The adjustment process requires more than just stimulating the economy and involves a worldwide rebalancing
By JOERGEN OERSTROEM MOELLER
THE current financial and economic crisis seems to be moving into a phase where the deceleration is losing steam. But we are still in unknown territory, wondering how long it will take before a flat economy caught by stagnation will gain sufficient momentum to accelerate.
The global economy has encountered more serious problems than originally envisaged because deep and strong imbalances - especially in the US - have been allowed to persist. Therefore an adjustment process is not just about stimulating the economy, but the need to tackle the more agonising issue of rebalancing the global economy.
There are four basic challenges requiring the policymaker's attention.
The first one is the frightening similarity between this crisis and the start of the Great Depression in 1929. In both cases, the calamities began with a collapse of the financial system in the US spreading to the financial systems in other countries, triggering a decline in the real economy through rising unemployment and economic contraction.
All other recessions seen between these two events have started with a fall in demand, steering the economy into recession with the result that the financial sector ran into problems later because the lower growth or outright contraction pushed enterprises into lower profits or losses, turning normal bank loans into bad debt.
There is a frightening similarity between this crisis and the start of the Great Depression in 1929. In both cases, the calamities began with a collapse of the financial system in the US spreading to the financial systems in other countries, triggering a decline in the real economy through rising unemployment and economic contraction.
In 1929 and 2007, the financial sector dragged the economy into crisis, contrary to the normal pattern characterising recessions.
Is the worst over?
When people judge the performance of the financial sector in the current crisis and the policy measures applied by central banks and finance ministers, they - quite rightly - find it reassuring that the worst seems to be over.
That disregards the unhappy phenomenon waiting in the wings that over the next six to 12 months, financial institutions will report heavy losses as many enterprises cannot service their debts. Or in other words: what we have seen so far in the financial sector is the consequences of the original financial crisis emanating from sub-prime and related exuberance, but not yet the consequences from the economic downturn coming in with a time lag.
Unless we realise this, observers may be disappointed. They may be more than that when 2009 does not bring along improving but deteriorating profits for the financial institutions.
The second challenge is that the financial cycles have gone global. Work by the International Monetary Fund (IMF) shows unequivocally that the world is steered by a congruous financial cycle among industrialised countries and emerging economies. The curves reveal that as soon as one of these groups get into difficulties, another one is dragged into the quagmire immediately. There is no possibility of finding a refuge or opting out.
This also explains why global policymakers are so focused upon global or international steering instruments for the financial systems. If the cycles were national or regional, they might be dealt with in a national or regional context. But the plain fact is that as they are global, measures on a global scale are required. The other plain fact is that even if all political goodwill is taken into account, the world is far away from such measures.
The third point is that there is no global business cycle. There are two business cycles - one dominating the economies of the industrialised countries and another one for the economies of the emerging economies and developing countries. As the figures published by the IMF show, emerging Asia stopped fluctuating with the US business cycle around 1980 and emerging Latin America did the same around 1990 to follow the business cycle in emerging Asia instead of the US.
That makes global economic policy more difficult than if there was a global business cycle. When the major countries do not follow the same or congruous business cycle, measures required to turn the economy around differ and countries tend to diverge in their policy options instead of converging them.
The fourth point is that the US follows a course of strong stimulatory policies disregarding the deficits and imbalances. China is adopting a similar policy, but can better afford to do so, as the Chinese deficits and debts are manageable. The figures for the US are frightening, disclosing a deficit for the federal budget running close to 15 per cent of gross domestic product (GDP) plus a high debt, and deficits on the balance of payments despite a reduction of the growth differential between the US and several other industrialised nations including Europe. The main worry is that there are no signs that these deficits and imbalances gripping US economy are going away.
Japan is mired in a severe recession with a contraction of about 6 per cent this year. Britain falls more or less in the same category as the US, while continental Europe is reluctant to run up heavy deficits to stimulate their economies.
The discrepancy is illustrated by a closer look at the figures for G-20 countries. From 2008 to 2010, the budget deficit among industrialised G-20 countries is expected to grow from 4 per cent of GDP to about 7 per cent. For emerging G-20 countries, the corresponding figures are nil for 2008 and only 2 per cent expected for 2010. Government debt among industrialised G-20 countries is expected to rise from 80 per cent to 100 per cent, but at an almost stable fluctuation of around 35 per cent of GDP for emerging G-20 countries.
Politically, it reverberates around the globe that unsound and irresponsible policies are pursued by the industrialised world with the US in the forefront, while prudent policies have become the pride of emerging G-20 countries.
The inevitable repercussion of this is an unbalanced effect on the global economy of national stimulatory measures. Some of the US stimulatory measures will benefit Europe or Japan or China, which will give rise to questions in the US on why such countries do not adopt similar stimulatory policies instead of getting a free ride on the US measures.
So far, these voices have been kept under control, but unless the US economy starts to reflate in early autumn, there is considerable risk that the US discontent about the lack of coordination will spill over into strong words and maybe even policy actions to preserve the positive effects of stimulatory measures for the US economy.
Time is running out for the global economy to mastermind a better coordinated global response addressing the underlying imbalances. We know that the crisis is deeper than we thought. Unless we introduce global measures to address the imbalances, it will also be longer.
The writer is a visiting senior research fellow at the Institute of Southeast Asian Studies, Singapore and an adjunct professor at Copenhagen Business School and Singapore Management University
Friday, May 29, 2009
Monday, May 18, 2009
Green shoots and dud forecasts
By Samuel Brittan
Published: May 14 2009 22:13 Last updated: May 14 2009 22:13
We have been told by that usual bringer of bad tidings, George Soros, that the “economic freefall” has stopped. The normally cautious president of the European Central Bank, Jean-Claude Trichet, has identified a slowing down of the rate of decrease in gross domestic product and, in some cases, “already a picking up”. The Organisation for Economic Co-operation and Development composite leading indicator shows at least a slight uptick. The admittedly highly erratic Easter UK retail sales figures show an actual increase and surveyors report more property inquiries. Financial commentators talk of “green shoots” and one of them has even suggested that the recession came to an end in April. So – Bank of England dissenting – everything is all right and we can get back to normal life.
Except that it isn’t. It is perhaps unfair to cite the continuing horrifying rise in unemployment in so many countries. For that is admittedly a lagging indicator. A better reason for being suspicious is that so much of the new optimism is associated with a very recent recovery in equities. These lost up to half their value in the key US and UK markets, but have come less than a third of the way back since early March. Paul Samuelson once said that the stock market had predicted eight of the last five recessions. The same might be said of recoveries.
There is also a little matter of arithmetic. UK GDP is estimated to have fallen at an annualised rate of 7.4 per cent in the first quarter of 2009. So it is as well that the rate of decline is itself declining. A more specific factor is that a drop in stocks much amplifies any recession. As the Bank of England inflation bulletin explains: “De-stocking only reduces GDP growth if the fall in stock levels is larger than the fall in the previous period.” When this no longer happens the recession looks less draconian; but it does not mean that it is over.
In fact, I have never shared the gloom-and-doom, end-of-capitalism attitude to the credit crunch. Injecting public funds into failing banks was not the best way to bolster demand and credit, especially as governments have relied upon these very same bankers to advise them. Critics on the left and right agree on this matter and are largely right. Nevertheless, governments and central banks have probably injected enough cash into the world economy to prevent the worst from occurring. Sound money commentators fret about the difficulties of withdrawing the stimuli in time. They should equally worry about the danger of withdrawing them too soon. One reason why US unemployment remained so high in the New Deal period is that a premature monetary tightening and attempt to balance the budget aggravated a new recession in 1937.
There has been much discussion about whether the present recession will be V-shaped, which is what national authorities would like; W-shaped, in which a modest recovery would be followed by a further downturn; or L-shaped, in which output stops falling but we crawl along at the bottom without getting back to normal trend growth. Having exhausted suitable letters of the alphabet, commentators talk of bath-shaped and hook-shaped recessions as well.
The truth is that we do not know. To me the most dispiriting aspect of current discussion is the way in which both governments and their critics still cling to national income forecasts, known in the trade as “NIF”. The value of such forecasts is not to be judged by their average record over several years, but by whether they signal problems and opportunities in advance of turning points. Here their record is abysmal. At the beginning of 2007 both national and international mainstream forecasters looked ahead to a golden period of good growth with low inflation, oblivious to the credit crunch that was to hit us later the same year. This should have been the coup de grâce, but it was not. There is no solution in putting wide ranges of error on the predictions – what one economist called “giving them wings”. New Bank of England charts show a range of between minus 2 per cent and plus 6 per cent for output growth in 2011 and 2012, which is honest but useless.
I recently heard a well-known forecaster say that the only valid question is which forecasters to go by and what methods they should use. Not so. New mathematical theories of chaos and complexity provide insights into why forecasting is so problematic but do not provide alternatives. We just have to accept that the future cannot be foreseen in the way many governments and businessmen would like.
Let me end with a simple illustration. The weather in summer in north-west Europe is known to be highly variable. Somebody going away for a fortnight in that part of the world would find it helpful to have a day-by-day prognosis of temperature, rainfall, sunshine, wind conditions and so on. But apart from the first day or two it cannot really be done. Rather then rely on long-term weather bureau predictions, it is safer to take an umbrella or raincoat and a warm pullover as well as sunglasses and a sunshade, even at the cost of slightly heavier luggage. Now apply this homely little story to economic policy.
More columns at www.ft.com/brittanwww.samuelbrittan.co.uk
Wednesday, May 6, 2009
EU-CHINA RELATIONS: A chess game with 28 players
By Jonathan Eyal
EUROPEAN governments may disagree about how to tackle the current financial crisis, but they all agree on one issue: China is crucial to global economic recovery.
Yet, as a recent report from the European Council on Foreign Relations (ECFR) - a leading think-tank - points out, the Chinese have a very different perception about Europe's importance. They regard the European Union (EU) as a political dwarf - a rich but dysfunctional player which very often can simply be ignored.
China 'treats its relationship with the EU as a game of chess, with 27 opponents crowding the other side of the table and squabbling about which piece to move', the ECFR report claims. And unless the Europeans act in unison, matters are only likely to get worse.
Europe has long felt sidelined by China. Trade disputes between America and China preoccupy all international financial negotiations. Europe, which is actually China's biggest export market, hardly gets a hearing. And the whopping $332 billion surplus in China's trade with Europe last year alone elicits no expressions of concern from Beijing.
More importantly, the Europeans feel politically humiliated. If the Chinese cancelled a summit at the level of heads of state with the US, this would have been headline news. But when China cancelled a scheduled summit with the EU last December because it did not like Europe's policies over Tibet, nobody noticed.
One reason why China does not take the EU seriously is that, despite its name, Europe is hardly a proper 'union'. It is a confederation of nation-states, pursuing different agendas. It did not take the Chinese long to conclude that, while there was no point in offending the stream of EU bureaucrats who visit Beijing, the real business is still conducted in Berlin, Paris and London.
True, the Chinese are paying a price for this policy. China's relations with the European Parliament are poor: the EU legislature frequently passes resolutions criticising Beijing's human rights record.
But, on the whole, China still gets its way by 'running rings around the EU', as the ECFR report puts it.
Beijing's chief tactic is to forge a close relationship with one important European country at any given time. For years, Britain was Beijing's bogeyman. Now, it is the turn of France to be excluded, while Britain is lavished diplomatic attention.
In theory, there is an answer to this tactic: the Europeans can stick together. As the authors of the ECFR report argue, the EU could refuse to make trade concessions unless Beijing opens up its own markets. Also, it could refuse to lift the current arms embargo on China until Beijing promises to cooperate over European security concerns in Iran or Africa.
But this confrontational approach, although beguilingly simple, is also guaranteed to fail. Europe is the victim of wider historic trends that can neither be ignored nor wished away.
Paradoxically, the Chinese used to be the EU's most fervent supporters. During the long decades of the Cold War, China hoped that the EU could provide a counter-balance to the US and the then Soviet Union, a third force in international relations. That was the moment when Europe could have forged a special relationship with Beijing. Unfortunately, that was also the moment when Europe preferred to examine its own navel.
That historic opportunity is unlikely to return. The Chinese have now reached a stage in their development when they no longer need the EU to counter-balance America: Beijing can do this on its own. And the rise of other powers has further diminished Europe's importance. So the Europeans are proposing to get serious about China just when Beijing no longer needs them.
And despite all their pretences, the Europeans still do not understand what makes China tick. Although all EU member-states have embassies in Beijing, only a handful have any serious presence throughout Asia. Very few European foreign ministries employ Chinese speakers or experts. And only a tiny minority have either the capacity or interest to think in global terms.
The result is that Europeans often make decisions without even sparing a thought as to how they could affect China.
At the last G-20 summit in London, for example, the Europeans wanted to isolate offshore financial centres - the so-called 'tax havens' - oblivious to the fact that China, with its interests in Hong Kong and Macau, was never likely to accept this. It took US President Barack Obama to broker a deal, leaving the Europeans to fume on the sidelines.
The same applies to Europe's grandstanding on human rights. Not one EU official believes that the 'dialogue' with Beijing on such matters can produce any results. But talks continue, because nobody agrees what should replace them.
As the report from the ECFR correctly points out, 'Europe's approach to China is stuck in the past'.
Yet the future still does not lie in confronting Beijing. Rather, it has to start with the Europeans understanding that they never had the slightest hope of 'changing' China, and they no longer have the luxury to choose how or when to engage with Beijing.
This may not be a pleasant conclusion for the 'old continent'. But it remains a necessary one.
ST May 7, 2009Friday, April 24, 2009
CEOs, it is time to decouple from financial markets
By Vijay Govindarajan and Anant Sundaram
Published: April 21 2009 03:00 Last updated: April 21 2009 03:00
Managers are frustrated. While many are intent on creating long-run value for investors, the recent performance of equity markets makes them question how the fundamentals of their business are reflected in the stock price.
Basic finance theory tells us that a company's value reflects long-run cash flows discounted to the present at the rate of return that investors expect ("cost of capital"). Cash flows are a function of revenues, costs and investments - and the life of a manager revolves around getting the most out of these. But cost of capital is primarily determined by the stock market.
As a result, individual stock prices are tied to movements of the market. If the market swoons, the chances are high an individual stock will plunge too. As we have seen recently, this can happen irrespective of what managers do to influence future cash flow prospects.
What to do? We believe it is time to re-examine the relationship between companies and capital markets. Chief executives should decouple their long-run strategies from the short-run vagaries of financial markets by taking any or all of the following six actions:
* Jettison quarterly guidance. Chief executives have had a simple bargain with the market: provide regular updates and the market will process the information and reveal "fair" prices. But, in many companies, earnings guidance has become a treadmill of managing for the next 90 days. Recent market falls made little distinction between companies that provided quarterly information and ones that did not.
* Reduce dependence on external capital. Having to justify to the markets why a company needs capital is viewed as a source of discipline. But that assumes the market will believe the company's business case, that the liquidity and the investment bank will be there when needed. We have seen that these could be somewhat naive assumptions.
Companies might do better by focusing on internal cash to fund growth. They should concentrate on cash flows - that is, the cash that comes in versus the cash that goes out - rather than accounting earnings. They should also rethink their dividend policies. If they can create more value by reinvesting the cash, they should do so, even if the action risks a fall in the share pricein the short term.
* Focus on individual and not institutional investors. Most shares in the US are owned by institutions. But it is perhaps time to develop, manage and communicate the company's strategy as though its primary investor is an individual. Why? Individuals have longer horizons. Second, if a company is managed for institutional investors, which institution should it care about and for what horizon? After all, they include everything from pension funds (longer horizons) to hedge funds (short horizons) to arbitrageurs (horizons measured in minutes).
This focus, however, must be accompanied by three changes in shareholder relations. Companies should appoint to the board a retail shareholder representative. They should treat the annual general meeting as an opportunity to have a meaningful conversation with investors. Companies should make financial statements more retail investor-friendly.
* Rethink compensation.
Earnings-per-share-related metrics bias managers' attention towards the short term. Companies should instead focus on long-run, cash-flow-based metrics in a manner that rewards managers for the value-creating investments they make.
If using stocks or options, payoffs should be benchmarked against market or peer performance. On the upside, executives are rewarded only for value they (and not the market or industry) create; on the downside, they are not penalised for market-driven declines.
* Innovate via adjacencies rather than breakthroughs. Tough economic conditions call for a brutal focus on costs. But companies must also grow and growth requires innovation: we recommend innovation into spaces adjacent to the core rather than via breakthroughs. The latter, such as Detroit's quest for an electric car, involves bet-the-company moves that can exacerbate share price volatility because the up-front cash outlays required and the chances of failure are both higher.
Adjacency innovations extend existing competencies and offer new products and services to already-familiar customers. To the extent that they involve a smaller up-front cash outlay, they are consistent with reliance on internal cash flows, and obviate the need for large external financing.
* Invest and acquire countercyclically. Companies tend to go shopping for big-ticket items when they feel rich. But the risk is that they can "buy high" in a boom and go into a defensive mode in a downturn. By being counter-cyclical in investing and acquiring, not only are assets likely to be cheaper but screening mechanisms are also more disciplined and the requirements for a business case more uncompromising.
Vijay Govindarajan and Anant Sundaram are professors at the Tuck school of business at Dartmouth
Source: FT.com
Published: April 21 2009 03:00 Last updated: April 21 2009 03:00
Managers are frustrated. While many are intent on creating long-run value for investors, the recent performance of equity markets makes them question how the fundamentals of their business are reflected in the stock price.
Basic finance theory tells us that a company's value reflects long-run cash flows discounted to the present at the rate of return that investors expect ("cost of capital"). Cash flows are a function of revenues, costs and investments - and the life of a manager revolves around getting the most out of these. But cost of capital is primarily determined by the stock market.
As a result, individual stock prices are tied to movements of the market. If the market swoons, the chances are high an individual stock will plunge too. As we have seen recently, this can happen irrespective of what managers do to influence future cash flow prospects.
What to do? We believe it is time to re-examine the relationship between companies and capital markets. Chief executives should decouple their long-run strategies from the short-run vagaries of financial markets by taking any or all of the following six actions:
* Jettison quarterly guidance. Chief executives have had a simple bargain with the market: provide regular updates and the market will process the information and reveal "fair" prices. But, in many companies, earnings guidance has become a treadmill of managing for the next 90 days. Recent market falls made little distinction between companies that provided quarterly information and ones that did not.
* Reduce dependence on external capital. Having to justify to the markets why a company needs capital is viewed as a source of discipline. But that assumes the market will believe the company's business case, that the liquidity and the investment bank will be there when needed. We have seen that these could be somewhat naive assumptions.
Companies might do better by focusing on internal cash to fund growth. They should concentrate on cash flows - that is, the cash that comes in versus the cash that goes out - rather than accounting earnings. They should also rethink their dividend policies. If they can create more value by reinvesting the cash, they should do so, even if the action risks a fall in the share pricein the short term.
* Focus on individual and not institutional investors. Most shares in the US are owned by institutions. But it is perhaps time to develop, manage and communicate the company's strategy as though its primary investor is an individual. Why? Individuals have longer horizons. Second, if a company is managed for institutional investors, which institution should it care about and for what horizon? After all, they include everything from pension funds (longer horizons) to hedge funds (short horizons) to arbitrageurs (horizons measured in minutes).
This focus, however, must be accompanied by three changes in shareholder relations. Companies should appoint to the board a retail shareholder representative. They should treat the annual general meeting as an opportunity to have a meaningful conversation with investors. Companies should make financial statements more retail investor-friendly.
* Rethink compensation.
Earnings-per-share-related metrics bias managers' attention towards the short term. Companies should instead focus on long-run, cash-flow-based metrics in a manner that rewards managers for the value-creating investments they make.
If using stocks or options, payoffs should be benchmarked against market or peer performance. On the upside, executives are rewarded only for value they (and not the market or industry) create; on the downside, they are not penalised for market-driven declines.
* Innovate via adjacencies rather than breakthroughs. Tough economic conditions call for a brutal focus on costs. But companies must also grow and growth requires innovation: we recommend innovation into spaces adjacent to the core rather than via breakthroughs. The latter, such as Detroit's quest for an electric car, involves bet-the-company moves that can exacerbate share price volatility because the up-front cash outlays required and the chances of failure are both higher.
Adjacency innovations extend existing competencies and offer new products and services to already-familiar customers. To the extent that they involve a smaller up-front cash outlay, they are consistent with reliance on internal cash flows, and obviate the need for large external financing.
* Invest and acquire countercyclically. Companies tend to go shopping for big-ticket items when they feel rich. But the risk is that they can "buy high" in a boom and go into a defensive mode in a downturn. By being counter-cyclical in investing and acquiring, not only are assets likely to be cheaper but screening mechanisms are also more disciplined and the requirements for a business case more uncompromising.
Vijay Govindarajan and Anant Sundaram are professors at the Tuck school of business at Dartmouth
Source: FT.com
Wednesday, April 8, 2009
Basic Truths About Jack Bauer
Killing Jack Bauer doesn't make him dead. It just makes him angry.
If Jack Bauer was in a room with Hitler, Stalin, and Nina Meyers, and he had a gun with 2 bullets, he'd shoot Nina twice.
If you wake up in the morning, it's because Jack Bauer spared your life.
Superman wears Jack Bauer pajamas.
If it tastes like chicken, looks like chicken, and feels like chicken, but Jack Bauer says its beef. Then you better believe it's beef.
Jack Bauer once forgot where he put his keys. He then spent the next half-hour torturing himself until he gave up the location of the keys.
1.6 billion Chinese are angry with Jack Bauer. Sounds like a fair fight.
Let's get one thing straight: the only reason you are conscious right now is because Jack Bauer does not feel like carrying you.
Jack Bauer was never addicted to heroin. Heroin was addicted to Jack Bauer.
Jack Bauer played Russian Roulette with a fully loaded gun and won.
When life gave Jack Bauer lemons, he used them to kill terrorists. Jack Bauer hates lemonade.
Jack Bauer once won a game of Connect 4 in 3 moves.
Osama bin Laden's recent proposal for truce is a direct result of him finding out that Jack Bauer is, in fact, still alive.
Jack Bauer is the leading cause of death in Middle Eastern men.
Jack Bauer doesn't miss. If he didn't hit you it's because he was shooting at another terrorist twelve miles away.
When Jack Bauer was a child, he made his mother finish his vegetables.
Jack Bauer killed 93 people in just 4 days time. Wait, that is a real fact.
Simon Says should be renamed to Jack Bauer Says because if Jack Bauer says something then you better do it.
Jack Bauer won the Tour de France on a unicycle to prove to Lance Armstrong it wasn't a big deal. He thinks yellow wristbands are gay.
When Jack Bauer pissses into the wind, the wind changes direction.
Jack Bauer's favorite color is severe terror alert red. His second favorite color is violet, but just because it sounds like violent.
When you open a can of whoop-ass, Jack Bauer jumps out.
When Google can't find something, it asks Jack Bauer for help.
You can lead a horse to water. Jack Bauer can make him drink.
Jack Bauer can get McDonald's breakfast after 10:30.
When the boogie man goes to sleep, he checks his closet for Jack Bauer.
Every mathematical inequality officially ends with "< Jack Bauer".
In 96 hours, Jack Bauer has killed 93 people and saved the world 4 times. What the hell have you done with your life?
Jesus died and rose from the dead in 3 days. It took Jack Bauer less than an hour. And he's done it twice.
Jack Bauer killed so many terrorists that at one point, the #5 CIA Most Wanted fugitive was an 18-year-old teenager in Malaysia who downloaded the movie Dodgeball.
In kindergarten, Jack Bauer killed a terrorist for Show and Tell.
What color is Jack Bauer's blood? Trick question. Jack Bauer does not bleed.
Guns dont kill people, Jack Bauer kills people.
If Jack and MacGyver were locked in a room together, Jack would make a bomb out of MacGyver and get out.
People with amnesia still remember Jack Bauer.
Sun Tzu once wrote, "If your enemy is weaker, conquer him. If he is stronger, join him. If he is Jack Bauer, you're f***ing dead."
Jack Bauer literally died for his country, and lived to tell about it.
Jack Bauer has been to Mars. That's why there's no life on Mars.
Superman's only weakness is Kryptonite. Jack Bauer laughs at Superman for having a weakness.
When Batman is in trouble, he turns on the Jack Bauer signal.
It took Jack Bauer two minutes to beat a confession out of OJ.
If Jack Bauer was gay, his name would be Chuck Norris.
The bumper sticker on Jesus's car reads, "WWJBD?"
Jack Bauer was conceived by torturing the other sperm until they gave up the location of the egg.
After 7 minutes of interrogation at the hands of Jack Bauer, Tom Cruise admitted that he was gay.
Jack Bauer's family threw him a surprise birthday party when he was a child. Once.
If Jack Bauer was in a room with Hitler, Stalin, and Nina Meyers, and he had a gun with 2 bullets, he'd shoot Nina twice.
If you wake up in the morning, it's because Jack Bauer spared your life.
Superman wears Jack Bauer pajamas.
If it tastes like chicken, looks like chicken, and feels like chicken, but Jack Bauer says its beef. Then you better believe it's beef.
Jack Bauer once forgot where he put his keys. He then spent the next half-hour torturing himself until he gave up the location of the keys.
1.6 billion Chinese are angry with Jack Bauer. Sounds like a fair fight.
Let's get one thing straight: the only reason you are conscious right now is because Jack Bauer does not feel like carrying you.
Jack Bauer was never addicted to heroin. Heroin was addicted to Jack Bauer.
Jack Bauer played Russian Roulette with a fully loaded gun and won.
When life gave Jack Bauer lemons, he used them to kill terrorists. Jack Bauer hates lemonade.
Jack Bauer once won a game of Connect 4 in 3 moves.
Osama bin Laden's recent proposal for truce is a direct result of him finding out that Jack Bauer is, in fact, still alive.
Jack Bauer is the leading cause of death in Middle Eastern men.
Jack Bauer doesn't miss. If he didn't hit you it's because he was shooting at another terrorist twelve miles away.
When Jack Bauer was a child, he made his mother finish his vegetables.
Jack Bauer killed 93 people in just 4 days time. Wait, that is a real fact.
Simon Says should be renamed to Jack Bauer Says because if Jack Bauer says something then you better do it.
Jack Bauer won the Tour de France on a unicycle to prove to Lance Armstrong it wasn't a big deal. He thinks yellow wristbands are gay.
When Jack Bauer pissses into the wind, the wind changes direction.
Jack Bauer's favorite color is severe terror alert red. His second favorite color is violet, but just because it sounds like violent.
When you open a can of whoop-ass, Jack Bauer jumps out.
When Google can't find something, it asks Jack Bauer for help.
You can lead a horse to water. Jack Bauer can make him drink.
Jack Bauer can get McDonald's breakfast after 10:30.
When the boogie man goes to sleep, he checks his closet for Jack Bauer.
Every mathematical inequality officially ends with "< Jack Bauer".
In 96 hours, Jack Bauer has killed 93 people and saved the world 4 times. What the hell have you done with your life?
Jesus died and rose from the dead in 3 days. It took Jack Bauer less than an hour. And he's done it twice.
Jack Bauer killed so many terrorists that at one point, the #5 CIA Most Wanted fugitive was an 18-year-old teenager in Malaysia who downloaded the movie Dodgeball.
In kindergarten, Jack Bauer killed a terrorist for Show and Tell.
What color is Jack Bauer's blood? Trick question. Jack Bauer does not bleed.
Guns dont kill people, Jack Bauer kills people.
If Jack and MacGyver were locked in a room together, Jack would make a bomb out of MacGyver and get out.
People with amnesia still remember Jack Bauer.
Sun Tzu once wrote, "If your enemy is weaker, conquer him. If he is stronger, join him. If he is Jack Bauer, you're f***ing dead."
Jack Bauer literally died for his country, and lived to tell about it.
Jack Bauer has been to Mars. That's why there's no life on Mars.
Superman's only weakness is Kryptonite. Jack Bauer laughs at Superman for having a weakness.
When Batman is in trouble, he turns on the Jack Bauer signal.
It took Jack Bauer two minutes to beat a confession out of OJ.
If Jack Bauer was gay, his name would be Chuck Norris.
The bumper sticker on Jesus's car reads, "WWJBD?"
Jack Bauer was conceived by torturing the other sperm until they gave up the location of the egg.
After 7 minutes of interrogation at the hands of Jack Bauer, Tom Cruise admitted that he was gay.
Jack Bauer's family threw him a surprise birthday party when he was a child. Once.
Tuesday, April 7, 2009
The kind of smart that IQ tests miss
ST 8 Apr 2009
By Keith Stanovich
IN 2002, cognitive scientist Daniel Kahneman of Princeton University won the Nobel Prize in Economics for work done with his longtime collaborator Amos Tversky (who died in 1996). Their research had to do with judgment and decision-making - what makes our thoughts and actions rational or irrational. They explored how people make choices and assess probabilities, and uncovered basic errors that are typical in decision-making.
The thinking errors they uncovered are not trivial mistakes in a parlour game. To be rational means to adopt appropriate goals, take the appropriate action given one's goals and beliefs, and hold beliefs that are commensurate with available evidence. It means achieving one's life goals using the best means possible. To violate the thinking rules examined by Kahneman and Tversky thus has the practical consequence that we are less satisfied with our lives than we might be. Research conducted in my own laboratory has indicated that there are systematic individual differences in the judgment and decision-making skills that Kahneman and Tversky studied.
Intelligence tests measure important things, but they do not assess the extent of rational thought. This might not be such a grave omission if intelligence were a strong predictor of rational thinking. But my research group found just the opposite:It is a mild predictor at best, and some rational thinking skills are totally dissociated from intelligence.
Ironically, the Nobel Prize was awarded for studies of cognitive characteristics that are entirely missing from the most well-known mental assessment device in the behavioural sciences: intelligence tests. Scientists and laypeople alike tend to agree that 'good thinking' encompasses sound judgment and decision-making - the type of thinking that helps us achieve our goals. Yet assessments of such good (rational) thinking are nowhere to be found on IQ tests.
Intelligence tests measure important things, but they do not assess the extent of rational thought. This might not be such a grave omission if intelligence were a strong predictor of rational thinking. But my research group found just the opposite: It is a mild predictor at best, and some rational thinking skills are totally dissociated from intelligence.
To an important degree, intelligence tests determine the careers of millions of people. Children are given intelligence tests to determine eligibility for admission to school programmes for the gifted. Corporations and the military depend on assessments that are little more than disguised intelligence tests.
Perhaps some of this attention to intelligence is necessary, but what is not warranted is the tendency to ignore cognitive capacities that are at least equally important: the capacities that sustain rational thought and action.
Critics of intelligence tests have long pointed out that the tests ignore important parts of mental life, mainly non-cognitive domains such as socio-emotional abilities and interpersonal skills. But intelligence tests are also radically incomplete as measures of cognitive functioning, which is evident from the simple fact that many people display a systematic inability to think or behave rationally despite having a more than adequate IQ. For a variety of reasons, we have come to overvalue the kinds of thinking skills that intelligence tests measure and undervalue other important cognitive skills, such as the ability to think rationally.
Psychologists have studied the major classes of thinking errors that make people less than rational. They have studied people's tendencies to show incoherent probability assessments; to be overconfident in knowledge judgments; to ignore the alternative hypothesis; to evaluate evidence with a 'my side' bias; to show inconsistent preferences because of framing effects; to over-weigh short-term rewards at the expense of long-term well-being; to allow decisions to be affected by irrelevant context; and so on.
All of these categories of failure of rational judgment are very imperfectly correlated with intelligence - meaning IQ tests tend not to capture individual differences in rational thought. IQ tests measure mental skills that have been studied for a long time, whereas psychologists have only recently had the tools to measure the tendencies towards rational and irrational thinking. Nevertheless, recent progress in the cognitive science of rational thought suggests that nothing could stop us from constructing an 'RQ' test.
Such a test might prove highly useful. Sub-optimal investment decisions have, for example, been linked to overconfidence in knowledge judgments, the tendency to over-explain chance events, and the tendency to substitute affective valence for thought. Errors in medical and legal decision-making have also been linked to specific irrational thinking tendencies that psychologists have studied.
There are strategies and environmental fixes for the thinking errors that occur in all of these domains. But it is important to realise that these thinking errors are more related to rationality than intelligence. They would be reduced if schools, businesses and government focused on the parts of cognition that intelligence tests miss.
Instead, these institutions still devote far more attention and resources to intelligence than to teaching people how to think in order to reach their goals. It is as if intelligence has become totemic in our culture. But what we should really be pursuing is development of the reasoning strategies that could substantially increase human well-being.
The writer is professor of human development and applied psychology at the University of Toronto.
PROJECT SYNDICATE
By Keith Stanovich
IN 2002, cognitive scientist Daniel Kahneman of Princeton University won the Nobel Prize in Economics for work done with his longtime collaborator Amos Tversky (who died in 1996). Their research had to do with judgment and decision-making - what makes our thoughts and actions rational or irrational. They explored how people make choices and assess probabilities, and uncovered basic errors that are typical in decision-making.
The thinking errors they uncovered are not trivial mistakes in a parlour game. To be rational means to adopt appropriate goals, take the appropriate action given one's goals and beliefs, and hold beliefs that are commensurate with available evidence. It means achieving one's life goals using the best means possible. To violate the thinking rules examined by Kahneman and Tversky thus has the practical consequence that we are less satisfied with our lives than we might be. Research conducted in my own laboratory has indicated that there are systematic individual differences in the judgment and decision-making skills that Kahneman and Tversky studied.
Intelligence tests measure important things, but they do not assess the extent of rational thought. This might not be such a grave omission if intelligence were a strong predictor of rational thinking. But my research group found just the opposite:It is a mild predictor at best, and some rational thinking skills are totally dissociated from intelligence.
Ironically, the Nobel Prize was awarded for studies of cognitive characteristics that are entirely missing from the most well-known mental assessment device in the behavioural sciences: intelligence tests. Scientists and laypeople alike tend to agree that 'good thinking' encompasses sound judgment and decision-making - the type of thinking that helps us achieve our goals. Yet assessments of such good (rational) thinking are nowhere to be found on IQ tests.
Intelligence tests measure important things, but they do not assess the extent of rational thought. This might not be such a grave omission if intelligence were a strong predictor of rational thinking. But my research group found just the opposite: It is a mild predictor at best, and some rational thinking skills are totally dissociated from intelligence.
To an important degree, intelligence tests determine the careers of millions of people. Children are given intelligence tests to determine eligibility for admission to school programmes for the gifted. Corporations and the military depend on assessments that are little more than disguised intelligence tests.
Perhaps some of this attention to intelligence is necessary, but what is not warranted is the tendency to ignore cognitive capacities that are at least equally important: the capacities that sustain rational thought and action.
Critics of intelligence tests have long pointed out that the tests ignore important parts of mental life, mainly non-cognitive domains such as socio-emotional abilities and interpersonal skills. But intelligence tests are also radically incomplete as measures of cognitive functioning, which is evident from the simple fact that many people display a systematic inability to think or behave rationally despite having a more than adequate IQ. For a variety of reasons, we have come to overvalue the kinds of thinking skills that intelligence tests measure and undervalue other important cognitive skills, such as the ability to think rationally.
Psychologists have studied the major classes of thinking errors that make people less than rational. They have studied people's tendencies to show incoherent probability assessments; to be overconfident in knowledge judgments; to ignore the alternative hypothesis; to evaluate evidence with a 'my side' bias; to show inconsistent preferences because of framing effects; to over-weigh short-term rewards at the expense of long-term well-being; to allow decisions to be affected by irrelevant context; and so on.
All of these categories of failure of rational judgment are very imperfectly correlated with intelligence - meaning IQ tests tend not to capture individual differences in rational thought. IQ tests measure mental skills that have been studied for a long time, whereas psychologists have only recently had the tools to measure the tendencies towards rational and irrational thinking. Nevertheless, recent progress in the cognitive science of rational thought suggests that nothing could stop us from constructing an 'RQ' test.
Such a test might prove highly useful. Sub-optimal investment decisions have, for example, been linked to overconfidence in knowledge judgments, the tendency to over-explain chance events, and the tendency to substitute affective valence for thought. Errors in medical and legal decision-making have also been linked to specific irrational thinking tendencies that psychologists have studied.
There are strategies and environmental fixes for the thinking errors that occur in all of these domains. But it is important to realise that these thinking errors are more related to rationality than intelligence. They would be reduced if schools, businesses and government focused on the parts of cognition that intelligence tests miss.
Instead, these institutions still devote far more attention and resources to intelligence than to teaching people how to think in order to reach their goals. It is as if intelligence has become totemic in our culture. But what we should really be pursuing is development of the reasoning strategies that could substantially increase human well-being.
The writer is professor of human development and applied psychology at the University of Toronto.
PROJECT SYNDICATE
Tuesday, March 24, 2009
Can Singapore fail?
By Kishore Mahbubani (Straits Times)
I have just finished writing an article for the Wilson Quarterly, an American journal, on the topic, Can America Fail? The opening paragraph reads as follows: 'In 1981, Singapore's long-ruling People's Action Party was shocked when it suffered its first defeat at the polls in many years, even though the contest was in a single constituency. I asked Dr Goh Keng Swee, one of Singapore's three great founding fathers and the architect of Singapore's economic miracle, why the PAP lost. He replied, 'Kishore, we failed because we did not even conceive of the possibility of failure'.'
The simple truth is that any society can fail. America is vulnerable. So too is Singapore. And as Dr Goh perceived, the only way to prevent failure is to conceive of failure.
The aim of this article is to stimulate Singaporeans into thinking how Singapore might fail. Let me emphasise that I do not believe Singapore is going to fail. But to ensure it does not fail, we must think of how it might fail. Such thinking is absolutely essential as we sail through the biggest economic storm the world has experienced since the Great Depression. I have come to the paradoxical conclusion that Singapore's greatest strengths may also be the source of its greatest vulnerabilities.
One of Singapore's greatest strengths is that it is the world's most globalised nation. The Foreign Policy magazine has a globalisation index. Singapore ranks No.1. There is no doubt that Singapore has succeeded in a spectacular fashion because it has been the best surfer on the tidal wave of globalisation.
But what happens to the Singapore economy if we move from an era of globalisation to an era of de-globalisation? De-globalisation has not arrived. However, there are early warning signals of its possibility.
Earlier this month, The Washington Post painted a gloomy picture of the global recession, noting that many countries were now entering a period of de-globalisation with plummeting world trade. It noted that Singapore's predicament was that it faced an 'ebbing of a golden age of trade, innovation, wealth accumulation and poverty reduction through globalisation'.
Against this backdrop, we should heed Dr Goh's advice and conceive of the possibility of globalisation failing. And if it fails, how does Singapore avoid failure?
Another of Singapore's big strengths is good governance. In May this year, Singapore will celebrate its 50th anniversary of good governance, since self-government in 1959. As an amateur student of politics who has travelled around the world, I cannot think of any other developing nation that has enjoyed 50 years of good governance.
Singapore is unique; good governance is not the historical norm. Every society in the world, without exception, has experienced bad governance. Inevitably, Singapore will experience it some day. Can Singaporean society cope with bad governance? Can we ever conceive of the possibility of Singapore experiencing bad governance?
The best way of preparing for bad governance is for the population to rely less on the government to provide solutions and to rely more on individual citizens to find solutions. But the unfortunate corollary of good governance is that Singaporeans have come to rely on the Government to solve their problems.
Let me provide one small but significant example: Singapore is one of the cleanest cities in the world. But this happens because we employ an army of cleaners. Few Singaporeans take personal responsibility to remove litter. I see this most vividly when I go running in the East Coast Park after a weekend. Mountains of rubbish are left thoughtlessly everywhere. One way to create a greater sense of responsibility is for each citizen to take individual responsibility for litter. Each citizen should pick up at least one piece of litter each day. If we cannot even pick up our own litter, can we prepare ourselves for the day when more individual responsibility would be needed?
A third strategic strength of Singapore is our ethnic harmony. Indeed, it is remarkable what Singapore has achieved in this area. One of my favourite comparisons is the following: The British Empire left behind several small multiracial colonies in all corners of the world, including Guyana, Cyprus, Sri Lanka, Singapore and Fiji. Only one has experienced continuous ethnic harmony since independence: Singapore. Can we fail in this area?
The older generation of Singaporeans has fully absorbed the virtues of ethnic harmony. I experienced that when I accompanied then Prime Minister Goh Chok Tong on an official visit to Malaysia. We stayed in the official residence, Carcosa. One day, the Malaysian butler asked Mr Goh what he would like for breakfast. He expected Mr Goh to choose either a Chinese or English breakfast. To his amazement, Mr Goh said: 'Get me thosai from Brickfields.'
Mr Goh's generation of English-educated Singaporeans has a near total blindness to ethnic differences. I am not sure that the younger generation of Singaporeans can match this. Some of the anecdotal evidence I have heard suggests that the younger generation of Singaporeans are more aware of their ethnic differences, partly because of the segregation caused by our second-language policies. Modern sociological methods of research can tell us whether ethnic harmony is growing or diminishing over time in Singapore. This is one area we need to monitor carefully, if we want to look for possible causes of Singapore failing.
I have suggested only three possible ways how Singapore might fail. The likelihood is that if Singapore fails, the failure will be due to a completely unanticipated cause. Ironically, Singapore is a legend in military history because it provides a textbook example of how things can go badly wrong when you don't think of alternative ways of failing. The British expected a Japanese naval attack on Singapore from the south. Instead, the Japanese came on bicycles from the north. The British discovered too late that their big guns were pointed in the wrong direction. Winston Churchill and other British leaders were shocked when the supposedly invincible fortress of Singapore fell to the Japanese in February 1942. Having fallen once as a result of a complete surprise, can we fail again?
Pray let us not give any future historian occasion to say of Singapore: 'They failed because they did not even conceive of the possibility of failure.'
The writer is Dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore. Think-Tank is a weekly column rotated among eight leading figures in Singapore's tertiary and research institutions.
I have just finished writing an article for the Wilson Quarterly, an American journal, on the topic, Can America Fail? The opening paragraph reads as follows: 'In 1981, Singapore's long-ruling People's Action Party was shocked when it suffered its first defeat at the polls in many years, even though the contest was in a single constituency. I asked Dr Goh Keng Swee, one of Singapore's three great founding fathers and the architect of Singapore's economic miracle, why the PAP lost. He replied, 'Kishore, we failed because we did not even conceive of the possibility of failure'.'
The simple truth is that any society can fail. America is vulnerable. So too is Singapore. And as Dr Goh perceived, the only way to prevent failure is to conceive of failure.
The aim of this article is to stimulate Singaporeans into thinking how Singapore might fail. Let me emphasise that I do not believe Singapore is going to fail. But to ensure it does not fail, we must think of how it might fail. Such thinking is absolutely essential as we sail through the biggest economic storm the world has experienced since the Great Depression. I have come to the paradoxical conclusion that Singapore's greatest strengths may also be the source of its greatest vulnerabilities.
One of Singapore's greatest strengths is that it is the world's most globalised nation. The Foreign Policy magazine has a globalisation index. Singapore ranks No.1. There is no doubt that Singapore has succeeded in a spectacular fashion because it has been the best surfer on the tidal wave of globalisation.
But what happens to the Singapore economy if we move from an era of globalisation to an era of de-globalisation? De-globalisation has not arrived. However, there are early warning signals of its possibility.
Earlier this month, The Washington Post painted a gloomy picture of the global recession, noting that many countries were now entering a period of de-globalisation with plummeting world trade. It noted that Singapore's predicament was that it faced an 'ebbing of a golden age of trade, innovation, wealth accumulation and poverty reduction through globalisation'.
Against this backdrop, we should heed Dr Goh's advice and conceive of the possibility of globalisation failing. And if it fails, how does Singapore avoid failure?
Another of Singapore's big strengths is good governance. In May this year, Singapore will celebrate its 50th anniversary of good governance, since self-government in 1959. As an amateur student of politics who has travelled around the world, I cannot think of any other developing nation that has enjoyed 50 years of good governance.
Singapore is unique; good governance is not the historical norm. Every society in the world, without exception, has experienced bad governance. Inevitably, Singapore will experience it some day. Can Singaporean society cope with bad governance? Can we ever conceive of the possibility of Singapore experiencing bad governance?
The best way of preparing for bad governance is for the population to rely less on the government to provide solutions and to rely more on individual citizens to find solutions. But the unfortunate corollary of good governance is that Singaporeans have come to rely on the Government to solve their problems.
Let me provide one small but significant example: Singapore is one of the cleanest cities in the world. But this happens because we employ an army of cleaners. Few Singaporeans take personal responsibility to remove litter. I see this most vividly when I go running in the East Coast Park after a weekend. Mountains of rubbish are left thoughtlessly everywhere. One way to create a greater sense of responsibility is for each citizen to take individual responsibility for litter. Each citizen should pick up at least one piece of litter each day. If we cannot even pick up our own litter, can we prepare ourselves for the day when more individual responsibility would be needed?
A third strategic strength of Singapore is our ethnic harmony. Indeed, it is remarkable what Singapore has achieved in this area. One of my favourite comparisons is the following: The British Empire left behind several small multiracial colonies in all corners of the world, including Guyana, Cyprus, Sri Lanka, Singapore and Fiji. Only one has experienced continuous ethnic harmony since independence: Singapore. Can we fail in this area?
The older generation of Singaporeans has fully absorbed the virtues of ethnic harmony. I experienced that when I accompanied then Prime Minister Goh Chok Tong on an official visit to Malaysia. We stayed in the official residence, Carcosa. One day, the Malaysian butler asked Mr Goh what he would like for breakfast. He expected Mr Goh to choose either a Chinese or English breakfast. To his amazement, Mr Goh said: 'Get me thosai from Brickfields.'
Mr Goh's generation of English-educated Singaporeans has a near total blindness to ethnic differences. I am not sure that the younger generation of Singaporeans can match this. Some of the anecdotal evidence I have heard suggests that the younger generation of Singaporeans are more aware of their ethnic differences, partly because of the segregation caused by our second-language policies. Modern sociological methods of research can tell us whether ethnic harmony is growing or diminishing over time in Singapore. This is one area we need to monitor carefully, if we want to look for possible causes of Singapore failing.
I have suggested only three possible ways how Singapore might fail. The likelihood is that if Singapore fails, the failure will be due to a completely unanticipated cause. Ironically, Singapore is a legend in military history because it provides a textbook example of how things can go badly wrong when you don't think of alternative ways of failing. The British expected a Japanese naval attack on Singapore from the south. Instead, the Japanese came on bicycles from the north. The British discovered too late that their big guns were pointed in the wrong direction. Winston Churchill and other British leaders were shocked when the supposedly invincible fortress of Singapore fell to the Japanese in February 1942. Having fallen once as a result of a complete surprise, can we fail again?
Pray let us not give any future historian occasion to say of Singapore: 'They failed because they did not even conceive of the possibility of failure.'
The writer is Dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore. Think-Tank is a weekly column rotated among eight leading figures in Singapore's tertiary and research institutions.
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