Back in the 1980's Europe led a blessed existence. No credit crunch, no ratings downgrade, no China, India or Brazil for that matter to worry about, USSR was collapsing, NATO was ascendant and there was no bottomless pit now known as Greece. And they had a wonderful crop of golfers in Ballesteros, Woosnam, Torrance, Langer, Lyle, Faldo, et al. The French did not care much for golf but had President Mitterand who first nationalised the banks and then privatised them, just for fun. These golfers did not make as much money as even fourth rate American golfers did, but were just beginning to taste the big bucks, mostly in the form of endorsements. A charming advert for American Express cards had Seve Ballesteros exhorting the general public, in his cutely Spanish accented English, "don't livhhome without it" (ie, don't leave home without it).
Now it is my turn to make that exhortation. Don't get me wrong, I don't play golf, nor can I remember a single current player's name save that of priapic Tiger Woods. Nor am I plugging for Amex or any other card.
Also back in the 1980s a group of us in London were engaged in trying to tell good companies from bad ones so we could smartly lend to the good ones while avoiding the bad ones. The idea was that while our competitors were counting the cost of their lending misadventures, we would be on some beach sipping diquiris and admiring beach beauties. Paul, my friend from those days used to declaim "if it looks like a duck, walks like a duck, and quacks like a duck, IT IS A DUCK", the exasperated capitals occasioned by my unwillingness to apply this maxim to India's fastest growing business house of that time. I thought Paul was a bit odd - after all he used to get all excited by female legs in patterned tights during our postprandial walks to the Barbican library, "god, I fancy that"- and did not take much notice of quacking ducks. I swore then that when it was my turn I shall also exhort others with something similarly pithy and witty.
Later on quacking ducks began to make a lot of sense as did the need for Paul's exhortation. We routinely missed common sense and folk wisdom and would invoke Godel's completeness theorem and its implications for the future of computing while considering a loan to a computer firm, just as easily as we compared Aliber's logit-function failure-prediction model with Altman's linear regression one. It is easy to take leave of common sense in a thicket of exoticism and the latter was like a comfortable, warm and familiar blanket.
That is exactly what happened in the sub-prime crisis. Consider this: if you let 5 glasses of muddy water to settle for a while and then decanted the top 80% of each glass you could have 4 glasses of clean "potable" water (triple A grade drinking water); then if you mix the remaining 20% of each glass, let it rest and again decanted the top 80% of that, will that be the same as the earlier decanting? The financial charlatans of the Wall street said yes, it is as good, and Triple A too. The investor community agreed. After all a lot of mathematics was used, differentials integrated and integrals differentiated, equations solved and Gaussian Copula was invoked. In short, quacking ducks were considered golden geese (which they were, for the privileged few on Wall Street).
We indulge in this every day. Not the differential equations, mind you, but this self delusion that a duck is something other than a duck simply because someone chooses to describe it in some esoteric, incomprehensible way using Greek letters and squiggly symbols. Take the general public for example: the poor things do not realise that in the name of giving their children access to education, the government has actually de-based the latter and now what they have will be worth nothing in the job market, thus making no difference to their futures.Their expectations having been raised (to a non-manual employment in salubrious conditions), the next-gen has become incapable of pursuing their traditional family vocation. The public is smart enough to not accept the offer of a shirt from a naked man; then why do they accept empty promises and (apparently) free cash from the Government?
Governments throwing money at people only creates a culture of dependence and inflation. Both hurt the poor more than the rich. Far more. The culture of dependence is far worse than the inflation. You only have to see the beggars who line Mumbai's Marine Drive on certain days. They patiently await alms from wealthy merchants. Their faces have no hope, not even anger; there is resignation, a certain passivity, a fatal acceptance and unwillingness to even try. You know that they will forever wait to be fed by someone or just lie down and die. But somehow the people are persuaded that a good government is one that gives them freebies and a better one is one that gives them even more. In their own personal lives are they similarly persuaded? Apparently not. Somewhere along people pick up the habit of willingly suspending disbelief.
Why do thousands of earnest young MBAs (mostly from colleges of dubious credentials, I admit) go to work everyday and spout absolute drivel from long-forgotten text-books without sparing a thought to what they are saying? Why are they afraid to call a duck a duck? Why are they ready to believe that "ordinary life" is somehow different from "work life" and that the laws of the former do not apply to the latter?
Why don't they subject what they see and hear to the test of Common Sense?
Why do they leave it at home when they leave for work or school or college?
Everyone should post this sign on the inside of their front door at home so that they are reminded of it every time they open their door to step out: Common sense - don't leave home without it.
Now it is my turn to make that exhortation. Don't get me wrong, I don't play golf, nor can I remember a single current player's name save that of priapic Tiger Woods. Nor am I plugging for Amex or any other card.
Also back in the 1980s a group of us in London were engaged in trying to tell good companies from bad ones so we could smartly lend to the good ones while avoiding the bad ones. The idea was that while our competitors were counting the cost of their lending misadventures, we would be on some beach sipping diquiris and admiring beach beauties. Paul, my friend from those days used to declaim "if it looks like a duck, walks like a duck, and quacks like a duck, IT IS A DUCK", the exasperated capitals occasioned by my unwillingness to apply this maxim to India's fastest growing business house of that time. I thought Paul was a bit odd - after all he used to get all excited by female legs in patterned tights during our postprandial walks to the Barbican library, "god, I fancy that"- and did not take much notice of quacking ducks. I swore then that when it was my turn I shall also exhort others with something similarly pithy and witty.
Later on quacking ducks began to make a lot of sense as did the need for Paul's exhortation. We routinely missed common sense and folk wisdom and would invoke Godel's completeness theorem and its implications for the future of computing while considering a loan to a computer firm, just as easily as we compared Aliber's logit-function failure-prediction model with Altman's linear regression one. It is easy to take leave of common sense in a thicket of exoticism and the latter was like a comfortable, warm and familiar blanket.
That is exactly what happened in the sub-prime crisis. Consider this: if you let 5 glasses of muddy water to settle for a while and then decanted the top 80% of each glass you could have 4 glasses of clean "potable" water (triple A grade drinking water); then if you mix the remaining 20% of each glass, let it rest and again decanted the top 80% of that, will that be the same as the earlier decanting? The financial charlatans of the Wall street said yes, it is as good, and Triple A too. The investor community agreed. After all a lot of mathematics was used, differentials integrated and integrals differentiated, equations solved and Gaussian Copula was invoked. In short, quacking ducks were considered golden geese (which they were, for the privileged few on Wall Street).
We indulge in this every day. Not the differential equations, mind you, but this self delusion that a duck is something other than a duck simply because someone chooses to describe it in some esoteric, incomprehensible way using Greek letters and squiggly symbols. Take the general public for example: the poor things do not realise that in the name of giving their children access to education, the government has actually de-based the latter and now what they have will be worth nothing in the job market, thus making no difference to their futures.Their expectations having been raised (to a non-manual employment in salubrious conditions), the next-gen has become incapable of pursuing their traditional family vocation. The public is smart enough to not accept the offer of a shirt from a naked man; then why do they accept empty promises and (apparently) free cash from the Government?
Governments throwing money at people only creates a culture of dependence and inflation. Both hurt the poor more than the rich. Far more. The culture of dependence is far worse than the inflation. You only have to see the beggars who line Mumbai's Marine Drive on certain days. They patiently await alms from wealthy merchants. Their faces have no hope, not even anger; there is resignation, a certain passivity, a fatal acceptance and unwillingness to even try. You know that they will forever wait to be fed by someone or just lie down and die. But somehow the people are persuaded that a good government is one that gives them freebies and a better one is one that gives them even more. In their own personal lives are they similarly persuaded? Apparently not. Somewhere along people pick up the habit of willingly suspending disbelief.
Why do thousands of earnest young MBAs (mostly from colleges of dubious credentials, I admit) go to work everyday and spout absolute drivel from long-forgotten text-books without sparing a thought to what they are saying? Why are they afraid to call a duck a duck? Why are they ready to believe that "ordinary life" is somehow different from "work life" and that the laws of the former do not apply to the latter?
Why don't they subject what they see and hear to the test of Common Sense?
Why do they leave it at home when they leave for work or school or college?
Everyone should post this sign on the inside of their front door at home so that they are reminded of it every time they open their door to step out: Common sense - don't leave home without it.
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