Investing: Probabilities Rather Than Certainties

Investing: Probabilities Rather Than Certainties by Cook & Bynum

Investing is a probabilistic endeavor, and being “certain” of a particular outcome – whether it is the direction of a commodity’s price, the shape of a yield curve, a smooth and steady increase in a company’s earnings, etc. – is the enemy of good decision-making and a recipe for permanent capital loss. A talk that Jason Zweig gave back in 2001 is a useful reminder of this idea.

So why did such smart people make such public fools of themselves? Precisely because they had been so right for so long that they had forgotten they could be wrong. Likewise, what has happened in the past year has not...