The rise of an explicit belief in irrationality like this one is troubling on many levels. An essential element of a modern democracy is the wide dispersal of knowledge among a multitudes of experts. But there is reason to think that respect for science has been diminishing over the past decades. References to the “scientific method” peaked in news and newspapers in the 1940s, and are lower today. Instead, we have the phrases “gut feeling,” “visceral feeling,” and “trust your gut,” which are proliferating. None of these phrases had any currency before 1960, and they have been rising, going viral ever since.
This “gut feeling” narrative is not conterminous with the current bull market in its entirety, but seems to be an important factor permitting the United States economy and markets to move ahead amid widely reported fears of a coming global recession.
Long before the Trump presidency we saw milestones in public awareness of thinking that comes “from the gut.” For example, there is the 2001 best seller by Jack Welch, “Jack: Straight from the Gut,” (written with John A. Byrne) about his successes as chief executive of General Electric from 1981 to 2001. Mr. Welch described his management style as intuitive, and not relying on experts, whose analyses he viewed as often phony. Mr. Welch says, for example: “I crossed out the payback analysis on his last chart. I drew an “X” over the transparency and scrawled the word Infinite to make the point that the returns on our investment would last forever. I meant it.” Whether Mr. Welch’s supposed genius has been called into question by the sharp drop in share value of G.E. after he left the company is a matter of debate.
The 1997 book “Rich Dad Poor Dad, written by Robert Kiyosaki, with Sharon Lechter, described two fathers (one his ow, the other a friend’s). The book’s publisher, Plata Publishing, reported that the book sold nearly 40 million copies as of 2017. His own, poor dad had college degrees, deferred to authority and told his son that many things were impossible. The uneducated but rich dad told him he should think about how he can make his dreams a reality. Donald Trump comes across to many many people rather like the rich dad. (Kiyosaki and Trump have co-authored two books, in 2006 and 2011.)
Then there is the 2011 book “Steve Jobs,” by Walter Isaacson, which described the co-founder of Apple this way: “Jobs was more intuitive and romantic and had a greater instinct for making technology usable, design delightful, and interfaces friendly.”
We are being saturated with these kinds of narratives today: describing inspired young people, some of whom drop out of college, who surpass overly polite conformists pursuing dull, bureaucratic work lives. For people who buy into this dream, one simple step is to avoid the mistake of missing out, by acting like a rich person and buying stocks.
This is obviously not an explanation for the level of the entire market, but it is surely part of it.