How was your Blue Monday?

Blue Monday is a charming bit of pseudoscience that – like all the best fiction – has a kernel of truth in it.

It’s supposed to be “the most depressing day of the year”, calculated on an arcane (and meaningless) equation combining the climate, number of days since Christmas, debt levels, failing New Year’s Resolutions and other factors.

Of course, all these issues can certainly impact on mood, but combining them into a precise formula for determining the maximal point of feeling down is the purest nonsense.

Nonetheless, the face validity of the concept has given it traction in the popular press, and anecdotally, I can certainly add that I had a busy day, with several urgent assessments.

That hectic day comes on a backdrop of having suffered a cold over the past few days and I reserve the right of my gender to complain bitterly about having been ill with a minor ailment. In fact, I felt so under the weather that I wore a few of my favourite items to work during the worst of it.

Coincidentally enough given today’s moniker, they happened to be predominantly blue. The top outfit has a navy worsted-flannel suit, paired with a pale pink shirt with white contrast collar, and a navy paisley tie. The lower look is of a navy pinstripe suit, contrasting grey flannel waistcoat, white shirt, and navy/silver block stripe tie.

Strange as it may be to some others who consider any tailored clothes to be constricting and ties as tantamount to nooses,  I view these as “comfort clothes” if having to work. They are old favourites, familiar to wear, soft and silky to the touch, and reassuringly snug. They provide predictability and protection when feeling under the weather. I’m sure everyone has examples of such items in their own wardrobe, although I accept I may be an outlier in picking tailored items as examples!

Clothes can be an external & unconscious manifestation of inner mood. It is a stereotyped cliche (with all the benefits and failings of that class) that subdued colours can sometimes reveal a low mood and that bright or clashing colours are worn by those with elevated affect. But a more nuanced view would be that we can consciously choose outfits to enhance or counter our moods. We can also use them to bring long-gone memories back to life. Just as Proust’s famous madeleine involuntarily evoked a detailed memory, so can favourite items of clothing elicit past events. For instance, the tie in the first outfit was purchased in Tokyo and choosing to wear it inevitably reminds me of various happy aspects of that journey.

This association of clothes with memories can cut both ways. For the longest while, I disliked green shirts as I received some bad news twice while wearing the same green shirt. Superstitious nonsense of course, but it still took a conscious effort to break that association. In the end, any linkage can be overcome with active practice to break the reinforcement. Fortunately, for the items worn in recent days and featured above, the positive associations linger on, despite my coughing and nose-blowing while wearing them.

Here’s to Blue Monday!

Do People Change?

Image via Wikipedia

I had the good fortune recently to catch up with a couple of close friends from my university days. Over time, my frequency of contact with them naturally reduced, such that by the time of this recent meeting, we worked out that it had been over seven years since we were all last together in the same room. We rapidly exchanged news and slipped back into the old familiar modes of chatting to each other. I enjoyed myself greatly, and I feel confident they did too.

It struck me on the journey home that it was remarkable that while we’ve certainly changed physically – a few grey hairs here and there, alas – and in our personal lives – varying relationships, children, career paths – we were still able to talk to each other smoothly and comfortably. I like to flatter myself that I’ve grown wiser and not just older over the years, but how much can one really have changed if it is so easy to slip back into old patterns?

Fortunately for all three of us, life has generally treated us well, and long may that continue. Is this part of the reason we hadn’t altered our fundamental patterns of engagement?

I suppose that much of this consistency comes down to the fact that by the time one graduates from university, one’s personality is well-formed. Personality is commonly defined as an individual’s set of enduring mental and behavioural characteristics. These develop as one matures, and by adulthood are fairly deeply engrained. Knowledge can be added, and decision-making can be refined in light of that new information, but our essential individual modus operandi to life is pretty well set. There is a whole field of psychological & psychiatric research and practice devoted to understanding what happens when these characteristics are unhelpful, though controversy exists as to how “unhelpful” in this context should be defined.

What is less controversial is that altering personality is a very challenging process: these characteristics are formed so gradually and over such a long period of time that it can take an equally long period of incremental effort to alter them. It’s akin to changing the course of a river that’s formed through gradual erosion; the odd viaduct or dam can be put in place with some significant effort but altering the entire course of the river requires a more fundamental reorganisation. Still, there is evidence that such exceptionally difficult change is possible.

In the end, I suppose that my friends and I have been fortunate that our own riverbeds have formed along favourable paths. A key life challenge is integrating new knowledge into these pre-existing patterns in such a way as to add value (wisdom? happiness?) rather than risk altering the fundamental trajectory by generating stress.

I’m curious as to what the general feeling is… do you think you’ve changed over time, on a fundamental level?

Psychology of Clothes: The Pocket Square

As a New Year dawns, what better way to commemorate it than by thinking about a very old item of clothing?

Pocket handkerchiefs have been around for a long time. Popular convention suggests that they were invented by Richard II of England; there are written reports from courtiers that he used square pieces of cloth to wipe his nose. Over the centuries, their use permeated through polite society. Distinctions were drawn between socioeconomic classes by the materials used and the amount of decorative embellishment present.

Their use as a style accessory is more recent, stemming from the early part of the 20th century. The tradition is thought to have begun from the habit of placing a clean linen handkerchief in the breast pocket of a jacket to keep it free of dirt. After it was used, it would be rotated to the trouser pocket and washed after use. Its prominence in the breast pocket inevitably affected one’s overall appearance, and led to the development of different decorative folds and its manufacture in more luxurious materials such as silk.

Unsurprisingly, these more expensive items became purely decorative: the pocket square. Practical handkerchief use continued in its traditional trouser pocket home, but the development of disposable paper tissues by Kleenex in the 1950s led to their too becoming rarer.

Pocket squares are very eye-catching with their anti-utilitarian quality making their presence a magnet for others to project their unconscious preconceptions onto you. At its most basic, anyone wearing a square will almost certainly give off the impression of being careful with their appearance. This can be a positive: someone who cares about such things may well be conscientious about other things too. But it can be construed negatively as someone who is self-absorbed and lacking in empathy. Care should be taken in one’s manner, speech, and overall appearance to reinforce the positive preconceptions.

The different materials and folds also impact how you may be seen. Plain white linen, folded square, has gained recent popularity due to its omnipresence in TV series Mad Men. While it is traditionally associated with establishment authority and conventionality, its fashionable popularity contaminates that message. Futher complicating this is the waning of the slim 60s look in more recent menswear collections, risking the fatal presumption by viewers of your not just having an interest in fashion, but also being behind the latest fashions! Wearing it with more typically-cut jackets/suits neutralises the appearance of following a fading 60s trend, and instead resonates with the older establishment image.

Silk squares, available in a dazzling variety of patterns and colours, are shown to their best effect in a puff fold or with the points showing. Their relative fluidity of appearance can counteract the sterness of a business suit, and their luxury mitigates the rusticity of a tweed. They are less serious than square folded white linen, allowing the projection of a softer, gentler image with the risk of appearing frivolous or louche. The less that is visible, the less likely it is that those flipside traits will be perceived. Complementary rather than contrasting colours to the rest of your outfit also help to project a soft and thoughtful image. Of course, which persona you wish to project is entirely up to you; personally, I think there’s a lot to be said for (occasionally) appearing a bit frivolous!

Judicious use of the pocket square can help you forge a useful identity. Imprudent use risks your projecting a far less helpful image. Understanding your target audience and your purpose when meeting them will help you to choose wisely.

The illustrating photo was taken earlier today. The pocket square is from Battistoni of Rome, worn in a loose puff fold against a tweed jacket with brown staghorn buttons, cashmere v-neck jumper in a similar brown to the buttons, and an oxford-weave button-collar shirt. Not pictured are flannel trousers in a somewhat duller green than the square and chelsea boots in a similar brown to the jacket. The square therefore picks up colours from the jumper, the trousers, and the jacket.

Merry Christmas! Or, 5 tips to staying sane over the festive season…

A puppy is for life, not just for Christmas – On the other hand, some of your more distant acquaintances (and some family!) may well only be for Christmas. Because you haven’t seen them for ages, it’s all too easy to slip straight back into last year’s arguments. If you know this happens, make a special effort to view them with fresh eyes, as if you’ve only just met. You’re unlikely to solve tensions of a lifetime over a few cold days in December; the arguments will only drag you down.

Loose lips sink ships – And nothing loosens them quicker than alcohol. If you’re already feeling irritated, a little too much liquid Christmas cheer will probably just cause you to say something you’d otherwise regret.

“I vant to be alone!” – Make time for yourself. Houses fill up over the festive period, creating less space and more friction, especially if you enjoy peace and quiet. Try going out for a walk occasionally. You never know, you might even enjoy the frosty scenery.

It’ll be lonely this Christmas… -  but if you’re on your own, or feeling lonely even around others, remember that for all the fuss, there’s nothing intrinsically special about these few days. All the cultural meaning we impart to it is man-made symbolism, created consicously & unconsciously through mutual reinforcement and over time. Christmas Day is also just the 25th of December, and New Year’s Day is just the 1st of January.

A change is gonna come – New Year’s Resolutions can sometime help move one from pre-contemplation into the contemplation phase of making changes, but unless planned carefully, they’re easily discarded making last-minute resolutions more likely to be a millstone around your neck or a reason to feel guilty about failing to make changes. So don’t make a resolution unless you’ve thought about it, and really mean it.

Feel free to add your own tips to the list!

A Very Merry Christmas & Happy New Year to everyone out there!

A Panglossian Perspective on the EU summit

Image via Wikipedia

In our turbulent times, it it reassuring to know that certain things remain unwaveringly true. One of those things is that regardless of any grand statements, national interests override supranational ones. Nowhere was this more in evidence than at the European Summit overnight. Interestingly enough, despite that, most of the major countries got their way and will not walk away unhappy.

Purists Germany stopped the ECB from actually solving the Eurozone debt crisis by letting it act as a proper central bank and prevented the ESM/EFSF from getting banking licenses of their own. The UK protected itself from a heavy extra burden of financial regulation in the City, a key driver of our economy, while not preventing the Eurozone from beginning the process of integrating into a more meaningful fiscal union with the real and necessary restrictions of national sovereignty required for a currency union to work. And the French got to maintain the pretence that they are the key diplomatic player in the EU, the power behind Germany’s economic throne, by loading the proposed treaty with so much of that financial regulation as to force the UK to veto an EU-wide treaty. And on an EU level, at least the Eurozone debt crisis has a bigger temporary sticking plaster to kick the can down the road a bit longer.

Let us be clear: Germany holds the Eurozone’s pursestrings and if any nation can be said to have got its way more fully than the rest, it is Germany. They have imposed their economic model on the rest of the Eurozone. It may not quite be an iron hand yet, but the velvet glove is certainly off. In the meantime, the EFSF will run concurrently with the ESM for about a year, which together with other resources pledged, brings the total amount of money in the EU bailout pot for profligate PIIGS to a bit over a trillion euros. That’s still not enough, really. Two would be nicer. But it’s not a bad sticking plaster – certainly better than the ones we’ve had so far – and might just be enough to calm the situation. Time will tell; it’s a little too early to judge that today.

The UK was forced to wield its veto. The usual suspects have begun hand-wringing about “isolation”, but as Terry Smith of brokers Tullet Prebon amusingly suggested this morning: “the UK as isolated as somebody who refused to join the Titanic just before it sailed”. To have signed the treaty would have subjected the City to a huge potential increase in regulation. Like it or not, the City contributes about 10% to our national wealth, a far greater percentage than any other EU country’s financial intermediation services. Add in financial services more generally, and the figure rises to about 1/3 of GDP. Even just considering the taxes it pays (yes, it does actually pay a lot of tax, despite what some would have you believe), that’s an important cash-cow for the UK government to preserve. Subjecting it to a new swathe of regulation is hardly conducive to profit, especially in such fragile times.

The French are very aware of this of course, which is why they insisted on including so much financial regulation in the proposed treaty. Unable to persuade the Germans to give the ECB proper banking powers, they were at risk of appearing impotent in the EU. And if there’s one thing that a French President with a looming re-election campaign can’t afford to appear, it’s impotent. As no other EU nation has as large a financial sector as Britain, it was easy for them to ensure that the other countries would not object; the impact of the regulations would be negligible to them. This ensured that either Britain would capitulate (handicapping one of its traditional strengths, benefiting France) or it would have to veto the treaty (allowing Sarkozy to frame the outcome as British isolation, boosting his domestic prospects).

The UK’s relationship with the EU will certainly now be very different to before. A veto, once wielded, is no longer a frightening spectre to either British PMs or our EU colleagues, but merely a tool. It will likely be used more frequently. I suspect the likely outcome will be a multi-speed EU, with the eurozone (and its likely future members) moving towards a more integrated political and economic union, and the UK and any other permanent non-eurozone members remaining in a looser alliance with the eurozone. The key thing the UK has to negotiate is the maintenance of a single market when it comes to no cross-border tariffs, minimising internal national subsidies, and the other key free trade tenets currently enshrined at an EU-level. Everything else can gradually be allowed to drift apart, which in the medium term will make it easier to begin cutting back on some of the more intrusive bits of current EU social and regulatory legislation.

It is undoubtedly in the UK’s long-term economic interests to remain part of the free-market aspects of the EU (although Channel 4′s relatively impartial FactCheck suggests its benefits may often be overstated). The challenge will be maintaining the UK’s free market relationship with the EU while the Eurozone members integrate further politically. Given the free market aspects are already in place, this should not be an impossible challenge. A delicated balancing act, certainly. But not impossible.

In the longer term, the UK can develop into a low-tax offshore gateway to the rest of the EU, with less regulation than the mainland, attracting global investment precisely because of that lower regulatory burden. A jumbo-sized Hong Kong, if you like. This would not be possible if the UK were part of a more integrated political, fiscal and monetary union with it. In the very long term, the balance may shift again. We cannot predict what the EU or the World will look like in 50 or 100 years. But for today, and for the short and medium terms, David Cameron did the right thing for Britain.

And funnily enough, leaving aside the relative sideshow of financial services regulation, the Eurozone may just have done enough to stave off imminent disaster too. Well, as the title suggests, I am an optimist.

The Fetishisation of Perfection

Head of a Nymph, Sophie Anderson

I must confess a penchant for complex systems.

There is little more pleasant than the intricacy of checks & balances, although I only enjoy them if my understanding of them arrives through noting the overall patterns that result, rather than through crude mechanistic analysis. Appreciating the underlying ebb & flow of emergent phenomena speaks to what Jung would have termed my intuitive rational nature.

My fondness and aptitude for noticing these mechanisms is at least part of what attracted me to psychiatry. The mind is doubly complex, consisting as it does of both physical and psychic constructs. The physical is the complexity of our neuroanatomical wiring and the neurochemical connections within that network. While some argue that theoretically the psychic world can be entirely understood through the physical, even such reductionist evangelists would admit that our current understanding is a long way from complete.

The psychic world is the more intriguing. It consists of our modes of thought: how we view ourselves, others, and the interplay between these entities. We create an internal construct of both ourselves & others, often built upon rather dubious foundations, and our entire understanding of the world in predicated upon these constructs. Some of the constructs emerge through experience, some are models formally taught to us, and some are probably rooted in a genetic hard-wiring. Even more amusingly, we are only generally aware of a small minority of the conceptual filters through which we view the world, which gives rise to what Freud would term the unconscious mind and perhaps also to what the spiritual would call the soul.

Regular readers know I enjoy a variety of complex systems; not just psychiatry & psychology but also clothes, economics, philosophy and some kinds of art. The common thread linking these interests are the delightful emergent patterns that are created through expression & exploration these systems. Different schools of art & philosophy, different conceptual models of the mind & human behaviour, different fashions & economic systems… they are all best considered not as absolutes with pros & cons relative to some theoretical gold standard, but as different sensory modalities. No-one would ever claim that smell is better than sound, or sight is better than touch.

Of course, this very relativist and individualist intellectual position of mine is itself derived from a set of preconceptions. In the end, everything anyone can attempt to say really is nonsense, if Wittgenstein will pardon the liberty of my paraphrasing. But this is to miss the point entirely: it’s rather delightful to play the game anyway.

The title of this post is a lament at how much of the world either cannot play, or refuses to play. Instead, they focus on improving things in an endless search for perfection. While superficially a laudable goal, the problem is that in order to improve a situation, you must understand the system well enough to know what improvement means. Simply having one specific goal in mind frequently – possibly, inevitably – leads to problems in other important areas. Imagine a fat woman being squeezed into a too-small corset: the narrow waist comes at the high price of either fat spilling over as visible unsightliness elsewhere, or internal distress. Similarly, targets and outcome measures can lead to many more negative issues in unexpected areas even if the target is achieved. Better to appreciate the system for what it is, and harmonise your existence within it, which can mean insulating yourself from its excesses by detaching yourself from its impact through rising above it.

Naturally, I am extremely grateful that most people prefer to seek perfection. It has led to tremendous improvements in material comforts, and grants me the luxury of not having to live a purely subsistence lifestyle myself. Nonetheless, those capable of broader perspective will be happier for indulging that aloofness rather than chasing the flitting faerie nymph of perfection. The nymph, you will recall, generally doomed her lover.

The Wisdom of Walter Bagehot

Readers of The Economist will already be familar with the name Bagehot, it being the title for their UK-focused regular column. I suspect fewer will have read anything by the man after whom it is named.

I recently had cause to browse Lombard Street: A Description of the Money Market (a free online copy can be found at Project Gutenberg). Written in 1873, in the aftermath of a banking crisis (Lombard Street is in the City of London, and used in this context to refer to the global banking system), it’s a remarkably prescient view of our current situation, and one worth citing from directly. I will not provide much further commentary as his quoted words are self-explanatory both in their description of the problem and the least-worst solution. I’ve also kept any modifications to the absolute minimum required to retain comprehension on stitching the quotes together.

The briefest and truest way of describing Lombard Street is to say that it is by far the greatest combination of economical power and economical delicacy that the world has even seen. Of the greatness of the power there will be no doubt. Money is economical power. But very few persons are aware how much greater than the ready balance is the floating loan-fund which can be lent to anyone or for any purpose.

A million in the hands of a single banker is a great power; he can at once lend it where he will, and borrowers can come to him, because they know or believe that he has it. But the same sum scattered in tens and fifties through a whole nation is no power at all: no one knows where to find it or whom to ask for it. Concentration of money in banks, though not the sole cause, is the principal cause which has made the Money Market so exceedingly rich.

It is a luxury which has never been enjoyed with even comparable equality before.

But in exact proportion to the power of this system is its delicacy. Only our familiarity blinds us to the marvellous nature of the system. There never was so much borrowed money collected in the world. If any large fraction of that money really was demanded, our banking system and our industrial system too would be in great danger. The amount of cash-in-hand is so exceedingly small that a bystander almost trembles when he compares its minuteness with the immensity of the credit which rests upon it.

We do not always manage it with discretion. There is the astounding instance of Overend, Gurney, and Co. to the contrary. Ten years ago that house stood next to the Bank of England in the City of London; it was better known abroad than any similar firm known, perhaps, better than any purely English firm. The partners had great estates, which had mostly been made in the business. They still derived an immense income from it. Yet in six years they lost all their own wealth, sold the business to the company, and then lost a large part of the company’s capital. And these losses were made in a manner so reckless and so foolish, that one would think a child who had lent money in the City of London would have lent it better. After this example, we must not confide too surely in long-established credit, or in firmly-rooted traditions of business. We must examine the system on which these great masses of money are manipulated, and assure ourselves that it is safe and right.

Ordinarily discredit does not at first settle on any particular bank, still less does it at first concentrate itself on the bank or banks holding the principal cash reserve. These banks are almost sure to be those in best credit, or they would not be in that position, and, having the reserve, they are likely to look stronger and seem stronger than any others. At first, incipient panic amounts to a kind of vague conversation: Is A. B. as good as he used to be? Has not C. D. lost money? and a thousand such questions. And every day, as a panic grows, this floating suspicion becomes both more intense and more diffused; it attacks more persons; and attacks them all more virulently than at first. All men of experience, therefore, try to strengthen themselves in the early stage of a panic [by limiting credit].

A panic, in a word, is a species of neuralgia; you must not starve it. The holders of the cash reserve must be ready not only to keep it for their own liabilities, but to advance it most freely for the liabilities of others. They must lend to merchants, to minor bankers, to ‘this man and that man,’ whenever the security is good. In wild periods of alarm, one failure makes many, and the best way to prevent the derivative failures is to arrest the primary failure which causes them.

There should be a clear understanding between the Central Bank and the public that, since the Bank hold out ultimate banking reserve, they will recognise and act on the obligations which this implies; that they will replenish it in times of foreign demand as fully, and lend it in times of internal panic as freely and readily, as plain principles of banking require.

We should also look at the rest of our banking system and try to reduce the demands on the Bank as much as we can. The central machinery being inevitably frail, we should carefully and as much as possible diminish the strain upon it.

It may be said that the reserve in the central bank will not be enough for all such loans. If that be so, it must fail. But lending is, nevertheless, its best expedient. This is the method of making its money go the farthest, and of enabling it to get through the panic if anything will so enable it. Making no loans as we have seen will ruin the country; making large loans and stopping, as we have also seen, will ruin it. The only safe plan for the Bank is the brave plan, to lend in a panic on every kind of current security, or every sort on which money is ordinarily and usually lent. This policy may not save the Bank [and the country]; but if it do not, nothing will save it.

Bagehot went on to describe the importance of central bank lending at a premium to the pre-crisis rate & to lend against collateral, both to ensure moral hazard remained. The US Federal Reserve, The Bank of England, the Bank of Japan and even China’s central bank have all read & understood Bagehot and turned on the money tap to keep the global system from seizing up entirely and so utterly destroying the quality of life of billions of people. The European Central Bank likely also understands it, given its participation in the 30th November 2011 central bank agreement to increase dollar liquidity. Unfortunately, it is currently prevented from acting further due the legal limitations placed on it by, primarily, the Germans in terms of using one of a central bank’s greatest assets: printing money to permit that liquidity flow and devalue currency, even at the cost of inflation.

As we begin to see the cautious outlines of a potential “grand bargain” on lending involving the IMF, the world’s major central banks, the BRICS, and Eurozone fiscal policy union, let’s hope they haven’t left it too late…

Swag v. Sprezz

This is a tale of two clothing philosophies, both capable of generating looks with real style, but coming from very different starting points and attitudes.

Sprezzatura is all about studied carelessness, the effortless grace & charm that comes with the calculated incorporation of nonchalant-appearing imperfection into a look. Swagger is the confident, borderline-arrogant, air that comes with wearing clothes in a bold, masculine, innovative ways.

While both aim at a union of clothes, man & personality, the methods are different, as is the impact on the viewer. There is a cultural element here that may be best conveyed by means of analogy: sprezz is Classical, swagger is Jazz.

Sprezz is variation within known & accepted rules. At a subtle level, it may be the choosing of softer tailoring, a mildly incongruous element such as an atypical fabric, or paying less than usual attention to matters such as correct pressing or polishing, while ensuring that all other elements of the look are quite correct. At a more cartoonish level, it is the half-unbuckled monkstrap shoe or painfully-deliberate badly-tied knot in one’s tie.

Swagger doesn’t do subtle. It still knows the rules, but riffs wildly on them and relies on a broad preservation of overall form to maintain meaning. It’s Richard Roundtree in Shaft, Gene Hackman in French Connection, Jamie Foxx in Dreamgirls, or Gordon Gekko in Wall Street. At an extreme, it is the Congolese Sapeur, dressed in finery amid squalor. It is no coincidence that my examples of swagger are movie characters. Swagger is about creating a memory of presence that is larger than life; Sprezzatura leaves a more human, and perhaps more humane, residual memory.

If you plan of going down either route, beware of the dangers. Badly done, sprezzatura can lead to genuine shabbiness (if there is non-deliberate poor fit, for example), an overstudied appearance (if the deliberate imperfection is too obviously deliberate), or incongruity (if the imperfect element is just too bizarre). Swagger in extremis leads to negative caricature (pimp, thug, sleazy, clown) if the elements are just too bold or poorly managed.

Below are a few examples of good and bad sprezz and swag (click pic to enlarge). See if you can figure out which is which. If you can’t, I wouldn’t recommend trying to pull off either aesthetic yourself and instead suggest that you’d be better served by dressing correctly and simply, within the conventional rules.

PS. I wish I could properly credit the photo sources, but they’ve been previously culled from various places across the internet, generally without credit being given to the original source on those sites. From top-left, going clockwise, we have Ignacio Quiles from here, Gianni Agnelli from (I think) Life magazine, the Asian gentleman’s photo is from this tumblr (and maybe originally a Sartorialist image; I can’t remember), Lino Ieluzzi of Al Bazar from (I think) The Rake magazine, and finally, someone pictured on Ring Jacket’s blog.

Italy. Or, How Markets Got Their Groove Back.

Image via Wikipedia

Two Eurozone governments toppled in almost as many days. First Prime Minister Papandreou of Greece was forced to resign, and at time of typing we hear that Prime Minister Berlusconi of Italy is finally throwing in the towel. The common factor? Despite bluster, both eventually kow-towed to capital markets.

Markets are much misunderstood & maligned. They are either perceived as Machiavellian, plotting complex geopolitical outcomes from the shadows, or as irrational, disregarding long-term economic fundamentals in favour of short-term risk-taking. Markets are a reflection of the sum of a large number of disparate actions. As such, they are subject to the emotional temperature of those making deals. Fearful traders make for volatile markets.

Since the global financial crisis first hit in late 2007, those traders realised en-masse that something had gone dreadfully wrong. The complexity of some of the financial vehicles, especially in securities markets, led to an inability to accurately price risks. Accurate pricing of risk is an essential of any market, from the man on the street choosing how much a used car is worth, to an investment bank deciding what a trillion-dollar collateralised debt is worth.

That inability to price risk shook confidence in the entire financial system, with results we’re all familiar with. Far from being Machiavellian geniuses, traders are all too human. They became extremely fearful to trade with, well, anyone. They lost the ability to gauge what was worth investing in and what was not, and in their fear desperately turned to politicians and governments to solve the problem.

There is something subtly different in the air this week. The repeated failure of those politicians to restore confidence, most especially in the eurozone but also in the USA, has caused something to snap. Market have gone from childlike fear to doing their basic job: pricing in risk. The cost of Italian government debt rose to near-unsustainable levels on the back of prolonged shilly-shallying by the Berlusconi government, prompting his slow-motion fall.

This is a restoration of moral hazard in markets for which we should all be very grateful, as it is the first sign in over four years of a return to some degree of normality in how markets are supposed to work, as abnormal and dramatic as the events themselves are. Unpopular as they currently are, markets are our least-worst way of judging monetary value. There is something potentially cathartic and empowering about their net actions this past week, which may encourage sustainability and further progress in the months to come.

Governments, beware.

Measuring Power

Image by JAS_photo via Flickr

Forbes magazine loves lists. One of their annual features is World’s Most Powerful People, the latest revision of which has just been published. The names on the list change occasionally; the order of the names changes more frequently. But what is power, why does it matter, and can it really be measured?

For Forbes, a business-orientated publication, the answer is a calculus of the financial, human and physical resources an individual can draw upon. Unsurprisingly, their list is therefore dominated by global political and business leaders. This demonstrates an important feature of power: it is as much in the eye of beholder (or in this case, beholden?) as beauty is.

On a global scale, Forbes’ list is not a bad attempt. If the world is a pond, Forbes measures the potential ripple effect created by an individual landing on its smooth surface. Current #1 Barack Obama is undeniably a bigger stone to throw in than a random African villager.

Another analogy would be the distortion of the fabric of space-time by large celestial objects. Massive bodies like the Sun or Jupiter create deep gravity wells, drawing other objects into their influence, to the point of bending light around them. At a gravitational extreme, a black hole creates a gaping maw that does not permit anything else to shine. People can create a similar effect on those around them.

One theory of planet formation is that small particles gradually accrete together, eventually forming planets. This analogy allows for an understanding of how large organisations wield power. Obama is not powerful because he is Obama; he is powerful ex officio as a result of the combined wealth & military might of the United States, and there are certainly those in the world who, rightly or wrongly, like to complain that the USA doesn’t let them shine.

Maintaining the strength of an organisation is therefore one method of its leader maintaining power. A more sophisticated analysis would point to the increasing importance of networks rather than organisations. To use Obama again, the power of the President of the USA is magnified through the network of allied nations whose political favours it can draw upon. On a more modest level, an individual’s power over their own network is magnified if they are the hub or major node of the network rather than a distant spoke.

All these forms of power are extrinsic in nature; they correlate power with the ability of an individual to influence the world around them. I would argue that this is a fundamentally unwise way to measure power.

Why? Because it is ultimately dis-empowering; it is a game no participant can definitively win. It is impossible for an individual to maintain their position at the head of an organisation or network indefinitely; new players keep entering the field, and the field of play itself continuously mutates. Essentially, to play this game requires you to accept a life of running to stand still, akin to a giant hamster wheel. It is not the act of a powerful person to subjugate themselves to a system in this way.

True power is intrinsic. It is the acceptance of self that comes from being able to stop. Epicurus famously said, “I would rather be first in a little Iberian village than second in Rome”, and the logical extension of this is to reduce the circle of concern to that within which it is small enough to remain permanently first. This is of course the individual himself. Mastery over one’s own life & emotions is the real challenge, and true mastery over these domains is real power.

Epicurus goes on to describe the nature of this challenge: “the art of living well and the art of dying well are one”. In other words, in order to achieve mastery over self, it is necessary to come to terms with death and the end of one’s existence. This is easy on an abstract level, and much harder on practical/personal one. Nonetheless, it is good to acknowledge the reality of the problem facing us instead of pursuing the endless distraction of extrinsic power. “It is better for you to be free of fear lying upon a pallet, than to have a golden couch and a rich table and be full of trouble”, as the aforementioned philosopher also said.

As those who know me will attest, I am no fan of a poverty-stricken hairshirt existence. Money is important. It has an undoubted – and powerful – insulating effect, permitting an individual the necessary psychological breathing space required to focus on the self. But if I may be permitted a final quote: “Not what we have but what we enjoy, constitutes our abundance”.