There’s an old saying that hope is not an investment strategy.
I understand the sentiment.
You can’t just hope and pray everything you buy goes up and to the right always and forever. You need a risk mitigation strategy and a plan for when things inevitably go wrong.
But optimism is absolutely an investment strategy. It’s my investment strategy.
No one knows what the future holds but why would you invest for the long run if there isn’t a hope that things will continue to get better?
Research also supports the idea that optimism can improve your life outcomes.
Shelley Taylor and Jonathan Brown argue that borderline delusional optimism can make you more successful.
They found that people who hold unrealistically favorable views of themselves, exaggerated beliefs in their personal control over events and an unrealistic optimism about the future are more likely to persist in the face of challenges and setbacks.
People with these attributes are generally happier, have greater social bonds and have more motivation to improve their station in life.
Optimism can be good for your mental health but it’s also linked to your physical well-being.
A decades-long study on longevity found that optimism is linked to living longer. Both men and women who were highly optimistic were found to have lifespans up to 15% longer.
I’m typically skeptical of research studies like this because there are far too many variables to consider. But these ideas line up with real-world experiences too.
Bob Iger wrote about this in his book:
One of the most important qualities of a good leader is optimism, a pragmatic enthusiasm for what can be achieved. Even in the face of difficult choices and less than ideal outcomes, an optimistic leader does not yield to pessimism. Simply put, people are not motivated or energized by pessimists.
Optimism sets a different machine in motion. Especially in difficult moments, the people you lead need to feel confident in your ability to focus on what matters, and not to operate from a place of defensiveness and self-preservation. This isn’t about saying things are good when they’re not, and it’s not about conveying some innate faith that “things will work out.” It’s about believing you and the people around you can steer toward the best outcome, and not communicating the feeling that all is lost if things don’t break your way. The tone you set as a leader has an enormous effect on the people around you. No one wants to follow a pessimist.
Warren Buffett is the greatest investor of all time. He’s an eternal optimist:
Without fail, however, we’ve overcome [challenges to our country’s future]. In the face of those obstacles — and many others — the real standard of living for Americans improved nearly seven-fold during the 1900s, while the Dow Jones Industrials rose from 66 to 11,497. Compare the record of this period with the dozens of centuries during which humans secured only tiny gains, if any, in how they lived. Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America’s best days lie ahead.
We’re not in the midst of a 2008-like crisis, which is when Buffett wrote this. The stock market is within 2% of all-time highs. The bull market remains in tact. The economy is still growing. There is an innovation boom.
But the boom in AI is causing a lot of doom about what the implications could be.
AI entrepreneur Matt Shumer wrote a blog post a couple of weeks ago that freaked everyone out about what it means for white collar worker:
This week Citrini Research published a piece of future fiction that looks at how AI could cause mass unemployment, a stock market crash and slowing economy:
These posts went so viral that they ended up impacting the market. Entire sectors sold off. Stocks crashed. People are scared.
The most bearish prognostications like this always sound plausible. Pessimism is a wonderful sales technique in a changing landscape.
I don’t entirely hate these AI doom narratives. No one knows what will happen in the future. It’s worth considering a range of outcomes, both good and bad. I don’t pretend to know what the AI impact will be.
Anyone who is certain about how this plays out will probably be wrong.
We could certainly experience a bumpy transition period as companies integrate AI into their workflows. I would be surprised if there weren’t many roles disrupted. I am worried about people getting left behind by AI.
But I also think people aren’t considering all of the potential benefits and unintended consequences of this innovation. There will be more work and opportunities created.
I’m still long optimism, human dynamism and ingenuity.
It’s not always going to be easy, but our species has the rare ability to figure things out.
I remain optimistic about the future even if I don’t know how it will play out.
Further Reading:
No One Wants to Follow a Pessimist
