{"id":1965,"date":"2021-10-02T23:55:00","date_gmt":"2021-10-02T15:55:00","guid":{"rendered":"https:\/\/www.granitefirm.com\/blog\/us\/?p=1965"},"modified":"2025-05-26T08:37:04","modified_gmt":"2025-05-26T00:37:04","slug":"investment-uncertainty","status":"publish","type":"post","link":"https:\/\/www.granitefirm.com\/blog\/us\/2021\/10\/02\/investment-uncertainty\/","title":{"rendered":"The uncertainty in investment"},"content":{"rendered":"\n<p>I have mentioned in many places that one of the tips for investing is to increase the probability of things happening. In other words, it can also increase the self-confidence of holding shares, which can increase the probability of investment success. I suggest that you can refer to the instructions of my other two blog posts:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/09\/06\/invest-success-depends-on-less-chance-of-making-mistakes\/\" target=\"_blank\" rel=\"noreferrer noopener\">Invest success depends on less chance of making mistakes<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/11\/29\/price-and-value\/\" target=\"_blank\" rel=\"noreferrer noopener\">Misunderstanding of price and value<\/a>&#8220;<\/li>\n<\/ul>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/10\/02\/investment-uncertainty\/#There_are_two_types_of_uncertainty\" >There are two types of uncertainty<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/10\/02\/investment-uncertainty\/#Buffetts_view\" >Buffett&#8217;s view<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/10\/02\/investment-uncertainty\/#Keynes_view\" >Keynes view<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/10\/02\/investment-uncertainty\/#Margin_of_safety\" >Margin of safety<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/10\/02\/investment-uncertainty\/#Related_article\" >Related article<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading has-medium-font-size\"><span class=\"ez-toc-section\" id=\"There_are_two_types_of_uncertainty\"><\/span><strong>There are two types of uncertainty <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><a href=\"https:\/\/news.uchicago.edu\/story\/how-embracing-uncertainty-can-help-policymakers-during-pandemic\" target=\"_blank\" rel=\"noreferrer noopener\">Professor Naish from the University of Chicago said that there are two types of uncertainty<\/a>:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The measurable probability is called risk. Risk can be determined by probability and expressed in numbers.<\/li>\n\n\n\n<li>The fuzzy state that cannot be quantified is the real uncertainty.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading has-medium-font-size\"><span class=\"ez-toc-section\" id=\"Buffetts_view\"><\/span><strong> Buffett&#8217;s view<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In <a href=\"https:\/\/www.rbcpa.com\/wp-content\/uploads\/2016\/12\/1962.01.24.pdf\" target=\"_blank\" rel=\"noopener\">Buffett&#8217;s 1961 letter to shareholders<\/a>, he mentioned &#8220;This is one thing from which I have always shied away and I still do in the normal sense. I am certainly not going to predict what general business or the stock market are going to do in the next year or two since I don&#8217;t have the faintest idea.&#8221;<\/p>\n\n\n\n<p>He explored in <a href=\"https:\/\/www.rbcpa.com\/wp-content\/uploads\/2016\/12\/1963.01.18.pdf\" target=\"_blank\" rel=\"noopener\">Buffett&#8217;s 1962 letter to shareholders<\/a> &#8220;I am not in the business of predicting general stock market or business fluctuations. If you think I can do<br>this, or think it is essential to an investment program, you should not be in the partnership.&#8221;<\/p>\n\n\n\n<p>Buffett said that when conducting investment research and making reasonable inferences based on various facts, what we have to grasp is &#8220;something is certain to happen, but we can&#8217;t be sure when it will happen.&#8221; In vernacular, it means; what investors should do. The homework is based on various facts, just infer that the stock price is lower than the intrinsic value. Sooner or later, the stock price will reflect the expected price level. <\/p>\n\n\n\n<p>As for when it will rise to a reasonable price, it is not something anyone can do. Investors must not believe that anyone tells you that he can predict the exact time of occurrence. Please always remember the investment guru Bernard Baruch\u2019s words, &#8220;Don&#8217;t try to buy at the bottom and sell at the top. This can&#8217;t be done \u2013 except by liars.&#8221;<\/p>\n\n\n\n<p>Buffett likes &#8220;buying uncertainty.&#8221; Buffett said: &#8220;Calculations of intrinsic value, though all-important, are necessarily imprecise and often seriously wrong.&nbsp;The more uncertain the future of a business, the more possibility there is that the calculation will be wildly off-base.&#8221; In this case, of course, the spread will be larger and the profit will be more substantial. If the mathematical calculations required to evaluate equities are not difficult, Buffet still said that experienced and intelligent analysts can \u201ceasily go wrong in estimating future \u2018coupons.\u2019\u201d<\/p>\n\n\n\n<p>Benjamin Graham:&#8221;Mathematics is ordinarily considered as producing precise and dependable results; but in the stock market the more elaborate and abstruse the mathematics the more uncertain and speculative are the conclusions we draw therefrom.&#8221;<\/p>\n\n\n\n<h2 class=\"wp-block-heading has-medium-font-size\"><span class=\"ez-toc-section\" id=\"Keynes_view\"><\/span><strong>Keynes view<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Keynes stated that &#8220;if investment is an art, then the art of investing is to use common misconceptions.&#8221; He said in his book &#8220;General Theory of Employment, Interest and Currency&#8221; that investment &#8220;Has no scientific basis, so it is impossible to calculate the rate.&#8221; General theory evaluates securities &#8220;using utilitarianism to calculate the strengths and weaknesses of expectations, multiplying each by an appropriate probability, and finally adding up the expected number of rewards.&#8221; But in the real world, it\u2019s actually mostly &#8220;We just don\u2019t know.&#8221;<\/p>\n\n\n\n<p>Keynes believes that there is no need to be overly precise in the stock market. The reason is simple: \u201cWe simply don\u2019t know.&#8221; Another his saying by Buffett is &#8220;It is better to be roughly correct than to be precise.&#8221; That&#8217;s why he said, &#8220;One good share is safer than ten bad ones.&#8221;<\/p>\n\n\n\n<h2 class=\"wp-block-heading has-medium-font-size\"><span class=\"ez-toc-section\" id=\"Margin_of_safety\"><\/span><strong>Margin of safety<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>At this time, it\u2019s time for the &#8220;margin of safety&#8221; to appear. When I discussed the margin of safety in section 5-2 of my book &#8220;The Rules of Super Growth Stocks Investing&#8221;, I pointed out that the margin of safety can play three major roles. One of them is to &#8220;offset judgment mistake&#8221;. <\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"208\" height=\"138\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2022\/09\/geralt-1600x1200-1-1.jpg\" alt=\"uncertainty\" class=\"wp-image-14013\"\/><figcaption class=\"wp-element-caption\">credit: geralt<\/figcaption><\/figure>\n\n\n\n<p>This is very important, because any transaction that is forced to buy, does not consider the price of the stock, only knows the price but has no value; most of the final results will make investors regret it. But as investors, we still have a way to mitigate these risks &#8211; that is, to increase the margin of safety when buying. If you are less sure about the future, that is, the greater the &#8220;uncertainty&#8221; of your investment, the greater the margin of safety you need.<\/p>\n\n\n\n<p>I mentioned in sections 1-2 of my book &#8220;The Rules of Super Growth Stocks Investing&#8221; Buffett believes that &#8220;Investing is the art, essentially, of laying out cash now to get a whole lot more cash later on, and something at some point better deliver cash.&#8221; He knows that it is impossible to obtain the true value of stocks with precise quantification or scientific calculations. But investors can still use non-quantitative methods to increase the reliability of investment; one of the techniques is to increase the margin of safety when buying stocks to compensate for the lack of accuracy in evaluating the company&#8217;s stock prices. This is the reason.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_article\"><\/span>Related article<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/05\/25\/investors-hope-as-they-wish\/\">Investors hope everything will develop as they wish<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/03\/10\/investment-vs-speculation\/\">Investment vs speculation<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/05\/17\/risk-vs-uncertainty\/\">Risk vs Uncertainty<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/07\/27\/survivorship-bias\/\" target=\"_blank\" rel=\"noreferrer noopener\">People believe successful investors are survivorship bias cannot succeed<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/06\/10\/game-of-chance\/\" target=\"_blank\" rel=\"noreferrer noopener\">Investing is a game of chance<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/04\/16\/vaguely-right-than-wrong\/\">I would rather be vaguely right than precisely wrong<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/16\/risks-investors-should-face\/\">What are the risks investors should face up to?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/10\/02\/investment-uncertainty\/\" target=\"_blank\" rel=\"noreferrer noopener\">The uncertainty in investment<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/03\/10\/investment-vs-speculation\/\">Investment vs speculation<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/12\/26\/complicated-math-stock\/\">Complicated math is not required in stock investing<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/07\/10\/sustained-investor\/\">A investor can be sustained or not? how to verify?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/12\/19\/investing-has-no-formula\/\" target=\"_blank\" rel=\"noreferrer noopener\">Investing has no formulas, but there are ways to invest successfully<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/02\/28\/factor-luck\/\">How big a factor does luck play in investment success?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/04\/19\/successful-investors\/\" target=\"_blank\" rel=\"noreferrer noopener\">The main investment principles of successful investors are similar<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/09\/06\/chance-of-making-mistakes\/\" target=\"_blank\" rel=\"noreferrer noopener\">Invest success depends on less chance of making mistakes<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/03\/mistakes-of-omission-and-mistakes-of-commission\/\" target=\"_blank\" rel=\"noreferrer noopener\">Mistakes of omission and mistakes of commission<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/11\/29\/price-and-value\/\" target=\"_blank\" rel=\"noreferrer noopener\">Misunderstanding of price and value<\/a>&#8220;<\/li>\n<\/ul>\n\n\n\n<p><em><strong>Disclaimer<\/strong><\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><em>The content of this site is the author\u2019s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.<\/em><\/li>\n\n\n\n<li><em>I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers&#8217; direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.<\/em><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>The uncertainty in investment. I have mentioned in many places that one of the tips for investing is to increase the probability of things happening. <\/p>\n","protected":false},"author":1,"featured_media":14013,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[779,42,397,11],"tags":[],"class_list":["post-1965","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-risks","category-john-maynard-keynes","category-margin-of-safety","category-buffett"],"_links":{"self":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/1965","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/comments?post=1965"}],"version-history":[{"count":41,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/1965\/revisions"}],"predecessor-version":[{"id":36596,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/1965\/revisions\/36596"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media\/14013"}],"wp:attachment":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media?parent=1965"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/categories?post=1965"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/tags?post=1965"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}