The LSE campus will undergo its largest redevelopment since the foundation of the School. The East building, Clare Market, the Anchorage and part of St. Clement's will be demolished and replaced with a single large building spanning the space from Columbia House to the Lionel Robbins building. The redevelopment represents an one-time opportunity to create a centrepiece within London, the United Kingdom and the world for the social sciences. I review and critique the 5 submitted architectural designs on their conceptualisation of the public space, their capture of natural light, their public visibility and branding potential, their success in establishing a grand boulevard and their ability to bring balance to the School's physical campus.
I like the succinct description of a society given by the great Scottish political economist Adam Smith (1723 - 1790): "A society may subsist among different men … from a sense of its utility without any mutual love or affection, if only they refrain from doing injury to each other."
LSE alumni relations in Kenya, the East African economic and political hub, has been re-launched this evening. A national committee has reconstituted itself. After gathering the volunteers and putting some momentum in the effort, I've given over the helm. The photo on the left shows me with the new committee volunteers at the kick-off dinner in Nairobi. The first event will be a reception in Nairobi in August for new and returning students. I will continue to facilitate LSE club establishment in the entire East African region. If you want to get involved, join the many LSE graduates who have already become a member of the private LinkedIn Group "LSE Alumnae and Alumni of East Africa".
I make the following prediction on the capital markets by 2030: Sovereign wealth funds, pension funds and private wealth will increase the most in importance as a source of financial capital. I base this prediction on several long-term trends, reasonably to be expected to take their course in the absence of major hiccups in the form, for example, of an inter-regional war, major pandemics and other serious risks: Private and public wealth will increase sharply and world population will continue to age. Mail me if you think my prediction and assumptions are unreasonable.
Governments are heavily involved in the extraction of natural resources on all continents. Owing to the ultimate exhaustibility of natural resources, this situation will hardly change. As a result, much income from natural resource extraction will continue to end up in government coffers. In some parts of the world, for instance in East Africa, such coffers are just starting to be filled. Government revenues will additionally be buoyed by price spurts driven by the inescapable long-run trend of increasing scarcity of natural resources coupled with increasing demand from rapidly developing world regions like China, India and Brazil. Revenues from de facto non-renewable natural resources are by nature temporary. For this reason, governments will have a strong incentive to forgo immediate public consumption and invest the revenue windfalls in assets other than money to maximize returns. Owing to the liquidity and depth of the financial markets, financial assets will feature in any reasonable asset diversification strategy. The institutional setup of choice for effectively managing such public investments are sovereign wealth funds. Considering a more inclusive definition of natural resource, many countries in the developing world have great natural wealth in the form of their huge pools of underused labor. Eventually this great resource will not only be more productively used but also monetized through the accumulation of private wealth also seeking to diversify through the financial markets.
In nations with shallow domestic labor, goods and service markets and rudimentary to no social security systems, having lots of children is one way to ensure prosperity or even survival. In countries with high living standards and extensive social security nets, having children is more motivated by individual fulfillment and rather associated with being a financial burden. Hence, climbing living standards in developing countries will, with a time lag, decrease birth rates and accelerate the aging of populations. With the ratio between the working population and retirees shifting ever more to the latter, more private and public-induced savings will end up in retirement schemes such as pension funds.
When it comes to financial investments, it's not principally hope which never dies but greed. In the last 5 to 10 years, passive investments as typified by exchange-traded funds (ETFs) and index-tracking financial products have seen a pronounced surge in popularity with all types of investors, from retail to institutional. The contrasting active investment styles are, nevertheless, far from becoming extinct but will continue to be demanded and, more probably than not, thrive again in future. The reason is not because they produce consistently higher net returns on investments over the long run, they don't, but because greed will continue to be a stronger influence on investment decisions compared to reasonable performance expectations or other quantitative reality checks.
In the distant past, an investor could realize sustained excess returns by knowing more than all other investors, whether by genuine effort or through illegal means. In contrast, in today's more global, more liquid and more regulated financial markets aided by barrier-free global information networks, privileged information in the public sphere has become a great rarity. If some market participant gets to learn something new about a publicly-listed company on one end of the world, it will not be long after somebody on the other end learns the same. Indeed, why go to all the trouble of finding genuine, legal insider information on a company if there are tons of relatively easy accessible market data to mine from the safety of your own office. After all, even active asset managers are under competitive pressure to lower their costs. Information from these secondary sources may work well in custom-made quantitative models but whether they truly reflect what's happening with a company on the inside is another matter. The modern firm is a complex organization, a multitude of inside and outside forces determine its actions. To understand its future from the outside, you need to become an insider through time-consuming research and prolonged observation, disciplines which are not necessarily core strengths of many active asset managers.
Now, if most of active asset management does not promise to bring superior returns, why are investors still going for it. I would argue that it is pure greed which motivates most investors. It's the same physical condition afflicting investors going for financial products they don't really understand. It's the insatiable desire for more, the satisfying realization that you are smarter than all others. It's an inherently human condition and, because it is, any financial investment style catering to it will always be successful.
The Classical Greek philosopher Plato (428 - 348 BC) wrote about five forms of government, which progressively may degenerate starting with aristocracy and ending in tyranny. Please feel free to associate modern governments with any of Plato's forms.
Plato favored form of government was an aristocracy, a state ruled by an enlightened leader imbued with the highest ideals and grounded on wisdom and reason. Many current long-time heads of government may see themselves as such enlightened souls. According to Plato, an aristocracy may degenerate into a timocracy, a state ruled by those primarily motivated by personal honor or advantage. Its more extreme form is the plutocracy in which power is used to entrench wealth. From there it's not far to an oligarchy, a two-class society of the rich as the governing and the poor as the governed. An oligarchy will eventually degenerate into a democracy in which the weight from the majority of the lower classes transforms the society towards the indulgence of personal freedoms and the consumption of whatever one desires. We finally then end up in a tyranny where there's no discipline and chaos reins supreme.
Without uncertainty and exposure there would be no risk. I like the parachute analogy: In jumping out of an airplane with a parachute, there may be uncertainty as to whether the parachute will actually open. The jumper is taking a risk by being exposed to that uncertainty. Jumping out of an airplane without a parachute entails no risk as death is certain. Of course, the decidedly risk-averse shouldn't conclude to leave airplanes in mid-flight without a parachute. It wouldn't be risky but it would be foolish.
I went recently to a corporate event and one of its theme was "talent management", i.e. how to find, recruit, reward, develop and retain "talent" for a business. Unfortunately, there may be no such paramount concept as "talent" as related to business. Mail me if you see it differently.
With an innate aptitude, one has "talent" to do a certain type of work at a particular level. Innate aptitude must be distinguished from acquired knowledge or skills. The former arises from individual characters not directly amendable by specific actions. It is also important to note that having talent respectively aptitude does not equate to performing at a very high level. Realized performance is influenced by many factors including knowledge, skills, aptitude, opportunities, other extrinsic factors and, yes, pure chance. You may have aptitude to masterly play the violin but you may never be a star violinist because you enjoy playing football more. Similarly, somebody who trains hard to play the violin may eclipse in performance another who simply has an aptitude for the violin as an musical instrument.
Hence, to speak of "talent management" in the narrow sense of recruiting and developing potential high performers for a business is already a misnomer by erroneously not recognizing that performance arises from many roots. However, "talent management" in the broad sense of being a more sexy synonym for human resources management works. In this sense, all potential and current employees are "talents" who need to be properly motivated and whose skills and know-how demand to be developed in light of individual interests, goals and aptitudes for the benefit of a business enterprise.
I got a deceptively simple question for you to answer: What's the purpose of business? Mail me your take or read on for mine.
Most MBA graduates will tell you that the purpose of business is to maximize shareholder value. Really? It would seem to me that only in an Orwellian world would all shareholders in a large public company share the same or similar objectives of holding that company's stock to enable management to cater to them. Others may say that the purpose of business is to maximize profits. However, many entrepreneurs and professionals are not motivated primarily by the prospect of great riches when starting or running businesses. The purpose of business is far simpler than that: to provide demanded goods and services. Profits are then simply a measure of how successful a business is in achieving that singular purpose. Profits are like the goal count of a striker in football, determining whether he can keep playing or should make way for a better goal scorer. The lack of profits induces extinction, the removal of unwanted goods and services and their suppliers. Everybody benefits when companies make sustained losses as, as a consequence, limited resources are re-channeled to those who better supply demanded goods and services.