Deconstructing Success Down To The Psychological Level - Morgan Housel

Who are the rational optimists?

I c- I came up with the term "rational optimist." I don't know if I did, but I don't know if I came up with the theory, but my idea was, if you think the future is just gonna be great, that's not optimism. That's complacency. My- my definition of rational optimism was you- you think the future's gonna be better than it is today, but the path between now and then is gonna be a disaster. It's gonna be a constant field of landmines and setbacks and recessions and bear markets and pandemics and wars and terrorist attacks that you have to endure, financially, psychologically, career-wise, in order to get the reward of optimism on the other end. So it's like getting optimism and pessimism to co-exist. That, I think, is realistic optimism.

Yeah, it's like the looking at price goes from here to here, but it doesn't go like that. Price goes from here to here by going (imitates bouncy sounds) .

Yeah, of course, you see it in the stock market, where, you know, over a 10 or 20-year period, you can make a crazy amount of money. But in any given month, in any given week, in any given year, sometimes even in any given decade, it's a disaster. And that's the price you have to pay in order to get thr- through returns over 10 or 20 years.

So we went through some of your book, Same as Ever, one of my favorite things. Everyone needs to go and buy it now. It's a super easy read, very, very enjoyable. Next lesson I want to go through is "when the magic happens." Stress focuses your attention in ways that good times can't.

There's so many examples in history of the world going through a crazy tragedy, wars, pandemics, awful things happen, millions of people die. And then you look back 20 years later, and you realize that because of that incident, because of that war, because of that pandemic, there was this crazy amount of innovation and technology that took place because people were panicked, and the incentives to innovate were off the charts. And you look back, and you're like, "Look, as terrible as that was, we created, because of that, all these inventions that everyone benefits from today." The most technologically innovative period in, I would say, human history took place in the 1930s and the 1940s, the Great Depression and World War II. It started with the Great Depression, which was, in analytical terms, the most... Uh, like the- the amount of productivity that increased in the 1930s is more than any other decade that's taken place, because it was all by necessity. Every single business in America in the 1930s woke up, and they were like, "If we don't become more productive today, we're out of business tomorrow." So every business learned how to become more efficient, and what came from that was the supermarket, laundromat, all these new businesses that were just designed to become more efficient. The, um, the factory line really exploded during this period, what Henry Ford did with the factory line, uh, in the 1910s and 1920s. Every business took up in the 1930s out of necessity. World War II comes along, and the incentives that happened because of that were just completely off the charts. During good times, boom times, people's incentive to innovate is, "If I create a new product, I might become rich." That's your incentive, and that's a good incentive. You'll get people moving in that world. In the 1940s, it was, "If we don't innovate and figure out new technologies, Adolf Hitler is gonna control the entire planet." That was literally what was going on back then. So the scientific community, the government, businesses, overnight, they were like, "All hands on deck. We need to innovate like there's no tomorrow." And what came out of that, in a very short period of time, I mean, I've summed it up like this. World War II began in 1939 on horseback. It ended in 1945 with nuclear fission.