BUT WE DO KNOW SOMETHING.

BUT WE DO KNOW SOMETHING. Kids, I quoted John Maynard Keynes yesterday on how precarious our knowledge of future economic events is. Nevertheless, people do know enough about the future to invest successfully. Keynes himself illustrates the pitfalls and opportunities of the market. He was a successful investor, although not always successful. As this Wikipedia article points out, “He was nearly wiped out following the Stock Market Crash of 1929, but he soon recouped his fortune.” Damodaran makes the same point here about taking Nassim Taleb’s views on Black Swans: we should not conclude that “planning, forecasting and valuation are useless since they will all be rendered to waste by the ‘black swan’ event.” Damodoran’s conclusion is that “We have to make our best estimates of the future and value assets accordingly. We have to assume that there will be shocks to the system that we cannot anticipate and build an appropriate risk premium to reflect these risks.”