Going to Hell on a Best-Fit Curve

Wriston, Walter B.

2007

One of the more difficult mental feats to which we can subject ourselves is trying to recall what we were thinking about a year ago, five years ago and ten years ago. What were the great events, the human triumphs, and impending disasters of these points in time? The velocity of events is so enormous and the rate of change in the world so great that it is hard to recall, out of the endless stream of data, what we were all concentrating on only yesterday. Add to this the fact that most of the great achievements of mankind are won slowly, and are not the stuff of headlines, while the crises--by definition--come upon us suddenly, and it becomes clear why we find it hard to maintain the perspective necessary for a balanced view of what is happening in the world around us at any given moment.

Each of us is the product of a unique personal experience, which remains very limited, even when supplemented by study of past events as described by others. From the perspective of a person situated by fate in the midst of a multinational corporation, I have watched and been involved at least on the margin in many situations which were touted at the time as harbingers of disaster. These events have ranged from the rise of the popular front in France after World War II, which was greeted by many pundits of that day as the inevitable forerunner of an all-Communist Europe, to recurring press reports of today that all less developed countries were or are about to go bankrupt and bring the world's financial system down with them.

Anyone who has been involved in some collective decision, great or small, knows that the outcome is usually determined by a narrow margin, and at least a measure of good luck. But since history is rarely written about what does not happen, most of the literature leaves the reader with a sense that the outcome was inevitable. As George Gilder has put it: "To many people the past seems inevitable and the future impossible. History is seen to have arisen not from unpredictable flows of genius and heroism, but more or less inevitably, from preordained patterns of natural resources and population." Contemporary newscasters select a few events from among the millions occurring on our globe and present them in the 22 minutes on the seven o'clock news. This compression of events is not as distorted as some narrative works which cover the history of a century in two sentences. But it illustrates why it is so hard to learn from history. Regression analyses of historical data rarely validate extrapolation because most history is never written down. It is literally impossible to obtain enough data, not only on events, but upon man's motives, to make an extrapolation valid. The best fit curve, so useful in engineering, cannot be laid out in human affairs because we simply do not have enough data points.

William Irwin Thompson put it this way: "One can say almost anything about human culture now and it will be true, for everything is going on at once...from the disappearance of the nation-state to the explosion of nationalism in Quebec, Wales, Scotland, and the land of the Basques; from the appearance of a new radicalism to the resurgence of a new conservatism; from a planetary miscegenation to a new tribal racism." When one reflects on this summary, which is by no means complete, we see that any account, any number of data points are an oversimplification. This can be illustrated by a recent personal experience--either yours or mine. Each of us who voted in the last election may have had slightly different reasons to pull the lever we did. Despite this, some columnists now tell the world we voted for new leaders with a new agenda, while others, using the same data, assure us that all we did was vote against the incumbent. Before the widespread use of movable type and the printing press, even less data were captured, but the results of extrapolation were about the same. People simply rushed to unwarranted conclusions using less scientific methods.

Our inability to predict what will happen tomorrow with any accuracy is fortunately offset by man's ability to cope with the unpredictable. This is a recurring theme in the long history of mankind, and the major reason we have survived. Since we are the prisoners of what we know, often we are unable even to imagine what we don't know. The most qualified "expert" is, in fact, likely to be the most hidebound, and even the free-wheeling science fiction writer often falls short.

The cartoons of Buck Rogers appearing in the newspapers in the 1930s turned out to be remarkably similar to what American astronauts wore when they actually landed on the moon. No one was greatly surprised by the success of the moon shot. The dream of a moon voyage runs back through history. Indeed, the event itself was widely anticipated. But the dean of science fiction writers, Mr. Asimov, reminds us that not one of the writers had predicted the most remarkable thing about the event--that when it happened the whole world would be watching on television.

The use of a group of experts to study and predict has a long tradition in man's history. Such commissions often have an enviable record of telling us what happened, and why, but a lamentable score when they proceed from there to telling us what will happen next.

In 1486, King Ferdinand and Queen Isabella set up a committee, headed by Fray Hernando de Talavera, to study Columbus' plan of reaching the Indies by sailing west. After four years work the committee reported that such a voyage was impossible because: one, the western ocean is infinite and unnavigable; two, if Columbus reached the Antipodes he could not get back; and three, there are no Antipodes because the greater part of the globe is covered with water, and because St. Augustine says so.

Not long ago, the doom and gloom club of Rome sold a lot of newspapers, and the book, "Small is Beautiful" flirted with the best seller list. Both were repackaging for our century Thomas Malthus' view of the eighteenth. Malthus had no computer, but he managed to extrapolate the future solely from current data. Noting that population increased geometrically, while food supply appeared to increase in arithmetic progression, Malthus hurled some nightmarish statistics at society. In 1798, he gave the world 25 years before it would engage in a grim struggle for survival.

Even as he wrote, what historians would later call the Industrial Revolution was gathering force, and with it a new era of mechanized agriculture, chemical fertilizers and plant genetics which would make scientific farming one of the most productive occupations of our time.

About the only thing that can be stated with any degree of confidence about human events is that whatever we are most concerned about today is a poor guide to tomorrow's problems, except perhaps in an inverse ratio.

Historian Barbara Tuchman explains why Malthus and others like him err: "doomsayers...take a trend and extend it, forgetting that the doom factor sooner or later generates a coping mechanism. You cannot extrapolate any series in which the human element intrudes: history, the human narrative, never follows, and will always fool, the scientific curve."

Pessimism, of course, did not die out with the advance of science and industry. Mankind's great leaps forward carried the doomsayers along with the optimists. Myopia is just as common in the twentieth century as it was in the fifteenth.

Just before Pearl Harbor, learned men drew attention to the fact that Japan depended on the United States for 80 percent of its gasoline, so war was not only unlikely, but impossible. On the other side of the world, an Ambassador was reported in as saying, "Hitler told me that conquest of the western hemisphere by German armies was as fantastic as an invasion of the moon." Charles A. Lindbergh, after inspecting the German air force, was convinced no country could withstand Goering's air superiority and used the radio to urge American isolationism. All of them made the same basic mistake of the doomsayers, even if some of them came out on the optimistic side.

The shock of attack, when it came, was great. It took three years for the tide of that war to turn, and when it did, Allied air power and rapid innovation were the decisive factors. The technical ingenuity that created synthetic rubber and radar during the war played a more important part in its outcome than the development of the atomic bomb.

When at last the war was over many experts predicted a great postwar depression. They were not mere theorists, they had witnessed the first world war, and knew from experience what had to happen next. One major corporation, acting on that belief, did nothing but pile up cash against the inevitable crash which did not come. Even today, that company has not recovered its competitive position.

When the Marshall Plan was proposed in 1947 pessimists predicted it would never work. Politicians warned against pouring more U.S. tax dollars "down the European rat hole," and urged a return to isolationism. Decimated Europe, and some voices in high laces in America, demanded punishment for Germany and Italy, rather than aid. Fortunately, the United States had learned something from the economic catastrophe that followed World War One. We underwrote the recovery of both our enemies and our allies, thus avoiding the burdensome structure of reparations and debt that had doomed economic prosperity after Versailles. The coping mechanism worked.

The Marshall Plan sent a flow of investment capital from America, where it had been created. Despite repeated forecasts that the "dollar gap" was structural and thus beyond the capacity of Europe to redress, a free and expansive system of interdependent markets got under way.

The dimensions of the recovery were astounding. In five years European industrial production rose 248 percent and the dollar gap narrowed by 80 percent.

In 1952, even the optimists failed to predict the economic miracles getting under way in Germany and Japan. To a great extent Germany prospered by rejecting the advice of American "experts" and abolishing controls and confiscatory taxation and letting individual initiative take over. As the global economy embarked upon a period of unprecedented expansion and prosperity, there were still doomsayers who anticipated economic collapse around every corner and perceived each problem as a full-blown crisis. Instant communication systems that sped the world's growth, just as rapidly circulated rumors of its imminent demise.

In the midst of the economic miracle, a new cult of concern was led by an articulate Frenchman. "The American Challenge," of the 60's, described by Servan-Schrieber as breaking down the "political framework" of Europe and plunging Europeans into "total despair"--simply did not materialize. Multinational drive, if anything, reversed direction. American sovereignty in the 80's is no more likely to be lost to foreign investment than was Europe's in the 60's. But the world moves on to new concerns.

The neo-Malthusian "Limits to Growth" crisis that burst upon the 70's with such dismal force, lost credibility as sensible people discovered that the Club of Rome's computer was not programmed to include real-world variables--such as human ingenuity. The Club's follow-up reports, grudgingly admitting that some growth is both necessary and possible, were less publicized. The same was true of Malthus two centuries ago.

Few people know that he revised his thesis in 1803 to allow that man could influence his own fate by, for instance, preventive checks on population growth. Despite his second thoughts, his original Doomsday scenario became so embedded in 19th century thought, that for decades the misery of the poor was considered necessary, and poverty deemed ineradicable. Malthus' projections were said to be partly responsible for William Pitt withdrawing a proposed poor law that might have given the poverty-stricken an economic leg-up. Instead, England instituted the harsh and punitive workhouse system well-known to readers of Charles Dickens.

It is a memorable illustration of how the power of an idea, even when wrong, can influence our actions when endlessly reported. We have a recent example with which we are all familiar.

Everyone here remembers the OPEC oil embargo. This event set off a round of price increases that quadrupled the cost of oil. No thoughtful person could fail to understand that there had occurred a fundamental change in the calculus of world economics. We were told to prepare for a global catastrophe as oil-importing nations would surely fail to meet their increased debts. Armageddon was at hand for industrial civilization. The prevailing anxiety was summed up by a panel of international experts in the quarterly, :

"Whether this (will) result in currency devaluation, in default by banks and businesses...or in political revolution and debt repudiation, the entire structure of world payments, and of trade and financial relationships (will) certainly be fractured."

Nothing of the sort happened. Thanks to freefloating eurodollars, global data nets, and thousands of participants pressing their own economic intents, the world had become one huge financial marketplace--and the market was able to handle it. New OPEC surpluses were recycled through the Euromarket and lent to other countries, especially to LDCs in need of funds to meet increased oil bills. The enormous efficiency of the marketplace handled these transfers with very minor casualties. This gave individual countries the time to adjust their policies to take into account the new realities. Today, almost ten years later, current account deficits of the LDCs in real terms are about the same as they were before the embargo and their international reserves have actually increased.

The real news today is that life is much better for the mass of the world's population than in any period in history. In some of the LDCs the standard of living has doubled in the last ten years. This is a feat that even the most dedicated optimist could not have predicted, and the pessimists have still not recognized.

To observe that mankind has been able to build a continuously better life on this planet is not to say that the world is not complex and often dangerous. The doomsayers have always had their uses, since they trigger the coping mechanism which often prevents the events they forecast. Indeed it was only when the Greeks made critics legitimate that old shibboleths fell and fresh ideas sparked new progress. A century ago, the world's scientific knowledge doubled about every 50 years, in 1960 it doubled every ten years, and currently every five. While no one knows if this rate can continue, it is clearly increasing the quantity of unknown variables. It is the kind of thing that should give pause to the forecasters. Should, but I doubt that it will even slow them down.

Of course, we have another option: We can reject the future altogether and cling to the past. We can emulate members of the flat earth research society, who have never quite given up hope. The society, founded in 1800, still claims nearly two thousand tenacious believers, who all dismissed the moon shot as an "Elaborate Hoax."

All of this reinforces the conclusion of the great historian, Carl Becker, who summed up a lifetime of scholarship with the observation that: "In human affairs nothing is predetermined until after it has occurred." Mindful of his warning, I stand here to tell you that the world is round and that it is much better off economically than many would have us think. Both the optimists and the doomsayers have a role to play, but the heavy lifting will be done by men and women who day in and day out work to advance the cause of mankind. They are the people who have always made the coping mechanism work and moved our society forward. They can safely be relied upon to continue to do so in the future.

 
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  • This document is created from the speech, "Going to Hell on a Best-Fit Curve," written by Walter B. Wriston for the World Affairs Council on 6 March 1981. The original speech is located in MS134.001.004.00027.
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