More Latitude

I was at Latitude, the festival, on the weekend. Had a great time, and settled in on Sunday night to watch Ben Howard and then Paul Weller to finish the show. The main arena filled with thousands of people in their twenties for Ben Howard and then... they turned and left. Just drained away, leaving about a hundred people near the front. While predictable, I guess, it was still an incredibly chilling experience to be left standing there virtually alone ahead of what was supposed to be the headline act. Eventually the rest of the middle aged set moved in and Mr Weller put on a stellar performance. But I haven't been able to shake the feeling of all those twenty somethings not seeing anything in it for them. And it's proving way too tempting to extrapolate from that to the current economic scenario.

Where do we think economic growth is going to come from? Who are we going to be relying on to get the job done in the next decade? Who needs to be inspired to achieve something out of the current mess? Who should have been encouraged to go nuts that night ahead of turning up to work on Monday morning, hungover but happy?

Okay, we're all living and working longer and the old stuff is still good. But let's be aware there are a lot of old snouts still in the trough. Let's give the younger ones a bit more latitude.

EU Pecking Ordure

Image from email circulating this week - happy to provide attribution if anyone knows who created it.

Shock As Faith Dies: Change Curve Activated

The patient failed to respond.

Faith in our institutions finally died this week after a long illness. Doctors amputated a banker, began a saline drip for 28,000 small businesses, corrected errors in several prescriptions and tried another infusion of cheap money. Parliament even held a debate. But the patient failed to respond.

Reactions were mixed. Some were 'sorry, disappointed and angry', others cried. Some remain in denial.

In other words, nothing has actually changed. But it's a start.

Hopefully, we'll soon have a lot of little things going wrong.

Image from VirtuallyShocking.

What Bank Customers Want And Why They Don't Get It

There's a lot of talk about 'restoring responsibility to banking', and 'returning banking to its sober Quaker roots', 'removing the casino culture', 'getting banks lending again' and so on.

But all these soundbites are focused on the activity of banking.

Nobody, except banks, engages in "banking". We may use a bank's service, but only in the context of a much wider activity, such as buying a house or a birthday present on the way to a party, or getting clothing made in China to sell over here. "Banking" is only what banks think customers are doing, because banks only view the world through the lens of their own products and not customers' activities. Which is why bank products are inherently designed to make money for banks and not to benefit customers (and why they fiddled 'Liebor').

All bank customers want is what the customers of any supplier wants - solutions to their own day-to-day problems rather than those of the supplier.

But if you believe banks are capable of aligning with their customers' activities any time soon - you're flogging a dead horse.

Back in 2009 and again in 2010, there was a lot of discussion about whether the role of social media would ever play a role in consumer finance. Typically, the banks claimed that using Twitter to communicate with customers was a publicity stunt - making the almighty assumption that Twitter is somehow divisible from the vast entanglement of services that make up the social media. They said online peer-to-peer finance platforms wouldn't scale. In 2011 that sort of discussion wasn't repeated. Why? Because even banks realised it was rubbish - just as it proved to be in the markets for retail services, music, entertainment, travel, politics, newspapers, television and so on, where online 'facilitators' have hacked great chunks out of the market shares of once dominant, sleepy, 'traditional' institutions that were not aligned with their customers' day-to-day activities.

But the banks have not been 'Googled'... yet. 

Why not? Comparisons between the rise of facilitators in other retail markets are not apt because there was no regulatory regime that protected high street stores from online competition. There were no tax incentives to persuade consumers it's safer to buy their music on CDs rather than download it. No compensation scheme for advertisers who don't get the return they want on their advertising spend in the newspaper or on TV, leaving online advertisers to fend for themselves. No taxpayer guarantee that allows high street electronics retailers to spend whatever it takes to maintain market share against online marketplaces.

Banks, on the other hand, rejoice in all that protection against innovation and competition.

In these circumstances, it is unrealistic to assume that new business models will thrive without some alteration to the regulatory framework.

Fortunately, change seems to be on its way.

Ignore LIEBOR Tricks And Cheap Politics

Ignore confidence tricks.

As the LIEBOR scandal claims a few scalps, let's not be distracted. As Bobby "Dazzler" Diamond himself has said, the time for remorse is over, and similar characters will no doubt take their place. 

Let's not be distracted by faux outrage from the House of Commons, which has been so meek in its challenge to the banks' self-serving culture that it suddenly chose to deplore last Thursday. After all, allegations of LIEBOR fixing go back many years and all the major UK political parties have declined to regulate it ever since. As the passage of the Financial Services Bill has demonstrated, the Commons will need to be dragged kicking and screaming to pass anything approaching adequate financial regulation.

And let's not be distracted by the crocodile tears and the speculative law suits from major corporations who claim to have unwittingly based their financial transactions on LIEBOR without understanding that it was open to manipulation. They're big enough to look after themselves - and usually do. Remember that they've failed to act on excessive equity underwriting fees charged by investment banks because they can always pass these fees on to retail investors and consumers, and the Office of Fair Trading seemed to have no problem with this. 

So while we should enjoy the revelations of age old scandals, the ritual sacrifice of Chairmen and Chief Executives and the occasional corporate bloodbath, let's not be distracted by them. Because they are not the driver of appropriate reform in a society that regards the accumulation of wealth of such high importance.

Let's focus instead on continuing to reward facilitators - those organisations that exist to solve their customers' problems, rather than to solve their own problems at their customers' expense. It is this trend in our day-to-day behaviour, more than any other, that will reform our society - and maybe even the behaviour of bank executives.

Image from Sulekha.