Business writer Morgan Housel is best known for his first book, The Psychology of Money, which remains high on Amazon’s list of business bestsellers more than three years after it was published.
Housel’s second book, Same as Ever, came out at the end of last year. Like Psychology of Money, he strings together an impressive array of anecdotes and quotations from wise people to support his observations about the way the world works, which this time out combine to form a helpful guide for how to use history to inform the present.
So far, Amazon buyers are keener on what Housel has to say about money. While the new book made the New York Times bestseller’s list for business in December, it appears to be fading fast. Housel, who got his start as a columnist at The Motley Fool and The Wall Street Journal, will understand why. The reading public has been so conditioned to respond to novelty that even a famous writer will struggle to get people to read a catalogue of the things that never change.
The past isn’t prologue. Shopify isn’t destined to fail because Nortel Networks and Research in Motion failed. There are echoes throughout time because human behaviour changes so slowly. We respond to things today in much the same way our ancestors did thousands of years ago. That fact makes Housel’s book a useful guide for anyone who cares to get an edge in this era of technological, demographic and geopolitical disruption. It’s going to be chaotic. History is there to help.
Penguin Random House sent me a copy of Same as Ever at about the same time The Logic was ramping up work on our year-in-review and year-in-preview packages. It’s difficult to assess Canada’s prospects for 2024. The economy could slide into a mild recession before the winter is over, but that would be much better than what most forecasters were contemplating a year ago. In other words, all things considered, the economy is fine.
Fine is pretty good compared with where we’ve been, and the damage that the combination of surging inflation and a historic interest-rate spike might have caused. Though the worst-case scenario—a proper recession that results in a spike in unemployment—remains a possibility, with inflation easing and central banks talking about interest-rate cuts, a soft landing is the most probable outcome.
But how do you feel about fine being as good as it gets?
Canada is a longshot to emerge from the disruption ahead as one of the winners. Maybe the all-in bets that the federal government, Ontario and Quebec made on electric vehicles in 2023 will pay off like the unpopular politicians who placed them have promised. Maybe the oilpatch has ambitions grander than pumping every last barrel. Maybe regulators in the United States and Europe will force Amazon, Alphabet, Meta and Microsoft to make room for AI upstarts such as Toronto’s Cohere and Quebec City’s Coveo. Maybe Beijing and Washington will call a truce in their Great Power struggle, NATO will provide Ukraine with the weapons and technology it needs to push Russia’s army off its territory and someone will find a path to lasting peace in the Middle East.
You’ll notice that Canada’s prospects depend on things largely outside its control. Even the bet on electric vehicles is contingent on vehicle and battery makers whose ultimate allegiance is to other countries. But that’s what short-term thinking and complacency gets you. It turns out you need more than free-trade agreements to facilitate trade—you need a fully funded military, too. Technology is power and for too long Canada shrugged as its best tech was commercialized elsewhere. Shopify is widely admired, but it says something about Canada’s ambitions when its entry in the global tech race is a company that makes it easier to buy stuff.
How did we end up here? Housel has this observation in a chapter about how a little stress makes you stronger: “When everything is great—when wealth is flush, when the outlook is bright, when responsibility is low, and threats appear gone—you get some of the worst, dumbest, least-productive human behaviour.”
That’s a pretty good description of Canada over the past couple of decades. We called ourselves a “trading nation,” even though about three-quarters of that trade amounted to moving goods to the world’s biggest economy. We ignored the longer-term implications of climate change and assumed short-term worry about peak oil would be enough to make us an energy superpower. We assumed Washington would handle global security on behalf of the world’s democracies and underfunded our military. We avoided the worst of the global financial crisis, then took advantage of low interest rates to orchestrate a housing boom that rivalled the one that nearly caused a depression in the United States.
It became too easy for companies and their shareholders to make money in Canada. The profit margins of non-financial companies here were close to nine per cent of operating revenue in 2022, compared with about four per cent in the late 1980s, according to calculations by CIBC economists Benjamin Tal and Ali Jaffery. Those margins likely were influenced more by global trends than by C-suite decisions. Tal and Jaffery estimate that muted wage growth, globalization and the ability to get away with outsized markups were the biggest factors. All those trends have now reversed, meaning profits will come harder in the future.
“Canadian firms will have no choice but to make drastic changes,” Tal and Jaffrey said in a report they published last month. The country’s most important companies have provided little evidence lately that they are up for leading any kind of charge. Maybe that’s because they haven’t had to.
Housel’s collection of historical anecdotes suggests innovation requires friction. For example, U.S. productivity surged during the Great Depression, as did high school graduation rates, because there were no jobs for teenagers. The result, according to Housel: the U.S. won the Second World War because it entered the 1940s as an industrial powerhouse with a newly enlarged pool of educated workers.
“The fear, the pain, the struggle are motivators that positive feelings can never match,” he wrote. Let’s hope that’s the same as ever, because the years ahead will be scary and painful.
Kevin Carmichael is The Logic’s economics columnist and editor-at-large. He has spent more than two decades covering economics, business and finance for outlets including Bloomberg News, The Globe and Mail and the Financial Post, where he also served as editor-in-chief.
