You simply cannot predict the future with precision

Abstract：The article emphasises the inherent unpredictability of the future, even when using cyclical theories or historical patterns to forecast events. While history can offer insights, it cannot guarantee accuracy due to the butterfly effect—minor changes can alter the course of major events, as seen in examples from World War I and the American Revolution. Predictions often assume other factors remain constant, but reality is dynamic and interconnected. In finance, market conditions shift so quickly that past logic becomes obsolete. Stability itself can breed instability, as explained by Minsky’s financial instability hypothesis, where optimism leads to debt, and debt fosters crises. True risk lies in the unforeseen, often overlooked until it materialises, as in the Great Depression. The greatest threats in the coming decade are likely those unrecognised today. Ultimately, the lesson is humility: to acknowledge uncertainty, adapt to change, and accept that the future cannot be predicted with precision.

In discussing cyclical theories, we attempt to make predictions from a macro perspective. Such predictions are based on high-probability events, but they are by no means perfectly accurate. In reality, such forecasts do not imply the inevitability of future developments. A nation performing well today could be completely altered tomorrow by an unexpected war; conversely, a country that appears to have no bright prospects could, if led by a figure with political wisdom and economic capability (such as Singapore), also achieve prosperity.

People often say, “To know where the future is heading, you must first understand the road that has been traveled in the past.” This seems to echo the famous historical maxim: “By using history as a mirror, we can understand the rise and fall of states.” However, Morgan Housel, a partner at The Collaborative Fund and an avid reader of history, finds this notion not entirely accurate. A more fitting statement would be: if you understand past experiences, you will realize that we actually know nothing about the course of the future.

Why is this the case? First, our world is full of butterfly effects—tiny changes in factors can trigger major historical turning points. For example, looking back over a hundred years to May 7, 1915, the RMS Lusitania was sunk by a German U-boat’s torpedo, an event seen as a catalyst for the United States entering World War I. But few know that if the ship’s captain had not previously shut down the fourth boiler room, the vessel could have traveled faster, avoiding the fatal encounter with the German submarine, potentially altering the course of WWI. Similarly, if the wind direction on the night of August 28, 1776, had been different for the British fleet, the outcome of the American Revolutionary War might have been entirely different, thereby rewriting world history.

This shows that behind every major historical event are unforeseeable contingencies, which make it impossible for logical reasoning alone to accurately forecast future developments.

In addition, when making predictions, people often assume that while one factor changes, all other factors remain constant. But in reality, there are no such controlled variables—everything is interconnected and mutually influential.

Take stock investment as an example: many regret not buying at low prices and, after a price rise, hope for a drop to buy in. But when the price does drop, multiple factors—such as market conditions and economic policy—have already changed, rendering the original prediction invalid.

Therefore, the lesson of history does not lie in providing a formula for accurately predicting the future, but in teaching us to humbly face uncertainty, recognizing that the future is full of unknowns and that our forecasts are filled with variables and challenges.

“Stability breeds instability.” This phrase might resonate with the ancient saying, “Within fortune lies misfortune.” Hyman Minsky’s famous “Financial Instability Hypothesis” actually describes a psychological process, which Housel simplifies into three steps:

• Economic stability leads to optimism.

• Optimism encourages people to take on debt.

• Debt makes the economy unstable.

Thus, Minsky’s core insight is that stability itself harbors instability—prosperity contains the seeds of recession. The challenge is that it is very difficult to know when the turning point will come, which is another reason forecasting the future is so difficult.

Another thought-provoking saying is: “Risk is what you don’t see.” This means that even if you think you’ve considered every possibility, the true risk often lies in what you haven’t foreseen. As one financial advisor put it: “Risk is what’s left over after you think you’ve thought of everything.”

Historically, the greatest risks and most significant events we’ve experienced were often those we failed to anticipate. For instance, on the eve of the Great Depression in the 1930s, a 1930 opinion poll showed that people believed the biggest issues facing the United States were judicial matters and Prohibition, with unemployment ranked only eighteenth. Yet just a year later, mass unemployment became the most prominent issue, showing that people at the time failed to foresee the real risk.

This is often because, if a risk is foreseen, people prepare for it, and its destructive power is correspondingly reduced, meaning it no longer constitutes a “risk.”

Thus, Housel points out that the greatest risks and most important news stories of the next decade are subjects that no one is talking about today. This is a constant truth—no matter when you read these views, the fact remains unchanged.

From the above analysis, we arrive at a somewhat pessimistic conclusion: predicting the future is an almost impossible task. The past was like this, and so will be the future. We must be realize that forecasting the future is filled with uncertainty and challenges.