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Do You Believe That Demography Is Destiny?

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Your disposition toward certain phrases or ideas can reveal a great deal about your psychology.

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The first is rather obvious: Folks characterized by an optimistic frame of mind are marked by a belief in the possibilities of men to alter any given course of events and effect positive outcomes. The mantra of optimists is that "anything is possible." By contrast, pessimists aren't inclined to think that human beings are capable of changing anything for the better. In their thinking, pessimists are inclined to emphasize the role of forces beyond human control that tend to determine the course of events. And to the extent that they focus on human forces at all, it is on the mankind's capacity for mischief.

The second reason pessimists are attracted to theories of inevitability is perhaps more subtle, and has to do with the tolerance for uncertainty. Optimists tend to be relatively more comfortable with uncertainty because progress requires change, and change necessarily is associated with uncertainty. Thus, optimists have a greater tendency to reconcile positive outcomes with uncertainty.

Pessimists, on the other hand, tend to have a relatively low tolerance for uncertainty. The reason is that pessimists don't tend to believe in the possibilities for progress. As a result, since by definition pessimists tend to believe that coming changes will produce negative outcomes, they are psychologically predisposed to associate the uncertainty that is associated with change with negative outcomes.

The relative intolerance for change and uncertainty that tends to be characteristic of pessimists is associated with a state of mind that takes great comfort in certainties. Thus, pessimists tend to be strongly attracted to theories of inevitability, for they offer certainties.

Conclusion

As an investor, one way to gain self-knowledge is to monitor ourselves and ask why it is that we tend to be attracted (or not) to certain catch phrases or aphorisms. Such sayings often contain emotional triggers that appeal to certain ingrained aspects of our psychology.

For example, if you feel attracted to the aphorism "demography is destiny," this could be an indication of the fact that you tend to be a pessimist. As an investor you need to become aware of any such biases, and their intensity thereof. For such biases will tend to influence one's interpretation of data, and they can frequently lead one to unsound conclusions.

Investors should also monitor their emotional disposition to theories and/or ideas. Understanding the roots of your feelings toward theories such as "peak oil" or the gold standard, for example, will probably be a great deal more useful to you as an investor than any informational edge that these theories will actually provide you with.

Postscript:

As an interesting aside, the phrase "demography is destiny" is usually attributed to French philosopher Auguste Comte, considered the father of "positivism." In the current context, Comte's substantive views of demography are of little import. However, Comte's positivism (evident in the aphorism itself) is of significant interest in the context of the above article as it is a philosophical theory in which the concept of inevitability plays an extremely important role. Furthermore, it is important to note that Comte's ruthlessly consequentialist political ideas, manifested in his thoroughgoing collectivism and utter disdain for individual rights can be traced to a psychological mindset that was influenced by a strong idealist strain.

I mention Comte's idealism because the psychology of individuals characterized by idealism (and prone to ideology) is, somewhat ironically, often framed by disillusionment. Disillusioned idealists, for obvious reasons, tend to be averse to uncertainty and risk. And in practice, with respect to most contemporary challenges facing mankind, they're almost always pessimists.

In a future article, I will discuss how the psychology of disillusioned idealism tends to affect people with an intellectual bent. I'll utilize the example of Marxists and partisans of the Austrian School of Economics. In that article I'll show how the psychological profiles and personalities of Marxists and Austrians tend to be strikingly similar (i.e. that of disillusioned idealists). I sustain that these similarities are far more interesting and important for intelligent people to understand than the presumed differences in the substance of these rival schools of thought.

For now I will merely say that if you find yourself attracted to either of these ideologies, you're probably a logical positivist and a pessimist. As such, it is unlikely that you will be successful as an investor unless you correctly identify these psychological tendencies and learn ways to deal with them. For readers who wish to read more on this general subject, please refer to my article, Perma-Bears: Pollyannas In Disguise?
No positions in stocks mentioned.
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