Optimism and Pessimism

Optimism and Pessimism

The space between optimism and pessimism is a delicate one. What happens to those who are too far on one side of the spectrum? Dangerous things.

Too optimistic? You don’t take the precautionary measures that will keep you from long-tail risks. You are betting on outcomes far away from the median. Too pessimistic? You don’t take the necessary risks to live a life that is anything out of the ordinary. You are confining yourself to one or two standard deviations from the median.

Imagine optimism and pessimism on a scale in regards to human health. Too optimistic? You never visit the doctor, eat only foods that do your body harm, never exercise, exist in high chronic stress environments, and the like. Without mitigating those risks in some form or another, the great expected outcome may eventually lose out to the odds of repeated games. Too pessimistic? You never leave your home for fear of catching a cold, eat no new foods, and can never imagine a world that is better than it is today. Simply. Dreadful.

In business cycles, we can imagine optimism as the growth phase of an organization. Reinvesting retained earnings back into the business to foster a continually greater future. Pessimism would exist during the plateau and decline phases of a business, where the retained earnings are kicked back out as people want to take money off the table. In general measure, once a company begins harvesting profits and returning them to owners, it in essence is saying to the marketplace that the halcyon days are over. There may be short-term aberrations to this, such as Partners wanting to take money off the table to pay for educational or medical needs, or because stability can set the platform for even greater bets. Generally, though, it is a good rule of thumb to see how optimistically the leaders of a business view the future prospects. Are they investing in or cashing out?

Generally this game of ping pong between favoring optimism and pessimism that is what defines many aspects of our lives. “Will the future be better than today?” Is a question that many of us ask ourselves. Everyone asks it in a different way. For some, the true question is, “Will my standard of living increase?” For others, it is, “Will my children and grandchildren have it better than I did?” For others, it is, “In the future, will we have more or less peace?”

The future is too large of an unknown for me to predict with great degrees of certainty (even as I was loathe to do in last week’s Memo). In order to answer this question for myself, I personally ask myself another related, but inverse question. “What is not going to change between now and the future?” The answers to this question guide my own thinking about optimism and pessimism.

So, what is not going to change?

More highly-educated people will be more valuable to our society, both financially and socially. Interpersonal communication skills will be valued highly and depend on experience. Gatekeepers to opportunity, though reduced, will exist. People will want to spend time with other humans. Communication one’s ideas will be required to move the world forward.

Yes, I’m optimistic about our work at LearningLeaders. That’s why we’re reinvesting retained earnings to grow our team, to build technology, and to solidify our brand in the marketplace.

Optimism unbridled can lead to ruin, so I ask that we do our best not to fall into that trap.

But that doesn’t stop me from thinking the future is going to be better than today, for every single Partner at LearningLeaders and their families.