"[Our ancestors] must have felt uncomfortable about their inability to control or understand such causeless events, as indeed many do today. As a consequence, they began to construct, as it were, false knowledge.

I argue that the primary aim of human judgement is not accuracy but the avoidance of paralyzing uncertainty. We have a fundamental need to tell ourselves stories that make sense of our lives. We hate uncertainty and … find it intolerable."

- Lewis Wolpert, Faraday Lecture

Scroll your feed today and you’ll read all about why the Dow moved in one direction or another. Media experts love to feed us stories about the latest Twitter (X?) rampage that erased market share, or the specific choice of adjectives used in the Fed meeting minutes.

Can’t blame the journalists really…. The overwhelming majority of content is paid-per-click and we’re just given stories that generate the most revenue with catchy headlines the public wants to read. Content creators need to eat, do we blame them? Clickbait pays the bills.

better yet… we’re also to blame.

We don't like hearing about accidental correlations or coincidences, we want to know the cause.

We’re certain that understanding an event will give us the data needed to make better decisions in the future.

This is where cognitive biases are born and mistakes are made based upon information that is either irrelevant or misleading.

The fallacy is to assume if Event A arises alongside Event B; then a cause-effect relationship is somehow established.

Let’s say we observe a large enough population and chart the number of bicycle injuries in a given year, then document the temperature for each day in which an injury occurred.

Given an adequate sample size, a bell curve would emerge, and we’d be able to argue that between 65 & 85 degrees Fahrenheit, there exists the greatest probability one might be involved in a bicycle injury.

We’ve clearly established a correlation between a specific temperature band and bicycle injury frequency.

The math doesn't lie.

Now, would you believe me if I told you that temperature conditions cause bicycle injuries?

Would you avoid riding your bike during this temperate range?

Of course not.

But it’s an example of how defective studies are used to create misleading hypotheses, and this is standard operating procedure in the world of financial news.

Nevermind the media report explaining the rise or fall of this or that. Yes relationships might exist, there are correlations, but also a near infinite number intermingling variables at play such as weather, political games, supply chains, futures contracts, risk premiums, exchange rates, Twitter storms, disruptive technologies, and market participants all with different time horizons and motivations.

Within self-organizing and adaptive systems, nothing happens in isolation.

Why was the Dow up today (or down), where will energy stocks be tomorrow, or where’s the market heading next week?

We really don’t know.

No one knows.

What we DO know is that the market represents the collective human sentiment as to how companies are expected to create and distribute future value.

Over the long term, as innovative companies solve interesting problems and create value, the market just might follow.

It just might.