The Guardian
The banking world ignored Gillian Tett when she predicted the credit crisis two years ago. Laura Barton hears how her training in social anthropology alerted her to the danger.
FT journalist Gillian Tett
Through a telescope in the boardroom of the Financial Times you can look out over the City of London; beneath this morning's clear blue sky stand the Natwest Tower, the Thames Exchange building and the Gherkin. Boats scud along the river. A man strolls its banks. I count the cranes on the horizon - said to be an indicator of a city's prosperity - and spot more than 20. Despite the news of global financial meltdown, there is, a pervading sense of business as usual.
This is a strange moment for economic correspondents; in the past weeks they have been thrust from relative obscurity on to front pages and prime-time television. Already the financial crisis has made stars of the BBC's Robert Peston and Newsnight's Paul Murphy, but for many the collapse's true luminary is Gillian Tett, assistant editor at the Financial Times, and one of the few people who predicted the current state of economic catastrophe, some two years ago. She sits in the boardroom in a smart boxy jacket, Prada sunglasses pushed back into her hair, making light of the sudden burst of attention. "I think," she laughs briskly, "it's the one moment in history when CDOs and CDSs become sexy!"
Collateralised debt obligation and credit default swaps, Tett's specialist subjects, have long been the dowdy end of finance, so there is a lick of satisfaction to their sudden prominence. "On the one hand, it's gratifying that people realise just how significant all this activity is," she says, "on the other hand it's horrific what happened. I mean we were sitting there a few years ago trying to tell people, 'Listen, if you don't take note of what's going on, the way that finance has changed so fundamentally, there is going to be an accident.'" She says it firmly, the way a teacher might scold you for running in the corridor.
Tett began looking at the subject of credit five years ago. "Everyone was looking at the City and talking about M&A [mergers and acquisitions] and equity markets, and all the traditional high-glamour, high-status parts of the City. I got into this corner of the market because I passionately believed there was a revolution happening that had been almost entirely ignored. And I got really excited about trying to actually illustrate what was happening."
Not that anyone particularly wanted to listen. "You could see everyone's eyes glazing over ... But my team, not just me, we very much warned of the dangers. Though I don't think we expected the full scale of the disaster that's unfolded."
There is something exceedingly calm and thorough about Tett. She talks with the patient enthusiasm of a Tomorrow's World presenter - a throwback, perhaps, to her days studying social anthropology, in which she has a PhD from Cambridge. "I happen to think anthropology is a brilliant background for looking at finance," she reasons. "Firstly, you're trained to look at how societies or cultures operate holistically, so you look at how all the bits move together. And most people in the City don't do that. They are so specialised, so busy, that they just look at their own little silos. And one of the reasons we got into the mess we are in is because they were all so busy looking at their own little bit that they totally failed to understand how it interacted with the rest of society.
"But the other thing is, if you come from an anthropology background, you also try and put finance in a cultural context. Bankers like to imagine that money and the profit motive is as universal as gravity. They think it's basically a given and they think it's completely apersonal. And it's not. What they do in finance is all about culture and interaction."
Back in 2004, Tett asked a colleague to sketch her a map of the City to show how every part fitted together. "Because one of the things I learned as an anthropologist is that to understand how a society works you need to not just look at the areas of what we call 'social noise' - ie what everyone likes to talk about, so the equity markets and M&A and all the high-profile areas everyone can see. But you need to look at the social silences as well." When she looked at the map, she realised how much of the City was ignored.
Tett's doom-mongering did not make her tremendously popular. Largely, her cautions were ignored, and when they weren't ignored they were subject to criticism. "We had enormous kickback from the bankers in the City saying, 'Why are you being so critical of the industry? Why are you being so negative?' All that kind of stuff." On a trip to the economic forum Davos in 2007, she was even denounced from the stage. "One of the most powerful people in the US government at the time stood up on the podium and waved my article, the article that predicted the problems at Northern Rock, as an example of scaremongering."
But in 2007, people finally began to pay attention. "I had been aware for two weeks that something very serious was building," she recalls. Tett was Japan correspondent for the FT during the country's financial collapse, and wrote a book about it, Saving the Sun. "The behaviour and the psychological mood of the markets in late July was almost identical to what happened in the autumn of 1997 in Japan." The similarities worried her. "I was busy cancelling holidays and things. But it came out of the blue for many people - investors, policymakers, bankers, our readers were suddenly completely at sea, at a loss to make sense of it." The financial system, she says, is "so dysfunctional, so tribal, that people just don't communicate with each other".
At 41, Tett is too young to remember the financial crisis of 1974. She argues that this broad lack of understanding of what a recession looks like has been part of the problem for many in identifying the warning signs, though Britain's taste of economic downturn in the 90s has helped a little: "At least we knew that could actually happen. America hadn't seen that at all."
The strength of the City's PR machine has not helped either, she argues, nor has the secretive nature of that area of the financial industry, or the fact that many of the innovations made in the financial world in the last decade, while "thoroughly sensible in principle" had become "completely perverted and taken to dreadful, nightmareish extremes. And that's partly because there was so little oversight."
She assumes more than ever that the general public regard the City with "fear and loathing". Yet she suggests that our own attitudes to money need to be overhauled as much as the methods by which the City operates. "People who come from a background of arts and humanities and social studies tend to think that money and the City is boring and somehow dirty," she says. "But if you don't look at how money goes round the world you don't actually understand the world at all. When you try and join up the dots about how money can be linked to politics, can be linked to culture, then it's electrifying."
She believes the nation needs to be educated in financial literacy, via community-based schemes in schools and through key community figures, such as midwives. In particular she hopes this might aid a greater economic understanding among women. One expects she feels this more keenly as a senior female financial journalist, and as the mother of two young girls (her husband, a former banker, now also works in financial education).
"Generally finance, maths, numbers, money, traditionally have not been seen as a female thing," she says. "That's all about the culture of power. And one way that you keep women away from the power traditionally is that not only do they not own the money, control the money, but they don't understand the money. I feel very strongly about educating women about finance."
It is of course our general bedazzlement in the face of the financial system that has made stars of Tett, Peston, Murphy et al. "It's a sign of how psychotic the financial climate is," she says. "The British public is looking for answers, and Robert [Peston] is in the crossfire of that. He's visible and he's memorable and accessible, a character in a sea of dull bankers and bureaucrats." The financial crisis has made an unlikely star of Gordon Brown, too. Over in New York, says Tett, "it's completely stunning, this Gordon Brown fanclub. He now walks on water." Does she approve of his handling of the crisis, or deem him guilty of mismanagement during his years as chancellor? "Well," she says neatly, "Gordon Brown, like every other western leader, was shockingly complacent and negligent in failing to understand what was driving the City. The British government was happy to enjoy the fruits of the boom, but it didn't ask the hard questions. That said, the American government has been worse, and, while for the last year the British government have looked like bumbling amateurs, against all the odds they've got their act together. The minute I saw the [bail-out] proposal on the table I did a double-take, because it seemed to me the first sensible response. It's not perfect, but ..."
Tett's move from social anthropology to financial journalism was not entirely planned. She was on work experience at the FT when the Soviet Union broke up. "And they came around and said, 'Does anyone speak Russian?' I put my hand up, and I basically went from making the tea to writing pieces. Total Hollywood moment. Then the foreign editor comes round and says, 'There's going to be a revolution in Lithuania, does anyone want to go?' And I went, 'Yes! Me!"
She returned and joined the FT trainee programme. "And they put me into the economics department." She pulls a face. "Initially I thought, this is absolutely horrific!" Her Damascene moment came one day when struggling to write about the foreign exchange market. "I thought, you know what, this is just like being in Tajikistan. All I have to do is learn a new language. This is a bunch of people who have dressed up this activity with a whole bunch of rituals and cultural patterns, and if I can learn Tajik, I can jolly well learn how the FX market works!"
She spent a year in Tajikistan during her PhD. "It's just next to Afghanistan and a very similar culture," she explains. "I lived up in a very remote mountain village for a year, as a Tajik girl - wore Tajik clothes, spoke Tajik, looked after goats." So if things go totally wrong with the economy, she's got something to fall back on? "Yeah," she laughs, "I know how to milk a goat.
"It's a weird background to have," she continues. "But it's helped me in covering the financial crisis. Having seen the Japanese financial crisis, I've always known that banks can fall apart. We never imagined that the Soviet Union would break up. And then in Tajikistan there was a horrific civil war. So that whole experience taught me that extraordinarily unexpected things can happen." She shrugs. "To be really cynical, once you've lived through a really brutal civil war that's shattered your community and you're dealing with massacres and stuff, today's banking crisis is bad, but guess what ... it ain't that bad".
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