In 18th-century Japan, a rice trader named Honma Munehisa stumbled onto what we’d now call market reflexivity: the price of rice didn’t just move with the harvest — it moved with how people felt about the harvest, and that feeling pushed the price further than the harvest ever could.
He built a relay of flag signals stretching 600 kilometers from the Osaka rice exchange to his hometown of Sakata, passing price updates hand to hand every 6 kilometers so he’d know the market’s mood before anyone else. He recorded each swing as a candle — open, high, low, close — and used the shape of those candles to read fear and greed as clearly as supply and demand. The pattern he was really charting wasn’t rice. It was crowd belief.
That’s the loop: price moving up makes people believe it will keep moving up, and that belief pulls in more buyers, which pushes the price up further. It works the same way in reverse — a drop breeds fear, fear triggers selling, and the selling confirms the fear. The number and the feeling behind it keep remaking each other.
This week’s clearest example didn’t involve rice or candles. Leopold Aschenbrenner, a 24-year-old former OpenAI researcher with no prior investing track record, turned a viral 2024 essay about AI’s future into a $45 billion hedge fund — backed early by Stripe’s founders and former GitHub CEO Nat Friedman. In July, his AI stock bets fell 67% in a month. He stripped out the leverage and told investors plainly that he’d let them down.
By most measures, that should have scared money away. It did the opposite — within a week, new investors were lining up, even as the fund itself started turning them down. Wall Street reads a 67% drawdown as a risk-management failure. Silicon Valley read the same number as proof the direction was right, just sized too aggressively — an expensive lesson, not a wrong one. Same number, two beliefs, each reinforcing a different set of future bets. It’s the same loop that makes leveraged ETFs swing harder than the index they track — the reset itself becomes part of the story the market tells itself tomorrow.
Honma never had a word for it. He just knew that watching people’s fear and greed told him more than watching the rice ever could.
My take: 300 years ago it traveled by flag, now it travels by feed — the wiring never changed.
Not advice. Just how I see it.