The Bankwatch

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Posts Tagged ‘wikinomics

Trust and verify | Tapscott offers radical solution for credit crisis

Don makes a terrific point here on the power of what he terms wikinomics, that comprises four principles:

  1. openness
  2. peering
  3. sharing
  4. act globally

CNW Group | DON TAPSCOTT | Troubled financial markets need to embrace Wikinomics-style transparency says Don Tapscott

“For example, investors should be able to “fly over” and “drill down” into a CDO’s underlying assets. With full data, they could readily graph the payment history, and correlate information such as employment histories, recent appreciation (or depreciation), location, neighborhood pricings, delinquency patterns, and recent neighborhood offer and sales activities. Now that AAA ratings have proved worthless, currently investors don’t have a glimmer of what they are being asked to buy. And they won’t start buying until they fully understand what they are purchasing, and that the price is fair.

There is little chance that the Banks would do this together, but what if one or two did it first. In the book, Don offers the example of Goldcorp who were having difficulty locating their next gold find, and CEO McEwan was frustrated by the ‘glacial’ progress from traditional geologists. So he took all their supporting geological data, and offierred it online, in the form of a contest.

Within weeks, they received 100’s of submissions but not jsut from geologists, but from students, mathematicians, military officers etc. The contestants identified 110 targets, 50% of which had not been previously identified. Over 80% of the targets yielded substantial gold reserves. McEwan estimates 2 – 3 years were shaved from the normal process.

The Banking system suffers the same problem as Goldcorp. Glacial movement in determining the true underlying value of ABCP supporting assets.

Tapscott offers that if the data were made available online, the data that supports the paper, then the internet community could solve the problem faster and more effectively by providing insights, solutions, early warnings, and no approaches that could never be developed by information protective bankers.

Written by Colin Henderson

June 11, 2008 at 10:59

Posted in Social Lending

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