Information investors need should be important and knowable

important and knowable

People ignore important and knowable

In January 10, 2017 memo, Howard Marks expressed his views on the troubles experts is facing– from prominent fund managers to the key media. They can’t correctly predict Trump’s presidency, Brexit, and other unexpected events. (Note: The final results of the two major events of Trump’s election as president and Brexit are contrary to all famous polls or mainstream media predictions). Why? Because they violate “important and knowable” principle.

Buffett’s view

Marks shared that he dined with Buffett a year ago. During the dinner, Marks said that Buffett raised the crux of the problem with forecasting: “Everyone is focused on what’s ‘unknowable’.” Regarding the unknowable, Buffett’s view is: people is powerless. This is actually exactly the same view as Keynes, who said: “We simply don’t know.”

According to Marks, Buffett pointed out that “for a piece of information to be worth pursuing, it should be ‘important’, and it should be ‘knowable’.'” More than ever, investors are craving insight into the macro future because it matters: It will drive the market. But there’s a snag: Warren and I both consider these things largely unknowable. He rarely bases his investment actions on them, and neither does Oaktree.

(Note: Buffett once said: “When I see memos from Howard Marks in my mail, they’re the first thing I open and read. I always learn something.”)

Beware of so called experts

“Of course, there are no ‘facts’ regarding most future events, just ‘opinions’,” and so-called “Experts — especially people who are paid to be experts — often couch their statements as facts, but that doesn’t mean they’re sure to come true.” In short, it’s not important and knowable!

Why modern media can be questioned?

“These days the news media shows little resemblance to what it was 30, 40, or 50 years ago,” Marks said. “Many outlets are highly biased to one side or the other and make it possible to read, watch, and listen all day and never be exposed to all aspects of the issues. Thus most people find something to complain about in the media coverage of the 2016 presidential election.”

He also recommended an article by Ryan Holiday at the Observer published November 16, titled “Want to Really Make America Great Again? Stop Reading the News.”

These words from Marks, five years later, are really true, and the situation has only gotten worse, not better ─ ─ The terrible thing is that this is the case in all countries around the world, and the advancement of technology progress has made this situation even worse. It is difficult for modern people to distinguish between true and false news. Even what you trust may be second-hand spread, manipulated, or information from unknown sources. At best, everyone has been brainwashed and led to absorb without knowing it. This is also the focus of my previous blog post, “Choose Media Wisely

Wall Street misses the point, not important and knowable at all

Marks said economists and Wall Street fund managers are concerned with:

  • What month will the Fed raise interest rates?
  • What could go wrong in the economy or the market?
  • What inning are we in?
  • And in each country I visit, how’s the outlook for that country?

None of these questions can be predicted and answered; and the point is that “it’s the surprises no one can anticipate that would move markets most if they were to happen.” Fundamentally, these are all not important and knowable at all.

This reminds me of another highly relevant blog post I wrote “How investors should look at economic trends and forecasts?“, I suggest you read it if you are interested.

Fisher’s view, same as Buffett’s important and knowable

Ken Fisher had mentioned his father Philip Fisher once warned him, “Don’t buy stocks on news, find out who knows the same news, if you’re not the only one who knows the news, it means that everyone in the world knows about it. then you have no advantage in buying.” You might think over it, and what we mentioned above on media and wall street.

 important and knowable


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