Some people insist that the world is in terrible shape and getting worse. Although stated as fact, is it true? Physician and educator Hans Rosling, who passed away in 2017, strongly believed that not only is the human condition not getting worse, it’s actually better than it’s ever been. Dr. Rosling spent decades encouraging people to employ “factfulness,” his term for forming opinions based on robust data, rather than to fall back on a host of common assumptions and psychological shortcuts.
In his enlightening book, Factfulness: Ten Reasons We’re Wrong About the World—and Why Things Are Better Than You Think, Rosling, along with coauthors Ola Rosling and Anna Rosling Ronnlund, outlined 10 “instincts” that lead to misjudgment. Investors should be aware of these systematic errors that both obstruct constructive change and waste economic resources. The following particularly resonated with me:
1) Gap Instinct: We continue to think in terms of “us” versus “them”—for example, rich cultures/countries versus contrasting poor ones—which doesn’t accurately reflect the world today. Instead, Rosling recommends categorizing people, regardless of country, into four relative income levels that generate remarkably similar outcomes no matter the location.
2) Negativity Instinct: Reliable data demonstrate ongoing worldwide improvements in health, education, wealth, safety and other measures. While we shouldn’t ignore or minimize real problems in the world, we should also acknowledge and feel encouraged by documented progress. Remember: a situation can be both “bad” and “getting better.”
3) Fear Instinct: Intentionally or unintentionally, some people foment fear to sell stories or generate support for a cause. For example, even though there are fewer global conflicts, plane crashes, etc., than in the past, instant information access skews our perspective and dramatizes the negative. Fearful people, including investors, don’t always think clearly or act rationally, so it helps to remember that there’s an important difference between “frightening” and “dangerous.”
4) Size Instinct: Large numbers, like fear, can be used for impact, but numbers out of context are not meaningful. When you see a splashy number, always compare it to another (e.g., the number of hungry children now versus 50 years ago) or divide it by another (e.g., hungry in proportion to well-fed children).
5) Blame Instinct: While it may be tempting to blame a complex problem on a single culprit, rarely is the world so tidy. Certain companies or political parties can be convenient scapegoats, but blaming a convenient target may prevent us from digging deeply enough to understand the problem at hand.
6) Urgency Instinct: Salespeople know that when they introduce a time element, customers are more likely to act before analyzing. Those with an agenda use this fact, too. Rosling shares some hard personal experiences that illustrate the danger of acting before fully understanding—even when motives are pure. I was impressed by his willingness to share such painful anecdotes.
I recommend this fascinating book as a way for investors to help balance their world view. We plan to include it in our holiday book offer next month.