MGI Research

Forward Thinking on ‘megathreats,’ ‘polycrises,’ and ‘doom loops’ with Nouriel Roubini

In this episode of the McKinsey Global Institute’s Forward Thinking podcast, co-host Michael Chui talks with Nouriel Roubini. Roubini is professor emeritus of economics at the Stern School of Business at New York University, and CEO of Roubini Macro Associates, a global macroeconomics consultancy. He covers topics including the following:

  • The “mother of all” debt crises and what to do about it
  • Likely future trends in the global balance sheet—the world’s economic health and wealth
  • The trajectory of globalization
  • Which “megathreat” worries him most

An edited transcript of this episode follows. Subscribe to the series on Apple Podcasts, Amazon Music, Google Podcasts, Spotify, Stitcher, or wherever you get your podcasts.

Michael Chui (co-host): Janet, have you heard of the legend of the character known as Cassandra?

Janet Bush (co-host): Yes, from my study of Greek mythology, she was the character who was fated to utter true and often tragic prophecies but never to be believed.

Michael Chui: You might say that’s true of today’s guest, who warned about a dangerous buildup of debt before the great financial crisis, and some people have nicknamed “Dr. Doom.” He has also recently written a book warning about other threats to the global economy.

Janet Bush: Oh, that sounds ominous. But I hope he has some suggestions about how to avoid or at least manage these risks.

Michael Chui: Nouriel, welcome to the podcast.

Nouriel Roubini: Great being with you today, Michael.

Michael Chui: I would love to hear where were you born? Where’d you grow up? What did you study in school? What did you learn, and how did that lead to what you’re doing today?

Nouriel Roubini: I was born in Istanbul, Turkey, but I’m not a Turk. My parents are originally from Iran, Persian Jews. And when I was a year old, we left Istanbul, went back to Tehran. I was born in 1958. And then when I was three years old, we went from Iran to Israel, to Tel Aviv. And then by the age of four, we moved to Milano in 1962. And then finally we settled in Milano.

I grew up in Milano, Italy, and then I went to college at Bocconi University, studying economics. And when I finished, I came to the US for graduate school at Harvard, my PhD in economics. My main advisers were Jeffrey Sachs, Larry Summers, among others.

My first job as an assistant professor was at Yale University in the economics department in 1988. And then by 1995 I moved to NYU, to the business school, Stern School of Business, where I’ve been since then.

So I started as an academic, but then I had a couple of years of policy experience in Washington between ’98 and 2000. First in the Clinton White House Council of Economic Advisers when Janet Yellen was the head of it. Then I moved to Treasury to work with Larry Summers and Tim Geithner for a year. So I had two years of policy experience and then I came back to NYU, and then I also started an economic consultancy. So I started with academia, added policy experience, then economic consultancies and private-sector kind of work. I’ve been living since then in the intersection between academia, policy, Wall Street, markets, and the business world, I would say.

Michael Chui: People talk a lot about trisector athletes, people who spend tours of duty in different types of organizations. And you seem to exemplify that. You’re also known as a scholar of debt and financial crises. How do you think about things as you do your work? How do you do what you do?

Nouriel Roubini: There’s a large literature—theoretical, empirical. There are thousands of different models that try to understand how the world interacts. But, you know, I’m an economist. Economists believe in the constant of comparative advantage. That means stick to what you know and shut up about the rest.

My previous books are all about economic issues, like emerging-market financial crises. But in this latest book, Megathreats, in addition to the economic, monetary, and financial risks, I deal with political ones, geopolitical ones, environmental ones, health ones, technological, trade, globalization-related ones.

Because we live in an integrated world in which economics interact with politics and geopolitics, and vice versa. Of course, technology has massive economic and even social and political implications. Climate change, it has a huge impact on the world—a slow-motion train wreck.

To understand this very complicated world, initially I thought it’s good enough to know international macro inside out. And that’s what I did for the last 30-plus years. But increasingly, you have to understand society, politics, geopolitics, science, technology, environment, legal issues even, and so on, to get a more holistic approach.

In Megathreats, there are ten dangerous trends that impair our future. It’s like a ten-by-ten matrix. Each one of these threats affects the other and is affected back. Some people now call it the term “polycrisis” as opposed to “megathreat.” Adam Tooze and others have started to use this term.

It’s the same idea. You have a bunch of risks and threats, and they’re all interconnected with each other. To understand the system, you cannot study it in isolation. There’s hundreds of books about climate change, hundreds of books now on global pandemics or on geopolitics. But sometimes they don’t connect the dots. And the purpose of this book was to connect the dots among all these different phenomena to understand our world as a system.

Michael Chui: If you don’t mind, let’s talk about some of these risks, some of the dots that you call to mind in the book. You have a chapter entitled “The Mother of All Debt Crises.” What did you mean by that?

Nouriel Roubini: If you look at the amount of private debt, household, corporate, and financial sector, and public debt of central and local governments as a share of GDP, globally, in the 1970s the number was less than 100 percent of GDP.

By 1999, the number was 200 percent of GDP. Last year it was 350 percent of GDP. And in advanced economies, it was 420 percent of GDP and rising. Three hundred percent of GDP in China.

Of course, sometimes borrowing makes sense, to borrow to invest into something productive. But if you borrow just to consume, then eventually you get in trouble and your debt ratios become too high relative to your need to pay back your debts over time. It could be a problem for households, for the business sector, financial institutions, for governments, for a country as a whole.

We have this huge buildup of debt, but since the global financial crisis [GFC], debt ratios were high. Many agents—I call them zombies—who are bankrupt: household, corporates, financial institutions, government, countries. But while debt ratios were high, debt servicing ratios were low because we had zero policy rates, negative policy rates, quantitative easing, and credit easing keeping borrowing costs for government and the private sector on the long end low.

Even institutions that were effectively insolvent and bankrupt could survive. And during the GFC, we bailed them out. And we bailed them out again during the COVID crisis, where initially there was a massive backstop of every type of institution. We even started buying junk bonds as a way of backing the corporate sector, to give you an example of how extreme it became.

The zombies survived because those shocks led initially to deflation, like during the global financial crisis. Or even at the beginning of the COVID crisis, demand fell more than supply, you have deflation. So monetary, fiscal, credit stimulus, backstopping, bailing out was, of course, the right solution.

Initially it led to asset inflation with all this stimulus and eventually, given the supply bottlenecks, led to then goods and service inflation. And once we ended up with high inflation for the first time since the ’70s, you have to raise interest rates to fight inflation.

But then the zombies who had high debt ratios now started to have high debt servicing ratios. The interest that you pay on your debt, and I think the rollover debt, is coming to maturity. And now we’re starting to see how this increase in debt servicing ratio may lead us to have a severe recession. It’s likely in the next year. Severe financial distress.

We avoided the debt crisis a couple of times. We kicked the can down the road. We bailed out and backstopped a lot of people. But now the game is over because you have inflation and you have to raise interest rates as opposed to capping them to zero or negative. So that’s where the risk of the mother of all debt crises occurs. There is a historic buildup of debt for the last 40 years. And now the problems cannot be resolved by easing monetary and credit policy. We have to do the reverse, so we don’t end up in financial and debt distress.

Michael Chui: You famously raised the alarm before the great financial crisis about housing assets. Some recent MGI research estimates the global balance sheet has tripled in the past two decades—50 percent higher than the long-run average compared to incomes. And two-thirds of the world’s wealth is in real estate. Is this a harbinger for the future?

Nouriel Roubini: The GFC was focused around real estate that was going bust. Not just in the US. In Iceland, in Ireland, in Spain, in Greece, even parts of Italy, Dubai, you name it. And it was banks that had lent to the household sector. If you fast-forward to the period before the COVID crisis, it was a buildup more of corporate debt, financed not by banks—then after the GFC were subject to state regulations—but were financed by shadow banks. Hedge funds, private equity funds, bank and nonbank financial institutions.

And it was a huge buildup of corporate debt. The high grade is fine, it is investment grade, but it was tons of junk bonds and high yields. There was lots of leveraged loans, CLOs [collateralized loan obligations], private debt, fallen angels. There were curiously investment-grade firms that were downgraded to below investment grade, and also lots of firms that are just on the cusp between investment grade to be downgraded to below investment grade.

So it was a huge buildup of corporate debt financed by shadow banks, and also buildup of public debt, as opposed to households and banks like in the GFC. But as I said, everybody was bailed out. And actually, they borrowed even more because interest rates were so low they leveraged themselves even more. And the Fed was already worried before the COVID crisis about the buildup of corporate debt.

Now those problems are going to come to the fore for that corporate sector because interest rates are rising. So it’s not possible anymore to kick the can down the road.

Michael Chui: Is there a trigger that you’re looking for? Or is it unpredictable? You know, the water line just keeps rising and we’re not sure, actually, when things will break?

Nouriel Roubini: There are many triggers. There are lots of factors. You have to look at the balance sheets and the P&Ls of individual sectors and see how much.

So suppose that we’re going to have a recession right now. For households and corporates, your income is falling. Households, because of falling real wages and potentially unemployment. For firms, because your profits are reduced if your revenues are falling. So that’s your P&L, there’s already stress.

Then on the asset side, we’re seeing a fall now in asset prices in the last year. Public equity, private equity, growth stocks, tech stocks, VC, public rates, all the bubbles in meme [stocks], SPACs [special purpose acquisition companies], crypto went bust, bond yields went higher and the price of bonds fell, credit spreads went higher so the price of debt fell. Even cash gave you a negative real return because of inflation.

There was nowhere to hide. You’re hit on your P&L, you’re hit on the asset side of your balance sheet. And if you’re highly leveraged—for households these mortgages, credit cards, auto loans, student loans, personal loans, for the corporate sector, business loans, bank loans, corporate debt in the form of bonded debt, you name it—then you have a shock to your debt servicing capacity.

It’s got, like, a Bermuda Triangle. You have a hit to your income, to your asset values, and then to the burden of financing your liabilities. And then you end up in a situation of distress if you’re a highly leveraged household or business firm. And when many of them are having these problems, then you have a systemic household debt crisis like the GFC, where millions of people could not pay their mortgages, lost their homes. Or when you have a systemic corporate debt crisis.

And then whoever lent you money, the banks like in the GFC, or nonbanks like in the current case, they can get into financial distress themselves. And then sometimes governments have to bail out the private sector to avoid even more economic damage. You socialize the losses and you have a buildup of public debt. So private debt becomes public debt. And since the public debt is held by the private sector, then the sovereign risk becomes a risk also to the balance sheet of the private sector.

That’s the doom loop between, say, banks and sovereigns that occurred in the eurozone, where the banks were going bust, the governments were bailing them out. But then the debt of the government was held by the banks. And then the insolvent government was at risk of making more insolvent the banking system. So you have these negative feedback loops as well, across sectors.

Michael Chui: So people should look for distress everywhere. It’s hard to predict where it’s going to show up.

Nouriel Roubini: There are lots of factors, variables. Studies will suggest what are the indicators that trigger red flags. There are dozens of them, and there’s whole literature about figuring out when that type of distress can occur. It’s a combination of science, empirical research, and a little of art as well.

Michael Chui: Another chapter, just to pull on another thread, talks about the end of globalization. You do mention Fukuyama’s End of History in the early part of the chapter, etcetera. Some of my colleagues’ research estimates that for every major region in the global economy, at least one, and in many cases more, key input to the economy, whether it’s a resource or manufactured good, over 25 percent is imported. While there are these forces pushing against the globalization trend that we’ve had previously, there’s a lot of integration in the world. How do you think about this risk, about the end of globalization?

Nouriel Roubini: In many ways, with the several decades of globalization and even hyperglobalization when the Soviet Union collapsed, and those countries joined the global markets and labor supply, the opening of China, India, and other emerging markets and from peer economies.

But when there’s trade liberalization and globalization, there are always winners and losers. It’s not as if everyone is better off. Say if we buy more cheap goods from China, where there’s a larger labor supply and wages are lower, rapid productivity, the jobs and incomes up, work, as in labor-intensive industries like some light manufacturing in Europe or US get displaced.

That’s part of the globalization process. Of course the economic pie is bigger. You could make everybody better off by somehow taxing the winners and transferring money to those who are left behind. But in practice, we never did that.

So initially, the backlash against globalization was from those who were “left behind” or lost because of globalization: mostly blue-collar workers in advanced economies. But then there were bigger concerns more recently about environmental standards. They’re lower in emerging markets. Concerns about labor standards that are weaker in poorer countries.

But now geopolitics is becoming something that’s going to lead to deglobalization, protectionism, economic trade and financial sanction, balkanization of global supply chains, fragmentation of the global economy. Because the tension between a number of revisionist powers—China, Russia, Iran, or Korea and US, Europe, and the West—implies that now we’re decoupling gradually but steadily, trading goods and services in the movement of capital and FDI [foreign direct investment], labor, technology, data, information.

Geopolitics now is leading to people talking about the need for secure trade and fair trade rather than free trade, to the need for reshoring manufacturing rather than offshoring manufacturing, or friend-shoring manufacturing rather than offshoring. That’s a process. It’s not overnight, it’s gradual.

I think the peak of globalization was achieved right before the global financial crisis. And then since then, there’s been—it’s not full deglobalization. Some people call it “lowbalization” or “slowbalization.” Or some other reversal of the trends. And in the world of geopolitical rivalry between great powers, then those processes become more severe.

People thought that the first era of globalization, from 1870 to 1914, would not finish, and the countries that traded wouldn’t go to war with each other. Instead, they did go to war with each other. And then we had massive deglobalization. And then we had the currency and the trade wars during the Great Depression. And then with the process of GATT [General Agreement on Tariffs and Trade], the WTO, and regional agreements, NAFTA, European Union, of greater integration, now we’re going in the opposite direction.

Again, no one’s going to go to economic and trade authority. But there’ll be more regionalization of trade, and more secure trade, and more friend-shoring rather than offshoring. So those are trends that are kind of ongoing.

Michael Chui: Why is it a megathreat? As you described it, you see more friend-shoring, more regionalization. It’s an evolution for sure.

Nouriel Roubini: For many reasons. One is that during the Great Depression, those trade wars like the Smoot–Hawley Tariff caused a trade war that became global and the collapse of global trade that fell by two‑thirds. And that was one of the factors, not the only, that made the Great Depression more severe.

Those processes accelerate. Instead of producing in the most efficient, least costly places, you produce in places that are more expensive because you get security rather than efficiency. But there’s a stagflationary shock that reduces growth, increases inflation. And trade wars are sometimes a proxy for geopolitical conflicts. You start with trade wars and you end up with hot wars down the line. So that’s why you should not underestimate the risk of what deglobalization implies.

Michael Chui: You also mentioned stagflation. Is that our more immediate future? We’re taping this in the middle of December, and the CPI [consumer price index] print actually seems to have some positive trends for inflation. But what’s your view in terms of the next, call it 12, 24 months?

Nouriel Roubini: I see stagflation coming up in advanced economies. Inflation got close to double digits in most advanced economies. It is starting to fall, but from a very high level. It might not be 10 percent-plus, but even 7 percent, 8 percent is way too high when your target is 2 percent.

Inflation grows in part because there were bad policies, excessively loose monetary, fiscal, and credit easing during COVID. But in part because there were these negative supply shocks, like the impact of COVID on production of goods, services, supply of labor, and supply chains, the Russian invasion of Ukraine, the zero-COVID policy of China. And that combination of loose fiscal, monetary, and credit policy and negative supply shock that reduced growth and increased inflation is stagflationary.

Right now, central banks are in a dilemma. If they raise interest rates to fight inflation, they’re going to cause a hard landing. And if instead they care about jobs and growth and employment, and they don’t raise interest rates enough, then inflation interest and expectation get de-anchored. There’s a price switch battle. You end up like the ’70s, with high inflation on a persistent basis.

In my book there is a chapter about the great coming stagflation, where I argue that leaving aside this pretty short-term factor, initial COVID, Russia–Ukraine, and the zero-COVID policy of China, they’re at risk of 11 forces that are more medium term that are reducing potential growth, increasing cost of production, and therefore they are stagflationary.

You have, as I said, protectionism and deglobalization, reshoring of manufacturing from low cost to high cost and friend-shoring, aging of populations in advanced economies but also key emerging markets like Russia, China, South Korea. Old people, they save and don’t work and produce. While young people produce and save. So aging is inflationary.

And then we now have restrictions on migration from South to North, from poor to rich, that in the past kept the lid on wage growth. We have this decoupling between the US and China that is going to be, again, stagflationary, fragmenting the global economy.

We have global climate change that, through many channels, causes, say, desertification, rising food prices. Or we reduce the production of fossil fuels, we don’t increase enough production of renewable, and then you have a lack of supply of energy and you’re spiking the energy crisis.

You have the impacts of, of course, pandemics that are going to be recurring, that destroy economic activity, increase cost of production, impose various restrictions to exports of critical goods and services. You have cyber warfare that damages firms’ production, or you have to spend a fortune to protect yourself against it.

There is a greater geopolitical depression that includes China, Russia, North Korea, Pakistan, Iran against the West, that is going to also fragment and balkanize the world economy. And finally, there’s a backlash against income and wealth inequality.

You have 11 forces that are all stagflationary. Slow motion, but they’re all going in the wrong direction. There’s only one that historically is disinflationary and increases the economic pie—that’s technological innovation.

But now there are many other forces that are going just in the opposite direction. That’s why I worry about stagflation being a decade-long, or even longer, phenomenon as opposed to just one year of economic contraction and high inflation. We risk having a stagflationary debt crisis, as I point out, because you’ll have inflation, recession, and also the amount of debt in that crisis. So we’re moving from the great moderation to the great stagflationary debt crisis and instability. That’s a trend.

Michael Chui: If you don’t mind me asking a funny question, you’ve made a case for a lot of things that are of great concern. I think you know your nickname is “Dr. Doom.” Do you like that nickname?

Nouriel Roubini: Usually I say I’m Dr. Realist, I’m not Dr. Doom. There are upsides, there are downsides. I tend to stress some of the downsides to be realistic about the world. And of course it’s more catchy to be called Dr. Doom than Dr. Realist.

You have to face the world the way it is. And unfortunately, I see more downside risk because of these megathreats. Megathreats that, by the way, when I was growing up in the ’50s, ’60s, ’70s, early ’80s in the Middle East, I mean—Europe did not exist, you know?

After the détente with the US and Soviet Union, Nixon going to China, I never worried about war among great nations or nuclear war. Never heard about climate change, because the temperatures were barely above preindustrial level. Never heard about the global pandemics. The last one had been in 1918, the Spanish flu.

Never worried about AI destroying most jobs because we were in the middle of an AI winter. Never worried about deglobalization and trade wars because we’re globalizing with the WTO, hyperglobalizing. Never worried about debt crisis because the debt ratio was low and growth was strong. Never worried about implicit debt because there were lots of young workers, growing populations. And the elderly were still limited, so there were no unfunded liabilities from Social Security, Medicare through aging.

Economic cycles were mild. Some recession, but not that severe, none that I would be worried about, Great Recession or Great Depression 2.0. Yes, we had the stagflation of the ’70s followed by the great moderation. No severe financial crises until the Latin America crisis of the ’80s because you had supervision and regulation of financial systems, financial repression.

You had capital controls. You didn’t have the type of toxic financialization with derivatives and other stuff that was dangerous that has occurred in the last 20 years. And in the West we live in liberal democracies, rule of law, respect of minorities. Not the kind of polarization or partisanship we see today. And a growing part of the world is going in the direction of radical authoritarian regimes of the extreme populist right or extreme populist left.

So you fast-forward to today and we said all of these are threats that, in that golden period between 1945 and the mid-’80s, were not even on the radar screen, or not even in the back of anybody’s mind.

They’re totally new compared to what they were before. That’s why it’s a different world. It’s really a world of megathreats. I’m old enough, in my 60s, to remember that better period. And now I see serious challenges to the 75 years of relative peace, prosperity, and progress we had since World War II.

In many ways, this period looks more like the period between 1914 and 1945, where the Industrial Revolution, where the first set of globalization, ended with World War I. And then you had the Spanish flu. And then the stock market crash of ’29. And then the Great Depression. And then trade wars and currency wars, inflation, hyperinflation, deflation, debt and financial crisis, and then the rise to power of authoritarian aggressive regimes like Nazis in Germany, fascists in Italy, Franco in Spain, and authoritarian Japan.

And then we got World War II, and we got the Holocaust. And many of the threats I’m talking about today, megathreats, look similar to that period between 1914 and 1945, as opposed to that period of peace, prosperity, and progress we’ve had since then. And some of them actually are new threats that did not exist in those years.

During the ’20s and ’30s, we didn’t have to worry about climate change destroying the planet. We didn’t have to worry about AI destroying most jobs. We didn’t have to worry about nuclear weapons, because World War II was mostly a conventional war. It was only at the end of World War II that the US got the bomb and then ended World War II by hitting Nagasaki and Hiroshima. Where today, a war between great powers that starts conventional is going to escalate into unconventional in a matter of months, if not weeks.

Some of the threats that exist today did not even exist in that disaster period of 30 years between 1914 and 1945. And the idea that the future’s going to be like the recent past and extrapolate, maybe it is wrong. Because if we don’t fix the problems we’re facing, we may end up like what happened before 1945 as opposed to what happened after 1945. That’s why I’m worried.

Michael Chui: A century later, we have a lot of things to worry about. If you don’t mind, let me just finish with a few quick questions, quick answers in a lightning round. And hopefully this will be interesting and fun. Number one, what’s your favorite source of data about the global economy?

Nouriel Roubini: I travel two-thirds of my time, so I absorb data pretty much everywhere. I’m an information junkie. I get data from everywhere. Anything can be data for me.

Michael Chui: Which of the megathreats worries you the most?

Nouriel Roubini: In the short run it is stagflation and debt crisis. Over the medium-long term, I worry about war among great powers and how much destruction it can bring, together with climate change.

Michael Chui: What’s your source of inspiration as you identify risks?

Nouriel Roubini: I have spent the last few decades understanding this complicated world and what’s going on in the various dimensions of it. What inspired me is a holistic view of understanding this very complex world economy and planet, society, and politics. And it’s very complicated, but it’s ambitious. That’s what inspires me to understand this world better and maybe resolve the threats that we face.

Michael Chui: The subtitle of your book includes “how to survive the megathreats.” Which, if I actually go by my page count, it’s about 1.6 percent of the pages in the book. But what gives you the most hope for the global economy?

Nouriel Roubini: In each one of the ten chapters on each of the ten megathreats, I speak about the potential solutions, what are the benefits and costs of them. And many of them imply costs and sacrifices in the short run for the common good over the medium-long term.

But we discount the future. We hope in miracles or that technology is going to resolve everything, or politicians and private sectors, you know, care about the present. They may not be in power when they are—the threats are coming. There’s a detailed discussion on how we address each one of these things.

And then there is a description in chapter 11 with a dystopian future, in chapter 12 of a more utopian future. If we have the right leadership, the right technologies, we can address these problems. Nothing is deterministic. We are masters of our own fate.

And maybe the world could get better, especially if the young generation will care about the environment, about nuclear winter, about pandemics, about economic opportunity, about sustainable, inclusive growth. They get involved to change the world for the better. So we’ll see whether we end up in one or the other. In the epilogue, I say that the dystopian scenario to me as of now looks more likely than the utopian ones, but I hope I’m wrong.

Michael Chui: I apologize. I was only counting the pages in the utopian chapter. I was unfair in not including all of your solutions within the other chapters as well. And by the way, I think that was a great explanation of something people call the “tragedy of the horizons” in terms of discounting the future.

How would you recommend the median developed-world individual investor allocate their portfolio across asset classes?

Nouriel Roubini: Normally, when inflation is low, there’s a negative correlation between the price of bonds and the price of equities—60–40, 70–30, risk parity works. Risk on, risk off, growth, recession. Equity prices go up, bond prices go down, and vice versa.

But when inflation is rising, you lose money on equities because the discount factor, long bond yields go higher. And you lose money on bonds that are safer than equities because higher yield means lower price. But this year, you lost more money on safe bonds than equities. And this year there was nowhere to hide. Private and public equity, rates, growth, tech, VC, SPACs, meme, crypto, debt, bonds, credit, even cash. So if you worry about the world in which average inflation’s going to be higher, you need to hedge against that.

Historically, real estate being in limited supply can be a good hedge against inflation under some conditions, because you have pricing power and there’s a limited supply. But a lot of real estate is going to be stranded because of climate change: hurricanes, typhoons, sea-level rises, floods, droughts, wildfires, you name it.

You have to invest into real estate that is sustainable. Some combination of short-term Treasuries, inflation index bonds, gold, precious metals, maybe green metals, and sustainable real estate may provide you a hedge against inflation, debasement of fiat currency, financial crisis, political and geopolitical risk, and environmental risks. So that would be the combination of things to start to think about if you are worried about some of these megathreats.

Michael Chui: What would you recommend a student entering college study today?

Nouriel Roubini: Any young person, man and woman, has to worry that his or her job eventually is going to be displaced by technology—AI, robotic automation. Not just routine jobs that used to be blue collar. Increasingly, even white-collar cognitive jobs can be sliced into different tasks. And now we have transformers and ChatGPT, and GPT3, and you name it. Even creative stuff increasingly can be done by the machine.

My view is that first you have to understand technology. For any young person, either a major or minor in STEM—science, technology, engineering, math—and/or computer science gives you the tools to understand technology and prepare yourself for surviving and thriving in a hyperdigitalized world.

Then you also need a major or minor in liberal arts. If you have to change jobs ten times in your life, you’re not going to have only one career because of technological obsolescence; you need to think well, write well, read well, and understand things in a more flexible way.

So probably major in STEM and minor in liberal arts, or vice versa. You have to be well rounded. And in terms of financial advice, nobody’s become rich overnight because of betting and gambling in Las Vegas or on crypto or meme or SPACs or any other type of bubble. You have to study hard, get good human capital, get a good job, heavy income, save it, invest it in a diversified way for the long run, and eventually, you’ll have enough savings to retire comfortably.

Because in your old age—our current pension systems are pay-as-you-go, are going to go bankrupt. And there are not going to be enough benefits for everybody who’s young today and is going to become older 50 years from now. You need to supplement it with private savings so that eventually you can live comfortably. That would be the advice for a young person.

Michael Chui: And what would be your one piece of advice to listeners of this podcast?

Nouriel Roubini: The advice would be let’s stop kicking the can down the road. Let’s stop putting our heads in the sand like ostriches, pretending that problems don’t exist. Let’s stop wishful thinking and a long shopping list of what’s desirable without knowing whether it’s feasible.

And let’s stop pushing the snooze button and go back and sleepwalk into disaster, as we’ve been doing because we keep on pushing that snooze button rather than addressing these threats that—arguably they’re dangerous, but you have to address them.

If you don’t address them individually and collectively and in the private and public sector, domestically, internationally, eventually they will overwhelm us. Either we swim and survive and thrive together, or we sink together, right? We’re on the same boat. There is nothing like an individual ability to survive these megathreats. It has to be done collectively.

Michael Chui: Nouriel Roubini, thank you for joining us.

Nouriel Roubini: Thanks for being with me today.

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