“In fact, the science of thermodynamics began with an analysis, by the great engineer Sadi Carnot, of the problem of how to build the best and most efficient engine, and this constitutes one of the few famous cases in which engineering has contributed to fundamental physical theory. Another example that comes to mind is the more recent analysis of information theory by Claude Shannon. These two analyses, incidentally, turn out to be closely related.” MindTwoFactsProblemTurnsCasesInformationExampleTheoryFundamentalsAnalysisRelatedEnginesEfficientEngineeringEngineersThermodynamicsShannon Author:Richard P. Feynman
“The efficient market theory is one of the better models in the sense that it can be taken as true for every purpose I can think of. For investment purposes, there are very few investors that shouldn't behave as if markets are totally efficient.” IfsThinkingI CanPurposeTakenTheoryModelsInvestmentInvestingBehaveInvestorsEfficientEfficient Markets Author:Eugene Fama
“In certain circumstances, financial markets can affect the so-called fundamentals which they are supposed to reflect. When that happens, markets enter into a state of dynamic disequilibrium and behave quite differently from what would be considered normal by the theory of efficient markets. Such boom/bust sequences do not arise very often, but when they do, they can be very disruptive, exactly because they affect the fundamentals of the economy.” StatesHappensWould BeCertainEconomyTheoryCircumstancesNormalFundamentalsFinancialAriseBehaveEfficientSequenceDisruptiveFinancial MarketsEfficient MarketsDisequilibrium Author:George Soros
“Berkshire's whole record has been achieved without paying one ounce of attention to the efficient market theory in its hard form. And not one ounce of attention to the descendants of that idea, which came out of academic economics and went into corporate finance and morphed into such obscenities as the capital asset pricing model, which we also paid no attention to. I think you'd have to believe in the tooth fairy to believe that you could easily outperform the market by seven-percentage points per annum just by investing in high volatility stocks.” ThinkingBelieveHas BeensIdeasHardWholeFormAttentionRecordsTheoryModelsEconomicsPaidSevenInvestingTeethFinanceCorporateFairyAssetsAcademicEfficientPercentagesDescendantsObscenityPricingVolatilityTooth FairyEfficient Markets Author:Charlie Munger
“I have a name for people who went to the extreme efficient market theory-which is "bonkers". It was an intellectually consistent theory that enabled them to do pretty mathematics. So I understand its seductiveness to people with large mathematical gifts. It just had a difficulty in that the fundamental assumption did not tie properly to reality.” PeopleRealityNamesTheoryDifficultyMathematicsFundamentalsExtremesMathematicalTiesAssumptionConsistentEfficientEfficient Markets Author:Charlie Munger
“The possibility that stock value in aggregate can become irrationally high is contrary to the hard-form "efficient market" theory that many of you once learned as gospel from your mistaken professors of yore. Your mistaken professors were too much influenced by "rational man" models of human behavior from economics and too little by "foolish man" models from psychology and real-world experience.” MenWorldHumansLittlesRealHardFormValuesPsychologyToo MuchPossibilityTheoryBehaviorModelsEconomicsContraryFoolishRationalProfessorsReal WorldEfficientMistakenHuman BehaviorFoolish ManEfficient Markets Author:Charlie Munger