Greek Philosophy, Tough Guys and Rubber Necking

In his most recent memo, Howards Marks of Oaktree (OAK) talks about forecasting. At one point he cites Greek philosophy to make his point saying ““If you wish to improve,” Epictetus [first-century Greek philosopher] once said, “be content to appear clueless or stupid in extraneous matters.” One of the most powerful things we can do as a human being in our hyperconnected, 24/7 media world is say: “I don’t know.” Or more provocatively, “I don’t care.” Not about everything, of course – just most things. Because most things don’t matter, and most news stories aren’t worth tracking. “

The hardest thing for anyone connected with Wall Street to say is “I do not know.” The whole business of Wall Street is making a bet based on a guess of the eventual outcome. The S&P 500 will rise by 7.3% over the next 12 months. The interest rate of the ten year Treasury Bond will rise to 3.01% by the end of 2017. IBM (IBM) will earn $13.84 next year. Amazon (AMZN) will grow earnings by 36.08% annually for the next five years. These predictions are all very concise and delivered with a high degree of confidence. They are almost certain to be wrong.

As Mr. Marks points out in his memo “Developments in economies, interest rates, currencies, and markets aren’t the result of scientific processes. The involvement in them of people, with their emotions, foibles, and biases, renders them highly unpredictable. As physicist, Richard Feynman put it, “Imagine how much harder physics would be if electrons had feelings!” It is hard enough to predict what might happen. It is impossible to predict how people will react to what happens.

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