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Finance: What is the Greater Fool Theory? 11 Views
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Description:
The Greater Fool Theory posits that there is always a greater fool out there to buy an item at a higher price... until there isn't.
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Transcript
- 00:00
Finance a la shmoop what is the greater fool theory? Oh shiny rocks, tulips,
- 00:09
Bitcoin.....The basic idea in the greater fool theory is
- 00:14
that you're a fool I'm a fool were all fools in the mosh pit [Man standing in a moshpit]
- 00:19
right here and we've all done and will continue to do stupid things like paying
- 00:25
$7,000 for a tulip one that just um you know sits there it doesn't speak it
Full Transcript
- 00:31
doesn't divine the future just sits there nor does it guarantee lifetime you [Man eating a tulip]
- 00:37
know sexual prowess if you eat it it doesn't even reproduce in a particularly
- 00:41
virile manner, it's just a tulip well a short term store of wealth that one fool paid
- 00:47
7 grand for making the big bet that there's another fool even more motley
- 00:52
foolish who will pay 8 grand and in Holland a few hundred years ago there
- 00:56
was one clapping wooden shoe wearing blond paid 9 grand for this tulip and [Man carrying tulip]
- 01:02
then another even greater fool paid 10 grand and then another fool paid 11
- 01:05
grand and so on until this most foolish of all tulips sold for $26,000 then what
- 01:12
there another fool well no there wasn't then the flower stopped selling for
- 01:16
$26,000 and probably ended up selling for about 26,000 cents yeah there were
- 01:21
no more fools even greater than the ones that came before so the price plummeted [Person removes price label of tulip]
- 01:26
back to I don't know what was it 4 cents a tulip actually sold for for a normal
- 01:31
tulip back then it's about what it was intrinsically worth and well that was
- 01:34
all she wrote or germinated or whatever the greater
- 01:37
fool theory posits that there is always a greater fool out there to buy your
- 01:43
stuff at a higher and higher price until there isn't a greater fool out there
- 01:47
yeah it's sort of the game of hot potato where you benefit only by holding the [Woman and man juggling a hot potato]
- 01:50
potato usually a very short period of time before dumping its finger burning
- 01:55
love on to someone else who's foolish enough to catch it and the greatest
- 01:58
thing about the greater fool theory... Well we're a planet with lots and lots and
- 02:03
lots of fools...
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