Let’s not be fooled…the data is not the only problem!

Please take a look at an excellent presentation “Paradigm Shift from Risk to Uncertainty” from Jason Jones, of Jones Consulting. Some much needed common sense on issues that too many in the industry appear all too ready to, at best defer or, at worst ignore.

Get "fit for randomness" [with Ontonix UK]

Unless you have been living in a cave you WILL be aware that the global financial sector has FAILED. It is “shot”! The models upon which the largest institutions and corporations quantified risk are discredited as are the rating agencies who wield such power over entire nations.

No-one could have seen it coming. Right?

WRONG. ABOUT AS WRONG AS YOU COULD BE!!! The warnings were out there. Not from fortune-tellers, soothsayers, prophets of doom and mad men. They, like those that relied upon their own intuition, would probably been marginalised or dismissed. But when warnings came from economists and academics you would have thought that the stakes were sufficiently high, to, at least, listen to what they had to say. NOPE. The most popular course was to ridicule what has since been shown to be the “inconvenient truth”.

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5 Responses to

  1. David, the problem with Greece or the banking system is not one of complexity. It is a political failure. Everyone with a bit of brain matter knows that it doesn’t matter what size a business, bank or country is, it does have to operate within its financial means and that also requires that it does not borrow more money than it can reasonably pay interest and repayments for.

    When I go to a bank they ask me how much I make and I need to prove it by showing them my income statement. Politicians however and especially the European ones misused the banking system (whose income and taxation they control which is a grave conflict of interest) to increase their ability to borrow money to overspend their budgets. And it was not even money that the banks had, but they allowed them (by changing the banking regulations) to print fresh money by allowing them to only retain a small percentage of their capital and multiply that in the form of derivatives that additionally were completely insanely rated by the agencies. Debt given to countries was ‘secure’ debt as it was given to those people who print the money supply and thus could reasonably claim that they could always pay the interest, if not the debt itself. This ridiculous approach was sold to the banks by allowing them to make immense profits that increased their incomes in selling the derivatives and allowed them to create huge valueless share portfolios that again allowed them to expand.

    It is not complex. It is not risky. It is IMMORAL and a LIE. It is the stupid citizens of these countries who are still voting for those politicians (left and right) and now are angry that they have to pay the money back. The Greek government got their people to vote for them by saying: Look we don’t need to ask you to pay your taxes because we get the money from these stupid pricks in the EU who simply give it to us with no proof whatsoever.

    Measure the complexity of that …

  2. Hi Max,
    Greed is certainly THE main driver and you, quite rightly, say we can’t measure or predict human nature!

    But, as you have also identified, these forms of “approved” but, nevertheless, immoral activities need a mechanism to facilitate them – as does fraud [the “unapproved” version] – and, guess what, that data IS measurable and, as the increased complexity is detrimental to the “health” of the system, we CAN measure!


    • David, surely anything can be measured and can be interpreted to mean anything … 😉

      But no, it is not greed. that is an easy cop out for the politicians too. It is not the banks who are in the business to make money. it is hard for them to decline these offers of political powers. It is purely the corrupt political structure that is sold to us as democracy and it is us citizens who believe this crap. Why should the political powers utilize software such as yours or any other to measure something they want to hide???

  3. Surely the two are only really “distinguishable” by the labels which indicate, either, what stage in their career they are at, or whether they are better equipped to operate with or without conscience!? http://wp.me/p16h8c-2y

    Think about it man…if we didn’t have bankers and politicians who would soul-less CEO’s and lobbyists have to schmooze? Seriously though, of course “they” would not want to measure something they want to hide. That is why the growing clamour for TRANSPARENCY is such a threat!

    Now that the scale of abuse by, once trusted, Institutions is laid bare, there can be little doubt that the nature of the problem. TRANSPARENCY is the only credible route to (re)building trust: an extremely rare and therefore valuable commodity…particularly in FS & Politics. They need “deep” transformation i.e. not of the green-washing variety.

    Longevity, size, wealth and influential connections, sustained the façade of respectability that hid strategies, reliant upon manipulation of financials and markets, with misinformation, in the form of marketing and rhetoric, intended to maintain the illusion. Let’s face it you have to be pretty “good” to be able to “sell” the concept of regulatory change that facilitates ambiguity of word and deed in exchange for more tax revenues (to mismanage), then share a taste of absolute power with “puppet agencies” to ratify what was required (at greater expense than anyone could have imagined). Then, to accelerate the whole process, increase earnings (by any means), pass off debt of as credit, leverage both and repeat ad infinitum (or so they thought), safe in the knowledge that Politicians were complicit, so they and their Regulators (even if competent) were in no position to do anything beyond token fines (that amounted to mere gestures) in “abuse cases” that could not be swept under the carpet: AND underwrite the moral hazard that was being amplified and spread deeper into the economic domain and “infecting” all others in the process (TBTF).

    Putting transparency and sustainable value at the top of the agenda SHOULD be paramount for FS and Politics but, strangely, this is a course that is resisted at every turn BECAUSE, THE COMPLEXITY OF WHAT THEY HAVE CREATED IS SUCH THAT IT HAS OUTSTRIPPED THEIR CAPABILITY TO (1) MANAGE (2) PREDICT/ANTICIPATE (3) RESPOND (4) “UNTANGLE”, without loss of function &/or incalculable individual/collective loss.

    Institutions that desperately cling to the belief that they can get by by keeping shareholders happy and continue to undervalue customers’ are overlooking the power of the communication tools individuals’ now have a their disposal: potentially Corporate WMD’s!

    Clay Shirky’s quote “it is easier to understand competition than obsolescence” may have been applied to media but it has broader applications.

    If a leader is intent upon fully discharging their responsibilities by acting in the best interests of stakeholders they cannot have an issue with a means of demonstrating their intent.

    Established firms that find a means of reducing complexity can reap the rewards. Otherwise the path is clear for new entrants and emerging economies to capitalise BECAUSE they can satisfy customer/client/citizen demands, evident on and off-line, for demonstrable values and value.


  4. But measuring complexity doesn’t allow you to assess how to untangle it — like measuring speed of an object doesn’t tell you how to change it. You might say: Oh, I am going to fast and if at that point you realize that the speed, brakes and road conditions are no longer a controllable combination all you can do is watch the car go over the edge.

    Yes, we can assume that measuring complexity (speed) could warn us if we are entering dangerous territory, but in one situation 50mph may be ok in another they could be fatal. The assessment of the measuring itself becomes an exercise in understanding or admitting context.

    Yes, some of it is related to shareholder interest because that’s how CEOs stay in power by driving share price up by any means possible, once again regardless of the speed they need go in relationship to road (market) conditions. Shareholders don’t listen to nay-sayer CEOs, they fire them. If the CEO starts to tell his shareholders that he needs to cut the business complexity back and the stock market reacts negatively that will be his last words.

    The same happens in politics. I am trying to say that we allow drivers to steer our political cars who are recklessly going at speeds without even looking what the roads ahead look like. Mostly because they just want to be at the steering wheel as long as possible. Politicians are there because they have been voted for and they know that people don’t vote for them if they tell them that they have to cut back on spending. If they tell their constituents that the taxation and social systems are unmanageable and they can’t go on spending like this that will be their last words too. So they borrow the money at the banks and allow them to push up share prices so the CEOs can stay and the politicians can stay and they can screw us with a false smile on their faces until the whole things explodes. Then they all jump ship and leave us with the mess.

    Let us agree that we basically know what the problem is. But what the heck can we do about it rather than just measure it?

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