# what an efficient market feels from inside

> “I often think of the time I met Scott Sumner and he said he pretty much assumes the market is efficient and just buys the most expensive brand of everything in the grocery store.” - [a Tweet](https://x.com/freezing_cloud/status/1199471383232704512)

It’s a funny quip, but it captures the vibe a lot of people have about efficient markets: everything’s priced perfectly, no deals to sniff out, just grab what’s in front of you and call it a day. The invisible hand’s got it all figured out—right?

Well, not quite. This isn’t to say efficient markets are a myth, but rather that their efficiency is a statistical property, describing the average participant, and thus leaving ample room for individuals to strategically deviate and find superior outcomes.

I recently moved to New York City, and if there’s one thing people here obsess over, it’s apartments. Everyone eagerly shares how competitive, ruthless, and “efficient” the rental market is. What’s unique about NYC is that nearly every unit gets listed on the same website, which shows you the rental history for every apartment—not just the ones you’re looking at, but nearly every unit in the city (and, awkwardly, how much all your friends are paying). You’d think with all that transparency, every place would be priced at its true value. But when you start looking, one thing jumps out: so many apartments are terrible, offering downright bad “value”—and still, they get rented, often at the same prices as the place you’d actually want to live in.

This bugged me. If the market’s so efficient, why are there so many seemingly bad apartment deals out there? Or does the mere existence of bad deals not necessarily imply there are good deals? I don’t think so. What I’ve come to realize is that being inside an efficient market doesn’t feel as airtight as it sounds. There’s still plenty of room to find better value, even in a ruthlessly competitive market like NYC rentals. 

**The Interior View of Market Efficiency**
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Here are some of the opportunities to “exploit” an efficient market that I thought about when looking for apartments in NYC.

### **Preference divergence**

The biggest and most obvious is this: everyone’s got different preferences.

Markets aggregate preferences into a single price, but your preferences aren’t the aggregate. It’s important to spell out very clearly: everyone has different preferences, so we all have a different sense of what value actually is.

Some people work from home and crave more space but do not need to be near where the corporate offices are. Others barely use their apartment beyond sleeping and care way more about a trendy location. Some bike and don’t care about being within 5 minutes of a key subway line, etc.

This also comes up outside of one’s strict preferences and their situation. If you’re looking for an apartment for one year only as opposed to a forever home, your appetite for swallowing a broker’s fee (or a steeper one), hefty application costs, or prioritizing rent control shifts compared to someone on a different timeline.

If your needs differ from the crowd’s standard checklist, you’re in a position to exploit that difference.By knowing what you actually value, you can consume more of the things you value more than others, and similarly, consume less of the things you value less than others.. It’s not enough to merely know what you like, but to know how much more you value certain things than others. Conversely, you should also think very systematically about all the other things people value and introspect on if there are any you seem to care about less, then ruthlessly discount these in your search (arguably, for finding what for others is a lemon, but for you is acceptable).

### **Temporal advantage**

A major reason people end up in lousy apartments in NYC is timing. There are lots of people who move to NYC on set dates (ie right before a new job or starting school) and need a place, whatever the cost, before then. They might have just one weekend to tour apartments and sign a lease fast. Then there are those who need to be out by month’s end when their current lease ends.

Merely by avoiding a time crunch or the busy period when others are in a time crunch will make your search easier. Better yet, if you can increase your slack by finding a short-term housing solution so you have no hard deadline, you can sidestep most of this chaos. This can also enable you to pursue apartments others can’t accommodate, like ones starting on the 3rd of the month (some buildings ban weekend move-ins, or they need a cleanup after the last tenant).

Another aspect of time that can be leveraged is that some buildings have lengthy 2- or 3-week approval processes. If you catch one nearing a point where they might miss a tenant for the next month (earlier than most renters anticipate), the landlord might be open for a negotiation. Rather than lose another month’s rent, they might cover the broker’s fee or application costs to lock you in at the month’s start and get you in right away.

### **Supply asymmetries**

Certain neighbourhoods have an abundance of certain kinds of housing. The Upper East Side in NYC, despite having a reputation as an expensive, fancy neighbourhood, due to having a large supply of one-bedroom apartments (compared to most other NYC neighbourhoods), is actually one of the most affordable neighbourhoods in Manhattan/cool Brooklyn to live in.

Similarly, in areas where housing is more uniform (ie where there are lots of apartment complexes with very similar or sometimes identical units), it’s easier to have comparable information to know exactly what the market says each unit is worth and to negotiate between different units.

### **Legibility and filters**

There are certain legible metrics everyone fixates on, which become critical filters for which certain apartments go under the radar. People searching for apartments click the same filters like 1 bedroom (no studio), this neighbourhood (not that other neighbourhood), dishwasher included. This means that anything that doesn’t fit this criterion will get less attention. Since these filters are binary, it excludes a lot of edge cases where the thing technically does not meet the criteria but effectively still provides you what you want—maybe there’s a massive studio laid out with a distinct bedroom separation, or one a block past the neighbourhood line in StreetEasy that’s just as good in practice despite not ticking exactly the geographic radius.

### **Intangibles**

There are many illegible things that people don’t know how to value and end up getting priced inefficiently.

Going to the above point, many people have some intrinsic ability to value something like neighbourhood A vs. neighbourhood B or a studio vs. a one-bedroom (the big-ticket items in their search, which they tell their friends and their mom), but how does one value the difference between being on the 8th floor vs. the 15th, or X amount of lighting vs. 3x the lighting, or 20 decibels quieter than the other apartment, etc. Often these things, even the difference between a 3rd-floor unit in the same building as the 20th floor, don’t get priced very efficiently. People might vaguely sense these factors matter and factor them in loosely, but most don’t analyze exactly how much they care.

### **Principal-agent problems**

Oftentimes, there are principal-agent problems with misaligned incentives that can be exploited. A broker might not care about maximizing rent—they just want it leased at the landlord’s asking price with minimal effort. If competition is stiff, maybe the landlord picks you, a solid tenant, over a higher bidder because you visited Albania, where he is from, and now he likes you. Maybe a broker has a new unit with a fixed price that isn’t even on the market yet, and he wants to do as little work as possible, so he gives it to you just because you were the one on his or her mind.

### **Search advantages**

One reason so many apartments are worse than others is that sizing up all these factors is seriously compute-intensive. By creating an actual scoring criterion and using tools like spreadsheets—or merely thinking harder for longer—you can better identify the apartments that maximally align with what you are looking for.

More simply, lots of people suck at looking for apartments (because it’s genuinely hard) or lack time, leaving them poorly calibrated in what is “good value” for them, too slow to make an offer on good places, or simply taking the third place they see just because they are fed up and don’t want to spend any more time on this. But if you’re willing to score and rank criteria, tour more units, and truly outcompute the lazy, you get an edge.

More critically, if you truly know what you want and are well-calibrated, when you spot a great apartment, it affords you the opportunity to commit right away—same with subscribing to a feed of all new listings and knowing when you should schedule viewings as soon as possible so you can be in a spot to fire off an application before others even have the chance to see it (again, brokers often don’t care beyond the first decent applicant, misaligned with the landlord’s hopes).

### **Circumvent the market**

While I’ve listed many ways one can get an edge in an efficient market, there aren’t likely to be very many huge, unbelievable deals that sound too good to be true.

While much rarer, one of the best avenues for business in general, life planning, and career success is to try to avoid all market competition if you can.

If you find an apartment that isn’t going to be listed anywhere (ie a university professor on sabbatical for a year or a co-op that only wants new renters whom they personally know) or take over the lease of someone who has been in their apartment for an extremely long time with a small-time landlord—there is much more room for finding a good deal without additional competition.

**From apartments to everything else**
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While this post was literally about apartments in NYC, the core insight might be this: efficiency in markets is always relative to the participants’ information, preferences, and constraints. When you are actually in an efficient market, it doesn’t feel like everything is priced perfectly—it feels like a messy playground where efficiency is just an average that masks individual opportunities. What looks like an efficient equilibrium from one perspective reveals itself as full of exploitable inefficiencies when viewed through a more nuanced lens. Markets aren’t perfectly efficient or inefficient; rather, at best, they’re approximately efficient for the average participant but exploitable for those with unusual preferences, better information, or fewer constraints.