--- title: "Meaning & Key Takeaway of: The possibility that stock value in…" description: "\"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..." image: "https://sms4smile.com/quotes/i/63a/charlie-munger-458_behavior_the-possibility-that-stock-value-in-aggr_2584033.jpg" --- # The possibility that stock value in aggregate can become… ![“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…” quote by Charlie Munger](https://sms4smile.com/quotes/i/63a/charlie-munger-458_behavior_the-possibility-that-stock-value-in-aggr_2584033.jpg) [Download](https://sms4smile.com/quotes/i/63a/charlie-munger-458_behavior_the-possibility-that-stock-value-in-aggr_2584033.jpg) [Open image](https://sms4smile.com/quotes/i/63a/charlie-munger-458_behavior_the-possibility-that-stock-value-in-aggr_2584033.jpg) > “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.” [Charlie Munger](https://sms4smile.com/quotes/author/charlie-munger/) ## About This Quote This interpretation was drafted with AI assistance. It is one reading of the quote, not the author's own explanation. He critiques efficient market theory, noting irrationality and psychological factors ignored by economists. **In simple terms:** Markets are often irrational, contrary to theory. Key Takeaway Consider human psychology in markets. Themes economics behavioral finance irrationality Mood analytical critical Type lecture financial When to use this quote - investment strategy - risk assessment - financial education Key Concepts psychology market theory Questions to Reflect On - How to blend rational and irrational models? - What evidence supports each view? A Different Perspective Overemphasis on irrationality may ignore rational trends. ★ ★ ★ ★ ★ No ratings yet [Behavior](https://sms4smile.com/quotes/about/behavior/) [Customer](https://sms4smile.com/quotes/about/customer/) [Economics](https://sms4smile.com/quotes/about/economics/) [Efficient markets](https://sms4smile.com/quotes/about/efficient-markets/) [Foolish man](https://sms4smile.com/quotes/about/foolish-man/) [Human behavior](https://sms4smile.com/quotes/about/human-behavior/) [Humans](https://sms4smile.com/quotes/about/humans/) [Investing](https://sms4smile.com/quotes/about/investing/) [Men](https://sms4smile.com/quotes/about/men/) [Possibility](https://sms4smile.com/quotes/about/possibility/) [Professors](https://sms4smile.com/quotes/about/professors/) [Psychology](https://sms4smile.com/quotes/about/psychology/) [Real world](https://sms4smile.com/quotes/about/real-world/) [Values](https://sms4smile.com/quotes/about/values/) [World](https://sms4smile.com/quotes/about/world/) ## Related quotes > [I have a name for people who went to the extreme efficient market theory-which is "bonkers". 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In the literature of…](https://sms4smile.com/quotes/michael-jensen/there-is-no-other-proposition-in-economics-that-has-more-solid/) Michael Jensen > [When I started eBay, it was a hobby, an experiment to see if people could use the Internet to be empowered through access to…](https://sms4smile.com/quotes/pierre-omidyar/when-i-started-ebay-it-was-a-hobby-an-experiment-to-see-if-people-2/) [Pierre Omidyar](https://sms4smile.com/quotes/author/pierre-omidyar/) > [If I subscribed to the efficient market theory I would still be delivering papers](https://sms4smile.com/quotes/warren-buffett/if-i-subscribed-to-the-efficient-market-theory-i-would-still-be/) [Warren Buffett](https://sms4smile.com/quotes/author/warren-buffett/) > [What's so seductive about the efficient markets hypothesis is that it applies nine years out of ten. A lot of the time it works.…](https://sms4smile.com/quotes/niall-ferguson/what-s-so-seductive-about-the-efficient-markets-hypothesis-is-that-it/) [Niall Ferguson](https://sms4smile.com/quotes/author/niall-ferguson/) > [Investment students need only two well-taught courses - How to Value a Business and How to Think About Market Prices](https://sms4smile.com/quotes/warren-buffett/investment-students-need-only-two-well-taught-courses-how-to-value-a/) [Warren Buffett](https://sms4smile.com/quotes/author/warren-buffett/) > [“The adjective “efficient” in “efficient markets” refers to how investors use information. In an efficient market, every titbit of new information is processed correctly…](https://sms4smile.com/quotes/alan-s-blinder/the-adjective-efficient-in-efficient-markets-refers-to-how-investors/) [Alan S. Blinder](https://sms4smile.com/quotes/author/alan-s-blinder/) > [Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac's talents didn't extend to…](https://sms4smile.com/quotes/warren-buffett/long-ago-sir-isaac-newton-gave-us-three-laws-of-motion-which-were-the/) [Warren Buffett](https://sms4smile.com/quotes/author/warren-buffett/) > [To invest successfully, you need not understand beta, efficient markets, modern portfolio theory, option pricing or emerging markets. You may, in fact, be better…](https://sms4smile.com/quotes/warren-buffett/to-invest-successfully-you-need-not-understand-beta-efficient-markets/) [Warren Buffett](https://sms4smile.com/quotes/author/warren-buffett/) > [The efficient market theory is one of the better models in the sense that it can be taken as true for every purpose I…](https://sms4smile.com/quotes/eugene-fama/the-efficient-market-theory-is-one-of-the-better-models-in-the-sense/) [Eugene Fama](https://sms4smile.com/quotes/author/eugene-fama/) > [Seven habits that help produce the anything-but-efficient markets that rule the world. 1. Think short term. 2. Be greedy. 3. Believe in the greater…](https://sms4smile.com/quotes/paul-krugman/seven-habits-that-help-produce-the-anything-but-efficient-markets/) [Paul Krugman](https://sms4smile.com/quotes/author/paul-krugman/) ## More by Charlie Munger > [Almost all good businesses engage in 'pain today, gain tomorrow' activities.](https://sms4smile.com/quotes/charlie-munger/almost-all-good-businesses-engage-in-pain-today-gain-tomorrow/) [Charlie Munger](https://sms4smile.com/quotes/author/charlie-munger/) > [If you want good behavior, don't pay on a commission basis. Our judges aren't paid so much a case. We keep them pretty well…](https://sms4smile.com/quotes/charlie-munger/if-you-want-good-behavior-don-t-pay-on-a-commission-basis-our-judges/) [Charlie Munger](https://sms4smile.com/quotes/author/charlie-munger/) > [Acquire worldly wisdom and adjust your behavior accordingly. 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It’s the one sin you can’t have any fun at.](https://sms4smile.com/quotes/charlie-munger/what-good-is-envy-it-s-the-one-sin-you-can-t-have-any-fun-at/) [Charlie Munger](https://sms4smile.com/quotes/author/charlie-munger/) > [We believe that almost all really good investment records will involve relatively little diversification. The basic idea that it was hard to find good…](https://sms4smile.com/quotes/charlie-munger/we-believe-that-almost-all-really-good-investment-records-will/) [Charlie Munger](https://sms4smile.com/quotes/author/charlie-munger/) > [It is way less certain to be a wonderful business in the future. The threat is alternative mediums of information. Every newspaper is scrambling…](https://sms4smile.com/quotes/charlie-munger/it-is-way-less-certain-to-be-a-wonderful-business-in-the-future-the/) [Charlie Munger](https://sms4smile.com/quotes/author/charlie-munger/) > [In the corporate world, if you have analysts, due diligence, and no horse sense, you've just described hell.](https://sms4smile.com/quotes/charlie-munger/in-the-corporate-world-if-you-have-analysts-due-diligence-and-no/) [Charlie Munger](https://sms4smile.com/quotes/author/charlie-munger/) > [We have to have a special insight, or we'll put it in the 'too tough' basket. All of you have to look for a…](https://sms4smile.com/quotes/charlie-munger/we-have-to-have-a-special-insight-or-we-ll-put-it-in-the-too-tough/) [Charlie Munger](https://sms4smile.com/quotes/author/charlie-munger/) > [I've heard that one-half of the students at elite schools want to go into private equity or hedge funds. 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Begin to act the part of the person you would like to…](https://sms4smile.com/quotes/anonymous/as-you-begin-changing-your-thinking-start-immediately-to-change-your/) [Anonymous](https://sms4smile.com/quotes/author/anonymous/) > [“I now know that deep within the human concept is something dark, selfish, and completely willing to do whatever is necessary to support the…](https://sms4smile.com/quotes/melissa-west/i-now-know-that-deep-within-the-human-concept-is-something-dark/) [Melissa West](https://sms4smile.com/quotes/author/melissa-west/) > [“We are endowed with genes which code out our reaction to beavers and otters, maybe our reaction to each other as well. We are…](https://sms4smile.com/quotes/lewis-thomas/we-are-endowed-with-genes-which-code-out-our-reaction-to-beavers-and/) [Lewis Thomas](https://sms4smile.com/quotes/author/lewis-thomas/) > [The number of poor, and poorly prepared, students who succeed in college and beyond undercuts the simplistic notion that economic or educational disadvantage is…](https://sms4smile.com/quotes/roland-merullo/the-number-of-poor-and-poorly-prepared-students-who-succeed-in/) [Roland Merullo](https://sms4smile.com/quotes/author/roland-merullo/) > [To behave creatively in art means behavior with skill; and skill comes from discipline, not derangement. The artist who knows the rules -and proportion…](https://sms4smile.com/quotes/burne-hogarth/to-behave-creatively-in-art-means-behavior-with-skill-and-skill-comes/) Burne Hogarth > [You don't put milk in chamomile tea - that's disgusting behavior! That's not right.](https://sms4smile.com/quotes/laura-fraser/you-don-t-put-milk-in-chamomile-tea-that-s-disgusting-behavior-that-s/) [Laura Fraser](https://sms4smile.com/quotes/author/laura-fraser/) > [The laws of thermodynamics, as empirically determined, express the approximate and probable behavior of systems of a great number of particles, or, more precisely,…](https://sms4smile.com/quotes/j-willard-gibbs/the-laws-of-thermodynamics-as-empirically-determined-express-the/) J. 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