Any Investing 'Map' Is Not the 'Territory'

Joel Litman

If you ever decide to become an international spy, you'll want to watch Ronin...

In the 1998 movie, Robert De Niro and his castmates plan a heist in Europe. After meticulously planning and mapping out the heist, De Niro emphatically remarks...

"The map is not the territory."

De Niro then insists that the group of special operatives visit the site and see the actual target. He believes they should go beyond the map and into the territory itself.

In other words... De Niro – or his character, at least – is saying that drafted plans don't always happen. The mapped-out version doesn't always show what the territory holds.

One of the greatest screenwriters alive today, David Mamet, wrote De Niro's words...

Mamet clearly studied Polish-American scientist and philosopher Alfred Korzybski...

You see, Korzybski originally said that quote way back in 1931. And he's credited with developing the field of "general semantics" a couple years later...

General semantics is a study of human behavior. It's about understanding the differences between how we perceive the world around us – and how it actually is.

By saying that the map is not the territory, Korzybski attempted to drive home the point that every model misses some aspects of reality. Nothing is perfect.

Korzybski's concepts around perception have helped improve critical thinking and analysis over the past century. And it's important for investors like us to know and understand...

The message of the 'map' and the 'territory' applies to investing as well...

As an investor, we all have plans. We track the market, research and study its ebbs and flows, and determine how to invest.

But it's important to realize that we're just like the map... We can't be perfect.

The ideas we conceive in our minds – in our mental maps and models – aren't always what happen.

As a result, we need to be prepared to change our maps, adjust for any new patterns, and rethink our approach. We need to be ready for the territory that varies from what we expect.

That's exactly why we created the Timetable Investor...

It's a map.

It's a way for us to summarize the patterns that drive the U.S. stock market. And it incorporates proprietary indicators to help us understand the market's valuations and trends better than anyone on Wall Street.

However, that doesn't mean it's perfect.

A great cartographer knows that maps have versions. They need to adapt over time...

The territory doesn't always stay the same. Rivers get bigger or dry up. New roads and cities pop up where forests or deserts once stood.

So in turn, the maps need to change as well.

The same thing happens with the stock market and any map used to navigate it...

For example, three years ago, no one could've predicted the COVID-19 pandemic – and the ensuing response...

Heck, even by January 2020, only expert epidemiologists could've understood the long-term implications. After all, COVID-19 was just coming to the U.S. at that time.

So naturally, our Timetable Investor didn't flash any warning signs for a "pandemic drop."

But as the territory changed, we adjusted our maps to compensate...

On March 10, 2020, we told Altimetry Daily Authority readers not to panic and sell at the market's lows. That's because the credit markets remained strong. Then, six days later, we reiterated that folks shouldn't listen to their gut and sell at what felt like the worst moment.

No perfect map existed. But we adjusted ours after seeing the territory.

Sure enough, the S&P 500 Index bottomed just a week later, on March 23, 2020. If you had simply bought into an exchange-traded fund that tracks the S&P 500 on March 16, you could've doubled your money by the summer of 2021.

And recently in Altimetry Daily Authority, we've looked at a map of what happened after World War II. We've also looked at things such as the post-COVID-19 market, the scenario with sanctions involving Russia, and a host of other situations going on in the world.

Korzybski's map-territory insights are incredibly valuable for our line of work...

In his words...

There are two ways to slide easily through life; to believe everything or doubt everything. Both ways save us from thinking.

A great investor doesn't fully ignore his maps. But he also doesn't rely on them for every decision.

Systems like our Timetable Investor can help us become more successful investors. But that's only because they're nimble and accept that the world is always changing.

In the end, it's critical to remember that the map isn't always the territory.

Get out on your own. Do your own research. And be open to changing your map.

I wish you all love, joy, and peace,

Joel
July 29, 2022

P.S. As I said, our Timetable Investor provides a great map for the territory of investing. But it's only valuable because we're open to adjusting it to reflect what's going on in the world. That's especially important in today's up-and-down market. So if you're interested in learning more about what the Timetable Investor says today, I encourage you to click here.