In his classic work The Black Swan, Nassim Nicholas Taleb notes that we must expect the unexpected. As he notes, almost all great discoveries and historic events – such as the Internet, the personal computer, World War I, the dissolution of the Soviet Union and the September 2001 attacks – were totally unexpected. They can be explained, often with great insight, using hindsight only. Our ability to predict the future is pretty close to zero. Taleb first discussed his theory in relation to the financial markets, where black swans are all too common and the use of probability theory to contain risk usually ends in failure. One need look no further than the financial crisis of 2008, from which we have not fully recovered.
Who, even six months ago, could have imagined that the price of oil would drop by more than 50 per cent. Besides potentially saving Canadians $12 billion in 2015 (based on last week’s prices), this drop has the potential, and has already begun, to have major geopolitical fallout. The price of oil is an issue of great interest to Jews, since the falling price is having a major negative impact on Iran. (And may the price continue to drop further and further!)
While stock markets, and people in general, hate uncertainty, there’s little we can do to avoid it. Likely since the dawn of human existence, man has tried his best to defeat uncertainty, and we’ve done a reasonably good job. Advances in science, medicine, communications and all else have allowed us to conquer much, though not all, of nature. But we, by definition, have had much less success at conquering human nature. We are an unpredictable lot, prone to rash behaviour and ignoring the long-term consequences of our actions, even if we’re well aware of them. Is it any wonder life is so unpredictable?
Despite man’s desire for predictability, there’s much to be gained from uncertainty. First and foremost, it should foster a connection to the Divine. Man is in need of help, and we’re meant to look toward heaven for that help. There are few places where uncertainty reigns as supreme as in the Land of Israel. This is no coincidence. God, the Torah tells us, specifically chose the Land of Israel for the Jewish People because of its lack of rain. This, the Torah hoped, would cause man to realize that it is God who is the ultimate provider of man’s blessings.
That the recent economic surprises are having a psychological impact can be seen in a recent poll showing an 11 per cent decrease in Canadians who feel confident they’ll reach their financial goals in 2015. Perhaps most worrisome is that the drop is greatest among those 65 and older, with only 60 per cent being confident they’ll reach their financial goals – versus 81 per cent in 2014.
As is so often the case, our perceptions of the economy turn into self-fulfilling prophecies. Those who aren’t confident about the future often act in ways that help ensure our economic fears will materialize. There’s no doubt the economic recovery would greatly pick up speed if corporations spend some of the approximately $2 trillion they have sitting in cash (or the equivalent) on their balance sheets. (Apple alone has about $165 billion in cash. To put that in perspective, the government of Canada spent $276 billion in 2013.) Having little confidence in what the future may hold, they’re most hesitant to do so.
The Talmud records that when the great sage Shammai would find a nice piece of meat, he would put it aside for Shabbat. Hillel on the other hand had a different attitude: “Bless God each and every day.” We must strive to both enjoy life each and every day, and plan with uncertainty for the future.