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Why negative thinking is good for you

According to Greek mythology, Cassandra, a princess of Troy, had misled Apollo into thinking that she’d give more than worship at his temple. So Apollo punished her by simultaneously granting her the gift of prophesy and the curse of never being believed.

 

But it doesn’t matter why we ignore bad news, the fact is that most of us do, and this creates big opportunities for the rare people who don’t.

 

The most salient example of someone who prospered by accepting the possibility of disaster was a pig. We don’t know his name, only that he was a diminutive pig living near two other small porcines who built their houses from sticks and straws respectively. When the neighborhood wolf came calling, the predator was able to blow down the flimsy straw and stick houses and eat their short-sighted occupants. But our nameless pig, who’d built his house of brick because he believed that bad things could happen, survived the encounter with the wolf to go on, so we are lead to believe, to live a long and happy piggy life.

 

Embracing bad news has paid off handsomely for real-world characters as well. In the mid 90s, when Bill Gates saw that the Web would probably become a “Killer App” that would rival Microsoft Windows and Office, instead of fighting the Internet, he incorporated it into virtually all of his company’s software (e.g. hyperlinks in Office documents) and, as a result was able to keep Microsoft growing at a healthy pace.

 

Ford motor company restructured their debt a couple years before the recent economic meltdown, helping them avoid the bankruptcies that plagued GM and Chrysler, and to turn down a bailout offer from the Government. As a result, Ford prospered during the recovery and gained in worldwide market share.

 

Prior to the same economic meltdown that Ford survived, hedge fund manager John Paulson thought it was likely that the housing bubble (artificially high housing prices) would collapse, so he directed his company to “short” mortgage-backed securities. Paulson’s vision was accurate and his company reaped huge profits when the mortgage market collapsed. (Farnam Street — Had his vision been inaccurate, he likely would have lost massive amounts of money and we’d only associate Paulson with gambling his clients money away on a bad bet.)

 

The Paulson case illustrates two important points about what it takes to be a visionary: First, if you allow yourself to think the unthinkable, you’ll probably find big opportunities that others miss, precisely because others don’t want to think the thoughts you’re thinking.

 

The second attribute you must have as a visionary is thick skin. Before the fact, your prognostications of doom will elicit skepticism and scorn; after the fact they’ll probably bring out jealousy ,even rage that you profited from others’ misfortune (Paulson is not a popular guy right now).

 

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