Jim Letourneau's Blog

Investing, Technology, Travel, Geology, Music, Golf. I think that covers it.

Scott Adams on Investment Banks

From a great Scott Adams (the creator of Dilbert) interview.

The goal of the people at the top now is to create what I call confusopolies. The barriers to entry to almost any business are so low now - any company can get into any business, just invest some capital and get your product made cheaply in China or somewhere - so everything is basically a commodity.

So you have to make your product so complicated that people will pay more for it, just because they are awed by the complexity of it. This is what happened on Wall Street. You know, before the big meltdown, somebody asked Warren Buffett to explain how certain derivatives and credit-default swaps worked and he said he didn't understand them - and, although he was too modest to say so, what he was implying was that, if he didn't understand them, then nobody did. Well, that turned out to be true. The big investment banks were the ultimate confusopolies.