— Bill Bonner Letter January 2017
In science, philosophy, and investing, we never know what is “true.” The best we can do is test propositions to see if they are false.
An experiment can prove that something is wrong; it can never prove it is not wrong. You say, “Water always boils at 212 degrees Fahrenheit.” Fine, give it a try. If it boils, good work. But you can never be sure that it will do so next time you try. If you say, “Water doesn’t boil at 212 degrees,” that is a hypothesis you can disprove by a single experiment.
The same process, more or less, works in the investment world. You can never know which premise is correct; that would imply that you could foretell the future.
Betting on something you think will happen is very risky. Zillions of things might happen. Only a few actually will.
You’re better off, generally, betting against things that others think will happen, but for which the probabilities are unfavorable.
“Identify the trend whose premise is false and bet against it,” says legendary investor George Soros. “