Past performance is the most significant predictor of future performance.

Lost in this statement is the nuance within the wisdom.

Both of these things can be true.

1.) Past performance is the most significant predictor of future performance.

2.) Past performance only correlates 10% with future performance.

My point is that past performance may be the best predictor, but that does not mean it is infallible or even reliable.

It’s just the best out of a lot of lackluster options.

It’s the easiest to observe.

It’s measurable but still quite flawed.

Past predictors can guide us, but they are not the answer – especially when it comes to dynamic or developing environments.

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Morgan Housel is one of my favorite writers and one of the reasons I started writing online.I wrote this post after reading his book The Psychology of Money. A similar post can be found here.