Saturday, February 28, 2009

Oh, forgot to carry the one...Boom!


I've been wondering just what went wrong with the world's finances, and finally found an article that explains the heart of the matter in simple terms (okay, there's a lot of political things that come into play as well, but I'm not going to get into that dogfight and that's not what the article talks about). Instead it talks about a central formula used to calculate risk. The problem arose from a combination of depending on things staying the same (they change), using a formula to correlate risk that doesn't cover a large enough amount of history to actually be useful as a predictor of risk (oh, and some greed and stupidity, but you knew that). The article is posted at Wired.

What does that have to do with Oracle? Absolutely nothing. But it is a fascinating article, and I personally recommend it. Also I suppose one can draw some valuable lessons about IT from the failure. The main lesson would be that you shouldn't depend on everything turning out perfectly without a glitch, nor should you depend on everything coming out as the worst case scenario every time, but you should probably perform due diligence before you bet the farm on a single, simplified assumption. 

Oh, and anothere good explanation of the mechanism behind the whole debacle (also pointed out by the Dark Roasted Blend blog) is this video, part 1 and part 2.

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