Uncertainty is the oldest alibi in human affairs. Generals have used it to explain retreats, merchants to explain empty shelves, and priests to explain unanswered prayers. It has never once been wrong, and it has never once been useful.
Every corporate earnings miss and most economic data has been preceded by a warning about uncertain conditions. The conditions were always uncertain. The miss was always a surprise. At some point in the past decade, ‘uncertain’ became the most expensive word in business language. It costs nothing to say and has never once been accompanied by a plan.
Charlie Munger, the late vice chairman and Warren Buffett’s partner at Berkshire Hathaway, was one of the more rigorous minds American investing produced. He kept a mental basket labeled ‘too tough.’
Into it went any investment where the executives involved described the future as uncertain. Not because uncertainty is abnormal-it is the permanent condition of all markets-but because the word, spoken by someone in authority, is a confession not to be ignored. It means they have stopped thinking about a problem and have started hoping no one notices ‘The Problem.’
The distinction Munger drew, borrowed from economist Richard Zeckhauser, is precise. Risk is calculable: you know the outcomes, you know the odds, and then you pay your money and you take your chances.
Uncertainty is harder: outcomes are visible, but probabilities are not. Ignorance is the condition below that: you cannot even map the possible outcomes. Munger’s argument was that honest people give a name to which condition they are actually in. Executives who reach for ‘uncertainty’ as a general-purpose explanation are usually operating in ignorance and calling it something more respectable.
Philippine public life is well-stocked with this particular euphemism. Listen to any BSP press conference where the forward guidance is being softened, any NEDA briefing where infrastructure timelines are slipping, any listed company disclosing why its earnings fell short. The word appears with the regularity of a legal disclaimer. It protects the speaker without informing the listener.
The Philippine peso has spent much of the past three years trading from the mid to high 50s to the dollar, and the official explanation for its weakness has consistently invoked external uncertainty: the Federal Reserve, the Middle East, China’s slowdown, global supply chains.
Every one of those factors is real. None of them is unknowable. The Fed publishes its dot plots. Freight rates have indices. China’s PMI prints monthly. Probabilistic thinking – Munger’s preferred alternative to uncertainty-as-excuse – would have fund managers and policymakers working with scenarios and probabilities. What gets called uncertainty is often the decision not to do the analysis.
The PSEi tells a similar story. Foreign portfolio outflows have been attributed to global uncertainty in virtually every quarterly report issued by any Philippine brokerage for the past decade. The implication is that the selling is external in origin and therefore beyond local control. The listed universe, however, is thin, illiquid at the second and third tiers, and dominated by holding companies whose earnings visibility is structurally poor.
That is not global uncertainty. That is a market architecture problem that nobody wants to own because owning it requires fixing it.
Munger’s prescription was not optimism. It was margin of safety- holding enough reserves, maintaining enough options, that when the truly unpredictable arrives, the institution survives it. The Bangko Sentral’s gross international reserves, running around $104 billion as of the latest reporting, represent that kind of institutional thinking. The BSP does not claim to know where the dollar/peso rate is going. It builds a buffer large enough to survive being wrong. That is probabilistic thinking applied at the sovereign level, and it is the exception rather than the rule in how Philippine institutions handle the unknown.
The ‘too-tough basket’ was not a blueprint for paralysis. It was a filter. Investments that could not be reasoned about with rigor went in that basket. If a department secretary or a CEO cannot specify which of Zeckhauser’s three conditions- risk, uncertainty, ignorance-they are actually operating under, they are not managing the situation. They are managing the audience.
The next time a Philippine official describes the investment climate as uncertain, the useful follow-up question is the one Munger would have asked: uncertain relative to what baseline, with what probability distribution, and what margin of safety is built into the plan? Those are not technical questions. They are the minimum threshold for knowing whether the person speaking is managing a situation or an audience.
Words have consequences in markets. Vagueness is not neutral. It is a position, and usually a losing one.
E-mail me at mangun@gmail.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis provided by AAA Southeast Equities Inc.