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And here’s the thing: It is not that an outcome is never informative. It is that it is informative only when the outcome is unexpected, when you didn’t anticipate the result in the set of possibilities. It doesn’t matter if the result is awesome or the worst. What really matters is whether you didn’t foresee it, because your decisions will only be as good as your ability to anticipate how they might turn out.
Afterward, Axe was gentle in his postgame critique. “Your problem,” he said, “is you keep trying to answer the question.” “Isn’t that the point?” I said. “No, Barack,” Axe said, “that is not the point. The point is to get your message across. What are your values? What are your priorities? That’s what people care about. Look, half the time the moderator is just using the question to try to trip you up. Your job is to avoid the trap they’ve set. Take whatever question they give you, give ’em a quick line to make it seem like you answered it…and then talk about what you want to talk about.” “That’s bullshit,” I said. “Exactly,” he said. I was frustrated with Axe and even more frustrated with myself. But I realized his insight was hard to deny after watching a replay of the debate. The most effective debate answers, it seemed, were designed not to illuminate but to evoke an emotion, or identify the enemy, or signal to a constituency that you, more than anyone else on that stage, were and would always be on their side. It was easy to dismiss the exercise as superficial. Then again, a president wasn’t a lawyer or an accountant or a pilot, hired to carry out some narrow, specialized task. Mobilizing public opinion, shaping working coalitions—that was the job. Whether I liked it or not, people were moved by emotion, not facts. To elicit the best rather than the worst of those emotions, to buttress those better angels of our nature with reason and sound policy, to perform while still speaking the truth—that was the bar I needed to clear.
A Promised Land
Barack Obama
I suspect Warren Buffett might deal with uncertainty by minimizing his “margin of unsafety,” while he has never expressed it in those terms. This would be the excess of a stock’s market price over an extremely conservative present value—a true worst case scenario. Instead of discounting all forecast cash flows—highly probable and somewhat fanciful together—only the most certain cash flows would be counted. No terminal value is assumed. In most cases, this is far too gloomy a scenario, because portions of the probable, possible, and fanciful forecast cash flows do emerge. Recognizing this, stocks almost never sell at a discount to their highly certain value. But if your first rule of investing is “Don’t lose money,” then minimizing the margin of unsafety is one way to do it.
Big Money Thinks Small
Joel Tillinghast
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