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Commercial imperative: Difference between revisions
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The [[commercial imperative]] is ''not'' beside the point. It ''is'' the point. It is, in [[the long run]] — when we personifiers of the better interests of commerce have been shunted from our mortal coil — the ''only'' point. | The [[commercial imperative]] is ''not'' beside the point. It ''is'' the point. It is, in [[the long run]] — when we personifiers of the better interests of commerce have been shunted from our mortal coil — the ''only'' point. | ||
Game theoreticians will tell this story through the metaphor of the ''iterated'' [[prisoner’s dilemma]]. But it’s simpler than that. | |||
===Why merchants transact=== | ===Why merchants transact=== | ||
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There are (at least) two kinds of [[dick move]]s: | There are (at least) two kinds of [[dick move]]s: | ||
*'''Mistrades''': [[Dick move]]s that arise from a misconception between the parties on a transaction: your expectation and your client’s about the commercial intention were different. [[Cheapest to deliver]] options in [[credit derivatives]] are this kind of [[dick move]]. Your client sees a Triple A [[Ratings notches|rating]] eligibility criteria — woo hoo! — and sees in it impeachable credit. You look at it and see some overworked grad at Moody’s who doesn’t understand correlation risk and has handed you an opportunity to dump the crappiest, most poorly risked, implausibly rated bonds that you can find into your portfolio.<ref>Once upon a time there were plenty. They all wound up in CDO<sup>3</sup> deals.</ref> | *'''Mistrades''': [[Dick move]]s that arise from a misconception between the parties on a transaction: your expectation and your client’s about the commercial intention were different. [[Cheapest to deliver]] options in [[credit derivatives]] are this kind of [[dick move]]. Your client sees a Triple A [[Ratings notches|rating]] eligibility criteria — woo hoo! — and sees in it impeachable credit. You look at it and see some overworked grad at Moody’s who doesn’t understand correlation risk and has handed you an opportunity to dump the crappiest, most poorly risked, implausibly rated bonds that you can find into your portfolio.<ref>Once upon a time there were plenty. They all wound up in CDO<sup>3</sup> deals.</ref> | ||
*'''“Tent-peg” mistrades''': A [[broker]] servicing its client is somewhat [[short an option]] — the one that arises because ''the client is always right'' — and as a consequence will write in ''ostensibly'' outrageous legal protections ([[indemnities]], [[hold harmless]]es and so on) which it never intends to use by way of defensive strategy to spike the client’s temptation to take advantage of its supine broker and pull a [[dick move]]. It is, I suppose, always possible a broker would opportunistically exploit a [[tent-peg term]] to rip a client’s face off ''but why on earth would a sane, well directed broker do that?'' | *'''“Tent-peg” mistrades''': A [[broker]] servicing its client is somewhat [[short an option]] — the one that arises because ''the client is always right'' — and as a consequence will write in ''ostensibly'' outrageous legal protections ([[indemnities]], [[hold harmless]]es and so on) which it never intends to use by way of defensive strategy to spike the client’s temptation to take advantage of its supine broker and pull a [[dick move]]. It is, I suppose, always possible a broker would opportunistically exploit a [[tent-peg term]] to rip a client’s face off ''but why on earth would a sane, well directed broker, who understands the commercial imperative, do that?'' | ||
===Legal risk=== | ===Legal risk=== | ||
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In any case arguing about these semantics will delay the start of the Historical X period. | In any case arguing about these semantics will delay the start of the Historical X period. | ||
{{sa}} | |||
*[[Prisoner’s dilemma]] | |||
{{ref}} | {{ref}} | ||