I blogged about our deficits in predicting the future the other day and mentioned not only our tendency to compare the present to the past, but also how we tend to get history wrong—by neglecting the impact that accidents and chance had on them.
Isn’t our place in history today the result of circumstances that no one foresaw, nor could have foreseen?
Isn’t it that when we look at history for lessons about the future we’re only looking at a single snapshot of what could have been? Because our history is a contingent fact – it is what it is, but could easily have been different.
So, should we disregard learning about history just because the future is unpredictable and uncertain?
In fact, we can learn quite a lot from it—we just can’t take it too far—because history is great at teaching broader and unspecific lessons like these:
1. History is subjective: Is history a science or an art? The true answer would seem to be that history is a science and an art. The subject must be approached in a scientific spirit of inquiry. Facts must be treated with scientific care for accuracy and un-biasedness. But they cannot be interpreted without the aid of imagination and intuition. The sheer quantity of evidence = history is so overwhelming that selection is unavoidable. Where there is selection, there is art.
2. Irrationality rules at the worst possible times: Most people can stay rational when things are calm. It’s when things get exciting—bear markets, bubble markets, wars, recessions–that emotions take over. We can be excellent stock-pickers capable of identifying winning businesses better than anyone. But if we panic when the market falls and sell everything, none of it matters. We’ll do miserably.
3. Unsustainable things last longer than we think: Every boom was surely going to pop any day, every war was supposed to be over in a month, and every round of money printing by Central Banks to finance the public debt orgies meant high inflation right around the corner. In reality, things that look unsustainable can last for years or decades longer than seems reasonable. “I was right, just a bit too early,” are famous last words, and indistinguishable from “wrong”.
4. Normal things change faster than we expect: In the first place, things take longer to happen than we think they will, and then happen faster than we thought they could. “History doesn’t crawl,” Nassim Taleb writes, “it leaps. Things go from fracture to fracture, with a few vibrations in between. Yet we like to believe in the predictable, small incremental progression.”
5. All economic improvement is slow and gradual: It’s easy to ignore progress when things improve slowly. The economy is clearly better off today than it was six years ago. But it’s only a little better than it was a year ago, which was only a little better than the year before it, and so on. This makes it easy to miss the bigger trend. If that’s the reason people are still cynical, there’s a sad conclusion: A lot of people will pretty much never be satisfied with the economy because they compare at a too-short-time-horizon.
I personally view this bias in this matter: On the one hand, people can draw whatever lessons they want from history. On the other, there are some “broader, undeniable, and indisputable lessons” that we should know and live by.
After all, there are two sayings that say it all: “Life only makes sense looking backward, but it has to be lived going forward.” and “History happens twice because people don’t listen at the first time.”
And while going forward, I prefer to be prepared for those occasional Black Swan Events (history is full of them) attempting to throw me off course.
“The events of the past can be made to prove anything if they are arranged in a suitable pattern.” — A. J. P. Taylor, historian and journalist
“I have written too much history to believe in it.” — Henry Adams, historian
“History never looks like history when you are living through it.” — John W. Gardner
“Men do not learn much from the lessons of history and that is the most important of all the lessons of history.” – Aldous Huxley
“There is nothing new except what is forgotten.” – Rose Bertin
“The first step to thinking clearly is to question what we think we know about the past.” – Peter Thiel