“Economists have accurately predicted 9 of the last 4 US economic recessions” is the punchline to a joke based on something economist Paul Samuelson said about the stock market in 1966.
My formal economics education consists of one college level microeconomics course so clearly, I’m no expert. But, what I am able to do is review predications that have been made during my lifetime and see if they were accurate.
They rarely are.
Sometimes I wish I had become an economist. I think it would be great to have a job pontificating and making predictions while no being held accountable for them. For much of my professional life, I was responsible to hitting arbitrarily assigned (and often impossibly high) sales quotas. I was also responsible for creating accurate sales forecasts for the month, quarter and year.
On the rare occasions when my predictions were accurate, it was due to either luck or extremely late in the forecast period. For example, my forecasts became more accurate in the final week of the quarter when there were only a few selling days remaining and we had already won or lost 95% of our active deals.
Even though my compensation (and usually my boss’s compensation) was based on these predictions, that still could not make them more accurate.
It was a guessing game – like all complex predictions are.
If I made accurate predictions, it was due more to luck than skill.
I, just like all economists, are much better at predicting the past.
And so, when I hear that tariffs are going to increase inflation, that Trump’s antagonism of our allies and trading partners will cause a recession or that the US economy will go into a downfall that will result in us no longer being a world economic power, I tend to tune these messages out.
First, I have no direct control over these matters.
Second, most predictions are wrong.
Third, I’ve got a fallback plan if everything truly goes to shit.
Welcome to Steve Ainslie’s peace of mind. You may not agree with my approach, but it’s better than worrying.