The recent US government Signal message service controversy brought to light not only a security breach and threat to the US military but also shed light on the new administration’s approach to markets. The leaked messages revealed a reductionist view of prices, where a single factor was isolated and given undue weight in decision-making.

In the lead-up to the US strikes on Yemen in March, Vice-president JD Vance expressed concerns about potential consequences of the mission. He feared a spike in oil prices and the unintended consequence of “bailing out” Europe by improving Red Sea shipping and reducing freight rates. However, the actual outcomes did not align with Vance’s predictions. Oil prices remained stable, and freight rates continued to drop even after the attack.

Vance’s analysis reflects a common trend in Western thought known as reductionism. This approach seeks to break down complex systems into simpler components to understand their relationships. While reductionism has led to important discoveries in various fields, it can also result in oversimplified explanations and misguided decisions.

Prices, such as those of oil and freight rates, are influenced by numerous factors that are constantly changing. Demand in major economies, supply decisions by organizations like OPEC, geopolitical events, and technological advancements all play a role in determining prices. A holistic view of these factors is essential for accurate decision-making in the market.

The best investors understand the complexity of the market and consider multiple factors simultaneously. They avoid falling prey to simplistic narratives that promise quick gains but may lead to disaster. By investing in a diverse range of high-quality businesses with strong fundamentals, investors can protect themselves from the pitfalls of reductionist thinking.

In the world of investing, true synthesis lies in recognizing the limitations of knowledge and preparing for uncertainty. Like Odysseus in Homer’s Odyssey, investors must resist the allure of simplistic stories and stay anchored to a well-thought-out strategy. By embracing the complexity of the market and staying vigilant against deception, investors can navigate turbulent waters and achieve long-term success.