“I go and talk to these companies, and they know they need me and they’re keen to make sure they’re protected against cyber-attacks…

“Then, I don’t hear back from them for months. I get in touch again. They say, ‘We haven’t actually been hacked recently… so we just don’t see it as a priority right now.’

“It’s crazy! These businesses are just wide open to attack. Look at the NHS over the weekend. How many of those NHS trusts do you think are scrambling to get their cyber defences in order this morning? All of them! But it’s too late… the damage is done.”

That’s the short version of a conversation I had with a cybersecurity expert (and reader) shortly after the final presentation at our first ever Tech Symposium on Monday. It was a fantastic event. At least, all the feedback I received on the day suggested it was.

If you couldn’t make it, don’t worry. You can still view all the presentations (plus a series of special backstage videos I asked Dan Denning to record) as part of our DVD package. Full details of that are here – it’s well worth taking a look, believe me.

Back to cyber. We didn’t address cybersecurity directly on Monday. But it came up, time and again. Akhil Patel talked about how cyber could come to the fore in “the age of turbulence”. Sam Volkering and Eoin Treacy both referred back to it several times. And of course the topic came up in our Q&A.

How could it not? We just saw one of the biggest (in terms of breadth) cyber-attacks in world history over the weekend. Our very own NHS was hit. That really brings it home, doesn’t it? It’s one thing when Sony gets hacked and we find out what film execs really think of each other. It’s another when it’s your personal medical records at stake.

Fortunately it doesn’t seem like there’ll be any long-lasting effects. No records were stolen. And we hope none were tampered with (a much more malicious and dangerous thing to do).

Eoin and I have talked about cyber a lot already this year. My sense is people don’t take it as seriously as they should. I’ve been on the wrong end of a hack myself, and the results were deeply unpleasant. But it all just serves to underline the importance of the work cybersecurity firms do. It’s getting more valuable by the day. Which is why you can expect cyber firms to do well in the coming months and years. Which one do you buy? Eoin reserves that kind of insight for Frontier Tech Investor subscribers.

One final point. Hacks like this make the way we currently think about data security seem increasingly obsolete. Having a “centralised” system whereby all data is accessible if you break in is crazy. It’s like a bank robbery: once you’re in the vault, you can basically fill your boots.

That’s madness. Especially when we now have distributed networks like the blockchain. Imagine a world where every individual medical record had its own blockchain. One hack would be just that – one. It wouldn’t threaten the entire system – and it’d be a lot harder to hack anyway, because that’s the whole point of distributed systems.

I’ll come back to that another time. In the meantime, what’s your view on the whole cyber-attack? Does it scare you? Or does it underline the fact that you need cyber firms in your portfolio?

Either way, get in touch with me at nick@southbankresearch.com. I’m curious to know what you think.

Price fixing and the free market

I wrote to you last week about Theresa May’s plan to “cap” energy prices. I got one or two emails asking me to “stay away from politics”.

I sent a similar note to Mrs May. It just said, “Stay out of the markets.” I’ll keep my word if she does.

I got a fair number of longer, more considered letters in response too though. Geoff wrote in to say:

Hi Nick

I would vote for free markets as much as the next man, but I think your argument misses a key point. My energy bill is over £100 per month so I have an incentive to keep it down. Over the last year I have “subscribed” to an energy comparison, based on my consumption, three times.

In all cases the difference between the offers from the big six was minimal. So in effect they are operating as a cartel, or something very close. As such this is not a free market so I do not have a problem with prices being capped, to protect consumers from being ripped off.

What is unfortunate is that the PM has to do this rather than the regulators. What is the point of the latter if they are not effective – and this does not only apply to the energy regulator.

I completely take that point. But there is an argument against it. Here it is, in brief:

Competition lowers prices. It’s the most effective way of getting prices down we know of – far more effective than government. But Geoff says the big six are basically an uncompetitive cartel. What is needed is real competition.

The problem is, a price cap on bills is a disincentive for competition. Why would any new market entrant spend time and money trying to break into a market that has been capped? They won’t. They’ll go elsewhere. And the UK will be stuck with an outmoded energy system run by cartel of six firms with the tacit backing of the government.

All prices caps really do is entrench and protect the cartel. The government needs to get out of the way and make it easier for other sources of energy supply to come on stream and compete. Price capping does the opposite of that.

In the short term, a price cap might stop us being ripped off. Long term… it’ll make the market less competitive and lead to even higher prices.

How to make better decisions (in life and in the markets)

Do you consider yourself a rational person? Do you make decisions with your or your heart? Or both?

By the way if you think you are completely rational… and don’t allow psychological biases or emotional states affect your decision-making… you could well be the first human being to achieve such a state. Congratulations!

For the rest of us – all of us – making better decisions is a case of understanding, and mastering, our emotional, irrational, biased selves. It’s well worth taking time to understand this.

For instance, let’s say you own a share… only to see it fall 50%. Are you equipped to make a good decision at that point? Are you rational… or are you in “loss aversion” mode? Perhaps you double down, buy more of the share and “cost average”. In which case, you just took an even better risk with your money to recoup a loss!

Or maybe you sell… then pile the money back into something else in your portfolio. Was that a good decision? Are you being rational? Or is the loss weighing on your mind?

It’s a fascinating subject. That’s why Dan Denning and I asked Herman Brodie, founder of Prospecta Limited, to come and talk to our staff about how to make better financial decisions. We also squeezed in time for a podcast. It’s the first we’ve done for a while. But I think it’s the best, and most useful, show we’ve ever recorded. You can listen to it free of charge here.

(When you’re done… tell me what you think. I’m at nick@southbankresearch.com.)

Until next time,

Nick O'Connor's Signature

Nick O’Connor
Associate Publisher, Capital & Conflict