“Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”
11 Oct 2010
In trying to explain why the economy blew up in 2008, John Cassidy’s How Markets Fail draws on a classic quote from the economist John Maynard Keynes: “Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”
Nassim Nicholas Taleb says much the same in his books on the follies of stock and hedge traders (and most everyone else), The Black Swan and Fooled by Randomness. He tells the stories of traders who followed the conventional wisdom, either because they didn’t know any better or because it was too hard for them to fight the tide of “common knowledge” of how the market behaves.
So why is it OK to fail conventionally? One of these books—I can’t remember which—pointed out that when everyone fails together, then no ones’ reputation gets too tarnished. It’s everyone’s fault, and so it’s no one’s fault. If that’s the psychology of traders, and no one holds them to task, then it seems the rest of society is caught in a wicked trap.