More proof that our most educated and gentile ....

[VeeDubb]

Originally Posted By: JHZR2


The problem- they are degrees in finance and business- they are more or less worthless, in terms of knowing how things really work.

They think they're smart? I bet 99% don't understand the underlying calculus in what they analyze and make claims on. I bet they don't even know what an integral is. Something like thermodynamics, which essentially explains why everything in the universe is how it is? Good luck.

They have degrees that are self proclaimed valuable, important degrees, but like law, it's a monopoly of cronies. There is very little real knowledge in these "degrees"


JHZ, let's not get carried away here. The structured finance and derivatives industry, which is the catalyst for out of control credit, did not begin blooming until Wall Street started hiring armies of physicists and mathematicians armed with stochastic calculus models and applying Brownian motion to model everything in site. Quant geeks with no ability to read between the lines when it comes to human behavior. They assumed that counter-party risk and fraud can be "assumed away" when using integral calculus. So they never even priced in any of this risk. An integral is useless if you are integrating over thee wrong variable.

 

[CivicFan]

Originally Posted By: VeeDubb
Originally Posted By: JHZR2


The problem- they are degrees in finance and business- they are more or less worthless, in terms of knowing how things really work.

They think they're smart? I bet 99% don't understand the underlying calculus in what they analyze and make claims on. I bet they don't even know what an integral is. Something like thermodynamics, which essentially explains why everything in the universe is how it is? Good luck.

They have degrees that are self proclaimed valuable, important degrees, but like law, it's a monopoly of cronies. There is very little real knowledge in these "degrees"


JHZ, let's not get carried away here. The structured finance and derivatives industry, which is the catalyst for out of control credit, did not begin blooming until Wall Street starting hiring armies of physicists and mathematicians armed with stochastic calculus models and applying Brownian motion to model everything in site. Quant geeks with no ability to read between the lines when it comes to human behavior. They assumed that counter-party risk and fraud can be "assumed away" when using integral calculus. So they never even priced in any of this risk. An integral is useless if you are integrating over thee wrong variable.


At some point they started thinking that risk didn't matter. As long as people kept making money, that was true. I still have Fortune issues where they talk about that.

 

[oilyriser]

Risk of cheating could be modeled, and added to the equations.

 

[VeeDubb]

Yes, but you have to recognize that people cheat and find loopholes. Modeling the real world is part intuition and part quant. A geek doesn't do intuition well.

 

[Gary Allan]

Originally Posted By: CivicFan
Originally Posted By: VeeDubb
Originally Posted By: JHZR2


The problem- they are degrees in finance and business- they are more or less worthless, in terms of knowing how things really work.

They think they're smart? I bet 99% don't understand the underlying calculus in what they analyze and make claims on. I bet they don't even know what an integral is. Something like thermodynamics, which essentially explains why everything in the universe is how it is? Good luck.

They have degrees that are self proclaimed valuable, important degrees, but like law, it's a monopoly of cronies. There is very little real knowledge in these "degrees"


JHZ, let's not get carried away here. The structured finance and derivatives industry, which is the catalyst for out of control credit, did not begin blooming until Wall Street starting hiring armies of physicists and mathematicians armed with stochastic calculus models and applying Brownian motion to model everything in site. Quant geeks with no ability to read between the lines when it comes to human behavior. They assumed that counter-party risk and fraud can be "assumed away" when using integral calculus. So they never even priced in any of this risk. An integral is useless if you are integrating over thee wrong variable.


At some point they started thinking that risk didn't matter. As long as people kept making money, that was true. I still have Fortune issues where they talk about that.

They must have been educated in the post public service writings of those depicting Ronald Reagan's views on economics. "People don't mind debt"

..which is true ..as long as they're unaware of the consequences.

I keep thinking of Pinocchio ..and the stage coach trip to Pleasure Island

 

[VeeDubb]

Gary, I've read some of these books on structured finance. They are based on the assumption that the economic environment is frictionless, with no transactions costs, no moral hazard, no adverse selection and perfect enforceemnt of contracts. Under this scenario, you can structure a product to perfectly replicate any stream of contingent income that you want. Sounds fantastic in theory because it allows you to eliminate all risk. Unfortunately, eliminate a single one of the assumptions, and the whole thing unravels. Well, it's unraveled.

 

[Gary Allan]

I see the merit of your words here. As much as we kick the can back and forth here on opposing points of view, I'm quite sure that most of us share more in common than these discussions depict. I'm very sure that Tempest and I would have a grand time in person. No doubt in my mind. That is, while I tend to merely see dysfunction regardless of station ..others tend to see it otherwise. Either way, we have to cope with the side effects of dysfunctional upper achievers ..or lower/non achievers. Since I've been on either side of the Horn a Plenty, I can identify with both, contoured over my life experience ..and the world view that it formed.

As you can see, you point to systemic/fundamental philosophical (assumed beliefs, if you will) behavioral flaws that cause some to falter ..which can be said of the lower dwellers too. I've seen the precursors to failure in lower dwellers as I saw them in myself in immaturity. "The Deal". Always hinged upon a string of fragile assumptions to get it to work. Success was only a matter of having no X factor intruding into your constructed plan. Maturity causes you to know that there's always an X factor.

 

[VeeDubb]

Yes, more and more I'm thinking that our business and scientific complex needs to worry much more about robustness rather than maximum efficiency. Much more about unintended consequences than treatment effects. I really agree with Nassim Taleb's thoughts about Black Swans being present almost everywhere. Our society has been over engineered to squeeze the most out of something rather than to be able to withstand any large shock. Our system currently is not robust to natural macro shocks or corruption shocks where a few renegade high class criminals can bring the whole system down.

 

[TooManyWheels]

Originally Posted By: VeeDubb
Yes, more and more I'm thinking that our business and scientific complex needs to worry much more about robustness rather than maximum efficiency. Much more about unintended consequences than treatment effects.


Indeed. To me the question that begs to be asked is - Why has this not always been the foremost concern by all parties?

In other words, a systems-thinking view. And just incidentally, the systems view happens to be the way to maximize the whole. It is, however, contrary to the idea of using the system itself to maximize some individual pieces at the expense of other individual pieces.

 

[Gary Allan]

It's because you're under utilizing resources if there's a buffer. Rouch builds engines that are just on the brink of failure to get the maximum performance with the slightest of margins in reliability. So is everyone else. If you install inhibitors (regulations)...

..but the failures are causing devastation in their impact on ..well, just about everything ..so I guess one has to start looking at truly sustainable economics and not "quench and purge".

 

[TooManyWheels]

Explain more about under-utilizing resources. I suspect that what you would call maximizing resources, I would call gambling and recklessly endangering the economy.

There is lots of room between gambling and having a system monitored so that one set of parties does not bring guns to what has been advertised as a knife fight. Our recent (most of the past thirty years) system has been to ensure that one side does have advantages where the other does not.

Sustainability and maximum efficiency are not contradictory, provided you are talking about the whole system, which of course should be the objective of government. In fact, they are one and the same. Any basic business text deals with the concept of "going concern", meaning "ongoing" concern. Essential to that is the idea of referees who look out for the system itself, to make sure that the rules of sustainability are not corrupted. A good referee does not care who wins, he just believes in the game (economic system) and wants it to be played according to the rules under which it was designed.

However, we have somehow let the idea come into being that maximizing individual parts, by definition, maximizes the whole. That is logically and observably false.

Even in the race car example, in fact particularly there, no singular portion is maximized. The whole effort is to provide a perfectly coordinated machine, within a well defined and monitored context, which just happens to be racing. The engine does not put out more horsepower than the chassis can handle, or in places where it can not handle it. Needlessly maximizing horsepower reduces mileage and increases pit stops. Capitalists however, would have you believe that just maximizing the horsepower of one car's engine would benefit the car, the driver, the team, the series, racing in general, and all mankind. And cure cancer, baldness and erectile disfunction.

 

[Gary Allan]

You're preaching to the choir, TMW. I merely stated what I believed the objections would be

We've been subjected to "phase variances". Tomorrows economy today ..all in advanced timing. This is the first over extension in that it was configured to avoid the sensible pauses that the normal physics of running out of steam assures. Recessions were our friends. This manipulation extended us even further than sensible extended differentials allowed.

It took it out a whole new door ..


..again, I still think that this was a strategic global defense evolution. What's left to covet? What player of merit is denied an even chance??

 

[TooManyWheels]

Originally Posted By: Gary Allan
You're preaching to the choir, TMW. I merely stated what I believed the objections would be

Ah, OK - Now I know why you sounded "off-note".

 

[Tempest]

Quote:
Even in the race car example, in fact particularly there, no singular portion is maximized. The whole effort is to provide a perfectly coordinated machine, within a well defined and monitored context, which just happens to be racing. The engine does not put out more horsepower than the chassis can handle, or in places where it can not handle it. Needlessly maximizing horsepower reduces mileage and increases pit stops. Capitalists however, would have you believe that just maximizing the horsepower of one car's engine would benefit the car, the driver, the team, the series, racing in general, and all mankind. And cure cancer, baldness and erectile disfunction.

You are operating in the realm that all things can be defined and quantified via reasoning by a small group of people, along with their consequences. Any cursory study of history will show this to be false, including very recent history. In fact, things pretty much always go wrong in such circumstances.

Some of the best engineers in the world design and work on race cars, yet they still go and test the cars on the track to make sure they work as designed, and they still select the top 3% of otherwise identical engines that put out that 1 extra horsepower for their car.

Just look at the race cars of the 1930', 1940's...etc. Wouldn't you say that the cars today are more advanced in every way? If you could purley "reason" an optimum car into being, that would not be the case.
Economies are no different.

 

[1sttruck]

Example of poor risk management with a huge global but minimal personal downside, all buoyed by the endless fascination and cheering by the little people. This is 'Network' in Bizzaro world .... 'we're mad as [censored] and we're going to take some more..'.

One of the best recent examples of what politics is really all about; 'who gets what'.

 

[My442]

Incentives and motives drive behavior.

The folks who wanted to deregulate the banking controls knew exactly haow to "game" the system.

Add in the fact that the elected folks are not 100% objective, and are heavily influenced by the lobby crowd.

It has turned government into a largely tainted, biased, and dishonest group.

"Res ipsa loquitor"

 

[GMBoy]

Originally Posted By: JHZR2
Originally Posted By: bretfraz
Originally Posted By: tpitcher
...and all these people had Degrees.


+1,000,000

It's not just the current financial crisis. Think Enron, Worldcom, Tyco, Adelphia. Think the S&L crisis back in the 80's.

What do all the people involved in the above situations have in common? They are all very well educated people.

It's not just a college degree from some Stinkville Community College. I'm not referring to an A.A. in Marketing from an online school. You can't get a job of any kind at Bear Stearns or Goldman Sachs with that kind of degree. Virtually all the people working for those companies (and many more) had advanced degrees, MBA's were common, from well regarded universities.

Take Jeff Skilling of Enron "fame". He went to SMU then got an MBA from Harvard Business School. He worked for McKinsey & Co., widely considered to be the best business mgmt. consulting in the world. McKinsey is consistently rated the #1 employment choice for freshly minted MBA's. Anyone with any business talent wants to work there. Skilling left McKinsey to work at Enron and turned the company into the world's largest trader of energy, invented the mark-to-market scam, held California hostage during their energy crisis of 2001 and basically became one of America's greatest corporate crooks.

Skilling is just one shining example of the smartest people in America using their brains to destroy companies, markets and the economy as a whole. There are no dummies at Merrill Lynch, everyone has an advanced degree, yet the company went down the tubes anyway. What difference did it make to Merrill employees if the market tanked and the economy went south? They all got their BMW's, their exotic vacations and their second homes in Florida.

Used to be that criminals used a deadly weapon to rob and steal. The weapons of choice for the 21st century crook is now an MBA degree, a cell phone, a laptop with PowerPoint on it and an expensive business suit.


The problem- they are degrees in finance and business- they are more or less worthless, in terms of knowing how things really work.

They think they're smart? I bet 99% don't understand the underlying calculus in what they analyze and make claims on. I bet they don't even know what an integral is. Something like thermodynamics, which essentially explains why everything in the universe is how it is? Good luck.

They have degrees that are self proclaimed valuable, important degrees, but like law, it's a monopoly of cronies. There is very little real knowledge in these "degrees"



You are so correct. I sometimes think the big Universities are sometimes just as corrupt as big business. I have an A.A, B.S and my MBA in Business. But I don't think I am better than anyone else and as a matter of fact much of what I was taught DID NOT AT ALL relate to the real business world. Nothing I learned helped me perform better as a Manager either. Common sense and learning how the business runs is what advanced me thru General Motors. I just had to have the "papers" to go with it.

 

[TooManyWheels]

Originally Posted By: Tempest
Quote:
Even in the race car example, in fact particularly there, no singular portion is maximized. The whole effort is to provide a perfectly coordinated machine, within a well defined and monitored context, which just happens to be racing. The engine does not put out more horsepower than the chassis can handle, or in places where it can not handle it. Needlessly maximizing horsepower reduces mileage and increases pit stops. Capitalists however, would have you believe that just maximizing the horsepower of one car's engine would benefit the car, the driver, the team, the series, racing in general, and all mankind. And cure cancer, baldness and erectile disfunction.

You are operating in the realm that all things can be defined and quantified via reasoning by a small group of people, along with their consequences. Any cursory study of history will show this to be false, including very recent history. In fact, things pretty much always go wrong in such circumstances.


There is lots that I could say here, and maybe I will when time allows. For the moment, lets just say that no one can exactly predict what will work well in the future. To some degree I agee with what I believe you are saying about planned and controlled economies never working as expected. However, we have excellent history on what does not work, and should not be repeated. The market is not smart enough when left to its own devices to keep itself solvent, that is always "someone elses problem". There have to be mechanisms to keep it "out of the weeds".

Today's NY Times article on the bailout situation has this to say - This administration made decisions that allowed the free market to operate as a barroom brawl instead of a prize fight,” said L. William Seidman, who advised Republican presidents and led the savings and loan bailout in the 1990s. “To make the market work well, you have to have a lot of rules.”

 

[Gary Allan]

Quote:
To some degree I agee with what I believe you are saying about planned and controlled economies never working as expected.


I think that this worked exactly as planned. The outcome was too perfect. The think tank that took all of this into account ..the greed the debt ..the effect on petro$$ ..the sharing with all the aligned industrial economies ...absolutely flawless.

What all of you can't do is imagine why someone would want to do it. The darker side of stuff is usually a reluctant notion.

 

[VeeDubb]

Originally Posted By: Gary Allan
Quote:
To some degree I agee with what I believe you are saying about planned and controlled economies never working as expected.


I think that this worked exactly as planned. The outcome was too perfect. The think tank that took all of this into account ..the greed the debt ..the effect on petro$$ ..the sharing with all the aligned industrial economies ...absolutely flawless.

What all of you can't do is imagine why someone would want to do it. The darker side of stuff is usually a reluctant notion.


In hollywood maybe. In the real world, I'd like to see who these ominiscient, all knowing conspiracy types are. The last time I saw one was when I watched Emperor Palpatine in action in Star Wars III. But of course, he had the Force....

A more likely explanation is accumlated opportunism at all levels of society due to layers and layers of corruption. Of course, those who are best able to survive in these environments are those with the most education and/or connections.