I last wrote about FB more than 5 years ago. At that time information was relatively sketchy but it seemed to have historic net income of around $0.3 billion but was suffering quite serious technical glitches. A few months later I made some comments about Zuckerberg’s fairly ruthless approach to using tech to get revenue. History repeats itself. For years Bill Gates was written up by the press as a techie bringing us wondrous technical things. Few could hope to understand what went on under the hood, but all could marvel at the benefits it brought. It turned out that as a geek he was beta+, probably worse at coding than I am (and my interest in coding is extremely part-time), whereas he was the son of a tough east-side New York lawyer, and far from second-rate at being tough in business. I want to try to avoid apoplexy, so now is not the time to rehearse his many misdeeds, but let us wonder instead at Mark Zuckerberg. Also presented as a geek. Yet his geekery seems to be mainly devoted to such misdeeds as pretending our privacy is well-protected on his site, whilst ensuring the opposite. It took me a while to grasp the magnitude of the MZ achievement. The 1Q16 figures show a billion DAU (daily active users), of whom 90% are mobile DAUs. I take that to mean that they are receiving push notifications on their mobiles. That does not mean, of course that they take a blind bit of notice of them. I get them on my iPhone6+ but rarely look at them, whereas recently I have been a DAU on my desktop (unusual – normally I glance at FB about 6x a year). MAU (monthly active users) are just over 1.5 billion. The split North America : Europe : Asia/Pacific : Rest of World is 14 : 20 : 24 : 32 (expressed as % summing to 100%). But the revenue per user is$2740, $1307,$862, $473. Advertising revenue is 97% of total revenue. Quite what the rest is I am unclear. But there is much to ponder there. It is unsurprising that a US user is worth nearly 6x a RoW user, but more surprising that they are worth more than 2x a European user. Then the amount per user is stunning. A single DAU (if that is what they are) in the US pulls in over$10k a year for FB.

I find it really hard to believe that those amounts are worth paying for the advertisers. This looks to me like MLM costs without MLM benefits. MLM = multi-level marketing. That is the system of one-on-one selling with downlines so that the supplier pays out about 75% of revenues in sales costs to the army of MLMers. In the UK we tend to sneer at MLM as (fraudulent) “pyramid selling”. Of course, it does attract fraudsters. But it is also a legitimate, and powerful, sales technique. At its best it can mobilise a large army of one-on-one sales reps in a remarkably short space of time to promote a new product. But with selling costs of 75% that only works for certain types of product/service.

The intensive day-time TV selling channels, which are typically used for new consumer gadgets, demand about 50% of revenues. Normal businesses expect to shell out far smaller proportions of gross revenues in selling costs.

I must get hold of some standard analyst materials. I simply don’t understand the FB numbers. Oh, GAAP earnings per share was 52c for 1Q16. So taking the earnings as $2, with a share price of$117 that is a multiple of nearly 60x. Sky-high. But then if he could pull up those European and Asia/Pacific per user numbers to something approaching the North America number there would be oodles of growth. But conversely, plenty of scope for plunging numbers if EU regulators got tougher and advertisers woke up to the fact that they were overpaying by a factor many.

## St Marcel Initiative

One of the few old Collegemen to become a Catholic bishop needs no introduction. Richard Williamson has certainly managed to make a complete fool of himself on various peripheral issues, such as holocaust denial and conspiracy theories for the collapse of the Twin Towers.

He originally applied to join the Brompton Oratory, but was judged unsuitable. Later he became an acolyte of Archbishop Marcel Lefebvre, who felt strongly that Vatican 2 had erred on various essentially minor issues. Lefebvre ended up ordaining four of his priests as bishops without the approval of Rome, which implied automatic excommunication under Canon Law.

Ratzinger was never particularly happy with this, given that the critical point appeared to be that the dissidents favoured the Tridentine mass. [Note that the dispute is often said, wrongly, to be about the Latin mass. Both modern and Tridentine masses can be celebrated in either Latin or the vernacular, so the language is beside the point.] Ratzinger felt that a form of the liturgy which had been in use for a thousand years in the Church could hardly have much wrong with it, but JP2 felt that dissent was intolerable.

Ratzinger allowed the Tridentine mass – if necessary without the local bishop’s approval – almost as soon as he became pope. He also did his best to bring the SSPX (“Society of St Pius X”, as the dissidents were styled) back into the fold, an objective he eventually achieved, although their return did not last long.

That did not suit RW. He engineered his throwing out of the SSPX and made it difficult for Rome to accept him back. After a huge international row about his denial of the Holocaust, he gave a non-apologetic apology and told his followers that “the fact is that the 6 million who were supposedly gassed represent a huge lie”.

That was an ingeniously constructed statement. Anyone who has studied Holocaust history carefully knows that 6 million is, as far as we can tell, a mild exaggeration for the total deaths in the Holocaust, less than half of which were from gassing. At most just under 3 million were gassed, possibly significantly less, maybe under 2 million. My figures, incidentally, are based on the best Jewish research (that of Raul Hilberg). So claiming that “6 million supposedly gassed represent a huge lie” is technically correct: it is too high by at least a factor 2. Note also that not all those gassed in the camps were Jews, although the large majority were. Also the testimony of Rudolf Hoess at Nuremberg (that as Auschwitz commandant he was responsible for 2.5 million gassed) is now thought to be substantially over-egged. In other words, the real picture is complicated, hard to evaluate fairly, and impossible to evaluate with certainty.

At the same time, of course, RW’s statements was designed to, and did, infuriate the Jewish lobby who want to present the Holocaust as a uniquely horrible event in human history – which is something of a stretch, and doubters should consult this:

The fact that more than half the Jews were murdered by incarceration in ghettos or by being herded into fields and machine-gunned hardly makes the Holocaust any less horrible.

Then again, RW was partly simply needlessly badly informed. Like many liberal arts types, he feels able to assess the truth on scientific issues without troubling to find out even the most elementary facts. He was, maybe still is, dumb enough to believe the Leuchter Report – a piece of total drivel by a conman, purporting to show that it was scientifically impossible that anyone was gassed at Auschwitz.

Equally, it is true that some holocaust memorials (like the one in Boston, Mass.) are specious. The Boston Memorial has millions of random numbers inscribed on it, masquerading, by a huge piece of artistic licence, as the numbers tattooed on those gassed in the camps. Certainly, the Jewish lobby likes to blur the distinctions between the various means by which the victims were murdered, because gassing evokes the most horror.

Turning to practical matters, RW was able to quarrel with SSPX because he had negotiated the setting up of the St Marcel Initiative with David Allen White (see below). Marcellus of Tangier (aka Marcellus the Centurion, feast day 30 October) was a Roman soldier in the third century who was martyred for refusing to make sacrifices in honour of the Roman emporer. His motto was said to be “Jesu Christo Regi aterno milito”. This is a neat little exercise in parsing, which is easy to get wrong. Milito is actually the verb: “I serve [as a soldier to]” + DAT. Note that “Regi” is DAT, so “Jesu Christo” is the noun, in the DAT, and “Regi aterno” (also DAT) is adjectival description as “eternal king”.

Marcellus was sent under a strong guard to Aurelian Agricolaus, vicar to the prefect of the prætorium, who was then at Tangier, in Africa. Agricolaus asked him whether he had really done as the judge’s letter set forth: and upon his confessing the fact, the vicar passed sentence of death upon him for desertion and impiety, as he called his action. St. Marcellus was forthwith led to execution and beheaded, on the 30th of October. His relics were afterwards translated from Tangier to Leon in Spain, and are kept in a rich shrine in the chief parish church in that city, of which he is the titular saint. 1

Cassian [on the right in the icon above], the secretary or notary of the court, refused to write the sentence which the vicar pronounced against the martyr, and threw his pencil and table-book on the ground. Agricolaus, rising in a rage from his seat, asked him why he behaved in that manner? “Because,” said Cassian, “the sentence which you have dictated is unjust.” He was immediately hurried to prison, and examined again about a month after. The firmness with which he defended his former answer procured him the crown of martyrdom. He was beheaded on the 3rd of December. These two martyrs are mentioned in the Roman Martyrology on their respective days. [From Butler’s Lives of the Saints, vol X]

SMI appears to be an oddball joint venture between RW and David Allen White, aka Doc White, a Catholic convert and former professor of English at the United States Naval Academy. There is much blather about official tax-exempt certification from the IRS on the website, and clearly fund-raising American-style is part of the joint venture. But the good Doc evidently enjoys talking too, you can buy his talks on The Wasteland and other themes.

The practical point is that this linkup provided the good bishop with some kind of office or maybe flat in, joy of joys St Louis, a place that most of us admire strictly from afar as we fly over the arch. I could not resist playing with the improved Google aerial “3D” mapping which shows the premises at 9051 Watson Road:

But it would be a mistake to think that RW is now in quiet retirement with a fellow scholar publishing critiques of the Wasteland. He has also been busy consecrating further rebel bishops. But that will have to wait for a later article.

## The unforgivable sin (for Tories)

For the benefit of any stray readers who may be even less well-informed than me on the new Cabinet, a few brief comments. I have unkindly put up the current cabinet, complete with photos:

Unkindly, because who can tell me, off the top of their head, which of them was already in the Cabinet, and in what position? And conversely, who (apart from Cameron and Osborne) have left it?

While you are mulling over that, let us focus on the two most important things that TM has done: (1) sack DC’s main acolyte (George Osborne, together with that other key Old Etonian Oliver Letwin, who otherwise had a respectable education, attending Trinity College, Cambridge a few years after me); (2) hand the Brexiteers the chalice they had poisoned.

A peculiar new Department has appeared. If you look at the bottom of the Cabinet proper (just above the also rans) you see David Davis, Secretary of State for Exiting the European Union. It sounds like something out of Monty Python, but I took those images direct off the government website, so presumably they are serious. The question, of course, is why he is not an FCO minister.

If you look at the full complement of the FCO, complete with junior ministers, you see:

If you scroll on down the government website, the Exiting Department has already exited, or never appeared. But I would predict that within a few days if you stroll down Whitehall (loosely speaking, so including the surrounding streets) you will find a new nameplate with the Exiting Department. The obvious place to rivet it would be the FCO, but we will have to see.

I have not seen anything yet on the Cabinet Committees, which are potentially far more important than Cabinet itself, so it is too early to tell whether TM will bring about a renaissance of “cabinet government”, meaning thorough and meaningful discussion in CC with big issues going to C itself for final decision. The main complaint of most recently retired cabinet secretaries seems to be that Tony Blair destroyed cabinet government and replaced it by an extreme version of the Wilson kitchen cabinet.

It will also be fascinating to see how David Davis gets on. See here for some disambiguation. He somewhat ruined his career by a bizarre resignation as an MP in order to fight a bye-election on the issue of civil liberties (this was well before the Edward Snowden revelations). As a principled stand, it failed to generate much respect, for reasons I have no time to investigate here. But he almost beat Cameron at the leadership election when Cameron came from nowhere to lead the party.

Mostly, I admire politicians. It is a rough, tough game, but most of them are strongly motivated most of the time by a desire to change things for the better (and of course to get the credit for it, but human motivations are always complicated). But I find it really hard to warm to Liam Fox. He seems to have an exceptionally high opinion of himself, which is exceptionally ill-founded. The Werritty affair was not pretty (insofar as it shed an unflattering light both on Fox’s judgment and on his extraordinary self-importance).

For reasons that escape me, he is well-thought of in the Tea Party reaches of the Tory Party, or more accurately, amongst the Teapot MPs. He also made loud, incoherent noises in favour of Brexit. So he has squeaked into the Cabinet, as Secretary of State for International Trade.

So TM’s approach is clear, she has handed the Three Brexiteers their sabres to go forth and deliver. Whether the ambiguity about which of them is in charge is deliberate in the hopes that they will turn on each other, is unclear to me.

Of course, there was a fourth Brexiteer, Michael Gove. He was, until recently, held in much higher regard by Tory MPs than by the public at large. The public know the names of remarkably few politicians, but a significant number knew Gove’s name, not to his advantage. Although his opinions were generally sensible he had a remarkable knack for presenting himself as some kind of hobgoblin. Or maybe a cross with some kind of Vulcan, but without Leonard Nimoy’s charm. In any case, he had definitely crossed the line between acceptable and slightly weird.

All of which appears to be irrelevant. He is perceived to be the worst of the backstabbers for taking a job as Boris’ campaign chief and then sabotaging his bid and standing himself, thus proving himself disloyal, and accordingly has been chosen by TM as the sacrificial victim. Or maybe she was merely completing her revenge by not letting Brexiteers take non-Brexit jobs.

[TBC]

## All too much …

Having blogged nothing so far this year, how to restart? I keep waiting for things to calm down. I cannot remember a time when so much happened so fast in the UK. I have not checked the news today, but we just had the “Day of the Short Stilettos” and the interesting question of why Boris was appointed to one of the Great Offices of State (FCO, but excluding the Brexit negotiations).

The only reason that comes to mind was that that came to TM’s mind as the fastest way to get him to self-destruct. But surely everyone has learnt by now that the Force is Strong With That One. Out of nowhere rescue comes again, again and again. There must now be a real possibility that he will be PM after the next election. Of course, the other answer would be that TM was economical with tha actualite and did do a deal with him, as was claimed in the run-up to Andrea Leadsom’s little self-harming incident.

MinAg or whatever it is called these days seems to have taken away from the Home Office the mantle of graveyard of polical careers. If the alleged leaks from exasperated Treasury officials about her being the worst departmental minister ever (some claim) are halfway true, it is hard to see her surviving for even 9 months.

I think I will restart gently and leave it there.

## Bank bonuses

I last wrote about bonuses and bankers’ pay more than six years ago. In the second half of the article I remarked in passing that:

It makes no difference whether high remuneration is paid as a bonus or as regular pay. It would be relatively straightforward to remove all bonuses without affecting the amount anyone was paid. That would certainly not help. Indeed the whole point of “bonuses” – effectively pay whose precise quantum is only set when it becomes clear how much the bank can afford – was to enhance the financial stability of the bank.

At the time I commented on the problems that particular words can cause in public debate, but unfortunately it is not quite that simple. The problem is that the level of public debate is depressingly low.

If something sufficiently dramatic happens, then most people will notice it and get to first base. In this case the collapse of Lehman Brothers was sufficiently dramatic, and most voters grasped that bankers were overpaid. But a little more analysis is needed before sensible action can be taken.

Bank managements are not entirely stupid and had noticed that talented employees demanded big rewards, but that profits tended to be erratic. They soared and plunged erratically, so it made sense to pay most of the big rewards as bonuses. In a bad year bonuses could be drastically reduced, because there was no legal obligation to pay them.

Of course, bank bonuses were totally unlike bonuses in other sectors of the economy. Most employees do not get bonuses at all. Most of those who do get them get relatively small amounts, maybe a few hundred or at most a few thousand. But they read about individual bankers getting millions in the “bonus season”. So the conclusion was obvious: we must stop, or failing that curb, bankers’ bonuses.

I tentatively debated that with maybe half-a-dozen people, none of them stupid. None of them were interested in the idea that curbing bonuses would just increase bankers’ basic pay, which was a bad idea. Of course, that is what happened. HSBC led the way and increased basic salaries for its top few hundred bankers shortly after the cap came in.

In other words, there are two problems. One is that many people are both stupid and ill-informed, with little interest in becoming better informed. But the other, and more serious, problem is that most people are simply not interested in politics. The fact is that thinking is hard work. Most people prefer to stick to their existing opinions – however ill-supported by the facts, and however self-contradictory – rather than do the hard work of thinking about an issue.

People like me tend to find it bizarre that people do not enjoy thinking. I tend to spend most of my time analysing and re-analysing. I cast my net fairly wide. My core activity is probably thinking hard about maths and fundamental physics, but because I have always worked outside those areas, particularly in government and in finance, I also spend a fair amount of time thinking about politics and finance.

Well maybe not huge amounts. Physics, and indeed science generally, is particularly challenging, and hence exciting, because relatively small changes (in experimental data, for example) can ripple through to require huge changes in apparently well-established theories. Nothing is ever final in science. The best you can hope for is that a theory becomes firmly established in a limited domain. But the excitement of seeing the implications of apparently small changes rippling through makes it much more alluring that politics. It is also fascinating how resistant to the evidence the large majority of those whose lives are supposedly dedicated to the search for truth can be.

For example, Newtonian dynamics is well established for velocities much less than the velocity of light and distances much large than a nanometre, but arguably the most important development of the last thirty years is that it has become clear that there is an additional limitation on its validity. The Newtonian/Einstein equations for the gravitational force are probably totally wrong in the weak field domain, which applies once you move away from the solar system to galactic scales. Getting any significant number of the thousands of astrophysicists and string theorists to face up to that is another matter entirely. My general experience in science is that the more speculative the area, the more dogmatic the participants.

Given that people are extremely reluctant to think about political issues, words become extremely important. Often debates are won by capturing an idea in a single word or phrase. So Tony Blair’s genius on Iraq was to popularise the phrase “weapons of mass destruction”. That phrase conveyed that if we didn’t go to war against Saddam Hussein then Hiroshima would come to us. No further thought was needed. But where it happened, it was all about a preliminary issue (is Saddam really a threat to us) and not about the main issues: (1) granted there is a threat, is invasion the best way of dealing with it, and (2) granted an invasion, what happens afterwards.

That tale also illustrates how expertise and talent can always be used for good or ill. Unfortunately, in that case the outcome was tragic.

In the case of bonuses, it seems to have been accidental that policy got decided on the basis of a the wrong word (the real issue was bankers’ pay, not the proportion that was paid as a bonus). I remember at the time that the regulators seemed to have fairly mixed feelings about attacking bonuses. Of course, the attack was not wholly harmful. One reform was to delay payment of bonuses, so that there was more time to check that the rewarded actions and the institutions health were as rosy as they appeared at the end of the year. But it was hopeless for regulators to resist capping bonuses, not just because of UK opinion, but also because of the even stronger EU opinion. Eurocrats were not remotely deterred by the possible damage to the stability of London banks, indeed some of them no doubt saw anything which might reduce London’s dominance in EU financial services as a plus.

Anyway, it will be interesting to see if passions have yet cooled enough for this area to be revisited. Mark Garnier (the Tory MP for Wyre Forest, a rural constituency in Worcestershire, and member of the Treasury Select Committee) apparently told City AM recently that the bonus cap was imbecilic.

Andrew Bailey and Mark Carney (Bank of England) have both spoken out against it. Of course, the snag is that trying to limit bankers’ pay is likely to be even more controversial. My own recommendation would be sunlight: we should introduce a rule that the names and pay of all bank employees paid £1 million or more should be disclosed in the annual report. Even if the concept was accepted, there would be attempts to water it down and delay it with arguments about the detail, but the idea seems sound to me, and indeed should be applied to all employees. To stop avoidance you would probably also have to require a brief summary to be published of the tax return of anyone filing income of more than £1 million.