Economic Cycles – Understanding the Crash

December 22, 2008

Kim has a good acronym for the current financial meltdown; GFHF or Global Financial Hissy Fit.  I was out to dinner the other night with a renowned pessimist who was quite outspoken in relating the various tales of woe and impending doom (his name is not Hanrahan by the way).  And so to the Review of 19 December and the lead article sourced from Prospect on the popping of the bubble in the contemporary art market.  I know nought about this market but it appears to have links to other bubbles that are popping (and they are not from champagne bottles!).

In his book Manias, Panics and Crashes, Charles Kindleberger observed that manias typically start with a “displacement” that excites speculative interest.  It may come from a new object of investment or from the increased profitability of existing investment.  It is followed by positive feedback as rising prices encourage less experienced investors to enter the market.  Then, as the mania gets a grip, speculation becomes more diffuse and spreads to other types of asset.  Fresh assets are created at an ever faster rate to take advantage of the euphoria and investors try to increase their gains by borrowing to buy assets or using derivatives.  Credit ultimately becomes overextended, swindling and fraud proliferate, and the mania ends in panic as investors seek to liquidate their positions.

The authors comment that the art market has adhered spookily to this model.  It seems that the sub-prime fiasco in the US is the “super-prime” example of such mania.  The markets work when asset prices are increasing so long as you are not the one holding the lemon at the end of all the wheeling and dealing.

That paragraph reminded me of a great book that I read about 5 years ago by Carlota Perez called Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages.  She describes the process of going through the following stages of a cycle commencing with the discovery of a new technology:

  • Maturity: Financial Capital Planting the Seeds of Turbulence at the End of the Previous Surge
  • Irruption: The Love Affair of Financial Capital with the Technological Revolution
  • Frenzy: Self-Sufficient Financial Capital Governing the Casino
  • The Turning Point: Rethinking, Regulation and Changeover
  • Synergy: Supporting the Expansion of the Paradigm across the Productive Structure

The main described by Kindleberger contains the particular stages in the irruption and frenzy components of Perez’s cycle.  We were enamoured with the book as we were reading it after the dotcom and telco crashes of the 1999-2001 period while working in an information economy area of the Australian government.  Little did we know that the financial excesses and losses of that period are minor in comparison with what is happening now.  It is clear that while billions of dollars were lost at that time, there was no turning point in rethinking and regulation.  There was still too much loose money sloshing around in the finanical system seeking short-term returns.

What we did like about the book was the expression of hope in the synergy phase where after the losses of financial speculation, money continues to be invested in the productive use of the technology.  Unfortunately, we are yet to see this period as more regulation is still required and the bodies on the shore as the tide washes out still need to be exposed before credit becomes available once more.


Baz Lurhmann’s Australia as Myth

December 14, 2008

Very good article in the Review section of the Fin Review last week, entitled What is Scotland. The article tracks the rise of nationalism in Scotland and how this is built upon notions of a unified identity. And so we get stories of nation-building that become the myths which people adopt as truths to fuel nationalist fervour and forge common bonds. The author relates how these myths are easily received, even if they were imaginatively fabricated in history, and how these myths are difficult to refute as people are not inclined to look critically at their own history.

My interest in this article was piqued from my recent viewing of the film Australia starring Nicole Kidman and Hugh Jackman. A film with such a grandiose title, with considerable airplay, and marketing from the Australian Government creates its own hype. Is it then a big enough film to retell and reformulate some of the myths of Australia as films like Gallipoli or The Man from Snowy River have done in the past? Australia came up short for me and I left the cinema disappointed for a number of reasons:

  1. The timing of various scenes was out of synch – a car driving off had only travelled 100 metres even though, in that time, a lot has happened in the movie which would actually take 3 or 4 minutes. The kangaroo hopping beside the car was another.
  2. The movie was too long and seemed to be disjointed and have multiple endings throughout
  3. The love story between Nic and Hugh did not really do it for me: even though I do not mind a romantic flick every now and then. I am wondering why that is so, it’s not because of Nicole but frankly, the relationship lacked chemistry
  4. The history was out of whack with what actually occurred with the Japanese bombing of Darwin
  5. The links with the Wizard of Oz and the song Somewhere Over the Rainbow were too corny and “unAustralian” for me
  6. The cattle stampede was way over the top and reminded me of a spoof Western

Perhaps I expect a bit more from a movie of such a name set in the iconic Top End and Kimberley region. Perhaps the ending should have been a tragedy as it was originally intended. Perhaps there was not enough about the inventiveness of Australians in the outback.

I did like that it had a great cast of Australian actors – from Bruce Spence to Ben Mendelson. I loved the acting of the boy who played Nullah. I really enjoyed that the stolen generations were highlighted (although a bit too much so in this movie) and that Aboriginal culture was portrayed. Perhaps more could have been made of how Aboriginal stockmen earned less than their whitefella equivalents.

While many people loved the film, I think it will not be remembered as a myth-relating film for Australians. That it did not rely on a particular story, poem or historical hero makes this more difficult. Also, the setting of the bombing of Darwin during the Second World War is not part of the major folklore of Australia as something that gives us our identity. Around that time, other happenings that have greater claim to defining Australian identity include those of Changi, The Burma railway, the exploits of Weary Dunlop, snipers along the Kokoda Trail, and the fall of Singapore (although all of these are located offshore of course).

Perhaps the film may have been better handled around the poem (and our national song) of Waltzing Matilda and the shearer’s strikes of the 1890’s. There could still have been love interests, breathtaking scenery, law and justice, politics, Aborigines and so forth built around it. But then again, people would have known the ending – but of course, that is the art of myth – it is the telling of a story in an entertaining manner that people want to listen to, even though they know how it will end!


May 23, 2007

Last night I organised a group of people to attend the hilarious Keating! at the Comedy Theatre in Melbourne.  It is one of the best productions that I have seen; very professionally performed, incredibly funny, highly satirical and very irreverent.  No one was spared – except perhaps Keating himself.  (warning below gives away some plotlines).

For those outside of Australia, the actors take off Australian politicians of the early to mid 1990s, of the rise and fall of the invective wittiness of Paul Keating, Australia’s last Labor Prime Minister.  This is the last week of the show in Melbourne after touring the country for the last two years.  The backing band is simply superb.

My highlights were the reggae hit “I’m the Man”, the rap between Keating and Hewson followed by “I Wanna Do You Slowly”, the outrageous Downer act of “Freaky” of which I will never be able to take Downer seriously again, the duet between Gareth and Cheryl (the line “My Peril, Cheryl” is very funny), the election night multimedia presentation, Howard’s “The Mateship” with some excellent costume changes and impersonations – especially the wave, and the finale.

For those of you who haven’t seen it, try and get to it wherever it plays.  Good political satire in Australia has been scant of late with few shows since the time of Max Gillies.  Keating! reengages with the genre in a delicious manner. 

For other reviews, see wikipedia, The Age, SMH.

Shifting narratives for war legitimacy

January 17, 2007

Good article last week (12 Jan 2007) in the Fin Review by Ferdinand Mount.  He comments on the shifting narratives for the legitimacy of recent wars.  He notes the history of Asian wars in the latter half of the 20th century that failed to leave behind effective democracies (apart from Malaysia and South Korea).  “We have continued to plunge into proxy wars at regular intervals” as we forget the pain and agony of the last one. 

He makes an interesting comment about the need to effectively name a war and that the current war in Iraq lacks a legitimising name.  Iraq War, Second Gulf War, Long Gulf War, War on Terror are all used but “that there is at present no public narrative that will carry the weight of the second Saddam war”. 

This remonds me of the benefits of effectively naming or branding an initiative to help it gain traction.  Within our department, we have Improving Justice seminars and I was talking today with someone about having a Doing KM conference rather than just seeing a bunch of talking heads.  But then this requires a common and consistent purpose and for the current Iraw war, this was lacking as another article in the same Review section by James Bamford notes:  “The White House took our [intelligence] work and twisted it for its own ends and Tenet (then CIA Director) set a tone whereby people know what he and the White House wanted to hear.” 

Perhaps the intelligence community suffered from not heeding the old saying: “Never fight a story with a bunch of facts:  you have to fight it with another story”.  And that is almost impossible if the dominant narrative keeps shifting!

Future Empires

December 21, 2006

Good article by Niall Ferguson in the Review section of the Fin last week (15 Dec).  He talks about the limits of imperial power and how more recent empires (eg Russian, German) are lasting less time than previous ones (Roman, Ottoman, etc).  He makes the point that empires emerge as world powers because of the economies of scale they make possible.  They can build bigger armies, tax more subjects, provide more public goods.  They endure so long as the benefits of exerting power over others exceed the costs of doing so and that resistance is outweighed by the benefits of being dominated.

He cites three reasons why the current US imperial ambitions will be short-lived.  These are troop deficits (which has long been a sore point for military commanders on the ground), the budget deficit (which is reducing the capacity to fund Iraqi reconstruction), and the American attention deficit with the lack of public support for this foreign war. 

This reminds me of the excellent polemic book by Zia Sardar and Merryl Wynn Davies American Dream: Global Nightmare.  The book explores the mythology of America and finds that Americans believe that they have a right to be imperial, that cinema is the engine of this empire with celebrity its common currency and that war is a necessity.  To combat this mythology, the authors state that America must rejoin the human community through dispelling the notion that America is the lone conscience of the world and then join human history through self-reflection on the perils of what happened to the Roman empire that had a powerful Executive, an irrelevant legislature and a content and distracted populace.

Of course, this does not mean that empires are history.  The Ferguson article concludes with the premise that as population increases and natural resources (like oil and water) become more scarce, imperialism can easily resurface.  The Chinese links to resource rich countries is just one example of this resurfacing.

FEARLESS (the movie), synchronicity and resisting power imbalances

September 3, 2006

For Father’s Day, the family went to see the movie, Fearless, this morning.  It stars Jet Li playing Huo Yuan Jia, a martial arts master in China in the very early 1900’s.  It showed a bit more blood than the old David Carradine Kung Fu shows which was a bit much for my daughter unfortunately!  The movie was a classic Hero’s story and it was intriguing watching it unfold in the various stages (Call to action, denial, mentor’s advice, transformation, return, overcoming obstacles, etc).

The movie spoke about power imbalances and approaches to counteract them.  The message was that violent revenge is our enemy and that one needs to use martial arts for self-discipline and inner development rather than violence.  A very similar message to my last blog post on resisting power through rebellious acts of insubordination from a different sort of Hero.  I was intrigued about the synchronicity of that post yesterday and seeing this movie today (since I had no idea of the similar themes).  Synchronicity is often a sign or symbol of some message that we are meant to be open towards.

I think the universe is advising me to consider some alternative means of addressing the power balance at work with a current task that I will be completing over the next couple of months.  Simply providing an intelligent product will not be sufficient; it will need to be encapsulated around some stories and subtle techniques to address some of the issues that will be confronted.  Sorry about the cryptic nature of the remarks but some people at work might be reading these entries!

Resisting Power and Understanding the Context in Story: Lessons from a Rebellious Messiah

September 2, 2006

One of the lines that I like out of the Richard Bach book, Illusions, states:
“I’ll quote the truth wherever I find it, thank you.”  Truth, or at least that part of knowledge we deem to be true, can be found in the most remarkable of places.

In the Review section of the Fin Review yesterday was an article by Gerard Windsor on the strange personality of Jesus.  Strange in the sense of appearing rebellious, paradoxical, a maverick – sort of like the shapeshifter archetype from Joseph Campbell’s Hero Stories.  Sort of like how KM and foresight practitioners can sometimes feel facing people in powerful positions who don’t seem “to get” what we are preaching. 

What does religion and theology have to do with KM?  When it consists of a couple of stories, the use of language, context and reversing the power balance, I think that it could be a really good examples for us to consider.

It reminded me of an article I read a while ago and which I quoted from in a KM talk last year to show how the messages in stories change over time.  Jesus is quoted as saying in Matthew 5:38-41

You have heard that it was said. “An eye for an eye and a tooth for a tooth.” But I say to you, Do not resist who is evil.  But if anyone strikes you on the right cheek, turn to him the other also; and if anyone would sue you and take your coat, let him have your cloak as well; and if anyone forces you to go one mile, go with him two miles.

This sounds like be obedient and docile against evil, be non-violent and go the extra distance.  Yet the real message is quite different and has been somewhat lost in translation over time.

Do not resist who is evil is taken from the Greek word “anistenai”.  This actually means do not use violence against someone who is evil.  His three examples point to alternative approaches. 

  1. Turn the other cheek refers to a situation when you are hit on the right cheek from a backhand, reinforcing your lowly role.  Turning the left cheek denotes hit me like a man with a fist which means being treated as a peer. 
  2. Giving someone who you are indebted to your cloak as well as coat means that you become naked, which in those days caused offence to the one who caused the nudity.
  3. Walk a second mile refers to a custom where Roman soldiers could seek the support of a civilian to take his pack one mile but no more.  Offering to take it a second mile caused discomfort to the soldier.

In all of these instances, Jesus is fomenting insurrection and insubordination in a manner tht embarasses and discomforts the oppressors without advocating violence.  He is encouraging breaking the cycle of humiliation, exposing injustice and asserting a moral position. 

These little historical examples have lost their context when we read them without an understanding of their culturally-sensitive full meaning. Apart from the message of context and translation, it also demonstrates some insubordinate methods to generate change in society though identifying abuses of power. 

A similar example was in The Age today, that of an Indian woman who has taken to photographing lechers and gropers on packed public transport in Bangalore and publishing them on a blog.  She and a group of women together stare back at leerers or board buses to read the testimony of victims of sexual harassment.  A great example of reversing the normal power balance.