Since then, the uncertainty trope has become the general catch-all for explaining (or mis-explaining) a variety of future events. The list of uncertainties is long: The fiscal cliff, U.S. tax policy, health-care laws, what happens in Greece, will we have a recession next year or not, is housing recovering, what happens to the euro zone, will the euro currency collapse, what about the U.S. elections?
I recall no one saying that investing was difficult due to the uncertainty caused by a potential nuclear conflagration between the United States and the Soviet Union during the Cold War. The sword of Damocles hung over everyone’s head. Is the Greek situation today more dire or uncertain than the policy of mutually assured destruction ever was?
Regardless, all of these unknown events will be resolved one way or another at some point in the future. Which is, of course, how all ambiguities eventually get resolved — at some future unknown date. That is why the uncertainty claim is so absurdist. The lack of understanding today of an unknowable future always gets revealed as the future becomes known to us.
This is how things unfold in a linear timeline.
It finally dawned on me what the uncertainty trope is all about. It took a conversation with a nervous chief executive to reveal it, but I teased out the answer.
Most of the time, people exist in a happy little bubble of self-created delusion. We engage in selective perception, seeing only the things that agree with us. Our selective retention retains the good stuff and disregards most of the rest. In our minds, we are all younger, better-looking, slimmer, with more hair than the camera reveals.
In short, we construct a reality that bears only passing resemblance to the objective universe.
During those brief instances when the facade fades, the curtain gets pulled back and the ugly reality becomes clear. We get a glimmer of understanding about our own lack of understanding. That’s when the grim reality of the human condition is revealed — and it terrifies us.
The next time you hear someone mention uncertainty, ask yourself this: How much less do they actually know about the future today vs. what they knew last week or year? How much less do they think they know?
We need only consider the track record of Wall Street’s prognosticators to recognize how little we know about what awaits down the line.
Ritholtz is chief executive of FusionIQ, a quantitative research firm. He is the author of “Bailout Nation” and runs a finance blog, the Big Picture. You can follow him on Twitter: @Ritholtz