Known Knowns and Unknown Unknowns

“Swami uncle, how do you know that Ganpati Bappa goes to his home elsewhere after we immerse him?” asked Jigneshbhai’s son as we were returning after immersing the Swami’s Ganesh idol after this year’s festival.

It was Swami’s turn to be at the receiving end of questions this time from our broker friend’s son. Jigneshbhai was having a naughty smile as he was enjoying the reversal of fortune – from Swami’s questions to Swami being asked questions.

“How can all lakes and seas reach his home?” Jigneshbhai’s son continued. “Do you have proof that Ganpati Bappa reaches home?”

Swami was lucky that we soon reached our coffee-house, and our families left us alone with our weekly coffee routine, and so the questions stopped.

“Your son asks a lot of questions!” Swami finally said, after they were all gone.

“For once, I did not face your questions! Or his!” my broker friend laughed.

“So how would you answer them? Of course, we know the real Ganpati Bappa goes nowhere. But next he would ask me if there was any proof if Ganpati Bappa was real?” an exasperated, god-fearing Swami exclaimed.

Jigneshbhai stayed silent for a while. He was probably lost in some thought.

“Well if we don’t have conclusive proof that he exists, we also don’t have conclusive explanation to negate the theory that he does exist!” Jigneshbhai stated.

That left Swami and I a bit confused. But our broker friend continued.

“There are the known knowns – like oxygen is necessary for life, and then there are the known unknowns – like we don’t know how life originated or if God exists for sure. But there are also the unknown unknowns – like maybe we don’t even know what we don’t know about the possibilities in the endless universe or in the future!”

Swami and I looked at each other, wondering whether our broker friend was fine. He seemed in fine health a few moments back, but suddenly he had escaped into an unknown orbit.

Unlike our normal confused faces in such situations earlier when Jigneshbhai gave some profound theories, this time our faces indicated outright amusement. Perhaps that’s the reason our broker friend too broke into laughter.

“I am not joking!” he said. “Isn’t it right? Even Donald Rumsfeld when once asked if there was enough proof that Iraq had weapons of mass destruction used something like this. Maybe he meant it, or maybe he was justifying the war – who knows!”

Indeed that was true. I distinctly remembered that, and it became a topic of contention for a long time. But it actually demonstrated the realities of taking decisions at the highest centers of power with an understanding of what is known, what is unknown, and an appreciation of how little may be actually known.

While Swami and I were musing about the known knowns and unknowns unknowns in our life, our broker friend, in a jovial mood today, intercepted our thoughts cheekily. “Like whether the markets will oblige him is a big unknown for Swami!”

Obviously that little provocation was enough for Swami to get started. “Maybe” he said sarcastically, “but most else in your investing domain is based on numbers and metrics isn’t it? So it should fall into known knowns!”

“Well” said our broker friend. “Numbers give you a false sense of knowing.”

Swami and I were starting to understand what our broker friend was trying to get at, and why his answers are often in shades of black and white – specially to Swami’s questions on buy or sell. But it still wasn’t fully clear so we were lost in thought.

Jigneshbhai continued.

“There are many known knowns in investing – like high profitability is good, or low P/E is cheap. And then there are known unknowns – like what will the market do in the next month, or who will be the next RBI governor. But there are also the unknown unknowns – like we don’t know what technologies or trends will emerge and impact business.”

“The important thing is to collect as many knowns as you can, and build an appreciation of their limitations due to the possibilities of the unknowns. And then act with openness.”

While we were engaged in this discussion on knowns and unknowns, the wealthy old man in the sprawling bungalow walked over to our table. He had been quietly listening to our conversation, and as we were preparing to walk, he looked at Swami and I and left us with some words of wisdom, emerging from rock music, perhaps?

There are things known, and things unknown, and in between are the Doors.

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