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The problem is not restricted to banking. The problem is that any two competitors X and Y, in any field. If X does not plan for low-probability failure and Y
by jbert 14y ago
The problem is not restricted to banking.
The problem is that any two competitors X and Y, in any field.
If X does not plan for low-probability failure and Y does, then Y will not have the additional inefficiency/overhead and so X will out-compete Y.
If the time frame for low-probability failure is long enough, and if being out-competed means the end of your business, then an efficient market means that risks which typically take longer than time T to manifest will not be handled, where T is the time for X to out-compete Y, given their advantage.
- jacques_chester 14y agoWhat's your point? Customers will choose the mix of cost and risk that makes them comfortable.
- jbert 14y agoI guess that my point is that anyone who thinks that a market will give them long-term stable institutions/companies is wrong. I think that conclusion is likely to be surprising/controversial to some/many people.
- jacques_chester 14y ago> I guess that my point is that anyone who thinks that a market will give them long-term stable institutions/companies is wrong. Definitely. It's a complex, dynamic system that requires enormous amounts of failure, misattribution and foolish optimism to work. The beautiful thing is that it turns these human inevitabilities from negatives into positives.