Edward Conard, of Bain Capital, talks about innovation and risk in his book, "Unintended Consequences: Why Everything You've Been Told About the Economy Is Wrong."
Edward Conard Bio
Ed Conard was a partner at Bain Capital from 1993 to 2007. He served as the head of Bain’s New York office and led the firm’s acquisitions of large industrial companies. He sits on several boards of directors including the boards of Waters Corporation and Sensata Technologies. Prior to Bain, Conard worked for Wasserstein Perella, an investment bank that specialized in mergers and acquisitions, and Bain & Company, a management consulting firm, where he headed its industrial practice. He is a graduate of Harvard Business School and the University of Michigan.
Here is link to Youtube interviews of Edward Conard.
Extended Interview on Daily Show
This is 33 minutes of the extended interview. There is only about 5 minutes of interview in the episode that aired on television.
The last 19 minutes of the interview get to the main heart of the debate and explanation of finance.
Here are the points that are made at different points in the 19 minute portion of the interview.
I list the time in the video and provide the point that is made.
About 2 minutes in
Wall street is about mortgages. 60% of the financial business in mortgages.
From 6:50 on
There are two separate problems for world economies. They are describe the main goals of national economic policy.
1. How do you incentive innovation ?
2. How do you put short term money to work ? These are the savings deposits that put into banks. This is an issue for national economies that have a lot of savings deposits.
The point is also made that economic growth is critical to economic sustainability.
At 9:40 in the video
The difference for Canada.
US homeowner is on the hook for the down payment.
Canadian homeowner is on the hook for 100% of the value of the house.
The 100% liability
11:30 in the video
Companies are working for customers. If they do not compete to do a better job for the customers successfully then the shareholders do not get rewarded.
12:30 in the video
The last time (from about 1980 to 2009) we recycled the short term money using mortgages (securitized and with a lot of the down payments provided by third party investors.) The system was designed to handle 20% loss and there was 30% loss.
$300 billion was lost on bad loans (loan losses).
$1.5 trillion was withdrawn (withdrawal risk). In spite of $15 trillion in guarantees from the government.
It was institutional run on the banks. Institutions (stock companies, insurance companies, other banks) took money out of other banks.
14:00 in the video
1. Expose banks to withdraw risk.
2. Charge banks for the government guarantees
3. Do not have zero % money from the Fed, charge the right amount to suck profits out of speculation
Guarantees did not hold the money in place, so not it sits on the sidelines.