Saturday, May 28, 2011

Quote of The Day

One of 90 gaffes by Prince Philip:
"Cats kill far more birds than men. Why don't you have a slogan:
'Kill a cat and save a bird?'"
 I now realise the man's a comedic genius: part Jack Dee with a dash of Simon Cowell...

Friday, May 27, 2011

Just Desserts

Two things struck me about President Obama's stop over in Ireland earlier this week. The first struck me watching the President proudly proclaim his English heritage during his state visit to the UK. And no, it wasn't the obvious thought. What struck me was that if it hadn't been for the visit by Queen Elizabeth only a few days earlier, then Obama's flying visit to Moneygall would have felt like going to a nice restaurant for the evening and only having dessert.

The fact that the Queen's state visit was accompanied by all the pomp and ceremony appropriate to the occasion meant that Obama's visit was the dessert after the main course. A little rushed maybe, but a nice end to a 'pleasant evening'. However, if it hadn't been for the Queen's visit I suspect more than a few of us might have been left wondering 'what was that all about?'

The second thing that struck me were the protests at the President's visit. Or rather: the lack of protests. Imagine if it had been President George Bush arriving in College Green: with two wars on the go and Guantanamo packed full of suspected terrorists? There probably wouldn't have been enough Gardai available to make that gig go so smoothly. But President Obama arrives with two wars on the go and Guantanamo still open and... silence.

I guess Britain isn't the only country with a 'special' relationship with the United States.

Quote of The Day

"If the Internet were a sector, it would have a greater weight in GDP than agriculture or utilities."

Wednesday, May 25, 2011

The Master

Work and reading have kept me away from blogging lately. Top of the reading list has been Iain McGilchrist's fascinating book The Master and His Emissary - mentioned before. Now that I've finished it I'll have more to say about it anon, but you might enjoy this in the meantime:

Saturday, May 21, 2011

Quote of the Day

As Internet Bubble 2.0 gets under way:
Twitter's business plan, such that it is, has always been something along the lines of “Get big and popular, then just flip the switch and start making money when we feel like it”. There is no switch.
John Gruber

Thursday, May 19, 2011

Wednesday, May 18, 2011

One Swallow

...does not make a spring. But maybe two do? My company's report on this month's mood of the nation was launched today. Most of the indicators are back to where they were this time last year, i.e.: improving, slowly. Let's hope they don't exactly track last year - which saw steady improvement over the summer and rapid decline through the autumn:

Tuesday, May 17, 2011

The Microeconomics of Devaluation

Going by the Argentinian experience, the micro is even worse than the macro. Here's a flavour:
What people don’t understand is that laws are written by men, not some greater power. As soon as those running the show feel an emergency decree or law is in order, existing laws are simply rewritten. They may even be ignored all together! What do you do if something like that happens? You may complain, you may sue, but you’re not changing the cold hard fact that as of right now that bank door is closed, that ATM has no money in it, and you still have to survive. This is something Argentines have experienced and know very well. Hundreds of thousands of us have banged the doors of our banks, for years, without a penny being returned. You still sued, and waited, and spent the little money you had by hiring a lawyer. You lose, they win…unless you have some of that money at hand before they decide to steal it.

Every single Argentine wishes he could go back in time, close his bank account, and put that money into gold. We would all do that if we had a time machine. Since you can’t guess the future, all you can do is estimate what can happen and play the odds in your favor. 
The government taking over the banks and seizing pension funds? Couldn't happen here, thank goodness.

More - if you have the stomach for it - over at the ever cheerful SHTF blog.

Monday, May 16, 2011

The Smart Recovery

New research by my company shows that Ireland is on the cusp of a majority using smartphones for the first time. So is the smart economy just around the corner? Probably not. Though the smart consumer market looks like it's gathering momentum.

It would be nice if it resulted in a smart recovery - but that's still some way off I reckon...

Sunday, May 15, 2011

The Jedward Effect

Never mind the two visitors coming to our shores this week and next, I reckon the two lads we sent to Düsseldorf last night have done more for our global reputation.

I have been experimenting with a trial version of Trendrr this past month and it is excellent. The chart shows mentions of Ireland etc on Facebook and the balance of sentiment (negative, positive or neutral). Spot the Jedward effect - literally an explosion of positive mentions for Ireland and all things Irish on twitter, facebook, Bing, YouTube and other social media in the past twenty four hours.

Well done lads - you've done more for us than all our doom-boosting commentariat put together.

Saturday, May 14, 2011

Shorting The Future

Andrew Haldane thinks the short term is getting shorter. Just one example from his recent paper:
Most recently, in 2011 PriceWaterhouseCoopers conducted a survey of FTSE-100 and 250 executives, the majority of which chose a low return option sooner (£250,000 tomorrow) rather than a high return later (£450,000 in 3 years). This suggested annual discount rates of over 20%.
And that's from a survey of people who could easily afford to sit out the three years for the extra return. Even with interest and inflation rates still near record lows across much of the developed world, it would appear our corporate leaders have lost faith in the future. Unfortunately that's our problem, not theirs.

The reason it's not their problem is obvious from the chart (from Goldman Sachs via Zero Hedge). Corporate profits are at record levels in the United States, even outside the banking sector. GS forecasts them to go even higher next year. In which case, why worry about profits in the 'distant' future when there's so much profit to be made now? Profits aren't at record levels everywhere (certainly not in Ireland, and not even in the UK). But the problem of short-termism is more pervasive. It may also explain the paradox Chris Dillow regularly highlights, namely the perceived dearth of investment opportunities that leave many businesses sitting on large piles of cash (a dizzying $65.8 billion in Apple's case). If you set the bar so high in terms of the level of returns required from investments in order to compensate for absurdly high discount rates and then, hey presto, there are very few 'worthwhile' investment opportunities out there...

So why is it our problem? It comes back to the biggest sector excluded from the Goldman Sach's chart, i.e.: the one it operates in itself, namely financial services. Tyler Cowen makes the link between profits, short-termism and inequality thus:
The first factor driving high returns is sometimes called by practitioners “going short on volatility.” Sometimes it is called “negative skewness.” In plain English, this means that some investors opt for a strategy of betting against big, unexpected moves in market prices. Most of the time investors will do well by this strategy, since big, unexpected moves are outliers by definition. Traders will earn above-average returns in good times. In bad times they won’t suffer fully when catastrophic returns come in, as sooner or later is bound to happen, because the downside of these bets is partly socialized onto the Treasury, the Federal Reserve and, of course, the taxpayers and the unemployed. 

...In short, there is an unholy dynamic of short-term trading and investing, backed up by bailouts and risk reduction from the government and the Federal Reserve. This is not good. “Going short on volatility” is a dangerous strategy from a social point of view. For one thing, in so-called normal times, the finance sector attracts a big chunk of the smartest, most hard-working and most talented individuals. That represents a huge human capital opportunity cost to society and the economy at large. But more immediate and more important, it means that banks take far too many risks and go way out on a limb, often in correlated fashion. When their bets turn sour, as they did in 2007–09, everyone else pays the price. 
 And that's just when they play by the rules. The harm that can be done by those prepared to ignore the rules - as brilliantly explained by Matt Taibbi in his article The People vs. Goldman Sachs is quite frightening. They really do make our local bankers look like 'faintly dim former rugby players' in Morgan Kelly's memorable analysis

The problem isn't just the inevitable bailouts and problems here in the real economy (where the rest of us earn a living), but also in terms of the long-run productive potential of the economy. Tyler Cowen again:
It’s as if the major banks have tapped a hole in the social till and they are drinking from it with a straw. In any given year, this practice may seem tolerable—didn’t the bank earn the money fair and square by a series of fairly normal looking trades? Yet over time this situation will corrode productivity, because what the banks do bears almost no resemblance to a process of getting capital into the hands of those who can make most efficient use of it. And it leads to periodic financial explosions. That, in short, is the real problem of income inequality we face today. It’s what causes the inequality at the very top of the earning pyramid that has dangerous implications for the economy as a whole. 
 So what to do?  Cowen isn't optimistic anything can be done - attempts to stop banks taking risks may end up with nobody taking any risks because the banks won't lend them any money (the situation we have in Ireland right now). The short term crowds out the long term yet again. Haldane is more optimistic - an increased focus on transparency, governance, compensation structures and taxation policies (e.g.: a Tobin tax) will be necessary.

One thing is for sure: we can't go on the way we're going, sacrificing the future on the alter of the present. 


Bit of bother with Blogger these past few days - a few comments seemed to get blocked or bounced - not sure why. Apologies to all affected.

Friday, May 13, 2011

Quote of The Day

I guess the Americans would call it 'blowback':
"What seems to be happening across Europe is the fracturing of both the state and the super-state as sources of tribal identity. The European Union has only ever commanded the loyalty of the liberal middle classes and as their political alliance with traditional working-class voters collapses it seems increasingly unlikely that the EU will survive the current economic crisis, at least not in its present form. More surprising has been the decline of the state as a unit capable of commanding people’s loyalty. In Scotland, the beneficiary of Labour’s desertion by working-class voters has been the Scottish Nationalist Party and that, too, seems a pattern likely to be repeated elsewhere. Ethnicity in Europe is beginning to trump more abstract sources of collective identity, as it did in the former Soviet Union after the collapse of the Communist control system in 1989."
Toby Young

Monday, May 9, 2011

Give Peace (and Trade and Democracy) a Chance

As many as 20,000 men refused conscription into the British Army during the First World War. The British Government introduced conscription for the first time in the country's history in March 1916, a few weeks before the Easter Rising tried to take Ireland out of the war (though Ireland was then exempt from conscription). There is a fascinating - and appalling - account of the experiences of Britain's conscientious objectors in the latest issue of The American Scholar

Yet as the centenary of World War One approaches it is striking how peaceful the world is rather than how violent. At the level of conflict between nation states at least. Though as the World Development Report 2011 reminds us:
21st century violence does not fit the 20th-century mold. Interstate war and civil war are still threats in some regions, but they have declined over the last 25 years. Deaths from civil war, while still exacting an unacceptable toll, are one-quarter of what they were in the 1980s. Violence and conflict have not been banished: one in four people on the planet, more than 1.5 billion, live in fragile and conflict-affected states or in countries with very high levels of criminal violence. 
War has been 'internalised' - or rather it has metastasised in many parts of the world into a grim mixture of civil war and organised criminality. We are sadly familiar in Ireland with the manner in recent times which 'freedom fighters' have become 'drug barons' when the war is finally over...

There is a way out for the world's victims of organised violence: for as the WDR report makes clear, strengthening legitimate institutions and governance to provide citizen security, justice, and jobs is crucial to breaking recurring cycles of violence.  But how? The short answer is free market capitalism with a strong dose of globalisation. Though there is rather more to it than that. For as Larry Arnhart observes:
Recently, some scholars have argued for a "capitalist peace theory": the correlation between democracy and peace arises not because democracy causes peace, but because modern democracies tend to be capitalist, and it's really capitalism and its attendant prosperity that fosters peace. Capitalist societies benefit from free markets and free trade, both within and between societies, which create networks of global interdependency and exchange that are disrupted by war.

Moreover, in capitalist societies based on contractual relationships with strangers based on social trust and the rule of law impartially enforced by the state, individuals are habituated to peaceful cooperation rather than violent aggression. Michael Mousseau argues that what promotes peace is the move from a "clientelist economy" to a "contract-intensive economy." In clientelist economies, individuals depend on their families, their friends, and their group leaders--their patrons--to provide economic and physical security, which promotes a xenophobic psychology of in-group/out-group conflict that fosters military conflict. In contract-intensive societies, individuals are habituated to making contracts with strangers with the expectation that those contracts will be enforced impartially by the state under the rule of law. Citizens in such societies are inclined to see the advantages of bigger markets with more contracting opportunities, and so they support foreign policies of international cooperation under an international rule of law that facilitates global trade and mutual exchange. 
 Once again we have seen here in Ireland how a failure to evolve from a 'clientelist economy' to a 'contract-intensive economy' can hurt and even reverse our economic progress. Though so far not our peace.

But I agree with Arnhart: "war will always be an option when human beings are caught in tragic conflicts over the objects of desire". The challenge will be to avoid a zero sum outcome that results in 'tragic conflicts'. Nevertheless, as the Rational Optimist - Matt Ridley - has argued, war will be with us in one guise or another for the rest of the 21st century, so we will just have to ensure that we build and support those institutions that create a positive sum world.

Like most Irish people I would never go to fight another country's war abroad, even though my grandfather did, along with 17,000 other Ulster Catholics at the Battle of the Somme. It helps of course that I'm too old for such an eventuality - and anyway I'd happily just take the white feather. Maybe one consequence of the intervening century is that there would be a great deal more than 20,000 conscientious objectors in the event that Britain re-introduce conscription to fight a foreign war.  And maybe that's one sign of hope for the future.

Saturday, May 7, 2011

Quote of The Day

Brendan O'Neill on the West's politically correct assassination of Osama bin Laden - brilliant:
"In the post-assassination commentary OBL is presented to us as the mighty figurehead of an organisation that posed a mortal threat to Western civilisation. In truth he was always an isolated actor, with little support, no army and few weapons, yet who benefited enormously from Western fears and confusion. It was Western society’s culture of fear that fed and nurtured him; he lived off it, vampire-style. The most powerful weapon in his armoury was not his access to cash or those crazy young guys willing to blow themselves up in his name, but rather the abject willingness of Western governments to change their way of life and panic their peoples in response to his threats and antics.

... What makes the wild celebrations of an unofficial VOBL Day even more bizarre is that in recent years bin Laden’s political and terror cachet had waned enormously: he was even less significant and world-threatening than he had been in 2001. For the past five years at least, maybe even longer, he has been the radical Islamist equivalent of an ageing rock star – a bit like John Lennon when he was tucked away in the Dakota building in the late 1970s, living off past hits and releasing the occasional crap audio recording to satisfy his fans and the tribute acts who made up al-Qaeda’s various terror cells."
 Do read the rest over at Spiked

Friday, May 6, 2011

Beacon of Light

This morning the Minister for Children, Frances Fitzgerald T.D., launched an initiative by my company. It a campaign to raise awareness and funds for the Beacon of Light counselling centre in Clondalkin. We are working with businesses in the Citywest Business Campus to help support an organisation that does incredible work with children, young people and their families in the west Dublin area.

To help the launch we prepared a short video about Beacon of Light's work (ably assisted by Bill Dowling and the rest of his very professional crew at The Courtyard Studio). See what you think:

Beacon of Light from Bill Dowling on Vimeo.

Tuesday, May 3, 2011

Life In Two Dimensions

If a picture is worth a thousand words then what value a two-dimensional chart? This is a fascinating example of 'mood-tracking' from The New York Times. You decide where on the two axes the news about Osama Bin Laden should lie: in terms of significance and your emotional response. Then add a text tag explaining why. The trend is fairly obvious at the time of writing (image grab below):


Have your own say here.
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