The US Foreign Policy is a Corrupt Scam

 

A Level Economics: When you Define Something you Miss the point

The quote "when you define something you miss the point" suggests that attempting to provide a strict, rigid, or fixed definition for something can lead to an oversimplified or incomplete understanding of that thing's true nature or essence. In other words, the act of defining something can sometimes limit our perception of its complexity, nuances, and broader context.

This idea can be interpreted in a few different ways:

1. Limiting Complexity: Many concepts, ideas, or phenomena are intricate and multifaceted, and they may not fit neatly into a single definition. By trying to define them with a specific set of words, we might inadvertently leave out important aspects that contribute to their full meaning.

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3. Subjectivity and Perspective: Definitions often reflect a particular perspective or point of view. Different people might have different understandings or interpretations of the same thing, and an attempt to rigidly define it could ignore these diverse viewpoints.

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5. Evolution and Change: Concepts can evolve over time, adapting to new contexts, technologies, and social dynamics. A fixed definition might not accurately capture these changes, leading to an outdated or inaccurate understanding.

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7. Emotional and Experiential Aspects: Some things, especially abstract concepts or emotions, can't be fully captured by definitions alone. Their experiential or emotional components might be more important than a literal description.

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9. Uniqueness: Some things are so unique or unconventional that trying to define them using conventional language falls short. In these cases, attempting to define them might indeed miss their true essence.

In essence, the quote encourages us to embrace the complexity and depth of things rather than confining them within rigid definitions. It suggests that understanding something comprehensively might involve acknowledging its multifaceted nature, allowing for various interpretations, and being open to the idea that some things are best understood through experience, observation, and an open mind rather than through a strict definition.

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Let's explore each point with some examples:

1. Limiting Complexity: Imagine trying to define the concept of "love." Love is a complex emotion that can encompass various feelings such as affection, attachment, compassion, and more. Attempting to define love with a single sentence might miss out on the intricate interplay of emotions and experiences that contribute to its true essence.

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3. Subjectivity and Perspective: Consider the definition of "success." For one person, success might mean achieving a high-paying job, while for another, it could mean having a fulfilling family life. The definition of success varies based on personal values, cultural background, and life experiences.

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5. Evolution and Change: The term "technology" has evolved over time. Defining technology solely as "the application of scientific knowledge for practical purposes" might not capture the rapid advancements in fields like artificial intelligence or biotechnology. A definition created a few decades ago could miss the modern scope of technology.

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7. Emotional and Experiential Aspects: Defining "happiness" as a state of well-being might fail to capture the deeply personal and emotional nature of the feeling. People experience happiness in diverse ways, and it involves subjective elements that are hard to encapsulate in a definition.

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9. Uniqueness: Certain works of art or creative expressions are so unique that defining them becomes challenging. Consider avant-garde art that challenges traditional definitions of beauty and meaning. Trying to rigidly define such art might neglect the intention of the artist and the emotional impact it elicits.

In all these examples, attempting to define these concepts using narrow, strict definitions could result in missing the depth, richness, and dynamic nature that make them meaningful and significant. The quote reminds us to approach these concepts with openness, acknowledging their complexities, subjectivity, and the ways they transcend conventional definitions.

How to spot the chancers who are ‘winging it’ at work

We are bad at assessing others’ skills and performance but true slackers will always slip up writes Emma Jacobs in The FT

“This one is going to be pretty special,” teased the Australian reporter’s Instagram post. How right he was. Accompanying a television crew to interview Adele, the British pop star, he discovered too late that he had missed an email containing the preview of her new album, 30. Talking about the album was the entire reason for their encounter. “This is the most important email I have ever missed,” he said. The interview was binned. 

The story emerged on the same day that Boris Johnson delivered a speech ostensibly about the UK creative industries to the CBI, the UK’s largest employers’ group. Instead, he lost his place in his notes — pleading “forgive me” — and swerved into talking about Peppa Pig. I’m no expert on public speaking but asking the audience for forgiveness might be an error. 

As examples of winging it go, these were both spectacular fails, criticised for being unprofessional and disrespectful. We’ve all been at meetings, watched panels or seen speeches where participants are bluffing, having failed to do their homework. Some (many?) of us may even have been the bluffers. 

Winging it has appeal. It’s a lot less work, for starters. And it can appear charming: making its practitioners human rather than robotic, fitting the business vogue for authenticity. A few people can genuinely pull it off. 

However, beware the faux-wingers (FWs). Anyone who has been to school will be all too familiar with the person who rocks up to an exam claiming not to have done any revision, concealing the fact they studied hard. Falling for an FW’s spin is a mistake that might cause you to fall flat on your face. 

One classic FW tool is spontaneity. It looks effortless but can be hard work. I called an FW friend I’ve known since university, where he would procrastinate by evaluating different types of biscuits. Today he is a senior barrister. Unsurprisingly, he’s left the biscuits behind, and prepares for cases with rehearsed arguments, strategy and detailed answers, reams of notes, including gags and analogies that appear to have been made on the spot, to keep the audience engaged. “You have to work harder if you want to riff,” he says. 

Another friend prepares sports stars to go on television. He works with two sportspeople (frustratingly, he won’t name and shame) who have very different attitudes. One puts the work in and appears fluent and natural at press conferences, the other puts no effort in and clumsily and inaccurately tries to parrot the words he has been fed. 

Chaos is Johnson’s schtick. The broadcaster Jeremy Vine once wrote an entertaining post about watching the prime minister prepare for an after-dinner speech by jotting a couple of random notes down just as he was about to go on stage and then forgetting half the joke. Only to see him do exactly the same thing — and the same speech — at another function. On many occasions, the prime minister would appear to be a classic FW. 

Those at the top of their professional game may be permitted some genuine winging, not needing as much prep because they are experienced. But as demonstrated by Johnson’s recent performance (which appears to be a case of genuine winging) and the Adele interviewer, there is no excuse for an experienced professional who fails to cover the basics.  

It can be hard to tell the fake from the genuine winger. Tomas Chamorro-Premuzic, an organisational psychologist who has researched confidence, says we are not very good at assessing performance, either in ourselves or others. And, as he says, the more “inept you are, the less good you are at evaluating your performance”. (In other words, the Dunning Kruger effect.) 

One of the paradoxes of the modern world of work, Chamorro-Premuzic says, is that “the more complex, skilled, and well-paid your job is, the harder it is for others to tell if you are performing well or not”. In other words, greater complexity makes performance harder to judge. 

Those who are overconfident often end up doing too little work: they might pull it off, but there is a strong chance they won’t successfully wing it. “Having less confidence can enhance performance as it means you prepare and study”, Chamorro-Premuzic points out. Which for all the worriers out there (like me) is a great comfort.

Brexit 'more complex than first moon landing', says academic study

Philip Oltermann in The Guardian


Nasa photograph of Buzz Aldrin walking on the moon. Photograph: Swann Auction Galleries




Britain extricating itself from the European Union will be “incomparably more complex” than the first moon landing, an academic study has found.

Roland Alter, a professor at Heilbronn University in Germany who specialises in risk assessment, said he had been inspired to carry out his analysis after comments by the Brexit secretary, David Davis, that he was “running a set of projects that make the Nasa moonshot look quite simple”.

But after analysing the two situations Alter said he concluded that Davis’s analogy “missed the point”. “Both project moonshot and project Brexit are in their own way extremely complex projects. The key difference is that the USA was aware of the complexity of its undertaking.”

The paper, to be published in the journal of the German Society for Project Management early next year, analyses the comparative complexity of Britain’s withdrawal from the EU and Nasa’s first moon landing using a risk assessment model developed by the Canadian government in 2007 to determine the risk and complexity of public sector projects. 

The study singles out a number of factors that make the mission launched by Theresa May’s triggering of article 50 in March 2017 more complex than the 1969 moonshot. That mission was accomplished within eight years of John F Kennedy setting the goal “of landing a man on the moon and returning him safely to the Earth”.

While the then US president had been aware of the complexity of the task from the start and deliberately fudged the timetable of the mission by adding the words “before this decade is out” in his historic speech, developments in the Brexit negotiations had revealed an “ever-widening gulf between the complexity of the project and its organisational capacity”, according to the study.

The crucial difference between the two projects, according to Alter, was that the Nasa mission had a definable “landing zone”, namely the moon. In terms of complexity, its challenges had lain mainly in developing and applying new technologies.

“The situation in Great Britain is completely different in this respect,” his paper concludes. “The project was authorised by a referendum phrased in general terms and does not have a clearly defined ‘landing zone’.”

Alter, who previously worked as a strategist for Siemens, also teaches a course on catastrophically managed projects, which includes modules on Berlin’s much-delayed new airport, the over-budget Scottish parliament at Holyrood, Airbus’s ill-fated A400M Atlas aircraft and the Iraq war. “Brexit is not part of the course yet, but it’s a hot contender for the top spot,” Alter said.

Nobel prize winners’ research worked out a theory on worker productivity – then Amazon and Deliveroo proved it wrong

Ben Chu in The Independent


Financial incentives are important. We all know that’s true. If you were offered a job that paid £10 an hour and then someone else came up offering to pay you £11 an hour for identical work, which one would you choose?

Most of us would also accept that well-designed employment contracts can get more out of us. If we could take home more money for working harder (or more effectively), most of us would.

Bengt Holmstrom won the Nobel economics prize this week for his theoretical research on the optimum design for a worker’s contract to encourage the individual to work as productively as possible.

The work of Holmstrom and his fellow Nobel laureate, Oliver Hart, is subtle, recognising that the complexity of the world can cause simplistic piece-rate contracts or bonus systems to yield undesirable results.

For instance, if you pay teachers more based on exam results, you will find they “teach to the test” and neglect other important aspects of children’s education. If you reward CEOs primarily based on the firm’s share price performance you will find that they focus on boosting the short-term share price, rather than investing for the long-term health of the company.

Holmstrom and Hart also grappled with the problem of imperfect information. It is hard to measure an individual worker’s productivity, particularly when they are engaged in complex tasks.

So how can you design a contract based on individual performance? Holmstrom’s answer was that where measurement is impossible, or very difficult, pay contracts should be biased towards a fixed salary rather than variable payment for performance.

Yet when information on an employee’s performance is close to perfect, there can also be problems.

The information problem seems to be on the way to resolution in parts of the low-skill economy. Digital technology allows much closer monitoring of workers’ performance than in the past. Pickers at Amazon’s Swansea warehouse are issued with personal satnav computers which direct them around the giant warehouse on the most efficient routes, telling them which goods to collect and place in their trolleys. The devices also monitor the workers’ productivity in real time – and those that don’t make the required output targets are “released” by the management.

The so-called “gig economy” is at the forefront of what some are labelling “management by algorithm”. The London-founded cycling food delivery service app Deliveroo recently tried to implement a new pay scale for riders. The company’s London boss said this new system based on fees per delivery would increase pay for the most efficient riders. UberEats – Uber's own meal delivery service – attempted something similar.

Yet the digital productivity revolution is encountering some resistance. The proposed changes by UberEats and Deliveroo provoked strikes from their workers. And there is a backlash against Amazon’s treatment of warehouse workers.

It is possible that some of this friction is as much about employment status as contract design and pay rates. One of the complaints of the UberEats and Deliveroo couriers is that they are not treated like employees at all.

It may also reflect the current state of the labour market. If people don’t want to work in inhuman warehouses or for demanding technology companies, why don’t they take a job somewhere else? But if there are not enough jobs in a particular region, people may have no choice. The employment rate is at an all-time high, but there’s still statistical evidence that many workers would like more hours if they could get them.

Yet the new technology does pose tough questions about worker treatment. And there is no reason why these techniques of digital monitoring of employees should be confined to the gig economy or low-skill warehouse jobs.

One US tech firm called Percolata installs sensors in shops that measure the volume of customers and then compare that with the sales per employee. This allows managements to make a statistical adjustment for the fact that different shops have different customer footfall rates – it fills in the old information blanks. The result is a closer reading of an individual shop worker’s productivity.

Workers who do better can be awarded with more hours. “It creates this competitive spirit – if I want more hours, I need to step it up a bit,” Percolata’s boss told the Financial Times.

It’s possible to envisage these kinds of digital monitoring techniques and calculations being rolled out in a host of jobs and bosses making pay decisions on the basis of detailed productivity data. But one doesn’t have to be a neo-Luddite to feel uncomfortable with these trends. It’s not simply the potential for tracking mistakes by the computers and flawed statistical adjustments that is problematic, but the issue of how this could transform the nature of the workspace.

Financial incentives matter, yet there is rather more to the relationship between a worker and employer than a pay cheque. Factors such as trust, respect and a sense of common endeavour matter too – and can be important motivators of effort.

If technology meant we could design employment contracts whereby every single worker was paid exactly according to his or her individual productivity, it would not follow that we necessarily should.

How to blame less and learn more

Mathew Syed in The Guardian

Accountability. We hear a lot about it. It’s a buzzword. Politicians should be accountable for their actions; social workers for the children they are supervising; nurses for their patients. But there’s a catastrophic problem with our concept of accountability.

 Consider the case of Peter Connelly, better known as Baby P, a child who died at the hands of his mother, her boyfriend and her boyfriend’s brother in 2007. The perpetrators were sentenced to prison. But the media focused its outrage on a different group: mainly his social worker, Maria Ward, and Sharon Shoesmith, director of children’s services. The local council offices were surrounded by a crowd holding placards. In interviews, protesters and politicians demanded their sacking. “They must be held accountable,” it was said.

Many were convinced that the social work profession would improve its performance in the aftermath of the furore. This is what people think accountability looks like: a muscular response to failure. It is about forcing people to sit up and take responsibility. As one pundit put it: “It will focus minds.”

But what really happened? Did child services improve? In fact, social workers started leaving the profession en masse. The numbers entering the profession also plummeted. In one area, the council had to spend £1.5m on agency social work teams because it didn’t have enough permanent staff to handle a jump in referrals.

Those who stayed in the profession found themselves with bigger caseloads and less time to look after the interests of each child. They also started to intervene more aggressively, terrified that a child under their supervision would be harmed. The number of children removed from their families soared. £100m was needed to cope with new child protection orders.

Crucially, defensiveness started to infiltrate every aspect of social work. Social workers became cautious about what they documented. The bureaucratic paper trails got longer, but the words were no longer about conveying information, they were about back-covering. Precious information was concealed out of sheer terror of the consequences.

Almost every commentator estimates that the harm done to children following the attempt to “increase accountability” was high indeed. Performance collapsed. The number of children killed at the hands of their parents increased by more than 25% in the year following the outcry and remained higher for every one of the next three years.

Let us take a step back. One of the most well-established human biases is called the fundamental attribution error. It is about how the sense-making part of the brain blames individuals, rather than systemic factors, when things go wrong. When volunteers are shown a film of a driver cutting across lanes, for example, they infer that he is selfish and out of control. And this inference may indeed turn out to be true. But the situation is not always as cut-and-dried.

After all, the driver may have the sun in his eyes or be swerving to avoid a car. To most observers looking from the outside in, these factors do not register. It is not because they don’t think such possibilities are irrelevant, it is that often they don’t even consider them. The brain just sees the simplest narrative: “He’s a homicidal fool!”

Even in an absurdly simple event like this, then, it pays to pause to look beneath the surface, to challenge the most reductionist narrative. This is what aviation, as an industry, does. When mistakes are made, investigations are conducted. A classic example comes from the 1940s where there was a series of seemingly inexplicable accidents involving B-17 bombers. Pilots were pressing the wrong switches. Instead of pressing the switch to lift the flaps, they were pressing the switch to lift the landing gear.

Should they have been penalised? Or censured? The industry commissioned an investigator to probe deeper. He found that the two switches were identical and side by side. Under the pressure of a difficult landing, pilots were pressing the wrong switch. It was an error trap, an indication that human error often emerges from deeper systemic factors. The industry responded not by sacking the pilots but by attaching a rubber wheel to the landing-gear switch and a small flap shape to the flaps control. The buttons now had an intuitive meaning, easily identified under pressure. Accidents of this kind disappeared overnight.

This is sometimes called forward accountability: the responsibility to learn lessons so that future people are not harmed by avoidable mistakes.

But isn’t this soft? Won’t people get sloppy if they are not penalised for mistakes? The truth is quite the reverse. If, after proper investigation, it turns out that a person was genuinely negligent, then punishment is not only justifiable, but imperative. Professionals themselves demand this. In aviation, pilots are the most vocal in calling for punishments for colleagues who get drunk or demonstrate gross carelessness. And yet justifiable blame does not undermine openness. Management has the time to find out what really happened, giving professionals the confidence that they can speak up without being penalised for honest mistakes.

In 2001, the University of Michigan Health System introduced open reporting, guaranteeing that clinicians would not be pre-emptively blamed. As previously suppressed information began to flow, the system adapted. Reports of drug administration problems led to changes in labelling. Surgical errors led to redesigns of equipment. Malpractice claims dropped from 262 to 83. The number of claims against the University of Illinois Medical Centre fell by half in two years following a similar change. This is the power of forward accountability.

High-performance institutions, such as Google, aviation and pioneering hospitals, have grasped a precious truth. Failure is inevitable in a complex world. The key is to harness these lessons as part of a dynamic process of change. Kneejerk blame may look decisive, but it destroys the flow of information. World-class organisations interrogate errors, learn from them, and only blame after they have found out what happened.

And when Lord Laming reported on Baby P in 2009? Was blame of social workers justified? There were allegations that the report’s findings were prejudged. Even the investigators seemed terrified about what might happen to them if they didn’t appease the appetite for a scapegoat. It was final confirmation of how grotesquely distorted our concept of accountability has become.

Cricket: complex, unknowable cricket

 Jon Hotten in Cricinfo

Old Trafford 2005: one in a scarcely imaginable run of four matches carved from gold © Getty Images

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This is Martin Amis, writing about chess: "Nowhere in sport, perhaps nowhere in human activity, is the gap between the trier and the expert so astronomical."

Is he right? In the field of human activity, at least, I can think of another arena in which the knowledge gap between amateur and pro is vast - that of theoretical physics. The latest man to try and bridge it is the particle physicist and former keyboard player with D:Ream (best-known hit - "Things Can Only Get Better"), Dr Brian Cox. 

He has a new TV series called The Human Universe, and he kicked it off with an interesting analogy for beginning to understand exactly what theoretical physicists are on about.

"Cricket" he began, is "unfathomable" to those who don't understand it, yet "bewitching" to those that do. "And all of [cricket's] complexity emerged from a fixed set of rules."

He held up the single page of a scorebook on which he'd written down the formula for the Standard Model of Particle Physics and the Theory of Relativity, and then flicked through a copy of the Laws of Cricket. "By this notation at least," he said, "cricket is more complex than the universe."

Maybe that's because Einstein never bothered with an equation to sum the Laws up, yet it's a clever way of illustrating that an understanding of the rules of anything doesn't necessarily lead to an understanding of the subject that those rules govern. To return to chess and Martin Amis, here he is on a match between Garry Kasparov and Nigel Short: "They are trying to hold on to, to brighten and to bring to blossom, a coherent vision which the arrangement of the pieces may or may not contain."

Cricket and chess are superficially simple. Sit someone in front of a chess board and you can explain the basics of the pieces and the moves in a few minutes. Show them a cricket bat and ball and a set of stumps and the idea and aims of the game become apparent. Where the genius lies - and where Cox's analogy holds quite nicely - is in the infinite small variations that these simple structures contain. The complexities mount when the knowledge and ability of the players grows: as Amis said, they are trying to bring about a vision from within the rules that isn't actually there until it happens.

This is obvious in cricket, where the game is built around endless repetitions of the same actions - the ball is bowled, the ball is hit (or not) - which, under different conditions and with various personnel, become increasingly complex as they happen again and again until stories emerge from within them.

The other day I watched a rerun of the 2005 Ashes. Once again, it gripped. Of the 1778 Test marches played before the ones in those series, along came, at random, four in a row that finished in teeth-grinding tension. Taking a wider view, they were barely different from all of the other games of cricket in history: it was simply the appearance of these very tiny complexities, one after the other, that made them what they were.

Sometimes we can feel these patterns emerging, at others we're simply too close to make them out. The brilliance of the design of the game provides a framework that stretches off into the future. We, as players and spectators, are finite, but cricket itself is universal.

Martin Amis was fascinated by chess because he felt it was "unmasterable", and it was, by any individual. "It is a game that's beyond the scope of the human mind," he wrote. And yet the human mind has devised computer programs that are able to analyse any game and beat any player. Theoretically at least, machines have reached "the end" of chess.

Despite the obsession with stats, that fate can't really await cricket. It may not be quite as complex and unknowable as deep space, but it needs a bigger book of Laws. What an invention it is.

------Further Thought by Samir Chopra in Cricinfo

The renewability of cricket

 

The 45-year-old professor, the older version of the once-15-year-old schoolboy, sees a very different game of cricket from his younger counterpart  © Getty Images

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My Cordon colleague Jon Hotten writes, in his recent post, "Cricket: complex, unknowable cricket": 

The brilliance of the design of the game provides a framework that stretches off into the future. We, as players and spectators, are finite, but cricket itself is universal.

I think Jon must have meant something other than "universal", because otherwise the contrast made here doesn't work. I suspect he wanted to say something like "cricket is infinitely extensible" or "renewable".

Be that as it may, I want to suggest here that "we, as players and spectators" have a great deal to do with the perceived complexity of cricket. Quite simply, this is because we change over time; we do not bring, to our encounters with the game in the middle, a stable, enduring entity, but one subject constantly to a variety of physical, emotional, psychological, and of course, political variations. This perennially in flux object brings to its viewings of cricket a variety of lenses; and we do not merely perceive, we interpret and contextualise, we filter and sift. (As John Dewey, the great American pragmatist philosopher noted, "Thought is intrinsic to experience.") These interpretations and contextualisations change over time.

The 45-year-old man, the professor, the older version of the once-15-year-old schoolboy, sees a very different game of cricket from his younger counterpart. And as he continues to "grow" and change, he will continue to "see" a different game played out in front of him. He will renew cricket, make it extensible and renewable. The seemingly infinite variations possible in a 30-hour, 450-over encounter between 22 other humans, each playing cricket ever so differently from those that have preceded him, will provide ample fodder for this extensibility and renewability.

A game of cricket exists within a larger symbolic order of meaning. When a young spectator sees men in white pick up bat and ball, he understands their activities within a perceptual framework in which active fantasy and wishful longing play an active part. As he grows, matures, acquires a political and aesthetic sense, and hopefully expands his intellectual, emotional and romantic horizons he will revise this, and come to understand the game differently. He may go on to watch umpteen variations on the fourth-innings chase theme, and each one will be uniquely located within this under-construction framework.

Anna Karenina is a classic precisely because in the face of changing readings it continues to speak to us, across time and space and idiosyncratic translations

Consider, by way of analogy, the reading of the classics, great works of literature, which continue to be read for years and years after their writing. Read Anna Karenina as a youngster, perhaps for a high-school class in literature, well before you have ever dated, or been in a serious romantic relationship; you will experience the heartbreak - and tragedy - of the adults at the centre of its story very differently when, 15 years later, you have acquired a few scars (and perhaps a child) of your own. Of course, Tolstoy's masterwork is a classic precisely because in the face of such changing readings it continues to speak to us, across time and space and idiosyncratic translations. This is why Susan Sontag - like others before her - suggested the classics were worth reading several times over; each reading was likely to be a new one, a co-operative, joint construction of meaning by the reader and the writer.

Cricket's games do not exist in isolation. They are played within larger political and economic realities, ones that affect its spectators and its players; these too change our understanding of the game. The benefactions of empire in the past are now the property of its subjects; witness the turmoil this has caused in our recent relationship to the game. The conflict in the middle can come to be understood very differently in these circumstances. Where the youngster might have seen heroes in the past, he now may see villains.

These remarks above suggest another way in which cricket could continue to renew itself over time: it could be embedded within more cultures and societies; it could be written about, and understood by, a broader cross section of humanity than it has been thus far; the language of description for it could expand beyond its current repertoire. (I have been fortunate enough to talk about cricket in English, Hindi/Urdu, and Punjabi; trust me, the game is viewed very differently through these alternative linguistic lenses.) We might find, too, that the conversations that surround it in new climes and locales enrich our previous understandings of cricket.

Imagine a rich cricket literature in not just English but in other languages too. Who knows what new classics, new understandings of cricket, we might find there?

It's time to start talking to the City

A radical reform of the financial sector can only be achieved if we know what kind of capitalism we want

• Ha-Joon Chang
• guardian.co.uk, Monday 20 February 2012

Last week I delivered a lecture on my latest book to about 150 people from the financial industry at the London Stock Exchange. The event was not organised or endorsed by the LSE itself, but the venue was quite poignant for me, given that a few months ago I did the same thing on the other side of the barricade, so to speak, at the Occupy London Stock Exchange movement.

At the exchange I made two proposals I knew may not be popular with the audience. My first was that we need to completely change the way we run our corporations, especially in the UK and the US. I started from the observation that financial deregulation since the 1980s has greatly increased the power of shareholders by expanding the options open to them, both geographically and in terms of product choice. Such deregulation was particularly advanced in Britain and America, making them the homes of "shareholder capitalism".

With greater abilities to move around, shareholders have begun to adopt increasingly short time horizons. As Prem Sikka wrote in the Guardian in December 2011, the average shareholding period in UK firms fell from about five years in the mid-1960s to 7.5 months in 2007. The figure for UK banks had fallen to three months by 2008 (although it is up to about two years now).
In order to satisfy impatient shareholders, managers have maximised short-term profits by squeezing other "stakeholders", such as workers and suppliers, and by minimising investments, whose costs are immediate but whose returns are remote. Such strategy does long-term damages by demoralising workers, lowering supplier qualities, and making equipment outmoded. But the managers do not care because their pay is linked to short-term equity prices, whose maximisation is what short term-oriented shareholders want.

That is not all. An increasing proportion of profits are distributed to shareholders through dividends and share buybacks (firms buying their own shares to prop up their prices). According to William Lazonick – a leading authority on this issue – between 2001 and 2010, top UK firms (86 companies that are included in the S&P Europe 350 index) distributed 88% of their profits to shareholders in dividends (62%) and share buybacks (26%).

During the same period, top US companies (459 of those in the S&P 500) paid out an even greater proportion to shareholders: 94% (40% in dividends and 54% in buybacks). The figure used to be just over 50% in the early 80s (about 50% in dividends and less than 5% in buybacks).

The resulting depletion in retained profit, traditionally the biggest source of corporate investments, has dramatically undermined these corporations' abilities to invest, further weakening their long-term competitiveness. Therefore, I concluded, unless we significantly restrict the freedom of movement for shareholders, through financial reregulation, and reward managers according to more long term-oriented performance measures than share prices, companies will continue to be managed in a way that undermines their own viability and weakens the national economy in the long run.

My second proposal was that, in order to improve the stability of our financial system, we need to radically simplify it. I argued that financial deregulation in the last 30 years led to the proliferation of complex financial derivatives. This has created a financial system whose complexity has far outstripped our ability to control it, as dramatically demonstrated by the 2008 financial crisis.
Drawing on the works of Herbert Simon, the 1978 Nobel economics laureate and a founding father of the study of artificial intelligence, I pointed out that often the crucial constraint on good decision-making is not the lack of information but our limited mental capability, or what Simon called "bounded rationality". Given our bounded rationality, I asserted, the only way to increase the stability of our financial system is to make it simpler. And the most important action to take is to restrict, or even ban, complex and risky financial instruments through the financial world equivalent of the drugs approval procedure.

The reactions of my audience were rather surprising. Not only did nobody challenge my proposals, but many agreed with me. Yes, they said, "quarterly capitalism" has been destructive. True, they related, we've seen too many derivative products that few people understood. And, yes, many of those products have been socially harmful.

It seems that, as it is wrong to label the Occupy movement as anti-capitalist, it is misleading to characterise the financial industry as being in denial about the need for reform. I am not naive enough to think that the people who came to my lecture are typical of the financial industry. However, a surprisingly large number of them acknowledged the problems of short-termism and excessive complexity that their industry has generated to the detriment of the rest of the economy – and ultimately to its own detriment, as the financial industry cannot thrive alone.

The rest of us need to have a closer dialogue with reform-minded people in the financial industry. They are the ones who can generate greater political acceptance of reforms among their colleagues and who can also help us devise technically competent reform proposals. After all, without a degree of "changes from within", no reform can be truly durable.