“Back then, we were living through an inflection point, a moment of tension and uncertainty.” – President Biden, Remarks to the United Nations, September 24, 2024
This has been quite an autumn. Geopolitical developments (ICBMs over Ukraine, North Korean soldiers in the fight, Gaza, Lebanon, Iran, Sudan, Argentina, stunning US election results); economic developments (inflation, a runup in US stock prices around the election, slumps in Germany and China, artificial intelligence, driverless cars, SpaceX, Tesla); and cultural developments (Taylor Swift! Elon Musk! Harry & Meghan!). I’m hearing and reading some buzz that we are treading on one of those razor edges in history, an inflection point after which nothing will be the same. Pundits who loudly backed winners or losers in the US elections are especially prone to this. The aim of this post is to invite you to reflect on the difficulty of calling historical inflections, and to take a deep breath. The Thanksgiving holiday in the US is a prime opportunity to do so.
What is an inflection point?
In mathematics, an inflection point is where the rate of change in a curve changes sign—a rising or falling trend begins to slow down or to accelerate. To the public, an inflection point looks like the moment when a trend crests and begins to fall, or hits bottom and begins to rise. Economists, historians, and political scientists cite inflection points where major change occurs, typically leading to a new direction and marking the end of one era and the beginning of another. Oft-cited examples are the assassination of Archduke Franz Ferdinand in 1914 (the start of World War I), bombing of Pearl Harbor in 1941 (triggering the entry of the US into World War II), the collapse of the USSR in 1991, 9/11, and various revolutions (1688, 1776, 1789, 1917, etc.) No official body designates events as inflection points. Rather, they gain prominence by general assent. Therein lies the weakness of the idea. A year or an event can be an inflection point if some people say so—but who says so?
The idea of an inflection point in history is a modern concoction. Frequency of the term, “inflection point,” among published books grew during 1940-1960, and again around 1970, plateaued, and then boomed again in the 2020s.
In the wake of the recent Federal elections in the US, pundits on all sides of the political and economic spectrum assert that major change is on the way. Is it? The right answer is that it is too early to tell. The explanation points to the difficulties of forecasting.
The major problem: inflection points are rarely sudden
It seems that the popular conception of an inflection point is of step-function change: radical and sudden. But history shows that change—even after major events—tends to be gradual. And even the identification of inflection points rarely happens in the instant, but only after some time has passed. This means that the significance of any turmoil one observed this fall is probably too soon to tell. It would take a crystal ball, a skill of perfect foresight to tell whether a particular event will result in major change.
My research on financial crises gives some instructive examples.
- Events that weren’t inflections. On one hand, the collapse of long-Term Capital Management in 1998, a sharp stock market crash on October 19, 1987, and the collapse of Enron and the dotcom bust of 2001 led to some hand-wringing that Armageddon was coming around the corner—but in each case it didn’t occur. The stock market crash of 1929 is popularly thought of as the start of the Great Depression. But an article I co-authored argues that it wasn’t.
- Events that triggered a long reaction. A book by Sean Carr and me explains that the Panic of 1907 was rooted in a series of macroeconomic stressors, most notably the San Francisco earthquake of April 1906. I have argued that the collapse of the USSR in 1990 accelerated after the oil price slump in 1986. The terror attacks of 9/11 fueled 16 years of warfare in Afghanistan and Iraq. And five years later, it looks like the global pandemic of 2020 left long imprints on culture (work from home), politics (populism), and economics (inflation and public debt).
My point is that it is too early to tell whether any of the events of 2024 matter historically.
Why can’t we foresee?
Predicting economic turns is notoriously challenging. Consider five reasons. First, the economy of the US—and indeed, the world—is immense and complex. Forces such as consumer behavior, government policies, technological innovations and other drivers interact in complex ways that are difficult to model. Second, random shocks (such as natural disasters, political changes, inventions) come along to alter economic expectations. Shocks are inherently unpredictable. Third, information is often out-of-date, incomplete, or inaccurate, meaning that even with the best models, garbage in becomes garbage out. Fourth, people behave in ways that deviate from models of rational action: cognitive biases can prompt people to respond bizarrely to news. Fifth, it can take weeks, months, or years for the consequences of events to show an impact. For instance, money supply changes typically show up in inflation only several months later. These challenges mean that even the most sophisticated models and experienced economists can struggle to accurately predict economic turning points.
The story is much the same in politics. In the past few weeks, we have heard some buzz about how this most recent election is fundamentally “realigning,” meaning an event that marks sharp change in ideologies, voting behaviors, political parties, contestable issues, and/or candidates’ attributes. Two examples of realigning elections are
- 1860, which precipitated the Civil War and a Republican Party hegemony lasting generations, and
- 1932, which initiated the New Deal and a 20-year political hegemony by the Democratic Party.
But identifying federal elections as “realigning” is challenging. First, electoral change emerges gradually. Realignments often occur over several election cycles rather than in a single election. This makes it difficult to pinpoint the exact moment when a realignment has occurred. Second, realignments arise from a host of social, economic, and political factors—in 2024, such factors included immigration, inflation, the rise of anti-elitism, and the lingering effects of the pandemic. Such factors make it hard to anticipate realignments. Third, lagging change occurs in politics as well. Gradually voters can abandon former loyalties and ideologies in search of new advocates for their interests. Finally, even the experts disagree on the occurrence of realignments and their causes. Yale professor David Mayhew examined assertions that many different elections were “realigning” and concluded “Electoral politics is to an important degree just one thing after another … Elections and their underlying causes are not usefully sortable into generation-long spans … It is a Rip Van Winkle view of democracy that voters come awake only once in a generation … It is too slippery, too binary, too apocalyptic, and it has come to be too much of a dead end.”[i] And Sean Trende opined, “”Almost none of the theories propounded by realignment theorists has endured the test of time… It turns out that finding a ‘realigning’ election is a lot like finding an image of Jesus in a grilled-cheese sandwich – if you stare long enough and hard enough, you will eventually find what you are looking for.”[ii]
So, how should we approach the future?
Some good advice is contained in Superforecasting: The Art and Science of Prediction, by Philip E. Tetlock and Dan Gardner. In studying the small population of people who forecast future economic results better than the mass of forecasters, Tetlock and Gardner report three sets of attributes) that one would be well advised to adopt today:
- “Philosophic outlook:
- Cautious: Nothing is certain.
- Humble: Reality is infinitely complex.
- Nondeterministic: What happens is not meant to be and does not have to happen.
- Abilities and thinking styles:
- Actively open-minded: Beliefs are hypotheses to be tested, not treasures to be protected.
- Intelligent and knowledgeable, with a “need for cognition”: Intellectually curious, enjoy puzzles and mental challenges.
- Reflective: Introspective and self-critical.
- Numerate: Comfortable with numbers.
- Methods of forecasting:
- Pragmatic: Not wedded to any idea or agenda.
- Analytical: Capable of stepping back from the tip-of-your-nose perspective and considering other views.
- Dragonfly-eyed: Value diverse views and synthesize them into their own.
- Probabilistic: Judge using many grades of maybe:
- Thoughtful updaters: When facts change, they change their minds.”[iii]
So, how should we deal with the unbearable lightness of foresight?[iv]
Be grateful for what we do know. Reach out. Take the long view.
- Avoid agnosticism and cynicism. If we have no crystal ball foretelling major change from the events of 2024, some might argue that we should give up any vigilance or engagement about such change. This is the wrong inference. The fact that foresight is imperfect should prompt healthy humility and realism, not rejection of what can be knowable and acted upon. Maya Angelou said, “There is nothing so pitiful as a young cynic because he has gone from knowing nothing to believing nothing.”
- Get grounded. Reach out to others. The research of Tetlock and Gardner emphasizes an insight echoed in a great deal of research that there is wisdom in a diverse circle of acquaintances. Get out of your echo chamber of cable news, the Internet, and pundits who profit from inflaming public opinion rather than informing. Widen your circle of acquaintances and listen to them.
- Take the long view. Change is generally gradual, not sudden. The fullness of time reveals the true inflection points, as experience accumulates and perspective broadens. I have argued in this blog and elsewhere that studying history helps to build one’s long view.
- Get a healthy attitude. Fight panic. Take a deep breath. Remember that fear and outrage can be addictive.[v] Consider what is going well, even in your depths of apprehension. Think about what you can be grateful for. My favorite US holiday of the year, Thanksgiving, occurs this week. If the turmoil of recent events has preoccupied you, then spend the holiday focused on the good things that anchor you. Perhaps health, family, friends, a dog or cat, the smell of coffee in the morning. The Mayo Clinic says that expressing gratitude can improve your mental and physical health. President Abraham Lincoln in 1863, just after the nadir of the Civil War, proclaimed a National Day of Thanks—an excerpt[vi] with which I conclude and extend wishes for the day:
The year that is drawing towards its close, has been filled with the blessings of fruitful fields and healthful skies. To these bounties, which are so constantly enjoyed that we are prone to forget the source from which they come, others have been added, which are of so extraordinary a nature, that they cannot fail to penetrate and soften even the heart …In the midst of a civil war of unequalled magnitude and severity, which has sometimes seemed to foreign States to invite and to provoke their aggression, peace has been preserved with all nations, order has been maintained, the laws have been respected and obeyed, and harmony has prevailed everywhere except in the theatre of military conflict; while that theatre has been greatly contracted by the advancing armies and navies of the Union.
Needful diversions of wealth and of strength from the fields of peaceful industry to the national defense, have not arrested the plough, the shuttle or the ship; the axe has enlarged the borders of our settlements, and the mines, as well of iron and coal as of the precious metals, have yielded even more abundantly than heretofore. Population has steadily increased, notwithstanding the waste that has been made in the camp, the siege and the battle-field; and the country, rejoicing in the consciousness of augmented strength and vigor, is permitted to expect continuance of years with large increase of freedom.
No human counsel hath devised nor hath any mortal hand worked out these great things. …It has seemed to me fit and proper that they should be solemnly, reverently and gratefully acknowledged as with one heart and one voice by the whole American People. I do therefore invite my fellow citizens in every part of the United States, and also those who are at sea and those who are sojourning in foreign lands, to set apart and observe the last Thursday of November next, as a day of Thanksgiving … with humble penitence for our national perverseness and disobedience … to heal the wounds of the nation and to restore it as soon as may be consistent with … enjoyment of peace, harmony, tranquility and Union.
[i] Mayhew, David R. Electoral Realignments: A Critique of an American Genre. 2004. (ISBN 0-300-09336-5), pages 147 and 152.
[ii] Sean Trende, 2012. The Lost Majority, New York, NY: St. Martin’s Press: Kindle Edition locations 231 and 238.
[iii] Tetlock, Philip E., and Dan Gardner, 2016. Superforecasting: The Art and Science of Prediction, New York, NY: Crown, page 19.
[iv] Pardon my riff on the title of a movie I liked, The Unbearable Lightness of Being.
[v] From Copilot AI: “Both emotions can trigger powerful responses in the brain, similar to other forms of addiction. Fear activates the body’s fight-or-flight response, releasing adrenaline and other stress hormones. This can create a heightened state of alertness and energy, which some people might find exhilarating or even addictive. Outrage, on the other hand, can produce a rush of dopamine, the same neurotransmitter involved in pleasure and reward. This can make the feeling of outrage rewarding in the short term, despite its negative consequences. Outrage can also foster a sense of moral superiority and community among those who share the same feelings, which can be socially reinforcing. Both emotions can create a cycle where individuals seek out situations that provoke these feelings, leading to a kind of emotional dependency. Understanding this can help in developing healthier ways to manage and respond to these powerful emotions.”
[vi] Source of Lincoln’s Thanksgiving proclamation: American Battlefield Trust, https://www.battlefields.org/learn/primary-sources/abraham-lincolns-proclamation-thanksgiving.