The Secret of Shelter Island

We’re struggling with the worst credit crisis since the 1930s. The S&P 500 has plunged. Investor’s Business Daily reports that over 90 percent of all stock and bond mutual funds lost money last year.

Millions of investors have rushed into Treasuries. Many will stay there until they find someone who can tell them when the coast is clear again.

I was an investment advisor and portfolio manager for many years. I’ve been a financial writer for the past eight. I don’t know what the market is going to do in the short term. And I’m not the least bit reluctant to admit it. Because no one else knows either.

However, there are plenty of people on Wall Street—and in the financial media—who make a good living pretending to know or, in some cases, deluding themselves that they really do know.

Anyone can make a good market call. But no one can accurately predict the economy, interest rates, inflation, the value of the dollar, or the financial markets.

Count yourself a sophisticated investor the day you finally say to yourself, “Since no one can tell me with any consistency what lies just ahead for the economy and the stock market, how should I run my money?”

This inability to know what the future holds drives many investors to distraction. (Or, in some cases, the poor house.) But, to a great extent, markets are always inscrutable.

As Jason Zweig recently wrote in the Wall Street Journal, “Uncertainty is all investors ever have gotten, or ever will get, from the moment barley and sesame began trading in ancient Mesopotamia to the last trade that will ever take place on Planet Earth. If tomorrow were ever knowable with absolute certainty, who would take the other side of the trade today? . . . The only true certainty is surprise.”

When I began studying the world’s great investors more than two decades ago, I soon discovered that they used many different investment strategies. But they all approached the market with a deep sense of humility.

Benjamin Graham, the father of value investing, said, “If I have noticed anything over these 60 years on Wall Street, it is that people do not succeed in forecasting what is going to happen to the stock market.”

Warren Buffett, the world’s richest man and chairman of Berkshire Hathaway, once told shareholders, “We’ve long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie [Munger] and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”

In his book One Up On Wall Street, Peter Lynch, the best mutual fund manager of all time, wrote, “Thousands of experts study over-bought indicators, oversold indicators, head-and-shoulder patterns, put-call ratios, the Fed’s policy on money supply, foreign investment, the movement of the constellations through the heavens, and the moss on oak trees, and they can’t predict the markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack.”

These men understood that humility is essential to investment success—as it is to so much else in our lives.

Humility doesn’t mean selling yourself short or not exercising your talents to the fullest. It means making an honest appraisal of the limited knowledge, experience, and understanding that we all bring to life.

It means having a realistic perspective, understanding that—whatever our particular talents—we are not the center of the universe. “We are all worms,” Winston Churchill remarked. “But I do believe I am a glow-worm.”

Humility is becoming. It wears well. Truly confident individuals don’t need to brag or boast. It’s much more attractive for people to discover your many charms on their own.

Secure individuals don’t lord their status over others. Even if you are a truly one-in-a-million kind of guy, in a world of six billion people that means there are thousands more just like you.

A companionable friend or dinner guest knows better topics of conversation than himself. “There are two types of people in this world,” observed Frederick L. Collins. “Those who come into the room and say, ‘Well, here I am!’ and those who come in and say, ‘Ah, there you are!’ ”

A modest attitude also demonstrates maturity. “Let us be humble,” said Jawaharlal Nehru. “Let us think that the truth may not perhaps be entirely with us.”

Live long enough and you’re likely to learn that life is one long lesson in humility. Things don’t always turn out like we planned . . . or even how we could have imagined.

Our happiness is determined, in large part, by how we handle these inevitable surprises. Because uncertainty will always be with us. Perhaps that is why Pulitzer Prize-winning columnist George Will once described his idea of heaven as “infinite knowing.”

Recognizing the limits of our knowledge is invaluable, whether we’re analyzing problems, figuring out relationships—or even puzzling over the big existential questions. Why are we here? Where did we come from? What’s it all about?

Scientists, philosophers, and theologians have struggled with these for thousands of years. And still wrestle with them today.

As Nobel Prize-winning particle physicist Leon Lederman wryly observed, the universe is the answer. What we still don’t know is the question.

This humble attitude has been embraced by great minds throughout history, from Aristotle to Newton to Einstein to Gandhi.

As Sioux Indian chief Ota Kte observed a century ago, “After all the great religions have been preached and expounded, or have been revealed by brilliant scholars, or have been written in books and embellished in fine language with fine covers, man—all man—is still confronted with the Great Mystery.”