Wednesday, July 21, 2010

How supermodels are like toxic assets

This article from 3quarksdaily, "How Supermodels are like Toxic Assets" compares the way one young pretty model rises to the top of the fashion world every year or so -- without having any obvious advantages over all the other young pretty models -- to the way the financial markets can go astray. Basically, it comes down to peer pressure of a sort. Both environments are ones in which people make financial choices based on limited information, and there are no clear rules to guide your people take comfort in mimicking the choices of their peers. If everyone else is choosing one stock, or one model, you can't be faulted for also choosing it/her. Very interesting.

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