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MASTERS OF THE OBVIOUS

Category: Rant
Tuesday, January 29th, 2002 @ 07:30 pm

Posted By Brent

The Can Opener
50 years in the making

I was watching the history of the New York Stock Exchange a couple days ago, being the History Channel junkie I am, and they dropped a bit o' trivia on me that nearly blew my fucking mind. It was about portfolio diversification. Now I'm not a economics guru by any stretch of the imagination, but I believe I have a firm grasp of the meaning of the term: you buy stock in a lot of companies, that way if one or two of them take a dive the diversification of stocks will take the brunt of it, and it will average out so you won't be taking a big loss. This is protection against the 'all your eggs in one basket' type of investing that causes people to lose all their money if the one type stock they own goes tits up. Seems kinda obvious, eh?

Au, contraire mon frair. The New York Stock Exchange opened its doors in 1792, with smaller, local stock exchanges predating that by decades; all this with the idea of diversification not existing until 1952. The guy that came up with it won a motherfucking Nobel Prize in Economics in -- get this -- 1990. What in the hell?!

This of course isn't saying that nobody ever thought of it, but Jesus, since the very beginning there have been investment firms in operation, consultants, and any number of people who's job it was to help people invest wisely; yet this idea was not published for over a hundred and fifty years?

It kind of reminds me of another piece of What The Fuck trivia that comes to mind every now and then dealing with the can opener. This little jewel of modern convenience wasn't invented for fifty years after the introduction of the tin can. How can you go about life for 50 years, bashing cans against pointy rocks, before it dawns on you that there has to be a better way?

And of course, as if it couldn't get any sillier, the better way turns out to be a big honking crowbar type thing that requires you to get your cans opened at the local grocery (probably due to the fact that any layperson would lose a few digits in the process of opening their non-perishables). It wasn't for another ten years that someone finally came out with modern can opener, who's derivatives we see and use today.

Sometimes I can't tell which astounds me more: humanity's amazing brilliance, or its complete inability to grasp the horribly obvious.

Comments

NAME: xerxes7

Sunday, February 3rd, 2002 @ 02:46 am

hola habla espanaba ebberyboddady stoyupiddy doo!!!!!!!!!!!

i am the dumbdumb dumm and i almost putted my pphone number up for all the world to see and god too. but i di \dn't.

mister fix should make a email to me and then i will tekll him the num ber to call me so it will be a nsecret/. or make it to ian. the charade is old oand molydy anyway.(the true secret is invisible vomit on ghirlygirl's desk because i almost dide that very same thing just now but didn't.)

NAME: suz

Saturday, February 2nd, 2002 @ 09:33 am

Ya learn something new everyday............People need to get out more.

NAME: GirlyGirl

WEBSITE: http://www.glitch13.com

Friday, February 1st, 2002 @ 06:16 pm

and there, folks, is your history lesson for the day.

NAME: redbean

Friday, February 1st, 2002 @ 05:44 pm

xenusux must have gone to big word school. but that's cool

NAME: XenuSux

Friday, February 1st, 2002 @ 02:53 pm

I'll start with the fact that the first mutual fund was created in the US in 1924, with the number of mutual fund shareowners reaching a new record - 1 million - in 1951. That means diversification had been around for over a quarter of a century before Markowitz wrapped a theory around the practice in 1952!

Sure, NYSE started in 1792 by 24 brokers - under a buttonwood tree at what is now 68 Wall Street. But, they traded outdoors until 1817 until someone said, why can't we do this stuff inside & not freeze to death in winter? But some (claustrophobic or cold-blooded reptilian) traders refused to go inside & stayed outdoors forming the Curb Exchange, which eventually became the American Stock Exchange, who did not move indoors until 1921. During the 1920's, only 1.5 million Americans played the stock market, basically the extremely rich, lot of whom got wiped out by the crash of 1929, which led to the Great Depression. All the trading was based either on insider information or purely on speculation. There was minimal financial data and no rules!

The Securities & Exchange Commission (SEC) was only formed in 1934 to prevent fraud & to provide full disclosure to investors. In 1938, the Committee on Accounting Procedure established "Generally Accepted Accounting Principles" (GAAP). Over 60 years later, the system still does not work perfectly, anyone heard of Enron, hello!!! Bottom line, until reliable financial data was available through standardized accounting and full disclosure laws, which wasn't until 1938, a financial theory was meaningless since it could not be empirically proven!

However, modern financial theory was pioneered in 1900 by Louis Bachelier, with the random walk theory of asset prices. Irving Fisher outlined the importance of risk in asset allocation in 1906. Once there was a financial system in place, during the 1930's, economists Keynes, Hicks and Kaldor and Marschak had already conceived of portfolio selection theory. Accounting for the distraction during the early-1940's of a little event called World War II, Markowitz's extension of these theories in his 1952 dissertation (with diversification as the key
theme) seems like a pretty reasonable timeline to me.

NAME: mr.fix

Thursday, January 31st, 2002 @ 06:14 pm

hello brainiacs!
i am alive and well in missoulla montana!
the plan is to come for a visit nola and hang with crispin glovers cousin!!
saw syl syl of the newyorkdolls, he said i was dynamite!!!
forgot what i did with ians number so it would be nice if he was cool enough to email me again.
now i will cry.
good day word makers.

NAME: glitch13

Wednesday, January 30th, 2002 @ 02:19 pm

Nah, he'll be out of office soon enough. Then we can call up the new mayor, who will have the same politics and level of corruption as the last 25 mayors of this city, and see if he gives two shits.

On the bright side, maybe we won't get a pillow bitter this time *crosses fingers*.

NAME: redbean

Wednesday, January 30th, 2002 @ 01:55 pm

i think one of you should call the mayor of new orleans and tell him to diversify his economy. you could also tell him to stop opening cans with his teeth. oh and maybe he should stop having sex with men it's out of style.

NAME: ian

Wednesday, January 30th, 2002 @ 10:47 am

Sometimes I can't tell which astounds me more: humanity's amazing brilliance, or its complete inability to grasp the horribly obvious.

it really is a wonderment that we're still here.

the can opener thing i knew about, but that portfolio diversification thing... W. T. F.?!

if i get a paper printed suggesting that people look both ways before they cross the street can i get a nobel prize?