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I like this anecdote of a CEO directing a particular “If you’re making this phone call we’ve already lost a shed load of money and the priority is not to lose more” decision, recounted by Matt Levine today. https://t.co/NA93lNmRuF


Partly it’s giving people permission to do the obviously correct thing. Partly it is a gentle scolding that they have not yet understood they have had permission to do the obviously correct thing. And partly it is, I think self-consciously, speaking into the history books.

“I have clearly paid tens or hundreds of millions already because I have failed the firm in instilling proper risk management and I will not not not waste this opportunity to start that course correction.” — my imagined mental monologue

We have a real aversion in our culture to say that something has failed, in almost any circumstance. This is exacerbated in corporate environments where one most particularly does not want to report failure up the ladder.

And so a responsibility of leadership is to understand this about culture and incentives and quickly deliver to one’s subordinates the thing that they have not organized for themselves: “This has failed. You are now free to take actions commensurate with that being true.”

“What’s the failure here?” No one has, until the point of placing that call, wanted to be the one to say “We grossly failed in underwriting a multi-billion dollar client. They have lied to us repeatedly and put our capital at risk. They blew up. These facts will not get better.”

And it’s understandable. You’re saying you/your team/your direct manager/etc are potentially on the hook for up to a billion in losses if you say that. Wouldn’t you prefer to say situation is hazy and wait for more data? Someone needs to call it. More data will not help.

Bloomberg reported a timeline: https://t.co/SYwjQPzlwO Useful to note explicitly: the margarita call does not place Jeffries early in the line of banks to de-risk.

@patio11 Rich Handler to his spicy margarita: https://t.co/IJkkVQrvYP
