Related question it’s critical to ask: Is the game I’m interested in the game that’s being played?
Amateur Jai Alai is probably full of people who love Jai Alai and are genuinely trying. On the other hand, Facebook isn’t trying very hard to make a social network that’s good for you—it’s trying to make a social network that consumes your attention, and is very good at that game, as long as you don’t take any strategic- or tactical-level actions against it. Likewise, equity prices are efficient at something such that dilettantes get burned, but they’re not necessarily efficient at estimating underlying fundamental value of businesses fairly. (For instance, a stock could be undervalued relative to its potential in part because investors correctly believe there’s a stable equilibrium of collusion to undervalue it, which would starve the company of capital needed to actualize its potential.)
Related question it’s critical to ask: Is the game I’m interested in the game that’s being played?
Amateur Jai Alai is probably full of people who love Jai Alai and are genuinely trying. On the other hand, Facebook isn’t trying very hard to make a social network that’s good for you—it’s trying to make a social network that consumes your attention, and is very good at that game, as long as you don’t take any strategic- or tactical-level actions against it. Likewise, equity prices are efficient at something such that dilettantes get burned, but they’re not necessarily efficient at estimating underlying fundamental value of businesses fairly. (For instance, a stock could be undervalued relative to its potential in part because investors correctly believe there’s a stable equilibrium of collusion to undervalue it, which would starve the company of capital needed to actualize its potential.)