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This episode is about pessimism and why it is so seductive and it sounds so smart.
But before we go on, I think we need to define the opposite, which is optimism.
Now, if you are optimistic about the world and about the future, and I think I am, being what I call a real optimist does not mean that you think everything's going to be great in the future.
That is what I would call complacency.
If you think everything is going to be good in your own life or in the world, that's not optimism, that's complacency.
Optimism, I think, is a belief that the odds of a good outcome are in your favor over time, even when you know there are going to be setbacks and problems and challenges along the way.
It's the simple idea that most people wake up in the morning trying to make things a bit better and more productive than wake up looking to cause trouble.
That's the foundation of optimism.
It's really not that complicated.
And it's not guaranteed either.
It's just the most reasonable bet for most people is to be an optimist about the future.
But despite that, we have to acknowledge that if you read the news, if you talk to people Not just in a crazy election, like this, but in almost every year, pessimism rules the day.
The irony of that is that if you are any bit of a student of history, and you look back and you see how much progress we've made in the last, you know, forget the last 100 years, the last 10 or 20 or 30 years, it's astounding.
We are as a society, so much wealthier, healthier, have so many cool new toys and tools, and we're more productive than we've ever been.
and yet every day you turn on the news and it is pessimism, pessimism, pessimism.
Particularly if you're looking at something like the economy or the stock market, it's always going to be the most pessimistic views prevail, but even if you're talking about new science and health and technology, pessimism gets people's attention in a way that optimism does not.
This is not a new idea.
There is a historian named Deirdre McCloskey, and many years ago she wrote in the New York Times, quote, "...For reasons I have never understood, people like to hear that the world is going to hell.
They like to hear it.
It's what they want to hear.
When they're reading history or the news, people by and large do not want to read about how good things are or are going to be.
Their attention is drawn to pessimism and bad news and scary forecasts." And something that's always hit me with these is the reason our attention is drawn to them is because pessimists tend to sound smarter.
They tend to sound like they know what they're talking about in a way that the optimists do not.
It's so often that if you see an optimist, he kind of looks like he's clumsy and aloof and he says, Oh, the future is going to be bright and everything's going to be good.
He looks detached from reality, but if you listen to a pessimist, you're like, ah, she's, she knows who she's talking about.
That is a, that is some good stuff right there.
This person has got their finger on the pulse, they know what's going on.
And it has always been like that.
This is not a new phenomenon with modern media at all.
John Stuart Mill wrote 150 years ago, he wrote, quote, I have observed that it is not the man who hopes when others despair, but the man who despairs when others hope, is who is admired by a large class of persons as a sage.
not Ridley the author he wrote in his book the rational optimist that quote if you say the world has been getting better you may get away with being called naive or insensitive if you say the world is going to go on getting better you are considered embarrassingly mad if on the other hand you say a catastrophe is imminent you may expect a MacArthur Genius award or even the Nobel Prize and And look, in my world, in many of your world, in finance and money and investing, you see this all the time—where you watch CNBC, it's the bear who says a recession is coming, stocks are going to crash, they're who gets
all the attention, the optimist is kind of pushed to the side.
But this idea goes so far beyond money and economics and investing.
There was a study from Harvard several years ago that showed that those publishing negative of book reviews are seen as smarter and more competent than those giving positive reviews of the same book.
In that study, only pessimism sounds smart.
Optimism sounds superficial.
And so what I want to talk about is why that might be.
Why does pessimism sound smart?
Why is it so intellectually seductive to us and captures our attention more than optimism does?
especially in a world where if you are attached to the reality of what has occurred over the last hundred years, you should be an optimist.
There's one very broad answer here that can capture a lot of what we're talking about, which is that there's clearly more at stake with pessimism.
Daniel Kahneman, the late psychologist once wrote that when directly compared or weighted against each other, losses loom larger than gains.
This asymmetry between the power of positive and negative expectations or experiences has an evolutionary history.
Organisms that treat threats as more urgent than opportunities have a better chance to survive and reproduce.
So of course we are drawn to the negative because there's more at stake.
To win over time you have to first survive over time so that threats are going to capture more of your attention than opportunities.
But there's several other reasons why pessimism sounds so smart and captures our attention.
I want to go through a couple of them now.
One, and I think this is a really big one that explains a lot of what s going on here, is that progress happens too slowly to notice.
But setbacks happen too quickly to ignore.
One other way to summarize that is there are lots of overnight tragedies.
But there are almost never overnight miracles.
So think about something like the improvement in health care over time.
One of the biggest and most important news stories of our lifetimes in over the last hundred years has been the incredible decline in heart disease mortality.
Now, on a per capita basis, death from heart disease has declined more than 70 % since the 1960s.
Not even that long ago, a 70 % decline in heart disease mortality.
If you had a heart attack in 1965, even if you made it to the hospital, you are probably dead." Whereas if you have a heart attack today and you make it to the hospital, there's actually a very good chance that you're going to end up okay and walk out of there and live the rest of your life.
Completely different world now that we have blood pressure medications, better technologies, better medicine, et cetera, et cetera.
And look, if you add up, how many lives that has saved since the 1960s?
The 70 % decline in heart disease mortality per capita.
It is in the millions of lives saved in the last 60 years or so.
That is incredible.
Millions of lives saved from new technology, better science, better medicine.
But how often do you hear that statistic?
How often is that in the news?
How often do people talk about how amazing that is, it may be you or your parents or grandparents are alive today and they would not have been 60 years ago, almost never.
We never hear about it.
And here's the reason why.
What happened over the last 60 years, that 70 % decline, was basically a 1 % or 2 % improvement every year.
It happened very slowly.
In any given year, there was nothing worth talking about.
You're never going to open up the newspaper and it says, breaking news, heart disease mortality declined by one tenth of 1 % last month.
That will never make a headline.
But over the course of 70 years, it changes everything.
It compounds like anything else and most good news is just like that.
It just compounds slowly.
It's a slow boil in the background.
So it's very easy to ignore because it's so slow.
But now think about bad news.
Think about Pearl Harbor and how the entire world changed in one hour.
Think about September 11th and how everything in the world changed in 30 minutes.
And COVID, which basically seemed to hit overnight practically, or think about a stock market crash that happens in one week and the stock market loses 40 % of its value.
Bad news tends to happen very quickly, and because it happens quickly, you cannot look away.
It's going to catch your attention because it happened overnight, and there is no equivalent of Pearl Harbor or 9 -11 for good news.
There's no such thing where the world changes for the better dramatically in 30 minutes.
It doesn't happen, but it happens very frequently with bad news.
And even something like a car accident or a tree falling in your yard, bad news tends to happen instantaneously.
Good news is slow compounding in the background.
So even if the good news is more powerful over the long run, it's going to make a bigger difference in the world.
It is easy to ignore because we are caught paying attention, deer in the headlights to the bad news that happens very quickly.
All right, next one.
This one's maybe a little bit more controversial, but I think it happens a lot, which is that Misery Loves Company.
And so pessimism shows that not everything is moving in the right direction, which helps you rationalize the personal shortcomings and the challenges that you have in your own life that we all have, Misery Loves Company as they say.
And so realizing that things outside of your control could be the cause of your own problems is a very comforting feeling.
And so we're attracted to it.
And so if you, as many of us, including me, do from time to time, feel that we're falling behind, that we're not doing a good enough job, there are challenges that we don't know the answer to, sometimes it can feel good to read a new story about other people struggling as well.
It makes you put your own struggles and insecurities and challenges into context that feels good.
Number three, the idea that pessimism requires action, you have to do something, whereas optimism usually means stay the course and just don't do anything.
And that's why pessimism gets your attention more, because you have to go out and do something about it.
So pessimism in the stock market is hey, you need to sell your stocks, you need to sell everything that you have right now.
That'll get your attention because you need to do it.
It's like, get out, run.
There's a fire. There's somebody chasing you.
It grabs your attention because there's an action to take right now, but you don't want to read an article by an optimist that says, everything's fine.
Just don't do anything.
Maybe that feels a little bit that feels good if you believe it, but you can just push that article to the side.
You don't need to add it to your checklist of things to do.
You're going to be much more likely to pay attention to something if you need to do it rather than just the fine print that you can ignore over time.
So tell someone that everything will be great, and they are likely to either shrug you off or offer you a skeptical eye about what they say.
But if you tell somebody that they are in danger, you will have their undivided attention.
Say we'll have a big recession and the newspapers and CNBC are going to call you and ask for your opinion.
But if you say that we are headed for an average growth and an average outcome.
Nobody cares, no one's gonna listen to you.
Alright next one. This one I think is very common particularly in finance.
Optimism sounds like a sales pitch, while pessimism sounds like somebody who is trying to help you, and often that is the case.
A lot of times the optimists are the ones who are trying to sell you something and it is a sales pitch, but in In general, most of the time, optimism is the correct default setting, and pessimists can be as big of sales pitchers as anybody else.
Especially, I think that's true, if it's a topic that is emotional.
Like money, or politics, or even health, that tend to be kind of tribal and emotional.
That's when the pessimists, I think, can actually get you your attention the most.
There are two topics that will affect your life, whether you are interested in them or not.
And those are money and health.
Doesn't matter whether you like those topics, those topics like you, and they will affect your life one way or another.
And while health issues tend to be individual, it's your own life, money issues in the economy and the stock market are more systemic.
Like we're kinda all in this together in where the economy is going to go and the stock market is to go.
And so in any connected system where one person's decisions can effect everybody else, it's understandable why financial risks gain this spotlight and financial pessimism gains the spotlight and captures your attention in a way that few other topics can.
And one last one here is that pessimists often extrapolate present trends of what's going on today without accounting for how things can change and adapt in the So, finding something that is ugly and scary and pessimistic today, and assuming it's going to stay like that forever, is a very easy assumption to make.
That look, the budget deficit is like this today and if you assume it's like that for the next 50 years, it's going to be terrible, people do things like that all the time.
And it's very persuasive, because you're not saying the world's going to change.
You're saying it's not going to change, which seems like less of a stretch than imagining how something might adapt, but that's usually not how the world works.
Things do change. Things do adapt.
Problems correct, and people figure out new ways how to do things and how to put up with old challenges that they had.
Threats incentivize solutions in equal magnitude.
The bigger the threat, the bigger the risk, the more incentive there is for people to figure out what to do about it.
That is a very common plot of economic history that is too easily forgotten by the straight lines.
That we are very, very good at figuring out new ways to solve challenges.
And the bigger the challenge, the more incentive there is to adapt.
In 2004, The New York Times interviewed Stephen Hawking, the scientist whose incurable motor neuron disease had left him paralyzed and unable to talk since age 21.
Through his computer, which of course is how he spoke, Hawking told the interviewer how excited he was to sell books to lay people and just how great and fun his life was.
The New York Times asked him, they said, are you always this cheerful?
And Halkings replied, I love his reply.
He said, quote, my expectations were reduced to zero when I was 21.
Everything since then has been a bonus.
Expecting things to be great and being very optimistic means a best case scenario that often feels flat.
Pessimism reduces expectations, narrowing the gap between possible outcomes and the outcomes that you feel great about, and so maybe that is part of why it's so seductive.
Expecting things to be bad is the best way to be pleasantly surprised when they're not.
That's it for this episode.
Thanks again for listening, and we'll see you next time.
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