I hereby predict that, in 2015, we will see more propheteers humbled more dramatically by realities that defy their theories more incomprehensibly than ever before.
Instead of the familiar vocabulary of forecasts and predictive models, we’ll do better if we cultivate our epistemic humility, a renewed comfort with irreducible uncertainty.
Beware the advice of financial analysts accumstomed to viewing the world through the reductive matrix of Excel spreadsheets with GAAP data.
Don’t obssess about the reliability of any predictions. Focus instead on the validity of the “metrics” being predicted. Examine the literature on the dubious meaning or relevance of the economic vital signs that dominate news headlines — the unemployment rate, GDP growth, the performance of market indices, or corporate earnings that miss, meet or beat Wall Street estimates, etc.
These metrics are not completely divorced from underlying realities. But in aggregate, they form a misleading narrative, a dense layer of noise that drowns out the ticking of time bombs.
This is not just an apocalyptic proclamation. It’s also a testable hypothesis. If we simply ignore the noise of allowable opinion, we’ll see that the digital displays on the “time bombs” convey simple messages and inescapable questions typically absent in mainstream punditry. To start:
— How long can quantitative easing (QE) continue?
— How much longer will investors maintain their trust in the integrity of the global financial system as it becomes increasingly evident that the system relies on accounting standards that materially distort the value of underlying assets?
— How much longer can the system sustain rising economic inequality while suppressing sparks of revolt?
— How much longer can the current political duopoly maintain the tyranny of no alternatives.
I hope to delve into these questions in my posts here over the next few weeks.