Same As It Ever Was

There are dozens of these behaviors worth paying attention to. I want to talk about four.

The first is a story about nuclear bombs.

#1: Big risks happen when a bunch of small risks combine and compound. But small risks are easy to ignore, so people always underestimate the odds of big risks.

The Soviets built a nuclear bomb 1,500 times stronger than the one dropped on Hiroshima.

Called Tsar Bomba (king of bombs), it was 10 times more powerful than every conventional bomb dropped during World War II combined. When tested in Russia its fireball was seen 600 miles away. Its mushroom cloud went 42 miles into the sky.

Historian John Lewis Gaddis wrote:

The island over which the explosion took place was literally leveled, not only of snow but also of rocks, so that it looked like an immense skating rink. One estimate calculated … the resulting firestorm would have engulfed an area the size of the state of Maryland.

The nuclear bomb was developed to end World War II. Within a decade, America and the Soviets had bombs capable of ending the world – all of it.

But there was a weird silver lining to how deadly these bombs were: countries were unlikely to use them in battle because they raised the stakes so high. Wipe out an enemy’s capital city and they’ll do the same to you 60 seconds later – so why bother? John F. Kennedy said neither country wanted “a war that would leave not one Rome intact but two Carthages destroyed.”

By 1960 we got around this predicament by going the other way. We built smaller, less deadly nuclear bombs. One, called Davy Crocket, was 650 times less powerful than the bomb dropped on Hiroshima, and could be fired by one person like a bazooka. We built nuclear landmines that could fit in a backpack, with a warhead the size of a shoebox.

These tiny nukes felt more responsible, less risky. We could use them without ending the world.

But they backfired.

Small nuclear bombs were more likely to actually be used in combat. That was their whole purpose. They lowered the bar of justified use.

It changed the game, all for the worse.

The risk was that a country would “responsibly” use a tiny nuclear weapon in battle, starting a retaliation escalation that opened the door to launching one of the big bombs.

Neither country would start a war with a big bomb. But would they launch a small one? Probably. And would a small bomb justify retaliating with a big one? Yes. Small risks weren’t the alternative to big risks; they were the trigger. Soviets missiles in Cuba during the Cuban missile crisis were 3,000 times less powerful than Tsar Bomba. But launching one of them, according to Secretary of Defense Robert McNamara, would have led to a “99% chance” that American would have retaliated with its full nuclear force. Robert Oppenheimer, the physicist who helped create the bomb, was guilt-stricken about the bomb’s destructiveness and pushed for smaller nukes to reduce the risk. He later admitted that was a mistake, because it increased the odds of a large nuclear attack.

Big risks are easy to overlook because they’re just a chain reaction of small events, each of which is easy to shrug off. So people always underestimate the odds of big risks.

We’ve seen it happen time after time.

No one in 1929 thought there would be a Great Depression. You’d be laughed away if you warned in 1929 that the stock market was about to fall 90% and unemployment rise to 25%.

People weren’t complacent. The late 1920s saw an overvalued stock market, real estate speculation, and poor farm maintenance. That was obvious. It was well documented. It was discussed. But so what? None of those things are a big deal in isolation.

It wasn’t until they happened at the same time, and fed off each other, that they turned into the Great Depression.

The stock market falls, the boss loses his savings, he lays people off, those people default on their mortgage, and the bank goes under. When banks fail, people lose their savings. When they lose their savings they stop spending. When they stop spending, businesses fail. When businesses fail, banks fail. When banks fail people lose their savings – and so on endlessly.

Same thing today.

The global economy shut down from March to May. Just stopped. It’s never happened before. It seems like we got hit with an unfathomable risk with a tiny chance of occuring, one that was never warned about in economic textbooks.

But we didn’t get hit with a one-in-billions risk. What happened – and I can only say this with hindsight – was a bunch of small risks colliding and multiplying at once.

A virus transferred from animal to human (has happened forever) and those humans interacted with other people (of course). It was a mystery for a while (understandable) and then bad news was then likely suppressed (bad, but common). Other countries thought it would be contained (standard denial) and didn’t act fast enough (bureaucracy, lack of leadership). We weren’t prepared (over-optimism) and could only respond with blunt-force lockdowns (do what you gotta do).

None of those on their own are surprising. But combined they turned into probably the biggest event of our lifetime.

It’s good to always assume the world will break about once per decade, because historically it has. The breakages feel like low-probability events, so it’s common to think they won’t keep happening. But they do, again and again, because they’re actually just high-probability events multiplying off each other. That isn’t intuitive, so we’ll always discount big risks like we always have.

Same as it ever was.

#2: Optimism is the fuel of progress, and without it people will grind to a halt. So you will often find it even when the odds are stacked against you and the facts don’t align.

“The American Dream” was a phrase first used by author James Truslow Adams in his 1931 book The Epic of America.

The timing is interesting, isn’t it? It’s hard to think of a year when the dream looked more broken than in 1931.

When Adams wrote of, “a man by applying himself, by using the talents he has, by acquiring the necessary skills, can rise from lower to higher status, and that his family can rise with him,” the unemployment rate was nearly 25% and wealth inequality was near the highest it had been in American history.

When he wrote of “that American dream of a better, richer, and happier life for all our citizens of every rank,” food riots were breaking out across the country as the Great Depression ripped the economy to shreds.

When he wrote of “being able to grow to fullest development as men and women, unhampered by the barriers which had slowly been erected in older civilizations,” schools were segregated, and some states required literacy tests to vote.

At few points in American history had the idea of the American dream looked so false, so out of touch with the reality everyone faced.

Yet Adam’s book surged in popularity. An optimistic phrase born during the gloomiest period in American history became an overnight household motto.

One-quarter of Americans being out of work in 1931 didn’t ruin the idea of the American Dream. The stock market falling 89%, and bread lines across the country didn’t, either.

It actually may have gained popularity because things were so dire. You didn’t have to see The American Dream to believe in it – and thank goodness, because in 1931 there was nothing to see. You just had to believe it was possible and then, boom, you felt a little better.

Psychologists Lauren Alloy and Lyn Yvonne Abramson have this theory I love called depressive realism. It’s the idea that depressed people have a more accurate view of the world because they’re more realistic about how risky and fragile life is.

The opposite of depressive realism is “blissfully unaware.” It’s what most of us suffer from. But we don’t actually suffer from it, because it feels great. And the fact that it feels good is the fuel we need to wake up and keep working even when the world around us can be objectively awful.

Tali Sharot, in her book The Optimism Bias, writes (emphasis mine):

Optimism 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.

Few would start a business if they were honest with themselves about their chances of success or how difficult the road to success will be.

Few would be as optimistic about the American dream if they took a cold look at the statistics around income mobility and wealth disparity.

Few would try to beat the stock market averages.

No one would buy lottery tickets.

But they do all of those things. I do some of them, too.

The idea that most people are overly optimistic about their own future – even if they’re pessimistic about others’ – shows up all over history.

In his book Fantasyland, Kurt Andersen argues that a founding virtue of America is its willingness, even desire, to believe things that aren’t true.

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. Day trading, advertising, and political rallies.

“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 wrote.

People believe things that aren’t true, are only loosely true, true but improbable, or true but lacking important context. To do otherwise hurts too much. They tell themselves stories, find statistics, and surround themselves with incentives to make their beliefs seem as real as possible.

They’ve done it forever.

No one should be surprised when they keep doing it, because it’s such a fundamental part of how humans work.

Same as it ever was.

#3 People will avoid even the slightest discomfort, even when the pain is manageable and trying to avoid the pain creates bigger risks.

Gabby Gingras was born unable to feel pain. She has a full sense of touch. But a rare genetic condition left her completely unable to sense physical pain.

She can fall off her bike and get up like nothing happened.

Stub her toe and not even notice.

You might think this is a superpower, or an incredible gift. But her life – profiled several times in the last decade – is dreadful.

The inability to feel pain left Gabby unable to distinguish right from wrong in the physical world. It’s one of those things that’s easy to take for granted until you see what happens when it’s gone. One profile summarized a fraction of it:

As Gabby’s baby teeth came in, she mutilated the inside of her mouth. Gabby was unaware of the damage she was causing because she didn’t feel the pain that would tell her to stop. Her parents watch helplessly.

“She would chew her fingers bloody, she would chew on her tongue like it was bubble gum,” Steve Gingras, Gabby’s father, explained. “She ended up in the hospital for 10 days because her tongue was so swelled up she couldn’t drink.”

Pain also keeps babies from putting their fingers in their eyes. Without pain to stop her, Gabby scratched her eyes so badly doctors temporarily sewed them shut. Today she is legally blind because of self-inflicted childhood injuries.

Pain is miserable. Life without pain is a disaster.

I’m not a full-blown stoic who thinks we should embrace pain and go out of our way to experience it. I like comfortable shoes and liberal use of the thermostat, thank you very much.

But there’s something to the idea that pain is the most useful map of what works and what doesn’t. Remove it, and you’re left wandering somewhere between oblivious and reckless.

So it’s interesting how much effort we put into avoiding the slightest pain, even when it backfires.

There are several areas of life where the best strategy is to accept a little pain as the cost of admission. But the natural reaction is to say, “No, no, no. I want no pain, none of it.”

The history of the stock market is that it goes up a lot in the long run but falls often in the short run. The falls are painful, but the gains are amazing. Put up with one and you get the other.

Yet a large portion of the investing industry is devoted to avoiding the falls. They forecast when the next 10% or 20% decline will come and sell in anticipation. They’re wrong virtually every time. But they appeal to investors because asking people to just accept the temporary pain of losing 10% or 20% – maybe more once a decade – is unbearable. The majority of investors I know will tell you that you will perform better over time if you simply endure the pain of declines rather than try to avoid them. Still, they try to avoid them.

The upside when you simply accept and endure the pain from market declines is that future declines don’t hurt as bad. You realize it’s just part of the game.

Companies do the same thing. A number of corporations adjust their earnings – that’s the charitable way to phrase it – to avoid reporting to investors that their profits temporarily fell during a quarter. General Electric was the grandmaster of this strategy. CEO Jack Welch wrote in his memoir about how GE dealt with a bad quarter:

The response of our business leaders to the crises was typical of the GE culture. Even though the books had closed on the quarter, many immediately offered to pitch in to cover the [earnings] gap. Some said they could find an extra $10 million, $20 million, and even $30 million from their business to offset the surprise.

It would seemingly do anything to help investors avoid even the slightest pain, even if that pain was rooted in reality. The irony is what happened next: GE shareholders have suffered through a decade of mammoth losses that were previously shielded by accounting maneuvers.

The idea that people are hypersensitive to discomfort and will move mountains to avoid it even when it’s manageable and the act of avoiding it creates bigger risks, is a strange trait. But it’s common. I’d say it’s even default.

It’s part of why people lie.

Why they don’t exercise enough.

And why everyone wants a hack or a shortcut.

There’s a scene in Lawrence of Arabia where one man puts out a match with his fingers and doesn’t flinch. Another man watching tries to do the same, and yells in pain.

“It hurts! What’s the trick?” he asks.

“The trick is not minding that it hurts,” the first man says.

Accepting a little pain has huge benefits. But it’ll always be rare, because it hurts.

Same as it ever was.

#4. Disagreement is constant because it’s rooted in individual experiences. Experiencing a major stressor can permanently change your behavior, leaving certain countries and generations with extreme feelings toward specific topics.

Psychologist Ivan Pavlov trained his dogs to drool.

He did this by ringing a bell before they were fed. The dogs learned to associate the sound of the bell with an imminent meal, which triggered a salivary response.

Pavlov’s dogs became famous for teaching psychologists about the science of learned behavior.

Less known is what happened to the poor dogs years later.

A massive flood in 1924 swept through Leningrad, where Pavlov kept his lab and kennel. Flood water came right up to the dogs’ cages. Several were killed. The surviving dogs were forced to swim a quarter mile to safety. Pavlov later called it the most traumatic thing the dogs had ever experienced, by far.

Something fascinating then happened: The dogs seemingly forgot their learned behavior of drooling when the bell rang.

Pavlov wrote about one dog 11 days after the floodwaters receded:

After the application of the [bell] all the remaining conditioned reflexes almost completely disappeared, the animal again declined the food, became very restless and continuously stared at the door.

Ever the curious scientist, Pavlov spent months studying how the flood changed his dogs’ behavior. Many were never the same – they had completely different personalities after the flood, and learned behavior that was previously ingrained vanished. He summed up what happened, and how it applies to humans:

Different conditions productive of extreme excitation often lead to profound and prolonged loss of balance in nervous and psychic activity … neuroses and psychoses may develop as a result of extreme danger to oneself or to near friends, or even the spectacle of some frightful event not affecting one directly.

People tend to have short memories. Most of the time they can forget about bad experiences and fail to heed lessons previously learned.

But hardcore stress leaves a scar.

Experiencing something that makes you stare ruin in the face and question whether you’ll survive can permanently reset your expectations and change behaviors that were previously ingrained.

It’s the basis of PTSD, and it leaves a mark in cases that have nothing to do with war.

It’s why the generation who lived through the Great Depression never viewed money the same. They saved more money, used less debt, and were weary of risk – for the rest of their lives. This was obvious even before the depression was over. Fortune magazine wrote in 1936:

The present-day college generation is fatalistic. It will not stick its neck out. It keeps its pants buttoned, its chin up, and its mouth shut. If we take the mean average to be the truth, it is a cautious, subdued, unadventurous generation.

It’s why countries that have endured devastating wars have a higher preference for social safety nets. Historian Tony Judt writes of post-war Europe:

Only the state could offer hope or salvation to the mass of the population. And in the aftermath of depression, occupation and civil war, the state—as an agent of welfare, security and fairness—was a vital source of community and social cohesion. Many commentators today are disposed to see state-dependency as the European problem, and salvation from-above as the illusion of the age. But for the generation of 1945 some workable balance between political freedoms and the rational, equitable distributive function of the administrative state seemed the only sensible route out of the abyss.

It’s why baby boomers who lived through the 1970s and 1980s think about inflation in ways millennials can’t fathom.

And why you can separate today’s tech entrepreneurs into two clearly different buckets – those who experienced the dot-com crash, and those who didn’t because they were too young to.

Two things tend to happen after you get hit with something big and unexpected:

• You extrapolate what just happened, but happening with even greater force and consequence.
• You forecast with great conviction, despite the original event being improbable and something few, if anyone, predicted.

The more impactful the surprise, the more this is true.

And – importantly – the more those who didn’t experience that big event will struggle to understand your point of view.

The oldest story of history is that of two sides who don’t agree with each other. It’s probably the most important storyline, the root of nearly every major social event.

The question, “Why don’t you agree with me?” can have infinite answers.

Sometimes one side is selfish, or stupid, or blind, or uninformed.

But usually a better question is, “What have you experienced that I haven’t that makes you believe what you do? And would I think about the world like you do if I experienced what you have?”

It’s the question that contains the most answers of why people don’t agree with each other.

But it’s such a hard question to ask.

It’s uncomfortable to think that what you haven’t experienced might change what you believe because it’s admitting your own ignorance. It’s much easier to assume those who disagree with you aren’t thinking as hard as you are.

So people will disagree, even as access to information explodes. They may disagree more than ever because, as Benedict Evans says, “The more the Internet exposes people to new points of view, the angrier people get that different views exist.”

Disagreement is less to do with what people know and more to do with what they’ve experienced.

And since experiences will always be different, disagreement will be constant.

Same as it ever was.