This a hilarious article, and very smart, and in m...

This a hilarious article, and very smart, and in many ways very true. But there is one deep flaw in its reasoning. There is a big difference between a novel analysis and a market-moving fact. The latter never get to the plebes before they've changed the market. But the former often do. And the problem with the article is that it (and the theories it wields) are talking about facts, not theories.

The US housing bubble is a great example. If you read Krugman, you read, in 2006, some copper-bottomed reasoning, coming from a guy with great credentials and track record, that it was hugely over-valued. But if you shorted it then, you got crushed. Another great example is the tech stock market. Everyone knew that by the end. But if you bet against it early, you lost tons. A third recent example is the London Whale. The guy who profited big from that lost money for 6 months.

These are not exceptions but the rule. Most deep analyses that something is wrong don't get proved right immediately. Often they don't get proved right for years. Hence the old saw that the key to investing is not knowing whether something is going down, but when.

The result is that you can be the smartest guy in the world and lose everything because you were smart too soon. When it comes to theories, the first-mover advantage this article is built on vanishes.

Instead you have, I think, a very plausible picture wherein being first, and being the smartest, are not enough by themselves. And where the key is exactly a "je ne sais quoi" -- a "I can't say what it is" -- of the sort the author mocks because it's illogical. He's right, it is. C'est la vie.

The problem with rational market theory is that the market isn't rational. It is, in fact, kind of hilarious to hold up efficient market theory as an intellectual touchstone in the post-2008 world. Most of the worst crap sold was built on it. It's in the sewer these days. The hot theories these day are exactly the opposite, trying to explain how the the market can be so illogical

This finally bring us to balls of steel, which the author mocks mercilessly and hilariously. But you do indeed need them to bet big on an analysis that nobody else believes. Because even if you're dead right it's going to take a while, and you're going to lose big for a long time and look like a fool. And of course all the time you know you could be wrong.

Big balls muddy men's minds, no doubt about it. But in all big contrarian bets they were always obviously needed. Because of this endemic time lag.