The Illusion of Control

We want to be in control of the future. Only when we know what comes next can we relax. But this power over the uncertain tomorrow is only fleeting and ultimately an illusion.

We love control. That's what research by renowned American health psychologist Dr. Elissa Epel shows. The University of California, San Francisco UCSF professor says we need to learn to understand how little control we actually have over what's coming, and how much uncertainty there will always be at the same time. Those who are comfortable with this dichotomy are more stress-resistant than others. [1]

The activity of investing shows how little control one has over the future. Meteorologists can probably understand this best, with good hit rates for 3-day weather forecasts. But even over this time frame, we investors unfortunately have to pass. 

But resignation is not appropriate, because the point is not to predict the future at all. It is much more important to assess the available information correctly. The forecast of how much a company's sales will grow in the next 10 years is pushed into the background. Much more important are current market position, competitive advantages, pricing power for the services and products offered, balance sheet quality, the ability and integrity of management, and the competitive environment. 

In the eye of the beholder

As you can see, knowing about all these things in depth is a huge challenge that takes time and energy. However, the peak of stress is reached when you have to put all qualitative information about the business model in relation to the traded stock exchange price. There is no right answer to the question, “Am I currently buying cheap or expensive?” It is always in the eye of the beholder. 

No one has all the information. Rather, investing is about having collected enough data points to make an assumption based on experience. The step towards a buy or sell decision is always a step into the unknown. Only people who are good at dealing with this will feel comfortable in the world of stock markets. Successful investors usually tolerate this uncertainty. 

Dr. Epel recommends that we redefine our own sense of uncertainty. As the beauty, the mystery of life and the freedom we can feel when we realize we don’t control tomorrow. 

[1] The entire "Huberman Lab" podcast with Dr. Elissa Epel can be found here (English language).