Interview: The evolving actuary

By Kelvin Chamunorwa, published in The Actuary 6 February 2014

Nick Silver_2

Nick Silver started out as a traditional actuary, but now focuses on helping developing countries and promoting green investments. He talks to  Kelvin Chamunorwa about working for the public good.

I arrive somewhat intrigued at the address Nick Silver had referred to as “my office”: a private members’ business club in the heart of the West End of London. It later turns out that this is where the influential actuary prefers to work and host business meetings when he is in town.

I can see why the club provides a conducive working environment – its secluded location, colourful furnishings and flood of natural light give it a calm and convivial aura – much like my impression of Silver himself.

Being an actuary and an economist, Silver’s CV is not typical. He is managing director of Callund Consulting, where he advises developing countries on pension and social security policy, and co-founder of Climate Bonds, providing institutional investors with access to ‘green’ investments for either hedging or speculative purposes. Silver is also a visiting fellow at the London School of Economics and Cass Business School, a member of Council of the Institute and Faculty of Actuaries and a member of the IFoA’s Resource and Environment Group, which he has previously chaired.

I look on while The Actuary’s photographer takes snaps of Silver before we began the interview. He engages the photographer throughout the shoot, questioning him on lighting, colour balance, profile and other photographic aspects. Silver’s questions are far from self-centred – his inquisitive nature seems to come from a genuine desire to expand his knowledge. This characteristic is confirmed as we speak about his wide-ranging experiences and how they have evolved over time.

He explains his personal motivation of working directly to benefit society, saying ‘What gives me meaning is working for the public good’.

Silver tongue

Silver started his working career in 1991 as an actuarial consultant with Punter Southall then PwC in London, specialising in UK private sector pension schemes. He qualified as a Fellow of the Institute of Actuaries in 1995.

So how did the transition to international and green issues come about? He responds by explaining his personal motivation. “What gives me meaning is working for the public good,” he says.

He goes on to describe the steps he took to start advising governments and other public bodies on the reform of their pension and social security policy. In 2002, he embarked on a Masters’ degree in Public Finance Policy at the London School of Economics. Silver recalls: “After graduating in mid-2003 I pursued David Callund, chairman of Callund Consulting at the time, in a bid to get involved with international public sector consulting work.”

It took a while, but eventually Silver’s persistence paid off when he was assigned to his first project in Bosnia and Herzegovina in late 2003 and has been at Callund Consulting ever since. Silver views this role as his “bread and butter”.

The way Silver got involved with public policy is in contrast to how he developed his work on climate change, which started with a voluntary role for the IFoA. In 2004 he joined the Resource and Environment member interest group. As one of the initial members of the group at a time when climate change was only just emerging into the public eye, Silver had the opportunity to build a network within the industry. He was one of only a few actuaries involved at the time and was often invited to speak at conferences. Perhaps inevitably, he began securing consultancy work. “I got into it by accident really as I was not actively looking for work,” he admits.

Many of his projects on sustainability now find him because of his knowledge of insurance, risk and pensions. In hindsight, Silver thinks he was able to start work in the public policy and climate change areas at a higher, more influential, level than he would have had he not been an actuary. He declares that it’s because of “the gravitas of an actuarial qualification”.

I suspect that his willingness to learn and his way with people also played a significant part in the  successful transition.



Silver lining

So what does the future hold for professionals in the pensions industry? Silver’s view is that the UK pension environment is highly regulated and hence there is a need for a large number of qualified professionals in the industry, including actuaries. He also believes that while the defined benefit pension market is shrinking, the ageing population means there will be a role for actuaries working in this space for many years to come. He asserts that much of it will be legacy work though; his view is that actuaries should be ready to apply their skills in related areas where there is financial uncertainty and risk that needs to be managed.

From a global perspective, Silver points out that there are many emerging economies in need of actuaries: “Each one of them has pensions and savings challenges, but with few qualified actuaries working in that space”. He is currently working on a project with the National Social Security Fund in Uganda, and uses that country as an example: “The fund has 500,000 members and assets of around $1 billion, predominantly invested in Uganda government bonds. In the next few years, membership and assets are both expected to double. It is a booming economy with increasing demand for actuarial advice.”

Surely actuarial work in developing countries also comes with its challenges, particularly where capital markets are not as advanced and data is scarce? Silver agrees and highlights the difficulty of developing long-term assumptions for actuarial valuations. He gives the example of risk-free rates of return, which can be “difficult to determine as some governments’ bonds are in no way risk-free”. In addition, there have been cases where there was no national mortality data to work with and he recalls that “in one small country we had to use the English Life Table rated up by 15 years as a  starting point”.

Silver sees the technical challenges of performing actuarial valuations as relatively minor compared to the soft skills required to persuade stakeholders to take the necessary action. “Unlike in the private sector in the UK, where legal requirements ensure that action is usually taken, it is more difficult with public sector work in any country. That’s where experience and a deep understanding of the culture helps to influence key decision-makers,” he says. On the whole, he thrives on dealing with the varying and complex issues in each country, a lot of which are taken for granted when working in the UK.

In Silver’s experience, many countries try to emulate Western regulatory models, like Solvency II, and this presents opportunities for him as an actuary with UK experience. He believes that the actuarial skillset is highly regarded, almost to the extent that stakeholders are prejudiced towards UK qualified actuaries.

In a lighthearted moment I take the chance to ask if the actuarial ‘premium’ is reflected in his consultancy fees. He sidesteps the question by talking about some of the perks that have come with his work, like having an audience with influential individuals.

The previous week, he attended a lunch event on food security at St James’s Palace and had a conversation with Prince Charles. I ask what they spoke about. Never one to miss an opportunity with those who have the power to drive change, he says: “Rather than talk about food security, I told him his speech at the recent National Association of Pension Funds conference was very helpful (where he urged institutional investors to better address sustainability issues in their portfolios), and he should keep pressing on this issue.”

Earlier this week Silver was in the government office’s in the palace of the Emir of Abu Dhabi where he is advising on the reform of the pension system.

Silver also takes time to experience the countries he works in. Unsurprisingly, he says he mostly enjoys engaging with local people, arguably the ultimate beneficiaries of his expertise.


Silver bullet

I was curious to hear more about climate bonds and how the initiative addresses climate change. Silver describes its objective as: to provide institutional investors, particularly pension funds currently invested in the fossil fuel economy, with an opportunity to invest in ‘green’ initiatives. His view is that in many countries, particularly those with sunny climates, the economics of energy supply is tipping towards solar energy. Thus the initiative provides access to investments that will generate renewable energy. He believes that as London is a major financial centre, it is a good place to start.

I ask him why the focus of financing sustainability ventures is through bonds. He uses the example of the cash flow profile of a wind turbine, which requires a large upfront investment to build and then once it starts producing electricity generates a regular stream of income. The bond can then be refinanced quite cheaply, or repackaged like a mortgage-backed security.

Climate bonds are a relatively new asset class and the idea is to make them investment grade and thus move them into the mainstream of institutional investors’ portfolios. Silver believes that this is a significant part of the solution towards a low-carbon economy.

As for the actuarial profession, Silver’s view is that it is not enough for actuaries to be technically astute, as that is generally taken as given. He gives the example of the declining number of actuaries on boards of insurance companies, which demonstrates the need for strong leadership and communication skills, but more importantly, a more adventurous attitude towards assuming responsibility in areas outside our comfort zone. He believes that only then will actuaries be able to increase their influence and relevance, resulting in a more significant role to play for the benefit of society.

Silver is a warm and very likeable personality. We spoke at length until there was just enough time left for him to pack up for the day and pick up his daughter  from school.

With such a busy work schedule including regular international travel, I ask whether he manages to find time to read The Actuary. He tells me he peruses articles as he travels. Pre-empting my next question, with a gleeful smile he adds, “and I always recycle my copy after reading it, of course”.

- See more at:


The mild-mannered prophet of doom

Interview with John Kay, Published in The Actuary, 4 April 2013

Kay Photo Kesteven


A small terraced house in the hinterland between London’s Marble Arch and the Edgware Road does not seem like the sort of place where you might expect to find a leading economist. But professor John Kay is not a typical economist: he has been a fellow of St John’s College, Oxford, since he was 22; a director of the Institute for Fiscal Studies; he was the first director of Oxford University’s Saïd Business School; and he has also set up a successful economic consultancy firm.

Alongside that, he has written weekly columns for the Financial Times for 17 years. More recently, he has been in the public eye having been commissioned by the government to carry out an independent review of the effects of UK equity markets on the competitiveness of the economy, published as the Kay Review in July 2012.

If I didn’t know that the slight, genial gentleman settled down opposite me was a professor of economics, I would imagine him as a specialist physician, detailing why a patient had only six months to live with comforting assuredness. During our conversation, he gently and politely dissects the state of the equity markets and financial services, the UK economy and the economics profession in his soft Scottish accent – and offers his thoughts on actuaries.

The current style of regulation
freezes the evolution of the system, preserving the dinosaurs

Kay on Kay

When asked what had first attracted him to economics, Kay explains that he started out studying for a maths degree at Edinburgh University. Having worked for a summer in the school holidays at Scottish Widows, calculating surrender values, his assumption was that he would become an actuary.

However, on taking a subsidiary course in economics, he decided he was more interested in practical affairs and ended up studying economics at Oxford. Asked why he had opted for such a varied career, rather than sticking to being an academic economist, his response is simple. “The idea of doing the same thing all of my life was a bit daunting,” he says.

His particular skill, he continues, is “the popular exposition of complicated ideas”. Throughout the conversation, I form the view that is a two-way street – rather than being stuck in a hermetically sealed world of academia, Kay has much practical exposure to the real world. This feeds back into his academic work, potentially changing his views on how the economy works.

Although he professes to not having any other major passions in life “besides my work and walking, where I do my best thinking”, I have the impression that Kay’s work is so wide-ranging that this encompasses multiple interests.

Kay on banking

My opening salvo is to ask him about his most recent FT column, in which he wrote that ‘the reputation of finance has been degraded by the actions of a few. But the few have been running the show, and have imposed inappropriate values on once respected institutions.’

He explains that, during the big bang, retail banks took over firms engaged in wholesale financial activities. “But the retail banks couldn’t control the investment bankers, who were richer and smarter, and so they ended up running the show,” he says. The only way to stop this, he continues, would be to have “a politically driven restructuring of the financial service sector” – a surprising answer, as the Kay Review was pretty limited on government intervention. Instead, we are seeing “the proliferation of a style of regulation that has plainly failed”.

Although he has seen change in the past year – among politicians and with public realisation that what went wrong resulted from the ethos and structure of the industry – he says there is an endemic culture in financial services that makes it incapable of learning from other disciplines.

Sciences that study systems – for example, engineering or biological systems – have developed a sophisticated understanding of how systems actually work. In an ecosystem, monocultures are the most vulnerable and this is exactly what we have in banking, made worse by the current style of regulation, which “freezes the evolution of the system”, preserving the dinosaurs.

It turns out that Kay’s optimism is predicated on the inevitability of another crisis, as the current banking business model is a proven failure, which will basically wipe out the financial system so we can start again.

Kay on economics

I read another column by Kay a while ago in which he wrote that he used to teach modern portfolio theory, but that he no longer believed in it. Asked what changed his mind, he takes us back to the early 1990s, when he was involved with the restructuring of the Lloyds Insurance market, following the London market excess of loss (LMX) spiral. “What had been going on was not the spreading of risk to reduce the cost of risk bearing, but the dumping of risk by people who understood a bit about it on people who understood less,” he says. This typified much of the financial services sector.

So when he observed the credit instruments between 2003 and 2007, “it was with a sense of déjà  vu, knowing how this would end”. His conclusion was that most financial market trading was the product of information asymmetry rather than different risk preference and risk attitudes – as assumed by the capital asset pricing model and the efficient market hypothesis. Financial markets are currently explained using models that cannot conceivably account for the volume of trading that takes place in them.

The other experience that led to his change of mind was carrying out some research on London casinos. He found that the typical gambler was a successful, entrepreneurial businessman. Far from being there for the thrill of winning, or losing, money, “these people actually believed that they could win”.

He realised he was observing the upper tail of a distribution of people who were aggressive risk takers, yet naïve about the risks they were taking – the businessmen one sees in the casinos are the ones successful enough to have enough money to lose.

These same people provide the underlying dynamics of capitalism. They are not rational, they do not understand risk and are therefore prepared to take risks that a rational agent would not take. And it is these people who drive the growth of the economy. Again, this entirely contradicts economic theory in which agents are assumed to be rational; it is the irrational agents that drive the markets.

Kay is not the only critic of mainstream economists, and it would seem patently obvious that economics has failed as a predictive and explanatory tool. Was the profession changing? Could there be an Einstein moment approaching, where the mainstream realises that the cranks were right? No, says Kay. Unlike subjects such as physics, you cannot definitively prove economics wrong. “The rewards structure of the economics profession is basically a common value system,” he says. Small marginal improvements are rewarded, critics are considered cranks and ignored.

But surely economists would become increasingly irrelevant as there would be decreasing demand for models that just do not work? Once again, Kay thinks not.

“People are continuing the use of value at risk models,” he says, “although these plainly failed, because extreme observations come from off-model events, not from improbable events within models.”

He cites the Goldman Sachs executive who said they were “seeing things that were 25-deviation events, several days in a row”. This was obviously not the case, says Kay. They were seeing events that were not in Goldman Sachs’ model. What interests Kay as a result is “exploring the limits of probabilistic reasoning” – something that has been discussed since the 1920s but has still not been taken on board.

Kay on equity markets

The subject of the Kay Review was how equity markets affected the economy as a whole. One of the findings was that companies rarely raise money in the stock market. But part of the purpose of savings, according to economic theory, is also to provide investment capital, which allows the economy to grow. Kay thought that this was no longer the case, as companies no longer needed to raise large amounts of capital.

“Companies such as Facebook or Google are capital-light and generate their own cash, which they can invest themselves,” he says. The main capital allocation decision in the economy is therefore taken within companies by company management, not by the capital markets. Most of the large-scale investment of the modern economy is required by government, for areas such as health, education and infrastructure.

The main economic function of the equity markets is not, therefore, to allocate capital efficiently, but to ensure that company management makes the correct capital allocation decisions.

Kay champions the concept of ‘stewardship’ asset owners that have a close relationship with the management of companies they own, overseeing the allocation of capital in a manner that will result in the long-term growth of the company. This is the only way in which the investment management industry can add value.

“Competing with each other on relative short-term performance is a zero-sum game,” says Kay, which is of no social value or value to their clients as a whole. At present, asset managers either do not focus on long-term growth or, worse, they actively encourage companies to behave in a more short-term fashion, undermining long-term value. By and large, therefore, the asset management industry has not been doing its job.

Doesn’t that make the Kay Review an indictment of modern capitalism, I ask? After all, economics teaches us that people’s earnings are based on how much they are ‘worth’ to society, yet the head teacher of my daughter’s school earns a small fraction of what most people working in the equity markets earn, despite her obviously socially important job. The Kay Review argues that what people working in the equity markets do is mostly useless, sometimes positively harmful, with most workers either not doing their jobs properly or not doing them at all.

Kay’s answer is that capitalism is working, but not necessarily perfectly; the most successful economies are obviously based, to a large extent, on free markets. But the UK’s financial services system is currently not serving the rest of the UK economy very well. As a result, the UK has become a global centre that is “quite good at manufacturing a particular set of products, which are of doubtful value, but which are mostly bought by foreigners”. This is the modern moral dilemma of our society.

Kay on actuaries

Before this interview, I searched the Kay Review and found no mention of the word ‘actuary’ and only one of ‘actuarial’. From our subsequent discussion, I can conclude that he lets us off lightly.

When Kay had his first interaction with the profession over 20 years ago, he felt that actuaries were “blissfully unaware” of financial economics. But, since then, he says, we have adopted them wholesale in a particularly naive and uncritical way.

He believes that people best deal with uncertainty, as opposed to risk, through narratives rather than probability distributions. For instance, the legal profession uses terms such as ‘balance of probability’ and ‘beyond reasonable doubt’.

“We might surmise,” says Kay, “that these could be translated into probabilities – the former greater than 50%, the latter greater than, say, 99%.” But this is not the case at all, he continues. Legal reasoning places the onus on ‘the ability to tell a consistent and convincing story’, and the judgment is based on what degree of confidence the judge or jury has in the story. ‘On balance of probability’ means which story is the most convincing. ‘Beyond reasonable doubt’ means the story is a clear and convincing narrative of events.

What Kay would like to see from actuaries is for them to exercise judgment and frame these in convincing narratives.

Another example he uses is taken from Malcolm Gladwell’s book Blink: The Power Of Thinking Without Thinking. A Greek statue in California’s J. Paul Getty Museum was easily recognised by experts as a fake, but it was very difficult for them to explain why they thought this – they just knew. Because of uncertainty, there cannot be an objective truth; expertise is exercising a subjective judgment based on experience, not the ability to run a model.

Kay on the way forward

For investment consultants and asset managers, the Kay Review is little short of devastating. So what does he suggest?

To start with, he says, the methods for picking asset managers and the mandates that they are set are a long way from perfect. First, the theoretical underpinning of current practice – for example, investing against a benchmark and defining ‘risk’ as deviation from that benchmark – follows the efficient market hypothesis and the capital asset pricing model, both of which Kay thinks are nonsense. Second, mandates should be based on “styles and strategies that look compelling”.

In Kay’s view, pension funds should invest in a smaller selection of companies, with whom they should be in close contact, either directly or indirectly via the asset managers, the key concept being ‘stewardship’.

He believes that asset managers should be selected for their convincing ‘narrative’. “They should not be reporting or judged upon quarterly returns against other managers, as this is not in beneficiaries’ interests,” Kay says. Instead, he continues, they should be judged over, say, three years – on whether they are investing in line with their stated narrative and how this is evolving through time.

The investment consultant should exercise professional judgment on which narrative is the most convincing.

Asked whether this was something actuaries could do, Kay suggests we do not, at present, have the right skills set. Instead, the work should be undertaken by asset managers who understand the “competitive advantages and evolution of companies”.

Kay’s message for actuaries is that we should distrust our models – what is not in our models is often more important than what is. And we should develop narratives of what might happen rather than relying on spuriously accurate mathematical projections based on past experience. Equally, we should not blindly follow methodologies implied by financial economics.

In conclusion, the Kay Review has been described as good on diagnosing problems but not on solutions. This impression is strengthened by our conversation, as Kay’s ultimate solution seems to be based on little more than the inevitability of another crisis, after which everything will be fine. Not a very comforting message, perhaps, but I think we should listen carefully to the diagnosis of this most mild-mannered of Cassandras.

Kafka in Kano

Nick Silver, in Kano

Published in The Actuary, 24 July 2012

Third travel log from our intrepid travelling actuary: Nick Silver on pensions consulting in northern Nigeria

This article is based on a number of trips I undertook in Northern Nigeria to advise the Jigawa state pension scheme over the last couple of years. Unfortunately, since I have been working there Kano has been in the news for the wrong reasons as the scene of recent terrorist atrocities, which has also curtailed my work there.

Kano is the major city of Northern Nigeria of approximately 10 million people. This figure may not be correct, because in Nigeria population figures are subject to political manipulation as they determine the size of the state’s  budget. Kano is therefore officially larger than Lagos, which apparently, is a ridiculous suggestion.

Nigeria could be described, to misquote a famous footballing cliché, as a country of two halves. The South is Christian, liberal, often lawless and contains oil. The North is Muslim, has sharia law, practically no crime (until the recent intervention of the Nigerian Taliban) and no oil.

Kano is a rambling though not unattractive place, with wide tree-lined avenues of large mansions, fronted by dust and very poor people trying to sell things. The hotel I frequent in Kano is the lovely Prince’s hotel – to anyone who has not travelled round Africa, it would seem pretty ordinary, but compared to other hotels in North Nigeria it’s the height of luxury – clean, with a swimmable swimming pool (which you really appreciate when it’s  40C) and a nice Lebanese restaurant -the Lebanese seem to own all of the functioning businesses in Kano.

Kano is a really interesting town – it is an historic market town on the edge of the Sahel which traders have used for over a millennia – it could almost rival Marakesh as a tourist destination, if it wasn’t in Nigeria . It was founded in the 9th Century, and has an amazing old market, which still has the buildings that used to house slaves. The city’s historic center used to be surrounded by 1000 year old mud walls, a 100m stretch has been rebuilt and looks suitably impressive. However, the German agency that had funded this had actually paid for the walls’ entire reconstruction but the rest of the money disappeared. The rest of the walls are in a sorry state – piles of mud which goats use to graze and which locals use for building material. There is also a place where they dye fabric, which doubles as a popular meeting place for flies, and a small but fascinating museum.  Of particular interest to me was a photo of the two armies, the victorious British and defeated Hausa during the ‘Scramble for Africa’ at the end of the 19th Century.  I already knew the story, the adventurer Fredrick Lugard had conquered the whole of the country and placed under British rule. However, what struck me about the photo was that the soldiers in the two armies were made up of the same people, i.e. black Nigerians. So what exactly was it about the ‘British’ army that could easily defeat the Hausa if it wasn’t the solidiers? The Britishness is actually a series of rules, institutions and blueprints that meant that Britain had the knowledge to produce the uniforms, guns and organize an army, and this is what enabled them to project their power to far-flung places. This also explains my presence here, although hopefully in a more constructive capacity and invited by the locals, I supposedly am possessor of another set of blueprints, and knowledge of how to implement them.

I was not actually working in Kano, but in Dutse the capital of Jigawa province a 2-hour drive North, towards the border of Niger. The drive was fascinating. The roads are crammed with the ubiquitous Jin Chao – a cheap Chinese motorbike. It is an amazing site to see the Kano men, adorned in their white Kaftan’s and traditional cap, and the ladies resplendent in their colourful robes riding on these bikes and more unbelievable  to see what they transport –most impressively was a car windscreen carried vertically on the back of a bike.

The Nigerian government receives all of its revenue from oil rather than taxes; to get into power in Nigeria you build up favours from various interest groups who you then have to pay off. Your success depends on how much of the oil revenue you can secure. Much of that revenue is siphoned off and leaves the country. The result is that the government has no interest in providing an environment that businesses can function to pay taxes, as it does not depend on these taxes for its income. You can see the physical manifestation as you drive along; there is rubbish everywhere, picked over by goats, no sewage the schools have no roofs (and, apparently no toilets and the teachers have rudimentary education), I could go on. The money for this infrastructure has disappeared. Apparently things are much better than they used to be, though – Nigeria has risen from the most corrupt county in the world to a heady 143rd least corrupt country in the world.

In the bad old days under Suni Abacha if you met an army or police checkpoint the advice to international workers would be to drive over the nails that they put in the road to stop you and keep going until you can’t anymore. Then you could phone and be rescued rather than fall prey to the mercies of the army/police.

As you leave Kano, the scenery changes as you enter the Sahel proper, which is semi-desert. The landscape is pancake flat, punctuated by Baobab trees (as a child I loved the book The Little Prince so I was particularly excited about these) and by traditional villages. These consisted of collections of mud huts surrounded by a straw corral. If you come here in the wet season though, the landscape is transformed into a lush paradise where the villages are no longer visible due to the abundant flora.

Anyone who has read my previous articles will know that I always have a “what am I doing here?” moment. But in this case, was I really here: middle of nowhere Africa where the people are apparently totally untouched by the modern world – do they really need actuarial advice on a defined benefit pension scheme?!

The journey was also fascinating for my companions. There was the driver, who was weighing up weather to marry a 4th wife, and my assistant Amin, a talented and prolific essayist who railed against the corruption of the government, but also, the corrupting morals (or lack thereof) of the West. Later I later shared a drink with Amin in one of the few bars in Dutse; as they have Sharia law in North Nigeria, alcohol is illegal, so the only place you can get a drink is in the car park of the police station.

We finally arrived in Dutse. Dutse is a new town, a sort of Nigerian Milton Keynes; it is surprisingly clean without fields of rubbish and has things which you notice when they are not there, like traffic signs and road markings. It would be unfair to say that my hotel, the ESSPIN Guesthouse was the worst place I’d ever stayed in, that title goes to and hopefully will remain for the rest of my life with the nameless and charmless place I stayed in Qurghonteppa, Tajikistan (see my previous article).  But it was a distant second. The proprietor was very willing and he did de-fumigate my room many times a day and the food was flavoursome and didn’t make me ill.

Jigawa is a new state which was created out of Kano. Starting with a clean slate, they are trying to make it modern, hence the new-town capital, and also the state of the art civil servant’s defined benefit pension scheme.  The rationale for the scheme was ambitious. In Nigeria, there has been a lack of belief in the viability of the country and this is one of the reasons that resources have been siphoned off to such an extent. But a funded public service pension scheme means that the government is thinking long term, civil servants turn up to work knowing they have a pension which will be there when they retire and hence have an incentive to keep the state going. This is a significant aspirational statement and the workers see it as such.

The state’s headquarter building is really a remarkable place. It is like a benign version of Kafka transported to the middle of Africa. Outside the building there are a bunch of men milling around for no apparent purpose who all greet you and shake your hand. The dusty corridors are also populated by people sitting or standing around. Offices of senior figures all have a antechambers with couches and a TV permanently  blaring out BBC News 24 at full volume. The offices are full of men sitting around watching the TV. Similarly the main office has BBC News 24 on permanently and there is a constant interruption during meetings of people coming in to shake hands, or the mobile ringing, or power cuts.

During my stay in Dutse I experienced an authentic African experience. I joined most of the men in the town in a field to watch a transmission of the Champion’s League quarter final. Half of Dutse are passionate supporters of Chelsea and half AC Milan, so there was a great atmosphere.

I found Nigeria so fascinating that I have not yet even told you about the work – this was fascinating too. Before you even get to an actuarial review, I discovered the scheme is beset with problems; the main one being human resources. The people who set up and are in charge of the scheme are visionaries, but there is a lack of depth of resources – because of the low levels of education, it is hard to recruit people with more than rudimentary mathematics, IT and administration skills. Also, the scheme is operated in a vacuum; Nigeria does actually have sophisticated pensions legislation with very clever incentive and transparency laws. However, there are no other defined benefit schemes, so the scheme employees have no peers to compare themselves against and develop best practice. It is therefore very hard for them to spot pitfalls.

I think many actuaries would find the challenges of valuing the system very interesting. Besides the lack of data to go on (which I am used to), how do you, for example, set a mortality basis? Nigeria has a life expectancy in the 40s, but surely this does not apply to Jigawa civil servants? What about inflation or salary inflation? Historically this has been very high, but has now been brought relatively under control, i.e. it is below 10% (just).  And, like in many muslim countries, the scheme operates under sharia law. So when a member dies his pension is split between wives and children, and can be paid for life to unmarried daughters. So, for example if a man dies at 65 with a 30 year old wife (quite likely as polygamy is common) and a 2-year old daughter, his pension will be paid in full for the life of that daughter if she doesn’t get married – possibly 80 years! I have just been reading the excellent report on discount rates by Chris Daykin and Chinu Patel, which sets out the difference between a matching and a budgeting basis . But how do you set a discount rate for a state in Nigeria, where investment returns are around 15% (in bank accounts), a government bond is not exactly ‘risk free’ and the scheme is mostly unfunded?

Nigeria has massive problems, but things are getting much better and it has great potential – a relatively benign government, natural resources, a rich and diverse culture and most of all 170 million wonderful people. On my return to Kano, the head of the Scheme turned up at my hotel saying “Mr Nick I have brought my tailor!” and insisted on having him make me a traditional costume. This doesn’t happen in London. I was touched.

Resilience through Vodka

Published in the Actuary 11 April 2012

My travels through Tajikistan with a bunch of Climate Scientists on an Asian Development Bank mission

Tajikistan villager old man
We were staying in what was, allegedly, the best hotel in Qurghonteppa, but it was probably the worst hotel I’d ever stayed in. When the food arrived at dinner I was, for once, very glad that there was no vegetarian option, so my dinner consisted of just bread and vodka.

My room demonstrated the hotel’s impeccable green credentials – through energy saving (only two of the seven light bulbs worked), water conservation (my bed-linen looked like it hadn’t been washed since the Soviet era and the tap-water stopped working at 8pm) and recycling taken to extremes (the toilet paper – we won’t go into this).

This is where actuarial skills come in really handy. It allowed me to do a quick discounted value calculation of how much vodka I would have to drink before I could face my horrible bedroom.

When I started out as an actuary doing transfer value calculations many years ago, I never dreamed that my profession would take me to rural Tajikistan with a group of leading scientists. The reader may equally well be forgiven for asking what I was doing here.

Firstly the mission: we were part of the World’s Bank’s Pilot Programme for Climate Resilience (PPCR). The World Bank has raised considerable funds to invest in making countries resilient to climate change. Tajikistan was one of the first beneficiary countries and was something of a test case.

Our job, which was actually led by the Asian Development Bank, was to propose how funds should be invested in respect of climate science, economics and risk management.

Secondly, why an actuary? Climate change is a long-term risk and therefore actuaries are well placed to understand and manage this risk. At the Profession’s Resource and Environment Group (REG) we have developed tools and knowledge so that we can exploit our skills in this area. I was delighted to be able to demonstrate their practical application.

Tajikistan is a landlocked country in Central Asia of about 8 million people. It gained independence after the collapse of the Soviet Union only to descend into a particularly nasty civil war in which around 100,000 people were killed. It is now recovering, albeit from a low base; with a GDP of $767 per capita it is the 158th richest country in the world, making it poorer than many African states.

The mission started in the capital, Dushanbe which, with its wide tree-lined boulevards, and decent restaurants and hotels, is a gentle introduction to Tajikistan. In Dushanbe, we were based in the country’s meteorological office, which looks exactly like you would imagine Tajikistan’s meteorological office to look (except for the toilets – nothing could possibly prepare you for those).

The Soviet era meteorological records were immaculate – the Soviets were good at keeping records, this is what they did. Unfortunately the subsequent records were rather patchy – the lady from the office claimed that her computer had crashed and they had lost all of the more recent data.

We were due to meet a number of high-ranking government officials and scientists, who mostly cancelled us. We did meet a number of NGOs, environment agency staff and development organisations, who gave us warning of the true situation of Tajikistan – but you can only really understand this when you leave Dushanbe.

The rest of the mission was to visit the Pyanj river basin. I was somewhat excited about this prospect. When I was younger I used to read about the Great Game, which was a shadow war fought between the British Raj and the Russians in the mysterious lands between their respective empires. Right in the centre was the mighty and mysterious river Oxus – fed by the Pamir mountains, the “Roof of the World”.

The British were desperate to find the source of the Oxus and map it, so they sent numerous spies into this region who performed unimaginable feats of derring-do. And this is exactly where we were going because the Pyanj is the Oxus. Unfortunately our helicopter trip over the Pamirs (including the 7,000m mountains that used to be known as Peak Communism and Peak Lenin) was cancelled as the only functioning helicopter in Tajikistan was in the garage being serviced.

Before our trip we had to get special visas – the Pyanj borders Afghanistan and is hence a prime area for drugs and arms trafficking. The further you travel out of Dushanbe, the more dramatic the terrain – bleak, bare mountains with green valley floors of vast cotton plantations. The roads rapidly deteriorate, only passable by way of 4x4s – our party was transported by a conspicuously large convoy of off-road vehicles to accommodate the translators and accompanying camera crew, driven by Tajik wannabe Michael Schumachers – the only other traffic being the occasional Lada, Chinese lorries and goat-herds.

As we approached the Pyanj basin we descended noticeably, the landscape becoming more parched and the settlements less and less developed. When we finally reached the River Pyanj the non-irrigated landscape was practically desert. Our first stop was to a hydrological station on the river. We had to have special permission to visit as the river forms the border with Afghanistan. We also surreptitiously took our shoes and socks off and had a quick paddle in the legendary Oxus with Afghanistan only a short swim away!

After this we followed the river for an indeterminate length of time along increasingly dusty tracks, through the dramatic river gorge to our final destination of Darvaz – including a four-hour stop in the middle of nowhere while the road was mended. Of particularly interest were the occasional glimpses of life on the Afghan side of the river; the odd village, ancient and seemingly formed from the mountains, connected by precipitous paths where families with goats travelled.

The next day we stopped at a number of Tajik villages which had suffered a series of misfortunes. Some had lost houses and a small power station washed away in floods; some were suffering from drought. The villagers came out en-masse to greet us, and laid on magnificent feasts of fruit, bread and slightly dodgy looking yoghurt/curd cheeses – fortunate as this was the only edible food we had all trip. In some ways these villages are magical places – green oases in harsh barren landscapes where pomegranates and persimmon grow wild.

According to our glaciologist, the floods were caused by small glaciers melting, bringing on surges in water. The rainfall in this area was very low, so droughts are caused when the farmers can’t extract enough water from the Pyanj. This is likely in part caused by climate change – the Pyanj is glacier-fed and the surge in waters because of spring melting are occurring earlier in the year and no longer coincide with when the crops need the water. However, the droughts are also caused because the Soviet-era irrigation system has not been maintained. And you also wonder if farmers should really be growing cotton in such a dry area?

The most interesting encounter we had was with an antique farmer, main picture, top, who had managed a collective farm in the Soviet era. In this time, they had subsidised fuel costs, a guaranteed and fixed-price market for the cotton, national crop insurance and, if anything broke, the authorities sent someone round to fix it.

In addition they had free healthcare and education (the farmer’s son had gone on to become a doctor). Although far from perfect, his belief that “things were much better in the Soviet Union” seemed highly credible.

Tajikistan used to be part of a large system, highly subsidised by Russia. After they left, everything collapsed. The farmers now have nothing – their oil inputs are expensive and volatile in price, the cotton has to be sold on the fickle international markets (if it can get there – this place is remote).

The farmers on collective farms were really just labourers who took orders, so when the collectives were split up these people had no knowledge or experience of actually running a farm. There has been no investment – the country is littered with old rusting equipment. Apparently there is a good trade in collecting the ruins of Soviet equipment and trucking it to neighboring China as scrap.

Also, the cotton economy seems to be a politically-driven Byzantine system which traps the farmers in perpetual poverty. Most males have left the area, mainly for Russia – remittances is Tajikistan’s major source of foreign income – leaving especially vulnerable female-led households. On the drive back to Dushanbe you could see that the USSR had built proper roads through difficult terrain – they used to be tarred and the odd road sign remains, signifying that these dirt-tracks were once proper highways.

So the country is already being affected by climate change because of land-slides, floods and droughts. However, it is vulnerable because it has fallen apart since the Soviet era and needs massive investment in infrastructure such as roads, power, irrigation, healthcare and education. If it had these, then it might be resilient, but the challenges required are massive. The underfunded ministry staff do use some forms of cost-benefit analysis, although an actuarial-type risk management framework is currently not in evidence.

Tajikistan does have potential as it is starting from a low base. It is now peaceful, has a relatively well educated population and is a transit route to China. If Afghanistan ever calms down, its Southern neighbour could become a trade partner rather than a source of instability. It does not have many natural resources, but is abundant in water from the mega-glaciers on the Pamirs – even with severe climate change they will take a long time to melt. So on an intellectual level our recommendations of building scientific, risk management and economic capacity seem justifiable, by the time these come to fruition Tajikistan should be a more prosperous, modern country.

However, contemplating the colossal wreck of the USSR that we witnessed, I can not help think of Shelley’s traveller reading the words of Ozymandius: “Look on my Works, ye Mighty, and despair!”

You can see the film of Nick’s mission on YouTube


Another day in paradise

Published in the Actuary, 1 March 2012

Nick Silver shares his entertaining experiences of an enviable and extraordinary pensions consulting assignment in the Caribbean Community (CARICOM) member states
Guyana looks quite small on the map, but when flying over a country the size of Britain with only 750,000 people, you see that it consists of vast areas of jungle with little sign of human activity. Driving from the airport to Georgetown along the Demerara River,  where the sugar comes from; in the blazing heat through dense jungle, I was overcome with a sense of the absurd – was I really here to carry out actuarial work?  At this point I decided that my trip might make an interesting article for The Actuary – part travelogue, part exploration of the limits of pensions consulting.
I had my extra day in an eco-lodge with my own natural hot spring – it certainly beats working on Solvency II.
Our assignment was to assess the social security systems of CARICOM states, with a view to advising on how they should harmonize to facilitate free movement of labour between the states. To do so, we had to travel to the 17 member states that have social security systems (Haiti and Surinam do not). Guyana was my first country to be followed by Trinidad and Tobago, Grenada, St Vincent & the Grenadines, St Lucia, Dominica and Barbados.Regretfully I had to give up the other 10 countries to my colleagues (I was especially upset about Montserrat) but I just had to get over my disappointment. My secret, private mission was to decide which country produced the best rum. Of course the thought of checking out the beaches and bars never crossed my mind – I was here to work.Geographically Guyana is not in the Caribbean – it neighbours Venezuela on the South American mainland. However, the majority of the population is English-speaking Afro-Caribbean. Georgetown is wonderfully atmospherically ramshackle; it consists of dilapidated colonial buildings all made of wood and has an edgy Wild West feel. My fellow hotel guests were aid workers who had just been hacking through the jungle.

The country has serious problems – young people have little prospects and mostly leave, migrating to Europe and North America (as opposed to other Caribbean countries). Those that remain often work in the ‘informal’ sector – this might mean legal informal, such as market stalls, or illegal informal – Guyana is a major drug smuggling transit route which makes up a large proportion of the economy – the other mainstay being remittances from abroad. This means that the social security system has to deal with an effectively ageing population despite the high birth rates and with large sectors of the economy non-compliant.

Just prior to leaving Guyana a friend sent me an email with attached weather map with the comment, “Aren’t you somewhere here”? The map showed hurricane Tomas forming between me and the rest of my destinations. Given the local airline’s reputation – LIAT is reputed to stand for “Leave Island Any Time”, I steeled myself for a long stay in Guyana.

However, I managed to get on the last plane to leave for my next destination, Trinidad – I was the only passenger at the airport. I had the weekend in Port of Spain, which I soon realised was a mistake – it resembles the set for the TV crime drama The Wire. Their social security system had an interesting design – the government had continuously raised the minimum pension, so that now the entire population received the minimum. Unlike the other Caribbean nations Trinidad is industrial – based on oil and gas. This makes it quite ambivalent towards CARICOM as they feel they do not have much in common with the other countries.

Next stop Grenada. I arrived there at night and went down to my hotel bar for a quick drink. On entering the bar I had to suppress a laugh – this was how you imagined the Caribbean; straw-roofed rum shack on golden sand beach, turquoise sea – and someone was paying me to be here!

Grenada is famous for two things, hurricane Ivan, which had wiped out the island in 2004 and the US invasion of 1983 (I wondered how a country of 100,000 of the most laid-back friendly people you will ever meet could have posed a threat to American national security).

Fortunately its history seemed to have kept the developers at bay so the island is still unspoilt. The social security system is by far the largest investor in the country. It invests 100% domestically; as you can imagine there are not many liquid investments in Grenada, so the system has to be highly innovative, for example it is the largest mortgage provider in Grenada. The words risk concentration immediately spring to mind. I spent a hard afternoon working in the hotel bar/restaurant as an improvised office.

My only regret about Grenada was that I was only there one night. A similar whistle-stop trip to St Vincent followed – another small country with similar issues to Grenada. Kingston had a ramshackle, pirate feel to it. I shared my very nice hotel with a famous hip-hop singer and his entourage, visiting for a gig and they kept me up all night (not in a good way).

The social security system is run by the highly flamboyant Mr Thomas. He has instituted a series of innovative measures to get popular buy-in, for example carnivals celebrating old age and school booklets explaining the system (which are the best and clearest communications documents on the subject I have seen).

I finally ran into the aftermath of Hurricane Tomas in St Lucia. I arrived in the middle of the night to be told that the hotel was not taking guests as there was no running water. I might have been less than amused had I been here on holiday, and the few holidaymakers who had rationed showers at 7am only were clearly not amused, but I was here on work; the slightly shady motel which was the only place taking guests would be considered luxury in the African countries that I have frequented recently.

My meeting was cancelled as the head of social security had to try and rescue his mother whose house had been washed away. It’s hard to imagine how long it would take to repair all the damage – the water and roads were out – and this was only a minor hurricane.

Next stop Dominica. I had finally reached paradise. Dominica is so lush that if you plant a metal rod in the ground it would probably blossom. Fortunately the social security staff were too polite to notice my appallingly disheveled state from lack of washing and sleep; my suit had not been pressed for six countries, instead insisting that they show me round the island.

The ravishing beauty of the place masks a dire economy – the mainstays of which are bananas,  which was undermined by the EU/US trade agreement, and tourism – the island  has no beaches and only 800 beds in the whole country. Young people mostly leave – from my perspective leaving an ageing and underfunded social security system. The dilemma is that this lack of development means that the country is unspoilt and a wonder to behold.

Dominica’s airport has no lights so planes cannot land when it’s dark. My 5pm flight was always going to be pushing it, but being on time proved too much for LIAT, so with impressive nonchalance the flight was cancelled, as were all my meetings in Barbados the next day. This was my eighth flight with LIAT on the trip, so I couldn’t really complain. And, if I had to chose somewhere in the world to be stuck, Dominica would probably be my first choice. I had my extra day in an eco-lodge with my own natural hot spring – it certainly beats working on Solvency II.

Last stop Barbados. This is the most developed of the islands; it has a sophisticated economy and high standard of living. The social security system is impressively run; it is one of the few places in the world that has successfully reformed into a sustainable system. Quite rightly the other countries look to Barbados for leadership.

The conclusions of my work were that the systems could be tweaked towards harmonisation, but people do not really move between countries –there is not much reason for someone to move from, say Grenada to St Vincent, they are too similar. Migration is outward, mainly to the US, UK and Canada, and inward from countries like Brazil, Cuba, The Philippines and China. The systems therefore need to address reciprocal arrangements with these countries. However, the systems face other problems which might be easier faced if they pooled resources.

Most countries are invested entirely within country – they are normally by far the single largest investor in their own country. You can understand why they do this, but that entails a massive risk concentration, especially in these hurricane-prone islands. Together they could pool investments, there is a Memorandum of Understanding in place for them to do this which is a positive development. Another problem is lack of capacity, again this could be addressed by pooling resources, there is no reason why they all have separate administration, IT and actuarial functions.

Unfortunately, the beauty of the islands masks severe underlying economic problems, with lack of diversity and ageing populations. The innovative and talented staff of the social security systems do the best they can with the limited resources at their disposal, but I fear they face difficult times ahead.

I left Barbados for home exhausted but having had one of the more interesting fortnights of my working life. Finally, to put readers out of their suspense, you can take it on authority that the best rum is 21-year-old El Dorado from Guyana.

An interactive map of the Caribbean can be found at

Forget the dogma, there is a way out of this financial mess

Published in Yorkshire Post, 31 January 2012

The latest twist in that financial soap opera, the euro debt crisis, is the downgrading by Standard & Poors of the credit rating of some countries, along with that of the EU’s bail-out fund.


Meanwhile the US government hope that they have successfully kicked their fiscal debt-can down the road until after the Presidential elections. While these problems are indeed serious, nearly all Western countries are facing a sword of Damocles over their heads, probably rendering efforts to deal with the current crisis futile.

I recently calculated that the total UK public debt is £5.5 trillion, or nearly four times our total output. If I did these calculations for other western countries, even the supposedly frugal Germans, I would get similar numbers. The figure is much higher than the official government debt because it includes so- called implicit liabilities from unfunded pensions and social security systems.

Implicit pensions debt represents the total future expenditure that government has already committed to pay, in the form of future pension and other benefits payments.

It could be argued that these liabilities are affordable because they are covered from future tax revenues. But because all western countries have ageing populations, government expenditure will inexorably increase as older people require more health care and other benefits. It also means that the tax base will be lower as there will be less people of working ages. These combined with existing pensions’ commitments mean that governments will find it increasingly hard to reduce deficits.

Increasing government deficits could still be sustainable, providing the economy grows fast enough to outweigh the increase. But the very same problems render this virtually impossible.

With an ageing population and low birth rates, even if per capita GDP grows overall GDP growth will not, as the working population is declining. Secondly, as we are heavily indebted this means that future growth prospects are poor.

For example, the US’s leverage ratio, that is the economy’s total debt (not including pensions and social security liabilities) compared to GDP, is 3.6 compared to a historical 1.6. That represents years of de-leveraging and hence stagnation just to get back to normal.

My conclusion is that even if the euro governments manage to somehow stave off disaster, this will only be a temporary respite – if we’re lucky we’ll be wiped out by the next financial shock, otherwise we face a slow and painful economic death.

But there is a way out – we need a grand bargain between governments, financiers and the population.

Firstly, we have to accept that we can’t pay our debts off – the only way out is to take the lead from the ancient Babylonians and enact a debt amnesty. Obviously this will still cause a lot of disruption, but the choice is not if but when, and how to avoid the most pain.

Writing off debt alone is not sufficient – we have to ensure that we do not get back into the same mess and we have to restore confidence. There are three fundamental problems we need to address: firstly to make sure that governments live within their means, secondly we need to limit credit to avoid unsustainable debt-fuelled booms and finally we need to re-negotiate current pension promises and set up sustainable systems that are fit-for-purpose for ageing populations.

For example, sustainable pensions systems could involve mandatory personal accounts or be controlled by an independent body setting the pension level and retirement age based on life expectancy and the budget available for pensions spending. A statist approach to limiting credit would be to place strong regulatory limits on borrowing and capital controls. A free-market approach would be as advocated by the Austrian School which is to move away from fractional reserve banking towards asset backed or even privately issued money.

Finally governments could make sure that budgets cannot become unsustainable by having an independent body determine the spending limit – this leaves right and left wing parties to debate the merits of different levels of tax and expenditure. The point is that there is a technical not political level within which budgets have to operate.

I am not advocating any of these solutions per se but illustrating that there are many options that political parties could adopt without compromising their principles. It is right and proper for democratic institutions to decide on how these problems are addressed, but it is not right and proper to ignore financial reality.

Although it sounds far-fetched, this could even have the added benefit of re-invigorating political discourse. But that would probably be one ask too many.

Climate Change – the Melchett Doctrine

By Nick Silver, published in the Huffington Post, 8 December 2011

In a scene in the BBC comedy series set in the WW1 trenches, “Blackadder Goes Forth”, Captain Blackadder enquires as to the wisdom of the British Army’s tactics –was going “over the top” for the 16th time a good idea, when it had been a total disaster last 15 times? Ah, replies General Melchett, (played by Stephen Fry), the Germans couldn’t possibly expect the British to be so stupid as to make the same mistake 16 times in a row, so they will be taken completely by surprise!

The international negotiations over climate change, where the 17th Conference of Parties (COP) is now taking place in Durban go one further than Melchett – the main question being how can so many clever people persist in an enterprise that has failed 16 times in a row? My conclusion is that it suits all the parties concerned. First of all developing world governments; they can continue to blame rich countries whilst becoming the world’s largest emitters, and at the same time trying to get some money out of them. Meanwhile the US can blame China for blocking negotiations and the EU can blame the US, whilst all of them have an excuse for doing nothing. On the other hand “green” groups can blame governments, especially rich countries, safe in the knowledge that none of their proposed policies would get implemented which would make them very unpopular (a la Liberal Democrats) and mean they would have to sacrifice their principles or look hypocritical (on issues such as nuclear energy).

The process is under the auspices of the United Nations; an organization that was set up to avoid wars – two antagonistic nations would be persuaded to talk to each other at the UN, by the time they had gone through all of the UN’s procedures, they become so bored and fed up that they forget what they were arguing about and give up –  the UN’s purpose is to prevaricate and delay, not to get things done. The only people who have some belief in the UNFCCC process seem to be the climate “skeptics” who have a mis-placed worry that a global deal might be achieved which will damage the economy. Let them be rest assured that there’s a snowball’s chance in hell of this happening.

The process did result in the Kyoto protocol and the carbon market. This has been a great success if you define success as the transfer of resources to vested interest. However, if you measure success by reductions in greenhouse gas (GHG) emissions it has been an unmitigated disaster – emissions have persistently increased by more than scientists’ most pessimistic predictions.

Climate change is, indeed, an intractable problem, which is why such an unprecedented amount of hot air has been expended on the subject. The main issue is the co-ordination/free –rider problem – it’s hugely expensive to reduce your own emission but everyone else benefits. However, there is a simple, viable solution, which has been proposed by a wide range of commentators from climate-“skeptic” Nigel Lawson, to scientist-activist Jim Hanson (that’s the climate change equivalent of Ian Paisley and Gerry Adams).

All individual governments have to do is put a substantial tax on GHG emission. If this tax is high enough it would massively incentivize people to use less, and for business to supply low carbon goods and services. Investment in low carbon economy is undermined by policy risk – investors, don’t trust incentives (with good reason as witnessed by the fiasco over solar feed-in tariffs), whereas taxes are almost never removed once the revenue have their teeth into them and are therefore very credible.

However, no one likes taxes. But governments raise lots of taxes anyway, so as long as the revenue from the carbon tax replaces an existing tax then the net burden of tax on the economy will not change. And most people would agree, even the most die-hard skeptics, that carbon is a “bad” (for example for reasons of energy security). Yet lots of things are taxed which are unambiguously good – for example employment. If, for example the UK imposed a tax of £80 per tonne of carbon, this would initially raise approximately £50 billion per annum. This would be enough revenue to remove income tax entirely for people earning less than £30,000 per annum. The result would be that the UK would become much less competitive in intensive energy using manufacture, but this would be more than compensated by a massive boost in employment and earnings for lower paid, hard-working people.

There would obviously be a number of difficulties to overcome – for example we would have to impose a tax on imported goods which would be difficult to calculate and would probably contravene some international trade treaty or other. But I’m sure these are not beyond the wit of man to solve.