source: the collaborative fund, courtesy of Bob Wallace
Big takeaways about how, and why, people do what they do.
The most important lessons from history are the takeaways that are so broad they can apply to other fields, other eras, and other people. That’s where lessons have leverage and are most likely to apply to your own life.
But those things take some digging to find, often sitting layers below the main story.
The Great Depression began with a stock market crash. October 24th, 1929. That’s the story, at least.
It makes for a good story because it’s a specific event on a specific day. But if you were to go back to October 1929, during the crash, the average American might seem unfazed. Only 2.5% of Americans owned stocks in 1929.
The huge majority of Americans watched in amazement as the market collapsed, and perhaps lost a sense of hope that they, too, might someday cash in on Wall Street. But that was all they lost: a dream. They did not lose any money because they had no money invested.
The real pain came nearly two years later, when the banks started to fail.
Just over 500 U.S. banks failed in 1929. Twenty-three hundred failed in 1931.
When banks fail, people lose their savings. When they lose their savings they stop spending. When they stop spending businesses fail. When businesses fail, banks fail. When banks fail people lose their savings. And so on endlessly.
The stock market crash wasn’t a relevant lesson to the vast majority of Americans who didn’t own stocks in 1929 and likely never would for the rest of their lives. But the bank failures upended the day-to-day lives of tens of millions of Americans. That’s the real story of how the Depression began.
As we look back at the Depression 90 years later, you might think the main lesson is “don’t let the banks fail.” And it’s a good lesson.
But it’s also a lesson that’s not useful to many people today.
I don’t know.
And does it even apply to bank regulators in 2019, when things like FDIC insurance now lower the odds of repeating the kind of consumer bank runs we saw in the 1930s?
Only a little, I’d say.
The point is that the more specific a lesson of history is, the less relevant it becomes. That doesn’t mean it’s irrelevant. But the most important lessons from history are things that are so fundamental to the behaviors of so many people that they’re likely to apply to you and situations you’ll face in your own lifetime.
Let me offer one of those lessons from the Great Depression. I think it’s one of the most important lessons of history:
Lesson #1: People suffering from sudden, unexpected hardship are likely to adopt views they previously thought unthinkable.
One of the most fascinating parts of the Great Depressions isn’t just that the economy collapsed, but how quickly and dramatically people’s views changed when it did.
Continue reading “FIVE LESSONS FROM HISTORY”