Edward Quince's Wisdom Bites: The Folly of Certainty – Why "I Don't Know" is Your Best Ally

Welcome back, fellow travelers on the path to financial clarity! In a world that constantly demands definitive answers and precise predictions, it’s easy to get swept up in the illusion of certainty. But as this blog consistently reminds us, intellectual humility is not a weakness; it is the bedrock of sound decision-making. Today, we delve into the profound insights of Howard Marks’ July 18, 2024 memo, "The Folly of Certainty," a piece that perfectly encapsulates our core philosophy of embracing the unknowable.

Marks, ever the realist, frames his memo around a simple yet powerful premise: "how can anyone be without doubt". He argues that macro-forecasting—the attempt to predict broad economic trends—is fundamentally impossible. Why? Because, as he explains, (a) "we don't know what's going to happen and (b) we don't know how the markets will react to what actually does happen". He points out that the consensus among economists has frequently been wrong about the trajectory of interest rate cuts and the likelihood of a recession.

This idea deeply resonates with the Edward Quince blog's long-standing stance. We've often highlighted the "irony of maintaining a daily economic update blog while firmly believing it is best to ignore all of the noise and false stimuli". Marks’ insights reinforce our conviction that "economic forecasts are notoriously elusive, wrong, inaccurate and that unexpected events often overshadow carefully thought out plans". Our philosophy embraces an "I don't know" mentality because, quite frankly, "Nobody knows anything, and that's okay".

Marks’ memo is a potent reminder that trying to predict the future is a "fool's errand". The financial services industry, as Ben Graham shrewdly observed, "will always supply forecasts because 'Nearly everyone interested in common stocks wants to be told by someone else what he thinks the market is going to do'". But as we’ve learned, these predictions are often "less reliable than the flip of a coin".

Ultimately, Marks' "The Folly of Certainty" reinforces that "Clarity comes from subtraction, not addition. Remove the noise, the distractions, and the unnecessary. What truly matters will emerge". It's about cultivating a "philosophical attitude toward the inescapable variations" and recognizing that "your behavior matters more than your forecast". In a world of constant noise and false certainty, embracing humility and discerning what you truly don't know is often the wisest path forward.