Saul Hansell, the "Bits" (Business-Innovation-Technology-Society) blog editor of The New York Times, only now asks one of the many critical questions that he SHOULD HAVE been asking and investigating months, if not two and three years, ago in the build up to the nation's current financial disaster: "So where were the quants?"
http://bits.blogs.nytimes.com/2008/09/18/how-wall-streets-quants-lied-to-their-computers/?em
(Quants are "quantitative analysts" or economics, mathematics and computer science experts whose job it is to develop sophisticated, built-in risk-management computer programs on Wall Street and for investment firms that are supposed to help safeguard against critical investment losses and better manage profit risks for greater yields.)
High-tech stuff, right? Smart innovation, right? Well, as Hansell points out, that depends on who's directing the quants to design those programs, and what the real motives are in how those programs will be used. Hardly an original observation. Which is where I'm going with this. Hansell gives reason for a reader to question whether he's truly qualified to be in the editorial position he's in. Because he's not exactly demonstrating that he's got the mojo on InJo. In other words, someone needs to be eyeballing the so-called experts who are supposed to be minding the store. Because it's not just about asking long after the fact: "Where were the quants." More importantly, it's for us to ask of Hansell, "Where the heck were you?"
For example, for all his tech knowledge, editor Hansell demonstrates his own version of intellectual bank failure and collapse. Near the opening of his above Sept. 18, 2008, blog entry on the quants-related fumbles, Hansell offers the following: "Before I started covering the Internet in 1997, I spent 13 years covering trading and finance. I covered my share of trading disasters from junk bonds, mortgage securities and the financial blank canvas known as derivatives. And I got to know bunch of quantitative analysts..."
He goes on to say of the quants: "They were developing systems that would comb through all of a firm’s positions, analyze everything that might go wrong and estimate how much it might lose on a really bad day. We’ve had some bad days lately, and it turns out Bear Stearns, Lehman Brothers and maybe some others bet far too much. Their quants didn’t save them." Gee, no kidding, dude. Tell us something we don't already know?
So, let me get this straight. Saul Hansell, editor of "Bits" in The New York Times, takes pains to point out his niche cred early in his blog entry. Then in practically the same breath, he proceeds to demonstrate his ignorance and negligence to do the job he's SUPPOSED to have done as an expert covering those very fields? Uh, pardon me for saying so, but that sounds like a whole lot of deflective ducking and hoodwinking hooey to me. Seriously, doesn't someone need to be checking out why Hansell only now seems to be starting to see the light -- and barely half-lit at that. Not to mention come up with a zinger to: How many technology-financial "beat" editors are needed to screw in a light bulb?" (Someone please tell me what Jay Leno comes up with on that one!)
This is not a personal attack on Hansell. But it is an inquiry into his professional qualifications to perform the scope of his position's responsibilities. For is it not important for us to have confidence in reporters, editors, and their news organizations to have the intelligence, courage, foresight, and gumption to do their jobs well -- especially at this very complex and pivotal time in human history? And to find truly creative ways to pull in steady, solid revenue without overly compromising journalistic integrity and mission?
Basically, where was Hansell's cred when all this stuff was escalating into a speculative frenzy over the last three years, when evidence for the dangers abounded? After all, you don't exactly need a roomful of quants to design a sophisticated computer program to warn you -- in screaming neon lights -- that such complex high-risk speculations (as these intricately bundled subprime mortgage securities were/are) are inevitable monster disasters just waiting to implode in your face.
Unless, that is, the only thing interfering with such common-sense brain solvency might be something called flat-out, no-holds-barred, reckless and ruthless, unregulated GREED?? The kind that drives behavior and choices that don't give a darn about the consequences of one's actions upon the entire country, upon people's retirement funds and bank savings accounts and a good chunk of the rest of the global economy. (I.e., raw, amoral self-interest versus enlightened profit motives which, in the long run, help drive a healthy economy and yield a pretty decent hunk o' change and far fewer sleepless nights.)
But that's exactly the point which Hansell seems so skittish in coming clean about. And one can't help but wonder why. I mean, shouldn't someone look into that? Shouldn't his questions demonstrate more concrete savvy of the connections between the crossover fields the "Bits" department is touted to cover? Because it begs the question as to how Hansell's conscience is riding on him now, and whether he'll be held firmly accountable for his apparent oversight. For the gamesters on Wall Street and beyond, who thought they were being clever when they were in fact being out-of-control dangerous, I don't think conscience is something they wrestle with too often.
But whatever the case is with Hansell, the underwhelming tone of his blog entry here is disturbing. Like many of his professional peers, is he still not able to grasp the underlying causes and full scope of implications surrounding this financial debacle? If not, then why should anyone read his blog? This is supposed to be "his" turf. I mean, there was no shortage of information available for him to catch these get-rich-quick-swindlers and guilty-as-sin securities peddlers with their pants down. And this before the whole ugly enchilada exposed itself (and the country) to financial mayhem. So then why does it sound like Hansell only just woke up? Heck, it's not like his name is Sleeping Beauty, right?
But going back to common sense over high-risk investments, Hansell quotes Leslie Rahl, the president of the consulting firm Capital Market Risk Advisors, as follows: "'New products, by definition, carry more risk,' she said. The models should penalize investments that are complex, hard to understand and infrequently traded, she said. They didn’t." Moreover, "'One of the things that has caused great pain is complex products,' Ms. Rahl said."
Hansell goes on: "That made me think back to some of the great trading debacles of the last century, such as the collapse of Askin Capital Management, a hedge fund that fell apart because of complex mortgage security investments gone bad. Wasn’t the moral of those stories that you shouldn’t put your money (or your client’s money) in something you didn’t understand? Furthermore, even if you are convinced you do understand it, you’re not going to be able to sell it when you need the money if no one else does." Uh, you think?!
Interestingly, Hansell only then quotes Rahl as follows: “'In some ways there is nothing new,' said Ms. Rahl, who helped investigate what went wrong at Askin." He also quotes Rahl as saying, "'The big deals are front-page news, then they go into the recesses of people’s memories.'” As in Hansell's own fade-to-blank memory banks as well? Because I wonder (since I now have reason to question Hansell's credibility), did Ms. Rahl just happen to conveniently remind Hansell about Askin before he could remember it himself? If so, is he playing fishy with his wording just to try to cover his tracks? To look like he actually knows what he's doing, when maybe he hasn't a clue and is afraid he's going to get called on it? As he totally should be, if that is in fact the case.
So, here we have Hansell, NYT "Bits" editor, feebly asking such elementary questions instead of seriously probing and investigating more hard-hitting, truly cutting-edge ones. Does he figure that a $700 taxpayer-funded bailout package amounts to just a relatively painless news "bit" that deserves no greater thoughtful attention? But, then, he did aimlessly toss out a few gutless questions out there. Yeah, that's some cred.
What Hansell does at least get around to saying -- but doesn't go beyond safely touching on -- is that complicit investment firm heads and managers deliberately turned away from ensuring that such quant-designed programs would churn out numbers and reports that were more in line with reality. This insofar as a computer program can be made to do so, based on investment traders' and managers' conscious desire for keener, more responsible data input and oversight. After all, the quants will only do what they are told (and paid) to do.
Which is why the irony here only gets thicker when Hansell says that "[l]ying to your risk-management computer is like lying to your doctor. You just aren’t going to get the help you really need." Like readers maybe expecting and relying on Hansell himself to offer the information and insight they could've really needed long before this last week?
My point is that, for all its glossy hype and glamour, innovation technology doesn't necessarily spell the kind of innovation we want or need as a nation and as a planet, if the mindset behind it isn't equally up to snuff or guided by the wisdom of the sages and of history, whose advice and perspective Hansell is apparently only now seeking.Though I don't advocate Donald Trump anything, doesn't his infamous directive come appropriately to mind here? As in: "Hansell, you're FIRED." For all the fallout damage our country's now experiencing, and the vast ripple-effects ordinary American tax-payers are and will be feeling in any number of countless ways years from now, I think that's going pretty darn easy on Hansell and his (and his mainstream news peers') largely inexcusable failure to inform the public about the implications of the mortgage speculation boom and its pending bust.
But, then, who's Hansell's employer? Oh, yeah, the same "venerable" publication that was out in front cheerleading for the U.S. invasion into Iraq just a few short years and how-many-lost-human-lives-and-lost-American-reputation-and-lost-billions-of-U.S.-dollars ago? Instead of scrutinizing the glaring potholes in the devious spin that was hurtling out of the Bush-Cheney White House, the NYT's reporters/editors became all-too-willing megaphones for the neo-cons' ulterior agenda rather than being microscopes for government accountability on behalf of the American and world public. I guess the NYT thought it was in the P.R. business instead of that quaint freedom-of-the-press-cornerstone-of-democracy thing called journalism.
(Don't get me wrong, though. There's some truly awesome journalists on the NYT staff. But what's happened to them on two of the most important occasions we've needed them? Were their stories killed? Were they victims of tacit censorship by their higher-ups?)
And, as a last observation, how is it that a New York Times editor can't even get the spelling of the name of one of his article's central sources right? (An admission Hansell rightfully puts ahead of his corrected blog entry.) As is constantly grilled into our journalism student heads, such gross factual errors only erode a reporter's and a new organization's most fundamental credibility. I.e., if Hansell can't even get a name spelling right, what the heck else is he and the NYT getting wrong? Well, I think we've identified what some of those bigger transgressions are already.
So, will the real journalists and better bloggers please stand up? Heck yeah. Thanks to the Internet, they will and they are. And you can bank on that.
- Misako M.
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