Arnold Kling  

Suits vs. Geeks Watch

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Wesley Mouch Award... Are Taxes "Passed On"?...

Calvin Trillin interviews a Wall Street old-timer.


When the smart guys started this business of securitizing things that didn't even exist in the first place, who was running the firms they worked for? Our guys! The lower third of the class! Guys who didn't have the foggiest notion of what a credit default swap was.

James Kwak piles on.

Even when you don't have the generational issue that Trillin talks about, the problem is that the sociology of corporations leads to a certain kind of CEO, and as corporations become increasingly dependent on complex technology or complex business processes (for example, the kind of data-driven marketing that consumer packaged companies do), you end up with CEOs who don't understand the key aspects of the companies they are managing.


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COMMENTS (8 to date)
manuelg writes:

> ...CEOs who don't understand the key aspects of the companies they are managing.

These CEOs seems to understand the game of regulatory capture well enough. They may be incompetent, but they are not stupid.

Relte writes:

There is another theory out there, quite controversial, but worth paying attention to: perhaps there are some things that the Universe Does Not Want Us To Know ...

"Two noted financial-physicists speculate that the future may be pushing back on the present to avert the disaster of observing the Finance boson.

The quest to observe the Finance boson has certainly been plagued by its share of troubles, from the cancellation of the Superannuation Supercollider in 1993 to the Large Housing Collider's streak of technical troubles. In fact, the projects have suffered such bad luck that Holding Back Netincome of the Goldman Sachs Institute in Copenhagen and Masao Nunomymoney of the Yudontwana Institute for Theoretical Finance in Kyoto wonder if it isn't bad luck at all, but future influences rippling back to sabotage them. In papers like "Test of Effect From Future in Large Housing Collider: a Proposal" and "Search for Future Influence From LHC," they put forth the notion that observing the Finance boson would be such an abhorrent event that the future is actually trying to prevent it from happening.

"It must be our prediction that all Finance producing economies shall have bad luck," Dr. Nielsen said in an e-mail message.

TA writes:

How would Kwak know this, about the "sociology of corporations"?

Elvin writes:

Kwak worked at McKinsey and saw plenty of corporate cultures. I don't always agree with Kwak, but he's probably been up close and seen the inside of many companies. He's seen way more than the average MBA or econ professor.


q writes:

increased specialization => lower information liquidity

+ global alliances based on knowledge and status rather than nationality

Elvin writes:

I'll expand on my previous point. Kwak has seen more corporate cultures than the average sociology professor.

Bill Woolsey writes:

Tullock's Politics of Bureaucracy might be useful reading.

Why do leaders tend to receive information that reinforces what they already know and want to hear?

Competition will help with this problem by killing off the organizations most ineffected by counterproductive bureacratic politics. Of course, when they are bailed out by the taxpayer, that process of selection fails.

BillD writes:

Another suits vs. geeks thought. Many/most ideas are not that new...

http://falkenblog.blogspot.com/2009/10/continuing-lament.html

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