April 20, 2017
Financial markets accommodate both prudent insurers and reckless gamblers. They provide investors with an opportunity to diversify their portfolios, and allow gamblers to bet on future movements in interest rates. The coexistence of the two can allow speculators to make profits by stabilising prices—buying when markets are fearful, and selling when they are greedy. But when the gambling motive overwhelms the insurance motive, speculation becomes destabilising and then risk, far from being minimised by careful management, becomes concentrated in the hands of those who understand least what they are doing. And when regulators perceive insurance when they should see wagering, their actions magnify a crisis rather than minimise it. Such destabilising speculation, mischaracterised by regulatory authorities as prudent risk assessment, is what caused the global financial crisis of 2008. ... The coexistence of insurance and gambling goes back to the earliest days of markets in risk, and the interaction of the two has been central to financial history. But it was four developments in the second half of the 17th century that combined to frame the way we think about risk, and the institutions we have for dealing with it, through to the present day.
One of the Cold War’s great mysteries is how the world survived the second week of November 1983. ... That it did is in large part thanks to the actions—or, more accurately, the inaction—of an Air Force officer named Leonard Perroots, who died this January. That it almost did not was a function of Ronald Reagan’s rhetorical and military bellicosity, the Soviets’ fear of that aggressiveness, and a tragicomic degree of misperception. At no other point in history had two nations devoted the level of human, financial, and technical resources that the United States and the Soviet Union did to sussing each other’s intentions. And yet their confusion remained so total that the Soviets mistook a NATO war game for the prelude to an actual attack, even as Reagan thought he was doing his utmost to pursue peace. ... For decades, the U.S. government kept whole chapters of this near-catastrophe secret, but the lessons of that fraught autumn are finally coming into focus. And not a moment too soon.
Parking can seem like the most humdrum concern in the world. Even planners, who thrill to things like zoning and floor-area ratios, find it unglamorous. But parking influences the way cities look, and how people travel around them, more powerfully than almost anything else. Many cities try to make themselves more appealing by building cycle paths and tram lines or by erecting swaggering buildings by famous architects. If they do not also change their parking policies, such efforts amount to little more than window-dressing. There is a one-word answer to why the streets of Los Angeles look so different from those of London, and why neither city resembles Tokyo: parking. ... For as long as there have been cars, there has been a need to store them when they are not moving—which, these days, is about 95% of the time. Washington, DC, had a parking garage in 1907, before Ford produced its first Model T. But the most important innovation came in 1923, when Columbus, in Ohio, began to insist that builders of flats create parking spaces for the people who would live in them. “Parking minimums”, as these are known, gradually spread across America. Now, as the number of cars on the world’s roads continues to grow (see chart), they are spreading around the world. ... Free parking represents a subsidy for older people that is paid disproportionately by the young and a subsidy for the wealthy that is paid by the poor.
Betting that oil prices were about to crash was an audacious wager, one made all the more remarkable by the individuals behind the deal—civil servants with unassuming titles such as “director general of fiscal planning.” In the lucrative oil business, a profession known for its generous compensation, these government employees were probably the worst-paid stiffs around. Yet the men from Hacienda—so called still, even though women are sometimes in the room—proved prescient in predicting a crash. ... In December 2009 the four investment banks involved in the deal wired the proceeds of the wager back to Mexico. Official records tracking the money that landed in Account No. 420127 at state-owned Nacional Financiera bank show the tidy sum Mexico made: $5,084,873,500. ... Despite its size, impact, and huge fees, the deal is one that few people, even in the energy industry or on Wall Street, know much about. Painstakingly, the world’s 12th-largest oil producer and its bankers have cloaked the program in secrecy to prevent others—namely trading houses and hedge funds—from front-running Mexico’s orders.
Zimbardo rose to fame in 1971 with his Stanford Prison Experiment, in which students role-played guards and prisoners. The experiment was scheduled to last two weeks, but ended within six days after the guards began to abuse the prisoners, some of whom experienced mental breakdowns. ... Even Zimbardo himself played a key role in the power structure. “In the experiment, I had ultimate power,” Zimbardo tells me. “I was the one ultimately that intervened and stopped it, [but] I could have intervened, and I should have intervened earlier.” The temptations of power can change an individual, he said ... In the years since the experiment, Zimbardo has become increasingly interested in positive psychology, and founded a non-profit organization that promotes everyday heroism and kindness. ... Power is the force that makes things happen, for good or for evil.
The company’s e-commerce platform was involved in purchases by more than 100 million individual shoppers in 2016, yet it is invisible by design, enabling the end-to-end operation of its customers, some 400,000 individual retail shops and brands. It proudly operates not from San Francisco or SoHo but from six floors of an inconspicuous office tower in Ottawa ... the company has quietly but aggressively encroached on territory occupied by retail giants like Amazon and eBay to carve out a lucrative niche in e-commerce. ... Lütke’s goal is a lofty one: to make commerce easier for everybody. Just as WordPress made it easy for anyone to set up a blog or content website, Shopify lets anyone set up and run a digital store immediately, without needing any technical prowess.
Roger Federer was supposed to be finished. Or at least exiting gracefully, getting on with his transition to post-tennis things. But then, in January, after five years without a Grand Slam and a season sidelined by injury, he went ahead and won again. Not as the unflappable perfectionist but, for the first time, as a rangy underdog. In the immediate afterglow of the Australian Open, Federer brought GQ to his mountaintop home in Switzerland, where we learned about his life off the court and just how much longer he feels he can pull off the impossible.