If there is one thing The Value Perspective likes better than questioning the ability of economists, analysts and other professionals to make accurate forecasts, it is a spot of contrarianism. That is why we were delighted to find an article in The New Yorker suggesting that, without the hugely optimistic or unrealistic forecast, the world would be an immeasurably poorer place.
In ‘The gift of doubt’, best-selling author Malcolm Gladwell focuses on the ideas of economist Albert Hirschman, who argued many of history’s great entrepreneurial and engineering feats would never have been attempted if, at the start, their architects had any idea how difficult they would be to complete. As Gladwell asks: “Is ignorance an impediment to progress or a precondition of it?”
Among the schemes highlighted by Hirschman was the “Troy-Greenfield folly” of the mid-19th Century, which involved drilling through five miles of mountain to connect Boston and the Hudson River – and ultimately the Pacific – by rail. A logistical nightmare that ran more than 10 times over its initial budget, it was nevertheless pivotal to the economic success of the state of Massachusetts.
The modern era is hardly short of similarly fraught yet ultimately beneficial endeavours – from the laying of huge communications cables along the bed of the Atlantic to the digging of the Channel Tunnel – which you may or may not feel casts controversial projects such as the High Speed 2 railway line in a somewhat different light.
Hirschman’s thoughts on HS2 are unrecorded – he died last December – but he did observe: “Creativity always comes as a surprise to us; therefore we can never count on it and we dare not believe in it until it has happened. In other words, we would not consciously engage upon tasks whose success clearly requires that creativity be forthcoming.
“Hence, the only way in which we can bring our creative resources fully into play is by misjudging the nature of the task, by presenting it to ourselves as more routine, simple, undemanding of genuine creativity than it will turn out to be.”
From that general idea, we might tease out two more investment-specific points, the first of which relates to the difficulties facing defence, engineering and other businesses that are paid to invent things. As the huge number of inventions that stem from, for example, the period 1939 to 1945 shows, necessity – as opposed to desire, hope or money, say – really is the mother of invention. As such, be wary of companies that accept specified financial amounts to solve complex problems through invention.
Following on from that, no matter the myriad problems facing humankind – the need to overcome disease, fuel shortages, five miles of solid mountain or whatever – we tend to find a solution when it is necessary and often in spite of ourselves.
To quote Hirschman again: “The entrepreneur takes risks but does not see himself as a risk-taker because he operates under the useful delusion that what he is attempting is not risky. Then, trapped in mid-mountain, people discover the truth – and, because it is too late to turn back, they are forced to finish the job.”