On Mon, Sep 14, 2009 at 7:41 AM, Bruce Bostwick <lihan161...@sbcglobal.net>wrote:
> I think you're oversimplifying the arguments for regulation. I don't > believe anyone involved in the process seriously believes regulation is a > one-dimensional parameter, and I think it's disingenuous to suggest that > supporters of plans that involve regulation that is stricter overall are > thinking that way. At the very best, that's a straw man argument. > Forbes magazine seems to take it as a given that lack of regulation was the problem behind our current economic woes: "Despite multiple layers of government oversight and industry self-policing, dangerous gaps in regulation allowed a speculative bubble to build, and then burst, rocking the financial system as it hasn't been since the Great Depression. Its corollary, the belief that the government would step in to prevent an important bank from collapsing, created a sense of complacency about the risks being created. Yet neither the gaps nor the "too big to fail" concept have been eliminated." See http://www.forbes.com/2009/09/11/financial-regulation-reform-business-wall-street-year.html > The market system is made up of people whose sole motivation is to make > more money and make money faster, and whose altruistic motivations are far > behind their motivations to get richer faster if they're there at all, and > often what altruistic motivations they *do* have are overruled by the > contractual obligations the corporations they work for have to pursue every > possible means of making a profit. Hmm. If it really were that simple, I suspect that things wouldn't be so chaotic. People do things for all sorts of reasons, not just profit. Power is a great temptation, too, which leads companies to get in over their heads. The need to "get big fast," as one famous Silicon Valley venture capitalist puts it, creates a lot of pressure on VC-funded companies to grow much faster than they probably otherwise would, which has been the downfall of many. They find that they can't grow the management, IT infrastructure and such fast enough. They can't regulate what they're growing, so to speak. As another VC said to me years ago when he raised questions about a computer retail chain that seemed to be a huge success, "You can hide a lot of problems when you're growing." Let's see how they do when the growth slows down. Sure enough, they failed not long after they ran out of room to grow. That was BusinessLand, if anyone remembers them. They weren't trying to maximize profits, they were just trying to get as big as they could, as fast as they could... because investors imagine that big profits would have to follow. In reality, an industry can undergrow tremendous growth in a short time but fail to produce above-average profits. The airline industry in the 1950s is a standard example - lots of investment in "the future," enormous growth, but nobody really made big profits. Nick
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