Our privacy policy describes how Fidessa uses cookies on our website. If you continue using our website, you are consenting to our use of cookies. OK

Why the Daleks and Vogons were right about financial markets

An interesting debate broke out here at Fidessa Towers this morning concerning the infamous Sci-Fi phrase “resistance is useless”. Should it be attributed to Dr Who’s nemesis, those metallic, warbly-voiced Daleks, or to the slug-like, green-skinned Vogons that appear in Douglas Adams’ The Hitchhiker’s Guide to the Galaxy? Anyhow, whilst folks furiously searched Google for the answer it got me thinking about the contrast between resistance and true resilience. The difference is more than just semantics. Resistance is all about hardwiring pre-programmed responses to known threats, whereas resilience is something more subtle altogether. Resistance assumes that you can deconstruct a system into its component parts, see how they fit together and so understand how it all works. This works well in simple systems, but global financial markets are now so complex and interconnected that this just won’t work; if anything, it makes the probability of some non-linear calamity actually more likely. Despite this, regulators around the world obsess on resistance by setting hard limits on some activities, banning others altogether and trying to impose blanket taxes.

Resilience, on the other hand, takes a different approach. Instead of focusing on the near field, it emphasises context and adaptivity. Making markets safer is the right thing to do, but it should be everyone’s responsibility not imposed top-down by a few well-intentioned regulatory bodies. The more rules they impose, the more I fear everyone else abrogates their own responsibility and simply plays catch-up with the new regulations. Maybe it’s time to think about letting markets manage themselves again, re-energise the concept of SROs and trust that market participants are best placed to learn from the mistakes of the past. Obviously this will not go down well with the politicians, but maybe it’s the only path to a truly resilient global financial system. The alternative is just to keep on ratcheting up complexity with more and more rules, which will either strangle the industry to death or lead to the next unforeseen disaster.

So maybe, as far as financial markets go, resistance really is useless, but resilience, well that’s another story…

Happy New Year.

P.S. Personally, I backed the Daleks.

2 Responses to “Why the Daleks and Vogons were right about financial markets”
  1. Mark Hughes says:

    Indeed – as Taleb and others have been saying for some time: https://hbr.org/2009/10/the-six-mistakes-executives-make-in-risk-management

    Or as Ford Prefect might say – if you’re going to survive out there, you’ve really got to know where your towel is.

  2. Mohan Virdee says:

    Spot on Steve,
    Great article. Resilience is indeed the order of the day….but for how many more years.

Leave a comment

Copyright © 2019 Fidessa Group Holdings Limited. All rights reserved.

The information contained within this website is provided for informational purposes only. Fidessa will use reasonable care to ensure that information is accurate at the time it is made available, and for the duration that it remains on the site. The information may be changed by Fidessa at any time without notice. We also reserve the right to close the website at any time. No representation or warranty, expressed or implied, is given on behalf of Fidessa or any of its respective directors, employees, agents, or advisers as to the accuracy or completeness of the information or opinions contained herein or its suitability for any purpose and, save in the case of fraud, all liability for direct, indirect, special, consequential or other loss or damages of whatever kind that may arise from use of the website is hereby excluded to the fullest extent permitted by law. Any decisions you make based on the information in this website are your sole responsibility and information on the website should not be relied upon in connection with any investment decision.

The copyright of this website belongs to Fidessa. All other intellectual property rights are reserved.

Fragulator® is a registered trademark of Fidessa Group Holdings Limited.

Reproduction or redistribution of this information is prohibited except with written permission from Fidessa.