Sorting through the financial crisis

| January 3, 2008

Unqualified Reservations is a new addition to my daily blog reading, largely because of posts like this one:

A better way to think of our present financial system is to compare it to Microsoft Windows. Windows is indeed complicated. It is astoundingly, brilliantly, profoundly complicated. If there is anyone in the world, even at Microsoft, who understands all of Windows, he or she must have a brain the size of a basketball. (One would think this individual would have at least been photographed at some point.) It took them six years to ship Windows Vista, and I really have no idea how the hell they did it.

But Windows is not intrinsically complicated. It is a time-sharing kernel with a graphical user interface. A smart undergraduate can write an time-sharing kernel, with basically the same functionality as Windows, as homework in a semester. The same can be said of the GUI, which is perhaps a bit more code but is certainly less complex. (I wouldn’t have the same student write both. I do feel this would be a little much.)

Windows is complicated because it is both ancient and mature. It has been around for a long time (20 years), and it has been used to solve just about any problem an OS could conceivably solve. Including quite a few that it has no business at all in solving.

Exactly the same can be said of the modern financial system. The difference is that Western finance is ten times as old as Windows. If not twenty or thirty. The result is that, as with Windows, people can spend their entire lives trying to understand a single small corner of it – say, real estate, or commodities, or bonds, or whatever. To actually understand all of modern finance, you would need a brain the size of a beachball. This would certainly attract notice, and you might have some trouble getting laid.

It’s a long post, with a promise of more to come [title: “A straightforward explanation of the present financial crisis (part 1)”], but is both informative and entertaining, an uncommon occurrence in general but particularly so when it comes to economics. ..bruce w..

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Category: Economics, Geopolitics, Main, Recession Watch

About the Author ()

Webster is Principal and Founder at Bruce F. Webster & Associates, as well as an Adjunct Professor of Computer Science at Brigham Young University. He works with organizations to help them with troubled or failed information technology (IT) projects. He has also worked in several dozen legal cases as a consultant and as a testifying expert, both in the United States and Japan. He can be reached at bwebster@bfwa.com, or you can follow him on Twitter as @bfwebster.

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