Bill is away until 17 April. So in his absence, we'll bring you some of his most insightful, caustic and witty observations from the last 14 years. This article was first published in 2006.
Rules are what we turn to when we don't know what to do. And most often we don't know what to do. Hence, our investment approach like our philosophy of life is founded on a bedrock of ignorance. Sure. Constant. Unyielding. Ignorance is something you can count on.
A man is wise, and here you may quote us, only to the extent that he is aware of his own ignorance. The wiser he is, the more he sees himself as an ignorant fool. The real fool, on the other hand, thinks himself wise; he thinks he knows things he cannot possibly know.
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It is not given to man to know his fate, said the ancients. We can never know what the future will bring neither in our investments nor in our private lives.
Since we cannot know the future, we cannot hope to improve it... except in the most marginal, modest ways. "We will be better off", we say to ourselves, peeking ahead just a few seconds, "if we don't step off the kerbquite yet; let us let the bus pass first". But will we be better off next year if we buy Google today? Will the world be a safer, better place in ten years if we bomb Tehran today?
The gift of clairvoyance is not something you can give at Christmas. But what an awful gift it would be. Yes, we could read tomorrow's newspapers today. And yes, we could see what direction the gold price was going, for example, and adjust our investments accordingly. We could read about natural disasters, strikes, revolutions, and make sure we were somewhere else!
But what a boring life it would be. There would be no pleasant surprises. And no chance to improve or achieve. You might win a Nobel Prize, but so what? It was foreordained. All of your striving, sweating and stretching would make no difference; the whole thing was in the bag even before you began.
And imagine the tediousness of it. Day after day, going through the motions of life without the serendipity, the sheer chanciness, of it. Every action, every word, every event - already written out for you in bold relief.
And you, just muttering your lines like a brain-damaged celebrity, not even bothering to think about what they mean; for what does it matter? The whole show would go on anyway with our without you... you are just playing a bit part in it.
You could look ahead, too, and foresee your last gasp. You hope for, at least, a small crowd of weeping friends and woebegone relatives, gathered round your bed, as you bid them farewell. Perhaps you will even get to do a grand death bed oration: "The evil that men do lives after them," you will remember from Julius Caesar, "The good is oft interred with their bones."
You will look at your children, grandchildren, your wife, your mistress, your creditors, your drinking buddies, and say: Please remember the good that I was, the good that I did, and the affection I have had for all of you. And remember: I'll be waiting for you all, with open arms on the other side.'
At this suggestion, the grandchildren will get quizzical looks on their faces. They won't know where the other side' is, but they have no intention of getting there any time soon. And the thought of grandpa's hairy arms waiting for them will not make them want to hurry.
But what's this? You turn to the future, you look ahead and see yourself crushed by the same cross-town bus you avoided today! Or done-in by a jealous husband. Darn, no deathbed scene! "I never get good scenes", you complain to yourself. And at that moment, you will be tempted to do a little rewriting.
But could you? Even if we could know what the future will bring, we probably still could not reach ahead and improve it before it happened. There are simply too many possibilities. Change one today, and tomorrow's lines don't make any sense.
Soon, the whole performance changes in ways even the fortune teller cannot foretell. Even if you could look into the future as it will be, you couldn't possibly look into all the futures that could be. In other words, as soon as you departed from the script, the ending would change in a way you couldn't predict.
You would have lost the power of clairvoyance, and will pop right back into the same impromptu low comedy you're in now, ad libbing from one day to next, ignorant of how thing will turn out, but hoping they sort themselves out better than you have any right to expect. You will have your appointment in Samara, no matter how far you think you are from fate.
If you look at the many mistakes and bamboozles of history, what you find is that the leading characters were misled not by ignorance, but by knowledge. What they thought was so turned out to be not so. Hannibal knew the Gallic and Lombard tribes would rally against Rome. Hitler knew his master-race could beat all the rest of Europe. Investors in 29, 66 and 2000 knew that stocks always went up in the long run.
No one has ever been let down by ignorance, on the other hand. Because ignorance forces upon a man a kind of modesty that rarely fails him. He has to retreat to the few things he really does know best, and follow rules that keep him from getting into too much trouble.
"I always tell the truth", Congressman Andy Jacobs once told us. "That way I don't have to remember what I said."
Likewise, a man who follows rules neither has to remember what he did nor wonder about the consequences.
"Did you kill John Brown?" the prosecutor asks him. "I don't think so", says our modest hero, "It's not something I would do".
"Why not?" the lawyer follows up.
"Because I would never know how it might turn out."
If you knew that you would be better off by telling lies or killing people, you would go ahead and do so. If you could look into the future, and if you had the power to improve it before it happened, why wouldn't you? Imagine that it was 1920, and you, for some unexplained reason, had the entire history of the 20th century in your brain.
You are travelling in Bohemia and happen to be sitting in a railway car when a young man, recently discharged from the German army, enters the car. His name, you discover, is Adolf Hitler, and you have a loaded gun in your pocket. Pull the trigger. Why not? Whatever happens, it is not likely to be worse than what did happen.
Alas, we have no histories of the future ignorance is all we can count on, and rules are all we have to go on. We do not kill, we do not steal, and we do not lie. We follow rules because we are ignorant. Nor do we buy investments that are overpriced. They might go up, of course. But we can't know that. So, we stick to the rules.
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