Picture from Wikipedia (Amaranth tricolore)
We often work hard to create values by being efficient in one point …. and forget that this can have a downside.
This is the story of a plant known as Amaranth. Most of its species are commonly referred to as superweed. And farmers growing mass food like corn, soybean, … spend a lot of money to let it not grow. This is not so easy because it grows fast and has a high rate of seed production and a multitude of varieties cross with one another easily. Some are even herbicide resistant …
But ironically, this plant is also highly nutritious and its is increasingly seen as an important ingredient of "gourmet food".
Unintended consequences when driving local efficiency blindly
Provocatively speaking, agricultural industry invests a lot in killing off a valuable food source to grow "raw material" for the fast food more efficiently- With all known consequences, from unhealthy over weight to bee deaths.
I do not want to stress the moral (culinary, medical,…) aspects of this, I find, it is an example of a predictably irrational behavior (in Dan Ariely's sense)
Are OTC derivatives a weed?
I am afraid, there are not so few that think so. And claim from regulators to keep them off the markets.
As experts you know that this has unintended consequences. In short, derivatives are to increase the values of firms, by helping optimize risk, by putting more quantitative information into the system, …
No doubt, some (artificially complex) derivatives are toxic, but most are financially nutritious - if you know their recipe and exactly how they work when you have used them in your financial kitchen lab.
This story is inspired by Mark Buchanan's recent post at BloombergView