Posts Categorized: Role models
Lives Well Lived
September 30 2020
Earlier this year, Richard “Tigger” Hoare died, sadly one of this year’s many Covid fatalities. His Times obituary can be found here. A highly capable banker of the old school, coming from a long-standing banking family who still own the family bank established in 1672, he was proud to state: “I have never minded challenging things, if there is something that needs to be challenged.” And he meant it too, as the last paragraph of his obituary makes clear –
“When the regulators interviewed the partners 20 years ago, they asked me what I thought was the greatest threat to the bank, and rather foolishly I said, ‘I think you are.’ They were very cross!”
Well, even regulators, maybe especially them, need to be challenged now and again.
Sir Harry Evans, journalist and editor of the Sunday Times at a time when investigative journalism rather than clickbait articles was valued, who died last week, was another who understood very well the need to challenge those in authority. During his time as editor he won famous victories over those who tried to stop the publication of diaries by Cabinet Ministers (Richard Crossman) explaining what really goes on in government and those seeking to cover up what was known about the thalidomide drug which caused such misery to so many families.
There is a lovely line in his obituary – “Evans combined technical proficiency with moral passion to an unusual degree.”
A combination of technical proficiency, challenge and moral passion: if only we had more people in positions of power and authority of whom this could be said.
Photo by author.
Back to Basics
July 30 2019
Ever since the financial crisis started there has been a plethora of explanations about why traders and bankers behaved as they did. Some have been purely descriptive: what happened and when, allowing us to marvel at the folly of it all, at least in hindsight. At the time these clever financiers were praised by pretty much everyone from Chancellors down. There were very few pointing out at the time that the Emperor had no clothes.
But increasingly there have been attempts to use the insights gleaned from other disciplines to explain why what happened in the way it did. The latest neuroscientific findings were used to describe the biology of boom and bust (The Hour Between Dog and Wolf, for instance). Behavioural economics has had its say, as has nudge theory. Rather than nudging people to behave well, all the payment and reward incentives nudged financiers into doing what suited them financially irrespective of the effect on the customer and no matter what the expressed good intentions of the firm were. Goodness! Whoever could have predicted that, without a theory to explain it.
Psychologists have had their say, of course, though only a cynic might wonder about how much actual knowledge about the realities of life in the financial sector they have. No matter: all could opine merrily on the importance of culture in finance and on all the wonderful insights that these disciplines could bring to those seeking to manage and regulate the financial sector.
And now the anthropologists have got in on the act, as in this article by Gillian Tett. In it she points out how anthropologists have tried to analyse the cultural patterns, the rituals and symbols, even the words people use in finance to understand what was going on under the surface. In truth, the insights brought by anthropologists (at least as described here) are pretty obvious rather than thought-provoking; the article does not need them to be worth reading.
What is interesting, though, is how commentators on finance and perhaps also regulators are, perhaps unconsciously, making the same mistake as many of those traders and bankers. They are over-complicating, coming up with all sorts of theories and hypotheses apparently grounded in science or other social studies, described and interpreted by experts, using technical language to describe common human behaviours. Just as too many traders developed over-complicated products which they only half-understood and managers kidded themselves into believing that they had found a foolproof solution to valuation or risk management or any of the other difficult tasks they had, so there is a risk of developing overly complex explanations for why so many people behaved so stupidly or worse. The risk is that the more complex the explanation, the more people feel that it is all too difficult really to do anything about it or that this is something best left to the culture specialists, psychologists and other “ologists“.
Keep it simple might be the motto. In the end, by whatever means the conclusions are reached, what everyone in finance needs to remember is this:-
- Trust is at the heart of finance.
- Everyone in a financial institution is, in one way or another, managing risk. There is no such thing as a risk-free product or institution. Or, indeed, individual. Understanding the risk you are running and managing it properly is what every bank, every employee in a bank, every customer of a bank, every shareholder in a bank, every investor in a financial product and every regulator of a bank is doing. Or ought to be doing.
- Understanding properly is hard work. There is no magic bullet, algorithm, theory, process, spreadsheet, AI or killer piece of management information which will do it for you. Thinking is often required.
- There is no way of eliminating risk. Mitigating and minimising it: yes. Eliminating it: no. If anyone says otherwise (and much of the financial crisis was caused as a result of clever people thinking they had done just this and learning, painfully, that they hadn’t) they’re a charlatan or worse.
- Human beings, even clever ones (particularly them, it sometimes seems) do not behave rationally around money. Money and emotions are bosom pals. As any decent novelist or lawyer dealing with divorces or wills will tell you. The “animal spirits” Keynes described do not just apply to market participants but to all of us.
- Managing people, understanding them, motivating them, inspiring and leading them, teaching them, setting them a good example, setting them high expectations and making it clear what the boundaries are, what behaviour will not be accepted, what crosses the line, helping them get past their frailties, working effectively with them is hard work, the hardest work anyone ever has to do. And by far the most valuable – and rewarding.
- Finance is there to serve others, not itself. It is a means to an end and the moment it (and the people in it) start thinking of themselves as indispensable, as set apart from the society they are part of, as entitled to special consideration and immunity from challenge is the moment when hubris sets in. Nemesis will surely follow.
August 1 2018
Last month the FCA published its near final rules on the Senior Manager and Certification Regime, a hefty 420 pages (and that’s not counting the consultation papers, responses and rules for insurers and solo regulated firms and so forth). So many words to deal with what was succinctly described in this paragraph of the Report of the Parliamentary Commission on Banking Standards:
“One of the most dismal features of the banking industry to emerge from our evidence was the striking limitation on the sense of personal responsibility and accountability of the leaders within the industry for the widespread failings and abuses over which they presided. Ignorance was offered as the main excuse. It was not always accidental. Those who should have been exercising supervisory or leadership roles benefited from an accountability firewall between themselves and individual misconduct, and demonstrated poor, perhaps deliberately poor, understanding of the front line. Senior executives were aware that they would not be punished for what they could not see and promptly donned the blindfolds. Where they could not claim ignorance, they fell back on the claim that everyone was party to a decision, so that no individual could be held squarely to blame—the Murder on the Orient Express defence. It is imperative that in future senior executives in banks have an incentive to know what is happening on their watch—not an incentive to remain ignorant in case the regulator comes calling.”
But what does taking responsibility really mean?
A few days after the FCA’s publication, the death was announced of someone who, in his life, gave three striking examples of this: Lord Carrington, Foreign Secretary 1979-1982, subsequently Nato Secretary-General and the last politician to have served in Churchill’s post-war Cabinet. Much of the commentary on him focused on his resignation following the Argentinian invasion of the Falklands in 1982. Though absolved of personal blame by the Franks Report, he explained his decision to resign thus: “It did not seem to me a time for self-justification and certainly not to cling to office. I think the country is more important than oneself.” In his autobiography he wrote: “The nation feels that there has been a disgrace. Someone must have been to blame. The disgrace must be purged. The person to purge it should be the minister in charge. That was me.”
Those 7 sentences admirably summarise what it means to be in charge and to take responsibility when something goes wrong on your watch.
(It would not be far-fetched to say that the nation might well feel that aspects of banking have in recent years been “a disgrace” which ought to be purged.)
It was not the first time Carrington had offered his resignation. As a very junior minister at the time of the Crichel Down affair in 1954 (a landmark case on the rights of individuals vs the interests of the state and the standards to be expected of Ministers) he had offered his resignation though it had been refused. It was the senior Minister in charge who resigned following findings of severe maladministration in his department, the first such Ministerial resignation since 1917.
Most surprisingly of all, despite being awarded the Military Cross in 1945, Carrington never mentioned it in his autobiography, stating that he only got it because of the good men he had under him and that it was “all such a rough raffle. Pot luck – nothing to do with me.” Well, hardly.
Still, that is what marks out leaders: recognising that being senior means taking responsibility even when you are not to blame and having the humility to know that your own achievements rest on the hard work of others (and a fair amount of luck) at least as much as on your own efforts.
What might we learn from this?
- Well, however wonderful the rules, having people around to set a good example and be good role models is even better.
- Role models can be found in the most unexpected of persons.
- And, finally, the aim of all good and long-lasting training is to ensure that concepts such as responsibility and leadership become an instinctive and genuine part of a person’s every day conduct and behaviour and not simply something to trot out in specified circumstances.