Wrong incentives leads to trouble #26

This book was not necessarily at the top of my reading list, but I got to it before attending a conference in April 2015 where Roger Lowenstein was a keynote speaker and thought it would be good to read one of his latest work.

Interesting and detailed recollection of all the events that took place between 2007 and 2008, from the MBS/CDS euphoria to the GFC and collapse of Lehman but survival of AIG.

Main takeaways in short,

  1. too much leverage
  2. too much greed
  3. too much overconfidence
  4. too much arrogance
  5. too much trust in the markets self regulation
  6. too little understanding of the dangers of wrong incentives

Privatisations of gains and socialisation of the losses summaries pretty simply what took place then.

As I learned in the Confidence Game (See previous story), Bill Ackman went to serious trouble to warn the SEC and the rating agencies, while risking being perceived as a market manipulator.

I wonder to what extent Roger Lowenstein made his voice heard on that topic prior to the GFC and how it compares to what Bill Ackman did with MBIA.


My purpose in life is independence, fulfilment and a better understanding of how the world works. Like Charlie Munger, I believe in the discipline of mastering the best that other people have ever figured out. And like Sir Isaac Newton, I believe in our ability to see further than any others before us by acknowledging that we are standing on the shoulders of giants. With this blog I hope to keep track of my learning about investing, business, decision making, entrepreneurship and self development while inspiring others to do the same. For the moment the format of this blog will be one post for each book that has influenced me, but I expect it to evolve over time. Join my Journey. John.
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