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

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.

You Need to Ask the Right Question

If you ask the wrong questions, the answers will probably also always be wrong, and even irrelevant.  This might seem obvious, but I’ve noticed that this truth is often completely overlooked, and even by the world’s most intelligent. While I’m certain this is so in every facet of life, for the purpose of this short paper I will focus on the investment/finance world.

We, The Deplorables

I recently saw a German movie called “Look Who’s Back” on Netflix, which I strongly recommend.  The film fictionally chronicles the return of Adolf Hitler to modern-day Germany and does a tremendous job of illustrating how Hitler’s call to arms for a better Germany for Germans resonates with the average German in the film. It cannot be lost on anyone who views this film that the message repeatedly heard from these average Germans that “what he says is mostly true…” is a frightening one, and one that is easy to imagine not only Germans saying but French, British, and Americans too.