Busting the myth of efficient markets

The article discusses the distinction between intellectual understanding and visceral knowledge, likening it to the difference between reading about physics and witnessing a practical demonstration. It highlights Brian Armstrong’s remarks during a Coinbase earnings call, where he referenced prediction markets, illustrating George Soros' theory of market reflexivity. Soros argues that market prices distort fundamentals rather than merely reflecting them, creating a feedback loop that can influence perceptions and decisions. He cites the 1960s conglomerate trend as an example, where inflated share prices allowed companies to buy smaller firms, perpetuating a cycle of reinforced beliefs. This idea is reflected today in digital assets, such as firms that promote valuation based on inflated assets. Soros also ties his theory to the causes of the Great Financial Crisis, indicating that misunderstandings of value can lead to broader economic anomalies.

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