The MT Diary: Howard Davies

Perlman's Christmas cracker; a haze over Hong Kong; alternative credit; plain sailing.

by Howard Davies, the director of the London School of Economics

Plausible business novels are remarkably rare. Tom Wolfe's Bonfire of the Vanities and A Man in Full showed his acute understanding of Wall Street, but it's hard to name an English novelist who knows how business people think. David Lodge's Nice Work, in which an academic shadows a manufacturing MD, was a decent try, though his main interest was the academic side of the relationship.

Julian Barnes' England, England, by contrast, was a resounding flop.

So it was a thrill to discover Elliot Perlman. His new novel, Seven Types of Ambiguity, centres on the relationship between a stockbroker, his clients and the firm's research department. It is no doubt just a coincidence that he shares a first name with Elliot Spitzer, but if you want to understand how the sell side and the analysts interact, here's the text for you.

There's a romantic plotline, too, and some rather PC observations on downsizing and rightsizing. But Perlman, an Australian, can write beautifully and it's a great Christmas read for anyone who wonders just why his broker is pushing that exciting new biotech stock.

Hong Kong is on the move again.

The economy is powering ahead, property prices are rising and you can't get a hotel room. The advantage of being the entrepot for the Pearl River delta, which has seemed a touch theoretical recently, is becoming evident.

But China's booming economy exports pollution as well as wealth. The French sent their equivalent of the Red Arrows to add a bit of je ne sais quoi to Chirac's state visit to China, but four out of five displays were cancelled through poor visibility. And the haze in Hong Kong this autumn, when the wind blew from the north, was not a pretty sight.

Even so, the floating casinos, where you can lose money all night out of reach of Hong Kong's gambling laws, could still just about find their way to the South China Sea. Perhaps, before long, they will come to anchor in the Thames, proud symbols of the Blair Government's perplexing new enthusiasm for the gaming industry.

I must have been away at the races when they explained why more opportunities were needed for people to impoverish themselves and their families. We need a new Dickens to describe the misery caused by addiction to casinos and slot machines. Perhaps Perlman could turn his hand to that form of gambling next.

It is surprising, too, that the gambling free-for-all bill took a higher priority than legislation to deal with lending at extortionate rates, a scandal highlighted by the unfortunate Meadows couple, who found an original debt of £5,750 magnified into an obligation of nearly £400,000 before a humane judge called time.

The companies involved in this business like to argue that they are providing a social service. The APR on a typical loan of, say, £300 over 12 months, is about 160%. So a washing machine that, to you, is £300, costs north of £450 to a single mother on benefit. The companies argue that someone has to do it, and that the alternative is a loan shark with a baseball bat.

Quite apart from the doubtful ethics of the argument, surely we cannot accept that there is no alternative? The most promising are credit unions, which pool financial resources within a community. Loan losses are typically low - people think twice before defaulting on their neighbours - and the spread between the deposit and lending rates is low. Small loans are charged at around 12%.

Credit unions are strong in Australia, Ireland and the US, so they could do well here. One way to help them would be more effective regulation of the sharks. That would be a better use of scarce legislative time.

A dozen years ago I dragged my wife and two veg on to a flotilla holiday in Greece, run by a tiny outfit with a simple name - Sailing Holidays. No experience necessary, was the company's proud, if risky, boast. On the first day, in a brisk force 5, we quickly acquired the relevant experience, after going round in circles for an hour or two, and have never looked back.

Nor has Sailing Holidays. In 1992 it had about 24 boats, mainly 27-footers left surplus to requirements by a company that had operated out of Dubrovnik before the Croatian war. There were a few patched-up gunshot holes, but nothing serious.

The company's rivals, Sunsail and Odysseus, had well over 100 bigger, fancier boats. Sailing Holidays was cheaper and more personal - run largely by itinerant Kiwis, with a captain, an engineer and a 'hostie' on each lead boat, who would do absolutely anything for you in return for a six-pack of Amstel.

Now they run 110 boats out of Corfu, and have eaten the big boys' lunch: moussaka, souvlaki, baklava and all. The owner keeps all the equity, though his long-service staff own some of the boats. Occupancy is 100% and repeat business runs at over 70%, so no marketing expense and no agents.

If you could bottle this mixture, I'd have a case of it. Sadly, it's not for sale. Nor is the owner prepared to grow a beard and have his photo taken dressed as Jason in a golden fleece, so no 'businessman of the year' awards for him. But if there's a more successful small business around, I'd like to sail in it.

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