The Moral Philosophy of Investing in Ignorance

Investing at the Edge of Knowledge, Part 5 · Start with Part 1 “If in an unknowable world none of your bridges fall down, you are building them too strong.” Zeckhauser’s version of this line refers to investments, not bridges, but the structural point is the same. A philosophy of investing that expects some failures is also a philosophy that accepts some losses will be borne by the people on the other side of the trade. Over four installments I’ve laid out a framework for thinking about what you can know (Part 1), why investors flee what they can’t (Part 2), how to assess what others know (Part 3), and how much to bet (Part 4). This final piece asks the question the framework doesn’t answer: when you profit from ignorance, is that a legitimate source of returns? Zeckhauser opens his 2006 paper with a warning that is usually read as practical advice: “Do not read on if blame aversion is a prime concern.” I think there’s an ethical question underneath the practical one. Three sources of…