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This Time It’s Different

It’s a popular refrain you tend to hear after a major market move.  This time it’s different.   You also hear it with respect to other prognostications.  But is it really different?

The Repeating of Narratives and How Things are Different

My recent read and review of Robert Shiller’s book “Narrative Economics” is really the inspiration for this post.  To make his point Schiller brings up numerous narratives from the past and how they relate to what occurred in the economy.    If you read these narratives you begin to notice something.  They repeat.  

Shiller even talks about this tendency for narratives to repeat with minor “mutations”  or modifications that make them return to viral status.  And if you read the narratives he references this is really the gold nugget in the book.

Historical Automation Fears

Take his chapter on Automation.  We all know the current fears that automation will lead to us all losing our jobs.  We can also instinctively point to automation causing job loss fear as far back as Charles Dickens.  But still most of us will say this time it’s different.  This time the automation will replace “all jobs” as it’s more impactful.

Always Thinking This Time It’s Different

The only problem.  Even that sentiment has been made before.  Shiller’s quote from G. Pascal Zachary in 1995 was “Most economists think the ill effects of automation are transitory, but a growing minority of their colleages and many technologists think the current surge of technological change differs from anything seen before.” Not early enough?  How about the quote from Samuel Lubbell 1959, “In two years a machine will be doing my job.”  Further back you have the rise of the Luddites in the 30s.  Basically if you dig deep enough you read about the same fears we have today happening more then 100 years ago.   In each case the writers thought this time is different from the last because the advancements were too great. So how did that turn out?

Income Gap Concerns

Shiller does the same analysis with the income gap.  Guess what, it’s been done before.  How about this quote from clear back in 1890 by the San Francisco Chronicle entitled The Great Problem: “the rich have grown richer and the poor have grown poorer… this problem must be solved or there will come a cataclysm which will destroy modern society”.  Again we’re all still here and this problem has repeated itself.  

The Nuances Change, But The Fears Remain

Now that doesn’t mean these fear narratives are identical.    The interpretation of the situation and what it meant to people changes dynamically with the situation and beliefs of the time.  So they might be afraid of robots taking their job, but the response 80 years ago might have been to shun technology ala the Luddites.  Conversely in today’s artificial intelligence discussion very few people are talking about giving up their technology despite the similar fear.  

Hoarding Versus Conspicuous Spending

The view of the wage gap also has morphed slightly.  These days it’s the hoarding of money by rich people that is railed against.  But in prior occurrences, it was more about conspicuous consumption.  The difference in tone along with the sameness is rather interesting.

The Gold Standard And the Stock Market

Even things like the stock market and the gold standard come in for discussion by Shiller.  Both narratives take slightly different forms throughout history.  The gold standard being contrasted with Silver at one point.  The stock market being discussed as tied to things like boycotts and business behavior.  But the themes again carry across the decades.

Always at Extremes: This Time It’s Different

So what’s my point?  Besides highlighting some pretty cool history I find this as a generally good reminder.    Every time in my life where I’ve seen us hit an extreme in the economy of stock market.  Either to the positive or negative,  I remember hearing this time it’s different.  

Even now you hear it.  The longest bull market on record, shifting age demographics and record government debts could mean a Japan type multi-decade stock market decline in the US.  The rise of artificial intelligence is the single biggest risk to the human race.  We’ll all lose our jobs.   I remember vividly hearing much of the same things during the dotcom boom.  On the flip-side, I remember hearing that things would never recover during the 2008 financial crisis.  

We will Live to Hear This Time It’s Different Again, Even If It Still Is Not

The reality is, just like everything else in this post, eventually these statements will be post-script and we’ll be talking about the next event being different from this one.  I can’t define how long eventually is, but it will come.  And yet a safe bet is that time won’t be different and neither will this one.  We might interpret what this time means differently.  It might even take a slightly different form.

Perhaps a stock market and economic collapse due to car loans instead of home loans.  But you can bet your money the market will eventually recover and then collapse again sometime in the future.  You can also bet there will be discussions on wealth inequality in the future, no matter how that gap is addressed today.  

Theme’s Repeat, So Be Prepared To See Them Again

This doesn’t all mean you should support changes to improve people’s outcomes or reduce the income gap.   But it does mean that you should be prepared that this time is not different.  That likely you will be replaying these themes in modified forms over the rest of your economic life.  Plan your finances accordingly.

2 Comments

  1. Lazy Man and Money
    Lazy Man and Money February 3, 2020

    I don’t think “all” jobs are going away. We aren’t going to replace plumbers for example.

    It’s just that jobs will be going away as part of the normal innovation cycle. There are fewer retail sales jobs at malls for example. Maybe there are more delivery and Amazon factory jobs.

    You do see stories like IBM’s Watson is better at detecting some cancers than doctors. We’ll still need doctors (until robot surgery), but maybe fewer of them. This isn’t much different than the cotton gin of the past though.

    Around the gilded age income inequality was pretty high. That was brought back down as oil conglomerates were broken up and income tax (the big one) was introduced. In effect, it helped solve the problem. Today we’re seeing the gap widen again. It’s not the end of the world or anything.

    As I re-read this comment, it may sound like I’m disagreeing with you, but I don’t mean to. I do think that eventually AI will fundamentally change things just like access to the internet changed things or easy access to almost any fact in the world (Google) changed things. It will be different as we won’t go back to the old ways, just like we haven’t gone back to horses and buggies. However, I don’t see the need for big extremes as it’s going to be gradual like everything else.

    • FullTimeFinance
      FullTimeFinance February 6, 2020

      It actually sounds like our views are pretty well aligned. ‘Nothing is constant except change’. When it comes to jobs and industries the normal is change.

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