A wife points out a $10 bill lying on the sidewalk to her economist husband. "That's silly," the economist replies. "If there really was a bill there, someone would have picked it up by now." It may not be a funny joke, but it is a very instructive one. Of course, the economist is right in the sense that if someone decided to make a living walking the streets looking for $10 bills, he would have to starve.

The joke ridicules the theory of information efficiency of the market, accepted by many modern economists. This theory assumes that it is difficult to make money on the stock market, since everything that can in principle be learned about the value of shares, currencies or bonds is already reflected in current prices. Hence the conclusion: price changes are random, unpredictable. The behavior of securities in the past cannot serve as a basis for predicting their movement in the future. An increase in prices is just as likely as a decrease in them.

The theory of the information efficiency of the financial market is the central link of modern financial theory, which remains the core of business school curricula, as it combines mathematical rigor with the possibility of practical application. And its successful followers receive high salaries in investment companies and banks. In 1978, Michael Jensen, the patriarch of the theory of the information efficiency of the market, wrote his famous phrase: "There is no theory in economic theory that has more solid empirical support than the hypothesis of the information efficiency of the market."

But Forbes' latest list of the world's richest people shows that Warren Buffett has amassed $44 billion picking up $10 bills off the sidewalks of Wall Street, and is now challenging Bill Gates for the title of the world's richest man. Buffett's investment success has long puzzled adherents of the information efficiency theory of the market.

Paul Samuelson, whose authority in economic theory is equal to Buffett's in the world of investing, published "Proof that Expected Market Prices Are Random," but hedged his bets by buying Berkshire Hathaway stock.

Supporters of the theory of information efficiency of the market confuse a trend with a law. Buffett himself once noted: "The followers of this hypothesis quite correctly claim that the market is very often efficient, but for some reason they conclude from this that the market is always efficient. Which is not true." The given anecdote explains why. It seems that there is no point in bending over for a bill, because someone should have already picked it up. But here it is, the bill, lying on the sidewalk. Joseph Stiglitz demonstrated this contradiction not with the help of an anecdote, but with the help of many mathematical equations, which became one of his achievements, for which he received the Nobel Prize in Economics.

But for everyday purposes, it is enough to remember the story of the $10 bill and its surprisingly complex interpretation. The theory of the information efficiency of the market is 90% correct, so ignoring it will cost you money. Many believe that relying on the remaining 10% is pointless, since the effort does not seem to pay off. But few seekers are adequately rewarded.

The author is a columnist for the Financial Times newspaper

RULES OF THE GAME: Against Theory