Didier Sornette Quotes

It is difficult to assess how much this gambling spirit is active in the minds of individual investors. If it is, even to a small degree, it is relevant to our discussion since it makes investors prone to imitation and herding because they invest on little information. It may also explain the anomalously large volatility of prices and their potential instabilities.

A bubble that goes up is just one that could have crashed but did not.

Faster-than-exponential growth also occurs in computing power, as measured by the evolution of the number of MIPS per $1,000 of computer from 1900 to 1997. Thus the so-called Moore's law is incorrect, since it implies only an exponential growth. This faster than exponential acceleration has been argued to lead to a transition to a new era, around 2030, corresponding to the epoch when we will have the technological means to create superhuman intelligence.

The incentives that people need to work and to find meaning in their lives should be found beyond material wealth and power.

One trader's move in the market can be interpreted by another trader as relevant additional information due to the uncertainty he faces.

These rumors do not circulate in all directions, but essentially from the top to the bottom of society. The rather sophisticated presentations, the apparently serious references that seem to justify their origins, and their distinguished proponents provide food for amplifications serving diverse interests and psychological biases in all layers of society.

Knowledge is encoded in models. Models are synthetic sets of rules, and pictures, and algorithms providing us with useful representations of the world of our perceptions and of their patterns.

Indeed, the financial world is such that any insight is almost immediately used to trade for a profit.

The same basic ingredients are found repeatably: fueled by initially well founded economic fundamentals, investors develop a self-fulfilling enthusiasm by an imitative process or crowd behavior that leads to an unsustainable accelerating overvaluation.

By one estimate, 90% of international transactions were accounted for by trade before 1970, and only 10% by capital flows. Today, despite a vast increase in global trade, that ratio has been reversed, with 90% of transactions accounted for by financial flows not directly related to trade in goods and services.

The assumption of perfectly rational, maximizing behavior won out until recently in the art of modeling, not because it often reflects reality, but because it was useful.

According to the academic world view that markets are efficient, only the revelation of a dramatic piece of information can cause a crash, yet in reality even the most thorough post-mortem analyses are typically inconclusive as to what this piece of information might have been. For traders and investors, the fear of a crash is a perpetual source of stress, and the onset of the event itself always ruins the lives of some of them.

Since it is the actions of investors whose buy and sell decisions move prices up and down, any deviation from a random walk has ultimately to be traced back to the behavior of investors.

The acceleration of the number of traders buying into the market in the inflating bubble captures the oft-quoted observation that bubbles are times when the "greater fool theory" applies.

Finally, empirical data suggests that assets are sold much more slowly during retirement years than when they are accumulated during working years.