First, I don’t think many people writing an application or going to a job interview realize that the person on the other side of the desk can be almost as nervous, stressed and under pressure as the applicant – maybe not in that exact moment, but about the whole hiring decision in general. If as a manager you make a bad hire, you cost your company a huge amount of money and time, you risk your own reputation and job, and your own workload gets only bigger while you try and sort it out. This means that there are incentives for interviewers to be risk averse and to hire someone they are sure as possible can get the job done well. Therefore, as an applicant it might be a useful strategy to do what you can do be a compelling candidate without triggering alarm bells that might make the hiring manager or HR person any more nervous than they already are. (As an aside, I believe this is a key reason for why candidates with personal recommendations get so often put to the top of the pile – their perceived risk is far lower when someone known is willing to vouch for them.)

To this end it might be useful for applicants to put themselves in the interviewer’s shoes and ask themselves “what would make it easy for this person to hire me?”. Since it’s hard to know this without actually talking to people in the company (that kind of intel is never in the job description), good questions to ask a potential boss or colleague might be along the lines of ”what parts of this job do you think it’s most important that I excel at in order to get the job done efficiently and effectively (subtext: how I can I make your life easier)?” and “what kind of person have you seen perform the best in this kind of role previously (subtext: which characteristics might you lean or be biased towards based on previous good or bad experience)?”. You want to do research and ask questions that help you a) know what is viewed as a good fit so you can present accordingly, and b) signal subtly that you appreciate that this is a big decision for the interviewer and you are confident that by choosing you they won’t make their life harder.

Second, not all positions are alike: a colleague recently pointed out to me that one important distinction is between positions that are “perform” hires, and those that are “develop” hires. Even if the hiring manager isn’t thinking in those terms, I reckon it’s very useful to know which bucket the position falls into before the interview and prepare accordingly.

For a “perform” position you’re being hired to execute on something that needs doing (often urgently), and the best candidate is someone with a solid track record doing exactly that. A lot of temporary positions fall into this pile, so do many senior positions, and it pays here to focus on tangible stories of past experience and success. Making life easy for a boss means being able to rapidly adapt to the idiosyncrasies of the organization while transferring your existing skills to the problem at hand. Your value will come from being able to be seen as competent quickly and to ease the burden on the team. It may help a lot if you can start immediately!

However you might also be applying for a “develop” position where the majority of what you need to do well comes from being familiar with detailed organizational processes, intricate politics or proprietary technologies, or where you’re simply expected to do a fair amount of training or other form of “getting up to speed” before being seen as competent at the job. In this case it’s your potential that you need to signal as one of your key attributes, ensuring the interviewer knows that you’re aware that learning, flexibility and commitment are important. Your value will come from being a pleasant, quick learner who is willing to stick around and make good on the time and training the organization will invest in you. (NB: Beware of jobs where the interviewer signals immediate “perform” expectations in a complex “develop” environment – you might be signing up for a tough ride in the first six months or so!)

Both of these tips require you to think of the motivation behind the position in the first place and the decision-making processes that will guide the hiring manager, which is easier said than done. However any advance information you can get on either of these elements before applying will in my experience help a lot. At least if it happens to be me on the other side of the table or skype connection…

I can see why EIU thought I’d like it – it dovetails very nicely with the Forum’s Global Risks 2011, supporting our Global Risks Survey data with slightly more recent data. As with our work, EIU asked respondents (among other things) to assess the likelihood and impact of range of global uncertainties, then married that with expert interviews. Apart from taking 1 year rather than a 10 year outlook, what’s different in the EIU approach is that these are termed “scenarios” and, from what I can gather from the helpful appendix showing the results, were posed in two sets – the first set being clearly negative “scenarios” (e.g. Break-up of the Eurozone), and a second being rather more positive “scenarios” (e.g. Housing industry in the US rebounds).  Thus, their impact axis, rather than being purely negative in cost terms (as the Forum’s is), goes from “Very positive” to “Very negative”. While the pedant scenario planner in me would rather think of these as fairly thinly described events rather than true scenarios, the use of positive events is a neat twist on the impact-likelihood matrix. As the most interesting chart doesn’t seem to be in html form on the EIU website, I’ve uploaded it here:

While I appreciate the survey and display innovation (and should add that the supporting analysis is solid) I wanted to put down a few reflections about the results which contributed to some the discussions here in Riyadh.

At first glance, the results shown in the chart above give the impression that investors are pessimistic or bearish, as it appears that the positive scenarios are, as a set, both less likely and less positive than the negative scenarios are likely and negative respectively. Only one positive scenario (The Internet and social media are a catalyst behind rapid political and economic change around the world) making it into “likely” territory, as opposed to five negative scenarios, four of which are “highly negative” for investors.

What can explain this? Of course it could be that people simply see negative scenarios as more likely and of greater impact than positive scenarios at this point in time, as various economic, social and political pressures create greater-than-normal systemic fragility and/or negativity in investors minds. However, it’s also possible that this distribution results from biases within the positive scenario set that was chosen – driven in turn by the fact that it is simply more difficult to come up with positive scenarios that sound reasonable than it is equivalent negative ones.

For example, while I personally love the cluster of global-governance related events in the top left (the result supports our analysis in Global Risks 2011 of the current state of multilateral decision-making), having a large proportion of positive scenarios as events that require coordinated action over longer time periods (such as Agreement of global accord to replace the Kyoto protocol on climate change), while having negative scenarios that are more general and distributed could be skewing the outlook somewhat. Could the survey have corrected for this by including intermediate steps along the way to a global accord, perhaps, which could be more reasonable in the time frame of the survey, yet still have positive impacts through market signalling?

Perhaps. But, to be fair, the report doesn’t make any claims about optimism or pessimism from the distribution of results in this chart. (In fact, the report is largely based on answers to questions not linked to this chart, with answers to other questions indicating a generally positive, if cautious, outlook globally.) And while part of me feels that there’s been a missed opportunity for the survey makers to think up a range of other possible positive events that would represent intermediate points of generalized opportunity, when I try myself, besides news of specific technological breakthroughs (cure for most types of cancer, amazingly efficient solar technology), I realize it’s far from simple to create such stepping stone scenarios. But the fascinating question for me in all these exercises is “what have we left out?”. For an entirely negative set, sometimes it’s a relief to stop thinking about quasi-black (charcoal?) swans. But I’m very much drawn to taking this question further in the case of white (double rainbow?) swans. Most scenario thinkers will agree that positive scenarios are the hardest to write, as they tend to smack of implausibility. And of course I realize that criticizing EIU’s choice of scenarios puts me in a glass house – our risk set is also open to criticism for not being MECE and levelled across categories too.

Second, I detect some interesting inconsistencies in the results that could be the result of packaging the survey questions into a “negative” group and a “positive” group (if that is indeed how the questions were asked – see pp32 to 32 of the pdf), with the divide creating artificial space between otherwise correlated scenarios. For example, the scenario The Internet and social media are a catalyst behind rapid political and economic change around the world is seen as likely and having a positive impact on investor’s portfolios. Yet, Further political turmoil in the Middle East, while similarly (although more) likely, is seen as having a highly negative impact on portfolios. Given the one year outlook and recent events in the MENA region (which have been, accurately or not, firmly linked to the Internet and social media, as Egyptian, Libyan, Tunisian and Syrian attempts to control these have shown), I would have thought that respondents would have seen these two scenarios as positively correlated, dragging down the perceived beneficial impact of the Internet and social media. An alternate explanation could be that respondents overwhelmingly associate these technologies with good things, though personally I would have predicted more negative associations with “rapid political and economic change”. Perhaps it is simply that the words “Internet” and “change” are far more positively viewed by respondents than “turmoil” and “Middle East”, and the result would hold even if if the scenarios were not sandwiched among other positive and negative scenarios respectively.

There is also an interesting tension between the perceived optimism of respondents regarding the Internet’s (typically leaderless and decentralized) power to have a positive impact via rapid political and economic change within a year’s time, and the perception that concerted efforts by multilateral institutions are very unlikely to achieve an equivalent impact over the same time period. This result is unlikely to be explained by the survey design. People simply must have more faith in the power of the iPad2 than the G2. Hmm.

In fact, it is the tension in this diagram and these results that makes it interesting, which brings me back to being in Saudi and why I’m writing this at all, having spent far longer than I normally would going through a report of this type.

Reflecting on these issues on the flight to Riyadh last night proved very useful. Early on in today’s workshop on Saudi Arabia’s evolving business environment, one of the participants made the point that it was important to look at investor perceptions of both the Middle East and Saudi to understand potential capital flows. Thanks to the Forum’s global risks matrices and systems diagrams (with their links to geopolitical risk) and the above chart, we had a lively and productive discussion about what distinguishes Saudi Arabia from the rest of the region. I won’t go into the ensuing debate, but I was very glad that I had spent some time thinking about how we perceive global risks and opportunities related to the region. And as most of the world’s organizations try to come to grips with these topics in a time of turbulence, I’m pleased that the Forum, EIU and many others are innovating in terms of how we identify and assess uncertainty using a combination of perception data, expert input and quantitative analysis. It’s possible to find flaws in every approach to assessing risk, but any approach that drives strategic conversations and dynamic debates is valuable.

Filed under: Random Musing ]]> http://nicholasjdavis.wordpress.com/2011/06/13/perception-perception-2/feed/ 1 Nicholas Davis EIU chart http://nicholasjdavis.wordpress.com/2011/06/08/the-benefits-of-percolation-aka-omg-greece-aka-vale-eurozone/ http://nicholasjdavis.wordpress.com/2011/06/08/the-benefits-of-percolation-aka-omg-greece-aka-vale-eurozone/#comments Wed, 08 Jun 2011 11:51:53 +0000 Nicholas Davis http://nicholasjdavis.wordpress.com/?p=783 ]]> Note: I wrote this last weekend and didn’t post it as I wasn’t quite happy with it. Since then, according to some side mentions in the German press, it does indeed look like the ECB will agree to debt restructuring in the Eurozone periphery countries (despite ongoing official speeches to the contrary). Apologies for the length – too busy to write a shorter blog post...

One way in which I’m justifying the fact that it’s been 77 days since I last wrote a blog post is the argument that it is valuable to leave the brain fallow for a while. I’m a big fan of “percolation” – raising an issue or question, then letting a day or so pass before returning to a detailed analysis of the issue. So I like to think that what’s been happening these past few months is a crucial period of percolation prior to some awesome, insightful blog posting.

Of course that might be true if I hadn’t been destroying brain cells through excessive travel, lack of sleep and a fair amount of whisky consumption. Worth it though – since I last posted I’ve been to two fascinating conferences in Estonia and Oxford, spent almost 3 weeks in Australia attending my little sister’s wedding and meeting great people in Adelaide, Brisbane and Sydney (not to mention attending a lot of late night phone conferences), and kicked off an exciting new project titled The Political and Economic Implications of Resource Scarcity. And I’ve enjoyed a fair amount of Springbank and Ardbeg, my two favourite whiskies along the way.

However of all the big things percolating in my brain over the last few months, the biggest is what’s going on around me here in Europe at the moment. Not sexist E. Coli, but rather Europe’s sovereign debt crisis that I’m worried is about to get less theoretical and more real in the form of a European banking crisis.

It seems that both markets and politics are finally catching up with the underlying economics of Greece and Ireland’s debt situations: namely, that both are technically insolvent with almost zero chance of paying back the money they’ve been lent, even given the large bailout packages they’ve already received and the austerity measures they’ve been forced to adopt. For the background story to Greece, see Michael Lewis’s Vanity Fair article “Beware of Greeks bearing bonds”, and for the same on Ireland (both told amazingly well by the way), see his companion article “When Irish eyes are crying“. Highly recommended articles.

Right now, thanks to investor jitteriness, the cost of debt to these countries is so high that they can’t even “ponzi” their way out by paying old debts with new borrowing. That means that as their various debts become due they will simply be unable pay them without help, leading to a default on the debt and some big problems – namely the flight of capital from those economies and the negative impact on European banks that are holding these countries’ debt, which will in turn need recapitalization. So, everyone agrees, help is needed. That help could come in two forms – by agreeing with the people they owe that they’ll pay less, or slower than originally agreed (a “restructuring” of the debt), or by receiving ongoing handouts from non-private investors such as the ECB, effectively meaning that taxpayers in the rest of the Eurozone take those debts on.

The problem has been that neither of these options have been taken seriously until now – the Germans and European Central Bank have been resisting any suggestion of restructuring (claiming, at least until recent talks, that restructured debt would no longer count as collateral against official support in the forms of current and future loans needed for liquidity), while politicians and populations in the rest of Europe see open-ended support and continued bail-outs as both politically undesirable (the conservative Germans paying for the profligacy of the Greeks!?) and potentially impossible anyway (while Greece could be saved, under current structures and trends, there is just not enough money in the combined bail-out mechanisms to cover Greece, Ireland, Portugal and Spain, to say nothing of Italy).

As Martin Wolf said on Tuesday, the Eurozone is now in a situation of intolerable choices - it seems politically impossible to create the financial integration and ongoing fiscal support that the region would need to cope with the debts in periphery countries (though Trichet is now hinting at Euro authorities taking over running the Greek economy!), yet it is economically almost unimaginable to see how an exit from the Eurozone by any country (Germany on the strong side, the PIIGS on the weak side) wouldn’t result in complete chaos. My fear is that it is politically “easier” from a domestic point of view to push for exit (which might be achieved unilaterally, for populist reasons, by a single country), than it is to corral support among member states and create even greater integration, particularly after what has happened so far.

I’m now convinced (though would be very happy to be proved wrong) that the central scenario and strategy espoused by the ECB and others of fiscal austerity, economic restructuring and sales of public assets combined with continuing (but limited) financial support from the EFSF, EFSM and IMF is almost completely implausible, even given the measures being discussed now to create new bail-out packages. According to an excellent report by Bruegel it is nigh on impossible for the Greeks to pay down their debt. Bruegel calculates that to reduce Greek debt to a more sustainable 60% of GDP by 2034, under an “optimistic” growth scenario the Greeks would need to run a primary surplus of 8.4% of GDP for the next 20-odd years. Under a “cautious” scenario the surplus required is 14.5% of GDP. To put that in context, the Bruegel report points out that “over the last 50 years, no OECD country (except Norway, thanks to oil surpluses) has sustained a primary surplus above six percent of GDP”. And until recently Greece has been running massive fiscal deficits – EIU data says that in 2007 Greece’s deficit was 6.4%, growing to 9.4% in 2008 and a massive 15.4% in 2009. With estimates of continued deficits of 9.7 and  8.1 over the next two years, you can see how hard it will be for Greece to pay back its creditors.

So, I’m calling that we will see some form of restructuring of Greek debt soon (not called restructuring, but “re-profiling” perhaps), combined with even more draconian measures on the ground, including fire-sales of state-owned assets and wage cuts. We might even see the Greek’s agreeing to some loss of sovereignty in the form of central management of their banking sector and public finances by the EU.

However even with I’m not sure that this will work. At the end of the day, what is needed is that the PIIGS economies create a situation where their citizens wake up and are productive in supplying goods and services to one another and the rest of the world in such a way that there is a surplus for their governments to tax in order to pay back their massive debts. And, as I’ve argued above, with the threat of ongoing public unrest, the psychological pain (and deflationary impact) of cuts to wages and living standards, and opportunities for populist grand-standing, the pressure in my mind is towards a Eurozone breakup in some form rather than the deeper financial integration that would be required to make it work. Scary stuff.

The fact that it doesn’t try to make sense of events after the fact, but instead provides a collection of articles “as they happened” (so to speak), is actually quite helpful. For example, some of the articles focus on the “will they / won’t they” questions about regime change in Egypt and Tunisia before Ben Ali or Mubarak stepped down – such musings may seem irrelevant now but the thinking behind them still applies to countries such as Saudi, Jordan and Morocco.

Reading the articles, and the fact that I also need to work on our Mediterranean scenarios tonight, got me thinking again about the range of post-revolutionary scenarios for North Africa and the MENA region and the link to generational succession.

The three scenarios most commonly discussed seem to go something along the lines of:

Scenario 1: The blooming of “true” Arab democracy.

Seemingly against the odds, the person on the Arab street (presumably aided in some way by a Facebook account) is finally able to participate fairly, fully and directly in the governance of her country. This participation is peaceful and productive as the advent of a fair process in a climate of optimism is legitimized and held to be more dear than the specific outcome – hence new constitutions are ratified that maximise political and social freedoms, and new elections are hailed as free and fair. Consensus is defined as “I may disagree, but I can live with it and will support it”. The people “own” the results. The resulting coalitions of interest groups who form government(s) are tolerant and celebrate each other’s strengths, bound together (both nationally and regionally) by a common vision of maximizing prosperity for all while refusing to be tempted to trade their hard-won freedoms for the promise of “stability” (often artificially threatened and created). As a result, while decision-making and the economic and political environment is initially messy, reforms proceed in such a way that they eventually lead to a far fairer distribution of wealth, new employment opportunities and a flourishing of entrepreneurial activity among younger generations. Over time this translates into far higher standards of living and competitiveness for the entire region.

What would indicate we are moving in this direction? The proliferation and use of websites like Egypt’s Dostour2011 (use the Google translate bar to read it unless you can read arabic!) to engage previously un-consulted segments of the population on crucial elements of government policy and the post-revolutionary structure. Increases in entrepreneurial activity by youth.

What would indicate we are moving away from this scenario? For Egypt, a failure to fairly rapidly adopt a new constitution. Prolonged internal instability, violence on the streets, a drawn-out war in Libya, the co-option of key institutions by old elites who play only lip-service to the youth.

What are the major implications for the rest of the world in this scenario? New investment opportunities for foreigners, but in an environment where new relationships must be formed. A resurgence of regionalism in the Arab world that will change power dynamics in foreign policy and commerce, particularly for Europe.

Scenario 2: A messy and destabilizing transition that leads to regional conflict.

A combination of in-fighting between post-revolutionary factions, the reluctance of incumbent/overthrown sources of power to relinquish control, and the actions of a range of powerful destabilizing forces (including external powers) leads societies into prolonged periods of social, political and economic chaos. As “legitimate” protest is threatened, quashed or squeezed out by lack of progress and more sinister elements who are willing to use violence as a tool, Al Qaeda, Islamism and extremist social and political views play an increasing role in the political discourse. The internal instability leads to the “hollowing out” of the region. Old elites and new faces cycle in and out of power as stability is sought with increasing desperation but is not found. Instability within countries spills over to create instability between states. Ultimately, the people on the street are even worse off than before the revolution, and the entire world suffers from a region wracked by uncertainty and conflict.

What would indicate we are moving in this direction? Long delays in constituting new governance models, the spread of violent stand-off tactics by governments facing popular protest (e.g. the Libyan model of government resistance is replicated elsewhere), the Libyan war spills over into other countries, a very messy situation in Saudi Arabia etc

What would indicate we are moving away from this scenario? A surprisingly quick transition to open, transparent democratic systems in Tunisia and Egypt. Reforms promised in other countries are undertaken with alacrity. Economic outcomes for people on the street improve thanks to strong growth and investment.

What are the major implications for the rest of the world in this scenario? Sky-high oil prices threaten global growth, migration flows to Europe create social stresses and further instability around the Med, security concerns create ever-greater transaction costs to business and the movement of people and goods.

Scenario 3: Plus ca change – regime capture by the old elites.

Despite the hopeful media reporting and the promise of change by government representatives and community leaders, the region experiences revolution only in name, as slight variations on the old elites take power in essentially the same institutions. Reforms are promised and short-term solutions implemented, but emergency laws return in order to “keep the peace”. While protests recur for a time, an exhausted public eventually accept once again that it is easier to trade freedom for stability, and simply hope that the new set of old leaders (made up of members of the previous ruling families, military structures etc) will be better able to manage the economy in a way that benefits them personally.

What would indicate we are moving in this direction? The continual delay of elections in Egypt and Tunisia on security grounds. A new series of coups by military or religious leaders.

What would indicate we are moving away from this scenario? An entirely new set of faces elected in a free and fair process (and which remain there for more than a few months). Public statements (or better, new constitutions) which explicitly provide separate roles for the military, religious bodies, monarchies etc, and leave no questions over what could constitute political capture by a body other than a fairly-elected representative.

What are the major implications for the rest of the world in this scenario? Lower oil prices, but the threat of a future revolution. 

More challenging scenarios:

Since these three scenarios are not mutually exclusive (we could go through 3 before eventually getting to 1, or, as many people argue, go through 2 and end up in 3), nor do they take much imagination to conceive, they are not as useful as they could be. What other more challenging scenarios might be useful to think about?

Here’s one, inspired in part by Evgeny Morozov’s speech to the RSA last year (you can watch the slightly more engaging RSAnimate version here on YouTube), and his recent book, The Net Delusion.

Scenario 4: A new age of cyber repression:

On the back of unprecedented political engagement, and with the support of Western powers, a new coalition of young, vibrant and independent leaders emerge across the region. They take particular care to emphasize their disconnect with previous regimes, their willingness to engage with all segments of society, and their commitment to distributing the wealth of the nation in a more equal way than previously was the case.

Unfortunately while they possess sincere fervour, an understanding of technology and a desire to capitalize social change, they underestimate the challenge of delivering on their promises. As time passes, cracks begin to appear and the murmurings of protest re-emerge amongst the public, driven in part by legacy issues from previous regimes, in part by frustration at the inexperience of new leaders and the unintended consequences of their hasty policies.

The reaction by the new leaders is to bunker down and to use their knowledge of social networking to buy more time. They start to spend more and more time on marketing activities designed to stabilize public support, and less and less time on solving the underlying issues. Eventually, it becomes clear that a series of new authoritarian states have emerged, intent on heading off dissent. Only this time, they are intimately familiar with the technologies that helped destabilize previous regimes, and are able to use the internet to project power much more effectively than the fragmented opposition groups can. It turns out that a highly educated and technologically sophisticated generation of leaders is far better at controlling dissent than their forbears. And yet, given that the underlying issues of unemployment, corruption and limited resources remain, how long until another popular movement has nothing left to lose and takes to the streets?

Naturally this is all just rambling, but perhaps useful to consider. What other scenarios for the region should we be considering?

Of course there are many other competing arguments for the fall or transformation of the empire (including another favourite of mine, Tainter’s idea of declining returns of investment in energy, education and technological innovation in the face of increasing complexity), but the old idea that a combination of economic disparity and frivolous activity can bring a society down remains attractive. Which begs the question whether Jamie Oliver, Martha Stewart et al are harbingers of doom for our modern empire(s).

Which brings me, naturally, to Charlie Sheen.

Brett Easton Ellis, (whose best-known novel is American Psycho), has been riffing recently (in an interview with NYMag in June last year, and more recently on the Daily Beast), on the idea that “We’re in the post-Empire world now”. Ellis is reported as defining Empire in terms of Gore Vidal’s idea of postwar global American hegemony, and dates its end to 2005. Post-Empire seems to be a conscious acceptance of the end of Empire – as Ellis puts it, “it’s a (for now) radical attitude that says the Empire lie doesn’t exist anymore, you friggin’ Empire trolls”. The Empire lie is not entirely clear in Ellis’s writing, but key aspects of it seems to be a willingness to pretend there is meaning in celebrity, to embrace false courtesy and in the process to deny your essential human frailty.

For Ellis, Charlie Sheen is definitively post-Empire. While “Eminem was post-Empire’s most outspoken character when he first appeared”, “nothing yet compares to the transparency that Sheen has unleashed in the past two weeks—contempt about celebrity, his profession, the old Empire world order…”. For Ellis, the mainstream reaction to Sheen – a combination of transfixed horror and false sympathy for his apparent madness and drug use – is “Empire”, which means you they just don’t “get it”. (For other examples of Empire v Post-Empire, see Ellis’s twitter feed). I like this argument actually – Sheen’s lucid honesty and openness seems only self-destructive from the perspective of one particular system – in almost any world he is talented and wealthy, and in a post-Empire one his attitude will surely sell theatre tickets as well as it drives media coverage.

While Ellis isn’t completely convincing, let’s assume he has an interesting point and try to connect the dots. If a overwhelming fascination and uncritical acceptance of celebrity is “Empire”, and a transparent, self-referential honesty is “Post-Empire”, what is the tipping point between the two? Is it, in fact, a saturation point of decadence which provokes a cultural response in the form of Cee-Lo Green, John Mayer and Mark Zuckerburg (three post-Empire exemplars according to Ellis)? More importantly, does a significant cultural shift from Empire into post-Empire mentality in fact allow or enable a form of social transformation rather than social collapse, acting like a safety valve for the more self-destructive elements of Empire, such as reality TV and cable cooking shows? Or is this all nothing more than literary babble that uses arbitrary categorizations to make something sound meaningful when it isn’t (sooo Empire!)?

These concepts bears more (structured) thinking, but perhaps there are interesting connections to the social shifts we’re seeing in other parts of the world. If Mubarak is Empire, who is post-Empire in Egypt? And at the very least, I’m going to start being more thoughtful regarding my choice of celebrity chefs in the future. Jamie Oliver is, now I think about it, relatively post-Empire. I wonder if Charlie Sheen can cook?

As I wrote in the comments to the Independent article, I appreciate that reconstruction could act as a short-term stimulus to economic activity and mean that people start spending a portion of their (relatively high levels of) savings. However, forcing people to spend their savings is not a measure of success on its own. Putting aside Sean O’Grady’s claim in the Independent that such savings represent “a classic case of deflationary psychology” (perhaps, under the circumstances, excess savings could now be seen as incredibly rational??), it matters how they spend that money. Struggling to replace basic amenities and productive assets destroyed in a disaster would only increase future growth if the resulting assets were more productive than previous versions, and meanwhile the value of the stored wealth is lost to replacement costs rather than being available for investment via the banking system or spending on other goods.

Perhaps part of the confusion is that people are not distinguishing between stocks and flows – the flow of output will rise, yes, but only because the stock of wealth has been significantly reduced. People who see disasters as producing some net benefit must either a) be ignoring the stocks altogether and only focusing on GDP flow as a measure of wealth, therefore being blind to the value of the installed capital that was destroyed (and argue that although GDP growth might take a hit from productive capacity taken off-line, the reconstructive efforts will more than compensate for this), or b) claim that the additional flow of economic activity spurred by the crisis will, in time, result in economic gains that will exceed the lost stock of value destroyed and take the economy to a higher level than was evident pre-crisis.

The first approach seems very short-sighted, while for the second to be true you need two things:

First, to assume a very heartless position in defining value: the GDP value of new flows of reconstructive activity will be qualitatively very different from the human, social and cultural stock of value lost. In accounting terms you may see a “gruesome calculus” that results in a net benefit – but I doubt that that represents any true improvement in the quality of life of the Japanese people.

Second, you need to assume a counterfactual where growth without the disaster is significantly less than growth with the disaster for a meaningful period of time. While Japanese growth has been trending down, continued flat or negative growth was not the only “non-disaster” scenario.

I like Jarrett Skorup’s analysis of this at the Mackinac Center:

The answer is found from French economist Frederic Bastiat in his 1850 essay, “What Is Seen and What Is Not Seen.” “There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”

In other words, what one sees are the workers paid to rebuild these destroyed cities; but what is not seen is where that money would have been spent if not for the disaster. Instead of being used to construct buildings, it would buy food, shelter, clothing and other goods. With the disaster, society has a new building, but without it they have a building and food, shelter, clothing or whatever else this money could be spent on. A country is much richer without the disaster.

Such theory-wrangling aside, economists have actually looked at this problem empirically, as was reported in the Economist yesterday. So you need not get too involved in the “scarcity v abundance” debate as described at Cafe Hayek , and instead can simply quote from the 2010 paper  Catastrophic Natural Disasters and Economic Growth” by Eduardo Cavallo, Ilan Noy, Sebastian Galiani, and Juan Pantano:

“Even very large natural disasters, when not followed by disruptive political reforms that alter the economic system, including the system or property rights, do not display significant effects on economic growth. …

Thus, we conclude that unless a natural disaster triggers a radical political revolution; it is unlikely to affect economic growth. Of course, this conclusion does not neglect the direct cost of natural disasters such as the lives lost and the costs of reconstruction that often are quite large.“ (Emphasis added by W.W. at the Economist, original page numbers for the quotes are p27 and p28)

So, in my mind at least, to suggest that temporary increases in GDP flows or the ability to manage better the public budget compensates in some way for the costs of the disaster is both a failure of imagination in terms of the alternative scenarios for non-disaster economic growth, and worse than gruesome when you consider the losses that can’t be measured in accounting terms. Particularly when out best current evidence fails to show any long-lasting economic impact either way.

A) global media attention creates a positive feedback loop for pressure on governments and other groups, starting by amplifying and solidifying a set of dominant messages
B) this encourages involvement by the international community, both populations and governments
C) which legitimises, reassures and engages greater numbers of local actors who feel emboldened by international support

If these hypotheses are both true and significantly powerful, shifting major headlines away from nascent change efforts could imply lower pressure, more degrees of freedom for regimes and other contextual factors that benefit incumbent regimes. Just a thought. So in addition to having a material impact on German politics (and possibly therefore European policy-making, as my colleague Max von Bismarck suggested), the Japanese disaster might also be materially changing the course of history in MENA.

In any event, since I read (and tweeted) this now-criticized-and-edited piece stating (now more or less implying) that there was nothing to worry about, there are enough scientific voices weighing in with nuclear factoids, and reports of additional explosions etc from the plants, to make me worry again. Even business insider comment threads are putting scary thoughts in my head. And suddenly it is emerging that the containment vessels may be leaking, prompting the remaining plant staff who were monitoring and (I assume) managing the pumping etc, to be evacuated so as not to expose them to radiation risk. And finally there’s the thought that combining the levels of likelihood of a core meltdown and another 7+ earthquake in the next few days drastically increases the chances that long half-life radioactive products could get into the surrounding environment.

Which brings me to a random and awful thought. Wikipedia cites one of the firemen who responded to the Chernobyl disaster as saying he was aware of the risks he was taking while being exposed to radiation as he helped extinguish fires (in the disaster there were literally bits of fuel rod lying around the site). Anatoli Zakharov said, “Of course we knew! If we’d followed regulations, we would never have gone near the reactor. But it was a moral obligation—our duty. We were like kamikaze.”

Gosh. Do we need kamikaze at the Japanese reactors? Could it be that Japan is facing a moral dilemma where regulations designed to reduce risk in one context act to increase risk in another? Or are points of no return already being passed? Above all: how can we reduce the uncertainty in all of this, so that we can anticipate and plan for a suitable, proportionate response?

UPDATE 3, 16/3 4.30pm ESDT: I’ve found that this Wikipedia page is actually the most up to date in terms of citing various news sources and synthesizing them, while this Earthquake Report page is also giving regular updates on verified information from the various government authorities on the more general disaster context as well as the nuclear issues. Apparently 5 plant workers have now died, up from 1 in previous reports, though it doesn’t seem that any of these are due to radiation so far (caught in the explosions perhaps?). And to add insult to injury, a dump of snow is making the general humanitarian situation worse.

UPDATE 2, 16/3 11am ESDT: According to another report by ABC news, the Japanese government has amended radiation regulations to raise the amount of radiation exposure permitted for workers by 2.5x, to 250 millisieverts. The crews of 50 workers cycling through the plant to manage the crisis have been nicknamed “the Fukushima 50″.

UPDATE 1, 16/3 8am ESDT: Apparently the workers have returned to the plant after a drop in radiation levels. My Kamikaze index has dropped.

Some interesting sources from Brad DeLong:

http://bravenewclimate.com/2011/03/12/japan-nuclear-earthquake/
http://bravenewclimate.com/2011/03/15/fukushima-15-march-summary/
http://en.wikipedia.org/wiki/Fukushima_I_nuclear_accidents
http://en.wikipedia.org/wiki/Talk:Fukushima_I_nuclear_accidents

I take issue with both his rubbishing of Sophocles and his central argument. After setting up a straw man of kooks, the latter is summed up in the statement “The most important lesson here is that there are no lessons for human behaviour, and over coming days it is vital that we watch out for the preachers and the moralisers who will try to use it to further their campaigns. First off the blocks, I see, is the anti-nuke lobby.” He concludes by saying that “There is no rhyme or reason to an earthquake, and we should for once abandon our infantile delusion that we are the cause and maker of everything.”

Boris is being a bit disengenuous with the Sophocles-bashing, as he must be aware that the word he defines as “terrors” and “terrible” (deinon) is not unambiguous. In fact, far from being rubbish, Sophocles’ words illuminate the point I am about to make in reply, which is this: Risk is defined and created in reference to human beings. Further: Our actions and decisions, collective and individual, profoundly shape the risks we are exposed to. It is therefore, in fact, very adult to consider how we contribute to risk.

As my colleague Stephan Mergenthaler pointed out recently, there is no risk without a subject. Ultimately, an earthquake is just a rippling of the earth. It is only a risk when we have built structures, societies and economies (and nuclear facilities) that might be interrupted by such rippling. And even more than the need for a subject to experience the risk, as I’ve written about before, we very often contribute to the creation of risk inadvertently, even while actively trying to reduce it.

Now apart from the entirely rational decision to continue to live on a fault-line and accept the occurrence of earthquakes as a part of life, it is fairly ridiculous for anyone to argue that that the Japanese could have or should have done anything different to prepare for the tragedy that just occurred, and I’m not suggesting this. Far from it. The earthquake in Japan is a tragedy of enormous proportions. The fact that Tokyo remains standing after four minutes of unbelievably violent shaking is astounding, and testament to the foresight of councils who designed building codes and engineers who enacted them. Despite all the fears of widespread radiation release, the damaged nuclear reactors are well-designed and have orders of magnitude more containment systems when compared to previous nuclear incidents: according to some experts (if not the media) there is still a very low risk of a Chernobyl-like accident where the fuel rods themselves were ejected from the facility during an explosion (UPDATE: recent updates are quite worrying!). Furthermore, the calm response and community spirit displayed by the Japanese people in general after the crisis shows that, as a society, they are inherently resilient to such shocks, and throws other similar disasters into sharp relief.

However I’m upset that Boris is willing to abdicate almost wholly the role of humankind in creating the conditions for risk in order, it seems, to preserve the option of nuclear power in the UK as an energy source. The bottom line is that when adopting any cause of action it is only rational that should be aware of the risks that are created thereby, both local and systemic. And certain causes of action have the capacity, perhaps extremely remote, to create risks of truly frightening proportions. One example of that can be seen in the adoption of certain derivatives in financial markets which, in part thanks to their opacity , contributed to the recent global financial crisis thanks to their systemic impact. Another example is nuclear power which, under certain circumstances, has proved to create radioactive fallout that poses serious health risks to local populations.

Rather than taking an extreme position on this, on the one hand by rejecting promising technologies or innovations out of hand simply because they are scary, ill-understood or give rise to irrational superstitions (as Boris implicitly accuses the anti-nuke lobby of doing), or on the other hand by claiming that such concerns are “infantile delusions” and we need to simply accept that nature will deal risks out of our control, I prefer a middle way. I would like to see an explicit and transparent acceptance by governments and the media that the actions we take in terms through both the use of technologies, and even simply how we build our communities and economic interactions, do create serious risks, particularly over long time periods and when combined with extreme exogenous shocks. Further, I’d like us all to acknowledge that there are boundaries of our knowledge in relation to those risks, and that therefore we, as a society, are prepared to accept them based on our current understanding but are prepared to abandon them if it turns out the risk is higher than we are willing to bear.

And, I’d like Boris to admit, Balliol classics scholar that he is, that a more nuanced investigation of the use of deinon in Greek tragedy (see for instance Darien Shanske’s Thucydides and the Philosophical Origins of History) might be a more productive way of viewing Sophocles’ words (p90). Rather than characterizing them as hyperbolic bilge that is overly solipsistic, an alternative interpretation might see such the “terribleness” or “dreadfulness” of deinon as an essential part of human nature – that which separates humankind from other animals, as Shankse suggests is evident in Antigone. Even more starkly for this context, Shankse points out that in Hesiod, deinon is used in the sense that “Humans are always pushing too far, pushing doing what they must do one step beyond the boundary they cannot see, and are undone.” (p81) Sophocles might therefore thoughtfully illuminating an essential characteristic of mankind in relation to our creation and experience of tragedy that explains the post-crisis soul-searching Boris laments.

We should indeed be humbled by the earthquake and always see ourselves in the perspective of forces far greater than our own. But this should not be an excuse to abdicate our responsibility to one another in light of such forces in terms of how we create and magnify risk: in my view, regardless of if we are truly deinon or not (and I fear we are), we should do everything possible such that our actions and decisions increase, rather than decrease, our collective resilience and prosperity. Sophocles of course might retort that this is futile. But we should still try.

Now, there were almost 10,000 people registered to this event (9,482 runners on the day). Being on supporter duty, I had a D300 clicking away and even now, looking back at the photos, the only people that looked in their 20s were the elite runners plus a couple of random young’uns that looked as though they had been roped in by their parents. In every other major sporting event I’ve been to in Europe or Australia (including running, cycling and tri events), the age structure has been firmly centered around the 20- and 30-somethings, with many teenagers, a good smattering of more mature athletes, but relatively few people over 40.

By contrast, at the Roma-Ostia event about half the competitors seemed to fall into the 40-50 bracket, and I swear a third of competitors looked even older. As it turned out, a quick check of the results largely bore this out: by some quick and dirty calculations, 44% of competitors were born between 1961 and 1972 (hence 40-50 years old), and 31% were born before 1961 (older than 50).

Compared to the two other half-marathons I’ve been to in the last couple of years – Paris and Geneva – this is pretty damn old. In Geneva, only 34% fell into the 40-50 age category, with 16% over 50. Paris was even younger on average – 28% in their 40s, and 15% over 50 years old (see Table 1).

Table 1: Age distribution of competitors in selected European half-marathons

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In addition, in Rome there was a lower variance of fitness levels – everyone looked at least like they had been training, most people wore the colours of an Italian running club (98% of the Italians listed a club membership), and the longest queues were for those people pushing to get into the 1h40min start time – not a bad time category for a half by any means. No overweight fun-runners here; the first medical stop was 8km into the run, indicating high confidence on the part of the organisers. The results indicated that only 16% of the (on average, much older) runners finished with times over 2 hours. In Paris, more than 36% were slower than 2 hours, and in Geneva, 27%.

So why would the Rome half-marathon be so overwhelmingly dominated by fairly fit, middle-aged Italians? Or to phrase the mystery more precisely, first, why do so few young Italians take part, and then, why do so many fit, older Italians? This post is a rough attempt to make sense of this mystery, drawing on anectodal evidence from Italian friends, 3 months spent living there back in 2003 (plus yearly visits since) and a good dose of stereotyping. You’ve been warned.

Mystery A: Why so few young people?

Hypothesis 1: Substitutes for use of time on the part of Italian youth

Perhaps the first half of the mystery is partly explained by our experience at dinner the evening before, when we’d been hanging out with a selection of Rome’s 18-30 population. They were all carbo-loading on pizza and pasta, but according to them it was all in aid of the flirting, smoking and dancing, to be followed by a really solid sleep until midday. The thought of getting up early on a Sunday to run was completely alien to our friends given their competing time commitments.

It is certainly possible that our youth survey sample was too small, or biased by venue, and we were hanging out with a wholly unrepresentative set of relatively un-sporty types. It could be that there are whole swathes of Italian youth using their free time to train – but they are training for other things or in other ways. Perhaps the sporty young Italians are attracted to other sports other than long-distance running – football or handball perhaps.

Hypothesis 2: Young Italians want to look good in public

Now that I think about it, I’ve rarely seen anyone jogging around Rome or Bologna on the street, except for the odd person circling the Giardini Margherita. Compared to Geneva, Dublin, Sydney or London, it seems people just don’t jog much in the street in Italy. By contrast, the gyms are full – so perhaps many of those who want to keep fit prefer to go to the gym rather than exercise in public. This could be influenced by a number of factors, the strongest of which might be a desire to always look good in public (witness the level of couture on the evening giro). There could be a significant cultural element here about the appropriate way to cultivate and display “la bella figura” – having a red face and sweaty clothes is fine in the appropriate environment, which isn’t on the street. Italian gyms are pretty much all mirrors and posing men and women. According to our Italian friends, the gym is social and fun, while running is boring. Add in the smog from traffic and you get fewer people out on the streets in running gear.

When compared to other available options, then, half-marathons are incredibly uncool events for young Italians. Footballers, racing car drivers and cyclists seem to capture the Italian spirit more than long-distance runners. So maybe half-marathons are abandoned to older cohorts who are slightly less conscious of such sensibilities.

Hypothesis 3: Lack of resources on the part of younger Italians

Further, few of the young people we talked to had much money – they were all struggling to find jobs or taking really quite low-paying positions compared to their level of education just to get by – so paying (even if only EUR30) to go for a jog may have seemed silly (substituting a packet of cigarettes and two drinks at a bar for the half-marathon entry makes much more sense, it seems). Income inequality is high between generations in Italy, so perhaps young people just see themselves too poor to indulge in the luxury of a group sporting event. While 30 euros doesn’t seem to be a huge direct financial disincentive, perhaps when combined with good-looking running gear and the time needed to train, it adds up.

Interestingly, I’m told that in Ireland since the financial crisis, participation in community sporting events (particularly adventure racing) has skyrocketed along with the free time available to younger generations suddenly out of work. But what is different about Irish youth that they want to spend their free mornings and afternoons running up hills, while it seems Italians prefer smoking, sleeping and talking about Berlusconi’s bunga-bunga parties?

Mystery B: Why so many older people?

Turning to mystery B, part of the answer could of course be the inverse of the reasons above – older people may have fewer substitutes for their time on a weekend morning (the older they get, the truer this could be), are less concerned about appearance in public (even only a slight reduction could result in an outsized difference in distribution) and have ample resources (the inter-generational economic disparity argument).

In addition, another explanation could be that the health benefits of running are perceived to be significantly more important to older cohorts than to younger ones: the sense of concern over appearance that would drive a young person to a gym is replaced by a sense of concern for cardiovascular health that drives an older person to go for early-morning jogs.

Furthermore, those running-club outfits make me suspect that community in general has a lot to do with participation. The running club, either recently or traditionally, seems to have cultivated a solid group of older members that are willing to travel to take part in collective sporting events. I took quite a few photos of groups of 8-10 50 year olds who wanted to pose for the camera together – clearly larger groups of friends supporting each other yet all participating. Time, health benefits and community spirit seem to be combining to put a lot of older Italians into lycra, while failing to do the same for their children.

Conclusion – areas for further research

Pondering all of the above, I suspect that a better understanding of the generational elements impacting Italian communities could help me better understand both mysteries. Our younger Italian friends told us that few of them voted in elections, as they felt generally disenfranchised from both politics and the economy. This implies that the communities with which young people identify (and hence their participation in community-based activities) may be both more fragmented than older generations’ and more unstable, with the exception of course of the family as a central source of identity.

Perhaps older cohorts of Italians, possessing greater incentives and fewer barriers to participating in different communities, respond with higher levels of participation across a variety of activities – only one of which is the Rome-Ostia half-marathon.

Still, it was FRIGGIN WEIRD (and somewhat motivating) to see so many grey-haired old biddies smashing 1h30 along the long, boring road to Ostia. Good on ‘em.

Thanks to Isobel Davidson for actually running all the half-marathons, contributing ideas to this post and doing all the stats work.