Just like a rocket
Burns a lot of fuel at launch
New things are hard work

In his exceptional blog at The Collaborative Fund, Morgan Housel posted recently that what seems like near-term destructive chaos is part of the process that creates long term growth.

He starts by sharing a graph of Per Capita Real GDP in the US Economy from 1850 through 2020:

Mr. Housel then lists a few of the calamities present within what seems like 170 years of almost linear growth:

“1.3 million Americans died while fighting nine major wars.

Roughly 99.9% of all companies that were created went out of business.

Four U.S. presidents were assassinated.

675,000 Americans died in a single year from a flu pandemic.

30 separate natural disasters killed at least 400 Americans each.

33 recessions lasted a cumulative 48 years.

The number of forecasters who predicted any of those recessions rounds to zero.

The stock market fell more than 10% from a recent high at least 102 times.

Stocks lost a third of their value at least 12 times.

Annual inflation exceeded 7% in 20 separate years.

The words ‘economic pessimism’ appeared in newspapers at least 29,000 times, according to Google.

Our standard of living increased 20-fold in these 170 years, but barely a day went by that lacked tangible reasons for pessimism.

A mindset that can be paranoid and optimistic at the same time is hard to maintain, because seeing things as black or white takes less effort than accepting nuance. But you need short-term paranoia to keep you alive long enough to exploit long-term optimism.”

If a person were to look at the first seconds of a rocket launch without any broader context, it would be easy to assume that all you were witnessing was a horrifically spectacular explosion. It would seem absurd that a controlled launch into orbit could start with such chaos.

The amount of energy required to overcome the rocket’s inertia, which includes the mass of all the fuel involved, is hard to comprehend. But, as the rocket lifts off and builds speed, its mass reduces by the amount of fuel ejected out of its engines. Helping matters further is that inertia is now working in its favor. Instead of “an object at rest tends to stay at rest,” inertia now means “an object in motion tends to stay in motion.”

As the rocket climbs towards orbit, it requires less and less fuel, until it (hopefully) floats miles above us without any fuel needed at all.

As 2022 ends like someone finally succumbing to gravity after bravely trying to remain upright on slick ice, the rocket analogy might be a helpful framework with which to think about the new year.

Whether it’s starting a new exercise routine, a new saving habit, a new investment strategy, a new tax plan, a new estate plan, a new budget tool, or a new mindset, the early stages are going to be tough sledding. As it goes with an individual, so it goes with the nation – and maybe the world.

The war in Ukraine drags on; American politics seem as circus-like as ever; inflation remains onerously high; forests are on fire; lakes are drying up; oceans are rising; and like pouring salt in a gaping wound, the Fed’s rate hikes seem destined to cause a recession.

But any moment between 1850 until today, under close examination, could appear from a short-term focus to be caught in the event horizon of the apocalypse.

However, looking once again the graph of per capita GDP, believing that now, at long last, the End Times are really upon us, looks like an unwise bet. Are there enormous problems? Yes. Have there always been? Yes. But our economic inertia, if looked at from the “objects in motion tend to stay in motion” framework, points to long term growth ahead.

With so much seemingly going wrong, how could this be possible? Current developments providing reasons for cautious optimism include, among other things:

The development of artificial intelligence as a problem-solving tool.

The ability for people to edit genetic code as a means of enhancing health and preventing disease.

The development of quantum computers that may be able to supercharge computationally intensive tasks, like…

Progress in the field of fusion energy, which just hit a milestone that, for the first time ever, points to a potential future where “x” amount of fuel produces “x squared” amount of energy.

Human exploration of the cosmos, starting with a lunar space station; and potentially human habitation of Mars before the end of the century, if not sooner.

Every single of one of these developments could end in catastrophe. Or, all of this striving may result in nothing beneficial to anyone. Mr. Housel’s point is not to ignore pessimism or dismiss it as foolish.

The point is that it may be because of our concern that things are spiraling out of control that people exert so much energy towards long term survival. Panic may lead to inefficient action and error, but it is incredibly effective at getting people moving.

As the year winds down, we’re at the precipice of several potentially life-on-earth-altering milestones. Based on history, progress will likely be halting, slow, laborious, and highly resource intensive.

We can expect people to make mistakes, and probably some disasters to strike along the way. That’s not the sign of the end of days. That’s a sign of the normal course of our gradual march towards a tomorrow that makes today look like a primitive backwater.

For 2023, I wish for all of you a bright explosion of energy overcoming whatever inertia is preventing you from reaching the heights to which you aspire.

If that inertia proves hard to overcome with your finances, and you need more fuel in your engines, we’re here to help.

From all of us at SeaCure, may your New Year be happy, healthy, and fulfilling!