Wednesday, September 24, 2008
Innovator's Dilemma - Quote of the Day
Mark Cuban quoting Warren Buffet concerning the current financial crisis: "First you have the innovators, then you have the imitators, then you have the idiots."
Thursday, September 18, 2008
Innovator's Dilemma - Regulations?
Here we are in the middle of a historic chapter in the history of Wall Street. Some are saying that the US Financial System got into trouble due to innovation out-of-control. Thinking about that assessment, they may have a point.
There's lots of finger pointing all around, but think about this:
- Where were the Paul Revere's in the media, sounding the early-warnings? (other than Jim Cramer)
- Where were the Paul Revere's in the Congress, sounding the early-warnings?
- Where were the Federal and State Government Agencies responsible for monitoring this industry?
While human nature typically is more engaged and responsive to emergencies than to the status quo rhythm of the day-to-day, think about it ..... could all of the above missed this current crisis that is impacting every major institution in this sector - virtually all with successful track records that go back over 100 years .... by greed and corruption? Think about that. Maybe one or two firms may get poisoned by a corrupt regime, but virtually all the players in the industry at the same time? Again, think about that.
If alarm sounding was virtually non-existant, what does this suggest? Were laws broken? Not that I've heard thus far. What is different? From what I have heard, laws for this industry have been evolving over the last roughly 2 decades to accelerate home ownership. As some analysts are saying, a nobile cause, but operationalized by softening time-tested rules for qualifying borrowers. On the surface, what institution would loan money to the unqualified? Well, if the government can fine a loaning institution if it doesn't follow new laws that require these institutions to offer these riskier loans, plus a complex set of industry schemes (that get beyond my understanding) allow these loans to be packaged and resold, then a government sanctioned shell-game is unleashed ... that created a bubble (which has its roots with Freddie Mac and Fannie Mae) ... that is now bursting.
Talk about a whole different type of an innovator's dilemma ... an evolved industry, following evolving (but untested) new laws, in a capitalistic system where investors demand that business leaders seek the best possible returns.
I don't pretend to understand why the "policing" of this industry failed, but am becoming increasingly convinced from my ongoing consumption of reporting on the current crisis, that Congress is one of the main reasons for setting the stage for what has happened. If the US does not get a true understanding of 'why', then proper corrective action will not be identified.
Bad-innovation can be tragic. Knee-jerk rhetoric fixes nothing. I believe that passionate innovators appreciate this challange and are dedicated to do their diligence to ensure effective innovation.
There's lots of finger pointing all around, but think about this:
- Where were the Paul Revere's in the media, sounding the early-warnings? (other than Jim Cramer)
- Where were the Paul Revere's in the Congress, sounding the early-warnings?
- Where were the Federal and State Government Agencies responsible for monitoring this industry?
While human nature typically is more engaged and responsive to emergencies than to the status quo rhythm of the day-to-day, think about it ..... could all of the above missed this current crisis that is impacting every major institution in this sector - virtually all with successful track records that go back over 100 years .... by greed and corruption? Think about that. Maybe one or two firms may get poisoned by a corrupt regime, but virtually all the players in the industry at the same time? Again, think about that.
If alarm sounding was virtually non-existant, what does this suggest? Were laws broken? Not that I've heard thus far. What is different? From what I have heard, laws for this industry have been evolving over the last roughly 2 decades to accelerate home ownership. As some analysts are saying, a nobile cause, but operationalized by softening time-tested rules for qualifying borrowers. On the surface, what institution would loan money to the unqualified? Well, if the government can fine a loaning institution if it doesn't follow new laws that require these institutions to offer these riskier loans, plus a complex set of industry schemes (that get beyond my understanding) allow these loans to be packaged and resold, then a government sanctioned shell-game is unleashed ... that created a bubble (which has its roots with Freddie Mac and Fannie Mae) ... that is now bursting.
Talk about a whole different type of an innovator's dilemma ... an evolved industry, following evolving (but untested) new laws, in a capitalistic system where investors demand that business leaders seek the best possible returns.
I don't pretend to understand why the "policing" of this industry failed, but am becoming increasingly convinced from my ongoing consumption of reporting on the current crisis, that Congress is one of the main reasons for setting the stage for what has happened. If the US does not get a true understanding of 'why', then proper corrective action will not be identified.
Bad-innovation can be tragic. Knee-jerk rhetoric fixes nothing. I believe that passionate innovators appreciate this challange and are dedicated to do their diligence to ensure effective innovation.
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