Risk-maxxing and the Death of the Middle Path

I was finishing this piece when Kyla Scanlon's "Why My Generation Is Turning to Financial Nihilism" dropped in the Wall Street Journal. She covers the financial detail better than I could — the crypto stats, the betting numbers, the prediction market explosion. The umbrella term I've been using is risk-maxxing: the deliberate pursuit of high-variance outcomes when the conventional path no longer computes. Read Kyla's Substack for the granular picture. This, part 3 of a series, is about the broader structure: what happens when a generation splits into poles, and where that leads politically.

Lately, I've been watching the same thing from two angles: professionally, tracking signals that younger, more economically precarious people are pushing their risk levels higher and higher; personally, watching my daughter, son, and daughter-in-law confront systemic barriers to any kind of headway. As soon as they make a tiny measure of progress on one path, other previously possible paths fall away — policy choices made by people higher up the ladder. Work, health care, and housing options shut down for the one living in America. Academic and professional structures erode for the one studying in Australia. Meanwhile we, their self-employed parents, spend all extra funds to keep them from usurious debt, just so they can hold the line.

As their parents, we were the first generation (X) to watch the American Dream fall apart. We've lived in three countries (our own choice) and worked in dozens, and seen similar erosions taking place in the big global economies. The postwar deal was simple enough that it barely needed stating: education plus work plus time equals house, security, retirement. It worked, more or less, for three generations across the US, UK, Canada, and Australia—long enough that people mistook it for natural law rather than policy choice.

In the 80s and 90s, the cracks appeared. Wages decoupled from productivity. Housing became an asset class optimized for existing owners. Increasingly , there was a trade-off between staying put and building home equity, and chasing work that paid enough to keep up with the rising costs of staying in the game. The 2008 crisis revealed just how rigged that game had become, and the engineered recovery that followed flowed almost entirely upward. The post-Covid recovery was worse — a K-shaped split where asset owners soared while everyone else treaded water. Now, accessing the upper branch of that K is essentially foreclosed for 95% of young people. There is no middle path, just an up-slope for a minority and a down-slope for many more.

The evidence is consistent across borders. In the US, Boomers held 20% of household wealth when their youngest turned 25; Millennials held 5%. In the UK, homeownership among 25-34-year-olds fell from 55% in 1990 to 31% in 2023. In Canada, 62% of Gen Z say homeownership isn't achievable. In the UK, 42% of under-40s have given up entirely—they call them "Guppies," for Giving Up on Property. Home prices now sit at 7-8x income versus 4-5x a generation ago.

One contested analysis pushes further. "Yes, I Give A Fig" recalculated the US poverty line using its original 1963 methodology and found the "crisis threshold" moves from $31,200 to roughly $140,000. The math is aggressive, but even heavily discounted, the directional claim holds: the official poverty line measures starvation, not stability.

Gen Z is the first cohort to enter adulthood without ever believing the contract was real. Gen X mostly rode the collapse. Millennials caught the tail end of it. Gen Z inherited the crumbs.

When the middle path closes, the responses aren't random. Several conditions converge to make extreme risk-taking feel rational: decades of bailouts have taught people that reckless bets often get rescued while cautious savers get eroded by inflation; winner-take-all economics means modest gains can't compete; and social media valorizes "fuck it" leaps over steady grind.

But the deepest driver may be temporal compression — the sense that the future has shrunk. Climate timelines, AI acceleration, geopolitical decay: the horizon keeps getting closer. Moderation assumes there's time. When the clock feels nearly out, people move to the poles. The sense of an endgame drives endgame behaviors.

Temporal compression works at both ends of the wealth spectrum. For those locked out of housing and retirement, the conventional game feels already lost — not ending, but ended, before they got their turn. For elites — founders, strongmen, billionaires — the endgame is more literal: climate collapse, civilizational transition, the singularity. (The ongoing looting within ascendant US power structures is one example of this mindset in action.)

If you believe you're in the final chapter, or the first chapter of something radically new, rules designed for continuity don't apply. Both groups arrive at the same conclusion from different directions: safety margins are a luxury for people who think there's time.

Three responses have emerged.

Pole One: Risk-maxxing

Scanlon covers the financial mechanics. The psychology underneath is simpler: a small chance at a large return beats a near-certainty of slow decline.

The behaviors are now generational norms, across borders. Gen Z commands $450 billion in global spending power — and they're deploying it differently. Gemini's 2024 survey across the US, UK, France, Singapore, and Turkey found 51% of Gen Z globally own or have owned crypto, compared to 35% of the general population. In the US, 44% of Gen Z investors started with crypto rather than stocks. Prediction market activity rose 130-fold in two years. In Australia, 72% of Gen Z use Buy Now Pay Later versus 28% of the general population. In the UK, gambling participation rises from 54% at age 17 to 68% by age 20. Seven in ten Gen Z bettors consider gambling "a form of entrepreneurship."

The coordination happens in public. 35% of investors under 30 now rely on social media for financial information — versus 13% of those over 65. The platforms don't just spread tips; they mobilize through FOMO, herd mentality, and a desire to disrupt traditional market hierarchies. The 2021 GameStop squeeze wasn't just about money. It was about proving the institutions could bleed.

The telling detail is who's participating. WSJ analysis found military bases dominated US crypto zip codes in 2020-2021. The military offers job security and guaranteed pensions — people who could afford to be conservative. When even people with pensions are betting on meme coins, the cultural shift is clear. One Coast Guard petty officer on why he bought dogecoin: "I was trying to punch my ticket."

Not everyone loses. Some risk-maxxers hit — spectacularly, visibly. That's the second-order problem. Failure happens quietly; success is performed. Survivorship bias isn't new, but social media amplifies it. The lesson the next cohort draws isn't "most people lost." It's "the winners didn't play it safe."

Pole Two: Reform

The system can still be reformed, this pole argues. The contract broke because policy chose winners and losers. Policy can choose differently.

This response still believes institutional reform is possible. A stronger social safety net will put things back where they should be. It skews slightly older—Millennials who remember when the promises felt achievable, who retain some residual faith that the machinery can be repaired rather than scrapped.

In the US at the moment, this pole is coalescing around a diluted flavor of socialism, fronted by the Democratic Socialists of America. DSA membership swelled from 6,000 in 2015 to over 90,000 in 2021, with the median age dropping from 68 to 33. Big chapters emerged in cities with expensive housing—LA, Chicago, the Bay Area—and NYC DSA alone accounted for 32% of new recruits in 2024.

Then came Mamdani. The 34-year-old democratic socialist won 73% of voters aged 19-29 in New York's mayoral primary, versus 32% among voters over 65. Over 8 in 10 NYC voters called housing costs a problem. He also did best among first‑time NYC mayoral voters and recent arrivals to the city— those trying to get into the casino, versus those already holding seats at the craps table. His promise: freeze rents, build 200,000 affordable homes with public investment. Run for Something saw 10,000 new sign-ups in the two weeks after his primary win.

This reform impulse still puts faith in institutions, if re-engineered ones. It believes the system can work with some reset guardrails and attempts at equity—and that there is time for reform and to experience the results of these reforms.

One note: the reform impulse doesn't always stay patient. When electoral paths feel blocked or too slow, the same generational energy turns to direct action. Sri Lanka 2022, Bangladesh 2024, Kenya 2024 — in each case, Gen Z-driven protests forced out governments that conventional politics couldn't dislodge. The Carnegie Protest Tracker tallies 53 demonstrations of 10,000 people or more across 33 economies this year, the highest total since tracking began in 2017.

This latter behavior is essentially collective risk-maxxing: high-commitment, high-risk confrontation with the state, taken because waiting feels like complicity. The temporal compression is explicit. You're not betting money; you're betting your body. But the psychology is the same: the conventional game is closed, so you go all-in on a different one.

Pole Three: Exit

Neither gambling nor reform. Just leave. Minimize exposure to a system you can't beat or fix.

Geographic arbitrage means remote work from Lisbon, Mexico City, Chiang Mai—not lifestyle branding but economic necessity, because the dollar or pound stretches further elsewhere. Credentialist rejection means skipping college, skipping debt, skipping the requirement to ask permission. Creator economy, freelance stacking, building outside the system's legibility (which, if you've noticed, actually gets co-opted by the system). Intentional downshifting takes the form of shibal biyong in Korea or "doom spending" in the US and UK. One 24-year-old told Bloomberg after buying a $2,500 vintage bag: "With traditional milestones so far out of reach, denying myself 'little luxuries' wasn't going to make a difference."

Exit doesn't have to mean "go elsewhere." It can mean "go home." Multigenerational living made a big comeback after 2008 and Covid. In large parts of Europe, it's returned to being a norm. In Canada, multi-generational living has gone mainstream—no longer a fallback but a deliberate financial strategy. In the UK, many Millennials who've managed to buy homes only did so through the "Bank of Mum and Dad"—parental support that accelerates homeownership by a decade.

In China, the same pressures produced tangping — "lying flat" — and bai lan — "let it rot." The vocabulary traveled. So did the posture: US Gen Z increasingly shows admiration for what it sees of China on social media, inverting decades of aspirational flow. The American Dream isn't being exported anymore. It's being exchanged for something that, at least online, appears more survivable.

The appeal is straightforward: no demands, no dependence, no disappointment. The hidden assumption is that the system you're opting out of will remain stable enough to ignore you. The exit is rented, not owned.

The Escape Hatches Close

All three poles assume continuity of conditions that are already degrading.

Geographic arbitrage breaks down when host countries tighten visas, when currency swings erase cost advantage, when climate makes cheap places increasingly unlivable. Credentialist rejection breaks when platforms consolidate and extract more, when AI commoditizes freelance skills, when a health crisis hits without coverage. Downshifting breaks when bodies age, when parents need care."Opting out" amounts to temporal arbitrage. It works until it doesn't.

When the Poles Converge

The risk-maxxers mostly lose their bets. The reformists don't get reforms fast enough. The opt-outers run out of places to go. When exit fails, what emerges is angrier, more fatalistic.

In the US in 2024, there's the well-covered young male swing (white, Black, Latino) toward Trump—the system-breaker-in-chief. In Argentina, 70% of voters under 29 supported Javier Milei—the chainsaw-wielding libertarian who promised to abolish the central bank. Young Argentines facing 143% inflation didn't want moderate reforms; they wanted something that could crack the system wide open. As one analyst put it: "They prefer for everything to blow up. They've got nothing to lose anyway."

The pattern repeats with opposite ideological signs—Milei's libertarianism, Mamdani's socialism. In Spain, where I currently live, a 2024 study found that pessimistic economic expectations push young people toward populist parties, but the direction splits by prior ideology: young pessimists on the left embrace anti-elitism, while those on the center-right are drawn to people-centrism. Same frustration, opposite conclusions.

The gender gap widens the fracture further. Young men with "future anxiety" show greater support for authoritarian principles; young women respond with what researchers call a "politics of care." Algorithms reinforce the split, pushing young men toward the manosphere and young women toward feminism. "Young men and young women are operating in completely different political worlds."

A PNAS study found income inequality is one of the strongest predictors of democratic erosion—even wealthy democracies are vulnerable if highly unequal. The mechanism runs through perception: people see unfairness, become cynical about the system, and that cynicism weakens commitment to norms. The housing crisis has allowed populist politicians to stoke anti-immigrant sentiment among younger voters and resulted in a generation more skeptical of democracy's ability to deliver.

The most dangerous dynamic may be what "Yes I Give A Fig" called the "politics of drowning." When you're barely keeping your head above water and you see the lifeguard throw a life vest to someone treading water next to you, you don't feel happiness for them. You get angry at the lifeguard. The anger isn't about the goods themselves. It's about the breach of contract, the maldistribution of relief.

What comes next depends on which of these responses gain traction:

• Burn-it-down nihilism. The shared premise across ideological lines is that the current arrangement is unsalvageable. The chainsaw is the point.
• More authoritarian order. Find someone strong enough to force outcomes. Research shows that authoritarian regimes with high state capacity can deliver lower inequality (temporarily, while they are themselves draining the system).
• Nativism of the precarious. "I got here first, close the door." Digital nomads supporting closed borders. Freelancers backing regulation that grandfathers them in. When scarcity rules, exclusion follows.
• Generational warfare. A huge cohort advocating for housing, vying for power against older generations protecting real estate. Inheritance taxes, zoning reform, pension restructuring—each becomes a zero-sum front.
• Resignation. Not a political response but the absence of one. Lying flat, letting it rot.

As I've asked elsewhere: "What happens when everyone abandons safety margins simultaneously?"

The experiment is running live right now, and it's expanding all the time.

In theory, the conditions that produced riskmaxxing can be unwound. Housing can be built. Benefits can be smoothed. Wealth can be taxed. But theory requires a political coalition that doesn't exist. The people who benefit from scarcity vote more reliably, and spend substantially more propping up their enablers, than those who suffer from it. The latter are still figuring out which pole to move toward.

By the time they converge on one, the window for reform may already be closed — and the only options left will be the ones that don't require permission. The outcomes aren't mysterious: rupture that forces redistribution, generational power that actually holds, parallel systems that scale, authoritarian bargains, or prolonged decay. The question is which one arrives first — and whether anyone's positioned to shape it.