FAQ

On Tue, Mar 3, 2009 at 7:54 PM, Eric Wilhelm 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

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