Illusion of Knowledge

Economists, as the joke goes, have predicted nine of the last five recessions.

All kidding aside, there is a profound lesson in humility that applies not only to the world of economic and investment forecasting, but to any domain where multifaceted predictions abound. “Never think you know” are sage words etched into my memory, imparted to me nearly a quarter century ago by Roger Hertog during my wealth management training at Sanford Bernstein (now Alliance Bernstein).  As the then-President of Sanford Bernstein, Mr. Hertog’s wisdom resonates with me daily.  This principle underscores the inherent uncertainty in forecasting, overconfidence in predictions, and the vital need for perspective and humility as we navigate the ever-changing financial landscape. 

In one of his most profound memos, “The Illusion of Knowledge”, Howard Marks delves into these themes, highlighting the challenges of relying on models laden with assumptions to predict complex systems like economies and financial markets.  Mr. Marks, who is the Co-Chairman of Oaktree, also contemplates the unpredictability of human behavior – a critical component of many forecasts. 

At Resnick Wealth Alliance, we advocate for a strategy-driven approach that integrates a long-term perspective, while also considering current factors to effectively meet our client’s objectives.   

For those seeking to delve deeper into what we “don’t know,” the full memo by Howard Marks is a worthwhile read, and can be found here: