Video – George Soros – Reflexivity Explained

George Soros is the most famous Macro Hedge Fund Investor. His Theory of General Reflexivity in economics is the theory that a feedback loop exists in which investors’ perceptions affect economic fundamentals, which in turn changes investor perception. The theory of reflexivity has its roots in sociology. Soros believes that reflexivity disproves much of mainstream economic theory and should become a major focus of economic research.

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Video postat pe Youtube de catre utilizatorul Patrick Boyle in data: 2020-12-30 00:19:13

Stiri Press 20/02/2021

42 Reviews

Thom Latte Goy Story says:
Hey Patrick, any chance you can give us your thoughts on real estate bubbles? I'm seeing an incredible bubble brewing in Australia
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Marc Jackson says:
Hi Patrick,
Loving your content. As an Electronics Engineer what you are describing is Amplifier theory 101, i.e. if you have negative feedback of an amplifier you create stability and if you have positive feedback you create oscillations.
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Strangely Brown says:
What we are seeing today with respect to BEV and autonomous vehicles is a great example of this mechanism in action. BEV stocks are well and truly off to the races and this is fuelling investment in the transition to Electric Vehicles. This is just the latest example of how exuberant capital markets bring about disruptive change in society. Where it will all end (as far a financial markets is concerned) is an open question, but I am confident we will end up with a much less polluting global vehicle fleet as a result.
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Kurt Alder says:
Hi Mr. Boyle,
Great video. You gave some fantastic examples of reflexivity that helped me conceptualize George Soro's whitepaper on the subject which he has posted on his open societies website.
I believe passive index funds are a good current example of reflexivity, but hear me out before you call me Chicken Little. I don't necessarily believe the sky is falling, yet.
John Bogle created an amazing product with his passive index funds, and it is true that they outperformed active money managers after subtracting their exorbitant fees. This outperformance is an example of a positive feedback loop.
Then Warren Buffett pounded the table that they are the best option for the average investor, and I still believe he is right, but as the saying goes, "what the wise do in the beginning the fool does at the end." Another positive feedback loop.
Now the pandemic has warranted massive money printing by the feds, who have flooded the market with cash by buying bonds. This has pushed the bonds into negative yield territory and investors chasing a decent return have turned to the stock market because bonds are unsatisfactory. Another positive feedback loop.
So, like the recent Wall Street Journal article asked, "Has the Fed Rewritten the Laws of Investing?" Perhaps no one knows. But the stock market is certainly high compared to historical norms and a regression to the mean should not be unexpected.
I believe the defensive investor can keep their money in a passive index fund currently. But a few lessons from the last financial crisis should be heeded to avoid tragedy-
1) Do not borrow excessive amounts of debt and plow it into the S & P 500 with the expectations that it will only go up
2) Manage expectations and please do not put money into the market that you need next year for a down payment on a house, etc. Invested money should have a long time horizon (10 years or more).
Thanks for reading and your consideration of sending me a free copy of your book on derivatives. I look forward to any constructive criticism!
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Nikhil says:
This was gold! You explained it so clearly , it all makes sense. I was thinking of Amazon and Tesla before you got to those names). I thought you would mention Bitcoin when lining the ducks for bubble pre-conditions (underlying trend in reality + mis-conceptions combined positive reinforcing loops) but I guess you left it out to avoid the 'negative' crypto folk loop towards your views, all good :). I had tried reading alchemy of finance by Soros some years back but to be honest, the jargon in that book put my brain in a static loop!
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Happy Meal says:
George soros admits that he was with nazis interview https://youtu.be/SGWizajL7tA
… (soros gave maximum donate to Obama https://youtu.be/FHJLKhhYlGw Soros is creator of black life matter antifa https://www.google.com/amp/amp.washingtontimes.com/news/2016/aug/11/george-soros-the-money-behind-the-transgender-move/
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Happy Meal says:
George soros admits that he was with nazis interview https://youtu.be/SGWizajL7tA
… (soros gave maximum donate to Obama https://youtu.be/FHJLKhhYlGw Soros is creator of black life matter antifa https://www.google.com/amp/amp.washingtontimes.com/news/2016/aug/11/george-soros-the-money-behind-the-transgender-move/
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John Houde says:
A great example of reflexivity is the magic of "low volume". A stock with 100 million shares outstanding and a small float trading at $10.00 would have a capitalization of a billion dollars. It's possible that the shares could trade less than 5,000 shares and go up $2.00. That roughly 100 million dollars increased the capitalization by 200 million dollars! ( A halted stock opening up a similar amount does the same thing without a single penny being spent-magic actually). In a fractional banking system the distortion caused by momentum, fuels the bubble (and margin availability) faster and faster. The market value of a company is always a "belief" rather than a fact. The change in value vs the dollars used to cause that change are always disconnected. The distortion is always present., It's the degree of distortion that changes. Secondary issues of stock actually suck up real cash and need to be watched carefully.
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Ben Dobbs says:
I think someone at FT Alphaville needs to own up to having watched this just before they wrote their piece about the recent Bitcoin spike, I refuse to believe it's a co-incidence!
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Gerald Ong says:
This video is so calming and peaceful. Was really nice listening to it! Thanks for the detailed explanation, it was especially insightful, such as George's point on why academia hasn't adapted it and what that they are discussing it more these days.
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vryzenok says:
Hi Patric, found your channel from a video on #Coffeezilla
. Very good content, please carry on. If I may suggest in a video like this if you put some slides, makes just more sense and the broader audience will get the point more quickly. never the less content of the channel are brilliant, thanks.
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yuşa says:
Market is always wrong-soros
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MyTonalVision says:
Thank you Patrick, I love what you are doing here, please keep it up.
The amount of information and unprecedented ease of access created a new field of misinformation and it’s even easier to access.
Making decisions is an art not a skill.
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David Friederich says:
I'm pretty sure AWS=FSD with Tesla. Something that can have crazy high margins and is already included in every car sold. If they can get to level 5 they shouldn't be caught in the next 5 years in this space.
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FatTad Rider says:
I read the book mentioned twice, and my mind kept wanting to skip the whole reflexivity idea as if he was just labeling something I already knew.
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badcompanygg says:
Nobody gonna mention Jeff Bezos eating an iguana?
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Kaelan Dean says:
As a student of behavioral economics in my undergrad, now getting my masters in finance, I am amazed how many people immediately discredit the idea of reflexivity. While it certainly questions much of the simple-math-model-modified-until-it-reflects-reflects-reality approach of economics and econometrics, I think it is quite evidently true in experimental and anecdotal evidence that prices are both somewhat disconnected from fundamentals and inherently influence later fundamentals. The sad truth, as a lover of economics and finance, is that the fields suffer a near-fatal degree of physics-envy. While math is important, it should be used to build models from experimental research and not arbitrarily assumed axioms, no matter how logical or optimizing.
Natural sciences get to play this game because it is simply more realistic to build good axioms there. In its inherently probabilistic and multi variable nature the social sciences lack this luxury. As I always say "The only vacuums in the social sciences are in our minds". You can't make simple mathematical models of behavior and expect any level of predictive quality when they hold things like unlimited information and rational optimization as axioms. We should be proud as social sciences that we have come so far despite the added difficulties of our field, and instead of mimicking the natural sciences methodology, should instead mimic its predictive power.
Math is great and necessary in econ and finance, but it is being misused. This allegiance to physics-like math models prevents us from fully accounting for psychology, reflexivity, irrationality, animal spirits, and whatever other term you have for fundamentally human variables influencing decision making of agents in an economy.
Do experimental research. A lot of it, with varying methodology. Then build mathematical models describing this behavior. Then modify those. I think you'll find they are more descriptive of reality. Don't make absurd assumptions and pin it on "simple human behavior in a vacuum" as no such thing exists.
Doubt this comment will get me the book, but I just had to get it off my chest. I see a bright future for econ, finance, and the social sciences as this is becoming more accepted and considered by academia. However, we do still need to fix p-hacking, significance bias, and post-hoc hypotheses if we want our experimental research to be worth anything.
Also, regarding the idea of "if investors can't see the bubble coming how could regulators?", I think Soros would argue that some investors do see a bubble coming, but have an incentive to invest, then prepare to divest as soon as the pop approaches. If this is the case, then sharp regulators would also be able to see the bubble, though perhaps not the pop itself, coming.
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Alex Williams says:
While I am partial to the idea of reflexivity and Soros's trading style, I found a problem with the theory. Suppose this theory is widely accepted and practiced, indicators would be developed, policies announced, and everyone involved would get a cool nobel prize. However, as you say, when the measurement becomes the target, it ceases to work. So wouldn't this theory become a self fulfilling prophecy that would only describe the times in which it isn't the standard? Once it becomes the standard, wouldn't that open it up to black swan events?
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Shocking Car videos says:
So, Soro yolo every time he bets on the stock?
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TinfoilTomcat says:
Fuck george soros.
That's it, thats the comment
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R4vens13 eversor431 says:
The interest rate set by the CB rather than the market is source of the problem. All the other regulation and manipulations cannot undo this fundamental issue in creating and maintaining bubbles.
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opticchickenmcnugget says:
You aren't Jason Statham, what a scam
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Ferdy R says:
The fact that Soros wrote the book 6 months before Lehman Brothers collapse tells how good the book is!
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Blockchain Reaction says:
Crypto currency market is a great example where reflexivity works. While you are defining it I was thinking of bitcoin and it exactly fits the bill.
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Francis Mumbi says:
I will just buy you book….:)
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Steven Giji says:
Bitcoin is the best example of reflectivity. The good thing is that govt cannot regulate it , 😂
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zhackore1 says:
Well this video aged like fine wine.
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Marcus Peabody says:
Get him to gitmo
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Ethan Helmsi says:
does soros ever get sick? I hope our precious mother earth get him xpired soon; he lived tooooooo long.
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Portofel Piele says:
Oooooooooooooooo
Well,
Almost every sentence.
The nature bubble came automatically to mind. From invasive species, example rabbits in an area without predators, they multiply and eat everything, then they starve to death, depending on the size of the location, they end up self regulating, having less rabbits, or resorting to cannibalism, to the mousetopia experiments where the 3 or 4th generation refused to breed, not because lack of food or shelter, but because the lack of basic skills needed for nurturing young rats. or to evolution same species spread out and become so different they can't breed with one another, see dog breeds, viruses, etc.
Thank you for the video.
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Amen Tin says:
George Soros is a criminal, he uses to give money to rebels in different countries, people like him should be published under the law… I like your content but not this video.
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Amity Ville says:
I think a great example is taking place today…
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Paul says:
So basically Soros just rebranded endogeneity and pretends he invented it.
There is literally nothing novel in this idea.
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thedragonball says:
I love how you put it at the end – despite the bubble popping, a very important infrastructure was laid out, so overall it's a good thing. Kinda hard to believe such wise thinker also almost broke UK…
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Jonathan Brotto says:
Too much power?
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mechanicsfoundry says:
I laugh every time at the Bezos picture.
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Nikil Raju says:
Manufactured defaults in the CDS market are a case in point for reflexivity. Hovnanian is the poster child for this.
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Kirim Salfeux says:
Jesús, can you Not explain it more easily?
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Frans van den Berg says:
Great video's, mr Boyle.
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Eva Venegas Pacheco says:
George soros, SATANAS T ESPERA EN EL INFIERNO!!!!!
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Yorkshire Way says:
This man George Soros is now villian in India. 🤔🤔🤔
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Mohammad Hossain says:
A good example of reflexivity is the GameStonk debacle!
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Video – George Soros – Reflexivity Explained

Video – George Soros – Reflexivity Explained

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