The AIG scandal, and I do see it as a scandal, seems to be the latest preoccupation with Congress. Yes, I'm outraged as the onion gets peeled back to find the legislative culprits that contributed to it, and am compelled to comment.
First, the scandal exists at a value of $165M, of a total amount pledged to AIG of about $300B, or roughly 0.05%. This is in the face of total TARP funding that appears to be pushing the $2T threshold, or a total fraction for AIG of about 15%. In other words, except for the obvious outrage, it almost seems petty.
Second, I started thinking about the word 'bonus'. From dictionary.com, it is derived from the Latin word for 'good'. Think 'bon bon', or simply 'bon'. Think of a bonus as a kind of tip...a reward for good performance, such as you would give a waitress for bringing the cream with your coffee without being asked, or bringing the check after a quiet nod across the room.
I work for a relatively conservative manufacturing company. Bonuses are typically reserved for those at the director level and above, to include vice presidents and division presidents, and corporate bigwigs. Sometimes they deign to give bonuses to lower level employees, but never as a matter of course, and rarely to the level that they receive them for themselves...that is to say, a serious fraction of their already serious paychecks. Really...don't you consider 50 to 75% of $175K truly excellent coin? But I also don't begrudge them for their wisdom, experience, and hard work that got them to a position of real responsibility, ensuring that the workforce is motivated, focused, and coordinated to deliver product on time and with good quality, often at great sacrifice to their personal lives.
Even then, the amount they receive is a mere drop in the bucket compared to the offerings of the financial institutions: enough money to cause me to think about quitting work and retiring very comfortably on just that one check. The numbers proffered in the AIG case approach this level, so I have to ask exactly what qualifies one for a bonus, and how is the amount determined?
For instance, if I gave my broker $1000 to invest, and after a year he returned $900, losing me money, I'd suggest he didn't really earn a bonus. What if he returned $1100? I consider that to be slightly above expectations, but that's what I pay him for. $1500? That would be extraordinary, and I'd be thinking about offering some kind of tip, or bonus...perhaps 10% of the amount over my expectation.
AIG is stating that the bonuses were offered as part of an employment contract, apparently without any obvious performance goals, with results that have brought the world economy to its knees and possibe ruin. I don't understand. Worse, it's stated that unless AIG is bailed out, things will be worse. In other words, they are blackmailing us to bail them out.
In its simplest terms, this is the equivalent of getting paid for showing up, with no accountability for the poor decisions and the high risks that they took with our money. It's the equivalent of giving A's for effort in class, or trophies and certificates for kid's sports teams for 'participation'. It's the price we're being asked to pay for the dumbing down of everything, where character counts for more than accomplishment...except here I don't see any character worth rewarding.
Thursday, March 19, 2009
Wednesday, March 4, 2009
Mumbai
Thomas Friedman, again. See http://www.nytimes.com/2009/02/18/opinion/18friedman.html?_r=1
I've been a bit busy lately...too busy to keep up with the newspaper...so most of my news gathering is via Google news several times a day. But the pile of old papers grows, and I try to catch up at breakfast and lunch...finally reading Thomas Friedman's post from two weeks ago.
He begins this missive by stating that there are 9 bodies laying unclaimed in the Mumbai morgue since last November...the bodies of 9 sub-humans who indiscriminately murdered 300 innocents because they didn't subscribe to a medieval world view of misogyny, oppression, torture, and death, while we celebrated our Thanksgiving holiday. Friedman states that this is a good thing, and while I agree with him on that point, I think he misses a broader disappointment.
At this writing, we are 7 and a half years from the horror of 9/11, and since 1982, the world has experienced over 30,000 acts of terrorism in the name of islam. The 9 bodies remain unclaimed because the muslim populace of India, the second largest in the world, rejects the claim that they are martyrs, and undeserving of a proper burial. Friedman says this is good because, finally, moderate islam (if there is such a thing) is standing up in at least one way to say that enough is enough.
We could reach back to the slaughter at the 1972 Olympics, an event conducted to unify the world, but let's just call it 27 years of barbarism, and FINALLY one muslim community has reached the consensus that they will take but one small stand, that the perpetrators of atrocity are not entitled to ritual burial. Yes, it's time. Yes, it's a good thing. But I remain disappointed: we've been waiting too long, and the gesture is too small.
I've been a bit busy lately...too busy to keep up with the newspaper...so most of my news gathering is via Google news several times a day. But the pile of old papers grows, and I try to catch up at breakfast and lunch...finally reading Thomas Friedman's post from two weeks ago.
He begins this missive by stating that there are 9 bodies laying unclaimed in the Mumbai morgue since last November...the bodies of 9 sub-humans who indiscriminately murdered 300 innocents because they didn't subscribe to a medieval world view of misogyny, oppression, torture, and death, while we celebrated our Thanksgiving holiday. Friedman states that this is a good thing, and while I agree with him on that point, I think he misses a broader disappointment.
At this writing, we are 7 and a half years from the horror of 9/11, and since 1982, the world has experienced over 30,000 acts of terrorism in the name of islam. The 9 bodies remain unclaimed because the muslim populace of India, the second largest in the world, rejects the claim that they are martyrs, and undeserving of a proper burial. Friedman says this is good because, finally, moderate islam (if there is such a thing) is standing up in at least one way to say that enough is enough.
We could reach back to the slaughter at the 1972 Olympics, an event conducted to unify the world, but let's just call it 27 years of barbarism, and FINALLY one muslim community has reached the consensus that they will take but one small stand, that the perpetrators of atrocity are not entitled to ritual burial. Yes, it's time. Yes, it's a good thing. But I remain disappointed: we've been waiting too long, and the gesture is too small.
Tuesday, March 3, 2009
Health Insurance Revisited
There seems to be this idea that people without health insurance don't get (or can't afford) medical treatment. Simply put, if I think I will only need, say, $6000 worth of medical coverage for a given year (an estimate of the national per capita cost for doctors, hospitals, and meds), why should I buy a policy costing $6000 (or more likely, from a private insurer, more)? Why not just take that money and put it in the bank, so if, say, I need LESS than $6000 worth of medical treatment, I can pocket the difference. It's MY money, not the insurance company's.
What if I need more? Well, that's why you buy health insurance...to cover the cost of potentially catastrophic illness. If you snooze, you lose...but more to the point, the average per capita cost of medical treatment is probably less than $6000.
What if I can't AFFORD a $6000 policy or the cost of my coverage? Well, that would be called WELFARE...relying on the good will of others to pay for that which you can't afford.
But the idea that lack of health insurance is somehow keeping people from getting medical treatment is false. You can choose how you spend your money...take your chances, or perhaps die...or beg from others.
t the end of the day, the SAME PEOPLE will be begging or borrowing from others. Having or not having health insurance isn't the issue. The issue is having the education to earn a salary that will allow you to either buy insurance or pay for coverage.
Demanding anything else is now somehow dipping into MY pocket...and it looks like I just don't have a say.
What if I need more? Well, that's why you buy health insurance...to cover the cost of potentially catastrophic illness. If you snooze, you lose...but more to the point, the average per capita cost of medical treatment is probably less than $6000.
What if I can't AFFORD a $6000 policy or the cost of my coverage? Well, that would be called WELFARE...relying on the good will of others to pay for that which you can't afford.
But the idea that lack of health insurance is somehow keeping people from getting medical treatment is false. You can choose how you spend your money...take your chances, or perhaps die...or beg from others.
t the end of the day, the SAME PEOPLE will be begging or borrowing from others. Having or not having health insurance isn't the issue. The issue is having the education to earn a salary that will allow you to either buy insurance or pay for coverage.
Demanding anything else is now somehow dipping into MY pocket...and it looks like I just don't have a say.
Monday, February 23, 2009
Entreprenurial Racism
It looks like Nadya Suleyman's 15 minutes of fame is finally over, but the US media circus is gearing up for round 12 in the nascent Obama administration. At this rate, we should be at round 576 come 2012, but who's counting? Following the mauling of a woman by a chimpanzee here in CT last week, where the offending chimp was shortly felled by police bullets, the ever high-brow New York Post printed a cartoon showing a felled chimp with the caption 'They'll have to find someone else to write the next stimulus bill'.
Ever one to invent a racist event, the Reverend Al Sharpton has called for a boycott of the Post because he saw the depiction of the chimp as a metaphor for President Obama. I'd suggest Jimmy Orr's hilarious column in the Christian Science Monitor, along with the barrage of comments, except CSM has withdrawn the column. My reaction, except for this post, is to do something I've never done in my adult life: seek out and purchase a copy of the NY Post, if only to show my support for them, or closer to the truth, my contempt for Reverend Al. By the third stop I could declare 'mission accomplished'.
I used to love the comments section for Yahoo news stories, until they disabled the feature after the Hezbollah war in 2007...but it's nice to see news sources allow reader comments these days. CSM is one of these sources, and a one 'ssjackson', claiming to be a 32nd cousin of Jesse Jackson, provided me with the title for this entry. He (?) states 'I applaud the Post for calling out Sharpton and all other wannabees whose motives are Entreprenurial Racism, not racial understanding or equality'.
My accomplice in this mission, a fine young black man, told me his father's position on this, based on the events in Jena, TX the other year, when a noose was found hanging from a tree on the high school grounds, resulting in inter-racial fighting between students, and apparently, a disproportionate number of suspensions between the participants. It was good to see a generational perspective on these events. I was told that in previous times, the appearance of a noose, or similar epithet, would result in the offended group rising to the challenge of doing better. Instead, in this Obama-led, post-racism period, we are faced with self-appointed community activists reinforcing the attitude of victimhood, demanding compensation, apologies, and justice.
Maybe it's time to recall the Kings, Rodney and Martin, and ask 'can't we all get along?'.
Ever one to invent a racist event, the Reverend Al Sharpton has called for a boycott of the Post because he saw the depiction of the chimp as a metaphor for President Obama. I'd suggest Jimmy Orr's hilarious column in the Christian Science Monitor, along with the barrage of comments, except CSM has withdrawn the column. My reaction, except for this post, is to do something I've never done in my adult life: seek out and purchase a copy of the NY Post, if only to show my support for them, or closer to the truth, my contempt for Reverend Al. By the third stop I could declare 'mission accomplished'.
I used to love the comments section for Yahoo news stories, until they disabled the feature after the Hezbollah war in 2007...but it's nice to see news sources allow reader comments these days. CSM is one of these sources, and a one 'ssjackson', claiming to be a 32nd cousin of Jesse Jackson, provided me with the title for this entry. He (?) states 'I applaud the Post for calling out Sharpton and all other wannabees whose motives are Entreprenurial Racism, not racial understanding or equality'.
My accomplice in this mission, a fine young black man, told me his father's position on this, based on the events in Jena, TX the other year, when a noose was found hanging from a tree on the high school grounds, resulting in inter-racial fighting between students, and apparently, a disproportionate number of suspensions between the participants. It was good to see a generational perspective on these events. I was told that in previous times, the appearance of a noose, or similar epithet, would result in the offended group rising to the challenge of doing better. Instead, in this Obama-led, post-racism period, we are faced with self-appointed community activists reinforcing the attitude of victimhood, demanding compensation, apologies, and justice.
Maybe it's time to recall the Kings, Rodney and Martin, and ask 'can't we all get along?'.
Sunday, February 22, 2009
Sticky Buns
Note: allow heated ingredients (milk, butter) to cool before adding to other ingredients to avoid killing yeast or cooking eggs!!!
1. dissolve 1 pack yeast in 1/4 cup warm water
2. add: 1 cup whole wheat flour (sifted after measuring, if desired), 1 cup scalded milk; mix to uniform consistency
3. keep covered in a warm place; allow to rise until dimpled (1 to 3 hours...I start the micro-convection at 100F for a few minutes)
4. mix lightly in a bowl: 2 egg yolks, 1/2 tsp salt, 1/2 stick melted butter, about 3 tbsp honey, 2 tbsp grated lemon rind (optional)
5. add egg mixture to previous flour mixture; add to this 3 cups white flour (sift after measuring, one cup at a time, if desired); blend to uniform consistency (polite way to say 'beat the s**t out of it); keep covered in a warm place; allow to rise 2 to 8 hours
6. roll out dough to 1/4 inch thick, approximately 16:9 ratio for the widescreen version, or 4:3 for standard (sorry...a little video humor...actually, wider IS better)
7. melt 2 sticks butter; add honey (somewhat optional...probably 4 to 6 tbsp); brush butter/honey over the entire rolled-out dough (try to get the honey from the bottom of the pot; DO NOT USE ALL THE BUTTER...see below); sprinkle cinnamon liberally, and nutmeg_ (nutmeg is optional). cover with raisins (yellow preferred; also any other dried fruit you may like, such as apples, dates).
8. roll the assembly up like a jelly roll; slice into 1 to 1.5 inch segments...about 15 to 18 total
9. back to the butter on the stove: add more honey, sugar_ (white or brown...or add molasses to white sugar) until thick (basically until most of the butter is absorbed and no longer just floating...probably about a cup, but don't just dump it all in at once). pour this mixture into a 13 x 9 x 2 glass pan; place segments orderly into butter mix in pan (think 5 rows of 3 or so...fill in at the ends with the smaller segments); allow to rise until pan is full
10. bake at 325 to 350F for 25 to 30 minutes
11. remove from oven and overturn immediately onto a tray (requires a little strength, dexterity, and speed to avoid making a mess...best to place the tray over the glass pan prior to overturning)
1. dissolve 1 pack yeast in 1/4 cup warm water
2. add: 1 cup whole wheat flour (sifted after measuring, if desired), 1 cup scalded milk; mix to uniform consistency
3. keep covered in a warm place; allow to rise until dimpled (1 to 3 hours...I start the micro-convection at 100F for a few minutes)
4. mix lightly in a bowl: 2 egg yolks, 1/2 tsp salt, 1/2 stick melted butter, about 3 tbsp honey, 2 tbsp grated lemon rind (optional)
5. add egg mixture to previous flour mixture; add to this 3 cups white flour (sift after measuring, one cup at a time, if desired); blend to uniform consistency (polite way to say 'beat the s**t out of it); keep covered in a warm place; allow to rise 2 to 8 hours
6. roll out dough to 1/4 inch thick, approximately 16:9 ratio for the widescreen version, or 4:3 for standard (sorry...a little video humor...actually, wider IS better)
7. melt 2 sticks butter; add honey (somewhat optional...probably 4 to 6 tbsp); brush butter/honey over the entire rolled-out dough (try to get the honey from the bottom of the pot; DO NOT USE ALL THE BUTTER...see below); sprinkle cinnamon liberally, and nutmeg_ (nutmeg is optional). cover with raisins (yellow preferred; also any other dried fruit you may like, such as apples, dates).
8. roll the assembly up like a jelly roll; slice into 1 to 1.5 inch segments...about 15 to 18 total
9. back to the butter on the stove: add more honey, sugar_ (white or brown...or add molasses to white sugar) until thick (basically until most of the butter is absorbed and no longer just floating...probably about a cup, but don't just dump it all in at once). pour this mixture into a 13 x 9 x 2 glass pan; place segments orderly into butter mix in pan (think 5 rows of 3 or so...fill in at the ends with the smaller segments); allow to rise until pan is full
10. bake at 325 to 350F for 25 to 30 minutes
11. remove from oven and overturn immediately onto a tray (requires a little strength, dexterity, and speed to avoid making a mess...best to place the tray over the glass pan prior to overturning)
Radio Days
Way back when, before I had satellite radio or an iPod, I would listen to broadcast radio. I guess I'm a media and first amendment buff, so I felt the bittersweet emotion of enraged amusement.
I'd leave work between 4:30 and 4:45, and tune to 99.5, WBAI, the flagship Pacifica station, and listen to Eutrice Lied (and eventually some other fop named Hugh after they had their leadership shakedown) do Talk Back, a phone-in show. you can imagine...
A classic example is the caller complaining about the police rousting the homeless from their cardboard boxes on cold nights to force them to shelters. The following week someone would call about the tragedy when a firetrap killed a family, but the city wasn't doing enough to provide the poor with safe housing...as if we can ever have it both ways.
I'd reach the edge of the reception range, and tune to 104.9, WIHS, the local Christian station, to catch the 5 pm news (listener supported...and I could never determine if it was kind or cruel to offer a pledge if it would be used to get their lead newsman a tongue transplant...the guy reminds me of William Shawn, the leader of the rat pack in The Princess Bride...both in appearance and voice).
Every day there would be an obscure story about abortion...not really passing an opinion, but planting enough seeds to make it seem it was rampant. All stories about Bush were positive. All stories about Kerry and the Democrats had a negative slant...such as how he might be more accommodating towards gays. There were always stories about Christian persecution somewhere in the world, and occasionally there would be a story about how some other faith was kind. The best I can say about them is that they were routinely pro-Israel.
But the bias from both sides was clear...particularly in the selection and presentation of stories and discussion...and it was a bit entertaining while it lasted.
I'd leave work between 4:30 and 4:45, and tune to 99.5, WBAI, the flagship Pacifica station, and listen to Eutrice Lied (and eventually some other fop named Hugh after they had their leadership shakedown) do Talk Back, a phone-in show. you can imagine...
A classic example is the caller complaining about the police rousting the homeless from their cardboard boxes on cold nights to force them to shelters. The following week someone would call about the tragedy when a firetrap killed a family, but the city wasn't doing enough to provide the poor with safe housing...as if we can ever have it both ways.
I'd reach the edge of the reception range, and tune to 104.9, WIHS, the local Christian station, to catch the 5 pm news (listener supported...and I could never determine if it was kind or cruel to offer a pledge if it would be used to get their lead newsman a tongue transplant...the guy reminds me of William Shawn, the leader of the rat pack in The Princess Bride...both in appearance and voice).
Every day there would be an obscure story about abortion...not really passing an opinion, but planting enough seeds to make it seem it was rampant. All stories about Bush were positive. All stories about Kerry and the Democrats had a negative slant...such as how he might be more accommodating towards gays. There were always stories about Christian persecution somewhere in the world, and occasionally there would be a story about how some other faith was kind. The best I can say about them is that they were routinely pro-Israel.
But the bias from both sides was clear...particularly in the selection and presentation of stories and discussion...and it was a bit entertaining while it lasted.
Health Insurance
Responding to a video on health insurance. See http://www.youtube.com/watch?v=bLJxmJZXgNI
It seems as if the pols don't want to solve any problem unless they can solve EVERY problem. The short list for health care:
1. high cost of care
2. high cost of insurance
3. uninsured
4. underinsured
5. and now, caring for illegal immigrants
Pay attention the next time you see an article about the high cost of health care/insurance. The story will NOT differentiate between health CARE and health WELFARE: that is, people who think that they can buy (or have provided) health insurance at, say, $4000 per year, but EXPECT $6000, $15000, or more in health care services.
Alternatively, they will not show you the difference between buying a policy at $4000 and paying $3000 in bills. Either way, they claim they cannot get/afford treatment, and that someone has to help.
I guess the path to resolution is to look at the facts and the law, and not let emotion get the better of you...emotion being the path of the left on just about every issue: find one case that cannot be solved, tug at heart strings, claim system is unfair.
The broader picture is that, plus or minus, health care is going to cost what it is going to cost. Yeah...maybe we can reduce costs a few percent by directing the un(der)-insured to PCPs and minimizing emergency room visits...but that's just a tool, not a solution. The costs are going to be borne by taxpayers and those who buy insurance.
So get the pols to admit it...set the rules, and abide by them. Figure out what the lowest cost solution is (government insurance or private insurance), and implement it.
Downsides:
Government insurance: same as public housing and other one-size-fits-all approaches
Private insurance: no accountability. Note the rapid increase in insurance costs after the Clinton initiative failed. Why? Because they could. The adversary to their business model disappeared. I really do resent insurance CEO salaries of $90M when they can deny treatment to customers, and say that is necessary so they can treat their customers. That is the big lie that has yet to face any intelligent scrutiny, and that is $90M unaccounted for in health care costs.
Last, this ranks just above gay marriage as an important issue. US world standing, education, economy, energy, moderating islam...far more important.
It seems as if the pols don't want to solve any problem unless they can solve EVERY problem. The short list for health care:
1. high cost of care
2. high cost of insurance
3. uninsured
4. underinsured
5. and now, caring for illegal immigrants
Pay attention the next time you see an article about the high cost of health care/insurance. The story will NOT differentiate between health CARE and health WELFARE: that is, people who think that they can buy (or have provided) health insurance at, say, $4000 per year, but EXPECT $6000, $15000, or more in health care services.
Alternatively, they will not show you the difference between buying a policy at $4000 and paying $3000 in bills. Either way, they claim they cannot get/afford treatment, and that someone has to help.
I guess the path to resolution is to look at the facts and the law, and not let emotion get the better of you...emotion being the path of the left on just about every issue: find one case that cannot be solved, tug at heart strings, claim system is unfair.
The broader picture is that, plus or minus, health care is going to cost what it is going to cost. Yeah...maybe we can reduce costs a few percent by directing the un(der)-insured to PCPs and minimizing emergency room visits...but that's just a tool, not a solution. The costs are going to be borne by taxpayers and those who buy insurance.
So get the pols to admit it...set the rules, and abide by them. Figure out what the lowest cost solution is (government insurance or private insurance), and implement it.
Downsides:
Government insurance: same as public housing and other one-size-fits-all approaches
Private insurance: no accountability. Note the rapid increase in insurance costs after the Clinton initiative failed. Why? Because they could. The adversary to their business model disappeared. I really do resent insurance CEO salaries of $90M when they can deny treatment to customers, and say that is necessary so they can treat their customers. That is the big lie that has yet to face any intelligent scrutiny, and that is $90M unaccounted for in health care costs.
Last, this ranks just above gay marriage as an important issue. US world standing, education, economy, energy, moderating islam...far more important.
Thomas Friedman
I've decided to review some of my musings over the past months and years to populate this...
Responding to a piece by Thomas Friedman, again in the NYTimes, dated May 4 2008, called 'Who Will Tell the People'. See http://www.nytimes.com/2008/05/04/opinion/04friedman.html?ref=opinion for the article.
I've been reading Friedman for years, and even if I don't always agree with his position, I have to respect the questions he's asking.
Unfortunately, he's been writing pretty much the same, tired pieces for a while, but this appears to be (one of) his first piece(s) since he took book hiatus. I probably would have missed it when reading the paper.
I think you've been hearing me say this for a while, that one of the key sources of wealth is innovation (something I learned in biz school), and one of the key technologies for the future is bio...and Bush essentially killed that...along with a whole lot of other stuff that would either poise or engage this country for the future...and NO...we can't blame this on Clinton.
One thing Friedman doesn't hit on is that all the wealth seems to be going to the elite class (remember...the first action of the government was to make sure that the banks don't fail), failing to bring the rest of us up with the tide, and in fact doing quite the opposite. Not to say that the sub-prime crew isn't responsible for it's situation, but when you read about billionaires making more, you somehow think that maybe you are entitled to a piece (at least if you are willing to work hard).
The only real issue I have with this piece is the last paragraph. he says that people are waiting to be enlisted. That's very Soviet...instead, why aren't people (corporations, billionaires) taking the risk of the challenge? That's the real yearning that's been lost in this country.
Responding to a piece by Thomas Friedman, again in the NYTimes, dated May 4 2008, called 'Who Will Tell the People'. See http://www.nytimes.com/2008/05/04/opinion/04friedman.html?ref=opinion for the article.
I've been reading Friedman for years, and even if I don't always agree with his position, I have to respect the questions he's asking.
Unfortunately, he's been writing pretty much the same, tired pieces for a while, but this appears to be (one of) his first piece(s) since he took book hiatus. I probably would have missed it when reading the paper.
I think you've been hearing me say this for a while, that one of the key sources of wealth is innovation (something I learned in biz school), and one of the key technologies for the future is bio...and Bush essentially killed that...along with a whole lot of other stuff that would either poise or engage this country for the future...and NO...we can't blame this on Clinton.
One thing Friedman doesn't hit on is that all the wealth seems to be going to the elite class (remember...the first action of the government was to make sure that the banks don't fail), failing to bring the rest of us up with the tide, and in fact doing quite the opposite. Not to say that the sub-prime crew isn't responsible for it's situation, but when you read about billionaires making more, you somehow think that maybe you are entitled to a piece (at least if you are willing to work hard).
The only real issue I have with this piece is the last paragraph. he says that people are waiting to be enlisted. That's very Soviet...instead, why aren't people (corporations, billionaires) taking the risk of the challenge? That's the real yearning that's been lost in this country.
Risk Management
A big part of my job is risk management: identification of risk, establishing risk plans to mitigate those risks, and reporting all of this to my management and customer. On Sunday, January 4 2009, the New York Times Sunday magazine published an article on risk management as practiced (or malpracticed) in the financial industry, and how one analyst believed it was a key driver for the current economic situation. See:
http://www.nytimes.com/2009/01/04/magazine/04risk-t.html?_r=1&scp=1&sq=risk%20management&st=cse
for the article. I finally finished reading the article this week, and found it interesting, but unnecessarily alarmist. By that I mean that the critics of the practices offered neither realistic alternatives nor identification of any key middle ground between qualitative and quantitative risk analysis, and seemed to condemn the risk tools along with their misapplication.
First, there are folks who will say that unless you have a 100% solution it is no good. By those criteria, we would not even be riding horses, no less putting someone into space. The answer to that is obvious, and implicit in its definition: it's called RISK, which means you don't know something, and CAN'T know. See a similar argument in today's health care debate: unless you can insure 100% of the people, you don't have a viable solution. I think we all know that isn't true.
There's also a huge contingent that says they don't believe in numbers, ever…except that their pay checks are too small and their taxes are too high. Any attempt to use numbers for something is by definition flawed to them. Of course, there's no alternate path to gathering or analyzing data, but that doesn't matter until something goes wrong and we need someone to blame…or things go very well, and they want their share. We call people who fear data 'English majors'. There are too many of them.
Last, VaR (the risk tool criticized in the article) may not be a perfect tool, but it sounds like a good first approach. Yes, it only watches for 2 sigma risk (95%) on assets, with the criticism that it doesn't watch for 3 sigma (99%). Even assuming it did watch for 3 sigma, once that is achieved the criticism will be that we don't have 4 sigma. Pardon the pun, but 'go figure'.
Risk, at least as practiced by the finance industry, is a quantitative measure of qualitative events, and qualitative measure of quantified events. What they ignored was that the rules were changing. Make it easier for people to get loans and more people will borrow, and more will default. Taking away the safeguards puts us at risk. Strip away redundancy (for instance, fewer but larger banks) to achieve more efficient markets, and we are more at risk. Marketing risky investments as safe so that all the gains go to the few, and with impunity, is the final ingredient in the recipe for economic disaster.
There's something to be said for tradition. 20% down, no more than 35% of your income towards housing and 39% total debt, were initially established qualitatively…but they worked.
http://www.nytimes.com/2009/01/04/magazine/04risk-t.html?_r=1&scp=1&sq=risk%20management&st=cse
for the article. I finally finished reading the article this week, and found it interesting, but unnecessarily alarmist. By that I mean that the critics of the practices offered neither realistic alternatives nor identification of any key middle ground between qualitative and quantitative risk analysis, and seemed to condemn the risk tools along with their misapplication.
First, there are folks who will say that unless you have a 100% solution it is no good. By those criteria, we would not even be riding horses, no less putting someone into space. The answer to that is obvious, and implicit in its definition: it's called RISK, which means you don't know something, and CAN'T know. See a similar argument in today's health care debate: unless you can insure 100% of the people, you don't have a viable solution. I think we all know that isn't true.
There's also a huge contingent that says they don't believe in numbers, ever…except that their pay checks are too small and their taxes are too high. Any attempt to use numbers for something is by definition flawed to them. Of course, there's no alternate path to gathering or analyzing data, but that doesn't matter until something goes wrong and we need someone to blame…or things go very well, and they want their share. We call people who fear data 'English majors'. There are too many of them.
Last, VaR (the risk tool criticized in the article) may not be a perfect tool, but it sounds like a good first approach. Yes, it only watches for 2 sigma risk (95%) on assets, with the criticism that it doesn't watch for 3 sigma (99%). Even assuming it did watch for 3 sigma, once that is achieved the criticism will be that we don't have 4 sigma. Pardon the pun, but 'go figure'.
Risk, at least as practiced by the finance industry, is a quantitative measure of qualitative events, and qualitative measure of quantified events. What they ignored was that the rules were changing. Make it easier for people to get loans and more people will borrow, and more will default. Taking away the safeguards puts us at risk. Strip away redundancy (for instance, fewer but larger banks) to achieve more efficient markets, and we are more at risk. Marketing risky investments as safe so that all the gains go to the few, and with impunity, is the final ingredient in the recipe for economic disaster.
There's something to be said for tradition. 20% down, no more than 35% of your income towards housing and 39% total debt, were initially established qualitatively…but they worked.
time to join the fray
read my blog...see my blog...link to my blog...everyone seems to have something to say, so why not me?
I'm an engineer, so I see things through a different, and usually practical, light. when I was in college, I shunned classes that required term papers...but in grad school I somehow took to them. I guess it was the time of my life to explore. I found I could write, express my ideas, and get them across...hopefully in a humorous way (two greatest influences: Mrs. Huber in high school, and PJ O'Rourke). I know that isn't usual for engineers, and found myself spending lots of time proof-reading documents at work, condensing and linking ideas in a way that made them intelligible, entertaining, and easier to read.
I find many coincidences across my life...the simple visit to a store will recall stories and events from many years ago, so I can't just write about buying a shirt, but must somehow link it to a previous shopping trauma. current events are related to historical events, and I'm sure future events will intertwine with them as well.
so here goes...
I'm an engineer, so I see things through a different, and usually practical, light. when I was in college, I shunned classes that required term papers...but in grad school I somehow took to them. I guess it was the time of my life to explore. I found I could write, express my ideas, and get them across...hopefully in a humorous way (two greatest influences: Mrs. Huber in high school, and PJ O'Rourke). I know that isn't usual for engineers, and found myself spending lots of time proof-reading documents at work, condensing and linking ideas in a way that made them intelligible, entertaining, and easier to read.
I find many coincidences across my life...the simple visit to a store will recall stories and events from many years ago, so I can't just write about buying a shirt, but must somehow link it to a previous shopping trauma. current events are related to historical events, and I'm sure future events will intertwine with them as well.
so here goes...
Subscribe to:
Posts (Atom)