‘You can’t lose.’ I have heard people say it, so have you. I also laugh, and so should you. Why, you ask? Well, because certainty is that one thing we all want, hope to get, but will never have.
Certainty is a tricky one. Human beings have been chasing it since we were starting the family BBQ with two sticks. If we could figure out how to get it, we would not only become insanely wealthy, but we would live a life of solemnity... or would we? Is knowing how everything is going to play out or work really that attractive? Does it challenge the human spirit? Or is it that having certainty reduces the anxiety of daily life in an already hyper-fast world?
Escaping the Certainty Trap
Many of us recall the movie, ‘The Truman Show,’ with Jim Carrey. Every day was predictable. He knew breakfast would be just right, television was always positive, everyone was nice and the sun always shined. If X (formerly known as Twitter) existed in 'The Truman Show,' everyone would be nice and not pick silly fights. I guess that's why it was a fictitious movie. Once he figured it out that he was being recorded for everyone else’s entertainment, he worked hard to escape this world. His soul virtually died.
We see the illusion of certainty manifest in many different areas:
-Politics
-Travel
-Sports
-Investing
Political: This certainty can be one of the most interesting. We are all guilty of it. ‘My candidate is the best because they like what I like, support my cause and therefore 51% of the 300+ million voters must see it this way as well.' You watch Fox News in the morning, but then CNN and MSNBC in the evening to get the full picture, right? Aka confirmation bias.
Travel: Haven’t we learned that travel certainty is a losing battle? We could all complain a bit less and reduce stress if we would bank on a delay and stop trying to thread the needle of time. Some use a cancelled flight to go explore the city they are stuck in, some just stew in anger like things will change to fit their plans.
Sports: Do I even have to explain this one? Pete Rose didn’t even lock this one down and he coached the Cincinnati Reds while betting on the sport (sorry to my friends from Cincy).
Image: Uncrate.com
Investing: I certainly find investing the most fascinating. Everyone seems to be an expert on markets and the economy, and when we get it right, the ego boost is strong. Eventually though, our ego hits the floor like a glob of pudding. We are then reminded otherwise and we either make excuses, admit ignorance or pretend we never bought that investment in the first place. Just ask any early investor in Cathie Wood’s ARKK innovation fund. 2020: I can't lose. 2022: How could I lose this much?
For investors, this is what creates winners and losers, and what also differentiates a lot of short term behavior from long. Short-term investing is chocked full of emotion, opinions and knee-jerk reactions. March of 2020 is the perfect example. Covid news hit the television. The certainty some had weeks prior was out the window and the short-term mindset hit the sell button. A new certainty emerged - this is end. All of this while the ‘long-termer’ shrugged it off like a Floridian hearing about a Cat 3 hurricane. Meh, it'll pass and the sun will shine again.
Case in point: Legendary investor, Carl Icahn, began investing in now defunct Blockbuster Video in 2004. Well, there is one Blockbuster store left. One. He started buying shares in the company with a bit of certainty that a business renting DVD's would continue to be sustainable. What was lurking around the corner was the revolution of streaming, which literally crushed the brick and mortar DVD and video rental market (if you want to learn more about the Blockbuster deal, I wrote about it in Just Cause). In the end Mr. Icahn lost significant money on what he thought was a good investment.
Fast forward to November 7, 2016, on the eve of the US Presidential Election between Donald Trump and Hillary Clinton. In the weeks and months leading up to the election, there were certainties on both sides. One of the swirling thoughts was that Donald Trump would be an agent of great decline for the stock market and economy. Mr. Icahn knew better. As the story goes, Mr. Icahn spent the evening at a dinner party, and after what he heard from those in the room, left the party late in the night and placed a $1 billion dollar trade on a Trump win and a raging market the very next day. It certainly paid off. He got a peek around the corner and went with it.
Image: YCharts
Comfort With Not Knowing What's Around the Corner
The global economy is a beast. It is filled with a trillion moving parts. Governments, laws, demands, changing tastes, changing needs, technological advancements and even opinions. But yet we know what is going to happen next, just certain of it. Sure.
Is it anxiety of the unknown that drives our insatiable appetite for certainty? Is it a bit of self satisfaction or the illusion of control that gives us those small hits of serotonin, a result of getting something right? Maybe it simply depends on the person. Regardless, we all have it. But, like fighting city hall, the more we try to use certainty to our advantage, the more we will be let down. I’m certain of it.
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