I was recently rereading The Black Swan by Nassim Taleb—a personal favorite of mine. In one chapter, he offers an intriguing parable, which I will loosely adapt here.

A group of turkeys is raised with great care on a farm. They are fed daily, have unlimited water, and are protected by guard dogs. Some of the turkeys keep records of their lives, and the data shows a consistent uptrend: the amount of food they receive increases over time. Naturally, the turkeys make a prediction: “Because our lives have improved in the past, surely things will continue to get better! We will have more food, more safety, and more shelter moving forward.” Then Thanksgiving arrives. The farmer leads the turkeys to a shed and slaughters them.

This story warns us about the risks of relying solely on past data for future projections. The turkeys were so blinded by their data that their confidence peaked right before the disaster. When it comes to managing our investments, there are several key lessons we can draw from this story.

The first lesson is that past data can create a false sense of security. Consistent gains can convince you that an asset will go up indefinitely, even when fundamentals suggest otherwise. The late-1990s tech bubble followed this pattern: year after year of gains trained investors to believe that technology stocks moved in only one direction. Valuations stopped mattering because recent history felt more "real" than any abstract warning. In the Philippines, we often see this in hype-driven stocks, where the crowd feels most confident right before a crash. Like the slaughtered turkeys, investor confidence tends to peak just as the trend is about to collapse.

The second lesson is that past data can also mislead in the opposite direction. Data can convince you that things will keep getting worse even when a recovery is imminent. For example, after the initial shock of Covid-19, global economic expectations were bleak. Yet, markets began a recovery that led to one of the largest bull runs in the history of the S&P 500. The Philippine stock market followed a similar path during the Global Financial Crisis. In 2008, the Philippine Stock Exchange index (PSEi) crashed from around 3,800 to about 1,900. While the outlook seemed hopeless, the PSEi recovered by 2010 to reach a new all-time high. By 2013, the index had climbed to 7,200—an astonishing figure at the time.

The third, and perhaps most important lesson, is that relying solely on the past is actively harmful. This habit isn't just mildly inaccurate; it is dangerous because it encourages us to let our guard down. In personal finance, this leads to "performance chasing"—putting large sums into unproven investments because they have been going up for five years, only to watch them crater. In the parable, the belief that things would continue to go well accelerated the turkeys' demise because it convinced them to stay on the farm. A more skeptical turkey might have tried to escape.

If numbers aren’t enough, you must learn to seek understanding over data. Ask why a trend exists, who benefits from it, and what would cause it to break. Layer these qualitative questions on top of your quantitative data. For the turkeys, the right questions were simple: Why are we being fed? What happens next? Can this continue forever? Even after gaining a deep understanding, you must remain open to the possibility of being wrong. In the dynamic world of business, perfect knowledge does not exist. One day, you are certain you have the perfect restaurant concept; the next, a global pandemic forces you to close. One day, you think a company is failing because its stock price crashed; the next, a larger firm buys it out at a massive premium.

No matter how much you think you know, the list of things you do not know will always be longer. Past data has its uses, but it becomes a liability when used in a vacuum. This is why investment products carry the standard disclaimer: “Past performance is not indicative of future results.” The better approach is to combine numbers with judgment, context, and a healthy dose of skepticism. That way, you are far less likely to be the turkey that gets cooked.