Visual Economics and Lifespan

Kennon-Green & Co. Fiduciary Financial Advisor, Wealth Management, Global Value Investing


For those of you who prefer visual data, watch this BBC video, which is up to 3,757,003 views after going viral on the net a few days ago and has been lighting up the economic blogs. In 4:48 seconds, you will see 200 years of human economic and health records, organized by country. I said it before and I’ll say it again: We are living in the most prosperous, peaceful, free time in the history of humanity. What we experience in our day-to-day lives is a paradise compared to what our great-grandparents and ancestors knew.

[mainbodyad]I’ve talked with you about the frustration I experience when people insist the world is a disaster today. It shows an almost willful ignorance of economic and financial history. Things are better now than they ever have been. Over the past 200 years, life expectancy is up, wealth has skyrocketed, democracy is now the de facto political system in most nations as opposed to totalitarian dictatorships or monarchies, literacy rates are at the top of the historical range, comforts are easily accessible so that even the working poor can have automatic heating and air conditioning, something not even the world’s richest men had, the ability to communicate with anyone, anywhere through telephones and video chat, and personal freedoms that ensure the opportunities are not just limited to white, Anglo-Saxon, protestant men.

There Are Several Mental Models That Explain Why People Think We Are Racing Toward Armageddon

Hardly a day goes by when someone well-meaning friend, colleague, or family members insists that we are living in the final days of humanity, Armageddon is around the corner, and the world is coming to an end. They talk about “war and rumors of war”, “earthquakes” and “disasters”. They hold up Egypt and Iran as examples of the coming apocalypse. They actually believe it because they have zero education when it comes to the history of mankind and what we, as a collective people, have endured in the past. It’s a sort of self-induced myopia through laziness.

I wouldn’t even mention it but this is becoming almost a daily occurrence with people I know. Glenn Beck is even hosting entire hour-long television shows about whether or not we are living at the end of humanity. The topic is even coming up at the office! Otherwise, intelligent, rational people have lost their minds and succumbed to the same mental models that allowed witch doctors to flourish in Africa a few thousand years ago.

Our Wars Are a Joke Compared to the Wars of Our Ancestors

Even if we did enter World War III, short of a nuclear disaster, what we have experienced in most of the lifetimes of the people reading this right now is a pathetic drop in the bucket compared to the wars our ancestors fought. Don’t even think about the usual culprits – World War I & II. As a percentage of the population, and in some cases, in absolute numbers, we have never been more at peace than we are now. Think about the An Shi Rebellion, the Mongol Conquests, the Qing dynasty conquest of the Ming Dynasty, the Taiping Rebellion, the Conquest of Timur, the Dungan revolt, the Russian Civil War, the Napoleonic Wars, The Thirty Years’ War, the Yellow Turban Rebellion in China, and the Crusades. Many of those were thousands of years ago! The American Civil war during the 1860’s was bloodier and more brutal than almost any conflict in which the United States herself has partaken.

Perhaps some perspective will help: We have been in war in Iraq and Afghanistan for 8 to 10 years. That is about what we experienced as a nation in Vietnam, which was long before I was born. In the former, American fighting forces have experienced 4,683 casualties and in the latter, 153,452 casualties. That is, almost 3,300% more American fighters died in Vietnam than have in the current two wars.

In addition, to somehow think that our involvement in the Middle East now is a harbinger of the end of humanity is idiotic, especially when you consider that this is NOTHING compared to our (westerner) involvement in the region in the 1920’s and during the Crusades. I mean, Britain granted independence to Iraq in 1932! The Middle East is nothing new. It’s the same story that has been going on for thousands of years. The arrogance to somehow think that this generation is different is staggering.

There Aren’t More Earthquakes & Disasters – We Just Know About Them Now Thanks to Television and the Internet

[mainbodyad]As for earthquakes, anyone who isn’t mentally deficient should be able to immediately recognize that there aren’t more earthquakes or disasters – we just have the seismic technology to know when they happen (my mom gets updates on her iPad whenever there is an earthquake anywhere in the world and there is inevitably one every few minutes). Think about the horrible Christmas tsunami that wiped out much of Indo-Asia a few years ago. If you didn’t have television and Internet, would you have even known about it? Of course not! Past generations didn’t have the luxury of knowing what was happening outside of the 5 square miles in which they resided.

So one more time just for repetition: We are living in the most prosperous, peaceful, free time in the history of humanity. What we experience in our day-to-day lives is a paradise compared to what our great-grandparents and ancestors knew. Somewhere, some idiot is convincing themselves the world is falling apart because they don’t understand the psychology of what I have jokingly heard referred to as “empire collapse anxiety”, which is a neologism designed to explain the feeling of panic people experience when at the height of good things; they are terrified something bad is going to happen.

Can You Guess the Mental Models?

Those of you who are devotees of the mental models espoused by Charlie Munger will quickly realize what causes each of these cognition failures. I’ll give you a clue to a few of them:

  • The average human tends to overweight evidence that is near us today and ignore what happened in the past.
  • The average human tends to fit what happens in the real world into a prediction, prophecy, or prognostication to make it fit with our world view to avoid cognitive dissonance
  • The average human tends to ignore “out of context problems” or “black swan events”
  • The average human is very bad at estimating his or her own capabilities and specialness. After all, 90% of drivers in Sweden think they are above average according to one poll.
  • The person who believes that we are in the “end times” are the same 50-ish to 65+ year old demographic, white, Anglo-Saxon, non-denominational or protestant Christian who has experienced economic disenfranchisement over the past two decades. Often, they have only a high school diploma (occasionally, a bachelor’s degree). It is not an accident or coincidence that those two things are linked. That should be a fairly large clue for the United States. (It is related, but slightly different, in African nations where you have 30-ish, poor evangelical converts to Christianity.)

Bonus points to whomever can identify all of the mental models at play in this particular form of self-delusion.