After Scotland …Federal Europe?

So…Scotland remains in the UK but just under half the population want to leave.  This could be seen as the worst result. Like telling your spouse you hate them, but will stay together for the sake of the kids. That is not a basis for a very happy relationship. The worst thing about the last two weeks has been the uncertainty about the future, and that uncertainty is still there overshadowing any decisions businesses make in the future. The upside, from Scotland’s point of view, is that there will be a massive devolution of powers in their favour. All other separatist movements around Europe take note: the louder the wheel squeaks, the more grease it gets.

The independence debate has been cast a battle between emotion and reason: heart vs. head. The ‘yes’ campaign has made emotional appeals about Scottish tribalism while the ‘no’ campaign has marshalled economic arguments about currencies, bank debt and trade and political arguments about constitutions and EU membership. The two sides could be crudely categorised as an enfranchised local community swayed by populism and a distant metropolitan elite who believe that “nanny knows best”.

The situation has some parallels to what has been happening in Thailand in the battle between the red shirts and the yellow shirts. The red shirts are the numerically superior rural poor whose votes are strongly influenced by populist measures and pork barrel politics. The yellow shirts represent the well-educated urban elite who believe they know what is best for the country. They call themselves Democrats, but still struggle to accept the verdict of the majority because they believe it has been tainted by vote buying and corruption. Street protests by the two sides and government gridlock led to a military coup in May this year.

In 5th century Athens, the birthplace of democracy, there was no such conflict because there was no universal suffrage; only ten percent of the populace had the vote. Your views only counted if you were a land-owning male citizen over the age of 35. Slaves, foreigners, women and youths were all excluded. In fact, if you look for the modern state that most closely matches this ideal of Athenian Democracy today, the surprising answer is China. Some ten percent of the population are members of the Communist Party who conduct a vigorous internal debate before deciding on the future path for the country. What is more, when it comes to economic growth, the system seems to work.

Be that as may be, it is a mistake to view the aspirations of the Scottish nationalists as irrational emotionalism. In fact, there is a quite rational argument for Scottish independence and for all the other separatist movements throughout Europe, which can be summed up as ‘eliminate the middleman’, the middleman in this case being the traditional Nation State.

The essence of the conflict is right there in the name, conjoining the two different concepts into a single descriptive term. The word ‘nation’, from the Latin natio (to be born), implies an interrelated community; a tribe of interwoven families. The word ‘state’ derives from the word estate implying ownership, controlled assets, and power. The nation state faces the threat of being pulled apart into its catataxic components. There is a pull downwards into smaller regional units that better reflect communal identities. This gives a stronger voice to local cultures who feel disengaged from national level politics as evidenced by falling voter turnout across Europe. There is also a pull upwards towards a supranational entity, namely, the EU. Many of the world’s current problems are global in nature and cannot be solved on a national basis. Consider the following list: global warming, corporate tax dodging, banking regulation, global free trade agreements, the Ebola plague outbreak and the threat from Islamic terrorists such as ISIS. All these issues are best solved at a supranational level. A strong argument can be made that defence and security issues sit better at an EU level than a national one. The current crisis in the Ukraine is best countered by a robust response from the whole of the EU (or NATO) rather than by individual countries.

In this three level structure, the bottom level gives a greater degree of democratic representation while the top level gives better economies of scale and ‘safely in numbers’. What need therefore for the middle layer – the nation state – which fulfils neither function very effectively?

This vision of the nations of Europe being dismembered into smaller regional entities under the overarching umbrella of the EU has been regarded with horror by the UK with its tradition of strong control from Westminster. Since it is similar to the current German model of federated states or lander, it is often summed up by the phrase “Federal Europe“ .

What would such a Federal Europe look like? It may come as some surprise to find out that it already exists, at least in the minds of the bureaucrats in the EU’s office of statistics. If you go online to examine the Eurostat database you will find the EU has been gathering economic data on a federal basis since the year 2000. The UK has been divided into 12 federal regions (three of which are Scotland, Wales and Northern Ireland) under an EU devised scheme known as “Nomenclature d’Unités Territoriales Statistiques” which is normally shortened to the acronym NUTS (yes, really!).

Take a look at the map below. It shows the federal regions of Europe (NUTS 1) scaled by GDP. In other words, the size of each region corresponds to the size of its economy while the colour shows the average annual growth rate from 2000 to 2011. There are some interesting points to note:

1. The UK’s growth rate looks poor relative to the rest of Europe. These figures are denominated in Euros and Sterling’s 20% devaluation in 2008 made a big negative impact.
2. Things which are small tend to be green. In other words, smaller regions tend to grow faster. This may be because a common market tends to drag up laggards and is further exaggerated by the fact that EU development funds tend to be channelled to impoverished regions.
3. It’s not just Scotland. There are a lot of other regions that would like to be independent in Europe. All regions with an established separatist movement have been outlined with a purple border.
4. Many of these proposed breakaway states are larger economic units than existing EU countries (eg Latvia, Slovakia, Luxembourg with bold black borders) which offers some support for their viability.
5. The names of the regions have in some cases been changed from a dry bureaucratic definition to something more culturally resonant. For example, South West England becomes Wessex, Romania Region 1 becomes Transylvania and North Region Poland becomes Pomerania.

Map of Federal Europe

It is easy to dismiss such a map as a bureaucratic fantasy dreamt up by statisticians who wish the untidiness of the real world could be neatly filed in appropriate pigeon holes. The dividing lines are arbitrary and in many cases merely drawn to create administrative units of similar size. The resistance to any such devolution from existing nation states would be so great as to be almost insurmountable. Many powerful entities invested in the current status quo would have much to lose. But at the same time, countries who decry the encroachment of the ‘unelected’ EU as an offense against democracy may find the same argument turned against them. After Scotland’s surprising vote, how many other European countries will allow an independence referendum? And if they do not, will their democratic credentials be tarnished?

There is another way of viewing the data that avoids the artificial segmentation of bureaucratic regions. This is to go one level deeper and look at cities rather than regions. Cities, particularly in a service economy, are the true engines of economic growth. A few decades ago, it was the common view that manufacturing industries caused clustering because of the requirement to have parts suppliers in close proximity. In contrast, it was thought that service industries, freed from the drudgery of the daily commute by teleconferencing, the internet and mobile communications, would spurn the cities in favour of a better quality of life in the countryside. In fact, the opposite has happened. The service sector, particularly in high tech, clusters together in cities to a greater extent than manufacturing does. This is mainly due to a happy blend of convenience and hedonism. For the service sector, the people are the product so meetings with clients and suppliers are even more important. In cities, meetings are easier to organise (convenience), there are great restaurants (hedonism), and internet connections are much faster (both!).

If you look at the second map, you will see a map of Europe by city, this time based on population. The size of each circle is proportional to the number of people living in the greater urban zone (both the city and its suburbs). Any urban centres with less than a million people have been omitted. In this view, London and Paris are in a dominant position while Brussels and Amsterdam are showing the fastest growth. Turkey is not currently part of the EU, although if it is admitted at some time in the future it would make a major impact.

CityState

These two maps, then, show two possible futures for Europe. One where increasing devolution favours smaller regional communities and one in which a post-industrial Europe echoes its pre-industrial, medieval past with powerful city states playing the dominant role. Or maybe it might be both. Either way the outlook for the traditional nation state does not look too rosy.

Barcelona’s Human Towers

I visited Barcelona for the first time this summer. The city has everything: fantastic food, great museums, Gaudi’s astonishing architecture, vibrant night life and, best of all, miles of sandy beaches. But this sybaritic urban magnet has a dark past. Situated at the fault line between France and Spain, the city has been fought over and occupied by many different armies over the centuries. Founded by the Carthaginian general Hamilcar Barca (father of Hannibal ‘of the elephants’), it was conquered by the Romans in the 1st Century BC, followed by the Visigoths (5th C), the Moors (7th C), the Carolingians (9th C) until finally coming under the unified Spanish crown in 1469. Barcelona backed the wrong side in the the War of Spanish Succession and the city was sacked in 1714 when the Bourbons defeated the Habsburgs and then ended up on the losing side yet again in the Spanish Civil War (1936-39). It suffered greatly in the subsequent period of General Franco’s rule and it was not until 1977 that Barcelona finally regained a degree of freedom when Catalan autonomy was restored.

This history of suffering at the hands of more powerful neighbours has bred a strong sense of local identity. Catalan culture, with Barcelona at its centre, has been forged through centuries of resistance to external oppressors and, as a result, is community oriented, suffused with a self -reliant creativity and an independence of spirit. This is evident in the very fabric of the city, composed of 10 different districts each with its own distinct character. Different neighbourhoods compete with each other in a rolling series of cultural festivals, in which local idiosyncrasies are expressed almost on a block by block basis. When I visited, the Grazia barrio was having its local festival. Turning a corner, I came across a sight that is such a perfect physical encapsulation of Catalan culture that it received UNESCO protection in 2010. It was a tall tower, built not of brick or stone but of people.

Barcelona’s “Castellers” compete in teams marked by different coloured shirts to see who can build the tallest ‘human tower’. At first, there is nothing to see. A crowd packed together and milling around in a urban square. Then a few hands go up, wrists wrapped in cloths of the appropriate team colour. More hands go up and then clasp together to form a rigid unit, and soon there are a hundred or so people locked together making a solid circular platform of humanity. Then, magically, a tower begins to arise spontaneously from the crowd. Men in groups of 3 or 4 standing on each others’ shoulders form the bottom stories. Crawling up their backs come the women and children adding new layers to the tower in turn and supported at the base by the pushing of the crowd. Then, at the end, an infant with elven grace scrambles to the very top to make a final flourish to the attendant judges.

  Castellers in Barcelona

The photos I took don’t do it justice. Seeing this human tower arise majestically from the massed populace, you are struck with a deep and resonant communal emotion. The same feeling in your gut as at a football match or rock concert but with a greater sense of purpose and a more satisfying consummation. This human edifice is a tangible expression of the will of the many as one; a spontaneous stalagmite of flesh; a priapic obelisk of collective zest.

Culture is a bottom-up phenomenon. It arises from below and can not be imposed from above. This is the truth to which Barcelona’s human towers bear testament. It is also a truth that many corporate organisations struggle with. Senior managers who want to change a corporate culture from above, often find the task close to impossible. New policies can be written, new procedures and guidelines can be published but they are more often than not ignored. These sort of prescriptive rules are only scratching the surface. One layer beneath this are the ‘core values’ to which an organisation subscribes, expressed in a corporate vision or mission statement. They often express banal sentiments such as ‘customers first’ , which ring hollow when you observe what is actually happening at the coal face. If you were to spend a morning sitting on a typical sales desk you might soon learn that doing a profitable deal is more important than customer satisfaction and that meeting this quarter’s sales target is more important than long term performance. These are the tacit assumptions, learnt from the peers and colleagues sitting next to you, that truly define corporate culture; it’s all about what is happening at the bottommost rung of the corporate hierarchy.

Part of the problem with the whole concept of corporate “culture management” is the assumption that it can actually be managed. In this paradigm, the company is viewed as a machine, with the manager as an engineer. Culture is seen as a mechanical part of an organisation that that can be reengineered and manipulated at a manager’s whim. Workers who resist are clearly either too ‘stupid’ to follow simple instructions or suffering from some sort of psychological maladjustment.

This mechanical model, the corporation as a perfectible Swiss watch, is deeply flawed. Culture is not something that a company has, it is something that the company is. So the appropriate paradigm is not a mechanical one but a biological one. Viewed from this perspective, workers who resist prescriptive policies are not psychologically ill, but creative problem solvers who have found an optimal pathway through a series of conflicting environmental pressures. Much as cells evolve in a Darwinian way in response to their surroundings, workers synthesise the conflicting messages from different parts of the organisation (HR, compliance, immediate boss, top management, customer support, etc) to come to a unique resolution that optimises all those inputs.

This is true both at the organisation wide ‘macro’ level and also in the microcosm of information security. Professor Angela Sasse, who runs the Information Security Group at UCL, has been exploring these ideas in a number of influential papers* which examine the conflict between the “top down” policies imposed by Information Security departments and “bottom up” user activity. She advocates a new approach to cyber protection which she terms “Shadow Security”.

A good example of this issue is corporate password policy. A common complaint from a company’s information security department concerns ‘stupid’ users who can’t remember their passwords and so write them down on post-it notes and stick them to the bottom of the screen. Corporate policy mandates long passwords made from a combination of numbers, symbols and capital letters which should be changed on a regular basis. The problem is that human memory does not work that way. The more frequently we do something the better we remember it, and we remember things with meaning better than a random string of symbols and numbers. A typical response from a user is “I was forced to change my password every month, so I had to write it down to remember it”. The user has found a workaround that resolves the conflict between an unrealistic corporate directive and the fundamental job requirement to do work on PCs.

The unintended consequence of the password change policy is to actually reduce computer security. Far better, in Professor Sasse’s view, to observe what users are actually doing and then build information security policy around that. One definition of stupidity is continuing to do the same old thing while expecting different results. This password problem has been the bane of information security for the last 30 years. So maybe it’s not the users but the information security department that is being stupid. Surely it’s time to try something new…

The breathing (middle) Earth

BreathingEarth
Winter is coming. It’s not only the fans of Game of Thrones who know it. The first leaves are starting to fall from the trees as we enter the season of mists and mellow fruitfulness. “To every thing there is a season…” according to Ecclesiastes, but John Nelson has put it even more eloquently in his animated GIF called “The Breathing Earth” shown above.

Constructed from a series of cloud-free satellite images from NASA, it shows the ebb and flow of snow cover and vegetation as the seasons pass. It beautifully illustrates the climatic rhythm of the world; the earth as a beating heart.

As you watch the snow line advance and retreat, one striking fact becomes clear. The United Kingdom is extremely fortunate as regards to its weather. Yes, it’s true. Look at the top part of the image. Despite a reputation as a land in which everyone constantly moans about the weather, in fact the UK has it good. Look how far down the snow line comes in winter elsewhere. It reaches all the way to places like Colorado, Turkey and Afghanistan, all more than thousand kilometres further south. Meanwhile, the British Isles remain remarkably warm thanks to the Gulf Stream.

The fact that there is a Gulf Stream should not be a surprise, since every school child knows that. But this animated map demonstrates its effect and gets the point across very efficiently. If you consider the different means of communicating information such as speech, the written word, numbers or pictures there is a clear hierarchy of efficiency when it comes to delivering facts. As the old adage has it, a picture is worth a thousand words.

Let’s consider speech first. The spoken word is very good at communicating emotional content. Vocal inflections help the listener to interpret the message and gauge, for example, the self-confidence of the speaker or the intended level of sarcasm or humour. In contrast, emails lack this. That is why it’s always a mistake to send an email in the heat of the moment. It is likely to be misinterpreted. But other than for emotional communication, the spoken word is very inefficient.

Proof? Here are two examples. First, on a presentation training course you are always told never to hand out your power point pitch in paper form at the beginning of the meeting. Why? Because the audience will then read it and race ahead of you when they are bored. Actually, this has always struck me as bad advice. Surely it’s more important to make sure your audience is not bored rather than deliberately keep them in a state of somnolent stupefaction. The main point is that they can read it faster than you can speak it. The written word is therefore more efficient at delivering information speedily than the spoken word. And they want it fast.

The second example involves a regular fixture of the winter calendar – a Peter Jackson movie about hobbits. When he made the Lord of The Rings, Peter Jackson condensed the original text of half a million words into three films, each of which lasted around two and a half hours. But when he proposed to turn the Hobbit, a slim book for children of less than 100,000 words, into a trilogy of films of a similar length there was uproar amongst the critics. Surely this was just a cynical marketing move. By stretching out the meagre source material to sell tickets for three separate trips to the cinema, he was clearly slicing the salami far too thin.

In fact, if you crunch the numbers you will find out that this is not true. If you were to read the Hobbit out aloud, it would take just over 11 hours. At least, that is the length of the unabridged audio book. Three movies at, say, 3 hours each for the extended DVD versions, would clock in at 9 hours. By that arithmetic, he could probably get away with making it into four movies. Coming back to our main point, it is further evidence that the spoken word is not a very efficient way of transmitting information.

The written word trumps the spoken word when it comes to speed of delivery. Taking the national average reading speed of 300 words a minute, it would take 5.5 hours to read the Hobbit, from cover to cover, in one sitting. In other words, it is twice as fast as reading it out aloud. But even the written word is much less efficient than pictures. If you want to know what happens in the Hobbit, then the plot can be summarised in just one diagram, such as the one below.

Hobbit-Map

No one would suggest that the fun of reading one of the classics of children’s fiction can be replicated by a glance at simple map but, leaving aside the rich descriptions, characterisations and interwoven story arcs of that imaginary world, it does at least present the bare facts of the story in a quickly digestible form. In a world where time is of the essence, text is being gradually replaced by infographics because pictures and numbers get the story across quicker. Web gurus often tell you that ‘pictures are the new text’. Nowadays, having the time to read is a luxury – something you do on holiday to relax.

 

 

Feudal lessons in tax avoidance

At the top of David Cameron’s agenda when Britain hosts the G8 this year is tax avoidance. In a presentation in Davos in January he called for an internationally co-ordinated clampdown on companies that pay too little tax. In his view companies that don’t pay their fair share needed to “wake up and smell the coffee, because the public who buy from them have had enough.” But he was then quick to point out that the UK had a “great offer” to companies because it was cutting its rates of corporation tax. The speech was strangely schizophrenic, castigating those who did not pay enough tax while trying to seduce at the same time by offering a lower tax rate. A bit like being nagged by a prostitute in fishnets.

The big problem facing the Western world at the moment is that governments are essentially bankrupt. They can’t afford the promises and commitments that they have to the general populace. They need more money which means more taxes and so the corporate sector is an obvious target. But this is not a new problem. It fact, it is so old that it goes all the way back to a time before companies, and even nation states, existed; all the way back to feudal times.

The feudal relationship between a king and his nobles was one of personal obligations: the use of land owned by the king in return for loyalty and military service. Over time wars, intermarriage and complicated inheritance customs resulted in a patchwork of decentralised authority with many overlapping jurisdictions. Nobles could own land in several different kingdoms therefore owing fealty to several different kings. This caused friction and feudal history is, essentially, a history of the struggle for power between kings and nobles with each looking to bribe, cajole or conquer the other.

As the economies in Western Europe developed, trade and wealth began to be concentrated in cities which disrupted the old feudal arrangements. In essence, the cities became a third player in the struggle between the nobles and the kings. This ‘three way’ game had different outcomes in different countries. In Germany, weak kings meant the cities banded together to form leagues (such as the Hanseatic League) to protect their interests against the nobles. In Italy, the cities became large and strong enough to defend their own economic interests and so formed independent city states that resisted the authority of the Emperor or Pope. In France, the cities and the king banded together against the nobles creating a strong central bureaucratic state. The cities and the king had many interests in common, both benefiting from a uniform legal system, a standardised  tax system, good transport infrastructure and a standing military force to keep the peace. In the end, the French model proved to be the most successful and in the Treaty of Westphalia in 1648 most of Europe followed suit and the modern notion of the nation state was born.

What lessons can we learn from this history? We can cast the struggle in catataxic terms like this. In feudal times, the king had legislative authority, the nobles had power (particularly military power) and the cities had wealth. The alignment of the wealth creating cities with the highest legal authority (in the form of the king) against the political power of the nobles was the winning combination.

Now let us replace the feudal chess pieces with their modern equivalents. In this case, the EU is the highest legal authority and the wealth creators are the multinational companies. The nobles with the political power are the national governments. In other words, David Cameron is the equivalent of a feudal baron. If history repeats itself, you can expect the multinationals to club together and pay corporate taxes directly to the EU rather than to national governments. Both parties would benefit from a truly single borderless market in legal and taxation terms. It is the nobles, in this case the national governments who could have the most to lose…

 

The Cultural Theory of Risk

Financial bubbles and crashes are a form of collective madness: a catataxic moment when suddenly more of the same is different. Perhaps you think there is no more to be said about financial crisis? You might be right from about economists, who failed to see it coming anyway but the most interesting analysis on financial crises, risk and blame, comes from cultural anthropologists.

Though Mary Douglas first developed this framework in a different context, it seems to add much more insight than standard economic models. Douglas suggested we could view societies (all societies) within a framework of four different groups within a society, all acting rationally and consistently from their own perspective.

These groups are: i) self seeking individualists, ii) fatalists, iii) hierarchical bureaucrats and iv) egalitarians. Crises happen when one of these groups becomes too powerful and too popular, which of itself creates instability.

The anthropologists have gone further and use the mathematics of biological ecosystems to model this instability. In the early 20th century, a Ukrainian chemist, Alfred Lotka, and an Italian mathematician, Vito Volterra, built a famous model to describe the volatility created by interactions between predator and prey. Imagine an island populated by foxes and rabbits, as the rabbit population grows, the foxes eat more rabbits: the fox population increases and the rabbit population falls. Yet the growth in fox population means that there is less food available per fox, while surviving rabbits have more food available. The system never settles down, but swings back and forth in favour of foxes, then in favour of rabbits. The ups and downs do not come from an outside source, they are built into the very structure of rabbit and fox populations on the island.

For a while the anthropologists experimented with the two agent version of Lotka-Volterra, but in the end found that their four agents of i) self seeking individualists, ii) fatalists, iii) hierarchical bureaucrats and iv) egalitarians was a more useful framework.

What does this mean for protections ourselves from future crises? Perhaps instead of trying to maintain stability as a goal “no more boom and bust!” we should accept that instability and volatility are the natural state of societies. And instead of looking for specific causes such as “bad lending decisions” or “greedy bankers” which economists, regulators and journalists can only see with the benefit of hindsight; we should instead look for warning signs when one group’s narrative becomes too widespread. And so, despite the financial crisis, perhaps the views of economists are still too popular.

 

This is a guest post by my good friend Bruce Packard

The tragedy of the commons

grazing cows and the tragedy of the commons“Don’t worry darling, there are plenty more fish in the sea ” said my mother as she comforted me after my girlfriend dumped me in 1983. It was little solace to my heartbreak then: a platitude worn thin by careless usage. It is even less use today, because it is no longer true. Sorry Mum. There aren’t plenty more fish in the sea.

Cefas, the government fisheries laboratory, has announced that  there are only one hundred adult cod left in the North Sea according to their estimates. Yes, that’s right only a hundred. Mature cod can live for up to 25 years and reach lengths of 6 foot. In 2011, a North Sea survey of catches showed not a single fish that was older than 13 years. Cod become more fertile as they get older. Most cod are caught when they have barely reached sexual maturity, on average when they are 4 years old. If there are no older fish, there are no eggs and larvae to perpetuate future generations. In the early 1970s, trawlers were catching 360,000 tons of cod a year in the North Sea. This year the catch is only 32,000, less than one tenth of the previous level but still 50% higher than the sustainable limit according to Cefas.

What makes this even sadder is that it is not a new story. It has happen before. In 1992, the Canadian Government finally banned all cod fishing in the Grand Banks following the complete collapse of the fish stocks. In Newfoundland, 35,000 fishermen became unemployed overnight, devastating the local economy and ending a traditional industry with a 500 year pedigree. The fishing moratorium was intended to last only 2 years to let the fish stocks recover. Sadly, this did not happen. It is only now, 20 years later, that cod stocks are recovering again but they are still at only 10% of previous levels. So the current collapse of the North Sea cod fishery is merely repeating a journey down a well worn tragic path*. If you plan on going fishing soon make sure to check out the best fishing kayak.

The crisis of the cod fisheries in both Newfoundland and now the North Sea were well flagged many years in advance. So the real question is  “Why didn’t someone do something about it before it was too late?” The short answer is that they couldn’t. The collapse in fish stocks had a ghastly inevitability; a high-sided luge track leading to disaster.  This phenomenon is known as the tragedy of the commons. Individuals acting in self interest deplete a common resource, even though it is in no one’s long term interest for this to happen. It was first observed by Thucydides and Aristotle, then resurfaced in the arguments over the British Enclosure Acts in the 18th Century but was most precisely defined in economic terms in a paper by the ecologist Garrett Hardin in 1968. It is also an excellent example of the reversal of virtue at a catataxic boundary.

In the tragedy of the commons, the word “tragedy” does not imply unhappiness and sorrow but rather the inevitableness of destiny, a remorseless working of logic to its inescapable conclusion. The logic working here is the economic concept of marginal utility. Picture an area of common ground – maybe a village green. Local cattle herdsmen have the right to graze their animals there. Gradually the number of cattle increase until the size of the herd is greater than the amount the grazing land can support. This is the catataxic boundary. The time when more of the same becomes different. Each individual herdsman is faced with a choice: should he put more cows on the pasture or fewer?  At this point the marginal utility equation comes into effect. He gains all the benefits of putting his extra cow on the common, but the negative effects are shared amongst all. He owns the cow but he does not own the commons. So the marginal utility to him as an individual is an overall positive: he gets all the upside, others share the downside. Therefore the logical course is for him is to keep putting more cows on the pasture until it is destroyed.

There are many examples of the tragedy of the commons and it is central to many of the problems of the modern world. Traffic congestion, email spam, the destruction of the rain forest, water shortages, pollution, global warming and overfishing all examples of the abuse of the commons. In each case, a slight gain to a self-interested individual results in a major detrimental effect to the larger community. So, for example, the new car owner gains some mobility but causes traffic congestion for everyone else. The online marketer gets a tiny positive hit rate as he clogs up the internet with spam. A farmer’s borehole to irrigate his parched crops lowers the water table for everyone else. Likewise,illegal logging, factory fishing fleets and toxic waste from chemical plants destroy the environment for every one else.

So what is the solution? In 18th century England the answer was obvious. Put the commons into private ownership. If the same man owns both the cow and the land, there is an economic incentive for effective stewardship. He owns all the upside and all the downside and so will manage both to positive effect. This was the argument behind the hugely unpopular “Inclosure Acts”: acts of parliament that allowed large landowners to expropriate  common land, turfing off peasant farmers and enriching themselves in the process. The Highlands of Scotland were cleared of crofters who then emigrated to the USA and in turn expropriated land from the native indians through similar trickery with title deeds. In England, a landless working class was created to feed the newly emerging “dark satanic mills” depicted in Danny Boyle’s Olympic opening ceremony. Karl Marx, living in London and watching from the sidelines, saw this as the first act in the class struggle that would eventually lead to the triumph of the proletariat. He outlined a different solution to the tragedy of the commons. He believed that the commons should be owned by the state not private individuals; hence, communism.

Since then, more nuanced solutions have emerged. Elinor Ostrom, who sadly died this June, won the Nobel Prize for Economics in 2009 for her work on the tragedy of the commons problem. Her solution was neither private nor state ownership, but local, communal ownership. She call such a solution “common pool resource” (CPR) management.  After years studying pasture management systems in villages in Africa and Nepal, she codified a set of rules which would enable common resources to be exploited in a sustainable way. In essence, these involve clear cut boundaries between entitled locals and outsiders and a strong set of property rights and sanctions administered in a self determined way by the local community. To some, this CPR solution is the holy grail: a temperate middle path between the twin evils of rapacious capitalism and spirit-crushing communism. But others will notice that this solution the problem requires the introduction of a different type of evil: xenophobia.

CPR requires a clear division between locals who have ownership rights and outsiders who don’t. There needs to be a line drawn between “us” and “them”. Through rose tinted spectacles, CPR is the idealised English village community; good neighbours, earnest vicars, friendly grocers, church fetes, a good local school and a cracking village pub. Take off those spectacles and you see small mindedness, nimby attitudes, petty chauvinism, corrupt local councillors, disapproving frowns from behind twitching lace curtain and the all the ghastly wrangling of the local housing committee.

Any system that encourages the demonisation of outsiders and foreigners is surely to be deplored. One headline in the weekend press was more tragic than the story about disappearing cod. It was the killing of the US Ambassador in Libya. J.Christopher Stevens was  a Peace Corps veteran, fluent in arabic with a deep knowledge of the Middle East; surely just the type of of ambassador Libya should welcome. He was killed by militant Islamists enraged by an offensive movie put on YouTube by a US citizen on the West Coast. It seems so unfair that a sympathetic arabist in Libya should be killed in retaliation for the actions of a crazed bigot in California, but to a xenophobe all foreigners are the same.

So the tragedy of the commons has three solutions, all with potentially negative side effects. Is there nothing positive to be said? Yes, there is. Let’s look at the mirror image of the tragedy which we could term the “comedy” of the commons or the “inverse commons”. This is where a small negative to an individual results in a major positive benefit to the community. Those who believe in the economic utility function would classify this self-harming, altruistic behaviour as impossible. But not only does it exist, it is the basis of a lot of successful business models in the new information economy.  The best example is Wikipedia where individuals contribute their knowledge for free for the good of the greater community. The “inverse commons” concept is also at the heart of the “facebook” social networking revolution and open source software movement.

On a lighter note, even cod shortage may have a silver lining. Fewer cod has meant a boom in the population of the crustacea that the cod feed on. It looks like you will be swapping your “cod and chips” for “scampi and chips” in the future…

* For those who are interested in further reading on the subject, I highly recommend Cod by Mark Kurlansky (Vintage, 1999) and The End of The Line by Charles Clover (Ebury Press, 2004).

The Olympics – who really won ?

Andy Murray Olympic MedalistI spent a few weeks in Scotland at the Edinburgh festival on my summer holiday. I was struck by how the local press was trumpeting how successful “Scotland” had been in the Olympics, even though it was competing as part of the UK. Had Scotland been a separate county it would have come 12th in the league tables with 13 medals ( UK as a whole won 65). On the other hand, people who dream of an independent Scotland must have been disappointed to see Scots like Chris Hoy and Andy Murray draped in the Union Jack after winning their golds and proclaiming their pride in being part of “Team GB”.

The Olympic medal table shows how many medals each country won. You might think that it should be very easy to figure out was is the overall winner. Not true. Even with such a simple set of underlying facts there are plenty of tricks you can play in the interpretation of those facts. Which only goes to prove the old adage “Statistics are often used as a drunk man uses a lamp post – for support rather than illumination”.

The version of the table most familiar to readers of the UK press goes like this, with the UK in third place:

 

Rank      Country               Gold            Silver            Bronze            Total

1.             USA                     46                 29                   29                  104

2.             China                   38                 27                   23                     88

3.             UK                       29                 17                   19                     65

4.              Russia                 24                 26                   32                     82

5.             Germany              11                 19                    14                     44

 

But you will notice that this ranking is on the number of Gold medals. If you rank countries by the total number of medals won, then Russia is third with 82 medals and the UK moves down to fourth place with 65.  Then again, maybe it is not fair to rank each medal the same. Surely a Gold medal should be worth more than a Silver. So you can give a weight to each medal like this: a gold is worth three points, silver two points and bronze one point.  After crunching the numbers, the result is still the same. Russia is third with 156 points and UK fourth with 140 points. For some other countries it makes a more dramatic difference. South Korea won 13 gold medals and relatively few medals of other rank. They score 5th on the “Gold only” ranking but only 10th on the weighted points method.

There are further steps to you can take to come up with a fair method of deciding who really won. Not all countries are the same size. Large countries have a larger pool of talent to pick from. So maybe a fairer method would be to adjust for population size and measure  medal haul per head of population. If you do this the ranking becomes:

Olympic medals per capita

  1. Grenada
  2. Jamaica
  3. Bahamas
  4. New Zealand
  5. Trinidad and Tobago
  6. Montenegro

Then again, since training top level athletes is expensive, it might be fairer to adjust for a country’s wealth rather than population size. If you look at the medals to GDP ratio then Granada and Jamaica are still at the top but the rest all change change:

Olympic medals to GDP ratio

  1. Grenada
  2. Jamaica
  3. North Korea
  4. Mongolia
  5. Georgia
  6. Kenya

There is another possible factor that might distort the results: team size. If you enter lots of athletes then you are likely to win more medals. So if you adjust for the size of the olympic team that was sent to the games the table looks like this :

Olympic medals to olympic team size ratio

  1. China
  2. Jamaica
  3. Iran
  4. Botswana
  5. USA
  6. Ethiopia

All of which goes to show that if you play with the data enough then everyone is a winner. Maybe a better conclusion is that sport is about athletes competing and that the glory should belong to the individual not the country. In other words, all the arguments about which “country” was the winner are merely a catataxic distraction. The spirit of the competition lies at level one (the person) not level two (the nation). Nationalistic triumphalism hijacks the very essence of the competition. Maybe things have not changed that much since Hitler’s Berlin Games of 1936.

All of the above examples are merely reshuffling the order of existing countries as recognised by the Olympic Organising Committee.  We can highlight the catataxic issues at the heart of the debate by playing with the concept of “country” which is much more flawed than you might think. Let’s returning to the Scottish example we started with. Scots athletes won 13 medals, but this includes team medals.  If you exclude the team sports (show jumping, gymnastics, rowing, canoe slalom, tennis doubles, team cycling) where the team was not 100% Scottish then you are left with only 3 medals – two golds ( Hoy and Murray)  and silver in swimming from Jamieson. Not too encouraging if Scotland competes under the blue saltire flag in Rio in 2016. If you want start practicing gymnastics here are some of the best gymnastics mats for home.

Would Scots athletes automatically be part of Team Scotland? Not necessarily. Northern Ireland sets an interesting precedent.  It is technically under the jurisdiction of the Olympic Council of Ireland, despite being part of the United Kingdom. Athletes from Northern Ireland can choose whether to join the Irish or UK Olympic team. There were three people in the team that won the Sprint Cycling medal for the UK: an Englishman, a Scotsman and a German (Phillip Hindes). Sounds like the beginning of a joke? Well, it is. The joke being nationalism in the Olympics.

I must confess to getting a small frisson of pleasure when I saw a medal ceremony with the three flags of the UK, New Zealand and Australia in gold, silver and bronze positions: they all had the union jack in at least part of the flag. One definition of a country is “a group of people who share the same flag”. If you were to recast the table so that all countries with a Union Jack in the flag were viewed as a single entity then then the supra-country “Union Jack Land” beats China with 42 gold medals and 113 medals overall.

Maybe can use a different definition of a country: territories that are united by a single head of state. The USA has President Obama. We can theoretically create  “Elizabethland”: those countries that have Queen Elizabeth II as Head of State.  This, amongst others, includes UK, Australia, New Zealand, Canada, Jamaica, Barbados and Grenada.  The total medal haul is 143, of which 48 are gold, which puts this entity top of the list whichever way you count it. The USA is second with 105 and 46 respectively.

A third definition of country could be this: a group of territories that form a single economic entity with a single currency. In which case the Eurozone would be the overall winner by far with a total (weighted method) medal score of 276. This is possibly the only positive thing that can be said about membership of the Eurozone at present….

 

 

Is it Gneiss? Or is it Schist?

I did a spot of time travelling this morning. In physical terms, the distance I travelled was about 40 miles, but it turns out I actually travelled 130 million years in time…geological time, that is.

It was my morning commute. Normally a depressingly bland rail journey from Tunbridge Wells to Central London but this morning I saw it with new eyes. The train line cuts right through the Weald of Kent, known as the Garden of England but also home to a sequence of rock formations that is so diverse it helped found the science of Geology in the 19th century.

Geol1

 

These rocks were laid down in the Cretaceous era, just after the age of reptiles in the Jurassic and just before the age of mammals in the Paleogene. Alternating layers of clay and sandstone were deposited in turn and then topped off with a layer of chalk built up from the tiny calcified skeletons of marine microorganisms.

This perfect layer cake of sediments was then disrupted by the Alpine Orogeny. The continents of Africa and India, drifting slowly northwards, collided with the Eurasian tectonic plate and threw up a series of spectacular mountain ranges as a result: the Alps, the Himalayas, the High Pamirs and the heavenly Tian Shan that look down upon the Silk Route in Western China. In addition, the pressures of this continental collision also caused the Wealden rocks to buckle upwards so a flat plain became an enormous chalk topped dome which would have been one and a half kilometers high, or roughly the height of Ben Nevis.

Geol2

 

 

Ben Nevis is made of hard granite, but this chalk dome was easily eroded. After 70m years of wind and weathering, all that is left of its original majesty is the outcrops of the North Downs and the South Downs and the famous white Cliffs of Dover. So to travel across the face of the Weald is to travel in time across the striations of a chronological sequence of exposed rocks; from the 135 million year old Tunbridge Wells sandstone, through the 70m year old North Downs to the relatively recent alluvial mud of the Thames at London.

Geol3

 

If you run your fingers over the local sandstone blocks of the station building in Tunbridge Wells, you are touching the ancient past; a tactile time tunnel to 135 million years ago. If you half close your eyes and open your imagination, you can summon up a vision of a dozen semi-evolved scaly reptiles blinking in the weak sun of a Cretaceous dawn. Not so different, in fact, from the morning commuters on the platform today…

 

How you see a landscape depends upon your training; you see what you are trained to see. To a geologist, the train trip from Tunbridge Wells to London is a trip through the Cretaceous Era. Scanning the rock formations, he is the one who can distinguish between what is gneiss and what is schist. A painter looking at a sunlit valley may see an exquisite balance of colour, light and shade. A military commander, looking at the same valley, may see ridges to shield advancing infantry and escarpments for setting gun emplacements. It all depends on your frame of mind and what you have been taught.

The hour between dog and wolf

There is an old French aphorism that calls sundown ‘the hour between dog and wolf’.  At dusk,  the familiar domestic pet turns into a rabid hunter.  Dusk is the hour of metamorphosis. This is how Jean Genet puts it in his 1986 memoir “The Prisoner of Love” (Un Captif  Amoureux):

[The hour] between dog and wolf, that is, dusk, when the two cannot be distinguished from each other, suggests a lot of other things besides the time of day … the hour in which … every being becomes his own shadow, and thus something other than himself. The hour of metamorphoses, when the people half hope, half fear that a dog will become a wolf. The hour that comes to us from at least as far back as the Middle Ages, when country people believed that the transformation might happen at any moment.

I spent last weekend at the Hop Farm festival, a three day mini-Glastonbury in Kent. Since it is British Sumer Time, the sun does not go down until 9.30pm so the headline acts are hitting the stage at dusk. We had two grand old men of rock: Peter Gabriel on Friday and Bob Dylan on Saturday. Both of them underwent a metamorphosis at dusk, since neither were presenting their seminal rock tunes in their original form. In both cases, their back catalogue had been radically transformed to such an extent that it was almost unrecognizable. I had heard a rumor about possible fleas or ticks in the fields around the festival so I made sure to check for ticks. To help with fleas I stripped and showered as soon as I got home, and so no critters ( more nitenpyram reviews)! Back to the main event with the two men of rock.

Dylan first. Listening to his incomprehensible growling and barking interspersed with the occasional yelp,  it was definitely a lupine transformation but I could not tell if it was a dog or a wolf. It was more like a metamorphosis frozen between the two, like a ghastly science experiment gone wrong or the dog monster from John Carpenters The Thing. The creature was clearly in excruciating pain judging from its piteous yowling, as was the audience that had to listen to it. More puzzling was the fact that the big video screens to the side of the stage were stuck on a single long shot showing a tiny figure in a white hat – exactly like the view from where I was standing – which made the whole thing utterly pointless. Technology negated by a man so vain that he had banned all close ups of his 71 year old face.

When he came on he was greeted with a huge cheer befitting his iconic status, but by the fourth song half the audience had drifted away to the other stages (Primal Scream, Gary Numan, New Order). This left a hard core knot of Dylan Fans in the gathering gloom exchanging quizzical glances as they tried to work out what song His Bobness was actually singing – sometimes it took until the second chorus to work it out.

Was I disappointed ? No. I last saw Dylan live 25 years ago when things were pretty much the same but just with a faster tempo. He has been on a never ending tour ever since. There is a PE ratio for live shows. Not the Price/Earnings ration beloved of financial analysts, but a Performance to Expectations ratio. Seasoned concert goers know that that Dylan is always the lowest ranked on this basis (followed by Van Morrison in a close second). The greatness of his artistic halo is repeatedly shattered by the awfulness of his live show.  The concert promoters had crowed in the advance publicity that this was to be Dylan’s “only UK Show in 2012”. Now we know why…

Peter Gabriel, in contrast, was terrific. His metamorphosis was triggered by setting himself an artistic constraint: no drums or guitars. So his rock oeuvre had to be completely reinterpreted for an orchestra to play…with spectacular results. The audience was still playing a game of  “guess the song” but in a good way.  The orchestral versions of his songs brought new resonance and meaning to his work. It is good example of how an artist can take a risk and and reach new heights.

The interesting point is how self-imposed restraint promotes artistic excellence.  Rhyming poetry has more artistic merit than blank verse, and blank verse more so than prose.  Art house movies often use black and white rather than colour. Peter Gabriel’s ‘no drums or guitars’ restriction was in a similar vein. But the best example of “high art through restraint” is calligraphy. Picture the master calligrapher standing in front of a blank sheet of paper with his inked up brush in his hand. The ink is black – no colour is allowed. The character he must paint is pre-defined. Even the very order in which he makes the strokes is set by centuries of historical convention. Yet despite, or maybe because, of all these constraints he produces something of such transcendent beauty that it is seen as the ultimate art form by more than half the world: the true mark of a civilised man.  Artistic endeavour must be honest; a truthful expression of inner conviction. This is pithily summed up in this maxim:  Lies cripple the artist. To this we can add another: a strait jacket sets him free.

Excellence through restraint was also very much on show in the movie I saw as I was recovering from the festival weekend. This was X Men – First Class. The restraint in this case being that there are pre-formed familiar characters – a lot of them – all of which have to be woven into the story.  This summer’s blockbuster Avengers Assemble, which I also enjoyed, carries a similar burden with four strong hero characters (Hulk, Captain America, Thor and Iron Man) all having to be fitted into a single movie. With X-Men – First Class we also know where we have to end up because this is a prequel. So unlike a typical story, we already know the ending and the character ‘development’ is similarly constrained. The fun and skill comes in delivering us (the audience) to that pre-agreed destination through the most enjoyable route. This is the storytelling equivalent to a third option on your satnav that lets you chose not the fastest, nor the shortest route but the most scenic.

The dilemma at the heart of the X Men movies is this: is being a mutant a disease from which you should be cured ? Or is it a beauteous and natural thing that should be celebrated. Should Wolverine be transmuted back into a domestic pet? In the movie the answer is no. So the series can be read as a thinly veiled critique of right wingers who believe that being ‘gay’ or ‘different’ is something that can be cured.

This month also sees the publication of a new book entitled “The Hour Between Dog and Wolf: Risk-taking, Gut Feelings and the Biology of Boom and Bust” by John Coates, a successful Wall Street Trader turned Cambridge neuroscientist. Coates took saliva swabs from 250 traders on the dealing room floor over a two week period. He then plotted testosterone levels against risk taking and trading performance. Those with higher testosterone levels took bigger bets, greater risks and subsequently made the most money.

In the book,  John Coates seeks to explain “irrational exuberance” of the markets through blood biochemistry – testosterone and other hormones coursing through the veins of amped up traders in the dealing room causes them to be overconfident, take unnecessary, irrational risks and so cause financial bubbles. Having found a ‘reductionist’ explanation for financial excess, maybe it can now be ‘cured’ ?

In my view, the error underlying this blood chemistry approach is the idea that financial bubbles are a mistake – something that needs to be eliminated or cured. The X men movies make the same point. Bubbles are not a mistake, they are a naturally occurring phenomenon, part of the fabric of nature. Their existence is not a sign that something has “gone wrong” but that everything is working fine. They may be inconvenient and cause financial damage but this is to misapply a human concern to an entity on a higher level. It’s the same type of error as calling the law of gravity “immoral”

King Canute ordered his throne to be carried in to the shallows of a rising tide. The reason normally ascribed is that he believed he could command the waves. In fact, his intention was to mock his courtiers and to demonstrate he was not all powerful: he could not control the waves. The tides follow their own cycles, dictated by celestial bodies in a higher dimension beyond the control of man. Likewise financial cycles, belong at a higher level.

Set up three levels: blood chemistry, trader, market. We can join the dots with two causal arrows pointing upwards crossing the catataxic boundaries like this: blood chemistry controls the trader, the trader controls the market. Our we could reverse them and have the causal arrows pointing downwards. If we want to control the market (eliminate financial bubbles and crashes) we must control the trader and to control the trader we must control the hormones. This leads to some rather farcical conclusions. This reductionist argument is really a reductio ad absurdum. Maybe the FSA should prescribe testosterone suppressant drugs in order to eliminate boom and bust? Or maybe firms should only employ women on the dealing floor?

Just as it is wrong to view the trader as purely a product of raging hormones  (drunk driving excuse- the booze made me do it). So it is wrong to see the market as purely an amalgam of traders. To do so is to make a catataxic error. Each entity belongs on its own level with its own rules. The point is that you can not control the market. King Canute knew that a thousand years ago. Some of us are still struggling to understand that now.

Microsoft’s management kills innovation

Vanity Fair this month has a great article titled “Microsoft’s lost decade”. It describes how the corporate giant lost its way and changed from being an indomitable technology Titan to a has-been. Just as IBM did a decade earlier. The reason? A management technique known as “stack ranking”. Every business unit had to rank a certain percentage of its employees as “top performers”, “average” or “poor” and this effectively crippled the company’s ability to innovate. In contrast, Apple (for decades underdog to Microsoft) generates more revenue with a single product  – the iPhone – than the whole of Microsoft Corp.

“Every current and former Microsoft employee I interviewed—every one—cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees,” Kurt Eichenwald writes in Vanity Fair. “If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, 2 people were going to get a great review, 7 were going to get mediocre reviews, and 1 was going to get a terrible review,” says a former software developer. “It leads to employees focusing on competing with each other rather than competing with other companies.”

This internal competition vs external competition is a catataxic debate and it lies at the heart of the resurgent interest in group selection theories of evolution. The question is whether the natural selection that drives evolution acts at the level of the group or at a genetic level. If evolution is the “survival of the fittest”, then the question becomes the fittest what? Is it the fittest group? The fittest species ? The fittest individual? The fittest set of genes ? This question about “which level rules” is the essence of catataxis.

In social animals such as ants and termites you can clearly see a form of individual altruism: insects that sacrifice themselves for the good of the colony as a whole. This seems to imply that natural selection is operating at the level of the group. However, Richard Dawkins in his book “The Selfish Gene” pins natural selection definitively to the genetic level. He explains the “self sacrificing ants” in a bottom-up genetic way. The ants in the colony are all related to each other; they share the same genetic material. So in sacrificing yourself for the sake of the group you are still indirectly propagating your genes. This genetic cause of altruism is summed up in Hamilton’s Rule which states that the degree of altruism depends on the degree of genetic relatedness. It can be summed up in this grim biologists joke :

I will lay down my life for two brothers, four nephews or eight cousins

Other biologists such as David Sloane Wilson see a group selection argument for altrusim which goes like this: If you mix a group of selfish people and altruistic people together, then the selfish people will always win. They act in their own self interest and exploit the generous altruists. But if you move up a level and observe the competition between groups then you see a different effect. Groups that are full of altruists working cooperatively together outcompete groups full of selfish people fighting each other. So at a group level teams of altruists win, but at an individual level selfish people win. So, turning this around, you can say that wherever you see altrusitic behaviour then it is a sign that competition between groups is a stronger force than competition inside groups. Or, as Microsoft has found out, when management emphasises internal competition the group as a whole will fail.

This “level of selection” controversy is still a hot topic of debate amongst biologists. In this June’s issue of Prospect Magazine,  Richard Dawkins wrote an excoriating review of a book by fellow biologist Edward Wilson titled “The Social Conquest of Earth”. Wilson was arguing for the theory of group selection outlined above. Dawkins violently disagreed. His review concludes “…this is not a book to be tossed lightly aside. It should be thrown with great force…”. This vigorous denunciation provoked a huge backlash. The Dawkins article received more responses than any other in Prospect Magazine’s history. In effect, it was the atheist equivalent of watching the Pope beat up the Archbishop of Canterbury on the steps of St Paul’s Cathedral.

The debate also provides a controversial conclusion for management consultants. If you want your company (group) to win then you should embrace the cult of mediocrity. Suppress internal competition and focus on external competition.

In fox hunting circles, when the Master of the Hounds is training a new pack, he takes the dogs for their first outing in spring to see how they perform. He then shoots both the first few pack leaders and the last few stragglers, keeping the mediocre middle performers because he knows they will form the most effective team.

Could this translate across to corporate management. Is the secret to commercial success to sack not just your worst salesmen but also your best? Let me know what you think….