renaissance 2

I can remember sitting in the offices of Citicorp Investment Bank on a cold March morning in 2003. I had just finished writing v1.0 of the world’s first manual on derivatives (swaps, as they are known in the game). Back then, bankers used currency and interest rate swaps to help their clients raise money at lower rates with less risk. The market was $10 billion, and in its first year. We had a single lever arch file in which we recorded the hedges for each swap, using a PC with 64k of RAM. Today, the market is worth trillions of dollars, and there are derivatives of derivatives of derivatives, and no one even knows where or how much all the deals are worth.

I blame the business schools. Though I have PhD from London Business School, and was a Fellow there for a while, I am embarassed, even outraged, at the complete lack of vision or accountability they display for their product: hyper-numerate, hyper-individualistic, hyper-ambitious jocks with spreadsheets who can calculate IRR’s and ROI’s, but seem to know little and care even less about the consequences of their financial engineering. This time, instead of blowing up the real economy, they have strapped the explosives to themselves and pulled the cord in the lobbies of their own banks, taking entire organizations with them. Leveraged suicide bombers, kamikaze kids, call them what you will, they are deadly, as the entire US administration has discovered in the past few weeks.

So, what next? Once the dust has settled and the American, British and a few European taxpayers have bailed out the unaccountable to the tune of over one trillion dollars (2.5% of the global gross domestic product of $40 trillion), can we expect any mea culpas from the Chicago School, the high priests of financial capitalism who invented the idea that greed is good and that markets will solve all our problems? Not likely, given they were able to blame everyone except themselves the last dozen times they came close to destroying an entire country (Argentinians are especially grateful to them), or the global financial system (remember Long Term Capital Management in 1998, the hedge fund founded by, guess who, Nobel prize winners who trained and taught in, uuuhhmm, Chicago?)

The problem, sadly, goes alot deeper than the b-schools- it is deeply embedded in our modernist, conventional cultural assumptions that if you do well at school, go to good university, get a good job, and then, perhaps an MBA, you are set for life. This year many believers in this worn nostrum will experience the reality of financial capitalism- there is zero loyalty, and even less trust in this hyper-trophied system. Some of the banks, such as HSBC, JP Morgan Chase and to a lesser extent, Citigroup, have been able to weather the storm and demonstrated, in the latter’s case, a degree of accountability by firing top executives who failed to deal with the excesses of their colleagues in the sub-prime market.

But, as Barack Obama rightly points out, we should be worrying about “Main Street”, not Wall Street. In a world where the rich have been getting ever richer while the middle class  has stagnated and the poor have stayed poor, it is a bizarre kind of politics which is offering oil companies and the world’s richest people even more tax breaks in the McCain/Palin Dark Ages express. Even Gordon Brown should hang his head in shame, though he finds it more convenient to blame short-sellers and “speculators”, those vague, undefinable bad guys who are guilty of ruining his ever so perfect long-term financial planning.

Let’s face it- they have all been out to lunch, literally and figuratively- the government leaders, the central banks, the executives in the posh dining rooms at the top of those glass towers in the world’s financial capitals, and the regulators. 18 years of unbroken economic growth in the UK and the USA save for the dotcom bubble crash and subsequent commodities and property fuled boom had left them all asleep at the wheel. And who gets to pay for the mess? We, the people in the real economy do: as taxpayers, as property owners, as employees and as folks with alot less money in their retirement funds.

They had much important things to do than ensuring fairness and reliability in our global economy. They were ”saving us from terrorism” (a vastly over-hyped threat which governments and the security industry have benefitted from enormously in terms of increased power and money); they were trying to unstick the stuck WTO talks (a mixed blessing if ever there was one); they were spending more of our money less wisely than ever before in history, with even less accountability than we have seen from top banking executives.

It is no wonder that polls show that levels of trust in politicians, leaders and business are lower than ever- we have all had a chunk of flesh bitten out of us by these charlatans, and we are powerless to do anything except vote them out of office for another bunch of egomaniacs with different policies which may or may not work.

So, what would restore our confidence in the “system”? Let us count the ways:

1. We could start by developing leaders who think systemically about the whole system, and can assemble collations of diverse groups to achieve some of our core needs: better education, healthcare, stable markets, more jobs and a genuinely more compassionate society;
2. Our business schools could stop glorifying charismatic egomaniacs who have “succeeded” as role models, and instead highlight the critical need for collective leadership and responsibility that will define the 21st century;
3. Our education system and businesses could begin to focus on the welfare of the communities they operate in, and involve students and employees in projects which cut across boundaries of wealth and class with social as well as business objectives;
4. We could each take responsibility for our footprint on our community and our planet, and only deal with people and businesses that do the same.
5. We could encourage more social entrepreneurs and corporate intrapreneurs to take the risks needed to get new business models off the ground that will lead to a more sustainable, healthier world;
6. We could invest our money only in ethical and sustainable businesses, and boycott the bad boys who make all the mess and leave it to the rest of us to clean it up;
7. We need to agree transparent global financial regulations that leave no loopholes for financial con-artists dressed up as bankers, and for regimes and politicians salting away fortunes at the expense of their fellow countrymen;
8. We need to prosecute fraudsters in all markets, fast, and make examples of them so that those who do not care about or consider the consequences of their actions will at least think twice before they attept to get rich quick at someone else’s expense;
9. We have to develop the next generation, known as the “Renaissance generation” or “Rengen”, into post-conventional leaders who will co-create the systems of the future for a sustainable business model for a thriving planet;
10. Each of us need to seriously re-consider why we are here, what we are doing, and the consequences of being on automatic pilot when we have in our power to change the world if we could only be bothered to step up and take action, now.