Optimism is an Investment Strategy

That’s an old saying Hope is not an investment strategy.

I understand the feeling.

You can’t just hope and pray everything you buy goes up and right every time and forever. You need a risk mitigation strategy and a plan for when things inevitably go wrong.

But optimism is a perfect investment strategy. My investment strategy.

No one knows what the future holds but why would you invest for the long term if there is no hope that things will continue to improve?

Research also supports the idea that being positive can improve your health outcomes.

Shelley Taylor and Jonathan Brown argue that relying on the boundary of illusion can make you more successful.

They found that people with negative self-concepts, exaggerated beliefs in their control over events and unrealistic optimism about the future are more likely to persevere in the face of challenges and obstacles.

People with these qualities are generally happier, have greater social responsibilities and have more motivation to improve their station in life.

Being positive can be good for your mental health but it is also connected to your physical health.

A decades-long study on longevity found that optimism is related to longevity. Both men and women who were highly optimistic were found to have up to 15% longer life spans.

I’m often skeptical of research studies like this because there are too many variables to consider. But these ideas correspond to things that happen in the real world as well.

Bob Iger wrote about this in his book:

One of the most important qualities of a good leader is optimism, a real passion for what can be achieved. Even when faced with difficult choices and less-than-ideal outcomes, an optimistic leader does not compromise. Simply put, people who are motivated or motivated by pessimists.

Hope puts a different machine in motion. Especially in difficult times, the people you lead need to feel confident in your ability to focus on what’s important, and not operate from a defensive position. This does not mean that things are good when they are not good, and it is not to convey some innate faith that “things will be fine.” It’s about believing that you and the people around you can steer you to the best possible outcome, and not conveying the feeling that all is lost if things don’t go your way. The tone you use as a leader has a huge impact on the people around you. No one wants to follow a hopeless person.

Warren Buffett is the greatest investor of all time. He has eternal hope:

However, without fail, we won [challenges to our country’s future]. In the face of those challenges – and many others – Americans’ real standard of living improved nearly sevenfold in the 1900s, while the Dow Jones Industrials rose from 66 to 11,497. Compare the history of this period with the many centuries in which people received little, if any, benefit from the way they lived. Although the road has not been smooth, our economic system has worked incredibly well over time. It has unleashed human power like no other system, and will continue to do so. America’s best days are yet to come.

We are not in the midst of a crisis like 2008, which is when Buffett wrote this. The stock market is within 2% of all time. A bull market is always in shape. The economy is still growing. There are new developments.

But the rise of AI is causing a lot of speculation about what the consequences might be.

AI entrepreneur Matt Shumer wrote a blog post a few weeks ago that shocked everyone with what it meant for the white-collar worker:

This week Citrini Research published a piece of futuristic fiction looking at how AI could cause mass unemployment, stock market crashes and a slowing economy:

This post went viral so much that it ended up influencing the market. All sectors are sold out. Stocks crashed. People are afraid.

Bearish predictions like this always audible sound. Pessimism is a wonderful sales technique in a changing environment.

I don’t completely hate these AI destruction stories. No one knows what will happen in the future. It is worth considering the range of consequences, both positive and negative. I don’t pretend to know what the impact of AI will be.

Anyone who is certain about how this plays out would probably be wrong.

We can certainly have a tough time of change as companies integrate AI into their operations. I would be surprised if there aren’t more roles disrupted. I’m worried about the people being left behind by AI.

But I also think people don’t consider all the potential benefits and unintended consequences of this innovation. There will be more work and opportunities created.

I still have hope, human strength and intelligence.

It won’t always be easy, but our species have an uncanny ability to find things.

I always have hope for the future even if I don’t know how it will turn out.

Further reading:
No One Wants to Follow a Pessimist