Comments on: Didn’t they really have skin in the game?

By: Methinks

Methinks — Fri, 02 Oct 2009 15:27:00 +0000

I wasn’t seriously suggesting we try it. I’m from the Soviet Union and I fully understand the drawbacks (which you describe brilliantly). Socialism turns people into wild animals who will sell their neighbours into the camps for a scrap of bread from the state. We both saw this, I think.

By: Name

Name — Fri, 02 Oct 2009 11:08:00 +0000

http://www.nber.org/papers/w15212

We investigate whether bank performance during the credit crisis of 2008 is related to CEO incentives and share ownership before the crisis and whether CEOs reduced their equity stakes in their banks in anticipation of the crisis. There is no evidence that banks with CEOs whose incentives were better aligned with the interests of their shareholders performed better during the crisis and some evidence that these banks actually performed worse both in terms of stock returns and in terms of accounting return on equity. Further, option compensation did not have an adverse impact on bank performance during the crisis. Bank CEOs did not reduce their holdings of shares in anticipation of the crisis or during the crisis; further, there is no evidence that they hedged their equity exposure. Consequently, they suffered extremely large wealth losses as a result of the crisis.

By: Anonymous

Anonymous — Fri, 02 Oct 2009 06:09:00 +0000

I think Keynes was tool. I blame him.

By: Anonymous

Anonymous — Fri, 02 Oct 2009 03:27:00 +0000

yes to your first question. No m’lady, I meant capitalism is a tool. A box wrench is a simple tool that has no moving parts.A Skill saw is a tool that is more complex and has many parts, yet is still a tool. You might say that a Skill Saw is a process yet a tool all the same.If I trade my surplus dried fruit to you for your surplus Pemmican, we are both presumably better off and we have used the tool of investment in capital goods to do so, that is capitalism at its root.If I really have a huge surplus of dried fruit and my woman makes decent pemmican then I can use the superior pemmican I got from you in my trade and invest it in a more storage pots from Olga the potter, thus next year I can dry and store even more fruit and maybe take another wife so that my labor force grows and I can spread my efforts to other fields.Understand, Methinks, I am just a simple businessman who sat in a crowd of ignorant college age kids who were chanting “kill capitalism” in response to the goading of an older man who was indoctrinating them. I did not, and still do not, believe for a minute that you could approach those kids and counter that man’s influence by arguing Marx. The only way I can see to do it is to demystify capitalism and show it as the natural process it really is, and to show that capitalism has roots, roots that grow in your bedroom when you get up in the morning, get dressed and go out into the world to profit from your efforts. Without those roots, no capitalism.No capital, no capitalism.No profit, no capital.No surplus, no profitOnly a rare few in this world believe they work for no profit, and they are mistaken.
Where does the surplus come from, and do I have to be Warren Buffet to be a capitalist, when my own efforts produce surplus, profit, capital, which I can then use to invest in the market, the whole thing is a process like the Skill Saw and like the skill saw it is a tool.Capitalism is a tool, no mystery there.This is the way I it from a pure street level reasoning of the facts I see in history, anthropology, and personal experience. Perhaps with more education I could say it better, but the facts are there to support what I am saying and the process of human practice of capitalism began so far back in distant history no one can say when that first human brought back food to its den or nest as an investment against having to get up early on the morning to go look for more food.Everything has a root, a foundation, and it can not be divorced from that root or foundation, they have to be seen as one interconnecting process from beginning to end. Capitalism is no different.

By: Surfisto

Surfisto — Fri, 02 Oct 2009 03:10:00 +0000

Yeah, let’s put the thinks back in Methinks huh. Just kidding.