Towards a Brighter Future

Topic: Pearls of Wisdom

Geoffrey J. Gouinlock, CFA

December 1, 2015

Image courtesy of iStock.com/2jenn


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Towards a Brighter Future

An attribute required for long-term investment success is an element of optimism about the future. Great companies find a way of navigating difficult times – adapting and evolving to maintain their commercial relevance and their profitability. But in this day and age, finding your inner optimist and then acting on it seems tremendously out of step with the times.

That’s why I have so often recommended Matt Ridley’s brilliant book, The Rational Optimist, to friends, clients and especially young people. It’s a brilliant counterpoint to the steady diet of pessimism and lowered expectations that occupies the public discourse. And it’s factual, evidence-based and persuasive. Although a bit dry, one finishes the book armed with a renewed belief that today’s all-knowing pundits who forecast an unavoidable gloomy future, preoccupied with managing with less, are off the mark.  For investors looking to build wealth and a comfortable retirement, it’s welcome news.

Recently Ridley took part in the Munk Debates, arguing for the side that “Humanity’s best days lie ahead.” Here’s an edited version of his opening remarks:

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“Woody Allen once said: “More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly.”

That’s the way pretty well everybody talks about the future. When I was young the future was grim. The population explosion was unstoppable, famine was inevitable, pesticides were giving us cancer, the deserts were advancing, the oil was running out, the rain forests were doomed, acid rain, bird flu, and the hole in the ozone layer were going to make us sick, my sperm count was on the way down, and a nuclear winter would finish us off.

It was only a decade later that it dawned on me that every one of these threats had either been a false alarm or had been greatly exaggerated. The dreadful future was not as bad as the grown-ups had told me. Life just keeps on getting better and better for the vast majority of people.

Human lifespan has been growing at about five hours a day for 50 years.

The greatest measure of misery anybody can think of – child mortality – has gone down by two thirds in that time.

Here’s a funny thing. Most improvements are gradual so they don’t make the news. Bad news tends to come suddenly. Falling airliners always make the news; falling child mortality doesn’t.

The world economy has shrunk in only one year since the second world war – in 2009 when it dipped by less than 1% before growing by 5% the next year. If anything the march of prosperity is speeding up.

But my optimism isn’t just based on extrapolating the past. It’s based on WHY these things are happening.

Innovation, driven by the meeting and mating of ideas to produce baby ideas is the fuel that drives them. And far from running out of fuel, we’re only just getting started. There’s an infinity of ways of recombining ideas to make new ideas. And we no longer have to rely on North Americans and Europeans to come up with them. The internet has speeded up the rate at which ideas have sex.

 But what about population? The population growth rate’s halved in my lifetime from 2% to 1% and the birth rate’s plummeting in Africa today. There’s a simple and beautiful fact about demography. When more children survive, people plan smaller families. With slowing population growth and expanding farm yields, it’s getting easier and easier to feed the world. Today it takes 68% less land to grow the same amount of food as 50 years ago.

 But am I like the man who falls out of the skyscraper and as he passes the second floor, shouts “so far so good”? I don’t think so.

 You’ll probably hear the phrase “turning point” in this debate. You’ll be told this generation is the one that’s going to be worse off than its parents, that it’s going to die younger, or see sudden deterioration in its environment. Well, let me tell you about turning points. Every generation thinks it stands at a turning point, that the past is fine but the future’s bleak.

 As Lord Macaulay put it, “in every age everybody knows that up to his own time, progressive improvement has been taking place; nobody seems to reckon on any improvement in the next generation.”

We filter the past for happy memories and filter the future for gloomy prognoses.  It’s a strange form of narcissism. We have to believe that our generation’s the special one, the one where the turning point comes. And it’s nonsense.

 Macaulay again: “On what principle is it that with nothing but improvement behind us, we are to expect nothing but deterioration before us?”

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Matt Ridley keeps an active blog that’s well worth following. You can find it here. More importantly, as we begin the countdown to the Christmas season, let’s be sure to give thanks for all that we have. But maybe, just maybe we can also give thanks for the better world that’s to come.

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