The Futures Company, where I am one of the blog editors, does an annual review by staff of a book, film, exhibition or other cultural experience they’ve found interesting in the past year. My contribution was a short review of Adam Gordon’s book on forecasting, Future Savvy. The link should be here.
As an experiment over Christmas I’m going to change the look of the site – I’ve been concerned that longer posts are hard to read in the previous design. I’d be pleased to have comments as to whether this new theme is an improvement or not.
Regular readers will know that I’m sceptical (see previous posts about Heathrow’s third runway here and here) about the long-term predictions that aviation demand will keep on growing – most of the main trends are pointing the wrong way (oil prices, restrictions on carbon emissions, competing technologies, government need for tax revenues from undertaxed sectors, along with changes in social values). So far, certainly in the UK, public policy hasn’t caught up with this. But with the news that Ryanair has noisily cancelled its order from Boeing for 200 planes, perhaps the industry has.
The so-called ‘paradox of futures work’ is that we know about the past, but not about the future, but make decisions which are intended to improve our futures outcomes. I used to use a quote from the American activist Stewart Brand to illustrate this point:
‘You can see the past but not influence it. You can influence the future but not see it.’
But it’s not right.
(‘Pretty Boy Floyd‘, by Woody Guthrie)
It’s hard to watch the whole bank bonus row unfold without thinking that it seems to be taking place in a social and economic void. To pump some air in, I thought I’d try the ‘Five Whys‘ approach to unpack it a bit.
Why can banks afford to pay huge bonuses? Because they make huge profits.
Why do banks make huge profits? Because the legal, regulatory, economic and political environment has increasingly been stacked in their favour over the last thirty years.
Why has the external environment been stacked in their favour? Well, I had a go at answering that question here, recently, but it’s worth spending some time on the first couple of questions. The answer, at least on one account, is that banks have systematically offloaded risk onto the state. Which, given that they’ve now been bailed out to the tune of billions without having to pay back their previous (or future) profits seems like a fantastically successful business operation; nice work if you can get it.
Blaise Pascal’s ‘wager’ was a pragmatic response to arguments about religious belief: if you believed and God didn’t exist, you hadn’t lost much, save your Sunday mornings. If you didn’t believe, and God did exist, you would burn in hell. Now there are obvious differences between this and climate change; we simply don’t know if God exists or not, but there is an overwhelming body of science which suggests that climate change is real (and which doesn’t vanish at the stroke of a hacker’s keyboard). But in the face of people who continue to assert that the science is flawed or even the product of conspiracy, the wager seems a good model.
Don’t offer us legal protection
They use the law to commit crime
I dread to think what the future will bring
When we’re living in gangster time
(“Gangsters‘, by the Specials)
There was a throwaway line by John Kay in his remarks at the TUC’s ‘Beyond Crisis‘ event a couple of weeks ago that didn’t get the attention it deserved: ‘that the financial services industry is by far the most influential political force in modern countries‘. It’s not the sort of language you expect from someone like Kay, despite his fine work on the limits of markets. But further evidence that he might be right followed almost immediately, in the shape of both the pusillanimous Walker Report and the breathtaking Supreme Court decision on banks’ overdraft charges. (To quote an old Goons sketch: Open your wallet and say after me, ‘Help yourself’.) Fortunately John Kay had spelt out his argument in his recent Wincott lecture. Two quotes from the lecture summarise it: first, “prosperity and growth require that entrepreneurial energy should be focussed on the creation of wealth, rather than the appropriation of the wealth of other people,” and second, that, “political freedom is jeopardised by excessive concentrations of economic power”.
In the Financial Times. columnist Tony Jackson has picked up on the Friends of the Earth report on carbon trading which I blogged about recently.FoE was mostly interested in the efficacy, or not, of carbon trading in driving down emissions, but it also warned that carbon trading could lead to derivative-type problems for the financial system. It’s this aspect which interests Jackson, as a way in to how risk managers should make these sort of assessments. His answer is by three yardsticks – simplicity, liquidity, and leverage.