Public information can come in two forms: public announcements of data and public announcement that is opinion or observation. Public information is discounted but that does not mean it is done correctly. Market efficiency has the view that all public information is properly discounted in markets and cannot be exploited. If you believe there is an amnesia effect, you should be always be a news skeptic. He actually stated in the article, “I refer to it by this name because I once discussed it with Murray Gell-Mann, and by dropping a famous name I imply greater importance to myself, and to the effect, than it would otherwise have.” It is a good story, but you will not find it in any behavioral finance discussion. There is no actual research on this effect. Crichton wrote about it years ago in a posting “Why Speculate?”. The Gell-Mann amnesia effect may seem to be an interesting behavioral novelty for cocktail conversation, yet it provides an important lesson for doing research in any financial markets. You turn the page, and forget what you know.” In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. I call these the “wet streets cause rain” stories. Often, the article is so wrong it actually presents the story backward-reversing cause and effect. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. You open the newspaper to an article on some subject you know well. Trust your area of expertise - and few others.“Briefly stated, the Gell-Mann Amnesia effect is as follows. We know the answer, so instead of falling victim to Amnesia, we need to ignore the noise and do what we believe is in our best interest. But if we pick and chose whose opinions we value - despite limited expertise behind them - then we can easily begin making decisions attempting to please the assessor instead of doing what we know is right.Īsk any executive if he would rather have an A today and a bad team two years from now, or a D and a good team? Making high or low-level decisions comes with second-guessing. If we let an unqualified opinion create added uncertainty, then subconsciously, we will hinder our process the next time. When we transfer to another subject outside our expertise, we believe everything written, never questioning the information.Īs leaders, what we have to understand is there are few experts and even fewer with the knowledge of our decision-making process. When we read something we have deep knowledge and an understanding of, we become critical and skeptical of the validity of the information. We all fall victim to the Gell-Mann Amnesia Effect at times. “I refer to it by this name because I once discussed it with Murray Gell-Mann, and by dropping a famous name, I imply greater importance to myself, and to the effect than it would otherwise have,” Crichton said. He then finds multiple errors in the report and becomes exasperated and upset, giving the author no credibility.īut when the same executive reads another team’s grade, good or bad, done by the same author, he believes every word, as if the evaluator somehow improved.
When an NFL executive is reading a poor draft grade for his team, he can then cast doubt on the credentials of the evaluator.
Draft grades then typically make a fan base happy, irate or extremely sad. He is also credited with developing the Gell-Mann Amnesia Effect, named after an American physicist who won a Noble Peace Prize for his theory of elementary particles.Īfter every NFL draft, teams are graded on their selection by members of the media who have evaluated the prospects.
After graduating from medical school, Crichton bypassed becoming a doctor and instead used his knowledge to write science-fiction thrillers such as Jurassic Park and Twister. What do Michael Crichton, NFL Draft grades and Murray Gell-Mann all have in common?Ĭrichton is an American author and television writer who has penned over 26 novels, selling more than 200 million copies worldwide.
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