Alec Hogg on #Brexit: Why it’s a good long term bet

The Brexit shock has left many commentators red-faced, but for some, including Dan Brocklebank, it just made sense. And while the week ahead will give markets more time to settle before the real damage can be assessed, the real work starts now. The people have decided, a win for Democracy, so the country, and its government, must forge a plan for the future that sees it as a non-EU member. But what exactly may that be? Fin24’s Matthew Le Cordeur spoke to Biznews publisher Alec Hogg who’s in London to get his views on how things may play out post the Brexit vote. And all may not be lost. – Stuart Lowman

Matthew Le Cordeur: I’m with Biznews Founder and Publisher Alec Hogg. Alec is Brexit doom and gloom or is this something that’s been waiting to happen for a long time?

Alec Hogg: Matt, it’s interesting. I dusted off some of my old books in the last few days to understand why we might have had the shock result that we have had. It’s a shock. There’s no question. In fact, a book that I was reading (by a social anthropologist) here in the U.K. Kate Fox, called ‘Watching the English’ predicted – definitely – that they were going to vote not to change and that’s just the British way. Over the years, there’s been accumulation of fighting against the EU and the world is moving towards this kind of a thing. A vote against their government, a vote against their business, and a vote for democracy in many ways. I just want to refer you to a couple of books that I pulled off the shelf. There’s one, called ‘The Sovereign Individual’ written by James Dale Davidson and William Rees-Mogg – it was 20 years ago. I got into this book because they wrote a magnificent book, called ‘The Great Reckoning’ that forecast the big crash in 1998 where they said the world was heading in the wrong direction.

This book takes up on that, has a look at the way the world has changed through the new networked environment, and says that power is devolving. This was around 20 years ago. Last year, when Mark Zuckerberg had his year of books (you might remember), the very first book that he read was this one, called ‘The End of Power’ by Moises Naim. Moises is a guy I’ve gotten to know quite well through my regular visits to the World Economic Forum. He used to be the trade and industry minister in Venezuela. He’s in exile now. He also wrote about how the world is changing the power equation from big to small, and how big government is being tossed out and small government is coming in. With hindsight I guess, we had to understand that something like this could have happened but my goodness, its caused shockwaves here in the U.K. as you can imagine.

Why do you believe it’s a good thing in the long-term?

Well, in the long-term, people want democracy. People want to have more control over their own outcomes. We’re seeing that in South Africa, even with something like what’s going on in Pretoria right now. We had Arab Spring that gave the world a shock and that everyone forgot that it was an exhibition of individuals not wanting to be told what to do by big government. If you look at the way the trend of the world is going, we’re going into the Fourth Industrial Revolution. This is a different world entirely, to the one that is now structured for the industrial age. Our businesses are still structured – very much – along the basis of ‘well, the guy at the top of the company makes all the rules and the closer you are to the top, the more powerful you are’, and that’s not necessarily the most efficient way of doing things. What the British have done here (and you have to admire them) is that they have taken a longer-term view.

They’ve taken a decision that the EU has some intractable issues, which it’s going to battle with. We all know that. The British were expected (because of the culture of the people in this country) not to be the first to break ranks. Well, they have been and they voted for a brand new future. It’s caused unbelievable chaos here. Just to give you an idea, Matt: the betting on Betfair had the return… If you had bet £1.00 on the outcome last night, you would have won 19 pence for your pound if a Remain vote had come in. You would have won over £5.00 if Brexit had happened (as has happened). That was a difference of 27:1 on the Return for a Brexit. That’s how big a shock it has been. It was most unexpected by anyone who is a punter and this is a country of punters.

Interesting stats coming through about how the young voted to remain, London voted to remain, Scotland voted to remain, and then the elderly wanted to leave. What do you make of those stats?

Well, it is very concerning on the one hand, because if young people would like the ability that Europe gives them (being able to travel), they are going to find it more difficult in the future. The perception that has been created here is that young people should have been given the opportunity to make their own decisions, which reminded me of something in the book that was written recently on Jan Smuts – that he made those kinds of calls as well. In his time, he said he didn’t have enough information. The older people in Britain are unhappy with the EU. There has been an anti-EU sentiment in this country almost in all of the 40 years since Britain actually joined the EU. Remember, that was with a two-third majority more than 40 years ago. It tends to happen like that. When you blame someone else for your problems – and the EU has been a very popular whipping boy – then eventually, you’re going to ingrain it into the population.

Eventually, when they get an opportunity, they’re going to show you that the message you’ve been sending through has actually resonated. Now, if you consider older people, they are generally more conservative. They have more lose. There is – make no doubt about it – an immigration relationship in all of this. The older people are the ones who perhaps feel like they are most at risk with the spread of terrorism around the world and they have the perception, (as do many Donald Trump supporters) that the best way to fight this is by putting up barriers. Overall, there are two arguments here to the Brexit. The one side is the fear argument but the other side is taking back the sovereignty. I thought one of the most cogent arguments that was presented was by Dan Brocklebank. He works for Orbis, which is a company that is very closely associated to Alan Gray in South Africa. Dan was saying that many of the major legal decisions that the British have had in the most recent past have been overturned by the European Union.

In South Africa, we know that Rule of Law is critically important. If you lose the power to make your own laws, what does that say about your sovereignty? Dan said that as an investor, he doesn’t feel that bad about the implications or the impact but he does feel that as a private citizen in Britain, that the sovereignty has come back. Many people who thought about this issue long and hard, started off with Remain (because it’s an obvious short-term economic impact, as we’re seeing in the markets today), feel that they should have stayed in the EU. However, the deeper you go into the conversation…the more you read books like Moises Naim’s ‘End of Power’ or ‘The Sovereign Individual’, the more you will come to the conclusion that in the longer-term, this is probably going to be the right decision. No-one will agree with it right now.

There’s anger. There’s unhappiness. The people who voted to leave (52% of the country) are being blamed for breaking up the union and for breaking up history. On the other hand, the future is going to belong to the small and nimble, not to the Goliaths and that’s a vote that Britain might one day look back on and say, “We did it at the right time.”

Is Brexit linked to what Donald Trump is doing in the U.S.?

Very much so. There’s no question. It’s no coincidence that Donald Trump is in Scotland today where he is congratulating the people of Britain on taking back their sovereignty.

He’s in the wrong country.

Isn’t he, just? The Scots are going to be doing exactly that. They’re going to be taking back their own sovereignty by voting against what’s happened here, to go back into the EU. They’ve probably seen what’s happened in Ireland. Ireland has been a massive beneficiary of EU largesse. The Scots will possibly vote for their own independence (just about, certainly) because they had a vote against the government here. In fact, roughly three parts of the country voted for staying in the EU… London – 6/40, the area where I’m based and that’s why there’s such a shock around here. On the trains into London this morning, there was almost a sense of disbelief. When David Cameron made his resignation speech, there was silence. You could hear a pin drop afterwards. No cheers. No jeers. Just silence.

And Boris Johnson got boos when he left his house today.

Well, Boris Johnson was shouted at because London wanted to stay in the EU. The interesting thing about all of this is that we as journalists, can take a big view. We can look at the big picture and we can say, “Well, this is the world and the way the world is going. This is probably the right thing for a country to be doing”, but most people who vote are just looking at their own personal circumstances. There’s no doubt that the personal circumstances in the minds of the people in London, which is a global city and is a city that’s attracted some of the best minds in the world… In their minds, they’re thinking ‘this is all going to change’ and they might be right. It was interesting to see earlier this week that the Prime Minister of Poland, while saying that he wished that the British stayed in the European Union, was also bemoaning the fact that the brightest of the young Polish people actually have come to London or to the U.K. to try to make a better life for themselves.

He said that he would love to see them coming back to Poland where they can make a contribution there. It’s interesting.

Let’s go back to Trump. Is Trump going to gain momentum from this and do you think it’s a good thing if Trump wins the Presidential Election?

I don’t think any sane person can believe it’s a good thing for Trump to win in the United States, except to say that it will – again – be a reflection of people power. Donald Trump has shown, time and again, that he has a very narrow world view, that he has really got some strange ideas on many of the liberal values that most of us take for granted. Gay marriages and the equality of the sexes, etcetera let alone before we start talking about race. Donald Trump has got a lot of obstacles in his path before the rest of the world will turn around and say ‘well, okay. This is a fairly reasonable fellow’ but it does show that people around the world are taking back their sovereignty. For too long, politicians have relied on a system where they get voted into power once every five years, and make the rules. It doesn’t matter how they treat you in that period.

As long as they lie to you sufficiently in those five years’ time, then they get voted back into power. Now, in Brexit, it is showing that it’s a system that is not sustainable indefinitely, that the system into the future is going to one where politicians have to become public servants. They have to become accountable to those they represent rather than imposing their will, which can sometimes be completely against what the will of the people is.

The world has always been a place where people move around freely. We’re all immigrants of one place or another, even if we think that we’re not. America’s made up of immigrants. Does this mean that America’s going to lock down this impact or that England’s going to lock down? Even England is a country made up of immigrants. I know the World Economic Forum and its risk analysis this year said that countries are going to be building big walls around themselves, going forward – the rich and the ones that are in the comfort zone – and leave the countries that are in a mess now to fight it out. It doesn’t seem like the world’s going in a very good direction, if that’s the case.

Remember, there are a few very important issues that are happening at the moment. We are transitioning into the Fourth Industrial Age. We are transitioning into a time where human beings…many of the jobs that they are occupying are going to be taken over by robots. That brings new stresses into the employment equation. It brings new stresses into a variety of issues in the economy. If you talk to somebody who’s been replaced by a robot (and many factories and old-style businesses have had to put up with that kind of thing) then clearly, they have a vested interest. It’s the same thing as the people who would have voted because they might have lost their job to an immigrant. In the future, they’re going to be just as angry about losing their job to a robot. This is a world in transition.

Technology is making things very, very different and it is going to raise social unrest and social concerns on a global basis. In one way, it tells you that the issues South Africa is struggling with are issues that are being felt all around the world. In another way, it also demands that those who are in leadership positions get very close to the populace and get their finger right on the pulse of what people are thinking and saying, and make the right kinds of decision. There are a couple of good things out of Brexit that must not be forgotten.

  1. European Union legislation is very anti-small business. It puts a cap on what you can do in a country to promote small businesses coming through by supporting some of the stuff that Jeremy Corbyn, a Labour Party leader in the U.K. is so fixated about. If you want to employ people or if you want more people to be employed, you need to get the small business sector running. Britain has been hampered in that respect because of EU legislation.
  2. If you look around the world at the countries that are adapting most rapidly to the Fourth Industrial Age, the one that jumps out at you is South Korea. In South Korea, they have a fixation (not as Corbin’s one) on having small, nimble…what they call gazelles, to promote the small business sector to find ways that… For instance, if you’re an entrepreneur (and as long as you haven’t committed any crimes)…if you bankrupt, they clean the slate of your credit record so that you can try again. Whereas in many other countries; if you go bankrupt, well that’s the end of it. You’ve got very little chance of getting back into the game. There are these huge forces/seismic forces that are happening around the world, brought on us by technology, brought on by the Communication Revolution, and brought on by the Internet and these forces are now being absorbed.

Perhaps, what we’re seeing with Brexit is the first concrete evidence of how the rational people of the world are starting to take control again, or are starting to take cognisance of this. I don’t think you must ever underestimate the intelligence of the ‘ordinary Joe’ when he is well-informed. As this has been a campaign that has been fought very bitterly from both sides, there’s been an enormous amount of information that has been available and people have been discussing it here in this country, at great depth. Wherever you go to, Brexit was the conversation. The only surprise of course, was that the view was (or propaganda, if you like) of the Remain Camp and the fear campaign that the Remain Camp put out there, did not prevail.