On Friday I had a NASA scientist lying around the house, so I encouraged the youngest Chip off the Old Hack to take him into class for a bit of show and tell. There was a moment of struggle, with some muttering about being an engineer and not a scientist. But through my finely calibrated manoeuvring of a Ford Galaxy, the Eagle landed at T minus 10 mins, with USB memory stick in pocket, loaded with images for an estimated 15-minute presentation. Eager questioning from 32 curious nine-year-olds turned this into more than an hour. One small step…

In my capacity as taxi-driver and provider of rocket fuel, I facilitated a prime-time public service. What goes around doesn’t necessarily come around, however; searching the TV schedules yesterday for child-friendly space programmage led into the void.

Perhaps it doesn’t matter any more. You should just record stuff. Later in the evening the documentary/drama Moonshot: The Flight of Apollo 11 came on, but this overlapped later on and after midnight with In The Shadow Of The Moon. This I managed to record to PC, along with two mistaken hours of “live” Big Brother and a Whoopi Goldberg movie. There goes the hard drive. But, if it was worth putting a man on the moon, forty years later you might reasonably expect the public service broadcasters to do a better job, particularly to inspire kids on the road to knowledge acquisition.

But don’t despair. Sometimes that which is lost and broken resurfaces. The BBC did perform its civic duty on Saturday morning by interviewing film director Theo Kamecke. He had been invited by NASA to make a so-called time-capsule documentary of the Apollo 11 mission. Even NASA’s PR seemed to understand that it would get ignored once it appeared, because the public would by then be all mooned out. And so it was. Languishing for nearly four decades, Moonwalk One was rediscovered by the makers of In The Shadow Of The Moon. It has been given a digital dusting off and released on a collectable DVD.

CNN provides three minutes with Kamecke here, where he talks about the smell of fear and the contribution of little old ladies to the space race:-

[16.01.10 Addendum: the video above  seems to have been withdrawn, but a full video of Moonwalk One looks  like it was made available in the past 10 days, and so is now pasted below.]

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One of the most unanswerable questions you’re likely to be asked in a job interview is “Do you think you’re tough enough to stand up to Piers Morgan?” Unfortunately I’ve had that question put to me.

Several years ago, by dint of having the two words “managing” and “editor” next to one another on my CV, Trinity Mirror called me in to see them in the possibly mistaken belief that I could help dig them out of a very big hole. I was pretty sure I could help in some way, but I think we had a different view of what type of hole they were dealing with. Given Piers Morgan‘s inexorable rise on two continents as the mean-spirited arbiter of folksy talent, might I humbly propose that this is the mother of all interview posers? Top it if you can.

To be sure, I was in the wrong place at the wrong time, as usual. There was a small coda to this interview conversation which involved another legendary Fleet Street figure: an experience which finally persuaded me it was time to steer a reciprocal course to the one Fleet Street was headed down and, boat-hook in hand, retrieve my bedraggled dignity. As tabloid journalists allegedly say in potentially compromising situations: “I made my excuses and left.”

Rightly or wrongly, and with rare exceptions, my approach to news management had been unusually low-key: a function of personality combined with the demands of real-time, I think.  I was always more interested in process than result. That’s what I offered in that interview, and I suspect that it was mistaken for weakness and (worse still) inexperience, whereas for them it should have represented a diverse perspective. My interviewer, I could tell, was not convinced.

Mercifully one of us escaped. I think it was probably me, though maybe it was Piers. So, in my sotto voce way, this  knackered hack is finally taking a hyper-linked opportunity to stand up to Piers Morgan: something that in real life only a handful of people seem ever to have done, and the Fates denied me the opportunity to chance my arm at.

Morgan was honoured this week with a slot on the BBC radio show Desert Island Discs: the longest-running music programme in the history of radio. It is the mama of all mixtapes: you get to choose the records that define your experience and broadcast them to the nation. Although Bob Geldof famously said that it is only a radio show, I reckon an invitation to appear is greeted by most in the same way as being tapped by Buckingham Palace for the Queen’s birthday honours.

Piers Morgan’s life is a catalogue of rather ghastly errors, none of which seems to have been a setback to his advances to fame and fortune: a modern day Bel Ami, perhaps?  So it seems like a category error for our public service broadcaster to accord him such high-quality attention. But hey, there goes the neighbourhood. For those who want to see if theirs is a match for his musical taste, this link should do it. Me, I’m averting my eyes.

In at least one of those counter-factual universes of infinite mathematical possibility, the Knackered Hack has himself been granted the honour of discussing his own desert island discs before an eager nation. In this same universe, Piers Morgan blogs and nobody reads.

Here’s a small taste of what my list contains. Until a few weeks ago Haydn would not have been on my modest mixtape.  For undisclosable reasons he has now hopped in.  The words, courtesy of the ChoralWiki, are below.  And for those who read me for stuff on decision-making, Haydn seems to have been on to heuristics and biases long before any of us.  You may have to think about this one a little bit.

Insanae et vanae curae invadunt mentes nostras,
saepe furore replent corda, privata spe,
Quid prodest O mortalis conari pro mundanis,
si coelos negligas,
Sunt fausta tibi cuncta, si Deus est pro te.

Vain and raging cares invade our minds,
Madness often fills the heart, robbed of hope,
O mortal man, what does it profit to endeavour at worldly things,
if you should neglect the heavens?
If God is for you, all things are favorable for you.

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In the middle of that 2001 Chapter 11 process, I was being primed for information in the Tipperary pub in Fleet Street. The “Tip” is the oldest Irish pub in England and the first ever to sell Guinness here, or so the free information on the internet tells me today. I did not know that then. There was plenty of free information available in 2001 despite a relative shortage of comprehensive pub histories. All the same,  you still had to pay for the Guinness. And that’s invariably the case today.

I was with a very senior colleague who was plying me with the black stuff; I think he’d been asked to keep an eye on me and my rank-breaking entrepreneurship. I said to him that I thought part of the problem for even highly specialized subscription content businesses, like the one we were proposing to launch out of the bankruptcy, was that so much generic news was then free on the internet. This factor perhaps had already tipped investor sentiment away from the concept of proprietary news content. I suggested that one of the principal reasons for this may have been the example set by our competitor, the news agency Reuters, in selling its news feed to search engine/portal Yahoo!, without obvious limitations on what could be published.

“Oh, I did that deal!” said the executive. Imagine the Knackered Hack coughing into his artisan-poured pint, spraying his “mentor” with white foam. [For sure, that's not what happened exactly, but I'm not a factual journalist any more; I don't carry an NUJ card these days and even my poetic licence is provisional.]

Some of us had known for a long while that the value proposition of unbundled real-time news was not what it once was. It wasn’t a good time to be giving so much of it away. Reuters seem to have wised up a couple of years ago because they no longer operate that Yahoo! deal.

But I still wonder, in my counter-factual way, if such a vast organization as Reuters had not taken that fork in the road so prominently would other news media have felt so compelled to provide so much stuff for nothing? And thence GoogleNews. Would a viable subscription model not have been built by now to get the more innovative news organizations [oxymoron warning] cleanly out of the ink-on-dead-trees business? Perhaps not.

There may be more lessons from the real-time news industry of the ‘80s and ‘90s for today’s media to illustrate the tragedy/farce heuristic. Anyone interested in another chapter on that soon?

Photo credit tricky

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As heuristics go, just as the most expensive wine on the wine list is not to be trusted, writers should be given a wide berth if they quote the first lines of books, especially if they are quoting Marx paraphrasing Hegel.

At the start of The Eighteenth Brumaire of Louis Napoleon, a book which I probably have read in its entirety (but don’t quote me), the bearded one says this:-

Hegel remarks somewhere^[*] that all great world-historic facts and personages appear, so to speak, twice. He forgot to add: the first time as tragedy, the second time as farce.

Chevy Tahoe, first a gas-guzzler, then a hybrid?

I risk getting into even deeper water with the mathematicians for suggesting there is something of the self-similar in Marx’s statement, and then with historians for invoking the idea that history repeats itself.  Perhaps I’d be safe with Yogi Berra: “It’s like déjà vu all over again”.

Yesterday General Motors announced it had filed for Chapter 11 bankruptcy.  This is on a grand, publicly-listed, credit-fuelled scale (GMs’ annual revenue was $149 billion last year, and it’s lost more than $80 billion in the past four years, its market capitalization collapsing from a surprising $26 billion in October 2007, when the credit crisis was well underway, to next to nothing.)  The German and US governments have intervened to save jobs.

My own experience of Chapter 11 in 2001 was a less remarked upon affair (less than $1billion in revenue).  But at their respective times, within their respective universes, the two Chapter 11 incidents share significance: the words “too big to fail” were uttered in both instances.

There is no shortage of animal spirits evident in either, some interesting uses of expenses, and for those observing closely (perhaps that’s just me in my Chief Brody hat ) the one may have heralded the other. Did the one in fact scale into the other?  GM is now perhaps the most iconic victim of the credit crunch, which through my long-path-dependent-tinted spectacles was hinted at way back when, in the perennial struggle between debt and equity.

The Chapter 11 that dissolved the news organization I worked for merited very little press comment; ironic  given that 600 global journalism jobs disappeared more or less overnight. Almost without exception those jobs were engaged in purely factual reporting: the scrutinizing of financial markets, banking and economic and monetary policy.  Instructive perhaps, given the current collapse of news businesses the world over, that they were entirely online, publishing by corporate subscription, and over internet protocol for several years already.  They could not be saved because the consensus then was that this market was already oversupplied.  News was a commodity, and only so much was necessary to lubricate the inner workings of global financial markets.

I’ve long since given up the conceit that the factual information output of my professional career met some fundamental human need (except the feeding of my family).  This was a way that I used to comfort myself: as a journalistic form, economic and financial newswire reporting could legitimately claim a fourth-estate function of representing important facts about the world, even if it was bounded in its day-to-day ability to call policy-makers and financiers fully to account.  It was not the sharpest instrument, but it was probably a lot sharper than print journalism which in effect fed off some of its by-products.

I’ve already described how, in my own attempts to refinance this organization — as I moulted my middle-management plumage and temporarily tried on the peacock feathers of the imagined future CEO — I submitted with my colleagues a restructuring that would focus news reporting resources on the growing and mostly under-reported market in credit derivatives.  That market was the one that made sense to my diverse rescue task force: whether their personal focus was Whitehall, currencies, commodities or companies, Essex-boy, anarchist or Etonian.  In retrospect, it is clear that transparency and scrutiny of those complex markets would have been useful in the post-9/11 world.  But in the summer of 2001, investors came there none.  The lesson, as ever, seems to be: if you’re going to fail, fail big. Don’t pin your hopes for rescue on a knackered hack, but a newly minted Barack.

This takes us back to Robert Shiller and George Akerlof’s qualification of capitalism: “It does not automatically produce what people really need; it produces what they think they need, and are willing to pay for.”  Since 2001, it is clear that a great many people, and at the same time too few, thought they needed GM’s Chevy Tahoe SUV.  President Obama agrees that they need more.  Me? I’m not so sure.

Photo credit Chevy Tahoe: anthonares

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Gregory Berns, a professor of neuroeconomics at Emory University and author of Iconoclast: A Neuroscientist Reveals How to Think Differently(UK)/(US), was interviewed this morning on Radio 4′s Today programme exploring the role of neuroeconomics in understanding the current crisis.  He’s in Davos for the World Economic Forum, with all the large fromages.

Back in the day, the Knackered Hack used to dispatch a team of reporters to Davos. Press places were then scarce.  Now I’m watching it all on Twitter, my very own self-organizing newswire, and tossing in the occasional iconoclastic observation of my own.  Who-da thunk it?  Everyone and his dog seems to be there; some shuddering, and not from the cold.

Berns message was about as negative as you can get when considering the current crisis.  He deftly applied the old-dog-new-tricks teaching heuristic to an entire generation:-

One thing that we know is when people make decisions that they are uncertain about is that they look to other people… We have seen along the way how other people’s opinions essentially pollute those judgments. Now,  modern markets are great. Now, economists like to talk about efficient markets and all of that, but the problem is that they are only efficient when people behave as individuals and render independent judgments.  Now I would probably go as far as saying the current crop of adults is a lost cause in that I think we should be focussing our efforts on the next generation and how to teach them to make judgment that are independent of each other and stop this crazy herd behaviour.

So there you have it.  All current adults are sheep.  Better cancel the Twitter account .  You can listen to the whole thing here.  I think it was edited, so there may be some context missing and the above quotation therefore not adequately representative. That’s mainstream media for you.

All that said, like a dog barking in the wind, I myself did tweet the following just a few weeks ago:-

Haunted slightly by counterfactual sense the boom promoted an entire generation of the wrong type of manager”

I’ll come back to that idea soon, I hope.  But in the meantime, given Berns’ imperative that we focus on the cognitive capacities of the next generation, it was a neat little coincidence that a review copy of a new textbook by David Hardman, entitled Judgment and Decision Making, arrived in the post yesterday from Wiley. US version available here.  Just take a look at the contents:-

1. Introduction and Overview: Judgments, Decisions Rationality
2. The Nature and Analysis of Judgment
3. Judging Probability and Frequency
4. Judgmental Distortions: The Anchoring-and-Adjustment Heuristic
5. Assessing Evidence and Evaluation Arguments
6. Covariation Causation, and Counterfactual Thinking
7. Decision Making under Risk and Uncertainty
8. Preference and Choice
9. Confidence and Optimism
10. Judgment and Choice over Time
11. Dynamic Decisions and High Stakes: Where Real Life Meets the Laboratory
12. Risk
13. Decision Making in Groups and Teams
14. Cooperation and Coordination
15. Intuition, Reflective Thinking, and the Brain

Back of the net, as they say in soccer.

David, with others, runs the London Judgment and Decision Making Group, whose seminars I’ve been lucky enough to attend when I’m in town.  If Berns is right, David should be needing a larger venue.  David assures me he will be blogging on the book before too long, so I’ll let you know when that happens.  We can definitely benefit from a regular dose of wisdom from this discipline.  Of course, it’s a little known fact that the Knackered Hack is already one of the leading decision science blogs on the web.  It says so here. And if you are wondering how that happened, the answer remains … well … uncertain.

Photo credit: stephenphampshire

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I wonder if Malcolm Gladwell’s Outliers: The Story of Success is going to inadvertently create a popular misunderstanding about success similar in form to my previously stated fear about what a superficial reading of Gut Feelings and The Wisdom of Crowds would do for effective decision-making.

In a few Twitter exchanges yesterday, the notion that 10,000 hours of work invariably leads to success seems to have been the takeaway of one or two people who have read the book, although that might be an erroneous gut feeling on my part, constrained by the 140-character limit of such “conversations”. That is how misunderstanding cascades through new media . To compound that problem, I have not yet read Outliers myself. However, it was David Shenk at The Genius in All of Us (a blog and the title of his forthcoming book) who highlighted the various longitudinal studies into talent that I believe Gladwell is using too.

My understanding from Shenk, whose blog has sat quietly on my blogroll more or less since I started here, is that 10,000 hours of hard work do not necessarily lead to success, but are the minimum needed for mastery of a complex cognitive task or subject. If that mastery or genius represents success, then there is no debate. But there are plenty of back stories (I am collecting them, of course) that reveal how other factors play a part after the mastery and may yet prevent even hard-won talent from being recognized. For example, Sibelius, who I’m learning seems to have had a rough ride from 20th century musical fashion in general, flunked his audition as violinist for the Vienna Philharmonic through a disastrous bout of nerves. In Gladwell’s defence, I’m sure that he states clearly in his book that there are a lot of environmental factors (some of them entirely random) that are usually necessary to support an individual over the ten years or so required to sustain that disciplined effort.

But I will not be surprised now if successful people, who have not read the book, start explaining their success having backwardly calculated that they must have spent 10,000 hours of hard work to earn it. Let me know any examples, won’t you.

You’ll have noticed in the last post [sic] that I surreptitiously tried to sneak myself into the musical outlier group that is prize-winning horn players. Here is the outlier among those outliers, Dennis Brain, providing an introduction to the horn. Killed tragically in an accident in 1957, aged just 36, he remains to be surpassed:-

The works of Dennis Brain can be purchased from Amazon here.

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What has the French Horn to do with the science of uncertainty? The Economist review of journalist Jasper Rees’s book I Found My Horn may have nailed it.  The book chronicles Rees’s mid-life crisis in which he picked up his childhood instrument rather than running a marathon .  It’s now being published in the US as A Devil to Play: One Man’s Year-Long Quest to Master the Orchestra’s Most Difficult Instrument.  More pertinently, a play starring co-writer Jonathan Guy Lewis opens this very night on the London stage.

What makes the horn quite so hard to play is the length of tubing necessary to produce its tonal range; despite three valves, it is very easy to hit the wrong note, or fall off the right one. There’s a level of doubt about each outcome that does not trouble other musicians to quite the same degree.  Even professional orchestral players are more exposed than most to public musical catastrophe, because of the horn’s expressive value to composers.  For this, among other reasons, horn players are considered a breed apart.  This is how Simon Rattle puts it:-

You never eyeball a horn player. You just don’t. They’re stuntmen. You don’t eyeball stuntmen when they’re about to dice with death.”

Given the Knackered Hack’s quest for antidotes to hubris, perhaps mastery of the horn (if that is not a contradiction in terms) should be considered an essential qualification for public or corporate office?  I’ve noticed that this website seems to attract a disproportionate number of horn players (at least two).  Perhaps there’s a connection? You can purchase a CD by one of those readers below.

[By way of full disclosure, the Knackered Hack was placed first in the under 12s brass section of the Harrogate Festival in 1976, performing the second movement of Mozart's Fourth Horn Concerto K495, cough... ]

Photo credit: vtengr4047

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When I read Michael Lewis‘s book Liar’s Poker a few years ago, I was left with the uncomfortable feeling that the entire edifice of modern finance might just have become nothing less than the mother-of-all Ponzi schemes. And that the mutant moment could possibly have been the day Salomon Brothers’ Lewis Ranieri invented the mortgage-backed security, based on what amounted to a salesman’s whim. The securitisation business would transform itself over the next 30 years, until its unfortunate reconnection with reality in the mother-of-all Minsky moments. This is how BusinessWeek described Ranieri in 2004, celebrating him as one of the leading innovators of the previous 75 years:-

A less likely financial engineer would be hard to imagine. Ranieri, a Brooklyn native, set out to be an Italian chef until asthma ruled out work in smoky kitchens. A part-time job in Salomon’s mail room set him on the path to trading. A large, volatile man, Ranieri built the firm’s mortgage desk in his own image: “fat guys,” as author Michael Lewis described them in Liar’s Poker, promoted from the back office, who indulged in feeding frenzies and practical jokes while selling strange new bonds to doubtful investors.

Ranieri’s own mortgage bank, Franklin, was closed last week by regulators and has now been taken over by the FDIC.

Michael Lewis, who worked for Salomon Brothers in the 1980s–an experience on which the Liar’s Poker was based–has just written a piece this week in Portfolio in which he is, in effect, calling the end of an era on Wall Street. This is how it starts:-

To this day, the willingness of a Wall Street investment bank to pay me hundreds of thousands of dollars to dispense investment advice to grownups remains a mystery to me. I was 24 years old, with no experience of, or particular interest in, guessing which stocks and bonds would rise and which would fall. The essential function of Wall Street is to allocate capital—to decide who should get it and who should not. Believe me when I tell you that I hadn’t the first clue.

If you did not see the Portfolio article, it’s worth reading all nine pages. It tells the story of a handful of people who saw that there was a wider problem, even if the full scale of the potential catastrophe eluded them too. Guys like Steve Eisman, of FrontPoint Partners, who did not play the standard Wall Street game and, when they had the chance, traded aggressively against the prevailing wisdom. It also paints a granular picture of what a short-seller really looks like, and why we should perhaps see them as the canaries in the coalmine rather than demonise them (as everyone from government to clergy did a few months ago here in the UK). There is a more interesting vignette in there too about how his short-selling was egged on by Wall Street firms for their own purposes. In all, it’s a great article. Lewis reveals, in the actions of his protagonists, some of that concept called bounded rationality, as identified by economist Herbert Simon and others. The following also stood out for me, highlighting the scale of the debt markets versus the more familiar stock markets which journalism, print and TV news, tend to focus on:-

By the spring of 2005, FrontPoint was fairly convinced that something was very screwed up not merely in a handful of companies but in the financial underpinnings of the entire U.S. mortgage market. In 2000, there had been $130 billion in subprime mortgage lending, with $55 billion of that repackaged as mortgage bonds. But in 2005, there was $625 billion in subprime mortgage loans, $507 billion of which found its way into mortgage bonds. Eisman couldn’t understand who was making all these loans or why. He had a from-the-ground-up understanding of both the U.S. housing market and Wall Street. But he’d spent his life in the stock market, and it was clear that the stock market was, in this story, largely irrelevant. “What most people don’t realize is that the fixed-income world dwarfs the equity world,” he says. “The equity world is like a fucking zit compared with the bond market.”

This reminded me of some of my own fish-out-of-water experiences, begging for some capital allocation from the selfsame Wall Street in 2001. I was in the middle of a management buyout attempt for the news agency that employed me, the parent of which had been plunged into a Chapter 11 bankruptcy administration. Unsure that this editorial cost centre would work in any other organization, we formulated a set of independent online subscription news services, slicing and dicing our coverage into what we hoped would be viable longterm businesses. The biggest slice had the world of credit derivatives at its core. But at that time the labyrinthine and mushrooming world of the credit markets was one that most journalists or news companies would not have heard of, nor wanted to touch. And so it was. When I offered it to the board of one major company (let’s call them Thomson Financial) I was advised I’d be more successful focusing the business on sectoral equities, because that was “what the market really needed”. Thomson was then aligned in some peculiar defensive editorial content strategy with Dow Jones (now owned by News Corp) against Reuters, now owned by err… Thomson.

Ah well, no dice.

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Jake Thackray was a Yorkshireman and troubadour (no, really), inspired by Georges Brassens. Good hunter-gatherers should be in bed early, but because of a journalistic (if not civic) duty to watch the US election coverage, allied with a bit of US jet-lag, I was accidentally around when the BBC aired a late night documentary on Thackray last Monday. I remember him from my childhood, when he did a regular turn on a consumer rights/light entertainment show called That’s Life, famous for finding dogs that could say “sausages”: the lolcats of its day.

A fortnight ago, the BBC’s highest paid presenter (Jonathan Ross) was suspended, and one of its rising stars (Russell Brand) fired, for an offensive prank phone call to ageing Faulty Towers comedy actor Andrew Sachs concerning the night-time activities of his granddaughter. One defence, I think from a BBC type, suggested that their misdemeanour was perhaps an inevitable part of a risk-taking comedy culture. Despite a Facebook support group set up to defend the two overpaid scallywags’ human rights, and despite the fact that some of my Twitter chums think what happened to the two is a travesty, I am a bit more hard-nosed. Watching Jonathan Ross’s performances over the years, it seemed increasingly likely that there would be a blow-up at some stage, which is now unfortunately squandering BBC goodwill just as it tries to defend its public service remit.

Ironically, self-deprecating Thackray offers a perfect lesson to managers in general, managers of “The Talent” in particular, and the talent itself in this wonderful song entitled The Bull. There might even be a message in there for bankers, central and otherwise. The contrast between the talent of Thackray and Brand/Ross looks quite stark, when it comes to pushing the boundaries of taste and decency for comedic effect.The clip has a slight hiatus, so hang on in there.

And if you’re wondering what that missing verse contains, curiously, I can’t find a CD including this song.  However, a boxed set of Thackray is available below (with a number entitled Black Swan – I wonder what that’s about? ).
    

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OK, now that we have the demise of Lehman, Merrill and AIG, and with HBOS teetering on the brink (and remembering that we don’t do anniversaries here), let it be noted that it’s just over a year since Northern Rock collapsed, and it’s also a year to the day since I coined the phrase “Magoo Finance” to refer to a remarkably near-sighted interpretation of financial events: let’s just call it linear thinking in a non-linear world.

Like “Gordonfreude”, “Magoo Finance” failed to catch an internet viral wind and remained locked in the doldrums of cyberspace, drifting aimlessly, waiting for wiser or more popular bloggers, twitterers, friendfeeders and maybe even journalists to jump on it, expound and celebrate it. The fact that it included an excuse to watch 6 minutes of unremittingly nostalgic 1960s cartoon mirth further confirmed my expectations for its success. Ah well.

A year on and, as a treat, here’s a small pointer to an essay by Nassim Taleb posted by The Edge organization. It’s well worth a read, not least as it elaborates on the problem at the centre of our financial woes. I may be wrong but I don’t think I’ve seen Nassim point the finger so directly at Alan Greenspan and Ben Bernanke before now:-

Now let me tell you what worries me. Imagine that the turkey can be the most powerful man in world economics, managing our economic fates. How? A then-Princeton economist called Ben Bernanke made a pronouncement in late 2004 about the “new moderation” in economic life: the world getting more and more stable—before becoming the Chairman of the Federal Reserve. Yet the system was getting riskier and riskier as we were turkey-style sitting on more and more barrels of dynamite—and Prof. Bernanke’s predecessor the former Federal Reserve Chairman Alan Greenspan was systematically increasing the hidden risks in the system, making us all more vulnerable to blowups.

And for newer readers (thanks for dropping in), you may want to read my post Smarter Than the Av-er-age Bear in which I reference some of my writing from way back in 2005:-

When people think about housing they don’t tend to think of a complex system. They will first think about their own house, those in the neighbourhood, and then a national price index recently described in the press which provides a sense of overall direction. They will probably then invoke a sense of someone who made a killing on property, or whom they saw renovate and sell at a profit on some TV show. From this they will make decisions to buy or sell. There is a strong element of imitation in what motivates them.

These behaviours are definitely part of what makes up a market, but Sornette’s specialism is in analysing them mathematically through study of the price activity of markets. Sornette’s last paper on housing demonstrated that the UK housing market would peak late 2003 or mid 2004, and then be susceptible to a crash. At that time, he did not characterise the US market as a bubble, but in his latest paper he shows that, two years on, the US is in a bubble.

A bubble with a crash in the UK will be one thing, but a serious reversal in the US would be very damaging. It remains to be hoped that the pump priming that occurred in 2000-2001 has not created a greater problem from which the world economy will suffer a more severe hangover.

I mention this again because I was quite astonished by the BBC‘s “heavyweight” Newsnight current affairs programme on Monday. Economic pundit Diana Choyleva from Lombard Street Research said that central bankers — and Alan Greenspan in particular — might shoulder much of the blame for the current problems through keeping policy interest rates too low for too long. This was met with a characteristic disbelief on the part of news anchor Jeremy Paxman which I feel suggested a serious lack of editorial understanding of the issues, now 18 months into a rolling crisis. But then, I haven’t yet told you of the disdain for business journalism that I personally experienced when interviewed for a very senior BBC post.

If you can’t be bothered to read Magoo Finance I, the video is here:-

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