Beyond the certain, highly probable, and probable, we enter a complex and chaotic future. Based on the trends we’ve seen over the last weeks, we have a sense of where the S&P 500 will be tomorrow. But forecasting 6 months ahead is highly uncertain, especially in volatile markets. Still, 7 months from now, the situation that looks so uncertain today will have returned, in retrospect, to certainty.

We make sense of uncertainty by constructing mental maps which define our interests, desires, strengths, and weaknesses. Casually or formally, we generate scenarios of possibility— usually highly influenced by the kinds of results we expect to see. Often, we construct our maps without notice. We recognize successful former patterns in the events we see; and base our plans on our skill at imposing what has worked before upon what comes next. We bridge uncertainty through learned inattentions and shortcuts; and convince ourselves that we have tamed its dangers.

A discussion with a client provides an example. She still had her job when she had explained to me that her career path had taken her to the height of her profession.  “No”, she said. She was not interested in considering how her work skills might be employed more productively— how her future might be determined more by her than by market forces.  She was certain.

Some months later, after her lay-off, she presented with a new  dilemma. Quite rationally, she explained the corporation’s reasoning: her salary and benefits had been too high; and younger colleagues, while not at her level, understood enough to maintain the division as a going concern. She had decided to begin a consultancy; but it was not going well. She believed that the envy of her former employees prevented them from hiring her. Yet again, she had rejected uncertainty for certainty: her consulting venture had been designed to fail. However, it had two plusses: it allowed her to speak her anger and frustration at her unemployment; and it demonstrated that she had “tried”; she was now resolved to wait for a new corporate opening.

These examples of unproductive certainty reflect a turning from reality. Our second discussion examined working knowledge. My client’s clarity about her former subordinates’ envy was striking. It was clear that the business planning for her consultancy was based on her own disregard for her working knowledge. Their envy was not simply a hunch: she had worked together with them as a team and had recognized it for a long time.

Then why base a business on such a failing proposition?  Her certainty here was of failure. It mirrored her real despair in the crashing and burning of a lifetime’s work. And it was only from examining her new working assumptions relative to her working knowledge that this emotional blockage emerged. She had needed someone to blame; and her business idea had simply recycled the worst part of a team dynamic she knew. Its yield? 100% productivity in blaming; 0 business productivity. In one sense it had completely eliminated uncertainty. In another, left the future completely at risk.

Leverage of course, generates risk; and with Enron as the moral exemplar to the current systemic financial mess, we all recognize that our system encourages the taking (and hiding) of risk. The crucible of capitalism may be creative destruction, but as we self-destruct, we might as well go down highly leveraged with minimal downside to us!!!

As shareholders, we actually risk only the entry cost of our equities when we wager in the belief that the sky is the limit. Despite our perfect desire for above average, secure and regular returns (reflected in the despair of Madoff investors), we are betting on a crapshoot and should recognize it as such. Its even better when the shares come free with the annual bonus— some might even say we’re incentivized to load the dice!

After all, all we personally risk (Who thinks about the “system”? Isn’t it there to be outsmarted?) is the value of the share, when we can gain the moon! This of course, is the economic parsing of rationality.

There is a downside of course to this pseudo-rationality of limited liability, as those of us with battered 401-k’s understand: the personal losses are deeply felt and real —- not rational outcomes of an economic wager.

As brokers understand, most of us enter the equities market with little real knowledge and the motivation only to increase the real value of what we have before it disappears.

The spinning wheel of markets spins faster and faster. In this volatility who can be certain of its multiple variables?

The only sure-thing is betting on the bank: too big to fail and underwritten by governments both on the credit and debit sides, we haven’t really understood that the problem of agency is with the dealer: that tight industry-government linkage ensuring that our financial system works. What is it they say in Vegas? The house always wins. Until it doesn’t.

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We believe in Mr Market, as we believe in bankers and advisors who guide us and entice us, because, despite our education and the availability of information, it remains exquisitely hard to know what to do to grow our savings and so insure our financial stability. So we declare ourselves adherents of the long term or the short term, the day trade or of buy-and-hold, of value, of growth, of dividend and price-to-earnings. We advocate shareholder rights although we have no idea of the secrets that the balance sheet contains. And now, our harrowing experiences of mark-to-market have been traumatic: a condition which shuts down thinking instead of generating a tolerable loss from which to develop understanding.

So our crisis is larger than the S&P and the Dow: it is a dawning recognition that our lives are balanced on belief, warranted and unwarranted, in systems and the performances of individuals playing roles in systemic drama.

We must save and don’t know what that means, really, as the value of currency erodes and prices increase. We seek counsel to guide and to soothe. And our counselor looks to his colleague to affirm that he’s doing it correctly; and their company looks to the practices of similar organizations to affirm that they are doing it correctly. And because we are focused on our own fragility, we hardly notice that we are, ourselves, playing an input role within a system for processing wealth from broker to firm to industry.

We disconnect our wealth from our anxiety as we plan prudent action. And we disconnect our prudent acts from their uniformity with others’ similarly rational acts as we place our trust in those advisors we believe know more. And we chose not to see the pressures under which our advisors work, to affirm to ourselves that they are better than the rest — which means, that they must participate in a common culture of commerce: but of course, do it much better than others, because we are choosing them and we demand the best. Our first condition is not understanding, but thin belief, based not upon conviction, but upon our own exaggerated illusions of understanding.

Most of us take aspects of the cultures that are lived by us for granted. And under the current shock of economic reality, we are in a place of panic rather than reflection. Yet the underlying dynamics of the situation which took us here— us and not the bankers and brokers— requires consideration. We have relied on shortcuts to knowing about personal finance—as we’ve assured ourselves that the sales assurances of our vendors have been objective. Mostly, though, we have ignored how bound within our economic and commercial systems we have been as our self preservative instincts have sought false security. We have traded careful thought in managing risk in relation to our own needs for the temporary illusion of having made the same wise investment decisions as everyone else.