From Francis J. Gavin, Frank Stanton Professor in Nuclear Security Policy Studies at MIT and author of Nuclear Statecraft: History and Strategy in America’s Atomic Age:
It is not always clear in real-time what matters most, though a historical sensibility can sensitize us to look for real-world consequences in unusual places. Will the recent U.S. presidential election seem like the key issue we faced 30 or 40 years from now, when perhaps some deeper, more fundamental shifts (the climate or demographics, for example) or a completely unexpected event shapes the realities of that future world? We don’t know, but it is worth considering.
Relatedly, history conditions decision-makers to understand that policy decisions made in world capitals are often far less important in shaping what matters in the world that other, often less visible historical forces. Culture, technology, demographics, and geography, for example — all are critical forces that are less pliable to policy than we often think.
My favorite examples are three events that took place within a very short period of time: the sale of the early Apple personal computer, the release of Star Wars — the highest grossing motion picture of all time, and the famous 1976 “judgment of Paris” in which previously unknown wines from Napa Valley bested established French wines in a blind taste test. In other words, policymakers in Washington in the mid-1970s who were pouring over economic data, looking at crime statistics and urban crisis, witnessing political chaos abroad, and fearing a Soviet military behemoth that appeared to be winning the arms race had little reason to be optimistic about the future.
But the future was being made elsewhere and in different ways than policymakers understood in places like California, where deep and often obscure historical forces were working to transform the U.S. economy, society, technological base, and culture in ways that would have profound effects on American power and world history.
A deep historical perspective should also allow the decision-maker to avoid outcome or retrospective bias, or fall into the trap of what I call “understanding the Third Balkan War.” As former National Security Advisor Sandy Berger pointed out: “History is written through a rear-view mirror but it unfolds through a foggy windshield.” If the past is to be of use to policymakers, it must be exploited in a way that avoids what economists call “the curse of knowledge,” or that cognitive bias that emerges that in hindsight, the outcome of a historical event was more predictable than was likely the case. Since we know how past events have turned out, we can easily assume that the causal path that led to the event was inevitable. But most complex and difficult policy choices involve what former Secretary of State Henry Kissinger has called “51/49” decisions: In other words, it is very difficult to know, a priori, whether a difficult policy choice will turn out correctly, even if in retrospect it seemed obvious. This is true for good policies as well as bad, which an immersion in history and an understanding of the past should tell us…..
Investors are in a way historians too. They study past events and extrapolate them into the future. They also suffer from the same challenge: the outcome of past events appears abundantly clear while the future is murky and obscure. Most investments are “51/49 Decisions”, hopefully with better probabilities, but still uncertain outcomes.
As with leaders of state, we face an uncertain future. Most important is often broad-based policy, or strategy, rather than specific actions. To use a farming analogy: investors need to till and feed the soil, creating fertile ground to sow seeds and wait for opportunities to grow. All the while exercising discipline to eliminate weeds and pests before they can spread and hurt your portfolio.
I’m beginning to sound like Chauncey Gardiner, the slow-witted gardener played by Peter Sellers in the 1979 motion picture Being There (1979), who through a case of mistaken identity becomes a close advisor to the US president.