On The Corrosion of Moral Leadership

LIBOR Illegality

News that Barclays Bank has been fined for LIBOR manipulation in both the UK and in the US, and that there are likely to be many more similar cases from other banks to come, just adds to the increasing evidence of a lack of moral leadership in our primary institutions.  It’s not just that illegality occurs, but that it appears to occur in a moral vacuum where the participants are happily and openly engaged in behavior which is corrosive to good society.

This isn’t just a problem in the financial industry, we’ve seen plenty of examples in other areas – in the media, in our legislators – where rank and file staffers mindlessly operate in a morally ambivalent bubble, without even attempting to hide their actions.  This doesn’t happen by accident, it comes from the top, and the buck needs to stop with those who permit these festering cultures to survive. 

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Stuxnetting the Eurozone’s Trust

Mistrust and Misrule

Markets and investors have long been possessed of a peculiar and unsubstantiatable notion, that the problems of the Eurozone are solvable as soon as people come to their senses and start engaging with financial reality rather than political theatre.  This is an amusing conceit bound up with the idea that the Euro project is too big to fail, but one that ignores the problem that cultures aren’t malleable, no matter how much politicians like to pretend they are.

The European single currency is a massive centrifuge which needs to keep whirling around at speed to keep itself together.  Unfortunately it’s got its own equivalent of the Stuxnet worm: incompatible cultures and attitudes to risk.  Infected with a lack of trust, the centrifuge is out of control and it’s only going to stop throwing off pieces when it’s finally shut down or the fundamental disease of mistrust is properly addressed. 

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de Tocqueville: Trust in Self-Interest

And I assure you that all the peoples and populations who are subject to his rule are perfectly willing to accept these papers in payment, since wherever they go they pay in the same currency, whether for goods or for pearls or precious stones or gold or silver. With these pieces of paper they can buy anything and pay for anything.
 

(The Travels of Marco Polo)

A Culture of Trust

When thirteenth century Western travellers reached the Chinese border they were forced to exchange their precious bags of gold and silver for apparently worthless paper notes. This created a certain amount of angst amongst the traders which was relieved only when, as Marco Polo recounted, they discovered that their paper was happily accepted by merchants within China, was backed by hard currency redeemable on request, was easily exchanged, easily transported and thus promoted commerce.

These exchanges encapsulate the nature and importance of trust, and the difficulties of establishing trust between different cultures. Why would you trust paper money if you’d never seen it before? Underlying this, though, is a deeper question: how can trust thrive if we’re all self-interested egotists, as modern economics expects?

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Trust Is In the Eye of the Beholder

Is Beauty More Than Skin Deep?

There’s been quite a bit of debate down the years about so-called beauty biases. Various bits of research have suggested that us humans have a bit of a soft spot for other humans who are easy on the eye, to the extent that we tend to attribute abilities to them that they haven’t got. Merely looking attractive is enough to help you get on in life, it seems.

However, there are usually potentially confounding problems with these experiments, in particular the possibility that lovely looking people might actually be better at stuff than the rest of us ugly has-beens. Fortunately a combination of the banking crisis and the proliferation of the internet has offered a glorious opportunity for field experimenters to conduct a bit of real-world research. Even better, it’s suggesting that automating risk management removes a vital layer of protection for lenders and that scammers can play on these traits to defraud us. So are the beautiful also brighter?

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