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Uncertainty, 1923

When the Russian novelist Vladimir Nabokov met Vera Slonim at a Berlin masquerade party, in 1923, he thought he was being duped. Vera was perfect. Smelled perfect. Sounded perfect. Said the perfect things. Looked, seemingly, behind the mask, perfect.

Had a prankster drinking-buddy found a random girl, exactly his type, and put her up to this ruse? After the party, he wrote to her:

I won't hide it: I'm so unused to being — well, understood, perhaps — so unused to it, that in the very first minutes of our meeting I thought: this is a joke, a masquerade trick.

While Nabokov was then publishing what became his early works, Lolita wouldn't come out for another 32 years. He was a financially unstable, working-class Russian writer living in Germany, who would later become a wealthy, famous, naturalized American.

Over this complex transformation, Vera and Vladimir were married for 52 years (it wasn't a ruse), but their first few years — technically together but physically apart — carried a heavy weight.

Many investors will calculate ratios to determine how much expected uncertainty they're willing to accept in their portfolio. Stressful investment experiences often derive from making decisions with imperfect information about the future. But having imperfect information is a familiar feeling, and we don't need ratios to examine uncertainty.

Investing introduces similar tradeoffs that we face everyday as people.

Until they eventually relocated to the United States, Vera and Vladimir lived apart for these early romantic years, and communication relied on writing letters. As Vladimir tried to monetize his budding fame, he networked and hobnobbed from France to Spain to England, while Vera stayed mostly in Germany.

He wrote constantly, and was a tragically beautiful letter-writer:

November, 1923: You came into my life — not as one comes to visit (you know, "not taking one's hat off"), but as one comes to a kingdom where all the rivers have been waiting for your reflection, all the roads for your steps.

December, 1923: I love you, my sun, my life, I love your eyes — close — all the little tails of your thoughts, your stretchy vowels, your whole soul from head to heels. I'm tired, off to bed. I love you.

January, 1924: My darling, I love you so sweetly, so joyfully...I dreamt of you last night — as if I was playing the piano and you were turning the pages for me.

But Vera rarely wrote back, and the uncertainty drove Vladimir crazy.

January, 1924: Don't you find our correspondence I'm so cross with you...honestly, why aren't you writing me?

August, 1924: Still haven't received anything from you...but I am full of hope (with a small "h").

June, 2026: Pussykins, you write disgustingly rarely to me.

Certainty can be satisfying or dissatisfying. Vladimir didn't struggle because Vera did (satisfying) or didn't (dissatisfying) love him.

He struggled because he just didn't know. She wasn't writing.

Nabokov was waiting days and weeks for we wait seconds and minutes for text messages. But as the rate of communication has changed, investment markets have not. One of the first written pieces about stock market uncertainty was Louise Jean-Baptiste Alphonse Bachelier's PhD thesis, in 1900. He observed that things look pretty random over short periods. This idea has stood empirically strong for 120+ years.

No one deserves high relative investment returns for taking low relative risks. Because we know exactly what return we can get for taking zero risk (i.e. the risk-free rate, or the yield on a treasury bill), we can take measured deviations toward uncertainty, and higher expected returns, based on our risk appetite.

Vera provided Vladimir with such little information, and he had to accept the uncertainty that came with that.

Investors are bombarded with so much information, but so little of it is useful.

The common thread is trust — without trust, there's uncertainty. With uncertainty, there's unwanted anxiety. Vladimir held on, but many investors lack conviction in their investment philosophy, or don't trust their financial advisor, and struggle to stay disciplined at critical inflection points.

Few people can invest only in risk-free assets to achieve their financial dreams. It's not so much a question of whether you need to accept uncertainty in your portfolio, but which uncertainties, and how much of them. Accepting uncertainty doesn't have to be painful — it's just a matter of framing. A belief that the rewards will be worth the effort. We know this feeling too, like butterflies in our stomach.



My blog posts are informational only and should not be construed as personalized investment advice. There is no guarantee that the views and opinions expressed in my posts will come to pass. They are not intended to supply tax or legal advice and there is no solicitation to buy or sell securities or engage in a particular investment strategy.

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