Driving Fast

I recently heard John Reed, former chairman of the wall
street giant City Group, interviewed about the financial crisis. Prior to the
financial meltdown he was one of the proponents for deregulating the financial
industry.  Now he believes things have
gone too far and that while over-regulation slows down the economy, too little
regulation causes it to crash.  He made a
compelling argument.

I particularly liked one analogy he used. He said that he
once asked his children, “Why does a car have brakes?”  They responded by saying  “to slow it down and to stop it.”   He told them, “No. A car has brakes so that
you can drive it fast.”  If you got into
a car that had no brakes how fast would you want to drive it?

Over regulation is a
problem. But in our zeal to relieve the burden of too many rules, let’s
recognize that some rules are necessary both in our businesses and in our
industry.  If the car represents our
business, the road represents the environment in which our business
operates.  When I drive on I-80, I recognize
the value of having lines delineating my lane and rules of the road that we all
agree to abide by.  Can you imagine
driving without them?

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10 Comments


  1. Brakes are only for stopping…. you go fast, because you have good brakes.
    Good brakes give the illusion of safety, as do good regulation.
    We all know that speed kills.

    Reply

  2. I disagree with the article. The brakes on a business should be the risk of failure and the speed at which it travels should be the success it achieves. I agree some regulation may be necessary, but usually most government regulation is trying to fix a problem AFTER the horse has left the barn, not before.

    Reply

  3. i agree some rules are necessary. for example the rule of law and equal protection. we have plenty of laws, but we do not have equal enforcement. laws are the policies or rules by which a game is played. however, some have become more protected than others. some are bailed out and some are let fail. by what rule? the rule of “we will make up the rules as we go” is what rule. it was the lack of rules that was the problem, but the lack of enforcement of the rules, and not everyone playing by the same rules. the latest is mf global and cme, look into it. big business and government are to close. all the goldman implants in the government looking the other way with a wink. nothing like letting the fox guard the hen house.

    also, the extra rules. for example lets make banks lower their standards and make loans for houses to people that really can’t afford them. little wonder they got a little over priced. the housing market started “driving fast”, because of rules, not lack of rules.

    Reply

  4. Regulation is necessary because we are all human and created with a sinful nature. Some follow this nature more than others and would trample all they could if allowed. You can’t violate the laws of GOD (& Nature), business and man forever and not reap the harvest you have sown. The only problem is these days everybody just leaves the mess for someone else to clean up!

    Reply

  5. In the long term you are probably right. But in the short term, I’m not so sure. A “pure” market place may be the most efficient place to set the rules. Unfortunately, as you point out, government doesn’t have a corner on greed and corruption. There is plenty of that in the private sector too…in the long term I believe that what goes around comes around…but it may take generations for it to come around.

    In the short term, if deregulation hasn’t led to as many problems as over-regulation, it has certainly contributed to some whoppers. The repeal of the 1933 Glass-Steagall Act and other steps to de-regulate the financial industry (and the failure to enforce other regulations that remained) contributed to Wall Street Fiasco of 2008 (and beyond). A lot of smart folks (Allan Greenspan among them) took a firm stance that the financial industry could regulate itself. Oops.

    It is awkward to argue for regulation and I am not making a case for more regulation. That’s not the point at all. I felt the idea of having brakes so you can drive fast was an interesting and useful way to clarify the purpose of regulation regardless of who makes the rules. I think the idea of having brakes so you can drive fast safely, would be a good litmus test for regulation.

    Reply

  6. My intention was not to relate it to ranching so much as to business. And, the answer to your “either or” question is “Yes.

    Whether we are talking about the internal workings of our own business or the environment in which we operate at least a minimum framework of rules for conducting business increases the efficiency of doing business…provided the rules make sense.

    Unfortunately, some of the rules imposed on us externally don’t make sense. They result in an unlevel playing field and are a royal pain in the @#$%&!

    My primary goal was to share with you what I found to be an interesting analogy between regulations as brakes…and the idea that the primary purpose of brakes (and regulation) is not to slow things down, but to provide a safe way to go fast. For me it was an thought provoking perspective and one I had not considered before.

    Reply

  7. I read this as an issue of trust. If you trust your partners, trust your business plan and trust your skills you can take more risk.

    Reply

  8. OK. So I’m trying to relate this to ranching. I take it you are saying that our businesses need rules and structure (plan) so it doesn’t crash? Or are you saying that to push our businesses forward quickly we need structure to know when to pull back?

    Reply

  9. That article fits perfectly with more that just the economy.

    Reply

  10. “…recognize that some rules are necessary both in our businesses and in our industry.”

    Absolutely! But…the market place has ALWAYS been and will ALWAYS be the best “rule maker.” Or problem is that we have turned rule making over to people who do not have a capital interest in the optimum outcome on behalf of anyone but themselves and their chronies in the congressional-military-industrial complex.

    There is NOTHING that government does that a private property-natural law based, for profit, free market society can not do better (more efficiently) and that includes the provision of adjudicative and protective services.

    Yours for freedom in our lifetimes.

    jtl, 419

    Reply

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