Oct

15

The market needs a self-correcting mechanism

Filed Under changing the world, microfinance, wokai 

Update: This is a cross post, a slightly longer version is posted on Wokai’s blog (a microfinance startup). Head over to check it out here. Thanks Leslie!

There’s an interesting Op-Ed on the NY Times titled “The Rise of the Machines“. As a technologist, I passionately believed in the power of technology to change the world. However, the power can likewise be abused. Well, in today’s market .. it’s more about greed catching up with men, not necessarily power being consciously used for malicious intent. From the post,

“BEWARE of geeks bearing formulas.” So saith Warren Buffett, the Wizard of Omaha. Words to bear in mind as we bail out banks and buy up mortgages and tweak interest rates and nothing, nothing seems to make any difference on Wall Street or Main Street. Years ago, Mr. Buffett called derivatives “weapons of financial mass destruction”

This entire economic mess, impacting the world .. all from some math formulas. Father of microfinance, Muhammad Yunus talks in this short insightful video:

He says that the market needs to find its own self-correcting mechanism. The more speculative you get, the more you set aside for a “rainy day” fund. A government bailout is akin to running to mommy and daddy for help. And the mechanism needs to be designed right now, right when we need it the most, right when we’re feeling the pain the most.

Because when times are good, we’re not going to be convinced that we’re going to need that rainy day fund. Microfinance, is about empowering people to lift themselves out of poverty. It’s not a free handout.

Awesome advice.

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