Last time I briefly explained my skepticism of ambitious optimists that overestimate their abilities and underestimate the difficulty and uncertainty of tasks that arise when "thinking big". Today, I'm talking about the naive optimists that think that they can control the future and thus feel need to spread their bad advise to ordinary folks that don't know any better. If I have learned anything the past two months, anybody that thinks they know what is going on is either misleading people or is actually clueless.
I feel no need to go after political figures for now, because let's be honest. If you know, you know. I would much rather go after those people that feel like they can model and forecast the future given the complete lack of experience that anybody has with the situation. Given the time we are living in (the information age) and the multiplicative impact and severity (which is still largely unknown) of the Coronavirus threat, the social engineers have watched their delicate house of cards be toppled over by a seismic earthquake of underlying reality. Decision makers have no intuition to go on because they never really had to make decisions like this before. So chaos ensues.
The underlying point is that nobody was prepared to act because they never really understood what was going on and didn't know how to react to it and wasted a lot of time panicking and trying to figure out things on the fly. After such a humbling series of events, you would think folks would reevaluate their assumptions about how the world works and start to think about secondary effects and start planning to address those. But unfortunately, I'm being too optimistic here. Apparently you can't learn things until you have been put in your place over and over again and beat into submission. Thank you, Crypto Bear Market for beating all of the stupid optimism out of me. At least I learned something from the past two years.
But it appears to me that the optimists have weathered the initial storm and everybody appears ready to take their advice in the meanwhile. It seems around here that things will be opening up in a future weeks and the markets indicate a rapid recovery and a return to normalcy. While this scenario is certainly within the realm of possibility, it remains one of low probability. It is one based on many assumptions of good to best case scenarios and takes little consideration of potential side effects. Just because Coronavirus may be solved doesn't mean that the other problems that Coronavirus triggered are solved. But with naive optimism there is a tendency to aggregate the blame and attribute it to the most obvious cause. The issue with such thinking is that potential adjacent and independent causes of problems may continue to worsen regardless of how well the virus is tamed.
Side effects are often left undiscovered when one doesn't address issues with analytical rigor and an understanding of probability. There are no certainties and mental models which don't have the flexibility to address many possible scenarios have the potential to be catastrophically wrong. For example, we may still underestimate the impact of the virus, let down our guards and experience a second more powerful wave that politicians will be reluctant to shutdown again as it "makes them look bad". How negative may things get if the optimists are shown massively wrong a second time? Millions of more people get sick. Millions of more people get laid off. Millions of more people are now out of money and are desperate. Distrust of intuitions increases and probably so does social unrest. There's potentially a lot at stake. Making assumptions is risky business.
Think about the side effects we haven't really heard about yet regardless of a second wave. Rents are not being paid which means mortgages aren't being paid which means that bets on those mortgages aren't being paid. Those are going to be bad bets and lose lots of people and organizations money. How many bets are made on those bets? Funds may go underwater which means more people lose their jobs, people get scared and any recovery takes significantly longer. This side effect has already been experienced to some extent. Further lockdowns might intensify the damage, but damage has still been done.
Yet they claim is a once in a lifetime opportunity to buy stocks. They claim the future is bright and we are just around the corner from restarting one of the greatest economic engines the world has ever seen. The optimists preach loudly. But they are deceived by their optimism. I hate being a pessimist here, but we're in an unprecedented situation where the upside scenarios have a decent, but relatively low probability with varying scenarios of worsening downside. But I can't see any side effects that are positive. Nobody inside the system is solving structural issues right now. They are running the money printer. That isn't a novel solution. All the side effects I can imagine are negative and I expect we can't see most of them. That's the thing that worries me and that should be what should keep the optimists up at night.