The Actuarial Black Eye

In his blog David Merkel gives a fabulous book review of the book:

While America Aged

The book and blog show that actuaries (and accountants as well) were not disciplined enough to resist politicians pressure and large companies board (and shareholder) short-term result demands. As a direct consequence those companies got into serious trouble.

Stick to one's guns, and keeping a save eye on the future, is one of the essentials of the actuarial profession.

Training (not just study alone) in giving the right push back on board level, should therefore be an obligate part of the education (and accreditation) of actuaries and accounts.

As (UK) Sir Derek Morris stated in his "review of the actuarial profession: interim assessment" (2004):

Too much has been expected of actuaries and, explicitly or otherwise, too much has been promised by them.

Clients have looked to actuaries to provide certainty, and actuaries have often appeared to provide it.

For Dutch actuaries, see also Willemse and Wolthuis in: "On the practical meaning of probability based solvency".

Actuaries are almost just like real human beings: after a few years successful studying and modeling, they gain confidence. They start to believe that reality will also act according their models. Moreover, they might get overconfident and think that their view and expertise on reasonably well predictable issues like life, death and disability are - with the same amount of certainty - also applicable on other issues like 'inflation' and the development of the 'stock market'.

This it typically a case of :

That what develops you, eventually might kill you

Practice hasn't shown that good actuaries are,by definition, also good weatherman.

The book also shows that self-regulating without clear targets and constraints is a fairy tale.

Keep in mind the Mongolian Proverb:

Of the good we have an understanding,
for fools we keep a stick upstairs

Success in being a PBA (Push Back Actuary)!

Regret

Bloomberg's Fred Pals reports on Oct. 29 that Rijkman Groenink, the former chief executive officer who earned about $33 million from the sale of ABN Amro Holding NV, said he regrets the takeover and wants to work again for the Dutch lender.

Groenink stated:

• he would really like' to become a supervisory-board member at ABN Amro
  
• "There is no one else in the Netherlands with as much banking experience and specific knowledge of ABN Amro as me,''
• "I'd be more than willing to put my knowledge and experience at the bank and my management experience in the service of the new bank and therefore of the Dutch people.''
• "My reality is one of loathing, sadness, I didn't need the money, I didn't want it. But the reality of public opinion is that I'm a money-grubber and I bargained away the bank.''

Source

Value for Money!

Now that Obama will be the next (44th) US president, confidence will rise and we'll get value for money......

That leads to the question of how you measure the Purchasing Power of Money?


The measure most often used, is the Consumer Price Index (CPI).

Other comparison series might be preferable, depending on the context of the question.

In fact there are:

Six Ways to Compute the Relative Value of a US Dollar Amount, 1774 - 2007

Calculate the actual value of a original year 1900 Dollar, Euro, Guilder or Pound and see how you get value for money.