Human emotion is a very powerful thing, and it has a way of creeping into daily decision-making in all sorts of ways that we may not understand or even detect.
The ripple effect of this phenomenon can be equally difficult to see yet have an enormous impact.
Consider the global financial crash, now marking its ten-year anniversary. In case you need a refresher, this torrid event — regarded by many economists as the worst financial episode since the Great Depression — started in the fall of 2007, and gained velocity from there. By the time the downward spiral bottomed out a year later, the global banking system was in a full-blown meltdown. In the United States, the epicenter of the crisis, a number of major banks collapsed, along with a string of smaller ones. Massive bailouts, authorized by Congress and overseen by a thicket of federal regulators, soon followed. So did a prolific recession.
Since then, the bull market has returned and the balance sheets of U.S. financial institutions have roared back to good health, aided by an aggressive set of new banking regulations — a residual gift of the crash.
But the primal effects of the crash continue to this day.
Specifically, I’m talking about the emotional impact of the global crisis on the hearts, minds, and pocketbooks of those who lived through that experience. We’re all familiar with the financial impacts of the crash. But how did it manifest, exactly, in a human and emotional sense?
This year’s global investment report by Legg Mason Global Asset Management, a division of Baltimore-based Legg Mason, offers an informed guess. The 2017 report, which surveyed more than 15,000 investors in 17 countries, found that more than half of respondents — 57% — are still “strongly” or “somewhat” influenced by the global crisis. The figure was even higher in the United States — 65%.
Who’s suffering the most?
The answer might surprise you: Millennials, defined as people aged 18–34.
Bear in mind: most Millennials weren’t old enough to be personally impacted by the financial crash. Indeed, the youngest among them would have only been around eight years old at the time; the oldest would have just been out of college, perhaps working at his or her first job.
In other words, this wasn’t the demographic that saw their investment portfolios drained, along with pensions and other retirement plans. But they did witness the suffering their parents went through, up close and personal. They also had a front-row seat to the devastating impacts on their friends’ families and local communities.
According to Legg Mason, that emotional whipsaw is now manifesting itself among Millennials in the form of more conservative investing and less willingness to assume financial risk. “Young adults are now saving like their Depression-era grandparents did, and for similar reasons,” the report observes. This is despite the fact that America is now in the middle of one of the longest bull markets in memory.
Given the large size of this demographic — Millennials recently eclipsed Baby Boomers to become the largest generation in America — the implications are, in a word, enormous. Even more foreboding, Legg Mason says this trend line “could be permanent and could echo through the world’s economies for decades to come.”
On the flip side, Legg Mason’s global report last year (2015) found that older people — older than Millennials, that is — were overwhelmingly bullish. The United States led the way, with 81% of respondents 40+ registering as “optimistic” about future investment prospects. Globally, 75% of respondents were optimistic.
Thoughtfully negotiating the differences between raw information and true wisdom — the former relies on data sets, the latter on a far deeper analysis that includes consideration of many things, including innately human factors like emotion — has never been more important.
Clifford Stoll, an American astronomer, Internet pioneer, and digital sleuth — his famous efforts to trace and identify a hacker in 1986 laid the groundwork for modern digital forensics — has written extensively about this same topic. One of his insights, about the Internet and its growing impact on society and critical thinking, caught my eye recently, and I’d now like to share it:
“Data isn’t information,” Mr. Stoll observed. “Information, unlike data, is useful. What turns the gears in our brains isn’t information, but ideas, inventions, and inspiration. Knowledge — not information — implies understanding. And beyond knowledge lies what we should be seeking: wisdom.”
I could not agree more. At H+K, we refer to this sort of higher-order counsel as the Fifth Seat; it is a cornerstone of our work, in fact. Data is a part of the mix, certainly. But as Mr. Stoll so astutely observed: “Data isn’t information, any more than fifty tons of cement is a skyscraper.” Indeed, the Fifth Seat is about using all of the tools at our disposal, including data sets, and then filtering through the unique lens of human insight and experience to reach the ultimate destination — true wisdom.