Physicists have long noted that observing some phenomena actually changes their nature. In finance, the equivalent is known as Goodhart’s law, after the British economist Charles Goodhart, who in 1975 argued that once a measure becomes a target, it loses the very properties that made it a good gauge to begin with.
—Robin Wigglesworth in the FT: ‘How a volatility virus infected Wall Street‘
“When a measure becomes a target, it ceases to be a good measure.”
— Goodhart’s law – Wikipedia
Continue reading Goodhart’s law
It is an old Rothschild adage that to get rich, you must buy “on the sound of cannons”.
— FT, in ‘There has never been a better time to invest in France‘
…experience has shown that there is no innovation, however seemingly benign, that the finance sector cannot overcomplicate and overextend. Securitisation was a good idea when first adopted, but ended with the mess of subprime loans that were sliced and diced into a dog’s breakfast.
—The Economist, in Lessons to a columnist’s previous self
…most businesses start out in the red: it usually takes financing, often in the form of a loan, to buy everything necessary to even open the business in the first place; a company is not truly profitable until that financing is retired.
Stratechery:Amazon Go and the Future
Many South Africans are ignorant of the basics of personal finance, a trait that transcends income levels. Neil Roets, who heads Debt Rescue, a debt-counselling firm, says new clients are first asked for their household budget. Most do not have one.
The Economist: In South Africa, more people have loans than jobs
- Do you understand the basics of personal finance?
- Do you have a monthly household budget, and know when you’re over/under it, and why?
Ignorance of personal finance basics, and lack of a household budget – I’m sure a good proportion of people, across income levels, in India and the UK, would fail this test.