Not right MichelPireu     | Business Day Wednesday, December 12, 2018
When we trade we make ourselves fully accountable to the truth. If we speculate correctly, in accordance with the “truth”, we enjoy a gain. If we speculate incorrectly, in opposition to the truth, we suffer a loss. The assumption is that, as a result, we will care enough to ensure that the information we act on is correct (the truth). That with real consequences at stake, we will closely examine the evidence, carefully check our reasoning, and take seriously the possibility that we might be wrong.

However, that’s not always the case. In reality traders are just as exposed to emotional biases and distracting incentives as everyone else. Like everyone else, they don’t like to confront unwanted realities, or abandon prior commitments, or admit to past mistakes, or acknowledge personal shortcomings, or embark on stressful changes, or accept perceived “defeat” in their disputes with those who disagree with them. The hope, of course, is that the monetary skin that they have in the game is sufficient incentive to guarantee they do all of those things. But not all traders have their own money in the game–most speculate primarily with other people’s money. For them, the primary incentive is not performance per se, but maintaining the confidence of the investor base, a game that depends more on appearance and persuasion than on truth. And for those that do have their own money in the game, money is just money, it isn’t everything. If we want to reliably force ourselves to be truthful and honest on a subject matter we are investigating, we need to imagine having more important things than money at stake – our well-being, our happiness, etc. Only then will the quest for truth become sufficiently important to get us to diligently prioritize truth over the other forces tugging on us.

Adapted from a piece at Philosophical Economics

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