Is this the same as positing “the market is continually surprised by the pace of technology”?
E.g., say I value company X’s stock at $100. Then I learn a new fact that there’s a 50% independent chance the company will discover a technology that doubles its value by 1 year from today. If I ignore all other factors, my estimate of the company’s value 1 year from today should then be $150. If the company discovers the technology, I’ll value it at $200, and if not, I’ll value it at $100.
For the market to trend upward as it does, it seems like either:
Everyone’s consistently getting those bets wrong, and underestimating how often/how much technology will pay off, OR
There’s something else to the story, like time-discounting or a different way of thinking about risk.
Is this the same as positing “the market is continually surprised by the pace of technology”?
E.g., say I value company X’s stock at $100. Then I learn a new fact that there’s a 50% independent chance the company will discover a technology that doubles its value by 1 year from today. If I ignore all other factors, my estimate of the company’s value 1 year from today should then be $150. If the company discovers the technology, I’ll value it at $200, and if not, I’ll value it at $100.
For the market to trend upward as it does, it seems like either:
Everyone’s consistently getting those bets wrong, and underestimating how often/how much technology will pay off, OR
There’s something else to the story, like time-discounting or a different way of thinking about risk.