Forecasting financial markets requires the ability to collect disparate facts, discover a pattern and imagine a trajectory projected far into the future.

1. Out From the Shadows: Discovering the Secrets of Financial Success
Forecasting financial markets requires the ability to collect disparate facts, discover a
pattern and imagine a trajectory projected far into the future.
Over the course of my career, I have found that the best way to understand complex
financial and economic topics is with a straightforward analogy, or better yet an
engaging story.
One of my favorites isn’t a fable or novel, but the true historical tale of the man who
discovered that the Earth is round.
Most of us believe that man was Christopher Columbus, but our planet’s spherical
reality was first imagined centuries ago by Pythagoras, Aristotle and Eratosthenes.
Amazingly, Eratosthenes not only believed this from a theoretical perspective, he
precisely calculated Earth’s circumference, more than 2,000 years ago.
The way he went about this should be an inspiration to economists and financial
planners everywhere, as it demonstrates the power of logic, intuition and persistence.
According to an essay in American Hellenic News, Eratosthenes wondered why
shadows cast by the sun at noon in the town of Syene were so different, in length and
direction, from those observed in Alexandria at the same time of day. The clear
implication to a logical thinker is that the surface of the Earth must be curved.
He set out to prove the theory, in much the same way a seasoned economic forecaster
analyzes markets. First, he examined the puzzle. As one of the greatest ancient
mathematicians, he knew there was a relationship between the difference in shadow
length and the curvature of the Earth.
He then collected key facts. He placed a stick in the ground in Syene and measured its
shadow, then did the same thing in Alexandria, several hundred miles to the north. With
the assistance of a man who measured the exact distance between the cities, step by
step, he plugged the data into an equation he created and arrived at a measurement of
the Earth’s circumference that was accurate within just a few percent.
He had no iPad, calculator or slide rule, just an idea, curiosity, a quest for understanding
— and two sticks.

2. Imagine what we can do — or don’t do — with so much more. Today we have endless
columns of data, the collective knowledge of generations and the tremendous
computing power to access and analyze it.
We have the science of psychology, which can aid in predicting the ways in which
human behavior drives markets. We have centuries of economic history, a panoramic
view of what has or hasn’t worked over the millennia.
It can be argued that calculating the circumference of the Earth is easier than discerning
the direction of the Dow Jones of NASDAQ, especially when tides of greed or fear are
pulling markets in random directions.
But the truth is that armed with the simplicity of logic and the curiosity to understand
important facts around us, we can not only grasp the obvious — in our own financial
lives, we can make history.
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