Page 124 - Morgan Housel - The Psychology of Money_ Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

COBACOBA
ARPANET

September 11th

The fall of the Soviet Union

How many projects and events occurred in the 20th century? Billions,
trillions—who knows. But those eight alone impacted the world orders
upon orders of magnitude more than others.

The thing that makes tail events easy to underappreciate is how easy it is to

underestimate how things compound. How, for example, 9/11 prompted the
Federal Reserve to cut interest rates, which helped drive the housing
bubble, which led to the financial crisis, which led to a poor jobs market,
which led tens of millions to seek a college education, which led to $1.6
trillion in student loans with a 10.8% default rate. It’s not intuitive to link
19 hijackers to the current weight of student loans, but that’s what happens

in a world driven by a few outlier tail events.

The majority of what’s happening at any given moment in the global
economy can be tied back to a handful of past events that were nearly
impossible to predict.

The most common plot of economic history is the role of surprises. The
reason surprises occur is not because our models are wrong or our
intelligence is low. It’s because the odds that Adolf Hitler’s parents argued
on the evening nine months before he was born were the same as them
conceiving a child. Technology is hard to predict because Bill Gates may

have died from polio if Jonas Salk got cranky and gave up on his quest to
find a vaccine. The reason we couldn’t predict the student loan growth is