Another bubble?

Interesting piece here on reviewing recent valuations of social media firms.

My interest was immediately piqued by the introduction to the article : ‘Traditional metrics are no longer valid when it comes to measuring the value of the new breed of social media companies’, which then goes on to review the valuations placed on four social media firms – with more to come – as a result of stock market flotations. The key quotes come via a ‘technology valuation expert’ at a major firm of accountants troubled by an overlong name and a 90s-oriented obsession with marketing, with the article highlighting that:

…traditional metrics like price-to-earnings ratios do not apply when it comes to social media companies, which tend to prioritise growth over earnings. PwC suggests that a ‘value per user’ metric is more appropriate for these companies, “on the presumption that subscriber bases can eventually be monetised”.

At that point, I had a severe touch of déjà vu, since this is more or less precisely the (ir)rationale which led to the over-inflated values of internet firms being a contributory factor in crashes in stock markets at the turn of the last decade. In short: we’ll throw out tried and trusted means of valuing firms because we fancy gambling your money, pensions, etc. on something new and sexy which we don’t quite understand but which we hope will come good. Markets evidently don’t function in cases of imperfect information – but let’s at least hold this sort of rubbish up to the ill-informed gamble that it is.

Add in the prospect of rising interest rates and a stagnant FTSE100 over the last six months (and a Nasdaq that seems to be in a similar place) and we have at least some of the conditions of 2000’s implosion in place all over again. Oil prices which seem to be rising again following the correction of early May, stubbornly high inflation, a weak economy heading for another ‘soft patch’ and a government whose economic ‘education’ is firmly in the traditions of Alfred Roberts’s Grantham corner shop all add to the pressures.

An unreformed, business as usual capitalism is not only free, but destined, to repeat the same mistakes over and over again. That it seems to be doing so with such a velocity is something of a surprise, but this is perhaps a corollary of governments’ apparent collective refusal to contemplate systemic change, as well as our dependency on financial services and the associated structural problems of the UK economy (on which Larry Elliott had some interesting things to say in yesterday’s The Guardian). An economy so dependent on financial services seems to me to be not only in thrall to the City but also thereby blinded to the problems which imperfect information causes to market-based systems. Until we grapple with that, the economy isn’t going to get better.


AV? No thanks!

A couple of pieces I saw this week piqued my interest in advance of next week’s vote. Firstly, Compass‘s Joe Cox and Tom Griffin argue that a yes vote is the best means of frustrating the policies of the coalition government (Martin Kettle has also argued similarly); while Hilary Wainwright argues in The Guardian that AV will not only improve the quality of political debate but will symbolise a vote for change.

I start from an interest in, and support for, electoral reform, but I just can’t bring myself to vote for AV. I’m not convinced that short-term political interests are worthy reasons to bring in this famously ‘miserable compromise’ as a new voting system, although I can of course see the tactical reasons for that; and neither am I at all convinced that AV is a much-needed ‘baby step‘ towards a better electoral system than the one we have already. This is a mature democracy and one in which, furthermore, we already have proportional representation voting systems in place, both for elections to the European Parliament and, up here in Scotland, to the Scottish Parliament – so it’s not as though we’re actually in need of something which helps us dip our toes in the water of electoral reform. And neither are we in need of being patronised, either.

We’re not being asked to vote for electoral reform based on proportional representation, we’re only being asked to vote for one, and one only, variant of electoral reform. It’s not a starting point for a wider debate about electoral reform; it’s an end point – not the end, obviously, but an end. People who argue that electoral reform might evolve into a better voting system if only we first took the opportunity to implement AV are surely deluding themselves: I can’t see the electorate having much of an appetite for repeating this embarrassing slanging-match-passing-as-political-debate in the forseeable future. This is not a situation of ‘vote yes to AV – get electoral reform’: voting yes to AV means the alternative vote is exactly what we get. And neither do I want to imagine that what was offered to the LibDems as a price of getting them to support the Tories in government is, in this area and for the foreseeable future, debate-defining.

For all its faults, first past the post is based on the principle of one person one vote. Every vote counts, and counts once (pace Tammany Hall). That’s the crux of my opposition to AV – some electors, but not all of them, get a second bite at the cherry when their candidate falls. That doesn’t strike me as at all in line with democratic principles – and neither does it strike me as at all rational: the people whose alternative votes are deployed are the ones who have voted, in order, for the weakest (and not only the wackiest), fringe-like candidate(s). That’s simply not credible. It’s not about candidates ‘pandering to extremists‘ but it does give a potentially determining power to those who vote for small parties and, in the first place, only to the voters of such parties. I can fully envisage some unholy scenarios of how that might pan out in practice and I can’t understand why I’d want to vote for that.

Abstentionism has never been my tradition, so I’ll be putting my ‘x’ firmly in the ‘no’ box next Thursday. Given who I will then be allying myself with, though, I will be washing my hands very thoroughly afterwards…

And then, once AV is dead and buried, the campaign for proper electoral reform goes on.

Marching on together

There are probably as many reasons to march tomorrow as there are cuts. Of all the reasons set out in the megabytes of bandwidth devoted to this, I liked Accidental Academic‘s perhaps the best.

The TUC’s largest mobilisation for decades will see hundreds of thousands on the streets of London demonstrating opposition to the government’s ideologically-driven cuts programme and in support of a better economic alternative. Sadly, I’ll not be among them – for reasons which include a certain indolence in getting myself organised in time; and weekends being sacrosanct, combined with a lot of travel at the minute from my Perthshire eyrie. Both reasons which are insufficient in themselves, and outweighed by the number of reasons why I should be out there. Though I will be there in the spirit (or, otherwise, in the Armchair Army (First Chairbourne Division)).

The False Economy and March for the Alternative websites have done a terrific job in the mobilisation in providing reasons for people to get out there, and the use of Twitter (@March26March) has been terrific in adding a steady drip feed of messages to stiffen resolve and provide backbone. The TUC has dealt well with the organisational and logistical difficulties in rallying this number of people in one place – as have thousands of ordinary trade unionists up and down the land.

Above all, probably, is the simple message that taking billions out of an economy faced with recession – and this week’s OBR report provides more proof that this economy is on the slide, compared to where it was six months ago – is neither sensible nor a strategy. ‘Marching for the alternative’ sounds to me  a campaign theme that it’s been pitched exactly right and it’s clear what the TUC is marching FOR, as opposed to what it is marching AGAINST.

And the campaign theme? Well, James’s Sit Down for me (obviously!); for everyone else: Marley’s Get Up, Stand Up (equally clearly). But for everyone, whether in the armchair army or the mobile marching one, how about dusting off Billy’s Between the Wars? The call for ‘sweet moderation’, when confronted with an ideological onslaught of the simplest, most caustic public-sector-bad, private-sector-good type being exhibited by the Tories and their yellow Tory mates, remains a strongly relevant call to arms for middle Britain.

For those going tomorrow, have a great day: and have a sing out for me! And make it massive (hat-tip: @kmflett).

CPI indexation: a saving or a cut?

A couple of days after Liberal Conspiracy disclosed the – denied – revelation that BBC journalists are being instructed to use ‘savings’ rather than ‘cuts’ in their coverage of government announcements, it came as something of a surprise that call me Dave spoke to his party conference promising ‘less debt, more saving’: it seems to me that less debt, more cuts is exactly what the ConDems are all about.

But – taking the promise at face value – if we can look forward to a government that seeks to encourage saving, then perhaps we can look forward to this government, after all, turning away from the proposed switch to indexation of pensions in payment by the Consumer Price Index rather than the Retail Price Index. The sleight of hand switch to a lower value indexation for future pensions increases in defined benefit schemes announced last July is no less than a government-inspired theft of workers’ occupational pensions. It will rob pensioners of thousands of pounds, with the loss rising with every year of retirement, leaving them more dependent on means-tested state benefits and taking crucial spending power out of the economy. And if the government can do that, to those who are pensioners already as well as to future ones, and in the face of pensioners’ expectations as to what they have been paying into all their working lives and frequently in spite of private scheme-based agreements on how indexation will be dealt with, why should they bother with a pension?

A DWP consultation on this issue as regards private sector occupational schemes closed last week: if the government is serious about encouraging more saving, it will have the courage to do away with this proposal and respect pensioners’ continuing rights to a pension indexed in line with RPI.

Mayday! Indeed…

What better place to look for some informed comment on the Tory plans to relocate the May Day bank holiday to later in the year than the TUC’s ToUChstone blog?

Paul Sellers’s post hits all the right notes on the issue, but I also learned – courtesy of ToUChstone commentator Adrian Cruden – that the UK actually came into being, as a result of the Act of Union of 1707, on 1 May. And so it did. What better day indeed to celebrate ‘UK Day’?

(Meanwhile, Adrian has some interesting, and radical, alternative suggestions of his own for a Bank Holiday date later in the year.)

ODA money spent in Britain

The Commons International Development select committee today questioned why £1.85m was taken from DFID funds to cover some of the £10m costs of the Pope’s visit to Britain back in September last year. The money was handed to the Foreign Office, and the Committee has asked for answers as to what the money was spent on and why it was imagined that this was compliant with the rules on overseas development aid.

DFID has pointed out that the money is separate to the overseas aid budget – so will have come from departmental running costs, i.e. the bits of DFID that is not ring-fenced from the cuts. (Although it is interesting that Harriet Harman has warned today that the government’s ‘fragile’ commitment to spending 0.7% of GNP on overseas aid by 2013 means it may not be realised.)

Perhaps the comment by a member of the Pope’s entourage that arriving in Britain was like landing in a third world country led to DFID being caught up by this view and thinking that the spending of the money in this country was legitimate …

That employer charter…

Been a little busy recently; hence the lack of posts for a while…

One thing I have been catching upon, however, is BIS’s publication last week of its draft employer charter. I had spotted the headline issue at the time – the withdrawal of the right to claim unfair dismissal (other than in discrimination cases) unless you have been employed for two years* – but the charter was new to me until today.

Apart from its abuse of the English language (continuing the ConDem tradition in this respect) – charters, historically, represent social progress rather than a menu of what you can do in the workplace to undermine it – I love the charter.

I think trade unions should embrace this – not so much to lambast it, although that is certainly one option – but as an extremely effective recruiting sergeant. Handing the charter out to non-members with a simple message to say:

Look at what employers can already to you – and that’s before the ConDems start attacking your rights at work. Join the union and make sure you’re protected

seems a very powerful message about the importance of joining the union. If I wasn’t already a committed and engaged member, I’d certainly be asking where I should sign.

* Attacking workers rights in a recession is a typically Tory agenda approach to life (which the LibDems appear to share). Yet, there is no evidence that it will actually increase employment and it is likely that, regardless of the promise, vulnerable workers will be most harshly affected. And the notion that you can’t be unfairly dismissed unless you can fulfil a two-year service criterion is, quite simply, bizarre. It will remove essential employment rights from 12% of employees at a stroke, and providing encouragement to poor employers will do nothing for jobs.