This phrase was coined by a Dutch professor to describe how the scientific community views uncertainties in the natural world. In a recent Advisor Perspectives article, Scott MacKillop of Denver-based First Ascent Asset Management, relates the metaphor to the financial markets.

Unlike in environmental science where there are hard and fast rules (gravity, planetary motion, and velocity to name a few), MacKillop writes, “All investment decisions involve an element of uncertainty. No matter how hard we try, we can’t make it go away.” But that doesn’t mean we don’t try. MacKillop refers to the “factor zoo” that exists in the world of investing, where data and regression-driven patterns are used in an effort to gain an edge. Specifically, he cites the example of value vs. growth stocks, and how “virtually everyone nods their head in agreement with the statement, ‘value stocks outperform growth stocks.'” He argues, however, that there is no hard and fast definition of a value stock.

While the famous research conducted by Fama and French (for the period between 1963 and 1990) segregated stocks into categories based on their book-market ratios and found that those with higher ratios outperformed over the study period, MacKillop warns against using such a ratio to define the category. He supports his argument by pointing out that different ‘value’ indices contain significantly different holdings and that, since 1990, what many refer to as value stocks have outperformed in 14 years (54%) while growth has outperformed in 12 (46%).

MacKillop concludes, “We know why water freezes at 32 degrees, but we don’t know if the value/growth patterns we have observed in the past will repeat themselves in the future. We just aren’t certain.”