“Why The Global Economy Will Begin To Collapse In Eight Days” – This headline greeted me in my Substack feed upon my return from a family vacation. Unfortunately, by the time I saw the article it had been 14 days since it was published. I was too late. After 30-plus years of prudently investing my clients’ assets, the global economy collapsed while I was drinking mango margaritas at a pool bar in Tulum, Mexico. I simply cannot apologize enough.
Fortunately for us all, no one has seemed to notice. The next article in my feed might give us some insight into why: This one, authored by Mark Manson, was titled, “Intellectuals are F*cking Idiots.” If it is not obvious as to why these two articles are related, then please bear with me.
The end-of-days story sells; It has since the beginning of human history. I believe it feeds our ego to think we will be the last humans. Manson’s article is worth reading. He relays the story of Malcom Caldwell, a professor at London University and a brave Marxism apologist well into the late 1970s, even after the publishing of “Gulag Archipelago” and the world knowing of the horrors of socialism. In 1978, Professor Caldwell had the opportunity to meet Pol Pot, whom he believed would finally bring about Marx’s full vision. After the meeting, Pol Pot had him executed. Reality hits hard sometimes.
Manson goes on to the example of Paul Ehrlich, with whom I am far more familiar. Ehrlich is the author of “The Population Bomb,” which came out in 1968 and predicted the end of the world due to overpopulation. Ehrlich, a celebrated biologist and hero to the environmental movement, predicted mass starvation in the 1970s and that the oceans would be void of life by 1980. He predicted all sorts of catastrophes, none of which occurred. Being spectacularly wrong never dissuaded Ehrlich. In 2004, long after every single prediction of his 1968 book had proven wrong, he claimed that his only real error was being too optimistic. He passed away in March of this year, and as recently as 2024 he was given a platform by “60 Minutes.” Ehrlich is the personification of George Orwell’s quote, “One has to belong to the intelligentsia to believe things like that: no ordinary man could be such a fool.”
Manson’s conclusion is that these intelligent people fall in love with their models and at some point can no longer tell the difference between their model and reality. He states, “All models are wrong, some are useful.” That is what inspired me. I doubt Manson has ever read “Security Analysis,” the landmark work of Benjamin Graham and David Dodd. It is the bible of investment management, and it is both longer and harder to read than the Bible itself.
Yet, somehow Manson, who to my knowledge has no financial training, perfectly summed up the entire first lengthy chapter of Graham and Dodd in one concise sentence: “All models are wrong, some are useful.” Humility is the number-one ingredient to sustainable investing success.
This brings us back to me missing the end of the world. That article was written by Porter Stansberry, an investment adviser. In fairness to Stansberry, he makes a useful insight: The world does not run on oil, precisely; it runs on diesel. The war in Iran has certainly sent shocks through all energy markets, but especially the diesel market. This is having and will continue to have economic ramifications. The one thing the doomsayers always miss, however, is human ingenuity and resilience: What they see as the end of the world, someone somewhere sees as an opportunity.
When given the freedom to act, humans always find a way to overcome obstacles and make their lives better. As my colleague Michael Smith is fond of saying, “The bears always sound smarter.” They have a complex line of reasoning that somehow seems to make sense, even when it is totally wrong. That takes a great deal of intelligence. So, you really do have to be intelligent to believe things that are stupid. Optimists are left with “It will all work out, guys.” That isn’t satisfying, even though it is almost always correct.
The end of the world is a popular story, but it is bad trade. Fortunately, the world did not actually collapse while I joined my family on vacation. I doubt I will live long enough to see it happen, but if I do, there would be worse ways to go out than sipping a mango margarita at a pool bar in Tulum. At least that is my perspective.
Warm regards,
Chuck Osborne, CFA
