In the Age of Black Swans, Why You Should Invest in 'Robustness' Instead of Prediction

Here is a pilot. His dashboard has only one instrument: a ‘rearview mirror’. He looks back at the smooth runway and calm skies he passed through and mutters to himself, “Well, since the path I took was so perfect, there should be no problem ahead.”

But his windshield is filled with thick fog, making it impossible to see even an inch ahead. He has no idea if he is heading toward a massive mountain range or into the worst turbulence in history. The only belief he holds is the sweet but deadly illusion that ’the past guarantees the future.’

Frankly, this is remarkably similar to how many investors approach the market today. We rely on rearview mirrors made of decades of return data and sophisticated economic models as we continue flying toward the future. But do you know the most terrifying truth history has painfully written? The deadliest risks and greatest opportunities always emerge suddenly from places not marked on any map.

This article does not aim to teach you some extraordinary investment technique. It is an invitation to completely change your investment perspective, or even your worldview. Let’s stop chasing the mirage of prediction and talk about the greatest wisdom of all: ‘robustness’ that will protect you and your family firmly no matter what future comes.

Part 1: The Dangerous Lie History Whispers to Us

We say we learn lessons from history. But the moment we use history as a tool to predict the future, history turns into the most cunning deceiver. Past data is not a blueprint for the future. It is merely a ‘preserved record’ of events under specific conditions, and it never warns us that a world where those conditions no longer apply is coming.

Case 1: The Miracle Sprouted from the Ashes, World War II

Imagine the world at the end of the war in 1945. The ‘data’ at that time was the worst despair in human history. Germany’s industrial output was cut to one-third, and Japanese cities vanished from maps. Economists predicted decades of darkness. The most ‘rational’ investment strategy based on this data was to sell everything and prepare for the coming Great Depression.

The data of 1945 was full of despair, but history took a different path.

Yet history flowed in a completely different direction, mocking pessimism. The U.S. launched the Marshall Plan, pouring astronomical funds into European reconstruction. Destroyed infrastructure was restored, suppressed consumption exploded, and the ‘baby boom’ created new demand. As a result, from 1950, the Western world recorded a miraculous growth period called the ‘Golden Age of Capitalism.’

Investors who trusted only the pessimistic data of 1945 could only watch the greatest wealth creation process in human history unfold. This was the moment history proved it is not a mere extension of data but a creation of unpredictable human decisions.

Case 2: 9/11 Terror Attacks — What Collapsed Was Not Just Buildings

On September 10, 2001, no risk model included the scenario that terrorists would hijack American passenger planes and strike the heart of New York. It sounded like a plot from a B-grade novel. On September 11, what collapsed was not just two buildings. It was the giant belief that ’the world would stabilize in a predictable direction.’

This enormous ‘surprise’ triggered a chain reaction no one expected:

1. War on Terror: The U.S. started costly wars in Afghanistan and Iraq.
2. Era of Ultra-Low Interest Rates: The Fed cut rates to historic lows fearing recession.
3. Housing Market Bubble: Ultra-low rates fueled a massive housing bubble.
4. 2008 Financial Crisis: The bubble burst, plunging the world into the worst financial crisis.

No matter how sophisticated the analysis of 100 years of financial data was, could anyone have predicted that the New York terror attack would cause the global financial system collapse seven years later? Impossible. History unfolds as a massive shock (Black Swan) that triggers completely unforeseen ripple effects over decades.

Part 2: The New Era of Surprises — The Fog Has Thickened

If past ‘surprises’ were mostly external shocks, we now live in an era of fundamental structural disruption where the rules of the game themselves are changing. Past maps have truly become useless.

Paradigm Shift 1: The End of the ‘Flat World’ — De-globalization

For the past 40 years, the global economy was built on the belief in ‘globalization.’ A world where goods are made at the cheapest place and supplied cheaply. This trend even led to declarations that ‘inflation is dead.’ But the pandemic and war shook this belief. Supply chains froze, and energy became weaponized.

Now the world prioritizes ‘security’ and ‘resilience’ over efficiency. De-globalization, restructuring supply chains around national interests, signals a structural shift ending the low-inflation era that dominated the past 40 years.

Paradigm Shift 2: Generative AI — The Industrial Revolution of Intelligence

Before ChatGPT’s debut in November 2022, no economic forecast predicted that large language models would fundamentally transform humanity’s knowledge work productivity. The rise of generative AI is the birth of a ‘general-purpose technology’ like the steam engine or the internet. It is a massive wave changing society’s productivity, the value of labor, and the definition of knowledge.

“How do you measure the value of self-learning, evolving algorithms with 20th-century accounting principles?” Old metrics like PER and PBR cannot capture the value of AI’s disruptive innovation. We are entering an unprecedented new era.

Part 3: Not Prediction but Robustness — Build Your Own ‘Ark’

What should we do in this thick fog? We must give up searching for more sophisticated prediction models and focus our wisdom on building a sturdy ‘ark’ that will not break in any storm.

Build robustness to withstand any storm rather than predict the future.

Principle 1: Benjamin Graham’s Wisdom — Margin for Error (Safety Margin)

Benjamin Graham, the father of investing, introduced the ‘margin of safety’ as an expression of humility: ‘I can be wrong, and the world will surprise me.’ Your safety margin is a ‘cash cushion’ that prevents your life from collapsing during unexpected crises. Cash is not a zero-return asset; it is the most valuable ‘call option’ in the world that lets you buy great assets cheaply in moments of fear.

Principle 2: Nassim Taleb’s Edge — Benefit from Shocks (Antifragile)

Nassim Taleb proposed the concept of ‘antifragility,’ where something becomes stronger when exposed to shocks. An antifragile portfolio means that when crises like market crashes occur, you actually seize opportunities. With sufficient safety margin (cash), you can scoop up great assets thrown away by panicked investors and become wealthier. The crisis makes you stronger.

Principle 3: Morgan Housel’s Soul — The Best Strategy Is One You Can Stick With for Life

Morgan Housel points out in “The Psychology of Money” that individual investors earn lower returns than the market average due to ‘behavioral gaps.’ Emotional actions like selling in fear and buying in greed erode returns. Ultimately, the best strategy is not the one with the highest theoretical return but the one you can follow calmly and persistently even when the market goes crazy. Investing is not a battle with the market but a battle with yourself.

Conclusion: The Greatest Freedom Is Saying ‘I Don’t Know’

Now we are no longer anxious in this thick fog. We have decided to remove the rearview mirror and face uncertainty head-on.

The highest level in investing is not to predict the future. It begins with humbly admitting, “I don’t know what amazing things the future holds.” This great realization frees us from the foolish game of prediction. Instead, it makes us focus on what we can fully control: saving rate, patience, and humility.

These will be your new compass navigating the unknown world, stronger than any prediction model. Please become the master of robustness, not a slave to prediction. So when the world faces storms beyond imagination, you and your family can enjoy peace of mind on a safe and sturdy ark.