#english #mental_model September 2024 # Finance The [efficient market hypothesis](https://www.investopedia.com/ask/answers/032615/what-are-differences-between-weak-strong-and-semistrong-versions-efficient-market-hypothesis.asp) posits that the market cannot be beaten because it incorporates all important information into current share prices, so stocks trade at the fairest value. Though the efficient market hypothesis theorizes the market is generally efficient, the theory is offered in three different versions: 1. Weak. The weak form suggests today’s stock prices reflect all the data of past prices and that no form of technical analysis can aid investors. 2. Semi-strong. The semi-strong form submits that because public information is part of a stock's current price, investors cannot utilize either technical or fundamental analysis, though information not available to the public can help investors. 3. Strong. The strong form version states that all information, public and not public, is completely accounted for in current stock prices, and no type of information can give an investor an advantage on the market. My opinion is that weak efficiency is true and strong efficiency is not true most of the time. However, in both cases there are short-term inefficiencies. Semi-strong efficiency is true in the long-term and its inefficiencies are sometimes mid-term. Taking this into account, I see the following ways of making money in financial markets: 1. Act on short-term inefficiencies. These inefficiencies can appear in several situations: crisis, illiquid markets, access to information, etc. Technology is key here and [Renaissance](https://en.wikipedia.org/wiki/Renaissance_Technologies)is a great example 2. Use non-public information to have an edge in the decisions you make but be careful in not doing anything [illegal](https://en.wikipedia.org/wiki/Insider_trading) 3. Take into account time as a variable in the decisions you make. Its impact varies depending on the situation and some inefficiencies take a lot of time to correct # Other complex systems Despite they may not be as efficient and fast as financial markets, there are many other [complex systems](https://en.wikipedia.org/wiki/Complex_system) where these learnings can be applied: 1. Big companies 2. Local politics 3. International affairs 4. Global climate 5. Human brain