Rational Optimism

“Optimism is a huge asset.”

Reading these simple words recently makes us realize how important and helpful it is to maintain a positive attitude, and, from a non-traditional perspective, to think of optimism as being an asset in life.

Melinda Gates, in the 2017 Annual Letter from the Bill and Melinda Gates Foundation titled, Dear Warren, writes, “Optimism is a huge asset. We can always use more of it. But optimism isn’t a belief that things will automatically get better; it’s a conviction that we can make things better. We see this in you, Warren [Buffett]. Your success didn’t create your optimism; your optimism led to your success.”

Realistic optimism as a default attitude has many benefits in business and investing, as well as in other areas of life. By keeping things real, we believe we are ultimately in greater control of long-term outcomes, and truly can make things better.

Research shows optimists value thoughts that make them feel good about themselves, whereas pessimists believe including the negative is a more truthful version. The realistic part comes from the belief that our actions will go a long way toward determining the eventual outcomes, and it is realistic to have a Plan B and Plan C for those times, when, realistically Plan A does not always work. Realistic optimists are cautiously hopeful of favorable results, but also work hard to achieve and obtain the desired outcomes.

As Sir Winston Churchill famously said in a speech in 1954, “For myself I am an optimist – it doesn’t seem to be much use being anything else.”

In building and operating our business, we have always had a strong belief that, if we do things constructively, we can achieve positive outcomes for our clients. While realizing that there will many times be short-term obstacles in our path, we know that by working to achieve desired results for our clients, and believing they are possible, we can work together with them achieve their financial and lifestyle goals.

Even as equity indexes hit new highs, we frequently see substantial market pullback (corrections and bear markets), and we are bombarded with negative (and frequently sensationalized) news. These factors can work to prevent investors from making rational decisions – even though we know that the S&P 500, including dividends, rose 1,100-fold over the last 70 years.

We are mindful of the words of psychologist Heidi Grant Halvorson, “To be successful, you need to understand that vital difference between believing you will succeed and believing you will succeed easily.”

Thank you for trusting us to be realistically optimistic in meeting your financial objectives!

This link will take you to the 2017 Annual Letter of the Bill and Melinda Gates Foundation, dated February 14, 2017, by Bill and Melinda Gates: https://www.gatesnotes.com/2017-Annual-Letter?WT.mc_id=02_14_2017_02_AL2017_BG-GW_&WT.tsrc=BGGW

Find the original CNBC article that inspired this blog post here: https://www.cnbc.com/2017/09/04/how-warren-buffetts-optimism-has-helped-him-succeed-according-to-psychology.html

Carl is a Senior Investment Manager based in the Shenandoah office. Carl is a CFP and has 40 years of experience in banking and investment management. For feedback or questions regarding this blog post, please contact Carl at carl@aowealth.com.