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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.

Language:
English Language

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

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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