<p><em>In this world of uncertainties, nothing but death and taxes are sureshot in our lives.</em></p>
<p>There are however some assumptions that withstand the test of time. These assumptions take into account basic human psychology and historical data.</p>

Permanent Assumptions

<ul>
<li><p>People generally want to solve problems than to create harm, but those who want to harm get a lot more attention.</p>
</li>
<li><p>While people can be taken advantage of, it can’t be done for an infinite period of time.</p>
</li>
<li><p>Every ten years or so, there has to be some economic, political, military or social breakdown, according to historical data.</p>
</li>
</ul>

The World We Live In

<ul>
<li>Stories are more engaging than statistics. A thousand people dead evokes different emotions than the death of that one person whose story we all know.</li>
<li>The only thing constant is change, and nothing good or bad stays that way, ever. However, one can never find out what or when the change would be.</li>
<li>Incentives can make people do good and bad things. While a group of people can be made smarter, they cannot be made more patient, less greedy during uncertain periods.</li>
</ul>

Human Behaviour

<p>History is studied wrongly, while we focus on the unprecedented events (The Blips) and use that knowledge as a map of the future.</p>
<p>Instead of studying war and invasions, history needs to be studied upside down, with an emphasis on peace and prosperity.</p>

History Studied Upside Down

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        <h1>Permanent Assumptions</h1>
      
      
        

<small>
  <time>Jun 4, 2020</time>
  <span>by</span>
  <span>
    <a>Morgan Housel</a>
  </span>
</small>

      
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  <section>
    <p>If you were told in January what April would look like, you wouldn’t have believed it. If you were told in April that in May we’d face a nationwide protest so important it would crowd out almost all Covid-19 news, you wouldn’t have believed it.</p>

<p>How do you analyze the world when everything feels broken?</p>

<p>And how do you even begin to make sense of the future when things change so fast?</p>

<p>Humbly, is the answer.</p>

<p>But humility doesn’t mean clueless.</p>

<p>Some things are always changing and can’t be known. There can also be a handful of things you have unshakable faith in – your permanent assumptions.</p>

<p>Realizing it’s not inconsistent to have no view about the future path of some things but unwavering views about the path of others is how you stay humble without giving up. And the good news when the world is a dark cloud of uncertainty is that those permanent assumptions tend to be what matter most over time.</p>

<hr/>

<p>Amazon is successful because it predicted how the world would change. But it’s been <em>really</em> successful because it bet heavily on what wouldn’t change – a permanent assumption. Jeff Bezos said:</p>

<blockquote>
  <p>You can build a business strategy around the things that are stable in time. It’s impossible to imagine a future 10 years from now where a customer comes up and says, “Jeff I love Amazon, I just wish the prices were a little higher.” Or, “I love Amazon, I just wish you’d deliver a little slower.” Impossible.</p>

  <p>So we know the energy we put into these things today will still be paying off dividends 10 years from now. When you have something you know is true, you can afford to put a lot of energy into it.</p>
</blockquote>

<p><em>When you have something you know is true, you can afford to put a lot of energy into it</em>. That’s why permanent assumptions are important.</p>

<p>I have no idea what’s going to happen next in the economy or society. But I have a handful of permanent assumptions I’ve put a lot of energy and faith into that guide almost everything I think about business and investing.</p>

<p>Here are nine.</p>

<p><strong>1. More people wake up every morning wanting to solve problems than wake up looking to cause harm</strong>. But people who cause harm get more attention than people who solve problems. So slow progress amid a drumbeat of bad news is the normal state of affairs.</p>

<p><strong>2. The world breaks about once a decade.</strong> <strong>There are so few exceptions it’s astounding.</strong> It can be economic, political, military, social, or a mix. But it breaks all time, in ways few see coming. The breaks aren’t as scary if you have a permanent assumption that they’ll keep happening and don’t preclude long-term growth.</p>

<p><strong>3. Stories are more powerful than statistics.</strong> And most statistics are incomplete props to justify a story. Stories are easier to remember, easier to relate to, and emotionally persuasive.</p>

<p><strong>4. Nothing too good or too bad stays that way forever</strong>, because great times plant the seeds of their own destruction through complacency and leverage, and bad times plant the seeds of their own turnaround through opportunity and panic-driven problem-solving.</p>

<p><strong>5. Knowing there will be a reversion to the mean does not mean you know when things will revert.</strong> Unsustainable things can sustain for a long time, because of incentives and the power of storytelling that turns nonsense into influential action.</p>

<p><strong>6. Incentives are the strongest force in the world</strong>. They cause good people to do bad things, which can make you overly cynical about how good people actually are.</p>

<p><strong>7. A big group of people can get smarter and better informed over time. But they can’t, on average, become more patient, less greedy, or more level-headed during periods of upheaval.</strong> That will never change. And it highlights the idea that edges, when they exist, usually come from behaving better than average rather than being smarter than average.</p>

<p><strong>8. History is mostly the study of unprecedented events, ironically used as a map of the future</strong>. Stuff evolves, paradigms shift. So what worked in the past may not work today or tomorrow. The most valuable part of history is studying how people behave when the world changes, because it’s the most consistent thing over time.</p>

<p><strong>9. It’s easy to take advantage of people. It’s also easy to underestimate the power and influence of groups of people who have been taken advantage of for too long</strong>. The former is obvious, the latter <a href="https://www.collaborativefund.com/blog/three-big-things-the-most-important-forces-shaping-the-world/">surprises people in a life-changing way</a> a few times per century.</p>

<p>I don’t think I’ll ever change my mind on those.</p>

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          <h4><a href="/blog/same-as-it-ever-was/">Same As It Ever Was</a></h4>
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philosophy

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Leadership & Management

<p>If you were told in January what April would look like, you wouldn’t have believed it. If you were told in April that in May we’d face a nationwide protest so important it would crowd out almost all Covid-19 news, you wouldn’t have believed it. </p><p>How do you analyze the world when everything feels broken? </p><p>And how do you even begin to make sense of the future when things change so fast? </p>

<p>Humbly, is the answer. </p><p>But humility doesn’t mean clueless. </p><p>Some things are always changing and can’t be known. There can also be a handful of things you have unshakable faith in – your permanent assumptions. </p><p>Realizing it’s not inconsistent to have no view about the future path of some things but unwavering views about the path of others is how you stay humble without giving up. And the good news when the world is a dark cloud of uncertainty is that those permanent assumptions tend to be what matter most over time. </p>

<p>Amazon is successful because it predicted how the world would change. But it’s been <em>really </em>successful because it bet heavily on what wouldn’t change – a permanent assumption. Jeff Bezos said: </p><p>You can build a business strategy around the things that are stable in time. It’s impossible to imagine a future 10 years from now where a customer comes up and says, “Jeff I love Amazon, I just wish the prices were a little higher.” Or, “I love Amazon, I just wish you’d deliver a little slower.” Impossible. </p>

<p>Amazon is successful because it predicted how the world would change. But it’s been <em>really </em>successful because it bet heavily on what wouldn’t change – a permanent assumption. Jeff Bezos said: </p><p><em>When you have something you know is true, you can afford to put a lot of energy into it </em>. That’s why permanent assumptions are important. </p><p>I have no idea what’s going to happen next in the economy or society. But I have a handful of permanent assumptions I’ve put a lot of energy and faith into that guide almost everything I think about business and investing. </p>

<p>Here are nine. </p><p><strong>1. More people wake up every morning wanting to solve problems than wake up looking to cause harm </strong>. But people who cause harm get more attention than people who solve problems. So slow progress amid a drumbeat of bad news is the normal state of affairs. </p><p><strong>2. The world breaks about once a decade. </strong><strong>There are so few exceptions it’s astounding. </strong>It can be economic, political, military, social, or a mix. But it breaks all time, in ways few see coming. The breaks aren’t as scary if you have a permanent assumption that they’ll keep happening and don’t preclude long-term growth. </p>

<p><strong>3. Stories are more powerful than statistics. </strong>And most statistics are incomplete props to justify a story. Stories are easier to remember, easier to relate to, and emotionally persuasive. </p><p><strong>4. Nothing too good or too bad stays that way forever </strong>, because great times plant the seeds of their own destruction through complacency and leverage, and bad times plant the seeds of their own turnaround through opportunity and panic-driven problem-solving. </p><p><strong>5. Knowing there will be a reversion to the mean does not mean you know when things will revert. </strong>Unsustainable things can sustain for a long time, because of incentives and the power of storytelling that turns nonsense into influential action. </p>

<p><strong>6. Incentives are the strongest force in the world </strong>. They cause good people to do bad things, which can make you overly cynical about how good people actually are. </p><p><strong>7. A big group of people can get smarter and better informed over time. But they can’t, on average, become more patient, less greedy, or more level-headed during periods of upheaval. </strong>That will never change. And it highlights the idea that edges, when they exist, usually come from behaving better than average rather than being smarter than average. </p>

<p><strong>8. History is mostly the study of unprecedented events, ironically used as a map of the future </strong>. Stuff evolves, paradigms shift. So what worked in the past may not work today or tomorrow. The most valuable part of history is studying how people behave when the world changes, because it’s the most consistent thing over time. </p>

Permanent Assumptions · Collaborative Fund