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Any feedback is welcome and greatly appreciated.

Introduction

Negative thinking in the context of this essay means focusing on negative factors rather than positive factors when evaluating options and making decisions. While positive thinking identifies what works and duplicates them, negative thinking determines what does not work and avoids them. For example, a negative thinking basketball coach prioritizes defense over offense. The emphasis is on conceding less points instead of scoring more. The popular maxim “defense wins championships” manifests the application of negative thinking in basketball. In this essay, I hope to analyze this rather counterintuitive, underdiscussed framework of thinking in three parts, (1) its logical basis, (2) its earnest supporters, and (3) its everyday applications.

Logical Basis

Logically speaking, negative thinking is sounder than positive thinking, because negative thinking is based on deduction while positive thinking is based on induction. The difference between deduction and induction is that, if the premises are true, the conclusion of a deductive inference must be true while the conclusion of an inductive inference is only probable. In other words, negative thinking delivers definitive conclusions while positive thinking returns only probable results.

A prime use case of negative thinking in philosophy is Karl Popper’s falsification theory. Popper is commonly regarded as one of the best philosophers of science. His main contribution is how to demarcate science from non-science. The criterion is falsifiability. Scientific theories or propositions must be falsifiable by possible empirical evidence. Albert Einstein’s relativity theory is science, because it contains implications that, if tested false, would have falsified the theory. On the other hand, Sigmund Freud’s psychoanalysis is not science, because it is not falsifiable. Freud’s theory is compatible with any empirical observation of the human mind. Deductive reasoning forms the logical foundation of Popper’s falsification theory. If a scientific theory is true, then its implications should all be true. Reversely, if an implication turns out to be false, the theory must be false. 

Contrary to negative thinking, positive thinking suffers from the so-called “problem of induction.” Induction is a method of reasoning in which a general principle is drawn upon a series of observations. For example, given weather records showing that it has rained every year in New York City, one can, by inductive reasoning, claim that it rains in New York City in any given year. David Hume, a prominent Scottish philosopher, argues that such enumerative induction has no rational basis, because there’s always the possibility to discover counter-examples. In the 16th century, as all available observations of swans found them to be white in Europe, it was widely accepted that swans were white. However, when a team of Dutch explorers discovered black swans in Western Australia, the white swan theory was obliterated. Similarly, the New-York-City-rains theory will hold true until the year that it does not rain.

There exists a permanent asymmetry at the base level between negative and positive thinking. It is logically impossible to validate a theory or option by reference to examples, but a single counter-example conclusively denies the corresponding theory or option. Proving something is hard. Disproving something is easy. Positive thinking is indecisive. Negative thinking is conclusive. Try to think of something that definitely will happen tomorrow, for example, the sun will rise. Then think of something that definitely will not happen, such as Julius Caesar will not resurrect. Which one is more likely? From a pure logical point of view, negative thinking is more certain than positive thinking.

Earnest Supporters

Negative thinking has many advocates in addition to Popper and Hume. Aristotle argues in the Nichomachean Ethics, “not pleasure, but freedom from pain, is what the wise man will aim at.” Goethe compares negative thinking with positive thinking in the Elective Affinities and believes that “to desire to get rid of an evil is a definite object, but to desire a better fortune than one has is blind folly.” Arthur Schopenhauer asks his readers to “direct our aim to, not toward securing what is pleasurable…but toward avoiding [life’s] innumerable evils.” The quote by Aristotle is also deemed by Schopenhauer to be “the first and foremost rule for the wise conduct of life.” 

These brilliant minds encourage avoiding pain rather than seeking pleasure because they are thinking negatively. For example, being healthy is a pleasure while being unhealthy is a pain. You may have countless instances demonstrating why you are healthy. Your body mass index is perfect. Your doctor admires your annual physical exam results. You finish half-marathons under one and a half hour with ease. But the aggregation of all these instances cannot logically establish that you are healthy. There could be a hidden complication that neither you nor your doctor or the most advanced medical machine knows. On the other hand, the evidence of the existence of any problems conclusively confirms that you are not healthy. Therefore, instead of maximizing “being healthy”, one should minimize “being unhealthy.”

More recently, Charlie Munger and Jeff Bezos are also earnest supporters of negative thinking. One of Munger’s most famous quotes is that “all I want to know is where I’m going to die, so I’ll never go there.” Compared to going after how he would live, Munger is more interested in staying away from where he would die. Munger also explicitly follows Aristotle’s life principle. He claims “some people collect stamps. I collect insanities and absurdities. Then I avoid them, and it’s amazing how well it works.”

When Jeff Bezos was asked why he decided to leave Wall Street to start Amazon, Bezos explained that he based his decision on a “regret minimization framework.”  Bezos’ decision-making was aimed to minimize future regret instead of pursuing “wine, women and sun”. Again, avoiding pain instead of seeking pleasure.

Everyday Applications

Given the complexity of this world, it is very likely to suffer from the “one more rule.” No matter how complex a model or an analysis is, there is always one more dataset or metric that can be added to the analysis to make it more complete. It is impossible to include everything. This is because one is thinking positively, not negatively. It is irrational to look for positive proof of why something might work. Find out what might not work and avoid them.

The primary manifestation of negative thinking in sports is a defense first mindset. In investing, it is not losing money. Warren Buffet’s fundamental principle is, “Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.” Stephen Schwarzman in his book What It Takes cites “don’t lose money” as the number one rule at Blackstone. Schwarzman demands his team to objectively assess the risks of every opportunity before making investment decisions. The optimal way to make more money is not losing money? Odd, but true. The idea is to discourage reckless risk-taking for potential reward. A negative thinking investor seeks to minimize his loss rather than maximize his gain. Profit-seeking and risk-taking can be illusional and self-reinforcing. Long-Term Capital Management was a successful business making billions until it wasn’t. 

Thinking negatively does not mean to entirely ignore positive factors. Similar to the debate between materialism and idealism, the key is to distinguish the primary from the secondary. If stuck between two promising stocks, try to calculate the downsides and pick the one that is less likely to lead to liquidation. Only if the negative factors are indistinguishable, then take a look at the positives and choose the one with higher expected value.

In investing and in life alike, given a set of options, a rational mind must deploy the process of elimination. Good options can turn out to be bad, but bad options are much less likely to become good, unless prior knowledge is mistaken or has changed. Instead of figuring out the best option in the set, identify the worst and eliminate. Still left with more than one choice after rigorous elimination? Leave the rest to chance and pick randomly. Note the magic of negative thinking. Now you can attribute all your successes to chance and all your failures to your lack of ability. After weeding out the negatives, you honestly do not know exactly which element makes an option superior. Although some explanations can always be made ex post, hindsight is 20/20 after all. On the other hand, the failure is on you for being unable to realize the negating factor that would have steered you away.

Conclusion

Sherlock Holmes teaches Watson that “when you have eliminated the impossible, whatever remains, however improbable, must be the truth.” Given an option set, positive thinking can trick you into making biased decisions, while negative thinking enables you to eliminate bad choices, and whatever remains is more likely to thrive.

(open beta v0.2)

Any feedback is welcome and greatly appreciated.

Introduction

Negative thinking in the context of this essay means focusing on negative factors rather than positive factors when evaluating options and making decisions. While positive thinking identifies what works and duplicates them, negative thinking determines what does not work and avoids them. For example, a negative thinking basketball coach prioritizes defense over offense. The emphasis is on conceding less points instead of scoring more. The popular maxim “defense wins championships” manifests the application of negative thinking in basketball. In this essay, I hope to analyze this rather counterintuitive, underdiscussed framework of thinking in three parts, (1) its logical basis, (2) its earnest supporters, and (3) its everyday applications.

Logical Basis

Logically speaking, negative thinking is sounder than positive thinking, because negative thinking is based on deduction while positive thinking is based on induction. The difference between deduction and induction is that, if the premises are true, the conclusion of a deductive inference must be true while the conclusion of an inductive inference is only probable. In other words, negative thinking delivers definitive conclusions while positive thinking returns only probable results.

A prime use case of negative thinking in philosophy is Karl Popper’s falsification theory. Popper is commonly regarded as one of the best philosophers of science. His main contribution is how to demarcate science from non-science. The criterion is falsifiability. Scientific theories or propositions must be falsifiable by possible empirical evidence. Albert Einstein’s relativity theory is science, because it contains implications that, if tested false, would have falsified the theory. On the other hand, Sigmund Freud’s psychoanalysis is not science, because it is not falsifiable. Freud’s theory is compatible with any empirical observation of the human mind. Deductive reasoning forms the logical foundation of Popper’s falsification theory. If a scientific theory is true, then its implications should all be true. Reversely, if an implication turns out to be false, the theory must be false. 

Contrary to negative thinking, positive thinking suffers from the so-called “problem of induction.” Induction is a method of reasoning in which a general principle is drawn upon a series of observations. For example, given weather records showing that it has rained every year in New York City, one can, by inductive reasoning, claim that it rains in New York City in any given year. David Hume, a prominent Scottish philosopher, argues that such enumerative induction has no rational basis, because there’s always the possibility to discover counter-examples. In the 16th century, as all available observations of swans found them to be white in Europe, it was widely accepted that swans were white. However, when a team of Dutch explorers discovered black swans in Western Australia, the white swan theory was obliterated. Similarly, the New-York-City-rains theory will hold true until the year that it does not rain.

There exists a permanent asymmetry at the base level between negative and positive thinking. It is logically impossible to validate a theory or option by reference to examples, but a single counter-example conclusively denies the corresponding theory or option. Proving something is hard. Disproving something is easy. Positive thinking is indecisive. Negative thinking is conclusive. Try to think of something that definitely will happen tomorrow, for example, the sun will rise. Then think of something that definitely will not happen, such as Julius Caesar will not resurrect. Which one is more likely? From a pure logical point of view, negative thinking is more certain than positive thinking.

Earnest Supporters

Negative thinking has many advocates in addition to Popper and Hume. Aristotle argues in the Nichomachean Ethics, “not pleasure, but freedom from pain, is what the wise man will aim at.” Goethe compares negative thinking with positive thinking in the Elective Affinities and believes that “to desire to get rid of an evil is a definite object, but to desire a better fortune than one has is blind folly.” Arthur Schopenhauer asks his readers to “direct our aim to, not toward securing what is pleasurable…but toward avoiding [life’s] innumerable evils.” The quote by Aristotle is also deemed by Schopenhauer to be “the first and foremost rule for the wise conduct of life.” 

These brilliant minds encourage avoiding pain rather than seeking pleasure because they are thinking negatively. For example, being healthy is a pleasure while being unhealthy is a pain. You may have countless instances demonstrating why you are healthy. Your body mass index is perfect. Your doctor admires your annual physical exam results. You finish half-marathons under one and a half hour with ease. But the aggregation of all these instances cannot logically establish that you are healthy. There could be a hidden complication that neither you nor your doctor or the most advanced medical machine knows. On the other hand, the evidence of the existence of any problems conclusively confirms that you are not healthy. Therefore, instead of maximizing “being healthy”, one should minimize “being unhealthy.”

More recently, Charlie Munger and Jeff Bezos are also earnest supporters of negative thinking. One of Munger’s most famous quotes is that “all I want to know is where I’m going to die, so I’ll never go there.” Compared to going after how he would live, Munger is more interested in staying away from where he would die. Munger also explicitly follows Aristotle’s life principle. He claims “some people collect stamps. I collect insanities and absurdities. Then I avoid them, and it’s amazing how well it works.”

When Jeff Bezos was asked why he decided to leave Wall Street to start Amazon, Bezos explained that he based his decision on a “regret minimization framework.”  Bezos’ decision-making was aimed to minimize future regret instead of pursuing “wine, women and sun”. Again, avoiding pain instead of seeking pleasure.

Everyday Applications

Given the complexity of this world, it is very likely to suffer from the “one more rule.” No matter how complex a model or an analysis is, there is always one more dataset or metric that can be added to the analysis to make it more complete. It is impossible to include everything. This is because one is thinking positively, not negatively. It is irrational to look for positive proof of why something might work. Find out what might not work and avoid them.

The primary manifestation of negative thinking in sports is a defense first mindset. In investing, it is not losing money. Warren Buffet’s fundamental principle is, “Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.” Stephen Schwarzman in his book What It Takes cites “don’t lose money” as the number one rule at Blackstone. Schwarzman demands his team to objectively assess the risks of every opportunity before making investment decisions. The optimal way to make more money is not losing money? Odd, but true. The idea is to discourage reckless risk-taking for potential reward. A negative thinking investor seeks to minimize his loss rather than maximize his gain. Profit-seeking and risk-taking can be illusional and self-reinforcing. Long-Term Capital Management was a successful business making billions until it wasn’t. 

Thinking negatively does not mean to entirely ignore positive factors. Similar to the debate between materialism and idealism, the key is to distinguish the primary from the secondary. If stuck between two promising stocks, try to calculate the downsides and pick the one that is less likely to lead to liquidation. Only if the negative factors are indistinguishable, then take a look at the positives and choose the one with higher expected value.

In investing and in life alike, given a set of options, a rational mind must deploy the process of elimination. Good options can turn out to be bad, but bad options are much less likely to become good, unless prior knowledge is mistaken or has changed. Instead of figuring out the best option in the set, identify the worst and eliminate. Still left with more than one choice after rigorous elimination? Leave the rest to chance and pick randomly. Note the magic of negative thinking. Now you can attribute all your successes to chance and all your failures to your lack of ability. After weeding out the negatives, you honestly do not know exactly which element makes an option superior. Although some explanations can always be made ex post, hindsight is 20/20 after all. On the other hand, the failure is on you for being unable to realize the negating factor that would have steered you away.

Conclusion

Sherlock Holmes teaches Watson that “when you have eliminated the impossible, whatever remains, however improbable, must be the truth.” Given an option set, positive thinking can trick you into making biased decisions, while negative thinking enables you to eliminate bad choices, and whatever remains is more likely to thrive.