A Reason For Optimism

January 17, 2023

“The world has a way of not ending…”

That was one of the big phrases at my previous company.

The world is a dark place. There’s always a reason to be bearish. Not just as investors, but for humanity overall.

War. Famine. Global warming. Politics. Geopolitics. Inequality. Social justice. The Federal Reserve. The debt ceiling. Negative interest rates. The pension crisis. Corporate fraud and malfeasance. Etc…

These issues have, and always will, be with us. Many of these issues have been with us for millennia. Several for centuries. Some for decades. And others more recent.

Yet here we are.

Those that lived through previous crises likely felt the way some of us may be feeling now.

Blog writer Morgan Housel said it best in his recent post (emphasis added):

“Most good things happened because of a reaction to a bad thing. So one reason I’m optimistic is specifically because I know there will be problems that push people into fixing what’s wrong with the world.”

The Titanic crash led to the mandate of radios on every commercial vessel.

World War I led to aircraft carriers, the creation of Band-Aids, the downfall of imperialism, and the beginning of universal suffrage in many countries.

World War II led to the invention of nuclear energy… to jets… to penicillin.

There was “Peak food.” Then came fertilizer.

There was “Peak oil.” Then came the Shale revolution.

There was “Peak water.” Now there’s desalination technology.

There’s rare and deadly diseases. Now there’s immunotherapy and gene editing.

Every “crisis” the world has ever faced led to innovation. Technologically. Culturally. Societally.

We’re dealing with a multitude of issues today. Many seem existential.

There aren’t immediate solutions today. But discounting human innovation has historically been a losing proposition.

Take global warming for example. The world is heating up – which has led to severe weather events. Many experts say we’re past the point of no return. That no matter what we do now won’t save us.

Those were the same “experts” that predicted peak oil, food, and water.

I’m a little more optimistic. We have millions of the smartest people around the world coming up with solutions. Ideas like carbon capture, “geoengineering,” reforestation/replanting seagrasses, modular nuclear reactors, etc…

We may not solve every issue tomorrow. The near present won’t be a soft, straight line giving us a smooth landing, either. But I’m confident we’ll figure it out. It goes against all of human history not to assume so.

Fortunes will be made (and lost) investing in some of these cutting-edge technologies. Mike and I are certainly following most of them.

Those are the moonshots most investors look for. But data shows you don’t need to invest in the early winners to beat the market or make a lot of money. You can wait for the company that emerges as the leader before you invest.

Here’s what we said in our missive on May 25th, 2021 titled Why You Want To Own Monopolies:

“Amazon. Apple. Google. Facebook. Netflix. (They're so dominant, you probably know them as the FAANGs).

All monopolies. All companies that would've made you many times your money had you invested in them the day you knew they were monopolies. (My guess - most of us didn't. Or bought and sold too soon. Actually, I think this is just a confession).

Apple's up more than 30x since it launched the iPhone in 2007. Amazon's up 20x in the past 10 years. Google's been dominating searches for decades. It's up more than 15x since 2009. The list goes on. These weren't unknown companies. They were already multi-billion companies that dominated our lives and time.

You didn't need to be a genius. You just needed to own them because they were monopolies.”

Our goal here at Mighty is to help every investor develop the right frame of mind when investing in markets. From proper position sizing to sleeping well at night.

All of these lessons are what will keep you invested to let compounding work its magic.

Because humans are innately risk-averse. We want to sell at the first sign of risk.

Because the world will always look to be teetering on the edge… yet it never does.

Humans are problem solvers. We’re innovators.

I’m confident we’ll come out better on the other side of whatever present or future risk we deal with.

We’re living during the best time in human civilization. Don’t forget to enjoy it.

Good investing,

Lance

P.S. Here’s a must-watch clip that encapsulates the dichotomy of how most people probably feel about the state of the world from HBO’s White Lotus. And how thankful we should be living in today’s society.

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