Ray sent this to me and I thought it made a good follow-up post to the discussion in class about risk.
I have heard it said that if you drop a frog into boiling water it will jump out the instant its pads touch the water. On the other hand, if you put it into a pot of water and slowly turn up the temperature it will stay until its demise. I have not tried it but it illustrates a key point about risk, assumptions, time-based analysis and early action to mitigate or avoid a risk. This material is prepared based on someone's comment or question about early warnings regarding the financial crisis.
I suspect it is easier to not think about risk or long term consequences. One philosophy is simply to 'just act' and fix the problems when they occur. This works sometimes but the pendulum always swings and we now find ourselves back in an area of thinking about consequences.
While we saw this described for the current financial crisis, it has always been a problem with technology. Sometimes it is hard to project the consequences but more often, we simply don't bother.
Next class we'll look at some futuristic ideas related to ICT and hopefully we'll think to also discuss possible consequences - both positive and negative.
Dr. Murray
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"I suspect it is easier to not think about risk or long term consequences. One philosophy is simply to 'just act' and fix the problems when they occur. This works sometimes but the pendulum always swings and we now find ourselves back in an area of thinking about consequences"
Okay, so I have never been one to talk about politics much, but with this election being so big I thought I would comment on how the statement above relates to both technology and politics....
Most states vote with new electronic voting stations. There have been numerous studies done that show these stations to be faulty technology! There is too much that can go wrong with them, from tampering to just plain malfunctioning. We have a new govn't agency, the EAC, that is suppposed to regulate these machines. Instead what happened? Nothing of the sort. The EAC spent billions of dollars on getting each state new machines. No new rules just new machines.
The risk involved with this is that the new machines will still have same problem associated with them. In early elections voters say that their Obama votes were turned into McCain votes! We think that it is just technology run amuck, bad programing associating a button a bad variable. Lets not mention the possibility that this was done by someone purposely to skew the election.
Long term consequences are having our democracy fixed! When I vote I like to think my voice is heard. Isn't that what having an election is all about? I know we do not pesonally elect the president, but the electoral college is supposed to vote for who the majority choose. If the electronic voting stations are fixed, switching votes, how is the true majority voice heard!
This is not a problem (the voting machine malfunctioning) that can be dealt with after the problem happens, by that time the votes will already have been publicised. A new president elected and as we saw last election year (in FL), nothing can be done to ease the mind of the loosing side!
How many of you have seen the HBO special about the voting machine malfunctions, how many of you watched 20/20 Friday night? How can we inform the public about what is going on? Three states have banned the use of electronic voting machines because they are so volatile.
20/20 made a good point, Banks and credit card companies make sure that each time we use our card at the teller or for a POS purchase it is recorded to our balance.
What is so hard that the gov't can't hold the makers of the voting machines to a standard of correctness!!!!!!!
Reminds me of that movie with Robin Williams. Where the woman found a problem with the voting machines but her company was doing everything possible to keep it a secret
Nothing really mentioned sparked my thought or challenged me to think differently because as a business major in the Coles Collage of Business i am subjected to 90% of what he is saying in most of my classes.
one thing though that i did like was his talking about risk. i like that little risk example on the orignial post, it is a perfect example of how people act. that whole stay in a slowly escalating risk till they die is a phenomenon called "Escalation of Commitment". people put forth their reasources and assets so much that they cannot mentally break away from the project/goal/ect. because of either optimism that it will get better soon, or just the fact they cant stand to just let go of that time and money they have spent on this loosing deal.
Also people panic. that is why the economy turned so sour so fast. if people wouldnt have panicked the stock market wouldnt have droped as much and the economy would be more stable than it is. the cure all for a bad economy is more spending.
Medically speaking risks are taken very frequently during emergencies without thinking of the long term effects. But when not in a time of emergency, long-term concerns are more thought of. It's hard to think of which one is more important because if, in an emergency, you don't take the risks then someone may not even make it to the position where you get to fully plan out your tasks. So in times of need it's hard to think about taking a risk or talking out ideas for the long-run. I really don't know which one is better :-/
Complacency is a huge part of the problem. It is easy for the big guy to say fix it later or not even acknowledge that there is a problem as long as everything is going along fine. Of course the CEO’s and VP’s are going to cry that their company is lost, apologize for their oversight, and ultimately walk away scotch free with millions of dollars. It’s the people like us that suffer. For example, banks reluctance to grant loans is going to affect large companies, but it going to keep small businesses from functioning and keep entrepreneurs from starting new businesses. This means less jobs and less “pocket” money for the working man, leading to people to still be weary of their spending. This doesn’t mean that people are saving more, it just means they have to pay more for their essentials and have less money to pay for it.
There is no doubt that technology had a hand in this failure. At least in the old days, if you were going to do business cross country let alone internationally, you would have to make expensive long distance calls and have actual contact with a person. It was a lot easier to hold someone accountable. Now people can buy and sell whatever they want, with whoever they want, whenever they want. It’s this instant gratification that kept fueling the fire. Everyone wanted to make money now, and no one was thinking about the long term effects. The basic idea of buying and selling CDO’s and CMO’s doesn’t seem bad within its self. The fact that it is hard to research what one actually has in their “bucket,” as Mr. Petrone called it, kind of placed the idea on the honor system. However, we all know that big business and honesty don’t always go hand in hand. In hindsight, when you couple that with the rate at which these buckets were being traded it seems inevitable that some kind of huge problem would have to arise.
It reminds me of TV. When two friends have to sell some item, like candy bars, they agree that they will buy all of each others candy bars. However, they buy the candy bars with the same dollar (I pay you with the dollar you just paid me with). In the end, they realize that all they did was move around the candy and there was still no money.
The main thing that sparked my attention when Mr. Petrone was speaking was the stuff about the companies rating the mortgages/risks. Obviously, these people did not have any kind of conscious to rate sub-prime mortgages to the equivalent (speaking of risk) as the US treasury. Why are these people not being brought up in the media? Why are they not getting at least some of the blame of all of this dumped on them? Also though, why were these risks not double checked by the banks?
Everyone was just living in their own little fantasy world thinking that nothing would ever go wrong. It's crazy that we have more technology than ever, yet people aren't using it efficiently to help prevent things like this. No one wanted to think about the bad things that could happen. I mean really though, who would! We have to be rational though during times like these and exercise some kind of risk-assessment and caution.
I think the main thing for me that is so frustrating is that I had no part in all of these problems that have occurred, but yet I still have to deal with the outcome and consequences. For how long will these consequences last, and how bad will it get before it gets better?
I do not agree with this statement one hundred (100) percent. Its always beneficial to know the risk that is associated with making a decision as this will help to steer one in the right direction. Not knowing what one is getting into can be the cause of some very harmful outcomes. Thus knowing the risk or having some basic idea of the risks involved in a situation is one of the key reasons why persons investigate or analyze the financial statements before they invest in a company. They seek information on the likelihood of making a profit and also the risks that are associated with the company itself. It gives them an idea of whether the company will be going into bankrupt soon and in general to find out if they are making the right move in putting their money in the business. We will never be right all the time, but knowing the risk that is associated with a situation helps to eliminate the dissonance that one may feel after they make a decision.
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