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Soros predicts an AI bubble: We live in a self-fulfilling market. | Bee Network

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Soros predicts an AI bubble: We live in a self-fulfilling market. | Bee Network Login الأخبار الشائعة منصة إطلاق ميمي وكلاء الذكاء الاصطناعي ديسي مستكشف السلسلة الأعلى لنوبي 100x عملات معدنية لعبة النحل المواقع الأساسية يجب أن يكون لديك التطبيق مشاهير التشفير ديبين الناشئين الأساسية كاشف الفخ الأدوات الأساسية المواقع المتقدمة التبادلات أدوات NFT أهلاً، خروج عالم الويب 3 ألعاب تطبيق خلية نحل منصة النمو إعلان يبحث إنجليزي إعادة شحن العملات تسجيل الدخول تحميل ويب 3 يوني ألعاب تطبيق خلية نحل إعلان بيت•تحليل•Soros predicts an AI bubble: We live in a self-fulfilling market. Soros predicts an AI bubble: We live in a self-fulfilling market.تحليلمنذ 4 أشهرجديدوايت 17٬157 6 Original translation by: AididiaoJP, Foresight News

How do financial markets, in turn, shape the reality they are supposed to measure?

There is a world of difference between rational “knowing” and personal “understanding.” It’s like the difference between reading a physics textbook and watching MythBusters blow up a water heater.

Textbooks will tell you that heating water in a closed system will generate hydraulic pressure due to the expansion of the water.

You have read the text and understood the theory of phase transition physics.

But MythBusters shows how stress can turn a water heater into a rocket, launching it 500 feet into the air.

You only truly understood what a catastrophic steam explosion was after watching the video.

Demonstration is often more powerful than storytelling.

Last week, Brian Armstrong gave us a live demonstration of George Soros’s “reflexivity theory,” with results that the MythBusters team could be proud of.

During Coinbase’s earnings call, after answering analysts’ questions, Brian Armstrong read out a string of extra words. These were words that prediction market participants were betting on when he might say.

He concluded the meeting by saying, “I’ve been watching the prediction markets’ bets on our earnings call. Right now, I just want to add a few words: Bitcoin, Ethereum, blockchain, staking, and Web3.”

In my view, this vividly demonstrates how most financial markets operate, as George Soros’s theory states: market prices influence the value of the assets they are pricing.

Before becoming a billionaire hedge fund manager, George Soros aspired to be a philosopher. He attributes his success to discovering a flaw in the “efficient market hypothesis”: “سوق prices always distort fundamentals.”

Financial markets do not passively reflect the fundamentals of assets as commonly believed; they actively shape the reality they are meant to measure.

Soros cited the example of the conglomerate boom of the 1960s: investors believed that these companies could create value by acquiring small, efficient companies, which in turn drove up their stock prices. This, in turn, allowed these conglomerates to actually acquire these companies at inflated stock prices, thereby “realizing” value.

In short, this creates a “continuous and cyclical” feedback loop: participants’ thoughts influence the events they bet on, and these events, in turn, influence their thoughts.

In today’s context, Soros might cite companies like MicroStrategy as an example. Its CEO, Michael Thaler, promoted this very circular logic to investors: you should value MicroStrategy stock at a premium to its net asset value, because trading at a premium itself makes the stock more valuable.

In 2009, Soros wrote that, using his theory of reflexivity, he pointed out that the root cause of the financial crisis was a fundamental misjudgment that “the value of (real estate) collateral is unrelated to the availability of credit.”

The prevailing view is that banks simply overestimated the value of the real estate used as collateral for loans, while investors paid too high a price for the derivatives backed by these loans.

Sometimes that is indeed the case; it’s simply a case of asset mispricing.

But Soros argues that the sheer scale of the 2008 financial crisis can only be explained by a “feedback loop”: investors buying credit products at high prices drove up the value of the underlying collateral (real estate). “When credit becomes cheaper and more readily available, economic activity picks up, and real estate values rise accordingly.”

The rising property values, in turn, encourage credit investors to pay even higher prices.

In theory, the price of credit derivatives like CDOs should reflect real estate value. But in reality, they also help create that value.

This is, at least, the textbook explanation of Soros’s theory of financial reflexivity.

But Brian Armstrong went beyond just explaining; he demonstrated it in real life, using the style of MythBusters.

By uttering the words people bet he would say, he demonstrated that participants’ opinions (predicting the market) could directly shape the outcome (what he actually said), which is exactly what Soros meant when he said that “market prices distort fundamentals.”

The current AI bubble is essentially a trillion-dollar upgrade of Brian Armstrong’s experiment, allowing us to grasp this crucial point: people believe AGI will be realized, leading to investments in OpenAI, Nvidia, data centers, and more. These investments make AGI more likely to become a reality, which in turn attracts even more investment in OpenAI…

This perfectly illustrates Soros’ famous argument about bubbles: he rushes in to buy because buying will drive up prices, and higher prices will improve fundamentals, which will attract more buyers.

However, Soros also warns investors not to blindly believe in such self-fulfilling prophecies. Because in extreme bubble scenarios, investors can drive up prices far faster than prices can improve fundamentals.

In reflecting on the financial crisis, Soros wrote: “A fully functioning positive feedback loop is self-reinforcing in its early stages, but eventually it will reach a peak or a reversal point, after which it will become self-reinforcing in the opposite direction.”

In other words, trees won’t grow to the sky, and bubbles won’t inflate forever.

Unfortunately, there hasn’t been a MythBusters-style experiment to demonstrate this in real life.

But at least now we know that market prices can make things happen, just like a few words mentioned in an earnings call.

Then, wouldn’t AGI (Artificial General Intelligence) be no different?

هذا المقال مصدره من الانترنت: Soros predicts an AI bubble: We live in a self-fulfilling market.Recommended Articles

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