Stress makes us value short-term outcomes
“Interestingly, stress induces [the limbic over-ride], and of course, money induces stress. So, the more stressed we are, the more we value short-term outcomes!”
Business
Two routes to the same bargain
“Whether business values rise faster than share prices, or share prices fall faster than business values, either way the effect is the same: a growing differential between the price of a business in the stock market and its real value.”
Capitalism teaches optimisation, not slack
“In a recent interview the author Nassim Taleb put it succinctly: ‘Capitalism does not teach slack, it teaches optimisation ’.”
Short-term efficiency is not long-term optimality
“Output maximisation looks efficient at least in the short term, but that is not the same as being long term optimal.”
The flaw in investing cash immediately
“The flaw to putting money to work immediately, for instance, is to presume that all relevant opportunity sets are available immediately.”
Slack cash is worth more than cash
“What Charlie was telling us was that slack cash is worth more than cash.”
The biggest mistakes begin unnoticed
“The biggest mistakes are the ones that did not look like mistakes at the beginning, after all bank robbers don’t start out robbing banks, they pinch sweets, get away with it, and drift their way up.”
Acceptable words replacing accurate ones
“To hide reality, the embarrassed use acceptable words to replace accurate words.”
Short horizons and busyness hide drift
“The point is that the drift toward poor long-term outcomes is so much harder to spot if your reference periods are short, and one is too busy being busy to notice a lack of real world thinking.”
Being right over being busy
“Zak and I don’t want to be busy; we want to be right.”
Good incentives cost little for what they create
“A good incentive scheme is so cheap compared to what is created.”
High-low retailing trains disloyal customers
“The incentives [in high low retailing] are awful: customers are trained to buy on deal, be disloyal and shop around, and for the retailer the inefficiencies of pricing and repricing and the volatility of volumes are meaningful.”
Shared scale economics breeds customer reciprocation
“Scale economics shared incentivises customer reciprocation, and customer reciprocation is a super-factor in business performance.”
Scale economics works in good times and bad
“Scale economics works well in bad economic times as well as good.”
Planning, not worrying, solves problems
“Indeed, I doubt that worrying is the solution to anything particularly: far better planning.”