Our Defences Against Disaster Weaken Over Time

Maintaining the Thames Barrier?

There's an interesting post at Zero Hedge speculating on the core theme behind the meltdowns in the debt markets, Gulf of Mexico and Fukushima:

"The bottom line is that if we continue to let the top 1% - who are never satisfied, but always want more, more, more - run the show without challenge from the other 99% of people in the world, we will have more Fukushimas, more Gulf oil spills and more financial meltdowns."

Yet danger lurks in positioning the lack of critical thought as the fault of the "top 1%", since that presumes the rest of us are even thinking at all, let alone critically or correctly.

It's not only 1% of us who fail on the critical thinking front. And not all people at the top of large organisations fail to think critically or act responsibly. There are plenty of yes-men and flunkies ready to act without question, while others genuinely and honestly believe it's their job to simply do what they're told.

However, given the devastating impact of recent disasters and the broad range of scenarios, the fact remains that our large-scale organised defences to key threats do seem to weaken steadily over time, regardless of the adequacy of the initial defensive position. We can also see that process at work in, say, the construction of the RMS Titanic, or the state of the New Orleans flood defences or the failed attempts to implement tsunami alert systems ahead of the Boxing Day Tsunami of 2004.

It's easy to blame cost-cutting itself, and management greed or short term shareholder expectations as its source. Or perhaps even a general human tendency towards complacency. It's easy because such 'causes' let 99% of us off the hook.

But surely that's the root cause of the problem. We all know that our society's defences to major threats weaken over time, but we lay the blame elsewhere instead of each bearing some responsibility to constantly question the readiness of those defences - whether as staff, parents, investors, taxpayers or voters. We are not powerless victims. The rise of the Internet, the empowerment of individuals and all the ensuing bottom-up changes those trends have wrought demonstrate that.

Image from Carbon Based.

The Bribery? What Bribery? Act 2010

It's okay folks. The Bribery Nothing-wrong-with-the-odd-backhander Act 2010 will limp into effect on 1 July, rather than convert Twickenham rugby stadium into, say, a new experiment in social housing, as feared.

The Ministry of Justice has even produced a helpful guide to Bribery, featuring lots of placatory language and easy talk of "prosecutorial discretion".

They may as well have stood in Parliament Square with a bullhorn shouting: "Get out there and sell UK plc, damn it. We need the spondoolies."

Image from Ministry of Justice web site - no joke.

This post is written for information purposes only, and is not intended to be relied upon for any purpose whatsoever, including but not limited to participation in government or corporate procurement exercises anywhere in the universe, either as we currently understand it or as it might turn out to look like following more intensive research involving the Large Hadron Collider and an errant strip of aluminium foil that a cleaner inadvertently left in the chamber after a late night game of cards [er, that's enough disclaimer. Ed].

Ode To London Tree Pollen

Now Spring has sprung,

I am undone

By dim-witted English trees -

They blossom now,

Only t' forget how

To hold-on to their blasted leaves.

Where I come from,

(I am no Pom)

The trees are not so dim -

Being Evergreens,

They keep their leaves

And rein their pollen in.

But be patient please,

While I sneeze and sneeze,

Brief Summer will soon wane -

Then these bloody trees

Will forget their leaves,

And the process will begin again.

Analyse This

Auditors, and others interested in the nature of scepticism (feel the irony) will have been interested in recent FT coverage of stock market analysts' reluctance to write "sell" notes on the companies they cover.

In theory, the distribution of sell, hold and buy ratings should be equal. Yet Bloomberg found that 60% of analysts' ratings are "buy", and "buy"/"hold" ratings together outnumber "sell" notes by 9 to 1.

One chief of US equity strategy was brave enough to be quoted as saying, "There is clearly a lack of willingness of management to deal with analysts who are highly critical."

McKinsey research, discussed here, has also found that analysts are "typically overoptimistic, slow to revise their forecasts to reflect new economic conditions, and prone to making increasingly inaccurate forecasts when economic growth declined."

It seems likely to be self-defeating to obviously exclude or limit critical analysts' participation in briefings - possibly a sell signal in itself. Or at least a signal that everyone should start asking a lot more questions. But ultimately the research highlights the fact that, for all the law on disclosure and directors duties, the stock market is just that - a sales forum.

Let the buyer beware.

Defrauding The Dodgy Dictators

Interesting post from Robert Peston, yesterday, concerning financial sunlight and despotic dollars (hat tip to nobby-Lobby). He concludes:

"You can even make the case that to guard against the propensity of any British government to waste taxpayers' money or reward friends, you would probably want every page of every outsourcing or PFI contract published on the internet.

Here's the thing. There is almost always a public interest in publishing commercial agreements with governments wherever they sit on the spectrum from parliamentary elective democracy to corrupt military junta. But against that public interest comes the national economic interest, which - whether we like it or not - is occasionally served by allowing businesses to operate under a dank fog of partial disclosure."

This is of course topical, not only because 'democracy' kicking off in the Middle East has resulted in an embarrassing mini Ice Age for assets allegedly under despotic control, but also because the implementation of our very own Bribery Act has stalled.

It's a fine mess.

But is it any surprise?

The current financial crisis and its causes tell us that the official Western attitude to financial misdeeds is fiendishly inconsistent at best. Witness the irony, for example, of Hank Paulson, as US Treasury Secretary, ramming entire financial institutions together over a weekend, but warning Congress it would take months to renegotiate bank CEOs' compensation agreements. Or the timid enforcement record when it comes to the pillars of the finance world, while the theft of some source code from Goldman Sachs gets you 8 years. No wonder Bernie's bitter. It's like he got everyone else's jail time, as well as his own. But maybe that was the idea. Hang one guy out to dry and hope that's enough for the baying mob.

It makes you wonder whether all the hand-wringing over bribery and corruption was just a Western conspiracy to fool Gaddafi and his ilk into trusting us with his loot.

Ah, £€$k 'em. They knew the risks.