A Message From the Past (Thoughts on Nostalgia)
After college, my wife (who was then my girlfriend) and I got an apartment in the Seattle suburbs. It was amazing – a perfect location, a beautiful apartment, even had a view of the lake. The economy was such a wreck at the time that we paid almost nothing for it.
A few months ago I reminisced to my wife about how awesome that time was. We were 23, gainfully employed, living in our version of the Taj Mahal. This was before kids, so we slept in until 10am on the weekends, went for a walk, had brunch, took a nap, and went out for dinner. That was our life. For years.
“That was peak living, as good as it gets,” I told her.
“What are you talking about?” she said. “You were more anxious, scared, and probably depressed then than you’ve ever been.”
Of course, she was right.
If I think deeper than the initial knee-jerk memory, I remember being miserable. I was overwhelmed with career anxieties, terrified that I wouldn’t make it, worried I was about to be fired. For good reason: I was bad at my job. I was insecure. I was nervous about relationships being fragile.
In my head, today, I look back and think, “I must have been so happy then. Those were my best years.” But in reality, at the time, I was thinking, “I can’t wait for these years to end.”
There’s a Russian saying about nostalgia: “The past is more unpredictable than the future.” It’s so common for people’s memories about a time to become disconnected from how they actually felt at the time.
I have a theory for why this happens: When studying history, you know how the story ends, which makes it impossible to imagine what people were thinking or feeling in the past.
When thinking about our own lives, we don’t remember how we actually felt in the past; We remember how we think we should have felt, given what we know today.
I remember myself as being happier than I was because today, looking back, I know that most of the things I was worried about never happened. I didn’t get laid off, the career turned out fine, the relationships endured. I slayed some demons. Even the things that were hard and didn’t end up like I wanted, I got over.
I know that now.
But I didn’t know that at the time.
So when I look back, I see a kid who had nothing to worry about. Even if, at the time, all I did was worry.
It’s hard to remember how you felt when you know how the story ends.
I was recently asked at a conference how investors should feel about the stock market given that it’s basically gone straight up over the last 15 years.
My first thought was: you’re right. If you started investing 15 years ago and checked your account for the first time, you would gasp. You’ve made a fortune.
Then I thought, wait a minute. Straight up for the last 15 years? To echo my wife: What are you talking about?
Are we going to pretend like the 22% crash in the summer of 2011 never happened?
Are we supposed to forget that stocks plunged more than 20% in 2016, and again in 2018?
Are we – hello? – now pretending that the worst economic calamity since the Great Depression didn’t happen in 2020?
That Europe’s banking system nearly collapsed?
That wages were stagnant?
That America’s national debt was downgraded?
Are we now forgetting that at virtually every moment of the last 15 years, smart people argued that the market was overvalued, recession was near, hyperinflation was around the corner, the country was bankrupt, the numbers were manipulated, the dollar was worthless, on and on?
I think we forget these things because we now know how the story ends: the stock market went up a lot. If you held on tight, none of those past events mattered. So it’s easy to discount – even ignore – how they felt at the time. You think back and say, “That was so easy, money was free, the market went straight up.” Even if few people actually felt that way during the last 15 years.
So much of what matters in investing – this is true for a lot of things in life – is how you manage the psychology of uncertainty. The problem with looking back with hindsight is that nothing is uncertain. You think no one had anything to worry about, because most of what they were worrying about eventually came to pass.
“You should have been happy and calm, given where things ended up,” you say to your past self. But your past self had no idea where things would end up. Uncertainty dictates nearly everything in the current moment, but looking back we pretend it never existed.
My wife and I recently bought a new house. Like most of the country, it cost – let me put this mildly – a shitload more than it would have a few years ago.
We started talking about how cheap homes were in 2009. In our region they literally cost four to five times more today than they did then – plus, interest rates were low in 2009, and there was an endless supply of homes on the market to choose from. We said something to the effect of, “People were so lucky back then.”
Then we caught ourselves, shaking off delusion, and thinking, “Wait, do we really have nostalgia for the economy of 2009?” That was literally the worst economy in 80 years. All anyone talked about was how terrible everything was. Homes were cheap because unemployment was 10% and the stock market was down 50%.
Looking back, we know 2009 was not only the bottom but the beginning of a new boom (albeit with volatility). But we didn’t know that back then, and it gave us plenty to worry about that’s easy to forget today. What felt like risks then now look like opportunities. What felt like dangers then now look like adventures.
In a similar way, Americans are still nostalgic about life in the 1950s. White picket fences, middle-class prosperity, happy families, a booming economy. There was also the ever-present risk of nuclear annihilation. Today, we know the missile was never launched. But the 5th-grader doing nuclear attack drills by ducking under her school desk? She had no idea, and had plenty to worry about that is impossible to contextualize today, since we know how the story ends. So of course she wasn’t as happy as we think she should have been.
I subscribe to a few Instagram accounts devoted to 1990s nostalgia. I was a kid then, so I’m a sucker for this stuff. The comments on those posts inevitably say some version of, “Those were the best years. The late ‘90s and early 2000s was the best time to be alive.” Maybe it was pretty good. But we also had: A bad recession in 2001, a contested presidential election, 9-11 – which utterly reshaped culture – two wars, a slow economic recovery, on and on. It’s easy to forget all of those because we know the economy recovered, the wars ended, and there wasn’t another major terrorist attack. Everything looks certain in hindsight, but at the time uncertainty ruled the day.
Of course, things could have turned out differently. And for many people – those who were laid off, or did lose their home, or did die in war – the happy nostalgia of remembering what life was like before might well be valid.
But as Thomas Jefferson said, “How much pain have cost us the evils which have never happened.”
Part of the reason nostalgia exists is because, knowing what we do today, we often look back at the past and say, “you really didn’t have much to worry about.” You adapted and moved on. Isn’t that an important lesson as we look ahead?
Understanding why economic nostalgia is so powerful – why it’s almost impossible to remember how uncertain things were in the past when you know how the story ends – helps explain what I think is the most important lesson in economic history, that’s true for most people most of the time:
The past wasn’t as good as you remember. The present isn’t as bad as you think. The future will be better than you anticipate.