On Having The Last Word

To believe something is to believe that it is true. So in theory, a trader when he places a trade, believes that all of his beliefs about the possibility of a forthcoming event outcome are true - otherwise why would he bother to trade? But through experience he knows full well that some of the beliefs that he currently holds to be true, will in fact be wrong (he is after all almost always trading on the back of incomplete information). So we are presented with a situation whereby a so-called rational trader believes that every one of his/her beliefs are true, whilst knowing that some of them are going to be proven to be false. That is the paradox - belief is actually nothing more than an experiment in knowledge acquisition. New information should always lead one to update ones beliefs, (perspectives should always be able to be changed when new information becomes available) - but this is far from being the case. People are essentially resistant to countervailing evidence: and indeed the backfire effect reveals that people will actually actively double down on their belief (or set of beliefs) when presented with contradictory evidence. Because most people are obsessed with having the last word they are resistant and unwilling to entertain other possibilities. Their back of a fag packet systems always exclude something, but what if what they have excluded was the most important piece of the jigsaw?

To inhabit a betting market is to be embedded in an interpersonal field in which we are in continual interaction with other people, some of whom we affect, many of whom affect us and some of whom affect each other. (Given that the full panoply of causes in play that are interacting and affecting the prices in any liquid betting market system is enormous, how is it, that we, as putative discoverers of the truth, set about selecting the causes that we take to be relevant to our final explanations.) There is an argument to be made that rational traders in betting exchange markets should not place bets with each other; the fact that another trader is willing to take the opposite side of my trade should suggest to me that this investor knows something I do not know.

In a betting exchange market, where liquidity is abundant, decision making is a difficult task. Traders are trapped in a network of relationships, surrounded by a sea of volatility. The information they receive is dispersed and arrives in a random order, creating an atmosphere of confusion. The uncertainty, ambiguity, and asymmetry of information, along with the temporal decay, variability, and excessive noise, creates an endless pattern of interpersonal interactions and almost always contributes to decisions that are sub-optimal.

What is needed for optimal decision making is clarity and consistency, yet traders are forced to attach significance to a multiplicity of conflicting cues. Analysis is nothing more than a retrospective construction and there is always the possibility that our views are biased by past experiences. We cling to our beliefs in an attempt to make sense of the unpredictable, but in doing so we fail to update them when confronted with new information and accordingly we risk losing sight of the true nature of things.

In this tenebrous world, we are faced with the absurd task of having to make fast decisions, whilst constantly aware of the extent of our own limitations and the inherent uncertainty of our actions. But it is in embracing this absurdity that we can find the freedom to make the bold choices that will actually make a difference.