The review that was meant to run in the June issue of Conde Nast Portfolio—which was shut down after the May issue—has found its way to the Sunday Washington Post (and a Friday evening online posting). The gist:
Fox, a business columnist for Time, spins a fascinating historical narrative, beginning with economist Irving Fisher's paean to markets in, alas, 1929. Postwar economists such as Paul Samuelson noticed that most investment pros do not beat the averages. This led to the one positive contribution of the efficient-market hypothesis: Jack Bogle's invention of index funds, which mimic the performance of the stock market as a whole and keep ordinary people from wasting their money trying to beat it.
Fox recognizes that true believers in the market's efficiency suffered from a "blinkered" mindset and "tunnel vision." Yet I think he lets them off too easily. He laments (as if it were necessary) the lack of any alternative "grand new theory" and finds that the debate has resulted in a "muddle." Fox concludes, "If you do come up with an idea for beating the market, you need a model that explains why everybody else isn't already doing the same thing." Not necessarily. Markets aren't physics. Maybe no one model explains them.
I have it on reasonably good authority that sometime soon a review will appear in another major newspaper from another very prominent student of the market, and he will say that it's a good book and all but I'm too hard on the true believers in the market's efficiency. Sigh.
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