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Optimism and pessimism go hand in hand. In finance, we are told to save like a pessimist and invest like an optimist. The short term is full of setbacks, problems, breakages, depressions, pandemics, errors, but if you can stick around long enough, you can experience long-term growth.
The long-run is usually rather good and the short run is normally quite bad. In reconciling the two, we learn how to manage both.
It is then essential to understand that no one thinks independently. We all suffer from some degree of blindness.
An important lesson from history is that big events are more complicated. It makes forecasting difficult, politics nasty, and lessons to learn from it harder.
We may demand simple answers to explain outlier events. However, it's almost impossible for something big to happen because of one event, person, or group. Unrelated things often culminate into something significant. For example, the Great Depression was the result of a stock market crash, a banking crash, a real estate bubble, an agricultural disaster, and an inadequate policy response. When all these things happened at the same time, it was a catastrophe.
The risks we talk about are seldom the most important in hindsight. The real risk is what no-one sees coming. For example, September 11th, Pearl Harbor, The Great Depression. These events surprised nearly everyone and instantly shoved the world in a new direction.
When we are caught off guard, two things happen: One is that we are vulnerable. The other is that surprise shakes our beliefs in a way that leaves us paranoid and pessimistic.
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The point is that the more specific a lesson of history is, the less relevant it becomes.
One of the interesting parts of the Great Depressions from history is not just how the economy collapsed, but how quickly and dramatically people’s views changed when it did.
People suffering from immediate, unexpected adversity are likely to adopt views they previously thought absurd. It’s not until your life is in full chaos (with your hopes and dreams your dreams unsure) that people begin taking ideas they’d never consider before seriously.
Our predictions usually seem to fall towards extremes, either too optimistic or too pessimistic. We underestimate how bad things can be in the short term, and how much better they ...
Too much optimism prevents us from accurately predicting and understanding the pain and struggle that is inevitable in the future.
What it does is it reduces our stress and anxiety and provides a ‘playground’ where we can imagine alternative realities which we need to believe in.
A realistically optimistic person knows that though things will happen, things that will be surprising, disappointing or completely out of control.
Often leaders have chosen to stay on when they should have bowed out. Without intending to, they often undo much of their own work and cause problems for their successors.
Mustafa Kemal Ataturk, the father of modern Turkey, accounted for his limitations by issuing an order to ignore instructions he gave in the evenings – when he liked to carouse with his friends. But history has far more examples of leaders whose convictions of infallibility grow in proportion to their power, eventually leading to the failure of their plans.
A job can subtly warp your judgement so that you only see things from one perspective.
Think of Richard Nixon trying to use the institutions of the American government to shut down the Watergate scandal. Or the unexpectedly long American war in Vietnam.