The Gell-Mann Amnesia effect in markets
Investors frequently overreact to news in specialized sectors they do not understand, while ignoring that same analytical blind spot when evaluating other industries.
The argument
The hosts discussed how Charles Schwab and Raymond James shares fell 10% on news of a small competitor launching an AI tool. They used this to illustrate the Gell-Mann Amnesia effect - coined by Michael Crichton - where people recognize media/market ignorance in their own field of expertise but immediately forget that lesson when consuming news about other fields.
Hear it yourself
"So we know that Schwab should not have lost 10% of its market cap because somebody launched an AI tax tool. We understand that, you and I, because we know this industry backwards and forwards, but the rest of the market doesn't."
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