"Watch your thoughts; they become words. Watch your words; they become actions. Watch your actions; they become habits. Watch your habits; they become character. Watch your character; it becomes your destiny." -- unknown

Insanity is doing the same thing over and over and expecting different results - Albert Einstein

Tangent so much...
September 26, 2008 - 7:40 am

We'll see what happens day...

Related to this.. was an article on Fark about some guy did a study and whenever more than 3 out of 10 Harvard MBAs go to Wall Street... there's trouble.

Of course.. there's a whole host of comments about how MBA folks are worthless fools who add no value and it makes total sense that ones from Harvard add the least value and fuck things up the most.. blah blah blah.

It seems, per the study which goes back many years, that in 2006 30% of MBA grads started to go to Wall Street and that grew to 42% and then the shit, as we know, hit the fan.

What many folks totally seem to miss is that correlation isn't causation.

To stereotype a bit...an MBA grad from Harvard wants to make a lot of money, right? That's safe to say... so as they are in school.. they are looking around for where big bucks can be found.

The troubles on Wall Street go back to pre-2000 and have been building over time. Basically what these firms did is radially increase the amount of money the are lending in relation to the amount of money they have on hand.

They increased leverage.

This is just like a person who's got a great job (say a sales job that's all commission) and is making tons of money going crazy with credit cards. Buy more and more stuff and worry about paying if off later.

The problem comes... when the party stops. The housing market slows, no bull market goes forever.. and so one think the firms can do is lower the qualifications for loans -- this keeps the housing market going. The liar loan is born. It's also far easier to flip houses and all that crap.. but these really just make things worse.. like so many short term solutions do.

This is like a person playing the balance transfer game on credit cards and signing up for more credit cards during a slow period in sales (i.e. far less money than used to come in... is coming in).

Finally.. the guy gets fired. He's just not producing anymore. Now there's no money coming in (i.e. the housing prices are falling, loans arnt' happening... and the bubble has popped) and what's he to do with all the credit debit he has?

Nothing. Nothing can be done. He'll sell whatever he can.. get out of his mortgage.. whatever.. but in the end, he's bankrupt.

Anyway. My point with the Harvard story is that... you're foolish to say Harvard MBAs are the problem based off the study. What the study is really telling us is that when 30% or more of Harvard grads go to Wall Street, there may be a problem... because there's too much money being made there. Profits are too high from all the shenanigans. Any and every time profits in anything get too high.. there will be a correction. Profits will be brought back into line. Sometimes it's quick.. sometimes it's slow.. but think of that as a Law of Economics.

In any business... if firms are making a ton of cash, new companies will enter the market and profits go down.

If for some reason a particular field of work starts to pay huge salaries, more and more people will enter the field... and this will drive salaries down -- or stop them from going up and inflation will take care of the 'down' part.

I really didn't mean to get off on the tangent so much...