On Tue, Mar 3, 2009 at 7:54 PM, Eric Wilhelm <enoba...@gmail.com> wrote: > And nobody ever picks $good, yet they wonder why they get what they get.
I think it's related to difficulty of judging future opportunity costs. Paying for $good has an immediate cost now over paying for $decent, but it's hard to assess what the future opportunity cost of $decent over $good will be. I work in risk management and it's a similar sort of thing. What's the value of losses avoided? And, for that matter, can they even be measured. E.g. "well, you lost $40 BN on these CDOs, but fortunately, you invested $10 MM in better risk software that kept your losses from being $50 BN, so that's a payback of $10 BN loss avoided on your $10 MM investment". (Exaggerated example, but I hope that shows the parallel.) And when management pays for $good now, but it might be different management later that suffers under $decent or even $crappy when the project is done, you can see how the incentives don't favor $good. -- David
