I don't mean to diminish the human suffering caused by the recent earthquake and tsunami in Japan or the violent responses to populist uprisings in North Africa and the Middle East, but I do mean this week to offer a brief antidote to the related, media-induced hysteria. Not coincidentally, the greatest risks to long-range investment success are not the short-run economic consequences of such events, but more precisely, investors' emotional responses to them. That's why I'm paid to maintain a rational, long-range perspective.
So, I've been re-reading The Rational Optimist1, by Matt Ridley. Of the many important points made by Mr. Ridley, the most currently relevant, perhaps, is "the pessimists' mistake of extrapolationism: assuming that the future is just a bigger version of the [immediate] past." I will have more to say about Mr. Ridley's book and its relevance to your future in the April edition of our print newsletter, Flourishing. But for now, consider this excerpt:
...the drumbeat has become a cacophony. The generation that has experienced more peace, freedom, leisure time, education, medicine, travel, movies, mobile phones and massages than any generation in history is lapping up gloom at every opportunity. In an airport bookshop recently, I paused at the Current Affairs section and looked down the shelves. There were books by Noam Chomsky, Barbara Ehrenreich, Al Franken, Al Gore, John Gray, Naomi Klein, George Monbiot and Michael Moore, which all argued to a greater or lesser degree that (a) the world is a terrible place; (b) it's getting worse; (c) it's mostly the fault of commerce; and (d) the turning point has been reached. I did not see a single optimistic book.2
To be fair, bookstore hype and get rich TV aided and abetted yuppie house-flippers as - in defiance of all reason - they drove themselves over the cliff in 2005 - 2007. Greed sells in good times. But, nothing sells books and cable TV time like fear.
So just now, let me now suggest that you think contrarily to the gloom and doom crowd. The benefits are many, and not least among them: Reason and History are on the side of the rational optimists. Until next week,
PATIENCE, DISCIPLINE, and CONFIDENCE in the FUTURE! mh
1 The Rational Optimist: How Prosperity Evolves,
Matt Ridley, Harper, 2010.
2 Ibid, p 291.