My friend Vince Farrell (of CNBC fame) wrote me this morning about AIG.
Teddy Forstmann, the most cautious leveraged buyout player around, remembered Warren Buffet’s “Three I” rule. The Innovator, is followed by the Imitator, who is followed by the Idiot. The Idiots get carried out. AIG was probably all three in the creation and eventual mismanagement of financial engineering. The company has always been on the cutting edge of what insurance to write and how to price it. But they copied themselves too often and got carried away with their own brilliance and forgot the rules of risk vs reward. The shareholders are paying the price.
Of course, as the idiots are carried out, some brave innovators begin to think about how to do things differently. The cycle of creative destruction at work. That I suppose is what we should be turning our energy to.