The reasons behind the failure of pessimism and its implications for investors

Astute investors always place a wager on human creativity

It's time to celebrate our ability to create a better future rather than apologize for our existence.

The truth is that our brains are hardwired to be pessimistic. What is it about this tendency? For sabre-toothed tigers, all of our hopeful ancestors have long since left the gene pool. Doomsday forecasts therefore appeal to us.

We are always drawn to tales of our impending demise, even in the face of all the contrary evidence. In the meantime, the daily grind of human progress keeps going, subtly intensifying in many facets of our endeavor.

The Reverend Thomas Malthus, who postulated in 1798 that while populations grow geometrically, the resources needed for sustenance only grow linearly, is the grandfather of modern economic pessimism. The man known to his parishioners as "the Dismal Parson" foresaw that plagues, famines, and a general decline in moral character would be the fate of humanity. His conviction that we would eventually outgrow our capacity for self-sufficiency was all a part of God's motivation to improve.

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Start your trial, but Malthus' Theory of Population was destroyed by the economic conditions of the two centuries that followed his passing. However, his gloomy ghost still haunts us today through groups of doomsters and gloomsters who see every increase in the world's amazing eight billion inhabitants as a step closer to our unavoidable demise.

In fact, The Voluntary Human Extinction Movement (VHEMT), a radical Malthusian organization, was featured in The New York Times in November 2022, just as the human population was approaching eight billion. The article titled "Earth Now Has 8 Billion Humans" alludes to its founder and leader, Les Knight. The man wishes they were nonexistent. Knight stated that he didn't agree with China's one-child policy because even one child is excessive. Knight and his 100,000 supporters are easy to write off as fringe anti-human nerds. However, it appears that a pro-human stance has become a contrarian position in many circles when such self-loathing is described with curiosity rather than contempt at a time when human progress is frequently framed as a planetary crime.

Dr. Paul Ehrlich, a biologist who wrote The Population Bomb and contributed to the environmentalist manual The Limits to Growth in the 1970s, passed away this month, leaving the deluded Malthusian tradition without a major leader. The end-of-the-world predictions in both books were headline-grabbing Malthusian retreads. Additionally, none of Ehrlich's forecasts turned out to be even remotely accurate, much like Malthus's earlier predictions.

In a 2015 piece about his work, The New York Times asserted that he was ahead of his time and not incorrect. According to the article, an Earth with limited carrying capacity cannot support growing human populations; the only thing that is uncertain is the timing and intensity of the inevitable rebalancing. Despite centuries' worth of evidence to the contrary, blind Malthusian claims persist.

The systems-thinking, positive-sum economist David Ricardo, the creator of the Theory of Comparative Advantage, faced off against the linear-thinking Malthus during his lifetime. While still a young man, Ricardo made a fortune in the City of London by applying his understanding of markets. Over the next 200 years, the world's wealth grew geometrically as a result of his ideas, which also helped to promote international free trade. By the 1970s and 1980s, Julian Simon's economic reality famously clashed with Ehrlich's delusional fatalism. Tired of environmental hysteria, Simon challenged Ehrlich to back up his claims after conducting thorough research on economic scarcity, which he detailed in his groundbreaking book The Ultimate Resource.

Simon suggested that Ehrlich choose five natural resources that he believed were nearing terminal depletion. He selected chromium, copper, nickel, tin, and tungsten. According to Simon, the basket's actual cost would decrease over the next ten years, making its components less expensive. In response to Simon's argument that resource price signals encourage the development of new supply, including better technology and the identification of alternatives, Ehrlich accepted the wager. The Stone Age didn't end because we ran out of stones, as Saudi Arabia's former minister of petroleum Zaki Yamani pointed out.

Why pessimism is not the path to success.

In 1990, the wager was resolved.

Each of the five metals had become less expensive. Simon emerged victorious. On October 11, 1990, Ehrlich paid a check for £576.07 to settle the wager, but his rejection of the lesson was telling. The core of Simon's optimism was entirely lost on him, and he continues to reject pro-human thinking. Thomas Malthus's theories are far more well-known today than David Ricardo's.

However, those who are willing to support human adaptation consistently win the financial prize, even though Ehrlich and Malthus may receive the intellectual benefits and public acclaim. Simon's enduring realization is that the linked minds of free people are the only genuinely limited resource. Given that a significant portion of the global hydrocarbon supply chain is still trapped on the wrong side of the Strait of Hormuz, it is crucial to keep in mind that human adaptation eventually renders physical limitations meaningless. The Simon-Ehrlich wager involved much more than just money. It was a contest between two ideologies: is humanity the maker of an endless future or the victim of a finite Earth?

Our only hope is human ingenuity, so it's time we stopped apologizing for being here and began to celebrate our ability to create a better future. We should be proud of our daily efforts to get better. Like any loss of human life, Ehrlich's passing should be lamented. However, their anti-human beliefs ought to perish with them.

In addition to writing the HyperNormalTimes Substack and hosting the podcast In The Company of Mavericks, Jeremy McKeown works as a market strategist at Dowgate Wealth.