Sometimes We Need To Draw Lines

The recent announcement by JP Morgan of a $2 billion trading loss caught a lot of people’s attention and caused financial stocks to drop globally.

Was the trade at JP Morgan Chase wrong because of the unnecessary risks involved or wrong because it failed?

What would have happened if the trader in question had made money on the trade?  It definitely would not have made the news, or affected global capital markets.  But, would it have been criticized at the bank? What I am asking is whether the trade was wrong because it failed or wrong because an unnecessary risk was taken.  Of course this is speculation on my part.  Here is a quote from JP Morgan CEO Jamie Dimon:

It was a bad strategy, it was badly executed, became more complex, [and] it was poorly monitored,(i)

However, news reports suggest that Dimon was not taken by surprise by the trade, but that alarm bells began to ring when it became clear that the trade was not going well. (ii)  So, it seems likely that the problem with the trade was that it lost money.

Some Thoughts on “Civilization: The West and the Rest” by Niall Ferguson

I’ve written quite a bit lately that a shared concept of truth is necessary to establish trust in society; and that a shared sense of trust leads to a better society. In particular, in personal and business relationships it is imperative that the counterparty or friend can be trusted at their word.

Reading Harvard historian Niall Ferguson’s latest book, Civilization: The West and the Rest, I was struck by this yet again.

In Civilization, Ferguson objectively examines why so-called western nations have been so successful over the last five hundred or so years. He points out that in 1500, China was far ahead of western countries by any standard of measure.[1] He proposes that the western use of what he calls “killer apps” - competition, science, democracy, medicine, consumerism and the work ethic were the source of this rise of western countries.

At the end of the book Ferguson looks at the reasons why the western countries are now losing their way, while nations like China are rising.

Ferguson does not list Christianity as one of “the killer apps” of western civilization. But that is perhaps because it is deeper than that. He points out that capitalism and consumerism without limits can be equally destructive. Much of the western world has spent itself broke. He points out that Christianity encourages competition and entrepreneurship coupled with asceticism. That is to say, one can work hard and generate profit, but still have a firm belief that personal gain is not the end goal. He writes that in China the explosion of capitalism going hand in hand with a high personal savings rate is a key to the rise of China.