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Neither model describes an equilibrium state among human beings. | Neither model describes an equilibrium state among human beings. | ||
*'''Information is inherently valuable''': Information is not universal, immediate, or homogeneous. Therefore those who have it have a distinct advantage over those who do not. ''Therefore it is economically rational to hoard information''. | *'''Information is inherently valuable''': Information is not universal, immediate, or homogeneous. Therefore those who have it have a distinct advantage over those who do not. ''Therefore it is economically rational to hoard information''. | ||
*'''{{risk|market}} conditions and cooperation strategies are interdependent''' | |||
{{risk|Cooperation}} | {{risk|Cooperation}} | ||
'''We do cooperate'''. In the right conditions individuals form natural alliances to share and protect valuable assets (like information). Cooperation rigs the {{risk|market}} in favour of the cooperators against those who don’t. | '''We do cooperate'''. In the right conditions individuals form natural alliances to share and protect valuable assets (like information). Cooperation rigs the {{risk|market}} in favour of the cooperators against those who don’t. | ||
Nepotism is an instance of this kind of cooperation. It also ''changes'' the {{risk|market}}: where there were ten equal players, now there are nine: Eight equal small ones, and a bigger one. | Nepotism is an instance of this kind of cooperation. It also ''changes'' the {{risk|market}}: where there were ten equal players, now there are nine: Eight equal small ones, and a bigger one. | ||
*'''{{risk|trust}}''': Basic rule: wherever there is cooperation there must be {{risk|trust}} | *'''{{risk|trust}}''': Basic rule: wherever there is cooperation there must first be {{risk|trust}}: credit, reputation, one’s word being one’s bond. It has to mean something, practically. But, in a brutish {{risk|market}}, {{risk|trust}} is a scarce commodity. A brutish {{risk|market}} is characterised by nasty exchanges: one-offs, negative sum games, predators and prey. | ||
==={{risk|Prisoner’s dilemma}}=== | |||
Trusting is a risky strategy. Generally one side doesn’t survive. How can {{risk|trust}} survive?Single round [[prisoner’s dilemma]] says it can’t. The [[prisoner’s dilemma]] assumes a zero sum outcome where one guy dies (or goes away for ten years – is any rate out of the game). A [[prisoner’s dilemma]] in the narrow sense is necessarily “brutish”. We are doomed to brutish existence. but this is not true in commerce: Let’s craft a wealthy equivalent of the prisoner’s dilemma that takes this into account: the [[eBayer’s dilemma]]. Here the worst that can happen on defection is you pay for but never get your second-hand Louboutins (or vice versa) – losing to a defector is not generally fatal. The [[eBayer’s dilemma]] is usually “iterative”. as we know, the game theory implications of an iterated [[prisoner’s dilemma]] are more benign.<br> | |||
:::(v) So in an environment we have many dynamics – brutish competitions, opportunities for wealthy collaboration, each interaction shapes the {{risk|market}}. <br> | :::(v) So in an environment we have many dynamics – brutish competitions, opportunities for wealthy collaboration, each interaction shapes the {{risk|market}}. <br> | ||
:(b) The {{risk|market}} is a direct analog for the | :(b) The {{risk|market}} is a direct analog for the ecosystem. <br> | ||
:::(i) The two competing views, [[Hobbes]]ian and Smithian, are not incompatible. In many ways they say the same thing. <br> | :::(i) The two competing views, [[Hobbes]]ian and Smithian, are not incompatible. In many ways they say the same thing. <br> | ||
:::(ii) OK not quite. If the {{risk|market}} is a game of whist, the biosphere is a game of black bitch. <br> | :::(ii) OK not quite. If the {{risk|market}} is a game of whist, the biosphere is a game of black bitch. <br> | ||
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::::::(i) Many of these firms started out life as partnerships, where those bringing in the profits were personally liable for losses, and the compensation they shared was specifically the equity. These firms took advantage of regulatory change to incorporate. The partners changed their formal status (if not their titles) from partner to employee, but the compensation structure remained. While these firms encouraged equity participation (to the point of paying compensation in shares) employees main source of income was celery and not share performance. Indeed the manual dilution of equity capital in the bonus round had the typical effect of depressing share performance. In this way and in many others comma employees in these Incorporated partnerships were and continue to be systematically preferred over equity holders. The same pay structure has been adopted by competing banks which have always had a corporate structure full stop the lesson of the last 30 years has been only a mug is long banking stock .<br> | ::::::(i) Many of these firms started out life as partnerships, where those bringing in the profits were personally liable for losses, and the compensation they shared was specifically the equity. These firms took advantage of regulatory change to incorporate. The partners changed their formal status (if not their titles) from partner to employee, but the compensation structure remained. While these firms encouraged equity participation (to the point of paying compensation in shares) employees main source of income was celery and not share performance. Indeed the manual dilution of equity capital in the bonus round had the typical effect of depressing share performance. In this way and in many others comma employees in these Incorporated partnerships were and continue to be systematically preferred over equity holders. The same pay structure has been adopted by competing banks which have always had a corporate structure full stop the lesson of the last 30 years has been only a mug is long banking stock .<br> | ||
===The nature of | ===The nature of {{risk|risk}}=== | ||
:(a) The real risks are the ones that people don’t recognise as risks AT ALL. All significant market dislocations have come from blind spots.<br> | :(a) The real risks are the ones that people don’t recognise as risks AT ALL. All significant market dislocations have come from blind spots.<br> | ||
:(b) Known knowns – about which firms naturally obsess, in fact are not generally risks at all, precisely because they are known knowns and are properly identified, managed and controlled.<br> | :(b) Known knowns – about which firms naturally obsess, in fact are not generally risks at all, precisely because they are known knowns and are properly identified, managed and controlled.<br> | ||