November 8, 2011
End Bonuses for Bankers by Nassim Nicholas Taleb / The New York Times “The promise of ‘no more bailouts,’ enshrined in last year’s Wall Street Reform Law, is just that - a promise…no one really knows what will happen the next time a giant bank goes bust because of its misunderstanding of risk.” “Instead, it’s time for a fundamental reform: Any person who works for a company that, regardless of its current financial health, would require a taxpayer-financed bailout if it failed, should not get a bonus, ever.” “Critics like the Occupy Wall Street demonstrators decry the bonus system for its lack of fairness and its contribution to widening inequality. But the greater problem is that it provides an incentive to take risks. The asymmetric nature of the bonus (an incentive for success without a corresponding disincentive for failure) causes hidden risks to accumulate in the financial system and become a catalyst for disaster.”

End Bonuses for Bankers

by Nassim Nicholas Taleb / The New York Times

“The promise of ‘no more bailouts,’ enshrined in last year’s Wall Street Reform Law, is just that - a promise…no one really knows what will happen the next time a giant bank goes bust because of its misunderstanding of risk.”

“Instead, it’s time for a fundamental reform: Any person who works for a company that, regardless of its current financial health, would require a taxpayer-financed bailout if it failed, should not get a bonus, ever.”

“Critics like the Occupy Wall Street demonstrators decry the bonus system for its lack of fairness and its contribution to widening inequality. But the greater problem is that it provides an incentive to take risks. The asymmetric nature of the bonus (an incentive for success without a corresponding disincentive for failure) causes hidden risks to accumulate in the financial system and become a catalyst for disaster.”

9:51am  |   URL: http://tmblr.co/ZdnLZyBfqaOl