Stocks are chips in a casino

Where else in the world can you find customers who are crazy enough to part with their money without even a the slightest guarantee that they will get back what they pay for, or at least be refunded should they not get what they think they paid for? When you buy an expensive watch or a new appliance, you want some sort of warranty. When you buy a web hosting service, you want to know of the SLA. When you go to the casino or invest in the stock market? Nada.

No big surprise therefore that a friend of mine who plays in the stock market regularly refers to the whole industry as being comprised of emotional, speculative individuals, driven more by gossip than in-depth analysis of the stocks they’re buying. I’m sure it’s not limited to just the investment industry in the Philippines. In fact, I was quick to argue that it’s not a Filipino trait, but a human trait: When you dangle hope in front of people, in this case the hope of making it big, and you do it convincingly, they will be more than willing to part with their hard-earned possessions in favor of that hope. Seth Godin will probably agree with me on this. As for the stock market, it comes with a facade of apparent smartness and a long history of respectable practice and conscientious decisions. Until the bubble burst.

An article in The Economist mentioned that most economic scholars nowadays have abandoned or started to abandon the idea of an efficient market: a theory that states that whatever route the free market takes is probably the most rational one. Now they are thinking about factoring in the possibility that most of these decisions may be driven more by “animal passion” than anything else. I’m not exactly sure what it means but I suppose it’s not too far from what I mentioned above: a tendency for human beings to cling to hope wherever it is sold convincingly.

So is animal passion a bad thing? Probably not. It’s certainly a good tool that a marketer can use. But as with many tools, it can be used for the good of man as well as to his destruction.


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