May You Live In Interesting Times!

2016-06-30 20:57

It was Benjamin Franklin that said, “There are only two things certain in life: death and taxes”; and boy ain’t that reassuring right now. Not! Just what the hell is going on these days? To describe the first six months of the year as “tempestuous” would be understatement; try ‘a freaking earthquake, tsunami, super-volcano, first-half Springbok, England football match’ of uncertainty. You know you’re getting a little anxious when you start taking comfort in those previously annoying “Everything’s Going to be Ok” stickers we’re forced to read every time we drive into a Joburg mall parking lot.

Change, especially change not of our choosing, makes us all of us just a wee bit anxious; and boy-oh-boy, ‘The Times They are a Changin’ (Dylan, 1964).

Trump. Corbyn. Tshwane. Brexit. Freaking Brexit! Downgrades. Currency Devaluations. Elections. Disinvestment. Hiring freezes. Feel the Bern! Technology. Disruption. Uncertainty. More Uncertainty. What next? Will I still have a job this time next year? ‘If I show my dark side, Will you still hold me tonight?’ (Waters, 1978)

One can argue the rise of Trump, Sanders, Corbyn, et al. and the hollowing out of the middle of almost every political movement, signals a rejection of establishment politics. That’s the easy part. I think there’s something more substantial afoot. In the end, it’s ‘All About The Money, Money, Money’ (Jessie J, 2011), and how relentlessly rising inequality and youth-unemployment could spell the end of the unfettered free-market, neo-liberal capitalist experiment of the last 40 years. (Whoa…before you get your IMF-emblazoned knickers in a knot, the key word in the last sentence is ‘unfettered’).

Whether we like it or not, the rich can’t keep getting relentlessly richer while the poor can’t even get a minimum-wage job cleaning toilets. IMO we’re uncertain about the future because deep down we know this to be true. Any muppet can work out that if 82% of the wealth generated in the next 26 years accrues to only the top 5% wealthiest people in the world, like it did from 1983 to 2009, the wheels will come off. Eventually.

Regardless of the moral failings one may feel we’re entitled to attribute to the poor, the winds of a disenfranchised, demographic inevitability have clearly begun to stir. The have-nots, rocket powered by hopelessness, social networking and nature’s latest unstoppable force – cheap, ubiquitous connectivity – have simply arrived. Get ready for a proper Sho’t Left. On a global scale. Not long from now, the only trickle-down we’ll see from the one percenters will be down the front of their trousers as election results come in. T’was Bob Marley that reminded us that ‘A hungry man is an angry man’ (1975, I think…)

But let’s focus on the Uncertainty part; social justice is a story for another day.

We all deal with ambiguity differently. What we have in common is that uncertainty causes stress. More for some, less for others, but no one can plausibly argue that an uncertain future is a pleasant experience in the present. Especially the lower down Maslow’s hierarchy we get. Our response to uncertainty is a combination of biology, psychology and sociology. I had to find a way to work the word Biopsychosocial into this piece!

Biologically: that’s straight forward, we’re hardwired to fight, flight, and swim in cortisol. It’s the same for all of us. Now the psychological and social attitudes we develop to the unknown are where things get really interesting.

Let’s play a game: Got a coin? I’ll offer you $120 for heads, but if it’s tails, you pay me $100. Cool?

Would you take the bet? Come on…the odds are obviously in your favour. As our friend at Capitec likes to say, ‘It’s a no-brainer’. Hold on there Texas Slim! You sure you really have $100 to lose?

By introducing a descriptive question – whether you can really afford to lose $100 right now – I change a mathematical ‘no-brainer’ into a more qualified example of what happens in real life. One suspects if I ask this question just after payday or 5 drinks in the pub, things our friends in Vegas learnt long ago, the uptake might differ slightly than after mid-month’s main course ala ‘Tinned tuna and Salticrax’.

Normative economic theory suggests we’d take the bet every time, behavioural economics, in this case (very basic) Prospect Theory, says, “Not so fast cowboy!” Remember losses hurt more than wins feel good. And in this example, the outcomes are known!

Let’s exaggerate a bit. In the current environment, we have the opportunity to bet on heads which comes up a guaranteed two-thirds of the time. Heads: you continue to come to work, get your salary, life goes on. BUT if you toss a tail, you pay an unspecified sum (like possibly being retrenched, defaulting on your mortgage, seriously considering driving for Uber, you get?). Still wanna play? Ok, I have framed the question for effect, but the world has changed so much in the past year, that if one were to offer people a 10% pay cut in exchange for a guarantee they won’t be retrenched in the next three years, I think we’d be surprised how many people would take that deal in the current economic environment - if I still worked in banking I'd consider it.

Uncertainty Avoidance on a macro-cultural level is well known phenomenon. Some societies deal with ambiguity by creating laws and regulations for everything. High uncertainty avoidance is seen everywhere: higher numbers of policemen-to-citizen ratios, or a lower nurse-to-doctor one. Hell even the ratio of prescriptions for antibiotics is strongly correlated with national uncertainty scores. Something we’re all going to pay for at some point. Woe betides us, the Tragedy of the Commons indeed!

Attitudes to uncertainty impact us everywhere. Think about how growing up in a risk-averse culture, which tends to value conformity over individualism, how that might impact future job performance as, say, a credit loan officer or financial markets trader. I mean from a young age, one is never rewarded for taking a risk, being a little different. There’s plenty of evidence that shows how cultural heritage plays a big role in certain types of job performance, though before you get ahead of yourself, this does NOT give us licence to discriminate. On the contrary, cultural intelligence is the about creating awareness and designing interventions to mitigate any unconscious bias.

Corporate management theorists should really dig deeper into culture. For instance, from meaningful Employee Value Propositions, to even Cash Management Balances are significantly (of the statistical and economic kind) impacted by the prevailing Uncertainty Avoidance attitudes in a country. The more uncertain a market tends to be, the higher the cash management balances tend to be. Not rocket science, but backed by proper data*.

How can a centralised HR manager hope to develop a meaningful value proposition to Group employees without actual evidence (read: actual data of which there is plenty) of cultural attitudes to job security? How would managers of multinationals start to understand the nuance of regulatory relationships– from capital adequacy to compliance reach – without an appreciation of local, general attitudes to risk-aversion?

Me, I wonder when investment analysts are going to start looking at whether a firm’s strategy and culture are in fact aligned. Call me; I’d only be too happy to point out – with certainty - that they almost always do not. Hint: CEO wants 10% top line growth, the COO wants a 10% cost cut and a hiring freeze. Cake? Ice cream? Anyone?

This uncertainty does have an ugly side though. Nothing says “Different is Dangerous” quite like a recession. So we must proceed with care, but to Boris, I say “Be careful old chap, for ‘when you lose control, you’ll reap the harvest you have sown’ (Pink Floyd, 1977).

Look, most people are hardwired to avoid uncertainty. It is a powerful preference. Reminds me of Douglas Adams, he of ‘The Hitchhiker’s Guide…’ fame: “We demand rigidly defined areas of doubt and uncertainty”.

I apologise, the quotes came thick and fast today, perhaps some kind of Freudian attempt at literary certitude, I mean why invent new stuff when the ol' tried and tested gets us all safely to the end of this tedious article?

All I know is that I could do with a few extra Benjamin Franklin’s in my own back-sky. Now that would ease my own uncertainty a touch. And hey, seriously, “Everything’s Going to Be OK


1. Institute for Policy Studies: Inequality Facts and Figures 99 to 1.

2. Ramirez & Tadesse. (2009). Corporate Cash Holdings, Uncertainty Avoidance and the Multinationality of Firms. International Business Review

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