Billy Collins

by Rick Nason, PhD, CFA

Partner, RSD Solutions Inc.

www.rsdsolutions.com

info@rsdsolutions.com

Mathematician Keith Devlin is quoted in “The Universe and the Teacup” by K.C. Cole as saying, “To really understand what it means to think rationally, mathematics will need to team up with psychology and sociology, and perhaps even biology and poetry.”

This was very similar to a presentation I made earlier this summer to the CFA Society of Toronto on New Axioms, Assumptions and Paradigms of Risk Management http://www.rsdsolutions.com/quotrisk-management%0Bnew-axioms-assumptions-and-paradigms, (see in particular slide 37), and a different presentation I made on “Sociological Finance” to the 2010 CFA Pension Conference in Toronto.

Risk management, as well as mathematics, needs to learn from sociology and psychology.  To be clear I am NOT talking just about behavioural finance.  Sociology, psychology, and biology tell us about complex systems and how complex systems and human interactions evolve (become emergent to use the technical term).  What is needed is creative people who are not hung up with the mathematics of risk management.  The confines of mathematics have taken us a long way in risk management, but it is time to realize that we are asking too much of the mathematics and the mathematicians.  Perhaps it is even time for risk departments to employ poets.  I wonder if Billy Collins is interested in doing some moonlighting.

Surfing or Passion?

by Rick Nason, PhD, CFA

Partner, RSD Solutions Inc.

www.rsdsolutions.com

info@rsdsolutions.com

Last week I read Yvon Chouinard’s book “Let My People Go Surfing”.  Yvon is the founder of Patagonia clothing company and I think I may be the last business person on the planet to have read his book.   In case you have not read it, it is the story of his founding of the company and the many path-breaking business principles that he and his associates founded, such as on-site day-care and flex time, etc. etc.  The book also outlines how he, his company and his associates became passionate and active supporters of environmental causes.

The book is a fascinating case study in how to run a company.  So many of the business practices that Yvon and his partner’s started are now common-place benchmarks – but they were anything but when he first introduced them.

When the company first started making mountain climbing gear, they warned their customers not to expect fast service during mountain climbing season as they (the founders) would be out mountain climbing rather than filling customer orders.  This passion for activity and passion in their chosen field, rather than following best business practices turned out quite well for them.  The title of the book of course refers to the fact that employees are encouraged to go surfing when the conditions are good, rather than wait until the 5 o’clock whistle has blown.

Yvon is obviously a very smart but also a very charismatic person.  (I assume he is charismatic from the way that the book was written.)  His company is a blue-print for many others that have tried to follow in his footpaths.  His book is also a popular read amongst B-school types. 

This brings up an interesting question.  Is Patagonia and Yvon successful because of his passion for mountain climbing and surfing, or is he successful because of his passion, or is he successful because of his education (he basically has no formal post-secondary education)?  Can risk managers be successful in the same way?