(no subject)

[randomness]

Matt Levine, describing banks in a way I think is generalizable to other large organizations:

It strikes me as a mistake to view banks as unitary entities that either internalize or externalize risk. A bank is not a group of managers and shareholders and creditors who get together and decide jointly and sensibly how much risk they each should take (and how much they can offload onto the rest of the economy). A bank is a system of different groups -- managers and employees and shareholders and creditors and regulators -- who sit around separately deciding how much risk they can offload onto each other, without the others noticing. "The rest of the economy" is just another outlet for that risk.

Comments

[dpolicar]

Yup.

[r-ness.livejournal.com]

I thought of you when I read this, as it's an idea you've expressed on many occasions, though not specifically about banks.

[dpolicar]

And my first thought upon reading this was in fact "this applies to other large organizations as well" and then I realized that you had just said that so I didn't comment on it then

[achinhibitor.livejournal.com]

As Wally in Dilbert said, "My competitors are my coworkers, with whom I compete for limited promotion opportunities." I remember finally noticing that the Wall Street Journal mentioned without comment that peons in businesses more or less did what the business wanted them to, but also mentioned without comment numerous incidents when executives would do what they were paid for only if it was arranged that it was explicitly in their interests to do so.

It's actually rather surprising that large organizations (or organizations of any type) behave approximately as if they were cooperating to maximize the profits of the organization.