What Good Is History?Roundup
Do you read history? Believe almost all of it? Use it as a guide to the future?
Me too. But let's consider something. Take these two statements:
"11 million jobs have been created since 2009. The stock market has tripled. The unemployment rate nearly cut in half. The U.S. economy has enjoyed a strong recovery under President Obama."
"The recovery since 2009 has been one of the weakest on record. The national debt has ballooned. Wages are stagnant. Millions of Americans have given up looking for work. The economy has been a disappointment under President Obama.
Both of these statements are true. They are both history. Which one is right?
It's a weird question, because history is supposed to be objective. There's only supposed to be one "right."
But that's almost never the case, especially when an emotional topic like your opinion of the president is included. Everyone chooses the version of history that fits what they want to believe, which tends to be a reflection of how they were raised, which is different for everybody. We do this with the economy, the stock market, politics -- everything.
It can make history dangerous. What starts as an honest attempt to objectively study the past quickly becomes a field day of confirming your existing beliefs. This is like steroids for inflating your confidence and puts you on a path to misguided, regrettable decisions. (Misguided and regrettable decisions being the one thing everyone agrees history is filled with).
In his book Why Don't We Learn From History?, B.H. Liddell Hart wrote:
[History] cannot be interpreted without the aid of imagination and intuition. The sheer quantity of evidence is so overwhelming that selection is inevitable. Where there is selection there is art.
Those who read history tend to look for what proves them right and confirms their personal opinions. They defend loyalties. They read with a purpose to affirm or to attack. They resist inconvenient truth since everyone wants to be on the side of the angels. Just as we start wars to end all wars.
I see this all the time in investing. The amount of investing data is incomprehensible and growing by the day. Anyone can think up a narrative, then sift through mountains of historical data to find examples backing it up.
Think stocks are expensive? History agrees. Think stocks are cheap? History agrees. Think tax cuts spur economic growth? History agrees.Think tax cuts don't spur economic growth? History agrees. History shows that raising interest rates is both good and bad for stocks. It proves that buy-and-hold investing is the best and the worst strategy. In the age of big data, no idea is so absurd that a good spreadsheet can't make it look right. ...
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