Control or Chaos - Being There
Probabilistic Conclusions
One principle of The Moneyball Method is to control what you can control. That may seem obvious, but in a world of artificial complexity manufactured by government trained economists from government funded schools, it is not easy.
To help remedy the problem, the first essay in this series identified controllable risks as the rational alternative to economic analysis and market predictions. This post will discuss risks that we know about and can anticipate with historical data. They are probabilistic risks and their likelihood, but to be understood, uncertainty must be measured in an objective context.
About this, consider the words of grandmaster and former world chess champion Garry Kasparov, “Applying context comes naturally to humans; it’s one way our brains handle so much data . . . In contrast, a machine has to build context for every new piece of data . . . To find the best move, language can be broken down into values and probabilities to produce a response.”
But subjectivity is what dominates the socioeconomic landscape today. Captured beautifully in the 1979 Peter Sellers classic movie Being There, lead character Chauncey Gardener tries to disconnect from uncomfortable reality by clicking his TV remote control - but reality doesn’t go away.
Later in the satirical plot, he is forced from the comfort of home and eventually befriends the most powerful man in the world, “Mr. Gardner, do you agree with Ben, or do you think that we can stimulate growth through temporary incentives?” Notice the automatized response of forced economic incentives - a contradiction in terms.
Yet, “stimulus” is the Pavlovian response of State bureaucrats - and when both advisors and their clients buy into its premise and begin to ignore cause and effect, the feedback loop will be destructive. In the end, the gardener’s real name was Chance and the President thought he walked on water.
In essence, economic chaos over an otherwise elegant system is to pretend the TV remote works. And to rely on macroeconomic forecasts that sanction the force of the State is equally irrational.
Objective investors control what they can control and balance that with the uncertainty of the future using the most reliable data available. Believing in the price mechanism is to believe in values, production and trade. And regarding risk management, the probabilistic risks that draw our attention are market risk, sequence of return risk and longevity risk.
Once we have defined the objective values that will become the performance benchmark - the variables we control, we can balance those against the uncertainty of the future - with confidence. To learn more, please click this link.
https://www.amazon.com/Moneyball-Method-Middle-Class-Manifesto-Objective/dp/1696009111/