'The Fourth Turning' Shows Disturbing Signs of Data Fitting

Oct. 19, 2009 7:21 AM ET5 Comments
Cam Hui, CFA profile picture
Cam Hui, CFA

I finally got around to reading the interview with Neil Howe, the co-author of The Fourth Turning. In the book, he outlines his approach to generational research:

We think that generations move history along and prevent society from suffering too long under the excesses of any particular generation. People often assume that every new generation will be a linear extension of the last one. You know, that after Generation X comes Generation Y. They might further expect Generation Y to be like Gen X on steroids – even more willing to take risk and with even more edginess in the culture. Yet the Millennial Generation that followed Gen X is not like that at all. In fact, no generation is like the generation that immediately precedes it.

Instead, every generation turns the corner and to some extent compensates for the excesses and mistakes of the midlife generation that is in charge when they come of age. This is necessary, because if generations kept on going in the same direction as their predecessors, civilization would have gone off a cliff thousands of years ago..

In our research we have found that, in modern societies, four basic types of generations tend to recur in the same order.

He then outlines the four generational archetypes and believes that America is undergoing a generational shift. To demonstrate his point, he goes back into American history and shows examples such as the generational shift between the leadership of Abraham Lincoln and Ulysses S. Grant. He goes on to postulate what that may mean for American society and, by extension, the investment implications of that shift.

Torturing the data until it talks?
Among quants there is a saying that goes “don’t torture the data until it talks”, which is another way of saying don’t over-fit the data. While Howe & Strauss’ analysis is very

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Cam Hui, CFA profile picture
Mr. Hui has been involved in the equity markets since 1980, both on the buy side and the sell side. He is a CFA Charterholder, and has presented numerous papers to quantitative discussion groups (Sample topics include: How Global are Resource Sectors).

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