Tag: chaostheory

Encumbered by Numbers !

Posted on by markybrett
  • 5.25% Current UK Bank rate (August 2023)
  • 7.9% UK inflation rate (June 2023)
  • 2.9% drop in house prices in the UK (July 22 -July 23)
  • 2.25 % Bank of England May 2022 forecast for Bank Rate May 2023
  • 96% of GDP to 267% in 50 years’ time in 2071/72 (UK Office Office of Budget Responsibility)Net debt as a share of GDP rising – When has any UK Government- probably includes any western democracy- been interested in anything longer than the next General election
  • $300 trillion Global debt(December 2022 -World Economic Forum) (US accounts for just over 10%)
  • £0.70p average price of a pint of milk in the UK August 2023 (Office of National Statistics)
  • 1.5% increase in UK Retail sales July 2023
  • 1.9% increase in UK Retail footfall (same period)
  • 3 in November -The age of our Dog Ari
  • 384 – BC the year Aristotle was born
  • 7000 – the number of trade prices I am supposed to remember (or so think some of my customers)
  • 5.6 million -number Airbnb listings worldwide
  • 7.9 billion -world population 2023
  • 2.3 million US properties underwent foreclosure during the Sub Prime market in the USA between 2007 & 2008
  • -4.1% (note this is a minus figure) China’s deflation figure August 2023
  • 47.8% Turkish inflation rate – July 2023
  • 64 million- number of shipping containers world wide
  • 29 million beef cattle in the US in 2023
  • 20 million penguins on Antartica
  • 392,000 hotel rooms in Spain
  • £84 billion -valuation of Pinduoduo ( owner of Temu latest Chinese market place)
  • 9 million downloads of above Temu app in the U.K. , since launch in the U.K. four months ago (August 2023)
  • 91 indictments faced by Donald Trump
  • 3-1 the odds on Trump winning Presidential election in 2024

The point being….. We are bombarded by numbers every single minute of the day . Most we ignore but most are actually interrelated, and in some way effect all of us either personally, socially or in our working day. All of the above (with maybe the exception of the name of our dog) are interconnected in some way or another . Its a bit like the Chaos Theory of the butterfly that flaps its wings in Tokyo and ends up with a huge storm in the Mediterranean. This may not be an exact hypothesis but hopefully it gives as a reasonable picture as any Mathematical Theory does.

What we have to do is try to unravel those numbers that come to us and we think have an influence on our own businesses .

Unravelling is not an easy task, apart from anything many of those relevant numbers change . Only this week the UK HMRC stated that the tax take for first half of the year was higher than expected . Thus making the public purse look healthier . How so ? Everyone, whether companies, employed or self employed or retired and receiving unearned income, has to make a tax return. That Return determines how much tax is due . So where does all these unexpected tax come from ? Some shady deals where some weird taxpayers want to overpay their tax ? Me think not .

All of a sudden underlying inflation in the UK is dropping quicker than expected , when only last month we were being told it was very stubborn. So if the number makers cant get it right what chance have the rest of us.

My view of numbers is to look at your own. That is is to say if your operation and your customer base is still spending make sure it continues . By that I mean there are many retailers who look at the numbers (cost of living, inflation, media reports ) and think ‘must batten down the hatches‘. This usually involves buying no stock . So as they have no stock , they sell less and are proved right and buy even less. Look at what is happening around you, not what others are telling is happening elsewhere.

Consumer confidence jumped five points to minus 25 this month , beating analysts’ expectations and up from 30 points in the previous month, according to the research firm GfK, which has been tracking the data since the 1970s.

An improvement in expectations for personal finances over the coming year and better predictions on how the UK economy will perform pulled the overall index higher.

The August confidence bump indicates households were growing more optimistic over the summer before a recent string of downbeat economic data renewed concerns about the UK slipping into recession.

The Times August 25/08/2023

Vs

The net balance of retail sales in August tumbled to minus 44 per cent, down sharply from minus 25 per cent in July. It was the biggest drop in sales since March 2021, according to the latest CBI distributive trades survey.

The Times August 25/08/2023

Same Newspaper , Same day (they were actually on opposite pages ) 2 very different sets of numbers .

Many a good retailer has told me that an empty hook doesn’t pay your rent . If you can only fill it with product that nets you a penny . That penny is better than nothing . If a customer walks into a store and there is nothing to buy, then that is exactly what will happen. They will buy nothing . But they will go elsewhere and buy that something. I experience empty shelves or hooks virtually everyday . Every empty shelf or empty hook= Potential Lost business and customer.

The media is stuffed full of numbers and most have some form of veracity or at very least they have at a point in time and place. But Context is the critical consideration . How do they relate to my business ? More importantly how do we react to those that are relevant .

If your business is not doing well, it is too easy just to blame it on the cost of living crisis, inflation, or the economic situation . Any one, or all, of those may indeed be the reason but those are not in your control . You can’t effect any of those . There maybe other factors either local conditions or something within your operation that you can affect. If your business is doing well , the very same things apply , but look at why you are doing well and don’t let the negatives alter your course unless there are very direct or obvious reasons for doing so.

Don’t let the Number Encumber ….

Chaos Theory……..

Posted on by markybrett

I will not patronise those highly intellectual individuals who read this post with an explanation of Chaos Theory. However, for the odd fish that slips the net and needs a quick explanation, see below

Chaos theory is a branch of mathematics focusing on the study of chaos—states of dynamical systems whose apparently random states of disorder and irregularities are often governed by deterministic laws that are highly sensitive to initial conditions. Chaos theory is an interdisciplinary theory stating that, within the apparent randomness of chaotic complex systems, there are underlying patterns, interconnectedness, constant feedback loops, repetition, self-similarity, fractals, and self-organization. The butterfly effect, an underlying principle of chaos, describes how a small change in one state of a deterministic nonlinear system can result in large differences in a later state (meaning that there is sensitive dependence on initial conditions). A metaphor for this behaviour is that a butterfly flapping its wings in China can cause a hurricane in Texas

Directly from Wikepedia

As everyone is entirely cognisant of the above, you can of course transpose the butterfly in China to Bat Coughing in China and causing a world health crisis. And for those who have forgotten the Chaos theory formula (why would you?), it is as follows:

There are alternative formulas but this is a useful starting point. Any one of us will at some point think that life is chaotic at least once a week. Yet that Chaos, will be something like your home is a mess, you don’t whether you are coming or going ‘cos the kids are driving you mad, the dog has just ‘pooed’ in your bedroom, your partner is working late again and the oven is broken.

I would like to be slightly more theoretical and point in the direction of the Chaos Theory may have some impact on your business and as likely your life in general.

A fictitious example staring with the humble wasp …….

Someone is relaxing in their garden, in summer, having a drink. A wasp pops down and stings said person. Said person has an anaphylactic attack and is seriously unwell. The said person is the leading heart surgeon in the US. That afternoon they were about to perform major and urgent surgery on the US President. There is no replacement . The President dies. Wall Street plummets, the dollar crashes, reverberating around the world. There is a run on the banks . Nobody is in control……

I can hear the cry, but there are checks and balances to correct this sort of event ! Maybe, maybe not, but that is the point , if there are there then they exist because of the existence of Chaos Theory. Most major organisations have teams who are continually running disaster scenarios and calculating what to do if they were to happen .

Or you would like to think they would. The current situation we are all faced with is a Chaos theory starting with the humble bat.

“The impact of a huge epidemic, like a flu epidemic, would be phenomenal because all the supply chains would break down. There’d be a lot of panic. Many of our systems would be overloaded,” ……”But being ready for epidemics of different sizes, there’s a lot more we should do.” 

CBS News Bill Gates Davos 2017

Few took note . In the last couple of weeks the Chairman of Trailfinders, a UK travel company, announced the company could last 2 years without a booking. Why? Simply because there was £300 million in the bank. Other travel companies said that this was very impressive but he was fortunate to have such cash reserves . Not quite so straight forward…..

Trailfinders from our seemingly pathetic little start-up in 1970 opened two bank accounts. One for our clients’ money and one which belonged to us. So we knew exactly which monies were ours and which were entrusted to us. I have also set aside large reserves of cash from past profits to guard against doomsday scenarios. We have been able to refund our clients while we wait to recover your money from Airlines in the present hiatus. We have honoured our unique Financial Guarantee even where Airlines have already gone into administration, taking the risk we will get it back ourselves.

Mike Gooley October 2020 Chairman & Founder Trailfinders

It would be a futile exercise to examine any governments responses, as despite warnings over many years there is little evidence that any substantial planning had been done. There is much evidence to illustrate the complete opposite.

Government’s, Institutions and commercial organisations of all types ignore the threat of Chaos, if whatever form it takes , at their own peril. We have a personal responsibility which is limited by resources, wherewithal , and education . For those who are encumbered by these restrictions, are reliant upon the very institutions, whether they are instruments of government, charities or their immediate community, that should have been considering Chaos in whatever form it appears, to come to their rescue.

Lets be quite clear, Chaos creates plenty of winners, albeit far less in numbers than the losers and in the most part far more privileged, a certain type of politician, hedge fund managers, currency traders, and market shorters to name but a few . If we accept we are in the midst of some form of Chaos now there will be those who will be benefit from it and not necessarily in a bad way. For example as some organisations will fail others will be created to take their place. However, somehow attention must be paid to those have suffered through no fault of their own. But history tells us that is unlikely to happen. Its a bit like the annual bush fires that burn all the dying grasslands, to be replaced by fresh growth. It does not take into account the price paid by those who suffer some form of loss, either in terms of wildlife or even personal loss.

In the midst of Chaos, there is always opportunity

Sun Tzu (shame his book is about War)

Simply speaking, I see three groups of approach . Everyone and every organisation will fall into the broad spectrum of anyone of these three. We can see all three variations within our current Chaos.

  • Those that can and should look at ways of mitigating negative impacts of potential Chaos (in whatever form)
  • Those that seek chaos and look for opportunities, for good or bad
  • Those that are unable to do either and look to those in the first category, in the hope that they offer assistance and guidance, when needed.