vague, but exciting

the porous city - commerce - investing



email me



Incentive schemes that reward successful managers with huge bonuses, without penalizing them for losing years, skew behavior towards risky investment strategies: "...appearing to create excess returns but in fact taking on hidden tail risks, which produce a steady positive return most of the time as compensation for a rare, very negative, return."

Dealbreaker's refutation is pretty unconvincing. First, I doubt that most traders have enough equity to counteract the effect described above. Second, banks being "long volatility" just means that they make more money when the market moves. That has nothing to do with the risk inherent in an investment strategy's distribution of payouts. One can have a trading strategy that capitalizes on volatility but still hedges risk effectively (I mean, it's not easy...)

My guess is that in most banks it's senior management whose equity compensation ratio is enough to make them take the long view. Therefore you'll see more blowups at poorly managed banks, or at pure-play investment vehicles.

Collaboration, Security, Business, s60, Web analytics, Shopping, Development, OS, Web, Data, Audio, Visual, Product Management, barcamp, WRX, Social, Hardware, RSS, Automobile, Storage, Net, Medical, Android, MacOS, Crowdsourcing, Mobile, Wearables, a11y, Javascript, PIM, Open, Energy

Bicycling, History, Games, Podcasts, San Francisco, Geography, Boston, Video, CrowdFlower, L.A., Transportation, Berlin, Housing, Activism, Friday, Statistics, Agriculture, Surfing, Clothes, Personal care, Politik, Quizzes, Feminism, NYC, Toys, Sports, Law, Minnesota, Travel, Life hacks, Food & Drink

Boston, Mailing lists, L.A., Good tracks, Reviews, Labels, Booking, Streams, Shopping, Hip-hop, Business, Musicians, Mixes, Mp3s, Events, Videos, Making, History, House, Lyrics

Exercise, Life hacks, Me, Working with, Heroes, Gossip, Meditation, Stories, Enemies, Subcultures, Languages, Health, Weblogs, Family, Friends, MOTAS, Vocations, ADD

Comix, Burning Man, Movies, Humor, Poetry, Rhetoric, Literature, Sculpture, Animation, iPad bait, Outlets, Desktop wallpaper bait, Events, Visual, Spoken Word

Microfinance, Management consulting, Marketing and CRM, Investing, Real Estate, Taxes, Macroeconomics, Shopping, Non-profit, IP Law, Personal finance, International Development, Personal services, Web, Insurance

Algorithmic, Type, Architecture, Data visualization, Presentations, Process, IA, User experience, Cool, Furniture, Web, Tools

Physics, Networks, Statistics and Data, Zoology, Psychology, Environment

Vagabond '08, Kenya, Kingdom of Siam, Uganda

Moblog, Friends, Photos I Wish I'd Taken


One Acre Fund


Internet classic

Subscribe to this site's rss feed