Quantum Physics and Investing
The Author of “The Comfort Book”, Matt Haig, writes these amazing lines – “According to quantum physics, the laws of the universe are probabilistic. This means that even among the smallest particles, nothing is entirely predictable”.
I repeat the line again – Even among the smallest particles, nothing is entirely predictable.
In other words, a key defining feature of the universe, of nature, of our environment, of us, is uncertainty.
Matt adds further, “The German physicist Werner Heisenberg, who came up with the Uncertainty Principle – discovered that even if every single initial condition is known, it is still impossible to predict with any fixed certainty the behavior of waves and particles”.
Likewise, in investing, uncertainty is the only certainty.
The best stock (and business) of the last decade (Netflix) was one of the worst performing ones this year.
Look at Facebook aka Meta (now). This giant had a market capitalization of $1.1 trillion not too long ago. Since it’s rebranding this year, the company’s stock price has dropped more than 60% destroying more than $0.5 trillion ($500 billion).
The point is that even for the largest and the strongest businesses (with loads of network effects and sources of competitive advantage), the future is uncertain.
Uncertainty however does not mean gloom and doom. But most of us associate uncertainty with bad things.
This same uncertainty opens the door for unexpected outcomes and better living standards for everyone. The progress that we witness is the result of this uncertainty.
And wise investors understand this truth better than anyone else.
Because Investing is an act of courage in a world of uncertainty and constant change.