Monday, November 10, 2008

Booms and Bust; Innovations and Risk Takers

Capitalist system works by boom and bust. It can be a very bumpy ride, but we all can win in the long term. The business cycle is not dead. I am not saying that there should be no regulation to temper the business cycle. However, you have to be careful as too much regulation can stop the economic expansion phrase of the cycle. You will not get rid of the economic contractions, but you can damage economic expansions.

Innovators and risk takers push the capitalist system. They push the economic expansions. We mostly benefit from this, but not always. This is one time when we are not benefiting much. In fact, this is why we have some of the current problems. However, if you slap down innovators and risk takers, or worse put them in jail, you discourage people from innovation and risk taking. If you do this, we can all lose. Here again, you can put a stop to economic expansions, but you will still get the economic contractions.

From what I can see, what you want to do is moderate the expansions. The higher and the steeper the stock market climbs, the lower and steeper will be its fall. So, putting in some regulations to keep the booms in check and some regulations to keep the innovations and risk taking in check, would certainly be in order. There seems to be lots we can do to kill economic expansion. Problem is, I have never heard of any economic contractions being stopped.

Business people (like CEO, CFO etc) are just people who are doing the best they can in the situations that they find themselves. I am not saying that there are no crooks; I am just saying that the majority of business people try to do the best they can. Humanity spend most of it’s time as a hunter-gather. Maybe under all our sophistication and our very complex society, we are just hunter-gathers at heart, just trying to cope with the world we have made.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at for a list of the stocks for which I have put up spreadsheets on my web site.

No comments:

Post a Comment