Who, then, can see the future?

Let’s put a twist on a favorite childhood question.

If you were an investor (so financial profit was your primary motive), and you could choose a superpower, which would you take? Would you scale walls, or fly, or see faraway objects?

Given the choice, I think you would be wise to answer: D) None of the above.

In my last post, “The Philosopher Kings”, I argued that the single skill that would come to differentiate successful captains of industry - the superheroes, if you will - from their otherwise talented and competent peers - us mere mortals - would be their ability to think intelligently about the future.

If D) None of the above then E) Other. Fill in the _____.

Let’s fill in the blank with the ability to see the future and imagine, for a moment, what we could do. Even if you could only gaze ten seconds ahead, or, for that matter, even one second ahead, you could make an endless amount of money. That is, of course, until the SEC finds out and bans you from trading with such an unfair advantage.

My friends who work at banks on Wall Street tell me that the most expensive real estate in the world is the server room next to the New York Stock Exchange’s routing system, because if you can transact orders even a fraction of a second faster than the rest of the market, you can provide liquidity with high frequency trading and make a spread by buying from the sellers and selling to the buyers. Even if the spread is tiny, if you can do it enough times and with enough volume, over time you can make a fortune.

If you could gaze even farther ahead, say a week, or a month, you would have an even larger and more unfair advantage. You would choose the security - a stock, for example - which you knew was going to make the most dramatic move, and invest in it heavily, and with as much leverage the market would lend you, and then you’d make a fortune.

If the days tell you their secrets, you become a trader on Wall Street. If the years tell you their secrets, you become a venture capitalist on Sand Hill Road. You provide every round of financing to the next Google.

It’s an interesting thought experiment, because the more you think about it, the more you realize how little hard information about the future you need to possess to become rich, and that the more information you have, the fewer and more targeted and more leveraged your investments would become. You wouldn’t need to have a portfolio. Portfolios are for investment managers who know they’ll have some winners and some losers, so they spread the risk around. Instead, as a rational profit-seeking actor, you would put everything you’ve got (or as much as they’ll let you) into the biggest winners in a descending order until you have no capital left to invest.

I wonder how long it would take someone with this superpower to amass the first trillion dollar fortune. Less than ten years, certainly. Perhaps less than five. Or maybe, even then, I underestimate.

Why entertain this fiction? Because it is a practical fiction.

It makes my point for me. Information about the future is valuable. Infinitely more so than gold. The prophet is the goose that lays the golden eggs. Only a fool would butcher that goose for dinner. Only a fool would trade that information for bullion. Yet it’s so easy to be a fool, and fools there are in legion.

What if there were a way for us, mere mortals, to drink a drop of some magical elixir that gave us that superpower for just a moment? What if it were possible for you and I to glimpse the future, if only through the fog?

There is a way. It’s there for the taking. And are we fools not to seize at the opportunity?

That is, by proxy: the ability to think intelligently about the future is as close as we can come to actually seeing the future, and that is certainly close enough to reap the benefits, although not close enough to be error-proof.

Who, then, can glimpse the future?


To be continued…