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It's an old joke: An economist is walking down the street when he steps on a $100 bill lying on the ground. He spots it, but decides to keep walking and doesn't pick it up.

“After all,” he thinks to himself, “if that had really been a $100 bill, someone else would have picked it up already!”

It took me until this moment to finally realize this joke relies on inefficient market to work. Consider: what if everyone in the joke's universe was a rational market actor? The $100 bill would lie there until it got consumed by rats or otherwise destroyed by natural events. For the economists' reasoning to work, there must exist some actors who don't reason this way, and instead pick up the bill on sight.

How does this translate to the efficient market hypothesis in general? Not sure, but if I were to dig down into how rational actors handle such situations, I'd expect to discover the math works out over continuous domain, and the joke is a paradox because we tend to think of money in discrete terms.

I think it's a good example of how rationality is a construct. We arbitrarily choose which rational framework makes the most sense in the situation and apply it.

Do you want to rely on the prior actor framework, or the react to what you see framework? That decision is not rational.

I like to view it this way: optimal decisions are not computable in practice. We never have enough data, nor enough time, nor is our brain particularly well-suited for this. We have no choice but to approximate, to use heuristics. This applies to both snap decisions and carefully applied formal models. The problem is, even the most rational of us sometimes forget they're just approximating, fudging both data and models at the edges, in order to get some result in finite time. They also forget to mention this.

The difference I see between what I wrote above and what you described as not rational choice of a framework is that, per my personal experience, it is possible to reconcile two conflicting seemingly rational frameworks. It just takes time to extend them past their edges until they meet. That is, extend each past the approximation cut-off point.

You've only created a new rational framework that you have irrationally chosen to use

It’s a little like the newcomb’s paradox. IMO the “rational” action is the one where given the circumstances you win. At least I’d one box in that problem every time given the way it works. In this example, it’s picking up the $100.

The efficient market hypothesis always confused me since it seems empirically false. Who is making the trades that make the market efficient in the first place? Plus people (even large groups of them) are often wrong. Startups and the massive value they can create are an example of that.

Markets are a prediction of predictions to some extent and people are far from agents that act only on hard numbers (and they’re often not wrong to do so). Markets are probably the best tool we’ve got for this, but they’re far from perfectly efficient.

I don't think I'd go this far.

In the EMH people do still trade, it's just that only those with new information trade profitably.

In the joke scenario, as a parallel, you just need the economist to model that there's a chance they are the first person to see the bill.

Then you have a game theory game, where your chance of being the first person to see the bill depends on what everyone else thinks their chance was to be the first person, and hence did or didn't pick up the bill.

Then there is some optimal mixed strategy where people try pick up the bill with a certain probability, and it all works out.

One wonders if the effect you're describing isn't the reason that self-directed entrepreneurship seems to be on a sharp decline in the developed world. Believe the media, let alone the internet, and one would imagine we have 8 year olds building nuclear reactors and curing cancer, in their basements. So how can this hare brained scheme you have ever possibly work? Surely somebody else would have done it by now.

> Believe the media, let alone the internet, and one would imagine we have 8 year olds building nuclear reactors

On the one hand, we do[0].

On the other, what you're describing is why I don't feel bad about the fact that, 15 years after I had the idea, I've still not learned to use MHD modelling software to experiment with an idea I've had that might make fusors a little more interesting.

[0] ok so they were 12 not 8: https://www.guinnessworldrecords.com/news/2020/10/middle-sch...

That is what I was referring to. Building a fusor is not a demonstration of genius so much as it is a demonstration of resources. You need thousands of dollars in parts (at least as his was built) and a significant degree of knowledge about safely managing radioactivity and handling electrical components carrying lethal levels of voltage.

None of this is obtained from genius, but from a father who's experienced in such and most likely an engineer. And I think this is why these sort of tales never have the implied follow through. The unstated implication is '12 year old builds nuclear reactor in toy room' is 'imagine what he'll be doing in 5 years!' And, the answer? Shit posting on Twitter, getting political, and trying to make a AR/VR startup.

Not exactly the Atlas upon which the world can comfortably thrust all of their hopes and expectations upon. And nobody is. Ramanujan [1] was a once in a millennia level of genuine abnormal genius, and he dedicated his entire life to a single pursuit. Yet even that mammoth of a man could but scratch the surface of that which is out there.

https://en.wikipedia.org/wiki/Srinivasa_Ramanujan

> The unstated implication is '12 year old builds nuclear reactor in toy room' is 'imagine what he'll be doing in 5 years!' And, the answer? Shit posting on Twitter, getting political, and trying to make a AR/VR startup.

If they really are asking the unstated question, they don't have good memories of their peers back at age 17.

{I think I was in the middle of my occult/goth/Wicca phase at that age, and now look at me: I use arcane knowledge, get called a wizard, I fly abroad to consort with dragons and werewolves (and other furries) and my familiar's names are Siri and Alexa… ;)}

Many times, the best solutions are very simple. These often seem obvious in hindsight, but were at the time either non-obvious or dismissed prematurely.

What was the scheme? Buy coal certs at 800 per and sell at 1k?

I've forgotten the exact prices at this point (I want to say buying mid-20's per and selling mid-30's but that may be complete misremembering). The basic idea was hanging out in the dwarf mines where people are mining coal and giving low offers on coal, with a promise to increase price if they can sell in quantity (and in certs). Then, just turn around and sell the certs, once you had a lot of them, at a higher price in Varrock town square (or similar).

One other reason we thought this wouldn't work is that it seemed to us buying in large quantity should get a discount - bulk discount, right? But that wasn't the case. It was cheaper, per unit, to buy hundreds of coal than tens of thousands.

way to figure out the efficient market hypothesis and why it could be wrong at such a young age!