Douglas McWilliams is the Deputy Chairman of the Centre for Economics and Business Research (CEBR) and one of Europe’s foremost economic forecasters. He is regarded as one of the most accurate and perceptive analysts of macroeconomic trends and specialises in making economic theory relevant to the real world. He will be speaking about the huge changes coming in the global economy and what you need to do to prepare. Read on for a preview and for some hugely valuable advice.
What will you be speaking about at the Traders Conference?
Douglas McWilliams: How, in a time of massive upheaval, the Irish, UK, and global economies are likely to be completely different in 10-15 years and what that means for all of us. I will also be telling attendees what they need to do to adapt to what is likely to be a much tougher world.
Can you give us some insight into the macro-factors that are going to change the world in the next 5-10 years?
Douglas McWilliams: Wait for the show! But as a trailer let me give you three provocative topics that will get developed in my talk.
1. Bitcoin is a scam. I think eventually it will be found out.
2. China is not about to fall – but it is changing into a different gear and we may find it more of a challenge as it develops than it has been in the past. It will start to get more into our space than it has previously.
3. India is in some ways a more exciting challenge than China and one which will change the world more than China has done.
At some time in the second half of this century, India will overtake China to be the largest economy in the world.
How much can the world of sports trading learn from the wider financial world?
Douglas McWilliams: The biggest lesson is how to combine human knowledge with statistical knowledge. The best financiers like Warren Buffett know how to mix human intuition with the results of modeling and what is interesting about the financial crisis is the people who went bust were not the casino banks, who had developed a pretty full understanding of how the world really worked, but the retail banks.
The retail banks (a bit like Robin trying to play Batman) tried to ape the behavior of the investment banks without the depth of knowledge. They tended to rely too much on modeling and not enough on intelligence.
How do economists see the world of risk and variance differently to traders or gamblers?
Douglas McWilliams: Most traders and gamblers are quite sophisticated in their understanding of risk and see it in much the same way as economists. Where economists and traders and gamblers differ from other professions is they accept risk is a fact of life and don’t shy away from it.
One of the best investment managers I know, who has made hundreds of millions for his clients, once told me he felt the biggest mispricing in the financial markets was 5/1 chances being priced at 25/1 and he has taken huge advantage of this.
De-risking rules that mean that not very risky assets are way underpriced because of excessive fears about risks.
How much conversely do you feel the financial world could learn from the world of trading?
Douglas McWilliams: We will, in time, see a merger of three highly different markets: betting, insurance, and derivatives. To some extent, the first and the third are already linked. I think the area that will have to advance most is insurance which, as information improves, becomes quite problematic.
Insurers will need to use derivatives and betting markets as an alternative to reinsurance and will find that self-insurance is a growing trend.
We understand you don’t gamble personally but are you a fan of sports?
Douglas McWilliams: I’m passionate about cricket and rugby. I live almost next door to Lords and am an MCC member. I also try to go to the big rugby matches at Murrayfield and Twickenham and have traveled to France and New Zealand (and even Newcastle) to watch the last three rugby world cups.
I would have got an Oxford blue at cricket except that I was an exact contemporary of Imran Khan who was streets better than me.
What do you think needs to change in the gambling industry?
I regard the efforts of the gambling industry to deal with problem gambling as pretty insignificant and to succeed the industry will have to treat this as a mission-critical item.
The alcohol industry has largely succeeded in transforming itself from an industry making most of its profits from people with an alcohol problem to an industry that makes most of its profits from social and responsible drinking. It is important that the gambling industry does the same – if not its entire existence is under threat.