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What the Market Teaches UsLimitations of Knowing and Tactics for Doing$

Charles Smith

Print publication date: 2015

Print ISBN-13: 9780198745112

Published to Oxford Scholarship Online: September 2015

DOI: 10.1093/acprof:oso/9780198745112.001.0001

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(p.194) (p.195) Appendix B The Interplay of Ethnography and Markets

(p.194) (p.195) Appendix B The Interplay of Ethnography and Markets

What the Market Teaches Us

Charles W. Smith

Oxford University Press

While markets have received a good deal of attention throughout this book, the methodologies used in obtaining the data for this book have been given comparatively little attention beyond a few autobiographical inserts. Whether the various methodologies, primarily ethnography, used in gathering and evaluating this data deserve to be relied upon for getting things “right” was not addressed. This is not uncommon in ethnographic narratives such as this, as methodological asides tend to interrupt the flow of the text. The different methodologies used are normally understood in general terms and either accepted as appropriate or not, the exception being instances where detailed quantitative data is included and analyzed. Each method tends to be known for both its strengths and its weaknesses, and where it is most likely to be appropriate and where not. The objective, regardless of the specific methods used, is to gather useful “facts” and to get them “right.”

It is in the various claims of getting things “right” that strong differences of opinion arise regarding the value of different methodologies. Getting things right generally means getting things as they actually are, not as they might be seen to be. This normally requires that different observers should “get it” fundamentally the same. Simple variables such as place and time and physical parameters lend themselves to consensual judgments. Written texts and quantitative data that are accessible also lend themselves to consensual judgments. When reported data is not easily accessible and when the intentions and values of observers are likely to play significant roles in properly classifying actions, reported facts and data are quite likely to be questioned. Ethnographic findings are commonly subject to such questioning as it generally entails all of these qualities. The problem in most such situations is not so much the ethnographic methodology in use as the highly subjective character of the findings being gathered. Such findings tend to be interpretations and responses of both individuals and collectives associated with ongoing concrete, everyday interactive behaviors of multiple participants.

Strictly speaking, one can never hope to get such behavioral findings “right” if they are presented only in terms of particular actions, since particular acts that appear to be basically the same are often very different in their intent. Scores of different buyers might buy a particular stock at approximately the same price at approximately the same time, but their actions are likely to entail a wide range of differences that if ignored prohibit getting these behaviors “right.” The most that can normally be hoped for is an account that grasps the core character of such actions, which requires somehow grasping the opaque forces and constraints operative in the behaviors observed. This, in turn, commonly requires focusing, not only upon what is happening, as well as when and where, but also how and why it is happening. This requires acknowledging the motivations and thoughts of the actors engaged in what is occurring. Getting such motivations and thoughts “right” unfortunately is difficult, as behaviors are subject to projections and misrepresentations, deliberate and unintentional, from both observers (p.196) and participants. These factors have led some ethnographic researchers to adopt a positivistic stance to their research that in effect requires limiting their data to observable actions, leaving their interpretation to rest upon the behavior itself. The great majority of ethnographic researchers rely not only on observed behavior, but also on accounts and reports offered by those engaged in these behaviors. Yet others, who often label their methodology as auto-ethnography (Ellis, Adams, and Bochner 2011), have adopted a very different path. Rather than attempting to filter out their own responses to what they observe and experience, they seek to build on them. Their argument is that their own responses are more reliable in understanding and getting to the core of what is happening than that commonly suggested by the offered positivistic accounts. Over the years the most respected ethnographic or “participant-observation” findings have tended to rely on all three types of information/data as evidenced in the appendix of William Foote Whyte’s classic Street Corner Society (1943/1955).1

The methodology pursued in this book, which has evolved over many decades, seeks to follow this middle road. It does this by utilizing three overlapping yet distinct “ethno-methodological” practices. What makes these practices of special interest in the context of this book is that they have taken form primarily in the context of exploring markets, and in many ways mirror the practices of markets. The label I have given this form of ethnography is “collaborative transactional ethnography.” It is itself, as just noted, a product of the “What the Market Teaches Us” insofar as it mirrors key exploration practices and actions taken to get things “right” inherent in the markets. It is constituted by three distinct practices: 1) Selecting and scrutinizing data pertinent to the market; that is, what is grasped by the term “observation” in the concept of “participant observation” and that mirrors in some ways the more positivistic ethnographic camp; 2) Personally engaging in the various market practices; that is, what is covered by the term “participant” in the same phrase and favors to some extent the autoethnographic camp; and 3) Soliciting and exchanging information, opinions, and perspectives with a range of market insiders as a market insider. All three of these practices are ongoing and require continual updates. As there are wrinkles to all three, each merits further discussion.

Practice 1) “Selecting and Scrutinizing Data,” mirroring “positivistic” ethnography as it does, entails what many consider to be the prime objective of any methodology; namely, collecting relevant data. A good deal of such data can be found in earlier research and other publications. The special contribution of ethnography is that it is capable of generating behavioral data drawn directly from ongoing, everyday behavior. Such data often serves as the “bread and butter” of a given study as it often seems to provide a new, grounded portrait of what is under investigation. The limitation of such portraits is that, as with any portrait, what we see is what the person responsible for creating the portrait claims to have seen, not necessarily what others might have seen. There is also the problem of misinterpreting what was observed, as well as the problem of being subject to deliberate misrepresentations of those being observed. Despite these very real shortcomings, as ethnographic data goes, this type of data is probably the (p.197) closest there is to what is commonly referred to as hard data. In depicting the various settings presented in this book, I relied upon masses of such data dealing with historical pricing of financial instruments, trading volume, different types of financial instruments, and other structural factors. Personally I prefer to think of this data as cold data rather than hard data, as it is inherently dormant.

Practice 2) “Engaging in the activities being observed” entails a very different set of behaviors from those of Practice 1. The goal is clearly not to gather hard or cold data: it is to experience directly what is happening in order to get a living “feel” for it. This is the primary objective of most auto-ethnographers (Ellis, Adams, and Bochner 2011). While most self-defined auto-ethnographers focus primarily upon their own experiences and attempt to use these experiences to understand the culture and collective they are studying, other researchers, who generally don’t define themselves as auto-ethnographers, are more concerned with using their own experiences to better grasp the experiences of those they are studying and as a way to understand and define what they are doing. The key distinction in the context of this study is that this approach, which emphasizes fully “experiencing” the situation with all of its emotional attributes, is directed more toward the underlying causal forces in play and less toward the behavioral patterns generated than is the first approach. My own research has clearly used this approach to grasp both my own experiences and, through them, the experiences of others engaged in the activities that concerned me. Trying to access the experiences of others based on one’s own experiences, alas, is at best a tricky business. In an attempt to support this process I found myself utilizing the third practice noted above of directly soliciting and exchanging information and experiences with other participants. This third practice, which is generally seen to be peripheral if not alien to ethnography, evolved in a manner that made it central to my own ethnographic methodology.2 In hindsight, it has become clear that this fit rested upon the inherent transactional character of both the markets I was studying and the research process I was utilizing.

In order to appreciate the importance of the interactions between researcher and those associated with the practices being explored, it is necessary to recognize that their primary objectives differ. Those engaged in the practices being explored are first and foremost interested in successfully obtaining their own objectives and goals related to the various practices. The researcher is primarily interested in understanding the practices themselves and various facets of the participants. These different objectives favor different presentations of self; they are also apt to generate various degrees of suspicion, especially from those who see themselves as being scrutinized. There is nothing surprising about this. Such suspicions and lack of trust is often given in validating and rationalizing the two types of ethnography first presented. In the first instance, this is used to support the practice of limiting interpersonal filters and framings and focusing upon hard/cold data. In the second instance, priority is given to obtaining first-hand experiences on the part of the researcher, and avoiding depending upon the questionable reports of others. Each of these approaches unfortunately ignores the richest veins of data held by those engaged in the practices being explored; namely, their own understandings and perspectives. There is, of course, a dilemma here, as a researcher soliciting this sort of data without validating filters of one sort or another is very likely to mine only “fools’ gold.”

(p.198) The two primary sources of this dilemma, as noted, are the pervasive mistrust that those being queried commonly have in these situations, and the different objectives that they and researchers commonly have. Given this situation, why should they share their professional and personal concerns and ideas with an outsider? Why should they even waste their time in doing so? It is here that markets present us with an interesting model and answer. People participate in markets when the markets offer them something that they want. Researchers who rely heavily upon questionnaires and interviews and experimental studies have sought to deal with this situation by paying subjects for their time. Ethnography doesn’t normally lend itself to this technique, though the process of “buying” attention and information is not unknown. Personal introductions can also help when past ties and favors are part of the package. When the participants being solicited are individuals of substance who are financially comfortable and professionally established, modest monetary rewards are apt to backfire. Close friends and family members may open doors, but then even a large network of family members and friends will not have access to all doors.

So what does that leave us with? Interestingly, there is one commodity that researchers and most participants, particularly those in professional practices, value highly; namely, information. This is clearly true of most market participants. Equally important, they normally prefer to pay for such information with information of their own. It is relatively cheap. In nearly all settings, there are admittedly boundaries regarding what types of information can be exchanged. In financial markets, for example, there are laws against insider trading; in most other settings there are commonly rules, if not laws, against revealing various private or personal items and issues. There are usually, nevertheless, vast amounts of information available for legitimate exchange. In order to engage in such exchanges, however, one needs to have sufficient informational capital of one’s own, For ethnographic researchers this means that they need to acquire sufficient knowledge of what they are studying before attempting to engage in any sort of serious discussion with participants. This is what the label “collaborative transactional ethnography” is intended to reflect. It is a joint exploration of an arena that both researcher and participants embrace not only individually, but collectively.

This collective, collaborative, interactional facet of markets and other research sites is often instrumental in fostering ethnographic research in other ways. Gaining initial access to many research sites, as noted above, commonly requires a range of introductions from insiders or individuals with strong relationships with insiders. A classic example of such a mentor who continued to function as a prime informer is described by Whyte in the appendix of his 1943/1955 classic referred to earlier. I have myself relied on a number of such introducers, some of whom also became in differing degrees prime informers as was the case with Whyte. In order to explore situations on one’s own, however, one needs to be able to engage in informational exchanges by oneself. Such exchanges can and do take a variety of forms, from simply exchanging one bit of information for another to using information to question a dubious response given. While the latter situations constitute a crucial tool in avoiding being fed false information, it is necessary almost always to avoid entering into a combative relationship. The most common and best way to avoid doing so is to establish oneself as personally invested, knowledgeable, and on the whole respectful of the practices being explored. Over the years I had a number of interactions with various market participants that evidenced these dynamics. One that speaks to pretty much all of the various (p.199) components just noted, however, stands out. I commonly refer to it as my “Bobby, Bobby!” interaction.

This particular interaction occurred in the early 1980s when I was studying various types of auctions. I was in Kentucky attending the fall thoroughbred horse yearling auctions with the expectation and hope of not only observing the auction but also of speaking with a number of major players including a key auction manager. I had not only already gone through the process of being introduced by name to this auction manager through a network of friends, but had also talked to him on the phone, been invited down graciously, and promised some face-to-face time. When I arrived, however, I quickly saw that upon meeting me, he was hesitant to engage in any sort of serious dialogue with me. He kindly arranged matters so I could attend the auctions and meet other people, which was not something I could have done on my own. Every time I approached him to engage him in a serious conversation, he brushed me off with an excuse of some sort. On the third day in desperation, seeing him walking from the auction tent to his office, I managed to get his attention by yelling out to him a simple question: “Do you always use the same signal to indicate a no-sale?”

The practice of camouflaging a no sale auction outcome, which occurs when no one is willing to pay the minimum/reserve price, is accepted practice in thoroughbred auction, though illegal in most other types of high-end auctions. The reason for this is that announcing a “failed sale” can undermine numerous other sales scheduled for that day involving the same sire. To offset this camouflaging practice, such “no sales” are reported after that day’s auction has ended. These reports also carry the name of the under-bidder in each sale which is not done in any other auctions I know and serves as an added guarantee that things were done honestly. In any case, in response to my question, the manager stopped, turned to me and quizzically asked, “What do you mean? What signal?” I yelled back “Bobby, Bobby!”

To understand what was happening here, a little more information is necessary. In these auctions, once a sale is made, the buyer is required to sign various documents immediately, at which time the buyer takes possession of the horse. If the horse dies walking out of the tent it is the buyer who is the loser. This is why all buyers need to establish a line of credit before being empowered to bid. Getting the buyer’s signature is the responsibility of the spotter who has relayed the buyer’s bid to the auctioneer. Here again these auctions differ from the more familiar fine art and antique auctions often presented on television and in movies where the auctioneer takes bids directly. In these high-end horse auctions numerous spotters tend to be in constant communication with a subset of buyers, some of whom seek to camouflage their own actions. In support of these buyers’ desire to maintain a low profile, the auctioneer identifies the present bid in terms of the spotter who has taken the bid. It is important that the auctioneer does this because at times the actions of a spotter may be misinterpreted by the auctioneer, and he may attribute a bid to a spotter that the spotter never intended to give. The problem in the “no sale” situation is that the auctioneer not only needs to inform all of his spotters that the bidding is over, but he also need to get one of the spotters to behave as if he is getting the signature from the assumed winner bidder. The signal that I recognized was being used was to double call the name of the spotter when such a “no sale” happened. A single name call would not be sufficient because, even if the spotter knew he had not made the final bid, some action of his could easily have been interpreted by the auctioneer as if he had.

The bottom line of all of this was that as soon as I had yelled out “Bobby, Bobby” the auction manager hurried over to me to ask me how I had figured out what the double (p.200) naming meant. My brief answer was something along the lines that this is what I did. I not only studied auctions of varying sorts but was fascinated and intrigued by them. Without missing a beat, he grabbed my arm, turned toward his office and said, “Let’s talk!” That is what we did for the next hour and a half, exchanging auction experiences and probing each other on a range of different related points. He wanted to know about how other types of auctions functioned; I wanted to know how his auction functioned. To top things off, he not only offered to continue our conversation the next day but to introduce me to a number of key people who could and did share with me their own understandings of these horse auctions. In all of these interactions, I was clearly seen as a thoroughbred horse auction outsider, but I was also seen as a very keen insider when it came to the wider world of auction, to which most of the people I talked to were outsiders. This was commonly the situation in my interactions with participants in a wide range of commodity auctions from fish to tobacco. The situation in financial markets was somewhat different. Here I was pretty much an insider having been in the market for decades. I was able to function as a sounding board based on my forty plus years exploring these markets for what traders and others were experiencing as changes in the market.3

Acquiring the experience required to engage in the types of collaborative transactional practices described above takes time and patience. Any research site worth exploring is highly unlikely to be a quick study. There is a hidden benefit to this, however. Most situations worthy of study tend not to be static. They are subject to change, and such change can only be grasped over time. Change, of course, tends to undermine given accounts. It also, however, tends to shed light upon the various causal forces in play. Collaborative transactional practices are also better at raising interesting questions about what can be expected in the future than in presenting final answers. As an ethnographically oriented sociologist, I find all of these lessons valuable not only in doing good ethnography, but also in trying to both make sense of and act sensibly in the world in which we live. As someone who has embraced price-setting markets, particularly financial markets, both professionally and personally for nearly fifty years, I can attest that few if any sources have provided us with a richer set of teachings for doing this than what we generally call “the market.”


(1) While all of the factors noted in this paragraph continue to be evaluated and debated, the question of how much weight should be given to what people say versus what they do probably continues to be the issue of major concern. For a recent discussion of this issue, see Jerolmack and Khan’s (2014) article “Talk is Cheap,” and the critiques from Maynard (2014), Cerulo (2014), DiMaggio (2014), and Vaisey (2014), and Jerolmack and Khan’s response.

(2) The process of formally soliciting information is normally considered to be in the realm of interviewing.

(3) Each of my earlier publications focused upon financial markets and auctions (1981, 1989, 2001) contains a methodological appendix that spells out in detail the various parameters of the ethnography utilized in gathering data for these publications. This book clearly depends heavily on these earlier explorations. They have been augmented, however, by literally thousands of additional hours engaged in following various markets, trading in these markets, and maintaining ongoing dialogues with scores of other participants, as well as time spent in scrutinizing the continual flow of both academic and trade publications focused on these markets, some of which are cited in the Selected Bibliography. The data upon which the kayak and surgery discussions rest also had ethnographic sources, but of a somewhat different nature. As noted in footnote 8, in the case of kayaking my personal experience of literally thousands of hours on the water in a variety of different locations, of paddling many thousands of miles, of many hours of instruction, and of interaction with hundreds of different kayakers have provided the bulk of the data utilized; this data has also been augmented by a variety of “how to books” that stress various survival procedures. As I am not a surgeon, the surgery data presented is not based on personal experience. The bulk of the data utilized was provided, rather, as noted in Chapter 1, note 9 and Chapter 6, note 2, by a prime informer. This data was also augmented by the literature cited and the fact that I grew up in a very dense medical context with both parents physicians: a slight ethnographic component.