Like the dart-throwing chimpanzees
In 2011, Freakonomics Radio aired an episode to show, tell and prove how incredibly poor human beings are at predictions. Seriously, we suck at it.
Still, at this time of year you’re going to read a lot of predictions by folks who seem to have the data and the inside track on what’s coming down the pike.
The markets will do this. Rates will do that. Company A is set for a bumper year and Company B will tank. Some of that may happen, but would you bet your house on it?
It’s hugely seductive to think we can get a jump on the future but it really is pinch-of-salt stuff. We can’t see the future. No one can. It’s one of the great mysteries.
More on predictions
In 2005, a landmark book was published evaluating expert prediction of geopolitical events. The book concluded, among other things, that supposed experts were not much better at predicting the future than were dart-throwing chimpanzees.
Some may now tell you that Artificial Intelligence has future-gazing capabilities but even that misses the point. Artificial Intelligence is able to scan and compile quantum amounts of data, but its predictions are still primarily based on history (what has been) and probabilities (what’s likely). It’s still maths and life still isn’t.
AI predictions are rather extensions of existing models; albeit with a lot more bells and whistles. More accurate – probably, but accurate? No. Or at least not yet.
In early 2021 GameStop share prices rose from $18.84 to $328.24 in a fortnight via a perfect storm of social media buzz and retail investor bandwagoning. If anyone tells you they saw it all coming then they’re a liar … or at least an outlier.
The value of a broken record
Money is an emotive subject. Especially when you put the word my in front of it. It’s tempting to look to predictions to fast-track our way to more, bigger and better because more and bigger and better speak to our emotional instinct for security.
But if the aim of the game is financial security, then there’s not much more we can do than trust in the time-tested principles of money management. Remember that as individual entities we have control over very, very little in life. Interest rates, investment markets, the economy, conflict, our health … these things happen while we’re busy making plans.
Spiritual gurus the world over will tell you that freedom and liberation live when we let go of expectations and get out of the outcomes game. So the question becomes what can we do here and now to prepare (not predict) our own (financial) future?
And it’s the same old stuff. We can appraise our goals, look at our overheads, save, tighten, stash some emergency funds, and do our best to guard against what if.
Brick by brick
Sticking to time-tested money planning principles isn’t sexy. It’s not as thrilling or winner takes all as investing everything in Netflix ahead of its next earnings report. But it’s safe.
Rome wasn’t built in a day, it was built, brick by brick, every day for thousands of years. Rome is still being built. The question isn’t what can I snatch out of the future? It’s can I today add another brick to what I’m building?
The former is shot-in-the-dark stuff. The latter acknowledges that each of us has control over 0.01% of our lives. We have domain over ourselves and our own actions only.
To put that to the test, what’s the only dead-cert way to put more money in your pocket right now? It’s not investing or trying to boost your income, those things have risk and other forces attached.
The one way to guarantee more money in your pocket is to curb your spending because you, no one else, you are in control.
Eyes on the now
There’s an old phrase written somewhere by someone that says if you’ve one eye in the past and another in the future then you’re blind to the present.
Fixing on the future is especially futile as it loads a person with fear and / or expectations in ways that’ll dent enjoyment and perspective in the now. Fears and / or expectations drive actions that aren’t always healthy or astute.
We’re all for giving yourself the best chance of growing your money or experiencing a lucky break but there’s a big difference between hoping for one and banking on one. There’s a big difference between preparation and prediction.
One is prudent; the other’s largely pointless. Meanwhile life’s a-happenin’ now.