Start Up Blog

Short memory – GFC

Posted in entrepreneurship by Steve Sammartino on October 18, 2009

Reading the New York Times this weekend it seems clear that the Global Financial Crisis has not diminished the ability of investment bankers to extract bonuses from poorly performing assets and even losses.

I still believe that private profits should also result in private losses. I remember back last year having a discussion with a prominent Australian Venture Capitalist. He held a strong view that the bailout activities were justified, while my view was strongly opposed.

He said:

“If a child trips and skins its knee that’s fine, but there is no point letting it fall from a 10 story building. The consequences are too great”

I said:

“It’s not a child, they’re investment bankers. And maybe what we need right now is a few of them splattered on the sidewalk.”

My view has not changed.

But it seems the general populous has a short memory as the rot is returning very quickly. In fact, it might do both our economy and our environment good to let the current system bleed for a while. Why not allow time for new eco-friendly industries and  egalitarian reward systems arrive?

Startup Blog wonders what your think?

Picture 118

4 Responses

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  1. Michael Fox said, on October 18, 2009 at 9:37 pm

    It’s a tricky problem. If you’re a bank and you ‘try to do the right thing’ and not pay large bonuses all your good people will leave to the banks that do pay the bonuses. The only way to prevent that happening is for the government to introduce legislation restricting bonuses at all banks. I thought the US government did just that when they bailed out the banks, but perhaps Goldman Sachs wasn’t included in that, or perhaps it was only for a limited period of time.

  2. Matthew Cooney said, on October 18, 2009 at 9:39 pm

    totally agree with you. You have to bleed, so you can regenerate fresh blood. Capitalism is about risk and reward. How are the bailouts going to effect the risk mentality into the future?

  3. ohdotoh said, on October 19, 2009 at 3:03 am

    Cargo cults and superstition. That’s what our modern economy is based on. When the rain dance doesn’t work, do it again, do it again, harder, harder… It’s an enormous case of group-think and hive mind gone rotten. People who support the bailout haven’t really thought about the situation, they’re just good at arguing. They’ve taken their favorite position and now they’re making their favorite noises and feeling very self-satisfied and self-righteous.

    We need to find a better way to structure Society that is more stable than we have now. We need less churn and froth. Unfortunately, at least in America, we don’t value Education and haven’t for several decades. We are now too stupid to know just how stupid we are. This makes solving the problem nearly impossible. Not completely impossible, but damn close.

  4. Jim Miller said, on October 29, 2009 at 3:45 am

    Splatter away!

    There is no such thing as “too big to fail”, and that includes the US government. By transferring private debt to public debt, Obama and Bush before him have guaranteed a devaluing of our currency. Just what the banks need!


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