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Geoff MacDonald’s thoughts on why ‘uncertainty’ is a very good thing

It’s true, today is very uncertain.  Other members of the investment team could all talk about this, there is no doubt that there is uncertainty and that changes the nature of the type of business that you are willing to invest in and the businesses you should not invest in, there is no doubt about that. The range of outcomes is certainly wider than normal [today].
 
But I think it’s important to highlight that you want uncertainty, and I know that sounds like a crazy comment at first. But, if there is no uncertainty and we all see the same future, that is not a time to invest. If the buyer and seller are both certain what the future looks like, there is zero chance for return, it’s a risk free rate of return, that’s what everyone will generate.  So everybody wants certainty, right? That’s what people want, they want certainty. But the truth is, outsized returns [comes from] the ability to have a view on a company that other people don’t know…. To see what a business could look like when others can’t quite see it….  But in that situation you happen to have a view that’s different…. That’s uncertainty.   Because they don’t see it….. but you do.  That’s how you make money.  You don’t want certainty. 
 
Certainty is why people want to own Netflix today, it’s why people want to own the obvious survivors. That’s certainty.  And if you go back in time when people wanted certainty - look at the Nifty Fifty. 50 great companies that everyone wanted.  Just own these ones, they’re the only ones going up – they’re great business!  Polaroid, Kodak, Walmart - just own those names!  That’s all you had to do!  You lost half your money and it took you 10 years to get your money back.
 
And then it was really certain in 1979 and 1980, oil had 10 years of reserves left. It was so certain, every expert agreed! Just buy oil and gas stocks, you bought the whole index, you got cut in half, you lost half your money, of course, and it took ten years to get your money back.
 
The next certainty that everybody agreed about, was Japan, how certain Japan was going to be. You’ve lost half your money, it’s 30 years later and you still don’t have your money back; you’ve got half your money 30 years later. Japan was certain to be a powerhouse
 
Then there was the Asian Tigers in ’92. You don’t have your money back from that.
 
Then it was certain that the internet was going to change our life in ‘99-2000. It was going to change our life!  We were going to be doing these webcam things that we’re doing today, whatever it is – unbelievable!  Webinars, whatever they are called again.  They were going to change our life, it was a certainty that the internet was going to do that. And you lost your money.  And lost a lot of it if you just agreed with others and seeked certainty.
 
So I’m not trying to make light of today, that it is highly uncertain. But that uncertainty should be craved because it gives you a chance to find insight. That’s what you need, and that’s the opportunity that is being presented today. And that’s where we are spending our effort and time in those various situations where we can find it.”
 
Sincerely,
Geoff