Like around seven and a half million other people I love the watching The Apprentice. For anyone outside the UK, or those who don’t watch or talk about television, this is the BBC’s major reality TV show at the moment. It features business man Alan Sugar and a bunch of aspiring apprentices who, in weekly, competitions between two teams, are progressively eliminated until the Chosen One emerges in the final show of the series.

The social critic in me (a powerful ranting voice that’s difficult to silence) says this programme is horrific. It glorifies selfishness and unbridled ambition. It suggestthat the way to get on in life is through shafting your co-workers. What’s more, it promotes capitalism in its most vicious form.

But if that’s the beginning and end of it, how come I like watching this programme? Could it be there’s a yuppie deep in my psyche that punches his way out every Wednesday night? Actually I don’t think so. The more likely explanation is that in common with others I like this programme because it is, at least in part, critical of the people and the scenarios it presents to us.

So, the contestants tend to be incredibly vain, but they’re also pretty stupid. They make basic mistakes in carrying out the tasks, like not reading simple instructions. And they spend a huge amount of time boasting and claiming, even in failure, that they have given ‘110 per cent’. The absurdity of this is palpable. They also lie. In fact public lying on this scale is rarely seen outside the realm of establishment politics with its steady drip-drip of untruthfulness. Then there’s the issue of class. The bourgeois contestants are as bad as those from working class backgrounds. Take Raef, who got knocked out last night (21 May), and his pal Michael. This pair come from well off backgrounds and were educated at elite institutions. While their pomposity and complacency is monstrous, so too is their ability to screw up.

Of course none of this necessarily invokes a critical response. We could just be enjoying the hubris of it all. Still, it does seem to me that the programme is a symptom of unease about capitalism, its mode of operation and dehumanising effects. What about the real capitalist on show then, Alan Sugar, or ‘Sir Alan’ as he is generally referred to. Sugar made his name and his fortune in the 80s. A true Thatcher generation self-made man, his Amstrad corporation produced the PCW range – an early mass market desk top computer. I started out in academia on one.

Sir Alan Sugar.
[photo © copyright]

On screen, Sugar is a highly accomplished performer. He combines the roles of high priest of capital, task master and hanging judge with a certain gruff charm. What’s interesting is that as well as showing his disgust with their incompetence he also demonstrates an ethical stance towards the contestants. Lying and back stabbing, he seems to suggest, really are bad. Yet, just as in establishment politics, so too in the private world of capitalism, vicious self-serving behaviour and mendacity flourish. That’s the danger of The Apprentice then. It serves ideologically to imply that big business is actually OK when really it’s very far from being so. Please, Sir Alan.

About the author

Jason Toynbee is Senior Lecturer in Media Studies at The Open University. His research interests are in creativity, copyright, and ethnicity - mainly through music - and his new book, Bob Marley: Herald of a Postcolonial World? is just out.

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The past nine months have been traumatic for the global financial markets.

The collapse of the US sub-prime market in 2007 has resulted in many banks incurring huge financial losses as their investments in asset backed securities linked to the US mortgage market plummeted in value.

Yet this was only the first domino to fall over in a calamitous chain reaction of financial events that now threatens the wellbeing of the UK economy and particularly the housing market.

The exposure to losses by banks exposed to the US market quickly led the financial markets seizing up. So called ‘inter-bank lending’ stalled with lenders becoming increasingly wary about which financial institutions to place their funds with.

The domino effect.

[photo © copyright Photos.com]

This quickly led to interest rates in the financial markets rising – an inevitability given the lack of supply of funds – with the result that market rates moved over 1 per cent higher than the Bank of England’s official lending rate (which normally dictates the level of rates in the financial markets).

For institutions reliant for funding on the ‘wholesale’ financial markets – as opposed to the ‘retail market’ of personal savings – this shortage of funds and a squeeze in their cost proved disastrous. The greatest UK casualty was the Northern Rock Bank: with nearly three-quarters of its funding coming from the wholesale markets the bank quickly found that it could not finance its existing mortgage loans and other assets. Ignominiously it was forced to seek help from the Bank of England. What happened next is well known: the personal investors who had funds at the Rock queued to get their money out. This forced the UK government and the Bank of England both to guarantee the Northern Rock’s savings liabilities but also to step in and provide a ballooning level of financial support in excess of £25bn as investors withdrew their money. Eventually in March 2008 – after a failed attempt to organise a sale – the government was forced to nationalise the bank.

For other, more prudent, UK mortgage lenders the ‘knock on’ consequences of the Northern Rock debacle were severe. First they suffered from the higher cost of funds as institutions reduced their lending to the sector – despite the fact that these mortgage lenders had materially less dependence on the financial markets for funds.

With limited funds, falling liquidity and a higher cost of funding mortgage lenders started to raise the cost of mortgages – despite three cuts in UK base rates initiated by the Bank of England taking rates down to five per cent. Additionally funds started to become less readily available with products being withdrawn, and the deposits needed to obtain mortgages rising. Mortgage approvals in April were the lowest since records began in 1993. The days of readily available mortgages – and those offered at 100 per cent of the value of the property being purchased – have now disappeared.

"the nice decade is behind us"

With mortgage availability decreasing the demand for property has fallen. Consequently, property prices have started to fall.  House prices are now, on average, around four percent lower than their peak in October 2007.

The weaker position in the housing market is only making it more difficult for mortgage lenders to borrow money in the financial markets thus reinforcing the vicious cycle – this despite some late efforts by the Bank of England to inject liquidity into the financial markets by taking mortgage backed assets from the mortgage lenders and swapping them for government bonds which may, in turn, be used collateral for borrowing cash.

Perhaps the only winners from this situation are first-time buyers, who may now have an easier step up to that first rung on the housing ladder, and investors, who are now seeing mortgage lenders compete aggressively for their funds by raising savings rates.

As for the housing market – tighter credit, limited funds and the prospect of a buyers’ ‘strike’ spell bad news for house prices and hence for the quality of mortgage lenders’ balance sheets. Mortgage arrears and repossessions may not have risen substantially yet – thanks to the continued buoyant level of employment - but a slower housing market spells slower UK economic growth and, in due course, higher unemployment.

With the added strain of higher food and utility costs and soaring petrol prices household budgets will be coming increasingly under pressure – and there will be less credit available to bail them out. Thus upward pressure on arrears and then repossessions could be the next stage in an uncomfortable scenario for the UK housing market and the mortgage lenders.

As Mervyn King, the Governor of the Bank of England, remarked a few days ago ‘the nice decade is behind us’. Certainly, with the shrinking availability of mortgages, the decade of booming house prices is well and truly behind us.

Weblinks

Northern Rock: a business model unravels
Why do we get into debt? – is debt always a bad thing?
You and Your Money – don't let your money be the boss of you, get help from our interactive
Property slowdown ahead? – expert views
Moneymadeclear – guides and advice from the FSA

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You and your money: personal finance in context
Understanding economic behaviour: households, firms and markets

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About the author

Martin Upton is lecturer in finance at the OU Business School. Previously he spent 20 years in treasury management, including 12 years as Treasurer of Nationwide Building Society. Martin's particular interests are financial services, the housing market, financial markets and risk management.

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It is now almost thirty years since the term enterprise culture entered the UK business vocabulary as a newly elected Conservative Government (under Margaret Thatcher) started to restructure the British economy by instilling the ethos of private enterprise and supply-side economics. As the large bureaucratic state-owned enterprises were de-layered and privatised a new breed of entrepreneur was being championed. One of these entrepreneurs was a young man by the name of Alan Sugar who made his fortune in the 1980s by selling low priced Amstrad word processors.

Both the UK economy and Sir Alan Sugar have done well for themselves since those early days but what about the original philosophy of the enterprise culture. As unemployment rose to record levels during the1980s the government was desperate to find new ways of redeploying employees who were too young to retire but unable to find work and were 'pushed' (GEM 2003 Executive Report) into setting up their own businesses. Today, with comparatively high employment levels, the story is different. Enterprise is now taught in schools and universities and the emphasis has changed towards creating a 'pull' mechanism (GEM 2003 Executive Report) for attracting young people to become entrepreneurs. Part of the pull mechanism is the media’s attempts to make entrepreneurship sexy with programmes such Sir Alan Sugar’s Apprentice.

The boardroom.
[Photo © copyright Photos.com]

The key debate, however, is how much of a contribution does such a programme make to the development of entrepreneurs and what skills are nurtured by such programmes? As everyone already knows the candidates are all forced to work in project teams in order to perform pre-selected tasks before being hauled into the board room for a ritual grilling. The drawbacks of this process is that any entrepreneur setting up their own business would be selecting their own team and would not under any circumstances allow themselves to be answerable to an autocratic bully such as Sir Alan Sugar. Research (Ettinger 1983) has revealed that one of the main motives entrepreneurs had for setting up their businesses was to be their own boss and to have independence and freedom from the corporate hierarchical structures that stifle innovation.

When managing a small team empathy and emotional intelligence are critical and learning from ones mistakes are a key part of this iterative process (Kolb 1996). However, the nature of the programme structure makes this impossible since the team members end up covering their backs and ultimately being fired. In terms of higher level marketing skills, the teams very rarely have any opportunity to research customers but have to make assumptions based on gut feelings and hunches which invariably prove wrong. The only skills that do seem to emerge are the ability to produce a sales pitch and to negotiate. These are skills which Sir Alan Sugar excels at and since Amstrad (and its subsidiaries) are basically trading companies driven by a power culture (Handy 1997) this is hardly surprising.

The Apprentice is unquestionably a popular business-themed reality show but is it sending out the right messages to budding entrepreneurs who may want to leave school or university to set-up their own businesses.

According to Sir Digby Jones:

“Alan Sugar does everyone a great disservice by doing it. Young people will be turned off because they think they will be shouted at by a horrible, fat, rich, old bloke”. (Financial Times 2007)

On the other hand, David Frost of the British Chambers of Commerce says:

“What it has done for a lot of young people and their parents is put before them the idea of starting a business. It shows enterprise, competition and working for your self as a good thing. I’m a huge fan”. (Financial Times 2007)

Perhaps the most sensible comments were made by another British entrepreneur, James Dyson who said:

“ ………The Apprentice can be entertaining but in my experience, business is far more complicated and involved than the simplified win or lose situation we see on screen. Good ideas aren’t enough; success takes dedication, perseverance, thick skin and usually many, many mistakes”. (Financial Times 2007)

References

Reynolds, P.D., Bygrave, W.D., Autio, E., and others, GEM 2003 Executive Report, Babson College and London Business School.

Ettinger, J.C. (1983) Some Belgian evidence on entrepreneurial personality, International Small Business Journal, 1983; 1: 48-56.

Kolb, D.A. (1996) Management and the Learning Process in pp. 270-87, K. Starkey, How Organisations Learn, London: Thomson Publications, p.271.

Handy, C. (1997) Understanding Organisations, Penguin.

John Willman and William MacNamara, Financial Times article: `Dangers of sexy profile for business in Apprentice`, Thursday March 29, 2007, p. 3.

About the author

Nigel Walton is an associate lecturer for the Open University and the University of Worcester, specialising in strategy, entrepreneurship and international marketing. He previously worked as a management consultant, primarily advising medium-sized companies with growth problems.

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In January 2008, the press were full of reports of the impact of Jérôme Kerviel’s impact on world stock markets. This trader cost Société Générale €4.9 billion by hiding trading positions he should never have taken. The impact of these trades being unwound is widely believed to have been a significant factor in the decline of market values around the world. Press reports at the time such as this one in the Times were full of phrases like global crisis, panic, nervous traders fears’. This story unfolded as it was becoming clear that the impact of the overinvestment in poor quality ‘sub-prime’ housing loans in the USA was tuning into a major threat to economic stability around the world. The effect has been that institutions, which were once blithely lending money to all and sundry almost regardless of ability to repay, have become fearful of lending even to each other. As this story has unfolded there has, again, been an important subtext of emotion in markets (for example Buy Panic: Gene Marcial on How Market Meltdowns Can Be Your Ally).

New York Stock Exchange.
[Photo: Helico used under a creative commons licence]

Emotion in financial markets is not all about fear and panic. We know for example that, on average, prices on the New York Stock Exchange are higher on sunny days than on cloudy days. Sunny weather tends to make us feel more optimistic and it turns out that professional traders are no exception.

Meanwhile recent work by Cambridge University neurologists John Coates and Joe Herbert has shown a significant link between traders behaviour and the levels of hormones, such as testosterone, which have important links to emotion.

This is all in complete contrast to financial economists accounts of market behaviour which see investor decisions as driven by rational analysis, and prices as perfectly reflecting rational analysis of all available information.

So should we simply conclude that traders need to get a better grip on their emotions, calm down and start making rational decisions on the basis of considered analysis? Certainly my own research (with colleagues Nigel Nicholson, Emma Soane and Paul Willman) shows that learning to regulate their emotions is an important part of traders learning as they gain experience. As one trader told us:-

“I would cite myself as a great example of someone who started trading when I was 18 and got terribly emotional about everything, every loss; and I’d lie awake at night and think everything through and try and replay the tape - I wish it happened a different way … Over time you realize that nothing matters and you not only realize that nothing matters in here, it doesn’t matter outside here either. It took me a long time to get that.” 

However our research, which involved detailed interviews with 118 traders and their managers, also seemed to suggest that learning effective emotion regulation is not simply learning to set feelings aside. In the fast paced world of trading, rapid decision-making is at a premium; and the emotional cues and hunches that come from long experience can be an important aid. Rather than emotionless machines, high performing traders were often aware of their emotions. They used them as important sources of information; but were not at their mercy. Our findings are supported by a recent study by Myeong Seo and Lisa Barrett (220K PDF) who found that stock investors who were better able to identify and distinguish among their current feelings outperformed other investors.

As we learn more about the ways in which human cognition and emotion are inseparably entangled it is becoming clear that emotional competence is not just important to our relationships, it is a vital element of success in the world of high finance.

If you are interested in learning more about decision-making, you can find a free course designed by this author on Openlearn: Making decisions. You can also find a free course which gives a financial economics perspective on markets: The financial markets context.

About the author

Mark Fenton-O'Creevy is Professor of Organisational Behaviour at the OU Business School. His research includes investigations into the performance of traders in financial markets, and the problems that occur when management practices are transferred from one country to another.

He is also a National Teaching Fellow, and Principal of the Centre for Practice-Based Professional Learning.

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A study by the European Commission (0.6MB PDF) in 2002 identified 4 key drivers of entrepreneurship and small firm development in Europe. These were:

• Continuous technological developments
• Shorter product life-cycles
• Increasingly demanding consumers
• Global competition

Research in 2006 by the Institute of Chartered Accountants of England and Wales (ICAEW) (based on a survey of 1,000 companies) revealed that 60% of companies with 49 or fewer staff bought goods or services from abroad or had customers or operations there.

“Increasingly, small businesses do not start off trading locally as they did in the past,” said Clive Lewis, ICAEW head of enterprise. “If you have a website you can think globally from the beginning”.

[from Small companies look beyond local to go global in the Financial Times, Thursday October 12, 2006, page 4]

The drivers of this trend according to the ICAEW have been globalisation together with the spiralling cost associated with red tape. Increased staffing costs were also becoming a problem for UK SMEs and was a primary reason for the outsourcing of back office jobs to the low cost economies in Eastern Europe and Asia . This is a trend that is likely to double over the next five years.

It is not just in the area of back office support services that SMEs (Small and medium enterprises) and small business start-ups are seeking overseas resources. If a business’ core product or service is information-based then virtual structures, using the Internet as a conduit, may have spawned new form of mini-multinational. For example, GNI is a biotechnology start-up that carries out research in Cambridge UK, data analysis in Japan, clinical trials in China and sells its outputs in the USA to large pharmaceutical companies.

“We take the best of what is available in each country and put them together,” says Mr Savoie GNI’s founder

[from March of the mini-multinational in the Financial Times onThursday May 4, 2006, page 12]

Video conferencing is used to link up personnel and the organisation is able to exploit national differences, cost and expertise to operate as a mini-multinational. Carol Cherkis, Vice President of GNI says that GNI is not a virtual company but a real company “It’s just that we are not all in the same place” [from March of the mini-multinational in the Financial Times on Thursday May 4, 2006, page 12].

Another example of a virtual mini-multinational is Lingo 24 which is a translation company  employing 40 staff in China, New Zealand and Romania with a turnover of £1.5 million and profits of £120,00 (as in 2004). The company’s headquarters are a two bedroom house in Deptford where clients ranging from BP, Honda, Ikea Orange and Travelex are served. Instead of having to physically travel to expensive offices employees can simply log on to a Lingo 24’s central database to obtain all the necessary information relating to translation projects. Homeworking and using international staff reduces overhead costs by 30% and permits a 24/7 service to be offered. Lingo 24 communicate on a daily basis using Skype and e-mail whilst the company intranet is used to monitor quality and provide an editorial oversight.

Richard Portes, an expert on globalisation at London Business School, said: “Small businesses are now operating on a global scale. They could not have done [this] 15 years ago.” Professor Portes added: “The advantage small businesses have is that they are not burdened with long lines of command, where important pieces of information come from operations in one country [back to the centre] then travel up and down chains of command”.

[from Small companies look beyond local to go global in the Financial Times, Thursday October 12, 2006, page 4]

So has the Internet spawned a new form of organisational structure and a new source of competitive advantage for agile and responsive entrepreneurial companies? Are the “big boys” shaking in their boots and would it be premature to start throwing out the textbooks on downsizing, delayering and business process re-engineering…….. or is this just a passing fad?

About the author

Nigel Walton is an associate lecturer for the Open University and the University of Worcester, specialising in strategy, entrepreneurship and international marketing. He previously worked as a management consultant, primarily advising medium-sized companies with growth problems.

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