RBS Bonuses, Bullying & (more) BS


BBC News – Royal Bank of Scotland announces £3.6bn of losses

In the style of “Points of View”: Why oh why oh why are we subjected to numerous column inches, hours of discussion, Select committee interviews, general politicking and bullsh*t on what are patently SYMPTOMS!?

It is all just further evidence that it is the CULTURE that needs to change before anything else of any real significance or permanence will occur.

Merciless leader Top performer

As far as RBS is concerned, it is pretty common knowledge that their “disgraced”, but unpunished and not impecunious, former leader has a track record akin to  Genghis Khan at the peak of his powers. Ok, so in keeping with modern etiquette his enemies were only put to the literal (financial) sword…whilst he is STILL a Knight of the Realm. Many of them, deemed to be ”traitors” from within his own ranks, suffered…along with their, equally innocent, families…as a direct result of their familiarity with old fashioned values – like Governance, Risk & Compliance

A great quote sprang to mind:

“IF YOU CAN’T CHANGE THE PEOPLE…CHANGE THE PEOPLE”

So Stephen Hester tells us that “…… some of our best-performing people have been leaving in their thousands”. As a taxpayer and, therefore, shareholder – for what that is worth – I am delighted to hear these greed merchants and acolytes of a disgraced and discredited regime are taking their “skills” elsewhere. PERHAPS THEN THE EMPHASIS MAY SWITCH TO DELIVERING THE TYPE OF PRODUCTS, SERVICES AND INVESTMENT STRATEGY THAT COMMENCE THE PROCESS OF REBUILDING TRUST.

START TREATING THE PEOPLE THAT YOU DO BUSINESS WITH AS STAKEHOLDERS (not idiots) AND DEMONSTRATE THAT YOU ARE SERIOUS ABOUT “CHANGE”. OTHERWISE TAKE THE KID GLOVES AND SHEEPS CLOTHING BACK TO THE FANCY DRESS SHOP. WE AIN’T BUYING IT!

The case for “Complexity Analysis”: Blind faith, Greek philosophy and risk


Unless you have been living in a cave you WILL be aware that the global financial sector has FAILED. It is “shot”! The models upon which the largest institutions and corporations quantified risk are discredited as are the rating agencies who wield such power over entire nations.

No-one could have seen it coming. Right?

WRONG. ABOUT AS WRONG AS YOU COULD BE!!! The warnings were out there. Not from fortune-tellers, soothsayers, prophets of doom and mad men. They, like those that relied upon their own intuition, would probably been marginalised or dismissed. But when warnings came from economists and academics you would have thought that the stakes were sufficiently high, to, at least, listen to what they had to say. NOPE. The most popular course was to ridicule what has since been shown to be the “inconvenient truth”. Read more of this post

Ten Principles for a “Black Swan” Robust World


Assuming that you have more than a passing interest in how and why our economy got to where it is and you don’t get your financial commentary, from the “red tops” you may have heard of Nassim Nicholas Taleb author of “The Black Swan”. He is, amongst other things, brilliant (if controversial) Distinguished Professor of Risk Engineering, NYU .

Like or loathe his views he is not afraid to challenge the, apparent, institutional blind faith in “conventional wisdom” and put his money where his mouth is…to very good effect!

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1. What is fragile should break early while it is still small. Nothing should ever become too big to fail.

2. No socialisation of losses and privatisation of gains.

3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus.

4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks.

5. Counter-balance complexity with simplicity.

6. Do not give children sticks of dynamite, even if they come with a warning.

7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”.

8. Do not give an addict more drugs if he has withdrawal pains.

9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement.

10. Make an omelette with the broken eggs.

So why do I feel the need to laud someone that I have never met…but would very much like to, whose most famous literary work I have yet to read(!) – although I have read several of his papers – and who operates on an entirely different intellectual {and financial} plain to myself?

Well, because what he says makes so much sense! He is unimpressed by [nae dismissive of] the closed-shop greed mentality that pervades the global financial sector.

I have read much of his work and have been struck by the frequency with which he uses terms, with which I have become increasingly familiar during my (unintended) extended sabbatical.

In a forthcoming blog I will explain why these terms have become SO important to me and the new venture I will shortly launch. But this isn’t just about me, my new business, or, indeed, NN Taleb. As you look at these words and, hopefully, explore some of Prof Taleb’s writings please consider some of the books, articles and news items you will have, inevitably, seen on the subject of banking crisis – risk management failure(s) – credit crunch – recession, etc.

I’m sure you get the picture!

MODEL – RISK – ROBUST – COMPLEXITY – SYSTEMIC – TRANSPARENCY – RATING – SUSTAINABILITY – PROFITABILITY – INTERDEPENDENCE – GOVERNANCE – CREDIT – PROBABILITY – RANDOM(NESS) – ENTROPY – POWER LAW – ADAPTABILITY – OPACITY – FRAGILITY – REGULATION – CRITICALITY – FINANCE – BANKING – INSURANCE – PROTECTION – QUANTITIVE – PRICE – RETURN – INCENTIVE – RESILIENCE I’m sure there are some really obvious omissions but I am trying to wean myself off the compulsion to try to make “perfect” and complete every blog, piece of research, letter, presentation…shit I’m doing it again!

Warning of the global banking crisis

In 2007, in The Black Swan

“Globalization creates interlocking fragility, while reducing volatility and giving the appearance of stability. In other words it creates devastating Black Swans. We have never lived before under the threat of a global collapse. Financial Institutions have been merging into a smaller number of very large banks. Almost all banks are interrelated. So the financial ecology is swelling into gigantic, incestuous, bureaucratic banks – when one fails, they all fall. The increased concentration among banks seems to have the effect of making financial crisis less likely, but when they happen they are more global in scale and hit us very hard. We have moved from a diversified ecology of small banks, with varied lending policies, to a more homogeneous framework of firms that all resemble one another. True, we now have fewer failures, but when they occur ….I shiver at the thought…”

PLEASE DON’T GET TOO HUNG UP ON DAVID CAMERON’S “INSIGHT”!!!