Future Results Not Guaranteed

If you have heard that phrase along with an add or prospectus, it is good to remember.  Here is one of the things I learned in undergrad Economics long ago…

A man receives a letter providing “free” advice on an investment.  He reads it and throws it away, but notices it was correct later.  He receives another letter with more free advice.  He ignores it, but it turns out true as well.  The third letter comes, he invests, it pays off.  The fourth, the fifth, all the same.  The sixth letter arrives while the man is getting rich off this seemingly Nostradamus like advice on finances.  It says, the first five were free.  To continue, please pay me $5,000 per letter.  This goes on for some time, and the man is very happy.

Eventually, a few letters are wrong, and after awhile, the man stops paying for them.

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I decide to make some money.  I write 10,000 letters to strangers.  Half recommend to do something, half the opposite.  I send out 5,000 letters to those I was correct with and repeat the process.  Then 2,500, then 1,250, then 625 finally 312.  Those 312 people then pay me $5,000 for my brilliant advice, after all, I have never been wrong.  I continue until at last, I have been wrong enough they stop paying.  I retire rich.

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The shrewdest advisors on Wall Street might just be the ones out of the first 10,000 that were randomly right.  You don’t hear about the failures, only the successes.  In that way, past experience really is NOT a guarantee of future results.  Strange when you think it through, but it is VERY true.