Foolproof by Greg Ip review – the biggest risk we can take is to allow ourselves to feel safe
Careering along a French motorway, Greg Ip caught sight of a thought-provoking sign: "La vitesse aggrave tout" - "speed makes everything worse". The faster we drive, the more extensive the damage when something goes wrong. He had already had good reason to ponder the nature of risk as a journalist and economic commentator covering the catastrophic financial crisis that swept through markets from 2007. In the run-up to the crash, consumers and even policymakers had come to believe that smart regulators and forward-thinking bankers had made the world of money a much safer place.
The fundamental insight of Ip's new book, Foolproof, is that this very belief was a key factor in the lead up to the crash. When people believe they are safe, they take more risks - they drive faster, in motoring terms - and "speed makes everything worse". Or as the economist Hyman Minsky, whose work Ip revisits, put it: "Stability is destabilising."
Continue reading...