‘Black swan’ theory, developed by the writer Nassim Nicholas Taleb, refers to unexpected events that have extreme consequences but are rationalised afterwards by pundits who say ‘That was always going to happen.’ Covid was a big one; Putin’s war on Ukraine another. It’s in the nature of global events that there’s always a dark-feathered disruptor lurking somewhere, waiting to make its presence felt. Right now, it just might be hidden in reports of protestors in Zhengzhou, capital of China’s Henan province, demanding their money back from four local banks that suspended withdrawals in April.
Runs on small banks are not unknown in China; nor is embezzlement by corrupt managers. The authorities’ response – using security forces to smash crowds and changing some depositors’ Covid-app codes from green to red to prevent them travelling to protest – is par for the course under Xi Jinping, whose greatest fear is widespread social unrest.
But behind this local eruption are long-running rumours that the country’s entire ramshackle banking system is increasingly vulnerable to the extended pandemic downturn and a slump in the property sector, which has overheated to account for as much as 30 per cent of both GDP and bank lending.
A $300 billion collapse of Evergrande, China’s second largest property developer (mentioned here as a potential black swan last year), was averted by state intervention. But unless Beijing can conjure the biggest systemic bailout of all time, an angry mob may one day storm the central People’s Bank of China, causing heaven knows what shock ripples across the globe. I’ll be one of the pundits saying it was always going to happen, but that will be no consolation.
Who’s up, who’s down?
Whenever there’s a Tory leadership contest, I think of my late father’s yardstick for judging politicians, which was to estimate how high they might have risen in the management hierarchy of Barclays Bank where he himself spent his working life. His cross-party fantasy bank of long ago would have been chaired by Lord Carrington, with Labour’s Denis Healey as chief executive and Norman Tebbit as a thrusting middle manager.
The game doesn’t work today, because it’s impossible to imagine most of our callow politicos holding any serious corporate job outside the PR department. But an updated version occurred to me after an encounterat the Spectator party with Konrad Kay and Mickey Down, who wrote Industry, the sexily authentic TV drama about young investment bankers competing for favour. Suppose today’s contenders were the graduate intake of a hothouse City firm: who’d be first for promotion or the P45? Would it be too-good Sunak or cunning Zahawi, feisty Truss or femme fatale Mordaunt, ambitious creep Hunt or refuses-to-party Tugendhat? Choose your own imaginary competitive setting – Love Island might work just as well – and I think you’ll find the whole extended contest become a lot more exciting.
A very British dotcom
I’m sorry to see trouble brewing at the Bolton-based online white-goods seller AO World – not because I’m a shareholder but because I’ve always liked the homespun backstory of this very British dotcom. Founded by kitchen salesman John Roberts after a mate in the pub bet him £1 he couldn’t start his own business, AO created a slick new consumer offer and a lot of jobs for a depressed town; in the early days it was famed for its party ambience, led by Roberts with DJ Lionel Vinyl.
It went on to achieve a £1.6 billion valuation after its 2014 flotation attracted investors such as the hedge-fund prince Crispin Odey — with the pleasing side-effect that one pre-float local backer, the philanthropist Sir Norman Stoller, was able to cash out £50 million to devote to charitable causes in the vicinity. The shares hit a second peak above £4 in early 2021 as online retail boomed in lockdown – but have since slumped to 43p, reflecting supply chain and credit insurance problems.
Job cuts are in prospect and the maverick tycoon Mike Ashley’s Frasers Group was reportedly trying to ‘gatecrash’ a £40 million capital-raising designed to ease AO’s cashflow last week. Some might see that last snippet as a negative, but this column has always admired Ashley as a shrewd judge of businesses worth saving. He and Roberts would make a lively combination.
Musk’s new wingman
Elon Musk is in a pickle entirely of his own making over the $44 billion bid for Twitter he now says he won’t go through with. Some observers think he never meant to do so in the first place, but that the would-be funding requirement for the bid was an excuse to sell a bundle of share options in Tesla, his electric car company, at an advantageous price. Either way, Twitter will now sue him for a $1 billion break-up fee and may even seek a court order to compel him to proceed to completion.
You’ll recall I advised Musk to stay focused on Tesla in the first place. But what this mercurial changemaker who heeds no advice needs is a gifted communicator alongside him, just as Mark Zuckerberg of Facebook-turned-Meta relies on former deputy prime minister Sir Nick Clegg. In Musk’s case, the job description would involve making the wackiest spur-of-the-moment gambit sound visionary while swearing that whatever was promised last week was never said at all – and the obvious candidate, suddenly available, is Boris Johnson.
The pair are perfectly matched in another respect, Musk having fathered at least nine children to Johnson’s seven, each by three mothers. The luxury Californian lifestyle would suit the Johnsons, who could share wronged-exile gripes and toddlers’ play-dates with the Sussexes. And Musk’s ultimate ambition of colonising Mars would offer Boris, quite literally, a new world to conquer.
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