Skip to main content

The Desire For Certainty

It has always struck me that the one thing that we cannot have – certainty – is the one thing that we crave above all else.  I believe that it is this misguided and intense desire for something that is completely out of our reach as human beings that contributes much to our levels of unhappiness and frequency of our poor choices.

A great example of this could be found in my field of finance where much faith and hope has and continues to be invested in math modeling to deliver us greater certainty.  I teach a business school class at USC where we focus on mortgages and the capital markets, and even my young students all figured out pretty quickly that the output of the math models to value mortgage products can only be as good as the assumptions input for the future of interest rates, the defaults and the prepayment choices made by the pools borrowers.  None of these can ever be input with any certainty or real long term accuracy, which by definition renders any math model based upon these assumptions nearly worthless, and surely unreliable in a vacuum.  This was painfully evident in 2008/9 when the rating agencies and the market participants mistakenly ignored the obvious and instead placed blind faith in math models.

Another prime example of us seeking certainty is when we invest our trust in leadership, assuming they will get it all right and thus taking us off the hook for worrying about or handling things ourselves.  Back in 2007/8, we believed, quite mistakenly, when Wall Street CEO’s and our Fed Chairman and Secretary of Treasury, and President all told us that the impending housing finance crisis would be short-lived and would not really impact the broader economy too much.  We then invested our trust in politicians with zero financial market experience (Congressmen Dodd and Frank, for example) to somehow fix the complex mess through regulation.  And more recently we invested our trust in central bankers around the world, most of whom had not ever operated outside of the theoretical world of academia, to pursue unprecedented money printing policies, continuing to hope/believe/pray that it all works out ok.  We believed the last President when he said “Mission accomplished,” and we believe the current one when he says about Ebola, “We’ve got this under control.” We believed Bill Clinton when he wagged his finger at us and swore that he never had sex with Monica Lewinsky, and we accept idiotic proclamations from his wife and many others in political power today about a whole host of things, way too long to innumerate in a blog.  Our desire for certainty causes us to believe the unbelievable.  We pretend to bury our heads in the sand and continue to believe in modern day Peter Pan’s, rather than accept that the world is fraught with uncertainty and that we need to contend with it head on.

Those who find themselves in leadership positions, our Peter Pan’s, generally understand this need of people to feel certainty.  That’s how they got there.  They appear to have all the answers, knowing that, like sheep, many, inspired by the sound of certainty, will follow them blindly.  On the flip side of this equation, those same leaders fear that any sign of uncertainty on their part, or even admission of mistake, would cost them their following.  And this prevents many from changing course even once they have learned the errors in their original ways.  Maybe its time we stopped acting like sheep and just believing what we’re told.  There is no certainty in life, and the sooner we accept that fact the more enjoyable and productive all of our lives, individually and collectively, will be.

Popular posts from this blog

"No, Not You. You Are Fake News."

"No, not you. You are fake news."  These were the words chosen by our president-elect to shut down a CNN reporter seeking to question him at his recent press conference. Many hearing those words surely recoiled, interpreting them as an affront to freedom and a form of censuring. I reacted quite differently, instead celebrating the moment that a strong leader decided to hold people accountable in a public manner for their actions.

Taxes and Hyperbole

There is a new tax code in the U.S., and this is indeed a “Yuuuge” deal. As far as I can tell, it is as close to an unmitigated home run for America as can be. Is it perfect? Of course, it’s not. The code retains its unwieldy size and complexity, largely as a result of compromises made in order to bribe congressmen and senators for their votes. Until we get term limits, it seems we’re stuck with a tax code that is big and complex. However, it does hit the mark on a few key issues: most every taxpayer will now pay less to the federal government (except those in states with ridiculously mismanaged economies who now will be forced to hold their state politicians more accountable); and our businesses, large and small alike, will remit less of their profits to the federal government and will be liberated to invest that savings into growth – which will surely create job and wage growth in the productive private sector.

James Harden - A Classic Case of Misunderstood Value

The last time I wrote on hoops was December 2013 when I presciently trashed Carmelo Anthony. The time has come to take out my poison pen once again to decry James Harden as a fraud. I know that Harden has amazing stats - third in scoring, first in assists, and that his team the Rockets have far exceeded expectations as they are currently the 3rd seed out west. But, I still maintain that he is an awful player.