My current situation with implants gave a very good insight how could carefully built financial systems, operated by the best and the brightest could fail terribly. To see how, you just have to think about one simple video game question: how much SS-905 implant worth?
I've posted a business report every day which need me to valuate all my assets. I just wrote "no idea" since T5 sellout. Because that's the truth. I have no idea how much these implants worth. You can have your own speculative idea. Maybe you - like me - expect CCP to fix FW after it reached "game over", Minmatar and Caldari completely capturing lowsec. There are lot of reasons to do so, much more than not. However we still don't know how much SS-905 will worth, neither how much it worth right now.
Now, "I have no idea how much my asset worth" is embarrassing. I'm supposed to be some kind of trading guru and I can't even tell how much money I have? Who will believe me now? This is a video game and my assets are mine. If I lost my credibility, too bad, I lose some visitors on a blog that I write on my free time. Now imagine that EVE would be real, I would really be a space industrialist, and above all, imagine that the assets weren't mine, I'd be just an investment banker. That would be bad.
Please note that it wouldn't be bad because I lost money. I think I didn't. I think I'll close this deal with profit. My situation would be bad because I had to write to my daily report: "dear investors, I have no clue how much your assets worth, but I guess it will elevate above the entry point some time". I'd be out of business no time. To stay in business, I had to write some number and preferably a big one to get more investment money which pays my salary. Since I have no clue, I best turn some expert! If I mouse-over the implant, it says 122M value. This is what the CCP algorithm says. Or, I can look at the graph above which says the same. So I bought 122M implants for 70-80M. Increased the assets of my investors by 50-60% overnight. They going to love me!
Of course if someone makes up fake results, he'll be out of business, strike that in the prison. But the point is that I did not fake results. I did not lie in the sense as Madoff. He knew that his scheme is a fraud and any sane person who could look at his accounting could notice that too. I honestly think that SS-905 will be over 80M in a month and while some might disagree, none can say that I'm scamming. Even they would testify that my guess can be right. The fundamental problem is that no one knows if and when CCP will fix FW, how many implants were swarming to the market, how much is in hands of investors and so on. No one can have a correct answer, so no one can say "you are wrong!".
OK, but isn't that the point of speculation? I do something risky, might win, might lose. Yes it is. The problem is that while I know that my implant value is a best guess, the guy who reads my report of "122M" will trust it. I just pulled it from a source that looked reliable enough to blame them if things go wrong. The guy who reads my expert opinion will believe that 122M is the proven price. He will make his decision based on the "fact" that SS-905 worth 122M.
Now forget the game which is rather simple and think about real world with derivatives, CDS-es, repackaged deals, stocks of corporations whose largest asset is stocks of other corporations and so on. No one can understand the whole system. Even the best analyst can valuate just his own papers. He uses the value of other papers as input in his calcualtion.
People kept building card-houses from reports that were best guesses at best. They took the opinion of others as facts and created new "facts" until the point the whole market was full of papers that everyone considered great, despite being totally worthless. This was another shitworm-scam a Ponzi-scheme built not by malice but by ignorance. No one ran away with the money, it was wasted by those who were spending their work hours by writing guesses and those who received a few % profit in the previous years for putting their savings into "rock solid" papers.
If every uncertain analyst would write "I have no idea, but my best guess is X", such events could be prevented as people wouldn't buy papers based on some strangers guess. But the first guy who writes this will be fired as incompetent, so the above is impossible.
The moral of the story: the valuations of papers, including the current stock market price are just guesses. No one knows anything for sure. If someone approaches you with the idea "give me money and I know how to get 10% interest on it", run from him screaming. Not because he is a scammer, but because he has no clue. All he has are educated guesses made from data that are guesses of other people. Use your money yourself or find someone who at least can explain how will he use it.
PS: since the FW AFK-farming messed up the prices trading is interesting again. Sometimes EVE almost feels like playing a game.
There is still no business report (obviously), hopefully I can tell something on Monday. I spent 0.5B on main account Plex.
I've posted a business report every day which need me to valuate all my assets. I just wrote "no idea" since T5 sellout. Because that's the truth. I have no idea how much these implants worth. You can have your own speculative idea. Maybe you - like me - expect CCP to fix FW after it reached "game over", Minmatar and Caldari completely capturing lowsec. There are lot of reasons to do so, much more than not. However we still don't know how much SS-905 will worth, neither how much it worth right now.
Now, "I have no idea how much my asset worth" is embarrassing. I'm supposed to be some kind of trading guru and I can't even tell how much money I have? Who will believe me now? This is a video game and my assets are mine. If I lost my credibility, too bad, I lose some visitors on a blog that I write on my free time. Now imagine that EVE would be real, I would really be a space industrialist, and above all, imagine that the assets weren't mine, I'd be just an investment banker. That would be bad.
Please note that it wouldn't be bad because I lost money. I think I didn't. I think I'll close this deal with profit. My situation would be bad because I had to write to my daily report: "dear investors, I have no clue how much your assets worth, but I guess it will elevate above the entry point some time". I'd be out of business no time. To stay in business, I had to write some number and preferably a big one to get more investment money which pays my salary. Since I have no clue, I best turn some expert! If I mouse-over the implant, it says 122M value. This is what the CCP algorithm says. Or, I can look at the graph above which says the same. So I bought 122M implants for 70-80M. Increased the assets of my investors by 50-60% overnight. They going to love me!
Of course if someone makes up fake results, he'll be out of business, strike that in the prison. But the point is that I did not fake results. I did not lie in the sense as Madoff. He knew that his scheme is a fraud and any sane person who could look at his accounting could notice that too. I honestly think that SS-905 will be over 80M in a month and while some might disagree, none can say that I'm scamming. Even they would testify that my guess can be right. The fundamental problem is that no one knows if and when CCP will fix FW, how many implants were swarming to the market, how much is in hands of investors and so on. No one can have a correct answer, so no one can say "you are wrong!".
OK, but isn't that the point of speculation? I do something risky, might win, might lose. Yes it is. The problem is that while I know that my implant value is a best guess, the guy who reads my report of "122M" will trust it. I just pulled it from a source that looked reliable enough to blame them if things go wrong. The guy who reads my expert opinion will believe that 122M is the proven price. He will make his decision based on the "fact" that SS-905 worth 122M.
Now forget the game which is rather simple and think about real world with derivatives, CDS-es, repackaged deals, stocks of corporations whose largest asset is stocks of other corporations and so on. No one can understand the whole system. Even the best analyst can valuate just his own papers. He uses the value of other papers as input in his calcualtion.
People kept building card-houses from reports that were best guesses at best. They took the opinion of others as facts and created new "facts" until the point the whole market was full of papers that everyone considered great, despite being totally worthless. This was another shitworm-scam a Ponzi-scheme built not by malice but by ignorance. No one ran away with the money, it was wasted by those who were spending their work hours by writing guesses and those who received a few % profit in the previous years for putting their savings into "rock solid" papers.
If every uncertain analyst would write "I have no idea, but my best guess is X", such events could be prevented as people wouldn't buy papers based on some strangers guess. But the first guy who writes this will be fired as incompetent, so the above is impossible.
The moral of the story: the valuations of papers, including the current stock market price are just guesses. No one knows anything for sure. If someone approaches you with the idea "give me money and I know how to get 10% interest on it", run from him screaming. Not because he is a scammer, but because he has no clue. All he has are educated guesses made from data that are guesses of other people. Use your money yourself or find someone who at least can explain how will he use it.
PS: since the FW AFK-farming messed up the prices trading is interesting again. Sometimes EVE almost feels like playing a game.
There is still no business report (obviously), hopefully I can tell something on Monday. I spent 0.5B on main account Plex.
