Thirteenth law of worker entropy: Difference between revisions

{{a|work|}}{{Thirteenth law of worker entropy}}

The JC developed this over a series of papers with sometime collaborator, poet, playwright and tropical disease victim Otto {{buchstein}} when trying to understand how [[medium term note]] documentation could be so dreary despite (a) the underlying product being basically straightforward and (b) repeated efforts by market participants to make it easier.<ref>For example, the  [https://patents.google.com/patent/EP1597650A2/en patent applied for] “'''MaJoR'''” Multi-Jurisdiction Repackaging Programme, which for a brief beautiful moment revolutionised the repack world, but inexplicably fell out of favour, to be replaced by earlier, crappier structures. Go figure. </ref>

There are underlying dynamics here. Firstly, ''r'' and ''t'' are positively correlated. This follows: the more patience, skill and hubris required to competently manipulate text, the fewer people can do it, so, by operation or ordinary economic principles of supply and demand the more those who ''can'' do it can charge for their service.

Similarly ''v'' is actual, real world value, and not “notional fright value imbued by lawyers”.  

Thus, a [[Medium term note|secured medium term note]] — typically in the tens of hundreds of millions of dollars — has high intrinsic value even though the basic premise of the transaction — “I lend you money, you give me a note, you repay whoever holds that note later with interest, depending on certain externalities” — is pretty simple. Thus, you can expect the documentation for a secured MTN drawdown to span several hundred pages of wretched text, and so it does, notwithstanding the inconvenient fact that one can, and parties typically do, trade on a one-page [[Cocktail napkin|term-sheet]].

By contrast, a [[confidentiality agreement]] is part of the traditional pre-trade appendage-measuring ritual of the pea-cocks and pea-hens of finance, is meant to ''look'' spectacular, set the scene, but no-one is meant to be seriously ''hurt'' by the experience, and nothing of lasting value is achieved by its negotiation. Notwithstanding that, the purely ''legal'' points of an NDA can be quite involved, even though nothing of any commercial moment hangs on them. Thus, [[Confidentiality agreement|NDA]]<nowiki/>s — even for  secret-squirrel event-driven [[family office]] types — rarely get past 5 or 6 pages.

Take a USD500m secured note. Even 5 [[basis point]]<nowiki/>s — 0.05% of the deal — is USD250,000. Who wouldn’t pay that to make sure nothing went wrong on a tenth of a yard of debt finance? But even at USD500 and hour that is five full working weeks of a [[legal eagle]]’s time:<ref>At 40 hours per week. Yes, we know that nowadays a transatlantic lawyer can expect to recover more billable hours per week than there actually are in the week, but we are assuming traditional laws of spacetime apply.</ref> it really wouldn’t do if all that was required was to top-and-tail the term-sheet with [[boilerplate]] and bang out an enforceability [[Legal opinion|opinion]]. Nor would there be much prospect of stopping clients going to some other guy down the road who will do the job in a day and send a bill for a £500.{{sa}}