Millions of investors dream of earning fantastic investment returns like Berkshire Hathaway Chairman Warren Buffett or legendary former manager of the Fidelity Magellan Fund Peter Lynch.
Unfortunately, the majority of them lack a crucial ingredient: the right mindset.
Here’s what I mean…
Before the coronavirus pandemic began, a survey by public opinion poll YouGov asked folks in 17 countries, “All things considered, do you think the world is getting better or worse, or neither getting better nor worse?”
Only 11% responded that things were getting better. (In the U.S., only 6% thought things were improving.)
You might even agree with them yourself. But you shouldn’t.
Two hundred years ago, 84% of the world’s population lived in extreme poverty. In 1981, according to the World Bank, that number was 42%. Today it is less than 10%.
Two hundred years ago, 90% of the world’s population was illiterate. Today that number is inverted: Almost 90% can read.
In the last 30 years, an additional 2.6 billion people have secured access to clean water. More than 85% of the world’s citizens now have access to electricity.
Thirty years ago, zero percent of the world’s population had access to the internet. Today more than half does.
There has not been a war between the world’s great powers since 1945. Over the last 30 years, civil wars have been far less frequent. Terrorist attacks are down, too.
We are living through what Harvard psychologist Steven Pinker calls the “Long Peace.”
There are many other signs of improvement.
- The number of people living under democracies is increasing.
- Life expectancy worldwide is rising.
- Standards of living have never been higher.
- Educational attainment has never been greater.
- Despite the sharp uptick over the past year, violent crime is in a long-term cycle of decline.
- Air and water quality are improving.
- U.S. carbon emissions are declining. (There’s a reason they don’t call it national warming.)
- Studies show that religious intolerance, gender inequality, racism and homophobia are all down.
Yet most people don’t know these things.
In his book Factfulness: Ten Reasons We’re Wrong About the World – and Why Things Are Better Than You Think, renowned public educator Hans Rosling explained how he posed hundreds of questions about poverty and wealth, energy and the environment, guns and violence, and global developments in health, education and gender equality to thousands of people in dozens of countries.
What he discovered was a story of massive ignorance, even – or especially – among well-informed, highly educated people, including Nobel laureates.
Everyone seems to get the world devastatingly wrong. Not only devastatingly wrong, but systematically wrong… [The test results] are worse than the results I would get if the people answering my questions had no knowledge at all.
Yet the world’s most successful businessmen and investors have a more accurate perspective.
They don’t get everything right. No one does.
But they have a more accurate view of the big picture. They recognize the progress that is occurring. And they invest in it.
Buffett’s mentor Benjamin Graham famously said, “Without a saving faith in the future, no one would invest at all. To be an investor, you must be a believer in a better tomorrow.”
In a Barron’s cover story not long ago, Lynch said, “The thesis underlying everything… is that the U.S. will be OK. If you don’t believe that, you shouldn’t be in the stock market.”
And in a recent Berkshire Hathaway annual report, Buffett wrote…
Many Americans now believe that their children will not live as well as they themselves do. That view is dead wrong: The babies being born in America today are the luckiest crop in history… America’s economic magic remains alive and well.
Clearly, the great investors recognize that we have serious problems and setbacks.
That’s always been the case, and it always will be.
But for decades now, most things have been getting better for most people in most places in most ways. Why do the overwhelming majority of us not realize that?
The answer is something called the “Master Narrative.”
I’ll explain what that is – and how it undermines investors – in my next column.