Editorial - Issue 27 InterIM Insight

19 December 2007

HOW BIG IS YOUR VOLCANO?

My thoughts today have been influenced by a number of things but the underlying theme seems to be one of scale. Last evening, I watched a television programme about the impact of volcanoes on the Earth’s climate over a geological timescale. Apparently, some 6-700 million years ago, the planet was a big ball of ice with average temperatures at -50C. This climate was possible as the earth cooled and there was no carbon dioxide to keep the heat in. There then appears to have been a lot of volcanic activity on a global basis which released massive quantities of CO₂ over just a hundred years or so, and this gave rise to a very hot climate, with average temperatures of +50C.

Neither of these options appears terribly attractive at this distance in time but the latter did enable life as we know it to start and absorb a lot of the carbon dioxide. This gave the balance that we more or less enjoy today which gives the average global surface temperature of +15C. On this scale, volcanic activity is viewed as a good thing. Continued volcanic activity, now that mankind is around, isn’t always viewed in this way as those living near tectonic plate lines can testify. However, if those plates didn’t move, we wouldn’t get mountains and if you think about it, without this resurrection of the land, it would all be eroded away over time and the planet would be completely covered by water.

Scale is in the news at the moment. How big an inflation shift is ‘acceptable’ before something has to be done about it? If you put two very large organisations together with different cultures, how do you ensure effective integration? You certainly know when you haven’t got it, as Mr Darling, the Chancellor, found out the other day, and now we all know that 25 million sets of personal data from the child benefit computer have gone ‘missing in the post’. I wonder what caused this action in the first place. Why send the effective contents of a computer in this manner rather than either; make the electronic connection from Tyne and Wear to London, or, perish the thought, get someone to travel to use the data in situ?

Here are some “factoids” you might like to conjure with when contemplating scale of change:

Pension funds raised 25% of private equity assets in Europe in 2006: more than the banks for the first time.
In 2005, professional services firms earned 7% of their total turnover, or £3.3 billion from private equity work.
Kenneth Blanchard’s “One Minute Manager” series has sold over 10 million copies since 1973.
In 1975, average house prices were about 3 – 3.5x average earnings; today they are 9x.
For the first time ever in the UK, personal debt (mortgages, credit cards, personal loans) at £1.35trillion (yes, trillion) is greater than the value of the economy, forecast to reach £1.33trillion GDP this year.

We all deal with change in our working lives as professional interims. Some of it is big for example when trying to make the best judgements on behalf of our clients. In the last few weeks, IIM events held at the Bank of England and in the San Siro Stadium have been designed to help members in this respect. We also have to deal with smaller things in our lives. Our event with PwC on the Money Laundering Regulations, highlighting the need for interims to register to avoid operating illegally, is a good example of ‘local volcanic activity’. Overall, a good thing but individually, we may not see it that way.

Of course, registering at this time of year is not a new thing. Thinking back two thousand years, the Roman Empire decided to do it – for tax reasons, surprise, surprise – and look where that has taken us.

Tony Evans