September 3, 2007: Uncertainty - a fact of life

I am quite sure that all of us think that we know what the future likely holds-whether inflation will rise or fall, which investments will do well and which poorly, what the political shape of America will be after the next election, etc.

But the future invariably contradicts our expectations in some way. Often one can be correct in your general expectations, but wrong about the specifics - so the investments you bet on don't work out.

Over and over again we are proven wrong (so are the experts) when we bet too much on our expectations, and yet each time we're tempted to believe we have found a sure thing. Unfortunately, sure things don't exist in the real world. Every economic event results from the motivations and actions of literally billions of people.To assume that you can predict what all these people will do is not only presumptuous, it is dangerous.

There is no way you can eliminate the uncertainty or obtain a private line to the future. You have to let the future unfold as it will. Uncertainty is a fact of life.

If one does have expectations, it would be foolish to treat these as certainties. However, it would be equally foolish to ignore them, since disregarding them would leave you exposed to the dangers one sees and unable to profit from what one believes will happen.

Uncertainty does not mean that you know nothing at all, that your opinions have no merit, or that you are helpless to prepare for the future. It does mean that you should allow for surprises-never taking anything for granted and never treating an investment as a sure thing.