Wired Magazine reports that a formula devised by mathematician David X. Li to evaluate risk was used by all the major financial players – who are now broke and begging for government handouts (a.k.a. welfare), is responsible for the current financial melt down.
True or False? Hmm … I’ll go with False. I’d say the root cause was herding behavior – they all did the same thing at the same time. And when reality emerged, all that “wealth” was revealed to an hallucination such as “House prices always go up”. Until they don’t.
Have to agree with you Dagny. And yes it is a herding syndrome. Financial types are especially risk adverse, so they always look to someone else to take the lead. Then it’s the lemming express. Can’t blame the mathematician. We won’t learn though. Best advise is the same about a restaraunt. If you hear the place is on the hot list of popularity it’s already too late. Oh-Oh! Lemming express.
Ric Frost said:
There are regulatory reasons for herd behavior as well; if everyone else is doing it, you can’t really be blamed for adverse effects, like destroying shareholder value, the world banking system, etc. The easiest due-diligence as a CEO is to do the same thing all the other CEO’s are doing.
Just passing by.Btw, your website have great content!
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