Banking, Behavioural Economics, Big Data, business intelligence, Business Management, Demagogism, Dogma
Much of my consulting work is done in the Financial Industry.
I was there when the crisis was prepared, when it was baked and when it was brought out of the oven.
There are many theories about what went wrong.
Most of them are misleading, misinformed or simply crap.
Mainly to protect the guilty.
Many theories have sprouted up. Black swans, elephants, dogs, cows, cheese, you name it, they’ve all been instrumentalised by opportunists, populists and hacks, out to make a dime.
Fair enough, we all need to work.
But, it wasn’t just the black swans that people ignored, even though they did.
It wasn’t even the elephant in the room that people ignored, which they did.
What most people in positions of power and influence deliberately, systematically and conscientiously overlooked was the 30 tonne Toro de Lidia (Spanish fighting bull) crapping on the marble floor in the executive boardroom.
Black swans are for pussycats and for people with low attention spans.
If you try hard enough the elephant in the room can look just like Dumbo.
Think “Alice in Wonderland’, and lose all sense of space, time and body.
But try as hard as you might with this little fellah, the Toro de Lidia will still potentially rip the guts out of you and your company and anyone else who happens to be around at the time.
So, whilst people on the periphery were fretting about the occasional black duck and a psychedelic dumbo called Walt, they also failed to recognise the real beast roaming the face of the earth.
Well, with the benefit of hindsight it’s no so difficult, but it was made exceedingly complicated at the time, and wilfully so.
So, what we had was the blissful and wilful ignorance of the contemptuously content.
Rude awakenings were many years in the coming. But their catalyst goes well back.
Many years ago I was working on Alternative Instruments for a prestigious bank in Zurich.
The bank decided to get into structured investments, such as collateralized debt obligation, many of which were tied into high risk elements.
At the time I pointed out what I saw were the inherent risks, given the cyclical nature of the economies we were dealing with.
“Don’t worry” I was told “It’s not going to be a significant part of our business”.
About six months later the bank decides to expand their structured instrument operations and to introduce new and innovative products.
So, I repeat my concerns. The black swan gliding across the artificial lake in the corporate garden had now become the elephant in the elevator.
“Don’t worry. We aren’t going back to boom and bust. We have cracked this thing”.
Later I went to work for a major bank in Dusseldorf.
There it was even worse.
I held meetings with the corporate guys from Wall Street, I explained my views.
“Risk management is completely out of control. We’ve thrown Basel out of the window. This isn’t a black swan threat, or a curious case of trying to nail Jell-O to an elephant. This is really, really massive”.
This time the guys were more considerate.
“We understand your concerns. We appreciate you taking the time to analyse the risks, to present the scenarios and to detail options. And…”
Now it could go anyway.
“You know, George Bush is our best friend. We have the shareholders on our side – they have no other option. We have very, very deep pockets. And… we’re too big to fail”.
I asked “George Bush will save our asses?”
“Pretty much so” came back the reply. “He’s our man”.
Well, the Toro de Lidia got out of its pen.
It ran up Wall Street royally fecking up everything it could get its horns into.
Not content with that, it crossed the pond to Eurolandia.
Where it wrecked even more havoc.
Not that the political and corporate leaders really noticed at the time.
If you thought George was perhaps not the brightest crayon in the box, you should have seen some of ours.
It was a massacre sold as a beauty pageant.
It was full blown crisis sold as a seasonal aberration. Like an August hailstorm in Madrid.
It will pass, they said.
Well it didn’t and its effects are still here.
So, forget that cock and bull about black swans and elephants.
If we are incapable of seeing the 30 ton Spanish fighting bull charging right at us, what chance do we have of spotting Dumbo in a clown’s outfit in the foyer, or of capturing that viral selfie with a backdrop of some exotic poultry gliding up our creek?
In a metaphorical sense, that is.
Yours strategically, Martyn
PS The thing is, in each of the occasions where I raised a red flag, I was able to back up my concerns with hard facts that me and my team had obtained from internal databases (via bespoke special project Data Warehousing, Business Intelligence and very complex and clever Excel spreadsheets, because the internal DW and BI systems were shite) and from external data sources, such as Bloomberg, S&P, Thomson Reuters and Morningstar. So much for the power of information and knowledge.