I am reading “Principles.” by Dalio, Ray.
A sentence confuses me in paragraph “MY PRINCIPLES AND HOW I LEARNED THEM”

The sentence is the consensus view is baked into the price., and its context:

“To make money in the markets, one needs to be an independent thinker who bets against the consensus and is right. That’s because the consensus view is baked into the price. One is inevitably going to be painfully wrong a lot, so knowing how to do that well is critical to one’s success. ”

I'm not very sure of its meaning.
Could it be explained as:
'If you accept the consensus view, you should pay added price because it's integrated into it.'

1 Answer 1


No, that isn't quite what it means.

To bake something into something else means to make something an inherent and unremovable part of something else. If you bake eggs into a cake, you can't take them out afterwards. So "baking into" becomes a metaphor for analogous situations. Here's a dictionary definition.

Your paragraph is saying that what most people think that the stock is worth (the "consensus view") is an inherent part of (is "baked into") what determines the price. So, to make money, you find and invest in stocks that you believe are more valuable than most people think ("bet against the consensus"), and you turn out to be "right": the company's profits increase more than everyone has thought that they would; more people start buying their stock; the value of the stock goes up; you make money.

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