Why Cliff Asness Believes Markets Are Getting Dumber

Financial markets have become increasingly prone to bouts of extreme inefficiency, driven by the rise of social media and prolonged periods of low interest rates. Cliff Asness, founder of AQR Capital Management, argues that while quantitative strategies and disciplined valuation-based investing act as forces for equilibrium, the "wisdom of crowds" is frequently undermined when independent opinions are replaced by coordinated, mob-like behavior. This shift manifests in recurring market bubbles, such as the dot-com era and the COVID-19 period, where prices detach from fundamental reality. Furthermore, the convergence of political extremes—characterized by populist, economically ignorant policies across both major parties—mirrors this instability. Ultimately, while machine learning offers new tools to capture subtle market nonlinearities, it remains insufficient to prevent the human psychological biases that fuel these large-scale, irrational market events.