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Clear distinctions can be made between ‘gamblers’, ‘traders, ‘investors’, and ‘speculators’ according to the extent to which each favors quantitative factors in their decision-making, as opposed to qualitative ones. E.g., gamblers typically play ‘closed’ systems whose risks can be exhaustively quantified. (E.g., card counting and Black Jack.) Investors/speculators typically play ‘open’ systems whose uncertainties can be enormous and that cannot be exhaustively quantified, no matter the attempts of the MPT crowd of statistical idiots to do so. (E.g., the ‘unknowables’ of stock investing, bond investing, etc. are huge.) ‘Traders’ play the middle ground, though the better (and more successful) ones tend to be very quantitative and/or have found ways to chop left-hand tails, all the while being ‘anti-fragile’ (as Taleb uses the term).

The four players can also be sorted into ‘good’ and ‘bad’ (‘skilled/unskilled’) according to whether the player --her or himself, though their own testing-- has identified whether a capturable, positive-expectancy exists in the game they are attempting to play and whether they have the discipline to actually capture it.

Thus, there are no skilled roulette players in the sense that no one but the house will win more often than not over the long haul. There could be skilled investors. But most --as the Dalbar longitudinal studies confirm -- are just ‘gamblers’ in the worst sense of that term in that they consistently fail to take more money (on an after-taxes, after-inflation basis ) away from the games they choose to play than they bring to them. If that’s not a definition of “paying to play” (or gambling just for fun of it, or for ‘social acceptance’, or whatever), then I don’t know what is.

Most “investors” are clearly not making any money in the sense of increasing their purchasing-power over the long haul, and ‘the market’ or ‘Wall street’ isn’t causing them their losses. It’s their own stupidity that causes their losses, which they try to excuse by calling their gambling, ‘investing’, for their thinking that invoking the word has some talisman-like power to confer wealth on those who use it and to excuse any need to actually understand the risks and rewards of the negative-sum game they are playing.

Scratch an "investor", and you'll typically find a very bad gambler. But find a decent poker player, and you'll probably find what could become a decent trader/investor. Risk is risk, wherever it is found, and always always, always, it has to be managed. That's why would-be 'investors' need to borrow from the work already done for them by 'gamblers'. The professional literature is extensive. But a very easy intro are the papers and books of Mauboussin.

(notes from a draft of a paper I’m preparing.)
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