Investors,

I promise to get to the pertinent global equity sell-off, but I’d like to take us through a bit of a detour first, hopefully as fascinating to you as it is to me. 

Last week I was in Oxford, England for an investing conference. One moment stood out as surreal and I think a powerful symbol for the decisions facing investors. Richard Thaler, father of behavioral finance, was a guest speaker.  Thaler is also closely connected to Eugene Fama, one of the father’s of the efficient market school. It was actually Thaler’s work in the mid 1980s on stock market inefficiencies that led to Fama’s most famous paper on the 3-factor model, which is a bedrock of the current “markets are mostly efficient” camp.

Thaler and Fama are old, both in years, and in the fact that their work is the foundation of modern finance.  And we’re talking about work that is only about 30 years old.  We were listening to Thaler in a hall that was about 400 years old at a university that was over 900 years old.  And further exaggerating the distinction of timeframes was one of the themes of the conference: The deflationary forces of automation.

Automation