'People will forgive you for being wrong, but they will never forgive you for being right - especially if events prove you right while proving them wrong.' Thomas Sowell
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Sunday, 16 April 2023
After the easy money: a giant stress test for the financial system
John Plender in The FT
Five weeks after the collapse of Silicon Valley Bank, there is no consensus on whether the ensuing financial stress in North America and Europe has run its course or is a foretaste of worse to come.
Equally pressing is the question of whether, against the backdrop of still high inflation, central banks in advanced economies will soon row back from monetary tightening and pivot towards easing.
These questions, which are of overwhelming importance for investors, savers and mortgage borrowers, are closely related. For if banks and other financial institutions face liquidity crises when inflation is substantially above the central banks’ target, usually of about 2 per cent, acute tension arises between their twin objectives of price stability and financial stability. In the case of the US Federal Reserve, the price stability objective also conflicts with the goal of maximum employment.
The choices made by central banks will have a far-reaching impact on our personal finances. If inflation stays higher for longer, there will be further pain for those who have invested in supposedly safe bonds for their retirement. If the central banks fail to engineer a soft landing for the economy, investors in risk assets such as equities will be on the rack. And for homeowners looking to refinance their loans over the coming months, any further tightening by the Bank of England will feed into mortgage costs.
The bubble bursts
SVB, the 16th largest bank in the US, perfectly illustrates how the central banks’ inflation and financial stability objectives are potentially in conflict. It had been deluged with mainly uninsured deposits — deposits above the official $250,000 insurance ceiling — that far exceeded lending opportunities in its tech industry stamping ground. So it invested the money in medium and long-dated Treasury and agency securities. It did so without hedging against interest rate risk in what was the greatest bond market bubble in history.
The very sharp rise in policy rates over the past year pricked the bubble, so depressing the value of long-dated bonds. This would not have been a problem if depositors retained confidence in the bank so that it could hold the securities to maturity. Yet, in practice, rich but nervous uninsured depositors worried that SVB was potentially insolvent if the securities were marked to market.
An inept speech by chief executive Greg Becker on March 9 quickly spread across the internet, causing a quarter of the bank’s deposit base to flee in less than a day and pushing SVB into forced sales of bonds at huge losses. The collapse of confidence soon extended to Signature Bank in New York, which was overextended in property and increasingly involved in crypto assets. Some 90 per cent of its deposits were uninsured, compared with 88 per cent at SVB.
Fear spread to Europe, where failures of risk management and a series of scandals at Credit Suisse caused deposits to ebb away. The Swiss authorities quickly brokered a takeover by arch rival UBS, while in the UK the Bank of England secured a takeover of SVB’s troubled UK subsidiary by HSBC for £1.
These banks do not appear to constitute a homogeneous group. Yet, in their different ways, they demonstrate how the long period of super-low interest rates since the great financial crisis of 2007-09 introduced fragilities into the financial system while creating asset bubbles. As Jon Danielsson and Charles Goodhart of the London School of Economics point out, the longer monetary policy stayed lax, the more systemic risk increased, along with a growing dependence on money creation and low rates.
The ultimate consequence was to undermine financial stability. Putting that right would require an increase in the capital base of the banking system. Yet, as Danielsson and Goodhart indicate, increasing capital requirements when the economy is doing poorly, as it is now, is conducive to recession because it reduces banks’ lending capacity. So we are back to the policy tensions outlined earlier.
Part of the problem of such protracted lax policy was that it bred complacency. Many banks that are now struggling with rising interest rates had assumed, like SVB, that interest rates would remain low indefinitely and that central banks would always come to the rescue. The Federal Deposit Insurance Corporation estimates that US banks’ unrealised losses on securities were $620bn at the end of 2022.
A more direct consequence, noted by academics Raghuram Rajan and Viral Acharya, respectively former governor and deputy governor of the Reserve Bank of India, is that the central banks’ quantitative easing since the financial crisis, whereby they bought securities in bulk from the markets, drove an expansion of banks’ balance sheets and stuffed them with flighty uninsured deposits.
Rajan and Acharya add that supervisors in the US did not subject all banks to the same level of scrutiny and stress testing that they applied to the largest institutions. So these differential standards may have caused a migration of risky commercial real estate loans from larger, better-capitalised banks to weakly capitalised small and midsized banks. There are grounds for thinking that this may be less of an issue in the UK, as we shall see.
A further vulnerability in the system relates to the grotesque misallocation of capital arising not only from the bubble-creating propensity of lax monetary policy but from ultra-low interest rates keeping unprofitable “zombie” companies alive. The extra production capacity that this kept in place exerted downward pressure on prices.
Today’s tighter policy, the most draconian tightening in four decades in the advanced economies with the notable exception of Japan, will wipe out much of the zombie population, thereby restricting supply and adding to inflationary impetus. Note that the total number of company insolvencies registered in the UK in 2022 was the highest since 2009 and 57 per cent higher than 2021.
A system under strain
In effect, the shift from quantitative easing to quantitative tightening and sharply increased interest rates has imposed a gigantic stress test on both the financial system and the wider economy. What makes the test especially stressful is the huge increase in debt that was encouraged by years of easy money.
William White, former chief economist at the Bank for International Settlements and one of the few premier league economists to foresee the great financial crisis, says ultra easy money “encouraged people to take out debt to do dumb things”. The result is that the combined debt of households, companies and governments in relation to gross domestic product has risen to levels never before seen in peacetime.
All this suggests a huge increase in the scope for accidents in the financial system. And while the upsets of the past few weeks have raised serious questions about the effectiveness of bank regulation and supervision, there is one respect in which the regulatory response to the great financial crisis has been highly effective. It has caused much traditional banking activity to migrate to the non-bank financial sector, including hedge funds, money market funds, pensions funds and other institutions that are much less transparent than the regulated banking sector and thus capable of springing nasty systemic surprises.
An illustration of this came in the UK last September following the announcement by Liz Truss’s government of unfunded tax cuts in its “mini” Budget. It sparked a rapid and unprecedented increase in long-dated gilt yields and a consequent fall in prices. This exposed vulnerabilities in liability-driven investment funds in which many pension funds had invested in order to hedge interest rate risk and inflation risk.
Such LDI funds invested in assets, mainly gilts and derivatives, that generated cash flows that were timed to match the incidence of pension outgoings. Much of the activity was fuelled by borrowing.
UK defined-benefit pension funds, where pensions are related to final or career average pay, have a near-uniform commitment to liability matching. This led to overconcentration at the long end of both the fixed-interest and index-linked gilt market, thereby exacerbating the severe repricing in gilts after the announcement. There followed a savage spiral of collateral calls and forced gilt sales that destabilised a market at the core of the British financial system, posing a devastating risk to financial stability and the retirement savings of millions.
This was not entirely unforeseen by the regulators, who had run stress tests to see whether the LDI funds could secure enough liquidity from their pension fund clients to meet margin calls in difficult circumstances. But they did not allow for such an extreme swing in gilt yields.
Worried that this could lead to an unwarranted tightening of financing conditions and a reduction in the flow of credit to households and businesses, the BoE stepped in to the market with a temporary programme of gilt purchases. The purpose was to give LDI funds time to build their resilience and encourage stronger buffers to cope with future volatility in the gilts market.
The intervention was highly successful in terms of stabilising the market. Yet, by expanding its balance sheet when it was committed to balance sheet shrinkage in the interest of normalising interest rates and curbing inflation, the BoE planted seeds of doubt in the minds of some market participants. Would financial stability always trump the central bank’s commitment to deliver on price stability? And what further dramatic repricing incidents could prompt dangerous systemic shocks?
Inflation before all?
The most obvious scope for sharp repricing relates to market expectations about inflation. In the short term, inflation is set to fall as global price pressures fall back and supply chain disruption is easing, especially now China continues to reopen after Covid-19 lockdowns. The BoE Monetary Policy Committee’s central projection is for consumer price inflation to fall from 9.7 per cent in the first quarter of 2023 to just under 4 per cent in the fourth quarter.
The support offered by the Fed and other central banks to ailing financial institutions leaves room for a little more policy tightening and the strong possibility that this will pave the way for disinflation and recession. The point was underlined this week by the IMF, which warned that “the chances of a hard landing” for the global economy had risen sharply if high inflation persists.
Yet, in addition to the question mark over central banks’ readiness to prioritise fighting inflation over financial stability, there are longer-run concerns about negative supply shocks that could keep upward pressure on inflation beyond current market expectations, according to White. For a start, Covid-19 and geopolitical friction are forcing companies to restructure supply lines, increasing resilience but reducing efficiency. The supply of workers has been hit by deaths and long Covid.
White expects the production of fossil fuels and metals to suffer from recently low levels of investment, especially given the long lags in bringing new production on stream. He also argues that markets underestimate the inflationary impact of climate change and, most importantly, the global supply of workers is in sharp decline, pushing up wage costs everywhere.
Where does the UK stand in all this? The resilience of the banking sector has been greatly strengthened since the financial crisis of 2007-08, with the loan-to-deposit ratios of big UK banks falling from 120 per cent in 2008 to 75 per cent in the fourth quarter of 2022. Much more of the UK banks’ bond portfolios are marked to market for regulatory and accounting purposes than in the US.
The strength of sterling since the departure of the Truss government means the UK’s longstanding external balance sheet risk — its dependence on what former BoE governor Mark Carney called “the kindness of strangers” — has diminished somewhat. Yet huge uncertainties remain as interest rates look set to take one last upward step.
Risks for borrowers and investors
For mortgage borrowers, the picture is mixed. The BoE’s Financial Policy Committee estimates that half the UK’s 4mn owner-occupier mortgages will be exposed to rate rises in 2023. But, in its latest report in March, the BoE’s FPC says its worries about the affordability of mortgage payments have lessened because of falling energy prices and the better outlook for employment.
The continuing high level of inflation is reducing the real value of mortgage debt. And, if financial stability concerns cause the BoE to stretch out the period over which it brings inflation back to its 2 per cent target, the real burden of debt will be further eroded.
For investors, the possibility — I would say probability — that inflationary pressures are now greater than they have been for decades raises a red flag, at least over the medium and long term, for fixed-rate bonds. And, for private investors, index-linked bonds offer no protection unless held to maturity.
That is a huge assumption given the unknown timing of mortality and the possibility of bills for care in old age that may require investments to be liquidated. Note that the return on index-linked gilts in 2022 was minus 38 per cent, according to consultants LCP. When fixed-rate bond yields rise and prices fall, index-linked yields are pulled up by the same powerful tide.
Of course, in asset allocation there can be no absolute imperatives. It is worth recounting the experience in the 1970s of George Ross Goobey, founder of the so-called “cult of the equity” in the days when most pension funds invested exclusively in gilts.
While running the Imperial Tobacco pension fund after the war he famously sold all the fund’s fixed-interest securities and invested exclusively in equities — with outstanding results. Yet, in 1974, he put a huge bet on “War Loan” when it was yielding 17 per cent and made a killing. If the price is right, even fixed-interest IOUs can be a bargain in a period of rip-roaring inflation.
A final question raised by the banking stresses of recent weeks is whether it is ever worth investing in banks. In a recent FT Money article, Terry Smith, chief executive of Fundsmith and a former top-rated bank analyst, says not. He never invests in anything that requires leverage (or borrowing) to make an adequate return, as is true of banks. The returns in banking are poor, anyway. And, even when a bank is well run, it can be destroyed by a systemic panic.
Smith adds that technology is supplanting traditional banking. And, he asks rhetorically, have you noticed that your local bank branch has become a PizzaExpress, in which role, by the way, it makes more money?
A salutary envoi to the tale of the latest spate of bank failures.
Thursday, 2 December 2021
Sunday, 21 March 2021
DECODING DENIALISM
On November 12, 2009, the New York Times (NYT) ran a video report on its website. In it, the NYT reporter Adam B. Ellick interviewed some Pakistani pop stars to gauge how lifestyle liberals were being affected by the spectre of so-called ‘Talibanisation’ in Pakistan. To his surprise, almost every single pop artiste that he managed to engage, refused to believe that there were men willing to blow themselves up in public in the name of faith.
It wasn’t an outright denial, as such, but the interviewed pop acts went to great lengths to ‘prove’ that the attacks were being carried out at the behest of the US, and that those who were being called ‘terrorists’ were simply fighting for their rights. Ellick’s surprise was understandable. Between 2007 and 2009, hundreds of people had already been killed in Pakistan by suicide bombers.
But it wasn’t just these ‘confused’ lifestyle liberals who chose to look elsewhere for answers when the answer was right in front of them. Unregulated talk shows on TV news channels were constantly providing space to men who would spin the most ludicrous narratives that presented the terrorists as ‘misunderstood brothers.’
From 2007 till 2014, terrorist attacks and assassinations were a daily occurrence. Security personnel, politicians, men, women and children were slaughtered. Within hours, the cacophony of inarticulate noises on the electronic media would drown out these tragedies. The bottom-line of almost every such ‘debate’ was always, ‘ye hum mein se nahin’ [these (terrorists) are not from among us]. In fact, there was also a song released with this as its title and ‘message.’
The perpetrators of the attacks were turned into intangible, invisible entities, like characters of urban myths that belong to a different realm. The fact was that they were very much among us, for all to see, even though most Pakistanis chose not to.
Just before the 2013 elections, the website of an English daily ran a poll on the foremost problems facing Pakistan. The poll mentioned unemployment, corruption, inflation and street crimes, but there was no mention of terrorism even though, by 2013, thousands had been killed in terrorist attacks.
So how does one explain this curious refusal to acknowledge a terrifying reality that was operating in plain sight? In an August 3, 2018 essay for The Guardian, Keith Kahn-Harris writes that individual self-deception becomes a problem when it turns into ‘public dogma.’ It then becomes what is called ‘denialism.’
The American science journalist and author Michael Specter, in his book Denialism, explains it to mean an entire segment of society, when struggling with trauma, turning away from reality in favour of a more comfortable lie. Psychologists have often explained denial as a coping mechanism that humans use in times of stress. But they also warn that if denial establishes itself as a constant disposition in an individual or society, it starts to inhibit the ability to resolve the source of the stress.
Denialism, as a social condition, is understood by sociologists as an undeclared ‘ism’, adhered to by certain segments of a society whose rhetoric and actions in this context can impact a country’s political, social and even economic fortunes.
In the January 2009 issue of European Journal of Public Health, Pascal Diethelm and Martin McKee write that the denialism process employs five main characteristics. Even though Diethelm and McKee were more focused on the emergence of denialism in the face of evidence in scientific fields of research, I will paraphrase four out of the five stated characteristics to explore denialism in the context of extremist violence in Pakistan from 2007 till 2017.
The deniers have their own interpretation of the same evidence. In early 2013, when a study showed that 1,652 people had been killed in 2012 alone in Pakistan because of terrorism, an ‘analyst’ on a news channel falsely claimed that these figures included those killed during street crimes and ‘revenge murders.’ Another gentleman insisted that the figures were concocted by foreign-funded NGOs ‘to give Pakistan and Islam a bad name.’
This brings us to denialism’s second characteristic: The use of fake experts. These are individuals who purport to be experts in a particular area but whose views are entirely inconsistent with established knowledge. During the peak years of terrorist activity in the country, self-appointed ‘political experts’ and ‘religious scholars’ were a common sight on TV channels. Their ‘expert opinions’ were heavily tilted towards presenting the terrorists as either ‘misunderstood brothers’ or people fighting to impose a truly Islamic system in Pakistan. Many such experts suddenly vanished from TV screens after the intensification of the military operation against militants in 2015. Some were even booked for hate speech.
The third characteristic is about selectivity, drawing on isolated opinions or highlighting flaws in the weakest opinions to discredit entire facts. In October 2012, when extremists attempted to assassinate a teenaged school girl, Malala Yousafzai, a sympathiser of the extremists on TV justified the assassination attempt by mentioning ‘similar incidents’ that he discovered in some obscure books of religious traditions. Within months Malala became the villain, even among some of the most ‘educated’ Pakistanis. When the nuclear physicist and intellectual Dr Pervez Hoodbhoy exhibited his disgust over this, he was not only accused of being ‘anti-Islam’, but his credibility as a scientist too was questioned.
The fourth characteristic is about misrepresenting the opposing argument to make it easier to refute. For example, when terrorists were wreaking havoc in Pakistan, the arguments of those seeking to investigate the issue beyond conspiracy theories and unabashed apologias, were deliberately misconstrued as being criticisms of religious faith.
Today we are seeing all this returning. But this time, ‘experts’ are appearing on TV pointing out conspiracies and twisting facts about the Covid-19 pandemic and vaccines. They are also offering their expert opinions on events such as the Aurat March and, in the process, whipping up a dangerous moral panic.
It seems, not much was learned by society’s collective disposition during the peak years of terrorism and how it delayed a timely response that might have saved hundreds of innocent lives.
Friday, 10 April 2020
Information can make you sick
As coronavirus infection rates peak in many countries, the markets rally. There is a nagging worry that a second wave of infections might occur once lockdowns are lifted or summer passes. But for anyone immersed in the financial markets there should be a further concern. Volatility created by the pandemic could itself cause a second wave of health problems. Volatility can make you sick, just as a virus can.
To get an inkling of what this other second wave might look like, it helps to recall what happened after the credit crisis. That event was both a financial and medical disaster. Various epidemiological studies suggest it may be responsible for 260,000 cancer deaths in OECD countries; a 17.8 per cent increase in the Greek mortality rate between 2010-16; and a spike in cardiovascular disease in London for the years 2008-09, with an additional 2,000 deaths due to heart attacks. The current economic crisis may be far worse than 2008-09, so the medical fallout could be as well.
Why do financial and medical crises go hand in hand? Many of the above studies focused on unemployment and reduced access to healthcare as causes of the adverse health outcomes. But research my colleagues and I have conducted on trading floors for the past 12 years suggest to me that uncertainty itself, regardless of outcome, can have independent and profound effects on physiology and health.
Our studies were designed initially to test a hunch I had while running a trading desk for Deutsche Bank, that the rollercoaster of physical sensations a person experiences while immersed in the markets alters their risk-taking. After retraining in neuroscience and physiology at Cambridge University, I set up shop on various hedge fund and asset manager trading floors, along with colleagues, mostly medical researchers. Using wearable tech and sampling biochemistry, we tracked the traders’ cardiovascular, endocrine and immune systems.
My goal was to demonstrate how these physiological changes altered trader performance. Increasingly, though, I came to see that a trading floor provides an elegant model for studying occupational health.
One remarkable thing we found was that traders’ bodies calibrated sensitively to market volatility. For humans, apparently, information is physical. You do not process information dispassionately, as a computer does; rather your brain quietly figures out what movement might ensue from the information, and prepares your body, altering heart rate, adrenaline levels, immune activation and so on.
Your brain did not evolve to support Platonic thought; it evolved to process movement. Our larger brain controls a more sophisticated set of muscles, giving us an ability to learn new movements unmatched by any other animal — or robot — on the planet. If you want to understand yourself, fellow humans, even the markets, put movement at the very core of what we are.
Essential to our exquisite motor control is an equally advanced system of fuel injection, one that has been misleadingly termed “the stress response”. Stress connotes something nasty but the stress response is nothing more sinister than a metabolic preparation for movement. Cortisol, the main stress molecule, inhibits bodily systems not needed during movement, such as digestion and reproduction, and marshals glucose and free fatty acids as fuel for our cells.
The stress response evolved to be short lived, acutely activated for only a few hours or days. Yet during a crisis such as the current one, you can activate the stress response for weeks and months at a time. Then an acute stress response morphs into a chronic one. Your digestive system is inhibited so you become susceptible to gastrointestinal disorders; blood pressure increases so you are prone to hypertension; fatty acids and glucose circulate in your blood but are not used, because you are stuck at home, so your risks increase for cardiovascular disease. Finally, by inhibiting parts of the immune system, stress impairs your ability to recover from diseases such as cancer, and Covid-19.
So why the connection with uncertainty? The stress response is largely predictive rather than reactive. Just as we try to predict the future location of a tennis ball, so too we predict our metabolic needs. When we encounter situations of novelty and uncertainty, we do not know what to expect, so we marshal a preparatory stress response. The stress response is comparable to revving your engine at a yellow light. Situations of novelty can be described, following Claude Shannon, inventor of information theory, as “information rich”. Conveniently, informational load in the financial markets can be measured by the level of volatility: the more Shannon information flowing into the markets, the higher the volatility.
In two of our studies we found that traders’ cortisol levels did in fact track bond volatility almost tick for tick. It did not even matter if the traders were making or losing money; just put a human in the presence of information and their metabolism calibrates to it. Take a moment to contemplate that curious result — there are molecules in your blood that track the amount of information you process.
Today, with historically elevated volatility, there is a good chance cortisol levels are trending higher. Immune systems could also be affected. When your body is attacked by a pathogen, your immune system coordinates a suite of changes known as “sickness behaviour”. You develop a fever, lose your appetite and withdraw socially. You also experience increased risk aversion.
Central to the immune response is inflammation, the process of eliminating pathogens and initiating tissue repair. However, inflammation can also occur in stressful situations, because cytokines, the molecules triggering inflammation, assist in the recruitment of metabolic reserves. If inflammation becomes systemic and chronic, it contributes to a wide range of health problems. We found that interleukin-1-beta, the first responder of inflammation, tracked volatility as closely as cortisol.
Recently we have focused on the cardiovascular system. Working with a large and sophisticated fund manager, we have used cutting-edge wearable tech that permits portfolio managers to track their cardiovascular data, physical activity and sleep. The cardiovascular system similarly tracks volatility and risk appetite.
In short, here we may have a mechanism connecting financial and health crises. On the one hand, fluctuating levels of stress and inflammation affect risk-taking. In a lab-based study, we found that chronically elevated cortisol caused a large decrease in risk appetite. Shifting risk presents tricky problems for risk management — and for central banks. Physiology-induced risk aversion can feed a bear market, morphing it into a crash so dangerous that the state has to step in with asset purchases. On the other hand, chronically elevated stress and inflammation are known to contribute to a wide range of health problems.
We are not accustomed to combining financial and medical data in this way. But corporate and state health programs should start.
The markets today are living through a period of volatility the likes of which I have never encountered. March was, to put it mildly, information rich. As a result, there is now the very real possibility of a second wave of disease. Viruses can make you sick, but so too can information.
Monday, 16 March 2020
How fighting an employer or becoming a whistleblower can lead to retaliation and undermining tactics
Caroline Barlow felt little emotion when she settled with the BBC last May and withdrew her employment tribunal claims over unequal pay and constructive dismissal. Just a crushing tiredness that left her shaky and sick and so disoriented that for a while she stopped driving.
She now views her reaction as a kind of grieving, for her job and faith in an institution that she had revered. She entered the BBC’s pay review process suspecting that she was paid less than male heads of product doing jobs similar to her own, and received a 25 per cent rise, though with little explanation of how the figure was arrived at. So she used data protection law to view internal documents that indicated that even after the increase she would still be paid less. The assessors argued, without providing evidence, that she had skills she still needed to develop and the men had bigger roles.
“Publicly the BBC was saying it had introduced a transparent process. Yet, it was made very clear to me that I’d only get salary information on my peers at a final tribunal hearing by court order,” she says.
Like the journalist Carrie Gracie, who also challenged unequal pay at the BBC, Ms Barlow talks of her sense of entering a no-man’s-land of stonewalling and doublespeak, where evidence that she presented was watered down or selectively reported. She says that a strategic project described as “transforming” in a business case, for which she obtained executive committee sign-off, was trivialised as “a hygiene project” after she questioned her pay. She felt blocked by the slow progress of her grievance — she only received the outcome on her final day of employment − undermined in numerous small ways and made to feel unimportant. She became ill and was diagnosed with depression.
Lawrence Davies, director of Equal Justice Solicitors, who acted for Ms Barlow, says such experiences are common. Most employers try to quash internal complaints to avoid exposing themselves legally, should the employee sue. Yet while employers uphold only 1 per cent of grievances, he says, 65-70 per cent of complainants who persevere to an employment tribunal ultimately win, though the strain can be immense.
Kathy Ahern, a retired mental health nurse and academic, studied the psychological toll of challenging an employer after discovering that nurses who reported misconduct had strong beliefs about what it means to be a nurse. When they faced reprisals for putting patients before other loyalties they suffered overwhelming mental distress, not just because of what was done, but because the institutional reality gave the lie to everything that nursing codes of conduct teach. Another study, published in the journal Psychological Reports in 2019, found levels of anxiety and depression among whistleblowers are similar to those of cancer patients.
Ms Ahern likens retaliatory employers to domestic abusers who psychologically manipulate or “gaslight” a partner to destroy their self-confidence and credibility. Tell-tale patterns, which she documents in a review paper published in the Journal of Perinatal & Neonatal Nursing in 2018, run the gamut from maliciously finding fault, to sustained campaigns of petty slights and obstructions, to seeding rumours that the victim is unhinged.
Tom Mueller, author of Crisis of Conscience: Whistleblowing in an Age of Fraud, believes that while employers sometimes label whistleblowers as “crazy” simply to tarnish them, this may actually be how they see them. To “more negotiable” colleagues who know when to bend with the wind, they may come across as “unreasonable sticklers”, and end up friendless and questioning their own sanity.
Margaret Oliver, a former detective with Greater Manchester Police, says that senior officers dismissed her as “unreasonable” and “too emotionally involved” when she voiced concerns about the conduct of two investigations into child sexual exploitation, Operation Augusta (2004-2005) and Operation Span (2010-2012).
After returning from sick-leave, brought on by stress, she spotted an article in the staff newspaper in which GMP’s then chief constable urged officers to challenge police policies that their gut told them was wrong. She “took the scary step” of contacting him directly. But instead of meeting her, as she had suggested, she says he replied with a “bland email” promising that her concerns would be reviewed and passing her back down the command chain.
Having got nowhere, she resigned in 2012 and went public with her allegations, prompting the Mayor of Greater Manchester to commission an independent review. In January this year phase one, covering the period to 2005, concluded that Operation Augusta, had, as she always alleged, been closed down prematurely and children at risk of sexual exploitation had been failed. Ms Oliver recently launched the Maggie Oliver Foundation to support abuse survivors, and also whistleblowers who, like her, have nowhere to turn. “I asked myself: ‘Is there something obvious to others that I’m not seeing? Or is what I’m seeing wrong and making me ill?’ I felt isolated,” she says.
Isolation dogged whistleblower Aaron Westrick throughout a 14-year US legal battle concerning alleged corruption in the body armour industry that concluded, in 2018, with all the defendants ultimately making settlement payments.
As research director at Second Chance Body Armor (since liquidated), Mr Westrick urged his employer to recall a line of defective bulletproof vests containing Zylon, a material manufactured by Japanese company Toyobo. Instead he says that he was frozen out, told by an HR officer accompanied by his employer’s attorney that he was “crazy,” sacked and maligned. “If there’s one word that describes being a whistleblower, it’s loneliness,” he says. “Even your friends don’t really get it.”
Georgina Halford-Hall, chief executive of WhistleblowersUK, says the stress of fighting a bad employer is all-consuming. But, however difficult, it is important to continue doing the everyday things you enjoy. Drawing on personal experience, she recommends finding an independent mental health professional to offload on. “Don’t make every conversation with your partner and friends about your concerns, because that only isolates you further, making it likelier that you’ll end up behaving irrationally.”
From a practical standpoint, the best way for society to support victims of retaliation is to pay their legal fees, says Peter van der Velden, senior researcher at CentERdata, a Dutch research institute, and lead investigator of the study published in Psychological Reports. “What we know from research is that financial problems are a main stressor, few people have money for a lawyer after losing their job.” Something organisations should consider doing, that might strengthen their culture, is to look for opportunities to hire former whistleblowers rather than giving them a wide berth, says Marianna Fotaki, professor of business ethics at the University of Warwick Business School.
Ms Barlow says she still has “bad days”, though increasingly less so. Finding people who have had similar experiences, she says, is helping her rebuild her shattered sense of self. “It keeps your feet grounded in reality, not the manipulated version of reality that your employer wants you to believe.”
The Choreography of Retaliation
When organisations retaliate against employees, they tend to do so through a gradual piling on of pressure that pushes the individual to the point where they mistrust their own judgment, says Kathy Ahern. They become anxious, hypersensitive to threats and easy to cast as “overreacting, or simply disgruntled”. Some warning signs of what she terms a “gaslighting” pattern of retaliation include:
▪Reassuring employees that their complaints are being investigated, while repeatedly stalling.
▪Using euphemisms that diminish the person’s experience, such as “grey area” or “personality clash” for victimisation.
▪Finding fault with a highly-regarded employee who makes a complaint. ▪Praising someone for reporting misconduct, while doing nothing to prevent reprisals.
▪ Encouraging an employee who has suffered retaliation to take sick leave or undergo a psychological evaluation, under the guise of offering support.
Wednesday, 8 November 2017
Ex-cricketers are candidates for post traumatic stress disorder
It is that time again — when a long-serving, much-respected cricketer has questions thrown at him, which, in summary is: isn’t it time to retire, buddy?
Years ago, Anil Kumble’s young son wore a T-shirt with the legend: It’s time to call it a day. It probably referred to his bed time, but those who saw it couldn’t help thinking it was a gentle reminder for his father, who, however, was smart enough to pick his time of departure.
Mahendra Singh Dhoni, who has quit Tests, is now being questioned over his relevance to the white-ball format. He would like to play the 2019 World Cup — and has the support of national coach Ravi Shastri — but spirit and flesh aren’t always in consonance towards the end of a sporting career.
Sport is a wonderful servant when you are young and fit. It will joyfully carry you to the top, unmindful of your occasional mistakes, with the promise that whatever happens there is always tomorrow. But it’s a terrible master as you grow older, demanding, unforgiving of lapses, reminding you constantly that your tomorrows will never match your yesterdays.
Ageing cricketers make a pact with time: let me make one more century, bowl my country to one more win; it doesn’t matter if the century is unrecognisable from the one I made ten years ago or if my bowling lacks bite. Just once more, and in gratitude I promise to quit.
But few players keep their end of the deal. Kapil Dev was carried around in the end like a grandmother everybody had to be kind to because she was responsible for all the family wealth. His goal? Richard Hadlee’s then world record 431 Test wickets. When past admiration combines with present pity, it is not a pretty picture.
When Brian Lara retired, he asked his fans, “Did I entertain?” For the average fan, it is impossible to understand or even imagine the feelings of a national hero, who once played as if there was no tomorrow but suddenly realises that there might not be a today even. I think it was Hemingway who said retirement is the ugliest word in the language.
Can you go easily from playing the world’s fastest bowlers, guiding your country to victories, having a whole stadium, perhaps a whole nation chanting your name, and being, to quote John Lennon, “more popular than Jesus Christ”, to an ordinary life of buying groceries and and attending PTA meetings while watching someone else’s name being chanted nation-wide? If you think about it, ex-cricketers are prime candidates for post traumatic stress disorder.
This, despite the easy familiarity which cricketers develop with the big issues that are usually pushed into the back of the mind. Cricket — in fact, all sport — prepares us for loss, failure, even death. A batsman dies symbolically every time he loses his wicket. Yet, there is always another innings, another match, another year which converts apparent finality into something temporary, something one gets over in time.
Retirement is different. The finality is final. Only so many ex-players can coach, commentate, write or get into administration to maintain their connection with the game. Others are pulled out of obscurity on special occasions, like the World Cup. Till 2011, players who had won India the 1983 World Cup were featured in the media every four years. Now they will have to share the spotlight with the Class of 2011, if at all.
Retirement can be traumatic. Few teams invest in a system that makes the player’s transition smoother and more natural. For most players, cricket is the only thing they know, and when that is gone from their lives, the void can be difficult to fill. Some fill it with alcohol.
There is an organised system which prepares a gifted youngster to play for India. He is given technical, temperamental, tactical, strategic guidance as he graduates through the age-group tournaments. And then, in the early or mid-twenties, he plays for the country. It is the start of a wonderful ride.
If he is good enough, he plays on for a decade and a half, or more. But there is no similar organised system at the other end of his career. Unlike a couple of generations ago, today money is no longer a problem. But relevance is, self-esteem is, acceptance is. It is difficult to walk into a room and realise that you no longer turn heads. You might still sign autographs, but then might have to answer a young fan’s devastating question: “What’s your name?”
Some are happy to leave, to put the training and discipline behind them. Steve Redgrave, multiple gold winning British rower once finished with, said “I’ve had it. If anyone sees me near a boat they can shoot me.” But the more common feeling was expressed by the US jockey Eddie Arcaro: “When a jockey retires, he becomes just another little man.”
Dhoni is capable of walking away without looking back. He has other passions. But till he does, the question will follow him everywhere.
Monday, 7 March 2016
Emails can be a curse, but don’t blame them for the failings of company culture
If you ask anyone what the worst part of their job is, they are likely to respond with one word: email. Over the weekend, the inventor of this contemporary curse, Ray Tomlinson, died. Tomlinson came up with the idea while developing the Arpanet – the predecessor of today’s internet – in 1971. He and his colleagues were scratching their heads about what to do with their new invention, wherein one application eventually became email. “Don’t tell anyone!” he told a colleague. “This isn’t what we’re supposed to be working on.”
How did email grow from messages between academics to a global epidemic?
Today, email is part of the fabric of our lives. A recent survey of US employees found that they spent 3.2 hours a day dealing with work emails alone. Often the first thing we do in the morning is scan through our emails. Smartphones have made matters much worse. One study that tracked the introduction of BlackBerrys a decade ago found employees would compulsively monitor the device, often waking up in the middle of the night to check emails. When the researchers asked people why they did this, they said they wanted to appear professional and didn’t want to miss anything. A decade later, we check our smartphones on average 221 times a day.
Email is a huge source of distraction at work. One study found that when people check their email, it takes them an average of 64 seconds to switch their attention back to their original task. Workers in the study were distracted this way an average of 96 times a day. This means they spent more than 100 minutes every day being distracted by emails. Another study recorded even more disturbing results. After observing employees closely over a two-week period, it found that after checking their emails, people would do on average 2.3 other tasks before getting back to the activity they were originally working on.
This distractive quality of emails is worrying. Our ability to focus on a task not only determines whether we get things done at work, but also helps to influence whether we feel good about what we do. A recent study by researchers at Harvard Business School asked hundreds of people what they did at work, and whether they felt they had a good day. They found that the days people felt good about their work were those when they had an uninterrupted block of time to make progress on a task that they saw as important. Unsurprisingly, the constant stream of emails is often the biggest interruption to this goal.
Many of the problems we blame on email are not really down to the inbox
Some people have suggested that you can avoid feeling overwhelmed by email with the help of a few small changes. A typical piece of advice is to only check your emails a few times a day and turn off notifications. Unfortunately, some studies suggest email management techniques don’t decrease stress. If you get a lot of emails, then you are likely to be stressed out by the sight of a bulging inbox no matter how you manage it.
It might be easy to think if we got rid of emails, our workplaces would be much happier. Some firms stop you logging into your emails after hours. Others have started deleting emails that are sent while someone is on holiday. Although dreams of an email-free workplace might seem appealing, the reality would be unlikely to create miracles. Many of the problems we blame on email are not really down to the inbox. They are actually the result of the increasingly fragmented, highly pressured and insecure patterns of work.
A recent study by researchers at Stanford found that people who spend more time working on emails were in fact not always more overloaded and stressed. Instead, people confused emails with other work issues. They saw email as a source of stress, but they did not consider other more important issues in their working lives, such as long hours or a stressful company culture. This had a dangerous consequence. A few “productivity hacks” were seen as magic keys to reducing overload, but the reality is that only changing wider working practices would help.
Tuesday, 12 August 2014
One in 10 do not have a close friend and even more feel unloved, survey finds
Monday, 23 December 2013
There's a new jobs crisis – we need to focus on the quality of life at work
Tuesday, 12 February 2013
The injury that has no quick fix. Brearley on Depression
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For sportsmen and women - but in particular men - depression has often been a badge of shame, especially in a world that values confidence, courage and the supposedly manly virtues of strength and assertiveness. When Trescothick's return home from England's tour of India in early 2006 was first explained, it was put down to a virus, which later changed to a "stress-related illness", still the terminology often used when his condition is discussed today. By the time Mike Yardy left the World Cup in 2011, the ECB did feel able to cite depression as the reason. This was a step in the right direction, but the reluctance to be open in the first place about Trescothick's plight stems, I believe, from a long-held idea that we should be thick-skinned and resilient; that to admit fear or unhappiness would be to lay oneself open not only to ridicule but to being dropped from the side (the very word "dropped" hints at the link to early-life anxieties and the insecurities of the baby). We are not supposed to be vulnerable, certainly not to show vulnerability. We don't wear our hearts on our sleeves - particularly not we English.
Depression is an arrangement by which we keep from ourselves the degree of hostility we feel, turning it on ourselves, but in a way inflicting it on others indirectly | |||
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