Hi Mary. There's a peculiar thing about intelligent people - they are subject more so than the common bloke to hubris. Having grown up as really smart, they are overly-impressed by their own intelligence, especially if occupying an entitlement niche in society due to parental or ancestral achievement. <including all those super smart people who manage hedge funds with their super computers >
They are indeed on the leading edge, but that doesn't necessarily make them right.
As one excellent example, there was the Globalstar crash over Siberia. A Zenit rocket with 12 satellites went AWOL, ironically because super smart computers had an argument about who was right and who was wrong and they democratically decided the minority was wrong, but the minority was right, so after the smart computers voted the other one to shut up, the rocket crashed.
Which was quite annoying for me because it was a substantial investment I had.
But I wasn't the only investor. There was a group of really super smart econometric prize winning investors called Long Term Capital Management, who counted among their geniuses Scholes of Black-Scholes fame. They had leverage stacked on debt, off-set against options, combined with puts and all sorts, up to the roof. But they were very very smart and had excellent computers.
When Globalstar crashed, that seemed to put them over the edge - they had a significant investment in Globalstar. Primed around the world was the Great Asian Contagion and irrational exuberance and Uncle Al [not then KBE]. A cascading collapse got under way. Seeing the financial carnage looming, there was a rapid financial rescue of the situation involving Green$pan and lots of New York financial magicians. But not before there was a global oops-a-daisy. Which, thankfully, didn't amount to anything great [though it was great for those affected].
The world's financial system was considered to have been endangered.
The leveraged hedge fund computed super smart systems now in place are much bigger than then, with more people depending on an even bigger stack of cards.
It is a vast real-time experiment, on which our lives depend. Which all makes it a LOT of fun. High wire acts are exciting.
It's not wise to depend entirely on those really smart people with their super swanky computers and their garbage-in programmes. It might not be garbage-in, but it might be. We can't tell until we look in the rear-view mirror to see what happened. So far, so good. But there is a LOT of debt stacked up around the world and USA and other housing seems to have rent/capital value/income/taxation/economic prospects not quite aligned correctly for stable continuation.
Indeed, there is a hint that some adjustments are being made as we speak.
I would not depend on "collective wisdom". I have not come across many mobs which show intelligence higher than a toad. They aim at a lowest common denominator in their intellectual prowess. After the mob has killed off a lot of the smarter people in the community, [which they like to do in revolutions and dire times, reverting to alpha male violence to determine outcomes, which the lowest decile is better at than they are at intellectual process, which the highest decile has as their advantage], the decision-making level drops even further.
Mqurice |
