This Time, It's Different
The four most dangerous words in investing are: “this time it's different."
—Sir John Templeton
How far can a pithy quote go toward helping you understand something?
Sometimes, a conventional mantra overreaches, and you end up with a useless platitude instead of a chunk of actionable wisdom.
Other times, the quote hits the nail on the head.
Sir John Templeton’s observation here uses financial markets as the lens through which he creates some actionable advice, but it might as well be referring to anything. Templeton himself was a bit of a polymath, finding success in investing, but finding wonder in various different facets of life.
He would have been about 18 years old when the bottom fell out of the stock market in 1929. Over two incredibly harrowing days, investors watched as the Dow Jones Industrial Average dropped by 13% one day, then 12% the next. Within 3 years, the market was down almost 90% from all time highs.
Templeton knew this wasn’t the first horrible crash, either. The appropriately named “Panic of 1907” saw moments of sheer chaos, as the US financial system rocked back and forth on incredibly unsteady footing. JP Morgan stepped in with a mountain of cash and an even bigger supply of bravado from a collection of big bankers, and this only barely kept the entire system from crashing.
This led to the creation of the Federal reserve in 1913, and a gradual feeling that the danger of speculation was largely in the past. This “calm before the storm” reminds me of the tentative, transitory moment of peace I lived through after the end of the Cold War. It was also a chimera.
During the fall of Big Communism, we got to see some pretty strange things happening, like David Hasselhoff headlining the fall of the Berlin Wall:
A new post-Cold-War era was quickly proclaimed. The US was now friends with Russia, and the churning wheels of globalism meant consumer goods in the West would be cheaper than ever before, ushering in a feeling of never-ending cornucopia.
Wars of the sort that happened in the before times wouldn’t happen now. This time, things were different!
Of course, if you’re alive in 2024, you know full well that this didn’t quite work out as advertised.
In many ways, the world feels more dangerous than at some times during the Cold War. I have to give a healthy caveat there because we had moments like the Cuban Missile Crisis, and that time Stanislav Petrov whistled past the nuclear graveyard.
Still, the idea that massive wars are behind us because they would be too costly to fight? That’s not new, and this time isn’t really different.
Likewise, the rise in electronic stock trading has done nothing whatsoever to prevent stock market turmoil and crashes, and while I do give the SEC a lot of credit in preventing even worse fraud, investors keep falling into the same types of traps over and over again.
What are some other examples of times you’ve heard “this time, it’s different?” Are we doomed to repeat the same cycles over and over again, or can we at least smooth those cycles out over time? Can this be done without making things even worse?
Help me think about this today!
The most concerning "this time is different" is the fall of the US as an empire. Not sure if you're familiar with Ray Dalio's Changing World Order Hypothesis (great YouTube video laying it out - https://www.youtube.com/watch?v=xguam0TKMw8&t=1s)
I like to think that we can escape things like this. When we see these cycles playing out as they did in front of our eyes before, it's almost as if part of this universe is continuing forward on a deterministic basis that we cannot control.
I like to think that we can change course, but again there is big danger in saying: "This time is different"
Another one is the AI hype cycle. I fear to say that this time is different, because typically technology cycles tend to far overshoot, there's a correction, and then it steadily builds for years; however, it's possible AI hype is UNDERSTATED in this moment...
My theory is that the mantra "But this time it’s different" rely on our physical perception and memory’s flaws.
By that time we all lived multiple bubbles. When we are in the middle of one, our everyday life turns around it. We inhabit a world of sensations and news. Even if we lived another semblable bubble before, the memory of it dulled what we felt back then. We look at it in retrospect as we would a story in the news.
When we say "this time it’s different" it is simply because we feel the thing as if experiencing it for the first time. It must be different then.
For me it’s akin to falling in love again. You rediscover it as if it was the first time. And you say to your friend "yes I said I would not do it again, but this time: it’s different."