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What Keeps Xi Jinping Awake at Night - The New York Times
By Chris Buckley and Paul Mozur

May 11, 2018

The recently released 272-page book of Mr. Xi’s remarks on “national security” includes previously unreleased comments that give a starker view of the president’s motivations than found in most Communist Party propaganda. Here is a selection.

Winning the Technology Race
The recent trade dispute between China and the United States has brought new attention to China’s zeal to become technologically self-reliant. The book shows that Mr. Xi was determined that China master its own microchips, operating systems and other core technologies well before this recent quarrel.

Taming the Internet
Since the introduction of the internet, Chinese Communist Party leaders have worried about its deployment as a means of subversion and spying. A speech on propaganda that Mr. Xi gave in August 2013 suggested he was alarmed by the United States’ surveillance capabilities that were exposed by Edward Snowden.

Racing for a Military Edge
China has been spending heavily to upgrade its military. In a December 2014 speech, though, Mr. Xi warned Chinese military officials that they risked being eclipsed technologically by the United States.

Hidden Financial Risks
China’s leadership has become increasingly forthright about the need to defuse financial risks from growing debt, and comments Mr. Xi made in December 2016 explain why.

Unrest Over Pollution
Mr. Xi has stepped up the Chinese government’s efforts to reduce smog, soil contamination and other pollution. Remarks that Mr. Xi made in May 2013, when China was in the midst of a smog crisis, showed how alarmed he was about public anger and protests, which Chinese officials call “mass incidents.”
Xi_Jinping  China  China_rising  threats  Edward_Snowden  security_&_intelligence  self-reliance  books  Chinese_Communist_Party  financial_risk  subversion  semiconductors  operating_systems  pollution 
may 2018 by jerryking
Carney, Bloomberg press for climate-change risk disclosure guidelines - The Globe and Mail
SHAWN MCCARTHY
OTTAWA — The Globe and Mail
Published Friday, Dec. 04, 2015

Mr. Bloomberg will lead a task force that will develop voluntary financial risk disclosure guidelines that will ensure consistent information for investors, lenders, insurers and other stakeholders....In a speech this fall at Lloyd’s of London insurance firm, Mr. Carney highlighted three types of threats: physical, or impacts from weather-related events such as floods, droughts and storms; liability issues arising from investors suing companies for failing to disclose risks or parties who suffer loss claiming compensation from those they hold responsible, and transition issues in which assets – especially fossil fuel reserves – are revalued due to the transition to a low-carbon economy.
climate_change  risks  Mark_Carney  Michael_Bloomberg  liabilities  threats  financial_risk  disclosure  valuations 
december 2015 by jerryking
Speaking the Language of Risk - NYTimes.com
By CARL RICHARDS MAY 11, 2015.

humans outside the financial world define risk differently. In everyday life, we tend to think of risk as uncertainty, or what is left over after we have thought of everything else.

With uncertainty comes variability within a set of unknown limits. It’s the stuff that comes out of left field, like Nassim Nicholas Taleb’s black swan events. Because we can’t measure uncertainty with any sort of accuracy, we think of risk as something outside our control. We often connect it to things like running out of money in retirement or ending up in a car crash.

But how did we end up with two such completely different definitions of the same thing? My research points to an economist named Frank Knight and his book “Risk, Uncertainty and Profit.” (Toronto Reference Library, Stack Request, 330.1 K54.11)

In 1921, Mr. Knight wrote: “There is a fundamental distinction between the reward for taking a known risk and that for assuming a risk whose value itself is not known.” When a risk is known, it is “easily converted into an effective certainty,” while “true uncertainty,” as Knight called it, is “not susceptible to measurement.”...I’m also betting that if you heard a term like “risk management model,” you really thought, “uncertainty management model.” Unfortunately, no financial firm offers uncertainty management.

Solving this problem doesn’t require a new definition. We just need to shift our thinking when we hear someone in finance mention risk. We need to remember, that person isn’t talking about the odds we’ll lose everything, but about something that fits in a box.

I suspect that is why financial professionals sound so confident when they talk about managing our risk. In their minds, managing risk comes down to a formula they can fine-tune on their Dial-A-Risk meter. In our minds, we have to learn to separate the formula from the unknown unknowns that cannot be accounted for in any model or equation.

Once we learn to recognize that we are not talking about the same thing, we can avoid terrible disappointment and bad behavior when financial risk shows up again. And it will.
risks  uncertainty  unknowns  books  interpretation  financial_risk  beyond_one's_control  Nassim_Taleb  black_swan  misinterpretations  miscommunications  disappointment  languages 
may 2015 by jerryking
The Biology of Risk - NYTimes.com
By JOHN COATES JUNE 7, 2014

What is it about risk taking that so eludes our understanding, and our control?

Part of the problem is that we tend to view financial risk taking as a purely intellectual activity. But this view is incomplete. Risk is more than an intellectual puzzle — it is a profoundly physical experience, and it involves your body...Risk by its very nature threatens to hurt you, so when confronted by it your body and brain, under the influence of the stress response, unite as a single functioning unit....The state of your body predicts your appetite for financial risk just as it predicts an athlete’s performance.

If we understand how a person’s body influences risk taking, we can learn how to better manage risk takers. We can also recognize that mistakes governments have made have contributed to excessive risk taking.

Consider the most important risk manager of them all — the Federal Reserve. ...Uncertainty over the timing of something unpleasant often causes a greater challenge response than the unpleasant thing itself. Sometimes it is more stressful not knowing when or if you are going to be fired than actually being fired. Why? Because the challenge response, like any good defense mechanism, anticipates; it is a metabolic preparation for the unknown....Most models in economics and finance assume that risk preferences are a stable trait, much like your height. But this assumption, as our studies suggest, is misleading. Humans are designed with shifting risk preferences. They are an integral part of our response to stress, or challenge.......[JCK from David Brooks -The Wisdom Your Body Knows scientists are now focusing on the thinking that happens not in your brain but in your gut. You have neurons spread through your innards, and there’s increasing attention on the vagus nerve, which emerges from the brain stem and wanders across the heart, lungs, kidney and gut. The vagus nerve is one of the pathways through which the body and brain talk to each other in an unconscious conversation. ].......One such opportunity is a brief spike in market volatility, for this presents a chance to make money. But if volatility rises for a long period, the prolonged uncertainty leads us to subconsciously conclude that we no longer understand what is happening and then cortisol scales back our risk taking. In this way our risk taking calibrates to the amount of uncertainty and threat in the environment.

Continue reading the main story
Under conditions of extreme volatility, such as a crisis, traders, investors and indeed whole companies can freeze up in risk aversion, and this helps push a bear market into a crash. Unfortunately, this risk aversion occurs at just the wrong time, for these crises are precisely when markets offer the most attractive opportunities, and when the economy most needs people to take risks. The real challenge for Wall Street, I now believe, is not so much fear and greed as it is these silent and large shifts in risk appetite....As uncertainty in fed funds declined, one of the most powerful brakes on excessive risk taking in stocks was released....There are times when the Fed does need to calm the markets. After the credit crisis, it did just that. But when the economy and market are strong, as they were during the dot-com and housing bubbles, what, pray tell, is the point of calming the markets? Of raising rates in a predictable fashion? If you think the markets are complacent, then unnerve them. Over the past 20 years the Fed may have perfected the art of reassuring the markets, but it has lost the power to scare. And that means stock markets more easily overshoot, and then collapse.

CONTINUE READING THE MAIN STORY
120
COMMENTS
The Fed could dampen this cycle. It has, in interest rate policy, not one tool but two: the level of rates and the uncertainty of rates. Given the sensitivity of risk preferences to uncertainty, the Fed could use policy uncertainty and a higher volatility of funds to selectively target risk taking in the financial community....IT may seem counterintuitive to use uncertainty to quell volatility. But a small amount of uncertainty surrounding short-term interest rates may act much like a vaccine immunizing the stock market against bubbles. More generally, if we view humans as embodied brains instead of disembodied minds, we can see that the risk-taking pathologies found in traders also lead chief executives, trial lawyers, oil executives and others to swing from excessive and ill-conceived risks to petrified risk aversion. It will also teach us to manage these risk takers, much as sport physiologists manage athletes, to stabilize their risk taking and to lower stress.
Wall_Street  risks  risk-management  risk-taking  uncertainty  U.S._Federal_Reserve  bubbles  volatility  behavioural_economics  risk-preferences  risk-aversion  biology  psychology  interest_rates  emotions  human_experience  financial_risk  signaling  stress_response  market_crash  immobilize  paralyze  bear_markets  policy_tools  physiological_response  risk-appetite  unpredictability  physical_experiences  calibration  human_behavior  human_frailties  human_psyche  metabolic 
june 2014 by jerryking
Flight Risks
November 2005 | Worth | by Dan Rosen.

Angel investors often get caught up with charismatic and passionate entrepreneurs. It‘s the joy and the danger of angel investing. For angel investing to work, investors and entrepreneurs need that shared passion and vision. But angel investing is not for the faint of heart. Seedstage investments tie up your money for a long time because you are investing early in the life of a company whose typical gestation period is six to eight years. No individual can do (nor does a relatively modest investment justify) the depth of analysis and due diligence that professional investors such as venture capitalists conduct; that often makes decisions difficult. And the likelihood that several additional rounds of financing will follow your initial investment and dilute your stake causes a large financial risk....Know your strengths, weaknesses and desires. If they don‘t match angel investing, don’t do it. If they do, have Fun.
angels  due_diligence  illiquidity  start_ups  financial_risk  risks  passions  strengths  early-stage  weaknesses  self-awareness 
march 2013 by jerryking
Weather insurance: Agriculture and algorithms
Nov 19th 2012 | | The Economist |by T.R. | BERLIN

Mass suicides are a shocking reminder of a global problem caused by global warming. Farming has always been a gamble, but the growing number of “unusual weather events”, as experts call them, make seeding and harvesting an even riskier business...The Climate Corporation, a start-up based in Silicon Valley, wants to reverse the trend and reduce farmers’ financial risks—by crossing agriculture with the IT industry’s latest trend: big data. The firm is collecting all kinds of information—including on weather patterns, climate trends and soil characteristics—and analyses the data down to an individual field. These insights are then used to offer farmers tailored insurance policies against the damage from extreme weather events....marketing is an equally big challenge for the six-year-old company. Farmers are least likely to be early adopters, especially when it comes to a new product that lives in a computing cloud, admits Mr Friedberg. The Climate Corporation has a website where customers can buy policies online. But it had to learn that selling its insurance to farmers in remote areas is best done through a network of agents.
weather  insurance  algorithms  agriculture  farming  climate_change  financial_risk  Climate_Corporation  Weatherbill 
december 2012 by jerryking
Giving Great Advice
Janaury 2008 | HBR | Interview of Bruce Wasserstein by Tom Stewart and Gardiner More.

HBR’s editor, Thomas A. Stewart, and senior editor Gardiner Morse
spent many hours at Lazard and interviewed Wasserstein, setting out to understand how he creates value as a manager, as a deal maker, and as a counselor to CEOs. How does he attract and
manage talent, build and sustain knowledge businesses, size up companies and industries, and craft advice?

Wasserstein describes his approach as discovering whether a deal or strategy “makes sense.” Such sensemaking seems to underlie every move he makes, and it has paid off handsomely. Following is an edited presentation of HBR’s conversations with Wasserstein...first to execute deals really well and then to market that track record.

How do you develop individual talent? The idea is to create a hothouse where young talent is nourished by our culture and people are encouraged to think creatively, think deeply,
think about the long-term client relationship—but above all, think. I want them to reflect on what they are doing and why, and then wonder,“Can we do better?”

Talk about the advice business. What are CEOs looking for as you’re helping them understand the landscape? What do they
need that you’ve got? The point of advice is to create value. The
first thing in that effort is not to assume the banker knows more than the client. The second thing is to remind the CEO that corporations have to change in order to prosper and that inaction isn’t prudent—it’s radical. What we can do is help the CEO think through an array of options, partly by asking
the necessary questions, but also by inserting some very practical observations about the effects of specific decisions.
Good advice is at least as qualitative as it is quantitative....On the other hand, there’s the more qualitative part of the advice. This strikes me as being an underdeveloped side of most investment-banking relationships. Knowing the characteristics of the industry and possible consequences of a deal comes from having seen what’s happened in many companies and industries over time. So, for example, you might say, “Look, you need a very different mentality to manage this type of business than your other businesses. You have a process-oriented mentality, but you need a more market-oriented approach. Are you confident that you’re going to be able to keep the number two guy in the company you’re acquiring? Because the number-one guy will probably leave.”

Deals that make sense. Can you elaborate on that? Law school taught me to focus on dissecting premises. Anyone who’s a good logician can build an argument on just about any premises.
The argument may be taut, but the premises may be faulty. When we do deals, I always ask, “Are the premises sound? Is the risk exposure worth it for this particular company, and have
I protected my client’s back?” We proceed by identifying and evaluating qualitatively and quantitatively the key elements of risk in the transaction—overall economy risk, strategic
risk, operating business risk, financing risk, people risk. Similarly, you need to fully understand the upsides. What are the opportunities in cost cuts, synergies, internal development,
additional investments, or revenue enhancement? It’s useful to apply all the paraphernalia of mathematical science in an analysis, but focusing on the sense of things is a much better use of time. Part of determining the sense of a deal involves understanding the macroclimate, the broader context, which I think gets too little attention.

...We think of each deal in terms of a flow chart with a series of black boxes. Each box represents a facet of the deal—for example, valuation, financing structure, approach to the other party, negotiating tactics and deal process, taxes, legal structure, contracts, market reaction, and regulatory hurdles.
advice  argumentation  Bruce_Wasserstein  contracts  cost_of_inaction  dealmakers  deal-making  downside_risks  financial_advisors  financial_risk  howto  investment_banking  J.D.-M.B.A.  Lazard  logic_&_reasoning  M&A  market_risk  mergers_&_acquisitions  operating_risk  problem_solving  product_risk  risk-assessment  synergies  team_risk  upside 
july 2012 by jerryking
Go Ahead, Take a Risk
June 22, 2004 | WSJ | By ADRIAN SLYWOTSKY

What are the risks you should be taking but aren't? Most managers treat risk as an unwanted byproduct of the business. They think narrowly of financial, operating, and hazard risks, such as currency fluctuations, employee fraud, and earthquakes. And they defend themselves through practices like hedging, internal controls, and insurance.

But disruptive strategic risks can be a much larger source of value destruction for a firm. I looked back to the bull market of the 1990s to analyze movements of the Fortune 1000 stocks; even then, before the market collapsed, 10% of stocks lost over one-quarter of their value in a single month, primarily because of strategic-risk events.

The most successful companies do not try to simply minimize strategic risk; they embrace such risk by making prudent bets in their growth-oriented strategies. Strategic risks include not just the obvious, high-probability events that a new ad campaign or new product launch will fail, but other less-obvious risks as well: Customers' priorities will change quickly -- as when baby-boomer parents quickly migrated from station wagons to minivans, catching most automakers off guard. New technology will overtake your product -- as mobile telephony has stolen market share from fixed-line voice. A one-of-a-kind competitor will render your business model obsolete -- as the Wal-Mart tidal wave has washed over mid-range department stores.

Although insurance and hedging can't address strategic risks, there are an array of countermeasures that can, including these three:
1) Smart sequencing for new growth initiatives. Look for incumbents that are moving deliberately, leveraging existing assets and customer relationships to gain the experience, knowledge, and reputation necessary to take the next step with confidence.
2) Proprietary information to reduce the risk of each new initiative. Gather and generate proprietary information that produces a depth of insight into the customer's needs and activities that traditional suppliers cannot match. This will make you a supplier of choice, reducing bidding volatility and allow you to plan with greater certainty.
3) Double betting to minimize the risk of obsolescence. When several versions of a new technology are competing to become the standard, it's impossible to predict which will prevail. So smart managers make double bets. Betting on both Windows and OS/2 positioned Microsoft to be the winner, regardless of which operating system prevailed.

Traditional risk management seeks to contain losses. But that's just one-half of the growth equation. By embracing strategic risk, Cardinal, JCI, and other risk-savvy companies have raised their growth potential in addition to reducing their economic volatility. That's important at a time when aggregate market growth is sluggish: The biggest risk of all is not to take the right growth risks for the business.
leaps_of_faith  Adrian_J._Slywotzky  risk-taking  proprietary  sequencing  scuttlebutt  information  growth  strategic_thinking  Mercer  Oliver_Wyman  product_launches  nonpublic  low_growth  slow_growth  insights  customer_insights  value_destruction  disruption  insurance  new_products  obsolescence  countermeasures  volatility  customer_risk  one-of-a-kind  hedging  overly_cautious  risk-aversion  de-risking  double_betting  risk-management  bull_markets  customer_relationships  dark_data  risk-savvy  internal_controls  financial_risk  risks 
june 2012 by jerryking
Litigation Portfolio Outsourcing
To reduce costs, Fortune 500 corporations outsource a wide variety of products and services outside their core competencies (e.g., information technology, employee benefits). The corporate self-insured litigation market is the last, large cost center where outsourcing opportunities have been unavailable. Many large corporations spend more on litigation than on most services and products. Litigation is the only corporate activity where transaction costs exceed all other costs.

DryStone Capital offers corporations the opportunity to outsource litigation. DryStone focuses exclusively on defending large portfolios of litigation, including employment, personal injury, product liability, commercial and environmental. DryStone offers a buy-versus-make alternative.

DryStone Capital resolves all lawsuits for a fixed price, which includes both defense and liability cost, and is 10% less than what it would otherwise cost. Using our own capital, DryStone Capital creates a reserve to take the financial risk away and to guarantee the savings.
law  Outsourcing  litigation  financial_risk  Fortune_500  transaction_costs 
november 2011 by jerryking
Why You Should Stop Being a Wimp
Aug. 3, 2011 |BNET|By Suzanne Lucas |Ever met a successful
wimp? No such thing. The person who succeeds in the world of work isn't
the person that refuses to take chances. Business owners must take
financial & personal risks, evaluate mkts. & spot gaps which
they try to fill. Sometimes they commit to paying other people’s
salaries before knowing for sure if they’ll bring in enough $ to pay
their own. Successful sales people go out every day & risk rejection
in order to sell their products. You can't expect customers to
call. SVPs didn’t get there by keeping their head down & doing
precisely what their bosses asked of them. They looked for new
opportunities, suggested new paths for the biz, made difficult
decisions..This isn’t advice to be irrational, nor rude. Be politely
firm. Think through your plans–you must have plans in the 1st. place.
Do take risks where there is potential for payoff, do speak up in
meetings, do work your ass off and do ask for the recognition you
deserve.
advice  chutzpah  financial_risk  hard_choices  hustle  independent_viewpoints  indispensable  individual_initiative  intrinsically_motivated  It's_up_to_me  jck  ksfs  opportunities  overlooked_opportunities  owners  personal_payoffs  personal_risk  recognition  rejections  risk-taking  self-starters  speaking_up  uncharted_problems 
august 2011 by jerryking
Banking On The Weather This booming derivatives market gives new meaning to rainy-day funds. - May 31, 2004
May 31, 2004 | FORTUNE Magazine | By Abrahm Lustgarten. "Over
the past few years the weather-derivative market--invented seven years
ago by Enron to hedge its energy liabilities--has seen exponential
growth. In fact, hedging with weather contracts is beginning to
neutralize a host of financial risks. There's just one problem:
Meteorologists still lack reliable worldwide data. "Believe it or not,
there is not much attention paid globally to taking accurate
measurements of the weather," says Steve Jewson, a meteorologist who
develops derivatives for Risk Management Solutions."
weather  derivatives  risk-management  financial_risk 
november 2009 by jerryking
Six Ways Companies Mismanage Risk - HBR.org
March 2009 |Harvard Business Review | by René M. Stulz
(Charles Waud & WaudWare)
Financial risk management is hard to get right in the best of times. Stulz explores 6 ways institutions usually drop the ball:
1. Relying on Historical Data
2. Focussing on narrow measures
3. Overlooking knowable risks
4. Overlooking concealed risks
5. Failing to communicate
6. Not managing in real time
HBR  risk-management  execution  failure  risks  measurements  unknowns  financial_risk  hidden  latent  Communicating_&_Connecting  signaling  real-time  disclosure  mismanagement  overlooked  historical_data 
march 2009 by jerryking

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