On the Stock Market and Elections

3 minutes read

Yes, this is inspired by the upcoming DLSU USG general elections, but rest assured that this is not simply a campaign effort.

Photo:AndreasPoike/Flickr, CC-BY-2.0

Most people know how to play the stock market: you buy stocks, or shares of ownership in a company, whose price or value is expected to rise. Ideally, people would buy shares in companies that have the potential for future profitability, or a company that is exhibiting excellent fundamentals such as a strong management, good products and services, and so on. In this manner, the financial system will perform its duty, which is to most productively allocate capital from those who have excess resources (savers) and those who need extra resources (investors).

However, this is not usually the case. Savvy players know that the price will only go up if other people are actually buying the stock, and thus they purchase stocks that they think others would buy, regardless of whether the company is actually doing well or not. This is how bubbles and crashes are made. Prices do not anymore reflect the true value and everyone buys in with the hope of getting out early, that is, until the bubble bursts.

I think you already know what I’m saying when it comes to elections. People only vote for the candidates that they think others will vote for, but this already creates a problem: groupthink. People might argue that, in a pragmatic sense, a true vote won’t really matter in the larger scheme of things. However, like in the stock market, valuations do not anymore reflect the true value. The vote of the many has been subjugated by the vote of the influential few.

One thing we must keep in mind about elections is that there is nothing pragmatic about them; they are exercises of pure idealism. They concern the future, not the present; hence, all that one hopes to accomplish, all that one wants to happen, is to be included in the vote. Nothing is to be gained from simply echoing the preferences of others, and not your own; there is a fine line between being rational and being cynical.

Hence, when participating in elections of the university or the country, be idealistic and true to your vote. Let us not be like stock brokers who, in the end, see that the assets they purchased weren’t worth that much after all.

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