The Illusion of Certainty: Why Predictions Rarely Pay Off

At the start of each year, we are bombarded with predictions for the year ahead. But for all the resounding confidence, there’s a critical element missing: wisdom.

It’s not that the forecasters aren’t intelligent — they are, and they can build compelling (and dramatic) narratives. It’s just that the future is unpredictable. Most people’s crystal balls are in fact cloudy, at best.

But if you still happen to believe that market forecasts — which are really just speculation — offer something of value, we should take a look at how people do in the market when they actually “know the future.”

 That’s not hyperbole, as this was a real experiment conducted in 2023 by Victor Haghani that was highlighted in a recent Wall Street Journal article. The experiment was aptly named the “Crystal Ball Trading Game,” and I think it offers us a fascinating insight into the value, or lack thereof, of predictions.

Here are the parameters of the experiment:

• Each investor started with $1,000,000.
• Investors were presented with 15 random front pages of the Wall Street Journal, one from each of the last 15 years. Of those 15 front pages, one-third included employment reports, one-third included Fed announcements, and the final third consisted of entirely random days that fell in the top half of days ranked by volatility.
• Investors then invested their money based on those front pages, effectively knowing the future.
• Investors could choose to add leverage based on the confidence of their predictions.

 So, how did the investors do while “knowing the future?” It turns out that they didn’t do so well.

The WSJ stated, “Through Thursday, more than 8,000 mostly financially savvy players had taken a crack at the game. Their median ending wealth after 15 rounds was just $687,986 according to the data provided. Many lost everything.”

 Remember, all investors started with $1 million, so it would appear that “knowing the future” didn’t seem to benefit them much at all. If anything, it seems to have hurt the majority of the investors.

Not only that, but it turns out that despite knowing the future, more than half of the players did not get the basic direction of the stock market right. This means that most investors would have done better in this experiment had they just flipped a coin and applied minimal leverage. So much for prescience.

Nassim Taleb once famously quipped, “I conjecture that if you gave investors the next day’s news 24 hours in advance, he would go bust in less than a year.”

With a median loss of more than 30% of their beginning wealth over just 15 days, Taleb is probably right.

The key to long-term success has nothing to do with guessing what the market will do next. It’s about committing to your plan—investing consistently, staying disciplined, and resisting the temptation to react to every headline or forecast.

History backs this up. The most successful investors aren’t those who attempt to “time” the market; they’re the ones who stay disciplined along the course of uncertainty, decade after decade. This is why we are compensated with what is called ‘risk premium’ as investors.

So, as we kick off another year of inevitable uncertainty, let’s embrace it. And focus on what we can control: a thoughtful financial plan, a long-term perspective, and the discipline to follow through.

That is wisdom.

To an inspired 2025.