Twitteretter

I am considering moving house, within UK, and have started cursorily looking at properties. In some London suburbs, those you would like to live in, a four bedroom house with a bit of garden, relatively close to a tube station, even at the far end of the line, sells for around £2.5Mn. This is whilst the average UK salary remains stubbornly stuck at around £30,000. These houses are worth 80 times the average salary. This is difficult to comprehend, and one has to ask the question, who is buying these properties? It cannot be working people. Or maybe it can. I have been giving this considerable thought, as I am fascinated by the apparently unexplainable. I wonder whether this market is sustained by inheritance, the combined result of smaller families and of older parents owning now expensive property which was acquired cheaply and which, when passed down, is sold to fund upgrading. Living in a desirable property may be becoming a multigenerational project. Bad news if your family is poor...

Monopoly. When you are a child, this is a board game, in which you greedily strive to become a property tycoon, accumulate land and build houses and hotels on it, to crash your opponents by taking all their money, ultimately winning the game. When nobody secures dominance, the game goes on forever, as monies you take when others land on your property, you return when you land on theirs, so nobody’s wealth runs out. This is a very apt analogy for how monopolies work. Once you establish one, as Peter Thiel, the mega successful Silicon Valley investor tells us, you guarantee maximum profits by negating the possibility of competition. One winner and every one else losing is fun in a board game but, when the game is real life and the board is society, this is a problem, from many perspectives. We are seeing this with the tech giants today, Google, Amazon and Facebook, behemoths which own their markets, increasing inequality and stifling entrepreneurship. Time to change the rules of the game...

When writing about Gamestop investors joining the Proletariat to fight capital, I discovered that I share my birthday with the International Workingmen’s Movement, born in London on 28 th September 1864, exactly 107 years before I was born in Madrid. This ephemeris is exciting from my perspective and, now that I am aware of it, I may forget my birthday less often. I think, in addition to a birthday, the International, as it is oft called, and I share a number of other things, such as a wish to see fair global distribution of wealth, equal opportunity for all and solidarity amongst fellow men. This would make us both communists which, nowadays, has become quite a pejorative term, imbued with negative connotations but which is really not that bad, or not bad at all. We also share a general lack of success in those hopes and limited efforts to improve their prospects. Chances are, of course, the International will long survive me and, in so doing, will get to see what we both wish for Le...

Poverty is not as easy to define as you may think prima face . For me, the best definition is probably not having enough financial resources to cover one’s basic needs, which, if we use Maxwell’s pyramid, are physiological and safety needs, the resources necessary to live with dignity and security, without constant worry of running out of funds. So understood, poverty can affect both people and businesses, and it is a trap, a situation in which you are pushed to make bad decisions, worsening your prospects by trying to stay afloat. You may take out short term, abusive lending, paying today’s bills but further undermining your precarious position. You may take on the wrong investor, if you are a business, or abandon an interesting course, if you are a person. Our system has perfected the poverty trap, with a range of benefits which prevent unsightly starvation but also financial recovery. Best way to avoid it? Don’t enter it in the first place, little consolation for those already in it...

It’s fascinating to return to Adam Smith, father of capitalism and of Economics’ attempt to become a science, and read about class war, a concept many believe developed by Marx, much later. Smith tells us of the mighty and powerful of his time, the elites, at war with the rest of society, pursuing their own interest to the detriment of all others. This, he predicts, will always be their behaviour, maximising their outcome beyond their needs, opposed by the rest of society, the aggrieved, Victor Hugo’s Miserables. Smith’s analysis of the sociopathy of the elites is prescient in its accuracy, but even he missed developments at the bottom of the social ladder, the poor giving up the fight, abetting their tormentors, no longer complaining, no longer uniting, no longer opposing the wealthy as they pillage and ransack, transferring wealth from all pockets to theirs at increasing pace. The rich have succeeded at making class war uncool, unfashionable for the losers and thus, just a fond memor...

Our modern World is redefining inequality. This used to be bad enough, the haves enjoying luxurious standards of living whilst the have nots, the majority, lived hand to mouth, struggling to survive from one day to the next. With the industrial revolution, and especially in the XX century, the general increase in wealth delivered meaningful improvements in the standard of living for most. These were the halcyon days of capitalism. But, at some point, in the 80s, with Reaganism, Thatcherism and neoliberalism, we lost our compass. Inequality is now escalating to unprecedented levels, even in the First World. Young people are staring at a future where automation will have taken many jobs, where assets are so expensive they are completely unaffordable and, to compound it all, where even the environment, nature, that one asset we all used to enjoy for free, regardless of individual resources, is being depleted, exhausted, to a point where we will be leaving nothing to those who come after u...

In socioeconomic terms, one of the salient developments of the XIX Century was the inception of the International Workingmen’s Association, founded in London in 1864 to organise workers globally for the class war against the abuses of capital, under the slogan ‘Workers of the World unite!’, borrowed from ‘The Communist Manifesto’ by Marx and Engels. A movement of such global reach was a huge undertaking with the communications of the day. Today, workers no longer unite, uninterested in class war, aspiring to individual success, to abandon the working class, rather than lift it into comfort, prosperity and freedom as a group. A shame, as our societies have now reached the level of wealth that would allow general prosperity if distribution were right. The events around Gamestop and Robin Hood last week, however, showed a new kind of social revolt, that of small investors against hedge funds. Seems like even small investors have joined the proletariat, the many, against the ever fewer few...

In Twitteretter 300 I took advantage of the name Robin Hood, used by the stock trading platform, to try to draw a connection between investment and classical literature. Now the SEC has decided to join the party, by allowing the analogy to continue. It seems that regulations need to be strengthened, to avoid this kind of action, a group of small investors playing havoc with the shorting strategies of the big hedge funds, bringing volatility into the market. The SEC is assuming the role of the Sheriff of Nottingham, determined to keep the status quo steady, to protect the mechanism that, slowly and without volatility, transfers wealth from the poor small investors to the wealthy funds. It seems that the system was so much about that at the time of the Crusades as it is today. I cannot wait to find out which person or organisation takes on the role of Maid Marian, although it must be noted that in Howard Pile’s original her role was much more peripheral than in later movie adaptations Le...

A recently published Rand Corporation study reveals an ongoing significant redistribution of wealth, from 90% of the population to the top 10%. This is not new and, for me, not a surprise. I’ve written about inequality before. What is new about the Rand study is that it quantifies the redistribution, at least for the US. If the share of wealth and income in US society had remained unchanged since the three decades following World War II, the 90% would be $47 trillion per year richer. The figure is staggering, less than 10% of the population would know how to write it in extended form. The average American would be $42,000 per year better of. How can the wealthy and powerful get away with this in a democracy, where people vote on policies? Simple. We know we have an enemy, but we don’t know who it is. For white men, Latinos and blacks. And for them, white men. For Brits, Europeans and, for many Europeans, African and Asian refugees. Meanwhile, the true enemy hides in plain sight  Le...

Last week in UK we learnt of a Conservative government plan to exempt for hedge fund managers, company managers and City dealmakers flying into UK of quarantine requirements. The stated rationale, if you care to listen, is that they are not a risk, as they fly in by private jet, use private cars and do 4-5 meetings in a day and fly out. This is disingenuous. For a start, it shares with Trump the unusual notion that people cannot get infected in a car. Secondly, the exempt will be meeting with people in UK, otherwise, what is the point in coming? And further, 4-5 meetings in a day can be done online. In fact, merger and acquisition activity in UK has been strong in the last 6 months, with many deals completed fully online. The exemption seems based in the very Tory notion that the wealthy are not infectious, that they know better and can avoid contagion, unlike the poor, who are also stupid, as their poverty clearly indicates. The virus is not only part time, but also reversely elitist...

No. Or not only. The title summarises a common view which informs most company management nowadays. The fundamental driver of a company is to maximise shareholder value, simplistically equated to profit or, rather, dividend or yield. This is a misconception. Companies are not only a vehicle to grow shareholder wealth. They are an environment where workers spend a significant part of their day. They are actors in a community, contributing to its dynamics and impacting its environment. They are entities integrated in society and their objective must be maximising the benefit to their stakeholders. These are, in my order of importance, employees (since they spend good part of their lives there and rely on them for their livelihood), customers, suppliers, shareholders, local community and wider community. Shareholders demand continuously growing returns, which drives managers to underpay employees and suppliers, shortchange customers and community. In the midterm, it is a recipe for failur...

Donald Trump, the incumbent US President and self-proclaimed billionaire, has paid negligible federal taxes for a number of years, as revealed by a New York Times exposé this week. Many of his supporters have come out in his defence, stating it is smart to use the tools available in the fiscal system to avoid tax, so long as it is done within current legality. Trump himself has often stated this self-serving view. The problem is that having a president who shirks tax obligations is a paradox. Tax is a manifestation of civic spirit, it is one of the tools we use to build a society. The president is a civic figure, the most important one, and the chief executive of the apparatus tasked with building society. What the NY Times revelation tell us, if we did not know already, is that the person charged by Americans with building their society is antisocial, the head of their civic society has no civic spirit. His individual behaviour is incompatible with the role the collective has given hi...

The last 25 years have shown a concerning political trend. For most, politics have become about the economy, and not much else. This was first realised (or instrumented) by Reagan and Thatcher, and ultimately enunciated by Bill Clinton’s ‘It’s the economy, stupid’. The trend is logical, we seemed to be entering a post-political period. With the USSR gone, there were no great political questions, or struggles, left. Capitalism was victorious, its politics widely accepted and democracies rose unchallenged. But this is no longer. Populism, fuelled by inequality and social problems, is waging war on democracy. Citizens are asked to choose between GDP and climate, jobs and minority rights, protectionism and international order. Still lulled into a false sense of security, they are, half sleep, choosing economy, when the battleground is on democracy. We are defending income and property when society and liberties are at risk. Wake up or kiss goodbye to democracy and, with it, to your economy...

I just had an interesting conversation with a friend. He does not want to be another rat on the spinning wheel, working all his life for a salary to be left old, decrepit and with a disappointing pension. He needs to find a way to escape this most common of traps. This dissatisfaction with his lot, he sees as unique and personal, not shared by others. This is fascinating, as most share it. The individualism pervasive to modern Western society and beaten into us from an early age prevents us from seeing our problems as common and from searching for collective solutions. Every individual is trying to individually solve the same problem and thus succeeding only occasionally and only through the failure of others. This is the great success of our system, making social problems appear individual and therefore blinding individuals to collective solutions. The system thus survives unscathed whilst the individuals it is made of, and it should serve, fail in their efforts to change their lot...

The interview I discussed in Twitteretter 161 got me thinking about success. In today’s society, we are evolving towards equating success with financial reward. Being richer means you are more successful. Money, a basic, blunt instrument we devised to represent the value of goods to allow their exchange, is becoming the tool we use to measure a person’s success. But success is not so simple. By this reductionist simplification, Van Gogh, for example, is hugely successful in death but was completely unsuccessful in life. I would argue that Van Gogh succeeded at creating exceptional works or art, his aim, but society failed at rewarding him justly for such achievement. And this illustrates the danger of oversimplifying, instrumentalising the concept of success. It means only achieving in some fields and certain ways is regarded as success by those who should recognise us and, as a consequence, many fundamental roles in society, such as nursing and teaching, languish forgotten and betraye...

I’ve lately been making the following joke: ‘The stupidest person in the cemetery is the one with the largest bank balance at death, and the smartest is the one showing a nice, round zero’. But this is not really a joke. It is in fact a pointed statement about money’s purpose and value. It is valuable only because it allows us to exchange goods and services, as we have chosen it as a simple and intuitive proxy for value. Thus, the value of our money is only exercised when we use it (for purchases, investment, tax payment or charity). When we don’t, and it sits on a bank account where we stare in awe at the many zeroes and grin at our name on the Forbes Richest List (other lists available, not that I recommend any), we get no value from it, bar for an empty, twisted satisfaction at most. Money must be deployed in the economy, creating wealth and improving standard of living for all. Anything else is stupid and indicative of a lack of understanding and, by extension, lack of intelligence...

It has become fashionable, in the last few years, for business people to read ‘The Art of War’ by Sun Tzu, a war treatise by a 5 th Century BC Chinese general. I would not go as far as saying it is their favourite text, but many have told me over the last few years that they are reading it. The concept is striking for its significance. It indicates that many of these business people think they are at war and that, to do business successfully, they must understand the apparent wisdom of a warlord from 2,500 years ago. It is paradoxical that business, a discipline that is meant to move technology and human capability forward by bringing discovery and science into application, improving lives in the process, is looking so far back for inspiration. It is worrying that, at a time when we have the collaboration tools needed to foster unprecedented cooperation to faster achieve humanity’s objectives, and with them those of businesses, many engaged in this activity think they are fighting oth...

  Capitalism as described by Adam Smith, its ideological father, is based on the accumulation of capital, which keeps the system operating. The capitalist (in modern terms, the entrepreneur, as for Smith the capitalists were the factory owners) accumulates wealth to reinvest it in additional means of production, growing his capacity and as a result his competitiveness. This in turn increases general wealth, as more competitive production means cheaper consumer goods. Alas, the XXI century is very different to the XVIII. A large proportion of global wealth today is unproductive, tucked away in tax havens and invested in obscure assets, not engaged in tax paying, employment creation or productivity increase. This robs the population of the benefit of accumulation, without benefitting the accumulator, who has nothing to show for it other than an inflated bank balance. Our system needs to find a new way to employ accumulated capital in the productive delivery of society’s objectives Le...

  Economics, or political economy, as the discipline was called then, became a pseudoscience in the late XVIII century, through the contributions of people like Smith and Ricardo. At the time, a critical simplification was made in order to model mathematically the behaviour of the system. Humans will act always to maximise their own self-interest, or utility. This is plainly not true. We are moral animals (at least some of us) capable of acting for the benefit of others over our own, but introducing this degree of freedom would make the modelling of inputs, processes and outputs necessary to be a science impossible. This simplification has become ingrained in the economic theories which actually inform the design of the actual system we live in. As a result, the system is better suited to those who best fit the oversimplification, sociopaths who always and unconditionally prioritise their own interest. We see the consequence in the success of Johnson, Trump, Putin, Koch, etc. Lengt...

I realise I am about to open a huge hornets nest, but in thinking about the incorporation of women to the workplace in the 50s and 60s, a critical step on the emancipation of women, as many would tell you, I cannot help but thinking also about the impact that this had on the value of labour in its ages old to and fro with capital for the share of the wealth created in the economy. By doubling the supply of labour overnight, it over time halved its value. The result is that a working couple today has, all else being equal, similar relative acquisitive power to a one worker couple in the 60s, whilst corporate profits have exploded since. This is a bad deal for workers and a capitalist dream. Women should, of course, have access to the workplace in fully equal terms, but the way this should work, in the interest of the working class, should have been with one of the couple, it does not matter who, entering the labour force, thus preserving the unit value of labour and the price it command...