Last year, after Silicon Valley Bank collapsed, we started getting texts and calls from people urging us to write about another threat — the impending meltdown in commercial real estate. Office buildings, in particular, are declining in value at historical rates, thanks to a storm of reduced demand (WFH) and rising interest rates. As a result, billions in debt is based on book values that are grossly out of step with market conditions. The prediction? When those loans come due, debtors will default and creditors will be crushed, triggering a crisis 10 times worse than the SVB mess. That math was right when the prediction was made, but predictions make their own math. The Fed and FDIC were also predicting a crisis, so it now appears we may avert one: This week the Wall Street Journal reports that “Banks Believe They Are Well-Prepared for Commercial Real Estate Fallout.”
Anxiety Brain
The human brain has extensive circuitry devoted to imagining, and worrying about, the future. The seat of memory, the hippocampus, extrapolates possible futures from our experience of the past. Our default-mode network — the components of the brain most active when we’re not focused on a specific task — includes the brain regions concerned with the past and the future. Whenever we aren’t asking our brains to do something specific, they default to contemplating the future. And worrying about it. An overactive default-mode network is associated with anxiety and depression, but a healthy measure of anxiety is one of humanity’s most valuable adaptations, comparable to language and the opposable thumb. NYU neuroscientist Joseph LeDoux says anxiety is “the price we pay for the ability to imagine the future.”
Having kids is a lifelong lesson in imagining the future. And anxiety. Several years ago, when my family was on a safari, my oldest son contracted salmonella. An hour into a game drive, he needed to go to the bathroom, urgently. He immediately began jogging away from the jeep in search of privacy. I ran after him — my hippocampus has seen too many TikToks that involve adorable animals seeking midafternoon refreshment from a lake in the savannah only to be taken for a swim by a large semiaquatic reptile.
What I remember most distinctly is how compelled I was, how visceral and present the fear of predators felt. Nature has bred me to worry, because eventually, there will be a lion. It’s good to be worried, but the problem is modulating — did I turn the stove off? I (no joke) worry about this, despite not knowing how to actually turn the stove on.
Unexpected
A million years of evolution and an overly dramatic media have sensitized us to imaginary plane crashes (the average American is 2,200 times more likely to die in a car accident than in a plane crash) and unlikely child abductions (28% of parents are “very worried” about a risk that is “effectively zero”). We are well armored against an array of vanishingly unlikely but cinematically potent threats. NASA recently spent $325 million to nudge an asteroid off course, as part of an ongoing effort to protect us from the one-in-a-million chance of a catastrophic asteroid strike on our home planet. I wrote about Daniel Kahneman a few weeks ago — his work illuminated many of the cognitive biases that sometimes misdirect our healthy sense of anxiety toward the wrong risks.
Since anxiety leads to preparedness, it’s usually the things you don’t worry about that get you. In early 2020 I was worried about a lot of things, from the occupant in the White House to preparing for a talk at SXSW. I dismissed the first reports of the coronavirus as hysteria. But the world was unprepared, lacking the equipment and training for a pandemic. The exceptions? A few nations with recent experience battling SARS, notably Singapore, were more anxious, and thus more prepared.
Over/Under
Nature programmed us to be anxious; it’s key to how we got here. But we shouldn’t let our instincts control every choice we make around what to worry about and how to respond. Our anxiety is a powerful tool, weakly tethered to an unreliable targeting system. Uncorrected by rational thought, we tend to worry too much about cinematic but unlikely risks (asteroids, sentient robots) and not enough about problems that are hard to visualize (viruses, blackouts). A good rule of thumb is that if Hollywood has made more than one movie about a threat, it’s probably not something we need to be scared of.
Following are some places we believe we may have over/underprepared:
Overprepared: In anticipation of the commercial real estate crisis, banks have been padding their loan reserves for months, sacrificing earnings for stability. The banks aren’t going into this correction blind, but their anxiety is ring-fencing the damage to some of the wealthiest people on the planet: commercial real estate owners. Some upheaval in the market is good — it creates churn and gives new entrants opportunities. We need more churn and disruption, as we’ve had a 15-year-long bull market after the largest bailout in history artificially elevated prices. There’s a decent chance, if the drawdown was a shock, office owners might claim this was a black swan event that warranted a bailout. However, the public can’t ignore the $7 trillion in debt we issued during the last bailout.
Underprepared: Whatever they’re worth, those office buildings aren’t much use to anyone without electricity, and one of the looming threats to our economy that doesn’t get enough attention is the state of our electrical grid. The average transformer is 40 years old; moreover, our grid was built for a more stable climate and a world run on fossil fuels. The massive Texas blackouts in 2021 cost the state $90 billion and killed 240 people. Since then, the state has mainly built additional natural gas backup generators, doubling down on the system that didn’t work in 2021. Nationally, Biden’s infrastructure bill included some funding for grid improvements, but likely not enough.
Overprepared: Fortress America is well defended against … whom exactly? Our trillion-dollar military ensures that no adversary can descend on the homeland. Our globe-spanning navy, air superiority, and premier fighting force (2.9 million strong) is insurmountable for a rival kinetic force. Experts say 100 nuclear weapons is the most a nation could have any feasible use for. We’ve got over 5,000, maintained at a cost of $40 billion per year.
Underprepared: The U.S. hasn’t been attacked by another nation since German U-boats landed saboteurs in Florida and New York in 1942, and it’s been nearly a quarter-century since the terror attacks of 9/11. But while we continue to build defenses against foreign invaders, there were 231 incidents of domestic terrorism between 2010 and 2021. Synagogue shooters, cop killers, and election deniers are daily threats we fight with patchwork programs and the deadweight of denial and appeasement. Politicians are held captive by the gun lobby and unwilling to pursue criminals who might vote for them. There are few more discouraging signals about the state of our nation than the emergence of insurrectionists, and other agents of chaos, as a voting block that warrants representation in government.
The Department of Homeland Security and the FBI don’t properly track white supremacist and anti-government violence and threats, leaving Congress unable to assess the effectiveness of counterterrorism agencies and to see whether they are making any discernible progress in combating domestic terrorism.
Overprepared: James Cameron said it would happen in 1997 (specifically, at 2:14 a.m. Eastern Time, on August 29), and he’s not the last to overestimate the risk of sentient AI. ChatGPT is impressive, and there are real economic benefits flowing from LLMs, but the notion that a technology that only recently mastered creating images of hands is going to start thinking for itself and orchestrate societal collapse is science fiction … with an emphasis on fiction. The loudest AI doomsayers created these models. It is techno-narcissism: I have created the singular “thing” that will create/save humanity, and now’s the time to convince regulators that I care … really care. Skynet was taken out by a single mom (twice!). I think we got this.
Underprepared: AI doesn’t have to be sentient to pose a threat — sentient actors are the threat. The 2024 election is going to be the World Cup of online disinformation, as AI supercharges these tactics. Social media bots sound like real people and can engage one-on-one in real time with millions. Deepfake audio and video clips show candidates saying hateful or foolish things. India offers a preview: A skilled AI content creator says hundreds of politicians have asked him for fake material. Some even want badly produced fakes of themselves they can release to discredit any bad press, even legitimate press. China used fake AI content to attempt to sway an election in Taiwan and is using the same tactics in the U.S. Congress is considering legal barriers, but nothing will come of it before the election. The people running the platforms that will deliver these threats to our screens are predictably claiming “it’s too complex” and “this is government’s problem” and “free speech” — all of which is bullshit. However, the liability shield of Section 230 will be enough to keep them unaccountable for another cycle.
Worthy of Worry
Steve Jobs said having kids is like having your heart run around outside of your body. Life is worry, and the most rewarding things in life are consequently sources of real worry. Just as grief is love’s receipts, anxiety is a recognition you are not in control. And having others in your life you care about is a loss of control. I’ve been so anxious, my whole life, about a lack of relevance or economic security. I am overprepared for this. The risk is that we allocate too much energy to shaping the views of people who will not be with us at “the end.” And, when it comes to the people who will be, we don’t worry enough. Yes, it’s important you are comfortable. However, it’s profound that you have peace with who will be in the room to comfort you. Put another way, are you worried about the right things?
Life is so rich,
P.S. Every Wednesday on The Prof G Pod, I answer our listeners’ questions about business trends, entrepreneurship, career pivots, and more. If you have a burning question, send a voice memo to officehours@profgmedia.com
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