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A.J. Carisse wrote:
>
> Walt Downs wrote:
>
> > Trading:
> > The primary goal of trading, to put it bluntly, is to take the
> > other fellow's money.
A.J.****
> I disagree. The only goal of trading is to make a profit. It isn't really the case anyway that this involves taking other people's money. In fact, it isn't even necessary that *anyone* ever loses on a trade, and the only reason that happens is that supply exceeds demand at times. Although this is a competitive game to be sure, what is sought is to be able to predict future supply and demand better than other traders, which isn't the same thing as taking their money.
WD:*******
I'm sorry, A.J. I don't understand your reasoning here. Yes it is true
that we use various tools in order to predict aspects of supply and
demand, however in the end, the money must come from somewhere. I
think you are confusing analysis with trading. If you can produce
profit without *someone* on the other side of the trade, that is a
magic act I would like to see. <g>
WD: (from prior post.)*******
> > If we do harm to the other person by taking his money
> > so be it. He understood the risks when he took the trade. The
> > winner has done no wrong. This is "good trading"
A.J. ***********
> If the other person eventually becomes "harmed" by selling to us (i.e. it> ends up going up in value), then it is not we that have "harmed" him. If he had lost money by buying at a higher price than he sold to us, this certainly doesn't have anything to do with us.
WD: (From prior post) *******
The goal of a good businessman is to be a *provider of value*. By this
we mean that he provides for the needs of his clients, employees,
partners, and those who sell him what he needs to produce his product.
A.J.***
> Yes, but only to the extent that it leads to gain (assuming the motive is profit, which is virtually universal).
WD:*********
Sure. It is *business*, not philanthropy.
WD: (From prior post.) *******
> >It is a synergistic "win/win" situation for all concerned. He stays
> up nights thinking about how he can add value to the lives of those
> that are connected with him.
A.J.******
> Essentially, what is being done here is satisfying demand. There is demand for whatever product or service he is offering, and he is attempting to take advantage of it, hopefully coming out ahead financially by doing so. By improving its quality, he may gain a competitive advantage, but this is limited to how it affects the bottom line of his enterprise over the long run.
WD:********
I think you missed the point A.J. . A good business man doesn't
just seek to take advantage of demand. He stays up nights, looking into
the future, with the primary goal of *foreseeing* what the market will
need, and in the best instance *defining* what the market will need.
This is the difference between "reaction" and "action". Ted Turner has
done this. Same with CNN. they *told* the market what it wanted before
the market even knew it needed it. They defined the need.
WD: (From prior post)*******
> > Let us now consider the old "dog eat dog" business paradigm. *This*
> > businessman has *one* goal: MAKE MONEY. He screws his suppliers out
> > of every nickel. He believes business is WAR...
>
A.J.******
Perhaps he could make *more money* by being more accommodating, but this
is ultimately the goal of both types.
W.D.:****
No. One provides value. the other *creates* nothing. Money is the
byproduct of the good business man, not the end. To compare this to
simple accommodation is like comparing aspirin to L.S.D. <g>
W.D. (From earlier post.)********
> > He fulfills no real needs, and he produces no lasting
> > value. (Speaking of the money grubber....)
A.J.*************
> Generally, what all businesses seek to provide is fulfilling *perceived* needs - whether they are *real* ones or not isn't of any real consequence.
WD: ********
Uh, A.J., a *perceived* need *is* a real one. I think you mean
"real need" to mean a physical need like food or shelter? These are
the first and "basic" needs. Once these have been met, the person
develops other real needs of less pressing status. I must point out
again here that the best businessmen *define* what those perceived
needs are.
WD: (From prior post)************
> > Why has business changed its view? Because they understand that
> > creating value and fulfilling needs also creates value for them.
A.J. *****************
> Agreed. I'm not so sure this notion is all that new, though.
W.D. *********************
This appraoch has only been around 5 to 8 years. It has only really
been implemented in the last 3 to 5 years.
W.D. (From prior posts)****************
> > Good trading and good business can not be considered analogous
> > at all. Trading is a game of speculation between two participants who understand and agree to the rules of the game. The goal of business
> > is to provide value.
>
A.J.
> Again - the goal of business is to make a profit, as is the case with
> trading as well. They both involve a voluntary exchange of goods between parties. Both involve a buyer who wishes to acquire something and a seller who has something to offer that the other party wants, at an agreed price. There really isn't anything significantly different here. If I sell you a car that I bought at wholesale, or securities that I bought for a cheaper price, both transactions involve the transfer of something that is *valued* by the buyer at a specific price, which would be in context of the benefit
> he/she expects to get out of the deal.
W.D. ************
No. this is *way* off base. 98% of trading is speculation. The goods
in this case are rarely exchanged. I don't recall anyone on this list
mentioning that they had just received the warehouse slip for their
5000 bushels of Soybeans. You *buy* the car because you need it to
get to work. You can't eat a stock certificate. The investor's only
primary purpose in his purchase is to eventually cash his share at a
higher price. You are confusing exchange for speculation with an
exchange of value. How can I put this?... In an exchange of value,
I might give you a widget. You need a widget, and this is the best
widget you have ever seen. So, you give me money and you take the
widget. I have provided a value. A lasting widget which you own and
use. I have received in return, money, which I will now use to fulfill
*my* needs. VALUE has been exchanged and provided for both parties.
In the case of exchange for speculation, party A has a stock. Party
A feels his stock is going to decline. Party B feels the stock is
going to go up. So, A sells to B. Eventually one side will be proven
correct. Let's say the stock went up. A. now realizes that he has
LOST VALUE. B realizes the he has GAINED VALUE. in this case both
parties have not received equal value, and they knew this would be the
case when they SPECULATED on the transaction. In scenario one, both
parties gained value. In scenario two, only one side gained value, to
the detriment of the other party.
In the case of exchanged values the needs of both parties are met.
In an exchange of speculation, the needs of one party are met.
Granted it may be possible to say that a bad business man who sold
an inferior widget received all the value, and this was similar to
trading. This is what Pete implied, but such is not the case:
The provider of non-value knew it. The buyer of the bad widget did not.
He was tricked by hype into receiving an item that would not fulfill
his needs.
In the case of speculation, both parties knew one of them
would eventually hold the value.
I believe that when you consider the results and perceptions of each
exchange, A.J., you will see the difference.
Regards,
Walt
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