You Can't Predict, But You Can Prepare: Howard Marks' Lesson That Changes How You Think

I was rereading *The Most Important Thing* by Howard Marks the other day, and something hit me hard:

Most of us spend time and energy trying to predict the unpredictable.

And Marks says it clearly: it's a losing game from the start.

But here's what's interesting. It's not that Marks says "give up and hope for the best." The opposite. What he proposes is much more practical and powerful.

The Prediction Trap

Think about this: How many times have you seen an "expert" predict exactly what will happen in the market?

Probably many. And probably they were wrong half the time.

Marks explains it this way: the future contains variables that no one can fully control. Geopolitics, technological shifts, irrational human behavior, unanticipated events. It's a system too complex to predict with precision.

What you do see constantly is people who:

Build their strategy based on a specific prediction
When the market moves differently, they get trapped
Lose money (or time, or both)

This applies to everything, not just investments. If you build a product assuming users will behave a certain way, and they behave differently, your strategy collapses.

The Alternative: Prepare for Multiple Scenarios

Instead of predicting, Marks proposes something radical: prepare for what could happen.

It's not the same thing.

Predicting is saying: "The market will grow X% because..."

Preparing is saying: "The market could grow, stay flat, or decline. Here's my plan for each scenario."

The difference is huge.

When you prepare for multiple scenarios:

You're not surprised by change
Your business has built-in flexibility
You can act quickly when something happens
You reduce the risk of making emotional decisions

How to Apply This in Your Business

If you're building a SaaS, for example, typically entrepreneurs think:

"I'll assume customer acquisition will cost X and I'll retain Y% of users."

Then, when reality is different, they run out of cash.

Instead, Marks would suggest:

1. Optimistic scenario: What if everything goes better than expected? Do you have capacity to scale?

2. Base scenario: What's the most likely outcome? How do I reach profitability in this case?

3. Pessimistic scenario: What if everything is harder? Do I have a Plan B?

It's not paranoia. It's intelligence.

Marks calls it "second-level thinking." While most people think: "What will happen?", successful investors think: "What could happen and what will I do in each case?"

The Margin of Safety

Here's another key concept from Marks: the margin of safety.

It's not about being conservative. It's about being rational.

If you invest in something that needs everything to go perfectly to make money, you have no margin of safety. One small change destroys you.

But if you invest in something where you make money even if things go worse than expected, you have a margin of safety.

This applies to everything:

Businesses: Do I make money if my costs rise by 20%?
Career: Do I have skills that work in multiple contexts or just one?
Products: Do they work if the market contracts?

Many entrepreneurs build businesses without a margin of safety. They depend on a single income source, a specific market, a metric that has to work perfectly. It's fragile.

Market Cycles and Preparation

Marks emphasizes that markets are cyclical. It's not a prediction, it's an observable pattern.

What you can't predict is when the change will occur. But you can prepare for it to happen.

During good times:

Build cash reserves
Reduce debt
Invest in things that work during hard times

During hard times:

Your prior preparation lets you act while others are scared
You can buy cheap opportunities
Your business keeps functioning

This is exactly what you see in great investors. They don't predict the crisis. But when it comes, they're prepared.

The Right Mindset

Marks insists on something crucial: intellectual humility.

It's not about being right. It's about being prepared.

Many entrepreneurs (and developers, and traders) fall into the ego trap. They believe they understand the market better than others. That their prediction is correct.

Marks says: probably not. And that's okay. What matters is having a plan that works even if you're wrong.

This is a lesson I've applied directly to my own projects:

I don't assume users will behave a certain way
I build products with flexibility
I measure constantly and adjust
I have multiple income sources
I don't bet everything on one strategy

The Practical Action

If you want to start thinking like Marks, here's the exercise:

Take your current project (business, career, product, whatever).

Make three lists:

1. What could go well? (Optimistic scenario) 2. What's most likely? (Base scenario) 3. What could go wrong? (Pessimistic scenario)

For each scenario, ask yourself:

Do I have a plan?
Do I have a margin of safety?
What changes would I make to my strategy?

You don't need exact numbers. Just mental clarity.

The Bottom Line

Marks' lesson isn't that you ignore the future.

It's that you stop trying to predict it with precision.

Instead, acknowledge that the future is uncertain. Prepare for multiple possibilities. Build a margin of safety. Maintain intellectual humility.

This doesn't just make you better at investing. It makes you better at business decisions, at career choices, at life.

And the irony is that when you prepare for multiple scenarios, you typically end up in a better position than those who predicted correctly but didn't prepare.

Because preparation is the only thing you can really control.