The Silo Effect
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mortgages, ix
defaults on, 101
subprime, 2, 17, 73, 83, 85, 91, 94, 96, 219, 226
MySpace, 170
National Health Service, U.K., 15, 206
Nestlé, silos at, 60
Newsweek, 200–201
New York, N.Y., 246
Bloomberg administration in, see Bloomberg administration
building and fire inspectors in, 2–3, 8, 9, 10
Buildings Department of, 2–3, 9, 10
Finance Department of, 9
fragmented bureaucracy of, 3, 6–7, 9, 55, 63
Health Department of, 246
housing fires in, 2, 7, 8–9
Housing Preservation and Development Department of, 8
illegal apartments in, 1–2, 7, 10
illegal dumping of restaurant grease in, 11–12, 246
Investigations Department of, 9
911 call bureaucracy in, 246
Prospect Ave. fire in, 1–2, 7
tobacco smuggling in, 10–11
Water Department of, 8
New York City Fire Department, 3, 7, 8, 9, 55
New York City Police Department:
“broken windows” strategy of, 146
compstat program of, 147, 153
New York Daily News, 151
New York Times, 72
New York University, 245
New Zealand Superannuation Fund, 242
Nissan, 68
Obama, Barack, 214, 223
Obama administration, 16
Office of Financial Research, U.S., 133
Ohga, Norio, 58–59
OpenTable, 135, 139, 140–41, 144, 152–53, 159
opportunities:
blindness to, ix, 12, 18, 85, 109, 142, 168, 247, 249
silos in creation of, 106, 218–44
organizational systems, see classification systems
Osborne, George, 133
Ospel, Marcel, 86, 88, 95, 103
Other Financial Corporations (OFCs), 121–22
see also shadow banking system
Other Financial Intermediaries (OFIs), rapid growth of, 121
Ouriel, Kenneth, 207
Ouroussoff, Alexandra, 47
OxyContin, illegal sales of, 11
Pagan, Rosemary, 2
Parker, Sean, 170
participant observation, 37, 38, 43, 48, 49, 186, 251
Partners in Health, 195
Patinkin, Don, 116
Patterson, Ryan, 185
Paulson, John, 226
pay and incentives:
at BlueMountain Capital, 238
at Cleveland Clinic, 205–6, 214, 217
in finance industry, ix, 60, 61, 91, 92, 93, 205, 223, 225–26, 227, 237, 238, 244, 248
Pension Plan Investment Board, Canada, 243
Pershing Square, 226
Phillips, John, 198–99
Phillips & Drew, 86
physicians, distinction between surgeons and, 204–5, 206–7, 210
PIMCO, 126–27
Playstation, 53, 59, 66, 67, 70, 74–75, 76–77
as example of successful silo, 71
Podolsky, Seth, 211, 216
Pozsar, Zoltan, 128
Pritchard, Evans, 37
Proust, Marcel, 245
Prudential Regulation Authority, U.K., 132
Radcliffe-Brown, John, 37
rating agencies, ix
“rational expectations” theory, 112, 115
regulators:
modern finance misunderstood by, ix
silos and, x, 81–82, 83–84, 88, 93, 97–98, 99, 103
Ricardo, David, 111–12
Riles, Annelise, 47
risk, blindness to, ix, 14, 81–106, 131, 142, 168, 221, 247, 249
risk managers, 81–82, 89–90, 93, 95, 97, 98–99, 101, 102, 103–4, 218, 233, 234
Robbin, Scott, 159
Rohner, Marcel, 83
Rubenstein, David, 230
“Russian doll finance,” 125
Salesforce, 188
Samsung, 66, 77–78
Sandberg, Sheryl, 170, 180, 185, 187
Santa Fe Institute, 224
Sarkozy, Olivier, 87
Sartre, Jean-Paul, 32, 34, 45
Sauseda, Marcelina, 151
Savage Mind, The (Lévi-Strauss), 38
Saverin, Eduardo, 170
savings glut, 128
Sayad, Abdelmalek, 42
Schroepfer, Michael “Schrep,” 178–79, 180–81, 183, 185, 188, 254
Scoby, Joseph, 102
securitization, 87–88, 90, 100, 108, 264n–65n
September 11, 2001, terrorist attacks, 3, 139–40, 158
U.S. intelligence failures and, 145, 146
SG Warburg, 86
shadow banking system, 134
diagramming of, 128–29
and financial crisis of 2007–8, 127–28
McCulley’s distrust of, 126–27
size of, 129
Shearer, Tony, 105
Siderow, Stephen, 235, 237, 242
BlueMountain Capital co-founded by, 222, 223
on price distortion of CODs, 229
Silicon Valley:
rapid growth of start-ups in, 172, 173
silo-busting in, 187
see also specific companies
silo-busting, x–xii, 18, 19, 135
in Bloomberg administration, 3–4, 6–12, 245, 246, 250
by BlueMountain Capital, 218–44
at Cleveland Clinic, 18, 192–217
collisions and, 171, 253
by corporations, 247–48
cultural translators in, 249
at Facebook, 17–18, 164–91
in finance industry, 218–44
Goldstein and, 162–63
by individuals, 139–63, 168, 247
innovation fostered by, 143, 215, 221
in institutions, 168–69
in Silicon Valley companies, 187
Stringer and, 68–69, 72–74
technology and, 250
travel and, 253
silos:
as classification systems, xii, 14, 18–19, 142, 247, 252
collaboration and communication stifled by, 62–63, 71–72, 85
as cultural phenomena, xii, 19
definition of, 13
difficulty in dismantling of, 79–80
efficiency and, 14, 60, 61, 254
in finance industry, ix–x, 14, 16, 17, 18, 107–35, 221, 222, 223, 224, 227, 242–44
in financial system, 109, 110, 130–31, 133, 134–35, 222
innovation stifled by, 14, 51–80, 204, 250
mental maps and, 17, 142
need for, 13–14, 19, 71, 175, 247, 252
opportunities created by, 106, 218–44
origin of, x–xi
prevalence of, 246–47
seen as natural and inevitable, 55, 63, 69, 93
self-interest fostered by, 15, 72, 76, 85
at Sony, 17, 54–55, 60–61, 68–69, 70, 79, 109, 135, 167–68, 174, 249
tunnel vision and, see tunnel vision
turf warfare and, 118, 134, 167, 168
Sinclair, Upton, 81, 98
Singer and Friedlander, 105
Smith, Adam, 14, 111–12
social anthropology, see cultural anthropology
social engineering experiments, at Facebook, 17–18, 169, 174, 181, 188, 190–91
social grooming, 172, 174, 200
social interaction:
classification systems and, 29–30, 31
Dunbar’s number and, 172
Facebook in reshaping of, 170–71
Facebook’s quantitative analysis of, 171, 188
social media, 246–47
corporate use of, 188
social networks, xii, 169
sociology, merger of cultural anthropology and, 48
Sony, xi, 18, 50, 51–52, 191, 222, 247
Apple’s eclipsing of, 77
collaboration stifled
at, 62–63
consumer electronics division of, 63, 67, 70
corporate restructuring at, 60–61
entrenched resistance to reforms at, 73–74
expanding product lines of, 57, 59
and financial crisis of 2007–8, 73
founding of, 55–56
innovation and creativity originally fostered by, 52, 58
Playstation of, 53, 59, 66, 67, 70, 71, 74–75, 76–77
proprietary digital music systems of, 65
risk-averse thinking at, 62
Samsung’s eclipsing of, 77–78
share price of, 66, 73, 77, 78
silos at, 17, 54–55, 60–61, 68–69, 70, 79, 109, 135, 167–68, 174, 249
stalled e-reader project of, 76
Stringer appointed CEO of, 66, 68
Stringer’s attempted silo-busting at, 72–74
Trinitron TV of, 57, 59
Sony Music Entertainment, 63
Sony Walkman, 52, 59, 64, 78, 222
competing versions of, 53–55
creation of, 57–58
revolutionary impact of, 58
Soros, George, 131–32, 226
sovereign wealth funds, 242–43
specialization, 71
need for, 14, 19, 249, 253
premium put on, 253
see also silos
Staley, Jes, 235, 242
Star Wars films, 52
Steel, Robert, 6, 253
Stehli, Jim, 89, 92
Steinkamp, Jennifer, 212
stock markets:
1929 crash of, 199
as zero-sum game, 220
Strachan, Timothy, 53
Straumann, Tobias, 84–85, 101, 103
Stringer, Howard, 53, 63, 78–79
appointed Sony CEO, 66, 68
background of, 67
at CBS, 67, 69–70
IBM as example for, 70–71
insider-outsider perspective of, 69–70
Playstation and, 74
silo-busting efforts of, 68–69, 73–74
silos as concern of, 55
structured investment vehicles (SIVs), 118–19, 121, 123–24, 268n
Stuart Little (film), 51, 52
Sun Microsystems, 180
super senior tranches, 91–92, 99, 101–2
surgeons:
arrogance of, 203, 208
distinction between physicians and, 204–5, 206–7, 210
Swiss Bank Corporation, 86
Switzerland, UBS as powerful symbol of, 85–86
Tajikistan, xi–xii, 49
Talbot, Lauren, 7, 246
Task Reaper, 166–67
taxonomies, see classification systems
technological change, 12, 14
silo-busting and, 250
Sony’s failure to keep up with, 62
technology elite, 190
Thiel, Peter, 170
Thinking, Fast and Slow (Kahneman), 1
3M, 187
Tibet, xi
tobacco smuggling, 10–11
tranches:
of CDOs, 225–26, 227n, 229, 231
high-return, 91
super senior, 91–92, 99, 101–2
travel, silo-busting and, 253
Treasury, U.K., 114, 130
Treasury, U.S., 114, 133
tribalism, x, 13, 17, 55, 68, 79, 98
in Chicago Police, 144, 156, 158
in economics, 113
Trinitron TV, 57, 59
Tristes Tropiques (Lévi-Strauss), 38
Trobriand Islanders, 37, 186
Tucker, Paul, 110–11, 116, 129, 130, 248–49
Bank of England career of, 110–11
broad-money growth as concern of, 120–22, 123–24
as head of market surveillance division, 114–15, 117–18, 120
passed over for Bank of England governorship, 133
on silos, 134–35
tunnel vision, ix, x, 13, 92, 107–35, 252
economists and, 17, 122–23, 127–28, 130–31
and financial crisis of 2007–8, 108–9
mental maps and, 125, 127
opportunities concealed by, ix, 12, 18, 85, 109, 142, 168, 247, 249
risk concealed by, ix, 14, 81–106, 131, 142, 168, 221, 247, 249
Turner, Adair, 116, 132
UBS, xi, 18, 80, 81–106, 168, 223, 228, 247
blindness to risk at, 84–85, 96–97, 103
capital reserves of, 102
as cash-rich, 87, 92
CDO holdings of, 88–93, 96–103, 106, 219
collaboration encouraged at, 104
corporate loan concerns of, 100–101
creation of, 86
Dillon Read hedge fund of, 95–96, 99
Ernst & Young credit rating of, 94–95
globalization and, 86–87
interdepartmental communication stifled at, 85, 97–98
IT systems overhauled at, 104
mortgage-backed securities held by, 82–83, 87–88, 89; see also UBS, CDO holdings of
mortgage-linked losses of, 83, 101, 102–3, 106
private bank of, 87, 92, 104
retail bank of, 104
risk managers at, 81–82, 89–90, 95, 97, 98–99, 101, 102, 103–4
silos at, 17, 85, 103–4, 105, 109, 131, 135, 219, 222, 224, 248
Swiss regulators and, 81–82, 83–84, 88, 93, 97–98, 99, 103
as symbol of Switzerland, 85–86
systematic failure at, 84
tax-evasion scandal at, 84
top leadership as operating in bubble at, 85, 94, 100–101
tribalism at, 98
2011 trading losses at, 105
UBS Investment Bank, 89, 90, 95, 96, 99
Unilever, 188
Union Bank of Switzerland, 86, 94
United States, housing bubble of 2006–7 in, 82, 94, 95, 97, 99, 100–101
U.S. News & World Report, 201
hospital rankings of, 213–14
Vai, Steve, 53–54
Vaio MusicClip, 54
“vehicular finance,” 125
Vietnam War, 202
VMware, 164–65, 172
Wall Street Journal, 73
Watching the English (K. Fox), 47
Weed, Frank J., 197
Wehrli, Ursus, 192, 205
Weis, Jody:
appointed Chicago Police superintendent, 144–45
Chicago murder-rate and, 151–52
at FBI, 144–45, 146–47
Goldstein and, 152–53
interagency data sharing promoted by, 146–47
murder map and, 155, 157, 161, 162
racism ascribed to, 161
resignation of, 158
on silos in Chicago Police, 154
Western Electric, 57
White, William, 119
Wiesendanger, Christian, 104
Wiesenthal, Rob, 75
Williams, David, 83
WindyGrid interactive map, 159–60
Wolf, Robert, 90, 91
Woodford, Michael, 116
World Bank, 195
World Trade Center, 9/11 attack on, see September 11, 2001, terrorist attacks
World War II, Japan in, 55–56
Wuffli, Peter, 96
Xerox, 70, 80, 174
Young, James, 207
Zakaria, Fareed, 253
Zaloom, Caitlin, 47
Zorub, David, 238, 240–41
Zuckerberg, Mark, 162, 165, 171, 173, 177, 180–81, 186–87, 188
Facebook posts by, 185
and founding of Facebook, 169–70
Zurich, 86
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