Zombie banks – dead right!

10/06/2012 - Leave a Response

‘Zombie banks’ is a new term which is finding its way into the media.  It describes those financial institutions which still – years later -have high levels of ‘write-off’ debts or worthless trading instruments that remain hidden from full public scrutiny.  The end result is that there is a break on economic recovery: banks are under-capitalised for lending to businesses, investors will not put their money into banking sector shares because they literally don’t know what they are getting for their money, and banks will not lend to other banks because they don’t trust one another’s true capacity to repay on schedule – or ever.   The banks exist but do nothing else; hence the designation ‘zombie’.

Usually in critical thinking, we consultants spend a lot of time warning clients about the use of emotional language in reports, strategies and projections.  Overtones create strong, simplistic and often misleading impressions.  They lead in turn to shallow understandings and poor decision-making.

Occasionally, however, a word or term comes along which does the opposite, stating a comprehensive yet pithy truth.  ‘Zombie banks’ is one such example.  Not sure?  Then, here is an exercise which we can use to examine the emotive validity of a descriptive term. Try a straight-forward word association game using ‘zombie’ with your colleagues during a lunch break or time at the water cooler.  Then match the resulting word list and overtones with the banking difficulties I’ve described here.  You too will conclude: zombie banks – dead right!

Doctored Figures

01/06/2012 - Leave a Response

I was listening to a representative attempting to justify why some UK doctors will be going on strike shortly.  I was listening – and I wasn’t disappointed.  Two of the most common forms of poor argument soon turned up.

The speaker stated that doctors’ salaries had shrunk by 10-15% during the last three or four years. The first point is that whenever someone states a period of time during which change takes place I always want to ask: “And what happened immediately before that particular period?”

The answer to that question is that last government administration gave away huge concessions to the doctors with new working agreements: doctors’ incomes increased hugely with many GPs suddenly earning £100k+ per year, and for far less out-of-hours service commitments than before.

The second point was the old – very unoriginal – tactic of quoting percentages without absolute numbers.  How sympathetic should someone be when they are earning less than £20k per year (and that is half of all full time employees in the UK currently) when a 15% drop still means the poor, hard done-by doctor is still pocketing £85k+ …

To be fair, there might also have been some potentially misleading statements coming from those on the other side of the controversy.  There were, for example, comments about the doctors receiving pensions of ‘up to £53k’.  I’m always wary of that phrase – investigation often proves that few are ever at the level stated in the ‘up to …’ and most are way below the number quoted.  We need more information although I don’t suppose for one moment that my pension will ever be anywhere near that of my doctor.

Whatever the rights or wrongs, so much of the argument has already suffered at the hands of the very worst kind of doctors – those of the ‘spin’ variety.

OMG – I’m not religious anymore

28/04/2012 - Leave a Response

Apparently researchers at the University of British Columbia have found that people undertaking analytical thinking demonstrate a decreased degree of religious belief after completing their tasks compared to those involved in activities which don’t require such thought processes.  This in turn relates to the two ways of thinking which are being much talked about these days – fast (intuitive) and slow (critical reasoning).

This has been misinterpreted – and painfully so – by those who defend both faith and atheistic viewpoints as meaning that you must have to hang your brain on a coat hook  if you have a religious belief.  Plenty of intolerant vitriol, innate superiority and ‘righteous forgiveness’ have been lobbed between the trenches.  And all so needlessly…

The full significance of two-track thinking has yet to be worked out but a short-term decreased belief is not the same as a total zero – the  requirement for the absolute assertions I have read.  Rather, it seems that the mind is geared to a balance between the types of thinking which depends at least in part on which kind of processing is being used according to the immediate task at hand.  Our lives are a mixture of circumstances and situations only some of which require pure analytical thinking.  And fast or intuitive thinking, after all, is still a process which incorporates logical steps even if some of them are by-passed for the sake of efficiency.

Some of our greatest thinkers such as CS Lewis articulated an effective interaction between logic and intuition long before we started to understand fast and slow thinking processes.   It was the Belgian priest Monseigneur (Abbe) Georges Lemaitre, a Physics professor, who first proposed the idea of an expanding universe, worked out what became known as Hubble’s Law and provided calculations of the Hubble constant a full two years before Hubble himself did so. Indeed, Lemaitre’s work corrected some of Einstein’s research.

The hard sciences are packed out today with believers of organised religions or private spirituality who are immersed in analytical thinking every day of the week.  But on Fridays, Saturdays and Sundays they still take time out to worship with others.

On average, people are confused about ‘median’

19/10/2011 - 2 Responses

The Institute of Fiscal Studies dropped an analytical bombshell into the midst of the few remaining economic optimists with its recent report.[i]   It estimated that median household incomes will fall by 7% between 2009-12  – the worst situation since the string of crises during the mid-1970s.  It then goes on to discuss the resulting huge numbers of people who will be facing poverty.

So far, so clear –  and the BBC[ii] helpfully explains,  “the technical term of “absolute” poverty [is] defined as being below 60% of the median income, adjusted for inflation.”

But wait a moment!  The Daily Mail also provides a definition, claiming the IFS as its source, as it notes that, “An individual is in….. absolute poverty if a household’s real-terms income is below 60% of the 2010/11 average.[iii]   This sentence even comes directly below a reproduced table bearing the caption, ‘Poverty line is 60% of median before – housing –costs’ income’.

In a very short space of time – just 24 hours – we have gone from median to average to median.  And one other newspaper’s article on the IFS report that I have failed to track down after an initial viewing used “median average” at least twice…That piece of writing is journalism’s equivalent to the each way bet.   (If anyone can find this article for me I will be enduringly grateful.  No prizes but a fuzzy warm feeling inside will be yours.)

So what is really meant – what is the difference between median and average, and why does it matter?  Actually, one of the biggest applications of all this discussion is indeed to wages, big and small.  So now your attention is no longer drifting,  let’s first consider the maths terms involved in very basic form:

Mean = add up all values and divide total by number of values.  This is what is meant by ‘average’

Median = line up all values in order from smallest to largest and pick the one in the middle . (If you have an even number of values in line, work out the mean for the two values either side of the middle.  That figure is your median.)

Here is a fact to contemplate: on average, a member of the human race possesses one ovary, one fallopian tube and one testicle.  Already you might be suspecting that ‘average’ or ‘mean’ may be less helpful than might first appear……

The mean is not in the middle of the range with almost everything else grouped closely around it and just a few values at either extreme, as in a classic bell-shaped curve.  In the skewed curve, the majority of values are significantly below the mean and far fewer are above it. The distribution is a bump to the left in the graph and a tailing off line towards the right.   The mean therefore does not reflect where most values actually are.  The average, so beloved of politicians, trade union leaders, employers’ organisations and journalists, is not where most people actually find themselves but gives a far higher value.

In most Western economies this skewed graph with most values bunched well to the left side has direct and hugely significant applications to salaries and house prices (both sales and rents).  Such graphs are important to businesses because salaries can easily be 60% – 80% of the costs of a company or commercial sector.  House prices are one of the wealth measures which drive consumer confidence and willingness to spend, boosting money circulation in regional and national economies.  Rentals may be a significant factor for restricting savings for house deposits and commitment to mortgages similarly can limit construction, DIY and allied supplier industries.

Let’s take a quick look then at skewed graphs, putting in some contemporary values.  Although what follows applies to the UK, any reader living elsewhere can insert their own country’s figures and the story will be the same.  In the UK national average salary is £26 000 per year.  Yet 50% of full time salaries in the UK are below £20 000 per year and around two thirds are less than £26 000.  So the mean actually reflects the dividing line between the wealthier 1/3 and the poorer 2/3.  It is not the divider between two equal segments of the full time salaried population.

For a skewed graph, if the mean can prove so misleading, what may help?  The median value for a skewed graph falls some distance to the left of the mean (ie a lower value) so it represents a downwards correction towards where the graph ‘bulges’.  It is not ideal but it is a great improvement for realistic understanding and discussion about the salaries situation.[iv]

Back to our definition of absolute poverty – ‘less than 60% of median income’ means people are worse off than ‘less than 60% of mean income’ by some significant degree.  I finish with the words of Barnardo’s CEO, Anne Marie Carrie: “…This isn’t just about statistics as every day thousands of families are being forced into making choices between heating or eating.”[v]   Absolutely, distressingly true – but we won’t see much change for the better if we can’t even get our heads around the concept of ‘median’, let alone act on what it is telling us.

[i] Brewer, M, Browne J and Joyce, R (October 2011) Universal Credit not enough to prevent a decade of rising poverty  http://www.ifs.org.uk/publications/5710


[ii] Sean Coughlan (11 Oct 2011) http://www.bbc.co.uk/news/education-15242103


[iv] Part of this discussion is adapted from Section 5 of my upcoming book on critical thinking for business, “LIFTING THE BLINDFOLD


More links than a golf course

20/09/2011 - Leave a Response

When confronted with a graph of the general kind: ‘as X increases so does Y’ or ‘as X increases Y decreases , the immediate thought is, “Why does X cause Y to do that?”  The actual answer could well be, “It doesn’t”.  This is because we need to distinguish between coincidence, correlation and cause + effect.  If we can make this distinction successfully then we do not waste time, effort and, quite possibly, hard earned cash on following up links that do not exist and effects that will never happen.

We do have to be prepared for coincidences in life with no actual links existing whatsoever, despite any apparent patterns.  It happens, and the whole subject area of randomness and probability makes up entire university modules and textbooks.  But what is the difference between correlation and cause+effect in simple practical terms?

Correlation has just one key aspect:  the relationship between two things .  Changing one of them ultimately leads to the other one also changing to some expected degree.

Cause has two key aspects: one thing influences another in a predictable way as before.  However, additionally, the first thing is the reason for the change in the second one.

For some reason, perhaps the simplicity of it, there is often a rush to claim cause+effect which leads straight to instant – and wrong – decision-making.  Sadly, though, human nature definitely seems to have a default setting  of cause+effect when most observations and commercial possibilities arise as a result of correlation.

Correlation works as a series of connections – a chain, at its simplest:

X—— A ——B—— C ——-Y

Very commonly, however, the correlation explanations work in parallel with several factors separately  linking the two observable things:




A recent media report[i] illustrates this second arrangement, in this case with social policy potentially affecting local businesses.  Alcohol Concern’s study found that, for every 2 local stores selling drink per 100 000 population, one under-18 person sought hospital admission for alcohol-specific treatment.  The report suggested that the government may need to control off-licence (street corner alcohol store) numbers as a consequence.

In this case X = 2 stores/100k and Y = one under-18/100k.  Noting that off-licences are the major source of alcohol for young people, explanations for the intermediate links included:

  • General availability through greater number of off-licences locally increases the quantity of alcohol at home
  • Street shop alcohol sales increases the number of opportunities for under-18s to stand near  off-licences and ask legally-entitled adults (over-18s) to buy alcohol on their behalf

These illustrate two very different pathways which make a connection between store numbers and hospital admissions.  But there is also an example of the series or chain pattern of connection rather than the ‘parallel’ explanations.  To summarise one of the report’s further points in terms of the correlation scheme:

2 stores/100k—— Alcohol in homes —— Easy access to friends’ supplies —— U-18 admission

It is also possible that there are other separately-operating link explanations for X and Y which are not listed, usually because further research is needed to confirm their validity:  off-licences being concentrated in poorer areas, for instance, where there are also high concentrations of college student accommodation ie a target market which keeps such stores open, local and available also to under-18s.

Think in terms of links with correlation and you will find your mind gets quite a bit of exercise – and some new ideas which could turn out to be significant.  Oh, and if you’ve learnt something from this blog, go to www.alcoholconcern.org.uk and make a donation.

[i]  http://www.alcoholconcern.org.uk/news-centre/press-releases/off-licence-density-linked-to-alcohol-harm-in-under-18s (Sept 2011).  Cited by BBC news text service 5 Sept 2011

Our Tony having a riot of a time

21/08/2011 - Leave a Response

Tony Blair has very rarely written articles concerning UK domestic politics since he left Number Ten but he has been featured in the Observer today with a piece on the recent riots.  He gets off to a good start, providing a quote which any analytical thinker can’t help but admire as a general principle of assessment:

“I think we are in danger of the wrong analysis leading to the wrong diagnosis, leading to the wrong prescription”.

He then goes on to make a wrong analysis and the rest goes awry with all the painful inevitability of a slow-motion train crash…..

“The big cause is the group of alienated, disaffected youth who are outside the social mainstream and who live in a culture at odds with any canons of proper behaviour….The key is to understand that they aren’t symptomatic of society at large. Britain as a whole is not in the grip of some general ‘moral decline…. the truth is that many of these people are from families that are profoundly dysfunctional, operating on completely different terms from the rest of society, either middle class or poor.  This is a phenomenon of the late 20th century. You find it in virtually every developed nation.”

So let’s start taking this apart in the light of the court cases and what is increasingly known about the perpetrators who have been convicted.  The big cause is ‘youth’? Really?  Someone recently pointed out during a television discussion that the number of under-18s as a proportion of all those being arrested and convicted is exactly in line with the ratio of under-18s within the UK population as a whole.  The most disproportionate grouping from court reports so far actually appears to be the 18 – 40 age group – hardly the ones going through the spots and angst stage of life.

Alienated? A culture at odds with any canons of proper behaviour?  The older age group features a disconcerting number who have social standing, jobs and/or turn out to be training for various careers and professions.  As critical thinkers we have to be aware that media headlines will selectively and disproportionately feature the small number of most dramatic examples.  Even so, it has been noticeable that stereotypic criminal profiles have been less common than most ordinary people were expecting.

Let us look at the UK despite Tony Blair’s final thought about other nations.  Undoubtedly there were locations and times where the disconnect between sections of society was evident; the profiles of the looters on film at night did not always match the profiles of those who turned out voluntarily for the clean-ups in the clear light of day. The telling pictures of handguns being fired at unarmed police and at a helicopter emphasise the worst extent of that disconnect.   There is some observable, measurable truth in what Tony Blair says.

But it is only a fraction of the truth.  Hundreds of people who are more than just surviving in 21st century Britain committed crimes when they knew, hoped or calculated there was very little chance of being caught.  The opportunity was there, and they embraced it with as much relish as they did the actual goods they looted.  All sections of society, all ages, all backgrounds – and all thieving in the midst of anarchy by design.  Of course, there is a current moral decline or, worse, this was another example of a severe but unmentionable moral crisis which continuously threads through our country’s mixed history.

The quotes above have been edited as indicated by the use of …..  Critical thinkers should always check the original text whenever they come across these indicators of omission, making sure that the argument has not been warped inadvertently or misrepresented deliberately.  So for reasons of transparency and honesty here is that original article link:


Pundits in a world of their own – and ours

08/08/2011 - Leave a Response

Currently, I’m writing a new book on critical thinking skills for business people and students (‘Lifting the Blindfold’ – how’s that for a shameless plug?).   I have the television on in the background – a wallpaper of sound around the room beyond the computer screen.  According to the ever-breathless TV news presenters, a major story is the continuing consequences of America’s credit being downgraded by the Standard & Poor’s Agency from AAA to AA+ during a tumultuous time in the stock markets.

Yet the whole world is listening to the wrong people, perhaps.  The situation reminds me of all those ex-players and managers on the weekend sports programmes.  These football (or soccer for my American followers) pundits seem to spend quite a bit of time after a game explaining in no uncertain terms why certain features and incidents were inevitable.  They just happened to say the opposite in pre-match expectations earlier in the day…..

It seems to me that the hugely influential international credit ratings agencies have a similar role as pundits of the business world.  After all, these agencies were giving the highest AAA ratings to complicated mortgage loans when US banks were, in effect, handing over vast sums to a particular set of homeowners who were less likely than most to afford repayments.  Enron received the highest ratings to within a few days of its final implosion as the world’s biggest corporate bankruptcy in humankind’s entire industrial history up to that point.  Fannie Mae and Freddie Mac were in the clear according to the credit agencies despite near-empty coffers as it later emerged.  Both ended up in public ownership, becoming examples of the business equivalent of patients on life-support.

And even now the unquestioned punditry continues.  The USA may have been downgraded by Standard and Poor’s yet the two other international rating agencies (Moody’s and Fitch) maintain its AAA status.  And very few people have noticed, let alone commented upon Japan’s rating by the same agencies.  The international supply problems and global layoffs following the earthquake and tsunami earlier this year only emphasise the discrepancy between proven demand for Japanese manufactured items (ie secure income sources) on the one hand and its lower credit rating as AA  (below the USA) on the other.

The truth is that pundits express decisive opinions to large and high-status followings but that doesn’t mean they are right and cannot be ignored.  They can – and quite safely, it seems.  Pundits can live in a world of their own.  We just shouldn’t let them affect ours.


For the full, enlightening article on this subject go to:


Critical thinkers have another name to follow and to thank: the article’s author, Alex Brummer.



Sins of omission

21/07/2011 - Leave a Response

The bewildering blizzard of revelations and speculations arising from the News of the World phone hacking scandal has successfully hidden from clear view a vital point relating to critical thinking.  That is the sin of omission.  Those drawn from traditional Catholic and Anglican backgrounds will immediately recognise the phrase – doing something wrong by not doing anything at all.

In critical thinking, ‘omission’ refers to a parallel situation: an assertion or conclusion is wrongly upheld simply because no steps have actually been taken to check if the assertion is true or not.  In the case of the NotW scandal, it is the police who provide a painfully embarrassing example of omission.

When the Guardian (9 July 2009) published detailed evidence regarding hitherto unsuspected journalists allegedly knowing about illegal access to voicemails, the police immediately announced an enquiry.  Yet only hours later they declared that there was nothing “new” to investigate.   This gave a profoundly misleading impression:  the only reason there was nothing new was because they had not done much about examining11 000 pages of notes seized in 2005 from Glenn Mulcaire, the private investigator apparently hired to get into victims’ voicemails.  A shameful verdict of no “new” evidence even though it existed and was literally under their noses. But no-one was actively looking at it or for it.

In business, when someone tells you that ‘there is no evidence’, the correct response in critical thinking is then to ask, “What measures have been taken to confirm  there really are no signs that your assertion is true or qualified?”  If that question is followed by an epic silence and a paralysis of  tazer-induced proportions then you can guess the answer is ‘none’.

I have a high degree of wariness about reported illnesses and other global statistics because of the calculated or inadvertent application of omission.  As an example, quite a few countries declared to the World Health Organisation very low levels of leprosy in their populations during the 1980s and 1990s.  However, when paramedics, community leaders and others were trained to go into villages and towns to identify the clinical symptoms, the reported rates invariably rose, sometimes to triple or more the official rates.  Leprosy was a seemingly low level public health problem (and often poorly funded as a result) just because it was not being sought out due to a lack of will or initiative…..and the tragedy was that this concerned an easily treatable, fully curable infection.

Endangering lives and livelihoods, neglecting the cause of heart-wrenching stigma and rejection – this behaviour on the part of politicians, social and health services in developing countries was (and perhaps still is in places) literally a sin of omission on a grand scale.  Sadly, it is not too difficult to find similar omission and attitudes to HIV across countries and societies today.  How true it is that for evil to flourish, it only requires that good men and women do nothing.  Ladies and gentlemen, I give you the sin of omission for our modern age.

Drama and over-simplification – here are the headlines

08/07/2011 - Leave a Response

I’ve just got back from holiday in Spain and have been catching up with the UK news.  It is has been quite a summer of statistical hand grenades, liberally lobbed from one entrenched group over to another to protect or assert preconceived points or positions.  One such weapon is ‘headlining’:  this is a mismatch – a discrepancy to varying degree – between the summary title of an article or report and the actual contents.

Headlining as a weapon has a few variants but of the most commonly used is that of dramatic proclamation – the immediate impression of deep crisis is not justified to the same extreme degree by the details upon examination.  This can go unquestioned because, even if the size of the discrepancy is observed, the emotional overtones accompanying the subject may deter objections.  No-one wishes to be perceived as heartless in matters concerning the welfare of children for example but this should not crush intelligent consideration of the true situation.

One story this summer declared that now ‘liver disease is hitting young drinkers’.  The public were told that “the number of young drinkers ending up in hospital with a serious drink problem ‘has risen by more than 50% in the last decade” (NHS report – emphasis is mine).   This is a huge and relentless rise is the thrust of the phrase.  It is only when we look at the figures behind the headline that perspective is fully restored:  351 people (30 years old and less) were admitted to English hospitals with alcohol related liver disease in 2009/10.  The figure for 2000/01 was 230.  This is out of how many millions of under-30s in the UK?  And with a total population that has increased to nearly 62 million?  We can also note in passing that the sin of dramatic presentation is made possible by committing the great sin of quoting percentages without the absolute numbers (e-mail me at info@clearthinkingclearprofit.com for a free pdf booklet which tackles this issue in the workplace).

Another widely featured story highlighted a 10%+ increase in one year of children in custody battles who were abducted then taken abroad.  Again the general presentation tone came across as one of dramatic change for the worse.  Headlining with only the percentage, we only saw the small numbers in the information which followed: 131 children in 2010 and 146 in 2011.  I recognise that even a single child removed in these circumstances is a massive trauma for the wronged parent and a contempt of court.  But again we have to ask – a how significant is an increase of 15 and a total of 146 children out of how  many custody cases with parents of different nationalities?  It does not help the cause of those families who need assistance and advice for headlines to be ‘messing with peoples’ heads’, cultivating distrust and suspicion which dulls a public response or sympathy to genuine crisis.

Pick Your Own – Summer Percentages and Numbers

21/06/2011 - Leave a Response

There has been a lot of talk in the media this last week or so concerning industrial action on a – well, industrial scale.  Quite a bit of the debate has revolved around the recently published results of official strike ballots and, depending upon your point of view, some statistics are apparently far more significant than others.  So let’s have a look at what has been reported and, equally importantly, how it has been presented.

Firstly, the teachers:  The NUT and ATL unions have almost 300 000 members between them, according to the Daily Mail (15 June 2011).  The newspaper goes on to note that, “Strike action was backed by 92 per cent of NUT members who actually voted, while the ATL ballot was 83 per cent in favour.  But just 40 per cent of the NUT membership and 35 per cent of ATL members took part in the vote.”

So there is a subtext from the editorialising elements (highlights are mine)that only a militant minority (a percentage of a percentage) have supported strike action.  The deeper sub text will be that this ballot is therefore scandalously less than democratic . Indeed, to make sure that the essential point cannot be overlooked by even the most casual of breakfast time readers absorbed in crunching their toast or corn flakes, the headline for the piece bluntly declares: “Teacher strike could shut 23,000 schools (but only 40pc voted in ballot over pension reform)”.

The Daily Telegraph (14 June 2011) reported that, “The ATL, seen as the most moderate teaching union which represents 160,000 school and college staff, voted “overwhelmingly” to strike…. 78,342 members were eligible to vote in the ballot. Of the 27,563 who voted (35 per cent), 83 per cent – 22,840 – voted to strike and 4,653 voted against.”  This more neutral wording hides nothing that is relevant to the debate but allows readers to work out the maths – and their personal conclusions – without so much editorialising written into the reportage.

The Guardian (15 June 2011) took a different approach when it reported, “Up to 750,000 state employees are expected to take part in the strike, over the government’s pension reforms, after members of the Public and Commercial Services union voted by 61.1% in favour of strikes, and by 83.6% for other forms of industrial action, on a turnout of 32.4%.”

Interestingly, here the turnout figure turns up last of all.  The lead figure of 750 000 + phrasing of ‘expected to take part’ + the percentages coming first could create a strong subconscious impression of overwhelming solidarity before the key statistic for understanding just how many are clearly in favour of such action presents itself.  Certainly, this emphasis on the front-loaded figures is not just my suspicious mind at work since Mark Serwotka, the general secretary of the PCS, is directly quoted as saying: “The clear majority in favour of a strike shows that public servants are not prepared to stand back…”

And in the interests of fairness here are the links…..