A tale of two people.

The political turmoil in the States has thrown up the best of people and the worst of people. James Comey’s autobiographical reflection on leadership presents a picture of the both.

Obviously, autobiography is a partial view, which it would be foolish to accept uncritically. Reassuringly perhaps, the self Mr Comey is willing to reveal to us is not without fault. He confesses to weaknesses, sins of omission and commission including bullying a fellow student when at University and lying about playing basketball in high school.

He makes no claims to infallibility, indeed quite the contrary recognising that key decisions he has made in his career may have been wrong. He appreciates how difficult it is to understand how motives shape decisions consciously or unconsciously particularly his own. If there is one thing he is keen to convince the reader, it is that, in his professional career he has always tried to act in good faith according to the law and the Constitution of the United States. He presents himself as a fallible human being but a deeply patriotic person who aims high in his professional behaviour.

The book considers the events and people in his life he believes shaped him as a leader. Whether or not he genuinely absorbed those influences and lived up to the high standards he describes only those he led would be able to answer. However his descriptions of what good leadership looks like are compelling and worth reading.

Whilst the leadership style of President Trump is not addressed directly until the end of the book one cannot but feel the first 210 pages create, consciously or not, a sharp point of contrast. Its elements include the ability to listen actively, to seek out the opinions of others and see the value of those that contradict your own. It understands the difference between intelligence and judgement. Intelligence being the ability to “…master a set of facts.” Judgement on the other hand being the ability to “…say what those facts mean and what effects they will have on other audiences.”

Comey, a Republican voter, describes what he thinks are characteristics of good leaders but his examples  are absent of partisan bias. He describes characteristics and behaviours of President Obama he thinks are important including a good sense of humour which he believes to be a good indicator of a persons ego. The ability to laugh at someone else’s joke reveals a degree of self confidence in a willingness to look a little silly as you laugh and an appreciation of others.

Central to Comey’s view of a good leader is personal confidence. Being comfortable in your own skin, knowing yourself, including your weaknesses as well as your strengths. Such confidence facilitates the ability to be humble. To recognise that a good leader does not have to pretend infallibility, rather they recognise others may have more to offer on certain matters and indeed provide better insight into an issue. A good leader blends confidence and humility in a mutually reinforcing whole.

Comey is clear a leader cannot take respect it has to be earned. Earned through consistency of words and actions. Living the values you espouse. He understands that as a leader you are constantly under scrutiny. Some will be willing you to exhibit actions which contradict your words, the vast majority will be looking for examples of what you value. Your words and actions are signposts, you constantly have to take care are pointing in the right direction.

Access to truth, for Comey is seen as fundamental to good leadership. Loyalty of those around you means having people who will challenge you with vigour when they think you are making a mistake. Helping you discover the uncomfortable truth as opposed to reassuring your convenient prejudice.  Loyalty expressed through flattery magnifies errors when whatever “the boss” says is agreed to as right. This is the loyalty offered to  the Mafia boss.

There are lots of textbooks on leadership but if you want a passionate guide from someone who at the very least has occupied some very senior leadership positions you could do a lot worse than read this book. Comey sets the bar high and from his autobiography you do get the impression he measured himself against it. He clearly reflected a lot on leadership and thought deeply about it.

And then of course there is President Trump. Clearly, the fact that President Trump sacked him will have shaped Mr Comey’s views about the man. However, the manner of his sacking, reported live on TV speaks volumes to the leadership style of the man who now ‘leads the free world”.

In summary, Comey was in the FBI’s Los Angeles field office speaking to a room full of staff when he saw the news of his sacking being reported on the TV screen running across the back of the room. Once it had sunk in that this was not a joke he got onto his assistant back in Washington who had been given a letter which she scanned and emailed to Comey which fired him with “immediate effect”.

If Comey had been guilty of some act of gross misconduct this would have been a shocking and deplorable way to handle his dismissal. The ostensible reasons in the advice given by the Deputy Attorney General Rod Rosenstein were, ironically, about his handling of the Hilary Clinton email investigation which had been conducted 6 months previously, before Trump had been elected to the Presidency.

Whilst this manner of sacking might seem unprofessional it does not plumb the depths of the sacker. The issue of how Comey would get home arose. The Deputy Director of the FBI, Andrew McCabe, who had suddenly become the Acting Director of the agency, decided it was appropriate to return Mr Comey to Washington in the official plane with his security detail.

Millions saw the return of the sacked Director live on TV, including, it seems, the President. Many would have thought this national coverage of his return a public humiliation. It was, but seemingly not enough for the President. The next day Trump rang the new Acting Director and asked how Comey had been allowed to use the official plane to get back to Washington. When McCabe explained he had authorised it, “The President exploded.” He ordered that Comey should never again be allowed into any FBI property anywhere. This meant his staff had to box up his personal effects and take them to his home.

Are we at the bottom yet? No. The Deputy Director’s wife had once run unsuccessfully as a democrat for the Virginia state legislature. Apparently in his fury with McCabe Trump asked “Your wife lost her election in Virginia, didn’t she?” When McCabe replied “Yes, she did.” Trump said “Ask her how it feels to be a loser.”

Confidence, humility, judgement? No. Petty, spiteful, vindictive? Yes.

In the epilogue Comey manages to maintain a sense of optimism. Whilst he deplores those who stand silent and provide tacit assent to Trump’s outrageous behaviour, he believes after the forest fire which is the Trump presidency the United States will refocus and restore the balance between the executive, legislative and judicial arms of government. We can only hope his optimism is well founded.

Having read this book I think about the lift test. Would I want to be stuck in a lift with Comey. He sounds genuine and interesting so the answer is yes. If it were Trump? I’d jump.


A Higher Loyalty: Truth Lies and Leadership. James Comey. Flatiron Books 2018


The Case for Impeachment

It is a sad but unsurprising comment on the Trump Presidency that in April this year (2017), less than three months into his term of office, an American professor of history, Allen J Lichtman, should think it worthwhile publishing a work entitled “The Case for Impeachment”. The book considers Trump’s behaviour generally and specifically in his first few weeks in office to present the “… foundation for building a case for his impeachment”.

He makes the point that impeachment proceedings are not confined to the actions of a President in office. Politically unlikely, but constitutionally possible is the impeachment of Trump for actions which were committed before he became President. More likely such actions may be considered as evidence of his character and propensity to behave in particular ways as part of an impeachment hearing for things related to his campaign for the Presidency and his time in office.

Professor Lichtman summarises a whole series of areas which he believes provide grounds for action to impeach Trump. A key one is his attitude to the law. He summarises the various laws that Trump has broken over the years: racial discrimination in housing; illegal use of charitable funds; failure to pay taxes; sexual discrimination against female  employees in his casinos; establishing a fraudulent “University” (one which offered no course credits, conferred no degrees, did not grade students and did not submit to outside review); and, perhaps most ironically, the exploitation of undocumented immigrants in the construction of Trump Tower in 1980.

Whilst impeachment may not be instituted because of any of the above transgressions they provide evidence of his attitude towards the law. Details of the above cases betray an attitude which sees it as a tool to gag and intimidate people who oppose him but to be ignored or subverted where it stands in the way of what he wants to do. His modus operandi is to spend his way out of trouble by, for instance, paying $25m to settle the case relating to his bogus university whilst at the same time claiming this as a victory. He has certainly had plenty of practice finessing the law it being reported he has been plaintiff in 1,900 legal actions, defendant in 1,450, and involved in bankruptcy or third-party suits 150 times.

The book catalogues the various and multiple conflicts of interest created by Trump’s ongoing business interests around the world and makes the point that the high level of debt many of his companies rely upon creates real leverage for the holders of that debt if something goes wrong and his businesses cannot repay their loans. The only way to avoid these conflicts and risks would be by selling all his assets, liquidating his debt and putting the proceeds into a blind Trust operated by a third part not reporting to the President. He has refused to do this rather handing over control of his business empire to his two sons!

Trumps propensity to see the truth as whatever serves his purpose is considered. The independent fact-checker PolitiFact reviewed all the presidential candidates at the end of the nomination process and found Trump had more “Pants on Fire” ratings than all twenty-one other candidates… combined! The point is made that lying under oath about his relationship with Ms Lewinsky was a key driver of the impeachment of Bill Clinton. A series of outstanding lawsuits against Trump could result in his having to testify under oath and create a similar risk for him if he failed to tell the truth.

Of course the big issue is the Russia connection and the book provides a summary of the nature of the pro-Trump Russian intervention in the election and the many links Trump has to Russia, and oligarchs close to Putin. It charts the pro-Russia interventions made by the Trump administration and the links going back to the 2013 Miss Universe pageant which Trump took to Moscow. It also mentions the fact that, at the time, Trump had tweeted “Trump Tower Moscow is next.” Since the book was published in April evidence has emerged that Trump Tower Moscow was more than a vague dream. It appears, despite statements to the contrary, that Trump Tower Moscow is a live project. Indeed in 2016 Mr Trump signed a letter of intent about the project.

Given what we know about the actions of Trump since the election the question arises, why has he not been impeached already. The cold reality according to Prof. Lichtman is that the Republican Party has a programme of change they want to see through. It involves, tax reform, de-regulation, eviscerating climate change laws, repeal of the affordable care act, shifting investment towards the military away from social programmes, and generally reducing the role of the state. Whilst it is judged Trump is capable of delivering on this the Republicans will not move against him and their control of the House and Senate means therefore impeachment would not succeed.

Given Trump’s spectacular failure to deliver pretty much anything since he came into office the GOP may well be starting to think about plan B. If they were to impeach Trump then, theoretically, Mike Pence, as Vice President, should take over which may have looked an attractive option at some point. However, this may not be so appealing if there is a risk that the investigations of special counsel Bob Mueller finds that Mr Pence has, in some way, colluded in the Russia connection or, even worse, the cover up of the same.

It is difficult to see how President Trump can survive to the end of his first term. His propensity to dig  when he is in a hole is spectacular. Whilst it is a comment on the times a book could be published 4 months into his Presidency making the case for impeachment it is even more instructive that 6 months later the book looks significantly out of date as to the weight of evidence mounting and pressure building on this presidency.

There is a sense President Trump has created a new standard for shock. He has set the bar much higher for outrage. However, in the background the prosaic investigations of the Mueller inquiry grind on. The President may find at some point the civilised standards of ordinary people reassert themselves and that no one is above the rule of law. If he does not – God help America.

The Case For Impeachment. A J Lichtman. Harper Colllins 2017


That Fight is Ours Too…

Politics in the United States is not the obvious place to look for inspiration at the moment however Senator Elizabeth Warren’s book “This Fight is Our Fight: The Battle to Save Working People” is like a shaft of light in  a dark cave. Ms Warren is the senior US senator for Massachusetts and a Democrat. Her book provides an analysis of how the US has been transformed over the past four decades from a nation characterised by a stable and growing middle class optimistic about its future to a society riven with insecurity and fear.

She is a genuine patriot, particularly proud of the amazing growth of the middle class in the states following the Great Depression driven by FD Roosevelt’s government which took on the multi-millionaires of the time. Promoting trade unions, breaking monopolistic practices, regulating competition, investing in education for all and creating a nascent welfare state.

Warren BookAll of this meant that over the period from 1935 to 1980 some 70% of all the income growth went to the bottom 90% of the population and 30% went to the top 10%. It meant that an enormous middle class was created whose experience was of steady employment, with good pensions to look forward to and a faith their children would be able to build on the foundations they had laid and gain a better future through education and their own efforts.

Do not think Ms Warren looks back through rose tinted spectacles however, at “the good old days”. Her personal experience as a child of how precarious existence could be when her father had a heart attack and could not work prevents that. When her mother became the only breadwinner in the house and got a minimum wage job at Sears things were tight, however, in the mid 1960’s, that one minimum wage kept a family of three afloat paying the mortgage and keeping food on the table.

It is not that everything back then was perfect, it was just that there was a sense the arc of history was bending in the right direction. Since then however the arc of history has been pushed in a different direction. Whilst the cost of living has increased significantly the value of the minimum wage has plummeted in real terms and the idea that a single minimum wage, could keep a family of three afloat is laughable. The current Federal minimum being $7.25 although in many states higher rates are paid up to $15 (£9) per hour. Worse, median wages have stagnated so that over a thirty year period working Americans have seen virtually no real increase in their pay. Why is this?

One of the reasons is that in the period since 1980 to 2015 the income growth of the country mentioned above got shared out differently. The amount received by the bottom 90% was a large round number – zero. And for those who struggle with maths this means the top 10% have taken 100% of the growth. How could that happen?

Well not by accident. Back in those crazy communist days of the 1960’s the 10% started to become discontent with the mere 30% of the wealth they received. This discontent was channelled in 1971 by a confidential memo written by a corporate lawyer named Lewis Powell which was essentially a call to the rich to transform themselves in to the rich and powerful.

To do this they were encouraged to invest their wealth in gaining control of the political agenda. Whilst this included funding supportive politicians in increasingly costly election campaigns it was more insidiously about capturing the realm of ideas. To do this they should fund research, think tanks, media shows, anything which promoted their ideas. Ideas which could be boiled down to low taxes for the rich and an ever reduced role for the state in the provision of services, regulation and, worst of all, transfer payments.

Ms Warren draws on her own experience and that of a number of individuals to illustrate what that process has done to people and their life chances. She talks about Gina, the woman whose family income has halved over the past 20 years from $70k to $35k. “No crisis. No Accident. No tale of woe. Juts the grinding wear and tear of an economy that doesn’t work for families like Gina’s”

She talks about Kai a young woman who worked hard through school and wanted to work in design. She paid to go to a private University but after the first year could not afford the fees so decided to return to her home state and complete her degree there only to find the credits from the Private University were not recognised so had to repeat a year. The upshot is she now has $90k of the $1.4 trillion US student loan debt and is repaying it out of her job as a waitress.

Finally, Michael who worked hard at his job at DHL for 16 years securing a house with  a mortgage and what he though was a solid middle class life ahead. Then 2008, DHL eliminated 14,900 jobs including Michael’s. He then got a call asking if he wanted his old job back. Not his full time job with benefits though, a part time job with no guaranteed hours and no benefits. He had to take on two jobs but even then he could not pay the penalous mortgage he had been mis-sold so lost his home.

Even then he did not give up but just kept on eking out jobs here and there until he got work in a Nabisco factory putting the cream in Oreos. Just when he thought he was getting back on his feet the factory was closed and production relocated to Mexico.

The real life stories of individuals trying to live up to the myth that hard work is all that is needed to secure a reasonable living are heartbreaking. They translate debates about trade deals, de-regulation and labour rights into a increasingly depressing reality for millions of American. As “the economy” and Wall Street does well and the stock market booms the 90% get left further and further behind.

Ms Warren is under no illusion about the implications for working people of a Trump presidency backed by a Republican Congress. However she draws strength from the millions of Americans who want to stand up against bigotry, for a fairer economy and most of all for Democracy. Her battle for Democracy has implications far beyond the States. Democracy there has been infected most by the “greenback virus” but it is happening in many other places including the UK where election expense rules are starting to be challenged by being ignored. We have a common interest in Ms Warrens fight.

If this book is a kite being flown to test support for a 2020 campaign run it gets my vote. Ms Warren comes across as intelligent, incisive, authentic but most of all humane. If voters want a choice of opposites in the 2020 election she would provide it.


Elizabeth Warren. This Fight is Our Fight: The Battle to Save Working People. Harper Collins. 2017.

Dark Money

Dark Money by Jane Mayer covers a period from the early 1970’s to the run up to the Trump election. It documents in meticulous detail the amount of money spent over the period by super rich Americans, not just to secure the election of politicians  supportive of their radical libertarian views but more insidiously to shift the terms of political debate to the right.

DMThe process begins in the late 1960’s early 70’s when a number of very wealthy Americans began to fear the US was about to succumb to socialism. It may seem unbelievable now but looking back it was a time of radical foment, the rights of black Americans were being fought for, a nascent women’s rights movement was emerging, young people’s opposition to the Vietnam war resulted in 4 students being shot and killed in a protest at Kent State University.

Whilst all this protest were real worries to many on the right there were other issues about the role of the state that were of perhaps of more profound concern. The Democratic President Lyndon Baines Johnson had initiated a War on Poverty. Worse however was a proposal by Republican President Richard Milhous Nixon to create a modest basic income, an idea about which there is currently renewed interest.

In 1970 the Family Assistance Plan passed through Congress with a healthy majority but was lost in the Senate to Democratic opposition that it was not radical enough. At the time it was said “This bill represents the most extensive, expensive and expansive welfare legislation ever handled.” Not only was their bipartisan support for this proposed legislation, but it was supported by 90% of the press and popular in the country.

For some, all of this represented an unwarranted intervention by the state in the operation of the market economy. An intervention that would expand the role of the state, require increased taxation and thus impact directly on the fortunes of the very wealthy. Some decided it was time time to act.

Ms Mayer’s book focuses primarily on the brothers Charles and David Koch. The brothers engaged in active politics in the 1970’s providing financial support to the Libertarian Party. In 1980 David Koch ran as the running mate to the party’s Presidential candidate, Ed Clark who was challenging Ronald Reagan, from the right. They got 1% of the vote. From this point on the Koch’s receded from public view and over the next three decades according to Ms Mayer gave well in excess of $100m “…to dozens of seemingly independent organisations aimed at advancing their radical ideas.”

The book charts how the brothers “weaponised philanthropy”, maximising the tax benefits of establishing charitable trusts, thus avoiding inheritance tax, and then using the money from the trusts to support a series of educational and social welfare groups to promote their libertarian viewpoint. Over the years a variety of think tanks were established or supported all with the aim of ensuring that conservative ideas were made respectable.

Over time the thinking evolved and there was a recognition that in order to change opinions the elite educational institutions of the US had to be “penetrated”. This led to the “beach head” theory which was about establishing conservative beach heads at “…the most influential schools in order to gain maximum leverage.” By 2015 the Charles Koch Foundation was “subsidising pro-business, anti-regulatory and anti-tax programmes in 307 different institutions of higher education in America.” Interestingly the book reports a comment about the Golden Rule of philanthropic giving – those with the gold, rule. This was taken to a higher level when a donation of $965,000 to West Virginia University by the Charles Koch foundation came with strings. The foundation was to have a say over the professors it funded, fundamentally undermining academic independence.

The Koch’s were not alone in this enterprise but they did, and continue, to play a major co-ordinating role such that at one point the sprawling breadth of their influence in right wing political promotion was described as Kochtopussy. Ms Mayer’s book makes clear that this was not the outcome of a series of more or less random individual initiatives. Rather it was an evolving, but very conscious, political strategy to move the political goal posts. It responded to a very clear cri de coeur set out in a memo by Lewis Powell in the late 1970’s urging American capitalists to wage “guerrilla warfare” against those he saw as trying to insidiously undermine them. Ms Mayer claims his call to arms inspired some of the super rich, “to weaponise their philanthropic giving in order to fight a multi-front war of influence over American political thought.”

You may wonder whether these people were driven by a bizarre but genuine belief in radical libertarianism, where the state, taxes and regulation were perceived as demeaning constraints on the freedom of the individual. In truth their idealism was always tempered by a strong regard for their personal advantage. When congress was considering the Troubled Assets Relief Progamme (TARP) the Koch’s and their radical caucus were opposed to the massive package of  state support. This changed however when the stock market started to tank. Suddenly their wealth was at risk and opposition to the TARP was dropped.

Another fascinating insight into the motivation of the Koch brothers comes from a post mortem conducted into the right’s failure to prevent a second Obama term at one of their annual seminars. Arthur Brooks, President of the American Enterprise Institute funded generously by the Koch brothers, made the point that if the 1% want to win control of America, “… they needed to rebrand themselves as champions of the other 99%”. This theme was built on in 2014 in a paper that Richard Fink, Charles Koch’s “grand strategist”, gave to a meeting of one of their annual seminars of the libertarian super rich. The paper was entitled “The Long Term Strategy: Engaging the Middle Third”. In a perfectly candid way Fink asked the question, “We want to decrease regulations. Why?” he then answered his own question, “It’s because we can make more profit, okay?.”

One third of the electorate who were perceived as solidly on the side of the libertarians, another third never would be. This mean the battleground was about gaining the trust of the middle third. To do this it would be necessary to convince the them that libertarian intent was virtuous. “We’ve got to convince these people we mean well and that we are good people.”

Following a Supreme Court decision in 2010 known as Citizens United it was found that corporations had the same rights to freedom of speech as individuals. This overturned a century of restrictions banning corporations and unions from spending all they wanted on the election of candidates. This opened the floodgates to political spending to support congressmen and senators and the Koch Brothers took maximum advantage building a real power base which was in but not of the Republican Party.

In 2014 the Koch network invested $100m into House and Senate races for the GOP plus almost twice as much into other kinds of activism. The result was they won full control of both. Their aim was to spend $889m in the 2016 presidential race. Whilst they could not legislate for the Trump wildcard the first attempt to replace Obamacare was such a shambles because of the intransigence of the right wing caucus within the Republican Party largely made up of Koch supported Congressmen and Senators who thought the Trump proposal was too generous!

Dark Money is a sobering work which casts an unflinching light on the very private world of the super rich in America and specifically on the brothers David and Charles Koch estimated to be worth $41.6bn each. It raises all kinds of issue about the role of multi-billionaires in undermining democracy in America and reinforcing a process which is concentrating ever more power and wealth in the hands of a smaller and smaller group of super rich plutocrats.

The influence of the Koch brothers, and many others of the same ilk, is not confined to the States however. They have played a part in shifting the terms of political debate across the whole of the developed world, dragging the centre of politics so far to the right that people like Richard Nixon look like lefty softies. If one thinks about how a proposal to increase taxes on the rich in Britain today would be greeted it is a testament to how far the super rich have captured common sense and shaped it to their benefit.

This is a book that should be read widely. It’s scale will probably prevent this which is a real shame. It is a tremendous summary of a long and sustained process of the exercise of soft power through the expenditure of vast amounts of private money. If the process is not stopped it will ultimately undermine democracy.

Dark Money. Jane Mayer. Scribe Publications 2016




Will robots “Exterminate!” jobs?

In December 2016 Mark Carney gave the Roscoe Lecture in Liverpool and spoke about the challenge of automation. He made the point that, “…every technological revolution mercilessly destroys jobs and livelihoods – and therefore identities – well before the new ones emerge.” His talk reflects growing concern around the world about the impact of robotics, machine learning and artificial intelligence. Some take an optimistic position arguing we can and should race “with” rather than “against” the robots, others are more concerned about the social and economic consequences. The following books reach differing conclusions,  but pretty much all agree on the accelerating pace of change and the ubiquitous impact they are set to have on the labour market.

In 2014, Erik Brynjolfsson and Andrew McAfee published “The Second Machine Age” It followed an earlier and much shorter work entitled “Race Against the Machines”. I start with this, much quoted, work as it provides a good overview of the brynspeed and scale of change. They start out with an interesting analogy to illustrate the accelerating pace of change in information technology based on the operation of Moore’s Law. That “law” was first enunciated by Gordon Moore in 1965. Over the years the shorthand version has become that roughly every two years the complexity of integrated circuits double and their cost halve. The critical consequence of this is the power and costs of computing double and halve respectively also.

This law has proven reasonably accurate over the past 50 years which means of course the power of computers has doubled 25 times since it was first described. Brynjolfsson and McAffee then use an analogy to give some indication of what may happen in the future if the law continues. They use the, possibly apocryphal, story of the reward provided to the man who invented chess. When asked by the emperor what he wanted he said he would like rice, and the amount of rice to be the exponential sum of rice if you started with one grain on the first square of a chessboard and then two grains on the next square and then doubled again on each remaining square of the chess board.

His request was granted until the amount started to become apparent. After 32 squares it amounted to 4 billion grains of rice which is about one large fields worth. So the first half of the chess board delivered a significant but manageable reward. The problem was when they moved into the second half of the board. Geometric progression really starts to accelerate and by the time you get to the 64th square you are at 18 quintilian grains of rice, more than has ever been grown on the planet. In passing, the emperor had the inventor’s head chopped off. No one likes a smart Alec.

The point that Brynjolfsson and McAfee are making is that computer technology is now approaching the second half of the chessboard and the increases in power which have been impressive to date, will pale into insignificance as we go forward. Computer power will increase at such a rate that it is difficult to predict what the limits of its capacity going forward will be or its consequences.

When you read Brynjolfsson and McAfee you cannot but be infected by their optimism. They are clearly impressed by the speed and depth of challenge technological change is creating. Despite the optimistic tone of their writing they do see the issues which this rapid change generates. In an article for the January 2016 World Economic Forum they recognised that “Globalisation and technological change may increase the wealth and efficiency of nations and the world at large but they will not work to everybody’s advantage…” They go on to make clear “ordinary workers” will bear the “brunt of the changes”.

Further they see the negative outcomes are likely to be increasing inequality of wealth and incomes leading to inequality of opportunity meaning that not all talent will be accessed, undermining the “social contract”which underpins social order. They also state, perhaps prophetically given what happened in the remainder of 2016, “Political power, meanwhile, often follows economic power, in this case undermining democracy.”

They argue, because of all this, there is a need for greater social investment to allow the provision of good quality basic services including education. They also make the case for public sector investment to boost the economy in the short term however they also talk about simultaneously putting in place a fiscal consolidation plan. There is a bit of cake and eat it here.

Coming from a rather different position is Martin Ford whose book “The Rise of the Robots” was the FT’s surprise business book of the year 2015. Ford makes the point that Information Technology is a radical “general purpose technology” by which he means it is similar to fordelectricity or steam. These advances had implications in every area of life. Electricity effected production, transport, communications, culture and opened the way to the creation of completely new industries. IT is a similarly powerful and ubiquitous innovation, what is more the pace of its evolution is accelerating across the second half of the chessboard.

Ford focuses on the economic impact of IT on employment. He describes how the declining costs of technology and the rising costs of labour are undermining the competitive advantage of developing economies workers. Foxconn, for example, who make Apple devices in China announced in 2012 plans to introduce up to a million robots into its factories there.

Another interesting example Ford presents relates to the textile industry. This was decimated in the US in the 1990’s as jobs went to low wage economies like China, India and Mexico. But between 2009 and 2012 US textile exports increased by 37% on the back of automation technology that could now compete with the lowest wage economies on the planet. Of course this does not mean the jobs that were lost have been recovered. It means the jobs were first exported to the developing economies and have now been replaced altogether by technology. Mr Trump might find it more difficult than he thinks when he tries to bring the jobs back home.

Of course many of the jobs that have been lost to technology to date have been precisely the manual jobs which provided reasonably well paid work for the lower skilled working class. With the development of machine learning and artificial intelligence however a wider and wider range of jobs are becoming vulnerable. The success of Deep Blue in beating Garry Kasparov in 1996 was seen as a major milestone in the development of computer capacity.

Whilst this feat was impressive it was largely a result of what might be called brute computation. There are an immense number of potential chess games however they are all derived from a set of basic moves which can be easily programmed. Advantage is obtained by computing the potential future moves given any particular configuration of the pieces. As computers become able to compute ever larger numbers they can see further ahead in the game which gives them the advantage.  In crude terms their sheer number crunching ability eventually gives them an unbeatable advantage. The success at the chess board is in large part a result of quantitative advances in IT.

Some argue we are now moving in to a period where qualitative changes are being made. It may be that the scale of quantitative change leads at some point to a qualitative change but different approaches are being made to the development of algorithms such that machine learning becomes self sustaining. It is the difference between programming a computer with chess moves on the one hand and enabling the computer to learn how to play chess itself. When this is combined with natural language communication some very impressive results ensue.

One of the most impressive of these is mentioned in many of the books. It is Watson, another IBM supercomputer, which managed to beat two champions of the American TV show Jeopardy in 2011. Jeopardy is an altogether different game from chess. It does not have an easily programmed set of rules. It is based on cryptic, natural language questions which may involve humour, slang, high culture, popular culture, deliberate red herrings etc. There is no straightforward set of basic moves you start from or algorithmic rules to move forward with. The Jeopardy victory was great publicity but the remarkable capacity of the machine was not developed to win a TV show.

Immediately after the show Watson was launched as a diagnostic tool in the health industry. By 2013 it was helping diagnose health issues and design patient treatment plans at major medical facilities in the US. IBM see Watson as having a wide range of applications based on natural language information requests. It is now starting to be used by companies to review business strategies. And for the avoidance of doubt I do not mean making sure their budget numbers add up. I mean taking a view about what products should be launched when, and where R&D expenditure should be made. Of corse Watson is not the only game in town.

Eureka is a programme which was set to work out the mathematical equations which explain the  motion of two pendulums, one dangling from the other. A fiendishly difficult problem, according to those that know about these issues, and incomprehensible to those of us that did woodwork. According to Ford the programme, “…only took a few hours to come up with a number of physical laws describing the movement of the pendulum – including Newton’s Second Law – and it was able to do this without being given any prior information or programming about physics or the laws of motion.”

The implications of this level of machine learning for the professions has been analysed by R Suskind and D Suskind in their rather academic, but non the less interesting book “The Future of the Professions”. In broad terms they see robotics and automation as mainly impacting on manual and administrative jobs. However software is now set to have the same transformative impact on professional jobs.

susskindIn true academic form they begin by carefully defining what a profession is and the model of the relationship between professionals and society. The definition talks about a body of specialist knowledge; admission through the gaining of credentials; a regulatory framework and a set of common values.They then identify the problems that the current model is experiencing. Economic issues of affordability, technological challenge in the manufacture and distribution of knowledge and a growing suspicion that professional knowledge is used to blind people with pseudo-science at the behest of those with economic power etc.

One of the most interesting parts of their work is the review of what is already happening. They systematically review, Health; Education; Law; Journalism; Management Consulting; Tax and Audit; Architecture and …Divinity! What is already happening is shocking but Susskind and Susskind make the same chessboard point. Technological innovation is on an exponential path and it will have the kind of transformative impact on the professions that digitalisation has had on the music industry.

Ford’s work reinforces the same points that automated sports coverage and news articles are starting to appear regularly, if not always identified as such. Precedent searches for law practices, journal reviews for doctors, automated diagnostic programmes are all examples of where technology is starting to make inroads. Whilst currently the focus is mainly on the effective analysis and review of vast quantities of data. It is replacing the need for some of the more routine middle class functions in the legal and health professions. It is a moot point whether a computer will take Silk but each year the possibility of this happening is becoming greater. Even if this never happens, a huge number of middle class jobs are at risk over the coming years, put that together with the more mundane jobs that are going and the economy looks set to need fewer and fewer people.

It is usually at this stage in the reviews of IT and AI progress that people start mentioning Luddites and the need for us to learn from history. The point is made that 300 years ago circa 90% of the population worked in agriculture. Now it is something less than 1% in the UK. As productivity in agriculture increased other opportunities opened up for the workforce that was thus “freed up”. Another, oft quoted, example is the development of the internal combustion engine. When this replaced horses millions of jobs were lost in breading, maintaining, and  cleaning up after them. However, millions of new jobs were created in the production, distribution and maintenance of cars. Given all this we should not worry too much about the IT revolution automating existing jobs, this will “free up’ labour to move into new jobs that will surely emerge.

Ford is not so sure about this, and neither am I. As computing power becomes ever more powerful and also ever cheaper robots will become ever more flexible and may well be able to take on whatever new jobs are created. There is a qualitative difference between previous technological revolutions and the current IT based one. Previous revolutions, brought about by general purpose technologies such as steam, electricity and the internal combustion engine, have been about introducing a source of brute power which humans use to magnify their efforts. Initially IT did something similar magnifying our physical capacity so that, for example, highly automated Amazon warehouses could replace a huge amount of manual labour. However IT also magnifies our intellectual power, indeed in terms of the storage, retrieval and manipulation of data machines have far exceeded man for decades. Whether at some point machines cross the Rubican of consciousness is in some ways irrelevant. There are millions of sedentary jobs which currently middle class workers do which are at risk. The internet of things linked to a machine which has the capacity to have a natural language “conversation”, whether they understand that in some conscious sense or not, means enormous amounts of intellectual work will disappear as far as humans are concerned.

Ford certainly feels we are moving into a new economic paradigm where substantial numbers of people will be redundant in the very strong sense that there labour and intellect is not needed, not just by a company or an industry but by the economy as a whole. This concern is shared by another interesting writer on the subject, Ryan Avent in his book “The Wealth of Humans”.

Avent disagrees with the view that the digital revolution is radically different from what has gone before. He argues the economic process is very much in line with what happened in the industrial revolution. At that time society had to make a trade-off between “…new and improved goods, services and experiences at lower costs in exchange for social and economic disruption.” (my emphasis) Avent looks at the continuities of economic processes between the industrial and the digital revolution. Specifically he looks at the concept of scarcity and how that determines cost. He sees, like Ford and others, that labour is becoming more and more abundant. In this context labour “finds itself settling for a shrinking share of income – and is increasingly irrelevant in the taking of important economic decisions.”

Given that labours bargaining power in the economy is limited and it no longer has the power of trade unions to artificially boost its scarcity to increase its bargaining power, it has to turn to aventpolitics to protect its position. If the existing political elites do not seem to be responding then it is increasingly likely labour will turn to “…radical political movements that offer the possibility of political expression and economic power.”

Avent charts the way the economy has evolved over the past few decades, and how, what he terms, social capital has increased in value. He defines social capital as “contextually dependent know-how, which is valuable when shared by a critical mass of people.” He makes the point that 80% of the value of Standard and Poor’s 500 companies is now “dark matter” or “the culture, incentives and tacit knowledge that makes a modern company tick.” In other words an enormous proportion of value is created socially. At a national level social capital is within institutions like, the rule of law. However, the rule of law isn’t a thing, it is an emergent property arising out of the willingness of a citizenry to accept certain processes that substantiate the rule of law in practice. As Avent sees it, the benefits of the collectively created social capital of the digital economy are going increasingly to the owners of financial capital. Further he thinks that “… this mismatch is a source of significant economic trouble.”

I started this article with an analogy about the geometric progression of computer power. We are now entering the second half of the chessboard and thus the pace of change in relation to AI, machine learning and robotics is likely to be even more spectacular than in the past. There is another issue that is picked up in some of the books above and illustrated by a story, again possibly apocryphal, about a visit by a trade union official to a modern Ford Motor plant. The official is being taken around by Henry Ford Junior. Mr Ford is extolling the virtues of the robots which produce the cars without the need for food breaks, trips to the toilet or holidays, 24/7 and 365 days of the year. The never complain or argue for higher pay. At the end of this paean for the robot the trade union official turned to Mr Ford and asked. “And how many cars do they buy?”.

During the enclosure movement it was said that sheep ate men. Some think now that software is eating men. I hope new jobs do come and they are like the physically and socially sustaining jobs that emerged in the post-war trente glorieuses. Jobs that enabled people to have a reasonable standard of living and a sense of their own worth as part of society. I have my doubts however and think Avent is probably right when he comments on how the the global economy has evolved in recent years  and concludes”…the hardest part in finding utopia is not the figuring out of how to produce more. We’ve managed that. The hard part is the redistribution.”


The Second Machine Age, E Brynjolfsson & A McAfee. Norton Press 2014.                                   The Rise of the Robots, M Ford. Oneworld Publications 2015.                                                             The Future of the Professions, R Susskind and D Susskind. Oxford University Press 2015.      The Wealth of Humans, R Avent. Allen Lane 2016



Makers and Takers – Rana Foroohar

Ms Foroohar is a Time economic columnist and CNN global economic analyst who has written one of the most scathingscreen-shot-2016-10-31-at-15-14-50 books about the American finance industry I have read. It addresses the process of financialisation, a process as ugly as its name. In essence it is about the transformation of the banking sector from something that sustained Main Street businesses in a solid, if slightly boring way, to something which now dominates and, more importantly, sucks the lifeblood from the very businesses it previously supported.

One point which is worth stressing from the outset, Ms Foroohar is not anti-capitalist. She is one of a growing number of people who are supporters of free market capitalism but who are very concerned with the way it is evolving. As she states at the outset, Ms Foroohar is “…not in favour of a planned economy or a move away from a market system. I simply don’t think that the system we now have is a properly functioning market system.”

She begins by considering the way finance has expanded dramatically over the past 40 years and particularly how it has shaken off the shackles of post 1929 depression. One example is emblematic of the way banking has moved away from a highly regulated sector is a piece of legislation called Regulation Q. This prohibited banks from paying interest on current accounts and controlled the level of interest that could be paid on other accounts. Its purpose was to “prevent banks from competing too vigorously with one another … which might in turn push them into the sort of risky investments that had precipitated Black Tuesday in 1929.” The aim of this and other regulations like Glass Steagall was to ensure banking remained a “safe boring utility”.

This regulatory framework remained robust and effective throughout the 30’s, 40’s and 50’s. In the 1960’s however things began to change. Ms Foroohar illustrates the shift of the sector through the history of National City Bank which ultimately became CitiCorp, the classic too big to fail bank. Specifically she charts the career of Walter Writson the Chief Executive of Citibank/Citicorp from 1967 to 1984, one of the most influential commercial bankers of his time. In essence he wanted to move banking out from being a low risk, low profit, highly regulated sector to something much more glamorous.

Writson’s actions, in terms of challenging regulation, dreaming up increasingly complex products to get around the rules, increasing the leverage of the bank and changing the compensation structure were things that would be repeated across the sector undermining the commitment to regulation so that bit by bit it was repealed with Jimmy Carter deregulating interest rates (Regulation Q) in 1980 and then critically Bill Clinton repealing Glass-Steagall in 1999.

The result was an explosion in banks turnover and the development of increasingly sophisticated financial products and derivatives. This led to increasing  profit levels which in turn drove a series of behaviours to protect and develop those profits which were more or, increasingly, less legal. Even the activities which were perfectly legal changed the risk profile of banking and its relationship with the businesses it was supposed to be encouraging and generated enormous systemic risk which exploded in 2007/08.

Whilst the inherent risks of fractional reserves and complex debt instruments like Collateralised Debt Obligations, made famous by the credit crunch, are important, the less legal side of the industry should not be overlooked. It is a staggering fact the  industry paid £139bn in fines between 2012 and 2014 for: rigging Libor, insider trading and a great deal more (and of course this is just banks within the USA in a 3 year period!). In the massively profitable finance industry however the view seems to be that fines are simply another cost of business.

Over the period that the finance “takers” were in the ascendancy at the same time the business “makers” were under attack. The growing importance of finance was leading to the development of what some have called “quarterly capitalism”. This meant that stock price was everything and it had to move upwards every quarter. The heroes of shareholder value, like Jack Welch of General Electric (Manager of the Century according to Fortune magazine), came to be seen as the models for business leadership. These were people whose interest in engineering was more financial than mechanical. Ruthless cost cutting, getting rid of jobs and reducing investment in R&D to feed the ever demanding stock market.

Those businesses which did not employ the right staff to do this internally were targeted by what used to be called corporate raiders but are now more politely called “shareholder activists”. These individuals, like Carl Icahn, buy sufficient shares in companies to replace existing management with more aggressive mangers who will take the “hard decisions”, cut cost and increase shareholder returns. They may also sell off valuable assets or break up the company to extract value.

This might be seen as the kind of process that Schumpeter described as “creative destruction”, getting rid of the dead wood. However, a growing body of evidence suggests that the stripping out of value is actually undermining the economy not making it more efficient. Evidence is emerging that private companies, i.e. those that have not gone to the market and become public have better track records of investment in R&D, staff and capital and more critically long term profitability.

Public corporations are bizarrely now borrowing to fund shareholder dividends and share buy backs thus artificially pushing up the value of the remaining shares. Why borrow to do that? Like Apple, to avoid having to bring the massive pile of cash from profit you have made abroad back to the States where you would have to pay tax on it.  According to Foroohar corporations have invested around 10% of every dollar they borrow into their company and 90% into shareholder payouts. This means the role of stock markets has reversed. Instead of wealthy individuals investing in new productive capital, rather, companies have been making payouts to the wealthy individuals. This might be morally objectionable but more importantly it does not provide for sustainable capitalism. This is cannibalistic capitalism, its eating itself.

Over the years another phenomenon has emerged consistent with the old adage, if you can’t beat them join them. GE probably the most significant engineering company in the world, decided the finance department should become a profit centre. It created GE Capital which was to all intents and purposes a bank but not registered as one. Not just any bank, in 2013 the Financial Stability Oversight Council declared GE Capital to be a systemically important financial Institution and thus subject to Federal Reserve oversight. What could have made them come to this snap decision? Because in the 2007/8 crash it was bailed out by the American taxpayer to the tune of $139bn.

Ms Foroohar’s book explores the way “financial speculation is playing a greater and greater role in fueling volatility in commodities…”.  Since 2000 there has been a fiftyfold increase in dollars invested in commodity linked index funds. Several things are pointed to as having pushed this: Goldman Sachs creation of a commodity index fund; deregulation of commodity markets; the credit crunch that scared people out of stocks; and the $4.5bn QE exercise. This financialisation means that businesses now have to compete with their banks for commodities. If this sounds weird it’s because it is and one example makes the point.

Goldman Sachs bought up thousands of tons of aluminium which it then controlled the supply of. By doing this of course they were able to control the price and thus increase the value of their investment and any commodity trades that they had done in relation to aluminium. Whilst this was an issue for Coke Cola, in that it put up the price of their cans, the wider speculation in commodities had much more significant effects.

In 2003  big investors were putting $13bn into commodity index trading, by 2008 it had risen to $260bn. Over the same period the price of 25 commodities including cattle and heating oil increased by 183%. When asked whether institutional investors were contributing to food and energy price inflation the unequivocal answer given by Michael Masters, a hedge fund manager was “Yes”. This means speculators were gambling with products that meant people ate or starved, and many starved.

Ms Foroohar addresses the fact that many of the people and institutions that have been involved in this process of financialisation have benefited spectacularly with astronomical reward packages and profit levels. She goes on to review how they spend hundreds of thousands of dollars to avoid paying tax on their enormous earnings. She also looks at the phenomenon of the “revolving door”. This is the process whereby elected officials and appointed civil servants, charged with regulating the financial sector, move into their posts from the very sector they are regulating and move back into the sector when they retire from public life. She suggests the opportunity to sit on the Board of a large financial institution may colour the view of regulators whilst they are doing their job in the public sector. Whether this is true or not is increasingly beyond the point. Many Americans think it is true and that is what matters.

Financialisation is  one, if not the, most significant trends that has occurred over the past 30-40 years. Ms Foroohar’s claim is that it has sucked the lifeblood out of Main Street America, undermined investment in innovation and productivity and thus the future of the nation. Putting finance back in its place will not be easy. It means empowering the makers which would involve a genuine and major shift of power. Ms Foroohar sets out a sensible programme of reform. My concern is that people rarely give power back it is usually taken from them and the result of that is not always sensible. Lets hope this time it will be different.


Takers and Makers: The Rise of Finance and the Fall of American Business: R Foroohar. Crown Business 2016

Hillbilly Elergy

This is a timely look at the viability of the American Dream. It is an autobiographical account of one hillbilly’s transition from a “broken home” childhood in a lower-working-class family, into a graduate of Yale Law School. I place “broken family” in inverted coma’s because the book challenges the glib labels that are placed on people and experiences. If this book does one thing it takes you into the complexity and contradictions of life amongst the poor white communities of the United States.

img_1542This is an insiders’ take on what it is like to live in a family where fierce loyalty and random neglect coexist. Where love and hate are two sides of an indivisible coin. Where parental violence is commonplace and serial relationships are the norm. Where a mother will demand a urine sample of her young son in order that she can pass a random drug test at work.

The author paints a picture which captures the ambiguity of the strengths of hillbilly life with its strong commitment to family and national loyalty. It describes how these strengths carried to extreme convert family loyalty into blood feuds and patriotism into a deep distrust of outsiders. Whilst the book is very much focused on the detail of the lives of individuals it is set against the economic backdrop of the migration of hillbillies from the poorer regions of Appalachia to places like Ohio, Indiana and Michigan.  The context is one where poor white Americans leave areas of decline to escape poverty and look for a new life in the industrial heartland of America being built just after the last war. This economically driven dislocation had its costs and casualties although the question is raised to what extent these were caused by the dislocation or were inherent in the codes of honour and double think of some existing aspects hillbilly life in the Appalachians.

Despite the fact his mother had a succession of partners and an addiction to prescription drugs, and despite the fact that she would occasionally threaten serious violence to her son and daughter, the author recognises that he was lucky in having a maternal grandmother and grandfather (Mamaw and Papaw) and a sister that provided points of stability, a permanent refuge and unconditional love.

Reading the book you feel the author would certainly have struggled had it not been for the unsentimental but solid support of his grandparents. He recalls how Pawpaw would spend hours helping him with his maths and taught him that, “…lack of knowledge and lack of intelligence were not the same. The former could be remedied with a little patience and a lot of hard work. And the latter? Well I guess you’re up shit creek without a paddle”. His Mamaw would always open her home and heart to him when he needed respite from his mother, even when she was in her seventies.

This is the same Pawpaw who had spent a large part of his early married life drinking and fighting with his wife Mamaw who herself was reputed to have killed a man. These are rough diamonds, at times, very rough. There is no sentimentality in this book, but there is an underlying theme of redemption. No one is all evil. People do good things even if most of their life they do the wrong thing. And most of the time when they do the wrong thing it is without either malice or forethought, and mostly to their own detriment. But to understand all is not to excuse all. Whilst the author records  Pawpaw recognises the extent to which he as failed his daughter in the past and is therefore in some sense responsible for her shortcomings as a mother this does not absolve her of all responsibility.

The ambiguity of reality is everywhere in this book. His mother, who he had, at best, a tempestuous relationship with, reinforced within him the view that education was important, taking him to the library and getting him a library card. She may not have nurtured it and created the best environment for it to flourish but she inculcated the benefits of learning into what was clearly a receptive mind.

A real strength of the book is the balanced and clear focus on the stresses and strains of life in poor families. Families where aspiration is a job not a career, where education is girlie, where arguments replace discussion and where fights replace arguments. Where the most innocuous of slights can become the subject of blood feud and where contradictory beliefs can be held, and fought for, without apparent hypocrisy.

The book has been picked up in the US by many on the right who claim it shows that individuals need to accept responsibility for their own failings.  The author may well be a patriot, he may well vote republican, he may still cling to the American Dream, but he has a clear view that the Dream is something that is getting harder and harder and that for folks from his background tantamount to impossible. Whilst he does argue strongly for personal responsibility, he also recognises the social, economic and psychological forces that weigh down upon and shape peoples actions. He does not offer easy solutions. He raises difficult questions and does so with an empathy and personal understanding for those that face the dilemmas of poverty.

His focus is on the cultural and personal issues, which undermine the Dream. This might be seen as a rerun of the “culture of poverty” thesis, which focuses responsibility for poverty on the communities that are poor. They are trapped in a culture of their own making which keeps them in poverty. I think his view is more subtle than this. I think he sees the interplay between the loss of employment in the rust belt and the decline into drugs and alcohol abuse and all that goes with that.

What he does do is wrestle with where one draws the line on personal responsibility. Whilst he recognises that not everyone has a Mamaw or a Pawpaw in their life he does not accept the view that people are simply the product of their environment and cannot be held to account personally for their decisions.

There is a touch of the Ayn Rand rugged individualism about his position. At one point he talks about the fact that his Mamaw could not leave bicycles locked up out on the porch for fear they would be stolen, or that someone had to sell his mothers house because he could not rely on his neighbours not to wreck it,  or that his Mamaw was afraid to answer the door to a neighbour who pestered her for money for drugs. He goes on to say, “These problems were not created by governments or corporations or anyone else. We created them and only we can fix them.”

Whilst some of us think there are things which governments and corporations do which directly contribute to these problems, it is a mechanical mind that thinks this is not tempered and mediated through real individuals making real choices which carry moral responsibility. Clearly, there are massive differences in the life chances of individuals and the author speaks very eloquently about the different environment, nay world, that “the rich” inhabit, a world full of social capital, and an understanding how to use it. But he also never loses sight of individual choice.

What is indisputable is that the author provides an intimate and clear-sighted view of what it is like to grow up in a family which has little money and a lot of uncertainty in the richest country in the world. He also describes the intimate stresses and strains of moving from a lower working class background to a solid middle class future. The constant fear of being “found out”, of discovering at university that a mistake had been made and your entry grades confused with someone else’s. If you have any experience of that transition the authenticity of the book will shine through.

Early in the book he says he recognises that he is a “hill person”. He goes on to say “So is much of America’s white working class. And we hill people aren’t doing very well.” This is certainly true and I suspect is part of the explanation for the popularity of Trump. I recommend this as an interesting and timely take on the life experience of poor white Americans.

JD Vance. Hillbilly Elegy: A memoir of a Family and Culture in Crisis. William Collins 2016