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0 pointsjbert13y ago0 comments

The problem is not restricted to banking.

The problem is that any two competitors X and Y, in any field.

If X does not plan for low-probability failure and Y does, then Y will not have the additional inefficiency/overhead and so X will out-compete Y.

If the time frame for low-probability failure is long enough, and if being out-competed means the end of your business, then an efficient market means that risks which typically take longer than time T to manifest will not be handled, where T is the time for X to out-compete Y, given their advantage.

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jacques_chester13y ago· 2 in thread

What's your point? Customers will choose the mix of cost and risk that makes them comfortable.

jbertOP13y ago

I guess that my point is that anyone who thinks that a market will give them long-term stable institutions/companies is wrong.

I think that conclusion is likely to be surprising/controversial to some/many people.

jacques_chester13y ago

> I guess that my point is that anyone who thinks that a market will give them long-term stable institutions/companies is wrong.

Definitely. It's a complex, dynamic system that requires enormous amounts of failure, misattribution and foolish optimism to work.

The beautiful thing is that it turns these human inevitabilities from negatives into positives.

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