Ruins of the Self-Esteem Society

Kevin Hassett nails the Wall Street whiz kids. He draws a bead on the toxic mixture of Ivy League education and cocksure self-esteem that reduced Wall Street to a discredited, ruined wreck.

Twenty or 30 years ago, it was common for the best and the brightest to be doctors or engineers. By the 2000s, they wanted to be investment bankers.

When Wall Street was run by people randomly selected from the population, it was able to survive everything. After the best and brightest took over, it died the first time real-estate prices dropped 20 percent.

Wall Street is gone because its firms did a terrible job assessing the risks of the positions they took. The models these firms used to evaluate risks failed.

Back when Wall Street was run by individuals without fancy degrees, they had a proper skepticism toward fancy models and managed their risks with a great deal more humility and caution. Only when failed models became canon did catastrophe strike.

Computer models and fancy degrees are great, but they can't replace humility and judgment based on experience. Read the whole article here.

http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_hassett&sid=a_ac69DqFutQ