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Gottfried Haberler’s contribution to trade theory

17 Feb

Gottfried Haberler was a member of what is loosely termed the ‘Austrian’ school of economics, to denote the group of theorists who opposed centralised – government – intervention in money creation, which they argued artificially distorted capital flows and created structural inefficiencies.

He was more closely tied to the Austrian school at the beginning of his career, when while in that country he was a regular contributor to the seminars organised by Austrian economist Ludwig von Mises; as part of the Mises-Kreis, the celebrated group of economic, sociological and philosophical thinkers.

In what was, for the time, a departure from the orthodox theory of value, quantified it in terms of labour and output, the Austrian theory of value focused on the process of production itself. And how in electing to lend part of the finite amount of money to certain industries over others, there was a danger of creating structural inefficiencies which would self-correct over the course of the business cycle.

A Pioneer in Trade Theory

In the 1930s Haberler was instrumental in creating an alternative framework for analysing cost and value, moving away from the theory of comparative costs (advantage) on the single-product model which had underpinned trade theory since Ricardo. Haberler’s framework mapped out the relationship between the opportunity cost of producing two competing goods, under a given supply of productive factors. This he performed both for constant and fluctuating opportunity costs.

Previously orthodox theory had been based on the ‘real-cost’ theory of value, which saw prices as quantified largely in units of labor. The new approach enabled the determination of relative prices to be analysed under more realistic production circumstances as variable factor productions, in a much simpler and more direct manner than under a real-cost approach.

This paradigm shift triggered a wave of writings by other academics, which incorporated and expanded Haberler’s theory, like Lerner (1932, 1933, and 1934), Leontief (1933)  and Viner (1937), who introduced ‘social’ or ‘community indifference’ curves. When these two curves – those of opportunity cost and social indifference – are plotted together – Marshall’s reciprocal demand curves can be derived; and most general equilibrium effects of trade on relative commodity prices, production, and consumption then shown.

What Haberler’s analysis did not include was an attempt to model consumer preferences for the commodities being produced. Nor an explanation of how productive factors evolve as an economy moves along its production-possibilities curve. This would have to wait until Stolper and Samuelson (disciples of Haberler) published their ground-breaking article in 1941, which elucidated more fully the way the production-possibilities curve is determined, and how factor proportions fluctuate along the curve.

 Where Trade Theory Fails

Haberler’s 1950 work, ‘Some Problems in the Pure Theory of International Trade’, examined the less-than-ideal situation of real wage rigidity, which can be caused by insufficient mobility of labour between a developed and less developed sector; one of the scenarios examined by economists who later expanded his model. This article formed the precursor for an extensive body of literature on ‘domestic distortions’ in which orthodox theories of trade relations might be non-applicable.

The consensus that in the majority of situations free, unimpeded trade has a net benefit did not change dramatically. The theory so-called Hicksian optimism rehabilitated the argument for free trade largely on the basis that wider availability of goods and increased competition leading to cheaper prices would yield a welfare gain; the need for protection arises only when there is a market failure in the domestic economy. Where there is a domestic divergence between prices and marginal costs, foreign competition can hurt some domestic industries.

In the event of real wage rigidity, the opening-up of trade – whether in a full customs union or a free trade area – could cause loss of output. Industries which for whatever reason are unable to pay a competitive rate which attracts new workers would be threatened by removing tariff barriers, which would allow unimpeded entry of competing products.

As the marginal return on these products became unviable, but wages were not flexible enough to change accordingly, labour would move out of these struggling industries and into more competitive ones. Often the industries that suffer are those at the breaking edge of new technology and development, which lacks a mature labour pool with the necessary skill set.

Let’s Get Technical

In his econometric model Haberler demonstrated that increased availability of products and a wider market to stimulate output had a net benefit, provided this increase was to the right of the domestic indifference curve.

In trade theory the state of ‘autarky’ is where the factors of production are deployed to their maximum potential, accounting for the limiting factors of the opportunity cost of manufacturing that product over another, which are assumed to increase; and a community indifference curve which has an inverse relationship to the opportunity cost curve, (increasing where there is scarcity of a particular good’.

The material gains from trade are represented in graphical form by the international trade ratio. In a model comprising two exchangeable commodities, this describes the amount of commodity A that can be exchanged for commodity B. If commodity A buys two of commodity B abroad, but at home you need two of commodity A to get one of B, then domestically A is more valuable. Therefore B should be exported.

However, Haberler has a caveat. If T, the international trade ratio representing the increased availability of goods from trade, is such that there is a net outflow of goods, that “these imperfections are persistent, … and that they persistently operate in such a direction as to weaken (rather than to strengthen) the case for free trade,” protection might be justified.

His idea of a desirable welfare position is not an overly naive one in which all individuals are necessarily better off, but “it is sufficient that everybody could be better off.” He distances himself from the idea that “perfect mobility of factors within each country is a necessary condition for the ideal classical model”, going on to assert that “what really causes trouble and may make trade detrimental and justify protection is rigidity of factor prices, which may or may not be associated with immobility of factors.” The most likely factor to experience difficulty transitioning between industries is that of labour.

Expanding this theory further, Brecher (1974) examined a number of scenarios involving real wage rigidity, starting with one in which free trade was combined with unemployment; he analysed the consequences of using different policy instruments. If the importable is labour-intensive to produce, a tariff would increase employment and output, by shielding domestic industry. But capital and labour would move disproportionately into the protected industry; also there would be a by-product consumption distortion.

When the demand for a product, reflected in its price, is proportionate to the marginal cost for each firm and product, there is zero distortion. But protectionism can mean the output swells beyond sustainable consumer demand, as that industry is protected from foreign competition and, more indirectly, may benefit from tariff revenue.

The Austrian school holds that distortions of this kind inevitably self-correct over the course of the business cycle, and ‘creative destruction’ can mean boom-time companies do not survive when they lose policy protection.

The second scenario Brecher modelled was polarised between a subsistence, and an advanced sector, where high skills and/or costly technology necessitated a wage rate in excess of the opportunity cost of labour – i.e. higher than the marginal product of labour in the subsistence sector. To phrase it in plain English, these advanced sectors would have trouble attracting capital which could be profitably employed in more basic industries.

This form of domestic distortion, he argued, necessitates subsidies in place of tariffs or taxes on trade. Because the revenue effect is negative and so higher distorting consumption taxes are needed, he acknowledges the extent of the offsetting subsidies may have to be incomplete.

The distortions not offset are weighed against the new distortions created as a consequence of financing the subsidies. While not a perfect solution, he concludes it is ‘first-best’, the most beneficial option, to deal with distortions in this way.

This theory of ‘domestic distortions’, which Haberler led the field in, is admittedly a far cry away from his origins as an Austrian School disciple, a staunch defender of the principle of unimpeded trade. This just goes to demonstrate his intellectual versatility and ability to break with orthodoxy and form new approaches.

But today it might be time for a new school of thought on the subject. As is so often the case in institutions where collective decision-making is skewed by relative economic and political weight, the WTO is governed to a large extent by the vested interests of the countries with the biggest economic muscle. Trade or customs unions like that existing within the EU and the proposed Trans-Pacific Partnership (TRIPS) which Trump made guillotining one of his first official presidential acts, only yield a net benefit to those participating in them.

For those countries outside the golden circle, they can face significant obstacles to equitable trade not limited to tariffs; customs’ scrutiny of imports is far lower, for example, within the EU which has a unified legislative framework to enforce commercial and legal standards. Trump’s announcement of his intention to renew the North American Free Trade Agreement is another step towards his avowed position as a champion of ‘free trade’[1] and greater competitiveness.



‘The Normative Theory of International Trade’ – W. M. Corden, Australian National University, Canberra  (Seminar Paper no.230)

‘Gottfried Haberler (1900 – 1995)’ – Joseph T. Salerno.

‘Some Problems in the Pure Theory of International Trade’ – Gottfried Haberler, 1950

‘Gottfried Haberler’s Contributions to International Trade Theory and Policy’ – Robert E. Baldwin, The Quarterly Journal of Economics vol. 97, No. 1 (Feb 1982), p.141-48



Why Recycling is the new Moisturising.

19 Oct

Of all the business workings you must archive and report, ‘waste’ is probably the least appetising. Trying to tot up the margin of product that fell off the production line, the bits you’d like to pick back up off the scrapheap… it’s not an auditor’s most exciting way to spend a day.


There are a number of different regulations in the UK currently, which as many are derived from EU guidelines might change over the course of the Brexit negotiations. They govern aspects as diverse as a ‘tax’ on packaging for prolific producers of paper, polyethene and cardboard hybrid coffee cups, glass, etc. And punitive fines and even jail-time for companies which engage in unlicensed disposal of ‘controlled waste’.

Wrapping-paper Tax

Any UK-listed or operating producer which emits more than 50 tonnes of packaging a year, and which has a turnover of over £2million, is obligated to submit a Packaging Tax Return to HMRC. They then have to offset their obligation by funding a commensurate amount to the government’s packaging recycling programme.

The private sector too has cashed in on the packaging sector, with a wealth of innovative initiatives to minimise waste. Probably the greatest expansion has been in devices to prevent food wastage, from the now fairly commonplace ethylene absorbers to special types of bacteria-fighting film. Ethylene is a hormone produced by metabolism in most fruit.  It initiates and accelerates the ripening of fruit and causes vegetables to start decomposing. Several companies now provide packaging with ethylene absorbers to increase produce shelf life.

Still more exciting are some of the patented inventions now seeking corporate sponsorship. For example, the wrappers with built-in anti-microbial properties recently developed by the Fraunhofer Institute for Process Engineering and Packaging IVV in Freising. Sorbic acid is the active component of the bacteria-fighting film; which in clinical trials reduced the size of an E.coli colony cultivated on day-old pork loin for the experiment to around a quarter of its initial size. Crucially, in the concentration of the laquer applied to the film, sorbic acid is neither poisonous nor allergenic and virtually odourless and tasteless.  )

Dodge the Plastic Bag Tax

The resource-efficiency bar has been raised still higher in the compostable plastic department, where a number of global competitors jostle for supremacy. In the UK there are several competing providers of biodegradable plastics, including Scotland-based BioBags, and Biopac, the self-described ‘leading developer’ of a very wide range of eco-friendly food packaging and catering disposables.

In Australia, where ‘sustainability’ is a buzzword even for the big mining companies, one player dominates the market. Publicly listed ‘Secos’ was formed in a reverse merger of Cardia Bioplastics Ltd with Stellar Films Group Pty. Ltd. In April 2015. Post-merger, its preliminary annual report for December 2015 showed total assets including cash, trade and other receivables and prepayments, was $9,076,829. The most recent figures available from show that the Australian stock market looks favourably on its prospects, as its P/B (price-to-book) ratio is 2.33, compared to 1.43 the market benchmark, and 1.54 for the sector.

UK-based Biopac’s impressive range of products enable catering and hospitality companies to proudly declare their green credentials; not only can they cite their sustainable container purchases on their annual reports, it is also often branded on the product itself. There is the ‘I am not a plastic cup’ made from renewable cornstarch that also carries the government approved CE marking (£130 for a case of 2100).   And the 12oz single use* ‘I’m a Green Cup,’ made from certified FSC (Forest Stewardship Council) board with a starch material, which is actually 100% compostable (£57.45 for a case of 1000). Various PLA (polylactic acid) clear tumblers …

If you needed further proof that this was a growth trend that has become impossible to ignore, there’s even a site called ‘Biodegradable Plastic Glasses’ (insert domain name here).

Or, if you prefer a more official stamp of approval, a market research report by Markets and Markets entitledBiodegradable Plastics Market by Type (PLA, PHA, PBS, Starch-Based Plastics, Regenerated Cellulose, PCL), by Application (Packaging, Fibers, Agriculture, Injection Molding, and Others) – Global Trends & Forecasts to 2020  states that the biodegradable plastics market is projected to grow from more than USD 2.0 Billion in 2015 to USD 3.4 Billion by 2020, at a CAGR of 10.8% between 2015 and 2020.

That’s a nice return on your investment.




MyWorkpapers releases game-changing software Connect – ‘like Facebook for Accountants’

17 May

As a seasoned accountant who has both managed his own practice and worked in-house on the corporate side, MyWorkpapers CEO Richard Neal has used his years of experience to create the complete set of tools for the busy accountant.

The newest addition to the MyWorkpapers toolbox is ‘Connect’, a collaborative platform between client and accountant which compliments its bookkeeping package. Richard believes the efficiency gains from this service could be as high as 30-50%; an ambitious claim but one which may just be borne out.

Its most obvious function is to provide a place for accountants and clients to communicate – “like Facebook, but for accountants,” he jokes. The ‘traditional’ communication methods of email and telephone can be inefficient, as calls and messages can be missed or lost in translation. Here queries can be organised alongside the client worksheets, and supporting information can be uploaded instantly to the relevant section.

Because it is a collaborative platform, everyone involved in managing the ‘numbers’, be it bookkeeper, business or accountant, is able to literally drag and drop supporting documents where the need arises. This process also leaves a clear audit trail.

In the information gap which arises between when an accountant emails for explanations of issues arising from the latest batch of figures, and later when responses arise, vital information might have been missed.

Pro-Active Accounting

Richard is keen for accountants to take a more active role in offering clients advice on how to optimise their business processes. The danger, he says, especially with the advent of bookkeeping software, is that accountants will be relegated to processing end-of-year accounts, because clients can learn and perform more of the bookkeeping, monthly reconciliation tasks and VAT returns themselves.

“Cloud accounting software has been picked up and adopted by thousands of businesses in the last few years because of the data feeds and intuitive use. Accountants are also promoting it to their clients, and assisting with implementation and rollout. The consequence, however, is that the ‘honeymoon’ is soon over because the client becomes educated and think they don’t need their accountant as much… Businesses become more independent and choose to do more themselves, and are less reliant on their accountant for processing and checking of the numbers.”

He is concerned that among the older generation at least, there is a reluctance to adopt time-saving technology because their methods have stood the test of decades. Why change now? Well, for one because they are in danger of having revenue poached by the tech-savvy twenty-somethings, who leap on promising apps and software with gold-rush enthusiasm.

And Richard is confident there is nothing quite like this on the market. A core attribute of Connect is that Workpapers are dynamically generated by integration connections. There is no exporting or importing of CSV files. Queries and tasks are also done through the product.

When his own company switched to using the Connect package, Richard says they saved around £20,000 on bookkeeping costs, and £5,000 on accounting fees. Another part of this efficiency gain is thanks to the capability for creating personalised worksheet templates and tasks and processes for different clients. By stipulating monthly tasks and required documents, the practice can keep tabs on problem areas like delinquent debts or payments; create realistic cashflow forecasts; spot and track potential areas of inefficient spending. Duplicated information is easily identified and corrected.  And because all problems have been resolved as and when they arise, “year-end becomes a breeze both for the accountant and the client.”

A question of security

What differentiates this package from other accounting software offerings are all the details: for example, they have hired an external cyber-security company – “basically hackers” is how Richard Neal describes them – to do penetration testing, so their encryption protection is independently verified. All the data is stored in the UK, in accordance with the Data Protection Act.

Furthermore the data is not just backed up, it is duplicated on three levels, and stored both on and off-site, with another provider. Where the industry standard for data duplication is 15 minutes, “ours is truly instantaneous.. if one server goes down, it will come straight back up and you won’t even notice.”

Perhaps the most telling indicating of how big a deal this company actually is, though, is that their services are now employed by one of the ‘Big Four’ accounting firms. So naturally assessment of their IT security policy formed part of the six-month due diligence process.

And how much is this evolutionary software?

Just £5 a month for each individual user.


How does a “soft pull” affect your credit score, and your ability to participate in P2P marketplaces?

14 Jan


A ‘soft pull’ or ‘soft inquiry’ is when an institution, or indeed yourself, does a credit check on you without it affecting your credit score. If you were applying for a loan and the bank did a ‘hard pull’ on you, and you were subsequently denied the loan, this would stay on your permanent credit record.

A hard pull resulting in a failed application would likely lower your credit score, because if you already have debts owed and are making further loan applications, this would make you a less attractive applicant.

Many organisations can ask for a ‘soft pull’ on your credit record, including P2P lenders. A potential employer can ask your permission to do a superficial credit check on you. Financial institutions you already have an account or relationship with check your credit; and credit card companies that want to send you preapproved offers check your credit.

What kind of checks do P2P lending forums perform?

The level of scrutiny a marketplace lender will put a potential applicant under varies greatly depending on the loan provider. Some target the upper tier of borrowers, while others offer sub-prime loans to those with credit scores too low to allow them to qualify anywhere else.

Some hire bespoke credit database companies to do an in-depth background check on applicants, usually if they are the company CEO and it is a business loan; other, perhaps less discerning, lenders stick to the three main credit reporting bureaus, Equifax, Experian and TransUnion.

Avant is an example of a company which deliberately targets applicants with low credit scores, offering them the chance to “repair” their credit score with a history of prompt loan repayments. Naturally applying for a loan with Avant, the company assures consumers, will not affect their credit score.

FICO (Fair Isaac Corporation), the independent industry body which is responsible for pooling the scores of the three credit scores from Equifax, Experian and TransUnion, warns that loan companies promising quick-fix solutions to a credit score are making empty promises.

The company does warn applicants that the interest rate on the loan they take out will be more favourable if they have a good credit record. It uses this as incentive to borrow, in the hope of ‘saving money’ in the future:

“We’ll send notice of payment history to the major credit bureaus which may improve your credit score with timely payments. As your credit improves, you may be eligible for lower rates on subsequent loans through AvantCredit.” Note that the representative APR is a hefty 48.5%.

It is true though that timely reporting to credit bureaus of prompt repayments on a loan might in the long run make a borrower seem more trustworthy. But if you are only looking to improve your credit score, remember that much of your scoring comes from paying bills on time (about 35%) and how much outstanding debt you have. Factors like drawing on a range of different forms of credit (e.g. credit card and long-term loan) comprise around 10% of your score.

Social Selection at Social Finance

Social Finance inc. (SoFi) carefully selects its borrowers, assessing a range of financial and cultural factors to determine not only the applicant’s creditworthiness, but also effectively their social status. It asks questions about their education and their career experience, as well as monthly income vs expenses, and obviously their financial history.

SoFi likes to keep loans within the SoFi community, operating a subtle social streaming process. It offers cash rewards for successfully referring a friend. Previous loan applicants can share a referral link to let someone else refinance their student loan or take out a personal loan.

The platform also mentors newly graduated entrepreneurs through the SoFi Entrepeneur Program, and here some of the application questions are indicative of the parallel socio-cultural assessment. The company is asking itself, “Is this individual a long-term investment?”

Such questions include details like the name of school the applicant graduated from, and details on their employment such as “Are you a founder/ co-founder?” and “Are you working full-time?”.

In Conclusion

The question is how thoroughly the organisation manages its data, and if it sells it to a third party. Information in this industry is currency, and there is no guaranteeing the privacy of everything you disclose in an application.

Consider that, while the Federal Housing Association (FHA) says anyone with a credit score of 500 can apply for a mortgage loan, 97% go to those with credit scores of 620 or over. While a ‘soft pull’ will not affect your permanent credit score, there is no guarantee the information unearthed will in no way affect your application for a marketplace loan.



Back to the Future: Bitcoin, Blockchain and how Marketplace Lenders are Using Technology to Overtake Banks in the Race to Attract New Lenders.

13 Jan


Encumbent institutional investors themselves admit that they have a lot of catching up to do before they can compete with the ‘upstart’[1] marketplace lending providers. A Morgan Stanley research paper published in June discussed how banks were hampered both by their due diligence restrictions, and by the backwardness of their big data analysis techniques.

Because the new marketplace lenders have less operating costs, they are attractive to borrowers as they are able to offer lower commissions; their risk assessment criteria are less exacting than banks, and they incorporate demographic data into their analysis. Thus they are able to offer lower interest rates to interested investors.

Morgan Stanley analysts wrote: “Traditional banks excel at originating loans and underwriting credit, but are slowed by the batch process and portfolio approach to their deposit and loan legacy systems, which are the backbone of the US and global payments system, and by liquidity and capital rules.”

Disruptive Innovations

As well as raising the bar in big data analysis, both for existing users and in targeting potential loan seekers, many in the marketplace lending sector have enthusiastically adopted Bitcoin and the blockchain in their payments system.

BTCjam was among the first forums to facilitate lending in Bitcoin. Founded in late 2012, in 2013 it gained a wealth of sponsors in Ribbit Capital, 500 Startups, FundersClub and the Bitcoin Investment Trust. By the end of 2014, BTCjam had facilitated bitcoin loans of over of $10 million in value, with more than 100,000 users in over 200 countries. The fact that its due diligence procedure only goes so far as an “optional soft credit check” helps explain its popularity.

Bitcoin and BTCPOP both offer bitcoin-denominated loans, of the ‘instant’ and collateral-tied variety. Loanbase, formerly known as BitLendingClub, specialises in bitcoin loans to developing countries, where beneficiaries might not have a bank account.

Why Not Create A New Currency With Your Payments System?

Another start-up has created an entire new currency, LoanCoin, which appreciates as interest is paid on a loan. Once the interest and principal are paid off, the attached LoanCoin is destroyed and exchanged for a currency of the Coinholders’ choice, so the currency value is preserved.

Within the system created by the developers Lending DApp, aspiring loan issuers, or ‘officers’, can source and guarantee new loans for Coinholders and charge fees for their service. Financial institutions, marketplace lenders, and even individuals can act as loan officers; though their commission and the size of the credit or ‘Trust line’ extended to them is dependent on their credit record. Lending is also at the issuer’s own risk and in the event of default or missed payment, the loan officer loses their collateral.

The Trust line is calculated by applying an aggregate function to its collected weighted trust ratings. The network is thus able to draw on the accumulated knowledge of its participants when assessing a loan officer’s reputation and creditworthiness. Percentage of performance fees is dependent on the difference between the risk-adjusted performance of the loans selected by the loan officer, and the mean risk-adjusted loan performance of all loans in the network.

Lending DApp, with its innovative decentralised business model, which relies almost wholly on pre-programmed systems, is typical of the new hybrid marketplace lending product, where banks and what we loosely define as “P2P” lenders co-exist to mutual profit.

Smittipon Srethapramote, who covers the North American payments industry at Morgan Stanley, confirms this is a growing trend. He says “The fastest growing marketplace platforms are not really peer-to-peer but institutional investors partnering with tech platforms to cherry-pick borrowers, often with offline marketing.”

 What The Future Holds

Max Rangeley, who works for the Cobden Centre, a thinktank which has been charged with creating a Bitcoin exhibition for the European Parliament, explains how the Bitcoin transfer system, the ‘blockchain’, might be adapted for other purposes. One potential use is to allow users to better insure the asset they use as collateral on a loan.

“Transactions can be conditional on any event which can be programmed into the blockchain (or even other events, if there is third-party verification whether the event occurred or not). Smart property (property registered on the blockchain) can be used either as collateral or for repo loans, are when the “lender” effectively buys the property from the borrower and sells it back to them at the original price plus interest after a specified period of time.”










Marketplace Lenders Leapfrog Lumbering Dinosaur Banks in Big Data Usage

13 Jan


While banks excel at writing in-depth research papers about the necessity of institutional investors better leveraging their disparate databases, consensus holds they have not embraced the new science of data analytics to as great an extent as the marketplace lenders.

An article on by Jon May, who writes for (Know Your Client), a new Markit and Genpact-sponsored venture to universalise identifiers for legal, tax and margin essentials pre-trade, explains how banks are hampered in their ability to process new credit applications by the seemingly endless checklist of their due diligence process:

“Processes that lead to being compliant are complex, inefficient and fragmented. Data is often sitting within silos across different parts of an organisation. Regulatory, tax and margin changes also mean that banks are obliged to ask customers more questions they weren’t asking before…. there is no standardisation.”


Hire Someone Else To ‘Know Your Customer’

When sourcing institutional buyers for a debt issue, the market research techniques that credit funds use, particularly for private debt, are heavily reliant on inter-personal connections. The infamous ‘black contact book’ is favoured over a more scientific data-based approach.

Dave Hunter, a partner with investment sales and marketing consultants First Avenue Partners, which uses social media analysis metrics on industry community forums like Mallow Street, admits that “What we do is still not really enough – and we’re told we’re above market.”

Some believe there is too great a reliance on existing relationships among placement agents. They are essentially, says one industry insider, “hired because they are people who know people, often former brokers.” Coming from this background, he claims, they are more comfortable in the role of ‘salesman’ than ‘data cruncher’.

Although the important firms have proprietary databases and have a policy of profiling contacts to enable better targeting, in many cases the systems are “fragmented and not properly integrated, and there is insufficient training in their usage. Either that, or a reluctance to fully embrace it.”

Gaining Advantage with Strategic Alliances

In contrast, marketplace lenders such as Credibility Capital have formed strategic partnerships with global technology companies and database providers. Credibility Capital has FIS Global source loan originators, a company self-described as “the world’s largest global provider dedicated to banking and payments technologies, with over 39,000 employees serving more than 14,000 institutions in over 110 countries.”

The lender is also partnering with UK-based credit information provider Dun & Bradstreet, which gives an additional layer of information beyond that provided by Experian; to include details on major shareholders in the company, any relevant sanctions, persons associated with it (to identify conflicts of interest), as well as the consumer credit rating of the company directors and management.

Previous bankruptcies and county court judgements are included as a matter of course. The D&B credit database is marketed as a source of comprehensive company research, on anything which may impact a borrower’s credit, or ability to repay debt in the future. Whereas a company like Experian will focus only on their credit record.

Funding Circle provides another illustrative example of the level of analysis many marketplace lenders put into processing credit applications. It claims to take over 20000 factors into account when assigning a risk band, and uses industry standard Experian as well as a variety of other sources.

It will analyse the workings of the business, incorporating factors like commercial invoice payment performance, and profit and loss account over the course of the business’s life. Thus it assesses its durability, while simultaneously factoring for macro trends within that industry; and probability of capturing market share within that region, to assess its future prospects. It will also look at how the loan will be used to advance the business.

Because these are small business loans, the company director has a disproportionate amount of power over whether it is profligate or thrifty. This is why the director’s personal credit, consumer and commercial record is scrutinised so intensely. Banks focus on a client’s due diligence record because their primary concern is violating AML rules; or complying to strict margin requirements on derivative trades.

If banks have any concern that the borrower might default on a loan, they will likely deny the applicant. It seems the marketplace lender’s approach is to use the data to actually get to know their clients, and customers, a little better.


To illustrate the importance of having up-to-the-minute systems – or of hiring a specialised data provider – we leave you with some telling stats from both D&B’s own data, and the UK’s Sales & Marketing Institute:

  • Up to 96% of email addresses and contact data within customer files and CRMs are inaccurate.
  • CRM degradation is approaching two percent per month
  • Within a 30-minute period the following changes occur:
  • 120 business addresses
  • 75 business telephone numbers
  • 15 company names
  • 30 new businesses formed
  • 10 businesses close
  • 20 CEOs to leave their jobs

Argos’ New Online CRM Tool Prevents Unnecessary Sales Approaches

26 Mar

Ever received an unsolicited offer of help while shopping online? A speech bubble pops up with a determined sales assistant who is set on selling you not only the product you were casually browsing, but all its trappings, garnishes and attachments.

While not quite on a par with being smarmed up by a sales assistant whose offer of ‘help’ is a covert accusation that she suspects you of shoplifting, it is still irritating and can act as a deterrent to purchasing the product in question. These unwanted approaches can also drag at ecommerce sales figures.

Pioneering new ecommerce techniques

Argos appears to have solved the problem with its [24]7 Predictive Sales solution, which analyses online behavioural metrics to determine which customers are actually in need of advice in making a purchase decision, or who are in danger of ‘deviating from the “golden” conversion journey’, explains Nick Mitchell, Managing Director, EMEA, [24]7. The success of the this Customer Relationship Management (CRM) tool could mean Argos’ technical methodology could be widely adopted.

Neil Tinegate, Head of Digital Innovation, Argos said: “Our primary concern here is to offer human assistance to customers who need it, at the right time in the shopping cycle for them. We have seen this work in digital stores where colleagues are on hand to help customers get what they want, and this is a natural extension of that. Customers tell us they appreciate the help, so we plan to continue to offer the experience.”

The platform is able to accurately identify customers who are perhaps comparing products but are struggling to make a decision; or perhaps those looking at finance or after-care products to add to their purchase, who don’t know which one to purchase. “Those customers are offered a contextually relevant offer of assistance based on their intent and then connected to an Argos advisor through sales chat to offer help,” explains an Argos spokesperson.

Nick Mitchell explained further: “We believe in encouraging more contextually relevant conversations with those customers who truly need assistance, accurately predicting when to offer assistance and using real-time cross-channel behaviour to know what to offer. Results from the programme show this is allowing Argos to have smarter interactions with its customers, which in turn is driving measureable increases in incremental revenue.”


How Much Big Data Do You Lose in Translation?

17 Oct

Professional traders depend on reliable, up-to-the-minute data without any figures lost in transmission, or unacceptable signal delays. What good is an algorithmic programme designed to shift block trades in carefully timed phases, if it cannot respond to changing market conditions because of incomplete information? The same is true of big data analytics companies, and of life science companies simulating programmed models. What use would the Human Genome Project have been if there were vital DNA fragments that just disappeared, and dissipated into the computer wiring? ‘Zero packet loss’ is one of those ideals that many technology infrastructure providers claim for their products. They assert that their particular wireless enabler or fibre-optic cabling will transmit data packets consistently without any loss of information whatsoever. Data integrity is essential for any organisation performing large-scale analytics. Data packets, or frames, can be disrupted. If an incorrect frame check sequence (FCS) is detected, the data packet will be automatically discarded.

An Antiquated Protocol

Moreover, an idiosyncrasy of the TCP (Transmission Control Protocol) means that what should be a statistically insignificant loss of information – say, 0.1% of the packets, – can make the network bandwidth contract to a tenth of its transmission capacity.[1] This is because under TCP, if the receiver of a signal does not confirm a sent packet within a specified period, the sender will retransmit it. The length of the so-called ‘Retransmission Timeout’ lasts between 500ms to 3s, and increases exponentially when more timeouts occur. R&M, in a white paper on its ‘High Performance Connectivity Solutions,’ explains that this is a legacy issue, that it “comes from a time when TCP was solely used to enable communication across a WAN. However, in today’s data centers this period exceeds usual round-trip times (RTT) by orders of magnitude. The consequences are worsening response time and performance.”

TCP Bitesize Is No Solution

Packet loss is exacerbated by the concentration of cabling in a data centre, and the high and rapid degree of communication required between end-hosts across the data network. The TCP protocol creates major problems in this environment. Breaking data ‘payloads’ up into smaller bite-size pieces that so that misplaced bits or bytes cause less significant information loss is no real solution; it simply increases the latency of a connection. As R&M explains, although “Links with a high bit-error rate are… better run with small packet sizes in order to minimize the impact of lost packets…Small packets increase the number of packets transmitted and further burden the network because a larger number of packets have to be switched.”

It’s effectively Zero Packet Loss, as far as we can tell…

There are multiple factors which cause packet loss, but the solution which Swiss research and cabling solutions producer R&M has produced, and tested to an exceptionally high level of accuracy, is related to the fibre-optic cables, and their alignment and installation. If incorrectly positioned, there is a higher likelihood that light beams will unintentionally intersect and refract off each other, causing the signal to be lost. A high degree of dispersion can mean a signal receiver is unable to distinguish an 0 bit from a 1 bit, rendering this bit, and all others corrupted in this way, void. The company explains how the methodology of its assessment of its equipment is superior to standard measurement techniques: “What is very often overlooked is the fact that individual optical measurements capture and integrate the test signal over a time frame of around 300 of milliseconds, while optical pulses for 10, 40 or current 100 Gigabit Ethernet applications are only 100 picoseconds long – 3,000,000,000 times shorter! It is obvious that these conventional test methods cannot resolve optical phenomena that occur on the bit level such as reflection or modal noise… these sources of noise and phenomena like dispersion can have a very significant effect on the network performance in the form of inter-symbol interference,” which is explained above.

R&M Claims Revolution in Optical Cabling

For this reason the company says it elected to use a Xena2544 RFC test suit, in its comparison of the performance of its own R&M OM4 cables (a 600metre channel, inter-connected with ten MTP connector pairs ), and a rival brand’s single 150 metre OM4 cable, which conformed fully with the standard protocol IEEE 802.3 Section 6, 40GBASE-SR4. Each pair of Xena Networks Test Module ports were connected by two Finisar 40GBASE-SR4 QSFP+ Gen2 transceivers. When the two competing fibre-optic cables were compared over 16 hours, each running an RFC 2544 test suite, the IRM 600metre channel achieved “maximum throughput with no loss” and the industry standard 150m cable showed “aggregated frame loss”, though it is admitted that “no single frame loss occurred over the individual time spans of 16 hours.” R&M’s white paper concludes that it achieved its claim of ‘zero packet loss’ over a 600m distance, over a time-span of 16 hours.

The paper asserts that data center links with a length above 150m will be “a regular configuration in the near future”. When questioned, Thomas Wellinger, its author and ‘Market Manager Data Center’, explained the rationale for this prediction:

“The increasing lengths will be due to a changing nature of the network. Currently, most data centers are built with a three-tier or level switching architecture (core – aggregation – access switches). Hence, each hop from switch to switch or rather the cables in between, are relatively short – somewhere between 5 to 80 meters.

With changing workload demand, these switching layers will consolidate to two or even one. This means longer physical distances between the individual machines. In combination with increasing sizes of data centers floor spaces, this leads us to assume this significant share of 150m+ links.”

Finisar is already persuaded of the value of the proven product, as the report concludes with the helpful statement on compatibility, “R&M’s HPNC Solution supports 300m on OM3 and 600m on OM4 fiber, which are inclusive to the Finisar 40GBASE-SR4 QSFP+ Gen2 transceiver module. [1] The example given is of a 10G NIC server, a 10G Ethernet network with three hops, and another server also with a 10G NIC, bandwidth of 10Gbps; with TCP windows size of 375 kBytes; and a maximum segment size of 1460 Bytes

Sound the alarm! The vehicles which sound sirens when speed limit is broken

14 Jul

One South American mining company uses remote vehicle monitoring devices to tell employers when drivers are speeding or brake suddenly. Some systems also sound an internal alarm which warns the driver they have committed an offence.

Satellite tracking devices are used by many mining companies in Latin America to prevent the loss of valuable assets through theft or accident.


Who needs a speeding ticket when you set off a deafening alarm if you break the speed limit?

How would you feel if your employer had access to automated performance logs of your quality of driving, and to track your vehicle’s movement in real-time?

Loss Prevention – the truck driver’s Fort Knox

Physical checkpoints proved insufficient to keep tabs on transport vehicles’ movements for one mining company in Peru, one of the case studies in a white paper on ‘3 Reasons Why Mining Companies Need Satellite Tracking’. Previously, one checkpoint would record the truck’s departure time, and notify the checkpoint at its destination what time it should arrive by. If it failed to arrive by the appointed time, the search would begin.

The problem was that the journey between mine and foundry took seven hours, and it took a further three to four hours from the foundry to the storage stations. Hundreds of miles of lonely road separated the checkpoints, making recovery of a stolen vehicle and its precious cargo like finding a thimble dropped somewhere in Hyde Park. But with more tree cover.

SkyWave, the satellite communications company that issued the white paper, described how infrastructure provider Geo Supply Peru created a tracking system for the mining company using both cellular and satellite-based GPRS signals. The network coverage for remote regions in Peru is insufficient to give an unbroken picture of the vehicles’ route and location.

The facility’s web-based user interface lets clients check on every vehicle in their fleet at any given point, in real time. Additional functionality is generated through ‘geofences’, virtual gates which automatically notify the client when trucks enter and leave. These generate accurate data on journey time, which employers can use to gauge how far efficiency initiatives are improving productivity.

Finally, the installation of a panic button ensures that, when hi-jacked or held up an emergency message is sent to the relevant authorities immediately, via the satellite system.


Don’t brake suddenly… you’re being watched!

Another mining company, that made heavy use of the narrow, two-lane Yungas Road, which has a formidable accidental death rate of 200-300 a year, is an indirect user of SkyWave’s satellites. It contracted Bolivia’s MONNET, provider of applications to manage vehicle fleets for distribution, sales, service, security, cargo and passenger transport, to provide more effective tracking technology for its drivers.

Again, the satellite signals were used in tandem with cellular networks to ensure continuance of coverage. When out of range of network stations, MONNET’s SureLinx device stores detailed location information in its memory, for transmission via cellular GPRS immediately cellular service is again available.

Most significant, though, was the provision of driver performance monitoring. Driver ‘incidents’, including speeding and hard braking, are reported and pooled to generate driver reports and a Driver Performance Index. SkyWave’s white paper says, “This index is a measure of the number of violations per kilometre recorded by the SureLinx and takes into account the severity of the violations. This information allows mining companies to identify drivers that need the most training,” (or will need to find another job), “as well as reward drivers who exhibit good driving behaviour.”

The net result of this innovation, states the report, combined with “Driver training and in-cab auditory alarms when a violation is detected have led drivers to use equipment more carefully and have reduced wear on vehicles.”

Theft prevention measures were also part of the package, with the installation of card readers in each vehicle. Possession of an identification card is as important as the ignition key, as no vehicle will turn on without having first scanned and validated a corresponding ID card.

At least with this efficiency-enhancing innovation, truckers still drive the lorries themselves; the latest emerging technology is self-driving transport vehicles. The drivers will not necessarily be out of a job, as for now the idea is to use the technology to give them breaks while driving, enhancing productivity by reducing the need to stop and rest when tired. Yet there is serious talk of dispatching fleets of several self-piloted transport vehicles, headed nominally by one human-piloted lorry. One thing is certain – the age-old commandment of ‘Don’t take your hands off the wheel!’ might no longer apply.