Save Like A Pessimist, Invest Like An Optimist

Sep 2, 2020 by Morgan Housel

In 1984 Jane Pauley interviewed 28-year-old Bill Gates. “Some people call you a genius,” Pauley said. “I know that might embarrass you but …” Gates deadpans. No emotion. No response.

“OK, I guess that doesn’t embarrass you,” Pauley says with an awkward laugh.  Again, zero reaction from Gates.

Of course he was a genius. And he knew it.

Gates dropped out of college at 19 because he thought a computer should be on every desk in every home. You only do that when you have relentless confidence in your abilities. Paul Allen once wrote about the first time he met Bill:

You could tell three things about Bill Gates pretty quickly. He was really smart. He was really competitive; he wanted to show you how smart he was. And he was really, really persistent.

But there was another side of Bill Gates. It was almost paranoia, virtually the opposite of his unshakable confidence.

From the day he started Microsoft he insisted on always having enough cash in the bank to keep the company alive for 12 months with no revenue coming in. In 1995 he was asked by Charlie Rose why he kept so much cash on hand. Things change so fast in technology that next year’s business wasn’t guaranteed, he said, “Including Microsoft’s.” In 2007 he reflected:

I was always worried because people who worked for me were older than me and had kids, and I always thought, ‘What if we don’t get paid, will I be able to meet the payroll?’”

Optimism and pessimism can coexist. If you look hard enough you’ll see them next to each other in virtually every successful company and successful career. They seem like opposites, but they work together to keep everything in balance.  What Gates seems to get is that you can only be an optimist in the long run if you’re pessimistic enough to survive the short run.

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