How bank bonuses let us all down
http://www.ft.com/cms/s/0/fa89be08-02aa-11de-b58b-000077b07658.html?nclick_check=1
Finally, I was involved in trading for 21 years and I can testify that traders consciously play the free option game. On the other hand, I worked (in my other job as risk adviser) with various military organisations and people watching over our safety. We trust military and homeland security people with our lives, yet they do not get a bonus. They get promotions, the honour of a job well done and the disincentive of shame if they fail. Roman soldiers signed a sacramentum accepting punishment in the event of failure. This is prompting me to call for the nationalisation of the utility part of banking as the only solution in which society does not grant individuals free options to look after its risks. No incentive without disincentive. And never trust with your money anyone making a potential bonus.
- Nassim Nicholas Taleb
Useful link:
www.fooledbyrandomness.com
Great essay. Nassim, I completely agree.
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