The Future Is “a Whirlpool of Uncertainty”

(p. B1) Nearly all of us try forecasting the market as if each of the past returns of every year in history had been written on a separate slip of paper and tossed into a hat. Before we reach into the hat, we imagine which return we are most likely to pluck out. Because the long-term average annual gain is about 10%, we “anchor” on that number, then adjust it up or down a bit for our own bullishness or bearishness.

But the future isn’t a hat full of little shredded pieces of the past. It is, instead, a whirlpool of uncertainty populated by what the trader and philosopher Nassim Nicholas Taleb calls “black swans” — events that are hugely important, rare and unpredictable, and explicable only after the fact.

For the full commentary, see:

JASON ZWEIG. “THE INTELLIGENT INVESTOR; Why Market Forecasts Keep Missing the Mark.” Wall Street Journal (Mon., January 24, 2009): B1.

The reference for Taleb’s book, is:
Taleb, Nassim Nicholas. The Black Swan: The Impact of the Highly Improbable. New York: Random House, 2007.

A brief, idiosyncratic review of Taleb’s book, is:
Diamond, Arthur M., Jr. “Review of: Taleb, Nassim Nicholas. The Black Swan.” Journal of Scientific Exploration 22, no. 3 (Fall 2008): 419-422.

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