In politics, as in marketing, offering a third choice can be a game-changer writes Tim Harford in The Financial Times
Imagine that you sell bread-making machines. Your task is complicated by the fact that most people have only a hazy grasp of what a bread-making machine does, let alone the joys and sorrows of owning one.
Nevertheless, there is a simple trick that will help these machines to fly off your shelves: next to what seems to be a perfectly adequate $150 bread-maker, place a $250 bread-maker with a long list of bewildering extra functions. Customers will think to themselves: “I don’t need all that nonsense. The cheaper, simpler bread maker is the better option.” Some of them will buy it, even though they would not have otherwise.
Itamar Simonson, a marketing professor at Stanford University, attests that the kitchenware company Williams-Sonoma doubled their sales of bread-makers in the early 1990s using this sort of technique. Mr Simonson, along with Amos Tversky, one of the fathers of behavioural economics, demonstrated similar preference reversals in a laboratory setting.
Mr Simonson and Tversky showed that when people are wavering between two options, you can change what they choose by offering a third, unattractive option. A $1,000 camera might seem extravagant unless there’s a $5,000 camera sitting next to it. The grande sized cup at Starbucks seems restrained when put next to the venti, a Brobdingnagian vat of flavoured warm milk.
All this brings us to Brexit. What we voters feel about different flavours of Brexit (hard, soft, train-crash) depends in part on facts, in part on propaganda, and in part on our prejudices. But it also depends on the comparisons that come readily to mind.
That means that the re-appearance of the European Economic Area is an intriguing development in the debate. The House of Lords recently voted to keep the UK in the EEA, and therefore the single market, after leaving the EU. This “Norway option” seems a popular enough plan: a BMG opinion poll in January found 52 per cent of people in favour of staying in the single market, and only 14 per cent of people against. In these polarised times that is as decisive a margin as one might expect for anything. Nevertheless, both prime minister Theresa May and the leader of the opposition, Jeremy Corbyn, have rejected the single market option, making it unlikely.
This might seem illogical. Why not go for a popular compromise that respects both the close vote and the fact that the Leave campaign won the referendum? But, remembering the tale of the bread-maker, it makes perfect sense that Mr Corbyn and Mrs May, both Euro-sceptics, should fear the Norway option being placed in front of voters.
To most voters, the EU is like a bread-maker: we don’t really understand what it does and we don’t know what to think about it. The Norway option clarifies matters in a way that does not help Leavers. It is very much like being in the EU, except just a little bit worse. If it becomes a salient possibility, it makes staying in the EU look rather attractive by comparison.
A hard Brexit will probably go quite badly for the UK, but it does have the merit of being a very different path to remaining in the EU. A Norway-option Brexit might well work out smoothly, but it is almost guaranteed to underperform the option of not leaving at all. No wonder Brexiters — so cavalier about having their cake and eating it before the vote — are now determined to ensure that the Norway option is taboo. They realise that if the British public decides that staying in the single market is a plausible plan, they might eventually reach the conclusion that staying in the EU itself would be even wiser.
This sort of preference reversal can occur in other circumstances, too. A hard Brexit offers temptations to many voters: control over immigration; an independent trade policy; no more membership fees to Brussels. It also offers obvious risks: leaving the largest single market in the world; damage to the political settlement in Northern Ireland; setbacks to scientific and diplomatic collaboration. Staying in the EU merely offers business as usual.
Do we tend to find a mix of stark risks and clear rewards appealing? That depends on whether the costs or the opportunities seem more salient. During the referendum campaign, the opportunities opened by Leavers seemed expansive, while the costs (“lower GDP by 2030!”) were vague and dull. During the negotiation process, it is the opportunities that are starting to seem vague while the costs are becoming vivid, at least to the small number of people who are paying attention.
None of this makes it likely that Brexit will be reversed. The simple fact that Leave won the referendum is likely to be proof against all sorts of psychological subtleties. Yet these seem to be nerve-racking times for the Brexiters.
It was always clear that asking an absurdly simple question about an absurdly complicated decision was unlikely to work out well. There is one ironic consolation: however befuddled our referendum decision might have been, the divided cabinet is now doing its best to make us, the great British public, seem like philosopher kings by comparison.
Najam Sethi in The Friday Times
If the Miltablishment is the irresistible force, then Nawaz Sharif is becoming an immovable object. Indeed, the more the Miltablishment engineers political change to suit its designs, the more Nawaz Sharif strengthens his narrative of “victimhood” in the popular imagination by exposing its past machinations.
Mr Sharif is being branded a “traitor” and “Indian agent” by the Miltablishment and its minions for publicly challenging its national security paradigm in which non-state militant actors continue to play a central role in asymmetric strategies at home and abroad. It is interesting, however, that he is not the first, and he certainly won’t be the last to admit or challenge this fact. General (retd) Hameed Gul (ex-ISI) boasted of the fact while General (retd) Mahmud Durrani (ex-NSA) and General Pervez Musharraf (ex-COAS/President) candidly admitted it. Asif Khosa (ex-IGP/ex-FIA) and Imran Khan have both publicly criticized this national security “contingency” as proving harmful to the cause of Pakistan but they have done so without arousing the ire of the Miltablishment. Indeed, every academic, local or foreign, worth his or her salt has penned reams on the subject, almost always in critical mode, but no book or article has been banned in Pakistan for articulating such views. More specifically, everything about the Mumbai attack of 2008 has been revealed, either in Pakistan or in India and the USA, in the media or during various court trials of various accused, including the role of the “hidden hand” of the deep state. So, what’s the big deal about Nawaz Sharif alluding to much the same thing today?
In 1964, President General Ayub Khan accused Fatima Jinnah, the Quaid-e-Azam’s sister, of being “pro-India and pro-America” when she stood up to challenge his legitimacy at the polls. Ironically enough, Nawaz Sharif is now faced with the same allegations when he is seeking to challenge the Miltablishment’s favourites in the forthcoming elections. General Ayub rigged the 1965 elections and but didn’t last long enough to enjoy the fruits of his victory. Will the current front runners meet the same fate?
The Miltablishment may be arrogant and self-righteous but it is not unaware or uncritical of the negative role and dire consequences that these non-state actors have spawned in domestic and foreign affairs. It claims to be seeking ways and means to minimize the militant role of “some” of these actors without directly provoking them and destabilizing the state in unmanageable ways. Its anger at Nawaz Sharif is directed not so much at his challenge of their strategic national security narrative but at his refusal to seek their advice on how to decommission these non-state actors or exploit them tactically in the realm of policy. Therefore, while it may be kosher to privately admit that Mumbai was a blunder that badly backfired, doing so in front of Pakistan’s adversaries is not okay because it is bound to extract a heavy penalty.
The Miltablishment is also angry at Nawaz Sharif for trying to diminish its predominant role in national life by “defaming” its institutional chiefs. General Musharraf’s “treason” trial is the original sin, followed by attempts to degrade General Raheel Sharif’s personal credentials.
The Miltablishment’s outrage over Mr Sharif’s latest remarks is in line with its indignation over Dawnleaks. It did not take umbrage when he expressed negative sentiments in the NSC meeting about the role of these non-state actors controlled by the Miltablishment. But it saw red when he leaked it to the media because it suspected that the leak was aimed at endearing himself to the international community at the cost of the Miltablishment instead of effecting a united civil-military front against it. It may be recalled that its reaction was much the same against Mr Asif Zardari following the Osama bin Laden-Abbotatabad affair in 2012 when it accused Ambassador Hussain Haqqani in Memogate of acting “treasonably” against the “interests of Pakistan” (read Miltablishment). It is once again in the same angry reaction-mode: it sees Nawaz Sharif as trying to save his skin at home by appealing to the international community as the good guy and portraying the Miltablishment as the evil empire.
The Miltablishment felt humiliated and resentful when Nawaz Sharif sacked COAS General Jehangir Karamat three months before his retirement in 1998 for merely supporting the idea of a National Security Council. It hit back in 1999 when he tried to sack General Musharraf for his irresponsible Kargil adventure. The two sides mended fences to jointly take up cudgels against a common PPP foe in 2012. Now they are at each other’s throats again, with the Miltablishment making common cause with former adversaries. And so it goes on.
The Miltablishment has eliminated anyone who has dared to cross its path and its national security policies have only wrought fear and instability. The politicians, too, without exception, have been corrupt, incompetent or authoritarian. Pity the nation that has been so trampled upon by its custodians since independence.
Nils Pratley in The Guardian
Apart from the junior director who tried to speak against the delusion in Carillion’s boardroom, nobody emerges with credit from the two select committees’ post-mortem on the contracting firm. The other directors, led by chairman Philip Green, chief executive Richard Howson and finance director Richard Adam, were directly responsible for the failure because they were either “negligently ignorant of the rotten culture” or complicit in it. But the entire system of checks and balances failed.
The auditors, KPMG, were useless, as was the audit industry’s passive regulator. The government, in the form of the Crown Representative, was asleep. The Pensions Regulator was feeble. City advisers to Carillion were paid to be supine. Big shareholders were not inquisitive. None of those judgments will surprise those who followed the evidence sessions, but the MPs’ report will count for little unless it forces action from government. Three areas are priorities.
First, reform the auditing industry. The public lost faith in auditors when HBOS and Royal Bank of Scotland collapsed without a squeak of warning from the people signing off the accounts. Now there’s Carillion, where the report accuses KMPG, which had the auditing gig for 19 years, of failing to exercise professional scepticism – the basic requirement of the job.
The MPs’ prescription is not original, but is correct. Get the Competition and Markets Authority to look at two specific proposals: a breakup of the big four auditors or a separation of the auditing arms from their consultancy operations.
Concentration in this market has now reached absurd levels – the big four are auditors to 97% of FTSE 350 companies. Carillion perfectly illustrated the closed shop in action. KMPG approved the accounts, Deloitte advised the board on risk management, and EY was consulted on turnaround plans. That left the field clear for PwC to name its price as adviser to the Official Receiver.Quick guide
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A proper shakeup of the industry would probably mean an increase in the cost of audits, but that will be money well spent if it means more competition and higher standards. “KPMG’s long and complacent tenure auditing Carillion was not an isolated failure,” says the report. “It was symptomatic of a market which works for members of the oligopoly but fails the wider economy.” Spot on.
Second, ministers need to understand the risks they take when they outsource work to companies of Carillion’s size. The failed firm had 450 government contracts and the Crown Representative, looking out for taxpayers’ interests, had no insight into how badly things were going wrong. The huge profit warning in July 2017, which marked the beginning of the end, was a complete shock in Whitehall.
The report is short on specific proposals, other than telling ministers to appreciate that “the cheapest bid is not always the best”. But there are good ideas around, and some have even come from the contractors’ side of fence.
Rupert Soames, the chief executive who led the rescue of Serco to prevent an earlier Carillion-style calamity, has suggested a few: open-book accounting so that the Cabinet Office and National Audit Office have the numbers; bank-style “living wills” so that contracts can be handed back to government without huge costs to the public purse; and a code of conduct that, on the supplier’s side, would involve conservative financing, timely payment of subcontractors, and adequately funded pension schemes.
The government is free to demand all that and more. It just requires the penny to drop that, when you’re buying £200bn of goods and services from the private sector each year, you can change the way business is conducted.
The third priority is pensions, since Carillion dumped an £800m liability on the industry lifeboat. The Pensions Regulator’s threats were hollow and its bluff was called, the report says. The directors were allowed to keep paying a dividend to shareholders that was plainly unaffordable.
It’s now too late for excuses or pleas about insufficient powers. The MPs’ hard judgment is that “a tentative and apologetic approach is ingrained” at the regulator and “the current leadership” may not be equipped for cultural change. That sounds like a call for Lesley Titcomb, the chief executive, to go. It would be personally tough on her, since she arrived in 2015, by which time the worst mistakes on Carillion had been made, but she should take the hint. A pensions regulator needs to be feared.
The overall report is impressive – it drips with anger and is strong on detail. It would be disgrace if it fell between the cracks of Brexit. It is essential that the government makes a point-by-point response – starting with the auditors, who escaped from the scene of the banking catastrophe but whose moment in the spotlight is now.
Tabish Khair in The Hindu
As far back as the ascension of Sanjay Gandhi, much before the coming of the (more likeable) Rajiv Gandhi, I felt that the Nehru-Gandhi family ought to graciously retire from politics and let the Congress proceed on its own. I was very young then, probably not even in my teens, and I belonged to a family of staunch Congress supporters, but I recall feeling distinctly uncomfortable with the notion of Sanjay taking over from his mother.
I have not changed my basic position on this matter, and yet I have to say that much of the current ‘opposition’ to Rahul Gandhi has a disturbing and dark side to it. While opposition to ‘dynasty raj’ is offered as an explanation, what really exists, more often than not, is a mix of envy, resentment, neo-casteist sentiment and a disturbing kind of racism, most of it indirectly supported by major BJP politicians.
This is barely camouflaged in many online cartoons and ‘jokes’ about Rahul Gandhi, which often refer derisively to the Italian side of his family. Frequently, he is dismissed — unfairly — because he has a parent who came to India from elsewhere. This dismissal is in tandem with the dismissal of Muslims and Christians by the same elements.
Not only does this present a destructive kind of nationalism, it often verges on racist prejudice. The perpetrators of such jokes — and I use the word ‘perpetrator’ on purpose — seem to relish degrading Rahul Gandhi. Very often this is done literally, for instance in cartoons of doubtful humour that place Rahul Gandhi in an abject ‘Baba-like’ position against a ‘towering’ BJP politician. Hence also, the ‘language’ jokes about him by people who speak fewer languages than him.
The case with Nehru
This drain of resentment runs a long way. Jawaharlal Nehru encountered it too, but in more restrained ways. And for similar reasons: in his writing and lifestyle, Nehru repudiated the entire structure of upper-caste prejudices. He also repudiated the strong structure of endogamy that still sustains the caste system, and not just within Hinduism. Elements of these prejudices are visited upon Rahul Gandhi too.
But there are other elements too, of which one was probably less of an issue with Nehru: Nehru appears to have faced far less envy for his personal, educational and class advantages. This might seem surprising; after all, Nehru was a more cultivated and talented person than Rahul Gandhi or, for that matter, any other major national leader today. And yet, Nehru’s difference was largely respected by the voters then.
Some of it had to do with the person: Nehru had spent years in jail and organising for independence among ordinary people. Some of it had to do with the age: Nehru lived in a less envious age, perhaps because the discourse of easy riches and the magnifying glasses of TV and such media — which take us into houses we cannot enter in reality — was not prevalent in the period.
And yet, some of it probably has to do with character — or lack of character. No, I am not talking of Rahul Gandhi. I have no reason to suppose that he has less character than any other national leader. Actually, he seems to have more than most. I am talking of people who obviously envy him, his exposure to the world, his space of living, even (subconsciously) his lifestyle.
This is the taluk middle and lower middle class to which I belong. These are people with education and at times professional careers whose formative years were spent in small towns of India, or who are still based there. It is among these people that you find the greatest resentment of Rahul Gandhi, not among farmers or workers or born metropolitans. I have spoken to such people. I am convinced that what they unconsciously resent in Rahul Gandhi is the structural lack that keeps them where they are.
Mores in taluk towns
A taluk town has never been cut off from the rest of India, but it is now wired not just to India but to the entire world. On the other hand, the mores and social skills that prevail in taluk towns are not those that enable its denizens much space in the world. To take just one example: English. Every time I visit my home (taluk) town, I am asked not about my books, but about how to become fluent in English. This is the genuine concern of people who have English, but not sufficient fluency in it to capitalise on their other talents and skills in the world. For people like this, the easy access that Rahul Gandhi has to the world — perhaps without even the kind of hard work they have put into their own education — is deeply galling. The best among them overcome it, but the worst simmer with envy against all the Rahul Gandhis of India.
Given the sharp educational and social stratification of India, and the vast chasm between not just the rich and the poor but between metropolitan/international education and taluk education, I suspect that Rahul Gandhi has a far steeper mountain of resentment to overcome than Nehru ever had. I can understand the resentment, but I cannot accept it, for it brings out the worst in us. Politicians who capitalise on this are doing us — and India — a disfavour.