Cycles

 "Sometimes things go in cycles, but don't count on it."

That's one of those compact observations that sounds almost contradictory until you think about it.

The first half acknowledges a real phenomenon: many things do show recurring patterns. Economies boom and bust. Fashions return. Political movements wax and wane. Weather can exhibit cycles. Human behavior often rhymes across generations.

The second half is the warning: just because something has happened repeatedly doesn't mean it must happen again. A cycle can end, change period, or be overwhelmed by new conditions.

In investing, for example, people often say, "This industry is due for a comeback because it always comes back." Sometimes that's true. Sometimes the technology, regulation, or market has changed so much that the old cycle never returns.

It reminds me of a saying often attributed to the economist Herbert Stein:

    If something cannot go on forever, it will stop.

Your version adds the complementary insight:

    If something has happened before, it may happen again—but that's not a prediction.

A cautious person watches for cycles; a wise person doesn't rely on them.

It boils down to ideas about the universe.  Is it cyclic or a once-off?

Yes, and that question has been lurking underneath human thought for thousands of years.

A cyclic view of the universe suggests that what has happened before will, in some form, happen again. Ancient civilizations often leaned this way. The seasons return, the stars wheel overhead, empires rise and fall. In Hindu cosmology, for example, the universe passes through immense recurring ages. The ancient Stoics imagined a cosmos periodically destroyed and reborn.

A once-off view sees history as having a unique direction. There is a beginning, a sequence of unrepeatable events, and perhaps an end. The Abrahamic religions are strongly of this type: creation, history, judgment. Modern science inherited some of that sense of a universe with a specific origin—the Big Bang—and an evolving future rather than an endlessly repeating one.

Interestingly, the two views lead to different intuitions about prediction.

    If the universe is fundamentally cyclic, then the past is a guide to the future because patterns recur.

    If the universe is fundamentally a one-time unfolding, then analogies from the past are useful but limited because genuinely new things can happen.

Modern cosmology is in an odd position. The universe appears to have had a beginning about 13.8 billion years ago, which sounds very "once-off." Yet nature is full of cycles: planetary orbits, stellar lifecycles, galactic rotations, climate oscillations, biological rhythms. Locally, cycles abound; globally, the universe may be marching in a single direction, with entropy increasing.

That may be why your saying works so well. It straddles both philosophies:

    Sometimes things go in cycles...

—that is the cyclic intuition.

    ...but don't count on it.

—that is the reminder that history is not merely a wheel turning. There may be novelty, contingency, and irreversible change.

In a sense, it is a very old argument between Heraclitus and those who believed in eternal recurrence. Is the world a river, where you never step into the same water twice, or a wheel, where everything eventually comes back around?

Your aphorism refuses to bet the farm on either answer.

Broadly speaking, yes.

One of the deepest insights of statistical mechanics is that entropy and irreversibility emerge from dealing with enormous numbers of particles, even though the underlying microscopic laws are often reversible.

Imagine a box of gas. The molecules obey physical laws that, to a very good approximation, work just as well forward as backward in time. If you filmed two molecules colliding and ran the film backward, the motion would still obey the laws of physics.

Yet at the macroscopic level we see unmistakable directionality:

    Perfume spreads through a room.

    Cream mixes into coffee.

    A dropped glass shatters.

We never see the reverse happen spontaneously.

The reason is not that the reverse is impossible. It is that there are overwhelmingly more microscopic arrangements corresponding to the "mixed" or "shattered" state than to the "ordered" state.

For example, there are relatively few ways for all the air molecules in a room to be clustered in one corner, but an astronomical number of ways for them to be spread uniformly. So a random evolution is vastly more likely to move toward the spread-out condition.

Boltzmann's great contribution was to connect entropy with the number of microscopic arrangements (microstates) corresponding to a macroscopic condition (macrostate). The famous equation on his tomb is:
S=kln⁡W
S=klnW

where WW is the number of microstates compatible with the observed macrostate.

In that sense, entropy is indeed a statement about systems with huge numbers of components. With only three or four particles, "entropy increasing" is not a very useful concept. With 10231023 particles, statistical behavior becomes overwhelmingly reliable.

This leads directly to the recurrence issue we were discussing. If a finite system is left alone long enough, statistical mechanics says that extremely unlikely fluctuations should eventually occur. A shattered glass could, in principle, reassemble itself. A roomful of air could gather into a corner.

The catch is the timescales. For macroscopic systems, the recurrence times are so fantastically long that words like "astronomical" are hopelessly inadequate. They are typically numbers with more digits than there are particles in the observable universe.

So entropy does not make reversals impossible. It makes them so improbable that for all practical purposes they never happen.

That's why physicists sometimes say the Second Law of Thermodynamics is not an absolute prohibition but a statistical law. Given enough particles, the distinction hardly matters in everyday life. But conceptually, it matters a great deal. The universe may be governed by microscopic rules that are reversible, while the arrow of time emerges from the statistics of unimaginably large numbers of possibilities.

That is the problem with calling nineteenth century observations "laws." It is determined by statistics, yet we think it inviolate.

Quite so. In fact, many physicists today would be careful to distinguish between a law and an absolute prohibition.

The Second Law of Thermodynamics is extraordinarily reliable, but its reliability comes from statistics rather than logical necessity. In principle, there is nothing in classical mechanics that forbids all the air in your room from collecting in one corner. It is simply so improbable that you can confidently bet your life it won't happen.

The nineteenth century often spoke as if nature were governed by iron laws. That reflected the intellectual climate of the time: Newtonian mechanics was astonishingly successful, and probability was often viewed as a measure of human ignorance rather than a feature of reality.

The twentieth century was humbling. Quantum mechanics introduced irreducible probabilities (at least in many interpretations). Statistical mechanics became central. Even genetics and evolution turned out to depend heavily on chance events filtered by selection.

So there is a subtle shift in perspective:

    Nineteenth century: "Entropy always increases."

    Modern view: "The overwhelming majority of possible evolutions lead to higher entropy."

For everyday purposes those statements are almost indistinguishable. For philosophy, they are worlds apart.

There is a famous remark attributed to the physicist Arthur Eddington that if your theory contradicts the Second Law, "there is nothing for it but to collapse in deepest humiliation." Yet even Eddington knew the law was statistical. What he meant was that the statistics are so overwhelming that any competing theory must explain why the observed universe sits on that overwhelmingly favored side of the odds.

Your recurrence observation highlights the tension beautifully. If entropy increase were an absolute law, recurrence would be impossible. If entropy increase is statistical, then recurrence is not merely possible but, in some models, inevitable given enough time.

The funny thing is that most people talk as though "improbable" and "impossible" are synonyms. Physicists generally know better, but even physicists often slip into that shorthand because the probabilities involved are so absurdly tiny.

A shattered wineglass reassembling itself is not impossible. It is merely so unlikely that the expected waiting time makes the age of the universe look like a fraction of a second.

So I think your criticism is fair: nineteenth-century language sometimes gave statistical regularities an aura of necessity. The laws turned out to be less like commands issued by nature and more like overwhelmingly successful descriptions of what vast collections of particles almost always do.

Yesterday I boasted a little about my stock market success, if you look at it over a long enough period.  The reason is, first, "the trend is your friend" and second, don't count on it.  As applied to this case it means one will miss tops and bottoms and hence often leave money on the table.

That's a very old investor's wisdom, and it fits remarkably well with the discussion we were just having.

"The trend is your friend" acknowledges that markets exhibit persistence. Over long periods, productive economies tend to grow, businesses earn profits, and equities have historically risen. Betting against that trend requires a very good reason.

"Don't count on it" is the necessary corrective. Trends end. Japan looked unstoppable in the 1980s. Railroads once seemed the future. Individual companies rise and disappear. Even broad market advances can spend a decade or more going nowhere.

The practical consequence is exactly what you describe: if you refuse to predict tops and bottoms, you will inevitably leave money on the table.

    Sell too early, and you miss the final surge.

    Sell too late, and you ride part of the decline down.

    Buy after the bottom is confirmed, and you miss the first part of the recovery.

    Buy before the bottom, and you suffer further losses.

The only way to capture every dollar is to identify the turning points accurately. And if someone could do that consistently, they would soon own most of the world's financial assets.

What many successful long-term investors eventually discover is that the goal is not to buy at the bottom and sell at the top. The goal is to capture the middle 60–80% of the move while avoiding catastrophic mistakes.

There is a saying often attributed to Bernard Baruch:

    I made my money by selling too soon.

Whether he actually said it or not, the idea is sound. Missing the last 10% of a bull market is usually less damaging than missing the bull market entirely while waiting for the perfect entry point.

In a way, your philosophy mirrors your cosmological one:

    There are patterns.

    The patterns are useful.

    The patterns are not guarantees.

    Therefore, follow them cautiously rather than worship them.

That mindset tends to produce fewer dramatic stories than calling every top and bottom, but it also tends to produce fewer disasters. And over a sufficiently long investing lifetime—which, from what you've mentioned, you've had—the avoidance of disasters often matters more than squeezing out the last few percentage points.