Politically speaking, I have a diverse friend group.
When we discuss politics or economics, one group is highly skeptical of capitalism and is passionately in favor of affirmative action. (These individuals tend to vote for progressives in elections.)
Another group is vehemently against immigration and increasingly skeptical of global trade. (As you can imagine, these people are politically conservative.)
I like both groups, but my wife and I rarely invite them to the same dinner party. It just gets too heated. On the surface, they seem to have so little in common.
But in fact, these beliefs – affirmative action and anti-capitalism on one side, anti-trade and anti-immigration on the other – are all based on the same underlying idea.
It’s called zero-sum thinking.
People who dislike or distrust capitalism believe that some people are rich because others are poor – and vice versa – because resources are finite.
This same idea spurs the belief in affirmative action. For some marginalized groups to be admitted to preferred institutions – whether they are prestigious universities or C-level office suites at corporations – other “privileged” individuals must be denied a spot. After all, there are only so many seats at the table.
Immigration? Same idea. If you let in more people, they’ll take what is ours. Because the economic pie is only so large.
And global trade? China’s gains can only come at the expense of U.S. workers, of course.
The basic idea behind all of these beliefs is that the gains for one person or group must come at the expense of others – and that economic activity is less about creating new wealth and more about reallocating existing wealth.
A Better Idea
The media is highly guilty of propagating this zero-sum idea. It routinely portrays our world as a limited sphere where some must lose out for others to gain. (Inspiring anger or resentment in viewers is a surefire way to keep them watching.) And to be sure, media outlets on both left and right are equally guilty of this.
But I’ve got a different narrative altogether… one that is contrary to this zero-sum worldview.
It goes like this: The potential for increases in wealth and living standards is limitless, as it is driven by human knowledge and innovation, which are also without limit.
Two Types of Benefits
This narrative is poised to become bigger and bigger in the years ahead. And those who understand it and aren’t afraid to abandon the zero-sum worldview will benefit in two distinct ways…
First, there is convincing economic research that societies in which zero-sum thinking is dominant have underperformed other societies in terms of economic growth and living standards.
One recent economic paper looked at societies throughout human history and found that zero-sum thinking is a “demotivating belief” that is highly correlated with lower levels of economic success.
“Across societies, our model predicts a positive relationship between zero-sum thinking and demotivating beliefs and a negative relationship between zero-sum thinking (or demotivating beliefs) and both material welfare and subjective well-being,” the paper’s authors wrote.
In more traditional societies, zero-sum thinking has been closely related to three distinct phenomena: the widespread belief that success is determined mostly by luck rather than hard work; a high degree of societal envy; and common witchcraft beliefs that cast suspicion on the origins of others’ successes.
All these demotivating beliefs discourage effort and productive activity.
And there is other research that found that when societies abandon these demotivating beliefs and instead embrace a “culture of growth” – the belief that science and industry can deliver progress for all – they reap enormous benefits.
Perhaps the best example is the Enlightenment ideals of science and progress in the 17th and 18th centuries that motivated and enabled Britain’s Industrial Revolution of the 18th and 19th centuries. That historical transformation sent living standards soaring and created a global economic juggernaut.
A Technological Revolution
And in fact, we may be on the cusp of something similar to the Industrial Revolution – or even bigger than it – today.
In the January issue of The Oxford Communiqué, Alex and I wrote about eight emerging megatrends. These are significant innovations that will not only transform our world but also offer investors as much upside as anything in the market today.
Embracing these technologies – both by investing in them and by believing in their awesome potential to deliver greater wealth for everyone – is the best way to benefit from them.
It’s also the best way to abandon the poverty-inducing and demotivating zero-sum ideology.