Wednesday, December 30, 2020


  1. That on a t-shirt. :-)

  2. No New Year's post? BAH HUMBUG. :-)

    Even in a cast, this feels like pathetic effort!

    So let's do one here.

    Goodbye 2020: pricing models for black swans.

    Hello 2021: pricing models for risk aversion.

    I'm thinking that there's a break point where the markets stop going along with this heavy risk aversion of 2020 and start pricing in how to punish it. This isn't going to look like a volatility upswing or be measurable with current market models, or even be something like bellwethers versus bell bottoms (meaning multi-generational firms versus the latest trendy new players).

    It's going to look like an expression of risk aversion relative to class.

    I found research from the Cass Business School in London that had some interesting stuff to point out about the problems of risk aversion.

    Interesting that it's from 4Q 2019, just before all of this mess started to unfold.

    Even more interesting is this part: "Members of social class A are less risk averse, more willing to take risks to avoid losses and less loss averse than members of social class E. However, members of social class B -- lower managerial and professional occupations -- are unusually risk and loss averse."

    When I look back on all of the massive changes that took place in 2020, I see my own efforts to price in risk awareness and to punish risk aversion, wondering how far this goes with others.

    Most of the people who went with the flow of changes stayed on this ride. All of the people who didn't aren't on it anymore.

    The people who went with the changes but weren't part of the future plans?

    Several of those people were given the vans that they were driving after our big supplies raid earlier in the year. Others were set up with independent supplier arrangements. But those people were either reliable "blue-collar" types or were previously successful on their own, meaning that they knew how to work with risk, even if it's just on an intuitive level.

    We entered 2021 with very few hold-overs in business operations from 2020, and nearly everything's on new footing, even if we're dealing with some of the same people (including me).

    We lost some sales engineers, some product engineers, a lot of "back office" support based in North America, and we picked up some new people who get paid more (and there's more expected from them).

    Everyone who refused to get on board with the changes isn't around for 2021.

    Right down to a personal level, in fact, because the blonde's not here and there's someone new.

    I do know one thing out of this: don't expect a lot from your "class B" people (to use that British class analysis designation from the research paper) when it comes to adapting to change.

    Now I understand Elon Musk a bit better. His organizations probably were filling up with risk averse people, and so doing a major move rearranged the furniture to provide more space for activities, so to speak.

    What's old is new again: this is a technique right out of Townsend's "Up The Organization" from 1970.

    Given the actual and potential appearance of social unrest in America that has a 1970s feel to it, seeing this roll out again shouldn't be too surprising.