Understanding the Mysteries of Human Behavior is a Great Course Lecture series by Mark Leary, Ph.D. Garonzik Family Professor of Psychology and Neuroscience Duke University (2012). In Lecture 8, “Why Are So Many People So Stressed Out?” Dr. Leary points out that much of modern day stress emanates from the fact that our lives are built around a “Delayed Return Environment”. This is defined as a world in which “people invest a lot of time and effort each day into tasks that don’t have any immediate rewards, without knowing whether their efforts will pay off in the future.”
It is striking to learn what causes stress is the essence of investing. This may be the core of why so many people fail to achieve decent long-term results. The investment process is the literal definition of stress.
The lecture continues, “In addition, as you put all of your time and effort into work or school on a particular day, you have no assurance that your hard work will necessarily pay off later. As a result, people experience stress over whether they will get a job after college or will achieve other long-term goals. The uncertainty about the future is stressful.”
The future success of investors hinges on our psychological resilience in the face of deep instinctive tendencies of the human brain. The thousands of years of evolution where humans lived from moment to moment do not match up to our responsibilities and challenges in this techno industrial society. Recognition of these challenges will help us persevere when the next down market cycle arrives.
Maybe we should think of this process as “instressting”, instead of investing.
Strong Markets / Crazy World
The equity buying continues globally in the face of mounting challenges. It seems that a pause or correction would be quite overdue at this stage. Bull markets can span a much longer trajectory and span of time than we could ever expect. The US and global economies are showing enormous potential that could create another stage of growth, but as prices rise the resistance to further gains is growing for the near term.
Political dysfunction is so stark it is difficult to track or reconcile. At the federal level, US political leadership is increasingly volatile and unpredictable. In DC, the disruption is happening on a minute to minute basis. Dramatic tax reform, environmental and energy policy changes are being proposed, changed and dropped daily. Counterfactual notions about how the past has unfolded are being thrown about like just another social media riff. There is a narrative being broadcast that says many of the things that have taken root over the last 25-75 years have not worked and that radical changes will create better outcomes going forward. Renegotiation, de-Regulation and tariffs are being discussed as if no one ever thought of those ideas before.
Imagining a different path of history is infused with hindsight bias, survivorship bias, the planning fallacy and a big helping of naïve realism. It is clear that there is little detail or actual policy proposals behind many these vague critiques. Suggesting that we have been duped or “ripped off” by past negotiations of complex trade agreements implies that there are real ideas that could be implemented. The has been strikingly little detail for actual solutions to accompany the populist themes and slogans.
The UK voted for a “Brexit” that is undefined. Brexiteers want the benefits of the EU without the costs. Agreements on trade and security that have existed between the UK and Europe for decades are now up for “renegotiation” without clear goals of what is being sought. The Economist has noted that security cooperation in Europe may being greatly disrupted by this process.
https://www.economist.com/news/britain/21729550-britain-proposes-treaty-retain-todays-security-arrangements-it-will-not-be-so-easy-brexit
The current rumbling of threats to “withdraw” from NAFTA resembles Brexit. There is a stark threat here of demagogic political slogans of the recent campaign season being implemented. These are complex systems that could be difficult to repair if they are suddenly disrupted without actual plans for new replacement structures. The ACA or “Obamacare” replacement process demonstrates this difficulty. In short, it is easy to criticize the existing leaders and laws, but quite difficult to effectively govern without concrete ideas to implement.
Protectionist rhetoric may be the most dangerous notion of all of this. If one is to examine economic history in the early 19th century, protectionist and nationalist policies had dire consequences that were contributing factors leading to WWI, the Great Depression and WWII.
As the WSJ recently noted:
The claim that protectionism made America’s economy great in the past, and can do so again today, is wrong. When the government boosts domestic steel prices to protect a few firms from foreign competition, it also hurts domestic steel users who need cheap inputs to remain competitive in a global marketplace. Making the U.S. a “high price island” for steel, semiconductors, sugar and solar panels favors some businesses at the expense of others. Protectionism can even push manufacturers to leave the country in order to remain competitive. And protectionism hurts exporters—not just the many American farmers who sell to foreign markets, but big manufacturers, such as Boeing and General Electric, which produce goods for sale abroad.
Economic nationalists say their protectionist program will ignite an economic boom. In fact, their poor understanding of history will damage the American economy and leave the country weaker.
https://www.wsj.com/articles/steve-bannons-bad-history-1505861920
Seeking to understand or forecast what is happening in real time is impossible. The velocity of information, thought, and presidential proclamation is now being accelerated by a president who “Tweets”. Each day can now offer early morning insight into what our federal leadership sees as issues that are the focus of our executive branch. The amount of material being broadcast is difficult to keep track of as each day brings new issues that seem to drown out the previous discussions.
An investors resilient, long-term mindset is challenged in this environment. It is difficult to ignore the news flow and drama of 2017 Washington politics. Looking to history for perspective and support for our patience is critical. It is so important to view other adversity and volatility in our history for reassurance that the world has always been a caldron. There is a new PBS Vietnam documentary now running by Ken Burns that provides a granular view of the difficult turbulence and challenge of period from 1950 to 1975.
http://www.pbs.org/show/vietnam-war/
This striking and detailed delineation of stormy American and world history somehow seems perfectly appropriate to turn to. It can be a great substitute for turning off the current news and avoiding social media.
This documentary material is heart wrenching to watch. The amount of death and destruction is overwhelming. The consequences of French Colonial rule and the cold war battlefield of South East Asia is one filled with actions and decisions that now seem colossally misguided and destined for failure.
These stories of our history are critical for helping ease the real-time anxiety that will never let up. While looking at North Korea, rising nationalism or the latest hurricane forecast we can often be overwhelmed with fear. These current threats can often seem insurmountable. One way or another, the world will move forward.
Econocrat Manafesto
What our Federal Government could be.
In this ideal we can be led by data driven leaders just like many successful businesses and investors, the “Econocrats. The Econocrat sees the world for the depth, complexity and randomness that pervades all that has happened and will happen. This new political force sees our university system, business community and cutting edge social science as the base for study and verifiable data to drive policy. This movement of positivity will not be driven by ideology or rigid partisan beliefs.
Economic and high level social science will synthesize all the best work being done regionally and look to refine and enhance those state and local policies that are productive and most effective. Great American companies and innovators will be asked to contribute tools and technologies that can lead to better and more effective government systems and operations.
The Econocrat seeks sustainable growth where all can compete for their slice of an ever-growing pie. The US can prosper in the global competition through educational excellence, and American innovation as we always have. Lofty Standards for our environment as insurance for our lives and health along with our children’s future. The debate regarding Global Warming can be ended as we seek to set the highest example of what it means to have clean air, water and safe food supply.
Growth through inclusion as the world’s beacon of hope; The recognition that our population needs to grow and the economic reality is that US demographics can continue to provide a competitive edge (The US is in much better shape than most of the rest of the world). A continually declining birthrate will not allow our economy or living standards to grow. Data regarding immigration can be disseminated without fear mongering or partisan manipulation. Aging populations in China and Japan are examples where there has been little immigration and dramatic problems await those countries.
The (Econocrat Party) EP sees that the world is an ever more competitive place and that raising levels of education is the way for all to reach for better living standards and opportunities for the future. The public K-12 education system in the US has a has a history of achievement and the highest level of excellence. This American Public Education legacy needs restoration. This system must always be improving and evolving to allow students to prepare for participation in a global economy that is driven by technical knowledge and complex skills.
The EP does not abide by stubborn ideological rules, but rather looks for the right solutions for each plank of social, tax, industrial, and foreign policy. Quality government is the goal, not less government or more government as a base principle. Data and study are the key principals of the EP. We seek to enlighten voters of the complexity of our challenges, not gain votes through slogans that have little potential or proof of benefit.
The EP does not seek “change” for the sake of trying new things or as a slogan in the pursuit of being elected, but the goal is excellence in the grand task that faces the Federal Government. No voter should be under any illusions that there are policies that will simply make their lives better. The world is an increasingly complex place, and for our democracy to work, we must be informed about the issues. Taxation, health care, food safety, wage growth, and many other issues do not lend themselves to neat solutions that make intuitive sense. It is every citizens responsibility to make effort to become informed as we seek the science, data and refinement of what has worked in our past and in countries around the world. The EP seeks to engage voters without manipulating them with “hot button issues” that have been a staple of the tribalism of the last few decades.
Global trade has been getting raked with criticism in this current climate of income inequality and manufacturing shift to automation. There is a nationalist / protectionist wave that has entered our political narrative that implies federal trade policy can help workers and domestic industry. These messages are being amplified by both right and left-wing commentary as a mechanism for securing votes.
The EP sees these messages to be dangerous slogans that are driven by political marketing and populism. The reality is that free trade is based on the economic principal that when countries specialize, more goods are produced at lower cost and living standards rise for all. The US has led this drive towards free trade for decades.
This process is not kind to workers. The damage has been particularly hard on lower skill occupations and manufacturing. Competition is brutal and creates perpetual change in the capitalist pursuit of efficiency and profit. The idea that United States can close off competition and end up with higher living standards and a growing economy is likely false. We are a massive exporter of agricultural goods, engineering, innovative patents and entertainment…how will that continue if we try to wall off our domestic manufacturing?
Workers have you been driven out of many areas of the economy by competition and innovation throughout history. Take agriculture as an example in the last 100 years. In 1988, the NYT noted that people were leaving farm communities at an accelerating pace. http://www.nytimes.com/1988/07/20/us/farm-population-lowest-since-1850-s.html
The article Notes that less than 3% of the US population resided on farms in 1988. This compares to nearly 30% as recently as 1920. There are no movements from either party to restore the agricultural jobs of the past. The agri-workers that migrated away from the farms moved over time to other occupations. This process was difficult and involved challenging training and difficult process of relocation.
There is great nostalgia toward the notion of domestic manufacturing, production and the jobs that offered people with limited education the opportunity to work hard, provide for family a piece of the American dream. These jobs have been diminishing in availability as global low wage competition, technology, and automation force efficiency. This has led to brutal dislocation as workers saw factories close, entire towns and regions transformed from vibrant production centers to areas of terminal decline.
The worker at the lower end of the skills hierarchy has always been vulnerable. These people need more training and skills and that process will be the most demanding thing. Altering the global trade system to try to alleviate this vulnerable group is unlikely to work and could have dire and disruptive consequences for GDP, living standards, the global food chain and beyond.
To suggest that masses of manufacturing workers can be reeducated, retrained, redeployed into knowledge work is often met with skepticism. This push back ignores the natural process of migration to opportunity that is a foundation principal of economic success. These migrations and shifts have brought us to the living standards that we experience today. Moonshots are what humans have always accomplished. The required skills that are in high demand and growing in the technological world that drives our economy in 2017 are challenging to acquire. These skills are continually growing more complex. As difficult as this will be, it is in harmony with the laws of capitalism and economics. Violating those laws could create more daunting threats than income inequality and unemployment. Threats like trade wars, global military conflicts and depression.
People must be convinced that training and education is essential. To paint a picture that the federal government can create a closed off country that will then allow jobs of the past to resume is implausible and not something that can be part of the Econocratic world view. Where are the examples of countries that have closed themselves off and prospered?
The EP seeks to reframe our view of how the political process can benefit all. We will not speak of other political actors or parties in denigrating or inflammatory terms. It seems that the good of our history has been driven through thoughtful debate and negotiation rather than the recent tribal battles between our two ruling political parties. As Bret Stephens wrote so eloquently in the NYT on 9-24-17;
It’s usually the case that the more we do something, the better we are at it. Instead, we’re like Casanovas in reverse: the more we do it, the worse we’re at it. Our disagreements may frequently hoarsen our voices, but they rarely sharpen our thinking, much less change our minds.
…In other words, to disagree well you must first understand well. You have to read deeply, listen carefully, watch closely. You need to grant your adversary moral respect; give him the intellectual benefit of doubt; have sympathy for his motives and participate empathically with his line of reasoning. And you need to allow for the possibility that you might yet be persuaded of what he has to say.
Our Econo process is to be driven by public health data, innovation and economic study. We seek to educate and refine for the future of “Better Government”. A process that seeks articulate leadership and a growing pie that can benefit everyone. Nurturing civil discourse, ideas free from ideology and a continuous appeal to all seeking opportunity, growth and prosperity.
In other words, less stress, more progress and a bigger pie so that we, our children, and future generations will continue to enjoy higher living standards and growing opportunities. Data, debate and faith in the American Way will take us all to the next level. We may be waiting a long time for this so stay patient. Meanwhile, let’s keep our confidence in the future, stay invested, avoid the stress and reap the benefits.