These are not — to put it mildly — particularly cheerful times.
Soaring inflation. Rocketing interest rates. Sky-high energy bills. Ukraine. A recession predicted to last until 2024. The post-Brexit hangover. And what appears to be the prospect of months of public sector strikes: nurses, teachers, rail staff, ambulance drivers — you name it, there’s talk of a strike.
Nor do the dark winter days and the present cold snap serve to lift the spirits, either.
No wonder the pundits are trotting out the parallels with the 1970s: The Winter of Discontent, the Oil Shock, and the 3-Day Week.
Flawed perceptions
Yet I lived through those events, as a young adult in my early 20s. Yes, there are parallels — but to my mind, they’re history rhyming, not history repeating.
Because when you look in detail at the comparisons, they crumble away.
Cars, computers, aircraft, per capita GDP, productivity, healthcare, average lifespan, education, standards of living: for all its present troubles, life in 2022 is infinitely better.
If a time machine existed, would you really want to go back? For good?
Things did only get better
The trouble is, many people don’t see it that way. And by ‘people’, I’m explicitly referring to investors. For proof, dip into a couple of internet investment forums at random. Negativity abounds.
To many of these investors, the world is ‘steady-state’, with cycles, and reversion to the mean. Things get better — and then go back to where they were.
Yet the reality is very different, as pointed out by the late lamented statistician and epidemiologist Hans Rosling, whose 2018 book Factfulness: Ten Reasons We’re Wrong About The World — And Why Things Are Better Than You Think is regarded by Bill Gates as “one of the most important books that I’ve ever read”.
Drilling into widely available public data sources, time and again he shows that most of us are wildly wrong about the state of human progress.
In short, we’re far too pessimistic: things are much, much better than most of us realise, demonstrates Rosling. In other words, while those cycles are indisputably there, they’re super-imposed on a rising trend.
A bias towards optimism
The pessimism bug, though, is difficult to shake off. Negativity seems to be wired into the human brain, Rosling wrote.
Nick Train, of fund manager Lindsell Train — who is surely one of the best fund managers of his generation — is also on the side of Rosling. A few years back, he went so far as to write an article on the virtues of long-term optimism. Warren Buffett and his partner Charlie Munger, he notes, are also optimists by inclination.
The world is making progress, right across the board. Healthcare, productivity, crop yields, resource utilisation, education, technology — you name it, and over the long term, there’s progress. There’s reason, in other words, to be biased towards outcomes that are optimistic.
And, observed Train, when he himself — a professional fund manager, with a career interest in taking a balanced view — began to teach himself to be bullish about the future, his investment performance improved. More than that, he reported looking and feeling younger, too.
Changed mindset
Back when I studied economics, I took a couple of courses in economic history — a useful antidote to the mathematics, models, and methodologies of economic theory. The Industrial Revolution was real — and the UK at its end was a very different place to the UK at its beginning.
Long before reading Rosling’s Factfulness, I’ve tried to embrace optimism in the own investment. I’ve been an investor in high-tech investor Scottish Mortgage Investment Trust for many years, and more recently subscribed to the IPO of space investor Seraphim Space Investment Trust.
As Rosling observes, the march of progress is undeniable — so instead of assuming that the companies driving that progress will fail, why not assume that some of them at least will succeed?
Proof point
For proof, consider the section in Factfulness where he outlines five global risks that he thinks we should worry about.
Top of the list: a global pandemic. Which, of course, is no longer a hypothetical possibility, but something through which we’ve all just lived. Not least because of vaccines from AstraZeneca and (perhaps even more impressively) Moderna, of course.
