I read a great piece on Bloomberg.com the other day, “Nuclear Fusion Is Close Enough to Start Dreaming” by Tyler Cowen. It’s a good reminder to stay cautiously optimistic about the future, both in investing and in life.
If you read the financial media (or any media really), it’s often not a happy story out there. Every day there is a story about an imminent market meltdown or some other catastrophe. Financial advisors can also sound depressing when they talk about “risk management” and protecting against the “downside.” When I craft a retirement projection, I often reserve a special focus for the worst case scenario… falling into poverty late in life and having to deal with the associated anxiety and isolation. Not exactly a happy place sometimes.
However, if recent history is any guide, then it’s a pretty good bet that the future will be better than today. After all, that’s the entire core of investing. Along with nuclear fusion, there are some amazing possibilities on the horizon: improvements in medical care, AI, cheap space flight, and quantum computing. If you asked someone alive in 1921 what the world would look like in 2021, they would likely not have to imagined in their wildest dreams the changes that have occurred, and the same is true for people alive today.
You might be thinking I’m some pie-in-the-sky idealist, but I’m not. I recognize that it’s also important to be realistic about future changes. Not all of them will be easy, or even welcome. People are uncomfortable with change, especially rapid change. And there are plenty of historical examples of people suffering due to technological improvements. If you invested your life savings into a horse-and-carriage business back in 1900, then you weren’t very happy with the invention of the internal combustion engine and the mass produced automobile. The same applies to New York taxi medallion owners and the rise of ride sharing services. Here is a chart of New York taxi medallion prices:
So if you bought a medallion in 2012-2014, it likely didn’t work out well. Now consider that many of those medallion purchases were financed with high levels of debt. The end result… financial ruin for those drivers and business owners. Cowen also mentions in his article the possible negative effects of a change like nuclear fusion. It’s imperative to keep perspective and stay rational.
I believe that if we embrace optimism, and work hard to address the risks of change, then everything will work out alright. The alternative, imagining a future where we are all worse off, will lead to a zero sum world, where the only way to get ahead is for someone else to have less. And that’s not a world I want for myself, my family, or anyone else.
