Were the good old days better?

Hi,

Yesterday we relocated from Sevilla to House Hjorth, my childhood home in a small town in north western Italy.

I’m a fan of the Game of Thrones books (and series) and found it fun to call the place House Hjorth as it is the family base.

As it naturally happens when we visit childhood places a lot of memories come up.

Typically we will reminisce how things were so much easier and comfortable.

In my case it can appear to myself that times were more fun when I was a teenager here, or when I was studying in Aalborg.

Of course they were neither more nor less fun, it just tends to appear that way because of a mental bias I think you will be familiar with as well: the Rosy Retrospection bias.

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More commonly we know the bias as thinking of the “good old days”.

The entertainment industry plays well with the concept as the past is always romanticized because we are all suckers for nostalgia at various levels.

If we let ourselves get caught by it though, it can lead to a skewed mindset in the present.

Our mindset is the most important element in being able to make good decisions consistently.

A non productive mindset inevitably leads to bad decisions, which we tend to identify as bad luck when we are unable to connect the dots between events.

If we are not careful external influences can lead us to believe that things were indeed better in the past, particularly when the present is challenging.

Looking at data, this is not true. Health care quality and availability over decades is the easiest example.

I’m talking about general progress here, of course for individuals we can be hit with periods in time where it indeed gets really challenging or even bad.

In those cases the Rosy Retrospection becomes useful as it serves to keep up hope as we remember from experience that things can be better and it can help put us on a path towards better times.

I hope you are in a period of balance and prosperity.

Me, I’m challenged on some levels, but I see that as an opportunity for learning and growing.

Looking at general progress, even if according to the news there is war everywhere and crime is rampaging, data shows that on average across the globe we are living in the most peaceful times ever in history.

In Seville I walked on Plaza de San Francisco, in 1481 for a while they used to burn people there simply for not acting enough Cristian. Can’t imagine what they would do if one believed in an entirely different god.

In most cases, our individual good olds days were not better than the present either.

They just appear as such because we tend to forget the struggles and only remember the good stuff.

As usual our brains flee from pain towards pleasure.

Struggles are only remembered when they were particularly painful and identified as lessons.

Being aware of this bias is not important simply to avoid melancholic moods, but to keep a mindset of abundance and growth.

Without the right mindset we find it harder to take action.

Without a growth mindset it can be harder to spot opportunities as we will err on the cautious side and play the naysayer.

When it comes to investing we are playing with risk.

No one takes responsible risks when in a state of mind of scarcity.

If we tell ourselves the past was better, it becomes a contradiction to invest.

By definition investing means expecting something to increase in value in the future.

Okay, you can say that a permanent short seller challenges this notion. Short selling eventually stops because prices cannot fall past zero. If everything fell to zero all economies collapsed beyond repair.

Simply not possible. Someone somewhere will always be able to provide value someone else will pay for.

We need a positive view of the present and the future to have a more open mind and to be able to spot investment opportunities that we can formulate arguments in favor of.

One can still invest with pessimistic mindsets of course, it is just much harder to deal with.

Hope this knowledge helps you keep a prosperous growth mindset not only for this week.

Happy Monday.

Have a good one,

Chris

Originally posted 4th December 2023 on ElliottSays.com

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