uncertainty

We take for granted that price measures value, but price just measures attention.

With the skillful use of modern media, attention can be herded away from value for long enough to trick the audience. Price can be used as evidence to show there's value when there is none.

This has some non-obvious implications.

Prices in the market drive the allocation of resources. Investors allocate capital to teams who know how to manipulate attention because the market rewards them for it.

The market cap of an asset or net worth of a person stops being a clean signal of value. This can happen some time before the market catches on.

An increase in price or market cap is no longer a clean indication that the right decisions were made or value was created.

If such an increase is used as evidence with confidence & certainty, even more noise is injected into the market.

Creating long-term value takes time but attention can be mobilized quickly.

The market teaches participants that they can get rich much faster if they prioritize steering attention vs creating value. 

Even long-term builders focused on value can juice valuations by diverting some time to the attention premium.

Relevant: https://onlinelibrary.wiley.com/doi/10.1111/j.1540-6261.2011.01679.x