I find this debate tiresome and nonsensical for multiple reasons. First, stuck markets are so efficient active managers as a group can't beat the indexes. If there was ever a group to exploit inefficiencies, they sure can't. 1/n
Second, this debate constantly confuses individuals with markets. WeWork was inefficient. The market wasn't. When WeWork IPO melted down, many tried to use it as a clarion call to remake markets and capitalism. No, it was one stupid company. Specific examples are not markets. 2/n
Third, yes even markets will at times be irrational. It does happen. By definition you can almost never tell when a market is irrational and the market is far more rational than irrational. People mistake specific examples of the market being irrational 3/n
To claim the market is always irrational. We must clearly distinguish. Finally, even if all players are irrational using large number mathematics, that does not mean the market must be irrational. Simpler scenario, assume some investors believe a company is a fraud with zero 4/n
Value and others believe it is the greatest company ever with $100 a share. Stock price will come out somewhere between those two values even if they are both wrong. They're are many examples of people being right in their logic but wrong in the outcomes and wrong in their 5/n
Logic but right on the outcomes. Being rational in a market doesn't mean right and being irrational doesn't make wrong. Think if it this way: as study after study has shown, Playboy Centerfold are effectively no worse at picking stocks than active managers, rationality 6/n
Has no impact on being right or market outcomes. Add in the confusion between individuals and markets and this debate send pretty worthless. Happy New Year.
