F FSome of the more vivid analogies to markets come in blood sports. Harry Clews writes well about them in Florida Frenzy. Here he describes and wonders about the honesty of cock fighting: "I watched guys shouting across the pit at one another, calling numbers, signaling to each other with upheld fingers, and it seemed to me there was no way in the world they could keep track of the bets. I turned to the man who had brought me and asked why losers of bets being made that way didn't renege, simply say the bet hadn't been made and walk away. "First, everyone here knows every one else. And second, these folks are as good as their word. Some of them got more money than others, but it ain't one here whose word you can't risk your life on. And the last thing is, welching on a bet can buy you a lot of trouble real cheap. You could git dead from it.' " Crews didn't realize that people will be dishonest when there is not any repeat business involved because then it's in their interests. And he doesn't take account of the value of reputation. But he does give a pretty good explanation of why there were so few cases of dishonesty in the pits even when walking away from a trade made the difference between life and success.

Victor adds:

It is an interesting aspect of human nature that pit traders, among the least honorable people I have ever met in dealing with the outside world, are so highly ethical in their dealing within their own tribe.

Tom Marks replies:

T MWhen futures trading was exclusively pit-based I always wondered why funds just didn't hire an ex-pit guy to go down there, tap the executing brokers on the shoulder, introduce himself, explain that he'd worked on the floor for many years, but now represents the interests of person X.

Then further explain that person X would greatly appreciate if any executing broker of his would eschew getting egregiously creative in the handling of his orders. Especially since person X has a knack for ferreting out patterns that is by no way limited to price movements on a grander scale.

Polite and to the point. They'd get the message.

That said, though, some might suggest that the chicanery of pit traders pales in comparison to what routinely goes on in law, and especially medicine, of the high-end variety. Regarding the latter, the bill is run up considerably by ordering expensive tests of dubious necessity and diagnostic value considering the circumstances. In that field it's called The Game.

Just as in pit trading and law, not all doctors play The Game, but regrettably a fair share do.

Art Cooper remarks:

Consider the difference in consequences between acting unethically to one's "own tribe" vs. the outside world. As a general rule, the adverse consequences from acting unethically towards the former are serious enough to enforce ethcial conduct. Adverse consequences from acting unethically towards the outside world, if any, tend to be attenuated. It's not a question of human nature; it's a matter of self-interest.

Douglas Dimick writes:

During my second year at U Miami Law, I went to one of these fights with a south Miami Cuban club type. Electronic market exchange systems would appear to shift the “ethic” here from the integrity of transacted exchange to the efficacy of the market process.

I see it here in China. Markets are rigged though the exchange transaction appears rules-based (or fair); from a transactional standpoint, the evil of nontransparent manipulations of supply and demand result with fraudulent systematics. Government and Communist Party affiliated holdings being sold (or bled) into the market, for instance, indicates how such a bloodless system sucks the life (or money) out of 80% of those who participate — being the percent of losers in China’s stock markets.


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