My goal with the Leap is to provide frameworks and tools to help entrepreneurs and builders of all kinds succeed.

Since professional money management and financial market strategy are part of my talent stack, I would be remiss not to share my views on the potential economic challenges—and opportunities—facing us over the next three to seven years.

Making the leap is uncertain enough. Understanding the economic environment your building in is essential.

Forest Fires

Imagine you live near a large forest. On random days you are asked to walk into the forest and drop a lit match onto the ground.

On rainy days the match might expire immediately causing no damage.

On average it might start a small fire that burns a few square feet or several acres.

Other days, with drought conditions, high winds and years of underbrush build up—similar to Los Angeles in early 2025—the whole forest could burn down.

The match, or the event, starts the fire. What determines the fire’s devastation is the structure of the forest—the amount of moisture, wind and underbrush.

Economies and financial markets are similar.

Most people overly focus on the matches. Examples include tariffs, company earnings reports or geopolitical events. Basically, most of what you hear and see from news headlines.

Not enough attention is paid to the structure of financial markets and economies including global debt levels, population growth and productivity.

Like forests, the same financial market match or event can cause very different reactions depending on the current economic or market structure.

Global financial markets and economies risk a 2025 Los Angeles Fire level event.

Global debt, declining populations and disruptions due to AI—which will ultimately be positive—could make the next few years simultaneously the most volatile and potentially lucrative periods in the past hundred.

Below I will walk you through the current structure—as I see it—of our global economy and financial markets.

Most attention is paid to the US as the best proxy for global growth.

I’ll end with a brief description of the playbook I am using to navigate the upcoming uncertainty.

Economic and Financial Market Overview

For clarity, this section is broken down into three parts:

• Macro - Where we are in the broader trends and cycles of the economy

• Fundamental - How major asset classes (equities, credit and interest rates) are relatively priced—Are they historically attractive or unattractive?

• Technical - Often short term supply and demand indicators. I will lightly focus here given our longer time frame.

Macro

A simple formula, universally used by economists, best describes economic growth:

Economic _Growth (GDP) = Population _Growth + Productivity _Growth

The formula—economic growth equals population growth plus productivity growth— makes practical and intuitive sense.

Anyone who has children knows how much money you spend upon their arrival. More people require more goods and services—ie more economic growth.

Productivity growth is our ability to do more with less.

Think of the productivity gains humanity realized as we moved from digging with our hands, to a shovel then a bulldozer. Our economies grow faster as technology provides more output per unit of input.

Population Growth

We are not having enough babies. Most of the developed world—responsible for more than two-thirds of the global economy—is reproducing below their replacement rate.

Put simply, each woman must produce at least 2.1 offspring to replace the current population. Below this and the population will decline as we see in most of the world.

In summary—population growth will negatively contribute to potential growth.

As bad as this is for long-term growth, we face a more immediate and dire situation due global debt levels—the underbrush of the global economy.

Can innovation drive productivity growth offset the negative impacts from global debt levels and population declines?

Productivity Growth

Productivity growth arises from the following:

• Investment Capital - Is money available to invest in projects, technologies, etc.?

• Innovation - What new technologies or discoveries can be leveraged to produce abundance (AI, the internet, etc.)

• Physical Capital - What non-financial resources are available including human capital, natural and physical resources (energy reserves, manufacturing capacity, etc.)?

Investment Capital - The Debt Super Cycle

Our economies grow over time—as the formula illustrates—from both population and productivity growth.

We also understand there is a cyclical nature—or booms and busts—to economic growth. These periods are primarily driven by short and long-term debt cycles.

A debt cycle is when too much debt accumulates—leading to outright default or severe economic restraint in order to pay it back. Either way growth is negatively impacted.

Short term debt cycles are the five to ten year periods of growth followed by a brief recession of several months. Such periods are often characterized with debt over-accumulating in specific sectors or countries—think the housing crisis during the Great Recession in 2008.

Long term debt cycles often span several decades with debt accumulating broadly across sectors—especially national governments.

The United States has experienced several and appears to be nearing the end of another. Most other major world economies are in a similar or worse debt situation.

The reason long term debt cycles are so dangerous—the debt death spiral.

When governments spend more than they bring in from tax revenue—known as running a spending deficit—the difference is made up from borrowing.

As debt levels accumulate beyond an appropriate level—investors demand higher interest rates to offset the risk.

The higher interest rates lead to larger interest payments that further increase the deficit and lead to more borrowing. Thus a debt death spiral is born.

Many of the most disruptive historical periods—from the French Revolution to pre World War II Weimar Germany—were preceded by debt death spirals.

Such periods are so dangerous because there are limited—unpleasant—ways to remedy them:

External Default

The U.S. could simply not pay back the debt they owe. This would be catastrophic as the U.S. Dollar is the world’s reserve currency—if lost, interest rates would skyrocket and foreign investment would dry up.

Cut Spending and Raise Taxes

A politicians first goal is the get elected—the second is to stay in office.

Cutting social programs or raising taxes is political suicide—hence the reason governments often run spending deficits.

Even if they were viable—no doubt necessary—the impacts to growth are negative.

Monetize the Debt

The third and most common way to resolve the debt is to create more money. The inevitable consequence is inflation.

Inflation is simultaneously in an indirect default on debt, a tax and a cut to benefits.

The debt is repaid but with a depreciated currency.

A retiree still receives there social security payment but—due to higher prices—can only consume as much as if their benefit had been reduced.

Similarly, tax payers have less purchasing power— constraining their income as a direct tax would have.

You can see how the conclusion of long term debt cycles often lead to societal upheaval such as regime changes, wars and the like.

The repayment of debt—regardless of method—crowds out the availability of investment capital and limits economic growth.

If you want to learn more about debt cycles, I highly recommend following Ray Dalio—the founder of Bridgewater—the world’s largest hedge fund.

Innovation - The Rise of AI

I could write daily articles on AI adpotion and distruption.

The most compelling statistic is how quickly AI (ChatGPT specifically) reached one hundred million users. Two main factors for the adoption speed:

• No upfront hardware investment - Everyone already owns a phone or a computer.

• Minimal learning curve - Natural language is the primary interface.

U.S. productivity growth doubled from 1995 to 2005—years of internet adoption—versus the prior twenty year period.

Productivity growth from AI could—at least partially—offset major recession or depression risk from our debt situation. However, the disruption of job losses through labor transformation could be extreme near term.

Physical Capital

As AI models scale, the limiting factor becomes energy — not data, not compute chips — because you need enormous power to run both training and inference.

During the gold rush of the 1800s—more money was made selling picks and shovels than mining.

Energy could be the picks and shovels of the AI era.

Fundamental

Given our macro structural issues—have financial markets priced in Armageddon?

The short answer is—not at all.

For equity markets—the long-term PE ratio — the multiple of company profits investors are willing to pay—are at historic highs.

Credit markets—such as corporate bonds—are often the canary in the coal mine. They are valued on a spread—or the yield premium above risk free government bonds.

The smaller the spread—the less risky and more highly valued.

Similar to stocks—credit is near historic overvaluation levels.

Technical

Technical indicators assess short term market momentum. Given the macro picture—most of these could be overwhelmed and unreliable.

RSI—Relative Strength Index—Is a measure of the average gain over a period vs the average loss for an individual stock or market. The 90-Day RSI for the S&P 500 is neutral—having moved from its overbought zone due to tariff volatility.

While technical tools like RSI track short-term sentiment, they’re often drowned out by larger forces. In times like these, it pays to focus on macro and fundamental factors.

The Next Step

We face a generational period of risk and opportunity due to our economic and financial market imbalances, and the rise of AI.

With so much potential volatility—long investment horizons are crucial.

Market timing will be next to impossible.

My playbook consists of three pillars:

• Cash 

  • Liquidity is king during periods of uncertainty and high short term rates help offset inflation.

  • Dry powder provides ability to participate in opportunities.

• Opportunistic

  • AI and related sectors (energy, compute, applications)

  • Overall market repricing - financial market corrections or crashes will provide excellent buying opportunities for long term investors

• Talent Stack

  • I wrote last week here about the importance of managing your talent stack as an investment asset class.

In ten years—now will be considered one of greatest periods to have been an entrepreneur.

Now will feel uncertain—even scary.

The opportunity of a lifetime awaits those who can weather the storm and continue investing in themselves.

My goal with The Leap is to provide you each Saturday with the knowledge, tools and lessons learned to help you get started and keep going toward building your future. 

Whether you are making the leap to startups, solo-entrepreneurship, freelancing, side hustles or other creative ventures, the tools and strategies to succeed in each are similar.