Earlier this year, a poll conducted by the Pew Research Center caught my attention. The survey asked the following question: “In general, would you say life in America today is better, worse, or about the same as it was 50 years ago for people like you”? 58 percent of those who responded said “worse”. The majority of respondents also expressed a pessimistic view of the future of the country across a range of different issues.
While I find the response about life being better 50 years ago to be surprising, I’m not surprised about the pessimistic outlook for the future. I hear that view regularly in my conversations with clients. If you are nodding your head in agreement, well, this letter is for you!
I wouldn’t normally tackle this sort of subject. But I believe that pessimism about the future has become an important investment issue. If your investment objective is to grow or preserve wealth for the future, accepting investment risk is necessary. Some degree of optimism is a prerequisite.
My goal with this letter is not to downplay the significant challenges in the world today. Nor do I mean to imply that everything is better, that life is better for all people, or that bad things won’t happen in the future. One can take their pick from a multitude of worrisome issues that have no easy solutions. Rather, I hope to provide some background on the many positive trends in the world because they may just get lost in what can be a sea of negativity. More importantly, I hope to encourage dialogue between you and your advisor if the topics in this letter interest you.
What Has Been Going Right
A small body of literature in recent years documents an interesting contradiction—across so many important aspects, life for many people around the world has been improving dramatically and yet people generally believe that things are getting worse.
In his book Enlightenment Now psychologist Steven Pinker offers the following framework that we’ll use to explore these improvements:
“Most people agree that life is better than death. Health is better than sickness. Sustenance is better than hunger. Abundance is better than poverty. Peace is better than war. Safety is better than danger. Freedom is better than tyranny. Equal rights are better than bigotry and discrimination. Literacy is better than illiteracy. Knowledge is better than ignorance. Intelligence is better than dull-wittedness. Happiness is better than misery. Opportunities to enjoy family, friends, culture, and nature are better than drudgery and monotony. All these things can be measured. If they have increased over time, that is progress.”
Let’s now turn to the measurement of this progress.
Health and Life Expectancy
- In the past 50 years, world average life expectancy at birth has increased from 56 to 71. In the U.S., average life expectancy at birth has increased from 71 to 77 (1).
- Since 1990, the global childhood mortality rate has declined from 9.3 percent to 3.7 percent. The childhood mortality rate in low-income countries has declined from 18.5 percent to 6.6 percent. (2)
- Around the world, deaths from malaria, pneumonia, and diarrhea, as well as from air pollution have declined significantly. (3)
Income, Poverty, and Food
- In the last three decades, global per capita income (inflation-adjusted) has increased approximately 60 percent. The increase in the United States was just under that threshold at 50 percent. (4)
- Over the same period, the percentage of people around the world living in extreme poverty has declined from over 37 percent to under 9 percent. (5)
- Since 1970, global calorie consumption has increased 25 percent, aided by a long-term trend of increasing global cereal harvests. Meanwhile, the percentage of the population in developing countries that is malnourished has steadily declined. (6)
- In the past 20 years, the percentage of people around the world without access to electricity has been cut in half while clean water availability has improved 20 percent. (7)
- Since 1990, deaths by homicide in the U.S. have declined by roughly half. World data on deaths by homicide begins around 2000 and shows a similar decline. (8)
- In the U.S., pedestrian deaths, as well as deaths from occupational accidents, motor vehicle accidents, and plane crashes all have declined substantially over the past several decades. (9)
- Also in the U.S. and since the early 90s, incidence of hate crimes, domestic violence, and sexual assault all have declined. (10)
- Violent crimes and property crimes in the U.S. have declined by approximately half since 1993. (11)
- Over the past 50 years, the global literacy rate has increased from 67 percent to 87 percent. (12)
- Over the past several decades in the U.S., leisure time and average length of retirement have increased while share of income spent on necessities has decreased.
Despite these positive developments, people tend to think things are going in the wrong direction. Interestingly, this phenomenon is neither recent nor exclusive to us here in the U.S.
I mentioned earlier that violent crimes and property crimes have declined substantially over the past 30 years. A Gallup poll conducted since 1989 asks this question: “Is there more crime in the U.S. than there was a year ago, or less?” The majority of those polled said “more” in all but two years (2000 and 2001). Yet reported crimes nationally have declined almost every year since 1989.
Another Gallup poll asks this question: “In general, are you satisfied or dissatisfied with the way things are going in the United States at this time?” Gallup has run this poll since 1979. The majority of Americans have answered “dissatisfied” in the overwhelming majority of these polls. (13) Over the same period and with remarkable consistency, roughly 80 percent of Americans reported that they were satisfied with their personal lives. (14)
How about outside the U.S.? In his book Factfulness, renowned lecturer and physician Hans Rosling reports the results of the following polling question of people in 30 countries: “Do you think the world is getting better, getting worse, or staying about the same?” More than half of those who responded in all 30 countries answered, “getting worse”.
Making Room for Possibilities
I like this quote from Rosling’s book:
“People call me an optimist because I show them the enormous progress they didn’t know about. That makes me angry. I’m not an optimist. That makes me sound naïve. I’m a very serious “possibilist”. That’s something I made up. It means someone who neither hopes without reason, nor fears without reason, someone who constantly resists the overdramatic worldview. As a possibilist, I see all this progress, and it fills me with conviction and hope that further progress is possible. That is not optimistic. It is having a clear and reasonable idea about how things are. It is having a worldview that is constructive and useful.”
The quote captures a tone that I have hoped to strike in conversations with clients about their concerns regarding the future. Not to ignore or minimize the big risks and challenges of our day but to provide some balance—the kind of balance that is necessary to stick with an investment strategy through thick and thin.
Without some intentionality to balance the future possibilities, it seems that normal forces will push many of us toward pessimism. The polling data from above shows a natural predisposition in that direction, even as the evidence shows progress all around us. Then, as Rosling notes, optimism can seem careless and naïve. Economist Friedrich Hayek put it this way: “Implicit confidence in the beneficence of progress has come to be regarded as the sign of a shallow mind”. It just sounds smarter to be cautious. Lastly, our political parties and popular media outlets actively cultivate fear and negativity. A study done on the tone of the news shows a consistent slide toward negativity from 1980 until the study concluded in 2010. Does anyone really believe that the news became more positive after 2010?
Rosling’s possibilist mindset might also have some advantages for investors. The possibilist recognizes that the future is uncertain and will therefore avoid trying to predict future investment outcomes. The possibilist expects both challenges and opportunities and will be prepared for volatility. Lastly, the possibilist would recognize that he or she is biased and subject to various influences and would therefore maintain a disciplined process to avoid unforced errors. In my judgment, these investment advantages are harder to come by with a highly rigid view of the future.
1. Our World in Data
2. Our World in Data. Refers to the percentage of children who die before reaching the age of five.
3. Our World in Data. Data starts in 1990.
4. Our World in Data. Note that median inflation-adjusted household income in the U.S. increased 26 percent from 1984 through 2020. The smaller increase in the median (versus per capita or average) suggests that incomes have grown more rapidly at the top-end of the income spectrum. This trend is one of many that readers may point to as not going in the right direction. Median household income data from FRED.
5. Our World in Data. Extreme poverty is defined as living below the International Poverty Line of $2.15 per day. This data is adjusted for inflation and for differences in the cost of living between countries.
6. Our World in Data
7. Our World in Data
8. Steven Pinker
9. Steven Pinker
10. Steven Pinker
11. Pew Research Center and FBI
12. Our World in Data
13. If you’re curious, it seems the period of greatest collective “satisfaction” with the way things were going in the U.S. was between 1997 and 2002.
14. Researchers call this discrepancy between satisfaction with one’s personal life and dissatisfaction or pessimism regarding one’s country the “optimism gap”. The optimism gap is not unique to the U.S. Polling data in many European countries confirms the same phenomenon.
15. From Matt Ridley’s book The Rational Optimist.
16. Study by data scientist Kalev Leetaru. Source is Steven Pinker’s Enlightenment Now.