Newsletter #1: Economic Narratives, Cognitive Biases, and Staying Positive

I'm using this unique time in history to work on a personal project - a newsletter. In an effort to evaluate what's going on in the world right now, the theme of this newsletter is thinking through a clearer lens. 

An academic paper on Narrative Economics by Robert Shiller (famous Yale Professor who predicted the 2008 Housing Crisis)

Fascinating read given the fact he uses epidemiology and pandemics to discuss economic narratives (it was written two years ago). His core point is that once a message begins to go viral, the narrative drives the economy more than the actual fundamentals of the market. This opened up a lot of interesting questions for me - many people are comparing our current market conditions to 2008 - but is it similar at all? There's also a comparison to the Spanish Flu in 1918 - is that really the case? We're so much more interconnected today that growth rates might be even worse. On the flip side, information spreads quicker, which in *theory* means we'd be more prepared.

Think about the narratives we tell ourselves - which ones are true, and which ones aren't?

Stratechery Post on how to evaluate the information you read

There's an interesting dichotomy between the power of real-time information from social media & the news vs. the potential misinformation.

"Once we get through this crisis, it will be worth keeping in mind the story of Twitter and the heroic Seattle Flu Study team: what stopped them from doing critical research was too much centralization of authority and bureaucratic decision-making; what ultimately made their research materially accelerate the response of individuals and companies all over the country was first their bravery and sense of duty, and secondly the fact that on the Internet anyone can publish anything."

More broadly, the author presents a great mental model for evaluating information. Think about the level of uncertainty and sensitivity of the information. Not surprising that we see "Narratives" come up again.

"Narratives around ongoing stories rely on a high degree of sensitivity (in an attempt to find the narrative thread) and a low tolerance for uncertainty (in an attempt to sell the narrative). History, on the other hand, requires a low degree of sensitivity (record what matters) and a high tolerance of uncertainty (we weren’t there)."

Cognitive Biases many people have been susceptible to in thinking about Covid-19

1.) People think linearly, not exponentially 2.) We think about first-order effects and third-order effects 3.) We focus on one-off solutions rather than refining daily habits.

A mental framework for how to think about the uncertainty of what we're all going through

Acknowledge the uncertainty, welcome it, and use it as a means to connect with others. For once in our lives, we're not actually "busy" - use it as a time to reconnect with friends, family, and yourself.

Wrapping up & questions to think about:

• How can we use the current state of affairs to our advantage? What's the one thing we've wanted to do, but kept putting off? 

• What are the narratives we are hearing? Which are true and which are not?

• What are the biases we're subject to? How can we think clearer, but accept our current realities?