William of Ockham was a 14th century Franciscan monk, born in the small village of Ockham, in Surrey, England. Now I know some of you are already thinking, "what the heck does a 14th century monk have to do with the investment world today?" My answer - not enough, but he should. Many of you may think that you have never heard of him, but if you're successful there is a good chance you intimately practice what this monk preaches.
Historians today regard William as one of the central figures of his time. He is most widely regarded for his work on the principles of parsimony. After William's death these principles later came to be known in academic circles as "Occam's Razor". Occam's Razor states that if you can solve a problem without making unnecessary assumptions, and while incorporating the least amount of variables - that is the right answer. Today we know this as the KISS principle - Keep it Simple Stupid.
When you click on CNBC, pick up your Wall Street journal, or turn on your Bloomberg radio - it should be blatently obvious. In the investment world, we don't do a very good job of this. Rather there is a whole army of financial wizards trying to decipher the behavior of the investment markets and sharing with us their opinion of what's to come. The irony is that seemingly more often than not, their visions fail to come to fruition. And yet we as investors are encouraged to base our investment decisions on their collective wisdom.
Perhaps this is where William of Ockham comes in… Rather than attempt to predict the future price of a stock or the future state of our economy - encompassing a mountain of data and incalculable variables; rather than the attempt the impossible by looking forward, wouldn't it just be easier to "look back"?
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