I was fascinated with Nostradamus as a child. The idea that a person could see and predict the future was nothing short of amazing to my young mind.
I read as many short novellas on the subject as I could get my little hands on. And I ate them up as fast as I could devour my sacks of Halloween loot every year.
No one really noticed my obsession. I read books voraciously at that age, and these were just a few of many.
But these passages struck a chord with me. Of all of the magical books I was reading at the time — these were the only ones that were true.
True magic in the real world. What a concept.
How Can You Predict the Future?
I want you to picture an intelligent financial advisor named Frank.
Frank is trying to find a devoted audience for his newsletter on stock markets. Frank read all the advice and books about True Fans and how to turn a newsletter into a business.
But Frank also knows how to predict the future.
In his research, Frank came across a method to get 10,000,000 real email addresses. Sure, it required a few bucks to purchase from a dubious source, but Frank didn’t mind — Frank had a mission to accomplish.
He had a few goals:
- To invest as little as possible
- To charge a $250 monthly fee for his newsletter after one year
- To make $1 million in the second year
On the first day of the month, Frank sent out his initial prediction.
“The S&P 500 will go up in price this month. Bookmark this.”
And it did. Millions of people viewed his short email and didn’t pay much attention.
The next month, Frank sent out another one.
“The S&P 500 will go down in price this month. Bookmark this for your own good.”
Lo and behold, the market did go down. And people paid a bit more attention this time.
In the third month, he predicted correctly again.
And again. And again. 12 times in a row.
Frank was more than just an investment guru by this point.
Frank was a godlike financial clairvoyant.
After 12 months of insanely accurate predictions, Frank now had his followers. Although by this point, they should probably be referred to as worshipers.
Oddly enough, there were also many non-believers.
In fact, Frank had lost almost all of his subscriber base. Of the 10 million initial email addresses, he only had a few thousand left.
But these few thousand were quite willing to pay a monthly fee of $250 to keep hearing his predictions. I’m sure they would’ve spent considerably more than that, too, if he had asked.
But he didn’t. Frank was a gracious god to his worshipers.
On the second anniversary of his newsletter, Frank shut it down with no notice.
Shockingly, his subscriber base had shrunk down to just one person.
Yet Frank had made his million dollars — and then some. Almost $1.25 million, in fact.
And he made that one last person an incredible amount of money as well. And cost potentially thousands of people their own precious savings.
Did you figure out what happened?
What Did He Do?
Frank was undoubtedly a devious messiah, but he was also a clever one. When he first started out with his 10 million email addresses, he divided them into two groups.
To half, he sent a letter saying the stock market would go up the next month. To the other, it would go down.
The next month, he split the winning group in half again. And sent a very similar newsletter as the previous month.
He repeated the process 24 times in total.
After every month, his potential subscribers would go down in half. The negative predictions moving to the trash bin, the positive predictions staying on.
The number of newsletter subscribers would look something like this.
Now imagine you were in that lucky remaining group sometime in the second year.
How long would it take before you’d be on your hands and knees praising this guy that made Warren Buffet look like The Count from “Sesame Street?”
You probably wouldn’t care by the second or third month.
But the fourth? Maybe you’d start paying attention, and certainly by the eighth.
After 12 months, you’d be very willing to give this clairvoyant profit a meager $250 just to keep hearing his advice.
And after 24 months? Jesus. Sign over my house today because I’ll get a mansion tomorrow.
But what about the others who were equally enthralled and invested? After one year of free and accurate predictions, only 5,000 people would be left to receive Frank’s email.
By 15 months, there’d be less than 1,000. By 18, not even 100. All the way down to one lucky soul.
But those few remaining people wouldn’t know his newsletter was going out to fewer and fewer people. They wouldn’t realize people were losing massive amounts of money. They wouldn’t know why Frank was able to see the future.
The information dissymmetry would prevent them from seeing the truth.
But would they really care at that point?
Here is Frank, a mysterious figure claiming and proving he can predict the stock market, time after time.
They’re lapping up his newsletter the minute it gets sent out. And making stock adjustments the moment after.
Month after month, they do this and only get more confident, wealthier, and happier.
Until they don’t. When one day they receive a wrong prediction.
“How can this be?”
And they never heard from Frank again.
Frank was a mysterious god.
Look Out for the Franks
All those months while people were dropping off like flies, Frank was smiling. He was making a considerable amount of money from the subscriptions.
Frank’s most accurate prediction was the most important one — people are greedy.
Thousands of people invested in a mysterious digital newsletter with the name Frank attached at the end. They didn’t need to know why or how the email was making these foretellings.
All they could see was green.
Until the day they only saw red.
As for that last lucky member of Frank’s newsletter — the one in 10,000,000 — he was probably just as happy as Frank.
Twenty-four straight months of accurate predictions in the stock market can bring a smile to the most miserable among us.
But then again, so can playing the lottery. It also has a one in 10,000,000 chance.
Be careful who you believe in this world. A Frank could be just around the corner.
And frankly, you wouldn’t know it if he was.