Why everybody hates politics

Daisy interviews Helen Thomas, CEO and founder of Blonde Money -  a risk monitoring consultancy that brings together years of experience in the worlds of Westminster and Wall Street to advise clients on political risk and how it affects financial markets.

Key takeaways include:

• That companies need to be much broader in the types of risks that they monitor, model, and prepare for. 
• The importance of developing a framework for understanding how the very human beating heart of politics may shift and how that might impact them and the broader market.

Find all of our episodes - and full transcripts for each one - at https://www.buzzsprout.com/1121639

Transcript

Daisy Powell-Chandler 

Welcome to Why Everybody Hates You, an audio support group for reputation professionals. If you have any responsibility for how people talk, think and feel about your organization then you are in the right place. I'm your host, reputation coach Daisy Powell-Chandler. 

Time and time again I watch clients with a more financial mindset struggle to comprehend how politics might impact their businesses - and politicians underestimate the impact of markets and importance of business behaviour. For this episode, I spoke to Helen Thomas, CEO and founder of Blonde Money -  a risk monitoring consultancy that brings together years of experience in the worlds of Westminster and Wall Street to advise clients on political risk and how it affects financial markets. 

Hi, Helen, thank you so much for coming on the show. It is marvellous to have you. Why does everyone hate politics?

Helen Thomas  0:50  

I think a lot of it is to do with the cacophony of noise that you walk into these days, if you read anything about politics. Whatever side you take to any of this, if you open a newspaper, if you're on social media, there's somebody with an opinion, and they're going to throw it at you. And I don't blame people for just thinking sometimes I'd rather switch off. 

And if I might make a particular point about the state of the world today. We've had a massive change to our lives and our world with the pandemic, with war, with inflation. I mean, these are… it's quite the opposite to the end of history, it's kind of like history suddenly thrown at you in three years. So I think that can be a bit overwhelming. Yes, I

Daisy Powell-Chandler  1:40  

I was saying that to someone the other day. In the 90s, I'm sure I was promised that history had ended and it was all going to be lovely and calm from now on. That doesn't seem to have happened. Obviously, there is a difference, though. In our personal lives, we might choose to hide under the cover and ignore all the coverage of the COVID inquiry, or Brexit, or whatever it might be that's driving us mad today. But when we work in reputation or risk monitoring, that is a lot harder, isn't it? And yet, some companies seem determined to ignore politics as much as possible.

Helen Thomas  2:12  

They do. I think sometimes that's because it's complicated and thorny, and doesn't fit into the way they look at the world. By which I mean, a lot, certainly, of my clients (being financial institutions) are very used to quantitative measures. They like as much data and charts as possible. And you know, politics is often about people. And people are messy and unpredictable and do strange things. And that can feel quite disconcerting, I think, to many people in many businesses. So I think there's something about the nature of politics that it’s just hard to grab a hold of it, and therefore it goes in the ‘too difficult to look at’ box.

Daisy Powell-Chandler  2:59  

Yes. Or what we find quite often is that you discovered the political reputation part of, of a company's risk management is being run on on someone's ‘spidey sense’ rather than on any particular data management process.

Helen Thomas  3:12  

Absolutely. It's almost too qualitative. Because the thing is, of course, we all have our own prior judgments on things. And even with the spidey senses (that’s a great way of describing it) that person may only know a certain particular group of the political world, or have their own experiences, which is all useful. But it's inherently narrow. It’s also hard to feel like you can hang your hat on it. 

I don't want to denigrate people in the ‘spidey senses’ world, many of them are extremely good at what they do and there is a place for their information. But I do think that it's very qualitative. And then the other extreme can be very quantitative and just all numbers. There needs to be a space that brings the best of both together. That's what we try to do anyway.

Daisy Powell-Chandler  4:10  

And what's at stake if you don't get this right? What happens when you try to ignore politics?

Helen Thomas  4:19  

Well I think it comes back and bites you on the bum, doesn't it? Really whatever way you look at it. 

Because, of course, in the 1970s and 80s politics and economics were inextricably linked. And in a way it was that sort of the 90s in the 2000s where… I mean Mervyn King called it the “nice decade” It was the ‘non-inflation consistent expansion decade.’ Gordon Brown had ended boom and bust, every budget was great. It was all good times. But of course, actually, that was the anomaly. It was a very unusual confluence of events, and we are going back to actually more of a normal world that we had in the pre 1990’s period. So, I think as well, part of it could just be what you're steeped in. 

So, it's quite interesting, when you just talked about people going into finance. I went into it in 2001. That of course coincided with huge tech bust, well tech had taken off just before it all collapsed. But the technological revolution was going, quantification of everything was easier because computer power got greater. And the other political stuff just did its own thing in the background. And the worlds were able to be really separate because it sort of suited them. The point is that that wasn't ever going to last, really, and so we've kind of come crashing back into, as I say, a more normal world where the two are intertwined. 

Daisy Powell-Chandler  5:51  

So what does that look like when it goes wrong?

Helen Thomas  5:56  

Well, I think we've had an interesting example of this recently. So mergers and acquisitions big takeover deal, there was one announced earlier this year. Microsoft - a massive company obviously - buying Activision, a UK gaming company, who are very well known in their field. They have big names like World of Warcraft and Call of Duty in their roster. I don't know if any of your listeners will be avid players of those, but they may well be. It's a big multibillion dollar deal which has an impact globally. And because of it being such a large deal, competition concerns were obviously raised, and each jurisdiction has its own Competition Commission, or whatever you want to call it that looked at whether this deal could go through based on its own assessment of competition. And to rehash this, for those of you who don't know, initially, the US FTC (Federal Trade Commission) and the UK CMA (Competition and Markets Authority) blocked this deal over competition concerns, It actually got passed in the EU because Microsoft provided some remedies that the EU were happy with but the UK were not so happy with. 

Now, straight off the bat, that's interesting because the only reason the UK was doing this separate is because of Brexit. ‘Taking back control’ there you go. That's what it means. you get to make your own decisions on this sort of thing. But to your point on this, although it looks a very purely financial decision about one company buying another company of course there are political impacts to this because, yes, competition law it's legal, it's economic but there is always a political dimension to it. And it did cause quite a kerfuffle in the political sphere of “Well hang on why is the UK blocking this and the EU isn't? Is the UK doing some sort of deal with the US to try and stop this?” I should say, by the way, that now at the time of us speaking, it's all gone through. But there were significant concerns raised initially about this. And of course it depends who runs these competition authorities and how they make their decisions. Even with all the best experts (Michael Gove's least favorite word!) even with the best experts in the world, you know at the margin, you can decide whether to wave through these deals or not. 

The head of Microsoft was furious that the UK blocked it and said “That's it, you know, Britain isn't open for business.” And I went to a select committee hearing where the MPs were grilling the heads of the CMA (Competition and Markets Authority). And, actually it was an interesting combination - they were attacked from all sides. It wasn't just the Conservative MPs, some of the Labour MPs weren't happy either. Because it does have political ramifications. Of course, it does. Because when it comes to financial markets, decisions like these set precedents, because… Remember I said it's all very quantitative? Well, if you're going to look ahead and think about a merger, or where you want to buy a British company, because of deals like this getting held up, you're gonna have to take into account what happens if there is a problem with this. And it's very hard with all the data in the world to know exactly how that deal is gonna go in. And even with all spidey senses in the world, it's very hard to know. So it's a very high level example of how politics can derail financial markets and how it can have very long lasting ramifications. Because financial markets remember,

Daisy Powell-Chandler  10:06  

And it flows back the other way, doesn't it? So they had that select committee hearing. And then in the end, the CMA decided to go back and have another think about it didn’t it?

Helen Thomas  10:18  

Yes. I mean, it's quite astonishing how this all panned out. I really recommend people have a look at what happened through July and August this year, because the CMA’s process was supposed to be that when they make their final judgement, they have various phases, the party bring forward evidence, the experts look them over but they make a decision. And that's their decision. The appeal process is only to go back and check ‘have they been reasonable in their process.’ It's not like the appeal can hear new arguments. 

Whereas in the US, the FTC makes a decision, and then it goes to court and gets litigated. And that was where the court in the US eventually a judge ruled it could happen. But in the UK we have a different process. The CMA, they've never done this before, they said “yeah, okay, well, we did that process. But okay, Microsoft, come back to us with something completely new and we'll start again. We'll run the process again.” I mean, Microsoft did agree, to some remedies, including selling off elements to a third party company, but you know they passed it through. When I talk to you about the credibility and certainty of process, that whole decision has thrown all of that up in the air because you need institutions to behave reliably and consistently. 

I should just say, on this point about the CMA and Brexit, you know, the entity of the CMA for a long time was not as busy and not as involved in such high profile deals because we were part of the EU. So there is an element of this that… although it's a long running institution. It used to have different names, people probably remember the Mergers and Monopolies Commission in the 80’s. The thing is we've always had one but it's gone under different iterations…. Inevitably, post Brexit, it's finding its feet. And it's this thing again, that in financial markets, people just want to see things in zeros and ones. But it's always people. It's always political arguments. It's, always about the context of what's going on around it. And that's a real reminder to people in finance - you just can't ignore how political institutions work. 

Daisy Powell-Chandler  12:38  

And likewise, politicians have come a cropper a few times in the past few years because they've ignored how markets work, haven't they? I mean, Liz Truss springs to mind immediately.

Helen Thomas  12:50  

Yeah, for sure. I mean, we really all should sit back and think what happened there. Whether you agree, disagree, whatever your sort of emotional response to this is, let's just stand back and say that the markets panicked about the credibility of the government to such a degree that the Prime Minister  left their post. That's quite an astonishing thing to happen. It's the kind of thing actually that happens in emerging market economies. And I don't say that to be denigrating necessarily to Liz Truss, I just say it about how the world in which we now live, as you say, where the markets are trying to come to grips with the politics. And, you know, the markets, were of course instrumental in that… because of what happened in that episode, and because of the lead the Labour Party have taken since then, and maintained, and of course, it now looks like the Labour Party will form the next government - we can continue to draw a line from that financial market blow up and say, ‘not only did it remove a prime minister, it might well have decided the outcome of an election.’ And that, if nothing else, should show people that you've got to look at what the markets doing. It may be for good or bad, but you can't just ignore them and say ‘well, I don't really understand what a gilt is or what interest rates are.’ Because they're actually having an impact on our democratic process, which is pretty significant.

Daisy Powell-Chandler  14:28  

And for a lot of companies, that means coming up with a better way of keeping track of the risks involved in both the action in the markets, and what politicians are up to. So how should they be going about that?

Helen Thomas  14:46  

So firstly, acknowledge that it's a risk that you need to look at. This isn't just going to go away. I mean, goodness, we could spend a long time on this podcast talking about all the ways in which politics and finance have interacted in the last 15 years, from the banking crisis to the sovereign debt crisis in Europe, Brexit, the sterling collapse, so on, and so on, and so on. I mean, so many ways in which this is relevant. So first of all, understanding that this isn't going away. These events were not some weird aberration, they are part of the world. And so you need to understand them. Then appreciate, or question in fact, is it being covered by how you look at risks at present? Do you have the quantitative angle? Do you have the qualitative angle? Do you do it regularly? Are you monitoring it frequently? 

I was on the board of CFA UK and, like many boards, we had a risk register. This is very common. A long, long list. Many people had pandemic on that list. And, you know, it flashes red or it's green and you're fine. And people review it annually or even quarterly. But we shouldn't feel too confident, necessarily, about those risk registers, because the most important thing really about any kind of risk is it's nonlinear. You can't just sort of go ‘it's fine, it's fine, it's fine, it's fine. Oh my god, there's a pandemic!’ Suddenly these things hove into view. ‘Oh, my God, the Prime Minister… she’s gone! There’s another one!’’ 

The nature of these sorts of risks is, in itself, mathematically difficult to model. Mathematical models can take account of non linearity and let's not get into all the geekery over this sort of thing. But it's a bit like, well, it's a bit like the way people interact with one another in life. Everything seems to going along fine. But then one minute something goes on in someone's life and things change. You know, they leave their partner, they move jobs, they move house. We are human beings, this is what happens. And risk is like that as well. So, as I'm sitting here talking to you right now, one of the things we're talking to clients about is the oil price because of the rising conflict in the Middle East. And again, if we go to your spidey senses, you could talk to some real Middle Eastern experts, former intelligence officials, army bosses. You could get a good spidey sense for you. You could also run historical data series analysis on the quant side. What happened to the oil price in the 1970s when there was a war back then? But just by running those processes doesn't mean you're in control of it. It means you started to become aware of it. But how are you going to monitor it on a day by day basis? Doing a one off annual look or one conversation is a great start, but the risk isn't going anywhere. You've got to keep on it. So I think that would be my message to people.

Daisy Powell-Chandler  18:20  

I think there's also an interesting distinction to be made here between risk identification and risk monitoring. Because I think quite often that annual process, you know that big perceptions audit that a lot of companies do, serves as a really valuable way of identifying risks and making sure that the list you're looking at, that risk register,  is up to date. But in terms of how those risks move up and down over the year, until your next audit, that is a slightly different process.

Helen Thomas  18:54  

And I think you also need to consider groupthink on this. I remember the reason I started my business. In 2017 I actually started it but then I had a blog called Blonde Money for a few years before then. But what prompted me to turn into a business was the Brexit referendum. I was at a fund management company at the time, a month before the vote, and we had a global investment team call across all of our financial divisions. 55 minutes into this call, nobody has mentioned ‘what happens if leave wins that referendum?’ Now, I interjected and said, ‘Can we at least talk about the possibility of it?’ And I remember somebody laughing and saying, ‘Oh, let's just hope that doesn't happen.’ And it's like, we're financial market professionals. We may have an opinion, we may have a personal view, but we are supposed to manage and monitor risk, you know. We were supposed to be able to do this. This is part of what we do. So when we talk about risk registers and risk monitoring and the whole world of risk, we need to understand our own biases towards it, which is that everyone will have a bias. 

Everyone does. Of course they do. I mean, even my team. Yes, my background is that I have worked with people in the Conservative Party. Sure, that's my politics. But our analysts have worked for Democrats in America, for Labour MPs, we have a former Liberal Democrat candidate on our board. I would say we may have politics, but Blonde Money has no politics, because financial markets shouldn't care. It's just about what is going to happen. And I think that that is something that can be brought to the concept of risk management. Because, inevitably, these are things people don't necessarily want to think about. 

I think it's something you've come across as well, Daisy. You have clients that might know their audience, or think they do. But you still need to run the numbers, do the analysis for them, to really get what's going on.

Daisy Powell-Chandler  21:00  

Yes. And I think to your point, we're human, we change, we adapt when we get new information. That means that sometimes… maybe you did know your audience but actually they're going through a cost of living crisis, or they are members of Parliament for a political party that's going through a fairly dramatic change, or having a traumatic time in by-elections at the moment. And that will change how they approach things. And the thing that it changes might be how they feel about your company. And to note take that into account and to say ‘well yes we spoke to them six months ago, and it was all fine’ underestimates the impact that some of these big shifts you're talking about might have on people's views. 

Helen Thomas  21:49  

That is a really important point. A really important point that, effectively, the actors within your risk register are themselves volatile, potentially, depending on shocks, depending on what turns up. And you just reminded me that, if I’m frank, I had previously had some discussion with a business that had interest in Israel. And that calculation has shifted now. I mean, it's just different. You know, politics sometimes feels, it feels kind of like this bloody, visceral, mucky mess sometimes. 

And what I talk often about is, you know, the beating heart of what is going on. Which is why of course, you know, the spidey senses are important. Which is why people read the newspapers, you do need to get the feel of it, which can be very, very unnatural to financial market or data driven people. But the goal, what we're trying to do, is to translate the heart into a chart. That rhymes! I didn't mean for that to rhyme! If there's some way of tapping into the heart and soul of what's going on. Where we started this whole conversation where two worlds are very distinct, we kind of have to map them on to one another, and that's what we try to do anyway.

Daisy Powell-Chandler  23:28  

That is brilliant. Thank you so much, Helen. What I've taken from this is that, first of all, companies need to be much broader in the types of risks that they monitor and that they model and potentially prepare for in their own business planning. But also that they need to come up with a framework for understanding how the very human beating heart of politics might shift and how that might impact them, even in quite short term situations. Well, thank you so much for joining us. I really, really appreciate it.

That's everything from us. A big thank you to my guest,  Helen Thomas, CEO and founder of Blonde Money, for talking to me about everything from Liz Truss, to computer games and how to monitor political risk. 

I would love to hear from you which lessons particularly stood out from this conversation. Perhaps this was the timely reminder you needed to update your risk register - or overhaul how you take account of political risks.

And if you've enjoyed this episode, I hope you'll tell your colleagues and perhaps write us a review on your usual podcasting app. It really does help new listeners to find the show. Thank you as always for listening to Why Everybody Hates You. And remember, you are not alone.