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A
This is more or less your statistical guide to life, the universe and everything. The programme now airs year round on the BBC World Service, but this is a full length episode from Radio 4. Hello and welcome to More or less opening cans of statistical whoopass. Since 2001 this week, is the Greek rail system so inefficient that it would be cheaper to send every one of its passengers by taxi? And are men better at chess than women? We look at the numbers, but first, are Britain's executives overpaid? It's a question which has been widely discussed this week after Andrew Moss, chief executive of the insurance firm Aviva, was forced out by shareholders who are, it seems, no longer content to watch him trouser £50,000 a week. There are other recent examples of shareholders flexing their corporate muscles, prompting the suggestion that we're witnessing a shareholder spring and an insurgency, which might be strengthened by the government's plans announced in this week's Queen's Speech to make shareholder votes on pay binding. But as the BBC's business editor Robert Peston has pointed out, there's little evidence that shareholders are against high pay as such. There's a saying after all, pay peanuts get monkeys. What's infuriating shareholders is they seem to be paying millions of pounds and getting monkeys anyway. Aviva's share price, for example, fell nearly 60% during Mr. Moss tenure. All this got us thinking about the link between pay and performance. Are Britain's shareholders getting value for money from their highly paid chief executives? Earlier this year, a Swiss financial research company called Obamat analyzed the pay and performance of the top 100 companies in the United States. Their research came to a startling conclusion that there is no correlation between pay and performance in the US, more or less asked Dr. Herman Stern from Obermat to apply exactly the same analysis not to America's top companies, but to ours, the FTSE 100. He told me first how his original model had worked.
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We have analyzed the 100 largest companies, the Standard Poor's 100 companies. We've looked at three years, and we have used the most relevant performance metrics, which is operating cash flow. That's how investors typically value companies. And we have looked at total shareholder return and we compared that to the pay that the CEO received.
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A
So you've looked at pay, you've looked at performance. Everybody says that pay should be connected to performance. For this S&P 100, what do you find?
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B
I found absolutely no connection between pay and performance. If there was a connection on a scale from 1 to 10, the connection is less than 1.
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A
Now, you've also done this for the FTSE 100, presumably it's different. In the UK, we run a tight ship and of course, chief executives very tightly connected with performance.
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B
Yeah, well, in the FTSE 100 you would expect more pay for performance alignment because shareholders for a longer time period had a say on pay. But actually the correlation between pay and performance in the UK is just as bad as in the us.
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A
In other words, there's no correlation whatsoever. Or almost no correlation whatsoever.
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B
There's no correlation whatsoever. Yes.
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So just to defend fat cat chief executives for a moment, if I'm a chief executive of some high performing firm and I'm awarded a bunch of share options in 2005, things are going great and I sit on these share options and then I leave the company five or six years later and maybe over 2008, 2009, 2010, things haven't gone brilliantly. I'm going to look as though I was paid a huge amount for not doing very much. That might be driving the lack of correlation.
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B
Not really. When you look at other analysis, they come to the same conclusion. A lot of those compensation components are absolute compensation, which means they reward not just the performance of that company, but actually also the wider economic cycles.
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So you're rewarding a mining company because the price of copper is high, you're rewarding an oil company because the price of oil is high, whereas that's not really a measure of how effectively the company is being managed.
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B
Exactly. This is one source for a lack of correlation.
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A
Why aren't shareholders insisting on tying pay much more closely to performance?
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B
Actually, they are. When they have, say. I mean, if you look at family run companies, you know, which is more common in Germany and Switzerland, where still large shareholders run the company, executive compensation is much more moderate. The very extreme situations where executive compensation is out of line with performance is typically in companies that have no clear owners.
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A
I mean, one of the things the government has proposed here in the UK is it is a binding shareholder vote on executive pay, do you think that would work? I mean, it seems to make perfect sense.
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B
I don't think that would actually solve the problem. It's just much more dangerous when you say no. I mean, you have seen already a couple of CEOs leave. If a company's in a difficult situation and you want to keep that management team together, you're much more likely to just go with it and say yes.
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It seems to be the opposite of football managers, or certainly football managers here in the uk, where even if they do quite well, the moment there's the slightest problem, everybody calls for them to be sacked. And with chief executives, it's the reverse. Doesn't matter how badly they're doing, it seems incredibly important to keep them on board and to keep jacking their pay up so that they don't leave.
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B
Yeah, something works much better in sports than in management, and that's performance measurement. You know, in sports, the rules of the game and the performance is completely transparent to everybody and it's even supervised by an independent. And in companies, that is not the case at all. It's disputed, it's hidden. And that could very well be a reason why pay for performance is missing.
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Dr. Herman Stern from Obamat. Now, before we move on, I'm afraid I have a rather unpleasant piece of housekeeping to deal with. Last week we reprimanded the Conservative Party's co chairman, Saeed Abbasi, for appearing to confuse debt with the deficit. I hardly need insult the intelligence of loyal more or less listeners by explaining the difference again, but just for the record, here it is pithily described for us last week by the BBC's economics editor, Stephanie Flanders. Debt is the accumulated amount of debt, borrowings that you've had in your lifetime. So it may be the size of your mortgage, for example, is your debt. That's how much you owe. And then there's the borrowing you do on a day to day or a
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C
week to week or a year to year basis.
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That's the deficit. So how much the government has borrowed this year to meet the gap between
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its spending and its tax revenues is the deficit.
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Well, it seems someone wasn't paying attention. Nick Clegg. We've set out a plan. It lasts about six or seven years to wipe the slate clean, to rid people of that sort of dead weight of debt that has been built up over time. Just imagine if you didn't do that. Just imagine if you didn't take the time to get it right now. For crying out loud, Clegg, see me after class. Britain won't have wiped the slate clean in six or seven years. In fact, nobody expects the debt to be paid off in the foreseeable future. According to the most recent estimate from the Institute for Fiscal Studies, our national debt won't even be back to where it was in 2007 until about 2035. Right, where were we? Ah, yes, our very own Greek God, Wesley Stevenson. What have you got for us this week, Wes?
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So, in recent editions of More or Less, we've tack tackled lots of Eurostats some of the wider statistics which have emerged with increasing frequency as the Euro crisis has deepened.
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Wait, where's.
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What?
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Something's missing. Much better. Now, what's the story?
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C
Well, I've been looking at the Greek railway system and for such a small network, I mean, there's only one main line, it's causing a whole lot of trouble. The Greek railways do seem to crop up a lot. And in the story of how the Greek nation came to be in its current predicament. And there's one particular claim which I want to look at, that the Greek railways are so expensive to run, it would be cheaper to send its passengers by taxi.
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Now, I remember reading that claim by Michael Lewis in his book Boomerang.
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E
Yeah, that's right.
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And it was first made by Stephanos Manos when he was Finance Minister of Greece way back in 1992, which is
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a pretty extraordinary thing for a finance minister to admit.
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It is. And he'd just been sworn in and he was speaking in Parliament in support of the Maastricht Treaty. What he was trying to do, he was emphasising what he saw as the need to cut the size of the public sector. It may sound a little far fetched, but Mr. Manos assured me that when he said it, at least it was true.
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I knew the number of passengers and I made a very brief estimate of what it would cost to send them from Athens to the north of Greece. And I decided that it was quite obvious that it would be cheaper to send them there by taxi than by train. And I still feel that it still holds true.
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C
So you think it would be true of the Greek railways today, here in 2012?
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Oh, absolutely, yes.
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In fact, it might be even worse
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these days now, it's been hard, impossible actually, to find the figures for 1992 to check this out, not least because many of the people who might have them have actually been a little distracted by the Greek elections, including Mr. Manos himself. But rail experts have told me they think it was probably close to being true in 1992, but maybe a bit
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of an exaggeration, but Stefanos Manos says it's probably still the case today.
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Yes, and he's not the only one. So we've been trying to look at the numbers for what's happening now. Now we know that in 2010, the two parts of the Greek railway were together, making a loss of just over a billion euros. From that, we can work out how much was being spent on every kilometre each passenger travelled that year.
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And this is how much is Being spent in subsidies by Greek state.
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That's correct, yes. The Greek statistical agency have some useful figures for the number of passenger kilometers traveled per year. The latest data are from 2007 when passengers travelled 1.8 billion kilometers. Now if we assume that's roughly the same for 2010, that means it's costing the Greek railways €60 cents for every kilometre each of its passengers travel, which is quite a lot. In the UK for example, it costs around €30 cents or 23 pence and that was in 2010.
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OK, so now we just need to know how much it costs to get around Greece by cab.
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Yeah, and Greg Moisiadis could tell me that. He's a cab driver. Mr. Taxi in Thessaloniki. Oh, hello, is that Greg?
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Yes, Greg speaking.
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Can you tell me how much it would be to take a taxi from Thessalonika to Athens?
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It costs €700.
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€700? And how far is it, Dino?
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It is 520 kilometers. And it takes about five hours to get from Thessaloniki to Athens on a motorway.
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Okay, that's brilliant. Well thank you very much for that.
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Thank you.
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So that's more than double the amount being paid to send people by train. So Manos was wrong.
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Yes, and we checked Greg's prices with a few other cab firms to make sure that he wasn't unusually expensive. And he's about average. So this looks like another convenient story that fits the narrative of Greek waste, but like so many of the others, it just isn't true.
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A
Well, very good. But we're slightly in danger here of missing the bigger picture. Mr. Manos, headline grabbing statement might have been an exaggeration, but it does look like the Greek railway is awfully expensive to operate. And the system's in a bit of a mess, isn't it?
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Yes, I think that's probably right. Panos Prevedouros is a professor of transport engineering at the University of Hawaii.
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So hang on, you've been discussing the Greek railway system with a bloke in Hawaii?
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Yeah, of course. I mean he's an expert in this sort of thing and he paints a pretty bleak picture of the Greek railway.
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Over $13 billion has been pumped in in the last 15, 16 years. In terms of passenger, long distance rail has 2.7% of the share. And in terms of freight, it's truly a joke really because it's 0.08% of the freight. So basically it carries no freight to speak of. So the costs are staggering. And also the condition of the system is highly variable. The majority of the system is near dilapidated.
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But whilst closing the railway down and sending everybody by cab isn't really a viable option, there are other ways in which the government can save money on the railways. It's already closed some lines and a mothballed sum rolling stock, some of it less than 10 years old, and it's running fewer services. But as Panos points out, there are good alternatives to the train other than taxes.
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The closest alternative, of course, is the intercity bus, which are in Greece now entirely privatized and the prices are very competitive. Charges for the main trunk trip from Athens to Thessaloniki, from essentially the center to the north, the bus charges €32 one way trip. If you do it by air, the rough approximation is 75 Euro. And if you were to do the same trip by a mid sized car, that would be roughly €95. So there are four competitors in the mix.
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So to send everyone by plane would cost €14 cents per km. By bus it would cost €8 cents per km. And in a private car that would be €18 cents. And all this is compared to €60 cents being paid to subsidize the trains.
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Yeah, not to mention the money that could be made selling off the potentially more profitable routes, the rolling stock and the other assets. But of course, the elephant in the room here is that the Greek railway has huge debts. In the past, the Greek government has acted as a guarantor for the money the railway borrowed, which is something other European states do. But the difference with the Greek railways is it had a turnover in the low hundreds of millions, but it was able to borrow in the billions. So in 2010 its debt was 8 billion euros in and costing 450 million euros in interest payments. So even if the Greeks closed the system today and told everyone to use coaches, the Greek government would still be on the hook for those huge debts.
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Thank you, Rose. You're listening to More or Less with me, Tim Harford, in association with the Open University, now the first in a regular series of interviews with former presenters of the show. Actually, it may be a short series because there is only one Andrew Dillnott. He's gone on to better things as Principal of St Hugh's College Oxford and more pertinently, the chairman of the UK Statistics Authority. A couple of weeks ago I spoke to Andrew in his Oxford office.
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From time to time I have favourite pictures about numbers. That's the kind of a person I am. And my current favourite picture is an attempt to represent public spending. People don't easily understand how big or little public spending is, so I have a chart with 697 little grey boxes on it. 697, because £697 billion is how much public spending is, you know, a bit more than a hundred of those boxes in the national health service, nearly 100 of them are Social Security benefits for older people, 44 of them defence and so on. And in the middle of this picture of 697 little grey boxes, I've got one fifth of a box, 0.2 billion pounds, because that's the budget of the Office for National Security Statistics. And the point I'm making there is, look, this tiny amount, about 1,3500 of public spending is what we spend on getting the data that we then use to allocate almost all of the public spending. Because to know how much health spending to spend in your local authority, how much education money to send there, we need to know how many people there are and what they're like. So it's a way of representing how small this beautiful and enormously important thing is.
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How would you rate the state of statistics and data in the uk?
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They're well produced, they use appropriate methodology. All of that is very exciting. And you and I, we know how much fabulous stuff there is. If there's a difficulty that we have in the UK with statistics, I think the key one is that people don't realise how important they are. So the automatic thought of the journalist or the minister or the senior civil servant, when faced with a new problem, is not go and find out what the data says, let's go and look at the truth, it's to do other things. And all too often the data is asked for by the journalist or the minister or the civil servant after they've worked out what they think the answer is. And I think we need to completely transform that.
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Perhaps we shouldn't blame politicians for not instinctively reaching for the statistics. I was just thinking about George Osborne's budget. He got into tremendous trouble for all kinds of policies that actually on this big macro scale, would hardly show up. And he was accused of having lost his political touch. So I suppose politicians, because we voters reward crowd pleasing moves, they need to have their political antennae well developed. They don't need to reach for the
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data well, they need to have their political antennae well developed. But part of that has to be the truth. And the data is a crucial part of the truth. So you can't have really well developed political antennae unless you've also looked at the data.
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Do you think we're making progress? Are we going backwards? I mean, sometimes I hear some politician just saying something completely ridiculous and I think the situation is just getting worse and worse. And at other times I think, well, there's a stats community, there's a geek community. Maybe the situation isn't that hopeless. How do you see it?
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I think there are some signs that things are getting better over the last 10 or 20 years. I think the availability of data has come along with a growing interest and there is a significant community. There are still, though, areas where, as you say, we seem to have a million miles to go. It's not very long ago that a major broadsheet newspaper in this country divided one number by another and got the decimal point in the wrong place and said that something that actually averaged out at about £400 a household averaged out at £4,000 a household. And that was the banner headline. And you think, well, how can we go on with that kind of error? So we've got a long way to go. But there are some exciting innovations and I think that the technology that's now available means that this is a moment to grasp, in the same way that the legal changes, the introduction of independence for the Statistics Authority four years ago, reporting directly to Parliament, that's an opportunity, a moment to grasp. So we who love numbers and should say something so with pride, this is our chance. These few years are an opportunity for us to get people to realise how important it is.
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Andrew Dillnott, chairman of the UK Statistics Authority. You might recall that last week we pointed out to the UK Statistics Authority that Immigration Minister Damian Green seemed to be trying to have it both ways by not publishing information about queues at Heathrow because it was internal management data, but then selectively using the data in a parliamentary debate. My interview with Andrew Dillnot actually took place before that exchange, just in case you were wondering. Now, forget the Olympics. The World Chess Championship match has just started. The champion is a man. His challenger is a man. In fact, there's only one woman in the top 100 chess players, Judith Polgar, who's been ranked as high as eighth in the world of chess. Some players have rather pungent views on the qualities of female players. For example, Levonoronian, the reigning World Blitz chess champion, has said women cannot play chess. Women are generally much too emotional for chess. If they want to play really well, they have to change their character and suppress their natural instincts. Every now and then, of course, some male sportsman shoots his mouth off about how the woman's game is rubbish. My favourite example is the aging Wimbledon winner, Bobby riggs. Who in 1973, in his mid-50s, challenged Billie Jean King to a five set match. Thanks to all the hype about the battle of the sexes, it was one of the most watched tennis matches in history. And Billie Jean King handed Bobby Riggs his own backside on a tray. Six, four, six, three, six three. But when it comes to chess, the performance of women is a particularly touchy subject because obviously chess is a mental rather than a physical game and there would seem to be no reason women and men shouldn't play to the same standard. So can a statistical analysis shed some light on the subject? We asked Simon Terrington, a mathematician and keen amateur chess player, to look into the question. He began his inquiries over a game of chess with Harriet Hunt, four time British Ladies Chess Champion and the highest ever ranked English woman.
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So I've got two pawns, which one do you want to choose?
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I'll have your left hand, please.
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My left hand? Oh, you're white, so you'll have an advantage. As if you haven't got enough already.
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We go.
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Pawn to king four. So Harriet's taken on D4.
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It's not really clear that Simon's come prepared for this game, despite saying that he's looked up all my games on Chess Boost.
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So, Harriet, you've been three or more times British Ladies Champion at chess. You're a very strong player. I first saw you play 20 years ago, aged about 14 or 15, I think, against a bunch of 45 year old men from Eastern Europe. But it's a fascinating thing, isn't there, that of the top 100 players in the world, 99 of them are men? It used to be a hundred. I just wondered what you think is going on there.
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Well, I think there are certain aspects of chess that are probably more appealing in general to men. I mean, chess is inherently a very competitive game. Even if you're watching children who are not playing very strong at all, the boys will sit there and go, I want to win, I want to kill you. And I have never ever seen a girl of that age do that. And wanting to win is really sort of a prerequisite to developing the skills that you need to win.
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When you were that age and you were playing all this tournament, did you feel that sense of killer instinct?
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My family was quite a competitive family and we played quite a lot of games of all sorts. I really got into playing chess because my brother Adam, who's also an international master, is three years younger than me and was playing successfully in tournaments. Sort of overtaking him was a Major. A major motivating factor.
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Alright, well, without really thinking about that, I'm putting my rook behind your pawn.
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Oh, but they're so horrible.
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Okay, I'm resigning that there's no way I'm playing on a rookie.
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That's just an insult refresh from that drubbing. Simon is with me now. Simon, you've been pondering this question for some time. What have you been doing?
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I think the place to start is a study that Oxford University carried out in 2007, and they analyzed the database of all the people who play chess in Germany. And they essentially found that the reason there are fewer elite female players is because there are just fewer women that play chess.
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That makes sense.
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Bit like more or less. It's a numbers game. The fact that more men play means that there are more elite men.
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You cited this study from Oxford. You've been looking at the numbers yourself as well.
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Yes. So I looked at the database from the English Chess federation of the 12,000 people who play in England and in Britain.
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When you say 12,000, I mean this is club players or officially registered players or something.
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F
Exactly. So these are the people who play in rated games. So we have a rating which shows how well they're performing and we know how many games they're playing and they're performing. Performance is officially tracked. And I did this because I wanted to investigate for myself why so many more men play than women. Because of course, that's the obvious question. If it's all driven by participation rates, why is it that so many more men play? And it looked like the right place to start was looking at young people, because in a sense, you're never going to be a great player if you don't play quite a bit when you're young. And essentially what you see is the age of 10 is the kind of high point for chess participation. And at that age, one in five of the players are female. So it's already got a big male skew. Between 10 and 17, you see a decline in participation with both genders. The girls decline more quickly than the men. It's not really clear why people are quitting over that period. I mean, you could hypothesize that the kind of pressure of senior school GCSEs might drive some people to choose to focus on schoolwork rather than chess. Some might say that's a good choice. And I would note that girls get better GCSE results than boys.
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Yeah.
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What's interesting, there is quite a bit of scientific research shows that there is actually a Very low correlation between chess and iq, which you would imagine would be totally counterintuitive because chess just seems like a brainy game.
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And do we know whether it's the best boys who are keeping playing? Do we know whether it's the best girls who are keeping playing? What's the quality of the people who keep going?
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Between the ages of 15 and 17, girls and boys have very similar performances. But between the ages of 10 and 15, actually boys have a slightly higher rating than girls, even though they're playing as many matches. Actually the girls play a bit more than the boys, which might suggest some form of self selection where people are dropping out because they're not doing as well. So they say, I'll give this up.
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A
And is it possible that this large gap in participation and this small gap in performance add up to this huge gap at the elite levels of the game?
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Basically, if you haven't started by eight or nine, you can forget it. In terms of the top 10, certainly if you haven't started by 18, you can really forget it. I mean, it's over. So I think the participation rates of children are really the driver. I think that's really the thing.
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Now, women and men generally play in different leagues, as they do in say rugby or football. I mean, why is this? I mean, there doesn't seem to be any reason in principle.
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F
It's odd. Judith Polgar is interesting because Judith Polga basically refused to play in the kind of female tournaments. She just said, I don't get it. I don't see why men and women shouldn't play against each other. Her results have been amazing and I think she's a great sort of role model.
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I would have thought that if the men are currently the best players in the world and the women are playing against each other rather than against these top male players, isn't that going to be a self perpetuating spiral? I mean, you've already said Judith Polgar, she's the best female player in history. She's beaten all the top male players. Can we draw any conclusions from her experience?
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F
I think we can draw a lot of conclusions, actually. It does kind of put to bed the idea that there's any fundamental genetic difference or there's a ceiling for women. She beat Garry Kasparov, who is up there with Fischer and Karpov as the best players in history. What happened was from a very young age, her father set out to train her and her sisters and they didn't think about this distinction between genders and had brilliant results.
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Simon Terrington and yes, I am aware of the irony that everyone I've interviewed this week has been a man. We'll try and do better next week. That's almost all we have time for this week. Do please keep your comments and questions coming in to More or less@BBC.co.uk or check out our website and podcast@BBC.co.uk more or less before we go, a word about Maurice Sendak, the brilliant children's author and illustrator who died this week. We wanted to mark the occasion because Maurice Sendak not only entertained generations of children, but also helped many to learn to count, including my daughter, with a little book called 1 was Johnny sung here by Carole King
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9 was the
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robber who left looking pale 8 was the tiger who chased him to jail 7 the blackbird flew off to Havana 6 was the monkey who stole a banana 5 was the turtle who crawled off to bed 4 was the dog who slid home on a hose Lane was Johnny Three was the cat who pounced on the rat Two was the rat who left with the cat and one was Johnny. One was Johnny. More or Less was presented by me, Tim Harford, the undercover economist at the Financial Times. The producer was Richard Knight and the editor, Richard Varden.