Does certainty exist?
Is it an exercise in futility? – akin to the search for the holy grail or the abominable snowman.
For centuries mankind has searched – in vain – for certainty, often from a religious perspective.
So, can we define it – touch it – measure it?
It has been variously described as knowledge – as in the certainty of knowledge or knowing something is certainty.
Or alternatively as experience – certainty is what you have experienced.
Or accurately recorded history.
Some wags suggest the only things that are certain are death and taxes.
I suppose in the context of the physical world in which we exist, one could say with certainty that the sun will rise in the East – or that the Earth is round.
It seems to me that there is one common element in the popular conceptions of certainty.
The moment we attempt to explore or predict the future, all semblance of certain disappears.
To paraphrase Clem Sunter, the well-known and respected scenario planner refers to the “cone of uncertainty”- a relationship between time and uncertainty – the premise being that the further forward in time we attempt to predict – the greater will be the degree of uncertainty (error).
A view that I completely respect.
So – is there any way in which we can improve our predictive capabilities.
Certainly polls – as evidenced in the recent US elections seem to have very little reliability.
Weather predictions are notoriously unreliable.
Big data analysis is commonly used to identify patterns, build profiles, predict behaviour.
It is probably also an imperfect science, but possibly the best tool currently at our disposal.
The same can be said of financial models – are they perfect – hardly – but do they have value – indisputably.
Properly researched and properly built, flexible, appropriate financial models are indispensable tools to assist management to make informed decisions.