After yesterday’s discussion on the uncertainty monster, a friend who “loves perspective changers” reached out with a challenge: “Most people rarely question their own basic ideas,” he said. He challenged me to find 10 concepts to do just that.
I agreed to give it a shot, assembling a list of my own, and filling it out with a few classics from others:
Uncertainty: Objectively speaking “uncertainty” does not increase or decrease – by definition, the future is always inherently uncertain. What does change are the circumstances surrounding uncertainty, which makes it more challenging for us to lie to ourselves about the sudden lack of clarity about the future.
Earnings Missed Estimates: Its earnings seasons, and there already have been some high-profile misses. “Earnings missed estimates” is intoned rather incorrectly by the pundits.
Morgan Housel corrects this error: “Earnings did not miss estimates, estimates missed earnings.” Earnings are what they are, the profits of corporate America. By definition, they cannot be wrong – only better or worse than expected.
What can be wrong? The analysts’ community estimates of what those earnings will be . . .
Minimum Wage = Deflation: I shouldn’t be shocked by the pundits declaring rising wages “inflationary, but consider this: Ever since the 1960s, the minimum wage has lagged just about everything: GDP, Corporate profits, productivity, executive compensation, the stock market and of course inflation.
Sure, the past 2 years of lower quartile wage increases have been inflationary, but for most of the past half century, the minimum wage has contributed to Deflation…
Everything is Survivorship Bias: Success is deceptive, and all you see around you are the winners — this is misleading, it deceives the into beoeiving success is easier than it actually is.
Survivorship bias rules the world around us. Anything that is successful – products, funds, people – are the result of millions of small and large failures. Success is an iterative process that we often overlook; we do not see the numerous misses, almosts, and faceplants that were behind victory.
Behind every winner are 100s or even 1000s of losers, without which accomplishment would not happened.
Consumers suffering from Inflation: Yes, its true, its no fun paying up for essential goods and services. But overlooked is the fact that many people buy these goods regardless of price – they may be suffering from inflation, but by paying much higher prices for discretionary purchases regardless, they are also helping to create even more inflation.
“The cure for high prices is high prices” goes the old commodity trader’s line; more supply, or less demand helps bring prices down. Paying up does not.
Traffic: Got a call from a friend driving to meet a few of us for dinner in the middle of rush hour. “Sorry, I am gonna be a little late, I am stuck in traffic,” he said.
He is a stickler for proper grammar, so it felt right correcting him: “You are on the highway at 5:30 pm near a major population center; you are not stuck IN traffic, you ARE traffic.”
We imagine life as this thing that happens to us, around us, whjere we are ther narrastor of events. In reality, we are always just another actor in the middle of it.
What’s Different?: Sir John Templeton famously observed: “The four most expensive words in investing are: ‘This time it’s different.’”
And people have been misunderstanding what he meant ever since.
What Sir John meant was that the world may change, but people are never different.
Consider: Technology advances, many of the companies of today are driven by intangibles, patents, algorithms, copyrights, logistical processes. Heavy commitments for “machinery, manpower, and materials?” They are no longer needed. This time the way companies operate is different.
What’s not different? Human nature. People will always be greedy at the tops and fearful near bottoms. Not markets, because of the very fallible, reliably emotional people buying and selling. That is what never changes – Human nature is immutable.
Counterfactual: “Invert, always invert.” So said Charlie Munger, channeling the great 19th-century Prussian mathematician Carl Gustav Jacob Jacobi.
Counterfactuals are a worthwhile intellectual exercise for looking at the world from a different perspective. Simply put, you imagine the world as if the specific issue under debate never happened.
A new corporate initiative is undertaken, a government policy is rolled out – and are declared ineffective.
How do we know? How much worse might it have been had we not done We do not have a lab where we can run the placebo group to see what happens. X?
The counterfactual allows us to consider the alternative universe where a variation of those policies was put into effect.
Time: A buddy suddenly announced he wanted to speak fluent Italian. “How long do you think that will take?” I asked.
Him: “5 years.”
Me: “Gee, sounds like a long time”
Him: “The 5 years are going to go by whether I am learning a new language or not.”
That has stayed with me ever since.
Oliver Burkeman observes: “The average human lifespan is absurdly, insultingly brief. Assuming you live to be eighty, you have just over four thousand weeks.”
Everybody gets 24 hours a day. The clock is ticking, get busy using your four thousand weeks in a way that you won’t regret in week 3,999.
Self-Help: Why do Book stores (and Amazon) misname this section of the store? It’s not Self-Help, where you undertake a series of tasks to improve yourself.
It’s just “Help.”
Self-help books can be called self-help but only from the author’s perspective. For anyone who reads that book, it’s just plain old help.
Those 10 seem to be a good start for shifting your perspective. If you have other ways to share your favorite perspective changes, please share them here.
UPDATE: July 25, 2022
A reader emails:
“I was gobsmacked by your column on the plural of anecdotes actually being potential data — that should be here too.”
How did I ever forget that?
The Plural of Anecdote IS Data (February 4, 2019)