Newsletter 68: rational optimism
Unpopular opinions
Welcome to another edition of the Struggle.
The Struggle is a bi-weekly newsletter where I share my thoughts and learnings from running a startup in Southeast Asia.
Today, I will take on an unpopular opinion that’s been on my mind for a long time - we are pessimists by default, and that’s self-fulfilling.
I often find it surprising how many people in my network, have a grim perspective of the world and their future. That happens because today's media has amplified a widely negative worldview. The more you follow regular media, the more you are led to believe that there is nothing but bad news.
Earlier today, I was in the elevator and noticed how the TV played some news channel. The program got interrupted by “breaking news” on how COVID cases grew by 10% in some random country. I did not see what’s so breaking about it since the number of cases was quite low. Especially in comparison to what’s happening in many emerging markets.
Just go through the following experiment. Turn on any news channel, you will immediately find out about a series of terrible events. Unfortunately, media-worthy news tends to be negative rather than positive. In turn, it’s not surprising how the pessimist inside us comes to life. Consistent exposure to negative news does that to you. We become pessimists by default.
That's not to say that the media is only to blame. Media is run by regular people like me and you. You do not need to have a grimmer view of the world to get a job at a news channel or newspaper.
The problem is that we are descended from pessimists so it does not take much effort to bring that mindset to life. In the past, being a pessimist helped people to survive. The world was a dangerous place. People who took risks got eaten by predators. While the cautious type managed to avoid most threats and survived. Over time that mindset got passed from generation to generation all the way until today.
In the course of thousands of years, we have become hardwired to embrace pessimism. Because it kept us alive.
I am sure everyone can think of that one friend who is always a pessimist no matter what. Whatever discussion you have, he will find a way to point out everything negative. Every danger, risk, or potential threat to the success of your idea.
At times that can be helpful. Pointing out at weak points of your reasoning can help you to think through all pitfalls. But offering nonconstructive feedback that lacks at least hints of solutions is unnecessary.
Growing up in Bulgaria and not coming out of a wealthy family, I experienced that quite a bit. It was difficult to stay positive about the future, given the mindset of most people around me. We always found ways to beat ourselves down, no matter how well things were going.
On the other hand, being too optimistic is not healthy neither. When that happens, you may lose track of reality. It clouds your judgment. You may reach a point where it's hard to differentiate between what’s possible and what’s not.
That’s why the ideal spot is becoming a rational optimist. To be successful in modern society you have to overcome your natural pessimism.
Modern society is a lot safer than we like to think. We have to convert our inherited pessimism to rational optimism. That will help us to adapt and thrive in a world that steadily gets better.
“…the upside is unlimited if you start the next SpaceX, or Tesla, or Uber, you can make billions of dollars of value for society, and for yourself, and change the world.
And if you fail, what’s the big deal? You lost a few million dollars of investor money, and they’ve got plenty more, and that’s the bet they take on the chances that you will succeed.”
Naval Ravikant
Rational optimism
As a person who traveled a fair bit, I spent the past 10 years living across both emerging and developed markets. That gave me a first-hand experience of countless environmental and social problems. Especially in emerging markets like Southeast Asia. By no means, I think the world is a perfect place. We face many problems around climate change, inequality, poverty, education, and wealth distribution. So my natural inclination is to be a pessimist too.
Not too long ago, my views on the topic were quite different than todays. I desperately wanted to do something to address those problems. There was nothing more important than working towards solving climate change.
But I am also an avid reader and entrepreneur. The more I read, the harder it gets to not see that in the long run, almost everything is improving. Go ahead and read “Factfulness” to understand how, for all its imperfections, the world is in a much better state than we may think. Or perhaps "The Rational Optimist: How Prosperity Evolves" to find out how our ceaseless capacity for innovation will increase our prosperity and biodiversity. Despite all inevitable disasters along the way.
Then go through “Sapiens: A Brief History of Humankind”, where the author argues how given what we know about our history, we live in the best possible time.
Last but not least, read "Abundance: The Future Is Better Than You Think" to study how thanks to science we are solving the world’s largest problems.
Another life-changing experience that pushed me towards rational optimism is my startup journey. You see, startups are hard. If you choose that path, you need to work on your optimism, otherwise, you risk burning out.
As an entrepreneur, I like to spend a lot of time following on the latest tech development. Every morning I take 10 to 20 minutes to review the latest investments in exciting startups. Over the weekend, I go deeper reviewing a carefully curated feed on Twitter and LinkedIn. In the process, I am studying what problems we are now able to solve. What technology do founders leverage to achieve that, and what’s trendy at the moment? That charges me with a lot of optimism about the future.
Yet, as a person who started several businesses, I am well aware of how hard it is to build anything valuable. When thinking of new concepts, I do my best to consider all the pitfalls and downsides while keeping my chin up.
It takes an immense effort to build even small things. Even when having qualities like perseverance, grit, and raw intelligence, success is not guaranteed. My experience has taught me that building anything of value takes a ton of effort.
Keeping track of tech progress alongside an awareness of how hard is to solve big problems results in rational optimism.
The conclusion I reached is simple. Today is the best time we could possibly be alive. We have access to more and better opportunities while living in times of the lowest threat of death.
“To be an entrepreneur, you need to be optimistic about the fact that you’re creating something that other people are going to find value in.
People who have a pessimistic philosophy tend to have a pessimistic psychology as well.
If you’re constantly thinking about all the ways in which the world is going to wreck and ruin, then this has a day-to-day impact on your outlook on everything—the rest of society, your family, and your friends—because you think this world is condemned.
You’re going to feel that weight on your shoulders, and that’s going to come through in how you present yourself to the rest of the world.”
Naval, Optimism
The old vs the new world
A thought experiment I like to go through is reflecting on how technology brings incremental improvements to our lives.
Let’s take a few examples, and start with the insurance sector. If you have ever procured insurance you would know how crappy that experience is. Most providers do not have transparent pricing, their T&C are long and hard to understand, and the customer experience is at best mediocre.
My experience of procuring insurance for my family was everything but smooth. I spent months talking to insurance providers. Despite countless emails, I still failed in securing what I was looking for.
Luckily, today things are changing. We are now seeing a lot of startups attacking problems in the insurance space. To name a few, think of Lemonade. The company is a certified B-corporation designed to reinvent the broken insurance experience. Visit their website and play with the customer experience. It's nothing like what you are used to. Procuring insurance is quick, playful, personalized, and most importantly transparent.
Another example is Vouch. In this case, the startup is addressing legacy issues in securing business insurance. Today, Vouch gives you the ability to get business insurance within minutes. The process is fast, transparent, and educational.
As time goes, I have no doubts that we will see a lot of innovation in this space. Taking down dinosaurs built for a different era while designing customer-centric solutions.
Insurance is not the only industry that’s going through a lot of good changes. Finance and banking in particular is another sector with a poor NPS of ~32.
Recently, I relocated to Singapore and needed to open a bank account and move my money here. It took me about 30 days to transfer my money from Indonesia to Singapore. In the process, I exchanged countless emails with teams across both branches. Luckily, at some point, my case got escalated and we managed to find a solution. But I nearly paid a few hundred dollars to move my own money from one branch to another of the very same bank…
As per Keith Rabois tweet, poor customer experience and fragmented industries are a formula for startup success.
A few weeks back, I wrote about how finance is being disrupted. My favorite illustration of that is the time it takes to open a bank account in traditional banks vs startups, as showcased by Revolut.
Companies like Robinhood, Acorns, and Wealthfront are making retail investment more accessible. Revolut helps with instant deposits, low-cost transfers, and investments.
Fundrise, MasterWorks, and Republic are unlocking investment in real estate, art, games, and startups. Crypto is disrupting the entire financial sector and a lot more.
All those startups are taking on what looks like small problems but are successful in building massive businesses.
To stand against insurance and finance incumbents and yet be successful you need to get one thing right. 10x customer experience. Luckily, technological progress has made that possible.
I once heard someone refer to that as the death of thousand cuts.
“AngelList lists 3,800 FinTech start-ups alone attacking the banking or financial services space. That’s a ratio of 1:2000 start-ups that believe investing in the experience is much more important that investing in the stack or the charter.”
Brett King, Why the Facebook of Banking Won’t Own a Charter
The same thing happened to entertainment with Netflix winning against Blockbuster. E-commerce and retail with Amazon trying to become the world's most customer-centric business. Apple Music and Spotify going against music labels. In the process improving the entire experience for all parties. Education with companies like OnDeck, YCombinator and Reforge taking on traditional universities and legacy systems.
The list of incremental improvements across industries goes on and on. With every innovation, our day-to-day life gets better. Startups survive and thrive only when they are able to build a 10x experience. In turn, I would argue that startups are good for society as they always challenge the status quo. As technology gets more affordable, accessible, and overall better, entrepreneurs start taking on harder problems.
In the next decade, I expect to see a lot of incremental innovation in climate tech and healthcare. Sectors that are notoriously complex and regulated. In turn, the upcoming incremental innovations in those areas will address massive problems. We will see more solutions tackling global warming and even life expectancy.
The world, while imperfect, is gradually getting better. We live in the best possible time and the upside of embracing rational optimism is unlimited. What's the worst thing that can happen if we embrace rational optimism and work on solving hard problems?
“…people who are creating are trying to bring something new into existence.
Unfortunately, pessimism is self-fulfilling.
Here we take the stance that all evils are due to lack of knowledge. Rational optimism is the way out. The data supports it, and history supports it.
Through creativity, we can always come up with good explanations to improve our lives and everybody else’s lives.
So stay optimistic.”
Naval, Optimism
Sources:
Rational Optimists by Naval
This is the best time in human history. We're designed to think otherwise by Chris Taylor
Optimists by Naval