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Big is ugly (in a corporate sense)

Robert Peston | 21:00 UK time, Tuesday, 1 June 2010

The collapse of the Pru's attempt to buy AIA of Asia for more than £24bn is an important event in the history of British stock-market capitalism.

Prudential logoIt shows that conventional investment institutions are prepared to act more like the independent owners of a business and not as absentee landlords too readily compliant with the wishes of managers - which is how their critics would characterise them.

In this rare case, it was the Pru's own shareholders who frustrated the takeover - by making it clear that they thought the purchase price was too steep and by telling the Pru's directors that they would vote down the deal.

The implications are significant.

The Pru's chief executive and chairman may have to resign, having wasted hundreds of millions of pounds of shareholders' money on a deal that won't happen.

But perhaps more importantly, it shows that investors have become much less supportive than they were of companies that want to become global giants through takeovers - since gigantism has often led to monstrous blunders.

After the woes of those enormous banks - from Citigroup to Royal Bank of Scotland - and the current humiliation of bid-bloated BP, it's not surprising that shareholders now see big not as beautiful but as grotesquely, dangerously ugly.

What investors have learned is that there are limits to the benefits of geographic and product diversification.

When a company becomes bigger and less reliant on a limited number of products, services or customers, there is reduction in the risk of serious setbacks up to the point where human ingenuity and information technology can actually monitor the risks being run by said company.

What we've learned in the last three years is that a number of massive global businesses - especially but not exclusively in the banking sector - grew well beyond the limits were any mortal could have a proper grasp of what was going on in the myriad nooks and crannies of those businesses.

Which is why, as the Pru's management have learned the hard way, investors have become much more wary of companies that want to carry out mega, "transformational" takeovers.

Comments

  • Comment number 1.

    As I said before the biggest cause of failure of successful businesses is over expansion. Tesco appear to be OK.....at the moment.

  • Comment number 2.

    The Pru's chief executive and chairman may have to resign, having wasted hundreds of millions of pounds of shareholders' money

    How can I "short" Thiam and McGrath?

  • Comment number 3.

    Big is ugly?

    So what of China, the USA and the EU or even the UK or Germany? In truth Robert, your version of E.F. Schumacher's "Small is Beautiful" contains about as much truth. Big and small are not synonymous with ugliness or beauty. They are just themselves and are not per se predictive of anything much.

    Except that power tends to corrupts and absolute power tends to corrupts absolutely (Lord Acton's aphorism) does possesses within it a little predictive value. It is not the bigness or the ugliness that matters it is the corruption!

  • Comment number 4.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 5.

    BP has had an accident. This could have happened to any oil major and it is why there used to be a risk premium in their shares. They being bid bloated does not matter. Things like this Gulf incident (we had it too with Piper Alpha) are what happens in the oil business. It is a risk prone business and safety is dinned in to every employee of every oil company.

    The Pru (who I once worked for as a student)is a different matter. You correctly identified that an out of control management went off the rails. Directors are paid to look after the interests of shareholers and this AIA deal was not in shareholder interests. I would have said a better parallel was Barclays and that Dutch bank whose name now escapes me. In their case, a deal was done to feed the egos of the management and had nothing to do with shareholder, staff or depositor interests. They were only saved by the even greater lunacy of RBS management. They needed reining in as the Pru has been. They weren't and went down the drain. There, but for the grace of sleeping institutional shareholders went Barclays.

    (Soon after this sad episode, there was the even more disastrous takeover of HBOS by Lloyds)

    After these episodes, institutions have learned not to automatically support managers but to be wary. The Pru is the first company to benefit from this new attitude. I hope there are more and that gross boardroom overpayment is also reined in.

  • Comment number 6.

    It would be nice to think that shareholders are finally able to exert proper influence over the way their investments are managed by the executive of large businesses but in reality the power is being exerted by fund managers who, yes, should have their investors interest at heart but are, essentially, as far removed from pension holders and small investors as the directors of the businesses they invest in are.

    I think people are finally waking up to the fact that their pension contributions are little more than additional taxation and I expect the trend in falling overall pension contributions to continue.

    'Small is Beautiful' by EF Shumacher is one of the best economic books I've ever read. If recent events are an indication that we are moving, even in a tiny way, to adopt some of those ideas, it would be no bad thing.

  • Comment number 7.

    Robert - I think your enthusiasm to get your blog out has resulted in your third last paragraph not making sense! I think 'reduction' should be 'increase'...?

  • Comment number 8.

    Sounds good.

    All our High Streets may no longer look like clones of some single architect/design bore!

  • Comment number 9.

    The deal never looked sensible from the outset and if it had succeeded Pru would have had a mammoth task to integrate the businesses.

    Investors talk about engagement and whilst the exact nature of the deal would have to remain confidential until it is made public I do wonder to what extent Pru's executives have had a meaningful dialogue with major shareholders over policy direction. To make a bid and then find several large shareholers unwilling to back the deal is a bit naff.

    For the moment Pru's shareholders and staff should pause for a breath of relief.

  • Comment number 10.

    The Pru's managers'problem was that they equated growth with shareholder value. The basis of their business case appeared to be that Asia was the growth region and so they needed to go there in order to grow. However, shareholders want value creation and this is not the same as growth. The Pru failed to highlight any source of value from their acquisition and so they were just copying what any company could do. All that they were bringing to the party was money and it is not reasonable to believe that simply turning up with a load of cash is sufficient to create value. At long last major investors said "no" to a strategy that was focused on growth rather than value.

  • Comment number 11.

    Thank god for that - presumably if it had all gone pear shaped this so called 'private sector' business would have had it's hand out to the tax payer to save everyone's pensions.

    I don't have much faith in any of the fat cats falling on their sword. The Times keeps publicising a banker who lost billions in the far east: he got the push from his job but is still picking up £160,000 A MONTH pay. So much for all the rhetoric about public sector waste.

  • Comment number 12.

    "Big is ugly" period.

    Your analysis, Mr Peston, may be partially true but just how many really big, I mean hugely, grossly big, corporations already exist each ready to swallow something ever so slightly smaller....

  • Comment number 13.

    Those who speculate to grow massively over night always fail in the end
    slowly slowly with hard work is always the right way . Any successful small businessman will tell you so those formula playing, debt ridden Execs are never Prudent except with their own money

  • Comment number 14.

    "It shows that conventional investment institutions are prepared to act more like the independent owners of a business and not as absentee landlords too readily compliant with the wishes of managers - which is how their critics would characterise them."

    Does one swallow make a summer?

  • Comment number 15.

    Yes - Big is ugly... and its stupid and it has been tried before ... and it is anti-competitive and causes all kind of problems ... and it is the nasty dark side of globalisation.

  • Comment number 16.

    RP: 'The Pru's chief executive and chairman may have to resign, having wasted hundreds of millions of pounds of shareholders' money on a deal that won't happen.'
    --------------------
    Could be an interesting parallel between the Pru and our last Government. People keep telling the CEO and the PM, 'You are wonderful!', 'You are brilliant' and, after a while, it perhaps leads to a situation where their judgement is skewed.

    #5 first para rightly points out the risk element and pricing in the oil business. Sadly, the same is true in M&A. We end up paying for it in the bad times and short/medium-term, but our pension funds, etc., benefit in the long term.

    We hope.

  • Comment number 17.

    On the wider issue of executive payments to bankers and the bonus culture that is prevalent in the City, I am sick fed-up of the excuse about these huge salaries that is forever trotted out by apologists: "that we need to pay these salaries to attract and retain the most talented people, otherwise they will be off somewhere else..." etc. etc.

    Well, point one, let them get "off somewhere else" as far as I am concerned because that will let the undervalued talented people of this great country have a chance at those jobs that we couldn't get for the huge salaries because: (a) we didn't go to the right school\university, (b) didn't speak with the right accent, (c) didn't have the contacts through friends and family that allowed us access to these positions.

  • Comment number 18.

    @ 12. At 09:01am on 02 Jun 2010, Daisy Chained wrote:

    > just how many really big, I mean hugely, grossly big, corporations
    > already exist each ready to swallow something ever so slightly smaller....

    That's why the tax system is to be adjusted to reward smallness and penalize bigness. It's clear that great benefits exist from having may small, loosely coupled, easily replaceable components, rather than big, critical, "plumbed in" components which can destroy the world's economy. Those are the very basic principles that we have learned since 2007.

    So, now we have to fix things. All those mammoth, clumsy, aloof and anti-social business systems, like the pru, have to be decomposed to make them social. We still have a long path to go, but at least we have started to cut them down to size.

  • Comment number 19.

    @ 10. At 08:50am on 02 Jun 2010, simon wrote:

    > The Pru's managers'problem was that they equated growth with shareholder value.

    No. Their problem was that they did not see the bigger picture. They were stuck in their restricted world of "money", and didn't notice that Big is Ugly.

  • Comment number 20.

    Call me naive, but if that £24 billion isn't going on buying someone business overseas, maybe it could be used to set up or expand some businesses in the UK? There's no shortage of things that need doing, or of people waiting for a chance to do them (variously, somewhere between 5 and 8 million). So come on private sector, let's see you start the process which our government expects of you.

  • Comment number 21.

    "The collapse of the Pru's attempt to buy AIA of Asia for more than £24bn is an important event in the history of British stock-market capitalism."

    WRONG - Capitalism died the first day Government we forced to intervene to support the contradictory system. This is now corporatism, soon to be fascism - keep up Robert! - drag yourself out of the dark ages fella.

    "In this rare case, it was the Pru's own shareholders who frustrated the takeover - by making it clear that they thought the purchase price was too steep and by telling the Pru's directors that they would vote down the deal."

    Don't try and make out this is some sort of 'peoples rebellion' - this was a few 'masters' of hedge funds who don't think it's the best idea to overpay for a company (AIA) when the economies of the world (including the Asian ones) are about to take a serious nosedive.

    The 'ordinary' shareholder had no idea if this was a good deal or not - and their vote counts for nothing anyway.

  • Comment number 22.

    " * 1. At 9:12pm on 01 Jun 2010, Dillers wrote:

    As I said before the biggest cause of failure of successful businesses is over expansion. Tesco appear to be OK.....at the moment."

    Really? Tesco are far too powerful, they are bigger than any of the banks and they hold a huge marketshare.

    Also, they are avoiding tax http://news.bbc.co.uk/1/hi/business/6504059.stm

  • Comment number 23.

    "In this rare case, it was the Pru's own shareholders who frustrated the takeover",

    I suspect the change has been that of the investment institutions being overt in their critisisms, as compared to a word in the shell like of the old boy chief exec and chairman.

    I also suspect the thrust of the critisism was the price rather than a switch to "big is ugly".

    Prudential seemed to me to want to be in Asia at any cost and do very little to show why there was real synergy in the deal

  • Comment number 24.

    Dinosaur @ 20 - don't be ridiculous, when has the private sector ever invested money in the UK when it can make much, much more from exploiting poorer regions and third world countries.

    The PRU's attempt to buy AIA was just such an attempt to clean up in an emerging market - they're not interested in the UK. The only way to get them to invest in this country is to take it off them in punitive taxation and invest it on their behalf. I'm sorry, but the free market approach just ain't working!!

  • Comment number 25.

    5. At 03:23am on 02 Jun 2010, Henry Quimper wrote:

    "BP has had an accident. This could have happened to any oil major and it is why there used to be a risk premium in their shares. They being bid bloated does not matter. Things like this Gulf incident (we had it too with Piper Alpha) are what happens in the oil business. It is a risk prone business and safety is dinned in to every employee of every oil company."

    There are risks - and there are risks.

    Before you quickly come to the defence of BP you should be a bit more balanced and point out that the only reason BP are drilling in such dangerous locations (which are more likely to have accidents) is to fulfil their insatiable appetite for profits.

    There are plenty of other oil fields, much easier to drill, but BP are not drilling out of neccessity but in order to secure future profits.

    The argument that this is unfortunate has as many holes in it as the oil pipe itself. This was brought on by a determination to bring down costs - which is what the criminal enquiry should find now it's been launched.

    I am sick and tired of hearing the oil industry's apologists coming on here and defending them blindly when the whole industry is putting profit before everything else - including the welfare of everything on this planet.

    When the leak first blew I found myself arguing on here with someone about 'how bad the leak was' - at that time BP were reporting 5000 barrels a day leaking out - oh how that's changed - and now Obama officially called it America's worst disaster.

    A warning to all blogers - there will be many people who come on here and blindly defend the corporations, some are sent and employed by those corporations and some do it because they think their interests are 'shared' - but both are wrong.

    This is the consequence of everyone following their own self interest, they will happily deceive the rest of us in order to supplement their own gain.

    ...and with the revelation that £1 in every £7 paid in dividends from pension funds are from BP - I guess a lot of people think BP's survival is in their interests.
    Personally I can live without BP and it's dividend, but living without the natural resources which feed us is slightly more important.

    If I were you pension holders I would be asking how 'diversified' my pension is if £1 in £7 is reliant on the success of a single company.

    Don't forget folks - you pay for that management - it's where the pension funds 'profits' come from. Seems like just another scam waiting for a black swan to come along and open it up.

  • Comment number 26.

    8. At 08:37am on 02 Jun 2010, copperDolomite wrote:

    "All our High Streets may no longer look like clones of some single architect/design bore!"

    Most of the high streets on my way to work look like they're all shut down!

    Some high streets only have taxi ranks and kebab shops left.

  • Comment number 27.

    Just tax large businesses.

    By removing small businesses from all taxation including, possibly, PAYE
    then huge administrative savings can be made.

  • Comment number 28.

    Ok, so Thiam and McGrath are toast... but what becomes of The Pru? Has Pru exposed itself as being vunerable to a takeover/merger? I do recall Robert's blog on his meeting with Tidjane Thiam, mention that Tidjane would sell the European and US assets of Pru for the right price to focus solely on the Asian market.

    I wonder how many of M&G's fund managers (owned my Prudential) voted against the takeover of AIA, or were they wearing corporate handcuffs?

  • Comment number 29.

    ...in fact - here is the full blog where you can see I am being clearly told that I speak nonsense about the amount of oil being spilled

    http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/05/bp_leak_costs_soar.html

    ...I'm no Derren Brown, I'm no mind reader, soothsayer or medium - I have merely stopped believing the lies and started working things out for myself.
    The corporations will destory our planet in their efforts to obtain control of the worlds wealth. After all - capital accumulation is what it's all about.

    The spill is rising on the list of all time worst spills - by the minimum spillage (BP's numbers) it's a mere tiny blot, but on the maximum spillage estimates it's the third biggest ever. I suspect it's location will make it the most destructive ever for sure.

    http://en.wikipedia.org/wiki/List_of_oil_spills

    Now I wonder if any of those people who were trying to discredit me would like to apologise for this?

    Special mention to grainsofsand who wrote:

    "It seems to me that BP is doing a pretty good job of cleaning up at the moment - after all little oil seems to be reaching the beaches. The leak wasn't done on purpose, so it's annoying to see that there is any suggestion that BP deserves to be hit with profit loss. The fact is that the world needs the oil."

    Oh dear - another 'believer' sorely disappointed.

  • Comment number 30.

    Big need not be ugly: the measures are does it work and for whom.

    In my time I have been taken over, sold off, been part of a taking over and a witness to corporate stupidity. In business all human life is there.

    The best bloke I ever worked for never took anyone over, he just set out to be the best in his market place. We suceeded and then he retired. I went elsewhere. Those who came after him took over competitors, became bloated, over-leveraged, well-known and applauded, over-controlling and finally blew up the business.

    Takeovers are for corporate players, they are not for real businesses. A real business has focus on its customers, its shareholders and its employees. Buying a competitor has nothing to do with that at all. That is about ego.

  • Comment number 31.

    #18 Jacques Cartier

    Really Jacques? You mean after three decades you know of a politician who hasn't signed away his/her life in blood? Seriously "big", Jacques, that is how large your naivety may be getting. Politicians are far too cowardly to commit suicide, and, besides, it takes a lot of courage to bleed to death under a tree in the name of truth.

  • Comment number 32.

    Another failure of leadership with the Pru. Didn't Jonathan Bloomer have to leave after a previous rights issue and poor leadership??? Importantly though.... if the CEO and Chairmn do go we have to stop any golden handshake going with them. If I did a poor job in my business I wouldn't get paid.

  • Comment number 33.

    @7, andrewinstirling criticised Mr Peston's logic:

    "I think 'reduction' should be 'increase'...?"

    No, Robert's right (hard though that might be to believe), and you are wrong!

  • Comment number 34.

    Thank heavens that the investment industries like Insurance companies and unit trusts have at last seen fit to start acting in the companies interests rather than for the future careers of their investment managers and a short term gain.
    It is not before time!
    For too long, investment management has been seen as a step towards becoming a director of the companies in which they invested pension funds and savings on behalf of their "customers".
    I believe they have at last seen sense. This would have been a bad move.
    Buying any large chunk of a failed US financial industry is likely to prove toxic.

  • Comment number 35.

    Oh, it looks like just a few people in the world of finance have finally decided to abandon the meglomaniac approach of we must conquer the entire (banking / insurance / whatever) world. We must be the biggestmost, superest, smash the competition into bits most, single one top dog in the whole world.

    Fine. I always believed that kind of 'greed is good' approach to be rather flawed.

    I've always had a wee bit of 'the bigger they are - the harder they fall' somewhere in my belief system.

    So, I guess there is some hope for the world yet.

    Maybe we'll even end up with politicians who serve the people rather than themselves.

    Or is that verging upon la la land?

  • Comment number 36.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 37.

    To continue my earlier point has anyone else noticed that customer service no longer seems a focus of many businesses, particularly big ones?

    They make sure the interests of their customers are covered for fear of legal action, loss of market share, damage to face, but there is no positive ideological commitment to supporting the customer. The role of the customer is perceived as passive consumption so the function of customer service is now focussed on keeping them quiet.

    This suggests to me that the focus of management has switched elsewhere perhaps to deal with the continuing fall-out from the credit crunch and the subsequent lack of investment.

    This is what makes the Pru bid stand out as odd. Why did they do it in the current market-place? One can understand it is much about perceptions of market access and global share but financially it made no sense other than the prevailing low cost of borrowing. In the old days our friends in the City had an expression about such deals namely; `does it wash its face'. In other words does the deal pay for itself. This one seemed like a load of flannel, lacking both the soap and the water.

    What a waste of money all round! I think the future will become a little more cautious for everyone. Reality dawns?

  • Comment number 38.

    #25 has written saying that I am an apologist for BP. I am not. I have no financial connection with BP. BP did not ask me to write what I did. (If they were foolish enough to hire someone to write in reply to Robert, they would have chosen someone who writes far better than I do). I am surprised thse poisonous remarks got past the moderator. I do not own any BP shares (although it is likely that my pension fund has some). I have never worked for them. If I was in any way connected with them I would have said so. With the Pru, I mentioned that I had worked for them when I was a student. (That was in the 1950s for goodness sake). My comments were intended to be objective.

    If BP are shown to have behaved irresponsibly or criminally, then I will be as enthusiastically supporting their prosecution as #25 will be. Such actions have no place in an industry that is so inherently dangerous. Every time you put petrol in your car, think of the men who died on that rig in the Gulf and thise who died when Piper Alpha blew up. That is the real price of petrol. Not the financial one.

    All PLCs do things to make a profit. BP was out there drilling to make money. What they weren't out there to do was to produce the worst environmental catastrophe in US history. I expect they wish they had never heard of the Gulf of Mexico at this moment.

    I did not write what I did to defend BP - although sadly it has been taken that way. All I wanted to do was to distinguish BPs misfortunes from the mismanagement of the Pru. That is what Robert's blog was about and I thought his throwaway line about BP to be a false parallel in an otherwise excellent blog. The Pru appears to be in the hands of people who have taken their eye off the ball of what they are there for. That being to act in the interests of shareholders. It is to be hoped that they are replaced by people who will remember who appointed them and what their duties are.

  • Comment number 39.

    37. At 11:46am on 02 Jun 2010, stanilic wrote:

    "To continue my earlier point has anyone else noticed that customer service no longer seems a focus of many businesses, particularly big ones? "

    Of course not - why bother spending money on customer service when a 'publicly funded ombudsman' will do the job for you?

    What's one of the first implementations of our new 'small Government'?

    Create a supermarket ombudsman....so we can waste more taxpayer money on 'managing' a system which is supposed to be 'self managing' but isn't - and yet participants are allowed to extract wealth from it's activities with the knowledge that there wil always be a Government to catch them when they fall.

  • Comment number 40.

    Has anyone noticed despite yo yo-ing the FT100 is still on a downward trend. I suspect it will be back below 5000 shortly, once again wiping out recent gains.

  • Comment number 41.

    38. At 12:04pm on 02 Jun 2010, Henry Quimper

    So why claim that this oil spill was an 'accident' i.e. something over which none of us have control, when in fact it was born out of recklessness in the pursuit of profits?

    No oil spill is ever 'accidental' - I think you're confusing 'accident' with 'feeling sorry' after the event.

    This is where you seem to have trouble in making the connection:
    "All PLCs do things to make a profit. BP was out there drilling to make money. What they weren't out there to do was to produce the worst environmental catastrophe in US history."

    Can you not see that the desire to increase profits always leads to a cut in safety costs, especially safety in place for 'infrequent events'?

    ...or is it a coincidence that the biggest and most profitable companies do the most environmental damage?

    p.s. in your response, whilst the human cost is tragic, not once did you mention the ecology and 'other life forms' which have died as a result of this spill.

    Has mankind reached a stage where only the death of 1 type of Earth inhabitant matters?

  • Comment number 42.

    37. At 11:46am on 02 Jun 2010, stanilic wrote:
    To continue my earlier point has anyone else noticed that customer service no longer seems a focus of many businesses, particularly big ones?

    HMRC, DVLA, BBC Oops sorry they're not businesses.

  • Comment number 43.

    Look, this McGrath fellow, and Tidjane Thiam are stretcher cases now. As with so many inhabitants of "The City", their greed far outstripped their intelligence. Only nowadays, you go down for that.

    A better solution is to hire the proper people in the first place. People who instinctively know that Big is Ugly, and don't have to have it beaten into them.


  • Comment number 44.

    42 DevilsintheDetail

    Nice point! I get very frustrated when government bodies call me a customer. The relationship precludes the role of a customer, possibly a client under certain conditions, but to them I am not even a citizen. Whereas I am constitutionally a subject as opposed to an object.

    The concern about large organisations which Robert articulates albeit rather half-heartedly is that they become other-directed and see relationships from a perspective far removed from that originally intended.

    To my mind if the state does not serve the people in protecting them from the foibles and oppressions of arbitrary power then what is the point of it? Isn't this what regulation should be about?

  • Comment number 45.

    26. At 10:10am on 02 Jun 2010, writingsonthewall wrote:
    8. At 08:37am on 02 Jun 2010, copperDolomite wrote:

    "All our High Streets may no longer look like clones of some single architect/design bore!"

    Most of the high streets on my way to work look like they're all shut down!

    Some high streets only have taxi ranks and kebab shops left


    This funnily enough is true, Cabs & kebabs are the main service industries to the binge drinkers, Lets hope the government veto the 'healthies' proposal to put up the price of booze. Save our high streets 'drink more grog' !

  • Comment number 46.

    40. At 12:27pm on 02 Jun 2010, Averagejoe wrote:

    "Has anyone noticed despite yo yo-ing the FT100 is still on a downward trend. I suspect it will be back below 5000 shortly, once again wiping out recent gains."

    The FTSE (as with all major markets) are 1 piece of bad news away from total capitulation. The only questions that remain are 'how far' and 'how fast'.

    While the media desperately picks out daily stories which are market related - they all miss the bigger picture - mainly because it simply doesn't happen 'fast enough' for the 24 hour in-your-face media requirements.

    However if you look carefully you can see the stories unfolding. A few months ago there was talk of the Greek debt - which has all but blown over as far as the media are concerned (although they like to point to daily market falls and vaguely claim "uncertainty about Europe" is the problem)

    However the crisis goes on, regardless of media attention or not. In the beginning the Italians were left out of the firing line, I don't know why, but they were. Now they appear to be right back in it.

    If you look at the bottom table from Markit you can see the CDS spreads (the insurance against default) has risen somewhat dramatically. It has risen 25 bps in a week and 32 bps in a day and 69 in a month. Your insurance premium goes up 13% in one day and nobody bothers to write about it? - seems odd that the media is ignoring this crucial event.

    http://www.markit.com/en/about/news/commentary/cds/cds.page

    The LIBOR is still widening and the attempts to calm the markets by the EU seem to have resulted in a political crisis within Germany - right when good strong leadership is needed.

    The chickens of our idiotic attempted solution to this crisis are now coming home to roost.

    You thought the 'banking crisis' was 'resolved' - well don't look now but when the first of these countries defaults (and talk is Greece is already on the 'restructuring' path) then the game will be up. No more bailouts, no more 'solutions' - just a lot of mess and chaos.

    Still - you don't need to believe me, you can trust your friendly neighbourhood media. They will show 'shock' and 'surprise' when it comes but I shall point to the numerous times it has been pointed out already.

    The Dow has fallen 10% through may - and just before May began I reminded all those tinky winky investors to 'sell in may and stay away' - if only they had listened then they may have kept their shirts.

    How many times have you heard 'buy in the trough' or 'the market is oversold' last month? - and yet anyone who listened to that baseless nonsense would be feeling the pain.

    It just goes to prove that some people will have the conviction of their actions - regardless of whether there is any reason for them to do so - or not.

    Speculators - what a waste of a life.

  • Comment number 47.

    Post 42, surely you aren't suggesting that either the DVLA or HMRC are businesses?
    If they were run on commercial grounds they would have gone bust a long time ago.
    Anyone who has ever had to try to get hold of HMRC to sort out a problem with their tax code, for example, will no doubt agree with me that HMRC and Customer Service is an oxymoron.

  • Comment number 48.

    Just a quick unrelated comment on 'Grog'

    Why do the Govt keep bleating about supermarkets selling alchohol too cheaply? If they were really serious they would double the duty which would have exactly the same effect and provide more revenue assuming that demand is ineleastic. If the supermarkets didn't up the prices they would still be hit with the extra tax.

    Can someone explain the logic to me ?

  • Comment number 49.

    > 48. At 2:17pm on 02 Jun 2010, DevilsintheDetail wrote:
    Just a quick unrelated comment on 'Grog'

    Why do the Govt keep bleating about supermarkets selling alchohol too cheaply? If they were really serious they would double the duty which would have exactly the same effect and provide more revenue assuming that demand is ineleastic. If the supermarkets didn't up the prices they would still be hit with the extra tax.

    Can someone explain the logic to me ?



    Because price fixing by a supermerket, eg Tesco, is illegal.
    But fixing the price in the market so no one can undercut a supermarket, eg Tesco, by law would be legal.

    PS, a minimum (profitable) price per unit is being supported by a supermarket, one that could show their 'moral' stance on this tomorrow by ending their belowcost deals that smaller supermarkets and independant off-licences can not compete with. Any ideas which one?

  • Comment number 50.

    All companies aim for market dominance, if they are the biggest they control the market. Some times the marketing men make it appear as though a company has a big market share than it really has.
    If you have say three players in the market for a particular commodity then in theory you have some degree of competition(hmm question that some times!).
    But as we all know markets can be rigged,what really upsets the apple cart is when a young upstart company comes in and under cuts them all!
    So from a consumer perspective small is beautiful it induces competition, keeps the main players on their toes. If a small company takes too much business it gets bought out. Example discount retailer Netto, selling low cost food & drinks.Walmart snapped it up and took it off the market.
    They must have been cutting into their profit margins in some locations.
    Mergers are bad news for the customer it prevents competition.

  • Comment number 51.

    Shareholder just experienced the loss of their investments during the banking gambling phase that made the hired staff rich and the investors poor. About time that someone looked in the window and asked what was going on with their money. Although a dramatic shit in attitude it might filer over to all the firms and maybe the staff will be reduced in incentives and more toward making money for the investors. After all, that was how it was supposed to work and maybe will once again if some heads roll.

  • Comment number 52.

    re #17.
    I agree. Some of the problem is poor journalism for most of the time. Think about that statement, which is heard almost hourly some days on radio, and you realise that the employment of top execs and traders etc is more complex than that.

    On the other side of the coin is the argument that journos (incl. the broadcasters) are under so much pressure these days they do not get time to think, let alone research their stories. They would argue that the public won't understand if they report in anything except the most simple ways. So dumbing down? Probably. Dropping the education ethos as well? Probably. Lord Reith + others may be spinning in their graves.

    Agendas and spin are not limited to a certain political party. The mega-money paid to one exec or s/manager in one business, starts to spread to similar businesses operating in the same sector. Then from that sector to another. Gradually it sucks in the rest of the private sector pulling up top pay. There is also a whole industry involved in headhunting and in working out remuneration packages. The guys and gals writing/broadcasting this stuff are also benefitting from it. Most people have no idea what the Editor of a broadsheet paper is paid. They would be horrified if they did!

    They are not going to want to point out things (things that may be obvious to a few folk who have knowledge of what is going on) to the general public in case the public start to look at their own jobs & pay and adopt the approach outlined in your second para.

    [I would like to point out, though, that the reasons the second tier don't get the jobs is a bit more complex than you suggest.]

  • Comment number 53.

    48. At 2:17pm on 02 Jun 2010, DevilsintheDetail wrote:
    Just a quick unrelated comment on 'Grog'

    Why do the Govt keep bleating about supermarkets selling alchohol too cheaply? If they were really serious they would double the duty which would have exactly the same effect and provide more revenue assuming that demand is ineleastic. If the supermarkets didn't up the prices they would still be hit with the extra tax.

    Can someone explain the logic to me ?
    --------------------------------------

    Smuggling. Illicit brewing. Plus for some, the incentive to give up or switch to different and untaxed stimulants.

    The problem is something of a moral one. The PM, Home Secretary and Health Minister don't like the binge drinking and drunkeness. The Chancellor loves raking in the cash to pay for the rest of the Government's activities. The supermarkets are a consistently profitable sector who hand over a lot of tax, in other ways too. HMG do not want to upset them too much, either.

  • Comment number 54.

    If the shareholders caught Thiam and McGrath with their dangly naked personal ambition bits hanging out, and they give them a magnificent severance rakeoff for playing hooky, then it's not going to put others off bidding to be Masters of the Universe. Innit?

  • Comment number 55.

    My worry would be that the management try to take the credit for any currency gain they make when unwinding the dollar hedge in place. This could even be larger than the break fees and other penalties aborting the deal has incurred. Whichever way they play it the management have a duty to all stakeholders with shareholders certainly being above themselves in the pecking order. They must respect that and offer some top level resignations immediately.

  • Comment number 56.

    49. At 3:39pm on 02 Jun 2010, Leviticus
    53. At 3:53pm on 02 Jun 2010, Up2snuff

    Thank you both. It makes unfortunate sense that the Govt don't want to upset the supermarkets. I try not to be too disparaging about politicians but i do despair that the media allows them to get away with so cynical an approach to such an important issue.

  • Comment number 57.

    We could solve private and public sector woes by outlawing all employers with more than one hundred employees, or even less. Personally I like "sole traders" or should they be called "soul traders" (all that hard work).

    Let's have a return to guild families where craft are passed down through the generations and families merge to provide pseudo-craft or super-craft or whatever. Mattress makers would do very well under my new provision.

  • Comment number 58.

    What seems to have happened is that when a business gets too big it fails to address risk properly. We had the big global banks that just did not have a clue about risks and now we have BP. In both instances the board just did not protect shareholder value by looking at the risks in each of the areas they were operating in. Is this just a by product of businesses getting too big- I think the conclusion has to be yes. I recall the late John Harvey- Jones stating that if he took over ICI then (about 2004 I think was the then), the first thing he would do was break it up into smaller more nimble businesses. Certainly we need something because the banks were bad enough but if oil companies have no idea of the risks associated with each area they operate in- and they certainly do not seem to have anything like proper contingency plans for what has happened in the Gulf of Mexico- and it cannot be just BP they must all be equally clueless- it is really bad and what about the nuclear power industry and the big drug companies- do any of them have any idea of the risks they face. And if so do they have plans to deal with it to protect shareholder value and of course us the public. And this is not about capitalism. big state planning a la Soviet Union seems to have been just as clueless.

  • Comment number 59.

    26. At 10:10am on 02 Jun 2010, writingsonthewall wrote:
    8. At 08:37am on 02 Jun 2010, copperDolomite wrote:

    Some high streets only have taxi ranks and kebab shops left.


    It won't be long until they are all second-hand furniture shops and charity shops. Ryder and Oxfam with the kebab shop in the middle!

    Maybe they'll just be mutated clones after all!

  • Comment number 60.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 61.

    Come on Robert, you have to tell us your opinion about Warren Buffet and Moody

    http://news.bbc.co.uk/1/hi/business/8717622.stm

  • Comment number 62.

    In high-tech manufacturing big can be essential. The UK doesn't have much of that. Rolls-Royce (aero engines) and Glaxo Smith Kline spring to mind. The high tech bits of ICI which Harvey Jones once ran are now parts of bigger companies: Astra Zeneca and Syngenta. Interestingly, Germany has big manufacturers but small banks.

  • Comment number 63.

    The Pru's chief executive and chairman = delusions of grandeur

    Whilst no doubt very talented, they have to go. At another time they would have pulled off the deal and there probably is a case for taking over AIA, just not now.

    That supermarket calling for a ban on selling alcohol at below cost (called a loss leader) can purchase alcohol from their suppliers at a lower cost than anybody else due to market share, implementing this ban in law would give them legal monopoly on cheep beer.

    A minimum price for alcohol discriminates disproportionately against responsible lower earning drinkers, it will make no difference to the middle/upper income drinkers and parents of such that descend upon Cornwall each summer.

    The argument is that, fueled up by cheep supermarket beer before they hit the pubs and clubs, the young are binge drinking and then causing chaos in the towns and cities at weekends making them effective no-go areas.
    Here is a simple solution, enforce the existing law that says it is an offence to serve alcohol to anyone who is drunk, remove licenses from premises breaking the law, lock up drunks till the morning and bring them up in front of the magistrates not just let them off with no charge.

    Customer service, don't make me laugh. It is a cultural thing, most of the top people at these companies/quangos are some of the most ill-mannered you would ever have the misfortune to meet (I've met a few in my time, Dick Skipworth was one rare exception, a regular guy), the feeling on the ground floor is 'my boss is rich, my boss is very self-centered, I want to be rich, I will be like my boss.'

    Asda buys Netto - more to the point, Maersk sells Netto. Why is one of the largest shipping companies raising cash by selling assets ? It tells you more about the state of the global economy than the state of UK retailing.

  • Comment number 64.

    Congratulations Robert, for once, you called the deal with AIA was in trouble and you were proved correct.
    Some points from this, I find puzzling:-
    The Fund Managers opinion was that the price (not the deal principle) was too high. Pru tried to lower the price by $5 Billion, the US Treasury said ok in principle to a lower price (getting rid of a liability?). The management of AIA said no to the lower price. The Pru now have to pay out half a billion dollars in break fees, advisory costs and currency hedging.
    So AIA have just made a nice windfall ($135m) for no effort and the Pru's shareholders (and other investors?) are down half a billion dollars for no return on the investment.
    I believe that if Pru's management had sweet talked their major investors before making a bid then this deal may have gone through.
    So talks of too big to manage , different business model, overstated synergy savings, optimistic rate of return on investment would have counted for nought if the Fund Managers could see a quick profit.
    I can see parallels with the decision by Lloyds to take over HBOS here as well as the famous Goodwin cunning plan.
    The individual shareholders opinion doesn't count in the world of high finance and maybe that is what needs to change.
    I await another blog from you, Robert, on the severance deals from a grateful Board of Directors to the two advocates of this deal.

  • Comment number 65.

    Its not big business thats the problem its big ego`s!
    Don`t worry all these highly talented graduates running businesses these days will get us out of this mess.
    Hang on a minute its them that got us in this mess in the first place LOL!
    Whats worse hiring a very well qualified (on paper) over confident individual or hiring a less qualified much more cautious person who assesses risk better because he is more mature?
    A lot of the problems we are facing now are because of too much emphasis on paper qualifications and not enough on maturity and good well rounded risk averse individuals.Sorry guys and girls you screwed up and you cannot blame unions for this one !

  • Comment number 66.

    #41
    "No oil spill is ever 'accidental' - I think you're confusing 'accident' with 'feeling sorry' after the event."

    An accident occurs when an event or series of events which you think is highly unlikely actually occurs. Every action involves some element of risk management as nothing in this world is totally predictable. Random events, never seen before, do occur. You should stop writng in absolutes. It weakens your argument.

    You are trying to make a very valid point in that what someone describes as an 'accident' may be an example of them accepting a higher level of risk than others would accept. They then use this glib word to try to con people that the event was totally unpredictable and they ambiguously feel sorry. Sorry for what has gone wrong or sorry because they have been caught out.

  • Comment number 67.

    House price pick up again in May

    Oh joy more inflation...

    The fools at the Bank of England are quite obviously totally incapable of managing the money supply and in any rational World must be / should have been sacked.

    But hey, we live in a Cameron La La Land so everything is just fine and dandy - NO David, this is the inflation that will slaughter the country yet again - DO SOMETHING about it NOW.

    Isn't this the real rottenness and corruption at the heart of the system. The poor must pay for the profits of the rich as ever - this is the true ugliness. It was bad under Labour and it shows every sign of being, as widely expected, far far worse under the Tories.

    The remedy is well understood and that is to reduce the money supply - by putting up interest rates. The fact that the economic conditions will be worsened in the short term by doing so just shows how very very poor the economic outlook has become - but nevertheless it is essential that it is done and done NOW, not next month! No recovery without first pain.

  • Comment number 68.

    65 KeithRodgers

    Another very valid point.

    It is the conflation of the big ego and the seeming opportunity to look good which is the very devil. Whether it be in business, banks or politics it has been very much the same problem.

    I have chosen the words `has been' as I think the world changed not so long ago and anticipate a closer examination of motives as risk management goes real.

    There is no substitute in both the public and private sectors for the well-rounded professional with a few scars as the vehicle to deliver the sound management which we badly need. Such people have the additional advantage as being motivated by the satisfaction of doing a good job rather than just the money.

    One of the ways to reassert these values will be to make a detailed audit of the CV of every senior manager in the country and sack those who have embellished their past. To lie in such matters is nothing more than theft to my simple, puritan mind.

    We need to rediscover the meaning of value in every sense of the word.

  • Comment number 69.

    @ 31. At 10:32am on 02 Jun 2010, Daisy Chained wrote:

    > it takes a lot of courage to bleed to death under a tree

    Not when you're off your rocker on co-proxamol!

    But no matter what cretins run business and politics, they can't escape new media. It's that simple.

    They are the little balls in a pin-ball machine; we work the buttons. It was hard for Tidjane Thiam get a high score, because the poor fool had no control.

    It's time to fire in the next ball!

  • Comment number 70.

    @ 65. At 02:18am on 03 Jun 2010, KeithRodgers wrote:

    > Its not big business thats the problem its big ego`s!

    Yes. Their greed outstrips their intelligence by a country mile.

    Chemical castration might be an answer, for grasping businessmen and
    politicians. On the other hand, real castration would be much more fun!

  • Comment number 71.

    @ 66. At 07:53am on 03 Jun 2010, Boilerbill wrote:

    > An accident occurs when an event ... which you think is highly
    > unlikely actually occurs.

    No. It's doesn't matter whether "you think" it is highly unlikely.
    For example, we all know that car accidents are "highly likely" to occur,
    yet we still call them accidents.

    The word "accident" is just a metaphorical fig leaf that covers a
    human's stupidity.


  • Comment number 72.

    66. At 07:53am on 03 Jun 2010, Boilerbill

    Q - Are all oil spills preventable
    A - yes they are

    Therefore oil spills are no accident in my book. I mean if we use BP's definition of 'accident' then we could also say George Bush 'accidently' created the boom / bust by dropping interest rates after 911, or we could say Gordon Brown 'accidently' sold off our Gold when it was cheapest, or George Osbourne 'accidently' forgot to tell us that a freeze on recruitment is going to hit the health service who have huge numbers of vacancies due to existing immigration policy sending back all those qualified Doctors and Nurses from outside the EU.

    None of these events were 'accidents' because the people involved had prior knowledge that this could go badly wrong - and if they didn't know then they were not qualified for the job in the first place.

    Q. Do BP have the knowledge to extract oil without causing a spill?
    A. yes, from land based sites or shallower drilling at sea

    Therefore the 'accident' came about as they went to hunt for 'black gold' in the most difficult of places rather than turn their attention to other forms of energy generation - which they could have developed by now.

    It's all about profit - this was no accident. I'm not suggesting BP deliberately popped this gasket, but with the help of the previous US administration they underplayed the risks of this type of drilling.

    None of this matters really as I can actually see this bringing BP down now - wasn't the Exxon Valdez spill the beginning of the end for Exxon?

  • Comment number 73.

    72. At 09:56am on 03 Jun 2010, writingsonthewall wrote:

    Q - Are all oil spills preventable
    A - yes they are
    ......................................

    What complete and utter rubbish. Are you from the planet 'perfect world?'

  • Comment number 74.

    72. At 09:56am on 03 Jun 2010, writingsonthewall wrote:
    None of this matters really as I can actually see this bringing BP down now - wasn't the Exxon Valdez spill the beginning of the end for Exxon?

    .....................................

    Yup, guess your right. Assuming you define the end as being the largest oil company in the world.

  • Comment number 75.

    It's true that Big is not beautiful, but this AIA / pru, story is miles off what we need to know. It doesn't really matter if Pru takes of AIA or not, what matters is the big picture.

    Here are a collection of articles which demonstrate what that big picture looks like.

    1) The option ARM story has been quiet for some time, but this was because they were some way off the 'step up'. Now this is going to start happening all over the US - a country which at best is in fragile recovery.

    http://seekingalpha.com/article/208150-the-coming-option-arm-crisis

    2) The LIBOR spread in relation to soveriegn debt issues - a sure sign of an expected banking / financial crisis.

    http://seekingalpha.com/article/208077-is-rise-in-libor-due-to-liquidity-or-growth

    3)Why monetarism is no longer working (or in fact never did)
    http://seekingalpha.com/article/207876-fresh-credit-data-holds-some-unprecedented-horrors

    4) ...and most interesting of all - the technology of markets and why it's doomed to fail - the 'flash crash' in May was just a sign of things to come - the parasites have become computerised.

    If anyone can explain how this type of 'profit' is justified then I'd love to hear it. This is not price efficiency, this is robbery by technology. It also backs up my point about the volatility we're seeing at the moment and what it means and where it's heading. As the author says - you don't get this sort of volatility on fundamantals.

    http://seekingalpha.com/article/208120-what-the-market-s-big-red-flag-is-telling-us

  • Comment number 76.

    65. At 02:18am on 03 Jun 2010, KeithRodgers wrote:
    Its not big business thats the problem its big ego`s!
    Don`t worry all these highly talented graduates running businesses these days will get us out of this mess.
    Hang on a minute its them that got us in this mess in the first place LOL!
    Whats worse hiring a very well qualified (on paper) over confident individual or hiring a less qualified much more cautious person who assesses risk better because he is more mature?
    A lot of the problems we are facing now are because of too much emphasis on paper qualifications and not enough on maturity and good well rounded risk averse individuals.Sorry guys and girls you screwed up and you cannot blame unions for this one !
    -----------------------------------
    I have posted in the past on NR's or SF's Blog about cyclical events. Clever people, perhaps more so than less clever folk, can be more distracted or lured into a particular pattern of thinking and acting. In economics and business it was probably easy to think 'We did this, it worked - we'll do it again. We learnt, anyway, at business school that it worked for ABC Co. in 19XX'.

    It is often possible for very clever, very confident people to (more easily) convince others to follow them in doing very risky things, heroic even, with success. And sometimes failure.

    On top of that, takeover growth is a short-term thing (as others have already posted) BUT is linked to our newly prevalent bonus culture. Which is why I have been issuing warnings that it is dangerous a) to have a bonus culture, and b) when thinking about bonuses to concentrate on those in the banking and financial sector to the exclusion of all others.

    All business - banking, insurance, oil or selling stuff in the local market or on eBay carries risk. It is dealing with that risk that enables some to become very rich, some to stay poor and others to move bewteen those extremes. 'Tis often said that at a given moment in a year, some of the FTSE 100 are technically insolvent.

  • Comment number 77.

    73. At 10:39am on 03 Jun 2010, Uphios wrote:

    "What complete and utter rubbish. Are you from the planet 'perfect world?'"

    No - Are you from the land of 'that will do'?

    Oil transportation and drilling technology has come so far that the simplest drills are 100% safe from big spills.

    Take a look at this list of the worlds largest oil fields:

    http://en.wikipedia.org/wiki/List_of_oil_fields

    ...and see how many you can find on the list of largest oil spills:

    http://en.wikipedia.org/wiki/Oil_spill

    Not many I fear.

    What is "utter rubbish" is that some people (like yourself) think that oil spillage is through bad luck and not recklessness.

    I mean we could tranport our oil across land rather than across the sea in tankers which would be much safer.
    Why don't we do this? - A. money, it's much cheaper to transport by sea than by land.

    We could stick to land based oil fields or easily accessible oil fields - where the risk of spillage is limited and if it does occur the damage is contained (because oil doesn't float on land) - why don't we do this? - money again.

    If you look carefully at the ordered list of biggest oil spills by date you will see most of these are water based rigs - because it's more dangerous - the last 'land spill' I can find was the Fergana Valley back in 1992 which was 18 years ago and well down the big list.

    The only nonsense on here is your statement backing the oil companies without a shred of evidence. The fact is is it cheaper to drill in deepwater (if you decide not to put in all the safety requirements) than it is to drill a land based well in a volatile area (let's say Nigeria)

    Without greed there wouldn't be a list of 'biggest oil spills'

    However it is for other bloggers to decide who has put the best case forward here. I have supplied evidence, what did you provide again?

    "What complete and utter rubbish. Are you from the planet 'perfect world?'"

  • Comment number 78.

    @ 73. At 10:39am on 03 Jun 2010, Uphios wrote:

    > What complete and utter rubbish. Are you from the planet 'perfect world?'

    We don't want to end up on 'Planet Slime', though. The South East may have gone completely to pot, but some parts of the world at still quite habitable!

  • Comment number 79.

    74. At 10:44am on 03 Jun 2010, Uphios wrote:

    "Yup, guess your right. Assuming you define the end as being the largest oil company in the world. "

    So by your definition HBOS became the 'biggest bank in the world' after it 'merged' with Lloyds? Did ABN Amro become 'the wealthiest bank in the world' when it merged with RBS?
    What about the BA / Iberia link up - is this BA becoming 'the largest airline in the world' - or is it in fact 2 drowning men clinging to each other for safety?

    I seem to recall that the Exxon company 'merged' with mobil in order to save it's skin.
    I mean 1989 - the valdez sunk, in 1999 Exxon was no more an independent company - it no longer exists.

    Of course at the time the Exxon valdez was only the 54th biggest spill in history - the BP one is looking at the number 2 spot right now - maybe the 'merger' will come quicker than 10 years this time...

    The consequence could be even less operators in this oligopoly / cartel the oil companies operate.

    ...but of course you can't see a problem with that - despite the title of this piece being 'Big is ugly'


    ..once again, we shall let the bloggers decide who is presenting the best case.

  • Comment number 80.

    @ 76. At 10:51am on 03 Jun 2010, Up2snuff wrote:

    > It is dealing with that risk that enables some to become very rich

    No. It is the insecure who strive to be rich. They need security because they fear risk, not because they thrive in it. But such hoarding is bad for everyone, including, ultimately themselves.

  • Comment number 81.

    77. At 11:18am on 03 Jun 2010, writingsonthewall wrote:

    Lots of rubbish.

    ...........

    OK you must be correct, I only spent 25 years in the industry and you?.

    I usually can't be bothered to debate your pathetic non-stance on subjects so I will give just a short taste of where you are so wrong.

    AWOL.I mean we could tranport our oil across land rather than across the sea in tankers which would be much safer.
    Answer. We do. Ever heard of tanker roll over? Ever heard of the alaska pipeline or the siberian pipeline or even the UK pipeline (you know the one that feed Buncefield).

    AWOL.Why don't we do this? - A. money, it's much cheaper to transport by sea than by land.
    Cheaper,yes safer,yes. The problem with all land base operations is that in spite of layers accident prevention things still go wrong. The result is ground polution that can seep into the water table. I personally know of of over 60 sites where steam is injected into the ground to float out the oil. Some of these operations have been going on for 20 years or more, at great cost I might add.

    AWOL. The only nonsense on here is your statement backing the oil companies without a shred of evidence. The fact is is it cheaper to drill in deepwater (if you decide not to put in all the safety requirements) than it is to drill a land based well in a volatile area (let's say Nigeria)
    Excellent example. You are aware of course that the problem with Nigeria is that the locals like to blow up the pipeline, but I guess you would manage that as an avoidable accident. It's not cheaper to drill in deep water as I suspect even your ignorance tells you, and the steps taken by all the major oil comanies to prevent accidents is huge. It always takes at least two things to go wrong in the run up to the accident to cause a problem. In this case an explosion on the rig, which was actually assessed in the risk analysis hence the installation of a cut off device, which also failed in spite of being the best (and most expensive) available and a defacto industry standard.

    AWOL. However it is for other bloggers to decide who has put the best case forward here. I have supplied evidence, what did you provide again?

    Clearly this worries you. Personally I care little for what other bloggers may think, I don't need my ego stroked.

    Lastly, I have done well over the last few months in ignoring your inane chatterings. I owe myself an apology for failing today, it was an accident.

  • Comment number 82.

    79. At 11:46am on 03 Jun 2010, writingsonthewall wrote:

    More rubbish.

    ........................

    Look up standard oil, look up BP/Mobil Joint venture. Your lack of knowledge on this subject compounds with every statement.

  • Comment number 83.

    78. At 11:32am on 03 Jun 2010, Jacques Cartier wrote:

    We don't want to end up on 'Planet Slime', though. The South East may have gone completely to pot, but some parts of the world at still quite habitable!

    .................................

    Couldn't agree more Jacques, and as you may recall from the previous BP blog I am no lover of BP. However, you would be surprised to know (or maybe not) it is not just the SE where problems have occured. Try looking into Milford Haven's past or Sunderland, or Grangemouth, or Birmingham. Further afield try Lintz, Amsterdam or (can't remember it's name but near.) Istanbul.

    People worry about the big spills, and quite rightly. But there are hundreds, no thousands, of smaller spills that cause huge ongoing problems. In a minor defence of the companies involved they take enormous steps to prevent these spills, not least because of the cost of clean up, but unfortunately accidents do still happen.

    20 or 30 years ago the oil companies probably deserved their polluting reputation. These days you would barely believe how much effort and dare I say waste of resources they put in to prevent damage to their reputation.

  • Comment number 84.

    80. At 11:57am on 03 Jun 2010, Jacques Cartier wrote:
    @ 76. At 10:51am on 03 Jun 2010, Up2snuff wrote:

    > It is dealing with that risk that enables some to become very rich

    No. It is the insecure who strive to be rich. They need security because they fear risk, not because they thrive in it. But such hoarding is bad for everyone, including, ultimately themselves.

    ---------------------------------------------------
    Are you not mixing up profit from process with the accumulation of more and more wealth (assets) from past activities?

    I agree that there is a tendency for insecure people to hoard. But also that covetousness, greed and selfishness are part of the human condition. Secure people do it too.

    We each have to deal with that in ourselves, and at the same time as living in a system that, to an extent, encourages constant acquisitiveness whether of skills, earnings, and goods & property.

    In the corporate sector, especially with top shareholder owned companies there is also the success measures and pressures. Who wants to head up a business and be seen as less than successful? The pressure is there for continual earnings increase. 'When I was a lad', 'before the war', it used to be measured on an annual basis. Then it moved to a mid-term ('half year' although not necessarily exactly six months) and now it is a quarterly thing. What does that tell us?

  • Comment number 85.

    81. At 12:36pm on 03 Jun 2010, Uphios wrote:

    "OK you must be correct, I only spent 25 years in the industry and you?."

    Well that explains a lot - and clearly shows you are from an 'unbiased' viewpoint!

    "Cheaper,yes safer,yes. The problem with all land base operations is that in spite of layers accident prevention things still go wrong."

    So it is cheaper and safer - I never said things never go wrong. However the likelihood of things going wrong is much reduced and the cost of putting accidents right is also reduced as oil can be collected from the land easier than the sea (even if you account for that which seeps into the water table)

    "Excellent example. You are aware of course that the problem with Nigeria is that the locals like to blow up the pipeline, but I guess you would manage that as an avoidable accident."

    No - indigenous people blowing up the 'alien' pipeline is not an accident, I didn't say it was. They blow it up because they don't like to see the pillaging of their natural resources. This is a situation oil companies create - so it's not justifiable to move on to more dangerous extraction simply because you can't buy off the local president.

    "It's not cheaper to drill in deep water as I suspect even your ignorance tells you, and the steps taken by all the major oil comanies to prevent accidents is huge."

    you need to read what I write before you make such comments, I said "The fact is is it cheaper to drill in deepwater (if you decide not to put in all the safety requirements) than it is to drill a land based well in a volatile area"

    ...and you will find out which corners were cut soon enough - I mean you're the one with the oil industry experience - surely you know about cutting corners?

    "In this case an explosion on the rig, which was actually assessed in the risk analysis hence the installation of a cut off device, which also failed in spite of being the best (and most expensive) available and a defacto industry standard"

    I think you'll find that's not true.

    So your repost is to tell us how experienced you are and then make some wishy washy claims about 'land spills still being cleaned up' and once again backing an industry which has historically been very, very bad at risk assessment (because it's driven by profit - not conscience)

    "Clearly this worries you. Personally I care little for what other bloggers may think, I don't need my ego stroked."

    I'm sure they will be very pleased to hear that

    "Lastly, I have done well over the last few months in ignoring your inane chatterings. I owe myself an apology for failing today, it was an accident."

    maybe it's because if you dare come up against the writingsonthewall he will show you for the oil industry apologist you are. I am no member of greenpeace - I have no axe to grind, however your opinion is tainted having worked in the industry and absorbed all that corporate b******t.

  • Comment number 86.

    82. At 12:41pm on 03 Jun 2010, Uphios wrote:

    "More rubbish."

    Is that it? - is that all you have?

    ........................

    "Look up standard oil, look up BP/Mobil Joint venture. Your lack of knowledge on this subject compounds with every statement. "

    I did, and what I said was true - or do you have anything other than 'hear say' to back up the claim that Exxon didn't merge with Mobil for survival?

    I love those whho come on here without any facts or evidence and lay claim to being superior in their knowledge simply by fact they worked in the industry.
    It's just like when the bankers come on here and try to tell us how banking generates wealth and yet not one of them can explain the source of profit.

    You are all the same - herds of mindless sheep. Not one independent thought amongst any of you.

  • Comment number 87.

    83. At 12:54pm on 03 Jun 2010, Uphios wrote:

    "People worry about the big spills, and quite rightly. But there are hundreds, no thousands, of smaller spills that cause huge ongoing problems. In a minor defence of the companies involved they take enormous steps to prevent these spills, not least because of the cost of clean up, but unfortunately accidents do still happen."

    Oh so the motivation to prevent leaks comes from the 'cost of cleaning up' and not from any responsibility to the environment. You almost make it sound as if we should be grateful for them cleaning up the mess they make in the pursuit of profit!

    ....now that is utter nonesense....only possible from someone who has worked 25 years in the industry.

  • Comment number 88.

    @ 83. At 12:54pm on 03 Jun 2010, Uphios wrote:

    > Try looking into Milford Haven's past or Sunderland,

    Yes. You jogged my memory. I was the Mission Operations Engineer of the satellite that scanned Milford Haven - RADARSAT. I was happy to do my bit.

    I wished I was helping with the BP response. I'm out of that business now, sadly. Oil, like space, is a special case, because you have to mount a very big engineering effort to get at the goodies, and the whole thing is dripping with risk, as BP and Trafigura etc. have found out.

    But money shuffling is child's play. Anyone semi-skilled manager could run a micro-insurance company. So break them up and keep them small, so they can't be a threat.

  • Comment number 89.

    Big just got uglier....

    http://news.bbc.co.uk/1/hi/business/10227478.stm

    Check out the CDS spread on BP.

    http://www.markit.com/en/about/news/commentary/cds/cds.page

    92 today, 155 this week and 182 this month. Now the cost of insuring BP's debt is greater than the cost of insuring Italy's (over 5 years)

    Also note that the credit deterioration that's worse than BP are all companies connected to this disaster

    ....remember the 'black swan'? - well we're all watching the sovereigns for default and perhaps we should have been looking elsewhere. I presume the 'economy' of BP far outweighs the 'economies' of any individual PIIG.

    £1 in every £7 from UK private pension funds is from BP. Too big to fail? - I should cocoa - but who has the muller to bail this one out?

    On top of that the US is going to make this a partizan argument - they're already talking about BP being a 'non-US' company - although the last time I looked giant corporations were 'A-national' and therefore no one nation has responsibility.

    Isn't that just a great.

  • Comment number 90.

    @ 89. At 4:44pm on 03 Jun 2010, writingsonthewall wrote:

    > but who has the muller to bail this one out?

    They don't need bailing out. So far, the problem has cost one month's profits, and it's lasted 6 weeks. They're making money, not loosing it.

    In any case, they're limited to $75m, by US law, and Hayward's legally obliged to take care of the shareholders first. If he gives any money away, he'll wind up in jail. He can promise what he likes, but it'll be coming from Transocean, Halliburton and the profits from the well when it produces. But at least they know there's plenty of oil down below!

  • Comment number 91.

    I suspect Thiam will have to go. It's just a shame Eric survived after Lloyds bought HBOS!

  • Comment number 92.

    Hallelujah. About time the stock-owning pension funds started actually doing something instead of sitting on the sidelines and waiting for the profits to roll in.

    If they would have the guts to also vote down the remuneration packages of the fact cats as well then maybe we wouldn't need to look for a better system than companies being run for shareholders, but they won't, so...

    I favour a return to mutual-style companies where the customer id also a shareholder. I believe that if the system made customers the driving force to whom the management are accountable we would see a better world.

  • Comment number 93.

    Empire building massages the human ego.

    It's not so hot for long term investors, most people are incapable of seeing the big picture, especially those people who strive towards becoming corporate emperors.

    Doesn't stop people trying though.

 

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