The Nostalgia Illusion
We remember things how we want to remember them, not how they actually were.
Below are the results of all of the games played during Euro 96, 28 (!) years ago this summer.
Barring a couple of great games (Russia v Czech Republic - probably quite a feisty one, England battering Holland), it was a pretty boring tournament. The knock out games in particular were objectively awful spectacles.
In fact, Euro 96 had the second lowest goals per game (2.07) of any Euros or World Cup tournament going back to 1930.1
But of course, that summer is remembered as anything but dull. Baddiel and Skinner, Seaman’s save (with an assist from Uri Geller), Shearer’s golden boot.
France nil Holland nil removed from the collective psyche to ensure space for the dentist’s chair.
A summer when the collective will of a nation carried their boys to *checks notes* a semi-final defeat on penalties to the Germans (of course). Poor Gareth.2
Nostalgia can be very powerful, particularly when the modern world feels so unstable. With an uncertain future ahead of us, the certainty of the past can offer solace.
But while it can be naturally tempting to pine for a “simpler time” (usually taking place around the same time as our childhood) - it is easy to observe the past through rose tinted glasses, conveniently forgetting about all of the things that weren’t so great.
As Hans Roling observes in Factfulness - on many, incredibly important fronts, the modern world is a far better place to live than it was even a few short decades ago.
11% of the global population today can be described as living in food poverty, compared to 28% in 1970. 80% of children diagnosed with cancer before the age of 20 survive today, up from 58% in 1975.
Back in 1800 194 countries around the world tolerated some kind of legal slavery, today there are 3. Today, 193 countries around the world allow women the same rights to vote as men - in 1893 there was 1. The list goes on.
Challenges definitely remain, some of these numbers remain unacceptable, but it is irrefutable that by most conceivable measures there has never been a better time in human history to be alive than today.
It can be difficult to recognise this in the moment however. A regular study undertaken by Gapminder finds the average individual to be almost entirely ignorant about the true state of the world. The latest version of this survey found that, on average, people mistakenly believe that:
There are ten times more refugees globally than there are in reality;
Death by suicide is becoming more common around the world; and
More than a third of the plastic waste produced globally ends up in the ocean.
Despite the questions changing year to year, the past results of this survey show consistent “widespread and systematic misconceptions about the world around us”.3 The results are regularly worse than the outcome that would be expected through blind luck, if each individual surveyed simply closed their eyes and answered each question randomly.
In some ways it is easy to understand why the average individual believes that the world is in a far worse state today than it actually is. Bad news is sudden, attention grabbing and therefore news worthy. Good news happens gradually, and is easily ignored.
In order to understand how far we have come , we first need to objectively assess the past - and this can be difficult given our obsession with nostalgia.
Such revisionist thinking can have negative consequences on our experience as investors as well.
One of the reasons that bear markets are so painful is that people don’t just lose money (albeit only temporarily if they do it right), the impact can be so visceral that it leaves cognitive scars in its wake.
In the aftermath of whatever terrible event has caused the latest “market crash”- people resolve never to get caught out by that particular set of circumstances again.
“It was blindingly obvious that that would happen!” (it wasn’t).
“How did I not see that at the time?” (because you, sir, are just as in the dark as the rest of us)
“I will make sure never to make that mistake again.” (you will)
It is very easy to look back on a past set of circumstances and feel that you could have done so much better in the moment. Most people are known to overestimate their own ability as investors.
Therefore we revise history to make it seem like we knew exactly what was going to happen all along, to protect our egos. We resolve to apply this “foresight” next time around - setting ourselves up for investing disaster in the process.
Trying to save yourself from the next bear market, by relying on the playbook that would have saved you from the last one is foolhardy in the extreme. It is incredibly unlikely that the next market event will be caused by the same circumstances that caused the last one. Risk is the car that you don’t see when you step off the pavement.
It is better to be brutally, intellectually honest with ourselves - recognise that the future is unknown and unknowable and that staying invested through difficult periods for markets is the price that we pay to access the remarkable long term returns that the capital markets offer us.
Instead of allowing our egos into the driving seat, a mindset of acceptance offers us the best possible chance of investing success.
Have a great weekend.
None of this constitutes advice to any individual. Past performance is not indicative of future returns.
If you care, the only lower scoring tournament was the European Championships in 1980 with 1.97 goals a game. Dry.
In the interests of fairness, Northern Ireland’s record at Euro 2016 reads thus - played 4, lost 3, goals scored 2, goals conceded 4.
Will that stop me telling almost anyone I meet how good that summer was? Not on your life.
Anna Rosling Rönnlund, co-founder of the Gapminder Foundation.
Putting a positive spin on most things and forgetting the negatives, is probably what keeps us alive as a species. I am sure I'd only have one child if my wife remembered all of the bits of the first childbirth!