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jerryking : stanley_o'neal   2

Risky Business - WSJ.com
April 24, 2003 | WSJ |By STAN O'NEAL.

Historically, investors' trust in the markets has been well founded because enterprising people have been willing to take risks. Backed by venture capital, entrepreneurs create value, employment, wealth, and opportunities. Without risk, there would be no electricity, no personal computers, no vaccines. No GE, no IBM, no Pfizer.

Of course, in any system predicated on risk-taking, there are failures, sometimes spectacular failures. But for every failure to be viewed as fraudulent or even criminal bodes ill for our economic system. The message to CEOs, to entrepreneurs and to venture capitalists right now is that you cannot afford to be wrong.

In the aftermath of history's greatest market bubble, this backlash against risk is understandable. Excesses in the system were taken to incredible levels. And while our industry did not create the bubble, it also did not bathe itself in glory recognizing or resisting those excesses.

But if we attempt to eliminate risk -- to legislate, regulate, or litigate it out of existence -- the ultimate result will be economic stagnation, perhaps even economic failure. To teach investors that they should be insulated from these forces, that if they lose money in the market they're automatically entitled to be compensated for it does both them and the economy a disservice.

In my view, the great, historical contribution of American capitalism is its ability to create value. Even when the system works imperfectly, value is created. If our financial system is to retain this particular genius, we need to be willing to continue to innovate. If we fail to rebalance the forces of risk and reward, the greatest danger may be deflation. Not probable, but not impossible either.
capitalism  Merrill_Lynch  CEOs  risks  Stanley_O'Neal  economic_stagnation  financial_system  overregulation  imperfections  value_creation  risk-taking  moral_hazards  backlash  innovation  deflation 
june 2012 by jerryking

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