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“Pessimism is intellectually seductive in a way optimism only wishes it could be”Morgan Housel
Before elaborating more on the topic, we must understand pessimism in simpler terms. Pessimism means a tendency to think negatively. A pessimistic person may frequently identify and focus on the negative or unfavourable aspect of a situation rather than concentrating on what is going right.
Tell someone that everything will be great and they are likely to either ignore you or have a sceptical eye. Tell someone that they are in danger and you have their undivided attention. For example, XYZ company calls you and tells you about issues with income tax, and to evade tax you are ready to talk to that person. You are so scared about paying income taxes that you even tell about all the investments you have made in a particular year.
In today’s era, hearing that the world is going to hell is more interesting than forecasting that things will gradually get better over time. This makes people taking pessimism even more seriously than optimism. Forecasting $250 a barrel oil in 2008 sparked immediate meetings of legislative bodies whereas forecasting the bankruptcy of oil giants as electric cars proliferate sparks immediate giggles. Another example, thinking that Coal-based power plants will never be closed, whereas European countries like Belgium, Sweden, and Austria have already stopped or going to stop using coal for power generation.
On the one hand, it does make sense, and it’s better to be on a safer side. Even in the field of investment, we focus more on not losing the capital than having high double-digit annual returns. Like COVID-19 has hit the world as the worst pandemic of a century. This may impact a person, thinking more about his/her family getting even more pessimistic about his/her life and buying life insurance though there might be a less probability for such an event to occur again in the near term. Even in 2003, SARS (Severe Acute Respiratory Syndrome) got more attention than a massive decline in HIV mortality.
But on the other hand, it is crazy. We don’t respond faster to pessimism; rather we become so indulged towards it for a longer time than it is necessary. Have you ever asked yourself, why do you cling so much towards pessimism? For example, Mr X is thinking to invest in XYZ company. He started digging more into a business model, like what kind of investments are required? What can be the payback period? What are the pros and cons of the business? Even after getting convinced on the company’s model, he thinks that certain road breakers which he is not aware of will stop the company from growing further, even if that company has performed well in the bad times. And in the current time, when COVID-19 investments are available cheaper than before, people are even more scared.
“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty”Winston Churchill.
Anything that currently looks bad can be always extrapolated into something disastrous. Extrapolate Government deficit and we might go bankrupt in 25-30 years. Extrapolate a recession or unemployment rate and we will go broke soon. All of these could be reasons for pessimism if we assume no future change or adaptation. Which is crazy, given our long history of changing and adapting.
“It is also why every past market crash looks like an opportunity, but every future market crash looks like a risk”Morgan Housel
What can we do to overcome or deal with pessimism?
Make a list of pros and cons: Make a list of pros and cons about a situation, and if possible, challenge yourself to come up with at least one pro for every con on your list. While this strategy might not apply in extreme circumstances, it may help you find a balanced perspective in many situations.
Seek out an optimistic person: Speaking with a friend or a loved one who is optimistic in nature can help to change an individual’s pessimism into optimism. These people may help you in rethinking ideas or opportunities which you might have ruled out due to excessive pessimism.
Believe in yourself: one should find a cause to believe in oneself, it helps you to build strength and become more optimistic.
“You always have ‘NO’ as an answer for any kind of situation, go for the ‘YES’ maybe you will be surprised by the positive scenario”Chirag Maroo
I would like to give credits to Mr. Morgan Housel, who has written about this topic.
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