In my view, if you have a 20-year-plus horizon, the key is to be diversified. You don't need to find the needle in the haystack. Just buy the whole haystack, because you want to play to your strengths — your time horizon — so you can withstand volatility. You absolutely want to do low-cost funds, and you could probably get into some alternatives, whether it's private equity or funds raising money for venture capital at a low fee, because you can absorb some of the risk that older people can't absorb.
In today's office hours, we talk about global markets, starting a business, and how big tech has evolved since the before my first book. Question number one. Our first question comes from John from the UK. John says, "Dear Scott, love the podcast." Thanks, John. "My question is on the investment time horizon. I've heard your recent comments on investing in US equities versus international equities and the relative returns 2026 year to date for each. If we're looking at a time horizon of decades, in my case, two-plus decades, does that change your view? For such a long time horizon, do you still recommend low-cost index funds? If so, US-focused or others? Thanks." Okay, so the question: does a 20-year-plus time horizon change the case for US-focused versus globally diversified low-cost index funds? If you look at the past few decades, what you see is that leadership is cyclical, not permanent. The US dominated markets or global markets for the past 15 years, but international equities led for much of the 70s, 80s, and again through the 2000s. So it is cyclical. From 2010 to 2024, US equities outperformed in 12 of the 15 calendar years, the longest such streak in recorded history. But since 1975, the average outperformance cycle has just been eight years. So we have basically a 15- or 17-year winning streak, which was twice as long as most winning streaks in terms of regions. The current US cycle has already run, as we said, about 15 years as of late 2025. If you were to bet exclusively on the US over the next 20 years, you're effectively betting that the longest cycle in history just keeps going. And that doesn't typically happen. There's been a recent reversal. In 2025, international equities gained 31% in dollar terms, outperforming US stocks by about 15 percentage points, the biggest margin since 1993. So, here's what the forecasters are saying. Vanguard projects US stocks returning just 4 to 5% annually over the next 5 to 10 years, almost entirely driven by stretched large-cap tech valuations, and Vanguard's model gives a 70% probability that international stocks outperform the US over the next decade. Fidelity projects US equities returning 3.2% over the next 20 years, roughly a third of the real returns delivered since 2005. In terms of valuation, or how I like to look at stuff, over half of the international sector trades at or below their 20-year median forward PE. So there's still relatively decent value, and every single US sector trades above it. Japan looked unstoppable in the 80s before entering multiple decades of underperformance. So it's a cautionary tale for assuming any market stays dominant. You know, past performance is no guarantee of future performance, as they say. So, what's the answer? In my view, if you have a 20-year-plus horizon, the key is to be diversified. You don't need to find the needle in the haystack. Just buy the whole haystack. I would buy US equities, but I would also diversify across asset classes, not only equities but bonds. And I would also diversify geographically. Now, with a 20-year time horizon and being young, quite frankly, you can be a little bit more aggressive. So if you're going to invest in a European fund, a Vanguard European, it might be European growth. I think you could probably, if you were looking at fixed income, look at some more exotic stuff like distressed equity or a PE fund. I think you can be a little bit more risk-aggressive. It sounds like you're a young man. If you're my age, you want to start to scale down your risk and really diversify. When you're your age, you can be a little bit more concentrated, but I would still go across different asset classes and different regions, but be a little bit more aggressive in terms of the type of fund. And you can endure volatility. You can invest in funds that invest in private markets, and you could even perhaps invest in some things that aren't as liquid, because you want to play to your strengths — your time horizon — so you can withstand volatility. You absolutely want to do low-cost funds, and you could probably get into some alternatives, whether it's private equity or funds raising money for venture capital at a low fee, because you can absorb some of the risk that older people can't absorb. But again, what's the key? Diversification. If you're just in SPY, you're not that diversified, because 40% of your investment is just in 10 companies which dominate the indices right now. And you also want to be diversified geographically. And then you want to pick good funds, very low cost, and quite frankly not look at them for a long time. Because not only is it an investment of capital — of financial capital — it's an investment of your time. And so you want to find good funds you feel good about and then not have to invest your time looking at your phone or wondering what's going on. You also may want to take 10, 20% of it and have some fun and pick stocks, individual stocks that you think might outperform. It's fun. You learn a lot. You track them, and occasionally you get lucky.
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Question number two comes from Thomas, who emailed us. "Hi Scott, first of all, I wanted to thank you for the great work that you do." Thank you, Thomas. "You and I have similar backgrounds. I was also raised by a single mom, and I too found my way into investment banking. I'm currently in my mid-20s and work in municipal bonds. And while this has been financially rewarding, I'm sick of working in corporate America. I have an uncle who has sold a couple of businesses to private equity firms, and we've tossed around the idea of starting a business, but I don't have many skills outside of what you learn on the job in IB. I can grind, can do detailed financial analysis, and can put together and deliver a great investor presentation. He's getting older, and I know that I would kick myself if I didn't take the opportunity to learn from him as an operator. My question is, if you were my age today, what industry would you try to break into if you had the time and willingness to work 80-plus hours per week?"
Okay. So, first off, don't sell yourself short. You and I have very similar backgrounds. I was in municipal finance in the fixed income department at Morgan Stanley. So we're doing the same thing. And you learn attention to detail, rigor, analytics by virtue of the fact you're at an investment bank, which are very selective. It means you have really strong skills, and you would probably make a very good entrepreneur and a good operator. What field you go into, quite frankly, is opportunistic. What fields do you have contacts in? What fields is your uncle interested in or already in? So if I said, yeah, in a vacuum, I would go into the intersection between AI and healthcare. But I don't know if you have any interest in healthcare or skills around AI or the ability to raise capital, which a business like that probably requires, or if your uncle is in the curtain-hanging business and already has a business with six vans and you're going to take it over and put your shoulder down and grow that business. There is a big opportunity in the following, and that is if you have a little bit of capital, going and buying a business. Baby boomers — we're seeing just an enormous wave of retirements of baby boomers, many of whom own small businesses, right? A landscaping business, an auto repair business, a company that installs appliances. There's all of these little businesses everywhere. And generally speaking, a lot of these companies, a lot of these people, because of lower birth rates, don't have many kids to take over the business, or the kids don't want to take over the business, right? You know, because what dad does is lame, or they just don't have anyone to take over the business. So you can show up a lot of times and buy a nice little small business and get seller financing. In other words, I own — let's just go with the curtain company, the curtain-hanging company. I just spent a bunch of money hanging curtains, and it was worth it. I love curtains. Who would have known? Who would have known? I would just be just down and crazy. I just go bonkers with a good curtain. I absolutely love them. I think they're so elegant. I think they're so sublime. I think they say a lot about me, right? Anyway, love curtains. So this guy — I spent a lot of money on this guy, and he was complaining that his kids aren't interested in his business, and I think he makes a very good living. And if you approach someone and say, "All right, I want to buy your business. I need one year for you to stick around to train me, and then I'm going to give you some cash up front, but I'm going to give you a royalty or a tail for the next three, five, ten years of X% of the top line such that you have a retirement." So you basically buy the business and they finance it, if you will. There's a ton of opportunity in small businesses. So having said that, maybe your uncle's already in a certain business, maybe you have a vision for something, but this is opportunistic. Meet with your uncle on a regular basis. Try and find something and then start it and see what happens. And if it's not working after two or three years, don't beat yourself up. Go on to the next thing, because, you know, small business is hard. But also, as a former investment banker in fixed income, I found a lot of my skills and training — it was more about an approach to work, attention to detail, and the willingness to work really hard and get along with others — that makes for a good entrepreneur. So you have outstanding skills to be an entrepreneur. Best of luck to you. We'll be right back after a quick break.
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Welcome back. Question number three comes from the pie is a lie on Reddit. "Hi Scott, I've been following you since your book, The Four, which I found to be an incredibly insightful take on the success of big tech in our world." Thanks. By the way, I wrote that 10 years ago. "My question is 10 years later." Well, there you go. "How do you think your analogies and predictions have held up? Is there anything you would update given today's reality?" When I first started writing the book in 2015, it was basically a love letter. I mean, people don't remember. In 2015, we were trying to figure out if it was going to be Jeff Bezos or Sheryl Sandberg that were going to be president. By the way, Sheryl Sandberg was supposedly going to be the VP for Secretary Clinton, or the Treasury Secretary, or Bloomberg's VP and his Treasury Secretary. And people were trying to get Jeff Bezos to run for president. And boy, has the worm turned. And my book was basically a love letter. I'd made a lot of money investing in these companies. I was fascinated by them. By the time I got to chapters three and four and did a lot of research and talked to a lot of people in the industry, it turned into a cautionary tale. And that is, I thought something is wrong here. And I'm not going to be humble here. The book was prescient. I said, don't be fooled. And this is again 10 years ago. There's something wrong in Mudville. That Meta does not have our best interest at heart. Amazon is using predatory pricing to basically put other small retailers out of business, consolidate the market. Their fulfillment costs went from 16% of the purchase to about, I don't know, something like 40. So the play is consolidate the market and then increase fees on your third-party retailers. So the core idea of The Four was that the biggest tech companies won because essentially they won because they tapped into basic instincts. And that was Google was knowledge and answers. When you pray, what are you doing? You're sending a query into the cosmos hoping that some divine entity with greater processing power than you will hear your prayer and then spit back an answer you can trust. That's Google. Your most personal items, your most serious queries, you type into Google now, maybe into Claude or ChatGPT, and you trust it more than your boss, mentor, girlfriend. You take your most serious questions to this new god, and that's our brain. Facebook or Meta was the heart. We want connections. We want to be loved. We want affirmation. We don't want to be shamed. Apple was the genitals, and that is status. If you have an iPhone, it's basically the most elegant kind of, I don't know, non-obvious or subtle way of saying, "I am wealthy. I am creative. You should have sex with me." Only a billion iPhone contract holders, and those are the billion wealthiest people on the planet. If you don't have an iPhone, you're kind of sending a signal to the world that things haven't worked out the way you'd hoped, if you will, and that the branch of your gene pool should come to an end. And then finally, Amazon is the stomach. And that is my dog, no matter what time it is, will just pretty much eat until we take the food away. Because dogs grew up with the experience on the savannah that there was never enough food. So they want to just gorge. And we have a consumption mindset where instincts haven't caught up to institutional production. So we gorge on fatty foods, on gambling, on porn. You know, these are things we can't — on feeling good, on alcohol. We can't — when they're put in front of us, no one is telling us, "Wait, you don't need to eat everything on your plate, because guess what? You're going to have cheap calories in the morning." That's kind of what GLP-1s do, and why they're so transformative in my mind. It's going to be bigger than AI is. It essentially is scaffolding on our instincts that brings our instincts up to date. But Amazon adopted the strategy of Walmart, of Dell, and of China. And that is the ultimate business strategy is more for less. And they were able to attract such cheap capital because Bezos is such a visionary and such a great communicator that they were able to basically give you a dollar worth of goods for 90 cents for a good 10, 15 years, and then consolidate the market and then slowly but surely start raising prices. But their scale, their operational excellence just gives you a dollar worth of stuff for less than anybody else, or almost less than everybody else usually. Yeah. And that taps directly into our consumptive instinct, full stop. So these companies, I thought, if you want to build a trillion-dollar market cap company, I think the first question you got to answer is what instinct is this calling on? What is it about kind of our primitive past that makes it obvious what this company is doing? Also, the book was more about a fear around a lack of regulatory frameworks and the idolatry of these companies because they were making so much money was wallpapering over some very troubling signals even back then in terms of radicalization of young men, putting smaller businesses out of business, tax avoidance, what Apple was doing with these double-dutch strategies and basically fooling government into thinking, "No, no, don't regulate us, we're your winners." And so essentially Section 230 passed in 1997 gave these companies free license to grow totally unfettered, right? No regulation, exempt from the same regulation that a newspaper is subject to because, quote-unquote, they were nascent platforms 29 years ago. Things have changed dramatically. In some ways, I think I wasn't harsh enough. I kind of missed how incredibly damaging it was going to be to our youth. The weaponization of our elections, or the weaponization of these platforms by bad actors. I think when we look back on this era, we're going to regret the coarsening of our discourse, the consolidation of industries, and income inequality. But I think the thing we're going to regret the most is — well, two things. One, how did we let this happen to our kids? And two, the shaping. I don't think people have really come to grips with how much we are subject to mind control or opinion control because of bots, sometimes sponsored by bad actors, or the loudest minority, if you will, that shape or shame our views and shape the narrative. I'm subject to it. If I say something and a hundred bots or people weigh in and say, "Scott, you're tone-deaf, just like an old white guy," I'm less reticent to say it again. So we have unfortunately a series of unknowns and bots and the most extreme on either side shaping our narrative, which has resulted in polarization and inability to get — this is the least productive Congress in history. Is some of that incompetence of our elected representatives? Maybe. But I think most of it is our fault, and that is we've all decided we hate each other and that the enemy isn't income inequality or climate change or Russians pouring over the border in Ukraine, that the enemy is the guy, the neighbor down the street who has a political sign that we don't like. So I think things have gotten worse. I think that it was a cautionary tale, and I think we got more right than wrong. And I wish I'd been a little bit — I wish I'd spent more time talking about the impact on kids and how it shapes our views on politics. And I also wish I'd spent more time looking at the CCP and the GRU's impact. Anyways, I might — who knows — maybe I should do an update and call it, you know, The Five, or I guess it's The Ten now. Big tech's more dominant. AI is making the biggest companies stronger, not weaker. Tech companies now look more like infrastructure than apps. Governments are starting to wake up and regulate them. It took us about — if you think about externalities, it usually takes 20 to 30 years for the public to weigh in. It took 30 years in tobacco. It took 20 years in opiates, and it looks like it's going to take 20 years in social media. Social went on mobile in 2013, and I imagine by 2033 we'll have pushed back. What's interesting is Microsoft really held on and became much more important due to AI and cloud computing. The new player on the stage, I would argue, is Nvidia, and it became one of the most powerful companies in the world because AI depends on chips and compute. And also, I think people recognize that social media has kind of shifted from friend to foe, specifically from friend networks to algorithm-driven platforms including TikTok that do not have our best interest at heart and elevate content that is incendiary or more conspiracy-minded because it's more novel, creates conflict, more ads for Nissan, more shareholder value. The original book was more about consumer psychology and platform dominance. Today, the story is increasingly about AI infrastructure and compute. That's all for this episode. If you'd like to submit a question, please email a voice recording to
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