Optimists Make More Money

Several years ago, believers in the ‘Peak Oil’ theory prophesized that our world had reached the height of oil extraction. Moving forward, they said, oil extraction was doomed to permanent decline before eventually ceasing altogether.

A friend of mine (“Squawker”) was an unwavering proponent of the theory. He was bug eyed passionate about telling all who would listen that when oil supplies get squeezed way, way tighter than the early 1970s oil embargo, our economy and lifestyle will spiral down. And the only thing you’ll be able to count on will be the fact that imminent disaster is just a matter of time.

You see, said Squawker, once oil prices skyrocket, transportation costs will be prohibitive. This will translate to an exorbitant rise in the price of food, since food cost is closely tied to oil cost.

And the next domino to fall will be the suburbs, which will transform into ghost towns. Because extraordinary fuel costs will essentially shut down individual commuting and public transportation. Biblical proportion exodus from nationwide suburbs will lead to higher and higher density and massive congestion (we’re talking Hong Kong style density multiplied by 100) in urban centers convenient for walking and cycling to work.


Squawker Does Not Come Home To Roost

Of course, Squawker was wrong. He was also wrong about impending Armageddon resulting from the Great Recession of 2007-2009. And he was wrong about returning to the gold standard and consequent end of paper money’s reign owing to perceived incompetence and self-interest of central banks worldwide.

I could go on but the point is not to flog Squawker. He’s a good person, smart guy, big heart. And as much as I shrink from labeling anyone, from boxing anyone in with a fixed, unchangeable trait, more often than not Squawker sees life’s glass as half empty.


 Enter Buddha

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Your mind belongs to you. Your perspective belongs to you. You may always choose what you see, and the way in which you see life.


Here’s the thing about pessimism: it rests on the notion of a perceived problem, or even crisis, that cannot be solved. Pessimism says that once we enter economic recession, especially a once-in-a-many-generations-shock-shiver-and-quake-in-your-boots-to-the-financial-system-set-back, you may as well drop the curtain and cut the lights because the party’s over. Pessimism says human ingenuity and capacity for problem solving is limited and finite. Pessimism says that never before seen difficulties, puzzles, and complications cannot be solved so it’s best to run and hide.


Optimists Rock

Optimists have another take. And Optimists, thankfully, dominate our scientific, engineering and business world, especially those in the following countries: South Korea, Japan, Germany, Finland, Israel and the USA. These six countries sit atop the Innovation List.

And individuals resident in these six countries are positively changing the way we live, empowering more and more global citizens through inventions that solve humanity’s problems and raise our standard of living.

Of course, residents of other countries contribute too, but I’d hazard a guess that there’s something about the culture of the six leading countries that encourages and cultivates an outsized share of Optimistic Thinkers and Do-ers.

Moreso than other countries, there’s something in the air or the water or the general rights and freedoms given to people in these six countries that facilitates determination, resilience, perseverance, strength, motivation, enthusiasm and flexibility, all traits common to the glass half full folks.

Unlike Pessimists, Optimists are fond of saying, hey, we sure would prefer to see human and economic development advance on a straight line up. But we’re realists too, and we know that just isn’t going to happen. We know that there are, and will continue to be, hiccups along the way. Two steps forward, one step back, and all that jazz.

And when the step back happens, we don’t freeze up, we don’t wallow and moan and hunker down with a multi-year supply of food, water, guns, and a mind wracked with fear. Nahhhhh! Optimists recognize the step back for what it is, knowing forward movement will soon resume.

As for us folks in the investment game, we know that the step back in the form of economic recession or a particular, fundamentally sound, company falling off the revenue/profit rails for a short time period presents prime opportunity to buy top quality shares on the cheap, paving the way for juicy long-term gains.


Enter Buddha

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The Pessimist complains about the wind. The Optimist expects it to change and adjusts her sails.


Optimism Leads to Success

Some folks attribute Warren Buffet’s unrelenting optimism to the fact that he’s the most successful investor ever and, for those keeping score, the third richest dude on this planet.

But here’s what Bill Gates, Microsoft founder and numero uno on the global rich list, says about his friend Warren:

“Warren’s success didn’t create his optimism; his optimism led to his success. Because optimism isn’t a belief that things will automatically get better; it’s a conviction that we can make things better.”

One research study after another has shown that optimism favorably impacts success of any endeavor. Because those who are optimistic, those who are able to envision a brighter tomorrow, are resilient and don’t hesitate to dust them self off after falling down, again and again and again.

What exactly are the ingredients stirred into the optimist’s mix? Dr. Susan Kobasa (1982) found that ‘resilient’ folks have certain characteristics that contribute to their constructive, positive perceptions:

  • Curious.
  • Accept that change is part of life.
  • Accept that change is essential for growth.
  • Believe in them self; believe that they make a difference and influence change by what they imagine, say, and do.
  • Are intent on making their life experiences meaningful and interesting.

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Looking On The Bright Side

Our brain works kind of like a muscle. Work it, and it grows stronger. Keep it idle, and it atrophies.

Our mental perspective operates in the same way. Grooves for cynical, pessimistic thought are dug deeper, little by little, each time such a thought takes root in your headspace. And if pessimism dominates thinking for an extended period of time, well, that’s going to result in an awfully deep hole, one that will detrimentally color your views on life, including investing and money management. Unfortunately pessimists often seek company from other pessimists, people who think like them, thus reinforcing the dark loop. And the longer the loop persists, the tougher it is to find an exit.

Looking on the bright side comes naturally to some; others have to work hard for it. Take Thomas Edison. Apparently, he ‘failed’ close to 1,000 times before perfecting the light bulb. And he had many other ‘failed’ inventions. Here’s a glimpse into Edison’s mindset:

“I have not failed 10,000 times—I’ve successfully found 10,000 ways that will not work.”

Getting back to Squawker. In 2008, he sold all of his stock market investments at a loss. Then he bought gold bars. And to this day, he holds the gold and hasn’t returned to the stock market. A stock market (let’s use the Dow Jones Industrial Average here) that has gone from a low point of about 6500 to today’s close above 21,000. A gain of about 325%. Easy pickings if he’d just stayed in a DJIA based passive index fund; if he just stayed invested in equities, which is a bet on the global economy, a bet on human resilience and innovation, instead of letting fear lead him astray, to the detriment of his personal finances.

Life, finances, investing … it’s sooooo much about perspective. And perspective is a choice you can make each and every day.


Enter Buddha

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The Optimist believes they are living in the best of all possible worlds. The Pessimist fears this may be true.