Markets are made of up of millions of people — emotional and biased — who do weirdly wild things for no apparent reason. And yet, somehow, the markets are rational?
Adam Smith (George Goodman) discredits the thought in an imaginative way in The Money Game. One of the running themes can be summed up by Australopithecus.
Australopithecus was the “missing link” in human evolution, an ape-human creature with a smaller-by-more-than-half sized brain.
Something with such a small brain can hardly be rational or logical. It must be driven by baser instincts. So Australopithecus represents the unknown and unmeasurable emotion of the crowd.
…the real test is how you behave when the crowd is roaring the other way. We know a little about some individual types, but the crowd, the elusive Australopithecus, is still largely an unknown, an exercise in mass psychology still not accomplished.
Smith’s subtle jab shouldn’t be lost either: evolution gave us bigger brains but kept the baser instincts. That interplay of the crowd and the constant pull on emotions is a feature of the Game. Continue Reading…