China Syndrome

Originally published in the Informanté newspaper on Thursday, 8 October, 2015.

In nuclear physics, China Syndrome refers to a hypothetical loss of coolant accident that causes a severe meltdown of the core of the reactor – a reaction so hot and self-sustaining that this core would hypothetically burn through all containment, sinking and burning through to the ‘other end of the planet,’ i.e. to China, colloquially. 

Emerging markets recently have seen a different kind of ‘China Syndrome,’ one that works in a different direction. Because the Chinese economic meltdown is now burning a financial hole in the world, and the emerging market is feeling the heat on the other side of the world. After the 2008 financial crisis, China was the bulwark of the world economy, leading an unprecedented surge in investment that dragged the world economy from the doldrums. But as the saying goes, all good things…

The Chinese economy is perhaps struggling – compared to its quarter century of 7% growth it has had. When Chinese growth dipped below that 7% benchmark, chaos soon followed. Their stock market has since reversed all gains made during the year, with the Shanghai Composite down to 60% of its peak during June this year.

Needless to say, the Chinese slowdown necessitated the devaluation of the Yuan several times during the last few months, but that was not the end of it. When the Great Engine of Growth slows down, its fuel needs drop as well. Commodities needed for infrastructure suddenly found themselves without a buyer, and commodity prices worldwide dropped as supply exceeded demand. 

Of course, all these commodities had to be mined somehow, and the resource-rich emerging markets were all too ready to supply when demand was booming. Cheap, low-interest rate US Dollar loans were easy to come by in the boom, and funded operational expansions that are now in excess of what is needed. And here is where the penny has dropped.

Emerging markets remain export-dominated economies, and when dollar-denominated exports drop, the supply of dollars to a country’s foreign exchange drops as well. But those dollar-denominated loans still need to be repaid – the demand for dollars remain high. Inevitably, market forces in a floating exchange rate regime take over, and emerging markets have seen sharp devaluations of their local currencies.

In an economic boom, it is easy to forget to price in the foreign currency risk when taking out a low interest rate loan in US Dollars. A loan taken out at 5% in US dollars at N$ 10 per USD suddenly becomes a loan at effectively 6% when the NAD/USD exchange rate rises to N$ 12 per USD. And as a currency devalues, more and more local currency is required to service foreign loans, exacerbating the issues an emerging economy faces.

And so the emerging market burns in the contagion. The once mighty BRICS that were widely hailed as a potential new economic power has been brought to its knees by the China syndrome. Brazil’s sovereign bonds were downgraded to junk bond status just last month. Russia’s economy is contracting in the face of low oil prices, and South Africa, as we are so keenly aware, is struggling with the issues mentioned above. Only India, thus far, has been holding up.

And perhaps it is the Indian lesson emerging markets should take to heart. For too long, emerging markets have been export-dominated, selling precious resources. India has developed their own, internal middle-class market that can keep its economy going even during turbulent times. It is this challenge that China is currently struggling with, and that Africa in particular is working towards.

It is thus quite commendable that the Namibian Ministry of Trade and Industry is actively promoting the development of local industries via licensing Export Processing Zone enterprises, and stimulating the development of local industries that ultimately will become the backbone of the Namibian economy going forward. 

After all, just because emerging markets are struggling, does not mean they always will. A billion people in the developing world have managed to make the transition into a service and manufacturing economy. With good governance we can all craft an economy to ensure our own well-being. This crisis has merely shown in relief, where we can do better.

A Learning Curve

Originally published in the Informanté newspaper on Thursday, 1 October, 2015.

If you’ve browsed the comment section of a website, viewed some of the comments left on Facebook, or encountered them in your twitter feed, you’ve met them. Perhaps you’ve even worked with them. As an aphorism that my mother used so many times, “Leë blikke maak die grootste geraas,” if you’ll excuse the Afrikaans. (Translation: Empty vessels make the most noise.)

This observation has been made many times in the past, from such wide-ranging luminaries as Confucius (“Real knowledge is to know the extent of one’s ignorance”) to Charles Darwin (“Ignorance more frequently begets confidence than does knowledge”), William Sharespeare (“The Foole doth thinke he is wise, but the wiseman knows himselfe to be a Foole”) up to scholars such as Bertrand Russell, who pointed out that, “One of the painful things about our time is that those who feel certainty are stupid, and those with any imagination and understanding are filled with doubt and indecision.”

But as with any aphorism, these cannot be accepted as fact without being examined via that infallible method we have for discerning truth, the Scientific Method.  And after years of simply being an aphorism, this finally changed in 1999, when Justin Kruger and David Dunning of Cornell University published their paper titled “Unskilled and Unaware of It: How difficulties in Recognizing One’s Own Incompetence Lead To Inflated Self-Assessments.”

In this paper, they showed by experimentation that those people who do not have a requisite competence in a specific task lack the skill and competence to adequately grade themselves at that task, and thus consider themselves much more competent at that task than they really are! In their words, “This overestimation occurs, in part, because people who are unskilled in these domains suffer a dual burden: Not only do these people reach erroneous conclusions and make unfortunate choices, but their incompetence robs them of the metacognitive ability to realize it.”

This cognitive bias has come to be known as the Dunning-Kruger Effect, and besides its relative ubiquity in our lives, this effect also has a profound influence on businesses that rely on employee self-assessments. After all, an incompetent employee is not only incompetent, but does not have the competence required to recognize his or her own incompetence. 

Further research by Ames and Kammrath found that the Dunning-Kruger effect is compounded by personality traits such as narcissism and extroversion, though self-esteem and gender had no impact. Of course, the Dunning-Kruger effect also showed that this effect worked in reverse for the highly competent. Those who score high on the tests consistently underestimated their own performance. After all, those who found the tasks easy, thought they would also be easy for others. This usually manifests as ‘Impostor syndrome’ where high achievers fail to recognize their talents as other must naturally be just as good.

Needless to say, this implies that employee self-assessments are naturally flawed – the incompetent would rate themselves highly, while the exceptionally gifted would tend to rate themselves lower. And if companies think that perhaps management evaluating workers would be better, then they have not evaluated the Peter Principle to its fullest extent.

After all, if people are inevitably promoted to a position just above their level of competence, then it follows logically that the people who have to evaluate the performance of their employees are likely not to have the competence to do it.

Dunning and Kruger even showed that with a little help, people could gain the competence required to recognize their lack of skill. But the root cause appears to be another aphorism, namely “if you can’t say anything good, say nothing at all.” After all, if no one tells you you’re not competent, how will you realize it when you lack the skills to recognize that fact? Dunning’s advice was “Get them to make an overconfident display, and then expose it for what it is, so that people are more on guard for such an issue.”

Of course, while it is easy to judge the mistakes of others, one should never be tempted to think that the Dunning-Kruger effect does not apply to yourself. The problem of unrecognized ignorance affects us all. And, after all, psychology is only tangentially related to my field of expertise, and I might have missed some nuances, misunderstood an important point, or left it out completely! And I’m just as sure an enterprising reader will advise me of such and correct me if need be. 

Though, to be fair, it was the great Isaac Asimov that said, "People who think they know everything are a great annoyance to those of us who do."

Good News, Everyone!

Originally published in the Informanté newspaper on Thursday, 17 September, 2015.

If you open a newspaper today, or browse Facebook, open your favourite news site or even turn on the television news, chances are you’ll see stories about death and mayhem, corruption and crime, and other terrible and depressing events. What is the world coming to? It seems as if the world is getting worse by the minute, and there’s nothing anyone can do to stop it.

But is it really? We are now living in the information age, and our consumption of news has also increased as a result. A research team from the University of Southern California crunched the numbers, and we now know that in 1986, we received about forty 85 page newspapers worth of information each day. By 2007, this had skyrocketed to 174 newspapers per day. Perhaps it’s not the world that is getting so much bleaker – it’s just that we receive so much more information now than in the past!

Good news seems like a thing of the past. People love to blame the media for the plethora of negative news. Claims range from journalists seeking out bad news since it is more compelling to the audience, to the fact the cynical reports on crime and corruption are simpler stories. But the truth, alas, is a bit more complex.

Researchers at McGill University in Canada devised an experiment whereby people were to select news stories to read under the guise of tracking eye movement. And while the participant afterwards reported that they preferred reading good news, the study showed that they invariably chose negative stories. It is, in fact, us that have trained the media to report bad news, simply by responding more to negative tones.

These researchers suspect this is linked to our ‘negativity bias.’ As a species, we’ve evolved to react quickly to potential threats, and we still seek out signals of a bad situation we should avoid. People generally have more to lose by not learning about a negative event than they have to gain from absorbing a positive one. 

But some good news deserves to be brought to attention. 

The world is not as violent as it seems. While there’s a lot more news about wars, the world is currently in the longest period of peace ever seen. No major powers have clashed since World War II, and even the wars we have now would be classified as skirmishes in times past. Global violence has declined steadily since the end of the World Wars. Instead of causing us to become more violent, the modern world and its cultural institutions has made us much more noble. This is the most peaceful period in world history!

AIDS was once an automatic death sentence. But thanks to antiretrovirals, HIV patients can now live decades past their diagnoses. The global rate of HIV infections have dropped by 25% since 2001. And access to these life-saving drugs have increased by 22-fold. Namibia has benefitted greatly from antiretrovirals, especially its effect of reducing mother-child transmission of the virus. There are young people in Namibia walking around, working, starting families and seemingly completely healthy who have had HIV for their entire lives. 

We are also conquering poverty. In 1981, 70 percent of those in the developing world subsisted on the equivalent of less than $2 a day, and 42 percent had to manage with less than $1 a day. Today, 43 percent are below $2 a day and 14 percent below $1. From 1990 to 2012, worldwide poverty was cut in half. Never before in the history of the world have so many people been lifted out of poverty in such a brief stretch of time. 

And we’re also living longer. In 1810, the life expectancy worldwide was below 40. In Africa and Asia, the average life expectancy was about 25. But science marched on. We’ve increased agricultural output, and significantly reduced death by hunger. Advances in medicine have enabled us to emerge victorious against most parasitic and infectious diseases, with diseases like polio almost wiped out.  The average life expectancy in Africa is now at 60 years, a 50% increase in 45 years. And while Namibia bottomed out with the AIDS epidemic in 2001 with a life expectancy of 54 years, we’re now back at 65 years. Between 1840 and 2007, life expectancy world-wide increased by one year every three years, and it shows no sign of stopping.

We are actually living in humanity’s golden age. People sometimes have so little to complain about, that they’ll invent new things to be upset about – and if that’s not a glowing endorsement of how far we’ve come, I don’t know what is. 

So remember next time you read or watch the news, and browse Facebook, or visit a website – the world is not as bad as it seems. And if someone tells you things were better ‘back in the old days,’ you can laugh. The world is better now than it has ever been, and I cannot wait to see where we’ll go from here.

The Spice of Life

Originally published in the Informanté newspaper on Thursday, 10 September, 2015.

The planet Terra, known as Earth. The planet of water, home to the spice of life. This spice controls empires. This spice extends life. This spice expands consciousness. This spice is vital for travel. And most of the spice that we know to exist in liquid form, exists on only one planet, Terra. 

Dihydrogen Monoxide – The spice of life. Also known as water. This planet is 71% covered by water, and it’s absolutely vital to all life we know. In fact, all life as we know it originally started in the water, over 4 billion years ago. And here in Namibia, we are quite aware of the importance of water.

Water has also been the herald of civilization. Our earliest ancestors were hunters and gatherers, constantly searching for food and water. It was the discovery of abundant freshwater that gave rise to the agricultural revolution – the ancient Egyptian civilization rose up around the Nile River, after all. And the access to water made them the preeminent civilization on earth for about 30 centuries. 

Their pre-eminence lasted until the next revolution in the utilization of water – the Roman Aqueduct. The ancient Roman Aqueducts are considered by many to be perhaps the eighth wonder of the ancient world. Indoor plumbing, a sewer system and running water elevated the Roman civilization far above its peers, with its systems centuries ahead of its time. This contributed to the urbanization of humanity, and only in the past few centuries have modern plumbing moved beyond the Roman design. 

Water eventually also became vital for maintaining empires and shipping. Today, the primary lingua franca of the world is English, ironically. This is principally due to the victory of Admiral Lord Horatio Nelson at the Battle of Trafalgar in 1805, where the Royal Navy achieved a decisive victory over the French and Spanish Armada’s during the Napoleonic Wars, preventing Napoleon from invading the UK, and establishing the Royal Navy’s hegemony over the seas for about two centuries. This established the greatest empire the world had ever seen – the British Empire. At its peak, over 20% of the world’s total land area and population was under British control.

Suffice it to say, water is the most critical resource not only for life on this planet, but for civilization as well.  Only with modern sewage and plumbing has humanity managed to achieve dense urban populations and mass industrialization. Only with modern water distribution systems and agricultural techniques have we found a way to feed this burgeoning population, and reached new heights in our population boom.

But this easy access to potable water has made us lose sight of its true value. In our relentless pursuit of industrialization and modernization we have slowly altered the climate of our planet, and we’re starting to see the effects of ignoring water already. Windhoek itself is slowly edging into a severe water crisis, with barely enough water to sustain us until June next year, unless we have a bountiful rainy season. The drought in California has resulted in quite severe measures having to be taken to preserve life on the edge of the North American deserts, with social unrest following its severe water restrictions. And this is just the tip of the iceberg.

Currently, there are water crises in Ethiopia, Sudan, Uganda, Afghanistan, China, India, Iran and Morocco. Without water, society collapses. And as the refugee crisis in Europe shows, this is not only a crisis for those specific countries, but also for their neighbours, who would be, if you’ll pardon the pun, flooded with refugees in such cases. 

In many ways, Frank Herbert’s seminal 1965 novel Dune was ahead of its time. In describing a desert world, along with all its ecological problems, Dune was the first major ecological science fiction novel written, and perhaps, also prescient. Given the problems we face, not only as a nation, but as a species, we should take care of this little blue dot we live on, lest we too need to learn how to survive on a desert planet.

A Secular Society

Originally published in the Informanté newspaper on Thursday, 3 September, 2015.

November 1989. The Namibian people vote for the first time. The results of this election form the basis from which the members of the Constituent Assembly of Namibia is selected. The Constituent Assembly, chaired by a certain Hage G Geingob (our current President) proceeds to draw up the document that forms the basis of our Republic, The Constitution of Namibia. 

Article 1 reads as follows: “The Republic of Namibia is hereby established as a sovereign, secular, democratic and unitary State founded upon the principles of democracy, the rule of law and justice for all.”

As a nation, we are quite comfortable with being a sovereign nation. We are proud to be a united, unitary nation. And we celebrate being a democratic nation. And yet somehow, we appear to neglect being a true secular nation.

In essence, a ‘secular state’ is a state that is officially neutral in matters of religion, supporting neither religion nor irreligion. And yet even in his inaugural address, His Excellency Dr Hage Geingob initiated proceedings with the distinctly religious quote, “This is the day the Lord has made. We will rejoice and be glad in it.” And he closed out his address similarly, with “Thank you, and God bless you all.”

This passed with nary a comment, but that is to be expected. After all, Namibia is quite a religious country. Approximately 86.5% of the country claims to be Christian, with approximately 4.5% following a traditional religion, 0.5% following other religions, and 8.5% non-religious. 

Importantly, a secular state does NOT mean an atheist state! It is simply a separation of church and state. It exists to ensure freedom of religion. A secular state is barred from interfering in religious affairs. Conversely, it also bars religious institutions from interfering with affairs of state. A secular state ensures that freedom of conscience and freedom of thought apply equally to all citizens, no matter their religious belief, or lack thereof. 

Hospitals, clinics, police and schools are public facilities of which all citizens may avail themselves of – a secular state exists to allow these institutions to service everyone, regardless of their religious beliefs. No one should be disadvantaged or denied access on the grounds of their religious beliefs, or lack thereof.

And yet state schools for a long time featured Bible Studies. While this was eventually replaced with Religious and Moral Education, which featured a more inclusive syllabus, in recent years there has been a push again to force a RME syllabus to focus on Christianity. 

There are quite a few religious institutions who appear to be pushing for a less secular state. And yet while they’ll happily apply pressure for their own religion to be included, there’s a distinct lack of interest when a more inclusive approach is presented that includes more disparate religions, or even acknowledges atheism or humanism.

It is telling that some of the most draconian regimes world-wide are not secular states, nor are most of them even democratic. A secular state guarantees citizen’s equality before the law and parliament – justice for all, you might say. Religious states often have laws against apostasy and heresy, and thus severely restrict freedom of speech and freedom of expression. This editorial, in fact, would have me either imprisoned or executed in several of these countries. No idea should be immune from criticism or discussion. It is important to remember that individuals have rights – ideas do not.

And yet Namibia continues on its slow descent from a true secular state. Only Christian holidays are national public holidays – no other religion enjoys that privilege. Government officials continue to espouse religious views and discriminate against the LGBT community based on those views without fear. Only the Christian Sabbath enjoys work exemption in law, with overtime pay for working on a Sunday. 

The preamble of the Namibian constitution claims that “recognition of the inherent dignity and of the equal and inalienable rights of all members of the human family is indispensable for freedom, justice and peace;” and points out that “these rights have for so long been denied to the people of Namibia by colonialism, racism and apartheid;”

Let us not slide backwards into a new colonialism, into a new apartheid, based on religious domination.