Why do Ma and Pa play in a rigged market?

“They have been able to pay off politicians with political campaign funds and have been granted informal and unspoken yet complete immunity from prosecution, setting the scene for even bigger confiscations of investor capital. With the risk of legal repercussions so small and the temptation to steal so large, why would any of them not take advantage? What do they have to do to stop people from entrusting them with their savings? Put up neon signs that say, “We steal your money”?”

                                        – Dimitri Orlov – The Five Stages of Collapse

Sometimes even that doesn't help.

"Darn it, Pa! I told ya not ta buy AAPL on margin!"

"But Ma, I thought you wuz talkin' 'bout apples."

The problem is that Ma and Pa believe they are above average--in intellect, in wisdom, in luck, in investing acumen. When they see that sign that says their money will be stolen, they all have faith that it will happen to somebody else.

When I was a kid, I wanted to be a pool shark. Never mind that I wasn't much good at it. I researched the concept at the local magazine stand and discovered that the secret was not to beat the other guy with great shooting, but to beat him in a way that he would think he had beat himself, through mistakes. The reason it works is because when your victim makes a good shot, he believes that is his normal capability, but a mistake is not--and tends to be discounted. That discounting is essential, because if your victim believes he only lost because of his own mistakes, he will be confident he will win the next time. On the other hand, if you simply run the table, chances are he won't play again.

This only works because people are usually not as clever as they think they are.

Consequently, Ma and Pa can read about what is being done to them--and they will think it is only a problem for other people. Their orders will get filled in a timely fashion. The stocks they buy have true liquidity--not the phantom liquidity of offers that are never to be filled. And when they file for bankruptcy, it will merely have been bad luck.