Don't Count on It!: Reflections on Investment Illusions, Capitalism, 'Mutual' Funds, Indexing, Entrepreneurship, Idealism, and Heroes

Let us begin our journey with a gentle reflection on the world of numbers—a world that, for many, feels solid and reassuring. Yet, as our story unfolds, we come to realize that numbers, while powerful, are but a pale reflection of reality. Imagine a lantern casting light through a dense fog of digits, illuminating the path ahead but never quite revealing the whole landscape. Numbers are tools, not truths, and when we trust them blindly, we risk losing sight of the deeper wisdom beneath.

Consider the allure of historical returns. For decades, investors and corporations alike have gazed at charts and tables, projecting the past into the future with unwavering faith. But as we’ve learned, the future is never a simple extension of yesterday. Historical returns are not actuarial tables; they are stories shaped by unique moments, emotions, and unrepeatable circumstances. When we attribute certainty to history, we build our hopes on shifting sands.

Optimism, too, colors our perception. We see the dazzling growth of a $1,000 investment becoming $212,000 over 50 years, yet we forget the silent erosion of inflation, taxes, and costs. In reality, that sum may shrink to $4,300 in real, after-tax terms—a sobering reminder that what we keep matters more than what we earn. The numbers on the page may glow with promise, but the truth is often far more modest.

Our obsession with hard numbers—stock prices, earnings per share, precise ratios—creates an illusion of control. We crave precision, forgetting that the true value of a company or a portfolio is shaped by countless forces, many unseen and unmeasurable. It is better to be roughly right than precisely wrong, for the market’s momentary precision often masks eternal imprecision.

As we move forward, let us remember that numbers, while necessary, are not sufficient. They must be balanced by experience, judgment, and character. The story of investing is not written in digits alone; it is a tale of human hopes, dreams, and frailties. And so, our journey continues, as we explore how these illusions shape not only our portfolios but the very fabric of capitalism itself.