Regulators v Barbarian hordes


As a franchise  Alien v Predator has obvious appeal. Unlike our title it actually sounds like a fair fight. One worth watching!

But pin-striped Barbarians atop elephants at the gates of Basel, London and Washington. How could you tell the combatants apart in hand-to-hand clashes? Well apart from the conspicuous mode of transport lack of conscience and the sharp suits. But Holly wood blockbuster? I think not…Art of War “yes”, FSA Handbook “no chance”.

Rome 

Image by Trois Têtes (TT) via Flickr

In his excellent article in this weeks Financial Times, (Barbarians at the gates of complexity) Prof John Kay, succinctly and effectively makes the point that the lessons from history are there to be learnt.

THERE IS A CONSIDERABLE BODY OF QUALITATIVE EVIDENCE TO SUGGEST THAT A “SYSTEM” CAN SUPPORT A FINITE AMOUNT OF COMPLEXITY. WITH SUITABLE DATA WE,  AT ONTONIX, ARE ABLE TO PROVIDE THE QUANTITATIVE VERIFICATION AND TO MEASURE BOTH CURRENT AND CRITICAL LEVELS WITHIN THAT SYSTEM…NOW THAT’S WHAT I CALL PROGRESS!

Please follow click these links for more Complexity Facts from Ontonix.

“…complexity breeds complexity, and is subject to diminishing  returns. Eventually the costs of increased complexity exceed the benefits” Prof John Kay

I would like to pose the question:

If the Barbarians of Financial Services have had the books but didn’t bother to read them what will be achieved by the introduction of more regulation?

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3 Responses to Regulators v Barbarian hordes

  1. mullermedia says:

    Interesting topic, David. I’m not a financial or a risk-management guy, but would like to mention a couple of related points.

    1. One of the principal “benefits” of regulation–especially the more complex–is unintended consequence (UC). The amount of UC can (I think) go up geometrically as layers of complexity are piled on. Freedom to innovate and prosper are likely to be the ultimate victims.

    2. Big government and big business seem to have affinity for each other. BB can absorb the expense of complex compliance more readily than smaller competitors, and thus regulation can assist them in resisting inroads from innovative smaller companies. BB, through lobbyists and campaign donations can often impact the language of new regulations, further increasing their advantage.

    Have a great Chistmas.

    • Hey Chris you already sound like a smart guy (not for visiting my blog – THANKS), just by choice of career path!

      1. This item kinda sums up the effect of “layering” Dilbert speaks out on: complexity and a novel alternative investment strategy but you are right that innovation becomes a real challenge…too many hoops. “Prosper”, I’m not so sure! Then again that depends upon your perspective. Financial Regulation is intended to benefit the customer, in other words they are the one’s who should prosper as a consequence of regulation.
      Strangely it rarely works out that way. Somehow FS “players” view it that the “more layers”, the greater the complexity, the higher the cost of their services, the less chance of the regulations achieving their original goal.

      ‘Cause, after all, with all that extra work AND the inevitable requirement for “transparency” it means they (FS) have to work twice as hard to find ways of providing an essence of transparency – more expensive by the ounce than designer French fragrance – whilst reaping greater remuneration than was originally the case.

      An alternative strategy is to maintain the level of charges for re-packaged products (sold as new and innovative) but to indulge in more dubious and more risky investment strategies that are so caught up in (flawed) mathematical theory that they should only be sold to investors in the presence of their own “Phd” Prof.

      The beauty of all of the above is that, when you are a B(S.O.)B. and you have the kind of latitude that scale and BG connections affords you, you can invest in this so you don’t have to spend too much time on 2.

      When that much time, effort, opacity has gone into it it is gonna take one smart, persistent and pretty vocal “little guy” with a conscience, to come along and rock the boat. Most of these guys will be “in awe” of the research, investment, technology, etc. and go along – only questioning what their commission is – delivering the latest and best to their loyal and trusting customers to start the process of feeding BB all over again. B-E-A-U-T-I-F-U-L.

      Invest away. Gamble. Take huge salaries. Receive outrageous bonuses. Bask in the power gambling other people’s money affords you. Support dodgy operations, or individuals, or countries, or causes…whatever, do it short term ’cause it s about results NOT strategy and, above all else do it without conscience. If it’s not good for the planet, don’t worry there’s plenty of “hippies” to go save it!

      Leadership: “Thompson Twins” still raining on OUR parade

      Here is my “simplified” take on things for BB (& BG) and if you want the view of Woodrow Wilson in 1913 put that in “search” on the blog

      WIN and you will be richly rewarded.

      LOSE – well that is unthinkable. That can never happen…because BG won’t let it…normally.
      Deny it…everything; blame the market; blame the poor; blame the Chinese; blame Lee Harvey “bloody” Oswald! Tell them you didn’t know what was going on; that your were off that day. Then, only if things aren’t quieting down, accept that the risks weren’t quite fully appreciated or that it was “a one in a million” event. You will be guided re public sentiment by other experts at wasting money….your BG friends! Eventually look sheepish, even remorseful and apologetic BUT NEVER LET IT GET TOO OUT OF HAND AND ACTUALLY APOLOGISE…that could lead to some kind of criminal action if the BG pals come under too much pressure.

      DON’T worry between BG & BB the whole damn thing is so complex that it will be nigh on impossible for ANYONE, ever, to prove any wrongdoing – the inevitable conclusion of BG Prosecutors – UNLESS you are borderline BB, went to the wrong College or vote for “the wrong people” – and in the meantime BG will get the same mugs that let them waste their money and who have just lost money to BB to give us (BG to BB) some more money and lots of their kids money to replace what’s been lost. Then we’ll get some more of their kids’ money to keep the BG/BB market inflated AND reduce the services that BG provide whilst BG/BB start the whole merry dance all over again

      Or am I just getting cynical early!?

      If I had been a Politician I’m sure I could have come up with some even more devious ways to abuse office. But it never really appealed and the fact that these guys haven’t maybe tells us all we need to know about them and their abilities.

      Thanks again for stopping by it is much appreciated. I hope you enjoy reading the response as much as I enjoyed writing it. Quite liberating really!

      Best of Christmas wishes and a healthy, prosperous, 2011 to you and yours.

      David

      • mullermedia says:

        Hi David,

        Slow typing and slower synapses combine to make my comments short. By coincidence, I just started listening to audiobook “The Informant” by Kurt Eichenwald. All true stuff. As you said, all too often BB/BG will see to it that prosecutions as well as news will get spiked.

        Chris

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