meep (meep) wrote,

On the real rules

Continuing on from my last post, I recall the story of a competition from a Mathcamper (20+ years ago), that made me laugh so much. Now, of course, the person telling the story may have been exaggerating at bits, but I think the shape of the story is essentially true.

This student was part of an engineering competition team for his high school, at a competition conducted by the U.S. Navy. Each team had a group of challenges they needed to complete, and they were given a certain amount of time in which to complete them all. It was up to the teams how they allocated their time to complete everything -- you built what you had to build, and then when time was up, the creations were put to the test.

Well, this being the Navy, one of the challenges was a boat race. They were to construct small boats (they were given certain approved materials) that had a certain amount of weight, and it was expected that they'd use carbon dioxide canisters (like with a seltzer bottle/soda keg) to propel the boat. Well, this guy's team ran out of time for this bit and their initial creation was really too heavy to go at a reasonable speed. It very slowly moved in the water.

So, here is where the story takes a turn: the team decided that, given it's a race, you don't have to be fast... just faster than all the other boats. So why not take out the competition and just putt-putt over the finishing line?

The story goes that one of the CO2 canisters was re-purposed as a torpedo launcher.

The story also goes that they were able to affect two boats before the judges removed their boat from the competition. And that the next year, there was an explicit rule about not interfering with the progress of the other boats.

Now, my reaction at the time (I was about 24 years old, iirc) was that was just plain wrong of the Navy to do that - at least the first year. You'd think the military would understand that if the rule was the first over the finishing line wins (and there was nothing about impeding the other boats), then a strategy of torpedoing the other boats was legit. To be sure, given the difficulty of accomplishing this (I believe the boats were RC), they probably wouldn't have won anyway with that very loose interpretation of the rules. Still, it was a funny story. I thought it was clever.

In any case, the real rules was that the Navy wanted a real boat design contest where the fastest/most maneuverable boat won, and they imposed that set of rules even though that wasn't what was written down.  A lot of times the "real rules" are not written down.

This post and the prior one on MtG were inspired, of course, by the current GameStop/Melvin Capital/Robinhood saga, but also by a serious discussion surrounding life insurance regulation (yes, really) on LinkedIn. I think it's a public discussion which you can see here:
Chuck Ritzke on complexity in life insurance regulation

I will not comment on the "real rules" re: GameStop (though we're all seeing that work out in real time), but I will remark on the "real rules" of life insurance regulation. The regulators want to make sure that life insurers set aside enough money to back the promises they've made to policyholders, and while they want to make sure people can actually afford to buy insurance, too, solvency is a big thing. It's not just a matter of how to calculate reserves, but also what types of assets life insurers are allowed to invest in, looking that they can actually administer policies (one annuity insurer fell afoul of that a few years back... there are all sorts of "boring" aspects of insurance that are really important to do correctly).  Much of insurance regulation is reactionary, in seeing how insurance companies failed to satisfy promises in the past -- the real rules have always been to protect policyholders, and when that fails under written rules, they change the written rules.

Then there's public accounting -- that's a situation where the "real rules" are that one wants to provide good information to shareholders. Valuing life insurance promises differs quite a bit between the regulatory (STAT) and public accounting (GAAP) approaches, but that's okay because they have different goals.  One is to protect policyholders, the other is to protect shareholders (and debt holders).

Then there's tax accounting, but I won't go there.

The thing is, it's important to know the "real rules", even if they're not written down. It's too easy to get caught up in minutiae, and then rail against how the written rules are, without thinking about how they got that way. Always go back to what the real rules are - what are they really trying to do. If you cannot agree on the real rules, why bother fussing about the details.

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