Cas. Tell me, good Brutus, can you see your face?
Bru. No, Cassius; for the eye sees not itself, but by reflection, by some other things.
Cas. ’Tis just;
Traprain Law is a craggy little stump of rock which juts up through the rich barley fields of East Lothian, three miles east of here. It is barely 700 feet high. Yet such is its profile that on a sharp March morning it looks for all the world like Liathach, a majestic giant of a mountain which towers above Upper Loch Torridon in Scotland’s west highlands. Without fixed reference points one’s impression of scale depends entirely on the nearby country. What makes a feature grand is not its true height but how it looks in relation to its surroundings.
Investment judgements are no different and they too depend on relative not absolute values. Take the standard company report from a city analyst. Packed as it will be with details of a company’s history exploring every facet of its operations, all of which may point to a first class business with glorious prospects, none of it can give the faintest clue as to whether the company will be a good or bad investment. That depends not on its own qualities in isolation but on how it fares relative to its peers, how expensive or cheap the shares are compared to other securities, and on a whole series of relative factors far beyond a statistical appraisal of the company itself. It is the business of a fund manager to tease out of this tangled web of absolutes and relatives a feel for the value of the company as an investment.
What is true of companies is true of countries. A UK based international money manager is not concerned about this country’s absolute strengths and weaknesses but about our relative place and prospects in the league of nations.
Sometimes we have to remind our friends of this as they look around and see everywhere the signs of a decaying economy and political drift, yet read at the same moment of the UK stock market hitting record highs and wonder in amazement how this can be. Living as we do with recurrent balance of payments crises, a weak currency and the bleached skeleton which passes for a manufacturing base, the wonder is that a UK securities market survives at all. Yet time and again, since the mega-crisis of 1974, the UK market has come bouncing back like an irrepressible clown.
Part of the answer to this puzzle admittedly is local. Over the past 30 years huge amounts of cash have flowed into the big UK pension funds and as inflation climbed they bought more and more ordinary shares and fewer government bonds, so propping up the equity market. North Sea oil in the 1970s and 1980s added billions of pounds to company profits and Treasury coffers. Both those factors are waning and in any case they can hardly have been the whole story.
Underlying the British stock-market’s apparent resilience, far the weightiest factors have been the comparative ones which are harder to measure and easier to overlook. For a start one can see now that, compared with other manufacturing nations, Britain’s economic decline has not been as steep as it seemed at close quarters from within. Shipyards have gone from the Clyde but they have been going from Yokohama too. The steel industry has all but vanished but so virtually has Andrew Carnegie’s mighty United States steel empire. Trains are dirty and late, but try commuting in Manhattan. (They run on time in Tokyo but you can’t get on board because there is no room).
Overriding all else is the simple truth that the strength of a nation consists not of performance indicators or economic abstractions but of people. And while the strengths of our competitors are real and all too visible – the Japanese for co-operative problem solving, Germans for method and order, Americans for practicality – there is a British genius which pacemakes the heartbeat of our economy in a subtler but no less powerful way. This British genius then, genius for what?
For the eccentric surely. Out of the social and cultural broth which contains all the ingredients of our genetic history have emerged men and women of astonishing ability. Whether in the flowering of Elizabethan England, in the grimy prosperity of the industrial revolution or the grand days of empire, Britain’s universities, professions, boardrooms have teemed with men and women of talent and distinction. Now there is no empire, no golden age, no economic miracle, yet still we produce them in plenty. We are a nation of world class eccentrics.
Here is Nigel Short about to challenge Gary Kasparov for the world chess championship: state support – nil, sponsorship – tiny, status – not spotted at any state banquets, but carrying a torch which, if it barely flickers in Britain, burns fiercely all over Eastern Europe. Or Sir Ranulph Twisleton-Wykeham-Fiennes (3rd Baronet) who, having spent most of his life traversing terrain upon which no smart husky dog would lift a leg, has just crossed Antarctica on foot and raised approximately £2 million in the process for charity. Difficult fellows these for the investment analyst to come to terms with.
Out of this cradle of the eccentric has grown a marvellous instinct for balance and even-handedness. We British grope our way along like a tightrope walker who, because the extremities of the pole are so far apart, manages to remain relatively stable as the man in the middle. That is how the British people can bring low a tyrannical miners’ union one year and in the next cut down a government riding roughshod over miners’ lives. It is how, when parliament struggles to lay aside in our name a decent allocation of humanitarian aid, the British people respond in record amounts to charitable appeals. How, when university students are encouraged to regard their education as an investment in the market place, they are queuing up to join international relief agencies.
Over long cycles and many centuries the wonderful, eccentric fringes of our society have themselves added richly to Britain’s store of achievement. But most of all they have bred into our nation a relative stability and tolerance of extremes which has helped us to tip-toe along the rope of evolution without falling off.
For businessmen looking to invest, whether directly in machines and factories, or indirectly in UK security markets, the combination of extraordinary individual talents and a slow-moving but relatively stable society has been a compelling attraction. It explains, perhaps, how as a nation we manage to muddle through so well, and how our stock market seems at times to defy gravity. The analyst can compare all the relevant economic statistics here and abroad in an effort to obtain a true perspective but his slide rule can’t measure the one ingredient which really matters, which is us. It is all relative right enough, but you can’t make relative judgements about yourself.
To hearts in Britain made heavy by a winter of economic failure and empty promise, the eccentric genius of the people, the face seen not by its own eye but, like Brutus’, by reflection, brings hope for the spring as it has brought stability over the centuries.
8 March 1993