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{{quote|''“Punctuated equilibrium” is a theory of [[Evolution by natural selection|evolutionary biology]] proposing that once a species appears, its population will become stable and will show little evolutionary change for most of its history. The theory restricts significant evolutionary change to rare and geologically rapid events whereby one species splits into two distinct species, rather than one gradually transforming into another. It stands in contrast to the idea that evolution occurs gradually and uniformly, transforming whole lineages in a smooth, continuous fashion.'' | {{quote|''“Punctuated equilibrium” is a theory of [[Evolution by natural selection|evolutionary biology]] proposing that once a species appears, its population will become stable and will show little evolutionary change for most of its history. The theory restricts significant evolutionary change to rare and geologically rapid events whereby one species splits into two distinct species, rather than one gradually transforming into another. It stands in contrast to the idea that evolution occurs gradually and uniformly, transforming whole lineages in a smooth, continuous fashion.'' | ||
:—Wikipedia (adapted)}} | :—Wikipedia (adapted)}} | ||
If the financial services industry is a grand experiment in the social evolution, then one of its infrequent shocks — [[LTCM]], ''l’affaire [[Enron]]'', the [[global financial crisis]], the [[LIBOR]] scandal — are surely inflection points: quick, mass extinctions, punctuations to the normal equilibrium state through which the genetic adaptations of commerce make their stately way. We should watch them | If the financial services industry is a grand experiment in the social evolution, then one of its infrequent shocks — [[LTCM]], ''l’affaire [[Enron]]'', the [[global financial crisis]], the [[LIBOR]] scandal — are surely inflection points: quick, mass extinctions, punctuations to the normal equilibrium state through which the genetic adaptations of commerce make their stately way. We should watch them carefully, for we may see organisms, as they sink into the mud, going extinct in real time. These events are our Burgess Shales. They are a precious treasure-trove: the laying down before us of a fossil record, not of what went ''before'', but what comes ''afterward'', is illuminating. | ||
We have | We have one before us in the shape of [[Archegos]]. We’ve written about it elsewhere, but there is one other aspect to consider: what the {{CS report}} is doing to the fragile psychologies in the executive suites of ''other'' institutions. | ||
These executives will have read the report with a view to constructing their own unique, imaginative conclusions, from which they will draw lessons carefully wrangled so as to fling responsibility as far as such a thing can be flung from such an elevated position. Things thrown from the top of a hill tend to land further down it. Thus, as [[Sidney Dekker]] reminds us, in any industry beset by calamity, “operator error” is usually the first identified cause.<ref>{{fieldguide}}</ref> | These executives will have read the report with a view to constructing their own unique, imaginative conclusions, from which they will draw lessons carefully wrangled so as to fling responsibility as far as such a thing can be flung from such an elevated position. Things thrown from the top of a hill tend to land further down it. Thus, as [[Sidney Dekker]] reminds us, in any industry beset by calamity, “operator error” is usually the first identified cause.<ref>{{fieldguide}}</ref> | ||
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You can see how “we’re all being a bit more switched on from now on” doesn’t make for the most compelling press release in the world, after all. But overhauling systems is expensive, time consuming, difficult, and tends not to work, so this is where dear old [[legal]] comes into the frame. | You can see how “we’re all being a bit more switched on from now on” doesn’t make for the most compelling press release in the world, after all. But overhauling systems is expensive, time consuming, difficult, and tends not to work, so this is where dear old [[legal]] comes into the frame. | ||
“Could we maybe put something in the docs?” the head of risk will gingerly enquire. He will direct this enquiry not to the [[subject matter expert]] in the derivatives team, whom he will not know to exist, but to the [[General Counsel]], who will “take an action” to get it done (he | “Could we maybe put something in the docs?” the [[Chief risk officer|head of risk]] will gingerly enquire. He will direct this enquiry not to the [[subject matter expert]] in the derivatives team, whom he will not know to exist, but to the [[General Counsel]], who will “take an action” to get it done (he won’t know the [[SME]] in the derivatives team either). | ||
And so, it shall be done: messages will be relayed down the chain, the last to hear will be our benighted derivatives [[SME]], and by the time she gets wind of it, not only will it be far too late to beseech anyone to see sense, the deadline to make it so will have already expired, so she must do what she can, as quickly as she can, to report back up the chain to the management committee that it ''has'' been done, so someone important can tick a box and approve a press release. | |||
Over the next 24 months, the documentation team will heroically battle away to get the new language in, but every major client will reject it, and after two years there will be exactly no examples of it in the agreement portfolio, though the negotiation throughput will be 25% slower as a result. This may lead to cost-cutting measures being imposed on the legal team — principally the derivatives SME, since she was the one that put in the language that caused all the bottlenecks in the first place. | |||
Perhaps, we venture, the problem is bigger than that. Perhaps | And that, ladies and gentlemen, is how legal documents become so unwieldy, and why negotiating then is such a chore. In five years’ time ''another'' [[family office]] will blow up, and there will be exactly the same hue and cry, with exactly the same outcome. The ''chutzpah'' to think a problem significantly serious to cause a billion-dollar loss really comes down to a [[representation]] no-one thought to add to the thousands of pointless representations already encrusted in the document no-one looks at. | ||
Perhaps, we venture, the problem is ''bigger'' than that. Perhaps that, in its way, ''is'' the problem. Perhaps we need a weightier response. A different approach; a re-think; perhaps a superficial gloss on the current status quo won’t do. | |||
Perhaps, folks, {{maxim|it’s not about the docs}}. | |||
{{sa}} | {{sa}} | ||