Friday, 29 May 2009

Travels in the Blogosphere

It's been a mad week, with my spare time absorbed by an article on the behavioural targeting of internet advertising and responding to a cascade of blogs. Highlights being:
I've also updated my own posts on:

I suspect that's enough havoc for one week, but I reckon there's more to come...

Wednesday, 20 May 2009

WE Are The Parliamentary Standards Authority!

How smug and complacent it is for MPs to suggest that a politically manageable Quango act as the arbiter of their "standards". This is simply further evidence that they just don't understand the depths to which they have sunk in our esteem. Expense claims are at the tip of an iceberg.

So let's be clear with them. I suggest a missive be sent to each MP and Peer to the following effect:
We, the citizens of the UK, are your so-called Parliamentary Standards Authority. You work for us. We pay you. It is best that you act in a way that inspires our trust and confidence in you, otherwise you will be thrown out of Parliament. As a guide, we have some standards we want you to abide by. These include, but shall not be limited to the following:

1. You must stop using the title "Right Honourable", because we do not believe that either term applies to you, any more than it does to anyone else.

2. You will abide by the most draconian expense policy that applies to middle managers in a FTSE 100 company from time to time.

3. You will publish your expense claims on your parliamentary web page within 7 days after the end of each calendar month.

4. You must not submit an expense claim that does not comply with the expense policy and is not supported by a valid VAT receipt.

etc - e.g. more transparent declarations of 'outside' interests and income, prohibition on taking cushy consulting roles with industries you are supposed to have been supervising.

We can amend this charter at any time in our sole and absolute discretion. Be good. We are watching you.

And the first job for the so-called "Digital Engagement Team" at the Cabinet Office should be to ensure a public datafeed of MPs' and Peers' expenses so that taxpayers can use the various analytical tools that have already sprung up to determine whether their legislators' interests are aligned with citizens' or with the lining of their own pockets.

PS: Also worth getting involved with the MySociety intiative on this. I wrote to my MP, Andy Slaughter, and he's promised to publish his expenses online. However, we need them all to publish in a format that can be readily analysed.

Private Sheriffs in Cyberspace, Counter-Regulation

Last night I attended the lecture by Professor Jonathan Zittrain on "The Future of the Internet: Private Sheriffs in Cyberspace", organised by the SCL organised in collaboration with the The Oxford Internet Institute. Jonathan is a Professor at Harvard Law School, Co-Founder and Faculty Director of the Berkman Center for Internet & Society, a great intellect and a fabulous speaker.

As the title suggests, Jonathan was highlighting the role of private rule-makers in the development of Internet-based services. Helpfully, he suggested a quadrant on which you can place rule-making for all scenarios. On the vertical plane, one considers whether rules are decided "top-down" by a dictator or small group of individuals, or evolve bottom-up amongst all interested participants. On the horizontal plane, one considers whether the rules are handed down and enforced via a single hierarchy or via a polyarchy of different people or agencies. I've re-drawn it here for the purposes of discussion, and hope Jonathan doesn't mind:

You can plot various examples on the chart, with a totalitarian regime being in the upper left corner, and Wikipedia being in the lower right.

Interestingly, Jonathan suggests that the likes of Google, Apple and Facebook are top-down rule makers, because their site terms and policies are all decided by the company and not the users of their services, albeit those companies tend to be very responsive to bottom-up pressures. He cites the exclusion of certain lawful, though potentially offensive, applications from the iPhone and Facebook platforms as examples of decisions that might not be consistent with previous decisions, nor deemed constitutional in the public environment. He queries whether, in time, these might result in some alternate form of regulation and considers what that might entail.

My sense is that this scenario is not quite so clear cut, since the evolution of services or platforms provided by those companies (read iPhone apps in the case of Apple) seems primarily based on user participation, feedback and complaint, rather than board or departmental decision-making. I'm not even sure that, when push comes to shove, those companies necessarily triumph. There are significant instances where - to their enduring credit - each of those companies backed down and modified services and terms in the face of widespread user vitriol.

However, it is true that in general terms, at least before push comes to shove, such firms are the 'sheriff' of their own platforms. And it is conceivable that there could be a substantial gap in time, and a significant amount of individual consumer detriment - mild or otherwise - before any arbitrary, inconsistent or harmful exercise of corporate discretion is corrected by some kind of mass user "action". But of course this phenomenon occurs even in the context of highly regulated businesses all the time - e.g. retail financial services, as Financial Ombudsman statistics demonstrate. Offline retailers and distributors also decide not to distribute certain products on their own whim, or due to informal pressure from certain interest groups.

So the responsiveness of a service provider to its users, and the legality of its behaviour, does not seem to be a function of how that service provider or its services are regulated. But is users' trust or faith in the provider a function of the type of regulation that applies to the service?

Jonathan looks at various models for keeping the private sheriffs honest, e.g. vicarious liability for harmful material of which the service provider is on notice (see PanGloss), public law constraints on municipal authorities and 'due process' requirements. But, crucially, he points out that when users start to feel powerless they look to top-down bodies for help - i.e. towards the top left of the quadrant - when perhaps the online world is demonstrating there are more trustworthy solutions to the lower left and right. To the lower left, Jonathan cites the adherence to the robots.txt exclusion standard, whereby researchers effectively agree not to interrogate certain parts of web publisher's domains. To the lower right, he cites the broad editorial body of interested participants in Wikipedia. Either solution might be safer than entrusting control to, say, government institutions that think nothing of bending or breaking the law under the guise of detecting crime, or the vague notion of "national security".

And here's the crux of the problem. When does a trusted service provider suddenly cease to be trusted to make and enforce its own rules?

To me, this seems to me to be answered by whether the service provider is perceived to be acting in its own interests or that of its users - or when it loses its "human effect", as I think Jonathan put it in answer to a different question. Here, the Wikipedia example is an interesting one. As Jonathan noted there is a constant preoccupation amongst the Wikipedia editorial community about what Wikipedia is and what it means to be a Wikipedian. This has also been touched on in the context of brands striving to be facilitators rather than institutions. Is this human element necessary for rule-makers and service providers to preserve users' trust in them?

As I've mentioned previously in a wider context, the rise of Web 2.0 facilitators that have enabled us to seize control of many of our own retail, political and other personal experiences has been accompanied by a plunge in our faith in our society's institutions. Are they causally related, or inter-related?

In this context, it is interesting to consider a shining example of a service provider and rule-maker that has utterly lost its way, and our respect: the UK's own House of Commons. Weeks of attention on MPs' excessive expense claims - widely viewed as a proxy for their attitude to the taxpayer generally - has forced the nation's legislators to reconsider how they themselves should be governed. And it's worth noting that much of that attention has been brought to bear via the Internet. Ironically, and in line with Jonathan's observation about where we look to when we feel powerless, the MPs are looking to the upper left quadrant in suggesting yet another Quango as an external regulator of their activities - a so-called "Parliamentary Standards Authority". That such a body needs to exist raises huge questions about the ethics of the body it is supposed to supervise.

But who on earth should comprise the members of such an authority? How could it bring about a positive change in the attitude of MPs to us, their constituents?

Which brings us to the notion that the private sheriffs of cyberspace may have a lot to teach their 'real world' counterparts about what it means to act in the interests of their users in order to retain their trust. This is a notion that I explored in an article for the SCL in May 2006, entitled "Counter-regulation" - a term I used to describe when the law requires offline businesses to implement the benefits of successful online business models. So, to borrow from Jonathan, perhaps MPs should be looking to the lower left and right of the rule-making quadrant for an alternative regulatory solution that could begin to restore a human element and raise the level of our faith in Parliament. And maybe our suspicion of Quangos as merely a means to reward government supporters with a nice cushy job would also be eased if the Quango in question comprised a very large, active group of UK taxpayers.

Tuesday, 19 May 2009

WolframAlpha Brings Semantic Web To Life

I see that WolframAlpha has just launched. It's a "computational knowledge engine" that gives an answer to your query by doing computations from its own internal knowledge base, instead of merely searching the web, returning links and leaving you to figure out an answer. That's not to say it's the right answer, any more than the search results you're used to seeing. But it's very likely to be a much better start, or at least worth doing in parallel to a normal search.

The introduction is certainly impressive already, and it's potential is limitless.

At last we are starting to see the fruits of semantic publishing, but even if it only kills price comparison sites, I'll be ecstatic!

The Bull Market in Australian Cattle Stations

Yep, amidst all the bloodletting and mayhem of the credit crunch, there's a bull market in Australian cattle stations - over 30 have been rounded up in the past 6 months. It seems they've been under-capitalised, relative to their potential capacity and projected global beef requirements, and stand to benefit from the decline in available land elsewhere.

Amongst the buyers are The Macquarie Pastoral Fund, Terra Firma (which just bought out the Packer's rural holdings) and Primary Holdings (management pictured on location), which is in the process of tying up with ex-Murdoch man Ken Cowley's iconic RM Williams vehicle.

It's such a significant opportunity that old mate and CEO, Bob Tucker (pictured, seated left), former COO at Man Global Strategies, recently moved from London to Sydney, after securing seed funding from the RAB Special Situations Fund.

I have a little empathy, as Irish ancestors on my mother's side helped open up the area of the Kimberley region in Western Australia that is now the Ord River irrigation area. The history is covered in Mary Durack's book, "Kings in Grass Castles". I see there's even an upcoming tour of the trek the various families took to get out there in the 1880's.

It's still a hard life out there, by all accounts. Nice to see that the humble whiteboard remains an essential tool.

Monday, 18 May 2009

The (Further) Shaming of Westminster

It's a feeble institution that allows itself to come to this.

Sunday, 17 May 2009

Black Swans and Risk in Retail Financial Services

In a recent speech, the EU Commissioner for Consumer Affairs, Meglena Kuneva, signaled 5 current priorities in relation to retail financial services:
  1. Address the way investment products are designed, described and marketed to consumers; and ensure that new proposals in relation to the sale of credit and mortgages "meet the high standards of modern consumer policy".

  2. Strengthen the strict rules and enforcement on the misselling of retail investment products, in the light of "clear indications that the laws that are meant to protect consumers were insufficient and may have been repeatedly violated."

  3. Complete by the end of the summer an in-depth study of banking fees and charges to consumers which appear to be unfairly hitting consumers.

  4. "Start with regulators a new debate on the correct balance of risk and reward on Main Street. It seems that in recent years, risk has been significantly outsourced to unwary consumers. The question is what amount of risk and toxic products are we willing to tolerate in the retail financial market?"

  5. Start a serious discussion on the regulatory oversight structure that is needed to generate accountability to consumers and to ensure consumer protection principles are consistently implemented across retail markets.
The nub of all these priorities lies in the highlighted question. I'm equally fascinated by it, even though the answer to it must surely be "nobody knows." It's part of the process of democratising the financial markets. However, as a starting point for the discussion, I'd be more comfortable with the statement that risk has simply landed on unwary consumers (and taxpayers, more importantly), rather than that it was somehow "outsourced" to them, implying intent and activity on the part of someone else. Otherwise we risk focusing on who outsourced the risk, and how, which is necessarily facing the past, not the future. Nailing those who broke the law should not be part of this debate. The fact is, the law failed to protect consumers and taxpayers from risk in the financial markets.

To put it another way, it was a mistake for us ever to have believed that we had successfully outsourced our own personal financial risk to banks, employers and governments.

The credit crunch is a Black Swan event - a surprise event that has a major impact and is [being] rationalised by hindsight, as if it had been expected. Inquiry into the why's and how's is therefore largely academic, albeit tantalizingly so. To take a counterfactual approach, one might ask whether it would have occurred if the CDO had been strangled at birth in 1987. The CDS also played a role, so we might consider the implications of it's death on a whiteboard in 1997. And we might ask the same in relation to Gordon Brown's rhetorical adoption of the so-called Golden Rule - that the government would only borrow to invest rather than to fund current spending, and in doing so it was "prudent" to maintain debt levels below 40% of GDP (implying it was also prudent to borrow up to that limit).

But we will never really know the cause of the credit crunch. And nothing we do will necessarily prevent another one.

Yet it seems likely and perfectly natural that we consumers and taxpayers will continue to rein in our expenditure, and take steps that we believe will maximise the sustainability of our income, for as long as it takes for us to feel we are able to survive another major financial disaster. As markets seem to "recover" in parallel, it will become harder and harder not to become lulled into thinking that our self-discipline is working, and that, at some ominous peak, we are finally safe...

So the real challenge is: how can we ensure that we consumers and taxpayers always understand that each of us personally bears the risk of financial disaster?

You are on your own. Pay less. Diversify more. Be contrarian!

Friday, 15 May 2009

MPs: Please Pay More To Vet Our Expense Claims

Surprise, surprise: the MPs' suggestion for keeping their own noses out of the trough is to create another Quango (number 191). They estimate this will cost the taxpayer £600,000 a year to run.

So, in addition to excessive expenses paid to date, we're now asked to pay even more, just to keep MP's honest.

These people aren't really in it for us, are they?

The Commons Fees Office is already "overseen" by a committee made up of MPs (WTF?) which is in turn "overseen" by the National Audit Office. One might flippantly observe that with so much 'oversight' it's easy to see how Swinegate happened. But seriously, where is the explanation by the alleged oversight committee of how it allowed Swinegate to happen on its watch? Where are the NAO's audit reports on the subject? I see that the NAO was called in to look at expenses abuse in 1995 by the Nolan Committee into "standards in public life". But clearly whatever action was taken only encouraged MPs in their audacity. It also seems from the report of its investigation into a blow-out in MP's expenses in 2005-06 that the NAO doesn't audit the exercise of the Commons Fees Office's discretion in approving accounts, merely the tally of those approvals against budget estimates (see House of Commons Members Resource Accounts). Does this mean there is no compliance audit function?

For the answers to these and other questions, one can always file a Freedom of Information Request on

Wednesday, 13 May 2009

EU Public Sector Pays Too Slowly

It's SME Week in the EU, and finance is very much on the agenda, with all sorts of chat about micro-finance and other funding.

But the fundamental problem is that SMEs don't get paid on time.

In fact, given their limited cashflow, even early payment of invoices is actually highly beneficial.

And while we've had plenty of legislation on the subject, and governments have bailed-out the banks, still the European Payment Index survey of over 5,000 European businesses reveals that the public sector takes an average of 37 days longer than the private sector to pay business invoices. So it's high time the Accounts Payable staff in public sector bodies got their act together.

Imagine! A lean public sector that pays on time!

Other, general, findings in the Intrum Justitia report include:
  • only 50% of all invoices are paid within 30 days, down from 53% last year, with 70% of respondents expecting that number to decline in the coming year.

  • 2.4% of all invoices have to be written off as bad debt, an increase of 0.4% or €20 billion on last year.

  • If all invoices were paid on time and in full, the money saved would equate to a liquidity injection of €270 billion into the European economy.
PS: The Irish government has changed its terms to pay on 15 rather than 30 days, though there is some doubt as to whether this will sound in practice.

Sunday, 10 May 2009

Swinegate's Feeble Whistleblower?

For every scandal there seems to be an heroic whistleblower working tirelessly to expose the thing, ignored by all in authority. For the MPs' expenses saga - "Swinegate" seems apt - we can only look to Andrew Walker, who is said to have signed off MP's expense claims in his role at the Commons Fees Office. Apparently, he "told Speaker Michael Martin more than five years ago that he must act to curb excessive claims. But Westminster sources say the Speaker told him not to meddle, and 'punished' him by refusing to speak to him for weeks at a time." Ah, the poor, poor man.

Just as the revelation of Paul Moore's unheeded warnings to the HBOS board were enough to hole Sir James Crosby's career at the FSA below the waterline, so should Andrew Walker's warnings do for the Speaker - not to mention all the little piggies to the left and right who had their snouts in the trough.

But hang on. Five years ago?! You mean Mr Walker has spent 5 more years signing off the sort of expense claims that he once found unacceptable. You mean that, unlike Mr Moore, he did not continue to make himself a thorn in the side of those he was supposed to be reining in? If that's true, then sorry, Mr Walker, you too have to hit the road. No pay-off. No pension.

"Another soure" is quoted as saying:
"A while back it looked as if Andrew might lose his job and you can't blame him for thinking that he might as well keep his head down. Why should he sacrifice his career for the sake of others?"
This feeble rhetorical question sums up what Westminster is all about. To change that, we need an answer, and it has to be: if you stop doing your job properly, you are sacrificing your career.

Monday, 4 May 2009

You're On Your Own: Pay Less, Diversify More, Be Contrarian

Heeding John Kay's timely warning, I've been paying a lot more attention to what's happening to my meager store of pension and ISA money and how much is being left in the hands of so-called "managers" who merely track an Index and their peers.

News on that front is getting worse. According to the FT, fund managers are finding it tougher to gain distribution through European retail banks, who are the dominant sales channel in continental Europe. The banks are cutting the number of fund managers whose products they distribute, and the fund managers are "scrambling" to be included. "Some fund managers are likely to have to pay higher charges to distributors...," the head of UK sales at JPMorgan Asset Management is quoted as saying. And the head of international retail business at BlackRock says, "Investors feel let down by what has happened in the financial sector as the industry has been focusing more on its own needs than those of clients."

In the same article, Lipper estimates that UK retail banks only distribute about 4% of investment products sold in the UK, and IFA-advised sales remain dominant at about 53%. But we all know that IFAs get a decent whack for the service they provide, so we're probably only seeing European banks playing catch up.

This news again signals the need to get more active, and use discount and execution-only providers to invest in cheaper products like Exchange Traded Funds. Doing the opposite of what the mainstream investment advertising suggests is also worth a shot, according to Mr Kay. This is not easy in the context of a full-time job and family commitments. While I've previously used a discount investment broker and began a stakeholder-friendly pension, only recently have I woken up to the "DIY ISA" and a low cost Self-invested personal pension (SIPP) that allows me to get off piste. But that's where I need to go. Next stop: ETF's in out-of-favour, non-correlated sectors.

I feel like this guy:

Friday, 1 May 2009

Phoul-Mouthing the Phoul-Mouthers Who Phoul-Mouth Etc

I'm very much looking forward to a balanced, impartial, rational presentation of my balanced, impartial and rational - and very much personal - views on behavioural targeting or interest-based advertising at the SCL Information Governance Conference on 12 May.

In the meantime, I would only observe that this site is a nice illustration of the implications I discussed a few months back, of trying to build a brand that is perceived as an institution, rather than trying to build one that is perceived as a facilitator.

Pragmatism Meets Oikonomics

One way to put theories to the test is simply to race them. Literally. On a race track. Let 'em fight it out, see which one wins.

So it was decided after only a small quantity of wine that Will and the folks at DB Max should be asked to make some room for Pragmatist and Oikonomics in the DB Max rowing triathlon on May 4 at Mallory Park.

Thus, by lunchtime Monday you should know whether it is better to base your personal theories about Life on trial, error and bitter experience or by extrapolating from careful, patient, highly-trained observation (trade: "deep hanging out").

Right. I'm off to the gym. But will leave you with Gus Mckechnie's extraordinary contribution to the world of sporting endeavour.

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