I Saw the Future, It Wasn't Today's Stock Market:
What Newton, Robinhood, and Your Retirement Portfolio Have in Common
On April 8, 2025, the S&P 500 surged more than 4%—then closed down 1.6%. It wasn’t just volatility. It was a real-world display of confusion of the masses.
In my earlier pieces—Decision-Maker’s Dilemma: What We Know vs. What We Believe (March 12) and Lessons from Game Theory (March 19)—I explored how uncertainty and ambiguity aren’t just abstract academic ideas. They are the very texture of how decisions get made in the real world, whether by presidents, negotiators, or everyday investors. The stock market, with all its wild swings and feedback loops, gives us a dynamic lens to revisit these ideas in action.
Unpacking the Stock Market Wild Swings
The trigger was a new round of tariffs announced on April 2. Over the next three trading days:
April 3: S&P 500 fell 4.84%
April 4: Down another 5.97%
April 8: Brief 4.1% surge, then a 1.6% loss
This wasn’t driven by earnings reports or any economic data. The moves reflected something deeper: confusion about what the tariffs mean, who they benefit, and what comes next. This is exactly where we must distinguish quantifiable risk, reducible uncertainty, and ambiguity.
Image Credit: ChatGPT
Revisiting Uncertainty and Ambiguity
As discussed in the March 12 post, uncertainty comes in two main flavors:
Reducible uncertainty: A lack of knowledge that can often be reduced. Investors wondering, "Will more tariffs be announced?" or "Will the Fed respond?" are facing reducible uncertainty. They may seek clarity via economic analysis, new data, or policy signals.
Irreducible randomness: Market fluctuations from day-to-day news, sentiment, or algorithmic trading fall into this category. You can’t eliminate them with more data.
But what truly unsettles markets is not uncertainty but ambiguity: (a) Conflicting interpretations of the same event; (b) No agreed-upon frame of reference or playbook; and (c) Competing narratives about what matters.
When some investors interpret tariffs as a patriotic defense of domestic industry while others see them as inflationary and globally destabilizing, the result isn’t just volatility—it’s whiplash. That’s ambiguity in motion.
Game Theory, Rationality, and Real Markets
In the March 19 piece, we looked at how game theory models the strategic decisions of players facing uncertainty and ambiguity. The Cuban Missile Crisis showed that sometimes rational calculation works. But examples like OPEC’s oil strategy or a salary negotiation reveal something else: outcomes depend on expectations, trust, and long-term relationships.
This applies to markets too:
Investors try to guess what other investors will do.
Traders position themselves based on likely reactions to policy or earnings.
Algorithms react to cues—sometimes reinforcing volatility.
It’s not rational logic at work. It’s perception, interpretation, and anticipation.
Newton, Robinhood, and the Psychology of Markets
Even Isaac Newton—a giant of science—was not immune to the emotional forces that drive financial decisions.
In 1720, Newton invested in the South Sea Company, initially selling early and making a handsome profit. But when the stock kept rising, he couldn’t resist jumping back in—this time near the peak. When the bubble burst, he lost most of his fortune. He later reflected: “I can calculate the motions of heavenly bodies, but not the madness of people.”
Three centuries later, a new generation of investors on Robinhood and Reddit fell into similar traps—chasing hype stocks like GameStop or IPOs based on social media buzz. History didn’t repeat, but it certainly rhymed.
In both Newton’s case and today’s markets, the lesson is clear: knowledge and intelligence are not enough when ambiguity and crowd psychology take over.
Framing the Decision for Investors
Let’s reframe this through the lens of our decision-making framework:
Uncertainty can sometimes be reduced with data, diversification, and modeling.
Ambiguity requires clarity on your own values, time horizon, and the stories you choose to believe.
If you’re in your 20s and 30s:
Use ambiguity to your advantage. Market drops driven by confusion can create long-term buying opportunities.
Dollar-cost averaging helps you stay disciplined and remove emotion from the equation.
Don’t chase narratives—stick to fundamentals and diversified exposure.
If you’re in your 60s and 70s:
Separate your money by function: cash for short-term needs, growth assets for longer-term goals.
Don’t rely on market rationality. Build in buffers, flexibility, and multiple scenarios.
Recognize that ambiguity is here to stay—but your financial strategy can be stable.
Engineering Diplomacy Meets Financial Decision-Making
In other posts from March, we emphasized the importance of navigating complexity not just with models, but with principles and pragmatism. In investing, this means understanding your own position in the game: your constraints, your short- and long-term goals, and your interpretation of risk.
The market doesn’t deliver answers. It reflects the reality of conflicting interpretations. And in such a world, robust decision-making depends less on finding the "right" answer and more on being prepared for multiple plausible futures.
What Comes Next?
Markets are surprisingly good at pricing risk. But when ambiguity takes over—when even the smartest people disagree on what's happening or why—models break, narratives collide, and volatility spikes.
That’s when decision-making stops being purely analytical and starts becoming personal—and ambiguous.
You don’t have to be Isaac Newton to fall for market euphoria. But you also don’t have to be a victim of it. The real challenge isn’t predicting the future—it’s understanding your own posture toward uncertainty and ambiguity. Forget precision. In ambiguous markets, principled pragmatism beats prediction.
Do I know how markets will react next week or next month? Absolutely not. I’m not watching every tick or headline. Here’s my crystal ball:
🌍 The world isn’t coming to an end.
💸 Trillions of dollars in global markets and retirement accounts won’t just evaporate.
📈 And my $100 today—with an added $1 invested every Monday—will grow to around $500 in five years.
That’s the kind of forecast I can live with.
What’s your crystal ball?
When the market sent mixed signals, and the narratives pulled you in different directions—how did you respond?
Hit reply, share your story, and let’s keep learning—together.