Guy Posts

Let’s brainstorm. Or so I thought.

Open brainstorming sessions, as explained by Keith Sawyer in Group Genius, achieve less than we might think. When a group’s focus is on simply getting ideas onto paper, their output is less effective than if led with a strict instruction to focus on generating quality ideas. A creative group needs a facilitator, someone to define the problem and direct people to come up with solutions, someone who says, “No idea is ever worth anything unless it has been well thought out… We want good, practical ideas. Let’s try to avoid stupid or silly ones… the emphasis is on quality not on quantity.”

But, after all, this is a book about collaboration. Sawyer wants to destroy the myth of the “solitary flash of insight” and demonstrate that true creativity is a process of small sparks linked together over time. He uses the telegraph as an example. Henry Morse didn’t invent the telegraph overnight, or even in a year. It took over a decade:

“His 1844 telegraph line depended on many insights contributed over time by many people. At every stage, Morse worked with others—Jackson, Gale, Vail—drawing on their expertise and collaboratively developing the next link in the chain. What made Morse successful was the twelve years of hard work required to iron out the technical problems, and the many small subsequent ideas that made the original idea possible.”

This concept of a steady flow of progress underlies Sawyer’s primary thesis on creativity. “Creativity isn’t about rejecting convention and forgetting what we know. Instead, it’s based on past experience and existing concepts.”

Creativity emerges as one gains a greater understanding of how different people, ideas, and technology link together. Put another way, Sawyer suggests that creativity is about applying past experience to the present. “To be creative, you need to be aware of as many potential analogies as possible; and when faced with a problem, you should try as many analogies as possible.”

In the most convincing section of the book, Sawyer delves into studies that test the solvability rates of certain puzzles. As background social clues and hints were introduced to the test subjects, they solved the problems at much higher rates. Additionally, the more people were exposed to difficult problems, the better they became at solving similar problems in the future. While the studies suggested that people derive their answers from social contexts, almost all the subjects from these studies, when asked how they reached the solutions, referenced a solitary insight. “This is a perfect example of the phenomenon psychologists call confabulation,” Sawyer explains. “People have no trouble coming up with explanations for behavior after the fact. They believe they had a solitary insight, but the real story is that a social encounter was responsible for the idea.”

These findings lead Sawyer to the conclusion that because “innovation emerges from the bottom up, unpredictably and improvisationally,” institutions must be structured to best capture and combine the sparks that end up changing the world. Here he begins to lose himself. He champions Linux and Wikipedia as models of open collaboration. In spirit, the examples may be adequate, but in reality, Linux has yet to conquer Microsoft, and Wikipedia struggles to maintain a level of quality deemed acceptable for scholarly and professional work. Linux and Wikipedia are like open ended brain storming sessions. Linux comes up with more features at the cost of many mediocre ones. Wikipedia presents good information at the expense of erroneous entries. Quality monitoring and filtering out the good from the bad is the cost that will continue to hold each of them back from conquering their for profit competitors.

“It seems to be almost a law of human nature that it is easier for people to agree on a negative program—on the hatred of an enemy.” – Hayek

F.A. Hayek’s 1944 classic The Road to Serfdom serves as a clarion warning against concentrated government planning. He highlights Nazi Germany and asks his readers, do you want to go down that path? The book reads easily if you agree with his premise. He hones in on something wrong—complete government control of industry—and hammers away at it. However, the book slows down if you stop to consider the seemingly endless number of concessions for situations where government action makes sense to him:

1. “To prohibit the use of certain poisonous substances or to require special precautions in their use, to limit working hours, or to require certain sanitary arrangements, is fully compatible with the preservation of competition.”
2. “The functioning of a competition not only requires adequate organization of certain institutions like money, markets, and channels of information—some of which can never be adequately provided by private enterprise—but it depends, above all, on the existence of an appropriate legal system, a legal system designed both to preserve competition and to make it operate as beneficially as possible.”
3. “Even the most essential pre-requisite of its proper functioning, the prevention of fraud, and deception (including exploitation of ignorance), provides a great and by no means yet fully accomplished object of legislative activity.”
4. “But there can be no doubt that some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody. Indeed, for a considerable part of the population of England this sort of security has long been achieved.”
5. “The case for the state’s helping to organize a comprehensive system of social insurance is very strong.”
6. “Wherever communal action can mitigate disasters against which the individual can neither attempt to guard himself nor make provision for the consequences, such communal action should undoubtedly be taken.”
7. “In any case, the very necessary efforts to secure protection against these [employment] fluctuations do not lead to the kind of planning which constitutes such a threat to our freedom.”

This hedging leads to some confusion as to what exactly he’s trying to say. All the above programs would require government planning and allocation of market resources. While he allows the government to plan programs to provide an adequate amount of food, shelter, and clothing for each citizen, in practice he would likely oppose any proposed policy to meet those minimums. As he makes clear, a government with this authority “would not only decide what commodities and services were to be available and in what quantities; it would be able to direct their distribution between districts and groups and could, if it wished, discriminate between persons to any degree it liked.” Furthermore, a defense on the basis that a government redistribution of food and shelter represents a benign and trustworthy act would there again oppose his own suspicious words: “even if we assume the dominant power to be as idealistic and unselfish as we can possibly conceive… How small is the likelihood that it will be unselfish and how great are the temptations!”

Furthermore, he seems to attribute the rise of Nazism to the German scholars and intellectuals that discussed Marx. He cautions against the same discussions happening in the West: “No description in general terms can give an adequate idea of the similarity of much of current English political literature to the works which destroyed the belief in Western civilization in Germany and created the state of mind in which Nazism could become successful.” Hayek manages to leave out a discussion of German hyperinflation in the early 1920s which appears to be a stronger explanation for why “the ideas of 1789—Liberty, equality, fraternity” became viewed as “commercial ideals which have no purpose but to secure certain advantages to individuals.”

Although the structure of his argument is weak he admits that his work is altogether incomplete—The Road to Serfdom exists as one part of a larger discourse on political and economic theory. In the preface to the 1976 edition of the book, he notes, “the discussion of the consequences of socialist policies which the book attempts is of course not complete without an adequate account of what an appropriately run market order requires and can achieve.”

He captures, appropriately, a larger concept and identifies a fundamental flaw with the socialist mindset. In the attempt to plan away inequities in the interest of the “common good,” even more get created. The scope of a centralized planning is broad, the goal is vague, but the consequences are very real. He explains:

The “social goal,” or “common purpose,” for which society is to be organized is usually vaguely described as the “common good,” the “general welfare,” or the “general interest.” It does not need much reflection to see that these terms have no sufficiently definite meaning to determine a particular course of action. The welfare and the happiness of millions cannot be measured on a single scale of less and more. The welfare of a people, like the happiness of a man, depends on a great many things that can be provided in an infinite variety of combinations. It cannot be adequately expressed as a single end, but only as a hierarchy of ends, a comprehensive scale of values in which every need of every person is given its place.

As an alternative to the “common good” and “general welfare,” Hayek adopts “competition” and “freedom” as counterparts. But like the socialist theories he denounces, he fails to inject meaning into these platitudes. The Road to Serfdom succeeds in questioning socialism, however in not advancing a clear alternative, Hayek fails “to determine a particular course of action.”

It’s difficult to write on a book that’s been elevated as highly as The Great Gatsby. So much has been said, by so many people that to move in the direction of exploring a greater, newer meaning would be akin to Gatsby pursuing Daisy Buchanan— an unrealistic goal, a delusion. Gatsby will never have Daisy. I will never have a unique view of the novel.

To that end, I pursue a basic thesis: Fitzgerald manifests the hopes and dreams of his primary characters to demonstrate the consequences of an unceasing individual focus on realizing them.

For Gatsby, the dream is Daisy. Gatsby was infected with the concept of Daisy when he was a young man and he’s wanted her—or perhaps the infinite hope she represented—ever since. The mansion, vehicles, and parties have become an outlet for “the colossal vitality” of Gatsby’s illusion— if only Daisy would notice them, she would be his again. Daisy is married to Tom Buchanan.

Tom is a peremptory alpha male. Fitzgerald describes him as having “two shining, arrogant eyes” that “gave him the appearance of always leaning aggressively forward… his speaking voice, a gruff husky tenor” contained a touch of “paternal contempt in it.” Fitzgerald includes a passage where he “compels” someone from a room “as though he were moving a checker to another square.”

The stage is set for a duel between Tom and Gatsby. Gatsby believes he can pry Daisy from Tom’s clutches by turning the clock back and resurrecting the past to “just the way it was before.” Meanwhile, to lose Daisy would be an affront to Tom’s vise-grip over the world that he has labored to maintain.

The consequences of the clash between Gatsby and Tom shed light on the destructive consequences of undertaking excessive means to realize one’s self-inflicted expectations. As the lies compound and the body count mounts, Fitzgerald conveys to the reader that the seeds of dishonesty, malconduct, and injustice find cozy quarters among the crystalline structures of our delusions.

If we assume Fitzgerald’s voice mirrors that of Nick Carraway, the narrator, he condemns the culture of consumption central to “Tom and Daisy—they smashed up things and creatures and then retreated back into their money or their vast carelessness or whatever it was that kept them together, and let other people clean up the mess they had made.”

When it comes to Gatsby, Fitzgerald displays a greater degree of sympathy as he makes a note about Gatsby’s “extraordinary gift for hope, a romantic readiness such as I have never found in any other person and which it is not likely I shall ever find again.” The dream of reviving a lost love is nothing sinister, it’s romanticism at it’s finest. It’s the culture, the “foul dust [that] floated in the wake of his dreams” that Fitzgerald condemns for Gatsby’s demise. The opulent wealth and empty materialism created a culture whereby strength of character and “internal wealth” became insignificant currency in the market for social vows. He fashions an allegorical scene to better explain the inhuman dynamic of the East:

I see it as a night scene by El Greco: a hundred houses, at once conventional and grotesque, crouching under a sullen, overhanging sky and a lustreless moon. In the foreground four solemn men in dress suits are walking along the sidewalk with a stretcher on which lies a drunken woman in a white evening dress. Her hand, which dangles over the side, sparkles cold with jewels. But no one knows the woman’s name, and no one cares.

Only Nick comes to terms with the consequences of the commodification of human worth. He grows and comes to understand the disingenuousness of undertaking pernicious behavior for the “short-winded elations of man.” He remarks, “I’m thirty… I’m five years too old to lie to myself and call it honor.”  The ability to wonder and hope dies a slow death when focus turns from the majestic gift of life, but to the jewels one wears, or perhaps the daisies they carry.

The blustery, dampened air put the world on edge. Pedestrians clung to their coats as they battled steady salvos of wind. Debris from shedding trees dotted the surface, susceptible still to the wake of a passing car. Colonies of light activated as the sun continued it’s subtle fade away. The crescendo of an economic liquidity crisis was at its loudest and an election was in a few days— both presidential candidates running on varying platforms of change. It was a moment of transition, a time when what would happen next contained a palpable level of uncertainty.

I recount this, not to set up a tale of incredible misfortune, a tale of dramatic consequence, but to mention a bowl of lobster bisque I had for dinner that evening. It was delicious, to the extent that I’ve never desired another. I wanted to preserve the unexpected perfection in a bowl of soup enjoyed on that most imperfect day. It was an odd experience, but the type of experience that Michael Cunningham deftly navigates in his novel, The Hours. He asks, “what if that moment at dinner—that equipoise, that small perfection—were enough? What if you decided to want no more?”

But life, being what it is…

Lehman, bankrupt; AIG, bailed out; Wachovia, welcome to Citigr… Wells Fargo. In 2008, while these dramas were unfolding, I wondered, who got this right? Who is standing tall? Who positioned themselves for this very event? How did they do it?

The Greatest Trade Ever is about John Paulson’s epic fifteen billion dollar hedge fund win and personal cut of over four billion dollars for 2007. “It was,” the book’s author Gregory Zuckerman notes, “the largest one-year payout in the history of the financial markets.”

While Paulson is the focus of the book, Zuckerman breaks up the action by weaving in a solid cast of secondary characters that each deserve their own book. Chief among them is Paolo Pellegrini. “I was forty-five and had zero net worth,” Pellegrini recalls, “from my perspective, I had no prospects.” Desperate, Pellegrini forced his way into an open analyst position at Paulson’s fund.

…a series of intersecting lives and incidents…

It was surely an odd fit, sad really. A man in his late forties in a position typically staffed by someone half his age. Zuckerman writes, “being financially successful was at the top of Pellegrini’s life goals, right up there with having a happy family life. He had failed miserably at both.” Whether it was luck or divine fate, the path of Pellegrini’s life had led him to Paulson’s fund, at this time, at the pinnacle of housing excess. All the mistakes of his past may have driven him to seek new angles, more creative ways to turn his ideas into the cash that had always eluded him. “One day in October 2004, Pellegrini, still nervous about his standing at the firm, got up the nerve to approach Paulson in the hallway to tell his boss that there might be a better way… Why not buy credit-default swaps?”

Paulson liked Pellegrini’s idea. Paulson then tasked him with finding the proof that housing was in a bubble and that betting on a correction would payout handsomely. Pellegrini went to work and found exactly what they were looking for:

“Housing prices had climbed a puny 1.4 percent annually between 1975 and 2000, after inflation was taken into consideration. But they had soared over 7 percent in the following five years, until 2005. The upshot: U.S. home prices would have to drop by almost 40 percent to return to their historic trend line. Not only had prices climbed like never before, but Pellegrini’s figures showed that each time housing had dropped in the past, it fell through the trend line, suggesting that an eventual drop would be brutal.”

With that proof, Paulson and Pellegrini became eager to pile on their trades. Zuckerman includes anecdotes which will lead to nothing short of outrage. The NYTimes recently ran a piece that suggests Goldman Sachs created and sold products that they knew were losers while betting against them. According to Zuckerman, “Paulson and Pellegrini were eager to find ways to expand their wager against risky mortgages; accumulating it in the market sometimes proved a slow process. So they made appointments with bankers at Bear Stearns, Deutsche Bank, Goldman Sachs, and other firms to ask if they could create CDOs that Paulson & Co could essentially bet against.”

If this is accurate, it appears certain banks were willing to package losing mortgages into CDOs to sell to clients… packages constructed for the explicit purpose of being shorted by Paulson. Some bankers were hesitant, including Scott Eichel at Bear Stearns, who Zuckerman quotes, “but it didn’t pass the ethics standards; it was a reputation issue, and it didn’t pass our moral compass. We didn’t think we should sell deals that someone was shorting on the other side.”

While Bear Stearns was hesitant, Zuckerman is clear, “other bankers, including those at Deutsche Bank and Goldman Sachs didn’t see anything wrong with Paulson’s request and agreed to work with his team… Paulson & Co eventually bet against a handful of CDOs with a value of about $5 billion.”

By the end of 2007, Paulson and Pellegrini’s bets had paid off. But even still, most of Pellegrini’s income would be in the form of a year-end bonus. The idea to go long CDS insurance and short selected CDOs was Pellegrini’s to start with, but he was still plagued with uncertainty: “He didn’t know what kind of bonus check Paulson might give him.”

He had little to worry about. As the financial landscape began to tremble, the redemption of Pellegrini was manifest: his keep for 2007, paid out by Paulson, was over $175 million dollars.

I picked up The Gamble because of its subtitle: “General David Petraeus and the American Military Adventure in Iraq, 2006-2008″. Petraeus seems to have succeeded in Iraq and I wanted to understand why.

If you’re not too familiar with the literature on contemporary warfare or well versed in counter-insurgency (COIN) tactics, the book succeeds in providing a clear explanation of the basics. Furthermore, the book serves as a remarkable case study for how to formulate, convey, adopt, and execute a dramatic shift in strategy.

The problem: Iraq was spiraling into chaos. American patrols were ineffective at diminishing Al Qaeda’s influence. The strategy of shoot first, ask questions later was doing little to win the trust of the Iraqi people. Furthermore, America’s transient troop presence in Iraqi communities created deadly consequences for those who aided American troops. Taken together, the result was greater civilian and military casualties and a growing sense that the country was sliding into— if not already in— a civil war.

General David Petraeus had a plan to change this. The plan required a re-definition of the mission whereby success hinged on securing and winning the trust of the Iraqi people. To do this, many things had to change. First, the strategy of running daily patrols from large forward operating bases was abandoned in favor of smaller outposts spread out around cities and communities with an aim towards placing a soldier on every street corner.

Ricks details a shift in deployment tactics in the book that embodies Petraeus’s emphasis on pragmatic, action-oriented solutions to counterinsurgency:

“The first step under the new approach was to send Special Operations sniper teams to sneak into the building he wanted to occupy. Then he would have a “route clearance” team work its way through the roadside bombs to the building, followed immediately by a company of Army troops or Marines to occupy the building. Upon arrival they would begin building a new combat outpost… They even figured out how to use a crane to immediately deposit a steel ‘crow’s nest’ on top of a building, so they could begin with a well-protected observation post without having to divert troops to filling and carrying sandbags to the roof.”

Additionally, respecting local customs and traditions became standard operating procedure. As Ricks points out, “the entire approach was distinctly alien to the rapid, decisive, mechanistic, and sometimes Manichean mind-set that had been taught to a generation or two of American commanders. It had nothing to do with technology and everything to do with dealing with some of the oldest of human traits— eye-to-eye contact and heeding the values and ways of tribes and their leaders.”

From the war’s onset, lofty expectations of a democratic Iraqi ally working alongside the United States drove strategic discussions away from establishing stability and towards finding a way to hand control of the country back to the Iraqi government— any Iraqi government so long as it was voted on. As part of the surge, “Petraeus adopted a posture of much lowered expectations.” He chose Frederic Remington’s The Stampede as a symbolic image of his mission in Iraq. “Everything about the painting conveys the threat of chaotic danger… If the cowboy’s pony trips, or throws him to the stony ground, the unfortunate man will be ripped by the horns of the charging cows or pulped by their heavy hooves.” Petraeus explains, “it is a metaphor really of the need to be comfortable with slightly chaotic circumstances… A stampede is not always orderly.”

Petraeus (himself holding a Ph.D from Princeton) had assembled a team of intellectual heavyweights:

“Col. Michael Meese, son of the former attorney general, and himself a Princeton Ph.D. in economics; Lt. Col. Douglas Ollivant, a veteran of battles in Najaf and Fallujah, who did a Ph.D. dissertation on Thomas Jefferson’s political theories; Lt. Col Miller, a Columbia University Ph.D. in political science… Even the junior officers around Petraeus seemed to have a maverick streak to them. One of his aides, Capt. Elizabeth McNally, looked like a future general, having been first in her class at West Point and then a Rhodes Scholar.”

They were outsiders in the sense that their academic qualifications went against the typical military pedigree. Ricks gives former President Bush partial credit for cleaning house and turning the mission in Iraq over to the “pragmatists and skeptics, especially the experts whose advice had been disregarded and even denounced during the run-up to the war.”

Results: After an uptick in initial violence, things appear to have stabilized. The constant, persistent troop presence in cities has made it more difficult for insurgents to move and coordinate.  As a result, they’ve begun “to communicate more electronically,” which makes them more vulnerable to “signals interception operation(s).” Here, the surprising lesson was that a conventional troop presence in the form of boots on the ground indirectly leveraged the American’s technological advantage. Furthermore, by building the trust of the local people, the Iraqi citizens have become more willing to take the initiative against Al Qaeda. In one episode, a commander of an American batallion recalls that he “got a call from a local religious leader. ‘We’re going after al Qaeda,’ he said. ‘What we want you to do is stay out of the way.’”

Petraeus remains cautious, as Ricks suggests he must. “The first and foremost task of a commander is to understand, with a steady head, the nature of the conflict in which he is engaged… In order to achieve that understanding a commander can be neither overly optimistic nor pessimistic.” It’s a view that Ricks has taken as well. The verdict on the surge still hangs in the balance. The larger purpose of it, Ricks reminds us, “had been to create a breathing space that would then enable Iraqi politicians to find a way forward and that hadn’t happened.”

Niall Ferguson’s The Ascent of Money paints a broad, general portrait of the financial strategies and schemes that have emerged since the rise of established trade. He focuses on the global expansion of fiat currencies to demonstrate that “behind each great historical phenomenon there lies a financial secret.” Ferguson traces the lineage of common financial instruments like war bonds, stock offerings, insurance policies, and home mortgages. In doing so, he highlights the occasional abuse that comes with the ability to defer payment and print more paper. Ferguson focuses most of his attention on the western world, specifically Great Britain, France, and the United States by following a tried and true narrative style that goes like this: We all know about stock market bubbles. We can thank John Law and the French government for the first one. Let’s start by taking a field trip back to 18th century Europe to talk about what Law did, before working our way back to the time of Enron, pointing out the similarities along the way.

At times, Ferguson’s grasp of Western history makes the historically illiterate wonder if he’s just showing off by casually referencing nine 18th century dignitaries in just two pages of text; on pages 138-9 (hardback) he manages to toss in at lease one reference to:

1. John Law
2. Lady Catherine Knowles
3. Earl of Banbury
4. Victor Amadeus II, Duke of Savoy
5. Marquis of Torcy
6. Louis XIV
7. Duke of Noailles
8. Duke of Orleans
9. Louis XV

Name dropping aside, Ferguson effectively sheds light on a number of financial dramas that influenced the course of political and military history. While Union victories at Vicksburg and Gettysburg fill up history text books as major turning points in the American Civil War, Ferguson explains that it was Ulysses S. Grant’s capture of New Orleans that turned the financial tide of the war in favor of the Union.

Early in the war, the Confederacy subsidized their war efforts by issuing cotton bonds to stake holders in Europe. These bonds entitled holders to a 7% annual coupon and the right to redeem it at maturity for cotton at the pre-war price. Initially, cotton bonds exploded in value as war time demand for cotton and the South’s ability to restrict the supply of cotton to Europe resulted in cotton prices soaring “from $6.25/lb to $27.25/lb.” In this environment, the price of the cotton bonds continued to rise, “making them an irresistibly attractive investment for key members of the British political elite.”

However, such a scheme hinged on “one overriding condition: that investors should be able to take physical possession of the cotton which underpinned the bonds if the South failed to make its interest payments.” When Grant’s troops seized New Orleans, the ability to move Southern cotton to Europe was all but lost, the value of the bonds plummeted, and the European financial support of the Southern war effort vanished. This was disastrous for the Confederate treasury as their only recourse for paying off their debtors was “to print unbacked paper.” According to Ferguson, by 1864, a confederate ‘greyback’ was worth one cent in gold compared to the union ‘greenback’ which held a value of fifty cents.

Too, the Union would win the war.

Ferguson’s greatest feat comes when he adroitly moves each piece of financial history explored earlier in the book under the umbrella of the emerging financial hybrid between America and China— Chimerica. Chimerica, Ferguson notes, accounts “for just over a tenth of the world’s land surface, a quarter of its population, a third of its economic output and more than half of global economic growth in the past eight years.” This economic— potentially imperial— construction represents the fusion of western finance and growing eastern economies whereby America outsources labor to China and then buys the finish product.  At present, it’s a convenient marriage: America’s managerial quest for cost-efficiency and China’s need to reach full employment presents a pareto improving opportunity for both nations.

Cautiously, Ferguson closes his chapter on Chimerica by raising the question of whether “anything could trigger another breakdown of globalization like the one that happened after 1914?” To this he responds, “the obvious answer is a deterioration of political relations between the United States and China… The scenario may seem implausible,” but Ferguson reminds us of “one important lesson of history… Major wars can arise even when economic globalization is very far advanced and the hegemonic position of an English-speaking empire seems fairly secure.”

He concludes the book on a note of markets-are-perfect-and-comprised-of-rational-agents-capitalism as he suggests, “markets are like the mirror of mankind, revealing every hour of every working day the way we value ourselves and the resources of the world around us. It is not the fault of the mirror if it reflects our blemishes as clearly as our beauty.” Strangely, he finds the blemishes in the humans and assumes a single, perfect mirror, free of distortions or odd characteristics that can confuse the beholder. I’m reminded of my last trip to the barber shop when two mirrors across from each other conspired to create the illusion of an ever repeating series of me getting a haircut. While it’s convenient to assume financial markets merely reflect our intent, our intent is often influenced by what we see— a house of mirrors can be rather deceiving.

Death’s a stranger; we know of it, we hear of it, but we don’t know much about it. It lingers behind, above, or generally around our conscience— an entity that can simultaneously compel us to live while fully aware that it, along with our physical selves, shall whither and pass. Perhaps sensing a great opportunity in life, it’s our conscience that compels us to make the most of it.

Camus’s stranger, Meursault, embodies the notion of being physically alive but spiritually dead. He dismisses the trivialities of living because he feels time’s irreversible, unwavering gravitation pulling him closer to a certain end: death. Overwhelmed by the certainty of eternal rest, he easily rationalizes the futility of life. Meursault’s pessimism manifests itself while he’s carrying his mother’s casket at her funeral service. It’s particularly hot, the sun’s beating down on him and he reflects, “if you go slowly, you risk getting sunstroke. But if you go too fast, you work up a sweat and then catch a chill inside the church… There was no way out.” A paradox no doubt, but one that can be worked around, maybe go fast at first and then slow down before you enter the church? Maybe move at a modest pace?

However, compromise is not a part of Meursault’s character as he chooses a certain inaction over an ambiguous action time after time. “When I was a student,” Mesursault reflects, “I had lots of ambitions… But when I had to give up my studies I learned very quickly that none of it really matters.” Furthermore, his girlfriend asks him if he would marry her and he says, “it didn’t make any difference to me and that we could if she wanted to… I explained to her that it didn’t really matter and that if she wanted to, we could get married.”

Meursault concedes his existence and fails to seize the opportunity to control his immediate fate. At the onset of a trial against him, he mulls the idea of reassuring everyone that he “was like everybody else, just like everybody else. But really there wasn’t much point”, and gives up the idea “out of laziness.” Later, he laments, “they seemed to be arguing the case as if it had nothing to do with me. Everything was happening without my participation. My fate was being decided without anyone so much as asking my opinion.” Ironically, the trial concludes with the judge asking him if he has anything to say, Meursault takes a moment before he answers, “No.”

For Meursault, the most important thing was being right, being certain. Being right transcended the frivolities of his day to day existence. As he insists, “I had lived my life one way and I could just as well have lived it another. I had done this and I hadn’t done that… Nothing, nothing mattered… A dark wind had been rising toward me from somewhere deep in my future… this wind leveled whatever was offered to me at the time.” Meursault makes a personal choice (one he fails to see) by yielding to the inevitability of fate and thereby expediting his demise. He was never looking to confirm the power of the individual, but the “gentle indifference of the world.”

By treating the world with the same gentle indifference he expected from it, he proves himself right: the world is indifferent, neutral to our passing. He reflects, “I was sure about me, about everything… sure about my life and sure of the death I had waiting for me. Yes, that was all I had… I had been right, I was still right, I was always right.”

Malcolm Gladwell makes the case in Outliers that a great opportunity plays a larger role in a person’s extraordinary success than an extraordinary talent. Gladwell would likely take one look at this graph and add Jamie Dimon to the list of people blessed by having the right skill set, in the right place, and most importantly, at the right time.

However, this characterization would only be partially correct. Dimon and his mentor Sandy Weill took a risk by entering the world of consumer credit, “the bottom of the financial ladder,” according to Duff McDonald, author of Last Man Standing, “the people with the least money… when their peers were all trying to grab a piece of the increasingly frenetic action in stocks and bonds on Wall Street.”

Their risk proved to be the right one, and they had a plan to capitalize: “run the business conservatively, building fortress balance sheets that gave the wherewithal to make acquisitions during downturns, when assets were cheap.” Dimon and Weill grew their financial conglomerate (eventually becoming Travelers Insurance) so well that they began setting their sights on Citibank. “Wouldn’t that be the mother of all deals?” Dimon says in 1990, along with, “God, I wish we could buy it! I wish we could buy it! Now is the time to buy Citi!”

Nevertheless, the consolidation of these two financial behemoths required the blessing of the federal government and a relaxing of Glass-Steagall regulations. Weill lobbied Federal Reserve Chairman Alan Greenspan and Treasury Secretary Robert Rubin and got the approval he needed in 1993; Glass-Steagall was waived, and the merger between Travelers, an insurance company and Citibank, a commercial bank created a financial monster unseen since the 1930s.

Still raging is the debate over the consequences of tossing Glass-Steagall to the wind. To many, Glass-Steagall erected a brick wall between depositors’ cash and investment bankers’ appetite for risk. By removing that brick wall, depositors’ cash became fuel for heightened risk taking and speculation. There’s no ducking the fact that Dimon and Weill “were early and enthusiastic participants in this movement, a somewhat dubious legacy. On the one hand, banking CEOs can reasonably argue that they needed scale (and leverage) to squeeze out sufficinet profit from businesses that were largely based on low-margin commodity products. On the other hand, it is also clear that the deals that built these giants were like a party drug, blinding Wall Street to their long-term implications. Everybody wanted to seize the moment and grab a share of the fees, the associated risks be damned.”

On the behavior that Dimon participated in, Paul Barrett from the New York times would have preferred McDonald to be more critical:

Dimon indisputably sensed before many others the dangers inherent in fraudulent home loans and the toxic securities Wall Street confected from them. But that’s not the same as being a virtuous banker. Dimon’s minions engaged in many of the deplorable practices that destabilized the financial system. They just stopped sooner and protected their bank from the fallout more effectively. JPMorgan under Dimon’s leadership allowed home buyers to borrow without having to prove their income. The bank did business with sleazy mortgage brokers who would lend to anyone with a heartbeat. These habits ended only in 2008, when it was too late. McDonald lauds Dimon for cleverly unloading huge volumes of the toxic subprime mort­gages JPMorgan originated. But that’s like praising a corporate polluter for trucking his poisonous sludge into the next state. It doesn’t solve the problem; it merely moves it elsewhere.

From Barrett’s critique, I stare at the phrase “solve the problem,” and wonder whether the problem he speaks of is ultimately moot. As Niall Ferguson notes in the Ascent of Money, “poverty is not the result of rapacious financiers exploiting the poor. It has much more to do with the lack of financial institutions, with the absence of banks, not their presence.”

A bank’s primary function is to lend money to those who require it (a risk assuming event), while managing risk appropriately to ensure a timely payout of their obligations. McDonald hones in on Dimon’s penchant for risk management and makes it the focus of his book. While Barrett criticizes McDonald for being seemingly “deaf to the odd notes” of Dimon’s character, I commend McDonald for not portraying Dimon through a thick lens of post crash anti-Wall St. sensationalism. There is much wisdom to learn from Dimon’s approach to risk and operations management on both a personal and corporate level. In Dimon’s words:

• “Don’t go chasing the flavor of the month unless you actually know its ingredients. Just because other people are making money in something, don’t be tempted to follow suit unless you understand the complexities involved and how they profit from it.”
• “Don’t do anything stupid… And don’t waste money. Let everybody else waste money and do stupid things; then we’ll buy them.”
• “It’s not that I don’t like derivatives…It’s only when I don’t understand them. So I want to spend some time getting to know them.”
• “You don’t run a business hoping you don’t have a recession.”

Prudence and risk awareness— true risk awareness— sets Dimon apart. As Warren Buffet notes, “the CEO of any of these firms has to be the chief risk officer… Somebody at the top has to be thinking about that stuff every day. Jamie is the kind of guy you want to have running an institution like that. You have to have somebody that’s got real fear in them of what can happen in markets. They have to know financial history. You can’t evaluate risk in sigmas.”

Just as a medical doctor dedicates a decade to schooling and training, society’s collective interest lies in studying the techniques and traits that are needed to manage systemically important institutions. In a world of increasing financial complexity, we need more Jamie Dimons, not less.

I found a paper I wrote in high school the other and day scanned through it. I focused most on the comment at the end:

“Your conclusion has fabulous insights. We’re just missing your voice— how your experiences and the literature have shaped your opinion.”

The teacher wants my opinion? Who particularly cares what a 15 year old thinks about Herman Hesse’s Siddartha? I certainly had an opinion (as it’s natural to have opinions), but what’s the value in voicing it? What if it’s wrong, flawed, and off the mark? Is it a greater risk to be right and silent, or wrong and outspoken? It depends on the subject I guess.

I read The Rule of Four in 2004 and then again in 2009. During the first pass, the book’s setting to me was unknown, but something I was about to step into, college life. In the tale, uncertainty and doubt cast a cloud over the protagonist, Tom, as he attempts to navigate the waters of his personal life and obligations to scholarship.

In first person fiction the author often constructs a world where an uncertain narrator experiences a world that is all too certain. The Rule of Four is no exception. Tom’s roommates have made the most of their Princeton experience, each in their own way: one is the president of an eating club, another going to medical school, while another is doing research that literally no one else can. Tom on the other hand has little to show for his time and nothing but uncertainty awaiting him after he graduates. While it seems most everyone around him has found their voice, Tom has yet to find his own.

Authors write books that readers can identify with. So it’s at once expected and a little cliché for me to admit that I could identify with Tom. Often in school, I’d ask myself the bigger question, what am I working towards? Punctuating the doubt was a sense that most of my peers had already settled on their own answers to that question and were executing a plan to get there with laser-like focus and efficiency.

My plans, if you could call them plans, were ever changing. Freshman year I hoped to start a business. Sophomore year I wanted to design electronics. Junior year I wanted to be a derivatives trader. When all was said and done, I left with a professional baseball contract. Doubt accrued as I sensed I was falling behind my peers. Fittingly, the last paper I wrote in college came back with the comment: “You’re understanding of the text is clear, but what do you have to say about it?” I still hadn’t found my voice.

What I think now is incomplete. I look back on passages I wrote in high school and can identify broad generalizations and unnecessary complications. Just the same, I will look back on this sentence and form a different opinion of it. Voice then is dynamic, not constant. We have one, but it will change and so will our opinions.

Effective writing gives readers something to hold onto, to think about, and to consider; it’s training camp for the resolution of our doubts, our silence.