Re: worth reading Mythbusting the Obama Magic

[David Farber <dave () farber net>]

Begin forwarded message:

From: Sid Karin <skarin () ucsd edu>
Date: January 4, 2010 2:48:31 PM EST
To: dave () farber net
Subject: Re: [IP] worth reading Mythbusting the Obama Magic

Dave,

For IP if you like:

Another question that we should ask ourselves is:

Do we make personal and/or professional decisions on the
basis of short term personal gain without regard to
either long term gain or to considerations of right
and wrong?

After all, some of us are the business decision makers of Jonathan's
note.

        Cheers,

                .....Sid





> Begin forwarded message:
> > From: "Jonathan S. Shapiro" <shap () eros-os org>
> > Date: January 4, 2010 1:42:33 PM EST
> > To: dave () farber net
> > Cc: ip <ip () v2 listbox com>
> > Subject: Re: [IP] Re: Mythbusting the Obama Magic
> > I haven't time for a long post, which is probably good, but there is one point here that I think is worth 
> > considering.
> >  
> > While bank lending practices were, in my opinion, largely responsible for the mortgage crisis, it must be 
> > acknowledged that banks, trading houses, and insurers suffer in common under what might be termed "the competitive 
> > death embrace".
> >  
> > The death embrace is best illustrated by the thinking "If I don't do this marginal deal, my competitor will, so I 
> > should do the deal rather than let the benefit go to them." If you review the papers, you'll see countless variants 
> > of that statement, and if you pay attention, you'll notice that not one says "benefits and risk".
> >  
> > This attitude is responsible for many investment cycle failures. Most recently the mortgage crisis, but more 
> > commonly the cycle in which insurance companies lower their rates in lock step to stay in business, only to find 
> > during some catastrophe that their underwriting models were too optimistic. On investigation, they invariably find 
> > that (a) the models really weren't very good, but (b) the risk assessment assumptions in the models had been 
> > progressively downgraded in response to competitive pressure. This is not a consequence of stupidity. It is a 
> > requirement for the insurer's market survival.
> >  
> > In technical contexts, we see companies repeatedly engage in the the "Innovator's Dilemma." The cause can ultimately 
> > be traced to the fact that quarterly behavior can be explained to investors while long-term behavior can't. This 
> > problem is compounded by the short-term biases of corporate securities reporting. A Warren Buffet understands this 
> > very well and reads through it. Most readers of IP, I would hazard to guess, understand it but lack the investment 
> > discipline to profit from it (I'ld certainly include myself). Most of the world at large probably has no idea what 
> > I'm talking about.
> >  
> > Broadly speaking, investors and customers are quite bad at assessing the long term risk and benefit inherent in this 
> > behavior.
> >  
> >  
> > So one question that I think we need to be asking, as a nation, is: how do we make long-term risk and results more 
> > visible so that people can understand it better?
> >  
> >  
> > Jonathan S. Shapiro
> Archives  


-- 
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
     Sidney Karin, Ph.D., P.E.        858-534-5075 (voice)
                                          858-755-5199 (fax)
                                              skarin () ucsd edu 
                                      
     Professor Emeritus,
     Department of Computer Science and Engineering
     Director Emeritus,
     San Diego Supercomputer Center
     University of California, San Diego                     
     9500 Gilman Drive                          
     La Jolla,  CA  92093-0505  

                       




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