Adaptive Markets: Financial Evolution at the Speed of Thought

My review is not really of the whole book but of a Blinkist Summary. I'm using these summaries to help me absorb more new ideas in the time I have left. (Which is rapidly contracting). If a book summary especially appeals to me, then I might indulge by reading the full book. However, I've noticed a tendency for Blinkist Summaries to be made of books by very prolific authors who are clearly just writing for a bulk market (especially with the self-help genre). So my hopes for Blinkist books are not high.
This is really my first attempt for years with Blinkist and I thought the summary was pretty good. As I also have the full book I will attempt a cross check by reading it. I took some notes of what I thought were key points from Blinkist show more (that's a summary of a summary) and here they are:
The Efficient Market Hypothesis is the most widely accepted theory for how the market works.
In a nutshell, EMH theory suggests that the price of stocks, bonds and similar investment assets will always provide an accurate reflection of the health, profitability and general value of a company.
Since you can’t beat the market, the standard advice is to “join the market” by investing in long-term, low-risk index funds, or mutual funds, which comprise a collection of stocks that will remain more or less untouched over time.

Humans are reliably irrational in dealing with money.
People tend to be more concerned with avoiding losses than making gains, which means we will generally take greater risks in order to avoid those losses than we will to hit the jackpot.

Human behavior is shaped by our emotions and instincts.
Through extensive research, neurologists have concluded that dopamine plays a central role in causing people to take irrational risks. This is something that the gambling industry is well aware of, as slot machines are designed to keep dopamine levels pumping so that gamblers will keep at it even as their money disappears.
Unfortunately, when dealing with money and trying to make the right decisions, we’re often in a fearful state of mind and experience the heightened emotional state of panic that accompanies it. This, in turn, is how we end up making irrational mistakes and piling up avoidable losses.

Survival of the richest is the ultimate force behind competition, innovation and adaptation.
Even though the exact methods used by hedge funds are still kept secret, they were soon popping up everywhere.
This is the evolutionary nature of the adaptive market in action: a new, superior species is introduced and soon begins to multiply and dominate.

The Adaptive Market Hypothesis can be used to make better financial decisions.
After all, there are some markets that will go through downturns longer than any investor can reasonably expect to wait out. For example, the Japanese market crashed in 1991 and remained stagnant for the next 20 years, a period known as the “lost decades.”
However, in some cases like this, what’s known as a behavioural premium may arise. This is when the irrational action becomes the dominant train of thought and more investors start pushing to sell, thus adversely affecting the long-term value of the company. In this scenario, relying on the efficient market would be unwise.

Financial crises are the result of markets evolving without proper oversight.
Most financial crises are an example of what happens when a market changes faster than investors can adapt.

The Adaptive Market Hypothesis can cure more than just our financial system.
If the Adaptive Market Hypothesis can help us see what went wrong in 2008, can it perhaps also point us to a better way forward, with more reliable markets? What history tells us is that we need better legislation to help prevent greed and fear-based decisions from ruining and damaging our economy.
There’s no reason why the financial industry should remain synonymous with greed and selfishness when it could use its power for the good of all humankind. [At this point he seems to be floating off into fantasy land.....ok, noble sentiments but a far cry from the realities of the market]
For example, there could be a “CancerCures” fund, managed by a panel of biomedical experts and experienced healthcare investors. Within it could be 150 independent research projects
With 150 independent projects looking at a wide range of treatments, we can estimate a 98-percent probability that at least three of them would be successful.
[I wonder where he got this idea from.....seems both fairly ambitious and does not really suggest that a "cure" might result. Most of these sorts of treatments are of a pretty simplistic nature....like Do you get better outcomes by combining chemotherapy with radiation every third week instead of every fourth week.]

Final summary
We’re long overdue for a new approach to our financial markets, one that acknowledges the human flaws of those participating in the system and recognizes the great potential the system has to do good. This is what the Adaptive Markets Hypothesis attempts to provide by incorporating the evolutionary element of markets.
Interesting ideas but not really new and where he does come up with new ideas they seem rather fanciful to me. Two stars from me. show less

See my Blinkist review of this book.