The Gell Mann Amnesia Effected is named after Murray Gell Mann, a physicist.
The term was coined by Author Michael Crichton who explained thxe law by his statement and I quote, “Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray’s case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the “wet streets cause rain” stories. Paper’s full of them.
In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.”
I think we can all agree that each one of us exhibits the behavior described above in our routine lives. Moreover, it is not just individuals. Multinational firms are just as predisposed to fall into this web as we are. The chances of smaller corporations falling in this trap, on the other hand, are lesser. But that is more because of coincidence than design. In large companies, there is always an ‘expert’ on hand on a topic so that individuals may outsource their thinking.
Analysis of the effect:
Let’s analyse the effect in brief. The notorious effect is viewed as a primary driver of the social pathology we have today regarding media in general and social media in particular.It postulates that we all at some point tend to routinely spot flaws in a publication’s logic around our areas of specialization while acting as if that same paper or individual is a guru when it comes to another field.
Opinions vs Facts:
Although when looked at, the Gell-Mann amnesia effect might come out as an interesting behavioral novelty for cocktail conversation, it provides an important lesson for doing research in any financial markets.
If you are a believer of this amnesia effect, it is of high probability that you should be always be a news skeptic. Market efficiency has the vision that all public information is properly discounted in markets and can never be exploited under desired circumstances.
Public information either comes in the form of public announcements of data or public announcements. Facts are obviously better than opinions. For a public data announcement, the majority of market participants read the headline and react. Only a few, keenly interested ones will read the details in the data. Headlines may choose to not reflect upon the reality. The headline may say unemployment is lower; however the details within the announcement may provide deeper more useful information that is not present with what you see in the headline.
For opinions of events, reality does not match the accuracy of information probably because opinions are often condensed reality. Opinions are just one person’s interpretation of events and subject to biases. They are likely to disagree with the direct knowledge you may possess.
How can Gell Mann Amnesia be eliminated?
The simplest answer for this is, ‘do not trust everything you read if you don’t have specified knowledge of the same’. This implies understand the dichotomy between opinions and facts.
