Vol 20 – The subtle art of prediction in Life and Investing

Humans, through our evolution have had one thing in common – we love fame and popularity. This has always remained constant over the last 1000 years of history, and it is safe for me to ‘predict’ that this will remain the same over the next 1000 years of our future, though I will not be personally around to witness this.

The interesting aspect of our lives has been around our fascination with prediction. Every country and demography has a history with astrology, tarot, planetary positions which have a certain element of science and prediction to it. The people who do this well, have always been revered and the same has come into investing too. The aspect of investing which will always be written about pundits, is each having their ‘prediction of the markets’. The wilder the prediction, the better the possibility of fame. If one looks back, we continue to write about some of the famous hedge fund managers who ‘predicted’ the 2008 Global Financial crisis, many of them handsomely profited from it too. However, most of them have gone into oblivion since then, because investment is not about getting 1 prediction right , but about maintaining consistency over decades. In the recent article from Acadian, the portfolio manager speaks about the markets of today, having parallels to the last tech cycle, that many saw between 97-2000. Here again, the article is extremely nuanced in going to the probability of where we could be in the cycle, by making a best-case guesstimate rather than saying that the market is going to crash (which is generally baseless).

There are multiple takeaways for the reader here – especially around separating prediction and probabilities and this will be one of the most nuanced debates of human evolution. While everyone likes a prediction, the world continues to move ahead through a better understanding of probabilities and being nimble around changing your views.