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Check. Mate.

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Mr. Stephen F. Diamond, entertainingly self-refuting apologist for the status quo:

In the world of corporate finance there is a very simple decision rule: managers should accept all positive net present value (NPV) projects.

A sadly anonymous commenter in our cesspool:

I will send Professor Diamond $1 if he sends me 1000 copies of the Mexico City telephone directory written in his own hand on foolscap. I will defray all costs of materials and postage.

Well, I think that’s the end of that argument.

Diamond goes on to say that “[t]his is a very simple and powerful concept. It lies at the heart of how we train managers at every business school in the world.” I find it very hard to believe that in fact “every business school in the world” teaches that “managers should accept all positive NPV projects” (without, apparently, any consideration of risk or the relative certainty of the projection!), but if so that explains a lot about what happened in 2008.

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