My favourite links #19

October 19, 2008

The Scientific American website has a nice section called 60-second science, in which they talk about a scientific topic for one minute. They also have some other interesting podcasts. So check them out here.



A few weeks ago in My favourite links #16 I mentioned the Open Yale Website. They have just posted eight new courses. They include:

Financial Markets

France Since 1871

Game Theory

Introduction to Ancient Greek History

The American Novel Since 1945

What I hadn’t realised is that they come with a transcript.

Creative destruction in the financial sector

October 12, 2008

Failure is part of the natural cycle of business. Companies are born, companies die, capitalism moves forward.

Fortune magazine

I have not failed. I’ve just found 10,000 ways that won’t work. Thomas Alva Edison

It’s not enough to succeed. Others must fail. Gore Vidal



Failure is all around us. Herbert Spencer coined the phrase survival of the fittest but nature seems to be more about death than surviving. 99.99% of all biological species which have ever existed have become extinct.  And just as species fail—and die out—so do companies. Failure in nature is measured over hundreds of millions of years. In Business the timescale is much shorter. We all know about Pan Am, WorldCom, Enron, and Lehman Brothers but they are merely the tip of the iceberg – ten per cent of all the companies in America disappear each year Is this a damning indictment of capitalism? Maybe but there is another way to look at things.

            When we look at the capitalist system it is not difficult to appreciate what an incredible wealth-creating machine it is. However many people become distinctly uneasy about the failures that are also endemic to it. We are not comfortable with the fact that individual citizens, groups or regions are not doing so well or may actually be worse off. This is when we get the calls for governments to do something. These calls for action are understandable but we should apply some scepticism to them. The left’s schadenfreude about the current financial metdown is reflected in this satirical piece from the Daily Mash:

With more economic bad news on the way, Britain is this week bracing itself for a fresh wave of bullshit newspaper articles about the nature of capitalism. Senior editors at the Guardian and Independent are expected to work through lunch to maintain a steady supply of pieces about hubris, deregulation and why Marx was right all along…… At the Guardian, Jonathan Freedland and Polly Toynbee have been ordered to invent 50 brand new excuses for why socialism failed the first time and 50 exciting reasons for why it cannot fail the next time.

What we need to realise though is that sometimes success and failure are intertwined. As economist Thomas Sowell has pointed out it is no coincidence that Smith Corona was losing millions of dollars on its typewriters while Dell Was making millions on its computers or that the number of pay telephones declined as more people acquired their own mobile phones. In a system like that of the Soviet Union you didn’t get this degree  of failures that the US has. The problem was that if something didn’t work very well it would continue on its way taking up valuable resource.

The concept of creative destruction comes to mind. It sounds like an oxymoron but it is a powerful tool for explaining progress in a capitalist system. It is associated with the Austrian economist Joseph Schumpeter. He employed it to describe the transformation wrought by radical innovation. For Schumpeter the key to long-term growth was the constant entry of innovative entrepreneurs into markets. Companies are always subject to the “gales of creative destruction. We look at established firms now and they seem all-powerful but over time these monopolies are undermined by newer more dynamic companies: we often lack this historical perspective. Schumpeter believed this destruction was important:

“This economic system cannot do without the ultima ratio of the complete destruction of those existences which are irretrievably associated with the hopelessly unadapted.”

All this talk of creative destruction brings me back to current banking crisis. It can be useful to analyse it from an evolutionary perspective. There are though some areas where the parallels between evolution and the banking sector just do not apply.  Evolution is a blind, random process; there is no intelligent design. There are no governments, regulators or supervisors in the natural world. Can you imagine what it would be like if there were?:

Oh my God! The dinosaurs are becoming extinct!  We have to organise a massive bailout with public funds.

In banking there is at least some kind of design in the system. They may not be omnipotent but there are some deities and they do have a lot of powers. Let’s take a look at regulators. They do have their own perspective and if there is one thing they don’t like, it is destruction. Former Fed chairman Paul Volcker expressed it like this:

“I can remember very clearly sitting in my office then, as President of the Federal Reserve Bank of New York, thinking that what this country needs is a first-class bank failure to teach us all a lesson – but please God not in my district. When I went to Washington, I had the same feeling – we need a clear lesson from market discipline, but please dear God, not in my country. Then if I read correctly the 1990s and what happened when the Mexican crisis came along, Bob Rubin and Alan Greenspan thought what we need is a good country failure to teach everybody a lesson but please not in a large country in my hemisphere.

Regulators find it impossible to avoid protecting the banking system. It’s in their DNA. We are all familiar with the argument too big to fail. Japan shows us the danger of trying to keep hopelessly unadapted banks alive artificially. Extinction may sometimes be necessary and we avoid it at our peril.


Further reading

The great dying: a memo to market dinosaurs Niall Ferguson



Classic cock-ups

October 12, 2008

Saltillo Prison in Northern Mexico was the scene of a gloriously unsuccessful prison escape in 1976. In November of the previous year 75 convicts had begun digging a tunnel designed to bring them up on the other side of the prison wall. Five months later, the escapees finally saw the light at the end of the tunnel but they ended up in a nearby courtroom, the one where they had originally been sentenced. The surprised Judges returned all 75 to Jail.

In October 2002, the US investment bank Bear Stearns entered an order to sell $4bn (£2.6bn) worth of Standard & Poor securities in a late trade, 20 minutes before the market closed. In the world of high finance this is not that unusual. The problem was that there had been a “clerical error” and the real sum should have been $4m, 1,000 times less than the order that was actually placed. They were finally able to cancel all but $622m of the order before execution. These kinds of errors do happen from time to time.  In 1998 a Salomon Brothers trader mistakenly sold £850m-worth of French government bonds by leaning on his keyboard.

The Ryugyong Hotel is an unfinished concrete skyscraper in Pyongyang, North Korea. Work initially began in 1987 but ceased in 1992 due to the government’s financial difficulties. It has yet to be opened but after 16 years of inactivity building has finally resumed this year. It has 105 stories and stands 330 m tall with 360,000 m² of floor space, making it by far the largest structure in Kim Jong-il communist paradise. When they first started, they intended it to be world’s tallest hotel. Critics have been less than complimentary about it. It has earned epithets such as the “worst building in the history of mankind”, “one of the most expensive white elephants in history” and the “Hotel of Doom”. The North Korean government has airbrushed the building out of pictures of the capital.

On the bloody Eastern Front during the Second World War the Russian Army came up with the idea of an anti-tank dog. The year was 1942, just a few months after Hitler had launched Operation Barbarossa. It was a brilliantly simple theory; if you always feed a dog underneath a tank, underneath a tank is the first place that they’ll head towards on the battlefield. The starving dogs would carry explosives strapped on their backs with a harness. They were then trained to run under the enemy tanks and in doing so would activate a large wooden trigger that would cause the bomb to detonate. However, there was one slight snag – they were used to the Soviet tanks and in battle they would run often under their own side’s vehicles. They thus became a menace to the Red army, once forcing an entire Russian tank division into retreat.  Although they were credited with the destruction of 300 German tanks, they were then promptly retired from service.

The NASA Mars Climate Orbiter will go down in the annals of incompetence. Lockheed Martin, who were involved in the ill-fated Orbiter project, wrongly assumed that they would be using imperial measurements for the controlling software. Nobody told NASA this and the inevitable result was that the $330 million spacecraft missed its orbit, entering the Martian atmosphere at about 57 km instead of the target of 140–150 km. This was too close and it was never heard of again.

During the 1978 firemen’s strike of 1978 the British Army took over emergency fire fighting duties. On 14 January they were called out by an elderly lady to rescue her cat, which was stuck up a tree. They arrived quickly and soon were able to bring the cat down. The lady was delighted and invited them all in for tea. Once the beverages had been served and they had said goodbye to the lady, they drove off. Unfortunately they then ran over the cat and killed it.

In August 1975 three men were trying to rob the Royal Bank of Scotland at Rothesay, the principal town on the Isle of Bute, off the West coast of Scotland. They found themselves trapped in the bank’s revolving doors. After being freed by some employees, the three men thanked them and left the bank. They probably should have called it a day there and then, but they were nothing if not persistent. A few minutes later they were back and announced that they were going to rob the bank. The staff all thought it was some kind of practical joke and when the men demanded £5,000 the head cashier started laughing.  Furious at the lack of respect they were being shown, one of the men jumped over the counter. But he fell to the floor, clutching his ankle in agony. The other two robbers finally realised the futility of it all and attempted a clean getaway, only to get stuck in revolving doors once again

Millionaire businessman Gerald Ratner managed to wipe off £500 million from the value of Ratners jewellers with one speech in 1991. In the speech he was somewhat unflattering about some of his company’s jewellery products, and by extension all of them.  He said: …We also do cut-glass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve you drinks on, all for £4.95. People say, ‘How can you sell this for such a low price?’ I say, because it’s total crap ……….. We even sell a pair of earrings for under £1, which is cheaper than a prawn sandwich from Marks & Spencer’s. But I have to say the earrings probably won’t last as long ” These comments were picked up by the media and Ratner got the sack. At least he had the satisfaction of having an expression named after him; Doing a Ratner is used for this type of corporate gaffe.

My media week 12/10/08

October 12, 2008

The Andrew Marr programme Start the Week is back on air. It’s a  40-minute conversation about art, history, politics, theatre,  philosophy and just about everything under the sun. It goes out on Monday and the podcast is available for a week.


In this video EconTalk’s Russ Roberts give some keys to understanding the current financial crisis.


John Allen Paulos’s article looks at the same question but from a mathematician’s perspective.


Finally If you haven’t seen this already, I recommend this piece from the BBC Joking about the credit crunch.






My favourite links #18

October 12, 2008

I haven’t had a chance to look at this website in detail but it looks quite interesting. It’s called It contains analysis of Spain, looking at politics, the economy, education and many other areas in Spain. There are some grammatical mistakes but I think it’s a worthy initiative. For example, they have  have an article on the fall of Fannie and Freddie: lessons for Spain.  Go here.

Political gaffes and blunders #2

October 5, 2008

Last June I did a post about political gaffes with American and British politicians. It has been my most successful post with 90 views. So I have decided to do an international version now.

Silvio Berlusconi

Silvio Berlusconi is always a rich source of anecdotes. You probably remember his comments to German MEP Martin Schulz at the start of Italy’s EU presidency in July 2003: “I know that in Italy there is a man producing a film on Nazi concentration camps – I shall put you forward for the role of Kapo (guard chosen from among the prisoners) – you would be perfect.” On another occasion he said that he had used his ‘playboy charms’ on Finland’s president, Tarja Halonen, in order to secure a European food summit in Italy. This caused outrage in both Finland and Italy. The Italian ambassador in Finland was summoned by the Finnish foreign minister. An explanation by a minister in his cabinet – “anyone who had seen a picture of Halonen must have been aware that he had been joking.” – didn’t exactly help matters.


Eamon De Valera

Eamon de Valera, Taoiseach (prime minister) during WWII, paid a visit to Eduard Hempel, director of the German diplomatic corps in Ireland to express condolences on the death of Adolf Hitler in his Berlin bunker. The act was widely condemned by the international community and remains one of the biggest diplomatic blunders in the history of Ireland . But De Valera argued that to refuse condolences “would have been an act of unpardonable discourtesy to the German nation and to Dr. Hempel himself. During the whole of the war, Dr. Hempel’s conduct was irreproachable. … I certainly was not going to add to his humiliation in the hour of defeat.”


Japanese Politicians

Japanese politicians, especially those from the Liberal Democratic Party seem to have an innate gift for coming out with the most inopportune remarks. In 2004 Kiichi Inoue, the Minister of State for Disaster Management, suggested that the murder of a classmate by an 11-year-old schoolgirl indicated a sign of women’s progress. He was quoted as saying “Men have committed thoughtless, harsh acts but I think this is the first for a girl.” In July of the previous year, Inoue’s predecessor in the job, Yoshitada Konoike, said the parents of a boy suspected of killing a small child should be beheaded as a warning to parents who do not control their children effectively. At a news conference Mr Konoike said: “The parents (of the 12-year-old boy) should be pulled through the streets and their heads should be chopped off.” Seiichi Ota, who would go on to become Minister of Agriculture, Forestry and Fisheries, was participating in a debate on Japan’s declining birth rate. He declared that at least gang rapists showed a healthy appetite for sex. At the time there was a scandal in Japan about blue-blooded students at an elite Japanese University who had formed the Super Free Club, which organised parties for Tokyo university students, at which women were lured into drinking sessions and gang-raped. Finally, a mention for former PM Yoshiro Mori, who was described as having “the heart of a flea and the brain of a shark” and achieved a single-figure approval rating during his time in office. In the 2000 campaign when there were said to be 50% floating voters Mori suggested that if these indecisive voters hadn’t decided who to vote for, they should just stay in bed on election day. When the USS Greeneville accidentally hit and sank the a Japanese fishing-school ship, Ehime Maru, killing 9 students and teachers decided it would be silly to interrupt a round of golf and he continued playing for another two hours. He finally resigned on April 26, 2001 to be succeeded by maverick Junichiro Koizumi.


Australian politics

Australian politics is known for its rough and tumble but some politicians still manage to cross the line. John Brogden, the leader of the right-wing Liberal Party in New South Wales had his nightmare moment in front of hundreds of journalists at a media junket while in a state of inebriation. Alcohol and politicians making public appearances are a very explosive mix and Brogden allegedly described Helena Carr, the Malaysian-born wife of former New South Wales Premier Bob Carr, as a “mail-order bride”. If that was not enough he went on to make lewd suggestions to two female journalists at the event, pinching one of them on the buttocks. These incidents forced his resignation. He apologised but the Carrs initially refused to accept his apology but relented after Brogden tried to commit suicide. The police found him unconscious, having slit his wrists in a drug and alcohol induced stupor. In 2007 Brogden spoke about his ten-year battle with depression and he became a patron for Lifeline NSW, a 24-hour crisis telephone counselling service run by Methodists. Finally, there is the case Philip Smythe, the former leader of the New South Wales Liberal/National Party Coalition, who was on a plane to Auckland for a political conference. When the cabin crew advised the passengers to put their watches back one hour for the new time zone, Smythe blurted out: “and your minds back 20 years”.  What he didn’t realize that the editor of an important New Zealand paper – the Herald – was sitting directly behind him and published the gaffe on the next day’s front page.


Boris Yeltsin

In 1989, Yeltsin was found at a police post outside Moscow dripping wet and wearing only his underwear. His story was that he had been attacked, his head covered in a sack and dumped off a bridge into a river. Yeah, right. In 1994, Yeltsin on a boat steaming down the Volga suddenly ordered his border guards to toss his spokesman Vyacheslav Kostikov into the cold river. In the same year, at a ceremony to mark the final withdrawal of the last Russian troops from Germany, a drunk Yeltsin seized the baton from the leader of a military band and insisted on doing the conducting himself. And in perhaps the most infamous incident, Yeltsin was incapable of getting off his plane for talks with Irish Prime Minister, Albert Reynolds during a stopover at Shannon airport in 1994, leaving his hosts waiting on the tarmac. An aide said he was exhausted after a visit to the USA and Yeltsin himself claimed he had overslept. Fatigue was used to explain away a 1997 gaffe when Yeltsin startled an audience in Sweden (and his own generals) by announcing that Russia was going to dismantle its nuclear arsenal.


Hungary – Ferenc Gyurcsany

In May 2006 the Hungarian Prime Minister, Socialist Ferenc Gyurcsany, admitted in a speech behind closed doors that his government had lied to win the election earlier that year and had dome little of note in their four years in power. He also employed a lot of colourful language. Wikipedia had this censored version of the speech:

“There is not much choice. There is not, because we screwed up. Not a little, a lot. No European country has done something as boneheaded as we have. Evidently, we lied throughout the last year-and-a-half, two years. It was totally clear that what we are saying is not true. You cannot quote any significant government measure we can be proud of, other than at the end we managed to bring the government back from the brink. Nothing. If we have to give account to the country about what we did for four years, then what do we say?”  Unfortunately for the candid Hungarian the speech had been recorded and was quickly made public Riots ensued, which threatened to bring down the government. In the end Gyurcsany was able to survive a vote of no confidence and a public enquiry and remains in office today.

A PP video

A video designed to attack Spain’s Socialist Party for losing control of crime backfired spectacularly on the opposition People’s Party. Television news pictures used in it turned out to have been filmed abroad or before the Socialists even came to power. One scene from 2003 of men firing pistols turned out to have been shot in the notorious Colombian city of Medellìn and featured clashes between rival drug traffickers. Another scene showing police and rioters battling it out on the streets of Barcelona was from 1986, eight years before Zapatero became president.



Some quotes about politics

October 5, 2008

Real politics…has little to do with ideas, values, and imagination…and everything to do with manoeuvres, intrigues, plots, paranoias, betrayals, a great deal of calculation, no little cynicism, and every kind of con game. Mario Vargas Llosa (1936– ), Peruvian  writer.


One ought to recognize that the present political chaos is connected with the decay of language, and that one can probably bring about some improvement by starting at the verbal end.  George Orwell (1903–1950), British writer.


The human tendency to search for panaceas and magic solutions is well represented among politicians and economists. William Keegan (1938– ), British author and journalist.


Do not criticize your government when out of the country. Never cease to do so when at home.   Winston Churchill (1874–1965), British prime minister and writer.


All political lives, unless they are cut off in mid-stream at a happy juncture, end in failure, because that is the nature of politics and of human affairs.  Enoch Powell (1912–1998), British politician.


Any party which takes credit for the rain must not be surprised if its opponents blame it for the drought.  Dwight Whitney Morrow (1873–1931), diplomat and politician.


Man is by nature a political animal .Aristotle (384 BC–322 BC), Greek philosopher.


Politicians use statistics in the same way that a drunken man uses lamp-posts—for support rather than illumination. Andrew Lang (1844–1912), Scottish writer and scholar.


Every country has the government it deserves. Joseph Marie de Maistre (1753–1821), French political philosopher and diplomat.


No Government can be long secure without a formidable Opposition. Benjamin Disraeli (1804–1881), British prime minister and writer.


Secrecy is the first essential in affairs of the State. Cardinal Richelieu (1585–1642), French churchman and statesman.


It is better to be feared than loved, more prudent to be cruel than compassionate. Niccolò Machiavelli (1469–1527), Italian historian, statesman, and political philosopher.


Unless drastic reforms are made, we must accept the fact that every four years the United States will be up for sale, and the richest man or family will buy it. Gore Vidal (1925– ), U.S. novelist and essayist.


Politics is not the art of the possible. It consists in choosing between the disastrous and the unpalatable. J. K. Galbraith (1908– ), Canadian-born economist.


I would remind you that extremism in the defence of liberty is no vice. And let me remind you also that moderation in the pursuit of justice is no virtue!  Barry Goldwater (1909–1998), U.S. politician, July 16, 1964.