Jan 8
I wrote this defense of financial innovation for the latest Spectator. Criticising individual overpaid, underperforming bankers is one thing, but taking aim at the financial industry as a whole is a terrible idea. Britain will depend on its financial sector to propel it out of its long slump. It should be encouraging it, not continuing to beat it down long after the financial crisis occurred.
In early December, I had the chance to go back to Myanmar – my mother’s home country – for the first time in my many years. It was delightful to return and find the country finally changing. The dreadful oppression which used to exist in Yangon has lifted – a combination of the government moving out to its new capital, Naypyidaw, and also lifting its boot from the country’s neck. Foreign visitors are now pouring into Yangon, Hillary Clinton in December, George Soros and William Hague so far in January – and it’s only the 6th. I wrote this oped which appeared in the FT today, and will have another, longer piece in the Chatham House magazine The World Today next month.
Jan 4
A great profile in the NY Times of the mathematician turned biologist Eric Lander. Lander now runs the Broad Institute of Harvard and MIT. Lander was a superlative mathematician who later became an expert in molecular biology, medicine and genomics, swapping the solitary life of a mathematician for a much more collaborative, inter-disciplinary adventure.
Two quotes in particular.
The first from Lander’s high school friend, Dr. Paul Zeitz, a maths professor at the University of San Francisco: “He was super smart, but so what? Pure intellectual heft is like someone who can bench-press a thousand pounds. But so what, if you don’t know what to do with it?”
The other from Lander himself, describing the improbable leaps in his own career: “You live your life prospectively and tell your story retrospectively, so it looks like everything is converging.” But of course, at the time, there is no convergence. You make choices and take risks, hoping that everything works out. Only when it does do others look back and approve.
Lander saw the kind of life he wanted, pursued it and succeeded, but I’m sure there were those at every turn wondering what on earth he was doing.
I reviewed James Marshall Reilly’s Shake the World for today’s FT. It’s a good New Year pick-me-up for anyone, entrepreneurs or not.
I just wrote this for the Notting Hill Editions in London. I argue that technology has introduced a deceptive ease to finance, which trips up those who don’t understand the complex maths, but creates a vast opportunity for those who do. Merry Christmas.
Sep 29
I’m often asked what to read in the business literature.
At least as regards entrepreneurship, Tom Eisenmann of Harvard Business School has done a good bit of the heavy lifting with this very comprehensive and up to date list.
Eisenmann and Eric Ries are breathing life into HBS’s entrepreneurship teaching.
And I say that without the slightest hint of cynicism.
Delighted to find that Columbia’s business school refreshed its disclosure requirements for faculty with outside interests this past July. Those who fail to fulfill them will be “subject to sanctions as judged appropriate by the Dean.” The same Dean, Glenn Hubbard, whose dismal performance in Inside job, I suspect, prompted the review in the first place.
When Jerome Kerviel was charged with losing 5 billion Euros at SocGen, I wrote about his case in The Sunday Times of London. My conclusion was that there was no way he could have acted without some level of management consent, even if it were just tacit.
My suspicion is that in these cases, a huge loss is preceded by a huge gain. The gain is quietly accepted, but the loss produces a panic and all the blame is foisted on one individual, often at a very low level in the organization. Kerviel at SocGen, Fabrice Tourre at Goldman Sachs and now Kweku Adoboli at UBS.
Carsten Kengeter, the head of UBS’ investment bank, has spent his professional life in derivatives. Earnings at the bank have been poor for some time now. Many jobs were on the line. My guess is that in an effort to boost them, short-cuts were taken which led to excessively risky trading.
It worked well for a while, but in the kind of volatile markets we have seen in recent months, there was a sudden drop. A few hundred million can be made back. Once you get to $2 billion, you have to call in the authorities, before anyone finds out what’s going on.
Kerviel said something along these lines in his own defence, but wasn’t believed. Adoboli may be taking a similar fall.
Mar 29
Finally got to see Inside Job, Charles Ferguson’s documentary about the financial crisis. It’s terrific and should be on the curriculum at every business school.
The final 20 minutes or so are devoted to the failures of academic economists to predict the crisis, or even come down on the banks afterwards. Ferguson, rightly I believe, attributes this to the economists’ eagerness to receive consulting gigs with banks. His interview with Glenn Hubbard, Dean of Columbia Business School is devastating. Here’s where Hubbard goes from Jekyll to Hyde.
It seems so obvious that economists and business school professors should have to disclose their consulting arrangements. I cannot see a single, reasonable argument for them not to. If our economic health really does depend on their ideas, and much of it does, then we deserve to know what goes into shaping them. If they wish management to be treated as a profession, then they should abide by the codes of doctors and lawyers in disclosing any potential conflicts of interest.
Which brings me to Michael Porter and Libya. I’m a great fan of Porter’s work generally - though his most recent HBR cover wasn’t so hot – and his history advising Libya doesn’t change that. I’m sure part of him wishes he had never taken up the invitation from Gadaffi and his son. But his work is in helping countries which could use his advice. These tend to be places with serious problems of every kind. As long as he’s open about this, which he was, then I see no problem.
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