Why David Cameron's Foreign Trade Claims are Flawed

I don’t tend to pick on individual politicians to criticize, but David Cameron’s piece in today’s London Evening Standard newspaper is worthy of some commentary. You can find the article here.

Let’s analyze what he says:

“This country is in a tough global race to succeed… the world does not owe us a living, we have to earn it.” – this much I agree with. We are, indeed, part of a global economy in which countries compete for economic activity.

But the message of Mr. Cameron’s piece is that we are being successful at attracting foreign investment. He trumpets major capital investments from abroad in the UK telecoms and energy industries and in real estate development. He seems to entirely miss the point that the kind of economic competitiveness that matters most is the ability to produce exports.

As a nation, the UK consumes vast amounts of imported goods, mostly paid for on credit, and as long as the country fails to increase its own exports, it will be increasingly indebted to the countries that supply these goods. Imports help people live wealthy-seeming lifestyles today, but then the debts are left over for future generations to pay off.

The three industries mentioned above, telecoms, energy and real estate, are all services sold back to the people within the country. No exports there, I’m afraid. Just highly inflated housing prices in London, as a direct result of foreign investment in the capital’s real estate. Well done, Mr. Cameron, for attracting all of that investment. Kudos.

Something that might benefit the country, and lead to products and services we can export, is innovation activity. And a good way to stimulate innovation is by supporting entrepreneurship.

Maybe Mr. Cameron realizes this, as he says, “the red carpet is rolled out for entrepreneurs.” But for some reason that doesn’t ring true, for example if the would-be entrepreneurs are from outside the EEA and have to jump through laborious hurdles just to get a visa. Last week Theresa May announced a new policy clearly tailor-made to attract thousands of foreign entrepreneurs: a £3,000 bond that must be deposited before visitors from some select countries are even allowed in the country. Cameron, to his credit, had the good sense to quash this one, but in generating so much uncertainty and confusion much damage has already been done. The sudden and arbitrary changes that are regularly being made to the Byzantine student visa and post-study work visa regulations also exemplify the country’s enthusiasm for attracting talented foreigners.

The third thing that irritated me in the article is Cameron’s joke about his most recent trade mission, “Just last weekend I was in Kazakhstan (but I missed out on the camel’s milk).”

I will leave critiques of his sense of humour for another time. Why, I ask, is our Prime Minister visiting Kazakhstan to attract investment, a country that ranks 133rd out of 176 in Transparency International’s corruption perceptions index, and in the bottom 15% of the World Bank’s control of corruption measure? A country that shoots dead protesters who dare to oppose the oil and gas industry? Is it because these unstable, autocratic, petrodollar-backed regimes are the only ones who both need and can afford one of our biggest actual exports, namely weapons?

Cameron has the gall, two paragraphs later, to trumpet the UK’s “stable democracy, where there are property rights and the rule of law.” He clearly cares very dearly about these things. We may as well put out a sign saying, “Billionaire oligarchs from despotic backwaters welcome here!”

Then, finally, comes the Battersea Power Station project, the “jewel in the crown” of the infrastructure investments Cameron cites. This will be backed by an £8bn investment and will “create 15,000 jobs.” Never mind the fact that jobs created on building projects are only ever temporary, and no substitute for sustainable job-creation. The thing that struck me here was the irony of it. The source of the funding – Malaysia.

Maybe Mr. Cameron is not familiar with the history of economic crises, but if he were he would surely stop boasting about foreign investment being the route to riches. Malaysia, Thailand, Indonesia and their neighbours know this well, from their experience of a financial crisis in 1997. Long before the credit crunch showed the Western world that laissez-faire capitalism has its risks, South East Asia experienced a severe currency crisis and long recession due to the aggressive inflow and then flight of foreign capital. Foreign investment is neither a stable nor a sustainable route to economic growth.

Whether the Battersea project will come to fruition remains to be seen, and I don’t have strong opinions either way (I give its odds of success maybe 1 in 3). But its use by Mr. Cameron as a piece of propaganda is entirely disappointing. Economic growth is important (though not nearly as important as most politicians think) and if the UK wants to pursue it the country needs to look for competitive industries inside its borders that create value for customers elsewhere. There is, perhaps, one investment referenced in the article that involves exports: the Tata group’s purchase and expansion of Jaguar-Land Rover. This investment has helped re-juvenate British manufacturing and create long-term jobs. When Mr. Cameron comes back with more of these type of investments to shout about, it might be worth getting excited about.

What is the Half Life of a Social Network? The Problems of Digital Baggage and a ‘Move Fast and Break Things’ Philosophy

It is a little over a year since Facebook went public in a c.$90bn IPO, and I find myself amongst a growing group of people questioning what the future holds for ‘The Social Network’. Social media is a new industry and the rules of competition are being discovered as we go along. And the same things that caused Facebook’s meteoric rise may end up making it irrelevant.

Online technology companies (by which I mean social media as well as services such as search, email, blogging, etc…) face the unenviable situation of being violently pulled in two directions at once. On the one hand is the imperative for constant change: that constant struggle to capture the attention of the general public while hundreds of competitors are trying to do a similar thing. In this light we see firms as locked in an arms race, repeatedly adding features and revising designs in a bid to stay fresh. On the other hand, there is the need to provide consistency and reliability in the service being provided. Users become accustomed to the current set of features, so any changes will tend to cause discomfort and lead to inevitable outcries.

In a way this tension is faced, in some form, by all businesses. But in the online tech industry it is particularly acute, because there are such low barriers to entry, and thus there are so many entrants trying to displace whoever is leading at any point in time. There is also an implicit premium on mere ‘newness’ as trend-setting users like to explore new services in order to be ‘at the forefront.’

In most industries, the most common problem is resistance to change, an inability to adapt to changing user needs and changing social pressures. It’s my strong feeling that in social media, the opposite problem holds. Companies like Google and Facebook are pioneers at experimentation, trialing possible changes with randomized subsets of users, and implementing the ones that appear to work on a wider scale. This is epitomized in Mark Zuckerberg’s famous management philosophy: “Move Fast and Break Things.”

The problem is that while this philosophy may be suitable for a small or mid-sized start-up, it suddenly becomes a lot more dangerous for a large corporation. With every change that is pushed through, Facebook risks alienating some fraction of its users, and of those, some fraction is likely to disengage (see my comments on community pages in 2010). Take, for example, Facebook’s algorithm for deciding what gets put on your Newsfeed. This is one of its most important pieces of technology, as it determines both how users interact with each other, and how advertisers interact with users. When this algorithm is changed, it will always have the effect of giving some posts more attention and other posts less attention – and the people or businesses getting less attention will be irritated. I noticed this last year, when Facebook changed the algorithm at the same time as it introduced paid-for “promote this post” options, earning the moniker 'The Biggest ‘Bait N’ Switch’ in History'. I’ve also noticed another change in the last few months, which has led to my newsfeed being filled with less relevant posts (and more advertising than before) and my own posts getting less attention than they used to. I am already changing my Facebook engagement habits as a result, and using Twitter more as a source of interesting links.

This excess of change is far from the only risk. Two others are worth highlighting. An article in the Financial Times last week focused on investor disquiet over FB losing its ‘coolness’ as a result of people’s parents joining. Young people are the key audience for social network, and tend to direct posts to their friends, and the growing presence of older relatives is reducing the perceived freedom of the space. I’ve seen an example of this myself, when one of my friends posted about having a ‘too many drinks’ – and minutes later their father making a rather embarrassing comment on the post, along the lines of ‘I thought you were more sensible than that.’ This is all just rather off-putting, given that the original appeal of Facebook in its early years was based around it being restricted to peers at the same university. Private social networks, such as Microsoft’s Yammer, could begin to capture the attention of users looking for a more exclusive forum.

Then finally there is the issue of digital baggage. This is something I’ve realized recently: much of my activity on Facebook in the early years after I joined in 2005 has left a very large, quite personal digital trail. Furthermore, since I created the content, joined groups etc., the architecture of FB has changed, as has its privacy policies. This makes it rather difficult to see who has access to what. And even if I correctly manage my privacy settings today, there is no guarantee that privacy policies won’t be changed in the future. To give concrete examples, I discovered several photo albums which I thought were ‘friends only’ were actually reachable by the general public with a simple google search. Also there was a set of ‘groups’ that I set up for University colleagues (which are now years out-of-date) but were visible to the general public. These examples struck me as disconcerting, and I realize now that the only way to ‘leave that baggage behind’ would be a make a fresh start with a new social network – for example Google+. I’m not going to do that just yet, but I expect other people will. The Facebook timeline was famously glorified in this video as a way of having a record of your entire life in one place. But that idea is actually quite scary. I, personally, do not want that record in the (potentially) public domain, and I doubt that I’m the only one.

During its initial rise, the trend of Facebook’s subscriber figures was exponential growth. To look at the graph, if it referred to a share price it would definitely look like a bubble. Of course it is not a share price, and so I don't expect it to ‘pop.’ But I think user engagement with FB will decay. However much effort it puts in to try and stay relevant, it is nevertheless likely to be displaced by newer start-ups offering cool new services. The proportion of cognitive real-estate it can command will decline as other services manage to win more. My message to Facebook investors is therefore, get out while you can.

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Agree? Disagree? Please leave comments below

Schelling, Focal Points and the Problem with Partial Vegetarianism

Following my previous post on Thomas Schelling’s contributions to Game Theory, I have been reflecting on another key idea from his 1960 book ‘The Strategy of Conflict’. Schelling introduced the concept of ‘focal points’ in situations where two parties have to coordinate. The idea is that when faced with several options, people often have a sense of which is the ‘most obvious,’ and when coordination is required they are likely to pick this obvious solution, in the knowledge that the other party is also likely to pick it.

 The classic (abstract) example of such a coordination problem is when and where you would go to meet somebody in New York City, if you had not agreed this ahead of time and communication was, for some reason, cut off. What do you think? When and where would you show up? (see below for the solution*)

The idea of the focal point is important for several reasons, of which I will highlight two.

Firstly, focal points do not fit well with standard ideas in economics. Most modern microeconomic theory deals with curvilinear relationships between variables: equilibrium is defined by the utility-maximizing point on a curve. We find this point using calculus and marginal analysis, and so we assume the curve is continuous. The focal point concept throws continuity out of the window. Even when we introduce game theory – a critical implement in the modern economist’s toolkit – this only tells us that Nash Equilibrium outcomes are stable, not which Nash Equilibrium is most likely. Somehow focal points allow people to efficiently choose between different equilibrium positions, even without communicating.

This leads onto the second, deeper, point. Focal points challenge the economist’s mechanistic idea of ‘rationality.’ It is very hard to specify what constitutes an ‘obvious’ choice. Often the cues that lead to particular choices are idiosyncratic to that particular context. Given a number of different equilibrium positions, standard models of rational behavior might suggest picking randomly between them, or undertaking exploratory search to see what the other players pick. It is difficult, if not impossible, to identify focal points using a mechanistic or analytical solution, the best we can do is identify heuristics for finding them. Yet gravitating towards focal points tends to lead to better outcomes for individuals than a strictly ‘rational’ behavior, and so behavior is in some sense ‘hyper-’ or ‘super-’ rational.

The idea of focal points has been broadened from Schelling’s original coordination-game context, to the general tendency for people to fixate on certain ‘obvious’ equilibrium points of behavior. The tendency to do this seems to be deeply rooted in human psychology. This has major consequences for self-control and our inability to ‘do things by halves.’ It is much easier to give up a certain behavior outright than to stop doing it half the time – for example, I am fully aware that meat production is environmentally very damaging. Vegetarianism would therefore be an ethical behavior for me to adopt – but I love eating meat so much that I can’t bear the thought of giving it up entirely. Now, I could halve the environmental damage my meat consumption does by halving my consumption. However, as I have found (upon trying to limit my meat consumption), it simply does not work like that. A plan to only eat meat on Fridays falls apart when there is a delicious steak on the cafeteria menu on Wednesday!

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*This example, conceived by Schelling, has been used many times by researchers as a quiz question. Overwhelmingly people opt for 12 noon as the most ‘obvious’ time to meet. The place chosen varies between two obvious locations: New York residents tend to pick Grand Central Station, whereas out-of-towners choose the top of the Empire State Building.

Strategic Delegation and the Cypriot Financial Crisis

An interesting thing happened in the eight days between the ‘first’ Cypriot rescue plan was announced on Saturday 16th of March and the ‘second’ plan was announced on Monday 25th March. The Cypriot parliament voted down the first plan, rejecting the levy on deposits and sending the President back to the negotiating table. But it also voted to allow the President to make a new agreement, which could include a bank levy (renamed as a 'restructuring'), and which would not need further Parliamentary approval. This is a noteworthy event: the Parliament relinquished its own decision-making ability. In a situation where the stakes are so high, for a powerful actor to give up its own power is, on the surface, quite shocking.

Why did it happen? It seems to be a textbook case of strategic delegation. The idea of strategic delegation was introduced by Thomas Schelling in his seminal 1960 book, The Strategy of Conflict. Schelling’s work highlights something that, from the perspective of economics, is paradoxical: having one’s choices restricted is sometimes a good thing. In traditional economics, freedom to choose between more options is never a bad thing, as each option may lead to a better outcome. Schelling shows that in multi-agent negotiations, less choice is sometimes better.

When our negotiating opponent makes their choice based on what they expect us to do, it can be an advantage to have very limited options. As a result, it can be beneficial to commit oneself to a particular course of action before the strategic interaction even begins – and let the opponent react. The classic example of this is set in a military conflict: a defensive force ‘burns its bridges’ to cut off its means of retreat. Realizing that the defensive force cannot retreat, and preferring to avoid a fight to the death, the attacking force does not advance. In Schelling’s terminology, the defensive force has made a credible commitment to stand and fight, and this in itself is enough to win the day.

Schelling identifies two uses of a bargaining agent. The first is to pre-commit oneself to a course of action, as in the burning of bridges strategy above. The second is to gain from using an agent whose incentives differ from one’s own.

When the Cypriot Parliament delegated power to the President, it was a highly strategic maneuver. They knew that the resolution of the crisis would require accepting a bailout, and that negotiating the bailout would require painful sacrifices be made on behalf of the Cypriot people. They realized that while they might privately support an agreement that causes pain, there is a high chance that in a public vote a painful agreement would, again, be rejected. The Parliamentarian’s objective is to make a decision that is popular, so they have an incentive to not be seen to support a bank levy. They chose to ‘bind their hands’ to prevent themselves from interfering in the future. The President, by contrast, had the overwhelming incentive to resolve the crisis, so he was appointed as an agent, and, ultimately, a scapegoat who could take the blame for an unpopular agreement.

To some, Game Theory is easy to dismiss as a parlor trick, a mathematical abstraction with little relevance for the real world. However the work of Thomas Schelling illustrates just how relevant it is to every moment of every day – hence why he won the Nobel Memorial Prize in Economics in 2005. Much of his work was inspired by the tension of the nuclear arms race and potential for Mutually Assured Destruction. In a world once again threatened by nuclear conflict, we could do worse than to revisit Schelling’s classic work to help us make sense of the situation. 

72 Hours to Decide the Fate of Cyprus: Will it Go Down Like Lehman Brothers?

The financial crisis in Cyprus is presently at a critical juncture. Having rejected a tax on bank deposits early this week, the government needs to come up with another option for financing, or face a liquidity crisis in the next 72 hours that renders the country effectively bankrupt.

From here there are several things that could happen, of which I list three in the order of relative likelihood that I would assign them.

     1.) The Russian government contributes to a bailout

The reason for proposing the bank levy initially was that the EU and IMF are unwilling to completely bailout Cyprus themselves. The EU and IMF funding is structured as loans. Despite the fact that the extra sum required is small compared to bailouts in other Eurozone countries, the Cypriot economy cannot support any greater level of debt than is currently being planned. What is needed is more 'equity' rather than debt, either from a direct fiscal transfer, or an internal source such as a bank levy. 

A fiscal transfer would be untenable to the EU, and Germany in particular, for two reasons. Firstly, this would set up a 'moral hazard' problem, such that other countries lose the incentive to be financially responsible. The impetus for austerity measures in Greece and elsewhere would be severely weakened. Secondly, a key beneficiary of the transfer would be Russian depositors, who were outspoken opponents of the bank levy as originally proposed. A bailout that transfers EU funds directly to wealthy Russians is rather unpalatable, both ethically and politically.

This leaves the Russians themselves the most likely participants in a bailout agreement. It is their own citizens that stand to lose out from default, and the Russian leaders have already shown their solidarity with the depositors, even if they are using Cyprus as a tax haven.

     2.) A bank levy is reinstated on large deposits

Having observed the outcry at taxing deposits universally, the Cypriot leaders probably wish they had limited it to large deposits in the first place. It is far more politically palatable to place a windfall tax on the wealthy than on the poor. They even amended the proposed bank levy before the vote in parliament, but by that time it was too late as it had already lost all support. However, since Cyprus is so low on outside options, a resurrection of a tax on larger deposits is a real possibility.

     3.) Default

There are many commentators arguing that default will not be allowed to occur, and EU authorities will relent and cave in to a larger bailout. In my view, default is a very real possibility. I outlined above why the EU is unlikely to provide a direct fiscal transfer; such a transfer is beyond the remit of the IMF and anything less than an equity injection will leave the Cypriot banks insolvent. This means the European Central Bank will cease providing them with cash, and they will be bankrupt.

In this case the likely consequence would be a Cypriot exit from the Euro. The mechanics of how this might be conducted were closely examined in case it were needed in Greece. The banking system would be put on hiatus while the currency is switched to Cypriot Pounds. Bank assets and liabilities, including customers' deposits, would be re-denominated. The new Pounds would instantly depreciate against all the major currencies. Simultaneously the government would probably default on its external debts, either directly (by ceasing payments) or indirectly (by denominating the debts in Pounds and printing money, leading to hyper-inflation.) In short a lot of people would lose a lot of money, and they would end up wishing they had accepted the bank tax originally proposed.

From the perspective of the rest of the Eurozone, the great big unknown in this situation is the knock-on effects. 

A very good parallel here is the Lehman Brothers bankruptcy at the peak of the credit crunch in 2008. This was allowed to happen by the US authorities on precisely the 'moral hazard' grounds that make the EU reluctant to completely bail out Cyprus. The Lehman bankruptcy had devastating consequences, which were unanticipated largely due to the opaqueness and intrinsic complexity of connections in the financial system. Small details, like where assets were parked overnight, went on to have major ramifications as it led to different bankruptcy laws being applied. With a national economy we are faced with a whole different set of opaque connections, complex dynamics and ambiguous legal territory.

The EU leaders know all this, and yet may still allow it to happen. If nothing else (and assuming the Euro survives the contagion), a Cypriot exit would provide a test case for how a bigger Eurozone nation might later conduct an exit.

My thoughts go out to the leaders currently negotiating the future of a nation. I hope you bring us back from the edge.

When the Music Stops: The Past, Present, and Future, of HMV

There are a two big myths circulating about HMV, the last-music-retailer standing on the British high street, which recently went into administration. Myth #1: HMV was killed by iTunes and downloaded music. Myth #2: HMV is, indeed, dead.

      1. HMV was killed by iTunes and downloaded music

This is a convincing narrative being propagated in much of the business press, but I don’t buy into it. There was, is, and will continue to be a market for hard-copy CDs and DVDs. Many people have not switched to downloading music, preferring the tangible feel of a disc in their hands.

No, from the product side, HMV’s competition comes from Amazon.com on the one hand, and from the supermarkets on the other. When it comes to buying the mass market, top charting movie release or pop record, it is simply easier to bung it in the trolley at Tescos instead of make a special trip to HMV. When it comes to buying niche, specialized albums and movies it was a safer bet that you would find it on Amazon. HMV has neither convenience nor range: it is stuck between a rock and a hard place.

      2. HMV is, indeed, dead

Reports of HMV's demise have been greatly exaggerated. As I write this, HMV has gone into administration, which means that it will be run as a going concern until a buyer can be found. Only if this proves impossible will it be wound down.
 
Most media commentators seem to miss the crucial point that on a going-concern basis HMV has still been reasonably profitable. It has been caught out because for years it relied on rising sales to support its working capital base. As I pointed out in this blog two years ago, its sales growth had halted, and it has been caught in a working capital trap. The administration process will wipe out its equity holders, allow a restructuring of debts and closure of unprofitable stores, but then the remaining assets should be able to continue running as a viable business.
 
One big risk factor here is the inexplicable decision of administrators to stop accepting HMV gift cards at the stores that remain open. This will have caused HMV’s credibility and brand value to plummet. In theory, as the last remaining record store on the high street it should have a reliable stream of customers. But the messy handling of the administration has caused much of its remaining value to evaporate. I would not be surprised if its future sale was accompanied by a complete re-branding to distance the firm from the current disarray.

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Update (21st Jan): Administrators have announced that HMV will accept gift cards. An eminently sensible decision, although much reputational damage has already been done.

Twenty-Twelve: A Year of Wake-up Calls

Every year has its share of good and bad events in world affairs. But looking back on this year it seems to have been filled with a mixture of unfortunate events and near misses which remind us of the failings in our current ways of doing things. However, many of these events seem to have triggered a real reevaluation of our policies, our political systems, and our social aspirations. Among the gloom there may be cause for optimism yet.

Extreme weather, Climate Change, and the end of the world

A few years ago, news reports would shy away from suggesting a link between extreme weather in the present day and long-run climate change. Any mention of such a link would be filled with hesitation and caveats. A turning point seems to have been reached this year, with news reports making this connection regularly and unashamedly. Indeed, the frequency and extremity of storms, droughts and flooding has undeniably been rising over the last decade. This year has seen Hurricane Sandy cause massive destruction in New York and its surroundings. Meanwhile much of the central US was hit by drought. In the UK, the rain from April to June was the heaviest on record, with more floods this winter making it possibly the wettest year on record.

The supposed Mayan prophecy of the end of the world did not come to pass. But the threat that climate change poses is very real, and this year saw a change in the tone of the debate about its effects.

American Political Deadlock, US National Debt and the Fiscal Cliff

As I write this, negotiations about raising the US debt ceiling are ongoing, and it seems likely that automatic spending cuts and tax rises will kick in. This in itself is a worrying prospect. But the fundamental factors causing it are even more cause for concern. On the one hand the US has an immense level of national debt, as well as a gaping budget deficit, which will doubtless be a source of global instability in years to come. On the other hand, the American political system is so highly polarized into two ideologically opposed parties it seems that meaningful political progress on any issue is almost impossible. 

A pessimistic analysis would conclude that the institutions of US politics are fundamentally broken, that gridlock is the new norm, policy will drift and the economy will stagnate. An optimist might attribute the slow resolution of problems to the election, and point to Obama’s new democratic mandate as a catalyst of further progress. We shall learn which (if either) is right by seeing how things play out in 2013.

EU Bureaucracy, public sector finances and the Grexit

In 2012 it seems we came very close to seeing the break-up of the Eurozone. While disaster was, apparently, narrowly avoided, the budgetary problems of the periphery countries are far from resolved and the political union is more fragile than it has been in years. In the mean-time the degree of bureaucratic waste in the European political system has become ever more apparent. The backlash in the UK against surrendering power to Brussels has grown to record levels; so much that the anti-EU UK Independence Party is now the third most popular party, having overtaken the Liberal Democrats in the opinion polls.

An image has emerged of an EU parliament and commission disconnected from the people they represent. European bureaucrats are seen as a sinister elite, bound together by the sacred mission of European integration, a mission so important that trivialities such as democracy and national sovereignty can be ignored.

The chaos caused by public spending cuts in Greece has changed the people’s tolerance level for wasteful publicly funded institutions. After the failure of leaders to agree on the next EU budget in 2012, the stage is set for a showdown in 2013. This could well lead to turmoil, both in Brussels and further periphery countries, if it is not handled with finesse.

Some other alarm bells

• The Arab Spring has stumbled. The jubilation at the toppling of several dictators is over, as the situation in Syria has crumbled to all-out civil war, and an Islamist-backed strongman has risen to the leadership of Egypt. The freedom and democracy that many in the region hoped for may yet be realized, but is proving more elusive than most hoped for.

• The Sandy Hook shooting seems to have caused a change in the US debate on gun control. The stark contrast between the two attacks on primary schools that occurred on December 14th is especially poignant. In China, a man with a knife attacked 20 children, and none died; in the US, a man with a gun attacked 20 children all of whom died. It looks like in 2013 we may see new legislation curbing sale of the most powerful weapons to the public.

• The Libor scandal has shaken up the banking sector and to skeptics is proof that the financial sector is rotten. When the metrics (i.e. interest rates) taken as the fundamental building blocks of the financial system are so easily corrupted, what does this say about the rest of the system?

• The dispute between China and Japan over island territory has raised tension in East Asia, and contributed to the election of a hawkish leader in Japan’s election. The search for a diplomatic solution must be a top priority, as the crisis is already damaging the regional economy and threatens something much worse.

Have we woken up yet?

This remains to be seen. While I have noted a change in the tone of many important debates, this needs to be followed by action if real progress is to be made. I will be watching closely in 2013 to see if these seeds of change will flourish.