Accept That We're Ruined, Plan How To Rebuild...

Following this morning's Spectator Business function - and the subsequent damp-squib budget announcement - you could not help but conclude that the UK's public finances are in ruins, yet politicians on all sides want us to wait until after the General Election before they begin to take any action (the Lib Dems would wait til 2011). They're in denial, and anxious that the electorate remains in denial too.

But there is no point waiting for the politicians. We're missing a golden opportunity. The election should not be about expressing anger and blame for New Labour's systematic destruction of the public finances. Instead, the election should be a choice between competing visions for how to rebuild the economy. All sides must be forced into saying how they would do it.

To make the most of this opportunity, we must first resign ourselves to the parlous state of our finances and accept the world has changed.

So let's accept that Britain isn't simply 'facing economic disaster'. It is one. Britain is not 'in decline'. It has fallen. There is nothing more we can do to 'save the country's finances', because there are none to save. Politicians can't make 'savings' here that may be 'spent' there. As Liam Halligan pointed out, the only choice is between more appalling over-expenditure, or less of it.

Let's also accept this wasn't an accident that might somehow rectify itself. Patience Wheatcroft (now at the Wall Street Journal), rightly points out that David Cameron has been too nice in merely saying Gordon Brown has merely failed to repair the roof. He should've been constantly and furiously berating Gordon for "removing the roof tile-by-tile": grabbing pension money, auctioning mobile spectrum for insane prices that damaged telco balance sheets, concealing public infrastructure costs in government-guaranteed PFI programmes, growing the public workforce by 20%, and deliberately borrowing more and more so that, in the bitter end, the Bank of England was forced to print £200bn.

But Cameron blew his chance. The time for anger and blame is over. We have to resign ourselves to the fact that we are stuck - our kids are stuck - with a £170bn public deficit, £80bn of which is a seemingly immovable millstone...

In planning how to proceed, we should not be distracted by hand-wringing about "cuts" and "higher taxes", and the timing of those. They must happen. But there are other critical issues that remain unaddressed. For instance, where is the incentive for investment in new export markets to redress the ever-widening trade deficit and the fact our biggest export market (the Eurozone) is in a similar, and worsening economic state? The UK must have some strengths and opportunities, and we need the political leadership focusing on those rather than playing for time.

Rant ends, for now ;-)

Role of Social Media in Consumer Finance

Recent discussions about whether new entrants are pushing banks to the back office of the consumer finance space have prompted me to update several previous posts on the role of social media and brands vs facilitators.

Of course, "social media" refers to the co-operative mix of internet and mobile  network services that are themselves increasingly networked. Look at all the platforms or applications that enable people to send and receive Twitter "updates" for example. This enables sharing of content amongst users at a time and location that suits them and whatever activity they're engaged in at the time. Unlike the off-line media, we can  even have all our social media available on one screen. So any single social medium is merely a hint of something very much larger:

Anyone who believes we can predict the social network service that people will choose to manage their finances will be disappointed. Human physiology may be reasonably predictable, but human behaviour is not. There is no "mass" of consumers, no bell-curve to accurately describe their behaviour to enable us to predict with any precision how each person is likely to behave next. Even Twitter could disappear in a sudden puff of user indifference, like others before it. Black Swans are lurking - surprise events that have a huge impact and which we rationalise by hindsight.

Yet it's tempting to try to explain the social media as a reflection of numerous trends that signify a desire to assert control over our own personal lives and experiences. Perhaps this at least explains the birth of social media, if not the basis on which it will be sustained.

At any rate, the commercial challenge the social media currently presents for any business is how to facilitate the individual's desire for control, rather than be shunned for failing to do so or even for trying to resist or subvert that desire. This means presenting services that are designed bottom-up and which are highly flexible and adaptable, rather than inflexibly geared to suit the product provider's top-down view of the world.

To distinguish the two approaches, one might call providers of bottom-up, adaptable services 'facilitators', and the providers of top-down, inflexible products 'institutions'.  Another way of summarising the difference between them is that facilitators primarily exist to solve their customers' or users' problems, while institutions are primarily driven by the need to solve their own problems (like 'delivering value to shareholders').

The requisite flexibility and adaptability is delivered by the "architecture of participation" of the kind created by various Web 2.0 facilitators and their users that has enabled us to break down and personalise the one-size-fits-all experience traditionally offered by music labels, book publishers, retailers, package holiday operators, banks and political parties. Such facilitators make the difference between us 'raging against the machine' on customer 'help' lines in a lone, fragmented way and achieving real change by acting as individuals, yet in a concerted fashion.

In the social media environment, the consequences of institutions putting their own needs ahead of their customers can't be overstated. The institution risks tapping into the dark side of the trends mentioned above, and being exposed in a borderless environment of interested, active people. In public policy terms that means being exposed to the sense of frustration and disillusionment responsible for both the plunge in faith in society's institutions and declining articipation in formal politics over the past 30 years, and the corresponding increase in political awareness, informal political action and consumer activism over the past decade. In terms of change theory, people have recovered from their shock at the parlous state of  'the system' and are doing something about it. Similarly, that sense of frustration and disillusionment marks the turning point between vicious and virtuous circles of consumer sentiment and related publicity. This was a key difference between President Obama and the other guy.

This is nicely illustrated by the "Influence Ripples" graphic from David Armano's "Logic and Emotion" blog.

What struck me about this graphic was not so much the ripple effect of conversations about a product, but the 'aerial' view of the customer community (specifically in the case of Twitter, blogs and other "Level 2 Ripples"). This would seem to be a great tool to communicate about, and focus resources on, the architecture of participation users are relying on to personalise their use of a provider's products - a 'virtuous circle' - or bitch about them - the 'vicious circle' of adverse comment.
There are several instances of this dynamic at work, driven by privacy concerns (Phorm, the Data Retention Regulations) content ownership (see the ripples emanating from Facebook's revision to its privacy and content ownership terms) and straight "us vs them" (e.g. Ryanair's collisions over its 'idiot blogger' remark, which viciously spiralled on reports they were going to charge £1 for answering nature's call).

The dynamic relationship between facilitator/institution and its customers is extremely complex, largely because it is driven by the activity in which each customer is engaged at the time of interaction, as well as the stage at which each individual customer has reached in his or her relationship with the facilitator/institution or its product(s). The  following (rather crude) slide is my attempt to illustrate this complex dynamic in the consumer finance context (click to enlarge):

Finally, this dynamic is perhaps even more critical for B2B product providers to understand. Not only may their immediate business customers have their own social media presence (even if only to relate to retail customers), but the B2B service provider's own product is also part of the end user's experience. If the B2B provider's element of the consumer service or experience is unsatisfactory, sooner or later that fact will show up in the 'ripple analytics', and the B2B provider will come under intense public (and published) pressure to resolve the issue. This is happening increasingly in the area of public sector projects, for example, as taxpayers become alarmed at the terrible state of the public finances.

In this environment it's pretty much terminal for a business to ignore the social media or the supporting facilitators, and not to see itself as part of the social media mix. In fact, since we have the Webby Awards honouring business excellence on the internet, why don't we offer Webley Awards for businesses that don't get it (as in the old imperialist who retires to the library with his service revolver and a bottle of port)?

Gordon: Retail Bankers' Hero To The End

Funny that Gordon Brown has chosen the last possible minute before his last ditch General Election to announce that UK banks will finally allow credit cardholders to repay their highest rate charges first - especially when President Obama let this cat out of the bag in May 2009.

When finally implemented, this long overdue requirement will apparently save UK cardholders up to £500 million a year. So it's far less amusing that Gordon Brown appears to have been rather passive on the issue of excessive bank overdraft charges, worth £2.6bn a year. The 20% of overdraft customers with a claim have had to wait years while the Office of Fair Trading has fumbled around in the courts at taxpayers' expense before meekly announcing a 'wait and see' approach to the problem earlier today. No last minute offer of regulation from Gordon there.

Of course, the end of 'negative payment hierarchy' on credit cards is an affordable goodwill gesture for banks. They aren't really in the business of lending money anyway, as the Bank of England found in its February Trends in Lending Report. They're in the business of hoarding it to 'repair their balance sheets' (which largely seems to involve paying bonuses and lobbying for regulatory restraint). By the same token, however, now is not a good time to lose billions in overdraft fee income, regardless of the fact that cash-strapped customers need it more, or that it's a rounding error on the bailout costs to date.

In other words, Gordon Brown is not really committed to ensuring fairness, even when there's a General Election on the line.

Supermeercats

These guys have a real job to do in Barcelona

Golf: Problem's In The Mind

An alligator bit a golfer's arm off in South Carolina last year. Commenting on an earlier attack, in Florida, a spokesman for the state Fish and Wildlife Conservation Commission said:

"12 to 18 physical encounters between humans and alligators typically take place during the summer months in Florida... People throw alligators chicken, hot dogs and other types of food...It conditions the animal to associate people with food, and that's when there is potential for something terrible to happen."

While they claim golf courses are dangerous, some reckon it's a conspiracy to make a buck out of re-selling balls that golfers are too frightened to look for. But family snaps like the one above show not everyone is cowed into submission. I once played in a corporate event at Industry Hills Golf Club, near LA, where the fairways are narrow and signs warn of rattlesnakes in the rough. Everyone else who hit out of bounds saw the signs, nervously took a drop and moved on. What a waste! I must've found twenty balls and didn't get bitten once, though I still flinch when my golf bag rattles.

Ah, but if only golf was a straight shoot-out between species, instead of our own synapses.

As Carl Hiaasen testified in Fairway to Hell, there are no words of advice, props or gimmicks that can prevent golf from driving you to distraction. The problem is internal. I reckon it can be summed up in the idea that Hope is the mother of Frustration and my own experience suggests Carl's problem may be that his home course, Quail Valley (slope rating 133 out of a possible 155) is too easy to dash all Hope.

Now take this "intoxicating" view of the 8th hole at my own club, Meland, near Bergen in Norway - rated 6th in the top 100 golf clubs of the world with a slope rating of 151.

According to Fairwaygolf, "The playing area is fairly generous but nearly every hole runs through a corridor of trees and creates problems in the mind." The "problem in the mind" at the 8th, however, is created by water in the foreground, water in the background, and the nagging certainty that there's an invisible lake in the middle ground - right where your eye would have you believe the fairway stretches unbroken to the green in the distance. Those are woods to the right and left, by the way. 

Confronted by such a vista, Hope departs, taking Frustration and all her other children with her.

But I'm no expert. Apart from a lack of timing, my handicap is 25, care of the generous staff at Stockley Park, near London. It took 20 years to summon the courage to present myself to golf club officials, and it wasn't just the knee-length socks that put me off.

I'd made various attempts to develop an acceptable swing in Australia, mostly by way of an 'escape' after slogging up and down the Parramatta River in a racing shell. It was hardly an ideal grounding, and I developed a hook so vicious that on the third hole at Warren golf course, in far western New South Wales, I hit a kangaroo with my tee shot, twice. I can see the poor animal as clearly in my mind's eye today as the moment I addressed the ball. It's resting quietly under a gum tree, about fifty yards away to the left, at a 45 degrees angle to the tee. My first drive strikes the kangaroo on the snout, whereupon it stands up, shakes its head angrily and stares hard at me. Hastily, I re-address the ball and, as so often happens in golf, I repeat the shot. This time the ball strikes the kangaroo squarely in the chest. It snorts angrily and rears up, taking guard like a boxer. We make our apologies and head for the next hole.

But my crowning moment Down Under was at the up-market Fairmont Resort in Leura ("Loo-ra") in the Blue Mountains, near Sydney. The course was busy, with 3 foursomes waiting on the tee. I was next up. The right side of the fairway opened out nicely, inviting the slice. Never mind, I thought, my problem's the hook. But a low fence ran down the left of the fairway, marking out of bounds. Beyond the fence, immediately behind me, was the hotel entrance. Forward of that was a car park, full of luxury cars. Nerves jangled. Adrenalin flowed. I swung hard, and brought the heel of my driver down on the ball like a lumberjack. Had the ball hit my shin, it would still be in my leg today. Instead, it cannoned into the front of the hotel, striking five feet above an open doorway. From there it ricocheted into the carpark, impacting in front of a Bentley, then took a giant hop, landing neatly in the middle of the fairway. There was an awful silence, until a lone voice from the gallery said, "That'll do it."

Naturally, when I moved to the northern hemisphere, my vicious hook reversed to become a fabulous 'push slice'. The ball starts out straight enough, but suddenly veers right, drifting further and further the longer it remains in the air - historically, with me berating it to stop instantly. The nadir of such impotent anger came when I was teeing off in Spain about five years ago. I push-sliced mightily from a high plateau waaaay out onto an adjacent fairway that sloped steeply back downhill to a green about a hundred yards behind us. Sensing the worst, I began cursing as the ball first veered to the right, the volume and intensity of the invective increasing to fever pitch by the zenith of the shot, punctuating with a burst of outrage as the ball landed, then spiking into apoplexy as the little cretin took off downhill. By the time the ball had rolled a good fifty yards past where I was still figuratively leaping up and down I'd exhausted the world's supply of expletives. Only at that moment did a wintry voice announce "Ladies present."

Putting all that behind me has not been easy. But, incredibly, my summer battles at Meland have been enormously helpful - chiefly because of the Hopelessness I've enjoyed on every round I've played there. The course is so hilariously difficult that even the best golfers may end the round exasperated. So I have absolutely no expectation of being able to avoid disaster. Having accepted that Meland will always be the winner, I'm (relatively) happy ;-)