Morgan Housel is one of my favourite writers in finance. In November 2023, he published his second book, Same as Ever: A Guide to What Never Changes. As the title suggests, the book is about mankind’s behavioural patterns and ways of thinking that do not seem to change over time.

Jeff Bezos, Amazon’s founder, once said: 

“I very frequently get the question: “What’s going to change in the next 10 years?” And that is a very interesting question; it’s a very common one. I almost never get the 14 question: “What’s not going to change in the next 10 years?” And I submit to you that that second question is actually the more important of the two — because you can build a business strategy around the things that are stable in time. … [I]n our retail business, we know that customers want low prices, and I know that’s going to be true 10 years from now. They want fast delivery; they want vast selection.”

Similarly, I believe that knowing the things that are stable over time can be incredibly useful in all areas of life – business, investing, relationships, and more. While reading Same as Ever, I made notes of the striking things I learnt from the book. I thought it would be useful to share this with a wider audience, so here they are:

The USA could have lost the Revolutionary War to Britain were it not for something as capricious as the wind

The Battle of Long Island was a disaster for George Washington’s army. His ten thousand troops were crushed by the British and its four-hundred-ship fleet. But it could have been so much worse. It could have been the end of the Revolutionary War. All the British had to do was sail up the East River and Washington’s cornered troops would have been wiped out. But it never happened, because the wind wasn’t blowing in the right direction and sailing up the river became impossible.

Historian David McCullough once told interviewer Charlie Rose that “if the wind had been in the other direction on the night of August twenty-eighth [1776], I think it would have all been over.”

“No United States of America if that had happened?” Rose asked.

“I don’t think so,” said McCullough.

“Just because of the wind, history was changed?” asked Rose.

“Absolutely,” said McCullough. 

Risk is what you don’t see

As financial advisor Carl Richards says, “Risk is what’s left over after you think you’ve thought of everything.” That’s the real definition of risk—what’s left over after you’ve prepared for the risks you can imagine. Risk is what you don’t see.

When a past event looks inevitable to us today, we may be fooled by hindsight bias

Two things can explain something that looks inevitable but wasn’t predicted by those who experienced it at the time: 

• Either everyone in the past was blinded by delusion.
• Or everyone in the present is fooled by hindsight.

We are crazy to think it’s all the former and none of the latter.

The level of uncertainty in the economy rarely fluctuates, just people’s perceptions

There is rarely more or less economic uncertainty; just changes in how ignorant people are to potential risks. Asking what the biggest risks are is like asking what you expect to be surprised about. If you knew what the biggest risk was you would do something about it, and doing something about it would make it less risky. What your imagination can’t fathom is the dangerous stuff, and it’s why risk can never be mastered

Even when the Great Depression of the 1930s happened, unemployment was not thought to be an issue by people with high posts

The Depression, as we know today, began in 1929. But when the well-informed members of the National Economic League were polled in 1930 as to what they considered the biggest problem of the United States, they listed, in order:

1. Administration of justice

2. Prohibition

3. Disrespect for law

4. Crime

5. Law enforcement

6. World peace

And in eighteenth place . . . unemployment.

A year later, in 1931—a full two years into what we now consider the Great Depression—unemployment had moved to just fourth place, behind prohibition, justice, and law enforcement. That’s what made the Great Depression so awful: No one was prepared for it because no one saw it coming. So people couldn’t deal with it financially (paying their debts) and mentally (the shock and grief of sudden loss).

Having expectations instead of forecasts is important when trying to manage risk

It’s impossible to plan for what you can’t imagine, and the more you think you’ve imagined everything the more shocked you’ll be when something happens that you hadn’t considered. But two things can push you in a more helpful direction.

One, think of risk the way the State of California thinks of earthquakes. It knows a major earthquake will happen. But it has no idea when, where, or of what magnitude. Emergency crews are prepared despite no specific forecast. Buildings are designed to withstand earthquakes that may not occur for a century or more. Nassim Taleb says, “Invest in preparedness, not in prediction.” That gets to the heart of it. Risk is dangerous when you think it requires a specific forecast before you start preparing for it. It’s better to have expectations that risk will arrive, though you don’t know when or where, than to rely exclusively on forecasts— almost all of which are either nonsense or about things that are well-known. Expectations and forecasts are two different things, and in a world where risk is what you don’t see, the former is more valuable than the latter.

Two, realize that if you’re only preparing for the risks you can envision, you’ll be unprepared for the risks you can’t see every single time. So, in personal finance, the right amount of savings is when it feels like it’s a little too much. It should feel excessive; it should make you wince a little. The same goes for how much debt you think you should handle—whatever you think it is, the reality is probably a little less. Your preparation shouldn’t make sense in a world where the biggest historical events all would have sounded absurd before they happened.

Geniuses are unique in BOTH good and bad ways

Something that’s built into the human condition is that people who think about the world in unique ways you like almost certainly also think about the world in unique ways you won’t like…

…John Maynard Keynes once purchased a trove of Isaac Newton’s original papers at auction. Many had never been seen before, as they had been stashed away at Cambridge for centuries. Newton is probably the smartest human to ever live. But Keynes was astonished to find that much of the work was devoted to alchemy, sorcery, and trying to find a potion for eternal life. Keynes wrote:

I have glanced through a great quantity of this at least 100,000 words, I should say. It is utterly impossible to deny that it is wholly magical and wholly devoid of scientific value; and also impossible not to admit that Newton devoted years of work to it.

I wonder: Was Newton a genius in spite of being addicted to magic, or was being curious about things that seemed impossible part of what made him so successful? I think it’s impossible to know. But the idea that crazy geniuses sometimes just look straight-up crazy is nearly unavoidable…

…Take Elon Musk. What kind of thirty-two-year-old thinks they can take on GM, Ford, and NASA at the same time? An utter maniac. The kind of person who thinks normal constraints don’t apply to them—not in an egotistical way, but in a genuine, believe-it-in-your-bones way. Which is also the kind of person who doesn’t worry about, say, Twitter etiquette.

A mindset that can dump a personal fortune into colonizing Mars is not the kind of mindset that worries about the downsides of hyperbole. And the kind of person who proposes making Mars habitable by constantly dropping nuclear bombs in its atmosphere is not the kind of person worried about overstepping the boundaries of reality.

The kind of person who says there’s a 99.9999 percent chance humanity is a computer simulation is not the kind of person worried about making untenable promises to shareholders. The kind of person who promises to solve the water problems in Flint, Michigan, within days of trying to save a Thai children’s soccer team stuck in a cave, within days of rebuilding the Tesla Model 3 assembly line in a tent, is not the kind of person who views his lawyers signing off as a critical step.

People love the visionary genius side of Musk, but want it to come without the side that operates in his distorted I-don’t-care-about-your-customs version of reality. But I don’t think those two things can be separated. They’re the risk-reward trade-offs of the same personality trait.

What gets you to the top also brings you down

What kind of person makes their way to the top of a successful company, or a big country? Someone who is determined, optimistic, doesn’t take no for an answer, and is relentlessly confident in their own abilities. What kind of person is likely to go overboard, bite off more than they can chew, and discount risks that are blindingly obvious to others? Someone who is determined, optimistic, doesn’t take no for an answer, and is relentlessly confident in their own abilities. Reversion to the mean is one of the most common stories in history. It’s the main character in economies, markets, countries, companies, careers—everything. Part of the reason it happens is because the same personality traits that push people to the top also increase the odds of pushing them over the edge.

Outrageous things can easily happen if the sample size is big enough

Evelyn Marie Adams won $3.9 million in the New Jersey lottery in 1986. Four months later she won again, collecting another $1.4 million. ‘‘I’m going to quit playing,’’ she told The New York Times. ‘‘I’m going to give everyone else a chance.’’ It was a big story at the time, because number crunchers put the odds of her double win at a staggering 1 in 17 trillion.

Three years later two mathematicians, Persi Diaconis and Frederick Mosteller, threw cold water on the excitement. If one person plays the lottery, the odds of picking the winning numbers twice are indeed 1 in 17 trillion. But if one hundred million people play the lottery week after week— which is the case in America—the odds that someone will win twice are actually quite good. Diaconis and Mosteller figured it was 1 in 30. That number didn’t make many headlines. ‘‘With a large enough sample, any outrageous thing is apt to happen,” Mosteller said

Why something bad happens nearly every year

If next year there’s a 1 percent chance of a new disastrous pandemic, a 1 percent chance of a crippling depression, a 1 percent chance of a catastrophic flood, a 1 percent chance of political collapse, and on and on, then the odds that something bad will happen next year—or any year—are . . . not bad.

The demise of local news, because of the internet, altered our perception on the frequency of bad news

The decline of local news has all kinds of implications. One that doesn’t get much attention is that the wider the news becomes the more likely it is to be pessimistic. Two things make that so: 

• Bad news gets more attention than good news because pessimism is seductive and feels more urgent than optimism.
• The odds of a bad news story—a fraud, a corruption, a disaster—occurring in your local town at any given moment is low. When you expand your attention nationally, the odds increase. When they expand globally, the odds of something terrible happening in any given moment are 100 percent.

To exaggerate only a little: Local news reports on softball tournaments. Global news reports on plane crashes and genocides. 

The internet’s existence means we’re more aware of bad things happening – but bad things are not necessarily happening more today

In modern times our horizons cover every nation, culture, political regime, and economy in the world. There are so many good things that come from that. But we shouldn’t be surprised that the world feels historically broken in recent years and will continue that way going forward. It’s not—we just see more of the bad stuff that’s always happened than we ever saw before.

A contemporary of Ben Graham seemed to know more about investing but was not as good a writer, so he is today much more obscure than Graham

Professor John Burr Williams had more profound insight on the topic of valuing stocks than Benjamin Graham. But Graham knew how to write a good paragraph, so he became the legend and sold millions of books.

US forces suffered against German forces during WWII because American leaders failed to account for Hitler going mad

Historian Stephen Ambrose notes that Eisenhower and General Omar Bradley got all the war-planning reasoning and logic right in late 1944, except for one detail—the extent to which Hitler had lost his mind. An aide to Bradley mentioned during the war: “If we were fighting reasonable people they would have surrendered long ago.” But they weren’t, and it—the one thing that was hard to measure with logic—mattered more than anything.

Lehman Brothers actually had strong financial ratios – better than even Goldman Sachs and Bank of America – in 2008 just before it went bankrupt; what went wrong for Lehman was that investors lost faith in the bank

A few examples of how powerful this can be: Lehman Brothers was in great shape on September 10, 2008. Its tier 1 capital ratio—a measure of a bank’s ability to endure loss—was 11.7 percent. That was higher than the previous quarter. Higher than Goldman Sachs. Higher than Bank of America. It was more capital than Lehman had in 2007, when the banking industry was about as strong as it had ever been. 

Seventy-two hours later Lehman was bankrupt. The only thing that changed during those three days was investors’ faith in the company. One day they believed in the company and bought its debt. The next day that belief stopped, and so did its funding. That faith is the only thing that mattered. But it was the one thing that was hard to quantify, hard to model, hard to predict, and didn’t compute in a traditional valuation model. GameStop

Hyman Minsky’s economic theory of stability leading to instability can be found in nature too

California was hit with an epic drought in the mid-2010s. Then 2017 came, dropping a preposterous amount of moisture. Parts of Lake Tahoe received—I’m not making this up—more than sixty-five feet of snow in a few months. The six-year drought was declared over.

You’d think that would be great. But it backfired in an unexpected way. Record rain in 2017 led to record vegetation growth that summer. It was called a superbloom, and it caused even desert towns to be covered in green. A dry 2018 meant all that vegetation died and became dry kindling. That led to some of the biggest wildfires California had ever seen.

So record rain directly led to record fires. There’s a long history of this, verified by looking at tree rings, which inscribe both heavy rainfall and subsequent fire scars. The two go hand in hand. “A wet year reduces fires while increasing vegetation growth, but then the increased vegetation dries out in subsequent dry years, thereby increasing the fire fuel,” the National Oceanic and Atmospheric Administration wrote. That’s hardly intuitive, but here again—calm plants the seeds of crazy. 

Why financial markets will always overshoot on both ends of the optimism and pessimism spectrum

The only way to know we’ve exhausted all potential opportunity from markets—the only way to identify the top —is to push them not only past the point where the numbers stop making sense, but beyond the stories people believe about those numbers. When a tire company develops a new tire and wants to know its limitations, the process is simple. They put it on a car and run it until it blows up. Markets, desperate to know the limits of what other investors can endure, do the same thing. Always been the case, always will be.

Markets going beyond the point of crazy is a normal thing 

One is accepting that crazy doesn’t mean broken. Crazy is normal; beyond the point of crazy is normal. Every few years there seems to be a declaration that markets don’t work anymore—that they’re all speculation or detached from fundamentals. But it’s always been that way. People haven’t lost their minds; they’re just searching for the boundaries of what other investors are willing to believe

Many things in life have a “most convenient size”

“For every type of animal there is a most convenient size, and a change in size inevitably carries with it a change of form,” Haldane wrote. A most convenient size. A proper state where things work well but break when you try to scale them to a different size or speed. It applies to so many things in life…

…Starbucks had 425 stores in 1994, its twenty-third year in existence. In 1999 it opened 625 new stores. By 2007 it was opening 2,500 stores per year—a new coffee shop every four hours. One thing led to another. The need to hit growth targets eventually elbowed out rational analysis. Examples of Starbucks saturation became a joke. Same-store sales growth fell by half as the rest of the economy boomed. 

Howard Schultz wrote to senior management in 2007: “In order to go from less than 1,000 stores to 13,000 stores we have had to make a series of decisions that, in retrospect, have led to the watering down of the Starbucks experience.” Starbucks closed six hundred stores in 2008 and laid off twelve thousand employees. Its stock fell 73 percent, which was dreadful even by 2008 standards.

Schultz wrote in his 2011 book Onward: “Growth, we now know all too well, is not a strategy. It is a tactic. And when undisciplined growth became a strategy, we lost our way.” There was a most convenient size for Starbucks—there is for all businesses. Push past it and you realize that revenue might scale but disappointed customers scale faster, in the same way Robert Wadlow became a giant but struggled to walk.

Different management skills are needed as a company changes in size

A management style that works brilliantly at a ten-person company can destroy a thousand-person company, which is a hard lesson to learn when some companies grow that fast in a few short years. Travis Kalanick, the former CEO of Uber, is a great example. No one but him was capable of growing the company early on, and anyone but him was needed as the company matured. I don’t think that’s a flaw, just a reflection that some things don’t scale. 

Militaries are really good at innovating because the problems they deal with are so important

Militaries are engines of innovation because they occasionally deal with problems so important—so urgent, so vital—that money and manpower are removed as obstacles, and those involved collaborate in ways that are hard to emulate during calm times. You cannot compare the incentives of Silicon Valley coders trying to get you to click on ads to Manhattan Project physicists trying to end a war that threatened the country’s existence. You can’t even compare their capabilities. The same people with the same intelligence have wildly different potential under different circumstances.

How the harsh conditions of the 1930s forced USA to innovate

The 1930s were a disaster, one of the darkest periods in American history. Almost a quarter of Americans were out of work in 1932. The stock market fell 89 percent. Those two economic stories dominate the decade’s attention, and they should. But there’s another story about the 1930s that rarely gets mentioned: it was, by far, the most productive and technologically progressive decade in U.S. history.

The number of problems people solved, and the ways they discovered how to build stuff more efficiently, is a forgotten story of the ’30s that helps explain a lot of why the rest of the twentieth century was so prosperous. Here are the numbers: total factor productivity—that’s economic output relative to the number of hours people worked and the amount of money invested in the economy—hit levels not seen before or since. Economist Alex Field wrote that by 1941 the U.S. economy was producing 40 percent more output than it had in 1929, with virtually no increase in the total number of hours worked. Everyone simply became staggeringly more productive.

A couple of things happened during this period that are worth paying attention to, because they explain why this happened when it did. Take cars. The 1920s was the era of the automobile. The number of cars on the road in America jumped from one million in 1912 to twenty-nine million by 1929. But roads were a different story. Cars were sold in the 1920s faster than roads were built. That changed in the 1930s when road construction, driven by the New Deal’s Public Works Administration, took off. Spending on road construction went from 2 percent of GDP in 1920 to over 6 percent in 1933 (versus less than 1 percent today). The Department of Highway Transportation tells a story of how quickly projects began: 

Construction began on August 5, 1933, in Utah on the first highway project under the act. By August 1934, 16,330 miles of new roadway projects were completed.

What this did to productivity is hard to overstate. The Pennsylvania Turnpike, as one example, cut travel times between Pittsburgh and Harrisburg by 70 percent. The Golden Gate Bridge, built in 1933, opened up Marin County, which had previously been accessible from San Francisco only by ferryboat. Multiply those kinds of leaps across the nation and the 1930s was the decade that transportation blossomed in the United States. It was the last link that made the century-old railroad network truly efficient, creating last-mile service that connected the world.

Electrification also surged in the 1930s, particularly to rural Americans left out of the urban electrification of the 1920s. The New Deal’s Rural Electrification Administration (REA) brought power to farms in what may have been the decade’s only positive development in regions that were economically devastated. The number of rural American homes with electricity rose from less than 10 percent in 1935 to nearly 50 percent by 1945. It is hard to fathom, but it was not long ago—during some of our lifetimes and most of our grandparents’—that a substantial portion of America was literally dark.

Franklin Roosevelt said in a speech on the REA:

Electricity is no longer a luxury. It is a definite necessity. . . . In our homes it serves not only for light, but it can become the willing servant of the family in countless ways. It can relieve the drudgery of the housewife and lift the great burden off the shoulders of the hardworking farmer.

Electricity becoming a “willing servant”—introducing washing machines, vacuum cleaners, and refrigerators—freed up hours of household labor in a way that let female workforce participation rise. It’s a trend that lasted more than half a century and is a key driver of both twentieth-century growth and gender equality.

Another productivity surge of the 1930s came from everyday people forced by necessity to find more bang for their buck. The first supermarket opened in 1930. The traditional way of purchasing food was to walk from your butcher, who served you from behind a counter, to the bakery, who served you from behind a counter, to a produce stand, who took your order. Combining everything under one roof and making customers pick it from the shelves themselves was a way to make the economics of selling food work during a time when a quarter of the nation was unemployed.

Laundromats were also invented in the 1930s after sales of individual washing machines fell; they marketed themselves as washing machine rentals.

Factories of all kinds looked at bludgeoned sales and said, “What must we do to survive?” The answer often was to build the kind of assembly line Henry Ford introduced to the world in the previous decade. Output per hour in factories had grown 21 percent during the 1920s. “During the Depression decade of 1930–1940— when many plants were shut down or working part time,” Frederick Lewis Allen wrote, “there was intense pressure for efficiency and economy—it had increased by an amazing 41 per cent.”

“The trauma of the Great Depression did not slow down the American invention machine,” economist Robert Gordon wrote. “If anything, the pace of innovation picked up.” Driving knowledge work in the ’30s was the fact that more young people stayed in school because they had nothing else to do. High school graduation surged during the Depression to levels not seen again until the 1960s.

All of this—the better factories, the new ideas, the educated workers— became vital in 1941 when America entered the war and became the Allied manufacturing engine. The big question is whether the technical leap of the 1930s could have happened without the devastation of the Depression. And I think the answer is no—at least not to the extent that it occurred. You could never push through something like the New Deal without an economy so wrecked that people were desperate to try anything to fix it.

Innovation takes time to be recognised, so it’s easy for people to think that innovation is lacking 

A lot of pessimism is fueled by the fact that it often looks like we haven’t innovated in years—but that’s usually because it takes years to notice a new innovation.

Economic progress has been incredible over long periods of time, but is unnoticeable over short periods

Real GDP per capita increased eightfold in the last hundred years. America of the 1920s had the same real per capita GDP as Turkmenistan does today. Our growth over the last century has been unbelievable. But GDP growth averages about 3 percent per year, which is easy to ignore in any given year, decade, or lifetime. Americans over age fifty have seen real GDP per person at least double since they were born. But people don’t remember the world when they were born. They remember the last few months, when progress is always invisible. Same for careers, social progress, brands, companies, and relationships. Progress always takes time, often too much time to even notice it’s happened.

Why progress happens slowly but bad news comes quickly 

Growth always fights against competition that slows its rise. New ideas fight for attention, business models fight incumbents, skyscrapers fight gravity. There’s always a headwind. But everyone gets out of the way of decline. Some might try to step in and slow the fall, but it doesn’t attract masses of outsiders who rush in to push back in the other direction the way progress does…

…The irony is that growth and progress are way more powerful than setbacks. But setbacks will always get more attention because of how fast they occur. So slow progress amid a drumbeat of bad news is the normal state of affairs. It’s not an easy thing to get used to, but it’ll always be with us. 

Good news is what did NOT happen whereas bad news is what did happen

A lot of progress and good news concerns things that didn’t happen, whereas virtually all bad news is about what did occur. Good news is the deaths that didn’t take place, the diseases you didn’t get, the wars that never happened, the tragedies avoided, and the injustices prevented. That’s hard for people to contextualize or even imagine, let alone measure. But bad news is visible. More than visible, it’s in your face. It’s the terrorist attack, the war, the car accident, the pandemic, the stock market crash, and the political battle you can’t look away from.

Why we underestimate big risks

Big risks are easy to overlook because they’re just a chain reaction of small events, each of which is easy to shrug off. So people always underestimate the odds of big risks…

…The Tenerife airport disaster in 1977 is the deadliest aircraft accident in history. The error was stunning. One plane took off while another was still on the runway, and the two Boeing 747s collided, killing 583 people on a runway on the Spanish island. In the aftermath authorities wondered how such an egregious catastrophe could occur. One postmortem study explained exactly how: “Eleven separate coincidences and mistakes, most of them minor . . . had to fall precisely into place” for the crash to occur. Lots of tiny mistakes added up to a huge one. It’s good to always assume the world will break about once per decade, because historically it has. The breakages feel like low-probability events, so it’s common to think they won’t keep happening. But they do, again and again, because they’re actually just smaller high-probability events compounding off one another. That isn’t intuitive, so we’ll discount big risks like we always have.

The fascinating history behind the phrase, “The American Dream”

“The American dream” was a phrase first used by author James Truslow Adams in his 1931 book The Epic of America. The timing is interesting, isn’t it? It’s hard to think of a year when the dream looked more broken than in 1931.

When Adams wrote that “a man by applying himself, by using the talents he has, by acquiring the necessary skills, can rise from lower to higher status, and that his family can rise with him,” the unemployment rate was nearly 25 percent and wealth inequality was near the highest it had been in American history.

When he wrote of “that American dream of a better, richer, and happier life for all our citizens of every rank,” food riots were breaking out across the country as the Great Depression ripped the economy to shreds.

When he wrote of “being able to grow to fullest development as men and women, unhampered by the barriers which had slowly been erected in older civilizations,” schools were segregated and some states required literacy tests to vote.

At few points in American history had the idea of the American dream looked so false, so out of touch with the reality everyone faced. Yet Adams’s book surged in popularity. An optimistic phrase born during a dark period in American history became an overnight household motto.

One quarter of Americans being out of work in 1931 didn’t ruin the idea of the American Dream. The stock market falling 89 percent—and bread lines across the country—didn’t, either. The American Dream actually may have gained popularity because things were so dire. You didn’t have to see the American Dream to believe in it—and thank goodness, because in 1931 there was nothing to see. You just had to believe it was possible and then, boom, you felt a little better.

In nature, species are never perfect in any one trait because perfection involves compromising in other areas

There is no perfect species, one adapted to everything at all times. The best any species can do is to be good at some things until the things it’s not good at suddenly matter more. And then it dies.

A century ago a Russian biologist named Ivan Schmalhausen described how this works. A species that evolves to become very good at one thing tends to become vulnerable at another. A bigger lion can kill more prey, but it’s also a larger target for hunters to shoot at. A taller tree captures more sunlight, but becomes vulnerable to wind damage. There is always some inefficiency. So species rarely evolve to become perfect at anything, because perfecting one skill comes at the expense of another skill that will eventually be critical to survival. The lion could be bigger and catch more prey; the tree could be taller and get more sun. But they’re not, because it would backfire. So they’re all a little imperfect. Nature’s answer is a lot of good enough, below-potential traits across all species.

Biologist Anthony Bradshaw says that evolution’s successes get all the attention, but its failures are equally important. And that’s how it should be: Not maximizing your potential is actually the sweet spot in a world where perfecting one skill compromises another.

The probability of a species going extinct is independent of its age

Leigh Van Valen was a crazy-looking evolutionary biologist who came up with a theory so wild no academic journal would publish it. So he created his own journal and published it, and the idea eventually became accepted wisdom. Those kinds of ideas—counterintuitive, but ultimately true—are the ones worth paying most attention to, because they’re easiest to overlook.

For decades, scientists assumed that the longer a species had been around, the more likely it was to stick around, because age proved a strength that was likely to endure. Longevity was seen as both a trophy and a forecast. In the early 1970s, Van Valen set out to prove that the conventional wisdom was right. But he couldn’t. The data just didn’t fit.

He began to wonder whether evolution was such a relentless and unforgiving force that long-lived species were just lucky. The data fit that theory better. You’d think a new species discovering its niche would be fragile and susceptible to extinction—let’s say a 10 percent chance of extinction in a given period—while an old species had proven its might, and has, say, a 0.01 percent chance of extinction.

But when Van Valen plotted extinctions by a species’ age, the trend looked more like a straight line. Some species survived a long time. But among groups of species, the probability of extinction was roughly the same whether it was 10,000 years old or 10 million years old.

In a 1973 paper titled “A New Evolutionary Law,” Van Valen wrote that “the probability of extinction of a taxon is effectively independent of its age.” If you take a thousand marbles and remove 2 percent of them each year, some marbles will remain in the jar after twenty years. But the odds of being picked out are the same every year (2 percent). Marbles don’t get better at staying in the jar. Species are the same. Some happen to live a long time, but the odds of surviving don’t improve over time. Van Valen argued that’s the case mainly because competition isn’t like a football game that ends with a winner who can then take a break. Competition never stops. A species that gains an advantage over a competitor instantly incentivizes the competitor to improve. It’s an arms race.

Evolution is the study of advantages. Van Valen’s idea is simply that there are no permanent advantages. Everyone is madly scrambling all the time, but no one gets so far ahead that they become extinction-proof.

An example of the unpredictable path of innovations: how planes made nuclear power plants possible

When the airplane came into practical use in the early 1900s, one of the first tasks was trying to foresee what benefits would come from it. A few obvious ones were mail delivery and sky racing. No one predicted nuclear power plants. But they wouldn’t have been possible without the plane. Without the plane we wouldn’t have had the aerial bomb. Without the aerial bomb we wouldn’t have had the nuclear bomb. And without the nuclear bomb we wouldn’t have discovered the peaceful use of nuclear power. Same thing today. Google Maps, TurboTax, and Instagram wouldn’t be possible without ARPANET, a 1960s Department of Defense project linking computers to manage Cold War secrets, which became the foundation for the internet. That’s how you go from the threat of nuclear war to filing your taxes from your couch—a link that was unthinkable fifty years ago, but there it is

The fascinating backstory behind the invention of Polaroid film

Author Safi Bahcall notes that Polaroid film was discovered when sick dogs that were fed quinine to treat parasites showed an unusual type of crystal in their urine. Those crystals turned out to be the best polarizers ever discovered. Who predicts that? Who sees that coming? Nobody. Absolutely nobody. 

The power of incentives can explain extreme events, unsustainable events occuring for prolonged periods of time, and warped beliefs

When good and honest people can be incentivized into crazy behavior, it’s easy to underestimate the odds of the world going off the rails. Everything from wars to recessions to frauds to business failures to market bubbles happen more often than people think because the moral boundaries of what people are willing to do can be extended with certain incentives. That goes both ways. It’s easy to underestimate how much good people can do, how talented they can become, and what they can accomplish when they operate in a world where their incentives are aligned toward progress.

Extremes are the norm. Unsustainable things can last longer than you anticipate. Incentives can keep crazy, unsustainable trends going longer than seems reasonable because there are social and financial reasons preventing people from accepting reality for as long as they can. A good question to ask is, “Which of my current views would change if my incentives were different?” If you answer “none,” you are likely not only persuaded but blinded by your incentives.

It’s hard to predict our behaviour during downturns because the environment changes so much

In investing, saying “I will be greedy when others are fearful” is easier said than done, because people underestimate how much their views and goals can change when markets break. The reason you may embrace ideas and goals you once thought unthinkable during a downturn is because more changes during downturns than just asset prices.

If I, today, imagine how I’d respond to stocks falling 30 percent, I picture a world where everything is like it is today except stock valuations, which are 30 percent cheaper. But that’s not how the world works. Downturns don’t happen in isolation. The reason stocks might fall 30 percent is because big groups of people, companies, and politicians screwed something up, and their screwups might sap my confidence in our ability to recover. So my investment priorities might shift from growth to preservation. It’s difficult to contextualize this mental shift when the economy is booming. And even though Warren Buffett says to be greedy when others are fearful, far more people agree with that quote than actually act on it. The same idea holds true for companies, careers, and relationships. Hard times make people do and think things they’d never imagine when things are calm.

Why humans prefer complexity over simplicity

The question then is: Why? Why are complexity and length so appealing when simplicity and brevity will do? A few reasons: 

Complexity gives a comforting impression of control, while simplicity is hard to distinguish from cluelessness. 

In most fields a handful of variables dictate the majority of outcomes. But paying attention to only those few variables can feel like you’re leaving too much of the outcome to fate. The more knobs you can fiddle with—the hundred-tab spreadsheet, or the Big Data analysis—the more control you feel you have over the situation, if only because the impression of knowledge increases. The flip side is that paying attention to only a few variables while ignoring the majority of others can make you look ignorant. If a client says, “What about this, what’s happening here?” and you respond, “Oh, I have no idea, I don’t even look at that,” the odds that you’ll sound uninformed are greater than the odds you’ll sound like you’ve mastered simplicity.

Things you don’t understand create a mystique around people who do. 

If you say something I didn’t know but can understand, I might think you’re smart. If you say something I can’t understand, I might think you have an ability to think about a topic in ways I can’t, which is a whole different species of admiration. When you understand things I don’t, I have a hard time judging the limits of your knowledge in that field, which makes me more prone to taking your views at face value.

Length is often the only thing that can signal effort and thoughtfulness. 

A typical nonfiction book covering a single topic is perhaps 250 pages, or something like 65,000 words. The funny thing is the average reader does not come close to finishing most books they buy. Even among bestsellers, average readers quit after a few dozen pages. Length, then, has to serve a purpose other than providing more material.

My theory is that length indicates the author has spent more time thinking about a topic than you have, which can be the only data point signaling they might have insights you don’t. It doesn’t mean their thinking is right. And you may understand their point after two chapters. But the purpose of chapters 3–16 is often to show that the author has done so much work that chapters 1 and 2 might have some insight. Same goes for research reports and white papers.

Simplicity feels like an easy walk. Complexity feels like a mental marathon.

If the reps don’t hurt when you’re exercising, you’re not really exercising. Pain is the sign of progress that tells you you’re paying the unavoidable cost of admission. Short and simple communication is different. Richard Feynman and Stephen Hawking could teach math with simple language that didn’t hurt your head, not because they dumbed down the topics but because they knew how to get from A to Z in as few steps as possible. An effective rule of thumb doesn’t bypass complexity; it wraps things you don’t understand into things you do. Like a baseball player who—by keeping a ball level in his gaze—knows where the ball will land as well as a physicist calculating the ball’s flight with precision.

The problem with simplicity is that the reps don’t hurt, so you don’t feel like you’re getting a mental workout. It can create a preference for laborious learning that students are actually okay with because it feels like a cognitive bench press, with all the assumed benefits.

Why people will always disagree

The question “Why don’t you agree with me?” can have infinite answers. Sometimes one side is selfish, or stupid, or blind, or uninformed. But usually a better question is, “What have you experienced that I haven’t that makes you believe what you do? And would I think about the world like you do if I experienced what you have?”

It’s the question that contains the most answers about why people don’t agree with one another. But it’s such a hard question to ask. It’s uncomfortable to think that what you haven’t experienced might change what you believe, because it’s admitting your own ignorance. It’s much easier to assume that those who disagree with you aren’t thinking as hard as you are.

So people will disagree, even as access to information explodes. They may disagree more than ever because, as Benedict Evans says, “The more the Internet exposes people to new points of view, the angrier people get that different views exist.” Disagreement has less to do with what people know and more to do with what they’ve experienced. And since experiences will always be different, disagreement will be constant. Same as it’s ever been. Same as it will always be. Same as it ever was

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Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. I currently have a vested interest in Amazon. Holdings are subject to change at any time.