Broker Check

Are You a Pessimist or Optimist?

August 18, 2014

Have you ever met a happy pessimist?

There’s a widespread perception that congenital pessimists – we all know a few – are realists, imbued with superior intellect, historical insight, and prescience. Conversely, optimists are often perceived as Pollyannaish, naive, ignorant of the facts, indulging in wishful thinking, or trying to sell you something.

In a recent article titled "17 Reasons To Be Cheerful," author Matt Ridley believes the world has never been better, and will get even better. Here are some of his thoughts for you to think about:

  • Poverty is nose-diving.  The rich get richer, but the poor do even better. Between 1980 and 2000, the poor doubled their consumption. The Chinese are 10 times richer and live about 25 years longer than they did 50 years ago. Nigerians are twice as rich and live nine more years on average. The percentage of the world's people living in absolute poverty has dropped by over half. The United Nations estimates poverty was reduced more in the past 50 years than in the previous 500 years.
  • The environment is better than you think.  In the United States, rivers, lakes, seas, and air are getting cleaner all the time. A car today emits less pollution traveling at full speed than a parked car did from leaks in 1970.
  • Global trade enriches our lives.  By 9 a.m., I have shaved with an American razor, eaten bread made with French wheat and spread with New Zealand butter and Spanish marmalade, brewed tea from Sri Lanka, dressed in clothes made from Indian cotton and Australian wool, put on shoes of Chinese leather and Malaysian rubber, and read a newspaper printed on Finnish paper with Chinese ink. I have consumed miniscule fractions of the labor of hundreds of people. This is the magic of trade and specialization. Self-sufficiency is poverty.
  • Great ideas keep coming.  The more we prosper, the more we can prosper. The more we invent, the more inventions become possible. The world of things is often subject to diminishing returns. The world of ideas is not. The ever-changing exchange of ideas causes the ever-increasing rate of innovation in the modern world. There isn't even a theoretical possibility of exhausting our supplies of ideas, discoveries, and inventions.
  • Optimists are right.  For 200 years, pessimists have had all the headlines even though optimists have been right far more often. There is immense vested interest in pessimism. No charity ever raised money by saying things are getting better. No journalist ever got the front page writing a story about how disaster was now less likely. Pressure groups and their customers in the media search even the most cheerful statistics for glimmers of doom. Don’t be browbeaten – dare to be an optimist!

You will have your own perceptions as to whether it is the market pessimists or optimists who have been more right than wrong. If you look back at the stock market over the last 50 years, the optimists win.

Are you an optimist or a pessimist?

The above material was prepared by Peak Advisor Alliance.