Brave new world

Brave new world

The recent unravelling of the US economy has put heads in a spin. But CIOs are more likely than most to sympathise with morose money men.

On the day the global financial systems melted down, a mate who is a chief information officer at a bank called me with gallows humour in

his voice.

"I'm sunk," he said. "We were massively into weird equities. You'll

see us get dissolved on the news tonight. My super has spent the last

year going backwards faster than the Top Gear team testing a

Lamborghini's reverse gear and if anyone on the planet so much as

thinks about turning on an electrical appliance ever again, the carbon

they make will put the house under a metre of water in 2025, anyway.

"What am I going to do, Simon?" he asked, switching from dark humour

to deep despair. "I don't reckon I'll have a job a week from now. The

whole industry's in meltdown. The way banking is going, no one's sure

if the business will be complex enough to need computers next month."

At this point I felt it necessary to administer the telephonic equivalent of a robust slap.

"Mate," I said. "This is the best possible time to be a CIO. We can

get through this easy."

He didn't understand why, so I explained. "The way to understand the

whole sub-prime thing is to think about it as virtualisation gone

wrong," I started.

"Some clever spivs on Wall Street obviously had a look at what we're

all doing in IT and said to themselves that a bunch of poor people

with no jobs and no chance of repaying a loan were - when you think of

them as actual physical people in physical houses - a rather nasty


"So instead of managing them one at a time, which is basically social

work, they bundled them all up and abstracted them as a logical

collection of debt instead of a million examples of heartbreak."

The problem, I explained, is that virtualisation is unusually susceptible to the Law of Unintended Consequences. CIOs know this, because their network teams are screaming about just how uncomfortable

routers get when they are suddenly asked to deal with five real computers one minute and 20 logical machines the next. CIOs therefore know all too well that pretending something isn't happening won't stop

it from happening, making my friend ideally placed to slap the spivs around and tell them what's what.

My friend understood this but wanted to know more about why CIOs could thrive.

"Have you had vendors ask you to renegotiate licences?" I asked. My friend had.

"When you think about it," I continued, "software is just zeros and

ones. So half of software is, literally, nothing. Yet vendors are now

asking us to pay more for nothing, even though it's being used on

computers that don't actually exist, other than as logical constructs.

Is banking any more complicated than that? Were the guys that cobbled

together sub-prime securities dealing with tougher abstractions than


"I know you've beaten back the vendors on this one. You saw through

the rotten deal of the same amount of nothing for more money and

knocked the extra licence on the head. That makes us CIOs smarter than

the finance guys - we know real value when we see it.

"The other reason we'll do all right is that we understand how to make

things unbreakable. Every banker under the sun knows that if things

get really bad, there's a bail-out waiting to happen. The government

knows it, too - that's why central banks exist. IT has never had that

luxury. Either we build fabulously redundant systems or we don't have

a job. Right now, we're the experts in building things that can't

break and the processes that go with them. We know how to layer the

safeguards and get the processes right.

"So who do you think the CEO wants the CFO to talk to now? The spivs?

Or the guys that build unbreakable stuff?"

By now my friend was buoyed, and even got into the spirit of things.

"I can make this work!" he exalted. "You know how everyone says we

should let generation Y do whatever the hell they want at work? I'm

going to suggest that the kid who founded Facebook should be our new


"He's made a stack of that weird virtual cash that got us into this

mess in the first place and clearly a bank needs someone who

understands almost-money inside out.

"And only the CIO knows enough about Facebook even to come up with a

great suggestion like that!"

My mate's bank was duly socialised the next day. It's now a division of Google

dedicated to auctioning off repossessed houses and selling ads on the

electronic wallpaper the company insists on installing upon every


Welcome to the new economy!

Fairfax Business Media

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Tags strategyfinancemeltdown

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