Would You Rather be Happy or Right?
(originally published 3/29/2016 on my personal LinkedIn page)
“Oh happy pessimists! What a joy it is to them to be able to prove again and again that there is no joy.”
Everyone knows someone who can find the dark cloud in every silver lining. They start every sentence with “No”, or if they are in a particularly good mood it is “Yeah, but…” I talk to these people more often than I prefer to admit. They make financial decisions based on rationale like “I just have a bad feeling.” They have been hoarding bars of gold for the past five years, anticipating the collapse of society as we know it.
For several years now, I have occasionally read the newsletter of one such gloom and doom prognosticator. Those who follow his thinking have been preparing for the collapse of the American government, as well as the U.S. Dollar for as long as I can remember. I confess that I chuckle when I think of these people sitting in their post apocalyptic bunker with their pile of shiny rocks. As they sit, hungry and thirsty, guarding their treasure and realizing that their gold nugget might best serve as ammunition for a slingshot.
This kind of talk consistently falls on deaf ears with the chronically pessimistic. They are more than willing to forego opportunity for success today, so that they can enjoy a slightly better version of misery in their vision of tomorrow. The unspoken reward to the pessimist is that they get to enjoy the self-satisfaction of uttering an eventual “I told you so.”
The investment world has its own version of this phenomenon. In discussing studies of Economic Forecasts, Freakonomics authors Stephen Dubner and Steven Levitt determined that there is essentially no risk to always predicting the worst. It seems that no one will remember if a person predicts calamity year after year, only for time to prove them wrong. When their predicted outcome finally does occur, they will still be publicly recognized as the brilliant mind who “called it.” Perhaps this is why the research of Christina Fang and Jerker Denrell revealed that those economists who predict extreme outcomes have an overall lower level of accuracy.
The fact remains, that we must plan for the misfortune that life can occasionally bring. We must also plan for the range of outcomes where things turn out just wonderfully! One simple process for decision-making is to ask yourself two questions: “What if I am right?” and “What if I am wrong?” The pessimist has to ask themselves, “Would I rather be happy or right?” The optimist can be both.
“The optimist is a pessimist with a plan.”