Something that I've always believed is that optimism makes you sound like a salesman, but pessimism makes you sound like you're trying to help people.
And this really explains why pessimism is so much more prevalent in the news.
Pessimists sound smarter than optimists.
If you say the future is going to be bright, I know that stocks are going to go up.
I know we're going to get better.
You sound aloof and detached from reality.
But if you say recession's on the horizon, dollar's going to collapse, hyperinflation right around the corner, people sit up in their chair and pay attention to you.
It's always been like this.
I think it always will be.
And the irony, of course, is that if you're a student of economic history, you know that things get better for most people most of the time.
Not for everybody all the time, but most economic history shows that things get better for most people most of the time.
And therefore, you should be an optimist.
So there's this detachment between how prevalent and how exciting pessimism is, and how dumb you sound if you're an optimist on one hand, but then, on the other hand, how?
Of course, if you look at history, you should be an optimist.
Because of that, I think it's really important to step back and say okay, if you are an optimist and I am, I hope you are too then you need to explain why.
You need to justify your optimism.
And that's what today's episode is all about.
How do you justify optimism?
Many years ago, I watched this documentary.
It's called How to Live Forever.
It asks a bunch of centenarians about their secrets to life.
And there's a scene in the documentary where they ask this centenarian from France.
They say what was the happiest day of your life?
And she says Armistice Day, referring to the 1918 agreement that ended World War I.
The producer asks why?
Why?
And the woman says, because we knew there would be no more wars ever again.
And, of course, World War II began 21 years later, and it was worse than World War I.
One of the most dangerous mental traps that anybody can fall for is what I call the appealing fiction.
Something that is false or uncertain, but you want it to be true so desperately that you believe it to be an established fact.
And I often think about this trap with optimism.
Just general long-term optimism, believing that things will get better in the future than they are today.
All optimistic beliefs can be dangerous.
They have the potential to become appealing fictions because they are so comforting.
They're so easy to accept without asking further questions.
Just assume that the world is going to be better in the future.
Of course, it feels great to think that way.
Pessimism seduces in its own way, but those who accept optimism can be just as blind to reality.
Because hope often masquerades as optimism when you think things will improve, only because the alternative is too scary to contemplate.
In her book called Optimism Bias, Tali Sherat writes The optimism bias protects us from accurately perceiving the pain and difficulties that the future undoubtedly holds, and it may defend us from viewing our options in life as somewhat limited.
As a result, stress and anxiety are reduced, physical and mental health are improved and the motivation to act and to be productive is enhanced.
I think that's so great, so smart.
And again, I consider myself an optimist.
I think that things will generally get better for most people over time, even if the path between now and then is a never-ending parade of setbacks and surprise and chaos and disappointment.
But even that qualified optimism needs justification.
Why do you think things will get better?
And it's important to point out that they may not.
The fact that things have improved for most of history is not an assurance that they will in the future.
The late scientist Hans Rosling said, I am not an optimist.
I am a very serious probabilist.
As in, it's not like being an optimist doesn't mean you know things are going to get better.
You just think that the odds are in your favor.
But that also leaves open the potential that they won't or that they'll get worse, but on the very serious possibility that things will get better.
If that happens, I think it will likely be driven by three things.
And these are my justification for optimism.
Okay, number one.
Most good things happened because of a reaction to a bad thing.
So one reason that I am optimistic is specifically because I know that there will be problems that push people into fixing what is wrong in the world.
Physicist David Deutsch says, quote optimism is a way of explaining failure, not prophesizing success.
I think what he meant was saying that you are optimistic does not mean that you think everything will be flawless and great.
It means that you know that there are going to be failures and problems and setbacks.
But those specifically are what motivates people to find a new solution or to remove an error.
And that is what you should be optimistic about.
Part of the reason that flying on an airplane is relatively safe is because after every plane accident comes this intense learn and fix process that reduces the odds of future accidents.
The same is generally true in business and economies and governments and for pandemics, etc.
The reason things tend to get better is that there are so many blunders and screw-ups and disasters to learn from.
And you can't separate one from the other.
Evolution does not teach by showing you what works.
It teaches by destroying what does not work.
That's why the Great Depression unleashed this surge of productivity.
You had virtually every business in America that said, if we don't learn how to innovate and become more efficient, we're going to be out of business tomorrow.
So it was this panic-induced problem solving that created all these amazing new technologies and new innovations that we still benefit from today.
And the crazy thing to contemplate is that we would not have had those benefits, those new innovations, if it were not for the Great Depression.
So back in the 1930s, the reason you should have been optimistic about the future is not because things were going to be great.
It was because there were things like the Great Depression that were going to push people to innovate and come up with all of these new technologies.
The biggest innovations don't occur when everybody is happy and gainfully employed.
They happen when there's enough stress to push people into gear forcing problem solving, fixing problems by necessity.
Nassim Taleb says, quote the excess energy released from overreaction to setbacks is what innovates.
So it sounds callous, but one version of a pessimistic world is one where nothing breaks and no accidents occur and no mistakes are made, no mishaps happened and every new endeavor is successful.
That's a bad world because, as comfortable as that sounds, all motivation to improve would diminish, which is the opposite of optimism.
Number two.
The constant human desire to one-up past successes and the generational knowledge transfer is a pure example of compounding inaction.
Skateboarder Tony Hawk landed a 900, that's two and a half spins, two and a half rotations, at the 1999 X Games.
It was the biggest achievement that the sport had ever seen.
It catapulted Tony Hawk into this legendary status.
His video game came out a year later and sold 30 million copies.
Six Flags named a roller coaster after him.
You just became a massive celebrity.
But here's the craziest part of the story.
Fifteen years later, an eight-year-old lays it at 900.
Tony Hawk was also the first person to land a 720.
That's two spins, two rotations.
A feat that was later accomplished by a second grader.
A lot of sports work like that.
Just qualifying for the Boston Marathon today requires a time that 100 years ago would put you within nine minutes of a world record.
It's the same in gymnastics.
A gold medal gymnast 70 years ago would not make the cut in a local youth competition today.
And does the same hold true for technology and science and business?
Of course, of course it does.
A first-year medical student today likely has more medical knowledge than an experienced senior doctor did 50 or 80 years ago.
Just because the field has progressed so much, the understanding of how the human body works has progressed so much.
The average eight-year-old today knows things about technology that a computer science professor 30 years ago would find bewildering.
That's especially true.
You know that's true if you have a child that is an expert at the iPhone and can do things with the phone that most adults could never even consider.
Innovation and advancement tends to compound.
One person raises the bar over the previous limit and that becomes the baseline for a new generation to aim for and to build upon.
Part of that is just a simple generational knowledge transfer.
It's pure compounding at work.
People spend years or decades discovering a new truth, and then the next generation begins their careers with that new truth as the baseline.
And then they can go on to discover some new truth, and then it keeps building and growing from there.
One other part of this is driven by the need to one-up the current leader of a field.
Charlie Munger says the world is not driven by greed.
It's driven by envy.
So you see somebody accomplish a new feat and you think, I should be able to do that too.
I should be able to do that and even better.
So it's hard to imagine a world in which that desire goes away.
It's hard to imagine a world in which people do not want to one-up the achievements of everyone else who came before them.
And because of that alone, it's hard not to be an optimist.
All right, number three.
As crazy as the world is, the core drivers of economic growth are still very much in place.
In his book The Birth of Plenty, investor William Bernstein writes that there are four necessary ingredients for long-term growth.
Those four things are secure property rights, a scientific view of the world, widely available and open sources of funding and rapid communication and the transportation of goods.
If you have those four things, economic growth tends to follow.
And every time you look at a historical example of economy that has some sort of permanent collapse, it's because one of those four things, or several of those four things, were missing or vanished.
So, as wild as things are today, whether it is COVID or political nonsense, or inflation or volatile stock market, whatever it is, all four of Bernstein's points are still in place.
There is always something to be pessimistic about.
There's usually dozens of things to be pessimistic about.
But it's often like being on a flight that's delayed.
Where the turbulence is frightening.
Where the airline loses your bags.
Where the guy sitting next to you is snoring.
Yes, I know that's miserable.
But are the engines roaring?
Are the wings intact?
Are the pilots capable?
Okay, well, that's all you need.
You're going to get to your destination.
You should remain an optimist.
That's it for this week.
Thanks again for listening.
We'll see you next time.
