You hear it all the time. It vests a short term. The problem with that thinking is not

realizing that if you are short term you have to sell the stock December and the person buying the stock isn't going to buy something that is bad.

They're going to pay the fair price and that person might be long term or even if that person

short term he has to sell to another person. Eventually when you unwind that you

realize that the price at which you sell at in pounds the long term.

I'm Mary Long and that's Jonathan Burke, a professor of finance at the

Stanford Graduate School of Business. He's also the co-host of the podcast All Else Equal

making better decisions. Ricky Mulvey sat down with Burke to discuss how all else equal thinking affects markets

and to sound off on whether at-home investors can really beat the pros.

This is a little different than our typical Saturday episode.

It's less, full school, and more,

office hours meets debate club.

We hope you enjoy it.

I want to give an introduction to all else equal thinking. I know this is popular among academics.

Why is it so useful? Well, yeah, let's start there. Why is all else equal useful for those who study economics, who study finance?

I would go so much further. I think it's useful for everybody, in particular the business decision

makers, which is through the

podcast is directive again in favor or whatever the word is anyway.

Here's the reason. We think in economics to call it equilibrium thinking. What does

equilibrium thinking mean? It means when you make a decision, that decision causes other people's behavior to change.

So what you can't do is say,

I'm going to hold all else equal,

...