Three Men Make a Tiger
An old Chinese proverb tells the story of a minister named Pang Cong who is about to leave the state on a long trip. Before he leaves, he asks the king, “If one man told you there was a tiger in the marketplace, would you believe him?” The king said no. “What if two men told you?” The king said he’d start to wonder. “What if three men told you?” The king said yes, he would believe it.
The idea of a tiger roaming a crowded marketplace is obviously absurd. Yet when repeated often enough, even the absurd can start to sound plausible. Pang Cong used this image to warn the king that whispered rumours would follow him in his absence, and that repetition would not make those lies true.
The moral of the story is that something clearly absurd or untrue becomes believable if repeated by enough people.
A Marketplace of Whispers
Most people believe a stock’s price is an objective measure of its value or worth; a measurement that can be taken as a fact, like the temperature outside or the weight of an object. This value measurement then, should give an accurate reading of a stock’s worth.
This assumption is, of course, wrong. A stock’s price is not a measurement, but rather the most recent value at which two people agreed to swap a share for money. This agreement is the result of many factors, including the traders’ beliefs about the company, the market, or what the two parties believe might happen tomorrow.
These beliefs are, of course, affected by whispers, and as Pang Cong warned, whispers compound.
A Tiger in the Stock Market
You don’t need to look far to see the rapid effect whispers can have on a stock’s price. Take Microsoft, for example. In October 2025, the company’s price was pushing against a recent all-time high, but within five months it had fallen roughly 34%, erasing around $1.4 trillion in market value. So, what terrible tragedy befell Microsoft to induce such a drop?
A look at their earnings shows Q1 and Q2 fiscal results delivered large increases in both revenue and operating income, with cloud growth accelerating and forward guidance raised. Their most recent Q3 earnings released this week (29th April) show yet another big win, with revenue of $82.9 billion (up 18%), operating income up 20%, and the AI business now running at a $37 billion annual rate, up 123% year over year. Commercial contracts already signed for future revenue have nearly doubled to $627 billion.
And yet, overnight the stock fell in reaction to these earnings.
If the fundamentals are not deteriorating (in fact, they are improving significantly), what has dragged the share price down so significantly? The issue lies not with the company itself, but with the whispers surrounding it.
Counting the Whisperers
Looking back across market commentary and media, it’s not difficult to see those whispers yourself. AI spending is too high, and it won’t see a return. Azure’s growth will decelerate. The Mag 7 bubble is about to burst. Copilot is a subpar AI model, and people won’t use it. Hyperscaler capex cycles have always ended with stranded capacity, and there’s no reason this one will be different. “MicroSlop”.
None of these whispers are absurdities; most of them are actually quite plausible. But all of them are rumours, predictions, or whispers rather than facts, and after hearing them repeated enough times, they begin to feel like imminent certainties.
By March, three men (or maybe three hundred thousand) had told the market there was a tiger in the AI marketplace. The market believed these claims, even though when you personally visited the marketplace and examined Microsoft’s actual earnings statement, you would find no evidence of a tiger. And so, Microsoft’s share price reflects not its value, but the value attributed to it by whispers.
Making Money from the Whispers
Once you accept the separation of price and value, you have two coherent options for trading around the whisper problem.
The first option is the value approach. You take a company and determine its “intrinsic” value or worth. If the current share price has diverged significantly from that price, you buy with the expectation that the market will eventually stop seeing tigers and the price will ultimately represent its true value. This method works, but accurately judging the intrinsic value of a company amidst chaotic times of innovation and disruption is an imprecise and difficult task.
The second approach is the systematic one. A systematic trader doesn’t try to argue with the whispers. They don’t have a view on whether Microsoft is “really” worth $356 or $540. For the systematic trader, the whisper is the primary phenomenon, because at any given moment, the whispers are what the price actually is, and their system is built to trade the behaviour of price itself.
This approach may sound frivolous compared to the value approach, but both methods are exploiting the same underlying fact and phenomenon in a different way. The value investor posits that the whispers will fade and intrinsic value will reassert. The systematic investor posits that the whispers are not random and have structure, that the way crowds move into and out of stories produces patterns in price (trends, mean reversion, volatility regimes, and momentum), and these can be measured and traded without needing an opinion on the underlying business at all.
In this scenario, a trend-following system would simply have sold Microsoft and moved its capital elsewhere. Not because it realised the stock had become overvalued, but because the system identified that the trend was turning and better opportunities existed elsewhere. The buy-and-hold investor who believes the company is worth more than $356, by contrast, has no such exits. They sit through an accumulating drawdown, watching the whispers compound, hoping their valuation work is right, with nothing to do but wait.
The value approach can and does work, but it asks a lot of you. You need a defensible valuation, the patience to sit through that drawdown without flinching, and the conviction to keep buying while the whispers and rumours are loudest. Those are hard skills to assemble and harder to execute under pressure. A systematic approach sidesteps most of that. It doesn’t ask you to be right about the company; it asks you to follow rules you wrote in a calmer moment, and it lets your capital go wherever the whispers are working in your favour rather than sitting through wherever they aren’t.
The King’s Mistake
The story of Pang Cong ends, predictably, with the king believing the whispers and turning against him. Pang Cong knew this would happen. He warned the king it would happen. The king agreed it shouldn’t happen. And then it happened anyway, because the human brain is built to focus on repetition, not necessarily on what is immediately true.
Markets work the same way, and they always will, because they are made of the same brains. You can’t fix the situation in the market; you can only manage the problem in your own way. You can either exploit the divergence in value or embrace the whispers and develop a strategy around them.
Microsoft was the same company at $540 as it was at $356. The price moved because the whispers moved, not because the business did. Some investors will make money buying low because they did the valuation work. Others will make money trading the moves because they built a system. The ones who lose money are the ones who heard three men describe a tiger and went looking for it themselves.
