Maybe it’s the current political climate, including the national election process, which seems to emphasize how politicians have supposedly ruined the economy and oppressed all but the one percent. Or maybe it’s the tendency of the news media to highlight stories about unemployment, foreclosures, European national economies on the brink, armed conflict and terrorism in the Middle East, and the nuclear threat from a destabilized Korea. If you pay attention to the headlines, you can’t help but think the general trend is downward, and that the economic and social prospects for the future are decidedly bleak. In this context, the discussion isn’t if the glass if half-full or half-empty; it’s whether there’s even a glass.
But all this pessimism may be obscuring a greater reality: Especially in the past 50 years, things have been getting better – for everyone – at a rapidly-increasing pace. Furthermore, considering the trajectory of past progress, as well as certain factors already in place, it is very likely that the next 10-20 years will be even better.
This is the message of Abundance, a new book by Peter Diamandis and Steven Kotler, who argue that “humanity is now entering a period of radical transformation in which technology has the potential to significantly raise the basic standards of living for every man, woman, and child on the planet.” Diamandis, a self-described “serial entrepreneur” who is the chairman/CEO of the X PRIZE foundation, and Kotler, a prominent science writer, believe that the coming together of several technological and social factors has put humankind on the cusp of unprecedented peace, prosperity and well-being.
While Diamandis and Kotler may seem to be viewing the future through rose-colored glasses, their long view both of past history and future possibilities merits serious consideration. Writing a commentary for the Huffington Post, Diamandis makes the following observations:
We are richer than ever: Poverty has declined more in the past 50 years than in the previous 500. During that time, as the population of the Earth has doubled, the average per capita income (adjusted for inflation) has tripled.
We are healthier than ever: In the past century, the number of mothers dying in childbirth has decreased by 90 percent, infant mortality has dropped by 99 percent, and life expectancy has more than doubled.
We are safer than ever: Violence has been in decline since the Middle Ages; the homicide rates today are a hundred-fold less compared to their peak 500 years ago.
And it’s not just the basic conditions of life that have improved. Diamandis declares:
“Even the poorest Americans today (those below the poverty line) have access to phones, toilets, running water, air conditioning and even a car. Go back 150 years and the wealthiest robber barons couldn’t have hoped for such wealth.”
“Right now, a Masai warrior on a mobile phone has better mobile communications than the president did 25 years ago; and if they’re on Google, they have access to more information than the president did just 15 years ago. We are effectively living in a world of communication and information abundance.”
Citing several recent technological advances, Diamandis states that this communication and information abundance makes it possible for “small teams of dedicated individuals to take on the kinds of challenges that were once the sole province of governments.” This means “Today, the average citizen is more empowered to change the world than ever before.”
Are these guys nuts?
It would be easy to dismiss Diamandis and Kotler’s sunny perspectives as either detached from reality, or at the very least, conveniently ignoring the troublesome and tragic challenges of life. In fact, some people get quite aggravated by the authors’ optimism. As one respondent put it in the comments section of a blog touting the book, Abundance is just…
More utopian garbage. All that information doesn’t amount to #@2!& when the world’s financial system is collapsing into a black hole and we’ll soon be forced to hunt animals to survive. Things are not getting better, they are getting worse.
Diamandis doesn’t gloss over the challenges to peace, progress and prosperity. In an FAQ section of his website (diamandis.com/abundance), he says “We are not so naïve as to think that there won’t be bumps along the way. Some of those will be big bumps: economic meltdowns; natural disasters; terrorist attacks. During these times, the concept of abundance will seem far-off, even nonsensical, but a quick look at history shows that progress continues through the good times and bad.” This confidence in the pattern of history is why “I can say that the future, much like the present, is going to be a whole lot better than you think.”
If “Abundance” is a correct long-term view, why don’t most people see it?
Diamandis says “Human beings are designed to be local optimists and global pessimists.” We are optimistic about handling many of the things that make up our everyday lives, because we believe we have some measure of control – we can affect the outcomes, we can make adjustments. On the other hand, when the issues get larger, and more beyond our control, we tend toward pessimism.
This local-global contrast is often quite true in our financial thinking. When most of the financial input we receive is about falling housing values, rising gasoline prices, and overwhelming national debt, it’s easy to become pessimistic. Faced with so many depressing factors, it is not surprising that some people believe “…we’ll soon be forced to hunt animals to survive.” In fact, there is a segment of the financial universe that seeks to profit from the gloom-and-doom by selling “financial survival” strategies.
Diamandis is arguing that technology is making it possible for many global problems to be seen as having local or small-scale solutions. Here is a modest example from the financial world:
As many large lending institutions have been forced to tighten their lending practices, some prospective borrowers have lamented their resulting lack of access to credit. These individuals and businesses find they cannot secure a loan for transportation, to start a business, or buy a piece of real estate. At the same time, many of these same institutions are offering minimal returns on savings account deposits. For both borrowers and savers, this seems like a global problem; there’s nothing an individual can do to overcome this situation.
Yet with a quick Internet search using the phrase “micro loans” or “micro loan investing,” it becomes apparent that technology is making it possible for small groups of individuals to associate for the purpose of providing funds for lending, or for obtaining loans. These arrangements are still in their infancy, and must be evaluated carefully because the terms – for both lenders and borrowers – are not the same as loans from large institutions. But looking long-term, it is possible to see that these peer-to-peer lending connections have the potential to radically reshape the process of saving and lending, giving individuals financial options which they can influence and control at a local, personal level. Who knows what other financial products and services can become “localized” by technology?
Does a static plan make sense in a rapidly-changing world?
Suppose you are willing to acknowledge that the future might be even better than we can imagine today. How might this optimistic perspective influence your financial decisions? Here are some thoughts:
First, prepare for change. “Progress is accelerating,” according to Diamandis and Kotler. “We’re poised to make greater gains in the next two decades than we have in the previous 200 years.” If this prediction is even close to accurate, it is almost impossible to imagine how this will impact work and career. But for many, it will mean changing jobs, learning new skills, maybe relocating.
In this paradigm of change, some long-term financial vehicles and strategies may need to be re-evaluated. For example, depending on your personal situation, how wise is it to continue making maximum contributions to a qualified retirement plan? Does it make sense to continue extra principal payments on a mortgage for a home you may have to sell in the next five years because of a relocation? In general, is it prudent to commit to long-term financial formats when the next two decades could bring radical change? A better approach might be to select products and strategies that fit your immediate priorities, yet have the flexibility to adjust to changing circumstances.
Second, control your benefits. Since benefits became prevalent as a tax-favored workplace perk in lieu of additional compensation during World War II, the tax code has favored acquiring insurance (life, disability and medical) through employer-sponsored plans. Because they were subsidized (by employer contributions and tax breaks), these benefits were usually less expensive than similar coverage purchased individually.
This arrangement was fine when long-term employment with one employer was the norm. But in a workplace that is moving toward more independent contractors, project work, and self-employment, relying on employer-sponsored group benefits can become problematic; not all benefits will be portable, new employment may require waiting periods, new coverage may not be comparable to old, etc. A far better arrangement would be to “own” your benefits, to have personally owned life insurance, disability income replacement insurance, and if affordable, your own health insurance.
Third, maintain liquidity. Technological and societal changes have always presented great financial opportunities. Some of those opportunities will be available only to those who have money to invest in them.
Conversely, technological and societal change can also mean financial displacement. Old industries and professions will be supplanted by new ones. If you are part of a fading occupation, the transition to a new career can result in severe financial stress if there aren’t extra funds available to bridge the change.
Finally, clean up bad debt. Looking at future possibilities can be tough when you are still paying for past financial decisions. Good debt helps you acquire appreciating assets and income streams (such as rental property or a business). Bad debt is usually unsecured, and, in the end, only adds an additional financial burden to your personal economy.
You may not agree with the main premise of Abundance. But even if the authors’ views of the future turn out to be off the mark, there is something worthwhile in their positive approach. On his website, Diamandis has a list of 30 maxims that he calls The Creed of the Persistent and Passionate Mind. Number 22 says:
“If you think it is impossible, then it is…for you.”
Regardless of circumstances, who has the better chance for success, people who prepare and work toward a positive outcome, or those who are resigned to whatever fate and chance brings them?
In many ways, the basic financial ideas presented above are “local” decisions; they are things you can control. Because they are things you can do, you should be optimistic about the results that will follow. But if the paradigm of Abundance is correct, optimistic local financial actions could be the first step toward bigger financial opportunities, maybe even ones with a global reach. As Diamandis says in Statement #2 of his creed:
“When given a choice, take both!”
Preparation today – from a positive perspective – offers a much better chance to “take both!” in the future.
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