The right focus

We are in the arguably most severe economic crisis since 1929, so everyone's attention should be at the economy, right?

Well, apart from the American congress, which yesterday chose not to do anything at all.

But look at the favourite articles by the readers of The Independent, one of Britain's most serious newspapers.

The most viewed articles on their website at this moment are the following ones:

1. The Ten Best Sex Toys
   
2. Lawrence dogged by injury
   
3. The 50 Best Menswear
   
4. 'I couldn't function without cocaine'
   
5. The Ten Best Ways for a Man to Impress a Woman
   
6. Sean O'Grady: Why bailouts only add to the sense of panic
   
7. Dominic Lawson: Why should anyone trust Joe Biden?
   
8. The Ten Best Cushions
   
9. Crisis derails John McCain's fightback
   
10. Exclusive: The methane time bomb
    

Well... hmm... at least twoof them are about the economy, even though the five first ones are not.

Maruska's road to fame

There are plenty of people who have their photos taken, that do not get famous, even if their photo happens to appear in a newspaper. There are plenty of pretty people, who do not get famous. There are plenty of happy people who do not get famous. There are plenty of trade unionists who do not get famous. However, if you show true intense happiness over a political event and if you are pretty and a journalist happens to take a picture of you at that very instant, you can get reasonably famous.

That is what happened to Maruska Piredda, an air hostess with Alitalia. Last week, when her trade union, Cisl, said no to yet another proposal to save the airline, she was happy over the outcome, and her radiant face made it to newspapers around the world.

To many of us, her reaction seemed bizarre. The airline has no money left, and it is bleeding millions every day. Any attempt to rescue Alitalia seemed laudable, and here signora Piredda shouted of joy that the rescue was refused.

Corriere della Sera was also intrigued and interviewed her. She was also interviewed on Italian state television.

There are two interesting things here. One is that someone can get famous for being happy in the wrong place. The other is that it may not have been the wrong place after all. For the time being (28 September 2008), it seems like the airline is saved anyhow. And the strong (some people may say "mad") actions of the unions may have led to better conditions for the staff in the long run. Provided the airline survives.

Wisdom of the North

In many bookshops in Europe and America, you can find books with titles like "Wisdom of the Orient" or "Eastern Philosophy". Likewise, in China and Japan, you can find books with titles like "Wisdom of Western Philosophy".

What so far seems to be missing is "Wisdom of the North". I try to remedy that with a few words of wisdom from Sweden:

From the world of plants:

På tallrik ätes efterrätt,
men om man tänker efter rätt,
man också tallrik kallar,
den skog som talrik är på tallar.

About animals:

"Far, får får får?"
"Inte får får får! Får får lamm."

From the world of skilled crafts:

Knut knöt en knut. När Knut knutit knuten, var knuten knuten.

Luck - an important ingredient in genius

There is an old scam that goes like this:

Send one thousand messages to one thousand persons. 512 messages predict that the stocks will go up the following week. The other 512 recipients get the message that the stocks will go down. Next week, you send only 512 messages, depending on the actual outcome of the stocks, so all the current recipients will get the impression that you were right last week. In 256 of the new messages, you predict that the stock will go up, and in 256, you predict that it will go down. Next week, you limit yourself to 128 messages, depending on if the stocks went up or down. You do this for about two months, halving the number of recipients each week, and you will soon be down to a handful of recipients.

Now, you send these few recipients a message asking them if they are now convinced of your knowledge of the stock market. If so, they can subscribe to your upcoming newsletter at an exorbitant cost.

The recipients can see from the messages they have so far received that you always have been right in your predictions, and they are reasonably likely to trust that you will succeed in the future as well.

Of course, you are completely unable to live up to their expectations, but that is besides the point.

The important thing is that you through a completely random process was able to give the impression that you were incredibly clever.

Now...

Let's have a look at some professions, like teachers or company directors. Let's assume that everyone with these professions have identical skills.

Nevertheless, some teachers will produce a large number of exceptional students, just through the laws of random chance.

Likewise, some company director may end up with a range of very successful deals and high profit for their companies.

This does not mean that anyone can be a teacher or a CEO. Skill clearly plays a roll in results. That is common sense.

However, it means that luck is an ingredient not to ignore in success.

Today's crisis - whose fault?

People try to blame each other for today's problems in the financial market, but it seems equally likely that it is the fault of no one.

Each investor tried to maximize his profit. Even if they could see that the risks were high with subprime loans, they almost had to take them not to get behind their competitors.

This is a good example of a case where the capitalist system does not work. The system encouraged each individual to take risks that are unsustainable if everyone takes them.

The ironic thing is that part of the cause lies within the planned economy. Fannie Mae was created in 1938 as part of the New Deal, which was US government intervention to solve the mess of the 1929 crash.

The investment banks were a result of the Glass-Steagall Act, 1933, which also was part of the New Deal. This act prohibited banks from both accepting deposits and underwriting securities to avoid speculation and conflicts of interests, so investment banks and commercial banks split into different institutions.

A problem was that this focus on one activity made the investment banks fragile, something which became apparent this year, 2008, when all the five big ones disappeared. (Bear Stearns got problems and was bought by JPMorgan Chase in March. Merrill Lynch was sold to Bank of America 14 September. Lehman Brothers filed for Chapter 11 bankruptcy protection 15 September. Goldman Sachs and Morgan Stanley became mixed banks 22 September.)

And yet, we all saw this happening before our eyes. The Democrats cannot say that the Republicans created the crisis, as both parties have had full access to all information. If the Democrats had been any wiser, they would have warned about the problem earlier on. Neither can the Republicans claim that the Democrats caused the mess, as the Republicans have had eight years to fix it without doing anything at all.

But it does not stop there. The Europeans did not warn about the situation. The Chinese did not see it coming. Neither did the Arabs, Africans, South Americans or anyone else. No one in the whole world was able to convincingly say that this problem was coming.

The conclusion for each and everyone of us is this: I was not alone in not seeing this coming. I am not alone in ignoring how to fix it.

FM and FM

There is something strange with Fannie Mae and Freddie Mac. They were state supported institutions whose main purpose was to make it possible for people who could not afford it to buy houses.

The result was that they made the housing market unstable. They were there to hang a Damocles sword over the economy.

The excuse was that they helped poor people buy their homes. That is a very worthy cause. However, making it easier for poor people to buy houses, means that the demand increases and house prices increase. And this increase is illusory, as the prices depend on FM and FM. Once the state decides not to support them, the prices fall, and everyone loses.

A detailed survey

In the company where my sister works, a director heard that customers sometimes were not happy with the delivery time. To investigate this, a group was formed to create a survey. The draft survey was sent to each department manager. Each manager was able to add at most 10 questions to the survey. It was decided that each answer should contain a mandatory text field, where the customer should enter an explanation for his answer. In addition, multiple-choice answers were allowed. The average number of choices for each question was 17.2.

A few months later, the survey was ready to go out to customers. The return rate was an unfortunate low 2%, but luckily the group managed to get enough material out of each response to compile a report with 400 pages. The summary conclusion was 87 pages, according to people who claim to have read that far.

When management saw the report, they were very proud of the result and archived it for future use, once they had time to analyse the material.

That is, they archived everything that was stored electronically. Part of the report was an appendix written by hand in a paper notebook. It was the result of a janitor, who used to ask customers who came to the building "Are you happy with our delivery times?" He wrote the answers down in his notebook. 98% answered "no". 2% answered "yes".

That paper was thrown away.