Leave it Morgan Housel to frame the optimism vs. pessimism debate in an interesting light. He writes:
“The difference between an optimist and a pessimist isn’t usually over substance. It’s the time frame they’re looking at. Problems are easier to spot today, but progress is almost always more powerful over time.”
Let’s conduct a little thought experiment. Close your eyes and think of five things that would knock the S&P 500 down 5% in a day. Okay, go.
If you are like me, that was a pretty easy exercise. All manner of economic, political, social and natural calamities sprang readily to mind. I won’t write mine down here. My guess that yours are pretty vivid as well.
Now let’s flip the script. Think of five things that would do the opposite and give the S&P 500 a 5% daily pop. Okay go.
Now that was more difficult. I really had to wrack your brain to come up with five plausible scenarios. You probably did as well.
Two things. First a one-day move in an arbitrary stock index is not the be all, end all, measure of progress. Just the opposite. It is just a tool to help you think about things. Second, our ability to access negative (potential) events is astonishing. (See: negativity bias.) The thing is our brains are not necessarily built for truth, but to protect us. Mark Rzepczynski writes:
“Smart does not always mean seeking the truth. Even smart people can be blinded not by their behavioral biases but by the biases of their preconceived opinions. Smart does not mean advocating the correct view or being open to other ideas.”
My guess is the smarter and more creative you are, the more interesting the examples were that you came up with in our little thought experiment. The thing is that when it comes to life, business and investing we don’t necessarily want to follow those people with the most vivid downside scenarios. We want to follow optimistic people who can contemplate a future where there are real possibilities. Josh Brown writes:
Count the perma-bears on the Forbes 400 list or the amount of pessimists who run companies in the Fortune 500. You will find none…The losers do get to win sometimes, too. But their victories tend to be Pyrrhic, as every calamity ultimately leads to opportunity when the dust clears.
For better or worse the media, including traditional and social, are highly attuned to negative news and events. That is nothing new. The phrase “If it bleeds, it leads” didn’t exactly originate on Twitter. The point that we need to be careful in our consumption of all media, including social. Ben Carlson notes:
“Pessimism can get you attention these days but it doesn’t lead to anything of substance.”
It’s easier than ever to get fooled into thinking someone, or something is of substance. Unfortunately this problem is only going to get worse over time as technology keeps blurring the lines of humanity and reality. Which just means we need to keep making efforts to better discern substance versus ephemera and pessimists versus realists.