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We begin with a question that gets harder to ignore every week: if markets are supposed to be rational, why do they act like this?

After a historic two-day plunge sparked by new tariffs, global markets are once again reminding us that volatility isn’t a glitch, it’s the norm. A single announcement from the White House triggered a domino effect: panic selling, global retaliation, and a revised outlook from the WTO. All perfectly logical, if you define logic as fear, reflex, and vibes.

Meanwhile, in the same week that markets dropped thousands of points, investors poured hundreds of millions into new ventures. Figma is moving toward an IPO, green energy is attracting private equity like it’s 2021, and Wall Street hopefuls are still lining up for careers built on navigating this mess. Even DHgate is booming, riding TikTok trends and viral consumer hype (not product quality or safety).

This is what irrational economics looks like in real time. The numbers don’t tell the full story. The emotions do. Welcome to Part One of our ten-part series, Irrational Thinking in a Logical Economy. Today, we unpack the illusion of rational markets––why economic theory still believes in logic, even as the world runs on mood swings.

-JD Washington

Coming up in Tuesday’s edition:

We’re unpacking the rise (and reign) of Microsoft. How a company once known for Windows and Clippy built one of the most powerful empires in tech. From quietly owning the enterprise world to its aggressive play in AI, this isn’t just a comeback story, it’s a masterclass in strategic dominance. Microsoft didn’t reinvent itself to stay relevant, it made sure the world couldn’t function without it.

Part 1 of 10 in Irrational Thinking in a Logical Economy
by JD Washington

The Illusion of Rational Markets

Markets are not rational. But people act like they are. This idea that markets behave logically and efficiently is an illusion of modern economics. It’s the foundation of countless financial models, investment strategies, and business decisions. It’s also completely detached from how people actually behave. Classical economic theory assumes that markets are self-correcting machines, always digesting new information and pricing assets accordingly. But if markets are rational, why do they behave so emotionally? Why do they swing wildly on rumor, panic, or hype? Why does the same stock fall on good earnings if “expectations” weren’t met, or rise for no apparent reason when a charismatic CEO gives a confident interview?

This fantasy is upheld by the Efficient Market Hypothesis (EMH), a theory that insists prices always reflect all known information. According to EMH, trying to “beat the market” is pointless, because everything is already priced in. But reality doesn’t behave that way. Markets are emotional theaters where perception, storytelling, and herd behavior often outweigh the actual numbers. Bubbles, crashes, frenzies—these are not anomalies. They are the market, laid bare. The dot-com boom, the 2008 financial crisis, the GameStop saga, the crypto surge, and the NFT explosion are all monuments to how deeply human behavior (fear, greed, FOMO) shapes the supposed logic of financial systems.

Even the more “realistic” field of behavioral economics, which acknowledges our biases and irrational tendencies, still treats these traits as deviations from a rational norm. But irrationality isn’t the exception, it’s the rule. It’s not a glitch in the system. It is the system. Markets aren’t driven by fundamentals alone; they’re powered by vibes. Investor confidence is less about earnings reports and more about how people feel about the economy, the headlines, the tone of a press release, or the charisma of a founder. It’s not about the data, it’s about the story being told and whether people believe it. Narrative moves markets faster than logic ever could.

The truth is that markets operate more like mythologies than mechanisms. They rely on belief, shared assumptions, and collective psychology. When investors behave as if something is valuable, it becomes valuable (until the mood shifts). This isn’t an efficient market, it’s a performance. And like all performances, it depends on the audience’s willingness to suspend disbelief. Market behavior doesn’t follow the rules of algebra, it follows the rules of theater. That’s why a tweet can move billions, or why a stock can skyrocket just because everyone is afraid to miss out. The idea that markets are cold, rational, and self-correcting systems is not just wrong, it’s dangerous. It leads us to overlook the emotional drivers of economic decision-making and to misinterpret volatility as failure, when in fact it’s simply human behavior playing out at scale.

This illusion of rationality also drives corporate behavior. Companies obsessed with quarterly earnings often sacrifice long-term stability for short-term gains. They lay off workers to appease shareholders, cut corners to boost margins, and invest in perception over substance. In many cases, the most “logical” thing a company can do (like reinvesting in resilience or innovation) gets sidelined in favor of whatever will temporarily boost the stock price. The market doesn’t reward logic. It rewards narrative, timing, and emotion.

And then there’s convenience. The rise of fintech platforms, algorithmic trading, and robo-advisors has only made it easier to act on impulse. With a few taps, you can invest your life savings in a meme stock or yank them out of a falling index. These tools don’t eliminate irrationality, they accelerate it. They make it frictionless. When emotion meets efficiency, volatility is inevitable.

In the end, markets aren’t logical. They’re mythological. They offer stories, not certainty. They give us frameworks to understand the unknowable and reasons to believe in the chaos. Like ancient myths, they help people make sense of fear and risk. They aren’t governed by laws of nature but by the psychology of the crowd. If we want to navigate the future of finance with any real clarity, we need to stop pretending the market is a rational machine and start treating it like the deeply human, emotionally driven system it actually is. Because in a world built on mass delusion, true logic isn’t just rare, it often looks like madness.