In this interview with MOI, Aswath Damodaran explains that life and investing are full of uncertainty, which means we can’t predict or control everything. People don’t like this feeling, so they try to ignore it or ask others for answers.
But instead of hiding, we should accept uncertainty as normal. He uses 2020 as an example of how unexpected events can change our plans. The key is to make the best decisions with the information we have and understand we’ll still be wrong sometimes, and that’s okay.
In investing, it’s not about being perfect—it’s about making fewer mistakes than others and moving forward.
Here’s an excerpt from the interview:
Damodaran: Uncertainty is what we hide from. Complexity is what we build as a barrier to even take a look at uncertainty.
Uncertainty makes all of us uncomfortable. As human beings, our first reaction to uncertainty is to try to make it go away. We do lots of unhealthy things to make it go away. We go into denial, outsource it, and look for consultants and experts to tell us what to do.
My advice with uncertainty is not to hide from it. It’s a feature, not a bug. It’s the nature of the beast.
Let’s take 2020 as an example. Did we learn how uncertainty can upend the best of plans? Absolutely. But does closing our eyes make it go away? No.
We have to face up to the fact that we’re surrounded by things we don’t control. Because of that, we have to make our best judgment with the data we have right now and then move on, accepting the fact that we’re going to be wrong 100% of the time, and that’s okay.
All you have to do is be less wrong than everybody else. That’s the nature of investing. It’s not being right. It’s being less wrong than everybody else.
You can watch the entire interview here:
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