Not knowing what will happen in the future is unsettling. It’s human nature to seek meaning in events, to turn randomness into something comprehensible. We are wired to find patterns—similarities, connections, stories—in an attempt to create order out of chaos.

This is why, when we look at clouds, we sometimes see faces or shapes. Our brain is constantly scanning for familiar patterns, trying to make sense of the world around us. This is the same reason why we sometimes over-interpret events in our financial lives. The mind is simply looking for a story to explain things.

We often do this in our investments too. It’s why we search for patterns in the stock market or try to explain why one stock is up and another is down. However, these interpretations can lead us astray. In finance, this behavior is part of the reason why investors often fall victim to what Nassim Taleb calls the “narrative fallacy”: the tendency to create simplified, often incorrect, stories from complex events.

The Danger of Looking for Meaning

Taleb’s concept of the narrative fallacy is an essential one for investors. It’s the tendency to retrospectively create simple narratives around randomness. For example, after a short-term market dip, you might convince yourself that you made a bad investment decision, that there’s some “hidden reason” why your portfolio is underperforming. But this is exactly what Taleb warns against: “we are narrative creatures” who are always searching for a cause, even when there is none.

This desire to find a cause-and-effect relationship in everything is part of the reason we struggle with randomness. We want to attribute meaning, but randomness is inherently unpredictable. Consider the stock market: short-term fluctuations are primarily random. They are driven by countless variables—some known, many unknown—and the human brain struggles to accept that we simply can’t predict it with certainty.

How Randomness Affects Your Investments

Let’s say you’re an investor who has been in the market for just a few months. Your portfolio drops by 10% in a week. In that moment, it’s tempting to believe that you’ve done something wrong, that your decision-making process must be flawed. Or perhaps you attribute the drop to a mistake that “caused” the loss.

However, this is where understanding the true nature of randomness is crucial. Nassim Taleb’s work in his books, Fooled by Randomness and The Black Swan, emphasizes that randomness plays a huge role in our financial lives. What may seem like a disastrous outcome or a “bad choice” might simply be the result of a random fluctuation. It’s important to remember that in investing, especially in the short term, there is a massive element of randomness—something we cannot predict or control.

Taleb famously states, “It’s not the events you expect, it’s the ones you don’t that change your life.” When investing, we must remember that small, random events can have outsized effects on your portfolio. The key is not to react emotionally to these events but to keep your focus on the long term and trust the strategy you’ve set.

Embracing Randomness in Your Investment Strategy

So, how can you embrace randomness in your financial journey? The first step is to understand that short-term market movements are unpredictable. If you’ve done the right financial planning and are committed to a strategy based on solid principles, there’s no reason to panic when the market experiences a setback.

Taleb’s idea of “antifragility” is helpful here. He argues that systems—whether financial, personal, or even societal—can be made stronger by exposure to volatility and randomness. Rather than fearing randomness, we should build systems that can benefit from it. In investing, this means diversifying your portfolio and focusing on strategies that can weather market fluctuations without forcing you to abandon your goals.

The Power of Patience and Long-Term Focus

If you’ve created a well-balanced investment plan, stick to it. Overreacting to short-term volatility will only undermine your long-term success. In fact, over time, randomness tends to even out. Taleb suggests that the real key to success is patience and resilience. The market will fluctuate, but those who are able to withstand these fluctuations—and who focus on long-term goals—will ultimately emerge ahead.

So, rather than worrying about every small market dip, consider how you can build resilience into your strategy. Stay focused on the fundamentals of your financial plan. Avoid the temptation to create stories out of random events, and recognize that your emotions, driven by the need to find meaning, can cloud your judgment.

Conclusion: Accepting the Role of Randomness

As you move forward with your investments, always remember: the desire to make sense of everything is deeply ingrained in us, but it often leads us to misinterpret randomness as something more significant than it is. In the world of investing, randomness is an unavoidable force. Instead of trying to fight it, accept it, and design your financial strategy to thrive in a world where the unexpected is the only certainty.

So, the next time you experience a setback in your investments, don’t jump to conclusions or blame yourself. Trust in your plan, ride out the randomness, and remember that long-term success is built on resilience, not on short-term accuracy.