The whole world has been busy analyzing the fall of Wall St. giants and now there is divided opinion about the bail out. There have been interesting comments from different types of experts. But all this is ex-post, when everything was going right (atleast appeared to be), no one was complaining.
A year back, sitting in a B-school classroom, I was thinking that I can understand every business model, scenario and situation. But after about 4 months in the real corporate world, I still have no questions about my ability to understand business models, scenarios and situations but I realized that if there one thing that separates class room from real world then it must be "transaction costs."
While appearing to be most simple, transaction costs are the most difficult to model or come up with assumptions about. Their nature is so different that even the smartest manager cannot predict them. They are ubiquitous and they need no planning, they just happen.
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