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AJ:
Who can determine the difference between perceived and real value? The
assignment of value to anything by anything is by how the perceive it.
I also have a deeper question: what is it that motivates the two
(theoretical)
parties to make a trade ($2 for an IBM whatever July xx option) at a
particular price. One party could say I will not part with the August
for less than $3, and the other party will say I might pay $1 for the June.
What real or perceived value are we talking about, and what goes through
their minds at the moment of decision to trade?
At 09:56 PM 6/6/98 -0300, 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.
>
>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.
>
>> 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"
>
>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.
>
>> 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.
>
>Yes, but only to the extent that it leads to gain (assuming the motive is
>profit, which is virtually universal).
>
>>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.
>
>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.
>
>> 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...
>
>Perhaps he could make *more money* by being more accommodating, but this is
>ultimately the goal of both types.
>
>> He fulfills no real needs, and he produces no lasting
>> value.
>
>Generally, what all businesses seek to provide is fulfilling *perceived*
>needs - whether they are *real* ones or not isn't of any real consequence.
>
>> Why has business changed its view? Because they understand that
>> creating value and fulfilling needs also creates value for them.
>
>Agreed. I'm not so sure this notion is all that new, though.
>
>> 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.
>
>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.
>
>Regards,
>A.J.
>
>
>
Furthermore, if one party perceives the value of the item to be a lot more,
and the other thinks it's about to collapse, who is doing wrong here when
the trade goes through? Is the person who predicts collapse morally
obligated to tell the other that?
Pete
petena9090@xxxxxxxxxxxxxx
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