adds, are committed to “being there” in a way their own parents weren’t during the latchkey years.
Commenting to Fortune on how Gen Z doesn’t seem to mind living at home, he says they know “you don't necessarily have to work for something stupid, right? It isn't really going to advance you. And it's not going to do anything for the country, either.”
Of course, part of the reason Gen Z isn’t straying too far from the nest is they can’t afford to during a period of historically high inflation—and historically low housing and rent affordability. Rather than live below their needs in a shoebox apartment, many in fact are staying longer in the parental home—a third of Gen Zers were living at home as of 2022, per CreditKarma. Beyond that, there’s evidence that Howe is on the money about the mission-oriented nature of the cohort, as they consistently say they want a job that aligns with their own values. This is global in nature, with China suffering record-high youth unemployment in large part because its Gen Z doesn’t want to work in blue-collar roles.
Howe concludes in his book that Gen Z is committed to “gentler virtues” than its predecessors, as rates of bullying, teen pregnancies, and alcohol and drug abuse are all in rapid decline, and Gen Z is remarkably sensitive to social harms and the needs of others. Above all, he argues, life for Gen Z is about “controlling emotions to keep others happy,” citing the astonishing number of blockbuster children’s entertainment offerings with emotional management as their theme, including Frozen and Inside Out.
The downside of this lifestyle, of course, is unremitting stress, and there is a wealth of evidence emerging that Gen Z’s mental health is in a fragile state coming out of the pandemic. The Surgeon General himself declared in May that loneliness is a major public health concern, the equivalent of smoking a dozen cigarettes a day. Young adults are hit with it especially hard.
The icebergs lurking in the economy
How does Howe reconcile his predictions of crisis with an economy that is performing surprisingly well, halfway through 2023? The blockbuster June CPI report shows inflation cooling to the 3% range, and the most widely predicted recession in Wall Street history not only hasn’t materialized, but odds of a soft landing are growing.
“I mean it’s possible,” Howe says of the soft landing scenario, “but I don’t think it’s likely.” His main reasoning is “some big sectors which are icebergs right now, and there’s very low transparency about them.”
He mentioned private equity, a much larger share of the economy than it was before the M&A explosion of the 2010s, and completely opaque. “No one knows what private equity is really worth,” and all the bad debt can be hidden during down cycles, with “mark to market” only happening at the most opportune times. Right now, he says, “they’re not showing anything, they’re not doing any down rounds,” meaning fundraising at lower valuations. “They’re waiting, they’re holding their breath, and if nothing saves them given the leverage of these companies, they’re going to be in trouble.”
Over the long run, he’s concerned about the economy, as he looks at economic indicators every day for his “day job” in asset management. “All the long-term indicators are red, all the medium indicators are sort of yellow, and all the near-term indicators are green.” None of this, he adds, will matter if the fourth turning plays out as he projects, because the entire economy will get restructured.
And then there’s the housing market, where Howe has a more personal analysis. Now on the “outskirts of DC” in Northern Virginia, he’s gotten sick of the lack of affordability and he’s moving “on the top of a mountain” in West Virginia, “way out in a rural area.” It’s been a long time coming, he says. “It’s just that it’s much cheaper to live out there.”
-- Additional reporting contributed by Chloe Berger and Hillary Hoffower
