The stories we tell ourselves have great influence over our destiny. These narratives shape our belief system and thus, in turn, the decisions we make.
Find yourself making poor choices? That's likely due to a fallacy in one or more of the beliefs you hold.
Psychology and social science have re-discovered this key learning: We can improve our odds of success in life by improving the stories we tell ourselves. Hence the flood of recent books on the topic (The Power of Story, Flourish, Being Happy — to name just a few)
But this insight is nothing new:
Great transformers throughout history like Gandhi, Martin Luther King, Elizabeth Cady Stanton, Frederick Douglass, America's founding fathers, Leif Ericson, Copernicus, and Aristotle all demonstrate the immense positive change that simply holding a different — but more authentic and useful — set of beliefs can unleash to the world.
The stories we tell ourselves not only ultimately determine our actions, but they determine how we perceive the world around us. Meaning: the exact same events can happen to two individuals; but if each holds a different set of beliefs, they can have extremely different interpretations of reality.
As a theoretical example, let's take two survivors of the same aggressive cancer. Both went through years of treatment in which their health and quality of life suffered greatly from the symptoms of the disease as well as the harshness of the surgeries and chemotherapy they had to endure. But both successfully emerged from the experience with the cancer in full remission. One survivor has an internal narrative that "fate is cruel" and spends his time lamenting the lost years, dwelling on the trauma and living in fear of the next metaphysical grenade to explode in his life. The other survivor holds an opposite story in his head, that "life is precious" and feels great gratitude at being one of the lucky to survive, full of excitement and eagerness to get the most out of the years ahead that he's been gifted with.
This example shows why having the 'right' programming within our narratives is so valuable. If our narratives are enabling and positive, yet aligned with reality, they can inspire us to happiness — potentially greatness — even in the face of adversity. If instead we guide ourselves by negative or unrealistic stories, the inevitable discouragement and disappointment handicap our ability to meet or even pursue our goals.
For years now, Chris and I have warned of the increasing damage being wreaked by the broken narratives that our society lives by:
- 3%+ GDP growth will rescue our economy. All efforts to make that happen are necessary, even if they punish the prudent.
- American energy independence is just around the corner.
- Our banks are too-big-to-fail (or jail) and therefore need to be supported at taxpayer cost.
- Preserving the euro is essential to Europe's future.
- Enhancing national security requires sacrificing more of our civil liberties.
- Gold is not money.
- We're all better off if the stock market is higher.
- Most of our social problems (schools, jobs, global competitiveness, etc.) will be solved with more taxes and more regulation.
- Housing and education loans are "good debt."
- We live in a completely free and fair society.
- The Fed knows what it is doing.
By telling ourselves stories that aren't supported by the underlying data, or even rational logic, we create unrealistic expectations for what should happen. That leads to making bad decisions. And when events play out differently than our deeply held convictions say they should, we experience the cognitive dissonance of not believing the reality we are seeing.
If we aren't willing to revisit and alter our beliefs based on new observed data, our actions are unlikely to change, and we fall victim to Einstein's famous definition of insanity: doing the same thing over and over again, but expecting a different outcome.
This can manifest in laughable ways, such as how investment bankers have developed such an oversized belief in their deserved income, they simply can't imagine a universe in which they could live on US$1.5 million or less:
For some people working in financial services, however, £1m is simply what’s needed to cover the cost of living.
“You get a lot of people who have a very expensive lifestyle,” said Louise Cooper, a former Goldman Sachs salesperson and financial analyst at Cooper City. “They will always have a nanny, private schools for the children and they will have a very big expensive house. All of this has to be paid for out of taxable income,” she points out. “With a top tax rate of 45%, this means that you need to be earning nearly double what you’re spending.”
Tax is an issue in the U.S. too. “After tax, your million dollars will be around $600k,” said Goldstein. “Out of that, you get people trying to pay the mortgages on, and maintain houses, in the Hamptons and Manhattan, to put three children through private schools costing $40k a year each, and to pay living costs.”
Why can’t bankers simply ditch the house in the Hamptons and put their children into state run educational establishments? Unfortunately, this seems easier said than done. “When you work in banking, you end up surrounded by people who earn a lot of money,” said Erika Shapiro, a former fixed income saleswoman at Goldman, Citi, Credit Suisse and UBS who became a yoga instructor. “Everyone around you has a big mortgage and is sending their children to private schools.”
“You just get trapped at a certain level of expenditure,” said Tony Greenham, a former investment banker at Barclays and head of finance and business at the New Economics Foundation. “You’re in a peer group which aspires to and achieves a certain standard of house in a certain area, a certain type of holiday home, and certain schooling for your children.”
The social conditioning to spend heavily is insidious and is enforced by bankers’ peers, said Nell Montgomery, an ex-Goldman Sachs sales trader-turned psychotherapist. “People in banking get into a thought process whereby having three children at private schools costing £100k after tax is normal. You hear people saying they’d rather pay for private tutoring than spend £10k on a holiday. It’s a mindset in which things which are not normal come to be perceived as standard,” she said.
I know, I know. Cue the violins…
But there's a darker side to holding on to a dysfunctional narrative. When our beliefs don't provide us with enabling material, disappointment and despair commonly result when we experience negative surprises.
An example mentioned previously on this site is the dramatic increase in alcohol-related suicides across Russia following the dissolution of the Soviet Empire.
Many middle-aged men experienced an abrupt change to their identity. Jobs were lost; uncertainty about the "new Russia" swirled. A man who had been a pipe-welder his whole life suddenly did not know if he would have more pipes to weld.
The loss of identity and the stress of not knowing what would come next sadly drove a tremendous amount of once-productive individuals to literally drink themselves to death. From the NIH:
Rates of alcohol consumption and suicide in Russia were high before the dissolution of the Soviet Union, rose sharply during the early 1990s, and are currently among the highest in the world…
…Repeated political and economic crises in 1990s Russia resulted in uncertainty and diminished hope for the future at a time when a paradigmatic shift of social, cultural, economic and political norms were creating anomic conditions (Durkheim 1966). It is generally accepted that the social and individual stress resulting from the reforms were the main causes of increased demand for alcohol at this time (Leon and Shkolnikov 1998)…
…Leon and Shkolnikov (1998) argued that alcohol played a central role in the mortality crisis of the 1990s, Notzon et al. (1998) showed that about 12 percent of the decline in life expectancy between 1990 and 1994 was directly due to alcohol-related mortality…
Remember that Russia remained communist at this time, with much of its social support system intact. In many cases, those who chose to drink themselves to death were not facing looming penury. But they had a narrative in their head that told them that a life different from the one they knew was not worth living.
What could have happened if they held a different, more encouraging belief? What if they believed that fate just gave them a chance to reinvent themselves. Or if they simply believed that "change brings opportunity" and waited to see what open doors the next few years might offer? Others in Russia did, and lived.
A Manifesting Concern
A growing worry here at Peak Prosperity is that we see increasing signs that people elsewhere in the world, particularly in the squeezed middle and lower classes, are falling victim to the same toxic cognitive dissonance that ruined so many post-USSR Russians.
In the U.S., individuals and families are increasingly realizing that playing by the rules society is asking them to is not resulting in the outcomes they've been sold on.
For example, imagine you're a college-aged student. The story is still:
- Go to the best college you can.
- Get a good paying job with a good employer.
- Get married.
- Buy a house.
- Raise a family.
- Retire happy.
But to the critical listener, it increasingly sounds like:
- Go to the best (which likely means 'most expensive') college you can. You'll likely need to take on a boatload of debt to pay for it.
- Good luck finding a job, especially one that pays you enough to cover both (frugal) living expenses and your college debt payments.
- Buy a house? With Housing Bubble 2.0 and tight lending, you'll likely need to live with your folks for at least a decade before you've saved enough. And we can't promise Housing Bust 2.0 won't happen after you finally do sign a mortgage…
- Sure; start a family. Did we mention that the government estimates the cost of raising a child at nearly $300K, and other studies think the actual amount is much higher?
- Retire? Ha! Don't even think about it…
- Oh, yeah. And while you're pursuing all this, the national infrastructure you're inheriting is crumbling, you'll be taxed increasingly to pay for the debts racked up by past generations, energy and commodity prices will be marching higher, and health care costs will be off the charts. Good luck!!
Is it any wonder that millennials are giving up on the American dream in huge numbers?
And it's not just the younger cohorts. In fact, we may be seeing a Russia-like identity crisis emerge across the U.S. Baby Boomer population:
More people now die of suicide than in car accidents, according to the Centers for Disease Control and Prevention, which published the findings in Friday’s issue of its Morbidity and Mortality Weekly Report…
Suicide rates among middle-aged Americans have risen sharply in the past decade, prompting concern that a generation of baby boomers who have faced years of economic worry and easy access to prescription painkillers may be particularly vulnerable to self-inflicted harm.
From 1999 to 2010, the suicide rate among Americans ages 35 to 64 rose by nearly 30 percent, to 17.6 deaths per 100,000 people, up from 13.7. Although suicide rates are growing among both middle-aged men and women, far more men take their own lives. The suicide rate for middle-aged men was 27.3 deaths per 100,000, while for women it was 8.1 deaths per 100,000.
The most pronounced increases were seen among men in their 50s, a group in which suicide rates jumped by nearly 50 percent, to about 30 per 100,000. For women, the largest increase was seen in those ages 60 to 64, among whom rates increased by nearly 60 percent, to 7.0 per 100,000.
“It is the baby boomer group where we see the highest rates of suicide,” said the C.D.C.’s deputy director, Ileana Arias. “There may be something about that group, and how they think about life issues and their life choices that may make a difference.”
The rise in suicides may also stem from the economic downturn over the past decade. Historically, suicide rates rise during times of financial stress and economic setbacks. “The increase does coincide with a decrease in financial standing for a lot of families over the same time period,” Dr. Arias said.
Dr. Arias noted that the higher suicide rates might be due to a series of life and financial circumstances that are unique to the baby boomer generation. Men and women in that age group are often coping with the stress of caring for aging parents while still providing financial and emotional support to adult children.
“Their lives are configured a little differently than it has been in the past for that age group,” Dr. Arias said. “It may not be that they are more sensitive or that they have a predisposition to suicide, but that they may be dealing with more.”
Preliminary research at Rutgers suggests that the risk for suicide is unlikely to abate for future generations. Changes in marriage, social isolation and family roles mean many of the pressures faced by baby boomers will continue in the next generation, Dr. Phillips said.
“The boomers had great expectations for what their life might look like, but I think perhaps it hasn’t panned out that way,” she said. “All these conditions the boomers are facing, future cohorts are going to be facing many of these conditions as well.”
In this report, we learn that the mismatch between expectations and reality — between narrative and destiny — is a driving force behind this recent rise in suicide. Again, we see the destructive outcome that can result when the stories we tell ourselves are too disconnected or useless to the world in which we actually live.
Improving Our Odds Through Emotional Resilience
The one thing that we can have confidence in about the future is that Change is coming.
If you've watched the Crash Course or read even just a few articles on PeakProsperity.com, the rationale for why is abundantly clear. But while we feel increasingly certain about the nature of the events that will unfold, the timeline and the pathways in which they will remain challenging to predict. So, surprises — certainly some of them negative — undoubtedly await us.
So how do we avoid the fate that befell the post-Soviet Russians when their world changed in unexpected ways?
Answer: Cultivate useful narratives. And develop emotional resiliency now, in advance.
As the above insights have shown us, it's often our response to events, rather than the events themselves, which determines our fate. If we work on guiding ourselves by beliefs that are well-grounded empirical, and give us pragmatic optimism, we'll have much better odds of successfully persevering through whatever uncertainties arise.
To make this a little more tangible, I'll share a few examples of some of the narratives that Chris and I hold.
Both of us experienced sizable life changes when we left our corporate executive roles to pursue our mission, a big one being a dramatic drop in income. But we had worked in advance on re-defining what 'wealth' meant to us. True, money still plays a major role in our wealth, but we decided that there are many other components with an equal footing (purpose, health, self-sufficiency, strong relationships, time in nature, community involvement, etc.). We believed we could "cut our standard of living in half, yet double our quality of life" — that was a foundational narrative for us. And it helped us weather the 'tight times' that ensued as we worked to get PeakProsperity.com off the ground. Holding that aspirational belief, along with a practical plan (with specifics), really did take a lot of the worry and stress away during a time when, without it, we easily could have become consumed by the shock of the lost income and the uncertainty of our venture.
Another important belief we hold is that "Fundamentals eventually win out." This helps us retain our sanity during the nonsensical times when it feels like the laws of physics no longer apply to the markets we analyze. It's what keeps us from throwing in the towel when the precious metals head in the opposite direction than the overwhelming preponderance of data says they should. And it prevents us from capitulating when the Fed-juiced stock markets levitate to ever-unsupportable heights day after day. It's what allows us to feel comfortable with our peak "net energy" stance, despite the cheerleading going on the US media that the shale revolution will solve all our energy concerns. Without this grounding belief, it would be hard to look at the superficial data today and not feel like we've been horribly mistaken in our positioning. But we don't. In fact, we feel comfortably confident. Why? We revisit and battle-test this belief often, and we've yet to find an empirical, logical rationale for changing it.
Chris and I firmly believe in the merit of "Creating a world worth inheriting." In fact, for those who didn't already know it, that's our mission. Having clarity around our end goal enables us to construct a set of values that guide everything we do. Integrity, quality, a relentless focus on improving the customer experience, living the lifestyle we recommend, fiscal prudence, investing in our communities, finding joy in the journey — all of these priorities dovetailed naturally out of the core belief once we embraced it. They have guided us very well so far, and have often provided non-monetary returns at least as equal as the monetary ones. Could we make more money or grow our audience faster with a different set of values? Sure, but they would violate our core belief; which we can't see a logical reason to abandon. Plus, we sleep very well at night guided by our current set. We're not looking to mess with that.
We also practice the recommendations contained within Peak Prosperity's Emotional Resilience wiki, which, if you haven't yet read, you should do so ASAP. It was written by a professional psychiatrist with deep interest and experience with the resiliency-building we promote through our site. This wiki is chock full of insights and techniques you can use to develop a mind-set that will give you more control over your life and decision-making (vs. being at the mercy of unexpected events) that will lead to greater calm and peace of mind.
And don't feel like you need to do all this inner work alone. It's a good idea to recruit support. For some that means involving close friends and family to serve as sounding boards and cheerleaders. For others, that might mean consulting with a good therapist. For everyone, the process should involve investing in developing and/or deepening relationships you can draw on as you go forward through life — as we explored in a recent article, supportive relationships have been scientifically proven to be the most important determinant for living a long and happy life.
Returning back to Gandhi in closing: Another of his maxims is often paraphrased as "Be the change you wish to see in the world." A wise sentiment from a wise man.
Such change comes from within.
And starts with getting our stories straight.
FYI: we focus further on the importance of narrative, and how to improve our own internal ones, at our Peak Prosperity seminars. If you feel you could benefit from this, as well as working to build your overall resiliency with the company of like-minded individuals, please consider joining our upcoming seminar at Kriplu in July in western Masschusetts. Click here to learn more.