armageddon and cherries

WHY THE WORLD MELTED DOWN IN 2008?

here's my view....

I don’t trust people who claim to have all the answers. It is a lesson I have learnt the hard way. And realized there is actually no other way to learn it!

For anyone who can claim they can predict the future, we all know is a liar. Yet we built a monumental economic pile of crap based on those very ‘predictions’. Quants who claimed they could first package consumer debt obligations and then value them based on predicted cash flows, economists who predicted long-term growth based on myopic short term stimuli (alan the magician anyone), doctors who claim to have found miracle cures to diseases only to find out years later the true consequences of medicating it.

And let me be clear, I am neither a pessimist by nature nor defeatist in attitude. I do believe we can solve problems, real problems, and if and when we are able to do it, it will come with massive positive fore-bearings. I just think the interests of society at large have just not rewarded individuals more keen to solve problems rather than profit from it.

Banking in general and stock & debt markets in particular did start with a higher social obligation at their core –facilitate the exchange of goods & services and fuel growth with limited resources at a risk adjusted cost. Albeit simplified, but true (remember what I said about myself).

Yet somewhere down the line, that social purpose was efficiently hidden by the best and brightest minds (the brightness can now be questioned) that manufactured profit at the cost of social functions they were really meant to play. Not to say it was necessarily evil by itself. Michael Lewis does an excellent job unraveling it all in 2 tomes which if you have not read you HAVE to read…or you will miss the gravity of what has been built on wall street (LIARS POKER & THE BIG SHORT).

At the heart of it, I argue, was a gaping hole. It was the lack of interest in data that financial institutions have forever generated but never really valued (and should all be asked to compulsorily spend time understanding how GOOGLE singlehandedly developed into a core and unmatched asset). Or better said, valued to the extent it suited their purpose. This was shocking given the fact that the data did exist. No one in the industry, then or now, had the ability to collect, store, match and produce it all quickly.

This drove the creation of an industry built on the premise that complicated models can and do mask the relative sparseness of data accessible to them (the limits a result of lack of interest in managing BIG data or investing in it). And in a 15 year boom cycle tracing its roots to the early 90’s (with relatively minor corrections along the way), such assumptions never got tested. Were infact rewarded on the street, in a mad rush to create the most complex models that could be built to create synthetic products that neither fulfilled any social needs nor passed common sense filters.

It can be argued that financial innovation outpaced technological developments, but in my mind that raises more questions than provide answers. For known as they are to be the pioneers of new technology, why did Financial Institutions not drive the development of data management platforms akin to what Google built (and changed the world forever in its wake) given that the efficient management and distribution of data (information) is its very foundation?

It was not to be. What happened is now the subject of many books, documentaries, white papers and popular literature. And none of it needs to be retold.

What I want to share is that this realization was a career-changing one for me. One that I am committed to trying to solve. .