Ranked #1 in the World
Matthew Bishop, NY editor of The Economist, conducts a powerful autopsy of the global financial crisis in his latest book (The Road from Ruin) and surveys the road out of the mess and towards a safer capitalism.
Bishop and Green argue that the efficient market hypothesis has been taken dangerously far and that we need a new form of capitalism grounded on a more sophisticated understanding of human behavior, an argument that seems to be gaining support (see my review of Justin Fox’ The Myth of the Rational Market).
Bishop and Green dedicate a chapter to the idea of a Hippocratic Oath for business managers (with a direct reference to the Thunderbird experience) which they believe can contribute to the necessary professionalization of management and its commitment to the public interest.
In the presentation of the book in Davos last week (see inserted picture) Matthew Bishop recognized he had been initially skeptical about the power of an oath to change behavior, but that the current course of events make him believe that a change in values by those in charge of large corporations and financial institutions is long due, and that a professional code of conduct embedded in business schools and perhaps eventually in professional associations, could contribute to such change.
March 2nd, 2010 at 10:30 pm
I appreciate that this topic is receiving more and more attention via thoroughly researched books (as opposed to Krameresque soliloquies). Justin Fox’s book has been an outstanding history to this point (I’m in the mid 60s) and it sounds like Bishop and Green’s book is as well. There is clearly significant validity to the notion of a “random walk”, as espoused by Working, Samuelson and others 50+ years ago. However, since Mandelbrot’s exit from finance, I’m curious what the next breakthrough paradigm might be. Books such as these are great illuminators, but there still needs to be work on the theoretical and practical underpinnings of a new model going forward that is irresistible to the investing public. And how does this thinking relate to a new operating paradigm for investors and executives? I think the TBird oath, like any oath, is powerful only when anchored in social norms and expectations. There will need to be a tipping point to this mantra that is probably further off than we think (i.e. patience vs immediacy in returns). What concrete steps can we take to demonstrate (statistically and otherwise) that investment operations grounded in sustainability (as dictated by the randomness of markets) serve us better than short selling and day trading (nothing against those two endeavors)? Who is currently working on this, both in academia and in the marketplace? Great topic.