For many decades I have built my wealth and protected my business and family by proposing different scenarios rather than trying to predict the future. Specific strategies and tactics must then be designed for each individual scenario. It is a practical application of different disciplines including understanding reoccurring cycles, Sun Tzu’s Art of War, and even “Game-Theory Optimal” used in playing poker.
With the cycles, you can have your strategy ready to go with the cycle and also in the event that the cycle breaks. Since you cannot genuinely know what the “enemy” is going to do in the future, you must have different scenario strategies because, as Sun Tzu says, “He will win who knows how to handle both superior and inferior forces.” Further, “In the midst of chaos, there is opportunity” if you have planned the right strategy. “Game-Theory Optimal” is where you essentially attempt to play perfect poker yourself which in turn only allows for your opponents to make mistakes against you, which is where you make your profits.
All the time every one of us creates potential scenarios, considers the probable likelihood of each happening, and designs potential strategies. Otherwise, you would (or would never) carry an umbrella 24/7. Some strategies, based on the probability of the scenario coming true, mean only making sure there is an umbrella in the car.
However, the moment we move into “predicting,” our actions are influenced and clouded by the expectation that our prediction will be accurate. You are 100 percent sure it is not going to rain and then must stop by the department store to buy an umbrella before the day is over. You might add that new umbrella to your collection of 10 other “rain shields.”
The Stanford marshmallow experiment was a study on delayed gratification in 1972, led by psychologist Walter Mischel. A young child was presented with one marshmallow and told that he or she could eat the treat now or wait a few minutes and then get two.
But later changes in the methodology of the test showed that those children who believed the “tester” was honest (primarily because of their home personal experience) and would give them the treat later versus those that did not trust the truthfulness of getting the extra marshmallow, determined who waited and who did not.
In other words, their personal “prediction” influenced their behavior. Children who had been “cheated” once, and who expected to get fooled again, immediately ate the marshmallow the second time without waiting.
In customer service, employees are told to “set expectations” with what they can do and cannot do. Then they “under-promise” and “over-deliver.” This is the best and easiest way to manipulate people by, in effect, making predictions and then making them come true. If the first time the kid gets three marshmallows for waiting, the next time he will wait forever for the tester to return.
You have the choice to “go with the flow” like a tree in a typhoon as “Life is a series of changes. Let things flow naturally forward in whatever way they like” (Lao-Tzu). Also, there will always be things that we cannot control; these things can be a huge source of anger, frustration, and stress.
The first choice sounds to me to be only reactionary and not prepared and proactive. The second sounds like it was written by a guy who makes a lot of predictions. I am neither of the two. I own a gas, electric, and charcoal stove.
E-mail me at mangun@gmail.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis provided by AAA Southeast Equities Inc.