Nature is a mighty teacher.
One of its most shocking lessons is that perfect balance is a myth. Chaos is mistaken for symmetry. Nothing lasts forever.
We can observe this in prairie lands.
Sometimes slight imbalances compound. It can take months, years, or even millennia. Or a shock, like a drought or a disease, kills off a food source near instantly. Less food means less grazing, which means other plants aren’t kept in check.
Any semblance of equilibrium is lost.
Certain plants just keep growing and spreading. Too many means too much competition for sunlight, soil nutrients, and too few bugs and bees to keep up with it all.
The system peaks.
Some animals get weak, and certain plants disappear. Grasses die and dry out. And then a fire comes.
With enough dried-out vegetation, wildfires spread effortlessly. There’s immense short-term pain.
But it’s not all bad.
This natural process stifles excess, reintroducing it into the soil as nutrients. And with less competition, growth is easier for future generations.
The cycle repeats.
Business cycles are no different.
Capital gets thrown into ventures that are projected to return greater capital. Sometimes, these projects are simply too optimistic. Minor miscalculations multiply until unignorable.
Other times, large, exogenous shocks (like COVID) disrupt the world’s trajectory.
Significant enough shocks mean no one is spared.
Disruptions proliferate quickly.
Failing companies can’t pay vendors, workers lose their jobs, less money is spent, and debt doesn’t get repaid. All of these things cause other businesses to make less money, throwing off their own models.
Rinse and repeat, deep into the trough.
Everyone finds themselves in defensive posture-uninterested in feeling more pain. People hoard their money. That means less spending and less investment into new endeavors because things look bleak, at least in the interim.
They wait until the smoke clears.
So, where are we now? Anyone who claims to know with certainty is a liar.
But there was a lot of dry grass before COVID struck. And COVID wasn’t a wildfire; it was a volcano.
Acting fast, we drowned the world in liquidity to combat potential damage. Now, excess capital and pent-up demand are driving even more growth. But we never let the dry grass burn. We never let nature finish its cycle.
No one knows how long the rain will last. No one can say how thick the overgrowth will become.
Will there ever be another spark?
Or have we beaten nature?