Melior Law and Regulation's Rebecca Sellers on how economics became a religion, the future of Fintech, the high price of sales culture, how to be a human leader and more

Today's guest Top 10 is by Rebecca Sellers, Director of Melior Law and Regulation.

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1. How economics became a religion

The top 10 column usually has excellent input from economists.  As a lawyer, interested in human behaviour, I was encouraged by John Rapley’s article. He writes about the tension between economists’ mathematical models and human behaviour and concludes that economists need to work more closely with other disciplines. 

2. The future of Fintech

The New Zealand financial services industry is currently considering a proposal by the FMA to enable “robo-advice”.  Robo-advice is financial advice generated by algorithms without direct involvement of a human adviser.  In New Zealand, such advice is prohibited if it considers the customer’s individual situations or goals.[1] In theory, relying on algorithms should improve consumer experience and outcomes, but taking people out of the transaction could concentrate risk.  This report reviews growth of Fintech between 2015 and 2017; anticipates future use across several sectors and demonstrates that globally consumers and the financial services industry are adopting technology, challenging the regulators to keep pace.

3. The ethics and competency of financial advisers

Pension reform in the UK has led to defined benefit pension scheme members being tempted to cash in their pensions by six-figure capital sums of up to 40 times their expected pension income.  The UK regulator is proposing that financial advisers are obliged to make a more comprehensive assessment, in the form of a “personal recommendation” to clients who want to cash in their defined benefit pension. Similar issues will keep the newly appointed NZ Code Working Group occupied as they consider the ethical and competency standards for all who provide financial advice, under proposed changes to the New Zealand financial advice regime.[2]

4. The high price of sales culture

Sales culture in the UK has cost the banks dearly.  An estimated 60 million personal protection insurance policies sold in the UK since 1987 have produced 18.4 million complaints.  As at the end of March 2017, UK banks and finance companies had paid out more than £26bn in compensation.[3] Australia has had similar issues, and the major banks in Australia have signed up to recommendations made by Stephen Sedgwick, restricting product sales commissions and product based payments in Australian retail banking.[4]   New Zealand’s banks are assessing the Sedgwick recommendations in the context of the proposed changes to the Financial Advisers Act 2008. 

5. Change a brain and change the world

“As you know, there is no such thing as society.” Margaret Thatcher’s 1987 comments to Women’s Own Magazine, were the source of much derision. However, the Dalai Lama, psychologists and philosophers all agree that if you change one brain, you have changed the world.

6. How to be a human leader

Culture may not be easy to measure, but diversity brings wealth of thought and experience that can counteract toxic organisational practises. But we can only recognise the value in diverse thought if it is expressed. What strategies do you use to make sure you are heard in meetings? This advice works for men as well as women who want to be seen and heard and valued.

7. Embracing cultural change

Taika Waititi is collecting for racism.  Every smile counts. Small changes in an individual’s behaviour can have big effect on the culture of organisations. Regulators talk about “tone from the top”, but every person in an organisation needs to embrace cultural change to get the best outcomes for customers.

8. Just mind your language

Each of us needs to take responsibility for the language we use. Google and Apple alum says using a particular word can damage your credibility

9 The huge upside of being forgetful

Before all this sounds too exhausting – there is good news.  Forgetting allows you to be effective.  So, enjoy your weekend, safe in the knowledge that everything you are forgetting helps you function better.

10. Our dangerous drinking binge

One of the best things about New Zealand is its beaches. Whatever else you do with your weekend, spare a thought for your beach when you are offered a plastic bag or drink bottle. The amount of plastic produced in a year is roughly the same as the entire weight of humanity.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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#1. Have you not noticed ...
Most if not all of the economic writers you refer to belong to the macroeconomic camp. Very few if any belong to the micro-economic camp. Then there are a few behavioural economists around but do not broadcast their views. Perhaps they dont have the need to convince the world of their world view. This scribe is one of the few of those who occasionally offers the plebs here the benefit of their wisdom, usually getting shouted down or an overwhelming number of disagreements or contradictions

Youre welcome

#1. An example of macroeconomics

If you take a six-sided dice and throw it against a wall and allow it to come to rest on the carpet and record the face value of the die. Repeat 50 times. Total up the 50 readings and divide by 50 to get an average. Probability is you will get a result of 3½ - an impossible number - doesnt exist

This was an exercise developed by American financial author Sheldon Natenberg 30 years ago - it didn't matter how many times you did it the result was 3½

Sorry, but that is not an example of macroeconomics but basic probability theory. 3 1/2 is a perfectly good number - not an impossible one - I can eat 3 1/2 pies if I try. However, perhaps you meant that die cannot roll 3 1/2, which is true but irrelevant since we are looking at an average. Make this simpler, flip a coin and keep track of the proportion of heads. Half the time you will get heads (on a fair coin) - nothing wrong with that.

Sorry, what's the point of this?
Of course you are going to get 3.5 - The sides of a dice are a set between 1 and 6, at 1 integer intervals. Given a normal random distribution and the law of large numbers, of course the mean is going to tend to the median with these constraints.

How that relates to #1 or macroeconomics, I have no idea.
If you are using it as an example of how mathematical models are wrong relative to human behaviour, I have no idea how they relate...

In my view the comment is brief but correct ... macroeconomists use data supplied by others, totalled, summed, averages, trend lines drawn and pretty pictures drawn from that data, then draw conclusions from it. Offer interpretations and advice. That's what they do. They never examine the composition of the data. They should. However, that's what micro-economists do

.... "the measurement of the economic desires of a social collective, a conceptual crowd. The result is not representative of any one individual within the social collective. is allied to .. Gustave Le Bon (1841-1931) analysis, the crowd submerges the individual character ... where ... "an agglomeration of people present very different characteristics from those of the individuals composing it". In gathering together, the crowd reach a state called the collective mind" That's just another way of saying 3½ is not a valid number on a 6-sided-dice.

A friend sent me this on the difference between 'complete' and 'finished'.

No English dictionary has been able to adequately explain the difference between these two words.  In a linguistic competition held in London and attended by, supposedly, the best in the world, Mr. Samdar Balgobin, a Guyanese man, was the clear winner with a standing ovation which lasted over 5 minutes. 

The final question was: How do you explain the difference between COMPLETE and FINISHED in a way that is easy to understand? Some people say there is no difference between COMPLETE   and FINISHED. 

Here is his astute answer:

When you marry the right woman, you are COMPLETE. When you marry the wrong woman, you are FINISHED.  And when the right one catches you with the wrong one, you are COMPLETELY FINISHED!!! 

He won a trip around the world and a case of scotch!