Friday, December 19, 2008

McKinsey Interview with Richard Foster

Foster, a former McKinsey director and author of Creative Destruction: Why Companies That Are Built to Last Underperform the Market—and How to Successfully Transform Them discusses the aftermath of the financial crisis and what it will mean for the capitalist system. One answer (McKinsey):
In the financial-services sector, the upheaval will create a new generation of leaders. Fifty years ago, we didn’t have 8,000 hedge fund managers. Then somebody said, “We can go short as well as long; we have much better information than people did in the 1930s, and the information comes to us instantaneously rather than days after the event. We can make a lot of money modeling and leveraging that information.” So the hedge funds were born. How many of those guys had been successful at mutual-fund management? I don’t think any. They might have been commodity traders, but few were mutual-fund managers. Today, other kinds of people with no experience or expertise will challenge incumbents from outside the industry, and there will be a lot of them. Most of the challengers will fail, but a few will succeed, and they’ll become the heroes of the next generation. If you had to bet on anything, that’s it because that’s what has happened in the past.
I've made the claim that this crisis might facilitate the rise of peer-to-peer lending (see here and here) but we'll have to see.

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