Jim Kramer Could, Theoretically, Be Good At His Job

Its generally accepted that the Jim Kramers of the world - the television stock market pundit set, that is - don't actually have any great insight about the workings of the stock market. And, indeed, statistics show that their picks generally do worse than the market. The idea, of course, is that if these people had any tremendous knowledge they'd be making money on the market, not giving out tips on TV.

However, that doesn't necessarily follow. Suppose, for example, Jim Kramer's advice resulted in profits at 101% of the market. In other words, Kramer beats the market by 1%. That's not enough for him to live off of, unless he starts with a massive amount of money to invest (and, frankly, he could just pull 1% out of that fortune per year instead of investing, and he wouldn't exhaust it in his lifetime).

Jim Kramer doesn't have that kind of money. However, Jim Kramer's viewers, in the aggregate, have that kind of money. Especially if Jim Kramer reliably beat the market, even by that small amount - if that were the case, he'd have even more viewers. So Jim Kramer's ability to slightly beat the market on a consistent basis isn't valuable to him, but it is valuable to a television company who can sell commercial time while he gives out his advice.

Of course, in reality, Jim Kramer's advice isn't reliably slightly better than the market. In fact, it's worse than the market. But that doesn't mean that it couldn't be economically optimal for someone to have Jim Kramer's job and be good at it.