Life is uncertain and volatility could be best understood by one’s life, sometimes you are on peak sometimes low. Loves, hatred, emotions, excitements, are the various factors that define the volatility of life.
Moving down to markets Volatility is the inherent behaviour of the markets that’s the reason trader makes and loses money.
The markets are volatile so does the life. It’s important to curb the volatility and see the things from the long-term horizon. The high tides do not last forever so does the calm sea-shore.
The nastiest thing I’ve ever told anyone (a finance fellow angry with me): “When you have absolute intellectual and more disrespect for someone, the only real compliment you can possible get from his in making him angry”
“In economic life and history more generally, just about everything of consequence comes from black swans; ordinary events have paltry effects in the long-term.” -Nassim Nicholas Taleb
Nassim Taleb’s contributions to the world of finance are two fascinating concepts — essays really — subsequently expanded into book length. The first is fooled by Randomness: The Hidden Role of Chance in Life and in the Markets, which describes the tendency of investors to find patterns where none exist, and to attribute to skill that which might be better credited to luck.
His second book is a corollary of sorts, almost the inverse to Fooled by Randomness: The Black Swan: Second Edition: The Impact of the Highly Improbable. The key takeaway being that we dramatically underestimate the probabilities of improbable events, as well as their outsized impacts.
Some unique rules on volatility:
Rule 1: Think of the economy as being more like a cat than a washing machine.
Rule 2: Favour businesses that benefit from their own mistakes, not those whose mistakes percolate into the system.
Rule 3: Small is beautiful, but it is also efficient.
Rule 4: Trial and error beats academic knowledge.
Rule 5: Decision makers must have skin in the game.