After Brexit, Robots

Published on October 20, 2016


On June 24th I was asked by a technology magazine for my reaction to Brexit. I think I heard myself say that the solution to a lack of immigrant labour for seasonal activities such as fruit picking is… robots. I don’t think that there is a robot capable of such an activity at the moment but robots are going to do more and more, it’s inevitable. It’s so worrying that even capable business people have shared their fears with me:

  • Will they dislocate society by creating more unemployment?
  • Will they reduce economic activity – GDP – because robots don’t spend money as workers do?

Initially I think they will displace jobs. All machines displace human activity, that’s one reason why we create them. But they create new activities too. Imagine the delight at being the first train guards, 150 years ago. But it is beyond my imagination to see some jobs being done by robots:

  • Hairdressing is too intimate, almost a ritual intercourse between cutter and head owner;
  • Analysis of a company is always unsatisfactory, in my view, until you have reconciled the figures with your assessment of the managers;
  • And how could we ever live without handmade biscuits…

The removal of wages and their replacement by capital equipment is part of a trend that has been accelerating in the last 50 years – the concentration of wealth in the owners of capital rather than the providers of labour. Wealth attributable to labour has moved from 66% in the Fifties to less than 60% by the mid-2000s. This has been disguised by the reduction in poverty in the developing world and the consequent reduction in costs for consumer/workers in the West. But that boon is over and people can see it when they shop. I think that the degradation of jobs is at the heart of the Brexit vote and it’s an issue which will become more acute with the advent of artificial intelligences.

I don’t think that we can bury our heads in the sand any longer. We need to invest in re-training and that will need some tax revenue. Surveys show that the current tax regime never collects more than 40% of GDP and that’s why I subscribe to the view of Thomas Picketty that we should add a capital tax. I would exclude pension funds; and SMEs and houses up to a certain size because “the first million is always the hardest”. In my view taxing capital in this way and re-training workers strikes a balance between enabling wealth creation and re-distributing it – a new social contract perhaps?

Of course the reluctance of all of us to pay more tax is ever–present. But if it got the railways working smoothly, and removed wildcat strikes by taxi drivers et al, as well as creating new, desirable jobs then it might be accepted by resident capitalists. There is still the risk that a large non-resident corporation could claim that their robots are Irish and should be taxed at the rate it has agreed with that Government. But at least now we could revoke their Robo-visas and send them back.

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What’s the difference?

Published on October 6, 2016


We’re all used to the fact that dealing with big companies – you know the ones where you can’t speak to the boss – is often unpleasant. They’re so big that no-one is big enough to matter; asynchronous communication has been replaced by unidirectional communication: emails are from “Don’t reply@” and phone numbers are private. Rather than grant a customer the right to query something, they prefer to use resources advertising the fact that they are a listening bank/store, creating FAQs that are banal and we are left to suffer. It’s usually the opposite with smaller companies which are keen to prove that they’re better than the competition. You can probably spot which of these examples that I have suffered/been delighted by recently are the big companies:

  1. I gave notice to the satellite TV company that I was moving out of my London flat and only needed to keep my Monmouth account. They told me I would have to pay the full monthly charge, keep the box with its unseen recordings (are all these recording devices 75% full now or is it just me?) but never use it or else pay £80.
  2. I gave notice to the internet provider too and told them that I would only need the one account in Monmouth. They waived the notice period.
  3. I gave my gym two weeks’ notice but they insisted on the full month. I queried whether I had had the full service given that the pool had been shut for about 10 days in the last year; and they managed to run out of towels! I know that there are unexpected surges, but towels?
  4. I took a rug back to the shop because it was the wrong colour. I’d accidentally thrown the receipt away the night before. I offered to email it but she exchanged it anyway.
  5. The new winch on my boat stopped winching. I got into port and emailed the site at 8.30pm. By 9.30 I had a director on the phone and by 2pm the next day I had a new winch, even though I was 400 miles from where I had bought it
  6. My ironing gets done weekly but the provider would only do it off-site. I asked for it to be delivered back in less than a week and got a delivery charge. I queried it, on the basis that it wasn’t on the price list, and arranged for the cleaner to drop it off on the way past. I got another delivery charge.

The first three are publicly quoted. The fourth is a big partnership and the last two are private. So it’s not always a question of size: any organisation can look after the customer and anyone can put themselves first. So what’S the deciding factor?

I think it starts with S. Prices usually follow an S curve: low as the business enters the market, rising as the product’s demand rises, then levelling off as demand catches up. It’s in the middle phase – where companies think that they’re in control and lay down the rules in ways that are patently unfair in order to maximise profit – that the business plants the seeds of its own destruction, destroying customer loyalty and enabling competitors into the market who don’t have to try that hard to provide a better service than the one now offered by the incumbents.

This was always a problem before mass communication but is more acute now. Some businesses get this and are using their resources to maintain and improve customer service. It’s tricky in the ever more complex world where allowing customer service representatives the power to waive fees is close to enabling employee fraud. But it is possible and so I plan to stay with BT. But don’t tell Sid.

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Negotiating Brexit

Published on September 22, 2016


Having worked in SMEs for all but 4 years of my career (when I was FD of quoted companies) I’ve never had to negotiate in the full glare of publicity, as the Government does. But I’m pleased to see that Mrs May and her colleagues have resisted the temptation to reveal their hand, either to lead the news agenda as Alastair Campbell demanded, or to assuage the need for certainty and its implied safety which Maslow identified as one of our greatest needs.

Dealing with uncertainty is, I believe, an essential attribute of leadership so it’s re-assuring to see that we are not rushing headlong into invoking Article 50. Like Andrew Tyrie I think that we should start with the end in mind, and see when negotiations can be concluded and then work back from that rather than rush into acting. All that that would produce is a deadline for removing this particular uncertainty faster. It wouldn’t produce a better result. As they say in finance, when asking for a loan or investment “If you want a quick answer it’s no”. Agreements to lend or invest come from understanding how the organisation works, which is a product of communicating sufficient information and ensuring that it is correctly received. Given the scale of the task this will take some time.

What I think would help is an interim framework, like heads of terms in business deals. It could say something like this:

“Nothing will change until a new arrangement is in place. Our new arrangement will recognise that the principles of free trade and free movement of people are beneficial to us all except where competition is unfair or migration exceeds levels that can be absorbed by the receiving country.”

I realise that this is not complete but I wonder why people would refuse to sign up to it?

There will be some tough negotiations for sure. We may need to stand firm for a while. In every negotiation there is a moment, sometimes several, when nothing is said while each party decides how much it can put up with. And when the other party says “take this because the alternative will be worse” then the time to pause lengthens. The pause may be some months. But I think that our ability to tough it out, and deal with this uncertainty will improve our ever uncertain future. At the moment the doom-mongers are being proved wrong -our stock market goes up, our exports grow and our interest rates reduce the strain on government spending and it is others such as France and Germany, who face elections, who have more negative influences to contend with. But even if it wasn’t looking pretty good, good leadership should work in this direction – helping us to deal with our need for safety, maybe by distracting us with announcements about schools and the Boundary Commission and even a bit of retail therapy. I’m just not sure that I would suit a pair of those kitten heels.

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Olympic business

Published on September 9, 2016


My passion is rugby so I was delighted when 7s – the shorter version – was included in the Olympics. My interest is purely as a spectator nowadays. And some may say that I had a similar role when I was captain of the under 13s whose record was a slightly underwhelming P12 W0 D1 L11. But this does allow us to observe and I find that I can learn much from sport to help grow a business. Here’s what I have learned from the Olympics:

Success takes time. I rarely believe forecasts of new businesses that show substantial profits in three years’ time. After four years of investment, cycling had still shown few results. In the eyes of some investors and business founders it wasn’t backable. But the evidence of long term investment is now clear: it took eight years to start to get close to success and has only really blossomed in the last five.

You need to get all the parts to work in order to succeed. I dare to suggest that The Netherlands were the better team in the women’s hockey final except in one significant aspect, the scoring of goals. GB took their chances and Maddy Hinchcliffe saved a penalty stroke in the first quarter as the first part of what was a Woman of the Match performance.

Office romance is ok. Jason Kenny and Laura Trott kept their romance secret until the London Olympics. Thankfully, for them as well as us, they’re still together and their performance stayed at its peak. The Richardson-Walshs were almost as far apart as it’s possible to be on the rostrum. Keeping good relationships with other teammates is one of the small details that the captain and her partner attended to.

Timing is all-important. Very few of the winners had won every competition in the last four years. Getting it all right at Rio (for which read exhibition or major tender) might require sacrifices elsewhere.

Progress is continuous. We got 65 medals in 2012 and this became the new normal.

Second is second. A silver medal still has value, so does bronze. And I’d be pretty impressed by someone who came fourth in the Olympics, or fifth… You may not be the best in your sector but there is still a place for you. Often those who have won find it hard to get motivated (Sir Bradley Wiggins spoke candidly of this pre Rio) and second keeps the team together and engaged in the venture. So long as that’s second in the market not second at each tender.

Or is it? (Did we come second?) The table that we all see ranks countries by gold medals then silver then bronze. But if you gave 3 points for Gold, 2 for silver and 1 for bronze you’d get a different result. In terms of number of sports in which a country won medals we’re top. But how about medals per population (winner – Grenada)  or per GDP (congratulations Taipei)? And giving additional weight to team sports? There is an old saying that asks what is 1+2? A mathematician would say it’s between 1 ½ and 2 ½; an engineer would say it’s3 but to be on the safe side let’s call it 9. And an accountant would say “you’re the client what would you like it to be?”

Rugby is a minority sport and 7s is a subset of it. But I still think that, whatever ranking you prefer, Fiji should be congratulated for winning the inaugural competition. Our women’s team showed what can happen when the pressure gets to you, with yellow cards at the semi-final stage that cost them a medal. Still, their record is somewhat better than mine.

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Brexit: the survival guide

Published on August 24, 2016

Brexit A Survivor%27s Guide

Having been promised an apocalypse if we had the temerity to vote leave I venture to suggest that it’s not turning out quite so badly. There is still much to resolve and the tough decisions are some way off but in the meantime life must carry on. So if you’re wondering what it means right now can I offer the following:

  1. Don’t panic. We haven’t gone to Mars, we haven’t even left Europe, just the European Union. Calais is still only 22 miles from Dover (about 12 hours by car or rail)
  2. Out is the new In. We’ve left the European Union, an enclosed trading area of 500m people and are free to trade with everyone now as freely as we like, so long as they agree. We’ve been making significant strides in this already with our non EU exports up 6.8% a year since 1999. We can join the World Trade Organisation and have a baseline of tariffs of 3%, not perfect but not a disastrous starting point.
  3. Don’t panic. Thankfully and I mean THANKFULLY we are not in the Euro and our currency devaluation not only does it mean our exports are priced as keenly as mustard – so keenly that Tata have postponed the sale of their Port Talbot plant – but if you want to sell your business then the overseas buyers will be almost 20% keener than they were.
  4. Inflation is good(ish). With a weaker currency our imports costs will rise. Everyone will use this to put their prices up. So should you. Even if you employ descendants of the Norman Conquest on land that produces King Edward potatoes and sell them to Smiths Crisps you will have some foreign inputs to justify increasing your prices. If you are uncertain just practise looking in the mirror and repeating the phrase “It’s Brexit mate” until you believe it yourself. Add “Innit” if you’re still having difficulty.
  5. Don’t panic. If inflation takes hold our national debt will finally reduce as a % of GDP. And as interest rates rise to satisfy holders of the devaluing of their investments you’ll be able to put money in the bank and get a return on it.
  6. We did it before so we can do it again. Those of us who worked before Maastricht didn’t have any problems selling goods and services in Europe. If you need an EU subsidiary to enable you to trade within the EU then you can get one. I doubt that it will be long before at least one country sees this as an opportunity and creates a cheap and fast hub in say Dublin or Copenhagen, which would validate transfer prices and ensure compliance with appropriate regulations.
  7. Don’t panic. The overseas businesses are not all going to leave. Pre-Brexit I used to listen to some hedge fund managers threaten to move to Switzerland if taxes rose. But they didn’t. Even for financiers there’s more to life than money. Do you know what is on at the theatre in Geneva? And could you understand it if you did?
  8. We can create new funds for scientific co-operation, farming subsidies and fisheries that are more effective than EU wide ones. In fact this has been announced in the time it took me to write this blog.
  9. Even better we can have new subsidies that won’t be prohibited by the State Aid rules. For example we can have as an Export tax credit scheme which I and other have proposed over recent years.
  10. Don’t panic. The labour laws in France and Germany are so strict that even tube drivers are envious. So moving large numbers of bankers there is unlikely. The need for flexibility will keep them here and so most (OK not all) of the industry will remain.

We’re going to have to pay something to the EU and the chances of us seeing that £350m in the NHS are as likely as winning the World Cup in the next 50 years. But so long as we don’t let the lunatics take over the asylum, and curbs on immigration are based on need not prejudice then we’ll be fine.


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BRian and EUnice were married

Published on August 4, 2016


Brian and Eunice got married in 1973 although Brian only asked his Dad if it was OK in 1976. Since he’d already done it, Brian’s dad, being a darn good bloke, said yes.

Eunice, petite and continental, was delighted. They lived on her farm and, with the money that Brian earned, she could expand its traditional methods until she had mountains of butter and lakes of wine. Brian promised never to eat Anchor from little New Zealand ever again and they and their growing family feasted on the fruits of their labour. In times of trouble the produce was a source of comfort for Eunice and in 1990 Brian looked up from his desk where he sold insurance 7 days a week in order to be able to buy enough fertiliser, took a long look at her and noticed how her slim frame had disappeared under layers of fat. Brian never wanted a big partner – it wasn’t who he’d married – but a deal’s a deal.

Things got worse soon after, when Eunice suddenly announced that she wanted to go out more often. This seemed harmless enough. There was no need for her to stay at home, she should be free to move around wherever she wanted. But she didn’t roam far. Her maternal instincts were strong and after rearing her natural offspring she also decided that she wanted to take in some poor distant relatives from the other side of the Continent. Brian, like his Dad, is a darn good bloke, so he wanted to help. He wondered about it out loud to his Dad while they were on a weekend vacation to Maastricht. But Dad was enjoying the food and didn’t really pay attention. Why would he? “Eunice is a grown woman, a big woman”, Brian explained. Brian’s Dad felt hot and just nodded. It wasn’t anything to do with him and anyway, Brian’s Mum, Maggie, had set up a family trust to make sure that Eunice couldn’t use the family money to look after them, before she passed away.

So Eunice started taking in her second and third cousins from the countryside hundreds of miles away, and enjoyed time by the fireside sharing stories with them about how their parents had fought wars against each other for centuries, while Brian’s family had been sailing around the globe to places where they spoke his language, after a bit of persuasion. One day Eunice made presents of special tokens made out of wine and butter for her relatives. They loved them and asked her for more. Soon they were awash with the things and made huge towers out of them which they called property investments. But when Brian’s Uncle Sam came to visit, they all caught pneumoneya, a new disease which didn’t affect the children but made their towers crumble. Brian felt sorry for them so he made up new tokens which he called Nevernevers, and spoke of new property investments where his Dad lived, which had magical powers – many of them had samovars, some had oil lamps that lit up at night to show the empty spaces. Some of Eunice’s relatives came to live with Brian’s Dad, hoping to buy another property investment. But they didn’t have enough Nevernevers because they were all locked up in the banks, so they had to clean the samovars and lamps instead. So when Brian went to see his Dad, sometimes he had to sleep on the couch in the sitting room. He even thought he saw the odd rat outside the back door.

One day, while Dad was asleep, a wizard called Boris arrived from Hamelin and offered to clean up his Dad’s place. Brian jumped at the chance. Boris got rid of the rats, apparently, but his magical powers were not those of a Pied Piper – they just made everyone feel light-headed – and the children remained. Returning to Eunice, Brian asked her to take some of them back so that he could have a bit of peace and quiet, and sleep in the bed that had been his since childhood. Eunice looked at him with her piggy eyes and said that she would only look after Peter, the smallest one, sometimes.

Brian, still feeling slightly queasy, contemplated another sleepless night, looked around at the faded palace that Eunice had built, with the extra-large maze that everyone could get through except him, and forty years of frustration with his over-expanded wife and family erupted. Without thinking, he said “I want a divorce”

Eunice, despite her over-adequate frame, jolted. But she was a proud woman with a mission to look after all her family, however large it turned out to be. She thought of today’s calls from people in places she hardly knew, whose claims to be related rested on the fact that they both bred the same cows, and their insistent pleas to come and stay. With Brian gone there would be a bit more room….

She clenched her fists, but released them. She fought back the tears of rejection as her mother had done when her father sent his wife to sleep in the cow shed for 6 years, and maintained the hauteur she had inherited from Maman. “Well if you’re going, then go now” she replied haltingly. Brian suddenly wondered if he had done the right thing. He recalled happier times, getting their first car and holidaying by the Med where the alcohol flowed like water and was almost as cheap. “Can I come back and see you whenever I like?” he whispered. “Maybe. So long as you remember that you have been my husband for 43 years and I expect to be kept in the manner to which I am accustomed,” was her stony retort. Brian looked in his wallet and it was almost empty. He would have to toil long and hard to get to sleep in his old bed again.

He went back to stay with his Dad who was entertaining Uncle Sam and distant relatives from even farther off lands than Eunice’s brood. Bemoaning the fact that divorce seemed as much effort as marriage but without the benefits, his third cousin twice removed, while chewing on the lamb that he had brought from New Zealand asked, “Can’t you make a clean break with her? Might make things easier between you?”. “Hey, bud, great idea” said Sam. Brian thought it would be a strain but better than seemingly endless maintenance payments. Dad had just finished paying off Uncle Sam the money that he’d borrowed for his overseas expeditions some seventy years ago, so he might be willing to do something similar again.

And so, many moons later, when the dust had settled and both Eunice and Brian were calm enough to negotiate their divorce like grown-ups, the decree absolute was signed. Eunice was to receive a one-off payment of a million dollars, which Brian borrowed from his relatives. His relatives promised to buy his insurances, which had always been the best in the world and were now really good value, and that he could come and stay whenever he wanted. Brian said to Eunice that, so long as there was room, then he would have her relatives to stay from time to time too, especially if they made themselves useful; after all Dad was getting on and there was no-one else to help him.

Brian went back to his Dad’s, made his old bed and lay down on it. It wasn’t quite as comfy as he remembered.

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Prime Ministerial

Published on July 19, 2016

Hubris, commonly translated as insolence, is a word I first came across while studying the Greek tragedies which are based upon it – humans think they are better than they are, take on the Gods and come a cropper.

Listening to the findings of the Chilcott Report, and reflecting on the failure of Cameron to secure a Remain vote, I thought that hubris seemed an appropriate description of their actions.  Like their tragic predecessors they started out modestly, humbly even, making promises of a better future. The problem is that they delivered a good deal of it – investment in public services and a reduction of the deficit – and were re-elected as a consequence.

Like the CEO whose acquisition is successful, they didn’t just have a vision to inspire. Now they had hard evidence of their genius. So Blair aimed at supping with the Gods (OK, OK George Bush, this IS a metaphor) and Cameron thought that he had the Midas touch: “Referendum? Referenda! I’m the master at getting them through.”

These were big risks and the consequences for them personally, when they failed, were tragic. Their own predicament is not our concern. But the fact that they took these risks without managing them – by having no discernible back-up plan if they lost – certainly is our concern. There was no plan to manage Iraq once its command structure had been de-capitated and then immobilised, and no plan to deal with the EU if we decided to leave.


No. Good management always involves managing downside risk. FD Solutions’ clients were all advised to hedge their currency risk and my IFA offered a defensive fund in the run up to the referendum, one of only 6 to do so on the platform used by over 2,000. Good long term investors such as the newly emerging Equitile have weathered the storm by choosing companies able to manage themselves through the multiple facets of uncertainty which everyone in Europe, and some beyond, now face.

The main lesson that I’d like to pass on at this stage is the lack of business acumen and risk management in the top echelons of Government. Visionary leadership is one thing but of little value without the capability to deliver it. Aside from Philip Hammond I see no-one in Government with the breadth of commercial experience required to negotiate the biggest de-merger ever undertaken. I suggest that the new Brexit department includes our toughest negotiators such as Lord Sugar, Sir Richard Branson and maybe Sir James Dyson. After all, a new broom sweeps clean! Or is such a comment insolent?

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The future is bright

Published on July 8, 2016


As I despatched my 100th blog, in the news vacuum of June 23rd, little did I know that my next century would start with an historic event which will lead us to question many aspects of our social, political, business, legal and economic life.

I set sail for Europe on the 25th so didn’t feel the vibe in the country which I heard as “what have we done?” combined with “what the heck have YOU done?”

I had written to friends that I hoped we would vote to remain because otherwise I’d be rather unwelcome on the Continent that we have rejected. But on arrival in Dunkirk, meeting my friend’s French friend we were congratulated on the vote. “We knew that Britain would be first now we can leave too”.

But to those who are aghast at the prospect of severing ties with Europe I offer this: we are still 22 miles from the continental land mass. And apart from having my credit card refused in the marinas because I “don’t have [a] Visa” the welcome has been as friendly as ever. We will continue to trade with Europe and to communicate in the same dislocated way that we have always done. For while the change seems momentous now I suspect that when enacted it won’t be. I have listened to many executives fed up with the company they work for, or parent company of which they are a part, and vow to leave by resignation or MBO.  Many wake up the next day and realise that in the cold light of day there isn’t  much that they can do differently even though they would like to, because the world is too big, and too complex, to enable significant change by any individual entity. The only splits that have really worked are those such as the de-merger of ICI when pharmaceuticals/bio sciences and traditional chemicals were both enabled to concentrate on what they’re good at.

Brexit could, if managed properly, enable us to be concentrate on what we’re good at. Freed from constraints of the out of touch bureaucracy in Brussels that couldn’t, or wouldn’t see what Cameron needed to maintain our membership of their impractical club, we have no excuse now for being the best that we can be. My version of best is an innovative, open-minded trading nation that respects all cultures and maintains freedom; even when freedom means you don’t get your own way and the immediate future has been made uncertain by those with a desire to feel more in control of their futures. Those who wanted to stay should work to maintain these values that could be overcome by extremism if they take defeat as a sign to be silent.

We may have to do things differently. For example we may need to set up European subsidiaries to enable inventions to be accepted in the EU but we used to do that sort of thing regularly and in the intervening years the cost of flying to Amsterdam to setup a company has fallen significantly. It may go up a bit but if we really do reduce unnecessary regulation and improve trade deals with non EU nations then we could keep the innovators who have prospered here in recent years and prosper as never before.

Because if we don’t who can we blame, now that the French, Germans and Brussels oligarchy are not our masters? The weather? How very British.

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Blog 100

Published on June 23, 2016


It’s official. I have passed the milestone of 100 blogs. From 2011 I have been sharing my thoughts with you fortnightly and, some five years later, we can look back on 100 musings that have been described, on occasion, as helpful thoughtful, insightful and… whimsical? One blog a fortnight might not seem a lot to the daily bloggers, but my aim was never to share a journey with you, as they usually do, nor the details of, say, a pigeon’s life , rather to take what is going on in the world and relate it to our challenges: and while it seems as if the world’s pace is becoming ever more frenetic, connected as we are in milliseconds, the amount that is useful to me, that I feel worth sharing with you, is currently optimally served up fortnightly.

500 words 100 times is 50,000 (once an accountant..) which is a book. And while writing these I have written a book WealthBeing- a guide to creating wealth and enjoying wellbeing – an endeavour which I started in 2012 and finished last year, sustained by the encouraging comments about this blog which gave me the belief that I could indeed write something worth reading.

It’s hard to keep going – writing a book, a blog, building a business. Milestones such as this and winning awards which FD Solutions did in 2008 and 2012, are a great help but the biggest help usually comes from someone who is or has been in the same situation as you, who can empathise. I hope that this blog has provided succour at least once on your journey -having been in business for 30 years, having worked with many SMEs as FD or mentor, I have learnt what solutions will work.

The answer is……….

And …………

But don’t forget ………….

It’s not possible to give answers because my answer won’t be your answer. All I can do, all any of us can ever do, is ask if you’re ready to look for an answer from someone else and then suggest options which may be, or lead to the answer. Sometimes those pieces of advice are what we don’t want to hear – stop investing in this new product, sack a close friend. Often they appear contradictory: “many hands make light work” but “too many cooks spoil the broth” so we get frustrated and reject the advice. Often we reject the adviser too.

Unless we follow the only advice that is always valid: the answer is somewhere in-between – neither left nor right but, starting where you are the way is a little to the right, then back to the left then straight on.

Our ability to find the right course comes through wisdom and experience which we get from our mistakes, and sometimes from those of others, which is why I write the blog and may be why you read it? Or maybe it’s for the cartoon – there’s always been a cartoon, drawn by David Lewis who finds the funny side of whatever I write and gives us cause to smile and carry on exactly as before, for another 100 blogs.

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Figures, not facts

Published on June 10, 2016


At the start of the EU referendum I highlighted the need for some useful information and, as the campaigns have got into full swing, information has indeed been forthcoming. But there are different types of information and it’s commonly agreed that hard data is the best on which to base decisions. Figures are usually seen as hard data so we’ve been given some: I suspect that £350m per week will stay with us as a fact long after the referendum. But, as an FD, I’m more interested in what the figures mean than their absolute value. £350m is a large figure. But so is £3,500 if you only have £3,400. Net migration is 336,000 at the last count, which would fill Wembley stadium nearly 4 times, the common measure for making people measures understood. But would these people actually come along to sit in Wembley, and wait for the other three to leave before they sat down?

Figures are only sensible when they relate to something else. When IBM lost $1bn in a quarter, it was presented as bad news. But I couldn’t help thinking what it must be like to be big enough to be able to do that. We are big enough to deal with both these figures: £350m is 0.5% of GDP (the net expenditure of £6bn p.a. is 0.8% of Government expenditure); and 330,000 is 0.5% of the population.

So what now?

Maybe it would be better if we acknowledged that our need for facts is part of our need for safety/certainty, the second most pressing need according to Maslow’s hierarchy, and that we are overdoing it? I think that the need for safety has driven advanced societies to their creation of debt, especially in the noughties and most notably in house buying, which now hangs around our governments’ necks.

Such things were frequently referred to at last week’s Hay Festival. I heard about social contracts and debt contracts but little mention of equity – the bit that’s left over when the certainties, such as debt interest and re-payment, have been dealt with. Sometimes equity suffers a loss and sometimes it enjoys a profit. As a business owner and equity investor I have got used to the ups and downs of my wealth. My quoted funds have gone down almost as many times as they have gone up. But, and it really is a big but, the ups have significantly outweighed the downs. The performance of the equity value of these businesses has involved shortfalls in profits and market fluctuations but overall the skill of the people in the organisation and how they are managed has brought an increase in wealth, of which I hold a share.

The EU debate can be seen similarly to those debates that are held among managers considering a management buy-out: would we prosper better as part of a group or as a buy-out. Buy-outs can transform businesses but most don’t stay independent for long, burdened as they are by debt. Government borrowing is around 90% of GDP, a debt that we can only service because of the low interest rates we are able to secure. I wonder how long we would stay independent because the one thing that seems certain to me is that interest rates will rise if we leave.

Maybe the Brexiteers realise this and their placards are not one but two exhortations:

  • Vote
  • Leave

Or maybe higher interest rates will be a good thing, giving savers a better return and lowering house prices for the young? As Douglas Adams observed: reducing the answer to a number – 42 – is fine but what’s the question?

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