The Alchemy of Finance

*The Alchemy of Finance*, by George Soros, explores how financial markets are shaped by the dynamic interactions between investors' beliefs and reality. Soros introduces the concept of "reflexivity," where investors' perceptions influence market outcomes, which in turn affect perceptions further. This creates a continuous feedback loop, causing markets to deviate from equilibrium and leading to trends and potential bubbles or crashes. The book emphasizes that understanding these feedback mechanisms and psychological factors is crucial for interpreting market behavior, highlighting that markets are complex, adaptive systems rather than purely rational entities.