Rowing forward looking backwards

I think that anyone who want to predict the future by looking into the past is playing a futile game. History at best provides us with a rough gauge of what may happen and not what will happen. Even if it does provides us with a definite what will happen, it rarely ever tells us when will it happen.

I heard on the MRT today that 'it will not rain today as it has rained yesterday'. What fallacy is that! As if there's a fixed capacity to the rain ABOVE Shenton Way. As human beings we love a good narrative , where every thing seems to have a cause. See how Sharon Stone got herself into trouble by suggesting that the terrible earthquake in China is related to the Chinese authority's treatment towards Tibet.

Furthermore we LOVE to extrapolate recent events. Sometimes it ok to extrapolate recent event, like "since loh wei's continuously gained 8 kg since oct last year, he'll probably gets heavier/fatter if he dun do anything about it." Weight change is a mostly a function of energy consumed and energy expanded, so unless i have some anomaly, it'll probably mean that i ate more than i worked for the past few months. While since i HATE to cut back intake, gotta force myself to expand more energy. Just that it's kinda hard to read and jog at the same time...Haha...

However, we also love to think in terms of trend, for example,e.g. since the company has increased sales for the past 8 years, it will increase sale next year, and probably for the next 10 years. Hey, that's how many financial analyst earn a living. Of course they will back it up with evidence of growing population, growing customer preference, etc. But if you care to look back into past analyst report, you'd find that most projections are painfully wrong. And when you back your ideas with lots of datas, tabs after tabs of spreadsheet in excel and preferably accompanied with a MBA, CFA, CPA, PhD, etc, people choose to believe that this fella knows more about the future than you. He may know more about the past than the untrained person, but does he really knows the future? who knows???

In investing and in life, we are like rowing a boat backwards away from the shore. All we have is the experience of the past to guide us, and the future is a vast unknown. How do we prepare for that? I guess i'll try by opening up my mind to more ideas, to allow people around me challange my opinions or even most precious belief, and always expect the unexpected.

p.s. i'm reading Black Swan now. Please, please read this book or the author's previous book Fooled By Randomness. It'll change the way you see the world around you...

Links
1. Preface to Fooled by randomness (free!)
2. Black Swan - Read reviews on Amazon