export_ofoct.com (2)

[00:01.22] This can set off cycles of exuberant recursive mentalizing, as investors desperately search for focal points, each one buying an investment not because of its inherent productive value but because they hope to unload it at a profit on future investors, greater fools.

[00:24.87] This can set everyone off in search of conspicuous focal points such as Super Bowl ads.

[00:32.04] Everyone knows that everyone watches the Super Bowl.

[00:35.23] In 2022, cryptocurrency exchanges ran high-concept ads in which they tried to gin up a common expectation of rising prices not by touting any of the advantages of cryptocurrency but by warning, "Don't be like Larry.

[00:51.69] Don't miss out."

[00:54.08] Now, of course, it's only so long that an asset can levitate in midair, suspended by nothing but common expectation.

[01:02.32] Bubbles pop when the market runs out of greater fools who don’t want to miss out on the next best thing or when the doubt itself becomes common knowledge.

[01:13.27] This can send investors running for the exits, each desperate to sell a security out of fear that everyone else is desperate to sell it.

[01:22.30] The result can be a bank run or hyperinflation or a Great Depression. When Franklin Delano Roosevelt said, "The only thing we have to fear is fear itself," it was not a feel-good bromide, but a theorem of common knowledge.

[01:38.51] With investors constantly on the lookout for focal points, financial leaders have to be wordsmiths, mystics and occasionally, comedians. Alan Greenspan once said, "Since I've become a central banker, I've learned to mumble with great incoherence."

[01:55.51] "If I seem unduly clear to you, you must have misunderstood what I said."

[02:02.41] After Jimmy Carter told his inflation czar, Alfred Kahn, never to use the self-fulfilling word "depression," he said, "OK, but we're in danger of having the biggest banana in 45 years."

[02:14.10] My own interest in common knowledge comes from its role in social relationships.

[02:19.41] A relationship is a coordination game.

[02:22.33] Two people are friends or lovers or allies, or dominant and subordinate or transaction partners because each one knows the other one knows that they are.

[02:33.76] And this common knowledge can be cemented by a number of common knowledge generating signals.

[02:39.60] Like eye contact, where you're looking at the part of the person that's looking at the part of you that's looking at that part of them.

[02:46.77] Or blushing, where you feel the heat of the cheeks, reddening of your cheeks from the inside, knowing that other people can see it from the outside.