Anti-Social or Just Anti-Modern World?

A friend of mine posted on her Facebook page a link to a disturbing report about youth gang violence in the area of London where I live.  Such reports usually lead to views dividing along traditional Left-Right lines: either the issue is caused by poverty, lack of opportunity, lack of facilities, discrimination etc. or they lack discipline, should be locked-up, bring back National Service, corporal punishment etc.  I would like to suggest an alternative view: the kids in gangs, just like people who climb mountains and join the army, are merely searching for a way of life more akin to the way that humans have lived for the vast majority of the time they have spent on this Earth?

I'm sure most people who are reading this (if anybody is) will be thinking I've taken a beating from the crazy stick, so let me explain.  Modern humans have been around for some 140,000 years, (and more primitive ancestors for around 4 million years in total) and for over 90% of this time they lived the life of nomadic hunter gatherers.  This was a harsh and dangerous life, but a life for which the human species had evolved.  Then around 12,000 years ago the first settled agriculture began, followed 2,000 years later by the first towns, and around 5,000 ago the first recognisable cities appeared.  Since then, everything has speeded up hugely, with nomadic hunter gatherers now confined to a few unwanted corners of the Earth and the recent revelation that the majority of the planet's population now lives in urban environments.  Humans are adaptable, we have an enormous capacity to learn, and in many ways modern life as far preferable to that of ancient times, but in historical terms, it is a very recent innovation, and certainly too short a period for nature to have made evolutionary advances

But what if you don't want to live a modern life?  What if you wish to live like humans traditionally lived?  It is possible, but it is certainly not easy.  What if you wish to live like humans traditionally lived, but don't realise it, and actually have no idea how they lived; you just know you don't fit in to the way things are?

   There was a comment in the report that my friend posted that I thought was particularly telling; it comes from a school friend of some gang members, "they don’t listen and they won’t learn". I think to blame a lack of either youth facilities or discipline is too easy; people don't join gangs because there isn't a youth club nearby or someone's not making them do their homework. It strikes me as more part of a cycle of self-destruction, alongside such activities as drug/alcohol abuse, smoking, eating junk food etc. These kids know it is bad for them, (I've never seen any evidence to suggest that most of them are educationally sub-normal) they know that it puts them at risk, but they choose to do it. I don't think you can look to solve the problem until you understand why the choice is being made in the first place. 

My hypothesis, for which I have no proof, other than looking back on 4m years of human evolution, is that the modern world lacks risk, it lacks adrenaline-pumping excitement, it lacks camaraderie, it lacks clear, unambiguous direction; it is the reason why so many young people around the word join armed forces, both formal and informal; it is why people climb mountains and trek across the Antarctic. For most of human history, such stimulation was provided by the instinct to survive; now survival is easy, the only option is to create an environment with survival becomes difficult again.

These kids have no interest in the world of offices, schools, shops, churches and hospitals they see around them, and "improving their opportunities" for a job in such an environ is not going to help. Most people can happily exist and prosper in the modern world, but those that can't are viewed as delinquents and failures; maybe we should accept that the modern world does not work for everyone and how we might adjust it so there are alternatives; we might even find that some people return to "normal" society once they have had a sufficient exposure to the alternative.  

It may seem odd to the vast majority of people who live happily in the modern world, but a life where risk has been minimalised by laws and health and safety rules and where the pursuit of a career, nicer house, spouse+2.4 children is not for everybody.  But what is the alternative?  Can us humans cope with multiple society models existing side-by-side?  Our historic record on this has been poor, and the recent trend towards globalisation has pushed more and more people around the world towards the standard modern Western model.  For generations, Romany and other travellers have been demonised for reasons that boil down to society at large being uncomfortable with people who want to live their life in a different way.  Look also at the way that Native Americans and Australian Aborigines have been treated, peoples who wished to live a traditional life. Of course, some "alternative lifestyles" are positively encouraged by the State, (or perhaps that should be the broader "System" or even the "Man") notably the Armed Forces, but most are regarded with deep suspicion.

Maybe the example of the Armed Forces might even provide a model.  They provide a society that is more "parallel but separate" rather than "side-by-side" with mainstream society.  Could such a system exist in a scenario where the State was not paying for it; I doubt it.  Would wider society be prepared to pay for such an alternative society?  It strikes me that it may well be both a superior and more cost effective alternative to the current structures of prisons, social workers.  It may seem an unthinkable option, having similarities to the film, "Escape from New York", but I am not suggesting some kind of giant prison camp, but an alternative structure that people could join and leave, but with different rules and laws inside the structure.

Nick

A Life of Transactions

I attended a lecture by the eminent economic historian, Niall Ferguson, on the life of Sir Sigmund Warburg, probably the foremost British merchant banker of the post-war era.  The focus of the talk was the difference in business approach between Sir Sigmund and those of a typical large, modern investment bank; between relationship banking, focussed on successful long-term relationships and transaction banking, focussed on winning the next mandate.    Mr. Ferguson's assertion was that Warburg's focus on:

• Building strong and lasting client relationships, based on trust, equality and mutual benefit;
• Cultivating connections across the business and political world, as well as broader society;
• Concentrating on the quality of advice and service rather than the short-term bottom line;
• The importance of reputation over profitability;

would have avoided the excesses of the current financial crisis.  This was a position that I could not disagree with, but it got me thinking about these matters in a broader context.  Have our lives in general become too transactional and less about relationships?  It is very easy to pin the blame for the financial crisis on "banks" and "bankers", but "banks" are not independent organisms and "bankers"are not a different species (even though they may seem so).  "Banks" are run by people; those people are "bankers", and they are a reflection of the world in which they operate and the society in which they exist.

Over the last 30 years banks have grown exponentially, services levels have deteriorated and the focus has moved to selling the most number of products/transactions and increasing productivity/profit levels.  Certain bankers have done very well, e.g. the proprietary traders at large investment banks, but others have done badly, e.g. the clerks and branch managers who used to man high street branches and whose jobs have either disappeared to call centres in India or have had their jobs de-skilled to become loan and insurance sales people.  Public opinion bemoans the disappearance of "old fashioned" banking, but any attempt to offer such services have failed to gain traction beyond niche sectors (principally the wealthy utilising private banking services); the mass market wants no fees, the highest savings rate, the lowest loan rates etc..  Banks are after all merely businesses; we may claim we want better service, but we buy on price; we have the banks we deserve.  Maybe the best example of this were Northern Rock and the Icelandic banks that collapsed so spectacularly: Northern Rock gained a huge share of the UK mortgage market by lending a greater proportion relative to the value of a property (its infamous 125% loan to value mortgage being the worst example) and the borrowers income; IceSave, whose savers had to be baled out by the British and Dutch governments pulled in over £2bn of UK savers money by regularly topping the "Best Buy" tables for offering the highest interest rates.

As an aside to this, I think it is also worth commenting on Sir Sigmund's personal financial position.  He was clearly a very wealthy man from a even wealthier family, but he appears to have viewed money as a reflection of satisfied clients rather than an objective in itself, and dedicated a large element of his fortune for philanthropic purposes. 

What about in areas outside the world of banking?  Survey after survey claims we desire a return to the days of when high streets were filled with independent retailers offering good service and who knew their customers by name, but the reality as demonstrated by where we actually spend money is that we want cheap food from Tesco and WalMart and cheap clothes from Primark and TopShop.  We don't give a damn about service, about having a shopkeeper we have a history with; we want yet another £1 t-shirt or a bargain price on a crate of Stella.  We get the shops we deserve.

How often do you hear people bemoan the "lack of community spirit" or how "kids have no respect any more"?  Next time you hear such a comment, ask that person whether they are a Scout leader/football coach/Sunday school teacher/etc.?  I would stake my buy one, get one free bottle of Tesco Cava that the answer will be "no"; they will be "too busy", "have enough responsibilities", etc.; thus we get the kids we deserve.

So to put Mr. Ferguson's suggestions into a broader context:

• Building strong and lasting relationships throughout our lives, based on trust, equality and mutual benefit;
• Cultivating connections across the communities in which we live, work and play;
• Concentrating on the quality of our human interactions and our surroundings rather than the short-term bottom line;
• The importance of reputation over wealth;

would lead to a better society.  So before we all point our fingers at others, blaming them for the problems that surround us, let us look in the mirror first.

Nick

More Cuts Than a Deli Counter

Anybody working in the public sector or providing products/services to government bodies will be sat in an uncomfortable place right now.  Thirteen years of a Labour government, with interventionism and centralisation built into its DNA, combined with a debt-fuelled economic bubble, has left the UK with unsustainable levels of both public expenditure and government debt.

As might be expected n the light of the recent election, opinions have tended to follow party lines, and I believe that this has resulted in an unfortunately narrow debate.  Two of the key issues raised during the election were whether £6bn of public expenditure cuts should be made this year or next and whether National Insurance should rise by 1% next year or not.  I would liken this to choosing the colour of a new car; it changes the way the car looks, but it does not alter whether or not the car will still be running in ten years.

It is too simplistic to just slice up the situation on ideological lines such as whether the state should supply certain services or whether taxation policies should be redistributive.  The example of what is happening in the USA right now shows how unhelpful such an approach can be, with political point scoring taking precedence over answering difficult questions.  I would like to make two observations that go beyond these ideological brickbats, ones that have been ignored by both sides.

My first observation is that there has to be a move away from a culture of entitlement.  This is often thought to be an issue just for the lower socio-economic echelons, but I would extend this much wider to include examples including:

1. The entitlement to cash benefits by virtue of circumstance with no reference to contributions, either in cash or by way of service to society.
2. The entitlement to use nature's resources without a second thought, merely because:
1. It is convenient;
2. It is a “better” school / “nicer” supermarket / “ideal” holiday destination;
3. It doesn't effect me.
3. The entitlement to take as big a “slice of the pie” as possible without any (or a token) consideration of the needs of others.

The world has changed beyond all recognition over the last 50 years, but the political and social structures we have were formed in this earlier age.  None of the political parties appears to have the "balls" to face up to this, as they know the majority of the population do not want to hear uncomfortable truths.

The UK has a population of 60m, all of whom expect to have living standards amongst the highest in the world, but no one ever asks whether such expectations are justified?  What do we provide?  We have some pockets of excellence in both manufacturing and services, but far too few of them.  As a country we have too many people engaged in low value added services, but who still expect the full fruits of a high value economy.

To put it simply, you can only go on for so long paying each other rich-world pay rates to make coffee while borrowing money to buy goods made overseas and expecting the value of your house to rise at double-digit levels forever.

This is not a call for a return to the "good old days" of large scale traditional manufacturing; there are many basic industries in which Britain would be unable to regain competitiveness, but we have failed to replace the old "smokestack" industries with something that truly adds value.  This is not a political point, as this neglect spans governments of both sides, which brings me to my second observation.

The pervasive culture in the UK does not celebrate or even encourage learning, innovation or excellence.  Adoration is poured on footballers, TV talent show winners, soap opera "stars" and models, while engineers and scientists are branded as "nerds" and geeks", science and maths subjects are viewed as "boring" and "too difficult", and efforts to encourage and pursue excellence are regarded as "elitist" and "divisive".

The last 30 years has seen a massive expansion in the number of people attending university, but has the economy really benefited from a dramatic influx of media studies, psychology, business studies and leisure management graduates?  People come into the workforce with more qualifications than ever, but are they truly better educated than a generation ago?  The use of information and communication technologies has exploded, but where is the British Google/Microsoft/Apple?

There is an advert for Lastminute.com with the strap-line, "do more of the goodstuff"; the problem with our culture is that we want to do more of the "goodstuff" but we do not want to put in the hard work to pay for it.  We also seem to have an increasingly narrow view of what the "goodstuff" is.   Hedonism is "good"; self is "good"; helping those less fortunate is "the responsibility of the government"; community activities are "boring"; buying things is "good"; going places is "good"; appreciating the simple things in life is "unfulfilling"; learning new things is "too time consuming".  Can this situation be improved; yes.  Will it be improved; I wish I could be hopeful.

Nick

Financial Regulation - No, don't fall asleep

There has been a lot of discussion about financial regulation recently, a topic that in past times would generally have elicited a gigantic yawn. The financial crisis that has afflicted the world over the last three years has changed this, just as it has changed many other things. This last week alone has seen Germany ban “Naked Short Selling” (not as interesting as it sounds, but some reason “fleshy” terms are widely used in financial circles) of many securities, the US Senate take a major step forward in passing new banking legislation and the new UK coalition government make reform of the financial sector a significant component of its proposals. The questions in my mind are:

1. How much of the of this impetus is driven by short term political point scoring?
2. Have we reached a point where financial innovation is being driven solely for the benefit of a narrow group of market participants?
3. Is anybody still reading?

Question 1 is the easiest to answer; a lot of the changes are likely to be a political knee-jerk reaction, but that is politics for you. It also doesn’t mean that the reforms are necessarily bad, but it probably means they will be implemented badly and will be distorted by the influence of politically powerful lobby groups.

Question 2 is harder to answer and will illicit the widest range of opinions. I regret to say that I think we have reached such a point. Finance is supposed to be a “SERVICE” industry, but I believe that is no longer the case within many institutions. The traditional role of the financial sector was to bring the benefits of intermediation and expertise, i.e. pooling the savings of many individuals in such a way that this capital could be lent out for productive purposes, invested in growing business and for risk to spread. The pillars of the financial sector: banks, stock exchanges, insurance companies, mutual funds, all had such purposes at their core. This was not out of some long-lost sense of altruism, this was capitalism at its most basic, just like free-trade, with the whole system benefiting. The financial sector was the oil that lubricated the whole capitalist system, and without it, the system did not work. Now however we find ourselves in a place where many of the most powerful institutions play a zero-sum game; no longer does the whole system benefit, but someone wins and someone else looses. The Goldman Sachs/SEC case has had much publicity, but it is just the tip of the iceberg. For many institutions their key mission is no longer to grow by providing the best service and products to their clients, but merely to ensure that they are on the winning side on as many deals as possible. “Naked short selling”, “flash trading”, “naked credit default swaps” etc. do not serve any economic purpose; they are just ways of winning and losing, and examples of where the overused term “casino banking” is actually true.

This is not some diatribe against bankers bonuses; they are not the cause of the problems but a symptom. It is interesting to note that as remuneration in these areas has risen exponentially, returns to Joe Public on their pensions and savings has fallen. In much the same way as a few oligarchs have come to dominate the Russian economy by taking control of formerly state-owned assets, the western capitalist system has seen a huge transfer of wealth from the many to the few. This is not the same as Bill Gates and Steve Jobs getting rich on the back of creating products that are bought on mass because they deliver something people want; this is they win, the rest lose just because they were on the right side of a bet, and that bet is on a race where the odds have frequently been stacked in their favour. I am not sanding up shouting “this is not fair” (I don’t think it is, but that is not the point); I am saying that it is not healthy for society. These are not people who are building businesses, developing new technology and creating a legacy; they are not even the Robber-Barons of 19^th Century America, who at least built industrial empires, albeit ruthlessly; no they are more akin to another type of Baron, those of medieval England, handed huge tracts of land and the lives of the people living on that land merely for “services to the king”. Just as such “Barons” built bigger and bigger castles, so today we see ever more luxurious homes in the finer parts of London, New York and Geneva. But just as castles produced benefits to the medieval economy, sucking resources from productive activities such as agriculture and trade, such is the case with the Knightsbridge penthouses of today.

OK, to bring today’s thoughts to a close, I believe that firms in the financial sector should refocus on the core principal of all businesses - providing offerings that benefit their customers, that their customers want, that are superior to their competitors offerings, and earning a fair return along the way.

Question 3? I doubt it.

Nick