George Soros identifies several observers who originally recognized the effects of reflexivity: Frank Knight (1921) explored the difference between [[Risk]] and [[Uncertainty]]; Keynes (1936) compared markets to a beauty contest; Merton (1949) wrote about self-fulfilling prophecies, unintended consequences, and the bandwagon effect; and Popper (1957) spoke of the 'Oedipus effect.' He relays his personal story of studying under Popper while also studying economic theory and how that multi-disciplinary learning led him to question the theory of perfect competition in economics. ![[Pasted image 20240110083012.png]] Our own work on the [[Efficient Markets Hypothesis]] is complementary to Soros' work on Reflexivity and the underlying principals of imperfect understanding and human nature are the common elements of both analyses. ## The Macro Laboratory >Global macro represents the perfect combination of timeless universal truths—patterns, relationships, and models which exhibit ==consistent predictive power across time and space—and yet is essentially inherently unpredictable in its nature.== > >This paradox exists for two fundamental reasons: > >1. **The chaotic, existential complexity of the machine**: Seven billion humans making decisions, institutions with their own dynamics, feedback loops upon feedback loops. > >2. **Explicit evolution through reflexivity**: Old patterns get simulated and embedded into asset prices over time. The very act of discovering a pattern changes the pattern. > >In short, it's the perfect laboratory of [[entropy]]. Much like Soros warned: the more you think you understand something, the more you build structures of meaning and reality in such a way as to guarantee you become overconfident and make mistakes going forward. >[*Alexander Campbell*](https://www.campbellramble.ai/p/stoic-macro-living-between-order) Explore Further: [Fallibility, Reflexivity, and the Human Uncertainty Principle](https://www.georgesoros.com/2014/01/13/fallibility-reflexivity-and-the-human-uncertainty-principle-2/) | [[Feedback Loops]] **Case Studies** - [[CHG Issue 158 The Third Law]] - [[CHG Issue 136 Reflexivity]] - [[CHG Issue 55 The Fog of War]] Tags: #seeds Your support for Cedars Hill Group is greatly appreciated <form action="https://www.paypal.com/donate" method="post" target="_top"> <input type="hidden" name="hosted_button_id" value="74PGN8ZXHQVHS" /> <input type="image" src="https://www.paypalobjects.com/en_US/i/btn/btn_donate_LG.gif" border="0" name="submit" title="PayPal - The safer, easier way to pay online!" alt="Donate with PayPal button" /> <img alt="" border="0" src="https://www.paypal.com/en_US/i/scr/pixel.gif" width="1" height="1" /> </form>