Saving the High Street – Is Mary Portas missing the point?

I must admit, as a consultant, I do love watching Mary Portas do her makeovers on the high street.  I find her smart, witty, insightful and passionate and usually right.  So I am delighted she has been given the job of saving our high streets by Mr Cameron.

However, having just read her article in the Telegraph I am a little worried that the very thing that has made her successful may make it difficult for her to find the right solutions.

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8526356/My-job-is-to-save-our-high-streets.html

In her article Mary already seems to be indicating that the solution to having a thriving high street is to generate a cadre of strong, talented, independent retailers freed from red tape, parking restrictions and planning legislation.  Now whilst I think that this would be an excellent idea and will work well in middle England, it seems to me to ignore the fact, that in our digital age, most people are not “going to the shops” anymore - they are buying online.  In a bargain centric, time poor, tech savvy world it’s just easier (and often cheaper) to buy online and no matter how attractive we make the high streets the working masses are unlikely to return as “shoppers” in the numbers required across the country to make the local retailers viable.  So in my view the solution to saving the high street is not to view the high street solely as a market place but to totally rethink it and repurpose it.   We do need the masses to return but it is unlikely to be shopping that draws them back.

My suspicion is that we need to repurpose the high street to specialise in offering service rather than sales.  We need banks that aren’t selling financial products but that are money advice centres.  We need business centres where independent businesses can find cheap office space and shared office infrastructures offering community and mutual support, we need community centres that are hosting meaningful activities for young people, we need entertainment complexes that engage and involve the local community and yes we do need a small number of those strong, competent independent retailers and coffee shops but they will not be enough on their own.

So best of luck Mary – we really need you to succeed – but can we think a bit more broadly than just retail.

Being Innovative – How to get started 3: Understand the level of innovation you are looking to drive

In this blog I want to cover one of the biggest challenges that CXOs face when driving innovation – namely being able to describe what innovation is and what innovation isn't.  This is not as easy as it may seem and this blog is certainly not long enough to rehearse all the arguments, so let me slide right to the point of providing you with a framework I use to help clarify the debate.  I am by nature inclusive so I have developed a broad framework through which to look at this thorny issue. 

To me innovation can be generated at four different levels.  Each level is fundamentally different from the others.  Each level requires different investment profiles, governance and disciplines to deliver its outcomes.

Level of Innovation - Business Enhancement

Key Features - Packaging and Sharing existing IP, Best Practices etc across an organisation.  Continuous improvement.

Infrastructure Required

·         Excellent internal knowledge management capability. 

·         Rewards given for knowledge management/sharing. 

·         Executives targeted on uplift/savings gained from demonstrable adoption of best practice

·         Local governance process required to manage release scheduling & change management

Expected RoI

In the range of X to 2X (year 1) and X to 4X (year 2 +) where X is the cost of delivering the infrastructure required

Good Hit Rate – 1:3

Who’s Good – Samsung, Tesco

Level of Innovation - Organic Market Expansion

Key Features - Using your own resource to develop new products, services and business models to expand the current market

Infrastructure Required

·         Substantive innovation governance model and process required

·         Access to ideation sources secured

·         Access to prototyping capability secured

·         Substantive seed funding secured

·         Executives targeted on uplift/savings gained from demonstrable adoption of new products, services, models etc

·         Agreement on “what does success look like” – i.e break even Year 1, 2 out of 10 ideas generates benefit Year 2 etc

Expected RoI

In the range of -Y to Y (year 1) and –Y to 10Y (year 2+) where Y is the cost of delivering the required infrastructure

Good Hit Rate – 1:8

Who’s Good - Philips, Unilever

Level of Innovation - Inorganic Market Expansion

Key Features - Partnering with 3^rd parties to develop new products, services and business models to expand the current market

Infrastructure Required

·         Substantive alliance governance model and process required

·         Effective collaboration culture –capability for creating and utilising partnerships and alliances (including legal support) secured

·         Substantive funding secured

·         Executives targeted on alliance benefits

·         Board level mandate secured

·         Agreement on what success looks like – e.g. revenue derived from partnerships and alliances = x% of total revenue by end year 2

·         Can require M&A capability

Expected RoI

In the range of -Z to Z (year 1) and –Z to 10Z (year 2+) where Z is the cost of delivering the required infrastructure

Good Hit Rate – 1:5

Who’s Good – Google, Microsoft

Level of Innovation – New Market Development

Key Features - Developing new products, services and businesses to create new markets

Infrastructure Required

·         World class innovation governance model and process required

·         Access to multiple ideation sources secured

·         Access to prototyping capability secured

·         Access to incubation capability secured

·         Substantive funding secured

·         Executives targeted on revenue/profit  generated from launch of new businesses

·         Agreement on “what does success look like” – i.e 2 new businesses launched by Year 3

Expected RoI

In the range of -Q to Q (year 1/2) and –2Q to 100Q (year 3+) where Q is the cost of delivering the required infrastructure

Good Hit Rate 1:10

Who’s Good: Apple, 3i, Google

As the above demonstrates Innovation comes in many shapes and sizes.  A first step is to figure out what outcome it is that you actually want.

More to come on Innovation in a future blog

How to stop people wrecking your business - the fine art of managing Conduct Risk

This week's guest blog is from the very excellent Sandra Quinn on the subject of getting a grip on managing Conduct Risk or to put it another way the risks arising from how your firm and your staff behave – no, no please don’t stop reading, I promise it will be interesting and it may just save you and your business from going to the wall.  Here are a few recent headline examples of how this can cost a few quid.

1.     During the 00’s the costs to firms of miss-selling of Payments Protection Insurance (PPI) is estimated at around £9bn,

2.     BP has made a provision of $41bn in its 2010 accounts to cover the costs for the Deepwater Horizon disaster

3.     Societe Generale and UBS rogue trader incidents are estimated to have cost more than $9bn

4.     In October the share price of Homeserve plunged 50% amid claims of misselling and the suspension of telephone sales.

As Sandra explains, managing this kind of risk to date has generally not been top priority. But now, with the “beefed up” regulators keen to ensure positive outcomes for customers and a public keen to ensure that firms are environmentally sensitive, socially responsible and ethically sound the challenge of managing conduct risks is now firmly on the agenda. If nothing else, the new Bribery Act brings the issue of managing conduct risk home to every firm and executive, with the potential for criminal sanctions and possibly gaol time if you get it wrong.

“Most organisations have a history of and a structure for managing their credit risk, their operational risk and their cash flows. To date though, very few businesses have systematically defined and managed the risks inherent in employing human beings and asking them to act with integrity in a complex and pressurised environment (Conduct Risk).   Regulators have been focusing for some time on the fair treatment of customers. Now increasingly they are pressing for firms not just to ensure they have decent processes but to go further and ensure they are getting fair outcomes for their customers. The problem for firms is that it's not just a proper process that defines the outcome. It's people who design and follow process and adding more process and more prescription doesn't necessarily mean you get a fair outcome. And what applies for financial services applies more broadly too. Think Bribery Act and the aggressive enforcement agenda of the SFO. Think data privacy. And more besides.

If we are to learn the lessons about how to manage this risk then we will need to look again at our enterprises through the lens of conduct risk and people.  Of specific interest and a good place to start will be to review how we treat our customers, how we set business targets, manage performance, reward and incentivise staff as well as deliver training and manage compliance to the front line.  After all, few, if any, people got up one morning and said “hey, I think I’ll go out and miss sell some PPI/endowment policies/pensions” or "I think I will cut a few corners in how I install or maintain that piece of kit". Most I bet did what they thought the organisation wanted or valued, constructively if not explicitly.

Much of the focus in financial services firms on this comes through compliance trying to ensure that regulatory obligations are met.   Other firms are starting to implement responsible business programmes, training, ethics and integrity seminars.  Compliance and trying to reboot ethics can only do so much.  But the reality for most organisations is that they run on business objectives, management information, financial and other incentives, and devolved decision-making.  These are the levers which make organisations and their people work  So, if we are going to really reduce Conduct risk we know that any successful solution for identifying, assessing and mitigating people and conduct risks has to get to grips with the DNA of organisations. After all, what gets measured and what gets valued, gets done.

Which leads me nicely to a major dilemma businesses are facing: the potential for firms to save money through better management of conduct risk is clear but ... with tight margins, pressures on costs, spans of control increasing and decreasing job security for staff in a tricky employment market, the conditions are arguably right for more not fewer conduct risk issues.

So the option is for an organisation either to bury its head in the sand or to take a good hard look at a lot of the ground breaking work that is being done in this field to construct solid, reliable Conduct Risk frameworks that allow businesses to seriously reduce and manage their exposure.

I hope for all our sakes they take the latter option”

Sandra Quinn is CEO of Quinnity Limited and is working with Capgemini to provide clients with real solutions to the myriad of Conduct Risk challenges they face.   Having worked for both the FSA and Lloyds Banking Group, where she set up a people risk framework, Sandra understands the challenges of both the regulator and the regulated. She is currently applying her learning from financial services with a client in multiple sectors.

Paying for the Peace & Quiet - How to economically provide “core” services to the far flung corners of the UK

Unsurprisingly, due to our austere times, I seem to have had a strangely high number of conversations recently about the provision of all manner of “core” services (banking services, mobile coverage, broadband access, TV coverage, energy provision and post office services, to name but a few) to the far flung reaches of our sceptred isle.  

At the heart of the conversation is the basic economic reality that the providers of these services can only provide them at a loss.  Now, when times are good and big businesses can afford to be seen as champions of Corporate Social Responsibility, putting in some loss making services to win PR brownie points and to appease the regulators seems to make sense.  However, when times are tough it puts real pressure on the providers to look again at the manner in which they provide the services.  To date there are a number of alternative models that are in place and it would appear that this is a rich area for potential innovation for “core” service providers.

1.       Community Purchase Schemes: This is where the community raises funds to purchase a specific service for an area e.g. Broadband.  What’s interesting is that there is potentially quite a lot of scope for extending this kind of thinking to the maintenance of existing services too e.g. banking services and post office services.  The concept is simple – you want us to provide you a service – you pay.  Now the plus side of this is that the raising of funds and maintenance of a service can galvanise a community and improve community spirit, making it a popular option in the affluent countryside areas that are keen to use/keep a service.  However, there are many communities who will find the fundraising beyond their reach.  This type of scheme will just not work for them.  It’s therefore not a socially inclusive option but it does make economic sense.

2.       Service Sharing Schemes:  For some services e.g. those requiring physical buildings (banks, post offices, shops etc) it is the provision of the staff and fuel that make them uneconomic to run, and whilst some communities could fund these overheads most couldn’t.  So what’s the alternative?  Well interestingly businesses could learn a lot from one of the other central pillars of the community – the church.  Faced with declining attendances, reduced incomes and increasing costs the church has been creating new “sharing” models that could potentially be replicated in business.  In some rural areas several churches from the same denomination will “share a vicar”.  The vicar will cover multiple churches.  In other areas different denominations “share a church”.  In this case “competing” denominations bury their differences and share a common building and associated costs.   Now imagine these models extended to banks, post offices, retailers.  It’s not going to feel comfortable to the service providers but by thinking a little laterally they can keep the regulators happy, maintain their CSR kudos and deliver a socially inclusive service.

To my mind this and other new models of service provision are definitely worth exploring in these austere times.   An area for real innovation.

Being Innovative – How to get started 2: Ask yourself some challenging questions ahead of “unleashing” innovation

In one of my previous blogs I looked at how a CEO/COO who really wanted to see Innovation break out in their organisation needed to “Fake it to Make it” – so, if you are a CXO who’s following along, here’s what you need to do next – simply ask yourself some challenging questions to ensure you can effectively unleash innovation in your organisation.  Easy to say very difficult to do – why - because this is a business problem most CXOs don’t face every day.  Ask them to reduce a cost base, manage a product launch, reorganise a distribution network and they are all over it.  However, ask them to unleash innovation and they are lost.  It’s the equivalent of asking a plumber to carry out laser eye surgery.   They don’t know what questions to ask or what to do.  As a result most CXOs default to instant action and rapidly implement all or some of the following initiatives to “get things going”

1.       Employee suggestion box – “they know where the problems lie”

2.       Customer suggestion box – “they’ll tell us what they want from us”

3.       Innovation Training – a 1 or 2  day sheep dip for senior managers to help them become innovative

4.       A communication campaign – encouraging everyone to “unleash their inner creativity”

Now whilst these are actually all potentially useful and viable solutions and they do show “executive intent” they are no substitute for some basic planning and the asking of some first order questions that may deliver much more suitable interventions, notably here’s my Top 10:

1.       What are the business outcomes I want from unleashing innovation?

2.       How much budget and resource am I prepared to allocate to delivering these outcomes?

3.       What type of Innovation do I want to “unleash”? – e.g. business model, product design, pricing structure etc.

4.       What level of innovation do I want to “unleash”? e.g. from better sharing of best practice to development of a new business

5.       Do I have people in or around my organisation that are capable of unleashing it – if yes how do I engage them, if no how do I find some?

6.       What process do I need to put in place to govern and manage innovation?

7.       What kind of incentives do I need in place to encourage innovation?

8.       What will we stop doing to make space for innovation?

9.       How do we need to change our culture so that it is accepting of innovation?

10.   What external resources can help me drive innovation? E.g. technology, expertise etc

When you’ve answered these questions you are right on the brink of being able to unleash innovation into your business.  The good news is your now walking and talking innovation and are asking all the right questions– in subsequent blogs I’ll dig into some of these questions in a bit more detail and do please feel free to get in touch if you are feeling overwhelmedJ

Innovation - A Starter for 10 - Fake it To Make it

Being Innovative – How to get started: Fake it to Make it!

Firstly many thanks to all of you who took the time and effort to a) read, b) think about and c) actually send through your  thoughts on my last blog on the urgent need for UK businesses to stop talking about Innovation and to get on and do it.

And yes, I am aware of the sweet irony that by pointing out that somebody, somewhere needs to do something I am of course becoming what I am railing against.  Your points are well made.  So chastened by the feedback and touched by the untimely demise of Steve Jobs I am now putting myself in a much more positive frame of mind and going in search of progress.

So, if you are a business leader, who is looking to truly go on the fantastic journey of innovation here are a selection of some of the positive things that I have learned over the past 20 years that will enable you to get the creativity ball rolling – more to follow next month

1.       Think Innovation – now this is an old mind trick (non-Jedi) and it may sound crazy, but start describing yourself to friends and colleagues as someone who has a passion for innovation, as someone who loves to see innovation occurring, as an innovator, as a champion of change – whatever, the phrase and positioning you need to make yourself believe your own press.   You will be amazed at the effect.  You’ll find yourself having conversations about Innovation, being invited to meet other innovative people and generally getting yourself in and around innovative people.  Which brings us to today’s second idea

2.       Hang out with innovative people – more fake it to make it advice I know, but, genuinely this works.  Being around creative people, chatting to creative people and playing with creative people is an excellent way of stimulating your own grey matter and sparking those innovative synapses.

Try these top two tips seriously for a month and see what happens.  Next month I’ll do another blog on some of the more esoteric aspects of Innovation – but for now enjoy a month of meeting cool people and having your world view challenged.

A rant free blog – I’m sure normal service will be resumed soon.

Let's do something - I really don't want to drown

So here’s the thing.   Given that it is now widely believed that:-

1.       Due to our own love of consumer goods and some wanton mismanagement, not only the UK economy but the European and world economies are pretty darned wrecked for the time being and will continue to be for some time to come (even Barack says so)

2.       Economic growth over the next few years in the UK is going to be as rare as a convincing England footy performance

3.       Unemployment is a scary fact of life for all of us – those without jobs and money and those with jobs and money who are scared witless by the thought of yet more looting hoodies

Wouldn’t it be a good idea to do something?   More specifically wouldn’t it be a good idea to do something different?  You’ve all heard the old adage that “continuing to do what you’ve always done expecting to get a different result is madness.”    Well to my jaundiced eye and opinion most of UK industry is now certifiable.

We are in a major, major crisis.  We are on the Titanic, it’s struck the ice-berg and we are going down.  The thing that is amazing me is the response of the leaders of our UK industries.  They are behaving like those terribly nice musicians on the Titanic who understand that they are in big trouble so start playing their instruments to keep up the spirits of those who are doomed.

I am now thoroughly fed up of hearing execs speak of the need to innovate (almost wringing their hands as they do) and then fail to actually put in place anything that would pass as a major innovation programme.

So here’s my plea – please, please, ladies and gentlemen of British industry, can we stop being so terribly reticent about taking radical action as this crisis hits us.  Let us take some radical action (and no I don’t just mean make a few people redundant), let us take some action that glories in the technological capability of the UK, our inherent inventiveness and let’s put in place some radical programmes that might just get us clear of the listing and holed vessel as it heads for the depths seeking to pull the passive and inactive under the water with it.

Rant over.

Guest Blog

I would like to present myself. My name is Laure, I am a French university student studying at the university of Lyon in France. I am studying Banking, Finance, Management and Economics and I am doing an internship at Capgemini Consulting in UK.

I am writing this article in order to share my experiences at Capgemini Consulting as a French intern.

This is the first time I have done an internship, let alone one abroad.

I am a university student and at the end of this academic year we were required to do an internship abroad. The goal of this was for us to practice and improve our English.

But why choose Capgemini Consulting?

Firstly because, in pursuing my studies and my life, I have decided I would like to consult and audit. Secondly, Capgemini Consulting is one of the biggest consulting companies and it is very famous (well known).  I could not miss the opportunity to spend several weeks working in this firm.

I will try to tell you my experience through the four main goals that I set myself for my time here: observe, listen and understand, practice and progress.

• Observe: As I have an ambition to do this type of work in the future, I had to try to understand what type of work people do here. But this is not always an easy task and even less so for a foreigner as much of the work is out of the office working with clients.

•  Listen and understand: this task is particularly difficult to achieve when it has to be done in a language that is not my own.  It takes a lot of concentration. The first few days and the first meetings were really difficult. Indeed, it takes a lot of concentration to stay focused when you do not understand much of what is being said, which is not very easy. So there I had to force myself a bit at first. I am not saying that I understand everything now, far from it, I think I am beginning to gain a little more concentration, which allows me to follow a meeting or conversation for longer. At the beginning, listening to a phone conversation was also very hard for me, but I think it is good for the ear.

• Apply: After observing, listening and trying to understand, I had to put this into practice right from the first day. During my first day I had to summarize and collect information from a number of CVs. The most complicated part of this was to summarize the pages. Initially, I had to ask some help. I confess that when this first day was finished, it was a little confused because it was all still new to me. But after more than two weeks behind the desk, everything seems clearer, almost simple.

• Progress: This is not something that is done in a snap of the fingers, it takes time and a lot of practice. As for my English, I think being integrated for six weeks in a company in England will do nothing but benefit me.  I probably improve a little every day even if I do not give any account.  Since the first week, I have been working with someone else.  At first, I asked for a lot of help, or had to repeat myself several times. Now, after three weeks spent in the company, I can get better by myself. It is true that from time to time, I ask for help or that I repeat myself but I feel that it is less often than before. As a result, they have to seen or felt that I am more at ease and suddenly I have been given more and more things to do. For example, I have been charged with translating articles from a blog which will then be posted online.

In my time here, I had an especially big project. Indeed, there were two of us working on the project. We were required to set up a PowerPoint on banking and insurance in the USA. I did not think that this project would take much time but in fact we spent two weeks to the day on it. The first task I had was to find a map of New York, find the addresses of each company and place them on a map. This was the shortest thing to do, that is to say, it took me one or two days. Then came the heaviest work, the part that took the longest: find all sorts of information on these banks and insurance companies. This research for information took both of us to complete it faster. For this project, it was not me who took care to do PowerPoint, but I could see, it took a lot of time. When it was finished, I was asked to check if everything looked good and was perfectly aligned etc. I enjoyed participating in this project because I like the subject. Indeed, it follows on from what I have learned in University.

Finally, I am happy to do my internship in this company. This allows me to see what kind of tasks are done in a consulting firm. Before I knew that I would do my internship here, I had thought to specialize during my years of study, in audit and management control. These weeks at Capgemini Consulting have helped me to confirm my choice.

I would like to say a special thanks to the FS team. Thanks for welcoming me like this in the team, for all your help and for your patience when you had to explain something to me.

Guest Blog

Over the next few weeks my blog spot is open to two very special guests who have helped make my life a whole lot easier working with me as my interns over the summer.  Given the early summer interest in the concept of internships from Mr Cameron and Mr Clegg I’ve asked both of them to blog their thoughts on what it’s like to do an internship at Capgemini and I think you’ll find their thoughts interesting.  First up is Tasha Williams

Hello all, I am Tasha. I am a university student at UCL, studying Economics, Statistics and Spanish. I’m looking to go into consulting and have just completed an 8 week internship at Capgemini UK.

I’ve read many articles over the year about a Masters becoming the new undergraduate degree, debates about the return on investment of further education (especially in light of the fee increases), or on the increasing relevance of PHDs, and the decreasing importance of MBAs. However from what I can see, formal qualifications seem to matter less in comparison to an appropriate internship. In fact I’ve been told by recruiters that if I cannot demonstrate a required level of transferable skills, any further education (beyond the necessary undergraduate degree) will not have any impact on a recruiter’s decision. So in my experience, an internship is of paramount importance. For those looking to work in a competitive industry, as they all seem to be now, an internship seems to be a prerequisite that separates successful candidates from the masses.

With that in mind, I have spent my second year at university almost as focused on gaining an internship as on doing well academically. I hoped to have an internship in consulting, which proved rather tricky, with the aim of gaining a real understanding of what a full time job in the industry would be like. Beyond the obvious CV enhancing transferable skills, I wanted to know if consulting would be the right career choice for me, if I could excel at it and while there was still time, learn what I could be doing over the final year of university, beyond achieving impressive results, that would help me to become more successful and ultimately get more out of my career.

The good news is that I managed to secure an internship with Capgemini and I hoped over the 8 week contract that I would gain a real insight into how not only a consulting firm functions, but what Capgemini does to make itself stand out. My ultimate aim was to be able to leave and say that I had contributed – that my time had been worthwhile, that the team would be glad I had been here. I wanted to impress, and I hoped to do that by demonstrating I had the required skills (or at least the ability to develop them swiftly), the right attitude and the ability to adapt and learn quickly.

There is of course the danger of giving up precious time for an internship in which all you end up doing is photocopying and coffee runs, with a minimal amount of learning or contributing. As it has turned out, I’ve done no photocopying but my own, and no coffee runs at all. Instead I’ve worked on a bid for a major client, collaborated on two research projects, been responsible for social media outlets and research, produced monthly reports and reviews, helped with a knowledge management project and written a review of a paper on the effects of the 2008 financial crisis. I was assigned a ‘buddy’ who has made sure that for the duration of my time here I have been fully integrated with my peers, have attended all informative/networking events, and have met all the key people  who could help me understand more about the company and the graduate scheme to which I am now planning to apply. When I first joined, I attended a ‘New Joiners’ course which meant I was treated and felt like an employee from day 1, rather than a university student squeezed in where there was space for me. I’ve worked on the Financial Services desk, which is where I asked to be in my interview, have worked on active projects, and in my humble opinion, made a real, if perhaps small, contribution to the team effort. In my time here I feel I have gained a real understanding of the consulting industry, the challenges it faces, and of Capgemini’s place within it and their key drivers. I have learnt about the company processes, the people, and the working environment, all of which I have gained a deep appreciation for. Through the research projects I’ve worked on I’ve learnt more than I could imagine, and on a very personal level, I’ve learnt more about my own abilities and where perhaps I could improve.

 I was thrown in at the deep end from my very first day and it’s been absolutely exhilarating. I have had a wonderfully tailored, personal and incredibly rewarding experience, in which I feel I have achieved what I aimed to. It has been challenging and stimulating, a little daunting at times, but on the whole amazing and I would effusively recommend Capgemini to anyone.  Although it sounds somewhat clichéd for a consulting firm, truly the best part of my experience here has been the people. Everyone, without exception, has had time to talk to me, to explain anything to me, to discuss everything. Everyone has been wonderfully friendly, helpful and supportive, so my thanks to everyone, it is you who have made this such a wonderful experience.

Special thanks to Rick Freeman, Ian Watts, Tim Dulley, Sarah Moore, Amy Ratcliff, Laure Urrea and the wonderful FS team.

Retail Banks: Dealers or Rehab Agents?

My last blog explored the concept of the “drug of affluence” and its impact on behaviour – this blog follows that on by looking at the role of banks in our addiction – so let me start with this cheery quote from Thomas Jefferson to set the scene.

 “I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.”

Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin, 1802

At the risk of joining the masses who condemn ‘The Banks’ I feel a discussion about our increasing levels of debt (and decreasing levels of buying power) is obsolete without a discussion of the main players. So, following the crisis what role are the banks playing with the affluence addicted- are they still the bad guy pushers or are they reformed rehab workers, helping us put our addiction to affluence aside by prudent financial planning and debt management? Ask the affluence addicts and the vast majority will have no problem answering that question.  The Bankers are still the bad guys - but interestingly not because they are overtly peddling affluence these days - rather they are now the bad guys for other reasons – firstly they’re bad because they’ve stopped dealing – they’ve removed our supply, they now won’t lend us money, we can’t afford to buy status symbols we don’t really need and secondly and really annoyingly they still look like affluence addicts themselves with their big salaries and corporate perks and thirdly and most gratingly of all they are using our tax dollars to feed their habit.  However, before all of us affluence addicts rise up and lynch a banker perhaps we should remember how we got hooked on affluence ourselves.

What is clear is that we, the consumers, the addicts, are not clear of all the blame and so if we decide, as many have, that the banks are our drug dealers, we must remember that when they offered us the initial hit we took it happily. And when they offered us another, in a deal that seemed too good to be true, again we said yes. We fed the fire that eventually burnt us.  So to some extent we have to shoulder responsibility – but knowing that doesn’t make us feel any warmer towards bankers.  So what do banks have to do to make us want them and respect them again for what they can do for us?

It is, of course, no surprise that reformed drug addicts can often end up as drug counsellors and rehab workers as they seek to find a way to make amends for the damage that they have done.  Is there a lesson here for the banks?  Absolutely – I think that it is not simply enough for the banks to have “stopped dealing” what us addicts really need now is to see the banks look sorry and provide us with useful help and support as we go cold turkey from affluence.  What I’d love to see are the banks investing more in providing community debt counselling, in providing free and effective financial and business advice to new businesses, in supporting local charities that are failing to secure funding and to find a way to measure whether or not they are raising the general standards of the community of which they are a part.  In other words like a drug worker with an addict, be a shoulder to cry on when our finances hurt, be our trusted counsellor when we need financial education, be a support to those around us when we’ve lost the plot and make the world us addicts live in just a bit better.

The drug of affluence

Whilst Karl Marx may have had some searing insights it appears that he was wrong when he confidently  declared that religion was the opiate of the (European) masses.  It is clearly affluence (and the dream of affluence) that has been the West’s narcotic of choice, not religion.  It is also clear too that our dependency on the affluence drug and it’s imminent withdrawal (see Greece, Iceland, Ireland, Portugal etc) is a major threat to our Western way of life and social structure.   If you want to appreciate how big a threat the drug is to our own Western civilisation one only has to look back in history to the demise of the other great civilisations (Grecian, Roman, Mayan, Egyptian etc) and chart their rise to greatness and their rapid decay.  Without doubt the collapse of these great civilisations is associated with an inability to continue to generate ever greater levels of affluence for a society that then simply implodes on itself.

So, at the risk of being called a Jeremiah (the Old Testament prophet who was renowned for his doom and gloom utterances), I will say again that UK plc has a big problem as we are deeply in love with the drug of affluence and to date this is a problem that we haven’t really faced up to.  Throughout history, wealth, sex, power and influence have always been the drivers of the ruling classes.  However, since the rise of capitalism, social mobility and the emergence of the aspiring masses, the drug of affluence has cascaded down to all levels of society and evolved into mass addiction.    In the UK we have the highest levels of personal debt within Europe – this is not good.

Affluence has powerful effects – it compels us to insist on our rights to health, wealth and happiness.  It creates a belief that we are entitled to the good life.  It strips us of our ability to think and act for the long term and instead creates a dependence on instant gratification and material things to validate us as human beings.  Moralising aside, in a Capitalist system, none of these are particularly bad things in themselves; however, affluence has side effects.   The side effects of affluence, including debt, a sense of entitlement and a general lack of responsibility, are relatively mild whilst we are all taking the drug and climbing the social ladder.  However, the problem comes when the supply of affluence dwindles and we are forced to withdraw from the drug and we experience a mass come-down on epic scales.

When affluence is no longer available, the consequences for a hooked population are dire, and misery, panic, selfishness and brutality ensue.  Like a child deprived of a favourite toy, the population of a nation deprived of affluence can quickly turn nasty, with some very unpleasant results.  It has of course been fascinating to watch the debates across the globe of whether it is better to go “cold turkey” like the UK intends to do under David Cameron’s coalition government or whether it is better to go for the “slow withdrawal” method favoured by Barack Obama in the US.  Either way the misery associated with facing up to drug addiction will be very real.  My hope is, that as we look for ways to cope without affluence, that we don’t get hooked on the equally potent cocktail of anger, recrimination  and blame – let’s hope that this time we can each take our personal responsibility to “do the right thing” seriously, even when it means that we personally will miss out.  To date the response of the Greeks and the public sector unions in the UK does not fill me with great hope.

Here endeth the lesson – sorry for being so moralistic but it probably needed saying.