Zen Buddhism has a concept called mujo, or impermanence – constant change.   It is in fact the only constant that investors can rely on.  Change is, and always has been inevitable.  As investors, we have to accept and accommodate change, understanding that we cannot control it.  That does not however mean that we are helpless as we go through our investment life.  We’re not.

We must think about what we can and cannot know, and how to prepare for the future – irrespective of our inability to predict it.  Yes, the future is unknowable, but the recurring cycles of boom and bust remarkably are not.  Most investors act as if the latest market trends will continue indefinitely (behavioral economists use the term recency bias to describe the cognitive glitch that leads us to overweigh the importance of recent experiences and project them forward).  This tendency that we all have, if not recognized and managed, can potentially be a costly mistake.


Financial writer Willian Green has an interview with master investor Matthew McLennan in his recently published book Richer, Wiser, Happier.  McLennan’s investment philosophy begins with the respect for uncertainty inherently present in the world.  This appreciation for uncertainty stems in part from his understanding of history.

He’s particularly fascinated by the relative calm of the early 1900s.  Quoting from William Green’s interview with McLennan,

“Surveying the world in, say, 1908-14 an investor had every reason to feel confident about the future. The global economy had enjoyed a long period of unprecedented growth. Asset values seemed reasonable. And it was widely believed that inflation had been vanquished. Why worry?

And then, all hell broke loose.


The assassination of Archduke Franz Ferdinand, heir to the Austro-Hungarian throne by a Bosnian revolutionary triggered a chain reaction that precipitated the outbreak of World War I, which ultimately led to more than 36 million deaths and casualties. During this period, the New York Stock Exchange closed for four months during the war, and every major European exchange shut down for the duration.

Following the war, the flu pandemic of 1918-19 killed 50 million people.  Hyperinflation gripped Germany in 1922, collapsing the government and economy, setting the stage for the rise of Adolf Hitler. The Crash of 1929 precipitated the Great Depression leading to breadlines and global revolutionary spirits everywhere (including here in the U.S.).  It all finally culminated with the outbreak of World War II (1939 – 1945) which killed an additional 75 million people before it too was over.”


One man, one shot, heard around the world for the next thirty-one years.  His seemingly isolated act of terrorism toppled but the first domino which led to a collapse of the entire social order, resulting in misery, death, tragedy, and destruction played out on the global stage in a way that would have been inconceivable to anticipate.

It is a dangerous blunder to assume that the period ahead will resemble the period most recently experienced.  It is precisely because the future is so uncertain that we focus heavily on attempting to avoid permanent losses through the balanced approach of our All-Weather portfolio design.  We created that portfolio such that it might endure various states of the world, come what may.  It seems to us here at BCM that this is the only way to prudently protect and build wealth in an uncertain world.