History's Hidden Dance
The pendulum any event or trend is riding on
Understanding history, both actual events and the dynamics of which they unfold is important in our approach to investing. “The best investors in the world are really good historians.” - Tim Urban.
Friends, let’s ride the swing of history for a bit.
(This is Part Two of a three-part essay on history. Read Part One)
Climactic and dramatic history often captures our attention more than other historical narratives do. The spectacular high points and radical stories are far more appealing than the small footnotes of history. However, upon closer examination, these footnotes, and other factors that often go unnoticed, are imprinted deep within these pivotal events. And, boy, are they important.
They dictate the forces of the historical pendulum upon which any significant event or trend rides.
Historical events are intertwined in a web of cause and effect, and it’s beneficial to recognize these dynamics.
Pairing history with cause and effect is probably something you learned back in fifth grade. But I've come to realize that this dynamic needs some dusting off, extra coloring, and examples to truly capture the depth of its importance.
I believe cause and effect has become subject to some overuse and hollow words, diluting what should be a filter firmly embedded in our minds, central to the process of assessing past and present events and trends.
Action = reaction
"Every action has an equal and opposite reaction."
This is Newton's third law. It states that for every action, there is an equal and opposite reaction. This means that when two objects interact, they apply equal and opposite forces to each other.
For example, when you jump off a diving board, your body applies a force to the board, and the board applies an equal and opposite force back on your body, propelling you into the air.
The first sequence of action plants a seed for the next sequence; one movement determines the reactionary movement, and the stronger the action, the stronger the reaction.
Marxism
When we think about Marxism, it sounds like a terrible idea. When viewed as a standalone action — a forced political system wrapped in scientific jargon — it’s shockingly bad. And believe me, I do think it's utterly awful.
However, when viewed as a reaction to a specific set of circumstances, the emergence of this ideology may bring forth a deeper understanding of why it was being formed - a fragment of sympathy, even.
Marxism emerged as a response to the harsh working conditions experienced by laborers during the Industrial Revolution in England. This period saw the rise of capitalism and the exploitation of workers who were forced to work long hours in dangerous conditions for very little pay.
Karl Marx observed these conditions and developed a theory aimed at achieving greater equality and justice. He believed that the exploitation of workers was an inherent flaw in capitalism and that the only way to improve labor conditions was through the abolition of private ownership and the establishment of a socialist state.
One radical system gave birth to another radical system. When the pendulum reaches extreme levels on one side, it contains an enormous amount of energy ready to swing equally hard in the opposite direction.
The exploitation of workers is bad.
Banning private ownership is bad.
Action equals reaction.
Look for the seed
Whatever we’re trying to assess or judge, it’s usually helpful to look for the seed, where the forces come from, to gain a larger understanding of the subject at hand.
Once we understand that instances rarely operate in a vacuum, but occur rather as a series of instances, we may learn to appreciate that there are some beautiful adaptive forces at play, as well.
Individualism arises as a countermeasure to collectivism.
Liberalism to counter conservatism.
Decentralized power as a reaction to centralized power.
And back.
I’ll usually try to zone out the second people are adamantly predicting the future, but this way of thinking can give us an idea of where we’re heading.
The leveler
Whatever side of the different spectrums we fall on, one should acknowledge that our favorite set of beliefs rarely presents itself in an absolutely perfect form in our society. The pendulum has a tendency to overshoot on either side.
But it also has the tendency to expose the flaws of whatever side we support.
“The fear of capitalism has compelled socialism to widen freedom, and the fear of socialism has compelled capitalism to increase equality. East is West, and West is East, and soon the twain will meet.” (Will and Ariel Durant)
History can be seen as extremes on both ends, but it can also be viewed as a story of balancing forces. Whatever the current state of affairs, it usually acts as a leveler, seeking to restore equilibrium in response to previous imbalances.
Just as the pendulum is working its way to its own equilibrium.