There is More Power in the Hidden...

"A hidden connection is stronger than an obvious one." ~ Heraclitus (c.536-470 BC)  

As children we learned to love surprises and to fear the dark.  For financial markets the greatest mover of stock prices, up or down, is the unexpected.   The unknown possesses more power than the known.  How can this be?  Are we not taught and often reminded of Sir Francis Bacon's famous assertion that knowledge is power?     Let's apply some logic here:  If our capacity to acquire more power is contingent upon the acquisition of more knowledge, then any power not yet acquired presently exists as the unknown -- the hidden.   This has tremendous impact on our ability to reach our potential, not only as investors, but also as human beings...  

"True wisdom comes to each of us when we realize how little we understand about life, ourselves, and the world around us." ~ Socrates (c.469-399 BC)

The gap between known and unknown is filled by perception. Once we realize that the unknown is greater than the known, we also realize that our perception is creating most of what we call “reality,” which may be disastrous.

Where we expose ourselves to weakness is the simple, yet common lack of awareness of our own ignorance -- not knowing that there is much that we do not know.  While we cannot acquire material knowledge -- or see the hidden; by virtue of recognizing our ignorance, we can acquire what we may refer to as wisdom, via the simple awareness of our ignorance -- yielding to the unknown -- or recognizing that the hidden exists...

"The difference between what the most and the least learned people know is inexpressibly trivial in relation to that which is unknown.” Albert Einstein (1879-1955)

The unknown has incredible power, primarily because we do not acknowledge its potential, or even its existence.  This has broad and overlapping applications.  Let's look at a few examples of how the hidden has harmed people:

• Assuming that large firms, such as Bear Stearns, Lehman Brothers,and Merrill Lynch cannot fail.
• Sharing with others details about you that they do not need to know.
• The false perception that real estate values never go down.
• The thinking that more money brings more security.
• Failing to recognize complacency.  
• Saying "It's different this time."
• Saying "It's the same this time."
• The Titanic is unsinkable.

"I hope our wisdom will grow with our power, and teach us that the less we use our power the greater it will be." ~ Thomas Jefferson (1762-1826)

• With the acquisition of wealth, our capacity to borrow against it increases.  A larger shovel only enables us to dig a deeper hole.
• If we give money/power to others, we increase our own potential for more money/power.
• It is not easy, if not impossible, to plan for the unknown; therefore, expect it and embrace the hidden and you will gain power. 

"One's own self is well hidden from one's own self; of all mines of treasure, one's own is the last to be dug up.” ~ Friedrich Nietzsche (1844-1900)

Ignorance represents what we do not know. If we know that there is much that we do not know -- admit to our selves that we are ignorant -- we become more powerful by leveraging the power of the unknown because we have revealed that which is hidden -- our ignorance.

If you are an active investor or trader, you already know that there is more to be gained by investing in that which is least known, understood or appreciated by the market but there is also more inherent risk involved and, therefore, more self-awareness and emotional intelligence is required.  This lesson also extends to personal relationships and any other endeavor that requires embracing the unknown... 

When we learn that there is much more to learn about ourselves and the world around us -- that there is much “hidden” from our view -- we realize our own ignorance and become empowered -- we shed more light upon the dark -- and most importantly, we enable the discovery and awareness of our self.

I refer to this as wisdom…

Related Posts:
Weekend Wisdom: When is 'Illusion' Good? Delusion, 'Non-bottom callers' & The Afflictions of the Investor's Mind

Weekend Wisdom: Uncertainty, Volatility 'The Vix'

Comments

[donna]

Good messages for a tough day.

Lots of risk and uncertainty out there right now. Too much was hidden for too long, methinks. ;^)

[Ari Koinuma]

I think uncertainty is freeing in a way that we are not attached to any particular plans or outcomes. When we do have such projections, we tend to worry about whether they come true or not. When things are uncertain, we can view it as a pure potential -- for good or bad. People who can harness its power can see uncertainty filled with positive opportunities. Others can see it as a threat. Either way, it is true.

Here's a post of mine that discusses stuff along that line:

http://ourbestversion.com/2008/06/making-uncertainty-your-friend/

ari

[Aman]

There surely is more power in the hidden. It's hidden because we're hiding from it. "Fear" of uncertainty appears to be the limiting factor. It's not the uncertainty that's the limiting factor, it's fear - a priori.

[The Financial Philosopher]

Donna / Ari / Aman:

I believe I can tie all of your and my thoughts together with a few quotes from Michel de Montaigne:

"A man who fears suffering is already suffering from what he fears."

"My life has been full of terrible misfortunes most of which never happened."

"There is no passion so contagious as that of fear."

"It is the mind that maketh good or ill, that maketh wretch or happy, rich or poor."

"A straight oar looks bent in the water. What matters is not merely that we see things but how we see them."

Thanks for reading and for sharing your thoughts...

Kent

[Next Gen Politics]

Once again fantastic Kent. I don't do a lot of investing, but the way you tie the investing with everyone's daily experience is great. Knowing that, in the grand scheme of things, we know nothing would probably lower our blood pressure and make our everyday relationships more meaningful as well.

Once Again, great post. I look forward to your next post.

Jerame Clough
-Next Gen Politics