Systemic Structural Risk and Too Big To Fail

[Stu]

Stu, if you don't think there is "too big to fail" in the real world, imagine the scenario if Chase declared tomorrow that they've lost all of the money entrusted to them by investing too heavily in beefsteak mines. The impact would be devastating, and with the panic that would ensue, I'd doubt you'd have much of a banking system left at the end of a month. So yes, corporations can become so large that the impact from their decisions can play outsized roles, particularly when it comes to the necessarily central industry of banking.

Completely disagree; but this is not the forum to go off on that rabbit trail. Let's stick to the topic of Drum Corps.

[GUARDLING]

this is starting to smell like the restructure thread..ughhhhhhhhhhhhhhhhhhhhhhhh...strap up

[garfield]

this is starting to smell like the restructure thread..ughhhhhhhhhhhhhhhhhhhhhhhh...strap up

[garfield]

No single corps is too big to fail and have any significant impact on the whole.

If a group of three or more all pulled out at once, however, then I suspect you'd feel a real impact at the DCI level, particularly if the three were "the usual suspects" at the top. Even still, such an impact would be temporary until such a time as the fan base could adjust.

Stu, if you don't think there is "too big to fail" in the real world, imagine the scenario if Chase declared tomorrow that they've lost all of the money entrusted to them by investing too heavily in beefsteak mines. The impact would be devastating, and with the panic that would ensue, I'd doubt you'd have much of a banking system left at the end of a month. So yes, corporations can become so large that the impact from their decisions can play outsized roles, particularly when it comes to the necessarily central industry of banking.

Drum corps, not so much.

And that's the whole point of the question; this activity is not like free enterprise competition (by some views) in that if the G-? split off the entire structure would fail and "competing" corps would not have the opportunity or structure to advance up to replace those who left.

Would the structure to organize and produce shows remain for the scrappy, little competitors if the G-? took off and deprived DCI of their "drawing power"?

[BRASSO]

SSR and TBTF are two hotly debated subjects in the business world. They refer to a structure, currently identified as "The Banking System", that has systemic risk in that, if one (or a few) banks fail, a systemic contagion will occur that will bring down the entire system.

As an extension, TBTF refers to those players that are identified as having the greatest component of risk simply because of their size; their failure would precipitate a systemic melt down.

The notion is debated here that drum corps carries significant "Systemic Structural Risk" because the big players "failing" (exiting DCI) would cause the whole organization to collapse.

Is there Systemic Structural Risk in DCI? If so, which entities are Too Big To Fail?

And if yes, what, if anything, should DCI do to mitigate the risk of systemic collapse?

The key difference here is that the Banks made bad decisions that resulted in huge financial losses, and they wanted their losees ( and risks ) covered. These Capitalist entities essentially demanded a Sociaist solution( not a free market solution ), for their huge losses and regretably a bailout of their risks ( and subsequent losses ) took place. The architects of the G7 by contrast were making money. They were profitable. But they wanted MORE money, and so they exercised ( imo ) the worst of " Crony Capitalism" ( to coin the phrase ) by making an effort to inimidate and extort those below on the economic food chain for their own greedy self interest. Another difference here is that the deadbeat Banks actually got their welfare checks to cover their bad decisions, while in DCI, those on the lower end of the economic food chain resisted the attempt at a financial grab, and twarted their attempt of a redistributive shift of money from the lower echelon to the greedy ones at the top. HUGE difference it seems to me between the Banking system " too Big to Fail " shift of monies from middle class taxpayors to the Banks thru their crony friends in both Politcal Parties, and the Drum Corps profitable G7 " Too Big to Fail " architects unsuccessful attempt to extort others for even more dough and power. The Banks got their requested dough. The G7 extortion attempt on the other hand failed its its brazen attempt at a power and revenue grab.

Edited January 24, 2012 by BRASSO

[MikeN]

I don't think a single corps could precipitate DCI's fall. Even BD, who would be the most likely candidate as they're the most successful corps both on and off the field.

That said, I think a coordinated action, such as the G-7 leaving, would indeed do significant harm to the DCI brand for a long, long time. I do agree with those corps in that they are indeed the main draw, and that the circuit could actually survive losing 7-8 non-finalist corps. (I do, however, disagree on what conclusions that the G-7 drew from that.)

Mike

[BRASSO]

And that's the whole point of the question; this activity is not like free enterprise competition (by some views) in that if the G-? split off the entire structure would fail and "competing" corps would not have the opportunity or structure to advance up to replace those who left.

Would the structure to organize and produce shows remain for the scrappy, little competitors if the G-? took off and deprived DCI of their "drawing power"?

I do agree that there is a correlation in the fear tactics used. The Banks ( that lost money ) said that if the taxpayors thru their elected officials, did not give them taxpayor monies, "the banking system would collapse." The similarity with the G7 scheme was that the fear factor used was that if the lower Corps did not agree with a power and money grab that they would consider the option of leaving and that "DCI would collapse".

Apparently, the G7 threat to bolt DCI and attempting the risk of going out on their own resulted in these groups blinking first. In the end, they reconsidered carefully that risk vs.potential reward. If they thought they could make it outside of DCI, then they would have left DCI after their Corps Directors were booted off the DCI Executive Board by the DCI Membership at Large. But the G7 in the end capitulated in their threat to the others to bolt DCI. And DCI... and its fans... won the battle by standing firm on the fundamental principles and the mission statement adopted by all the DCI member Corps. If one looks at the original G7 Powerpoint Presentation demands, they received in the end only minor, cosmetic changes that they demanded. Additionally, with the replacement of the new DCI Executive Board, its seems likely that this original G7 group actually LOST power and influence within DCI from what they had in power and influence before they hatched their ill conceived power and revenue grab attempt plan.

Edited January 24, 2012 by BRASSO

[CQuinn]

this is starting to smell like the restructure thread..ughhhhhhhhhhhhhhhhhhhhhhhh...strap up

I was thinking the exact same thing. Once one of these "Let's prove how much smarter I am than you are" threads runs it's course another one pops right up to replace it. I hope when I finish my MBA I don't become pompous and all-knowing!

[audiodb]

A few thoughts:

1. There is no SSR or TBTF among the corps. Looking back at your definitions:

SSR and TBTF are two hotly debated subjects in the business world. They refer to a structure, currently identified as "The Banking System", that has systemic risk in that, if one (or a few) banks fail, a systemic contagion will occur that will bring down the entire system.

The failure of one corps, or a few corps, will not cause the rest to fail. We have ample evidence of this, whether from the failure of three of DCI's charter members to even attend the first championship, to the 1975 season proceeding without five of the top 25 (Kingsmen, Purple Lancers, Commodores, Blue Rock and P-N Patriots), or the 1994 season proceeding without five of the 1993 member corps (Star of Indiana, Spirit, Dutch Boy, Sky Ryders and Black Gold).

More importantly, there is no systemic mechanism where a corps failure would cause others. Quite the opposite....the loss of a corps opens up opportunities for their competitive rivals.

As an extension, TBTF refers to those players that are identified as having the greatest component of risk simply because of their size; their failure would precipitate a systemic melt down.

Clearly, no single corps is too big to fail. Again, having had top-3 corps like '74 Kingsmen and '93 Star of Indiana fail (or leave), the activity did not collapse.

2. As for DCI, the questions are more compelling. Obviously, since DCI has assumed operation of the entire junior corps activity, it's failure would be very disruptive, certainly a "systemic meltdown" of some sort. Thus, one could easily argue DCI is "too big to fail" in that sense. In reality, though, I think that if DCI really ever did fail:

- someone would step up and take it's place

- many of the corps would continue operating in some form

Even here, we have historical precedents. Drum Corps Holland had a meltdown back in the late 1990s. Several corps fled to a marching band circuit to keep their events going; a few others competed in surrounding countries; some just performed in non-competitive venues. Should have killed the Dutch activity off, right? Well, actually, hardly any of the corps folded over it, and a few years later, some guy just decided to start his own circuit. Check it out....it's called Drum Corps Europe, and not only did it bring drum corps all the way back in the Netherlands, it has also helped revitalize the British drum corps scene that was teetering on the brink of extinction 5-6 years ago.

3. The premise of one of your questions is ambiguous. Take a look:

The notion is debated here that drum corps carries significant "Systemic Structural Risk" because the big players "failing" (exiting DCI) would cause the whole organization to collapse.

A distinction must be made between corps "failing" and corps "exiting DCI", especially in today's context. If the corps exiting DCI form their own circuit a la G7, which becomes a cut-throat competitor with DCI, that creates several additional challenges way outside of the scope of the SSR/TBTF issues. (On the other hand, I still don't think DCI would fail even in the face of a hostile G7 split....but that's for another thread.)

And if yes, what, if anything, should DCI do to mitigate the risk of systemic collapse?

There might be some interesting conversation to be had in response to this question. But I don't think there is such a risk.

[GUARDLING]

I do agree that there is a correlation in the fear tactics used. The Banks ( that lost money ) said that if the taxpayors thru their elected officials, did not give them taxpayor monies, "the banking system would collapse." The similarity with the G7 scheme was that the fear factor used was that if the lower Corps did not agree with a power and money grab that they would consider the option of leaving and that "DCI would collapse".

Apparently, the G7 threat to bolt DCI and attempting the risk of going out on their own resulted in these groups blinking first. In the end, they reconsidered carefully that risk vs.potential reward. If they thought they could make it outside of DCI, then they would have left DCI after their Corps Directors were booted off the DCI Executive Board by the DCI Membership at Large. But the G7 in the end capitulated in their threat to the others to bolt DCI. And DCI... and its fans... won the battle by standing firm on the fundamental principles and the mission statement adopted by all the DCI member Corps. If one looks at the original G7 Powerpoint Presentation demands, they received in the end only minor and cosmetic changes they had demanded.

I truly believe if there was a split and there were those 7 .8, 17 whatever corps, people would still run to support these shows no matter what they say or think personally. People want to see the best of the best for thier moeny and prove it all summer long running to see these corps opposed to some other corps. With that being said for a select group to run off they would also have to be extremely financially sound especially in the beginning to pull this off.

I think smaller corps would survive though but i just think the make up of both sides and the activity as a whole would change drastically. Both can survive but never as we know it now.JMO