"How Knowledge Can Make You Stupid" :

Being unable to assess somebody else's beliefs with 100% accuracy is a problem, and if it's your own knowledge that get in the way, that means it's even more important to ensure the beliefs you hold are the correct ones.

This research is very interesting. How can we know better where the market will go? Does it pay for one to know more than what the market does? Or is it worth it for a trader to spend all his effort to absorb all the information? The research seems to say no. Knowing more doesn't make one more correctly predict what others would do.

Another situation to which this may apply is financial bubbles. We believe that bubbles are caused by people's irrationality. But perhaps that understanding is not enough. A bubble may just be caused by people's inability to judge others' thoughts. Since mostly everyone knows something that others don't, that information gets magnified in the bubble when people who know it assume that others would also use it to value the situation when in actuality those others don't really have that information.





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1 Comment so far

  1. Bastiaan Agtereek on April 28, 2013 9:51 am

    Mr Jia ( i stay if i post here with this maybe ridiculous form of decent behaviour, but won’t call you Sir or people i mention, mostly hedgefundmanagers by there first name, cause i don’t know them personally or like my mother Always says: “you did not spend time with them in school”.) To business: i listened the whole video, and you know i am biased, i have Mr Soros in such high esteem, that maybe my vision must be taken with a grain of salt (or more). Besides maybe a different sound what garbage i most of the time read on his person, family, associates of fund(s). It comes down to the point that i think that the answers of the questions are in this video (listen to it all though!)If i have the will and energy i am gonna listen more to it, cause i question myself if i did get everything. Further on, 4 years ago, so if i am correct 78 of years, but giving college without taking some water, for about 45 minutes, with high quality talk.



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