Idea Ripper // ArchiveCards: 1555 [Live] | Updated: 2026-10-14
Card #c1293IR // #c1293Synthesis

"If adverse selection dominated, nobody would ever trade because everyone would be afraid that everyone else has better information than they do." "If you know what you are doing, you will be adversely selecting others much more often than you are adversely selected yourself."

— In our words · Source: Trade Outside the Box (Brent Donnelly)

[Use when]

You're worried that anyone willing to deal with you must know something you don't.

[Why it matters]

Most trades in liquid markets are hedges and routine flows with no hidden information. The danger is real in thin markets, where the counterparty likely knows more and exiting is expensive. Donnelly says to fear it where it applies and nowhere else.

Filed under situations:When the other side has more leverageWhen you must decide and the facts aren’t in

More from Trade Outside the Box

#c1278"Keynes asks us to imagine a newspaper which holds a contest where readers are rewarded for choosing which contestant will be chosen by the…You're right on the merits and need to predict how a crowd, market or committee will actually decide. #c1279"Younger children, or those without a fully developed Theory of Mind, will say that James will say: “pencils,” because they are unable to…You're sure the other side must see what you see. #c1280"There is a market aphorism that says: Early is the same thing as wrong." "You underperform as you wait for your dream trade to come true…You're about to bet against a trend just because it has gone a long way.

Same situation, different book

#c1358Take the deal when the timing and the partner are rightAn offer undervalues you but solves your real constraints and comes from a partner you trust.From Cancel Me If You Can #c1273Moving the goalposts, best versus goodEach time a deal gets close, someone declares it not good enough.From The Oxford Handbook of Modern Diplomacy #c1267Test motives instead of pleadingYou're chasing a reluctant party to the table and wondering why each round goes nowhere.From The Oxford Handbook of Modern Diplomacy #c1259Time to cool down saved the worldYou've just been provoked and the pressure is on to answer today.From The Oxford Handbook of Modern Diplomacy