Some Thoughts On Brexit

Clearly the UK’s decision to leave the EU is a big deal. The implications for the UK and Europe are large. And there is a feeling that similar politics will be adopted in other parts of the world. All of that is concerning. But my immediate reaction to the news when I woke to it on Friday morning was this:

I got some flack for being so “opportunist” and “financially minded” on a day when many people were dealing with the the reality that their world was going to change and maybe not for the better.

I realize that things like this are not all about money and financial opportunity. I realize that there will be a lot of pain for some in this transition.

But I am all for change. A static world is not a good world. And, as I said, with change comes opportunity.

Is it possible that the British Pound will be trading higher against the dollar and euro in a few years than it was before the vote? Absolutely. Is it possible that US stocks will recover from the losses they took on Friday and continue the eight year run they have been on? Absolutely. Is it possible that all the hand wringing over the potential for a global economic slowdown brought on by Brexit is overdone? Absolutely.

I am not saying all of these things will happen. But they could.

But more than that, going into a foxhole right now seems like the wrong idea. Some of the best companies have been created in times of great economic turmoil. And, because of that, some of the best venture capital investments have been made in times when everyone was risk averse. I am not for getting too excited when times are good and I am not for getting too conservative when times feel bad. I am all for looking for opportunity at every turn.

#life lessons

Comments (Archived):

  1. William Mougayar

    You are assuming that this is fait accompli now, and there is no irreversibility to the vote, whereas there’s a possibility that implementing and confirming the exit still has some hurdles ahead of it. The vote marked just the start of the process.That said, your concluding remarks reminded me the Two Mindset theory of Carol Dweck: a growth mindset or a fixed mindset. The growth mindset is a better one to have because “it allows people to thrive during some of the most challenging times in their lives.” It’s a learning mindset that adapts, learn and re-adjusts continuously.https://www.farnamstreetblo

    1. pointsnfigures

      the vote is done. they will be out. in the long run, probably better for them. The EU is a failed experiment.

      1. JLM

        .The vote is the beginning of the end for the EU. It may not make it to Christmas.JLMwww.themusingsofthebigredca…

        1. LE

          I always love to see, and in fact I gloat, when downside risk is not considered and smug white men get their comeuppance. All of those stuff shirts in Belgium not taking the unhappiness and threat seriously.

      2. SubstrateUndertow

        To fail is a learning opportunity step and repeat 🙂

  2. Ed Freyfogle

    “Buy when there is blood in the streets. Even if it is your own blood.”

  3. andyswan

    Always supportive of people voting for smaller and more local governance

    1. William Mougayar

      What will happen to Scotland and N. Ireland? They are in a pickle since they are part of the UK, but voted against leaving the EU.

      1. jason wright

        thinking creatively England and Wales could opt to withdraw from the UK leaving Scotland and Northern Ireland inside the EU. it’s much more likely that Scotland will vote to leave the UK having secured an understanding with Brussels to become a EU member in its own right upon independence.Northern Ireland is more interesting. the citizenship and nationality laws of the Republic of Ireland allows for anyone born on the island of Ireland to have citizenship of the Republic. that’s just about every UK citizen in Northern Ireland, and applications in NI for Republic passports have rocketed since the Brexit result. It could mean that a land inside the UK but outside the EU becomes largely populated by EU citizens (Republic citizens holding dual UK citizenship). the English and Welsh may not like that mother is now applying for her Irish citizenship and passport (her father was an Irish citizen). that’s her ‘opportunism’, having her cake and eating it (she voted Brexit).it is possible that the UK may not leave the EU at all. the two major UK political parties are having meltdowns. there will be a general election before the end of the year. parties (perhaps new parties) will definitely stand on a pro EU platform. there could be a new popular political mandate and a second referendum on the issue.there’s even talk about London’s place in the UK.welcome to the madness of island life.

        1. William Mougayar

          It’s getting complicated…but interesting nonetheless.

        2. LE

          thinking creatively England and Wales could opt to withdraw from the UK leaving Scotland and Northern Ireland inside the EU.Nah. The clusterfuck you know is better than the clusterfuck you don’t.

      2. Girish Mehta

        Another Scottish referendum for independence is definitely on the table.More interesting – Can the Scottish Parliament veto UK from Brexiting ?

        1. Talk to the Wall

          They can refuse to endorse but most opinion here says that refusal can just be over-ridden (like much else here, by Westminster!)

  4. William Mougayar

    I’m predicting in less than 2 years, the economic effect will re-equalize and it will be a moot topic. That’s because much of the pro-exit arguments were not very solid, and more emotional than logical.But maybe less Britts will retire in the south of France, Italy or Spain.On the positive side, this might be a wake-up call to EU bureaucracy which is an abomination of its own kind, maybe 2nd to the UN’s bureaucracy.

  5. Tom Labus

    Economic transitions are not pretty. Leaving is part of a larger economic issue of productivity and wage growth that has stalled. This move may make some feel good for awhile but it doesn’t do anything to help the real issues.This is also part of the 08 Crash which will be with us for a full generation. Some Churchill always helps. He was for a United States of Europe.…This has also been the nicest June that I can remember. What a string of great days!

  6. Pranay Srinivasan

    LIke Warren Buffett says, “be fearful when people are greedy and greedy when people are fearful”. VC is a classic study in this – most breakout startups are started or funded during these downturns (USV is the best in class at Identifying those too!)

    1. Girish Mehta

      This quote of Buffett’s is what I had in mind when I said here a few days back that our investing has to mirror our personality. The truth is – this statement is right. The truth is also – Nobody can execute to this entirely.Its a question of knowing in advance where each of us fall on the continuum of being able to be ‘less fearful’ and ‘less greedy’ when the environment is the exact opposite. Willpower is highly over-rated relative to Self-Awareness.”Be greedy when others are fearful and fearful when others are greedy – Advisors with a hundred years of data.LOL – Epinephrine, with 2 million years of evolution !” – Morgan Housel.

  7. David C. Baker

    I do not think this is as big a deal as the press seems to think. Primarily, I think it’s jarred the world because the final vote was a surprise in that the polls and general sentiment got it wrong. If we had been expecting a “yes” exit vote, we’d have had the collective mental space to process the idea a bit more.This is one of those times, thankfully, when the massive gears of government slowly grind away and never really spin. We never get great things done quickly enough, but there’s an inherent limit on how much bad can be accomplished in a given period of time.E.g., even Boris is recommending that they not submit the official notice to Article 50 right away. Until that happens, nothing has changed.I too love change because true leaders find their sea legs in uncertainty and all the dimwits get wrapped up in their own rhetoric.

  8. Vendita Auto

    Cameron’s Tories f!!!ed up by instigating an unnecessary referendum that leaves the UK and Europe in the hands of “Roger” [Lord of the Flies]. Europe Union is in grave danger from nationalism & the global financial markets. Nationalism / Tribalism is not local governance what would happen if Scottish nationalist now brow up bridges & railways are they freedom fighters or terrorists whistling Dixie.”But maybe less Britts will retire in the south of France, Italy or Spain.” Sad stupid comment.

    1. William Mougayar

      I didn’t say it negatively, nor implying it’s good or bad. Just stating it would be a reality, as an outcome of Brexit.

  9. Laurent Boncenne

    What this points out to me as a french living and working in London is that the overall thinking behind the EU was flawed in the first place and that the political system we live in has been broken for a while which explains the low turnout and participation, especially from the youth.The main parties picked a side for the sole purpose of picking a side against the other without being rational of the whole thing as there are interesting aspects to the remain and leave camp.What we end up with is dimwits who in no way should have had a shot at being the leaders of their respective parties stand on shaky grounds and political sneakiness to push an agenda barely anyone wants.I wouldn’t be surprised if other countries like France tried to follow suit, and i wouldn’t be surprise if the same bullshit sides is going to happen again with them seing as what they’ve got for a head of state…

    1. JLM

      .That has already happened. When Germany — who got the power over Europe it could not get with Hitler’s tanks — realizes who is going to be asked to pay the bills, the game is over.It will be a boon in the short term for anti-terror efforts as soon as frontier checkpoints are re-instituted and a Greek passport cannot allow you to travel unimpeded to London.JLMwww.themusingsofthebigredca…

      1. Laurent Boncenne

        which is a shame, as back in the day (about 20 years ago if not more), tremendous efforts were being made to get France and Germany closer and closer to each other (and i don’t mean in the EU kind of way). Those efforts should have remained and would have lead to a completely different political landscape in both countries and would have likely influenced what the EU ended up being.

        1. JLM

          .Not to go ugly on an ape but why would France want to be close with Germany?There was one historic and repulsive moment when the French and the Germans were united — in the persecution and extermination of the Jews.The French delivered their Jews to the concentration camps with a zeal equal to or greater than the Nazis.Sorry.JLMwww.themusingsofthebigredca…

          1. Laurent Boncenne

            because at the time, having a united France and Germany (after the war, the fall of the Berlin wall etc. we’re talking mid 1990s there) was the right direction to go for; to put the past behind and work towards a relationship that would lead and show the way for what people wanted Europe to be.There’s some left-overs now, but much of it has changed and took a slight detour, which is a shame.

          2. JLM

            .The fall of the Berlin Wall — 9 Nov 1989 — exposed two Germanies.The West — a modern industrialized nation. The East — a pathetic, piece work, socialist failure.The West Germans almost didn’t want East Germany.I am unconvinced as to the wisdom of France (a country I admire BTW) and Germany getting into the same hotel let alone the same bedroom or, horrors, the same bed.When the lamb lies down with the lion, the fucking lamb doesn’t get much sleep.I bow to your superior local knowledge and present you the field. Now, as to Texas BBQ …………….JLMwww.themusingsofthebigredca…

          3. Laurent Boncenne

            there’s quite a bit of history of friendship between the two, i mostly refer to the friendship during the Helmut Kohl/Francois Mitterand which lead to… as an example, and the continued relationship during the Gerard Schroder & Jacques Chirac to Texas bbq, i have no doubt 🙂 between San Antonio and Austin, which of the two has it better?

          4. JLM

            .Lockhart, Texas (thirty minutes from Austin) is the BBQ capital of Texas while San Antone (hour and fifteen minutes) is the TexMex capital of the world.Austin, is in the perfect spot to enjoy both.JLMwww.themusingsofthebigredca…

          5. Peter Beddows

            Reminds me of an instance of calling Siemens in Karlsruhre for MTBF data (Mean Time Between Failures) on behalf of a British client of their process control systems equipment for a Nuclear Power Station.The response from Germany was “We do not have failures”!It is very hard to negotiate any kind of mutually beneficial deal with any party that is so convinced of its own “superiority of performance” that all others are regarded as lesser and therefore not worthy of consideration, would you not agree? The Lamb is surely ready for a roasting!

          6. sigmaalgebra

            From my now very rusty German, maybe they said something like:> Wir haben kein fehler gemacht

      2. William Mougayar

        Merkel is saying “Good riddance” without saying it, but it’s pretty close to what she’s thinking.

      3. pointsnfigures

        The burghers of Germany still rule that country. They have since the 12th century

    2. William Mougayar

      Yup, the EU bureaucracy overhead is appaling.

  10. JLM

    .This is much ado about nothing though it is much ado, indeed.”There will always be an England; and England will always be free.”Ooops, sorry, got diverted into some jingoism.England has a vibrant royal family and kept the Pound Sterling regardless of whether it allowed a different flag into the flag closet for some time. To suggest that UK was “into” the European Union requires a bit of a squint.It is difficult to see how such a well organized democracy (flawed as all democracies are) can really be held down by some silly bit of formal written cooperation or its being torn up.What really happened was a rejection of the “wisdom of the elites” by the individual voter. This is what happened in the US in 2014 when the punditry and political illuminati woke up to find out the voters had delivered the Senate, a larger majority in the House, and lots of governor’s mansions and statehouses to the Republicans.Of course, the Republicans were just as surprised and had no idea what to do with their newfound power other than to approve every bit of nonsense forwarded by the President while posing for striking photos. Never underestimate the photo op.I suggest that people are better informed and slightly — only slightly — more willing to vote on their own futures. [This does not suggest that the information is of any high quality, true, or instructive. There is just more of it.]Nationalism is alive and well. Much of what pretends to be “globalisation” is really just a subtle attempt to mask or otherwise mute nationalism.[“What flag are you voting for, mate? Well, the Union Jack, of course.”]The fact that President Obama felt compelled to weigh in with his two cents makes for some interesting side theater. It was never going to be effective and it was not. What it did was to simply link both sides of the ocean to the same sentiment which was already ascendant in the US — witness l’affaire Trump.Brexit will be reserved a slot in history next to the Millennium Crisis (when the computers were supposed to be unable to figure out what to do with “2000” — haha, see you forgot about that, didn’t you?).Much ado about nothing except for Scotland leaving the UK and maybe Northern Ireland?I very much dig David Cameron’s promise to resign. Seems like the sporting thing to do since he is the idiot who called the question in the first place.JLMwww.themusingsofthebigredca…

    1. Girish Mehta

      Re : “To suggest that UK was “into” the European Union requires a bit of a squint”.:-).

      1. JLM

        .Haha, “a pig’s breakfast” indeed!JLMwww.themusingsofthebigredca…

      2. JLM

        .In return, I offer you this gem about when Norway refused to sleep with the rest of Europe. Quite interesting.<iframe width=”1280″ height=”720″ src=”…” frameborder=”0″ allowfullscreen=””></iframe>”All false.”JLMwww.themusingsofthebigredca…

      3. Peter Beddows

        Many a true word is spoken in jest.We laugh because we are uncomfortable with hearing what we suspect is really the truth about a situation but yet is a truth we prefer to deny because the truth itself is really too uncomfortable to bear.As I wrote in a blog post on some time ago =>: “As we are now in an era within which we are becoming more fearful of the failing of our economy, increasing unemployment, incredibly large deficits and increasing foreign competition all around us and thus we are ever more prone to more frantically scream the mantra “how great we are as a nation and in how so many things and ways that are American are the greatest anywhere” as if doing that often enough and loud enough will magically solve our problems and thwart our enemies: In reality, if this were actually true, we would never have to keep reminding ourselves or protesting this. Instead we are numbing ourselves into uncomfortable unawareness (denial) of how we have actually been self-defeating ourselves by making many of the poorly understood impactful choices that we have been making that have consequentially been inexorably leading us to where we are today. As Richard Tedlow has, rather ironically, defined this state: “Denial is the unconscious calculus that if an unpleasant reality were true, it would be too terrible, so therefore it cannot be true.” We behave like the ostrich with our heads conveniently buried where the light of truth does not shine.Hence we have Trump, we have Hilary, we have Bernie and we have BREXIT. Careful what you pray for, you may just get it!

    2. LE

      Brexit will be reserved a slot in history next to the Millennium Crisis (when the computers were supposed to be unable to figure out what to do with “2000” — haha, see you forgot about that, didn’t you?).Not at all! Also the Avian Flu (google trends attached).And let’s not forget that the media (especially the newspapers) also missed the Internet as well (as a threat in various ways). To the point where they actually added (similar to what they have done for Trump) to their own demise by giving it so much free publicity. They don’t have a bad bone in their body they are so pure and wholesome.Meanwhile when 9/11 happened media outlets completely missed the economic impact that would result from that event. [1] Or withdrawing the troops overseas (Obama slamming that through) and the consequences of that premature action.Now what you have is the NYT going crazy over Brexit (it’s been non-stop) whereas prior to that their “experts” apparently didn’t see much of a threat at least enough to make it a front page story.Hillary is now running with the theme (and this may be the NYT slant to a small part) that the results of Brexit and that type of change are why Trump is bad and why we need her to keep our ship steady.[1] Selfish me, on the other hand, completely thought at the point of impact “oh shit this changes everything we are going to have all sorts of expensive security theater as a result of this one event”….

      1. PhilipSugar

        Love this comment. So true. It is so easy to run around like Chicken Little but when the sky doesn’t fall the ramifications for those that said it would are much less than their dire predictions of what would happen if it did.One of the things that I do to temper people down that have dire predictions is to say…ok I hear you. I am not going to follow, but if nothing happens what do you lose???

        1. JLM

          .Don’t worry, Trump will never win the nomination. Not going to happen.JLMwww.themusingsofthebigredca…

          1. LE

            Latest NYT [1] hit job was a review of books written about Trump. Essentially took quotes from all of the books by people who knew him. Was actually convincing as a technique I have to give them credit for using it. (note credit is actually to WSJ)It’s as if George Ross in one example ( his former lawyer and well known for appearing on the original apprentice) is taking credit for what Donald does:Mr. Ross admires Mr. Trump, but he thinks this indifference is a fairly lethal weakness. Bad negotiators share an “inability to focus on the details,” he explains elsewhere in the book. “Trust me when I say the devil is in the details.” Then he adds: “You want to be the expert on the topic under negotiation” (his italics). Mr. Ross even advises readers who wind up across the negotiating table with “someone who thinks like Donald Trump” to offer to bore his subordinate with the minutiae. “This gives you complete control over the documentation process and who will make the day-to-day decisions. You have uncovered the real deal maker for your transaction—and it’s not the boss.”Summary from Mr. Ross: “He blows hard” (my words) and doesn’t deserve any credit, I do because I actually did the heavy lifting.[1] Go figure I thought it was NYT by the bias when I wrote this but now I am seeing it was actually WSJ.when I go to offer the link.

          2. sigmaalgebra

            Yup, Trump is heavily in the media headlines, and I’m trying to understand what the heck is going on. Since what I see on the surface makes little sense, I suspect that a lot that I can’t see on the surface has the explanation.Now Hank Paulson wants to vote for Hillary. Same for George Will. Mitt Romney seems really to hate Trump. To me, their stated reasons make no sense.E.g., on immigration, Trump’s main point is that he wants to enforce existing laws and long standing processes, e.g., the ones his wife Melania followed. The surprising, radical view would be our current practice — refuse to enforce the laws and neglect the processes. So (A) Paulson, Will, Romney, etc. are really against enforcing the laws or (B) is there something else not visible on the surface? I’m guessing (B) but can’t make a good guess on what that would be.Okay, sure, each of Paulson, …, etc. may be concerned about different ones of Trump’s positions. Fine. And just what might those be and why? Again I’m left with (B).Trump on Details?Can Trump work with details or is he just a big picture guy who delegates and, when things don’t go right, says “You’re fired!”?On the one hand, I have to believe that Trump negotiated and signed a lot of contracts for big things for big bucks; such contracts were awash in important details; his business success indicates that he had a lot of contracts and details at least pretty good; and that at least when he started out in business he had to do much of the work himself. So from this, it appears that Trump is able to do well with details.On the other hand,

          3. PhilipSugar

            This is why Donald Trump is where he is and George Ross is where he is. Mr. Ross was merely a tool that Donald uses. It was Ross’s job to know the details it was Donald’s to get the deals.Lawyers have a big weakness for thinking they are the ones doing the deals. Nope, the are merely a tool.

          4. LE

            Yep. Exactly. And easily replaceable at that. The tool analogy is great.Of course one of the qualities that a guy like Donald has is to make a George Ross think he is more valuable than he really was, and to lavish praise on him to keep the horse running at top speed and doing his bidding.

          5. PhilipSugar

            Success has many fathers failure is an orphan. When Donald won the lawyer thinks he won. When Donald loses the lawyer had nothing to do with it, it was all Donald.

          6. LE

            What’s interesting is that in theory if an attorney like Ross were as good, valuable and essential as Ross thinks he is, a competitor would recognize that and poach him from Donald by dangling bigger dollars.

          7. Merckel

            If Trump runs as the Republican nominee, he will lose by historical margins. It will be laughable. If Donald were smart, he’d find a way to abandon his ego-filled endeavor to mitigate permanent damage to his brand.

          8. JLM

            .I think the ship may have already have weighed anchor on this one.I would not underestimate Donnie. Same clowns who had Brexit -5 are doing the polling.Decent chance Hillary attends the debates in prison garb? Under sniper fire, most certainly.No, this is going to be a donnybrook.Doesn’t even begin until Labor Day. Stay calm.JLMwww.themusingsofthebigredca…

          9. Pete Griffiths

            From your lips to god’s ears. I fear you’re wrong however.

    3. PhilipSugar

      The real question will be Texit :-)As one of the few people that holds a 1960’s birth certificate from Fort Worth, TX I will definitely return to my homeland 🙂

      1. LE

        Interesting thing I read last week was that way back in 1980 people born in 1960 and beyond were required to register for the selective service. But not people born between 57-59.As a result, only men born between March 29, 1957, and December 31, 1959, were completely exempt from Selective Service registration…There are various bills (according to the wiki page) that would require women to register as well (reading about that is how I forked to the wiki page).

    4. Girish Mehta

      On another note – The last 2 days have again driven home to me the need to be conscious of the filter bubble. Not a surprise, but a reminder.The majority of what I have read over the last 2 days in media is about how Brexit is a disaster, or about how maybe some Brexit voters did not understand the consequences of what they were doing.You’d think this was a flip of the coin that went the wrong way, and not an actual vote where people exercised their preference (never mind the merits of the voting process).

    5. Conor

      Ireland leaving the uk? You are obviously well informed

      1. kenberger

        I would have said that’s a good catch, but most Northern Irish refer to their country as simply “Ireland”, enough to give JLM a pass here IMO.

        1. RichardF


      2. JLM

        .Fair play to you. I meant Northern Ireland. My apologies.JLMwww.themusingsofthebigredca…

    6. RichardF

      I am all for change but this is change because the over 50’s want something from the past, not a vision for the future. It’s based on racism and economic failure for the general population outside of London and the South East. Nothing to do with Europe, that’s the fall guy.As of Friday the UK has no strategic voice in Europe and Putin will be rubbing his hands with glee.Scotland will (sensibly) vote to leave the UK which will leave Wales and Northern Ireland in a very weak position as England devolves power to it’s regions.I have not seen a single well thought, well articulated point of view in favour of leaving the EUIt is what it is but Little Britain indeed……

      1. Talk to the Wall

        Spot on Richard

    7. Lawrence Brass

      Not me, he is the idiot.:-)

  11. Salt Shaker

    Buyer’s remorse.It’s good to put decisions in the hands of the people when they have a full, or even a subtle, understanding and appreciation of the implications from the choices they make. Not sure that is the case here from anyone’s perspective. Cameron foolishly rolled the dice and it came up black. The fallout could prove to be a short-term emotional reaction, wouldn’t be too surprising, or it could have significant long-term economic and social consequences. Only time will tell.

    1. JLM

      .All indications are Cameron rolled the dice with a full expectation of crushing his opponents. He was acting on faulty polling and data.JLMwww.themusingsofthebigredca…

      1. Twain Twain

        Re. relying on polls, maybe Cameron should have been mindful of what another Prime Minister said ..

      2. Peter Beddows

        I believe it was on Fareed Zakaria – CNN GPS program or Reliable Source – this morning that I heard someone say that the basis of polling has significantly changed in recent years. Once there was a time when as many as 36% of the folks asked in polls for their opinion would respond. Today only 8% respond. With that now being the case, how could any poll be considered reliable indicator of the way things might go?

    2. LE

      Also “be careful what you wish for”.It’s good to put decisions in the hands of the people when they have a full, or even a subtle, understanding and appreciation of the implications from the choices they make. I don’t ever think it’s good to put decisions like this in the hands of the people. For one thing it allows a large block of people to control things in a way that was never intended, that is, without some kind of adult oversight (even with the obvious flaws and shortcomings of that). And second it’s obvious that people, even given all of right info to make a decision, still won’t be able to make an intelligent decision. [1][1] Kids still smoke cigarettes and people still do drugs when it’s pretty obvious what the down side of those activities are.

      1. SubstrateUndertow

        So we should abandon democracy for informed elitism and its associative oligarchic fallouts ?Collective knowledge/wisdom is a long slow painful social evolutionary process that seems to move at a snails pace but still we have better collective epistemologies afoot now than even 100 years ago and new internet technologies are accelerating our collective epistemology skill set very rapidly.We do presently work on a very flawed middle-ground compromise between expert elites and the uninformed masses. Improving that dovetailing process is a work in progress but we do have new App based tools that hold great promise for much quicker progress.

        1. LE

          So we should abandon democracy for informed elitism and its associative oligarchic fallouts ?No. Just don’t let people vote on individual issues. They elect leaders and then the leaders vote and either get re-elected or not.And most importantly: Politicians should understand and employ the “you scratch my back, I’ll scratch yours”. This is a necessary part of the process. Favor trading. Really. The world doesn’t work the way Elizabeth Warren thinks it should. It’s not fair like that because men and women have agendas, and that is natural and ok.Let’s take an extreme. If everyone voted on all or most issues, money or laws would get allocated to things that only a small minority cared about. (In addition to just one of the other problems that I have highlighted). A state with low population would not get anywhere and a state with high population (like CA) would get everything they wanted. They kind of do in some ways. Like things that they make manufacturers do get adopted as standards because they control a large portion of the market. (Ditto for NY in some cases or with what their attorney general does).

  12. William Mougayar

    Big decisions by a plain 50%+ vote can produce a standstill more than a finality on direction. Even in cryptoland, consensus by 51% can create debatable situations, as we have learned in the DAO debacle.You can’t ignore 48% of the population and in essence make a 180 turn against half them. Maybe referendums should required a 2/3 vote either way in order to make changes. 52% is “technically” a majority, but it’s not a majority of opinions.

    1. JLM

      .You may be conflating garden variety decisionmaking technique with leadership.If a spokesperson were to emerge from the counting house and say, “The “ayes” have it,” without revealing the margin of victory, would there be the same reaction?Voting is how democracies make some decisions, not all.Great ideas have been advanced by a single vote.A bad idea held by a majority is still a bad idea.This is more about how democracies make decisions than the decisions themselves.Leadership is what determines which matters are presented to the electorate and why. The timing of elections is paramount to “coaching” their outcomes. Donald Trump could never have weathered the storm of 17 opponents at any other time in the history of the US.Timing.Until such day as I am anointed dictator, it is as good a system as has been created. Warts and all.JLMwww.themusingsofthebigredca…

    2. Vasudev Ram

      Speaking of majorities, there is a term for a specific type of majority, it escapes me right now. Something to do with absolute numbers versus percentages, maybe.To make it a bit more clear: there are different kinds of majorities, like different kinds of auctions – not just one kind.Update: This page explains some of it:…Things like supermajority, absolute majority, etc.

      1. William Mougayar

        Yup. Something as important as this should have required more than 50% of the votes IMO. Maybe 5-15% extra perhaps.

    3. SubstrateUndertow

      Its worse than that !Such complex collective-decisions with inherent low information voters, an by that I mean all of us voters, is a dubious decision mechanism at best. More emotional driven than fact driven.It is to late now but such decisions would be better made by having a two out of three voting sessions approach separated by a double of months each.This would allow for time dependent emotional/informational/situational-fallout reconsiderations around such monumental shared decision making.

      1. William Mougayar


    4. sigmaalgebra

      Ah, William, you want the democratic process to result in good decision making. So would I!But, IIRC, democracy was set up by the ancient Greeks to let people fight at the ballot box instead of in the streets. I guess that was one step less bloody than their other idea, just before a battle that might kill thousands, pick one soldier from each side, let them fight, and let that be the result of the battle.So, net, democracy is about avoiding blood in the streets!Good decision making, good government? We’re still working on those! We’ve tried newspapers. We even have freedom of the press:Amendment ICongress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.Ah, apparently the founding fathers didn’t anticipate that the press would be mostly stimulating anxiety, grabbing people by the heart, the gut, and below the belt, always below the shoulders, never between the ears, for eyeballs and ad revenue and definitely not for information.”Will Aliens Bring Back Elvis?”So, freedom of the press didn’t give us the good information, decision making, and government we need.Then we believed that political correctness would save us?Now we are hoping that the Internet will save us?

      1. William Mougayar

        Good points. In this case, the UK itself will also have to deal with the visible political divisions it’s facing.

  13. sigmaalgebra

    Brexit does bring some changes”(1) Britain will not be forced by the Brussels EU arrogant, socialistic, bureaucratic Poobahs to accept more Mideast medieval uncivilized immigrants that can’t be permitted to be near a public beach, are too likely sources of TB, measles, etc., and might be radical Islamic Jihading terrorists following violent Fatwahs of some wacko Imam. Thus, Britain will save some money, have more security, and be able to go to a pub and drink a beer without some wacko throwing in a bomb and screaming “Akbar” whatever that is. The EU Brussels Poobahs will be a little less arrogant.(2) The newsies stimulate more anxiety and get lots of headlines, eyeballs, clicks, and ad revenue.(3) The promise, potential, importance, and wisdom of Brussels EU arrogant, socialistic, bureaucratic Poobahs is called into question.(4) Germany held their nose and tongue and waited until it was Britain who pushed back first at the Brussels EU arrogant, central planning, socialistic, bureaucratic Poobahs accepting more Mideast medieval uncivilized immigrants that can’t be permitted to be near a public beach and are too likely sources of TB, measles, etc. and radical Islamic Jihading terrorists following violent Fatwahs of some wacko Imam.(5) Arrogant, central planning, socialist, bureaucratic Poobahs of the world added one more loss to their long, dismal record of disaster.(6) Attention is diverted from more important concerns.

    1. Pete Griffiths

      “Mideast medieval uncivilized immigrants that can’t be permitted to be near a public beach, are too likely sources of TB, measles, etc., and might be radical Islamic Jihading terrorists following violent Fatwahs of some wacko Imam”WTF???

      1. sigmaalgebra

        That’s not covered in economics courses, but the rest of us using just common sense understand it.

        1. Pete Griffiths

          Sounds disturbingly like racism/hate speech.

  14. JLM

    .Total misread on your part, Wm.It is GOPe/DEMe (no difference really) v the American people.A pox on both of the GOPe and the DEMe.I better watch myself or I may be kicked off the Travis Cty Rep Exec Committee.JLMwww.themusingsofthebigredca…

    1. William Mougayar

      True there was a sliver of pounding both sides; I read into that.

  15. LIAD

    Reading this post in real-time whilst queuing at border control. Will definitely miss fast track flying in and out of 27 countries.Some could say the xenophobic rhetoric which played so well in this decision will only embolden Trump.Whilst I agree change is good. I’m not sure that holds true if the changes are bad.

    1. pointsnfigures

      Xenophobic rhetoric might have been used-but I don’t see British people as particularly xenophobic anymore than Americans are. They are rightly concerned about immigration though.

    2. SubstrateUndertow

      There may well be some xenophobic rhetoric/tendencies at work here but there are also many governance-efficiency issue at play as well.What constitutes the most naturally cohesive governance granularity as regards both the cultural and economic comfort-zone of the citizenry ?Social/economic efficiency has a large social acceptance/enculturation component with its own evolutionary development trajectory and time-constraints which are vastly separate from our more traditionally singular preoccupation with the purely economic food-fight efficiencies between various stakeholders.The EU is awash in these poorly-understood, under-studied and under-appreciated social engineering complexities/dependencies.Globalization is not inherently bad but it is inherent complexity. To be sustainable it requires an organic-integration of social and economic equitabilities. Modern interdependencies make that social-demand-gradient an inarguable fact as well as an irresistible force moving forward! Modern information-ubiquity guarantees that the natives in every jurisdiction are extremely wrestles for such equitabilities.Globalization built upon 20th century oligarchic wealth structures simply elevated to supra-national status, built upon 20th century growth-based economic structures and built upon 20th century acceptance of built-in-obsolescence that facilitates vast material/human-resource waste for quick, short-term, 1%er profits are simple not workable in an age of network-effect interdependencies.The EU experiment is running well ahead of our present understanding of such organically integrative social/economic equitabilities. Kudos for trying such an ambitious experiment. It offers up a lot of teachable moments regarding the sheer complexities of sustainable/equitable globalization.Other countries, especially the EU countries, would do well treating the UK’s experiment at leaving as a useful side experiment and as a co-operative opportunity to re-examine the complex social/economic equitabilities that are inherent prerequisites to any successful globalization experiment.

  16. William Mougayar

    Can’t the Euro countries work together and trade with each other without a “union” and its overhead?Look at Canada and the US. They are the largest trading partners in the world, without being in an union, without a joint parliament (thanks goodness), and without imposing standards on each other. Any Canadian is welcome to retire in Florida or San Diego, and Americans are free to retire in BC (many do). The world is open already.

    1. JLM

      .’You are talking about, perhaps, the most unusual border relationship in the world with the same language (mostly).Plus, Molsons.JLMwww.themusingsofthebigredca…

      1. William Mougayar

        Indeed. We were sitting on this patio in Niagara-on-the-Lake this week sipping wine, and here’s the US across the lake, not even 1/4 mile across, on the 2nd row of trees.

        1. pointsnfigures

          Depending on who gets elected, it might get congested there. (a joke)

          1. William Mougayar

            I’m sure the lake patrols will be on double duty after the election 🙂

    2. Matt Zagaja

      Sure, though I think the intent is that the Union provides less overhead because it’s easier to have one negotiation with a bunch of people that implement one set of rules than 20+ individual negotiations that all implement their own set of rules. One need only talk to the tax lawyers at Amazon about how much they love dealing with 52 (probably more, especially if you’re dealing with local) tax jurisdictions in America.

      1. William Mougayar

        In theory yes, but the EU ended up creating their own bureaucracy and overhead costs. For the period 2007-2013 they spent close 1 Trillion EUROs (yes trillion) on their admin, and the EU administration has an annual budget of 155 Billion Euros for 2016, fyi.

    3. pointsnfigures

      The one thing the US govt did that really ticks me off is having to bring my passport to get back into the US from Canada. Used to be able to do it with your drivers license.

      1. William Mougayar

        I remember those days as well. I think it was a bilateral decision to change it.

        1. SubstrateUndertow

          Not bilateralActing on legislation passed by Congress, the Bush administration will require Canadians entering the U.S. by air or sea from Canada to carry passports starting January 2007.

          1. William Mougayar

            Same for the US citizens coming into Canada. I think they were enacted about the same time if I remember correctly. Maybe bilateral coordination is more accurate?

    4. Charles Kenny

      European countries are rather notorious for being unable to work together let alone keep the peace for any considerable length of time. The devastation of World War II and the new world order of opposing superpowers is what drove the foundation of the EU in the first place. The end result is that European countries are having to learn how to work together for the benefit of the whole, which for all intents and purposes is akin to herding cats.

      1. Joseph K Antony

        The impact of Brexit can be expected to be hugely asymmetric within an economy, when information flow are free and increasingly so everywhere and the “knowledge economy” gains hold . The poor who cannot migrate to jobs will suffer and could actually accelerate the switch to automation and remote working. As things evolve, say 5 to 10 years from now, it may not look too bad, if initiatives like a Basic Income Guarantee finally falls into place – though that initiative may look controversial at the moment.

    5. Kent Karlsen

      Business people in Europe asks the same question. We want a trade union. As simple as that. Not more power to the political elite, PR companies and central banks.

    6. JLM

      .The EU (economic/monetary union to be technical as the notion of a single citizenship predates it to the Maastricht Treaty in 1993 (check that date, not sure of it)) was born in 1999 and came out in 2002. There are 19 countries who use the same currency.The significance?There was a Europe BEFORE the formation of the EU and there will be one AFTER its dissolution.The loss of direct representation at the United Nations, the World Trade Organization, the G8, and the G-20 is all proforma. The individual nations will still be represented.The EU had a GDP generally the same size as the US and a population of 580MM.The EU was a damn expensive proposition to administer with a plethora of organizations created including the European Council, the Council of the European Union, the Euro Parliament, the Euro Commission, the Court of Justice of the European Union, the Euro Central Bank, the Euro Court of Auditors.[I freely admit to knowing what less than half actually do.]It was truly a real government regulatory burden. There should be some considerable savings in its disappearance.JLMwww.themusingsofthebigredca…

      1. William Mougayar

        The EU annual administrative budget of 155 billion euros is a telling sign of the excess in bureaucracy. What do the Congress & Senate cost in the US?

        1. Pete Griffiths

          An excellent question.Any estimates out there?

          1. William Mougayar

            Couldn’t easily find it on Google.

    7. Henry Yates

      This lecture by Michael Dougan (Professor of EU Law) explains why it will be difficult. If you are interested in this topic, it is well worth watching. Most of the UK appears to have not watched it:

      1. William Mougayar

        I will watch it. Thank you very much.

      2. James Ferguson @kWIQly

        Thank you – Have been looking for a good resource like this.Living in Switzerland , European, Part English Irish Scottish {And a bit of probably every nation under the sun}

  17. Chris O'Donnell

    I got an email from Quicken Loans on Friday that specifically referenced Brexit as an opportunity to refinance my mortgage. I found it very distasteful. A more generic “rates are dropping” email probably wouldn’t have bothered me, but tying my theoretical opportunity to benefit directly to something that was causing real pain and concern for millions in Europe was over the line IMO.

    1. LE

      I got an email from Quicken Loans on Friday that specifically referenced Brexit as an opportunity to refinance my mortgage.Well it got your attention. And now I know about it and so does anyone who reads AVC. And most likely those people will easily pick over and think about the carcass of lower rates and get over their disgust with how opportunistic Quicken Loans was. People will always act in their own self interest and almost all publicity is good publicity. Best thing that could happen to Quicken loans is for someone to write a major media article highlighting this opportunism.

  18. Ana Milicevic

    A couple of practical things jumped at me from this whole debacle:1) As entrepreneurs, we’ve traditionally looked to London HQs as the proverbial beachhead into the European market. The results of the referendum make that choice no longer the default and this is exciting – if you’re the mayor of Berlin, Amsterdam, Dublin, Barcelona, Budapest, Belgrade or any number of other quite lovely European towns you should be doubling your pitch to attract business to your region now. Easy, streamlined immigration for highly qualified professionals, establishing duty/tax free trading zones (which especially applies to the Western Balkans), and embracing the inevitable outflow of talent from London has the potential to drive growth across the continent dramatically.2) It’s an opportunity to revisit other nation-state legacy borders that could be in need of adjustment now. We’re seeing Scotland vote overwhelmingly to remain, the possibility of a united Ireland, Gibraltar going back to Spain, etc. What other territories no longer make sense and which ones are better off operating as a larger federation?3) Information filtering and media influence present interesting opportunities – the role of certain media outlets on the outcome of Brexit is really important to understand (especially in the context of US elections come November where news-for-ratings has been a longer term play). We must actively ensure we don’t end up with news, analysis and opinion echo chambers facilitated by algorithmic curation; if you’re designing such systems, this is an excellent example of dissemination of information and communicating complex cause-effect systems while resisting the pull to meme-ify & permit incorrect information to become viral and thus the de facto statement of record (like Nigel Farage’s bus or immigrant ad).

  19. Julian

    I find that “accusing” someone of opportunism is just a negative way of looking at the following dynamic: recognising opportunity + using preparation = increased probability of luck creation.Since the truth is never binary (and therefore we get to pick our truths), I’d rather “accuse” people that try and make the best of things of being smart. That smartness is met with my respect if they then try to use that smartness to make this world a better place for all of us. It is met with my disdain if they use that smartness to create wins for themselves at the cost of others.

  20. Salt Shaker

    Data is 100% honest when results are measured de facto, say, for example in sales, revenue or profit. Data is tricky when measuring attitudes and opinions that are subject to change and capture only a moment in time. Polling, for example, is often quite wrong cause opinions change. We see behavioral shifts–either subtle or significant–at the time when a final decision needs to be made, often driven by risk tolerance, whether it be on a large purchase item, a financial investment or even when voting for a candidate for office. There’s also an ephemeral or emotional aspect to data and MR that is challenging, if not impossible, to fully grasp, evaluate and measure. Emotion can turn data, particularly behavioral data, upside down. Fear, for example, was a huge intangible w/ respect to BREXIT.

    1. JLM

      .There is a huge difference between economic and political nationalism; as there is a similar difference between economic and political globalisation.I suspect the victory was built on a foundation of political nationalism and that economic globalisation will be unchanged.What is also clear is that voters are united against any effort they believe to be led by the “elites” whoever those guys are.JLMwww.themusingsofthebigredca…

  21. Gregg Freishtat

    For entrepreneurs, down markets are a great time to be building and growing. Money stops flowing so freely that you worry every morning some new company near your space will be over funded or decide to spend millions on marketing. Good companies can always find required capital b/c of folks like Fred that are always looking for opportunity. And when things turn up – as they always do – there you are in a great growth or M&A environment b/c a lot of folks have indeed gone into the “foxhole” while you were busy building and working….

  22. pointsnfigures

    look at it a different way. If competition is good, then a new competitor emerges in a single UK. If markets are made more efficient by lots of competitors seeking to maximize their own utility, the world will be better off.Or, is this akin to the great unbundling? Unbundling oligarchy, unbundling conglomerates. Are the gains from unbundling larger than the gains from being bundled?Thomas Sowell wrote about government by bureaucrats. It’s noted here and it rings true. http://streetwiseprofessor…. The US needs to dismantle it’s fifth estate-and fast.

  23. Dara Albright

    This is your best blog post ever!

  24. Dara Albright

    UK declares its independence and US stocks tank – even those businesses with zero exposure to European markets. This is the repercussion of a global financial system monopolized by traders who are completely detached from their investments. Instead of being valued on fundamentals, US stocks are being priced based on the result of a vote cast thousands of miles away. Days like Friday illustrate the advantages of ‪‎crowdfinance‬: investing in one another not tickers.

    1. Salt Shaker

      Nothing really new here, right? Stocks trade on news and emotion, not just fundamentals. If the FTSE tanks on Monday, and it again impacts U.S. exchanges like Friday, then I’m likely gonna take a shot. When investing I try and focus on the rational (fundamentals) rather than the irrational (emotion).

      1. Dara Albright

        Exactly. When stock tank on emotion, they bounce back. When there is a fundamental reason behind their crash, they will only recover if the company is able to fix what is fundamentally flawed.

    2. LE

      It kind of boils down to a system whereby people take action based upon things that happened in the past that were only loosely followed by rationality. If some stocks drop, all stocks drop that has been happening for the longest time. It has never been about money the company makes, since investors don’t really see that money (or the losses take Amazon for example losing money forever).Ditto for hocus pocus about gold, it rose on this news as “investors flock to safety”.Gold soared as much as 8 percent to its highest in more than two years on Friday after Britain delivered a shock vote to leave the European Union, sending investors scurrying for protection in bullion and other assets perceived as lower risk.

      1. Dara Albright

        Sometimes understanding investor psyche can be more lucrative than analyzing charts or dissecting financial statements 🙂

        1. LE

          100% correct. Just be able to predict what traders will do. For example there is no doubt people made money predicting that Brexit would pass and the market would drop the way that it did.

  25. LE

    Upside, cheap flights and hotels in England, good for local travel industry. Plus all those people will take side trips to France and other countries while they are there.…Can’t find the link but also read that obviously cars made in Britain (like specifically the Mini Cooper) will be cheaper as a result of the drop in the pound, if that is sustained…

  26. WA

    If there is fear in the street we know where Warren and like minded minions are on that. The value game continues.

  27. creative group

    Contributors:The similarities with the people who voted for Brexit and US populist movement supporting so called non establishment candidate are a lack of formal education. A fact.The Republicans who consider themselves educated see Trump as a means to an end. The Republicans have been unable to win the oval office on the traditional platform so the motto embraced is By any means necessary. Especially when the SCOTUS has an important opening.On the business side which as Former London Mayor Boris Johnson stated he only wanted to leave the EU to unshackle the UK to create their own rules and international trade policies. (This is were reading is not so fundamental and requires comprehension and a mind is a terrible thing to waste PSA’s intertwine) The face of the Leave EU Nigel Faragec (Head of the UK Independence Party) wanted to leave the EU more on Nationalist sentiments.The economies of the 27 remaining countries and GB are dependent trade partners, from automobile to finance. Many countries rely upon the GB economy and vice versa.The Demographic data from the Office of National Statistics show many of the cities in the Leave vote included fewer people with higher education than the British median and ages were over 55. Sounds familiar with the demographics in the US.Facts are not a place were those in the xenophobia, divide and racists (definitely not all people can be painted with the tainted brush. There are true to principaled Republicans). History and views are usually revisioned and yelled and repeated hoping it will replace facts. (Karl Rove doctrine) Democrats have their own way of presenting and handling facts. Just ignore them or acknowledge them and change subject.Fred so happy you rebooted topic to Brexit because it allows the blog to get a glimpse of the incompetent and aforementioned views who lack understanding of free trade with other countries and being isolationists. This is a VC generated board. About making money . Who in the hell cares if people who have forgotten they are not Native Americans and Eskimos and ancestors are from another country. (Like having European hertiage but forgetting that silver spoon up that a$$ or not forgetting but manipulating the less educated. There also are those who consider themselves educated but support the populist movement who they have nothing economically in common. We can smell that fraud a mile away.Again thanks Fred.

  28. William Mougayar

    Let’s get serious, this is what’s coming next.

    1. Vasudev Ram

      Ha ha, that was circulating on LinkedIn recently – prob’ly on other social media too.Will DE issue still be Germane after all that?

      1. William Mougayar

        Good rebuttal 🙂 Where is Jim Hirshfield

  29. scottythebody

    I know a lot of Brits here in Europe and a lot of Europeans living in London and the UK who aren’t really thinking too much about opportunity. We’re talking about people who staked it all to open an artisanal sausage shop, artists living and creating for cheap because borders worked to their advantage, pub owners, gallerists, and a whole lot of people of relatively meager means who have it all hanging on the line to make it in a world that is now possibly going to be swept away for what they perceive to be no good reason.

  30. scottythebody

    Opportunities, though, for sure. Buy property in Frankfurt (the new EU financial capital), Madrid (also financial and business capital), Berlin (culture and still cheap).

  31. Vasudev Ram

    Haha, flack (flak) and foxhole – have you been reading WWII novels lately.

  32. Pete Griffiths

    “It is important on days like today to remember that change creates opportunity and opportunity can create wealth if approached correctly”It is rather hard right now to see how this change will create wealth for most of the UK’s population. Most economists agree that this will exert a powerful downward pressure on the the UK economy and that this will translate into downward pressure on the well being of the large number of Brits still reeling from ‘austerity measures.’I’m all for having a positive attitude but not to the point that we blind ourselves to calling a spade a spade. This vote was a disaster.

    1. SubstrateUndertow

      Are those the same economists that so clearly and collectively foretold of our 2008 problems ?I think the jury is out on this one. Their will be short term pain for sure but the long term bigger picture is much less clear.The EU is a half-measures style union and this event offers an opportunity for self-reflection and experimentation with some structural realignments around representational granularity issues inherent within such unified governance structures.

      1. sigmaalgebra

        > Are those the same economists that so clearly and collectively foretold of our 2008 problems ?Cruel! HOW can you be so CRUEL? I mean, maybe the economists are doing the best they can? I mean, over here they have a supply curve. Over there, a demand curve. Do they have anymore? Well, they have Lagrange multipliers and the Kuhn-Tucker conditions. What the heck in any version of reality those have to do with a real economy is a bit of a strain!You ask such tough questions! Are you just naturally a mean person? I mean, so, right, they didn’t see 2008 coming clearly enough to get any serious attention. Now 8 years later, 2/3rds as long as we were in the Great Depression, we still don’t have GDP, etc., back where they were — see the graphs and discussion inhttp://themusingsofthebigre…and the economists don’t seem to know why not.But 2008 was just once, right? Or are you remembering much the same about mismanaging the economy in 2000? The crash in the 1990s where Greenspan announced that the Fed window was open? The inflation from the Viet Nam war? The Great Depression, how we got in, why we took so long to get out. The crash of 1929.Yes, it looks like the economists are still back where medicine was 1000 years before they started with leach bleeding. I’m being too generous — maybe it was 10,000 years.Yes, if all the economists were laid end to end, it would be a good thing.When I was in grad school in applied math, I saw that apparently economics just flatly didn’t understand the US economy and considered working on solutions. I looked a little at the economics department, ran out, did an upchuck, and concluded I couldn’t do anything about the disaster except just pursue applied math like I was.

        1. Pete Griffiths

          So given the fact that we do have an economy to manage, and given that imperfect though it may be economics is the only social science studying the economy, I am curious to understand what intellectual framework or tools you would use to frame policy. Applied math may be totally awesome and didn’t make you upchuck, but it isn’t going to tell you shit about economic policy.

          1. sigmaalgebra

            (1) Drop the arrogance.(2) Drop the physics envy.(3) If going to do some math, then actually learn some that is powerful enough to have a chance to help. And learn how to do research in math.(4) First cut, short term, follow what Leontief did for production planning for WWII. Academic economics hates Leontief because his work is too empirical and practical and not theoretical enough, e.g., won’t do much to achieve the goals of physics envy.(5) Map the states (e.g., inventories) and the flows of money, goods, and services in the economy. As far as I can tell, mostly we just refuse to make even a serious effort at even a first meaningful set of results. We seem to be stuck with the old tools, approaches, theories, paradigms, econometrics, etc., and obviously those don’t work — they let us get sick in 2008 and don’t know how to get us well since then.So, need a clean sheet of paper, at first some common sense, then some good data, likely not being collected now, and start to make first cut sense out of that data. Then continue with more in data and understanding.For what Kantorovich, Solow, Arrow, Hurwicz, etc. said, I don’t much care. E.g., there is the famous Arrow, Hurwicz, Uzawa paper; it posed a question about the Kuhn-Tucker conditions but gave no answer; I found the answer and published it, as part of some other material, in JOTA. But, none of that, their work or mine, has anything to do with anything important about any real economy. So, I don’t want to listen to Arrow on the Kuhn-Tucker conditions or on the economy.Samuelson wrote a popular college text on economics. I read through trying to find something that looked like he understood something significant about a real economy. I didn’t find anything except the overview chapter on the legal framework of the Fed — it appeared that Samuelson understood that. The rest? About the real economy? Not even zip, zilch, or zero.E.g., for the 2008 crash, see the states and flows before the crash that caused the crash and the states and flows since then that have given us such a slow recovery.The danger of the situation before the crash was easy enough to see for anyone with even a first cut look at what was going on, with even a little real data, even just simple inspection, very short of a good description of the flows. E.g., as at…Richard Kovacevich, Chair, Wells Fargo (2001-09) saw it:I would say: “This is toxic waste. We’re building a bubble. We’re not going to like the outcome. I’m very concerned.”It was obvious. The Fed, Fanny, Freddie, the security rating companies, the academic economists with research grants, no one did the obvious monitoring.Since then, eight years, why won’t the economy get going again? In the flows, where are the shortages, the bottlenecks? What’s wrong? It appears that no one is even looking.From what I did see about academic economics, really there’s not much there to say. In a medical analogy, what is there is like trying to diagnose the cause of a weak patient without knowing Anatomy 101, the standard blood tests, or endocrinology. It’s just sickening.Economics doesn’t even know dip squat about the real economy. Civil engineers know a lot about strength of materials. Chemical engineers know a lot about chemical reactions. Aeronautical engineers know a lot about aerodynamics, lift, drag, stability, and their materials. Physicians know a lot about the human body, sick or well. Physicists know a lot about the four forces and the standard model. But economists don’t know about the real economy.(A) In engineering, need to understand the materials and the tools. (B) In science, first need to understand the situation empirically; progress on theories come later. Economics fails on both (A) and (B).Instead, academic research economics sits in small closed rooms, considers simple imaginary economies, and, with their physics envy, tries to dream up a version of E = mc^2. Disgusting. It is as if they want to keep building models, based on little more than just imagination, until somehow they get a model that works. Dumb.For another one, there is the “framework” that the way people do grocery shopping is to determine a lot of utility functions, set up one heck of a non-linear, integer optimization problem, and then solve that, in their head, as they push the grocery cart around. Total BS in essentially every sense. We are lacking just a solid proof that 100% of that work will be totally useless forever. Yes, in some sense, resource allocation might have a significant role, but it won’t for how people do grocery shopping.The economy is far too important to be left to the economists. We need a new effort, both culturally and intellectually far from academic economics.That’s why I upchucked.

          2. Pete Griffiths

            At the risk of being dubbed an arrogant physics envier I find myself laughing at the idea that the only problem you see is that economists don’t do hard math. LOLThe reference to Leontief is hysterical. In fact his work was enormously influential in economic planning. The Soviet Union relied on his ’empirical’ and ‘practical’ work for decades. Worked out well for them.As for mapping the state of the economy and getting some ‘good data’ that’s just brilliant. It’s amazing that it’s never occurred to economists. You’re wasted doing research in ‘hard math’ you should be in charge of some school of new ‘hard economics with grown up math.'”So, need a clean sheet of paper, at first some common sense, then some good data, likely not being collected now, and start to make first cut sense out of that data. Then continue with more in data and understanding.” Yeah – that should do it alright.You mock me for arrogance. Do you have the faintest idea just how silly you sound. The arrogance of thinking that sitting down with a ‘clean sheet of paper and some common sense’ is going to vault you above a couple of centuries of very smart people trying to get to grips with a hard problem is truly breathtaking.The real world is messy. It’s not a measurable space. Don’t trivialize its difficulty. It just makes you look naive.

          3. sigmaalgebra

            At the risk of being dubbed an arrogant physics envier I find myself laughing at the idea that the only problem you see is that economists don’t do hard math. LOLSo, you are an economist. That means you actually took that sewage stuff seriously. Poor guy.the only problem you see is that economists don’t do hard math. LOLI said no such thing. As I made very clear, their main problem is that they refuse to look at and understand the real economy.So, you have a reading compensation problem. Some junior colleges might be able to give you a remedial course.LOLI can understand why that is considered a good argument by an economist, but everyone else has much higher standards.If you thought that you got some good content from your courses in economics, then that’s more evidence you have some reading comprehension problems.The reference to Leontief is hysterical. In fact his work was enormously influential in economic planning.Supposedly in the US for mobilization planning during WWII. Otherwise US academic economics hates the Leontief work. What the Soviets did with that work, I have no idea.But, for a first cut, especially considering what an upchuck the rest of economics is, the Leontief work stands to be useful now in how the heck, after eight years, eight sick-o years, to recover from 2008. I’m sure we need a lot more, but what Leontief did, really, some good common sense accounting, is ahead of the upchuck stuff.As for mapping the state of the economy and getting some ‘good data’ that’s just brilliant.Well maybe to an economist. To nearly everyone else, it is just an obvious first step, one the economists refuse to consider taking seriously. You did read where I indicated that the economists don’t try at all hard to understand the real economy?”So, need a clean sheet of paper, at first some common sense, then some good data, likely not being collected now, and start to make first cut sense out of that data. Then continue with more in data and understanding.” Yeah – that should do it alright.Again, once again, over again, one more time, this time so simple that even an economist might be able to understand it, I described the first steps. But, again, over again, the economists don’t do anywhere near enough of that; they fail right at the first steps.You mock me for arrogance. I didn’t mock you; I mocked economists. You didn’t have to confess that you are an economist. But, you must be an economist; no one else would admit such a thing.The arrogance of thinking that sitting down with a ‘clean sheet of paper and some common sense’ is going to vault you above a couple of centuries of very smart people trying to get to grips with a hard problem is truly breathtaking. You really swallowed that sewage.very smart people I will judge that based on their results, not their arrogance.When Arrow, Hurwicz, and Uzawa couldn’t solve a little question in the Kuhn-Tucker conditions (KTC) and I did quickly, then they don’t look so smart to me. That they thought that their work with the KTC was relevant to economics makes them look still less “smart”.For a little more, supposedly Arrow’s work in optimization is the core ofDarrell Duffie, Dynamic Asset Pricing Theory, ISBN 0-691-04302-7, Princeton University Press, Princeton, New Jersey, 1992.I tried that thing. Yup, the first chapter or so is awash in KTC theory. The proofs were sloppy or missing. The stuff didn’t look right to me. So, go into counterexample mode: I found counterexamples for every statement they made. Then I gave up on the book.Right, for people in the real world, Arrow won a Nobel prize in economics decades ago, and Hurwicz won a few years ago.=== Background Note ===What was going on? Well, Saturday I went to Wal-Mart for some common items. And I got some diet soda. A guy was stocking the shelves, so I got a package still in shrink wrap. Sometimes they are out of stock. So, the guy mentioned that they order based on what sells but have limited space in the back. Soooooo, right, that limited space is potentially a bottleneck. Soooooo, maybe, first cut, make good use of that limited space, e.g., fill it with items with high return on the space they take up.Could set up this simple question as an optimization problem. So, describe it all with equations in unknowns that, when have their numerical values, say what to do.If all the equations are linear, as in linear equations in high school, then can take the high school technique of solutions, Gauss elimination, tweak it slightly, and get the Dantzig simplex algorithm of linear programming — so it does optimization, e.g., makes best use of that storage space, in the linear case. Can also try to do the nonlinear case, and then run into the Kuhn-Tucker conditions. The more important part of the KTC is the Kuhn-Tucker necessary conditions for optimality. First, cut, intuitively, they say, if in a tunnel with non-flat floor but, of course, with walls, put down a marble, and if it starts to roll, then must not be at the bottom. Dirt simple. Actually, can take the KTC and make a little progress on the linear case. If the walls are not pathological, i.e., obey some constraint qualifications, then can then can say more in terms of derivatives. Kuhn was H. Kuhn, and Tucker was A. Tucker — both were at Princeton.As optimization in applied math, the KTC were regarded as good work. That the economists thought they could get something good from the KTC about the real economy was next to delusional. Upchuck.To heck with the Wal-Mart back room; the real world of the real economy is awash in applications of linear programming. There are two main reasons: (1) The optimization part is how to make the most money. (2) The linear part is common just from accounting where just multiply quantity times price and add. But, in the whole economy, these optimizations are for small things, might be part of microeconomics.So, early on, the academic economists looked at linear programming, based on it started writing papers about the whole economy, and started winning Nobel prizes in economics. Then later, e.g., as in Arrow, Duffie, etc., they tried the nonlinear case. With R. Pindyck over time they tried deterministic optimal control theory (IIRC J. Yellen has mentioned that this might have potential or some such). At times, e.g., some of Samuelson, they tried the uncertainty (stochastic, random over time) case. But for the economy, that optimization is next to irrelevant.Why? First cut, don’t have anywhere near enough data.Again, about all we are missing is that we don’t have a proof that work will be 100% useless forever. But for getting us out of the crash of 2008, it’s on the level of intellectual self-abuse, i.e., pocket pool.=== End of Background Note ===We still have yet to recover from 2008, and the economists are the village idiots sitting under a tree, amusing themselves by abusing themselves. Contemptible. Upchuck.Their results are awful, worse than any epidemic, any natural disaster. As everyone but economists appreciate, economics didn’t clearly see and explain the crash of 1929, the threat to the economies of the industrialized world, the Great Depression, how to get out of the Great Depression, the threat of the Great Depression to cause world war, continual recessions since then — didn’t see going in and don’t see how to come out.US culture is still suffering from the damage of the Great Depression.We got out of the Great Depression in 90 days flat in early 1942, once people started shooting at us. But we had gone for 12 years with thin, tired, worn out mothers with no milk for their babies and worse. Apparently we could have gotten out in 90 days in 1930. Then, maybe no Hitler or Tojo.We got out in the 90 days essentially by accident — the economists didn’t understand it.Yup, and economist J. Galbraith wrote a book on the 1929 crash and claimed that it didn’t cause the Great Depression. Hmm, smoking funny stuff while abusing himself.To heck with McDonald’s tens of millions sold. From 1929 to 1945, the economists have tens of millions dead. Upchuck.From this grim record, we have to conclude that the economists flatly don’t understand real economies.The real world is messy. It is until understand it. It’s easy to see why an economist would think that the world is messy — they don’t look at or understand the real world nearly strongly enough, and their work is a mess.The academic economists essentially say:”Data? What data? We don’t need no stink’n data.”Yup, as I outlined, they want to do it all with some version of pure thought. The last time someone told me about a “messy” problem, a few months later I had a nice, clean solution. Published it in Information Sciences. Funny that you should mention a measurable space; the paper was based on an algebraic group of measure preserving transformation as in ergodic theory.It’s not a measurable space. Of course it is. Just what is it about a measurable space you don’t understand?Essentially every number we observe can be regarded as the value of a real valued measurable function with domain a measurable space (with the usual topology and corresponding measurable sets on the reals).There is some power here: E.g., we are just a small step away from a normed space, an inner product space, a complete normed space, and a Hilbert space where can do projections, i.e., best approximations. But I’m not recommending that material for understanding the economy.

      2. Pete Griffiths

        The problem with this argument:”Are those the same economists that so clearly and collectively foretold of our 2008 problems ?”is that it can be used to undermine the authority of economists on ANY topic. Admonitions that general are worthless.Economics isn’t a perfect policy science but when it comes to economic issues it’s all we’ve got in the way of rational analysis. So if you want to be rational you have to at least listen to what they have to say. Of course, if you don’t care about any rational analysis, no matter how flawed, then by all means drag up their errors and ignore them. I don’t have a clue what you propose to replace it with though.

  33. RichardF

    I’m sure there were traders on Friday who made a shit load of money, I’m sure you are right there will be lots of opportunity for making money in all sorts of ways…..meh!For all it’s faults and Britain hasn’t been Great since before WW1 this is a backward step for the country, I could go on but I would just be boring the avc audience.

  34. Jens Achilles

    Brexit destroys a lot of wealth in the first place, hence gives room to recreate wealth, a bit like an earthquake. However, there is no better way to create wealth than free trade, migration and deregulation. Therefore wealth creation after Brexit can only be the second-best solution.No question, the EU is far from being perfect. But it has been the foundation of more than 50 years of peace, wealth and freedom in Europe. Ironically the generation that benefitted most from this in the UK has now voted for the Brexit.

  35. bfeld

    After reading a bunch of stuff about #Brexit today, I’m in the camp that doesn’t think it’s going to actually happen.I consciously ignored all the news on Friday and Saturday. I let the first way of reactions / talking heads do their thing. I think went looking for some long form articles today, and of course found plenty.After reading about a dozen that covered a lot of different things, I think there is a > 50% change that this is an example of Cameron and others playing the long game.We will know a lot more by the end of the year.

    1. bobmonsour

      I agree with you Brad that there is a decent likelihood that it may not happen. Here’s a comment on a Guardian post that is making the rounds. It makes quite a case for at least significant delay, if not an outright non-exit.

  36. Pete Griffiths

    Imagine Trump has just won the Presidency.Now read this:”It is important on days like today to remember that change creates opportunity and opportunity can create wealth if approached correctly”I’m thinking quite a few people wouldn’t find this reassuring.

    1. RichardF


  37. Vendita Auto

    Liking this on Twitter: Hello dear, I am Grace Cameron, wife of Last Prime Minister of UK. My country has collapsed and I need your assistance to transfer £350 bn

  38. Antonio Rocha-Ferreira

    Sometimes I hate entrepreneurs. I’m all up for leveraging opportunities but could you please explain to me opportunity of one of our “founding fathers leaving”, all the rest of populist leaders win their own refs, ultimately leading to the EU breaking up?What we are doing at the European level is little by little building a single market.If we break, it will be a loss to the globe. Fragmentation doesn’t help anyone, because it will only reduce the overall market “opportunity”.Moreover, what we need here is more pressure to change the result, not acceptance of hate and racism because its an “opportunity”.Yes, there’s always opportunity in everything. Even in war. I guess we’ve had enough of that.

  39. Seb Robin

    EXACTLY! I could not agree more.

  40. Tek Kim

    Agree. Whether Brexit actually happens or not, hopefully this is a wakeup call for the EU to reform for the better.

  41. creative group

    Contributors:The unintended consequences of the Leave Brexit supporters ignored.————-Brexit vote sends new shocks through financial markets, political chaos deepens…

  42. lunarmobiscuit

    Your quote does sound opportunistic, even if you didn’t intend it to. All the Brexit news made me think of “impermanence” and how the EU is only a year older than, and most European countries younger then our upstart USA, and especially how our first attempt at Union had to be replaced after 12 years with a rewrite constitution.

  43. ShanaC

    This ain’t over till the fat lady sings.Aka, a vote which is really advisory isn’t the future. It isn’t happening until it happens, and by Cameron resigning, it also might never happen because the costs of doing so to British society might be too high.So we wait

  44. Margaret Francis

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  45. Maximilian Madile

    I think you are wrong for once. Brexit is very much a vote against change. Voters want to go back to how things once were, before globalisation, and they don’t realise they hurt themselves most with this choice. If things continue like they are, Brexit will have been the starting point for the slow demise of the United Kingdom, economically and politically.

  46. Andrew Hong

    This change, it’s just a plausible change to stick to conservative things.