Feeling Pessimistic? Zoom Out.
| Kevin Miller
The sky is falling! The world is coming unglued! We all feel this way at some point. I think most of us know, and are grateful for, the fact that life is much easier now for most people than it was for folks a century ago. But it’s easy to get bogged down by the latest tragedy or travesty. Most news we see is bad news, and that can lead us to the idea that things must be getting worse. However, if we take a longer term view, we can see that the world is becoming a much more prosperous place for more and more people, and it is happening unbelievably quickly. That’s not to say that life is easy; I think I speak for most of us that the last year and a half has been full of challenges. If we zoom out, however, there is plenty of reason to feel optimistic about the direction of the world.
Perhaps it’s in our DNA to be a little pessimistic. A 2017 Ipsos Poll asked respondents if they thought the proportion of the world living in extreme poverty was increasing, decreasing, or about the same. A significant majority responded that it was increasing or about the same. However, global poverty is decreasing faster than ever. Humanity has flourished in the last 100 years, and human suffering is on the decline. Besides poverty, here are three other data points that I hope will paint an objective, optimistic view of what humans are accomplishing across the globe, and how this relates to financial planning.
- Child mortality is plummeting.
Child mortality is plummeting, and today is lower than it has been at any point in human history. In just the last 30 years, the decrease has been nothing short of a miracle. While the world population has drastically increased, the number of child deaths has fallen by over 57%! What’s more, that is just the most recent 30 years. That trend has been going on for over 100 years. In 1990, 36% of children globally did not survive past age 5. Today, that number is below 4%, or a reduction of nearly 90%.
- Homelessness is on the decline.
Many people feel a great deal of sympathy for those experiencing homelessness, and rightly so. Homeless folks are exposed to many dangers that most of us are safe from. And for those that do have a home, homelessness still affects us – it makes some feel unsafe, and it can strain public resources. It also can be a frustrating topic because it often feels like there’s not much more that can be done. The good news is that it is a smaller problem today than it was just 14 years ago. From 2007 to 2016, homelessness fell by 21% despite the Great Recession. Specifically, in 2007, in the U.S. 215 people out of 100,000 were homeless, compared to only 170 per 100,000 in 2016.
- Literacy has exploded across the world.
Literacy has taken off in the last 100 years, and continues to expand. In 1800, it is estimated that only 12% of the world’s adult population could read and write. By 1900, that rate had made an impressive increase to over 21% of the population. But it wasn’t until the twentieth century that literacy really took off – and it really, really took off. By 2016, 86% of the world’s adult population could read and write. What’s more, the gains in recent years are most acute in the world’s poorest areas: since 1990, literacy has expanded by over 50% in places like the Middle East, North Africa, and South Asia.
These trends don’t stop there; there are many more I could include. So what does this have to do with financial planning? A lot.
A central assumption in finance is the concept of growth – that there will be more next year than there was last year. This is what justifies an entrepreneur’s decision to take the risk of starting a business, and the bank’s decision to lend her the money she needs to start it. It’s why we invest our hard earned dollars into the stock market – we trust that over the long run, those companies will grow, and our investment with it. In short, the essence of investing is that society will be more prosperous tomorrow than it is today.
That can be a difficult concept to buy into, if you simultaneously believe things are falling apart. This is why it is important to recognize that the collective effort of humanity has been enormously successful in the last 100 years. The fact that the market is at an all-time high at the time of this writing should not just be something we smile about when we look at our investment accounts. It should be a marker of all the great things humans have accomplished in the project of prosperity, in turn making the world a better place.
These trends in human flourishing demonstrate that growth is not just something that happens on Wall Street in the form of stock prices, but is both the cause and the natural byproduct of humanity working each day to create value. We should continue to have trust that humanity will work hard to find solutions to the challenges of the twenty-first century, be they pandemics, climate change, or some other threat we don’t yet know about. Therefore, we should continue to be disciplined and invest for the long term. The market has its ups and downs, just like life has times of joy and of mourning, but the more you zoom out, the better things look in the long run.
We still have serious problems on our hands, no doubt, but solving problems is what we humans do. Just take a look at the data.
If you’d like to spend some time perusing these kinds of trends, I recommend checking out ourworldindata.org.
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