All we have to fear is our optimism

Can optimism become a weakness?  Can too much confidence become hubris, leading to imprudence?  America seems determined to push our optimism to the limit, to provide future generations with answers to these questions.

Seen in terms of John Boyd’s Observation – Orientation – Decision – Action loop, excessive optimism creates a “locked orientation.”

The result is an Orientation that doesn’t accurately represent the changing external environment, and actions coming from such an Orientation are often inappropriate, ineffective, or late. Just like what we’re seeing today.   [Chet Richards, source]

Once hubris takes hold, our very success works against us.  Why play hard in a game we “know” we will win?  Complacency kills in a rapidly changing, hyper-competitive world where, as Andy Grove says, only the paranoid survive.  Our triumphant, incredible success in the post-WWII era world blinds us to the awareness that this was just one chapter in history.

Our optimism is our enemy

With this insight, so many incomprehensible things become obvious.

Why did we ignore so many warnings, given over such a long time, by so many prominent experts and institutions?  (see this for a list showing a tiny fraction of the warnings).  Optimism!

  1. Why did so many Americans ignore the many signs that the economy was slowing, dangerously slow?  For example, in the almost 4 thousand of Internet posts mocking the warnings with “Dude, Where’s my Recession?”  Optimism!  (For analysis of this, see Making us dumber, chanting “Dude, where’s my recession?” and When did “Dude” predict a recession? How severe?)
  2. Why has our leaders’ response to the financial crisis been so slow, incremental, and reactive?  Twenty programs, each too late and too small.  Optimism!  With success guaranteed, and recessions always brief and shallow (for the past quarter-century), our leaders concentrate on delicacy and precision with their medicine.
  3. Why have economists been so reluctant to acknowledge the magnitude and unprecedented nature of this downcycle?  Optimism!  Mainstream economists still tend to see this as a typical post-WWII recession.  To open their minds to more extreme outcomes would push them to become Doctors Doom — “outcasts” from the safe community, like Professor Roubini.

We are like children playing on the beach who see a tsunami coming toward us.  “Cool, look at the wave!”

An alternative perspective

We are about to suffer the consequences of past mistakes.  At this point inevitable, unavoidable.  Our last opportunities to even soften the crash passed many months ago.

Adults are realistic, looking at their problems with clear eyes and steely resolution.  As did our forefathers in the Revolutionary War and the Civil War.  Let’s hope we can put aside our bubble gum and beanie caps, and prepare for what lies ahead.  A recession — even a depression — is not Armageddon.  Just bad times, like those America has survived before.

With hard work and a modest portion of wisdom we can come out of this stronger than before.

For more information from the FM site

Reference pages about other topics appear on the right side menu bar, including About the FM website page.  To see all posts about our new wars:

Forecasts and warnings on the FM site:

  1. A brief note on the US Dollar. Is this like August 1914?, 8 November 2007 — How the current situation is as unstable financially as was Europe geopolitically in early 1914.
  2. We have been warned. Death of the post-WWII geopolitical regime, Chapter II, 28 November 2007 — A long list of the warnings we have ignored, from individual experts and major financial institutions.
  3. Geopolitical implications of the current economic downturn, 24 January 2008 – How will this recession end?  With re-balancing of the global economy — and a decline of the US dollar so that the US goods and services are again competitive.  No more trade deficit, and we can pay our debts.
  4. What will America look like after this recession?, 18 March 2008  — The recession will change many things, from the distribution of wealth within the US to the ranking of global powers.
  5. Making us dumber, chanting “Dude, where’s my recession?”, 3 June 2008 — Economic columnists do a disservice to their readers by ignoring the data showing a weakening economy.
  6. Another warning from our leaders, which we will ignore, 4 June 2008 — An extraordinarily clear warning from a senior officer of the Federal Reserve.
  7. When did “Dude” predict a recession? How severe?, 6 June 2008 — Why accurate economic forecasting is difficult, what we know about current conditions, and warnings from a top economist.
  8. Consequences of a long, deep recession – part I, 18 June 2008
  9. Consequences of a serious US recession – part II, 19 June 2008
  10. Consequences of a long, deep recession – part III, 20 June 2008
  11. A look at one page of what lies ahead in America’s history, 7 August 2008 — Death of an American industry.
  12. “The Coming US Consumption Bust”, by Nouriel Roubini, 6 September 2008
  13. The most important news of the month. Perhaps the year., 29 September 2008 — Warnings from our foreign creditors.
  14. Forecasting the results of this financial crisis – part I, about politics, 13 October 2008
  15. Forecasting the results of this financial crisis – part II, a new economy for America, 14 October 2008
  16. Miscelaneous news and thoughts about the financial crisis, 16 October 2008
  17. The Coming Global Stag-Deflation (Stagnation/Recession plus Deflation), 28 October 2008
  18. A look at the next phase of the crisis, as it hits the real economy, 31 October 2008

Afterword

Please email me if you have a correction to this post.  Or email me if you wish to make a comment and either have expertise in this field or are mentioned in this post. Send messages to fabmaximus at hotmail dot com (note the spam-protected spelling).

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13 thoughts on “All we have to fear is our optimism

  1. “Let’s hope we can put aside our bubble gum and beanie caps, and prepare for what lies ahead.”

    But hope is not a method, as Gen. Gordon R. Sullivan (ret.) likes to say. America’s captains of industry are lining up with begging bowls in hand, starting with automakers. Adult leadership is handing out the beanie caps instead of confiscating them.
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    Fabius Maximus replies: I did not say to adopt hope as a method, but as one component of a plan. Hope and faith are valuable — perhaps necessary — to maintain social cohesion in difficult times. Think of the speeches by FDR during the Depression and WWII, and by Churchill during WWII.

    Things might get dark, so dark we cannot see the light beyond. Logic can only take us so far. Hope and faith can help us stay together and keep moving when logic fails us.

  2. Defeat has phycological as well as military ramifications which often change the people’s approach to policy. Hitler’s Germany was largely the result the people’s outlook of their defeat. Ditto Japan. Both regions where able to channel the despair of defeat into a better new way. The American South, however, was not able to channel the post defeat pessimism into better policy, and continuous to be last in the nation on many metrics.

    I’d say it’s the object of despair or hope that decides. To hope in the imaginary will bring misery, just as will despairing at needed change. It’s the saving policy that saves, whether anyone hopes in it or not, and the stupid policy that kills regardless of how much hope is placed in it.
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    Fabius Maximus replies: All good points! For more on this I recommend reading Wolfgang Schivelbusch’s “The Culture of Defeat.”

  3. I could not agree more with your post on blind optimism, and its pernicious effects. There is nothing wrong with hope or a positive attitude, but a misplaced faith that things will simply work themselves out because they always have, is courting disaster. Propserity has many blessings, but also risks and drawbacks. The long postwar economic boom eventually had to end, if for no other reason than that our competitors and trading partners were not standing still; they were absorbing our successes and learning from our failures. Prudent leaders would have recognized the basic truth that hardship is inevitable, and planned for that day; instead too many of our leaders have arrogantly acted as if the good times would last forever, and kicked the can down the road, posponing the hard choices economic health demands.

    If there is any silver lining to the coming hard times, it is that they will perhaps gave a sound slap in the face to those who deny reality. We can only hope….

  4. With regards to 2; many Japanese elites consider the only reason to regret Japans participation in world war two is that it lost. There is a deep collective amnesia in Japans society about that nation’s role in that conflict. Germany has largely come to terms with its Second World War history – Japan hasn’t even scratched the surface. Search Google news for information on Air Self-Defence Force Chief of Staff General Toshio Tamogami for some insights into this.

    Whilst hubris is certainly an issue, I also think that political power or an increase thereof, can potentially magnify the effect of personality defects in the individual – leading to a corresponding loss of judgement. This is a phenomenon that applies not just to politics, but also to workplaces and other social environments.

  5. Optimism is a curse. One day our medical technology will get to the point where:

    Imagine a young couple, wife just pregnant at the Doctor:

    Doctor: “I have some bad news for you, we ran all the genetic tests and your baby has ..”

    Wife: “not spina bifida”
    Doctor: “No, worse”
    Husband: “congenital genetic heart disease”
    Doctor: “I’m sorry it is so much worse”
    Wife (in tears):” Not, not ..”

    Doctor: “Yes, I’m so sorry your baby is going to be an optimist, now we can abort or of you choose to have it then with the right drug treatment and councilling there is a chance it may have a normal life, otherwise it will have to be locked up in an institution for the reat of its life, because, we all know, optimists are such a menace to society”.

    Husband and wife: “nooooooooooooo”

    To be fair I believe in: “optimism of the heart, pessimism of the intellect”. I mean you dont want your bridge to be built by an optimist, but you have to have the faith that a bridge can be built at all

  6. HAH FM, never thought I’d convert you to my position.

    I’d comment on the nuclear thread (some great, really exciting things coming out now), but I’m off on holiday tomorrow. The wife is healthy again, the dogs are good, the old truck is all fixed up and the Engel fridge is full of wine and food .. Nullarbor (look it up on Google Earth) here we come.

    Catch up in a few weeks, all the best, and keep up the good work.
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    Fabius Maximus replies: More valuable was your data showing that the US had a low degree of social mobility. Unwelcome news, but important. My post about this is here.

  7. When South Africans fell behind F.W. DeKlerk, they optimistically believed that by ending the evil of apartheid, they would rejoin the world, and bring their nation into a new age of peace and prosperity.

    Today, the Afrikaner tribe is the most likely to be violently murdered minority in the world, has largely fled the land of its birth, and is forced to watch the destruction of the fruits of generations of blood, sweat and tears–their industry, culture, language, and the very land itself is being decimated as an the international community which pressed them so hard sits on its hands.

    There is no reason to be optimistic about the judgment of the average American with regard to anything, especially in light of his shockingly poor choices with regard to his personal finances and exposure to risk.

  8. I love optimism, because it’s hard to be happy without hope, and hard to be hopeful without optimism.

    But I don’t think it’s optimism as much as pandering — politicians, and people in power, telling the people ‘what the people want to hear’, rather than the truth.

    The truth is, almost all voters are voting to get more benefits from gov’t than they are willing to pay for, and they want somebody else to pay for it. They are voting to control Other People’s Money. And as long as there are any rich people, there will be some envious folk who think it’s good to take from the rich, ‘who have more than they need’, and are ‘greedy and selfish’.

    I’m enraged at pig trough handouts to overpaid Fannie Mae execs, who left with $15 mil. cash payouts BUT the taxpayers now have to pay for their irresponsible risky bets. They are among the undeserving rich.

    But other rich folk actually started companies and created wealth and deserve their rewards.

    I think your post about lack of heros is important here. If ‘nobody is innocent’ (best line from the Daredevil movie), then it’s OK to use gov’t to take back the unearned cash from the rich. The genius of capitalism and the free market is to create, for the first time in history, a rich class of business owner who really is innocent.

    AIG should now be allowed to go bankrupt. Same with GM and Ford and Chrysler — Americans can make cars in America for Toyota & Honda, and maybe the buyer of the GM factories.

  9. The solution to this is simple, and both easy and hard. The easy part:

    Hope for the best*
    Plan for the most likely*
    Be prepared for the worst*

    The hard part: *Assuming you know what it is. ;-)

  10. Am I the only person who thinks that mindless optimism is the other side of FDR’s famous “The only thing we have to fear is fear itself” speech? I am in favor of optimism and hope (as Jerry Pournelle is fond of pointing out, despair is a sin) but not Pollyanna optimism. (Which I think is FM’s point)

  11. your unassailable optimism, as exemplified by this most recent rant, is depressing. time to wake up
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    Fabius Maximus replies: Here speaks someone who has not read much of this site! However absurd, I will treasure his description of my “unassailable optimism.” Frequent readers, you can expect to see JApate’s quote appearing many times in the future!

  12. I like the way this piece is structured, thematically. It is insightful as well. However, I am not sure that ‘optimism’ is really the core thingy here. I suspect it’s more akin to complacency stemming from the hubris you mentioned. Complacency in the loose sense of just taking it for granted that things will always work out (the optimistic aspect here) because we deserve it because we are Americans.

    This links, strangely enough, with the comments on the Japanese and Germans after the war. They had to come to terms with many things as defeated peoples that we did not. To this day, very few Brits and Americans are even aware of how many people we roasted alive in massive fire-bombing raids in Germany especially, but also Japan, nor how many Germans we force-marched to their deaths, or starved by Presidential Order in open fields for months on end. As victors, we did not have to shine the light of revealed atrocity on ourselves. And consequently we have a highly distorted sense of our victory being the equivalent of being good, moral, upright and decent peoples who deserve success and luxury.

    This is not only a false, but also a dangerous view. And this view will make it that much harder to face up to a worsening cultural and economic picture in the years ahead as adults need must do. But families need food on the table and this immediate, daily necessity will ensure that people will find a way to muddle through, although many might fall by the wayside in the process.

  13. Nice idea, Erasmus, but I would strongly claim that the Japanese are far less knowledgeable about “The Rape of Nanking”, for instance, than about Hiroshima.

    In fact, I suspect that Americans are more aware of their past imperfections, relative to the numbers killed or maimed or without freedom due to these mistakes, than most other cultures / nations / peoples.
    As victors, we did not have to shine the light of revealed atrocity on ourselves.
    I’m sure there are far more movies about US killings in Vietnam, for instance, than about victorious N. Viet commies and their killings of those who surrendered, and their rounding up folk and sending them into re-education.

    There is exactly one well known movie about the commies in Cambodia — the Killing Fields. What the evil commies did was far worse than what America did.

    Of course, it IS true that there is a blindness in America that being anti-war was equivalent to supporting victory for the commies. Or that being anti-war in Iraq is equivalent to supporting rule by Saddam, or after he was caught, rule by terrorists.

    But with or without optimism, the economic issue is: what to do?
    1) Let the Big Banks die — no to bailouts keeping too many bankers in jobs to push around the $60 tr (?) fictitious capital that has now disappeared from the world.
    2) Push the UAW to become the owner of GM & Ford, before any more tax dollars. Go thru bankruptcy to eliminate pension liabilities. Slash management, big time; pay more for performance, less for seniority, etc.

    BIG fiscal programs, NOW.

    3) Help veterans and all with some money to invest to buy the currently low cost houses — 4 mil. units on the market are too many, but there’s probably still too much fictitious house wealth. Gov’t should first help those who have NOT defaulted, and who have been responsible in paying.

    The principle of gov’t help must be to help the responsible most, first; even tho it seems they need it less.

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