They Saw a Bet
In 1950, director Akira Kurosawa released Rashomon, a film in which a single crime is recounted by four different witnesses. Each person walks away with a drastically different, mutually contradictory version of what happened. This gave birth to the Rashomon Effect—a psychological phenomenon where our pre-existing beliefs, egos, and motivations act as a filter, distorting raw data before it ever reaches our conscious mind.
Psychologists often illustrate this with a classic 1954 study on biased perception known as “They Saw a Game.” Researchers showed students from Princeton and Dartmouth a film of a particularly rough, penalty-heavy football game between their two schools. When asked to evaluate the footage, the Princeton students saw the Dartmouth players as aggressive rule-breakers who instigated the violence. Meanwhile, the Dartmouth students saw a hard-fought, fair game where both sides were equally scrappy.
They watched the exact same film but saw two completely different games. Their institutional allegiances dictated what their eyes were allowed to see.
Neither group was lying. They were simply victims of what Charlie Munger called the Inconsistency-Avoidance Tendency. As Munger famously observed, the human mind operates a lot like a human egg: once a deeply held belief gets in, a psychological shut-off mechanism activates, blocking out any raw data or facts that contradict it.
In life, this is a psychological blind spot. In financial markets, it is what makes a trade.
Every day, millions of shares change hands. For every transaction, there is a buyer and a seller looking at the exact same company, reading the same annual reports, earnings call transcripts, etc. Yet, we can see two completely different realities.
They watch a ticker; I study a business. And even when we both look at the exact same enterprise, they might see a company crippled by problems, while I may see a mispriced opportunity.
“The investor’s chief problem—and even his worst enemy—is likely to be himself.”
Benjamin Graham
When fear grips the market and a stock violently sells off, they look at the cascading red numbers and see volatility, risk, and a falling knife. Their loss aversion kicks in, and they sell, desperate for the comfort of cash. I look at the exact same asset, and I might see opportunity. They sell a stock, making it very cheap; I see a business that is now fundamentally mispriced. As I’ve noted before, there is always a bear market somewhere, and that chaos amplifies the extreme human emotions that create these mispricings.
The Rashomon Effect works in reverse, too. When the market is roaring and a popular stock is hitting all-time highs, they look at the momentum and see consensus. They feel validated because the crowd agrees with them. While they fixate on price action, I look at the fundamentals and see dangerous groupthink and a complete lack of a surplus of safety.
Consensus is the architect of short-term asset prices, but it also embeds the world’s collective errors into those prices. The crowd operates through a selective filter, instinctively discarding any data that contradicts the prevailing narrative—ignoring red flags in a bull market and dismissing durable earnings power in a bear market.
To be an outlier investor, you must understand that the market is not a perfectly rational weighing machine in the short term; it is a psychological battleground.
“Men are disturbed not by things, but by the views which they take of them.”
Epictetus
Ultimately, the stock market is the grandest Rashomon experiment of all, perfectly illustrating the core tenets of General Semantics. As the discipline teaches, everyone possesses a unique nervous system and a unique point of view, heavily shaped by their own past experiences and ingrained biases. We do not experience reality directly; we only experience our nervous system’s abstraction of it.
Because of this inescapable filter, humility is required. Even when I buy or sell, I could be wrong. And when the crowd buys or sells, they could be wrong. Understanding bias—and recognizing that every transaction is just two conflicting abstractions colliding—is how we survive.
Learning to keep your thinking sharp, clear, and free from built-in human misjudgment is a necessary, lifelong skill. It is the only way to ensure that when you look at the market, you are seeing the business, and not just the crowd’s reflection—or worse, the distorted projection of your own unchecked biases. If we fail to actively audit our own filters, we have no one to blame but ourselves for the errors that inevitably follow.
“We can be blind to the obvious, and we are also blind to our blindness.”
Daniel Kahneman