Saturday, April 12, 2008

Wall Street and more

Recently, a Fortune article by Shawn Tully asked "what's wrong with Wall Street - and how to fix it" and dealt with one current problem. Another type of problem deals with product development and delivery. These problems do have similar characteristics as has been discussed here.

Looking at Wall Street (and its cohorts) and the financial gaming involved, one has to ask a few questions. Tully suggests three major factors to resolve: ethics and gaming, leverage, and pay.

For the first factor we need to remember that Wall Street and gaming are almost a necessary partner; hopefully, oversight, such as that being suggested by Paulson now, will help. To support their gaming addiction, the Wall Streeters like to leverage big time; let's just say that banks are not allowed to approach what Wall Street takes for granted; again, Paulson needs to reign them in. Now, of course, the main motivation is to line pockets. And this is done short term. Why not make those guys/gals wait?

Why? In one case, a company made oodles (10s billions) the past few years; then, lost big (even more 10s billions) last year. However, pay and bonuses took a bunch of the profits, which were not paid back when things tanked.

We can see similar things with product development with some adjustments. Naturally, we hope that ethics apply to announcement, yet earned-value assessments are very hard to do. Besides, doing things lead to oops, by necessity. So, adjusting and reporting ought to be a normal part of things, not just a game of hide-and-seek. Too, Wall Street might like leverage, but product people like to outsource.

You see, leverage allows grand earnings on the up side; on the downside, it eats the cake and more. The same holds for farming out; you hope that you get magic and rewards. It's not a given, as Boeing has learned of late.

Finally, on the pay, one reason to outsource is to cut cost; that is, one can hope that the supplier can work their magic despite limits. Swamping suppliers with your own experts must be costly; where's the saving?

One can see how finance and marketing might lead to gaming; engineering a plane or any other type of crucial product as a game? Not!


11/04/2010 -- Big Ben is still putting us at risk and trashing the savers.

12/17/2008 -- We'll use made-off in lieu of ponzi, henceforth.

11/26/2008 -- The mess grew and grew, fairy dusting indeed.

10/26/2008 --

That the gaming is insane goes without mention, except many expect otherwise (old Marx had it somewhat right, fictitious capital). So, not only is there the Minsky issue, we have abuse of mathematics. Very interesting, indeed.

08/01/2008 --

It's not enough to rant and spout off. So, let's start something constructive by looking at money and what it is.

Modified: 11/04/2010

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