Other People's Money

At Modeled Behavior, economist Karl Smith writes:

I don't mean that my comments are morally defensible. ...

I am sure the emotion I am having right now leads many people on Wall Street to do not so nice things.

...you should leverage your house to the maximum the bank will allow. You should always leverage to the maximum your counterparty will allow.

If you don't get this then you don't get the concept of "Other People's Money" which is fundamentally superior to your own money, because it belongs to someone else. If you lose it , they are screwed. They could try to screw you in return but it is always harder to re-screw than to screw.

If there is screwing to be done you want to be the first one to screw, not the last. This is applicable in many contexts, but especially in finance.



Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.

NPR thanks our sponsors

Become an NPR sponsor

Support comes from