By Michael O’Connor

I received some bad news over the last few weeks, and it has changed my perspective on a few things.

One thing I realised is that it's the things you never see coming that truly impact your life.

We spend our days worrying about the obvious risks, and then our lives are upended by an event we could never have predicted.

This is true across so many aspects of life.

Investing is no different.

Much of my day job is focused on what happens next.

Are we headed for a recession, will the stock market crash, and how much will property prices fall?
These are all pressing questions, but these attempts to predict the future can be soul-destroying when the future is so hard to predict.

History is an endless stream of reasonable predictions upended by unforeseeable surprises.

In 2001, as we focused on the debt crisis in Europe, two planes struck the Twin Towers. In less than 90 minutes, the world changed in a way that was simply impossible to predict.

In 2020, as we focused on the implications of Trade Wars, a virus shut down the global economy, and 20 million Americans lost their jobs in a single week.

And on and on.

Paying attention to the known unknowns is essential, but it’s risks that we don't see coming that truly define us.

No preparation, no protection, maximum destruction.

So, if the surprises are what really move the needle, why do we spend so much time trying to predict the future?

Simple put, it helps us worry less.

Building a vision of the future and convincing ourselves it will play out offers unrivalled piece of mind - a sense of control in an entirely uncontrollable world.

The warm cozy hug of certainty is hard to resist.

Despite the allure, however, we must ask ourselves; why obsess over predicting the exact path when the probability of us getting it exactly right is so low? Surely this is an obvious waste of time and resources?

So how can we better allocate resources?

Focus on the bigger picture

Instead of arguing over the minutiae, we need to focus on the bigger picture.

So many risks could play out over the short term.

Inflation runs higher, and interest rates pull down stock market returns.

The real estate market falters, creating economic ripple effects;

Energy shortages
A new COVID strain

The point is, there is always risk.

History is just one thing after another.

There is never a utopian state of calm, but over the long run, humans have prevailed.

In the face of wars, depressions and pandemics, people have become more productive.

We have continued to innovate and create products and companies that are more and more profitable over time.

This is the detail we often fail to see - the glimmer of light in a dark room.

Our ability to adapt and overcome over time is undisputed.

So, instead of trying to predict exactly what happens next, trust that we will prevail over time and focus on the larger trends.

What innovations will inspire the next generation of profitable companies? How will changing demographics change the world?

You will never get it 100% right but focusing on the stuff that really matters certainly improves your odds.

To learn what companies to invest in and to get direct access to my personal investment portfolio go to www.theislandinvestor.com.