Why all trades are considered 'sharks'

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Why all trades are considered 'sharks'

Post by Sekai on Sat Mar 01, 2014 12:34 am

I made this thread is to disprove the common, but false, belief that sharking and trading are two different things in a virtual market.  

In order to disprove this, I am going to prove the following:
1) Why all trades are actually considered 'sharks'

Assuming the above is true, then the following statements are also true:
2) All traders are 'sharkers'
3) Thus, 'sharking' is simply trading

Abstract (tl;dr)
Sharking is an unofficial term in the context of a virtual market and is thus not an official word in this context when applied to the real world.  There is no 'sharking' in the real world we live in; it is simply known as trading in the real world.  A trade can only happen when both parties make a profit, which is only possible due to the difference in each party's opportunity costs.  Sharking is defined only because of the presence of spreadsheets like Backpack tf.  These spreadsheets try to create a market where only even trades happen, which is impossible due to the definition of trading.   In essence, these spreadsheets are interfering with the market by directly influencing the people's opinions, and is thus very harmful to any economy.

Introductory concepts:
My proof avoids the use of economic theories and laws, as if you have studied introductory microeconomics and macroeconomics, you should already know why sharking is simply trading.  The only economic theory I will use in this proof is the theory of opportunity cost, which I will explain later, and is a very easy to understand theory, basically common sense.  This post is written in an interactive format, where I will be providing you with questions for you to think about as you read, with answers that follow.

Assumptions
The only assumption that I make in this proof is that people act rationally, which is a common assumption used by all economists.  This means that people will act based on their self-interest only.  

Definition of Trading
Obviously, we will need to define the terms 'trading' and 'sharking' before we can compare those two terms.  Surprisingly, not many traders in TF2 actually know what trading means.  In everyday language, trading is defined as an exchange of goods (or services) between two parties.  

True or False:  Both parties have to make a profit for the trade to occur.

True. Obviously both parties will need to make a profit for any trade to happen, as no one would want to lose profit in a trade, nor does anyone want to waste time doing an 'even' exchange, as time is considered a resource.    

How can both parties make a profit from the same trade?

Many TF2 traders have difficulty answering this question, especially if they answered false for the previous question.  For both parties to make a profit from the same trade, both parties must have different opportunity costs.  Opportunity cost is simply the cost you give up for the next best alternative.  For example, suppose you have $5, and you go to a store that only sells juice and milk, each for $5.  Which item do you purchase?  Obviously there is no right answer, as some people prefers juice over milk, others prefer milk over juice, and some people might not even buy anything, as they consider the $5 they have is more valuable than milk or juice.  What makes those people differ in the choice they make?  The answer is personal opinion.  Each person has their own unique opinion, which directly influences the choices they make.  Applied to trading,  both parties thus must have different opinions of the values of the goods being exchanged, in order for a trade to happen.  Please note, however, that opportunity cost is NOT opinion (don't want you to fail your economics class), but for simplicity, it can be thought as of such, although it is not the proper definition of opportunity cost.

Virtual Spreadsheets (e.g Backpack Tf)
If you are reading this, you must be familiar with virtual spreadsheets like Backpack tf.  However, what is the purpose of backpack tf?  Many of you will say that backpack tf allows a trader to decide if a trade is a good trade for him or her.  But if you think about it, what does that actually imply?  It implies that the trader is no longer has his or her opportunity costs, in other words, the trader no longer has any opinions for himself or herself.   After all, as mentioned above, it is the person's choice that decides if he/she wants to buy the milk or the juice.  If a 3rd party, such as your friend or even the president of your country, says milk is more valuable than juice, but you yourself believes that juice is more valuable than milk, which would you buy?  Obviously, you would still go with the juice, unless you are a devoted fan of the president or something.
Virtual spreadsheets also simply a 3rd party opinion.  However, the problem with the TF2 market is that many traders (99.5% of the traders) follow virtual spreadsheets like its their bible. This causes them to lose their own opinions of the values of items, and simply follow the spreadsheet opinions of values.   Going back to the milk and juice example, this would mean that you are a devoted fan of the 3rd party themselves, and want to be like them, so you get what they get without considering your own opinions of the values.  What is this exactly?  This is exactly how advertisements work!  Advertisements try to persuade you to buy something that you wouldn't normally buy without the ad (by means of having famous people, companies, or simply a honest lie).  
In summary, virtual spreadsheets is simply a 3rd party opinion, and if you're basing their opinions over your own opinion, that means they have succeeded in persuading you to do something that you don't want to do!  

Are virtual spreadsheets bad for the TF2 market and economy?
Yes! By changing the trader's own opinions to their opinions, it causes all sorts of mess in the market.  There are various economic models and theories that can be used to prove this, but that is not the purpose of the post.  If interested, I can make another post devoted to this topic, but they will require a solid understanding of introductory microeconomics and macroeconomics to understand.  As an easy to understand example, there are no such spreadsheets in the real world; all transactions you make are due to your own opinions.  Furthermore, I will let you consider this question, which may help you understand why such spreadsheets are simply hurting the economy:

What happens to the TF2 market if all the spreadsheets, like backpack tf and trade tf, shuts down overnight and never comes back up?
The obvious answer is that 99.5% of the TF2 traders will have no clue what anything is worth anymore, as they have lost their own opinions of values due to becoming a backpack tf follower.  But what will that cause?  The final effect is pretty simple, but I'll leave it to you guys to consider it

'Sharking'
Alright, after understanding all that, we can now talk about sharking.  

I will begin this section by claiming that 'sharking' is not a real word in the trading context, and I will prove this below.  To prove this, we must first assume that a term like 'sharking' does have a definition, and we will thus now define it.

What does it mean when trader A 'sharks' trader B?  Most traders would say that sharking is when A traded an item to B that is significantly less valuable than the item B gave to A.  But that cannot happen!  After all, as explained above, both parties have to make a profit off a trade for the trade to happen, so it is impossible for trader B to end up with an item that he considers less valuable than what he gave away.  In fact, it is the other way around, as both traders will think 'this is a good trade for both of us, as I will make profit off this, and so will the other trader'.  For an inexperienced trader that does not understand the definition of trading, he or she will instead think: 'this is a good trade for me, as I will make profit this and thus the other party loses profit hehehehehe', which is actually what 99% of the TF2 traders think when they do a trade, but it is the incorrect thought process.

Thus we must reconsider the definition of sharking mentioned above.  Mainly, we have to consider what does it actually mean by 'less valuable?'

The answer is that 'less valuable' is defined in terms of spreadsheet opinions like backpack tf.  If backpack tf says that item 'X' is worth significantly less than item 'Y', then if trader A trades item X for trader B's item Y, then the trade is considered a 'shark'.  But, again, if this trade does happen, that means both traders are making a profit from the trade.  Similarly, if backpack tf says that item 'X' is worth the same as item 'Y', then the trade is not considered a shark, but if the trade does happen, both traders again are making a profit out of the trade.   What this actually means is that the term 'less valuable' in this case has no meaning, as the 'less valuable' opinion comes from a 3rd party's opinion, and a 3rd party has nothing to do with the trade itself.  Thus, it is like having the president saying 'oh I value item 'X' over 'item 'Y', while you and your friend does the trade between items X and Y.  It means absolutely nothing.  

This also explains why 'sharking' in this context does not have any meaning in the real world, as there is no such spreadsheets in the real world because they are bad for the economy.    

Thus, sharking is an unofficial term that simply refers to trading.  After all, without spreadsheets, the term 'sharking' wouldn't even  have existed.

Alternative way of looking at sharking
For those people who are still confused about the actual definition of trading (inexperienced traders), I will now give a shorter and alternative way of looking at sharking and trading, without using backpack tf. Suppose there is a term called sharking, and it is defined as 'trading an item 'X' that is worth less than item 'Y' that the other trader gives you.  In this case, we can safely say that all trades are sharks, as in all trades, each party has to make a profit, which means each party considers their item to be worth less than the other party's item.   Thus, both parties are considered 'sharkers', but in reality, all they are doing is trading.

Conclusion
Sharking is unofficial term that simply refers to trading.  The term sharking exists only because of the existence of spreadsheets, nothing more.
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Sekai
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