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UNSUSTAINABLE THINGS CAN LAST LONGER THAN WE ANTICIPATE.

admin July 16, 2020

3 minutes read

By Ubukombe Hallellua Pacifique CONTRIBUTOR (Opinions expressed by YOH contributors are their own.)

There’s a long history of military leaders following a logic that goes like this: “The enemy is outnumbered. They are out-gunned. We are gaining ground each day. Their morale will soon break and, accepting reality, they will surrender.”

And then that outnumbered, out-gunned enemy keeps fighting, and fighting, and fighting. Sometimes to the last man.

A rational person might look at this and say, “Why are they still fighting? It’s unsustainable, and they have to know it.”

But wars often aren’t governed by spreadsheets and clean reasoning. During the Vietnam War, Ho Chi Minh put it bluntly: “You will kill ten of us, and we will kill one of you, but it is you who will tire first.”

Identifying that something is unsustainable does not provide much information on when that thing will stop. Unsustainable things can sustain for a long time.

There are two reasons why. One is incentives. The other is storytelling.

If you looked at the U.S. housing market in 2003 and said, “Prices are too high. Growth is being fueled by low interest rates that are going to rise soon. This is unsustainable,” you were 100% right.

But the housing market kept rising for another four years. Bankers kept lending, buyers kept buying.

Why?

Put yourself in the shoes of a subprime mortgage broker in 2003. Your job was to make loans. Feeding your family relied on you making loans. And if you didn’t make those loans, someone else would, so quitting in protest just lowers your pay and hurts you more than it hurts anyone else. Plus, that pay was huge.

Rule of thumb: The more unsustainable an industry gets, the more it relies on inexperienced workers pulled from less prosperous industries to expand. Exposed to pay they couldn’t dream of before, those workers become more susceptible to looking the other way as their industries go off the rails.

This goes up the food chain, from the broker to the CEO, the investors, the real estate appraiser, the realtor, the house flipper, the politician, the central banker – incentives lean heavily towards not rocking the boat. So everyone keeps paddling long after the market becomes unsustainable.

Then there’s the storytelling.

If enough people believe something is true, unsustainable ideas can gain durable life support.

Stories are more powerful than statistics because they take less effort for your brain to contextualize complex issues.

“Housing prices in relation to median incomes are now above their historic average and typically mean revert,” is a statistic.

“Jim just made $300,000 flipping homes and can now retire early and his wife thinks he’s amazing” is a story. And it’s way more persuasive in the moment.

It’s more persuasive because the gap between what works in a spreadsheet and what’s practical in real life can be a mile wide. This usually isn’t because we don’t know the statistics. It’s because spreadsheets are cold and rational, but real life is messy and involves all kinds of variables from different parts of the world that are easy to leave out of spreadsheets but easy to tell in stories.

On paper, or to outside observers, decisions should be made with facts. In reality, to those in the field, they’re made with facts contextualized with things like social signaling, time horizon, office politics, government politics, year-end bonus targets, making up for past mistakes, massaging insecurities, and so on. There are so many moving parts that the easiest way to answer the question “What should I do?” is to be guided by a story that makes sense to you. Not a statistic, and not a fact. A good tale.

That’s not ideal. But it’s realistic and reasonable. And it helps explain why people keep doing things long after they’re factually unsustainable.

The solution is knowing the difference between expectations and forecasts. The former is good, the latter should be used sparingly. The difference between “That looks unsustainable so I don’t want to be a part of it,” and “That looks unsustainable so I’m going to bet that it will end by Q1 2020” is enormous.

UBUKOMBE HALLELLUA PACIFIQUE is a Voracious Reader, Entrepreneur/Investor, Business Scientist, Writer, Renaissance Speaker & Student of Life. He can be contacted at the following email: [email protected]

Ubukombe hail from Kigali, Rwanda