Clearly Distorted News, in Black and White

Editorial: Brass Balls

Despite its vaunted efficiency, the market system built on rewarding risk is fundamentally inefficient. When times are good the long-term thinkers are shouted down. Money talks and “we’re making money” resounds so loudly in the lobbys of the brokerages that the squeaks of the long term crowd are laughable. The problem it turns out is the very god that has brought us this horn of plenty: competition. “You know what it takes to sell real-estate?” asks Alec Baldwin in GlenGarrey GlenRoss. “Brass Balls.” Exactly. The recent news of Harold Pinters funeral slash obituary slash death The way to win is to take the most risk. And in fact, if you don’t take the most risk, you lose and you’re a loser. A parallel from sports: when olympic atheletes were asked in the weeks leading up to their competition whether– if were it possible to guarantee them a gold metal at the modest price of be death within ten years, about 50% said they’d take the offer. Another: something like 30% of professional cyclists die from epogen and various other enhancement drugs.Obviously anybody who doesnt take these drugs will not win. So Morgan Stanley Goldman Sachs, Lehman all have to be the most aggressive as possible even to be in business, even to stay afloat in the good times. Only too bad– something that risks their demise when the market turns. Remember “Go west young man!” The advertisement for the brokerages should read: “Who wants to stand in the cage with the lions?” Let’s face it, absent regulation brokerages is a bad business, because one day, maybe not today, but one day, the lion will eat you. What’s a good business? What do you say to the young man today? “Go to a regulated industry, young man, like an electrical utility, because if you go to wall street you will be in the cage with the lion. From an individual perspective, anything works. Tell the young man, “Listen. Go to Wall Street and make money, just don’t ever be the last one at the party.” That’s great advice. Unfortunately it doesn’t work for the market as a whole. Any individual can escape the jaws of unregulated markets, and be a lot lot richer in the process, but as a society? the boom-bust will catch the society. And the embarrassing surprise for the free market crowd is that– hey! the market is not efficient. Why not efficient? because the winners assume the most risk: The sit in the cage with the lions they buy a plot of desert land in the desert that was thought unfit for life and build there a city. They haul in the materials, survey the land, hire the people, spend our sweat and tears out there in the desert and then the cycle turns and goddamn that city is abandoned to the elements. would not another less risky allocation of these surveyers, workmen, equipment etc be more efficient? is there a scenario for a market mechanism more efficient than boom/bust, create/destroy? that is the million dollar question. Too bad by the time we answer it it will take that much for a sandwich.