The Secret World Investment Guide

There are four types of men:

- Ibn Yami, 13th-century Persian-Tajik poet
 * 1) One who knows and knows that he knows... His horse of wisdom will reach the skies.
 * 2) One who knows, but doesn't know that he knows... He is fast asleep, so you should wake him up!
 * 3) One who doesn't know, but knows that he doesn't know... His limping mule will eventually get him home.
 * 4) One who doesn't know and doesn't know that he doesn't know... He will be eternally lost in his hopeless oblivion!

There are knowledgeable men who attempt to evaluate the risks of the things they know, and then make bets on the outcomes.

But there are things that can't be known. Uncertainties, for which there is no risk analysis possible. A scientist figures out how to create a micro-singularity, and Beijing disappears from the face of the earth. A gateway from another dimension opens up in New York or Tokyo. A lost Pandora Box is found and opened, or the knowledge of how to create a Philosopher's Stone is re-acquired by the wrong people.

For events such as these, there can be no scientific basis on which to form any calculable probability whatever.

We focus on risk because it is something that we can model. The economics profession has physics envy. Economists like to think of themselves as scientists, but it must be said that they have convinced only the gullible of this elevation in status. Economics has a great deal to teach us, but it cannot tell us much about certainty. It can’t even help us all that much to avoid risk.

Economists don’t pay enough attention to uncertainty because, given the aforementioned hubris, economists cannot reduce it to an equation. How did the economists of Japan, investors, or the worlds' stock markets price in the risk of a Filth outbreak in Tokyo, even two months prior to the event? The answer is that no one did.

For more than a century now, we have created ever more sophisticated models of risk in the economic and investment worlds. With each new tool we create to measure risk, we seem to think we have somehow gained more control over our future. Paradoxically, we appear to believe that the more we understand risk, the more we can somehow control our exposure to it. The more we build elaborate models and see correlations between events and the performance of our investments and the economy, the more confident we become. We think we've tracked all the butterflies, and charted their most likely courses.

But the truth is, we live in most uncertain times.

- From The Guide to Investing in the Secret World, J. Maudlin, Templar Square Press. Edited by Jason "Jaise" Maier.