Who Will Disrupt the Disruptors? A Review of Live Work Work Work Die

The final words of Corey Pein's Live Work Work Work Die are, "Off with their heads." In an engaging, hilarious, and gutwrenching first person account of the netherworld of Silicon Valley startup culture, Pein implores the reader to consider seriously the titans of tech are leading us into. By his account, it is a highly stratified society in which the toiling masses take turns pretending that they are among the tech elite.

New Post at NSER: Experimental Evidence of Sunspot Bank Runs

Last week, I attended a seminar by Jasmina Arifovic. I did a write up at the New School Economic Review blog:

For all the adoration that the gold standard gets from radical libertarians, currency is surely more stable without it. On the gold standard, currency crises were so regular that social scientists and philosophers came up with all sorts of theories to explain them. Some of them were really weird.

Among the weirdest was the sunspot theory of bank runs. Through several blind leaps of conjecture, William Stanley Jevons connected the occurrence of sunspots as having an (unproven) effect on crop yields which, in turn affects farmers’ debt from seed to harvest.

Later Arthur Pigou and later John Maynard Keynes used the phrase to describe sudden shifts in financial markets not based on changes in the fundamentals. A fluke. A panic. A sunspot. A bankrun.

Read the rest here

When Commodities are Contracts

On Monday, I brutalized my muscles in my first Krav Maga class. Afterwards, I got drinks with one of the people from the class who turned out to have a really interesting finance job. He is a lawyer who writes contracts for derivatives.

In my naivete, I said something to the effect of, "That must be exhausting writing and reviewing all those contracts so quickly." His response made me think about something in derivatives markets I had never thought of before. As he explained it, his job was to draft template contracts in advance of trading. He said that a minor oversight in the wording could mean thousands of trades that have nothing to do with fundamentals.

So in addition to "animal spirits" affecting the financial markets seemingly at random, the legal frameworks under-girding the financial market itself pushes traders in various directions. So much for fundamentals.