"Over a long and industrious career, the investor George Soros developed a theory he calls reflexivity. The basic idea is that expectations don't form in a vacuum. They are shaped, in part, by our perceptions of what other people believe. The more widely an idea is accepted, the more likely we are to accept it ourselves and that, in turn, reinforces the collective wisdom."
"If many believe that, say, the stock market will go up or that AI will create an economic boom, we're more likely to believe it too. That belief then drives behavior: investors buy stocks, companies pour money into AI, and the prediction begins to fulfill itself. All of this only adds fuel to the fire. Nobody wants to get left out of a good thing."
George Soros's reflexivity theory explains that expectations form through social feedback: perceptions of others' beliefs shape individual expectations, reinforcing collective views. Widely held beliefs about markets or technologies prompt investors and firms to act, thereby making predictions self-fulfilling and amplifying momentum. Such self-reinforcing dynamics often overshoot underlying fundamentals, and eventually reverse. Increasing concentration of power within large institutions magnifies systemic distortions and provokes backlash aimed at redistributing control. Historical strategy paradigms like Porter's competitive advantage emphasize dominating value chains, whereas Silicon Valley models emphasize ecosystem interdependence, collaboration, and network effects that challenge extractive, transaction-focused approaches.
Read at Fast Company
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