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The Most Important Thing by Howard Marks

Knowing What You Don’t Know

“There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know” ― John Kenneth Galbraith


The more we concentrate on smaller picture things, the more it is possible to gain a knowledge advantage. With hard work and skill, we can consistently know more than the next person about individual companies and securities. That is much less likely with regard to markets and economies.


People should try to know the knowable.


Content of this chapter comes primarily from these two memos:

  • The Value of Predictions, February 15, 1993
  • The Value of Predictions II, July 22, 1996

It is possible to be right about the macro future once in a while, but not on a regular basis.


On balance, forecasts are of very little value.


The key question is not “Are forecasters sometimes right?” But rather, “Are forecasters as a whole, or any one person’s forecasts, consistently actionable and valuable?”

Nobody should bet much on an affirmative answer.

Acknowledging the boundaries of what you can know, and working within those limits rather than venturing beyond, can give you a great advantage.

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Units 15/21

Jeremy Silva

Jeremy Silva lives near San Francisco with his wife and son. He is a writer, blogger, and personal investor. He is passionate about education, personal development, project management, and investing. His blog has over 100 book summaries on many topics including investing, self-help, and business. You can click on the link to read some interesting book summaries on Jeremy’s website (https://jsilva.blog/book-summaries/).