A Short History of the US Economy 1945-2019

Morgan Housel, an economics writer and venture capitalist, recently took a crack at summing up (in just 5000 words) what happened to the U.S. economy since the end of World War II. Even if you disagree with it (or parts of it), the whole thing is worth a read. I think this captures a large part of the main point:

Everything in finance is data within the context of expectations. One of the biggest shifts of the last century happened when the economic winds began blowing in a different, uneven direction, but people’s expectations were still rooted in a post-war culture of equality. Not necessarily equality of income, although there was that. But equality in lifestyle and consumption expectations; the idea that someone earning a 50th percentile income shouldn’t live a life dramatically different than someone in the 80th or 90th percentile. And that someone in the 99th percentile lived a better life, but still a life that someone in the 50th percentile could comprehend. That’s how America worked for most of the 1945-1980 period. It doesn’t matter whether you think that’s morally right or wrong. It just matters that it happened.

Expectations always move slower than facts. And the economic facts of the years between the early 1970s through the early 2000s were that growth continued, but became more uneven, yet people’s expectations of how their lifestyle should compare to their peers did not change.

Along with this:

The biggest difference between the economy of the 1945-1973 period and that of the 1982-2000 period was that the same amount of growth found its way into totally different pockets.

This reminded me of Matthew Stewart’s piece from The Atlantic that I read when it came out but never blogged about: The 9.9 Percent Is the New American Aristocracy.

When it comes to the division of wealth, many Americans believe that the country is split between the 1%, which possesses a significant share of the country’s money, and the 99%, or “the people.” In reality, The Atlantic writer Matthew Stewart argues, 9.9% of the population comprises America’s new aristocracy, which often “takes wealth out of productive activities and invests it in walls.” But this group of people is rich in more than mere money, and its constancy poses an insidious threat to the promise of American democracy.

The related video is a good 3-minute summary of Stewart’s piece.

• economics
• Matthew Stewart
• Morgan Housel
• USA

How people respond to life-changing inventions

Near the end of a piece by Morgan Housel called Innovation Isn’t Dead, appears “the typical path of how people respond to life-changing inventions”:

1. I’ve never heard of it.
2. I’ve heard of it but don’t understand it.
3. I understand it, but I don’t see how it’s useful.
4. I see how it could be fun for rich people, but not me.
5. I use it, but it’s just a toy.
6. It’s becoming more useful for me.
7. I use it all the time.
8. I could not imagine life without it.
9. Seriously, people lived without it?

That’s about right. I can only recall a couple of instances where I’ve skipped from step 1 to step 8 or 9: when I first used the Web¹ and when Jobs introduced the iPhone at MacWorld. Everything else — Google, HD TV, Twitter, personal computers, streaming music services, wifi, laptops, Instagram, mobile phones — went through most of the 9 phases. (via @cdixon)

1. Not the Internet, the Web. I used the Internet before I used the Web (Usenet, FTP, and Gopher mostly) and I never got the “OMG this is going to change everything” vibe I got after using the Web for five minutes.↩

• iPhone
• lists
• Morgan Housel
• WWW

Mixed signals vs. noise

Over the course of his 3000 columns at The Motley Fool, Morgan Housel has learned a few things:

I’ve learned that short-term thinking is at the root of most of our problems, whether it’s in business, politics, investing, or work.

I’ve learned that debt can cause more social problems than some drugs, yet drugs are illegal and debt is tax deductible.

I’ve learned that finance is actually very simple, but it’s made to look complicated to justify fees.

Unfortunately, the list is undermined almost completely by the get-rich-quick advertising on the site, including this bit at the end of the article, which I can’t even tell is an ad or just a promotion:

Opportunities to get wealthy from a single investment don’t come around often, but they do exist, and our chief technology officer believes he’s found one. In this free report, Jeremy Phillips shares the single company that he believes could transform not only your portfolio, but your entire life. To learn the identity of this stock for free and see why Jeremy is putting more than $100,000 of his own money into it, all you have to do is click here now.

Short-term thinking is at the root of most of our problems, click here now. Now!

• economics
• finance
• lists
• Morgan Housel