Imagine you want to buy a bond. All rating agencies have assigned a score, which informs you of how ‘safe’ it is. In other words, a better score means a lower probability that the company will default on your credit.
But there’s another component to the rating. And it’s the outlook. What does that mean? It means the expectation that the rating will get better or worse. And even though that doesn’t have an immediate impact on your current situation (if you have the bond and it’s a triple A, you’re still very safe), it influences the expectations in the market.
The price of the bond does reflect the expectations of the market, so even though the possibility of getting your money back remains intact, a negative outlook instead of a positive one ends up bearing an impact on the market price of your bond.
As this principle applies in financial market, so it does in your entire life.
When I lived in Italy, my ears were full of the usual conversations and complaints about the crisis, things going down, low salaries, no opportunities for the youth etc.
While most of the arguments are true, there was always this general sense of stagnation, negativity, anger in the air. Whining and complaining about the situation was very common.
I contrasted this predicament with many Asian countries, such as Thailand, Indonesia, Vietnam, where I’ve travelled extensively over the years. Despite of the current living conditions, people seemed a lot more enthusiastic about life.
While some may argue that some of these countries have been growing fast, I once took the trouble to compare the GDP per capita (PPP), only to realize how lucky we still are in Italy, in spite of the crisis and all sorts of problems happened in the past few years, that forced so much of the youth to leave the country.
Italian GDP per capita still stands at about 32,000 USD. Whereas Thailand is at about 6,500, Indonesia at 3,846 and Vietnam at 2,343.
Then Vientamese people should have complained 10 times more than Italians! But that was never the case.
So, what’s happening here?
If we look at GDP growth over the years though, numbers tell a different story. For the past 10 years, Italy has either been in a recession or has grown anywhere from 0.1% to 1.5%, when it did. Other developing economies in South East Asia, have been easily hitting 5% annual GDP growth.
It would still take them forever to catch up, but that doesn’t’ matter. What appears to have a bigger impact on people’s happiness and motivation is the idea that things are bound to get better.
Think about it for a second. Can you fully enjoy your current circumstances, no matter how hard you try, if you’ve been diagnosed with a disease that’s going to progressively impact your health and lifestyle? And if I made you choose between a holiday that starts off terribly and then turns around, with each day better than the previous one until the last, and a trip that has the same days, but lined up in reverse order…. Which one would you choose?
That’s how powerful your outlook is. Just like a bond price, expectations are incredibly powerful in running the script you apply to your current experience.
In a sense, we might say it’s better to live on a slow upward trend, than having a big spike followed by a downward slope, even when the slope would land a lot higher.
It’s no surprise that a lot of lottery winners end up broke and you can see how much failed actors and celebrities struggle to cope with the downward phase of their career, fighting through addictions of various kind.
Now the Zen advice would be: live in the present, drop expectations. But can you? Seriously, how many people you see, who authentically live without expectations? We all have expectations, it’s part of life. We all have hope and desire a better future, even though we know that challenges will be there.
Believing that tomorrow will be better, that it will bring more magic to our life, helps us getting out of bed with energy and motivation to do anything in the first place.
So, what’s the solution? There’s only one way out: constant growth.
Constantly working on yourself, learning new things, pushing yourself to do the things that make you uncomfortable: that’s the only way to ensure your outlook will always be positive. In fact, you can’t delegate your life circumstances to luck and randomness and trust that the outlook will be good that way, and you can’t just forget about your outlook altogether because we’ve seen that a negative one has the potential to pollute all your present experience.
That’s why conscious personal development is the only key to a satisfactory life. You just can’t afford to stagnate, the same way that the richest economy can’t afford to stop growing.
Also published on Medium.
