Common Plots of Economic History
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There are only seven plots that are so fundamental to the way we tell stories that every storyteller uses one of them: Overcoming Monsters, Rags to Riches, The Quest, Voyage and Return Rebirth, Comedy, Tragedy.
It's not that good stories are the same, but the plots are less diverse. When we realize this, we see stories in a new light, because we have come to the heart of what stories are about and why we tell them.
Looking for a few universal plot patterns reveals things fundamental to how all people think, which are likely to be repeated in the future and relevant to your own situation. This idea also applies to how the economy works.
Economic history can seem complicated because it's part of politics, psychology, sociology, criminology, biology, military, technology, education, finance, etc. But within all that complexity is a lot of similarities.
Although economic history may seem complicated, there are only a small number of broad story plots throughout the world and throughout time.
A good idea taken to the furthest extreme becomes indistinguishable from a terrible idea.
The most important technological breakthroughs deliver such a high that most will fail to know the limits and will inevitably overdose. Railroads transformed every inch of the economy, from military tactics to where people could live and work. The excitement over rail's potential sparked overbuilding and cutthroat competition that pulled the country into economic chaos at least three times.
The history of oil, cars, banks, housing, and technology are identical. So are certain regulations, social programs, management principles, and business strategies.
The only thing harder than gaining a competitive edge is not losing an advantage when you have one.
Sears was the largest retailer in the world and so dominant at retailing efficiency that it could spread its efficiency to unrelated industries. But then the growing income inequality pushed consumers to either bargain or luxury goods, and Sears was left in the shrinking middle, becoming a shell of its former self.
The story of Sears losing its competitive advantage is not unique. Almost 40% of all public companies lost all their value from 1980 to 2014.
Five things contribute to the gravitational pull of competitive advantages:
Future progress is underrated because past progress is misunderstood.
Surprises are constant, and not necessarily because we’re bad at predicting, but because everything important in the economy is driven by power laws where a tiny portion of things are responsible for the majority of outcomes. No single forecaster can track every moving part.
The ability to believe things that aren't true or haven't happened yet is the foundation of all economic growth and decline.
Every society tells fictional stories and is willing to believe them to some extend. It isn't a bad thing: It's the root of most growth. Most economic growth comes from optimism, and optimism requires a degree of believing in something you can't or haven't verified.
A breakthrough is a big deal because no one had thought of it before. Because no one had thought of it before means it's likely either illogical or appears to violate previously accepted rules.
When someone pursues a breakthrough, as an entrepreneur, investor, or consumer, it requires a leap beyond your own abilities or the ability of someone else. It should not be surprising that stepping out might end up in failure. But without the willingness to move into the unknown, we would not have growth, productivity, and great innovation.
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Elon Musk uses decision trees to make big decisions (a tool that uses a tree-like graph or model of decisions and their possible consequences, outcomes, and resources). They are particularly useful for avoiding stupid risks and big bets that aren’t likely to succeed.
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One of the best ways to get information is not from just being better at searching Google, it’s from learning how to build a network and get the information you need through that network.
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The mind is creating 'thems' all around us, with people putting other people in the 'in-group' or the 'out-group' all the time. This can be easily observed in office politics, as well as family discords.
People casually dismiss other people, ignore, discount, or attack them, reducing 'them' to a two-dimensional figure which they can use and throw at will, to further their own position, status, and identity.
We need to stop creating mental divides and see the people around us as our common humanity.
The way to recognize that we are 'them-ing' other people is to catch those subtle moments when we lose empathy, we use stereotypes, we discriminate, cast out or punish anyone.
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An executive needs those she leads to translate strategic insights into choices that drive results. For people to commit to carrying out an executive’s strategic thinking, they have to both understand and believe in it. But repeated explanations don’t necessarily increase people’s understanding and ownership of strategy. Making them discuss the pros and cons of it make it so the problem is better understood and flaws are identified and fixed increasing ownership for success.
When someone is promoted into a function that requires strategic leadership it’s easy to spend time fixing what was wrong in their previous function but that often isn’t what the strategic leadership position requires. So, identify the strategic requirements of your job and focus on them.
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A mental model is an explanation of how something works. They are beliefs, worldviews or frameworks of thinking. You carry a certain kind of thinking in you to arrive at a solution to a problem.
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One useful conclusion that people can draw throughout their life is that, all things considered, it is not easy to find a path that hasn't been walked on before.
Most likely, the ones before you have already tried what you are thinking about, so why not taking into account their reactions to the events when planning on taking up the same path?
Once you have decided on a certain path to follow for your professional life, you might also want to consider reading and learning a bit about any subject that can be connected, even in a small degree, to your field. This can be extremely useful and interesting.
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Stories are a very integral part of being persuasive.
Stories trump data when it comes to persuasion because stories are easier to understand and relate to.
We love to tell and listen to stories. The 'Story Narrative' is hardwired in us, as we think and remember in stories.
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Human beings are able to creatively solve problems, alone or in a group. This has given rise to many inventions, shaping common goals shared by a group of people.
We needed a 'sticky' idea to spread it among people, and the story narrative is exactly that.
Stories cater to our Ego. A listener puts himself in the shoes of the protagonist of a story, and an idea is given emotional heft and sturdiness.
The more we are able to relate to the central character, the more engaging, effective and memorable a story narrative becomes.
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The point is that the more specific a lesson of history is, the less relevant it becomes.
One of the interesting parts of the Great Depressions from history is not just how the economy collapsed, but how quickly and dramatically people’s views changed when it did.
People suffering from immediate, unexpected adversity are likely to adopt views they previously thought absurd. It’s not until your life is in full chaos (with your hopes and dreams your dreams unsure) that people begin taking ideas they’d never consider before seriously.
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Incomplete stories are filled automatically by the brain, as we have an urge to find meaning in everything. We also tend to believe the simplest explanations. Stories need to be shown a linear cause and effect for the reader to stay interested. If there are too many effects, the effect is lost.
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