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The Inescapable Debate of Human Nature
You Best Start Believing That Psychology Matters. Its All That Matters
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The more writing I do, the more I start to feel a similar feeling; this feeling of having threads of ideas made up of words I can't find a way to release. Today is one of those day.
My writing each week isn't really meant for anyone but me, at least not in how its designed. I write to unpack how I'm thinking and the implications of the work that I'm doing. My "secret public journal." But this week, a lot of my thinking is drawn more towards human nature, psychology, and things like empathy.
I kept finding myself thinking, "I'm not sure that stuff matters in an investing blog." But first? I write for me and you decide to come along for the journey, so what really matters is whats in my head. And second? In investing, as in so much of life, often psychology is the only thing that matters.
So what has me thinking about psychology? Watching the unfolding awfulness after the Hamas terrorist attacks in Israel, and the subsequent violence in the Gaza strip. Now, I'm not a journalist, or a scholar, nor am I either Jewish or Muslim. But I am human. And my thinking centers around empathy.
I'm a member of the Church of Jesus Christ of Latter-Day Saints (also referred to as Mormons). My family has been in that church for several generations. Growing up, I would hear stories of the Haun's Mill massacre and the Mormon extermination order when members of my church were attacked, killed, and chased out of the eastern United States.
There's no equivalency in suffering. There is only empathy. Suffering is a shared human experience. And I feel terrible empathy for the people who have died in this conflict, the families that have lost loved ones, and the people currently living under the threat of constant violence.
What's more, I find myself reflecting on the conversation that has come from people's responses to the suffering. Entire college organizations issuing statements in support of other people's murderous actions. The rise of anti-semitic violence in cities all around the world. Why are people responding the way they're responding? How are these people making decisions? And how do I unpack the role of human nature in everything that I do?
Investing Is 95% Human Psychology
"As I've read about many of the best investors in history, I've noticed two important takeaways: (1) they seem to be thinking about investing all the time, and (2) they're NOT talking about investing all the time. What do they talk about a LOT? Psychology. So much of success in life, business, and investing, is mastering yourself. Your bias', your habits, your fears, and your aspirations."
As I unpack some of the things I've been thinking about this week, I won't necessarily dogmatically tie it back to investing. Instead, my thoughts have revolved around what these events and people's responses to them teach me about human nature. And any time I find myself thinking about human nature, I come back to one key debate.
Compare the thinking of John Adams vs. Thomas Jefferson. There's a lot of meat on the idea so I'll just summarize it. On the one hand, people will act in their own self-interest and should be left free to do what they want, giving unfettered power to the people (Jefferson). On the other hand, people are riddled with inadequacies and easily swayed by misaligned incentives. They need guard rails, guidance, and systems to ensure people are protected from each other and themselves (Adams)."
In some ways, I see those two views as a default optimism vs. default pessimism about people in general. Are people generally good, who often make bad decisions? Or are people generally bad, who often make good decisions? As both a religious person and a venture capitalist, it's hard not to be optimistic. You want to "dream the dream."
Instead of looking at suffering or atrocities and condemning people you can instead consider the systems of decision making that people are using and how it shapes their world view. One of the things that this past week shows me is that people struggle with nuance that is counter to how they want to see the world.
Dozens of responses from different groups blaming Israel for the Hamas terrorist attacks likely come from an established perspective. The people who made those statements have watched the Israeli–Palestinian conflict, and formed an opinion. Likely that opinion was heavily influenced by their in-groups, whether nationally, religiously, or otherwise. But in the face of brutal terrorist attacks, they're incapable of suspending their perspective of a broad issue in order to respond to a specific event with some humanity.
In the words of Frank Rotman, "Tribalism can easily create an us vs them world view for which there is no middle ground. To be part of the tribe requires complete belief in the tenets that define the tribe."
So often, people trust nuanced tribal group identity and political association without any basis of first principles. I'm not Mormon, or Christian, or Republican, or a Costco member. I am a system of values and beliefs that determine how I act. Group membership should be a lagging indicator of your beliefs, not a leading indicator. When people substitute their own value system with a cookie-cutter platform from their in-group the first thing to die is nuance.
I think all the time about this video of Jordan Klepper describing his experience talking to a woman who was completely bought into the Donald Trump in-group of MAGA. She was reaffirming her belief in Trump's innocence. Klepper said, "like if he was blocking witnesses from testifying, that would actually be bad?" And the woman said, "right, it's not like he's doing that." Then Klepper said, "... but he is doing that." And her response after a long beat? "...I don't care."
"So much of this is 'maybe I could convince that person.' We can have debates about what you want. You want this, I want that. Let’s compromise in the middle. That's politics. When your politics becomes who you are, we can't debate that."
Identifying the first principles of who you are is becoming dangerously well-packaged from all sorts of identity groups, and its dangerous. The same is true personally, professionally, religiously, and on and on. The more you cede personal responsibility for deciding who you are, the more you empower the people who ultimately are deciding the value system of your in-group.
Joseph Smith, the first modern prophet in the Church of Jesus Christ of Latter-Day Saints, has a quote about how he led a church that had 26K members. It's a quote that I think very highly of, and have tried to live by:
“I teach them correct principles, and they govern themselves.”
I try not to do things because I'm Mormon, or because I'm white, or because I'm heterosexual, or because I'm American. I try and do things because they adhere to my first principles. What do I believe? And what does that say about who I am?
Now, there are lots of things I believe that shape who I am and why I do what I do. One of them is most relevant in this discussion. Human empathy matters more than human associations. In everything I want to be involved in, my hope is that it leads to less suffering than more. Net positive outcomes. We should want to eliminate suffering, from the slightest tweak in someone's expense management software interface to the alleviation of poverty, starvation, and violence.
When I think about every institution or reality of life, I try not to say "is this what a democrat wants?" Or "is this what a Christian wants?" Instead, I apply that first principle of "does this alleviate or cause suffering?" Impact investing is bad if it doesn't alleviate suffering. ESG is bad if it doesn't alleviate suffering. Billionaires are good if they alleviate suffering. Burning fossil fuels is good if it alleviates suffering.
One of the difficult things about suffering is that it is one of the easiest things to trickle down. As humans, we're so bad at understanding the trickle down effects of our actions, choices, and associations.
Sometimes those trickle effects are positive. John Adams was a real lover of education and, in 1780, he wrote the state constitution for Massachusetts. In it, he included a specific (and unique) section that enforced the importance of education:
"Wisdom, and knowledge, as well as virtue, diffused generally among the body of the people, being necessary for the preservation of their rights and liberties; and as these depend on spreading the opportunities and advantages of education in the various parts of the country, and among the different orders of the people, it shall be the duty of legislatures and magistrates, in all future periods of this commonwealth, to cherish the interests of literature and the sciences, and all seminaries of them; especially the university at Cambridge, public schools and grammar schools in the towns; to encourage private societies and public institutions, rewards and immunities, for the promotion of agriculture, arts, sciences, commerce, trades, manufactures, and a natural history of the country; to countenance and inculcate the principles of humanity and general benevolence, public and private charity, industry and frugality, honesty and punctuality in their dealings; sincerity, good humor, and all social affections, and generous sentiments among the people."
The trickle effect? For a long time, if Massachusetts was a country, it would be ranked in the top 10 globally for education, up there with educational power houses like South Korea and Finland.
But just as often, those trickle effects can be pretty terrible. Ronald Reagan's policies didn't just benefit wealthy people, it basically broke the middle class in America. The 13th amendment didn't just outlaw slavery. It repackaged slavery into a prison industrial complex that has been weaponized against minorities as quite a big business.
It's All About Incentives
Every time I talk about psychology when it comes to investing, it comes back to incentives. That's not a coincidence. The same is true of most psychology. We often believe what we want to believe because of what we want to come to pass.
I've written before about people's aversion to other people's incentives:
"The same skepticism of the healthcare complex, the military complex, the prison industrial complex, all of these things are based on the skepticisms derived from other people's profit motives. In other words? People feel like they've been playing stupider games. And they're trying to wake up to understand what different games other people are playing. And how those games impact their own games; their own lives."
So how do you square a very human thing, like empathy, with a very economic thing, like incentives? It's a personal reflection. In the face of rising anti-semitism, many people have sorrowfully shared this poem one that is now featured in the US Holocaust Memorial:
"First they came for the Communists
And I did not speak out
Because I was not a Communist
Then they came for the Socialists
And I did not speak out
Because I was not a Socialist
Then they came for the trade unionists
And I did not speak out
Because I was not a trade unionist
Then they came for the Jews
And I did not speak out
Because I was not a Jew
Then they came for me
And there was no one left
To speak out for me."
What are the incentives we each have for speaking up in defense of other people? Other groups? Other identities? The reality is empathy can never be a macro activity. Empathy is a 1:1 human experience. You can't feel empathy for a group because that group doesn't actually exist. Only people exist. Macro empathy is hollow and based in identity politics. Micro empathy is based on shared human experiences.
So you can't answer the question "why should people care?" You have to answer the question, "why should I care?" And that brings us back to first principles. What is your value system? Why should you care?
I've gotten introduced to the idea of moral relativism several times in my life. The TLDR is "the idea that there is no universal or absolute set of moral principles. It’s a version of morality that advocates “to each her own,” and those who follow it say, 'Who am I to judge?'"
In a post this past week called Moral Inversion by Mike Solana, he unpacked a similar topic; the idea that while moral relativism opened the door for people to "decide for themselves" what was good, or evil, the internet super-charged some would-be Pied Pipers. Moral standard bearers that will tell you what you should or shouldn’t feel:
"The proliferation of inverted moralities and truths has rapidly accelerated in an age of social media, rooting into almost every aspect of our lives. Today, we are living under a culture and popular ethics shaped almost entirely of spectacular, total lies... It’s not entirely clear what causes moral inversion, but the dramatic recent acceleration seems at least partly rooted in reaction to the internet. Press omission of the full truth is how America tolerated everything from Iraq to Vietnam. But social media is a rogue, chaotic portal to everything, from unhinged fantasy to the unvarnished, unmistakable, inescapable truth."
The in-group “Morality-in-a-Box” that people seem content to let dictate who they are and how they live is a lazy approach to life. People have ceded their morality to their in-groups. It's a short hand. Cancel culture simply ensures that those values become only more entrenched, but cancel culture wouldn’t work if we hadn’t decided to renew our in-group membership cards.
As simple as that shorthand seems, it is anything but. Inaction is, as always, a form of action. The debate of human nature is really meant to do one thing: make you question your own judgement, your own actions.
Solana made this particular claim in response to whether people can make their own judgements outside the cultural internet-enriched zeitgeist:
"The average person knows what’s right and wrong. Given enough time, in reaction to almost every warped platitude, open discussion and dissemination of video has led to popular, if yet culturally forbidden, rejection of inverted moral dogma."
So as I reflect on this week, I’m led to the conclusion that “people will always tell you who they are. Just wait.” So what are you telling people?
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