Optimism Is A Super-Power
When I first entered the investment business, I had no clue how much psychology, a calm demeanor and optimism would play into delivering long-term success.
I recently had a conversation with a friend, Paul. The topic of the economy and investing came up and Paul had a look of frustration on his face. Curious, I asked why he looked like he was in pain?
Paul shot back and proceeded to blast me with everything wrong in the world.
He launched in, declaring that our elected leaders have failed us. Our government is so inept we will have a funding shutdown. Elected leaders, who can’t balance a budget, are available to the highest bidder. People don’t work hard anymore. China is stealing our technology and has hollowed out our manufacturing sector. Russia is a threat. Terrorism is lurking. Inflation is ruining the American dream. The far right is too intolerant. The far left is unrealistically liberal. There is too much infighting and too much absolute “take it or leave it” mentality.
As Paul took a breath, he said it had never been this bad before. And given these challenges, how will the economy ever grow and how will things improve? Given these circumstances, why would anyone be an investor?
I could not take issue with a single point Paul made. His points are true. Softening his tone a bit, Paul said he would appreciate visiting with someone like Warren Buffett who has been successful, but over more than seven decades.
It was an interesting point that allowed us to have a great conversation.
These challenges have been true throughout Buffett’s investing career. He has faced numerous wars, high unemployment, high inflation, bad governmental policies, social unrest, deficits, assassinations, impeachments, recessions, and pandemics.
And yet, according to S&P 500 Index statistics, over the last 97 years, the market has gone up 73% of the time. In 36 of those years the market increased by more than 20%. Decliners of more than 20% only happened in 6 years.
According to Statista, GDP (total sales of the nation) in 1929 was $104 billion. This year it will exceed $22 trillion. That is an increase of 200 times.
Although there are many things I admire about Buffett, one quality is often missed. Yes, he is incredibly smart and is a very good investor. He knows the economy ebbs and flows over time. However, Buffett has a super-power. While being coldly rational, he is also an incredible optimist on the ability of a capitalistic society to improve despite numerous shifting headwinds.
Paul sighed and said, “Maybe Buffett is simply naïve or outdated. I think the world has changed. It is now challenging, dark and hostile.”
Yes, it certainly feels that way sometimes.
However, every bit of what Buffett faced was 100% factual. And all the concerns we face today are legitimate. The magnitude of our challenges has many standing like a deer in the headlights. We are paralyzed to make optimal decisions.
But what Buffett knows, is that despite these challenges, capitalism continues to trudge forward. Progress will be made. Society will improve. Every day there will be 1,000 things to worry about. But things will improve over the next decade, the next 25 years and the next 100 years.
One thing that has changed is the proliferation of the news media. We are bombarded with “news” at every turn. It may be TV, YouTube, Tik-Tok, Instagram, Facebook or any of a number of delivery mechanisms.
Those are not news providers. They are advertising platforms that know negative stories are more enticing which allows the sale of more advertising. The algorithms powering these platforms know if you click on a certain type of article, or even stare at it for a period of time, they serve up another article that builds upon prior ones. This makes it seem as if all news is of a certain variety. It is not. This is merely what is being delivered to you because it sells the most advertising, not because it is factual, fair or balanced.
To be a better investor, turn off your alerts and put your phone in another room. Eat well. Exercise. Read a book and sleep well. Know that capitalism is undefeated. Things will get better….one bad news story at a time.