Dear All,

The Eurozone crisis is now two years old. It was sparked by the revelation, in October 2009, that Athens had repeatedly misrepresented its finances. At the time, Greece’s annual budget deficit was already more than three times over the 3% limit intended for Euro countries.

Today, the risk that Greece will default on its sovereign debt remains the most incendiary factor in the European financial system. It is ironic that the nation that helped instil theatre in our culture has orchestrated such a protracted drama, complete with deception, sub-plots, masks, trapdoors and dilemmas.

In the first act of this play, romantic Greece has borrowed money to buy flowers for a girl he is wooing (his voters). When the loan falls due, he has no way to repay it. As luck would have it, an elderly lady on the island takes pity on him, and uses her savings (that she has not touched) to settle his debt. So Greece won the mercy of three kind benefactors (the European Commission, the European Central Bank and the International Monetary Fund) and received a €110bn rescue package. It is fairly usual - in theatre and in real life - for a profligate character to be supported while teetering on the brink of bankruptcy. That was Greece’s advantage in being the first to fall into distress, while there was both the funding and the willingness to help it reform.

The twist comes in the second act. Once again, Athens is unable to pay its bills. Now the plot is become more perplexing. The kind benefactors feel obliged to help Greece in order to safeguard the financial stability of Italy and Spain. In order to do so, they need to dig deep into the collective reserves of their community, which have mostly been contributed by Germany and France. Are you still with me?

The notion that societies have a duty to help those in need is part of the theory of distributive justice. However it is only one aspect of distributive justice, which is mainly concerned with how goods are distributed among members of a society at a particular time. Right now, several Euro countries are relying on guarantees from the same reserve fund (the European Financial Stability Facility) to stave off their own debt crises, including two small economies (Ireland and Portugal) and two large ones (Italy and Spain).

There are two common errors when dealing with social justice. The first is to think that fairness depends on the character of the claimant. The second is to think that a fair process will deliver a fair outcome. Since we are only spectators to this drama, let’s ignore these traps, and look at the evidence anyway.

Risking levels of Greek debt are partly the misfortune of enduring three straight years of recession, worsened by corruption, the backlash against austerity and the strikes and violent protests which have hampered those with jobs from getting to work. Perhaps stronger political leadership could have marshalled the population better and driven through deeper budget cuts, but this seems unlikely. Greece’s fault however, was that it took on too much debt in the first place, aided on one instance by Goldman Sachs, who engineered a currency swap deal at an artificially high exchange rate in order to circumvent the Maastricht rules. This was in 2002, the first year that Greece joined the Euro, and makes these bonds even more expensive to repay when they mature between 2012 and 2017.

Furthermore, when Greece’s newly appointed Finance Minister, former constitutional lawyer Evangelos Venizelos, made his stage debut at an emergency meeting in June this year, his first move was to attempt to renegotiate the second bailout package to give Greece softer terms. This angered the point-man in this discussion, the normally mild-mannered Finn, Olli Rehn.

While the audience takes a secret ballot on Greece’s character, let’s examine the second trap – the fairness of the process. It’s often said that ‘the squeaky wheel gets the oil’. Greece has €388bn in debt, which is 143% of its GDP, and its fiscal deficit is adding to their liabilities at a current run rate of 10.5% of GDP. This is squeakier than a panzer division.

European policymakers are intent on shoring up Greece’s finances because unless they do so, the financial markets will deem other Eurozone debt to be unacceptably risky (take Italy as an example, currently €1.9 trillion or 120% of GDP) which will in turn push up the cost of financing those debts, and leave less money in their budgets for spending on education or infrastructure. A quick glance around the playhouse suggests that the audience agrees with the need to preserve confidence in the Euro and prevent the contagion, yet is truly puzzled that buying Greece’s debt is the best way in which to accomplish this.

The curtain rises on the third and final act. For almost 24 months, European Finance Ministers have been holding a burning match, yet they appear to be locked in a state of paralysis. At some point they will need to blow out the match, or drop it before it burns them. Yet perhaps their quandary could be resolved by adopting another Classical precedent – from Sparta, which was the pre-eminent Greek city-state around 650BC. Sparta’s complete focus on military training and excellence gave rise to an unusual social system. When a child was born, the mother bathed it in wine. If the baby survived, the father took it before the council of elders, who decided whether it was fit enough to be reared. Puny infants were thrown into a chasm on Mount Taygetos.

Ultimate leadership is about keeping the rights of the invisible majority firmly in mind while attending to the squabbling demands of those who hold your attention. Our financial leaders do not know how to blow out this match. Their only option is to drop it into a chasm. By inference from Sparta’s primitive ‘eugenics’ ¹ in order to maintain a strong gene pool in the Eurozone, Greece would first face the acid test of whether it will ever be able to repay its current obligations using its own tax revenues. Only once it had convincingly passed that challenge would the council of elders (or the ECB ²) determine the rescue allocation it merits – with full regard to all other potential claimants, present and future. Call this eurogenics. Cruel? Yes it is. Social Darwinism? Yes it is. Fair? You decide what fairness is in this case.

In the meantime, we the audience watch the unfolding drama and try not to shift too much in our seats. Comedy it is certainly not. Satire it could still be, but it will take an amazing piece of stagecraft for this crisis not to turn into an all out tragedy.



1. Eugenics is the applied science of aimed at improving the genetic composition of a population, which became deeply unpopular due to its association with Nazi Germany.

2. European monetary policy is determined by the European Central Bank (ECB). The original mandate of the ECB was cloned from the Deutsche Bundesbank, which was by far the strongest and most responsible of the European central banks at the time that 11 countries (now enlarged to 17) decided to tie their fate together in the Euro. Its DNA still reflected the profound fear of inflation that Germany carries in its collective unconscious due to the indiscriminate ravages of hyperinflation after the Weimar Republic collapsed.

Over the course of this crisis, the ECB has strayed from its guiding objective - to keep inflation below 2% - and has bought €160bn of bonds from peripheral Eurozone countries. This is a major constitutional shift. German delegates Alex Webber (best positioned to have replaced the outgoing head, Jean-Claude Trichet) and Juergen Stark each resigned their seats on the central bank’s six-member executive board this year – long before the end of their respective terms. A recent poll shows that 54% of Germans would like to return to the Deutschmark.

2010 Articles

Quarter 1, 2010

• 07.01.10 The Essence of Networking
• 21.01.10 Finding Connectivity
• 04.02.10 The logic of the networked economy
• 18.02.10 Roman Insight
• 04.03.10 Spark of Ignition
• 18.03.10 Bright light of recovery

Quarter 2, 2010

• 08.04.10 Campaigning Online
• 22.04.10 Finding the Fortune
• 12.05.10 Co-collaboration in Westminster
• 19.05.10 China: Blueprint for Growth
• 10.06.10 Football Frenzy

Quarter 3, 2010

• 08.07.10 Into the Night
• 22.07.10 Seamless dynamic interaction
• 05.08.10 The invisible mind
• 18.08.10 Our corrective wave
• 03.09.10 Mapping it out
• 19.09.10 Game changers

Quarter 4, 2010

• 01.10.10 Cyber-warfare’s Friendly Fire
• 15.10.10 Iran’s nuclear record
• 28.10.10 Master Craftsmanship
• 11.11.10 remembrance
• 25.11.10 states of flux

2011 Articles

Quarter 1, 2011

• 06.01.11 Passing Go
• 20.01.10 (Hu)man Rights
• 03.02.10 The camel’s nose
• 17.02.10 Leading Innovation

Dear All,

If you've tasted Cobra Beer, the less gassy lager, or even giggled at their advertising you will know that there is an 'ingenious' mind behind it all. It's founder, Karan Bilimoria - now Lord Bilimoria, a life peer, is one of the most astute entrepreneurs I have ever met. In his view:

“Networking isn't about having a drawer full of business cards or meeting that one-off contact, it's about building strong, long lasting friendships and relationships.”

BusNet is a 'network of networks' that helps you to proactively develop these strong relationships, and participate in the lasting benefits of collaborating. We want our 'resource on your desktop' to be more powerful than the business cards in your desk drawer.

Looking out your window at the 'winter wonderland', you may be tempted to hibernate through January, so here is a reminder of some of the 'not to be missed' events (links removed!):

Get all these events at a glance, here on BusNet

Dear All,

Yesterday marked the first year anniversary of the Obama administration, however most commentators are still trying to make sense of his first year in office, with questions like “has his bold victory been matched by strong governance?” and so on.

Luckily we’re a business network not a political one, so we’ll save our own answers for discussions around the fireside!

Yet the ambiguous responses help illustrate a point: when our environment changes, it takes time for us to adapt to the new possibilities. When television went public, all we could think of was to broadcast a live image of the newsreader behind his desk. It took many years, the first Gulf War and CNN before we got 24/7 live coverage.

BusNet added its 52nd network this week. Not quite the 52 states, but you’re probably also wondering what to make of us. How will this change our possibilities? We would like to give you three ‘pointers’ to where we’re heading.

Our first aim is to offer an information service: a comprehensive listing of all the networking events in the Arc Lémanique – and hopefully we are getting there.

Our second aim is to enhance your ‘connectivity’ so that you can collaborate more easily with likeminded business professionals. To enable potential employers or clients to get in touch with you directly, we’re providing a free, spam proof, directory listing on our website. Find more details here (link removed).

Our third aim is to provide selective events of our own, to enhance the richness of our lives. The first of these is on 18th February, when we invite you on an atmospheric journey into the literature of Carla Haas, winner of the best book in Switzerland for La Nuit, accompanied by double bass and fine whisky. Details will follow next week.

BusNet relies on you to innovate (help us improve) and to advocate (word-of-mouth) our services. Like all new possibilities, much depends on what we choose to make of it. We hope that we can help you live your opportunities. And yes, hindsight is a wonderful thing! In the meantime, here’s our listing for the next few weeks (links removed):

Dear All,

As Bill Gates advised a group of high school kids this week, “the world will expect you to accomplish something before you feel good about yourself”. So how do we engineer the luck and planning that is usually needed to accomplish something?

Welcome to the networked economy, our new way of operating. Having a rich network of friends and acquaintances gives us links to vibrant information, deeper roots in our society, better opportunities to influence, and more ways to take incisive action. Barack Obama’s social-networked election victory is often cited as evidence of this.

What we like most about business networking is it allows us to feel good about ourselves while we are accomplishing something. Which is why we are so passionate about ‘connectivity’. We think it’s one of the big secrets of the next business generation. Our event listing is designed to help star performers find stellar events, while our directory is there to help build a ‘constellation’ of connected professionals.

In addition to listing your details, expertise and location, our directory allows you to link to your profile on Linkedin (or Xing etc.) - so you can relay your personal ‘portrait’ without having to maintain yet another online identity. If you haven’t already done so, you can browse the new directory with this guest id:

Username: busnet
Password: connect

The aim is simplicity, so if you would like to be part of it, it’s really easy to add or amend your information using this form.

Whether your objective is tweeting, collaborating, co-creating, building alliances, crowd-sourcing or social networking, we hope to bring the spark of connectivity to your business life.

Dear All,

A local entrepreneur shared this in an email yesterday...

I thought for you last week-end as I was spending some time in a wellness centre: guess why? Because you promote networking in informal environments and, all of a sudden, I realized that this was probably going on within the thermal baths in Ancient Greece and Rome. Discussing business and projects while relaxing physically.

Absolutely! As another historical precedent, Lloyds of London, today worlds leading insurance market, had its first beginnings at Edward Lloyds' Coffee House in 1688. Gentlemen of circumstance would meet and discuss the affairs of the day, and it rapidly became recognised by merchants as the place for obtaining marine insurance.

The formal business structure of our world today is helpful to us, but it is not essential to getting things done. Access to the right information in the right context, par contre, can be critical to any mission.

BusNet has adopted the fundamental mandate of helping people connect: Right Place, Right Time, Same Wavelength. Our advocacy of networking stems from a wholehearted belief in the power of ideas. When we interact and share our ideas, we become more effective. Just the act of expressing our thoughts helps us to define them more clearly. Dialogue with others further accelerates our abilty to put content (information) into context (perspective).

An average brain has around 10 billion neurons, which allows us to spark an astonishing number of patterns (estimated at 10 followed by over 800 zeros). Networking allows us to find corresponding brains to help solve our current issue through insight (where a piece of information suddenly means more in the right context) and denouement (where a piece of background context explains and clears up a mental puzzle).

When Lloyds was just a Coffee House, the front page of the Times newspaper simply listed the arrival and departure times of merchant vessels. This is rather like the main page of the BusNet website. We simply list business networking events in the region. The rest is up to you!

Experience the time-honoured pleasures of conducting business in an informal setting. The attached rolling two-week agenda (apologies to those who didn't receive the attachment with the last bulletin – if it happens again, you can also download it from the website) presents 10 opportunities to get out there and become more powerful. If you hurry you can still hear Henk Potts, Equity Strategist at Barclays Wealth who is addressing a Luncheon of the British Swiss Chamber of Commerce in Geneva today. As the Romans would say, Carpe Diem!

Dear All,

On average, a plastic carrier bag is used for nearly 20 minutes and goes on to last for another 400 years. Considering that about half of the 500 billion bags in circulation are plastic, this adds up to a major environmental problem for our planet.

This was one of the reasons why I was fascinated to attend last night's HEC MBA Alumni event on bio-packaging. By replacing petroleum based materials with bio-resins made from potato starch, a Swiss company of eco-protagonists have produced a bag that turns to compost in a couple of months.

Equally impressive for me was seeing how networking can provide the 'spark of ignition' to the process of business development – in this case, technology transfer.

Imagine a startup company that is pioneering a new technology, like the many great ventures that arise out of the EPFL. It represents a rich source of potential value for us, the end-consumer. The development within its labs normally takes place through a well-controlled scientific process...alongside some well publicised accidents, like the Post-it note!

Before consumers can enjoy the benefits of their solutions, the start-up needs to gain access to the market. Here the process is far more serendipitous - some would say it depends heavily on luck.

Last night I witnessed how just such a start-up – one that uses bio-resins made from a starch outside of the conventional 'food chain' – connected with John Darbyshire, head of Nestle's Product Technology Centre. Ten minutes was all they needed to communicate their pitch and to leave him with a sample of their product for his team to work with.

These are the doors that open when you network artfully. It's not luck, it's the result of detailed planning allied to a vision. As the Buddhist proverb goes, when the student is ready, the master appears. These were well prepared students.

There is no guarantee that their solution will stand up to the rigours of the Nestec technology centre, where the team understands profoundly the importance of life-cycle sustainability, and there is no quick-fix.

Nevertheless, ten minutes was all it took to chip-away at the 400 year problem.

Dear All,

BASELWORLD, the World’s largest Watch and Jewellery Show, opens today. It brings nearly 2,000 exhibitors into contact with 100,000 buyers and a press contingent of about 3,000.

Following a difficult and disappointing 2009, many are beginning to speak of the bright light of recovery that, they hope, will revitalise the industry.

As Switzerland’s largest trade event, BASELWORLD provides a wonderfully sophisticated illustration of relationship marketing in action. As Thierry Stern, President of Patek Philippe commented, “we have the unique opportunity to meet a vast majority of our worldwide network of retailers in a limited amount of time”.

These exhibitors appear to invest the same effort in the design of their marketing messages as they have in their luxury timepieces. We can learn a great deal about our own relationship marketing in the company of such Maestro’s.

Based on some parallels, here are three insights for positioning our own personal brands when networking.

1. Select the right show for you. Each event provides your unique opportunity to meet with those who share your passion. Scan the listings of available events for suitable opportunities.

2. Refine your message. You are steadily building your brand positioning through a series of consistent messages. Well crafted messages will reveal your unique personal value, highlight what makes you special, and underline what makes you reliable.

3. Make the connections. Whether you are avant-garde, classic or timeless, you are trying to find a connection with an audience that values the role you play. Working these opportunities can be a pleasurable experience. Use chatty dialogue to uncover how their needs match your distinctive offering, what trends are emerging, and what mutual opportunities this creates.

The luxury of BASELWORLD gives a fine example of how to enjoy the experience of the show, and create lasting business connections, while subtly engaged in relationship marketing. We think it is also an excellent role model for the value of networking…or as we like to say, Right Place, Right Time, Same Wavelength.

Dear All,

On 6th May, UK voters will go to the polls to decide one of the most closely contested elections in British history. Both major parties will be trying to win the approval of the ‘swing voter’ – those who have no party loyalty or are willing to change their allegiance.

In previous elections, a key moment has been the televised debates between the leaders of the top parties, however in this election the emphasis has shifted to social media. The major parties are convinced they can win more approval through facebook and twitter than by traditional canvassing (i.e. laboriously knocking on doors and asking if they can count on your vote).

Politicians have recognised that online networks provide the opportunity to position messages that are more intelligent and more creative than traditional communication channels allowed. They are hoping that the right idea in the right sub-group will lead to a rapid, spontaneous growth in their popularity. As individuals in business, we are also seeking an effective and affordable way to position our messages, so this election period could provide an opportunity for us to learn new approaches.

Consumer goods companies have used online marketing to build deep relationships with their customers for many years now. In addition to the original 4P’s of marketing (Product, Price, Place and Promotion) they now respect the 4P’s of Web2.0 marketing:

• Personalisation – customising the message and the user experience
• Participation – co-operating in an interactive and democratic way
• Peer-to-peer – creating advocacy networks and communities
• Predictive – modelling likely behaviour and spotting new trends as they emerge

Our expectation is that online political campaigning will be a poor imitation of the sophisticated consumer goods marketing we have seen since the emergence of online networks. Nevertheless, with much at stake and huge budgets to spend before 6th May, the politicians may still surprise us with some ‘best practice’ methods.

One of the subtle success drivers of online campaigning is that it is ‘mutually beneficial’ and British politicians, of all people, will have come a long way if they can demonstrate this. Otherwise, their overtures are likely to remain as unwelcome as the smiling ‘human spam’ that pitches up on your doorstep at election time!

Dear All,

One of the great business thinkers of our time, C.K. Prahalad, passed away in the last week, aged 68, following a brief illness.

Together with Gary Hamel, he authored “Competing for the Future”, a strategic framework for industry leadership. They advocated that the key to market dominance is to visualise the benefits that your customers will demand in the future, and to put in place the core capabilities that will allow you to excel in delivering those benefits. A good example of this is Apple, who foresaw the importance of lifestyle media and accordingly built a dominant position in devices (the iPhone and now the iPad) and online distribution channels (iTunes and the App Store).

Yet it is likely that C. K. Prahalad’s second contribution to competition strategy will turn out to be his lasting legacy. In “The Fortune at the Bottom of the Pyramid” he reveals the immense profit potential from serving the needs of the vast populations who live on less than $2 per day. He makes the case for changing the way we do business in order to meet the needs of this market, and presents 12 ‘value-centred’ principles for innovation to help companies achieve the ambition of ‘eradicating poverty through profits’.

This thinking contradicts much of the received wisdom of business management. After all, if 80% of a company’s sales revenue tends to come from 20% of its offerings, surely we should concentrate on the key 20%. In this respect, the Bottom of the Pyramid has many similarities with the Internet concept of the Long Tail* as both approaches appear to concentrate on the unprofitable 80%.

The web ecosystem has demonstrated that a company like Amazon, with its vast catalogue, can produce as much collective revenue from its Long Tail of low selling books than it does from its relatively few current bestsellers. As an Amazon employee put it: “We sold more books today that didn’t sell at all yesterday then we sold today of all the books that did sell yesterday”. Strange, but true!

Harnessing the Long Tail is possible on the web, were inventory and distribution costs are negligible, yet it causes a serious rethink of real world economics too. If I’m in the movie business, do I produce a typical Motion Picture Association film ($96.2m to make and market) or do I follow the model of the Blair Witch Project ($35,000). Fortunes are no longer the preserve of the fortunate.

The clairvoyance of C.K. Prahalad continues to drive business innovation, and hopefully the richness of his thinking will continue to change the face of poverty.

Dear All,

“I’ve started so I’ll finish” is a catchphrase from Mastermind, a UK quiz show. Since we started on the UK election, we decided to delay the BusNet Bulletin by a day to report the outcome of the British Elections. Five days later, we can do that. As many of you will know David Cameron paid the ceremonial visit to the Queen last night and emerged as the new Prime Minister.

David Cameron’s Conservative Party won 306 seats to Gordon Brown’s Labour Parties 258 and Nick Clegg’s 57 seats. This result is historic as it has yielded the first hung parliament in 36 years, the first coalition government in 70 years and the youngest Prime Minister in nearly 200 years.

It also means that Gordon Brown has neither started nor finished: He was not voted in, and he has not been voted out. Nevertheless he leaves with dignity, having also stepped down with immediate effect as leader of the Labour Party. In this regard he must be admired for the way in which he has put his party before his self interest. The first instance was in 1997 where, over a meal, he agreed to a pact that gave Tony Blair the run at the leadership. Apparently Blair was also meant to hand over the reins after the end of his first term, and reneged on the deal.

Before the election, we questioned the role that social networks would play in this election (as they did in the US). Facebook, which has 23m UK users, enabled the download of 14,000 electoral registration forms, and Democracy UK, their 2010 election page received over a million unique visitors. Nevertheless we feel the role played by social networking was rather muted. Also Cameron’s twitter followers (7,900 at the time) were more than Brown’s (7,300) though by less than his election margin.

In any event, we believe that this moment will herald a new shift in politics, as the online trend of ‘co-collaboration’ moves to Westminster and even to Downing Street. John Humphries, the Radio 4 legend and himself a questioner on Mastermind, was know to ask some tricky questions in his career. Perhaps none will hold politicians to account quite as much as the questions that will be asked internally with the new Conservative – Lib Dem coalition.

Dear All,

As further evidence of its rising global influence, China is host to the 2010 World Expo. What distinguishes this Expo is not just the tens of thousands of fireworks that were launched during the opening event, nor the 250 or so countries represented, but the staggering 70 million visitors that are expected over the six-month opening. At 8pm yesterday (the fair’s 17th day) a total of 3.19m had already filed through the turnstiles.

It would be consistent with our business philosophy to emphasise that Cisco Systems, with its own corporate pavilion, is providing the ‘blueprint for smart and connected communities’. But, for once, connectivity is not where the magic lies. The magic of China lies in its scale and its precision.

China has spent more on the Expo than it did on the Olympic Games. This includes a comprehensive public transport network of rail, bus and ferry (part of the hardware) and ten panda bears, brought into their indoor entertainment complex at the Shanghai zoo (part of the software). Most of the pavilions were completed more than 100 days before the opening ceremony. China makes things happen and this has been the business theme for decades.

Those of us who are unable to attend the Expo have another opportunity to leverage the immense power of the world’s oldest (viz. 1421) and newest superpower. And we can do this in Lausanne next week.

The Hong Kong Science and Technology Parks have invited you to a special seminar on how to access their best business and scientific minds…and with that, of course, the impressive Chinese consumer market. The event takes place next Wednesday, 26th May, from 9am to 1pm at the EPFL*. Come and hear from a fascinating handful of speakers, including:

• Stephen Wong Kai, Hong Kong’s Ambassador to Europe, on reasons to trust on IP issues
• Ken Hui, Technopark VP Marketing, on HK Science Park as an entry into China
• Pasan SA, a Neuchatel based company, on their success they have had with testing devices for the solar panel production line

Together these speakers will reveal how the Technopark enables interaction and cluster innovation…and of course the kind of networking that opens doors. Find all the details with your invitation here.

If you are interested in how high-tech enterprise converges with talented people, here is a chance to learn at close quarters. For the truly committed, it is also, perhaps, the chance to transform your presence in the Chinese consumer market. While China continues to be the flywheel that keeps the global economy turning, this seems like an opportunity not to be missed.

A return trip to Shanghai on China Airways costs about Fr 1,275. For those who can get to Lausanne next Wednesday, the event is free. Come and discover how China makes entrepreneurial business happen.

Dear All,

Over the next few weeks, it will become apparent that “all the world is football shaped”. Not the perfect form of the controversial ‘Jabulani’ ball that Addidas designed for this World Cup, but spherical and hurtling through space all the same.

Football is the greatest social phenomenon of our time. Until the final on 11th July, South Africa will host an additional 32 tribes. Only half of the teams will progress beyond the group stage, but all are hopeful that they will make the cut. Of course, only a small part of the action takes place on the terraces of the newly-built stadiums. The last World Cup was broadcast in 214 countries and reached 5.9 billion viewers, with an average of 93 million viewers per match. Considering that around 8% of viewing happens ‘out of home’, the prognosis is good for the hospitality industry.

As an early indicator, Panini has already sold 51m picture sachets in Switzerland – which accounts for a fair amount of pocket money. Even more locally, the big screen in Ouchy can accommodate 10,000 fans, though it will only broadcast daytime matches over the weekend – perhaps as a show of solidarity for the businesses that are uninvolved in hospitality and anxious about their next month’s productivity.

While the players are at the pinnacle of skill, dedication and athleticism, it is the fans that show the most stamina. Each game is pored-over and diagnosed for hours after the end whistle has blown – a characteristic that prompted legendary England coach, Sir Bobby Robson to quip that “the first 90 minutes are the most important”.

We’ve joined in the frenzy and released an online football game called Possession. It’s still in the beta testing phase, but you can preview it at http://www.sf2010cup.com. It’s designed for kids to play on facebook, but we think there are a few Dads out there that will want to challenge them. Our ambition is to help emphasise the relationship between FIFA and unicef, using the tagline “Putting the cef (unicef) into sf (South Africa).

By the way, Jabulani is a Zulu word meaning ‘rejoice’, which we will as we cross our fingers and hope that South Africa has enough electricity to keep the stadiums lit and the camera’s rolling.

Dear All,

In Greek mythology, Icarus attempted to escape from Crete with the help of a masterful pair of wings fashioned out of feathers and wax. He was warned not to fly too close to the sun. Overcome by airborne giddiness, he soared too high, melted the wax, and fell to earth. The Icarian Sea marks the spot where this fatal mission ended...and countless home truths* began. Most of these tales caution against the dangers of excessive curiosity or ambition.

Undaunted by folklore, Solar Impulse soared through the skies above Neuchatel yesterday, in its bid to change perceptions. The mission, headed by adventurer Bertrand Picard, aims to fly autonomously, day and night, fuelled only by the Sun’s power. In our world of depleting fossil fuels, if a plane can do this, surely we can do the same for houses and cars. In the build-up to this maiden nocturnal flight, they have chased out every useless gram of weight and found lighter substitute components. Their target is not to take risks but to demonstrate potential, yet they have successfully pushed aeronautical boundaries as well as social ones.

The eco-friendly HB-SIA is fitted with 11,628 solar cells and has the wingspan of an Airbus A340 (for those of us who think a honeycomb sandwich is something you eat in front of the telly, that’s about 63m, or nearly three times the length of its fuselage). Weighing the same as a mid-sized car, its four 10-horsepower engines can propel it at an average speed of 70km/h. Which means it will take five legs of five days each to circumnavigate the globe sometime in 2012 – once all the preliminary tests have been completed.

Having completed its first ‘short hop’ last summer, yesterday’s plan was to gradually ascend to 8,500m - the natural limit of oxygen and cockpit pressure - until about two hours before sunset, when the Sun’s ray’s no longer replenish the batteries, and the to begin a gradual slide to around 1,500m by 11pm, before levelling out and coasting through till dawn. If this sounds reminiscent of your normal game-plan for New Year’s Eve, 2010 year was a whopper! Based on the telemetry data, the plane reached the planned altitude sometime after lunch, then flipped up to nearly 18,000m several times before 9.30pm - clearly their patented cockpit pressure technology works! By midnight the cruise had still not bottomed out, and at the time of writing, this bird is still cruising at 22 knots using only 24% engine power somewhere over Avenches (which in classical times was Aventicum, the capital of Roman Helvetia).

When you read this, Solar Impulse will probably have completed the longest and highest flight ever by a solar-powered plane...which could surely never have been achieved without boundless ambition. What lessons can we draw from this piece of modern mythology?

For starters, we can learn a great deal from another myth, Usain Bolt, who holds the world record for the 100m, the 200m and the 4x100m. To put it in perspective, his world record of 9.58s for the 100m means that he could out-sprint the Solar Impulse on takeoff (35km/h). Addressing an audience of senior executives at IMD this week, the Jamaican sprinter explained that mental strength and a sense of purpose are key attributes of his quest for success, yet when he goes out on track to compete he chooses to ‘relax and let it flow’. According to his agent, “He’s changed the whole culture of sprinting”.

For centuries, the Icarus myth has been used to encourage individuals to seek less. At tonight’s Athletissma race meeting in Lausanne, Usain Bolt will hopefully reverse that with a master-class in achieving more while appearing to seek less. And somewhere in the night skies, Solar Impulse is initiating a cultural revolution - in a hair and tortoise way – by demonstrating with that it is possible to achieve more while seeking to consume less. And that is truly illuminating.

Dear All,

According to EPFL President, Patrick Aebischer, “Scientific inspiration almost always comes from unexpected encounters that break down the boundaries between disciplines”. This vision inspired the inimitable Rolex Learning Centre, which opened in February and is now the flagship of the EPFL campus. It has replaced a myriad of departmental libraries and given rise to a forum in which many different fields of learning can exchange knowledge freely and easily.

Under Professor Aebischer, the EPFL (Ecole Polytechnique Fédéral de Lausanne) aims to become the best institute of technology in the world. It is already ranked first in Europe for Engineering, Technology and Computer Sciences, alongside Cambridge University. Cambridge was founded in 1209, when a group of dissenting scholars took a clump of Oxford earth and transplanted it to form the second oldest campus in England. The EPFL, by contrast, moved to its present campus in 1968, and has closed the gap on Cambridge pretty quickly.

Leman Events arranged a guided tour of the Rolex Learning Centre earlier this week. It was captivating to discover the ‘back story’ of how Japanese design innovation (architects SANAA) combined with Swiss precision engineering (Losinger Construction) to produce a building that defies conventional physics, and invites social interaction into the process of learning.

Its aesthetic simplicity belies an immense technical complexity. The centre is shaped from one continuous concrete surface of 37,000 square metres, which undulates like the surrounding Vaudoise countryside. Within this interior landscape, each zone is separated by slopes instead of walls, and acoustically insulated by changes in height and aspect, so that students are separated and connected at the same time.

This floor is made from two amorphous shells, a smaller one with 4 arches of about 35m in length, and a bigger one with 7 arches that range from 55m to 90m in length. These are kept suspended by 70 underground cables which act like a bow and arrow aiming into the sky: the tension in the underground cable is like the drawn bow-string that forces the bow to stiffen outwards – keeping the arches flexed above the ground.

To build this structure, over five thousand box-shaped moulds were designed and laser-cut in Japan, then reassembled (using GPS positioning) in their rightful place on the reinforced steel spine, which was temporarily suspended in place on a hydraulic platform that mirrored the future shape. Over three days, the boxes were filled with concrete (with specific flow properties that were designed by Holcim). Once completely set, the hydraulic supports were simultaneously lowered and the superstructure, like a fine belladonna, held its ballerina poise to great applause.

Beyond architectural fascination, we at BusNet have a particular interest whether this seamless network of slopes and terraces will lead to a dynamic interaction between students who are free to choose where they go and how they collaborate. In many ways it represents an emblem of the bridge-building, boundary spanning role we see for ourselves in helping business professionals create their knowledge networks. We watch with interest. Since this magnificent centre is open to the EPFL, Unil and the general public we hope you will join us in finding out.

Dear All,

The dynamics of brand building have shifted once again.

The first shift occurred when advertisers moved from an authoritarian stance (rationally asserting ‘iconic’ product qualities) to a compassionate one (seducing the consumer with powerful emotional associations). An example is Dove soap. Their 70’s advertisements showed ‘cleansing cream’ being poured into each beauty bar, whereas their award-winning 2006 Campaign for Real Beauty has inspired normal women with natural curves to feel good about themselves when buying beauty products.

The present shift is relatively sudden. It acknowledges the unstoppable emerging force of the ‘social web’. Marketers can no longer control the public perception of their brand image, since internet-savvy consumers now seek the opinions of their online peer groups, rather than align with those of big business.

To illustrate the new rules of engagement, let’s look back at a chapter in history. From 1966 onwards, France conducted periodic tests of its nuclear arsenal on the French-owned Polynesian atoll of Mururoa in the South Pacific. Over a period of 30 years, a total of 41 atmospheric and 147 underground tests were performed.

Few questioned the authority of a sovereign state to behave like this until Greenpeace, then a disorganised collection of adrenaline-addicted activists, took direct action to ensure that the community would no longer ignore this deplorable practice – because, in their current words, ‘this fragile earth deserves a voice’.

Their skirmishes are reminiscent of the school playground. In the early 70’s Canadian David McTaggart sailed the Vega into the nuclear test zone and maintained a position 3 miles downwind from Mururoa. The frustrated French navy rammed the Vega, and then proceeded to test their bombs once she had hobbled into port for repairs. As Mahatma Ghandi expressed it: “First they ignore you, then laugh at you then hate you, then they fight you then you win”. While Vega failed in her mission, she inspired a groundswell of support, and Greenpeace began to learn the power of harnessing media attention.

In 1985, an undercover French agent found plans for the Rainbow Warrior to mount a fresh interference campaign off Mururoa. The French intelligence agency (DGSE) intervened before the Greenpeace flagship could leave the port of Auckland. Combat frogmen attached two limpet mines to her hull. As planned, the first blast crippled the ship so that those onboard were forced to evacuate. Ten minutes later the second mine blew a massive hole in the side of her engine room, and the Rainbow Warrior flooded and sank. Two years later, a court of international arbitration in Geneva ordered France to pay more than $8.1m in damages to Greenpeace. A private organisation had taken a sovereign nation to court and won.

Although the structural parallels between this particular story and Social Network Marketing are oblique, there are some important common threads that can help us understand the new media paradigm:

• Social conscience is not negotiable
• Authority is no longer a persuasive force
• Consumers are inclined towards civil disobedience
• Control over the message rests with the social peer group
• The ultimate arbitrators do not revere size or status

While ‘brand aura’ remains important, marketers are now beginning to appreciate that the relationship they have with their consumers is a real-time dialogue. Like Greenpeace, their consumers have no permanent allies or enemies. They campaign where a voice is needed. They rudely gatecrash events where free speech is thwarted.

To remain relevant, brands need to keep the dialogue open, to understand the causes, to play the game. Building strong ties is the essential new art of Social Network Marketing. It is driven by behaviour, not by technology.

After years of study, we understand commerce quite well. We know that the ‘invisible hand’ of the market resolves issues of price and volume. But social networks are quite a new phenomenon, and we are only beginning to learn how they arbitrate on issues of value and quality. They are lead by the ‘invisible mind’.

Greenpeace founder Bob Hunter pioneered the idea of the ‘media mind bomb’ – campaigns that generate images, stories and messages too sensational not to broadcast. This is the new opiate for capturing the hearts and minds of online communities. Welcome to Branding2.0!

Dear All,

One of the focal moments of the year is upon us again. La rentrée is considerably less fun than Christmas, but equally notable in the way it displaces all other thoughts. Political and macroeconomic news, however seismic, is reduced to a sub-melody in the soundtrack that accompanies this film noir.

Summer is coming to an end, and so are the carefree holidays. Personal souvenirs are being archived in the library of past memories. Days are becoming shorter and the weather is colder and wetter. We are forced to cancel the cruise control and actively contemplate our next steps.

Periods of consolidation are essential to growth. We can affirm this by plotting historical stock-market prices. Even in rising markets, prices periodically pull back and rebuild their strength, before surging forward again with renewed vigour. These technical charts reflect the natural sequence in which collective investor psychology moves from optimism to pessimism and back again.

In Natures Laws – The Secret of the Universe (1946), R.N. Elliott set out his framework for identifying the extremes of investor psychology. Elliot Wave Theory still provides an eloquent explanation of rhythmic cycles in which five ‘impulse’ waves are followed by three ‘corrective’ waves. Each wave is fractal in nature, so an impulse wave can, in turn, be broken down into 5 up-moves and 3 down-moves, and the signature of a full cycle consists of a total of 89 impulse waves and 55 corrective waves. This means that Elliot waves can be clearly identified in retrospect, however their predictive force is sometimes muted by disagreement over which particular wave of a complex cycle is playing out at any given time!

For la rentrée it is more clear-cut. We are at the bottom of a cycle and we need to get through the valley to enjoy the pastures on the far side. There are still circles within spirals, and waves within waves, however they come in manageable 24-hour chunks. Through perseverance and positive reinforcement, this period of consolidation allows us to reframe our environment – to get back to basics; to establish a new relationship with the world; to release unwanted emotions and to incorporate fresh ambitions; to re-align with our inner Zen and to reaffirm our essential worthiness.

Phil Mickelson, who won the 2010 Masters (claiming the coveted green jacket for his third time), once said that Golf is played on a course of 5½ inches (between the ears). The mental strength we acquire during our ‘consolidation wave’ empowers us to cope with the pressure when times are tough and to perform when the opportunity presents itself. In the language of Zen archery, this allows us to remove the impediments so that the arrow naturally finds its target.

Then, when the flywheel starts to turn again, we find ourselves renewed and empowered. We have accentuated the positive, and we are ready to connect and to collaborate - to learn and to laugh.

Dear All,

Ronald Reagan was an actor before he became President of the USA. His role didn’t change much, but the scripts improved. He surrounded himself with excellent advisors, who briefed him thoroughly each morning, and he delivered his lines with panache. He didn’t need to dream up the concept of supply-side economics, he simply had to understand the roadmap and interpret the daily news briefings. America prospered.

If roadmaps and briefings can bring clarity to the Oval Office, surely they can help us become more effective in our own careers. Enter Google from stage left. We all knew they did maps, but did you know they do briefings too?

“At Google we believe geography can be a powerful way to organise the world’s information. That’s why we’re building products to help you display, share and promote your information in a geographically useful way” states their brochure.

Street View is one example of this: the opportunity to explore and navigate a neighbourhood through panoramic street-level photographs. Google collects images (from eight cameras and a fish-eye lens) and processes them into high-definition footage. Users can then drag a matchstick figure onto a static map to begin virtual tours up and down streets or in sweeping 360 degree panoramas. This makes it an excellent planning tool for finding your meeting venue or visiting a foreign city...and even for printing out translated directions for your taxi driver! [http://www.google.com/intl/en_us/help/maps/streetview/]

BusNet was in Cape Town last week for the launch of Street View’s Special Collection series of wineries [1]. Juliet Cullinan, a sibling of one of our founders, had selected the 17 Cape Wineries which pioneered the concept of vineyard-level tours. Her main selection criteria were winemaking quality, international reputation, and aesthetic beauty (although beautiful estates tend to attract the best wine-makers and garner the best reputations). If you’re unlikely to visit a wine estate, think instead how footage of a golf course can help you plan your game, tele-spectate, or know where to stand at a live tournament.

As for briefings, Google developed Fast Flip (still in its beta phase) which let’s browse online pages as easily as you would turn the pages of a magazine. It’s a bit like standing at a news stand and scanning the headlines, only it provides a better-categorised and more personalised “review of the press”. Each article is captured as a picture, so there is no re-loading time, and the left and right arrows allow you to slide past a spectrum of articles to find those that catch your interest (and also ‘like’ or share them with your friends). [http://fastflip.googlelabs.com]

Hopefully these links will be useful to you, and that better briefing and clearer planning can help us search for the President within us! These Google tools erode the distinction between ‘talkers’ (those with the art of slick presentation) and ‘doers’ (those with hands-on knowledge). They offer broad media exposure and rich ground-level experience. For those of us who rely on being well-informed, it’s as close as we can get to being there. They are our eyes and ears, and as the army saying goes, “time spent in reconnaissance is seldom wasted”.

Elsewhere in politics, Tony Blair (whose memoirs went on sale this week) was also an actor. Not professionally like Reagan, but he understood the actor’s maxim that “if you can do sincerity, Darling, the rest is easy”. He took a gullible audience to war in Iraq on a script of manipulated information and a musical score from his home-grown doctrine of pre-emptive strike. It was forced through without a UN resolution and against the UN weapons inspectorate’s conclusion that there were no WMD in Iraq. Seldom has good reconnaissance been so badly wasted. The recently released film ‘Green Zone’ reminds us of the extent to which ‘shock and awe’ destroyed the political and social fabric of Iraq and made civil war inevitable. Méfiez vous if he ever contemplates a return to European politics. Not everyone deserves the chance to be President.

Dear All,

Three MBA’s and three accountants are travelling to a conference by train. Before departing, the accountants each buy a ticket and watch as the three MBA’s buy only one ticket between them. “How are all of you going to travel on one ticket?" asked an accountant. "Watch and you'll see," answered an MBA.

On boarding the train, the accountants take their seats while the three MBA’s cram into a lavatory and close the door. Soon after departure, the conductor comes round. He knocks on the lavatory door and says, "Tickets please!" The door opens just a crack and a single arm emerges with a ticket in hand. The conductor takes it and moves on.

The accountants see this and agree it's a clever idea. They decide to copy this trick and save some money. On the return journey, they buy only one ticket between them, but notice that this time the MBA’s haven’t even bought one ticket. "How are all three of you going to travel without a ticket?" asked one perplexed accountant. "Watch and you'll see," answered an MBA.

Once aboard, the three accountants cram into one lavatory and the three MBA’s cram into another one nearby. Shortly after departure, one of the MBA’s walks over to the accountant's lavatory, knocks on the door and says, "Tickets please!"

The point of this story is that businesses need to evolve. As the Chicago mob apparently put it: “if you think you are winning the game, you obviously don't understand the game”.

The term 'business model' captures the essence of how a business competes. It describes the rationale of how an organisation creates, delivers and captures value.

Many businesses have an imprecise and ambiguous grasp of what their business model really is, and this becomes even hazier as they project it forward in time.

In their new book, “Business Model Generation”, specialists Alexander Osterwalder and Yves Pigneur set out a systematic approach for improving your business model. Presenting this in Lausanne yesterday evening, they revealed a few of the keys of their approach to a packed auditorium.

Their handbook begins with 'Canvas', a tool based upon nine basic building blocks that map out the logic of how your company intends to be profitable:
1. Customer Segments
2. Value Propositions
3. Channels
4. Customer Relationships
5. Revenue Streams
6. Key Resources
7. Key Activities
8. Key Partnerships
9. Cost Structure

The book goes on to synthesize five important business model patterns (and the concepts on which these are based). Subsequent chapters suggest techniques for designing your business model, and propose ways to evaluate your strategy through the lens of the business model.

Whether your business is still just a paper napkin sketch, or about to deploy a disruptive strategy that will redefine your industry and lay waste your competitors, their methodology is salient.

A strong business model matters crucially. It distinguishes the shapers (seated in first class watching the countryside race past) from the adaptors (possibly on the right train, but unsure whether they will recognise the station when the doors open) from the victims (and yes, we know where to find them!)

Dear All,

A few months ago, a complex computer worm called Stuxnet was identified by a little-known security firm in Belarus. It was originally found on an Iranian computer, and is believed to disseminate via USB sticks. Today nearly 60% of infected computers are in Iran, and Stuxnet has reportedly infected the personal computers of staff at Iran’s nuclear power station. The Stuxnet worm targets computer systems made by Siemens and is capable seizing control of industrial plants, although so far Iran claims that the operating system at the Bushehr plant has not been harmed. Iran’s nuclear programme is often viewed as an existential threat to Israel. So has an electronic war been launched against Iran?

In recent weeks, security experts have broken the cryptographic code behind the software. This virus is unlike any other. The emerging consensus is that it was probably built by a team of sophisticated people with varied backgrounds and significant funding – possibly a nation state – and it was designed to destroy a high-value target. It exploits four Windows zero-day bugs (normally one would do) and it operates behind two stolen digital certificates in order to appear legitimate. What distinguishes this worm is its ability to spy-on and re-programme the command and control infrastructure of industrial systems.

Industrial cyber-espionage and cyber-warfare is not a new concept. In the late 90’s a computer specialist from Israel’s Shin Bet international security service hacked into the mainframe of the Pi Glilot fuel depot north of Tel Aviv. It was meant to be a routine test of safeguards, but according to one of the veterans of the Shin Bet exercise, “Once inside the Pi Glilot system, we suddenly realised that, aside from accessing secret data, we could [cause damage] just by programming a re-route of the pipelines”. Digital infiltration crossed the divide and entered the physical world of pipelines, power grids and industrial plants.

Ralph Langer, a well-respected expert on industrial systems security simulated a Siemens industrial network and then analysed the Stuxnet worm’s attack. It looks for specific Siemens settings – a kind of fingerprint – which confirm that it has made contact with its target. It then injects its own code into the Programmable Logic Controller of that device. More specifically, it makes changes to a piece of Siemens code called Organizational Block 35, which monitors critical factory operations – things that need a response within 100 milliseconds. It can, for example, provoke catastrophic failure by shutting down lubricating or cooling systems or causing centrifuges to malfunction. The code checks every 5 seconds to see whether the parameters for launching an attack have been met, then executes or else erases all traces.

Returning to the broader political context, Iran could be building nuclear weapons under the guise of its civilian nuclear energy programme, yet today there is no clear indication that it has such ambitions, and even less evidence that it has the ability to refine uranium to the concentration required for weapons grade materials. As the BusNet ‘cut out and keep’ guide to Iran’s nuclear record (below) shows, Iran has not benefitted from the ‘presumption of innocence’ and faces UN sanctions anyway.

While Israel has the motive and the opportunity to deploy a cyber-warfare initiative like Stuxnet, we can only speculate whether this is their work (some credit Unit 8200, an Intelligence Corps of the Israeli Defence Force deep in the Negev desert). While the forensic trail might make such an allegation plausible, this story joins a long list of unproven, though normally quite seductive, conspiracy theories.

Another field of conspiracy theory, and the cause of countless fierce debates, is the origin of AIDS. One theory holds that AIDS is the consequence of bio-warfare research that inadvertently filtered out into mainstream society. Once Pandora’s Box was opened, there was no way back. In a similar way, Stuxnet is a compelling instance of cyber-warfare that could filter out into mainstream industry. Stuxnet ensures that each infected USB stick will only infect another three computers, so the virus lies undetected for some time, while proliferating steadily. Furthermore, it installs its own peer-to-peer network, which communicates updates to other infected computers, so there is no central server to target and eliminate. Undetectable and unstoppable, will W32.Stuxnet (and its future incarnations) be to industrial control systems what AIDS is to humans?

The US military coined the term ‘friendly fire’ to describe incidents of inadvertently firing on one’s own forces while attempting to engage enemy forces (particularly where this resulted in injury or death). NATO called it ‘blue on blue’. Stuxnet represents a conceptual change in the history of warfare, the ability to launch fire-and-forget cyber weapons against physical targets and cause them to malfunction. As Shakespeare put it, to ‘Cry ‘Havoc’ and let slip the dogs of war’. This form of cyber-attack makes air strikes look quaint. Yet have we created a new millennium bug, a virus that will ultimately infiltrate and incapacitate the global industrial infrastructure? Is this a new Pandora’s Box – an evil that cannot be undone? With the benefit of hindsight, will Stuxnet turn out to be not so much one worm as a can of worms?

Dear All,

Iran’s early nuclear history is fairly straightforward: It began in the 50’s under Eisenhower’s Atoms for Peace programme. Having signed the Nuclear Non-proliferation Treaty (NPT) in 1968, Iran was free to develop nuclear technology at will, with the support, encouragement and participation of the United States other Western European governments. At the time, the only nuclear nations not to have signed the treaty were India, Israel, North Korea and Pakistan. Then, after the Shah was toppled in the 1979 Iranian Revolution, Iran’s international cooperation ended but so did their development work at the Bushehr nuclear complex. Years later, those derelict reactors were the target of repeated bombing raids during the protracted Iran-Iraq war that ended in August 1988. No international cooperation, no nuclear capability, no problem.

The current conflict resurfaced in 2002 when, after seven years of delays and despite US opposition, construction began on a new reactor at Bushehr, aided by engineering and nuclear expertise from Russia. Later that year, US satellite photos captured images of a heavy water plant at Arak and, more importantly, a nuclear enrichment facility at Natanz. Enrichment can produce uranium for reactor fuel or, at higher enrichment levels, for nuclear weapons. For a while, the humble town of Natanz at the foot of the Karkas (meaning vultures) mountain range become the crux of Iran’s dispute with the international community (although last year, a second enrichment facility at Qom took its share of the limelight).

The International Atomic Energy Agency (IAEA) conducted an investigation and concluded in November 2003 that Iran had systematically failed to meet its non-proliferation obligations, although it also reported no links to a nuclear weapons programme. The IAEA board of governors delayed a formal finding of non-compliance till September 2005 and then, in a rare non-consensus decision, reported Iran’s noncompliance to the UN Security Council. In July 2006 the UN Security council adopted Resolution 1696 calling on Iran to halt its uranium enrichment programme. Iran permitted inspections under its NPT safeguards, but refused to suspend its enrichment related activities. Six months later the Council adopted Resolution 1737 which imposed sanctions on the supply of nuclear-related technology and materials to Iran (and freezing the assets of key individuals and companies related to the nuclear programme).

Iran says that its nuclear programme is peaceful. It also says that it was forced to resort to secrecy after US pressure caused several of its nuclear contracts with foreign governments to fall through, and it insists on its inalienable right to peaceful nuclear technology. Nevertheless, there is a confidence deficit, and a ratchet of UN Security Council Resolutions has continued to weigh against Iran, click Resolution 1747 (March ‘07) expanded the list of blacklisted entities click Resolution 1803 (March ‘08) extended the blacklist further, imposed travel restrictions, and barred exports of nuclear- and missile-related dual use goods to Iran click Resolution 1835 (Sept ’08) reaffirmed the preceding four resolutions click Resolution 1929 (June ’10) imposed a complete arms embargo, banned Iran from any activities related to ballistic missiles, authorised the inspection and seizure of shipments violating these restrictions (and extended the asset freeze to the Iranian Revolutionary Guard Corps and the Islamic Republic of Iran Shipping Lines) click, click, click countries including the US, the EU, Australia, Canada, Japan, Norway, South Korea and Russia have imposed domestic measures to implement and extend these sanctions.

After four rounds of sanctions in four years, the traditional Security Council approach has proved alarmist, menacing and completely ineffective. There is still no evidence of a nuclear weapons programme. Conversely, Iran has begun loading the Bushehr reactor with fuel. At the official opening on 21 August, it was hailed as ‘the largest symbol of Iran’s peaceful nuclear activities’. Pending any unforeseen setbacks, the first nuclear power plant in the Middle East is expected to go online by the end of this year.

Dear All,

If I mentioned international artists Chris, Will, Guy and Jonny, you’d be forgiven for assuming they were a trendy boy band – probably one in which the members didn’t actually play any instruments and had little artistic credibility, yet were propelled to stardom by well choreographed acts and a hologram of cut-out personalities.

This particular group is in fact Coldplay, the most successful British band of the decade, having received 43 major awards and sold over 50 million albums.

They first met during their orientation week at University College London and they were friends for a year before they realised their shared dream of forming a band. They left university three years later as professional musicians after signing a five-album contract with Parlophone.

A model of excellence on many levels, Coldplay symbolises four of the main characteristics of networking. The first is that the personal connection comes first, and the business rationale usually only emerges later. We call this finding connectivity, and remind you of the chance to do this at the Léman Expat Fair in Lausanne this Sunday. It’s a free event with over 120 exhibitors, all arranged by the excellent team at Léman Events.

The second characteristic is that deep inspiration comes from outside sources. It’s very rare that you will have all the best expertise in your own business team. The accepted wisdom is that you can find performance catalysts in the ecosystem around you. The versatility of Coldplay’s repertoire shows how they have sought and found inspiration from a spectrum of other successful artists.

Thirdly, networking is about collaboration. The spark of a new song may begin by idly strumming random chords trying to stumble upon an appealing melody (the band’s front-man, Chris Martin, describes this as the ‘fisherman’s bank’ because of the patient process of waiting for something to bite). It takes elaborate teamwork to refine this into a hit single – for the subtle lyrics written by one individual in the middle of the night to become a collective anthem to twenty thousand people at a live performance. Coldplay had experimented with over 80 variations of Viva la Vida 1 before they finally agreed on one. The song went on to win last year’s Grammy award for Song of the Year.

Finally, networking is about loyalty – an enduring willingness to share your experience with others, and to have faith in the advice that others offer you. Unlike typical boy bands, neither Chris, Will, Guy nor Jonny have tried to break away to find greater success on their own. Once, however, they dropped Will (their drummer) from the group after they received negative technical feedback from some critics. Then, three days later, they pleaded with him to rejoin when they realised that music is about feeling and not about technique.

Coldplay never want to be bigger than they are better. I guess we can only dream of getting as much pleasure from our life in business as they clearly get from the hours they spend pushing the frontiers in their London recording studio – yet they personify four of the things that can make our business lives more pleasurable: connectivity, resourcefulness, collaboration and loyalty.

Dear All,

In Flanders fields the poppies blow, Between the crosses, row on row. These lines by John McCrae, helped establish the poppy as an icon of remembrance of the Great War of 1914-1918.

Few horrors can match the intense, interminable misery of this grinding war of attrition – fought in wet trenches, in fields of mud so thick they bogged down hundreds of tanks and drowned thousands of soldiers. The Trench line changed very little between 1914 and 1917. In the Battle of Passchendaele, the Allies captured 8km of territory at a cost of 140,000 combat deaths, only to concede it again 5 months later.

Few blunders can rival those of the ‘bite and hold attacks’ intended to capture so-called critical terrain. Dissociated by distance and by class, Generals in London and Paris ordered infantrymen ‘over the top’ to clear the barbed wire and forge through the mud under a shower of bullets from the three lines of German trenches. The Battle of the Somme resulted in 57,470 casualties on the first day alone, most of these in the first hour.

The scoreboard of nauseating statistics helps explain how Europe had to come to terms with the sudden loss of their best and their brightest. Towns and villages would never recover. Young girls would never find another love. Nations would not rebuild the wealth squandered on warfare.

More than 9 million combatants were killed before the cessation of hostilities on the eleventh hour of the eleventh day of the eleventh month of 1918. In the aftermath, disillusioned populations sought the misguided comfort of extreme policies (nationalism, fascism, or communism – each the cause of further misery) while some enlightened leaders cooperated to form the League of Nations and pave the way for the United Nations as insurance against further wars.

Historians give engaging accounts of how the war was sparked by imperialistic foreign policies, and how the world’s great powers of the day assembled in two opposing alliances, the Allies and the Central Powers. The rhetoric still persists that this was ‘La guerre pour la civilisation’ or ‘The war to end all wars’. Perhaps through honour or patriotism, we feel compelled to uphold the respectability of this conflict. Dulce et decorum est pro patria mori (It is sweet and fitting to die for one's country).

Once a war begins, it runs by itself. The most honourable moment in any war is the moment in which we are still able to avoid it. Our world needs fewer Field Marshal Haig’s or Joffre’s and more Mandela’s and Obama’s. Building bridges beats digging trenches.

Perhaps, over time, we should be allowed to airbrush the whizzbangs and shrapnel from our collective consciousness. The enduring symbol is the poppy – a Warhol-like pop art image, naive and surreal amidst the dizzying geometry and scale of the fields of white crosses. Today, possibly even as you read this, a profound act of remembrance is taking place – dignitaries lay wreathes at the Cenotaph in London (or closer to us at the Commonwealth War Graves Cemetery in Vevey), and millions worldwide observe two minutes of silence to commemorate the sacrifice of fallen soldiers.

But if we are truly respectful of their sacrifice, we would do better to offer our silence for past wars, and to speak out against proposed ones.

Dear All,

A blogger posted an interesting map of the world this week. The country names were rearranged so that the country with the largest population (China, with 19.5% of the world’s population) appeared in the territory with the largest area (Russia), then the next largest population (India) took the next largest area (Canada), and so on. The USA (3rd) and Brazil (5th) did not have to move, while Bangladesh moved into India’s territory and Switzerland took its place. Also, North Korea now theoretically shares an even larger border with South Korea, which is worrying for world peace!

The aim of this fictional map is to iron-out the extremes in population density (highest in Monaco at 16,923 per km2 and lowest in Mongolia with only 1.7 per km2) so that all countries approached the global average of 13 humans per km2. Perhaps unintentionally, Frank Jacobs’ map also reminds us that ‘Geography is Destiny’. Our lives are enriched or deprived by the environment in which we live. We are fortunate to live in one that is spacious, affluent and green (in terms of both natural beauty and sustainability). By the hazard of birth, it could have been so different.

The Vatican City (which was relocated to somewhere in an archipelago near Fiji) found itself at the centre of the political stage this week when it appeared to shift its stance on birth control. The Catholic Church has always insisted that the purpose of sex is procreation, and that artificial interference is a violation of their teachings. This made family planning tricky. As the old joke goes, Question: ‘What do you call couples who practice the rhythm method of contraception?’ Answer: ‘Parents’.

The use of condoms has an important role to play in combating the spread of AIDS. With about 33.4m people living with HIV (22.4m of whom are in Sub-Saharan Africa) the current statistic is that each year around 2.7m people will contract HIV and around 2m people will die from AIDS. While Pope Benedict XVI’s comments that condom use is a ‘lesser evil’ than transmitting HIV appear to be limited to a few special circumstances, their revelation in a book (Peter Seewald’s Light of the World, which was released on Tuesday) signals a seismic shift in papal teaching.

There is still a degree of ambiguity about the pontiff’s intent. His original comments referred to condom use by male prostitutes, however in the Italian translation of the book, prostitute is feminine, yet in the German translation it remains masculine. Asked to clarify on the position, Vatican spokesperson Rev. Federico Lombardi said that the pope knew full well that his comments would provoke intense debate, and that when he asked the pope whether he had intended to refer only to male prostitutes, Benedict replied that it didn’t really matter, the important thing was that the person took into consideration the life of the other.

The Ancient Greek Philosopher Heraclitus was known for his doctrine that change is central to the universe, and that ‘you cannot step twice into the same river; for other waters are continually flowing in’. This new polemic about moral and sexual responsibility began about two years ago, when Cardinal Carlo Maria Martini, the former Archbishop of Milan planted the idea that the use of condoms was a lesser evil in couples where one partner had HIV or AIDS. The Catholic Church deserves much respect for the willingness it presently shows to revise its orthodoxy in the light of changing circumstances.

By contrast, our political and finance elites appear far less willing to rethink their orthodoxy. The past fortnight has seen more Quantitative Easing in the US and more debt bailouts for countries in Europe, this time Ireland (which, ironically, didn’t have to move in Jacobs’ map!). Printing money is a risky bet. It could be just the thing we need to kick-start our economies, or it could be the rampant force that destroys our advantaged quality of life. We will get an early indication over the next few days, since tomorrow heralds the official opening of Christmas shopping in the USA, known as Black Friday (because of the density of traffic) and followed by Cyber Monday, its online equivalent.

In the meantime, we are still holding gold. It cannot be created the way paper money can, and there are only 189,000 tons of it, which sounds like a lot until you apportion that to the world population of 6,883.5m and get only about 0.88g per person. Hurry while stocks last!

We wish our American readers an excellent Thanksgiving!

Dear All,

Starting the new year can occasionally feel like passing ‘Go’ in Monopoly. We get to begin a new round of the game, not knowing what life will hold for us in 2011, though generally quite optimistic.

The so-called Chinese curse says ‘May you live in interesting times’. The past few years have been tumultuous. The clearest example is probably the financial crisis, which is still visible in the debt overhang that now plagues European governments.

It’s refreshing to momentarily cast-off our unwanted baggage, and set new personal aspirations. Yet as we look ahead, we are faced with a dilemma that has confounded some of the greatest thinkers of all time: Do we wish for easy success, knowing that this could make us soft and complacent, or do we wish for the difficult challenges that make us stronger and more determined?

As in Voltaire’s satire, Candide, our generation has endured slow and painful disillusionment as we witnessed many great hardships in the world, and felt despair at the failure of those in authority to respond effectively. We have been robbed of our optimism.

It seems inevitable that, in our emotionally drained condition, we will collectively choose another year of the easy option. For example, another round of Quantitative Easing, that will transfer more parcels of doubtful assets onto the balance sheet of the state, and place $600bn of easy cash in the hands of the indebted US consumer. We know that this stores up trouble, but still we go along with it.

Two roads diverge, and ultimately we must choose one. Will we favour the uphill climb of high aspiration and deep conviction, or will we take the gradual descent of loose money and an easy passage under the patronage of unchallenged leaders? Apparently, the Chinese curse was the first of three curses of increasing severity. The third and worst one was ‘May your wishes be granted’!

This is a time for individuality and moral courage. Who dares take the road less travelled1? Many of the world’s great movements have flowed from the work of a single individual. Could Julian Assange prove to be such a force for good? Is it conceivable that WikiLeaks will herald the birth of the empowered citizen?

Given the complexity of the WikiLeaks saga, it’s hard to arrive at a clear verdict. They have introduced some transparency, which was needed, yet they have not shown sufficient discretion in releasing harmful and sensitive intelligence. Let’s hope that they have set the stage on which more sophisticated actors will one day perform.

In any event, on 3rd February (Chinese New Year) we move out of the clutches of the ferocious Year of the Tiger, and into the cuddly comfort of the Year of the Rabbit.

May we take this opportunity, then, to wish you a Hoppy New Year!

Dear All,

Throughout the Cold War, life seemed clear cut. It was presented rather like a Western film, where the good guys wore white hats and had rode well-groomed horses, while the baddies wore black hats and rode nags. The good guys stuck together, and guitar fretwork played whenever they approached. The bad guys squabbled – there was no honour among thieves. Justice was a silver bullet. Then, in the real-life conflict, the other guy suddenly blinked. The Soviet Union capitulated and the USA became a hyper-power.

The term Cold War was first used by George Orwell in his essay “You and the Atomic Bomb” (published in the Tribune newspaper in October 1945) to warn of a “peace that is no peace”. When others were celebrating the end of World War II, he had the foresight to identify the next flashpoint.

Yesterday in Washington, the future hyper-power paid a visit to the present one. There was a similar “peace that is no peace”, though for now it is diplomatic. President Barak Obama welcomed Chinese President Hu Jintao to the White House at the start of his high profile state visit. President Obama urged his Chinese counterpart to uphold human rights, saying it could prove key to China’s future success. “History shows that societies are more harmonious, nations are more successful and the world is more just when the rights and responsibilities of all nations and all people are upheld”. President Obama is a great and respected orator, yet this message seems to loosely translate as “good guys stick together” which may signal how little the Western tune has changed.

According to the received wisdom of Sun Tzu, the 6th Century BC Chinese General and legendary military strategist, open confrontation will trigger overpowering resistance. Thus all warfare is based on deception. A skilful attack is when your opponent does not know where to defend. Diplomacy provides a wonderful arsenal of weapons for such an artful war. Human Rights represent a perfectly nebulous area on which to obsess.

That’s not to say that Human Rights do not matter. There is strong consensus that they do. Former Haitian leader “Baby Doc” Duvallier is being sued for torture and other crimes against humanity, within days of his surprise return to the country after 25 years in exile. Also this week, Tunisia’s interim President Foued Mebazaa promised a ‘total break’ with the past, and hailed “a revolution of dignity and liberty” following 23 years under the increasingly authoritarian grip of deposed President Bin Ali. An association of Tunisians living in Switzerland has sought the freezing of his assets here, including a building on Geneva’s exclusive Rue du Rhone, and a Falcon 9000 jet at Geneva Airport. Perhaps they also hope to recover the 1.5 tonnes of gold that Bin Ali’s wife Leila allegedly withdrew from the Central Bank of Tunisia on the day they fled.

There are four types of justice: Distributive justice, is about the fairness of how resources are allocated in society; Procedural justice, is the idea of fair play; Restorative justice, which would allow Tunisia to get back their Falcon 9000 jet; and Retributive justice, which would enable Haitians to seek revenge against Baby Doc. In an ideal world, we would try to prevent atrocities, rather than have mechanisms to correct for them after the fact, which is what restorative and retributive justice facilitate.

If all warfare is based on deception this would also obscure the role of procedural justice in International Affairs, leaving only distributive justice as a proactive mechanism for preserving order. Since the Cold War, this has been achieved through Capitalism and the free market. President Hu Jintao’s state visit provides the backdrop for a myriad of trade and investment deals, such as a $45bn export deal that includes 200 Boeing Aircraft. This is where the real transfers of power are taking place.

As Sun Tzu recommended, the Chinese premier can retreat without fearing disgrace, so humility about human rights comes easily. But on the real issues, the redistributive ones, he knows that the transfer of economic power from the USA to China has already been seismic. Yet he also knows that ‘the victorious strategist only seeks battle after the victory has been won’. Next time round the Aircraft will be manufactured by Comac, the Chinese aircraft corporation.

In a Western film, this would be a good moment for a clear-thinking Sheriff to ride into town, quell the uprising and re-establish order. But we are no longer living in the black and white world. Two hyper-powers are now eyeball to eyeball, and in this world (with apologies to Rudyard Kipling) “if you can keep your head when all about are loosing theirs, you clearly don’t understand the situation!”

Dear All,

Addressing a news conference in April 1954, President Dwight D Eisenhower spoke of the ‘falling domino’ principle: “You have a row of dominoes set up, you knock over the first one, and what will happen to the last one is the certainty that it will go over very quickly.”

In other words, if one land in a region came under the influence of communism, the surrounding countries would soon follow. Fear of such knock-on effects had already helped to form US foreign policy a decade before, when President Truman introduced measures to contain Soviet influence in Europe, including NATO the Marshall Plan.

Eisenhower’s message was delivered about a fortnight before the 4-month long Geneva Conference. The conference, a condition of the Korean War armistice, had two tasks: it sought a way to unify Korea, and it grappled with the challenge of restoring peace to Indochina. Under the resulting Geneva Accords, Indochina was granted its independence from France, and a ‘provisional military demarcation line’ was introduced to separate North Vietnam, supported by its communist allies, from South Vietnam, supported by the USA.

So began the Vietnam Conflict, which ended 21 years later with the fall of Saigon, and the withdrawal of American forces (and financial aid). Once the South Vietnamese domino had fallen, the communist allies soon captured Laos and Cambodia, providing one of the few instances in history where the domino effect has actually applied.

Right now, Morocco, Algeria, Tunisia, Libya, Egypt, Jordan and Yemen are stacked up like dominos. The boundaries that divide them are ‘demarcation lines’, while their links of culture and common experience run deep. A wave of discontent is sweeping through the region. Street protests have turned into popular uprisings. A day of revolt in Egypt has escalated into many ‘days of rage’ with still no end in sight. Violent clashes in Cairo have been echoed in Alexandria and the town of Suez.

As chaos, unrest and panic take hold, the scene is starting to parallel the hysteria of the final days of Saigon. While Algeria still has it’s 1992 state of emergency in place, other leaders are beginning to reach for their chosen pressure release valves - fresh political reforms under a new Prime Minister in Jordan; increased spending on public housing in Libya; elections within six months in Tunisia; an undertaking by Mubarak not to contest Egypt’s September elections; and a promise from Yemen’s president that he will not seek another term in office, nor extend the current one, nor hand over power to his son. Could the Arab world’s old order really be crumbling?

While we wait to see whether any of these palliatives will work, we know that an angry mob is inherently unpredictable, especially when they earn less than $2 per day, as is the case for nearly half the population of Yemen. Rising oil prices seems to indicate a deep international scepticism that any of this can work. Unable to gauge the progress, for now, it may be worth drawing insight from some of the failed policies of Vietnam. Three that stand out are ‘proxy wars’, ‘containment’ and ‘idealism’.

In a proxy war, opposing powers use third parties as substitutes for fighting each other directly. It seems highly likely that a ‘third force’ has been stoking the common grievances in this region for some time now. On 17 December, Mohamed Bouazizi – a young unemployed man who had been prevented from selling his vegetables in the streets of his home town in Tunisia – set fire to himself, and this ultimately ignited the present conflict.

Containment was a ‘patient but firm’ strategy of stalling the enemy and preventing them from expanding, in the belief that this would eventually lead to their collapse. It represented a middle ground position between the contemporary strategies of détente (developing a working relationship with the enemy) and rollback (destroying it). Just as it has in Iraq, a policy of attrition allows conflict to fester. Instead of mounting a ground advance into Laos to cut the communist supply lines, the US waiting game served up an opportunity for the communists: The 1968 Tet Offensive was a coordinated wave of offensives that struck at South Vietnam’s military and civilian control centres in more than 100 towns and cities, with the intention of sparking a general uprising among the population. Most of the strikes were quickly contained and beaten back, so it was a crushing military defeat for the communist forces. However, against the social backdrop of dwindling domestic support, the scale of this attack pierced the veil of propaganda, and made it clear to Americans that the war was just not worth it. It became the turning point in the conflict. Budget cuts in Washington, and oil price hikes in the Middle-East, left the South Vietnamese unable to exploit their vastly superior firepower. An elusive victory slipped from their grasp.

Ideology, in this case, is the arrogant belief that every country in the world wants Democracy as much as the United States does. Just as the USA is ruled by two forces, consumerism and democracy, the Middle East has a religious hegemony to complement their political structure. To the people, the church counts for as much as the state, and the two notions are often confused. Their religious leaders have remained deeply relevant to them, since they impart Allah’s word, and as far as they are concerned, very little gets lost in translation. This brings certainty to their lives and happiness to their homes. The autocratic strong-men that have led their countries for the past three decades belong to this certainty. They live perfectly happily without democracy.

There is an old Arabian proverb which holds that “If the camel once gets his nose in the tent, his body will soon follow”. It is a metaphor for the manner in which a small undesirable situation will lead to a gradual and unavoidable worsening, or in other words, a domino effect. It is not yet clear where the current crisis will lead, however it is patently obvious that we have failed to learn some expensive lessons from Vietnam.

Many in the Arab world would, not just the ruling elites, would prefer this particular camel to keep its nose out of their tent.

Dear All,

This morning, Nestlé announced its financial results for 2010. It was another year of strong performance, with 6.2% organic growth and a further increase in its EBIT margin to 13.4%1. This combination of strong organic growth and margin growth is rare. According to traditional economics, a company with a turnover of CHF104.6bn is thought to achieve sales growth by lowering prices – a phenomenon politely called ‘margin compression’. Nevertheless the Nestlé model has consistently produced organic growth of 5–6% and further EBIT margin improvement. How is this sustained performance possible?

There are, of course, many contributing factors. One reason that is often cited is innovation – successfully implementing creative ideas. Good innovation requires two distinct phases. At the front-end it needs clever invention, which is essentially a creative process. At the back end it needs single-minded implementation, which is essentially a disciplined process.

INSEAD professor J.C. Larreche performed a rigorous study of the world’s largest companies, and identified the characteristics of ‘momentum firms’ that are able to ignite exceptional growth and harness its momentum. He describes these two innovation phases as ‘the twin engines of momentum’: Momentum Design (front-end) and Momentum Execution (back-end), and sets out eight clear steps for gaining, maintaining or regaining momentum.

Nestlé has achieved “accelerated innovation”, which can only occur if the organisation is able to get those at the front-end to collaborate with those at the back-end. According to IMD Professor J-P Deschamps (who spoke to their alumni on this topic last week), this is the role of ‘innovation leaders’. These are the executives who stimulate, steer and sustain innovation. They may not be innovators themselves, however they perform three essential roles: they shape an ambitious vision, they build the delivery capabilities and they steer its execution.

Professor Deschamps emphasises six qualities that Innovation Leaders possess:
1. A mix of emotion (ideas) and realism (execution)
2. An acceptance of risk and of failure (learning)
3. The courage to terminate a non-performing project
4. An ability to build winning teams (attract & retain; high conflict, high respect)
5. Openness to external ideas (internal and external networking)
6. A contagious passion for their mission

Excellent leadership, like great innovation, is difficult to define. It has so many faces. A single innovation project will rely on different leadership skill-sets throughout its evolution. At some stages a key strength may be mobilising and integrating resources. When facing challenges, it may require adaptation or persistence. Faced with doubt, it may rely on your ability to imagine and sell new concepts.

Leadership styles are often compared to Team Coaches or Sponsors or Architects or Conductors. Professor Deschamps believes that it’s important to match the leadership style to the innovation challenge, and his book sets out a way to achieve this. Essentially if you are using incremental innovation to reinforce your existing business, the Team Coach style works best for individual products and the Conductor style works best for whole systems. If you are using radical innovation to reposition your business, the Sponsor style works best for products, and the Architect style works best for whole systems.

It is easy to recognise success when you see it, in further great results at Nestlé. It is more difficult to plan for momentum in advance. There are countless routes to your personal success, but the one that will work best for you depends on your operating environment as well as your preferred leadership style. And there is probably a certain element of luck in finding yourself in exactly the right place at exactly the right time. Oh yes, and on the same wavelength!

Dear All,

Many Parisians can still remember what they were doing twenty years ago yesterday. When the news broke that Serge Gainsbourg had died of a heart attack, and French culture went into shock. At once they had lost a poet, singer, songwriter, actor and director. At his funeral, President Mitterand eulogised that he “was our Baudelaire, our Apollinaire, he elevated song to the level of art”.

His talent for music and scandal made Gainsbourg an irresistible figure for French media, where his well-publicised antics disgusted and delighted in equal measure. There is something truly enigmatic about the ugly man who loved some of the world’s most beautiful women, including Brigitte Bardot. While his posthumous image - with its notorious trademarks of facial stubble, well-worn jeans, ponderous gaze, bottle of whisky, and crumpled packet of Gitanes – seems cohesive, it masks a deeply fragmented personality. Unswervingly provocative, at times worldly-wise and arrogant, at times deeply shy, and all too frequently drunken and abrasive.

Unsure of himself, Gainsbourg found initial acceptance by giving his songs to popular female singers. France Gall won the 1965 Eurovision Song Contest with “Poupée de cire, poupée de son” and Francois Hardy added to her fame with “Comment Te Dire Adieu”. Yet his sexually twisted side bubbled close to the surface – in fact he even gave it a nickname, his Gainsbarre. His next song for France Gall “Les Sucettes” was filled with double-entendre and sexual innuendo, made more poignant by the fact that when she recorded it, the betrayed 18-year old artiste honestly thought it was a song about lollipops. The enfant terrible had already mastered the art of scandal.

Serge Gainsbourg felt born to raise hell, “For me provocation is oxygen”. He teamed up with Jane Birkin, a young actress whose big eyes and long ironed hair personified London’s Swinging 60s. In 1969 they released “Je t’aime… moi non plus” with which featured soft focus melody, explicit lyrics and simulated heavy breathing. The press, of course, speculated that it was an audio vérité to which he bragged that it wasn’t “otherwise it would have been a long-playing record”.

Their hymn to sexual liberation had the predictable effect of mayhem and scandal. The Pope denounced it as immoral. It was banned in Sweden, Spain, Brazil and Britain, while in France, it could only be played after 11pm. Philips was forced to stop pressing the disc, but the slack was instantly taken up by various black market firms, and it appeared in 8 languages, and topped the charts in Austria, Norway, Switzerland and the UK. Gainsbourg called the Pope “our greatest PR man”.

In 1976, he was the first white guy to do a recording in Kingston, Jamaica. A couple of years later, the song that made him notorious, the one that made albums fly out the store, was “Aux Armes et cetera” a reggae version of the French National Anthem. It parodied the militaristic overtones of the sacred La Marseillaise, and this moved Gainsbourg from the entertainment pages to the news pages. There were denunciations from generals, priests and politicians. Former paratroopers disrupted his concerts. Yet the album went gold (over 500,000 copies) and Gainsbourg won the ‘best male performer’ and ‘best album’ awards at Cannes that year.

Gainsbourg’s musical output over three decades was both prolific and varied. He experimented with a succession of musical styles, each time in a truly individual way. His lyrics were legendary. As he later noted morbidly, “I have succeeded with everything, except my life”.

On the flipside, he once quipped that “Ugliness is in a way superior to beauty because it lasts”. And quite rightly, since no artist has come close to filling the gap he left behind.

Dear All,

Prior to the Japanese crisis, the collective desire for clean energy led us to our ‘nuclear renaissance’ in Europe. Developing countries were in turn swayed by the appeal of nuclear energy. The only perceivable risk was that there could be ruptures in the supply of the Uranium that fuels them.

Right now, teams of heroic Japanese engineers are desperately fighting to avert further nuclear meltdown at the Fukushima complex. In the final analysis of this catastrophe, it may transpire that the rupture that brought our nuclear dream to an end was in the pipelines that channel cooling fluid to the reactors.

Those in the financial sector would have a prosaic way of describing the ‘perfect storm’ that has hit Japan: The worst earthquake ever in their lively tectonic history; an unstoppable and persistent series of tsunamis; aftershocks that could themselves make headlines; the rising toll of their humanitarian crisis; and rolling electricity outages across the country. The plant itself was severed from the national electricity grid, and inaccessible due to shattered infrastructure, and, oh yes, radiation. Those in the financial sector would put their point so sweetly, it would be clear that there was no way they were culpable. It was all an act of God.

In Japan, the attitude to responsibility is somewhat different. For nearly a week now, a team of just over 150 engineers has been defending the front line. They are being rotated through shifts to try to limit the amount of exposure they receive, but knowing what we do now, it is unlikely that any of them can survive the exposure they have already incurred. In the months to come, those of us who watched the unfolding events on television will probably criticise them - those of us who have never worked in a plant, and who don’t know how difficult it is to coordinate an emergency plan when the chain reaction is already working against you. At a company level, the Tokyo Electric Power Company immediately switched to seawater for cooling, knowing of course that this meant writing-off the future value of those reactors. When the crisis is over, it is almost inevitable that the debt-laden company will fall on its sword.

There are few declared statistics on levels of radioactivity, yet a few days ago, it was eight times our exposure tolerance for a year. One forensic trail leads to reactor 4, which was shut down at the time of the quake for routine maintenance. As is customary in the industry, a number of fuel rods had been removed from the reactor and were in a cooling pond inside the reactor building, awaiting reinsertion. Normally the water level would be 5m above the tops of the rods, which both cools them and blocks radiation. Cooling ponds also contain boric acid, to mop up neurons – the particles that sustain a nuclear reaction. Somehow these rods became exposed to air, and that began a losing battle: the rods became hotter and boiled away more water, all the while releasing radioactive material.

The events in the cooling pond of reactor 4 began as a sideshow to the unfolding drama, but they could turn out to be the most critical. In a ‘Chernobyl style’ meltdown, the fuel rods become molten and fall through the bottom of the reactor vessel, where they are reasonably ‘contained’ in the ground below. The trouble with the cooling pool is that it lies outside of the containment chamber, and there is nothing to stop the particles escaping. Gamma rays go straight outwards.

Right after the quake, it was clear that this was a battle about cooling, and that the diesel generators (normally the third level of backup) and compromised pipelines would be an inadequate response to the wide-scale disaster. The US rapidly sent ships with emergency power generators to the north of Japan, just not into this battle-zone. It is smart for the US to express concern about the crisis today if it is to encourage their citizens to leave the region. It is pure hypocrisy if it points the finger of blame at the local response.

So once again, nuclear is under the microscope as European countries order urgent health checks for their nuclear facilities, and China shelves its current nuclear plans. Existing green tech and clean tech breakthroughs have not yet been able to match the efficiency of nuclear, and for this reason, it would make sense to prolong the nuclear renaissance. What happens inside the reactor vessel is safe, it is what happens outside that makes nuclear dangerous.

It seemed fairly innocuous to the world, five years ago, when Jack Dorsey sent the SMS message “just setting up my twttr”. The majority of us are not yet familiar with @twitter and its confusing #tags. We haven’t grasped the significance of a platform that allows users to send short bursts of inconsequential information.

Twitter’s ‘micro-blogging’ service now generates over 65 million ‘tweets’ per day, which suggests that its 200 million users are onto something big. So why have so many of us not joined the stampede? Last year, an astronaut on one of NASA’s expedition crews even published a tweet from the International Space Station, making this one of the few San Francisco start-ups to live up to its stratospheric ambitions.

Back on Earth, it’s unclear what force lies behind Twitter’s naïve blue sparrow. Is it further evidence of the ‘banalisation’ of modern-day culture, or is it a text book example of disruptive innovation in action? An IMD event on “The Transformation of the Media Industry” this week helped to put this question into perspective.

The Swiss publishing industry has a turnover of about $2.56bn, roughly 70% of which is from advertising. They are fully aware of the trend towards online, having already seen much of the advertising spend migrate to the Internet (including classifieds). Many publishers, such as Rupert Murdoch’s $32bn News Corp empire, are now trying to extract value from their online audiences through mandatory subscriptions, or ‘paid content’ as it is know in the industry.

The problem for publishers is that the humanitarian in each of us believes that information should be set free. No more incarceration, no more protectionism, no more information asymmetries. Equal rights for all in the knowledge economy! The great liberator of the last decade was the Google search engine. Information was brought to our fingertips whenever we asked for it, and we could graze in whichever pastures offered the best grass that day.

Paid content, on the other hand, cannot be accessed by Google’s search engines, so the ‘walled garden’ approach will distance publishers from the nomadic group of trend-setters who use Google to source news, and then tweet about articles they found impressive. This protectionism is a big strategic bet. Exactly the reverse approach is being taken by Twitter, and the numerous ‘over-the-top’ services that are making twitter feeds more intelligible.

A classic example is the Lausanne-based start-up paper.li which enables individuals to create their own daily newspaper simply by organising their most valued twitter feeds into a well-designed tabloid (if you are interested, you can read ‘The BusNet Daily’ here). Its founder and CEO, Edouard Lambelet, threw down the gauntlet to industry leaders from Tamedia, Edipresse, Publigroupe and Swisscom at the IMD Media event: content creation will remain the same, but it will be communicated via a ‘web of people’.

Both sides of the debate agree on the importance of good quality, well edited journalism. However they differ on the transmission channel, and at the moment the smart money is backing the real-time network of influence, where #people have replaced #tags as the means of highlighting relevant news.

You would normally expect the media giants to use their superior financial strength to buy-up the emergent competitors (AOL acquired the Huffington Post for $315m this month), however their industry is fragmenting so fast they cannot hope to pick up enough pieces to maintain their control. Which makes this is a truly disruptive development.

To state it (in 140 characters or less) any publisher who still discounts the importance of a tweet from space has clearly not grasped the microgravity of the situation.

Yesterday, the European Commission fined consumer products giants Unilever and Proctor and Gamble €315m for fixing the prices of washing powder. It followed a three-year investigation codenamed ‘Purity’. Although both companies acknowledged their participation in the cartel, and had already set aside amounts to cover the inevitable fine, there should be some red faces in the world of ‘whiter than white’.

I turns out that between 2002 and 2005, the companies agreed to fix the prices of washing powder in 8 European countries (though not Switzerland). They initially met as a trade delegation to discuss the environmental impact of their products, which was a good thing, as most detergents keep on cleaning and bleaching long after the spin cycle has ended. One environmental initiative was to introduce smaller pack sizes, although their crime was to collectively agree not to reduce prices when they did this. I guess the logic seemed reasonable to them – previously they had charged consumers for the air in the boxes (caused by settlement of the product), and now they were going to charge for the air anyway, even though they were not providing it.

The matter came to light as part of an internal compliance audit at Henkel in 2008. Henkel, who had also been part of the cartel, immediately informed the authorities, who duly raided the offices of the three companies in June 2008 to gather evidence. The conclusion was that the three companies had deliberately fixed prices, which is of course illegal in the European Union. Henkel was not fined in return for providing the tip-off, and Unilever and P&G received a 10% reduction in their fine for acknowledging their participation, which is all consistent with an EU leniency programme designed to encourage voluntary disclosure of information.

Interestingly, last week the European Central Bank agreed to raise interest rates by 25 basis points for the first time since the financial crisis struck in 2008 (the ECB main refinancing rate is now 1.25%) This makes it harder for households to pay the interest on their mortgages, and may compound the European debt crisis. It is difficult to see why the collusion by finance heads from various European countries should be seen any differently to the washing powder cartel. Each has the effect of increasing the amount it costs to run a household.

One of the smartest distinctions in economics is to identify whether inflation is ‘cost push’ (caused by a rising price environment) or ‘demand pull’ (caused by excess buying). Increasing interest rates does help to choke-off excess consumer demand and stabilise prices. But that is not the scenario we face. The increase in interest rates will only add to the cost burden and push prices higher – so that the average household will get smaller boxes for the same price.

As in the soap saga, the road to hell may be paved with good intentions, but many Europeans will feel that justice is done (and seen to be done) if a few of our financiers could also have their day in court.

Beginnings and endings can have great popular appeal. Yesterday marked an ending, when about half a million people gathered in the southern Indian town of Puttaparthi for the funeral of spiritual leader Sai Baba, who was buried with full state honours. Tomorrow marks a beginning, when similar numbers will congregate in Central London for the marriage of Prince William of Wales to Catherine Elizabeth Middleton, a private day that has become inescapably public, because William is destined to reign over Great Britain and the Commonwealth.

The trouble with beginnings is that they are naturally accompanied by high expectations, yet in many ways theirs is a simple wedding story: The bride (29) and groom (28) met at university. He proposed to her on holiday in Kenya. His younger brother will be best man, her younger sister will be bridesmaid. Their family and friends will be present, with the notable exception of his late mother, who died when he was only 15. Some ex-partners are invited, as is her rogue uncle. Afterwards there will be a reception at his mother’s house, since it is bigger.

For William and Kate, the most memorable day of their lives must accommodate a full Royal Pageant, and the glare of publicity. The Queen has invited 1,900 guests to the wedding, including around 50 heads of state and 45 foreign royals (so about five thousand policemen will be on duty around fortress Westminster). It will be held at Westminster Abbey – home to coronations since 1066 and many royal weddings since 1269. The Life Guards will escort William and Kate’s open carriage (The Landau of State) from the abbey to Buckingham Palace, where Pol Roger champagne and 15,000 canapés will greet the guests (the menu has not been divulged). As in the financial markets, gold will be on the ascent. The BBC will cover the event live, with commentary by Huw Edwards (fittingly a Welshman) the BAFTA Award winning journalist and anchor of the BBC News at 10. It will be screened to 200,000 in neighbouring Hyde Park, and broadcast to over two billion viewers globally.

Over the past few weeks, a debate has intensified over who has been invited, and more importantly who has not. Given the excellence and finesse of the Royal Household, we can safely assume that there were no oversights. Presidents Obama and Sarkozy have not been invited, since the invitations went largely to Commonwealth and ‘crowned’ heads of states. Past Prime Ministers Tony Blair and Gordon Brown were also not invited, which is reported to have caused some offence. If they are smart, they will let the matter drop, as I’m not convinced they will emerge very well from an audit on how they performed their respective roles as Prime Minister of Great Britain, where the Queen remains the constitutional head of state and head of the armed forces. Iraq 2003 springs to mind here.

The bride and groom will nevertheless leave their personal signature on the event. Kate has dropped the promise to ‘obey’ from her marriage vows, there will be no beer at the reception, and the wine will be English (from Chapel Down). Instead of departing on honeymoon at 4pm, they will stay for an evening of dinner and dancing. To create a ‘younger atmosphere’ the Throne Room at Buckingham Palace – normally the setting for crisp family photos - will be transformed into a glitzy nightclub, with Dizee Rascal as DJ.

William and Kate are likely to exceed expectations. Not just in terms of their performance on their wedding day, but in terms of the cultural challenges they face in the years to come. In recent history, the British Monarchy has been accused of being out of touch with the people. William, the Crown Prince who went by the name William Wales at St Andrews and Sandhurst, and Kate, who wears high-heels but has her feet firmly on the ground (and has yet to set a foot wrong!), have avoided publicity yet won the hearts and minds of modern-day Britain. Their royal fairytale seems likely to culminate in a highly popular King William and Queen Catherine.

In the meantime, they carry a huge burden of responsibility, particularly for their age. Let’s wish them what every newlywed couple deserves – love and happiness!

A month ago, the BusNet Bulletin radically suggested that a few of our financiers should have their day in court¹. We could not have predicted how quickly this would happen, or the circumstances under which it would materialise. Now Dominique Strauss-Kahn, who yesterday resigned as head of the IMF, faces trial in the USA on charges of sexual assault.

Televised images of DSK in handcuffs are disturbing and depressing. They evoke memories of the footage of Saddam Hussein – captured, drugged and dazed – having swabs taken from his inner cheeks to confirm his DNA. However bad the criminal may be, ritualistic humiliation is counterproductive. It strengthens the resolve of those who may sympathise with him, or who at least feel that the trial should precede the degradation.

The actions of Dominique Strauss-Kahn, nicknamed the Great Seducer, were ultimately going to catch up with him - particularly in an election year where he was tipped as the favourite to become France’s next president. They now have grave consequences for the public image of the IMF, and the general level of trust in our appointed leaders - which comes at a difficult time for global economic stability.

Top-ranked business school IMD understands the complexity of the global environment. Each year, their World Competitiveness Center assesses the performance of 59 countries and compiles a national competitiveness table – based on a broad base of 331 criteria relating to economic performance, government efficiency, business efficiency, and infrastructure. According to the Director, Professor Stephane Garelli, competitiveness is “a little bit like a salad bowl: the ingredients have to be very good, but the national dressing can be quite different from one country to another”.

Their World Competitiveness Yearbook 2011 was released yesterday. Only four big economies made it into the top 20, demonstrating that self-reliance, rather than scale, is the key. Hong Kong (+1 rank, with a sound balance between government and business efficiency) shared the top slot with the USA (+2 ranks, ‘rescued’ by its business efficiency). This pushed last year’s champion, Singapore (-2 ranks, still a key engine of growth) into third position. Switzerland (-1 rank, has weathered the recession well) conceded 4th place – which it had held since 2008 - to Sweden (+2 ranks, on the strength of the Nordic competitiveness model).

Although government efficiency has been a strong point for Switzerland, Bern remains the exception. Government spending has reached new highs since the recession, and it accounts for a massive 47% of GDP in the most advanced countries. The 23 biggest spenders are all European governments. Professor Garelli questions how long this can last, “In a world of ‘state capitalism’, government efficiency will become a key determinant of competitiveness”. This theme prompted the World Competitiveness Center to release their Government – Business Efficiency Gap rankings for the first time this year. This shows the gap in competitiveness between government and business, in order to establish whether countries have “the government they deserve”. Interestingly, Brazil’s government is worst (gap of -26), and China (gap of -8, 6th worst) and India (gap of -7, 9th worst) have also fared badly.

At the start of this week, my economic faith still rested on ‘blockbuster’ solutions. One was the belief that the BRIC countries could provide the solution to the global economic crisis. The other (just a glimmer of hope despite all my innate scepticism and criticism) was that excessive government spending could prove to be the magic bullet we desire. The findings revealed in this year’s Yearbook have damaged the prospects for both of these hyper-solutions.

We have previously been looking for a super-hero to restore economic performance and global growth. Should we instead be content to see the emergence of ‘a few good men’ - small pockets of contagious, high performance, low unemployment, trade-led growth in countries like Singapore, Sweden, Taiwan, Turkey, Qatar and possibly even Switzerland, that could finally restore global order and allow real recovery to take hold.

BusNet is not well known for its business of predictions, although a year ago we plugged gold (it’s now 22% higher) and we were unexpectedly right about DSK. Dare we wish for a new paradigm?


1. In our 14 April bulletin, we suggested that Central Banks raising interest rates were akin to cartels rigging selling prices.

An unpublished report commissioned by the US government has contested the death toll figures claimed by the Haitian authorities after last year’s earthquake. The USAID report could challenge the premise of a multi-billion dollar aid and reconstruction effort. Coming so soon after the catastrophic Great East Japan Earthquake, this report seems in bad taste.

Human evolution is a curious thing, particularly when we look at how our sense of community has developed through three major phases, and is now on the cusp of a major new movement.

As hunter-gatherers (the first 90% of our existence) the only social bonds were blood ties. Homo sapiens tended to move around in small groups in order to avoid resource competition, while still allowing sexual selection to advance their gene pool.

After the Neolithic Revolution, when farming methods and metal tools became widespread, our distant ancestors were gradually detribalised, and began instead to acquire a theological consciousness. This led to an extended ‘sense of family’ with those of the same religion.

It was only after the Industrial Revolution that our social connection was further extended, and we began to develop a kinship with those with the same national identity. We didn’t lose the old identities of blood ties or religion, we simply added national solidarity.

Today, our outlook remains polarised by our identification with a particular nation state. In war, as in peacetime, this is something that defines us. Regrettably, many do not feel the need to advance their social reference points any further than their local borders.

Dualism is the doctrine that reality consists of two basic opposing elements, like good and evil, or us and them. The trouble with dualism is that it gives rise to conflict, as is often the case between nationalistic states, fundamentalist religions, or warring tribes.

The awaiting challenge in our cultural evolution is to move beyond the dualistic mode to one in which we feel a greater sense of community with the human race as a whole – leading to greater sociability, attachment, affection and companionship. Some of this mood was captured in the 1986 charity song “We are the world, we are the children”.

The key to this is empathy – the capacity to share the emotions and feelings of another person. The Social Revolution is helping drive us towards a more empathetic civilisation, in which unity replaces the ‘us and them’ divisions of the past.

Empathy is frequently brought out by human suffering. The devastation of last year’s 7.0-magnitude Haiti Earthquake, with its 52 aftershocks, prompted the celebrity remake of ‘We Are the World 25 for Haiti’. For a while we were keyed-into empathetic sociability with our fellow man.

How quickly we forget!

On Monday evening, BBC2 screened a piercing documentary entitled “Choosing to die”. It showed distressing footage of millionaire British hotelier Peter Smedley ending his life at 71, rather than see through the unattractive course of his motor neuron disease. The documentary has enflamed the ethical debate on assisted suicide, and also divided those who found it grotesque from those who thought it was a beautiful moment of true humanity.

Peter Smedley had made his fortunes in the hotel business. Soon after their marriage, he and his wife bought a stately home in Somerset, which they painstakingly converted into a luxury hotel. Within a year of opening, it was named the 1982 Hotel of the Year by food critic Egon Ronay. By contrast, in his later years Smedly did much research into motor neuron disease, which is incurable, and the options available to him, which were few. Only his closest family knew of his final decision, when in December last year he and his wife Christine, 60, travelled to the Dignitas clinic in Switzerland in order to deliberately end his life. Dignitas was founded in 1998 by Ludwig A. Minelli, a Swiss lawyer. They offer a way out by exploiting the Swiss laws on assisted suicide. These clearly state that those who assist in a suicide can only be prosecuted if they are motivated by self-interest – and the presumption is that Dignitas acts with neutrality ¹.

Television viewers watched Peter Smedley follow the Dignitas protocol, which is an oral dose of an entiemetic drug (which prevents vomiting) followed 30 minutes later by a lethal overdose of dissolved pentobarbital, a barbiturate that depresses the central nervous system. This causes a person to fall asleep within 10 minutes of drinking it, to progress into a coma, and to die from respiratory arrest within about 30 minutes. Who could watch his final hour and not cry as he drank these cocktails and wished his wife of 40 years to “Be strong my Darling”?

The BBC2 is now accused of being a “cheerleader for assisted suicide”. While its stance was clearly been provocative, this did not set out to be a sensationalist documentary. “Choosing to die” was presented by Sir Terry Pratchett ², now 62, who has campaigned for the legalisation of assisted suicide since he was diagnosed with early-onset Alzheimer’s in 2007. This was why Peter Smedley had invited him, and the BBC film crew, into the closing days of his life. The documentary wasn’t intended to be impartial, though it was followed by a Newsnight debate, which was.

The issue of assisted suicide is complicated by our inability to separate the part that cannot be changed (terminal illness) from the parts that can (our legislation). Nobody seeks the choice of whether to die peacefully rather than to suffer, but once a patient is in this predicament, the sanctity of life needs to be weighed against the dignity of life. While death should not become as easy as going to the dentist, our legislation could undoubtedly become more flexible for patients who, through wilful and informed consent, wish to fly free of their affliction.

As for Peter Smedley, he was forced to leave his gracious home in Guernsey in order to give up his life in a frugal room in an industrial zone near Zurich, simply because that is where the law permits it. Although he felt ‘the need to go shortly’, were it not for such restrictive legislation, he would still be alive today, because he would not have been forced to go to Switzerland while he was still fit enough to travel. In this respect alone, his brave death fittingly punctuates his bold, fruitful and admirable life.



1. Soraya Wernli (a nurse employed by Dignitas until March 2005) accused the organization of being a 'production line of death concerned only with profits'. There are other allegations of irregularities regarding bequests.

2. Sir Terry Pratchett is the UK’s best-selling author of the 1990’s (with sales of over 65m books worldwide in 37 languages).

As many families turn their attention to the end of the school terms and the start of the summer holidays, we face an entirely different ‘breakup day’. One that promises even less sunshine than the current spell of grim weather. At 1pm today, an emergency EU summit begins to crunch out the future of the Euro. It is possible that this summit could mark the beginning of the break-up.

Last night, German Chancellor Merkel and France’s President Sarkozy met to hammer out their common position on the Euro debt crisis. Jean-Claude Trichet, the European Central Bank president was also brought into their discussions. This morning both leaders are talking down the possibility that their 11th hour meeting could have produced any spectacular results. The trigger for today’s summit is, of course, the possibility of another Greek bailout deal, which is rumoured to be about the same size as the €110bn rescue package approved last May. This which constitutes a serious and immediate risk to the European financial system, and in this matter, there is no silver bullet.

One point that has divided Merkel and Sarkozy’s positions is whether Greece’s existing bondholders should be forced to take losses as part of any further rescue deal. According to a BIS Quarterly Revue, Greek debt has reached €340bn (or €31,000 per Greek citizen, which is more than the average annual salary). France’s government and banking institutions have lent €40bn to Greece, making it the largest debtor with 12% of the total. Germany’s are the second biggest, having leant €24bn (7%). Despite this difference in financial exposure, the leader’s difference of opinion is based on something quite different – and the very essence of this financial crisis: the possibility of contagion.

Lenders need to believe that a lender can repay its debts, otherwise interest rates will soar. Countries in this predicament are no longer able to finance their debt commercially, which is why Greece was bailed out (€110bn in May 2010), as were the Irish Republic (€85bn in Nov 2010) and Portugal (€78bn last May). There are also concerns for the larger economies of Italy and Spain. Add together the indebtedness of these 5 ‘periphery countries’ and in amounts to 230% of Germany’s Gross Domestic Product (GDP).

Allowing Athens more time to repay, and effectively rolling over the maturing Greek debt by issuing new bonds, may constitute a default in the eyes of the international credit rating agencies. This could impact not only on the perceived creditworthiness of Greece, but - given the interdependency of Euro denominated debt – that of the entire Euro area. Spanish and Italian bond yields are already over 6%. While most investors will take some losses on Greek debt, the bigger concern is that the contagion will ultimately test the resources of the ECB and undermine investor confidence in the Euro itself.

Ironically, this crisis is partly a consequence of one of the Euro’s greatest strengths – an independent financial entity in the form of the European Central Bank (ECB). This prevents indebted governments from simply ‘printing more money’, which for decades has been the economic remedy of choice. Monetising debt remains an issue both for small economies and for the world’s largest economy, the United States. In addition, the ECB set parameters for indebtedness, The Stability Pact, whereby a member states’ cumulative debt could not exceed 60% of their GDP, and should not exceed 3% of GDP in any single year. Theoretically, these were conditions for remaining in the Euro, but their firmness was diluted when the debt to GDP ratio of both France and Germany exceeded 3% of their GDP after the Great Financial Crisis in 2008, and the parameters were dubbed the ‘stupidity pact’ for ignoring the countercyclical nature of government spending (falling tax revenues and increasing social security payments in a downturn).

The Euro symbol was based on the Greek letter ‘epsilon’ yet, ironically, double crossed by horizontal lines. It seems likely that at a national level, Greece abused the implied guarantee of the Euro, and raised excessive levels of debt to pay the shortfall caused by years of living beyond their means. Once severe accounting irregularities were corrected, the Greek debt ratio rose to 12.7% of GDP, rather than the 3.7% that was reported at the end of 2009. Further surprises in social security funds, hospital arrears and transactions between the government and public enterprises led to another upward revision to 13.6% last year. Now their austerity programme is viewed as too harsh locally, where unemployment already runs at 15.8% and insufficient from abroad. Yesterday Fitch downgraded Greek debt to just one grade above default status.

So the question remains about the future of the Euro, which seems doomed in its present form. Will strong countries like Germany exit from the top, or will the weaker economies like Greece fall like skittles from the bottom? Their day of reckoning is near. In the meantime, the very prospect of an exit by Greece means that Greek savers will withdraw their funds from their banks, and either redeposit them in German banks, or given the difficulty of opening offshore accounts, stick them under the mattress as notes or as gold. Their completely rational action could cause a run on Greek banks and will certainly put much pressure on the Greek central bank, which in turn, will be escalated to the ECB.

The creation in February this year of the European Stability Mechanism, a €500bn permanent bailout fund will help to absorb this pressure. But in the end only decisive political action can remedy an inherently unstable position. Today’s summit will probably indicate whether the Eurozone is destined for greater integration and burden-sharing, or a dramatic breakup.

Fifteen months ago, when Britain’s Prime Minister David Cameron came to power, he unveiled a fresh vision of ‘Big Society’ made possible by ‘small government’. We are already seeing some of the challenges of realising that ambition. The violence that first erupted in the area of Tottenham, then gripped London and has since engulfed several other major cities is beginning to look endemic. Has the Arab Spring set the stage for a London Summer? The legendary ‘thin blue line’ of Britain’s police is all there is to contain a frustrated underclass, which feels excluded from society and abandoned by government.

In music, consonance describes a pleasantly harmonious combination of notes, while dissonance describes a harsh or unpleasant combination. Similarly, ‘cognitive dissonance’ is an uncomfortable feeling caused by simultaneously holding conflicting thoughts and ideas. As humans, we adapt our attitudes and beliefs to try to reduce our conflicting ideas – sometimes in a noble way, though more often through justifying, blaming or denying. And we hope that the dissonance phase is just a brief transition – much as we do with music.

For four nights now, the rioters have been banging away on a tune we don’t like, and we can’t get them to stop. What makes this worse is that we can’t resolve our mental conflict either, because there is something deeply puzzling about these disturbances. Normally demonstrations have spokespeople who seek to draw attention to their particular cause. Yet, for now, there is no manifest cause, no demands to be met, and there are no representatives. Very few people know why this is happening. The rioters hide their faces.

Like warring spouses, their message remains unspoken: We shouldn’t have to ask! We don’t know what goes on in their communities, because we have paid no them no attention. We cannot grasp what it’s really like to grow up in an environment where there is no employment, no space to live or move, and where police stop-search kids on their way home from school. Marginalised and harassed at once, they have a valid point. In fact they have two points - unemployment and disenfranchisement have both been cruel to them. In Los Angeles, the winning slogan was ‘nothing stops a bullet like a job’. In good times, providing jobs would be the easier problem to solve, but these are not good times. Reintegrating the minority class that has evolved will also be challenging. How can we possibly repair the schism that has formed over decades?

The political solution is to begin to listen. The mob, in turn, must begin to speak. This interaction can open up ‘noble’ opportunities for reconciliation, and may potentially facilitate high-road solutions like the dream of Big Society. Dialogue may not seem very attractive to the protesters, but morally it is essential to offer this carrot in addition to the stick of baton-charges and rubber bullets that inevitably awaits them. If there is a command structure behind the Blackberry riots, they will do well to accept any overture from Westminster. This is a time for strong yet reconciliatory leadership on both sides.

Swift action is necessary, for the alternative course is blame and denial. And in the meantime, those with nothing to do and little to lose will continue their violent protest, yet their legitimate political point will become blurred by repeated instances of mindless criminality. And those who huddle together watching their cities burn will grow angrier. And the cycle of violence will provoke fear, and that fear may ultimately incite further racism and xenophobia, which would be a terrible setback for the fibre of British society.

There is an African proverb that says “If the young are not initiated into the village, they will burn it down just to feel its warmth”. Let’s not isolate this group any further, let’s engage them in dialogue – and instead catch them doing something right.

A few hours ago, Steve Jobs resigned as CEO of Apple Inc. due to his ongoing battle with cancer. This announcement marks the departure of an American icon. While his move had been widely anticipated, its confirmation appears to have sent Apple shares as much as 7% lower in after-hours trading. Ironically, his exit coincides with the arrival of another American icon – the Boeing 787 Dreamliner, which is expected to gain FAA approval this week, and enter service in October. Each of these icons tells an insightful business story.

Steve Jobs co-founded Apple in 1976, and six years later TIME magazine recognised him as the ‘maestro of the micro’. In 1984 he launched the Macintosh, with its appealing Graphic User Interface, yet there was a growing movement within the business to contain him and his ‘expensive forays into untested products’. In 1985, Jobs was ousted from the company following a power struggle with CEO John Sculley.

This is where the two stories overlap. The 787 Dreamliner is the world’s first composite-plastic airliner, yet so far it has been an ‘expensive foray’. Boeing claims its design will allow the Dreamliner to fly further and consume 20% less fuel than its rivals. The project was launched, amid great optimism, with a target certification date of May 2008. The 787 quickly became Boeing’s fastest-selling jet ever with over 800 orders from 52 countries at a catalogue price of $202m apiece. But the project was plagued by delays from the outset, and the maiden flight was pushed out to December 2009. When testing finally began, there was the notable problem of ‘rain in the plane’ as the composite fuselage allowed a higher level of air-moisture. Now, after 4,800 flight hours of testing high-altitude performance in Bolivia, noise in Montana and crosswinds in Iceland the airliner is ready for passenger service. Boeing will deliver the first 787 to its launch customer, All Nippon Airways, this September.

More than three years overdue, it is Boeing’s longest commercial development ever. Over this period, the company has amassed $16.2 billion of inventory of almost finished jets. In fact it has more 787s on hand than Virgin Atlantic Airways has planes in service. Boeing has had to lease land after it ran out of space to park them all. Each plane is in a different state of readiness (many have concrete blocks hanging from the wings to keep them from tipping over before engines are installed) although most have undergone waves of retrospective repairs following testing ‘discoveries’. One of those jobs has been to install new condensation-collection systems. As an external consultant commented, “Anytime you’re building an airplane out of sequence, the amount of work that’s required probably goes up by a factor of 10, because they have to un-build all the things you built on top of whatever you have to change, and then build it all back”.

Boeing will spend most of 2012 winding down this inventory, which will probably peak at the current level ($16.2bn). The interest payments will be painful for Boeing and the many suppliers who, under their production system, will not get paid until Boeing does. In this regard, Boeing is symbolic of the huge misallocation of resources, and related debt burden, incurred since the Global Financial Crisis, and the way in which it is felt all the way along the supply chain. Another stark example is the speculative investment in 65m residential properties in China that might never be occupied.

Toyota developed the Just-in-Time production process to remove inventory from the production system, and to detect problems early and avoid expensive rework. In contrast, Boeing has spent $300m apiece on their first batch of planes, and will spend $145m on the 45th unit that is currently on the assembly line. Ultimately, once the ‘learning curve’ improvements have been embedded in the assembly process, the cost of production should fall to $116m apiece, and analysts expect that the Dreamliner project will turn profitable after the 1,000th delivery.

The Du Pont analysis breaks down a company’s Return on Equity into three performance areas: Gross Margin, Total Asset Turnover and Financial Leverage. Boeing’s 787 performance has suffered on each of these measures. It currently produces at a loss, it has vast inventory to turn, and it carries excessive funding obligations. Part of their ‘expensive foray’ was known risk, and part was unforeseeable - what statisticians call ‘fat-tail’ probabilities. While it can mask the financial impact by spreading it out over the initial block of 787s (so-called program accounting), the business lessons are clear.

This flips the story back to Steve Jobs with his idiosyncratic, countercultural mindset. In 1996 he returned to Apple. In the prior two years, the company had run up $1.86 billion in losses, and it was 90 days away from bankruptcy. A month ago it Apple Inc. briefly overtook Exxon Mobil Corp to become the most valuable company in the world. Over this period, Steve Jobs introduced devices that revolutionised the computer (iPad), mobile phone (iPhone) and digital music (iTunes) industries. His attention to detail and emphasis on sleek, easy- to-use products that ‘enchant’ users, means that consumers the world over are willing to pay a premium to own them. And this means strong gross margins.

Since 2008, most businesses have done their utmost to pare costs and strip excess assets from their balance sheets, until only the critical business infrastructure remains. Yet the Du Pont analysis reveals that there is still one lever we can pull to extract business performance – gross margin. The Apple ‘miracle’ was to drive up selling prices through enchanting innovation, of which Steve Jobs has become the icon. For his disciples, his amended biography will still be released on 21st November. Just-in-Time!

By contrast, while the approach adopted by Boeing may occasionally work, until the FAA gives them the all clear, their fleet of wide-bodied Dreamliners resembles a theme park of fat-tail liabilities.

The Eurozone crisis is now two years old. It was sparked by the revelation, in October 2009, that Athens had repeatedly misrepresented its finances. At the time, Greece’s annual budget deficit was already more than three times over the 3% limit intended for Euro countries.

Today, the risk that Greece will default on its sovereign debt remains the most incendiary factor in the European financial system. It is ironic that the nation that helped instil theatre in our culture has orchestrated such a protracted drama, complete with deception, sub-plots, masks, trapdoors and dilemmas.

In the first act of this play, romantic Greece has borrowed money to buy flowers for a girl he is wooing (his voters). When the loan falls due, he has no way to repay it. As luck would have it, an elderly lady on the island takes pity on him, and uses her savings (that she has not touched) to settle his debt. So Greece won the mercy of three kind benefactors (the European Commission, the European Central Bank and the International Monetary Fund) and received a €110bn rescue package. It is fairly usual - in theatre and in real life - for a profligate character to be supported while teetering on the brink of bankruptcy. That was Greece’s advantage in being the first to fall into distress, while there was both the funding and the willingness to help it reform.

The twist comes in the second act. Once again, Athens is unable to pay its bills. Now the plot is become more perplexing. The kind benefactors feel obliged to help Greece in order to safeguard the financial stability of Italy and Spain. In order to do so, they need to dig deep into the collective reserves of their community, which have mostly been contributed by Germany and France. Are you still with me?

The notion that societies have a duty to help those in need is part of the theory of distributive justice. However it is only one aspect of distributive justice, which is mainly concerned with how goods are distributed among members of a society at a particular time. Right now, several Euro countries are relying on guarantees from the same reserve fund (the European Financial Stability Facility) to stave off their own debt crises, including two small economies (Ireland and Portugal) and two large ones (Italy and Spain).

There are two common errors when dealing with social justice. The first is to think that fairness depends on the character of the claimant. The second is to think that a fair process will deliver a fair outcome. Since we are only spectators to this drama, let’s ignore these traps, and look at the evidence anyway.

Risking levels of Greek debt are partly the misfortune of enduring three straight years of recession, worsened by corruption, the backlash against austerity and the strikes and violent protests which have hampered those with jobs from getting to work. Perhaps stronger political leadership could have marshalled the population better and driven through deeper budget cuts, but this seems unlikely. Greece’s fault however, was that it took on too much debt in the first place, aided on one instance by Goldman Sachs, who engineered a currency swap deal at an artificially high exchange rate in order to circumvent the Maastricht rules. This was in 2002, the first year that Greece joined the Euro, and makes these bonds even more expensive to repay when they mature between 2012 and 2017.

Furthermore, when Greece’s newly appointed Finance Minister, former constitutional lawyer Evangelos Venizelos, made his stage debut at an emergency meeting in June this year, his first move was to attempt to renegotiate the second bailout package to give Greece softer terms. This angered the point-man in this discussion, the normally mild-mannered Finn, Olli Rehn.

While the audience takes a secret ballot on Greece’s character, let’s examine the second trap – the fairness of the process. It’s often said that ‘the squeaky wheel gets the oil’. Greece has €388bn in debt, which is 143% of its GDP, and its fiscal deficit is adding to their liabilities at a current run rate of 10.5% of GDP. This is squeakier than a panzer division.

European policymakers are intent on shoring up Greece’s finances because unless they do so, the financial markets will deem other Eurozone debt to be unacceptably risky (take Italy as an example, currently €1.9 trillion or 120% of GDP) which will in turn push up the cost of financing those debts, and leave less money in their budgets for spending on education or infrastructure. A quick glance around the playhouse suggests that the audience agrees with the need to preserve confidence in the Euro and prevent the contagion, yet is truly puzzled that buying Greece’s debt is the best way in which to accomplish this.

The curtain rises on the third and final act. For almost 24 months, European Finance Ministers have been holding a burning match, yet they appear to be locked in a state of paralysis. At some point they will need to blow out the match, or drop it before it burns them. Yet perhaps their quandary could be resolved by adopting another Classical precedent – from Sparta, which was the pre-eminent Greek city-state around 650BC. Sparta’s complete focus on military training and excellence gave rise to an unusual social system. When a child was born, the mother bathed it in wine. If the baby survived, the father took it before the council of elders, who decided whether it was fit enough to be reared. Puny infants were thrown into a chasm on Mount Taygetos.

Ultimate leadership is about keeping the rights of the invisible majority firmly in mind while attending to the squabbling demands of those who hold your attention. Our financial leaders do not know how to blow out this match. Their only option is to drop it into a chasm. By inference from Sparta’s primitive ‘eugenics’ ¹ in order to maintain a strong gene pool in the Eurozone, Greece would first face the acid test of whether it will ever be able to repay its current obligations using its own tax revenues. Only once it had convincingly passed that challenge would the council of elders (or the ECB ²) determine the rescue allocation it merits – with full regard to all other potential claimants, present and future. Call this eurogenics. Cruel? Yes it is. Social Darwinism? Yes it is. Fair? You decide what fairness is in this case.

In the meantime, we the audience watch the unfolding drama and try not to shift too much in our seats. Comedy it is certainly not. Satire it could still be, but it will take an amazing piece of stagecraft for this crisis not to turn into an all out tragedy.



1. Eugenics is the applied science of aimed at improving the genetic composition of a population, which became deeply unpopular due to its association with Nazi Germany.

2. European monetary policy is determined by the European Central Bank (ECB). The original mandate of the ECB was cloned from the Deutsche Bundesbank, which was by far the strongest and most responsible of the European central banks at the time that 11 countries (now enlarged to 17) decided to tie their fate together in the Euro. Its DNA still reflected the profound fear of inflation that Germany carries in its collective unconscious due to the indiscriminate ravages of hyperinflation after the Weimar Republic collapsed.

Over the course of this crisis, the ECB has strayed from its guiding objective - to keep inflation below 2% - and has bought €160bn of bonds from peripheral Eurozone countries. This is a major constitutional shift. German delegates Alex Webber (best positioned to have replaced the outgoing head, Jean-Claude Trichet) and Juergen Stark each resigned their seats on the central bank’s six-member executive board this year – long before the end of their respective terms. A recent poll shows that 54% of Germans would like to return to the Deutschmark.