Thanks for the clarification…if that was the context, then the idiots he was referring to are the financial analysts [investment bankers] who sell hype and the lazy investors who believe their BS.

Another apt quote by W.E.B…”Never ask a barber whether you need a hair cut.”

In future posts, please be making a clear distinction between IBs and commercial bankers [we are the good guys].

I got that quote from warren buffett after watching a segment of his on the charlie rose show. I think the context (if i recall) was really about this hoarde mentality to investing, which he obviously has not fallen prey to.

I think he was essentially saying that the majority of people don’t do their homework when it comes to investing.

You’ve quoted Warren Buffett referring to bankers as idiots. Is this the same man who was Chairman and CEO of Salomon Brothers in 1991, who also recently forked out $5 billion to buy Goldman Sachs?

Kindly provide us with the context of his quote.

When you refer to “Bankers” are you talking about the kenyan bankers who are mostly retail bankers? Or are you talking about

The U.S. Investemnet bankers?

It seems to me you have a healthy loathing for kenyan bankers but at the same time, you’re accusing them of the sins commiitted by the American INvestment Bankers

NDIANG’UI

Very interesting post from someone who’s both an MBA and Engineer/ Scientist.

You said

“Infact more importantly is that looking at the value chain of the banking industry, it is one of the key enablers of any economy and the very innovations of financial products meant to fulfill the needs of the society for wealth preservation or wealth creation, be it derivatives, bonds, unit trusts etcetra requires great depths of knowledge and at the end of the day it drives an economy’s performance.”

I agree with the above, in that, that’s what ’s been going on. However, of what benefit is to society/ the economy as a whole if the Financial Products being created cannot be understood by anyone? i.e. they are too complex to be understood and end up being labeled “Toxic Assets” ?

Thank you for summarizing my point so clearly.

Without a product (and a product could be anything from food, to clothing to an ipod) – without such products, what on earth will bankers sell?

Ah yes,

They will sell you a bunch of financial instruments, which have no real value and which nobody can measure. Isn’t this why America is in trouble right now? the bankers began to believe they were scientists and they foolishly believed that these products they created were real, but as we have now seen, it was all just a bunch of worthless paper.

This is why warren buffett says that they are 3 kinds of people when it comes to business:

Innovators (scientists)

Imitators (chinese manufacturers )

Idiots (bankers and the consumers who believe them)

I like analysans point from a basic macro-econmic view on the ne t production of goods and services.

Infact more importantly is that looking at the value chain of the banking industry, it is one of the key enablers of any economy and the very innovations of financial products meant to fulfill the needs of the society for wealth preservation or wealth creation, be it derivatives, bonds, unit trusts etcetra requires great depths of knowledge and at the end of the day it drives an economy’s performance. Ditto these products do leverage on the new or existing technology to give it a market to thrive. i.e where the synergy between such products and those who innovate them i.e the demonised bankers and the technologists who automate the sell/buy environments cannot be decoupled. Take for instance the emergence of Chicago Board Of Trade (CBOT) ; the futures products that emerged from future contracts on pork bellies have contributed immensly to the development of Agriculture in the United States. Now we can measure the jobs that this organisation has created and whether they have been sustainable.

And your take on the financial disaster is not really diffrrent from the dotcom products that had flawed business models due to the fact that the technologists didn’t take time to think through the ‘theory’ (as you refer to it) of how value is added for technology to be commercialised. These sort of inflection points are common ; We saw Rail companies go burst not long ago and it I think these events are healthy to keep us in check on excesses and they also provide lessons of how better to organise our economies and organisations.

The argument on who contributes to an economy the most of a Banker and a scientist will lend us to gross generalizations.

I really do not see anything wrong by everyone garnering an MBA , as long us it is used intelligently to create and preserve wealth. Infact most of the education courses around whether science or arts have lacked that element of ‘wealth creation’ paradigm and more less they have not produced wealth creators. So really may be the question should be the quality of the course and the motivation of the student and ways in which incarcinate an entreprenurial/innovative mindset as well as the ability to commercialize ideas . I say ideas because ‘technology’ is not only about raw science but the application of it in ways that meet basic jobs to be done by the society. And so innovation can be around business models or Products/services .

We have seen the growth of Wal-mart and it might not be very differrent from the age of mercantilism when british and France merchants thrived, only that this time the supply chain management is backed up by technologies but the technologists didnt offer an iota of merchandizing knowlege to Sam who saw a need to get goods closer to the small town people. Has wall-mart created jobs and wealth ? I leave that to you to answer.

We have also seen the growth of Equity Bank and its ability to mobilise financial assets , create financial products and then disburse them at lower costs to those who need them , previously left out by mainstream banks i.e a classical business model innovation. An enterprise thrives where there is a need by a consumer not just for the technology’s sake. We have seen big failures in both financial products innovation as well as technology products innovations from minicomputers to dotcoms and now the failure of Asset Backed Securities.

So the theory that scientists contribute more than do bankers would be without casuality if not backed by any data that sets this clear. All we can continue to hack through are mere collerations.

Infact I fnd it offensive of you being critical of financial or management theories which are not much differrent in their objective to scientific theories of trying to represent reality better in order to understand it and advance societies that live in it.
I mean the theory of economic management including the definations of ‘ecoomies’ or measuring the performance of economies through things like GDP , and even the new Gross National Happiness whether they work to represent reality or not are not really different efforts to theorizise as is the theory of DNA.

Turning to VC’s , I see them backing bankers as well as scientists. Infact I see many VC firms having a combination of these skill sets in their employees; mostly scientists/engineers with MBA’s. And so I don’t see what you can call these ones ; MBA’s or scientists ?
To put my life in the line in the defense of MBA’s , I am in that category too where I have been in both worlds of ‘technology/engineering’ , ‘banking’ and management consulting.

I do agree that the sudden rush for MBAs is ill-informed. As Workingstiff has quoted above, trying to teach management to people who have never practiced it is a waste of time and resources. Should this trend continue, the Kenyan economy will continue to suffer from the ills of pseudo-experts and white collar criminals armed with MBAs.

That said I do not agree with your advice to young Kenyan entrepreneurs i.e. focus on acquiring IT skills. Though IT is a fast growing industry with a lot of potential, Kenya is – and will continue to be, a net importer of IT. The sad reality is that even when local IT skills and technology is available, most buyers opt for imports.

From a competitive advantage point of view, the young Kenyan entrepreneur should focus on developing technology to improve agricultural productivity and to scale up the value chain in agric prodn. The GoK should develop incentives to ensure Kenya becomes The regional hub for financial services, education and health services.

From your posts it is evident that you have sth against bankers since they supposedly dont “procuce”. From my basic economics the material wealth of society is determined by the goods and services provided to its members. This productive capacity is a function of the real assets of the economy – land (farmers), knowledge (scientists, bankers, entrepreneurs), buildings and machines, that are used to produce goods and services.

Financial assets also contribute to the productive capacity indirectly by enabling the transfer of funds to firms with good investment opportunities. FYI loans by Kenyan banks to the consuming retail borrowers constitute about 52% of total advances, the rest goes to the productive sector. It does make sense to finance both the producers and consumers, the only problem is that the consumers mostly buy from foreign producers.

At the end of the day real assets produce goods and services, financial assets determine the allocation of income or wealth and bankers (including serious investors such as VCs) get paid twice for owning both assets. Love us, hate us, we get PAID!

I don’t think Commercial banks are keen to fund these “risky” start ups. This kind of finanacing only comes from V.C.’s.

I do not see all those kenyan banks funding start ups that deal in tech.

For that V.C’s and pro startup ploicies from the government are needed hand in hand