The dog in the night time

Podcast idea - look at unusual anomalies in the markets and ask why they persist

Categories

Crashes

What caused the crashes and how were these risks managed and viewed before the crash?

• Dotcom bust
• Russia crash of 1998
• October 1987
• Credit crunch of 2007

Fraudsters

what are the red-flags that an out and out fraud, pyramid, ponzi scheme is going on? are there some consistent themes?

Theories:

Disbelief-suspenders

• Over-reliance on “other adults”: We imagine regulators/rating agencies are better resourced, more watchful, more powerful, more talented and less human than they are. **Examples: SEC on Madoff. FDA on Theranos.
• The velvet rope: the hoi polloi not welcome here. Celebrities only. See also “I don't want your business oh go on then”
• Affinity fraud: He's one of us.
• I don’t want your business: ... Oh go on then, really, if you must, just as a favour to you, you understand.
• Credibility: Connection top political figures or well-regarded community pillars. If George Schultz is on the board the company must be legit, right? We imagine community pillars have done their due diligence on our behalf?
• Cult of personality: A single Svengali, genius, Nobel prize-winners, NASDAQ chairmen,
• This time it’s different: A paradigm shift as part of the narrative. We’ve banished risk. The internet has changed economics forever.
• They're techno trousers. They’re ex NASA. See also "this time is different".

Nothing to see here folks

• Sleepy backwater: It’s a boring and unglamorous part of the operational network. No one’s taking any risks there: Libor, Kerviel, Abodolo
• Weird whistleblowers: The people who called it out were unglamorous, outsiders, easy to catagorise as cranks

Porkie Indicators

• No errors: no screw ups, no bad launches: everything is fine. Real companies have setbacks. Especially if defended with hostility - e.g., you threaten to ruin EVERYTHING with your questions.
• The dog ate my homework: Promised answers to your questions are delayed, derailed, lost or excused. There's an excuse for everything. The excuses are implausible/out of proportion with the question. (what's the most plausible explanation: The dog really did eat your homework or ---?

Cloaking devices

• Micromanagement: Single person unusually able to influence/control the narrative.
• Secrecy: Insistence on confidentiality not just of unannounced plans but of entire operation. Black box operations. Masking the size of the operation (Madoff) or suggesting it is so secretive that you cannot know it (Theranos)
• Hostility: combative/aggressive demeanour to criticism
• This is different how?: To what extent is “fake it till you make it” bravura, and how much is it confidence in your ability to sort it out later, or big opportunities. Is there a difference?

All is not well

• High turnover: Especially when combined with confidentiality. Workplace bullying etc.
• Who’s that guy?: A position of unusual influence with a flaky backstory
• A big problem is a small problem that hasn't grown yet: Often big problems start out as small problems, where a well-intended patch didn't play out. How disciplined is your organisation with sweating the little stuff. and what of the trade off between “bureaucracy” and “discipline with sweating the small stuff”?

Correlation risks

• Interconnectedness of red-flags

With all the checks and balances in financial regulation, how did:

Examples

• Bernie Madoff get away with it? - Author Harry Markopoulous
• Nick Leeson
• Theranos
• Enron
• Lance Armstrong
• Dot com bust
• CDOs
• Libor

Upcoming?

• Blippar
• WeWork

Pervos

• Jimmy Savile

Does regulation work? - Netting - Diversity