Tag: radio

The Cover-Up

By James Kwak

Wall Street is engaged in a cover-up. Not a criminal cover-up, but an intellectual cover-up.

The key issue is whether the financial crisis was the product of conscious, intentional behavior — or whether it was an unforeseen and unforeseeable natural disaster. We’ve previously described the “banana peel” theory of the financial crisis — the idea it was the result of a complicated series of unfortunate mistakes, a giant accident. This past week, a parade of financial sector luminaries appeared before the Financial Crisis Inquiry Commission. Their mantra: “No one saw this coming.” The goal is to convince all of us that the crisis was a natural disaster — a “hundred-year flood,” to use Tim Geithner’s metaphor.

I find this incredibly frustrating. First of all, plenty of people saw the crisis coming. In late 2009, people like Nouriel Roubini and Peter Schiff were all over the airwaves for having predicted the crisis. Since then, there have been multiple books written about people who not only predicted the crisis but bet on it, making hundreds of millions or billions of dollars for themselves. Second, Simon and I just wrote a book arguing that the crisis was no accident: it was the result of the financial sector’s ability to use its political power to engineer a favorable regulatory environment for itself. Since, probabilistically speaking, most people will not read the book, it’s fortunate that Ira Glass has stepped in to help fill the gap.

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The Art of Selling

By James Kwak

This morning I was listening to an especially brilliant This American Life episode from 1999, titled “Sales.” I spent a lot of the past decade selling — first pitching my startup company to venture capitalists (not very well), then pitching software to potential customers (a bit better). The first segment — Sandra Tsing Loh listening in as a screenwriter pitches his story to two movie producers — absolutely nails the the staging of a sales call, including the forced casualness of pretending that huge amounts of money aren’t at stake, the small talk (is it good for there to be a lot of small talk?) and the water bottles, the seller talking uncomfortably fast when he doesn’t get feedback cues from the buyers, and the uncomfortable close and the confused debrief. (However, Loh and the screenwriter broke one of the cardinal rules we used to follow: don’t say a word about the meeting until you are safely out of the building, not even — especially not — in the bathroom.)

The third segment — in which a reporter reflects on his time as a radio advertising salesman — also perfectly illuminates the interpersonal dynamics and moral ambiguities of being a successful salesperson. Is it right to sell someone a product he doesn’t need and that isn’t actually good for him? Of course it’s legal, but is it right? If he buys it, is it his fault . . . or yours? What do you do when your skill at getting people to like you* causes your potential clients to open up to you in ways that are not in their interests?

Once someone came to our office to give me a sales pitch. By the end of the pitch, I had the feeling that we were good friends. Later, thinking about that, I felt used. How could this person manipulate me into thinking we were friends in just forty-five minutes? Then I realized this was the best salesperson I had ever seen. And we are friends now. (Or at least I think so.)

In between, the second segment is screamingly funny.

* A skill I don’t really have, by the way.

Update: I should say that I don’t actually have the negative opinion of sales and salespeople that some of the comments below seem to assume I have. As I said, I’ve spent a lot of my time selling, and I don’t think I’m a bad person. For one thing, sales is as critical to the economy as design and production. The rituals of sales — particularly high-touch selling of very expensive products, which is what I was involved in — were established before any of us got into the business, and all salespeople have to conform to them, more or less. Many if not most salespeople really believe that most of their customers will be better off if they buy their products. On the other hand, this is one way that salespeople justify pushing at the envelope of truth on occasion — it’s for the customer’s good, after all. (The other big reason for this behavior is that the market for certain products has settled into an equilibrium where all the competitors are exaggerating, and the customer assumes that you are exaggerating, too, and discounting everything you say, so if you don’t play the game you have no chance.)

Radio Stories

I spend a lot of time in the car driving to and from school, so I end up listening to a lot of podcasts (mainly This American Life, Radio Lab, Fresh Air, and Planet Money). I was catching up recently and wanted to point out a few highlights.

Last week on Fresh Air, Terry Gross interviewed Scott Patterson, author of The Quants, and Ed Thorp, mathematician,  inventor of blackjack card counting (or, at least, the first person to publish his methods), and, according to the book, also the inventor of the market-neutral hedge fund. These are some of Thorp’s comments (around 24:20):

“As far as you can tell now, how are quants being used on Wall Street? Are these mathematical models being relied on as heavily now after the stock market crash as they were before?”

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