I’m sure you recall some version of the story of Chicken Little (or perhaps Henny-Penny, or some similar name). An object fell on her head and she concluded “the sky is falling”. One useful lesson we can draw from this folk tale? Hesitate before you conclude disaster is looming. Chicken Little notwithstanding, in 2020 many of us are convinced that disaster in one form or another is imminent. But is it?
In 2018, one of Bill Gates’ recommendations for “5 books worth reading this summer” was Factfulness, by Swedish global health lecturer Hans Rosling. Indeed, Gates endorsed it as “one of the best books I’ve ever read.” Rosling’s observations about how the world is getting better - rather than “going to hell in a hand basket” - are striking. I found especially interesting his connection of why we often are so pessimistic with how our brains work. Rosling describes this as “the gap instinct.”
All of us have a strong tendency to binary thinking - a perspective which divides things into 2 groups - this or that, right or wrong, good or bad. It helps us deal with a complex world if we can readily use a framework of this kind and easily categorize things.
Rosling points out this is not only useful and intuitive, but dramatic because it implies conflict. Our bent toward binary thinking is reinforced because dramatic conflict is the stuff of interesting stories, and our storytellers - journalists, political leaders, and others - construct compelling narratives with conflict between two opposing people, views, or groups. We are told - and readily believe - that there is “an increasing gap” between two ends of a spectrum, when the reality is that many elements fall into the middle - exactly where the gap is reported to be.
What does this have to do with financial planning? As we evaluate options and make decisions, we often construct the question as “Should I do this or not?” However, we will make more effective choices if we recognize that we have a range of options, not just binary alternatives. As we move into an increasingly polarized environment, I would encourage you to recognize binary thinking (personally and in the world around you), and consider there may be nuance and more alternatives than you imagine at first blush. That’s likely to be good for us as a society, as well as good for you personally! (And if you’re a reader, you might check out Factfulness.)