Disagreement Not Agreement
Is at the Heart of an Economic Transaction
We shake hands.
We have come to an agreement.
Nothing could be further from the truth..
In Stock Market transactions the Buyer and Seller have apposing viewpoints.
I spent a decade of my life going to the Flea Market on Saturdays and
Sundays. During this time, E-Bay became a thing. At the
beginning of the E-Bay Era, a person could make a profit 'Transporting'
items from the Flea Market to the E-Bay Market. And this would be
an example of a common complaint with the above analysis: that
different folks have access to different markets that a store
operates under different economic constraints from it's customers.
However, this isn't accurate . Though it is true at
the beginning of the E-Bay Era some folks knew about this new market
and others did not. After a few years, everyone at the Flea Market
knew about E-Bay to the point that some would print out screen shots of
E-Bay Auctions and place them next to key items that they were selling
to establish their worth. For example, one might sell an item
similar to one that had sold on E-Bay for $100 at $75, a $25 discount.
And herein is where we have the disagreement. That even if
both parties knew about E-Bay and knew it was the higher paying market,
they disagreed about the whether it was worth the effort to carry the
item to this new market.
- The Seller would rather have money than the underlying security.
- The Buyer would rather have the underlying security than money.
- At this price, the Seller will sell.
- At this price, the Buyer will buy.
- The Seller believes other investments are better.
- The Buyer prefers this investment.
- At all points, the Buyer & Seller disagree.
What keeps the whole thing going and clouds away this basic state of affairs is that not only do:
- Sellers had decided it was not worth the effort (money, payback, reward) to carry an item to this new market.
- While many Buyers turned a regular profit doing just that.
- In short, the Buyers & Sellers disagreed.
- Disagreement over value, worth, and/or preference is at the heart of any economic transaction.
And so, we find that at the heart of any economic transaction lies a profound disagreement over preference, value, and worth.
- Buyers & Sellers Disagree, but
- Buyers Disagree with other Buyers, and
- Sellers Disagree with other Sellers.
Disagreement Drives the Market