Are Overly Optimistic Leaders Forgetting Their History?


Doug Parker, the CEO of American Airlines, recently made a rather bold statement: “I don’t think we’re ever going to lose money again.”

Such a declaration deserves points for confidence, but might get marked down for historical awareness.

Superoptimistic projections after several years of positive results are both typical and something of a contrary indicator. People tend to forecast by extrapolating existing trends: The longer the good times, or a bull market, or an economic expansion, the more people tend to think it will continue forever.

An example: “No Congress of the United States ever assembled on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time,” Calvin Coolidge professed in 1928. Economist Irving Fisher the following year proclaimed that “stock prices have reached what looks like a permanently high plateau.” We all know what happened next. In 1999, at the tail end of a decade in which stock market indexes had already tripled, James K. Glassman and Kevin A. Hassett published their superoptimistic book, Dow 36,000. The market promptly peaked.

Making forever projections would seem to be particularly ill-advised in the airline business, a complex, volatile, and capital-intensive industry whose profitability has been much maligned over the years. The history of mass aviation is filled with bankruptcies, bailouts, and forced mergers. “I think in the entire hundred-year history of the airline industry, the cumulative profits in the U.S. have been approximately zero,” as venture capitalist Peter Thiel put it. That may be difficult to prove, but that sentiment has emerged as something like conventional wisdom.

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