On Reflexivity, Simulacra, and the Market

Bridget Riley, Blaze, 1964

"Speculation is not surplus-value; it is a sort of ecstasy of value, utterly detached from production and its real conditions—a pure, empty form, the purged form of value operating on nothing but its own revolving motion, its own orbital circulation."
— Jean Baudrillard

When I first stepped into the world of capital markets just over three years ago upon joining CoinShares, I felt like an outsider peering into a complex maze. Coming from a background where shaping perceptions and ideas was my daily bread, I was struck by how many seasoned investors still clung to the belief that markets are rational. They seemed convinced that the market accurately reflects the true intrinsic value of assets and that their mission is to uncover undervalued gems hidden from everyone else's sight.

But after three years immersed in this industry, I've started to see things differently. Today, the market isn't just about numbers and fundamentals; it's become a living, breathing entity influenced by the ebb and flow of perceptions and narratives.

To make sense of this transformation, I revisited George Soros's concept of reflexivity, which is deeply influenced by the philosophy of Karl Popper. Soros studied under Popper at the London School of Economics, and Popper's ideas on fallibility and the open society significantly shaped his thinking.

Popper posited that our understanding of the world is inherently imperfect and that our knowledge is always provisional, subject to revision. He emphasized the importance of critical thinking and the recognition that our perceptions can influence the phenomena we seek to understand.

Building on this, Soros suggests there's a loop between how market participants perceive things and the actual market realities. Our biased views don't just sit in our heads—they influence our actions, which in turn can alter the market itself.

Soros sees speculative bubbles as a natural consequence of reflexivity. "When perceptions of market participants become increasingly detached from the underlying reality (for example, an overvaluation of assets), it can lead to a bubble," he explains. Eventually, this distortion becomes unsustainable, and the bubble bursts.

In today's market, this reflexivity is supercharged by the speed at which information—and misinformation—spreads online. However, we must question whether this concept still operates effectively in allowing investors to detect inefficiencies and anomalies. When perceptions and narratives dominate, traditional signals of overvaluation may no longer serve as reliable indicators. If reality has been deconstructed, does it still hold any significance in our investment decisions?

Jean DuBuffet, Simulacres, 1969

This brings me to the idea of the market as a spectacle, much like the Situationists' "Society of the Spectacle." The market isn't just a place where assets are traded; it's a stage where images, narratives, and symbols perform for an audience hungry for the next big thing. And who is this audience? It's us—the investors.

Interestingly, the word "invest" comes from the Latin "investire," meaning "to clothe" or "to adorn." Investing, then, is like donning attire that reflects what we believe in and wish to present to the world. It's an embodiment of our values and aspirations. Tell me what you invest in, and I'll tell you who you are, what you believe in—even who you might vote for.

In this Market of the Spectacle, the spectacle produces its own reality. Lies take the shape of consensual truths. As Guy Debord wrote in Comments on the Society of the Spectacle : "The spectacular lie is not a distortion of reality, but its pure and simple suppression."

The spectacle doesn't merely manipulate facts; it creates an alternative reality that replaces genuine experience. The truth has been dissolved.

Baudrillard's concept of "simulacra" comes to mind—copies without originals. Financial instruments, derivatives, and even cryptos, tokens often feel detached from any tangible underlying asset. They exist in a realm of their own, where value isn't anchored to physical reality but floats freely based on collective belief.

Consider the phenomenon of memecoins like $PEPE, $DOGE, or $WIF, or meme tickers like $WGMI (CoinShares Bitcoin Mining ETF), $BRRR (CoinShares Spot Bitcoin ETF), and $MEME (Roundhill MEME ETF), which leverage existing memes and trends. Born out of internet culture and propelled by social media hype, these assets have seen wild fluctuations in value, driven largely by online communities and influencers. Their value is less about fundamentals and more about the narratives and sentiments they embody.

Or take the GameStop saga, where a group of retail investors rallied on Reddit to drive up the stock price—not because of the company's fundamentals, but as a collective stand against institutional short-sellers. Stocks, cryptocurrencies, ETFs—they've become exchanges of abstractions infused with beliefs, ideals, and worldviews. They're no longer just financial instruments; they're symbols in a larger narrative about technology, empowerment, and disruption.

In this spectacle-driven market, reality isn't just distorted—it's often entirely replaced. The spectacle creates its own version of truth, one that resonates with collective desires and ideologies. As investors, we're not merely participants in this market; we're also actors and audience members, each contributing to and influenced by the unfolding narratives. Understanding this dynamic is crucial, as it reshapes how we perceive value and make investment decisions in an era where the line between reality and representation has never been more blurred.

Another fascinating example is Cathie Wood's Ark Invest. Beyond periods of poor performance, Ark's products represent more than just investment vehicles; they're manifestations of a techno-optimist and accelerationist vision of the future. Their tagline says it all: "We Believe Innovation Is Key to Growth."

When an investor buys into Ark, they're not just purchasing a fund—they're buying into a belief system. It's a vision of the world that is liberal, pro-technology, and confident in the convergence of groundbreaking technologies leading to a deflationary world with hypergrowth.

This raises a provocative question: Is traditional performance measurement becoming obsolete? Is performance itself changing according to the zeitgeist, reflecting how certain ideas become dominant and shape market behavior? Has performance decoupled completely from reality? 

Dominique Teufen, Mountainview, 2013

The recent $GOAT saga epitomizes the pinnacle of market simulation. When Truth Terminal, an AI avatar that created its own religion—the Goatse Gospel—and interacted with people on social media, decided to endorse the $GOAT (Goatseus Maximus) token, we witnessed something unprecedented. A simulacrum (the AI avatar) generated value for another simulacrum (the token). Today, this token is valued at approximately $600 million.

This saga illustrates the extreme extent to which the market has become a spectacle of simulacra, where value is created and propagated within layers of abstraction—fueled by narratives, memes, and the enigmatic influence of artificial intelligence. 

Some might argue that we've entered an era of financial nihilism, where traditional metrics and valuations no longer matter. But rather than focusing on the causes of this shift, what's critical is that investors understand and adapt to this change of paradigm.

The market has become a public space where beliefs and perceptions collide and compete for dominance. In this context, it's not about worrying over speculative bubbles bursting; it's about detecting the new "pump," the emerging macro or micro-trends poised to become hegemonic. It's about recognizing which ideas will capture the collective imagination and drive market movements.

Successful investors will be those who can identify these shifts early—spotting the weak signals that hint at the next big movement. It's less about dissecting balance sheets and more about understanding the narratives shaping society.

Let's take the example of Hubertus Bigend, the enigmatic character from William Gibson's Pattern Recognition novel. As the founder of the global consultancy Blue Ant, Bigend epitomizes the fusion of cultural insight, storytelling, and strategic thinking. He operates on the belief that by decoding hidden patterns and tapping into emerging subcultures, one can anticipate and influence market trends before they become mainstream.

Embracing this new role as investors means adopting a mindset similar to Bigend's. It's no longer sufficient to rely solely on traditional metrics and analyses; we must tune into the heartbeat of society itself. By paying close attention to cultural shifts, social movements, and emerging trends, we begin to recognize the subtle factors that influence investor sentiment and market dynamics. This isn't about chasing every new fad—it's about understanding the deeper currents (or undercurrents) that guide where collective attention and capital might flow next.

Engaging with the narratives that circulate around industries and communities becomes essential. Social media platforms and online forums are the modern-day arenas where stories gain momentum and shape perceptions. By immersing ourselves in these dialogues, much like Bigend does, we gain insights into not just what people are investing in, but why they're investing. This deeper understanding provides a competitive edge, allowing us to anticipate market movements driven by collective beliefs and emotions.

As the economy evolves into a realm where value is increasingly abstract, we find ourselves navigating a landscape that often defies traditional economic theories. Embracing this new paradigm helps us make sense of markets rooted more in perceptions than in physical reality. It's about adapting to a world where value is determined by shared beliefs, and where the intangible can hold immense power.

In essence, embracing the new role of investors means becoming storytellers and listeners, analysts and philosophers, strategists and ethicists. Like Hubertus Bigend, we must become adept at reading the cultural zeitgeist, understanding that the intersection of technology, culture, and narrative is where new opportunities arise. By blending analytical rigor with creative insight, we position ourselves not just to navigate—but to actively shape—the evolving landscape of modern markets.

The market as a spectacle isn't just a metaphor—it's the reality we're operating in. By recognizing the autonomization of value and understanding that the market is an exchange of different abstractions loaded with various narratives and meanings, we can better grasp the forces at play.

References

• Baudrillard, Jean. Simulacra and Simulation. (1981). Translated by Sheila Faria Glaser. University of Michigan Press, 1994.

• Debord, Guy. Comments on the Society of the Spectacle. (1988). Translated by Malcolm Imrie. Verso, 1990.

• Gibson, William. Pattern Recognition. (2003). G. P. Putnam's Sons.

• Soros, George. The Alchemy of Finance. (1987). John Wiley & Sons, 2003.

• Popper, Karl. The Open Society and Its Enemies. (1945). Routledge.