MENTAL MODEL · M3879

Soros' Reflexivity

BehaviorHigh supportSocial Psychology

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Updated 2026-08-05

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INTRODUCTION

English translation pending.

CORE DEFINITION

Developed by George Soros, notably in 'The Alchemy of Finance', reflexivity holds that cognition and participation mutually interfere. Prices are not passive readings of value: they shape credit, sentiment, and corporate behavior, which in turn reshape prices. The condition is a two-way feedback loop; where beliefs cannot affect fundamentals, the effect is weak.

SCAFFOLDING EFFECT

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Reduce cognitive load

- Sentiment tracking: Watch dominant beliefs as data, not only fundamentals. - Cycle positioning: Ride the self-reinforcing phase and plan the exit before the reversal. - Bias map: Write down the mainstream narrative and how it is currently altering real decisions.

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Anchor fast decisions

Beliefs influence actions, and actions alter the conditions the beliefs were about. A rising price lowers borrowing costs and lifts confidence, which raises earnings and validates the original belief. The loop runs until the gap between belief and fundamentals becomes unsustainable, at which point the same mechanism works in reverse.

MINIMUM ACTION

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Practice this model in one real situation:

Write down the dominant narrative and what it assumes. 2. List concrete ways that narrative is changing real behavior. 3. Track whether fundamentals are improving or only appearing to. 4. Define the condition that would mark the turning point. 5. Set the exit in advance and honor it when the loop flips.

Check to track your progress (stored locally)

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Source support: Explicit

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en.wikipedia.orghttps://en.wikipedia.org/wiki/Reflexivity_(social_theoryZH · Explicit
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