Tuesday, February 2, 2010

Action : Outcome

The salesman selling snake oil doesn't care if his product doesn't cure buyers' ills. By the time the buyers find out, he's already skipped town.

The congressman who requests $10 million to build a bridge to nowhere in a neighboring state doesn't care that you didn't want your tax money spent on that project. Come election season, you can't vote against him.

The loan officer who packages and sells the loans that she approves doesn't care if the borrower repays. By the time default occurs, the loans aren't on her books.

The salesman, the congressman and the loan officer are all acting rationally. They will not be punished for the bad outcome that results.

Markets are elegant value creating systems. They are the best that we have, and we should avoid restricting them . . . as long as we can assure that actions are connected to outcomes.