There Are No Atheists in Foxholes

A friend happened to point me to this article from economist Jeff Miron, who argues that the bailout is a terrible idea because of the effect of introducing a moral hazard.

I learned a lot about this phrase, "moral hazard", living through the Asian economic crisis of 1997-1999. So I felt compelled to write a response that I'm duplicating below...

Economists are, by confession, far more useful at near-equilibrium econometrics than at extrema (the edges of booms and busts) such as the one we're experiencing. This is also why idealogues for- and against-regulation are both wrong---best to let the system loose around equilibria (dereg) but need firm and swift clamping at the edges (reg). More simply, desperate times require desperate measures.

Furthermore the larger picture includes sociological and not just economic considerations. If I'm about to lose my job/my house/my family I don't much care about Adam Smith or moral hazards.

The same "moral hazard" arguments were applied across economies in Asia during the devastating dislocations of 1997-1999, backed by a then-naive IMF. Just look at the now-correlation between those that ignored/took that prescription and countries recovering faster/slowly-if-at-all and their doing well/poorly. Do these economists take massacres in Jakarta into account when talking about moral hazards?

I couldn't resist the bait, as it's a pet peeve... :-)

The 4% Without An Opinion

Here in the US it's presidential election season, and it's difficult to turn around without running into one poll or another. Occasionally you run across a poll result that's really useful, like this one heard on KLIV radio one day after the VP debate between Palin and Biden:

"71% of callers thought Biden won, 24% thought Palin won, while 4% have no opinion."

I'd love to find a way tap into the energy of the last 4%, who obviously are passionate enough about their non-opinion to call KLIV and share that belief.

Start-Up vs. Big-Corp Pace

A quick weekend thought I wanted to jot down. I often read or chat with some degree of bemusement the stereotype that "start-up types work really hard round the clock" and "big-corp types just look for the 5 o'clock".

In my own experience of decades operating in both worlds (*), I've found more often than not the opposite is true. The folks with big-corp experience tend to be the most self-motivated, hardest-working, and hardest-charging bunch, wherever you find them. Perhaps it's because they've internalized and instinctively know how competitive the world is out there. Those without experience or only smaller start-up are more liable to use work-life-balance as code for slacking off, which they don't think of as slacking off because they haven't seen anything else.

Also, it isn't true that it's OK to punch out early before the job is done in a large corporation. Certainly you're more likely to be able to get away with it, in a larger jungle, but that doesn't mean it's OK, and you'll eventually pay for it. In today's world, in Silicon Valley, in this global economy, the prize goes to the earnest and the swift and the fruit-bearers, not the clock punchers, start-up or big-corp.

If you're building a start-up, think about that the next time you worry about hiring someone "with only big-corp experience". You might be pleasantly surprised when s/he pushes you to get some real work done!

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(*) my data is limited to the following industries: academia, IT systems integration, investment banking, and Internet services.