incentives
Show me the incentive and I'll show you the outcome
The rule
Every message has someone who pays for it. Before you believe a tip, ask who earns money if you act on it.
Where it flips
Having a reason to gain does not make the claim false. A broker can be paid and still be right. The fix is to separate the useful fact from the action they want you to take. Do not reject everything just because a seller stands behind it.
No tip, target, or hot opinion reaches you by accident. Someone gets paid when you act on it. The key skill is to name that person first, before you weigh the claim. Once you see who earns from your belief, the confidence of the message is no longer proof of anything.
A worked example
A trading channel keeps posting the same small stock with an exact target. Ask who profits. The channel earns from views, and often already owns the stock before naming it. So the buyer who arrives on the tip is the exit for others, not the winner. [illustrative]
How to spot it
- ·an exact target with no method shown
- ·the messenger gains if you trade
- ·hurry added to a slow decision
- ·the risk of loss never mentioned
Charlie Munger · Poor Charlie's Almanack