Fast Times: Why Optionality Matters More Than Prediction

You Don’t Have to Predict What Happens Next 

Things are moving fast, and the faster things move, the less predictable the future becomes.

As humans, we instinctively respond to uncertainty by trying to predict better. But in a fast-moving world, resilience, adaptability, and optionality matter more than prediction.

Over the last couple of years, I’ve gotten used to logging into The Wall Street Journal in the morning and being completely surprised by what I find. Unpredictability abounds: politics, the economy, markets, AI, technology, world events... all of it.

And everything seems to be moving faster.

At this point, admitting I can't predict the future may concern you, since I advise people on how to achieve financial success amid change and uncertainty.

But that’s exactly the point.

As the world moves faster, the future becomes harder to predict. And at some point, trying too hard to predict it can actually create more risk.

We can’t help ourselves, of course. We want to know what happens next.

• Where are interest rates going?
• Will the stock market keep climbing?
• Will high oil prices continue?
• Will inflation keep rising?

These are important questions. Our advisory team discusses, debates, and researches them every day.

But things are changing so quickly, with so many forces interacting, that predicting any of them with much certainty is impossible.

So we approach the problem differently.

Rather than building client portfolios around what we think will happen next, we build them to succeed across a wide range of possible outcomes.

We diversify. We maintain liquidity. We avoid making the plan dependent on one particular forecast being right. We create choices. In other words, we build for optionality.

And I increasingly believe this principle extends far beyond investing.

It applies to financial planning. It applies to running a business. It applies to careers. And, increasingly, it applies to life.

The faster things move, the less useful it becomes to construct our lives around a specific prediction of what comes next.

Prediction is comforting, but optionality is the real key to success in a fast-changing environment.

The goal isn’t to become better at forecasting an unpredictable future; rather, it’s to build a life that doesn’t require us to.

These are my thoughts,

Rob, CFP®