Field of play
Tomorrow is always uncertain
Before I get into the bold assertion made in the title to this post, I have a question for readers. Do you think the assertion is true? Do you agree that investors are more anxious about the economy than at any time in recent memory?
Another question: Do you think that investors are more or less anxious in July 2025 than they were in January 2025?
I’m not playing games. The rest of this post will make more sense if readers decide where they stand on this question before they read on.
The quote
The bold assertion is a quote from Laurence Fink, Chairman and Chief Executive Officer, Blackrock Inc. Blackrock is the largest asset manager in the world. The quote comes from his 2025 Annual Chairman’s Letter to Investors published January 15, 2025.
Here’s what he wrote: “I hear it from nearly every client, nearly every leader—nearly every person—I talk to: They’re more anxious about the economy than any time in recent memory. I understand why. But we have lived through moments like this before. And somehow, in the long run, we figure things out.”
The pitch
Let’s just think about what he wrote and why he wrote it. The whole letter is a sales pitch made to investors. It is saying that levels of anxiety in the economy are high and that Blackrock can be trusted manage investors assets in the long run.
The message
I suspect that most readers of Laurence Fink’s words quoted will be left thinking, yes, the economic situation is extremely uncertain and there is every reason to be anxious. And he adds: “I understand why”. This suggests they have good reason to be anxious. They will then be primed to accept that Blackrock with its vast experience and expertise will be needed to help see them through in the long run.
The cynic in me
Fink’s message is quite neatly put. He doesn’t simply say that he thinks the economic situation is making him anxious. He says he’s hearing it from everyone else. He’s encouraging a kind of groupthink or social proofing. He tells us that everyone he talks to says there’s more reason for anxiety than in recent memory. He is inviting us to believe it is true.
Social Proofing and Groupthink
The problem of looking to others for direction or confirmation is sometimes called Social Proofing or ‘informational social influence’. Human beings are social creatures. We naturally look to each other for confirmation. This can lead to social cohesiveness. It can also lead to problems such a herd behavior and Groupthink.
The problem we have is that the ‘others’ we look to may be completely wrong. They may have erroneous information. They may be making any number of cognitive or other errors. They may be manipulating us, selling us a bill of goods. By falling into Social Proofing, the investor may unwittingly be led completely astray.
Cognitive ease
In his classic book Thinking Fast and Slow, Daniel Kahneman has a section titled “How to write a persuasive message”. Most readers will know that Kahneman was a psychologist who was awarded the Nobel prize in economics.
Kahneman writes that when you want recipients of your message to believe it is true: “It is entirely legitimate for you to enlist cognitive ease to work to your favor, and studies of truth illusions provide specific suggestions that many help you achieve this goal.” (Kahneman, Thinking, Fast and Slow. 2011) p62
Central to Kahneman’s work was how humans make decisions in face of uncertainty. Cognitive ease occurs when our brains process a message fluently and easily. Laurence Fink’s message enlists cognitive ease; that you’d be in good company if you believed there was good reason for really elevated anxiety. Cognitive ease and social proofing work together.
True or false
But let’s come back to the question whether investors are more anxious about the economy than at any time in recent memory or were in January 2025.
I start with the idea that the economy is and always has been highly uncertain and risky; and with the idea that commentators are constantly talking about heightened uncertainty.
I just happen to believe that in 2025 there is no reason for heightened (i.e. more than normal) anxiety about the economy.
Let’s turn to Warren Buffett. In his 2010 letter to the shareholders of Berkshire Hathaway Warren Buffett wrote:
“Money will always flow toward opportunity, and there is an abundance of that in America. Commentators today often talk of “great uncertainty.” But think back, for example, to December 6, 1941, October 18, 1987 and September 10, 2001. No matter how serene today may be, tomorrow is always uncertain.
Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born. The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential – a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War – remains alive and effective.
We are not natively smarter than we were when our country was founded nor do we work harder. But look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and 1941, America’s best days lie ahead.” (Emphasis added)
Aeneid and Ben Graham
Let me sum up this post with a quote used by Ben Graham from Aeneid: “Through chances various, through all vicissitudes, we make our way …” (Graham, The Intelligent Investor, fourth revised edition. 1973) Opposite title page.
Conclusion
The world is filled with comments about the economy and the stock market. I encourage readers to simply form their own judgements, as I suggested at the beginning of this post. Just because something is said or written by the chairman and chief executive officer of the largest asset manager in the world, doesn’t mean that it is true. We must always ask, where are they coming from. Is this part of a subtle sales pitch? In the case of Blackrock, I think it is.
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For readers wishing to dig deeper into investing in our uncertain world, take a look at these posts:
Putting a world of turmoil in perspective
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You can reach me by email at rodney@investingmotherlode.com
I’m also on Twitter @rodneylksmith
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