Germany’s GDP fell by more than half in 1945, when the end of World War II left a pile of bombed-out buildings and starving citizens.
No one a few years prior was predicting a 50% economic collapse, but it’s what happened.
Then came an equal surprise in the other direction: West Germany’s economy recovered all its lost ground and exceeded its pre-war GDP by 1950.
No one a few years prior was predicting an economy could fully rebuild itself in five years, but it’s what happened.
A lot of things work like that.
The ease of underestimating how bad things can be in the short run and how good they can be in the longer run is a leading cause of bad forecasts, bad decisions, and confused people. It’s common because it’s easier to go all in on either optimism or pessimism – having one foot on each side feels waffling.
But straddling both sides is usually the best stance.
So let me define what I call a reasonable optimist.
It has two parts.
1. THE REASONABLE
One prominent medical study begins: “The incidence of pathological gambling in Parkinson’s patients is significantly greater than in the general population.”
Dozens of studies have confirmed this. Even among people with no history of poor financial decisions, a typical Parkinson’s drug regimen increases the likelihood of compulsive gambling.
It’s a big deal. Doctors have been sued. Casinos have been sued. Pharmaceutical companies have been sued – all linked to compulsive gambling after taking Parkinson’s medications. A Louisiana lawmaker once raided his campaign account to go on a gambling spree. He claimed his addiction started soon after he began treatment for Parkinson’s. “The drugs involved, I’m sure they had something to do with it,” he said.
Other Parkinson’s patients suffer cheaper but similar side effects: superstitious beliefs and delusions.
The suspect drugs – dopamine agonists – help reduce Parkinson’s tremors. But as a nasty side effect they can fool patients into believing the world is giving them concrete signals: that there are patterns to exploit at casinos, that conspiracy theories are real, that a person obviously loves or hates you, or that a full moon portends disaster.
That’s what dopamine does: it reduces skepticism and pushes the signal-to-noise ratio heavily towards signal, offering a rewarding brain buzz for finding patterns in the world whether they’re real or not. It’s gullibility and overconfidence’s best friend.
A corollary here might be more interesting.
The opposite of excessive dopamine leading to overconfident beliefs could be something called depressive realism. It’s the observation, well documented, that people who are a little depressed have a more accurate view of the world – particularly their ability to accurately predict whether their actions control an outcome.
In simple experiments like giving people a button and a light, and asking them whether pushing the button controls the light going on, depressed people quickly (and accurately) realize they’re not in control, while the non-depressed are more likely to find false patterns, like (falsely) assuming hitting the button three times, waiting a few seconds, and hitting it again makes the light turn on.
The slightly depressed are like the opposite of the Parkinson’s patients.
I’m making a leap here, but perhaps because they’re endowed with less dopamine they’re less likely to fool themselves into thinking they’ve found patterns and signals that don’t actually exist. They’re more likely to identify randomness, realize what’s out of their control, and how unpredictable the world can be. They’re more guarded against the illusion of control.
This is what Ambrose Bierce meant when he described a cynic as a person “whose faulty vision sees things as they are not as they ought to be.”
And it’s a good description of the first half of a reasonable optimist.
The reasonable optimist is a little pessimistic, a little cynical, maybe even a little glum – not because they’re helpless, but because they’re realistic about how complex the world is, how fickle and opaque people can be, and how history is one long story of surprise, bewilderment, setback, disappointment, confusion, disaster, and humbling reversion to the mean.
They expect bad news.
They don’t assume they have any ability to predict what that bad news might be.
They know they can’t prevent it.
But they’re still optimistic.
2. THE OPTIMIST
In his book Fantasyland, Kurt Andersen argues that a founding virtue of America is its willingness, if not desire, to imagine a world that doesn’t exist.
It started with the whole idea of the New World, when 16th century Europeans were told of a magical land across the Atlantic filled with abundance, only to find a malarial swamp when they arrived.
It continued with things like P.T. Barnum and Hollywood.
“From the start, our ultra-individualism was attached to epic dreams and epic fantasies—every citizen was free to believe absolutely anything, or to pretend to be absolutely anybody,” Andersen writes.
It’s important that these optimistic thoughts are about the future – where you’re going, who you can become, what lies ahead, and what’s possible.
It’s important because if you can’t imagine a world where things are better your motivation to do anything vanishes. This is even true – especially true – if you’re “a reasonable” optimist who knows the world is complex, uncertain, and largely out of your control. In her book Optimism Bias, Tali Sharot writes:
The optimism bias protects us from accurately perceiving the pain and difficulties the future undoubtedly holds, and it may defend us from viewing our options in life as somewhat limited. As a result, stress and anxiety are reduced, physical and mental health are improved, and the motivation to act and be productive is enhanced. In order to progress, we need to be able to imagine alternative realities—not just any old realities, but better ones, and we need to believe them to be possible.
That last line is crucial. We tell ourselves stories about our potential for progress because if we’re realistic about how common failure and pain is, we’d never get off the couch.
Which is how the optimism bias becomes self-fulfilling. Once people believe in a better future – for themselves and others – they become willing to take risks, work hard, sacrifice near-term comfort, delay gratification, and cooperate with others, all of which are the raw ingredients of economic and social progress.
That, by itself, is why you should be an optimist.
Things tend to get better because people are naturally optimistic – almost obliviously so – and believe they’re capable of making things better, which motivates them to wake up in the morning and try to make things better. The odds of failure and setback are ignored in a way that pushes people to try all kinds of crazy and innovative things, a few of which work and benefit everyone else.
It’s why for most of modern history, for most people in most places, it pays to think things will be better in the future.
These two parts of the reasonable optimist might seem contradictory.
How can you be a glum pessimist with realistic views of how messy and painful the world is and a blissfully unaware optimist who knows things will get better?
A lot of it comes down to timing.
A realistic optimist is someone who knows that what happens in any given day, month, or year will be surprising, disappointing, difficult, and mostly out of your control. But they know with equal confidence that what happens in any given decade or generation is likely to be pretty good, bending heavily toward progress.
Progress happens when people learn something new. And they learn the most, as a group, when stuff breaks and gets painful.
So the reasonable optimist expects the world to break all the time. But they know – as a matter of faith – that if they can survive the day-to-day fractures they’ll capture the up-and-to-the-right arc over time.
It’s not an easy thing to reconcile. But let’s be optimistic that we’ll be able to one day.
Dec 3, 2020 by Morgan Housel · @morganhousel