From elections to ash clouds, 2010 was a year that taught us to expect the unexpected
This was a year of predictable trends and unpredictable events. It was predictable that the UK would limp out of recession behind France, Germany and the US, and a reasonable bet both that we would avoid a double dip and that we would not avoid a burst of inflation. Observation of past cycles made it easy to predict that banks would return to profit while brutalising their customers and showing no remorse. Many economists had foreseen a crisis of the euro since the day it was dreamed up, because they did not believe a single currency could work without fiscal and political union: they were right, and despite successive bailouts, that crisis will gather momentum into 2011.
But then came the unpredictable. Look back at investment columns in March and April, and you’ll find they were all about positioning your portfolio for a hung parliament. No one foresaw the Lib-Con coalition, which has helped turn a faltering recovery into a more robust one by offering business and consumers a clear view of the path ahead, however rocky. On the darker side, no one expected the ash cloud or the arctic freeze-ups, or that an offshore accident would wipe £40 billion off BP’s market value. The financial consequences of these physical events are reminders that, even if economic patterns can be relied upon to repeat themselves, today’s world is full of uncertainties. Raw material prices suddenly spike as shortages are amplified by speculation. Globalised logistics are interrupted by turmoil in the earth’s crust. Shares that had long been labelled ‘dull but safe’ suddenly plummet. Neighbouring countries suddenly become dangerous credit risks.
For business leaders, all this makes tight focus on core strengths a more useful attribute than bold blue-sky vision: hence Prudential shareholders’ rejection of their chief executive’s plan to transform a traditional UK insurer into an Asian giant. It demands an ability to cope with shocks, as Rolls-Royce is having to do after an unexplained explosion in one of its engines on a Qantas plane. It requires constant reassessment of the risk-reward ratio offered by familiar markets as well as emerging ones. The winners for 2011 and beyond will be those who keep fear and pessimism at bay, but expect the unexpected.
Final salutes
In the rollcall of those who departed during 2010 were two outstanding City figures, Brian Pitman and Gordon Richardson. I paid tribute here to both, but it’s worth repeating that ‘tight focus on core strengths’ was precisely what enabled Pitman to transform Lloyds Bank from a high-street also-ran into a market leader. He shunned any activity, and crushed any cost item, that did not contribute measurably to shareholder value — and it’s remarkable how swiftly his successors forgot the lessons he taught.
Lord Richardson was the most formidable governor of the Bank of England in modern times. His handling of the 1973-74 banking crisis reminds us, as we watch Mervyn King fending off attacks from past and present colleagues, that there is something to be said for conferring the governorship on an haut banque autocrat rather than an academic, however wise, who constantly needs to win arguments with other economists in order to maintain his authority.
Two former CBI presidents also deserve a final salute, not so much for their industrial achievements as for other facets of their lives. The modest Sir James Cleminson, chairman of the mustard-to-Brasso conglomerate Reckitt & Colman, won an MC as a young officer in the thick of the fighting at Arnhem recreated in Richard Attenborough’s film A Bridge Too Far, in which Cleminson was played, with authentic handlebar moustache, by the actor Michael Graham Cox. And Sir Trevor Holdsworth, chairman of the car-parts maker GKN, was a musician who trained as an accountant but at the height of his business success still daydreamed of escaping to become a ‘Happy Hour pianist in a New York bar’.
Party games
I bet they had a proper Christmas party at Sterling Cooper, the fictional 1960s advertising agency of Mad Men. Today’s office drones — in a world ruled by diktats against ‘alcohol abuse’ and fear of sexual harassment tribunals — will never know what joy it was to drink all afternoon in your boss’s office before plunging across a sweaty dancefloor in pursuit of a typist called Dawn. That’s how it was in the early 1980s City (Dawn, I still dream about you), though the party had become a lot staider a decade later, when I was cold-shouldered by Dawn’s successors and cut dead by my boss, who had already decided to fire me in January.
In between I was in Asia, where they also knew how to party in their own ways. In predominantly Muslim Kuala Lumpur, I was asked to dress as Father Christmas and say ‘Ho ho ho!’ In Hong Kong, I was invited — strictly as an observer — to join a ‘seasonal cruise’ laid on by a company that specialised in leasing kitchen equipment: hundreds of restaurant-trade clients were packed on to a shabby car ferry with equal numbers of hookers hired from Wanchai, for an evening floating in circles around the harbour.
In Tokyo, I was told that amusements in the style of a television game-show were the order of the day — and that, as the head of our small office, I was expected to enter into the spirit. Blindfolded and armed with a baton of rolled newspaper, I was pushed forward to joust with an unknown opponent. As any recent guest of the US government knows, blindfolding can have a strange effect on a chap. Like a kendo master, I rained blow after savage blow on my ineffectual foe until someone hauled me off hissing ‘OK, Martin-san, you win!’ Removing the blindfold, I found a small Japanese lady, the office librarian, cowering on the floor and being comforted by her colleagues. But they all seemed to think it was a terrific party — and I hope readers find plenty of their own kind of fun, in or out of the office, to keep fear and pessimism at bay this Christmas.
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