explain xkcd - User contributions [en]

1499: Arbitrage

2015-03-17T20:20:15Z

Cshucks: /* Explanation */

{{comic
| number = 1499
| date = March 16, 2015
| title = Arbitrage
| image = arbitrage.png
| titletext = The invisible hand of the market never texts me back.
}}

==Explanation==

In {{w|economics}} and {{w|finance}}, {{w|arbitrage}} is the practice of buying cheaply whilst selling at a higher price, taking advantage of the price difference to make risk-free profit.

In real-world {{w|Market liquidity|liquid financial markets}}, arbitrage ensures that there is only one price for a product. Arbitrageurs are the individuals performing this act to equalize the prices in those markets and hopefully make a profit.

The place where [[Cueball]] and [[Hairy]] are eating is giving away unlimited free {{w|tortilla chip}}s. Hairy is acting Arbitrageur by collecting the chips to later resell them. This is much to the consternation of Cueball, who is (depending on how you interpret the simple art-style) holding his hands up in front of his mouth in shock, covering the lower half of his face in shame, covering his eyes out of denial, sliding his palms down the front of his face in disgust, or eating chips. Possibly all in sequence.

In the real world an attempt this strategy would fail, as the supply would be limited. Customers leaving with bags of chips out of the restaurant would presumably be asked not to return. Similarly the lack of a {{w|secondary market}} for open, perishable and perhaps hand-soiled chips would limit selling.

In the caption below the comic, [[Randall]] suggests that society only functions because we don't take people like Hairy "out to dinner", i.e., we generally have an aversion to dealing with people with such extreme self-interest, bordering on {{w|Psychopathy#Sociopathy|sociopathic}} behavior. We see from Cueball's reaction that he is appalled by is by what Hairy believing he can profit from the apparent generosity.

A distinguishing feature of {{w|social animals}}, rather than animals simply sharing a {{w|habitat}}, is that they perform tasks that benefit their group. All such societies rely on some situations where the individual is not working purely on short term self interest. The payoff for this is generally that co-operation makes things better for the group as a whole. Most people would find Hairy's behavior embarrassing and shameful, and thus would not socialize with people who behave like that. By rejecting such individuals, society protects itself from such people.

The title text mentions the ''{{w|invisible hand}}''. In economics this is a metaphor used by {{w|Adam Smith}} to describe unintended social benefits resulting from the individual actions of self-interested parties. In the context of arbitrage, the "invisible hand" compels all of a given fungible substance to be sold for the same price, as a result of the actions of individuals like Hairy who are only seeking personal profit.

==Transcript==
:[Cueball and Hairy are sitting at a table with a bowl of chips in the middle. Hairy is taking chips from the bowl on the table with one hand, and his other hand is dropping chips into a large bag behind him. Cueball is double facepalming.]
:Hairy: ''They're'' the ones giving chips away!
:Hairy: If they don't see the arbitrage potential, sucks for them.
:On the bag is written: Chips

:[Below the main frame:]
:In a deep sense, society functions only because we generally avoid taking these people out to dinner.

{{comic discussion}}
[[Category:Comics featuring Cueball]]
[[Category:Comics featuring Hairy]]

1499: Arbitrage

2015-03-17T20:18:46Z

Cshucks:

{{comic
| number = 1499
| date = March 16, 2015
| title = Arbitrage
| image = arbitrage.png
| titletext = The invisible hand of the market never texts me back.
}}

==Explanation==

In {{w|economics}} and {{w|finance}}, {{w|arbitrage}} is the practice of buying cheaply whilst selling at a higher price, taking advantage of the price difference to make risk-free profit.

In real-world {{w|Market liquidity|liquid financial markets}}, arbitrage ensures that there is only one price for a product. Arbitrageurs are the individuals performing this act to equalize the prices in those markets and hopefully make a profit.

The place where [[Cueball]] and [[Hairy]] are eating is giving away unlimited free {{w|tortilla chip}}s. Hairy is acting the Arbitrageurs by taking advantage of this to turn a profit by collecting the chips to later resell them. This is much to the consternation of Cueball, who is (depending on how you interpret the simple art-style) holding his hands up in front of his mouth in shock, covering the lower half of his face in shame, covering his eyes out of denial, sliding his palms down the front of his face in disgust, or eating chips. Possibly all in sequence.

In the real world an attempt this strategy would fail, as the supply would be limited. Customers leaving with bags of chips out of the restaurant would presumably be asked not to return. Similarly the lack of a {{w|secondary market}} for open, perishable and perhaps hand-soiled chips would limit selling.

In the caption below the comic, [[Randall]] suggests that society only functions because we don't take people like Hairy "out to dinner", i.e., we generally have an aversion to dealing with people with such extreme self-interest, bordering on {{w|Psychopathy#Sociopathy|sociopathic}} behavior. We see from Cueball's reaction that he is appalled by is by what Hairy believing he can profit from the apparent generosity.

A distinguishing feature of {{w|social animals}}, rather than animals simply sharing a {{w|habitat}}, is that they perform tasks that benefit their group. All such societies rely on some situations where the individual is not working purely on short term self interest. The payoff for this is generally that co-operation makes things better for the group as a whole. Most people would find Hairy's behavior embarrassing and shameful, and thus would not socialize with people who behave like that. By rejecting such individuals, society protects itself from such people.

The title text mentions the ''{{w|invisible hand}}''. In economics this is a metaphor used by {{w|Adam Smith}} to describe unintended social benefits resulting from the individual actions of self-interested parties. In the context of arbitrage, the "invisible hand" compels all of a given fungible substance to be sold for the same price, as a result of the actions of individuals like Hairy who are only seeking personal profit.

==Transcript==
:[Cueball and Hairy are sitting at a table with a bowl of chips in the middle. Hairy is taking chips from the bowl on the table with one hand, and his other hand is dropping chips into a large bag behind him. Cueball is double facepalming.]
:Hairy: ''They're'' the ones giving chips away!
:Hairy: If they don't see the arbitrage potential, sucks for them.
:On the bag is written: Chips

:[Below the main frame:]
:In a deep sense, society functions only because we generally avoid taking these people out to dinner.

{{comic discussion}}
[[Category:Comics featuring Cueball]]
[[Category:Comics featuring Hairy]]