AI Practice Knowledge BaseCounterintuitive Facts (2): Why Are All the 'Good Ones' Never on the Market?
PremiumAdverse Selection: When information is asymmetric, junk automatically drives out quality until the entire market collapses
I. Have you ever wondered: Why can't you meet truly quality partners on dating apps? Why can't you find truly good cars in the used car market? Why can't you find truly talented candidates on job boards? Why do publicly bid projects always end up abandoned?
II. It's not because good things don't exist. It's because of a terrifying economic law: In markets with information asymmetry, quality goods automatically exit while junk automatically floods in, until the entire market is filled with garbage. This is called Adverse Selection.
III. Nobel laureate George Akerlof proved this with the used car market. Assume there are two types of cars: good ones worth $100K, bad ones worth $20K. Buyers can't tell the difference, so they offer the average price of $60K.
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