Change has been a human obsession for thousands of years. The fashion industry is built on change. The whole point of a New Year’s resolution is to say that a changed version of you is better than the existing version. The concept of “planned obsolescence” intentionally pushes change on consumers whether they want it or not. Not surprisingly, thousands of people have written millions of pages on the topic; if you go to Amazon.com’s website – Jeff Bezos’s own company – and search for books on change, you get over 60,000 results.
And yet change is notoriously difficult to predict accurately. We’ve been expecting flying cars and teleporting since The Jetsons and Star Trek, and neither is around the corner. And we’re no closer to nuclear-powered vacuum cleaners now than we were in the 1950s. People have been making horrible predictions about change for as long as people have been making predictions.
For investors and markets this is extremely important, because stock prices reflect a set of beliefs about future events, discounted back to the present. If that set of beliefs is inaccurate, then so are stock prices. If we can’t predict the Next Big Thing, how can we know where to invest?