Too Much Technology and Too Little Regulation? The Spectacular Demise of P2P Lending in China

In this paper we trace the rapid growth and spectacular demise of online peer to peer lending in China. Drawing on a series of interviews conducted in China in 2017 and 2018, we follow the expansion of the sector from the establishment of the first major platform in 2007, through the introduction of limited regulation in 2015 in response to a series of platform failures to the final de facto closure of the whole sector by the regulator in 2019–20. However, contrary to claims that technology would reduce risk, the new platforms appear to have given rise to new risks by connecting dispersed borrowers and lenders whilst the regulator had decided to leave the sector to evolve without specific regulation. While there were hopes that P2P lending might increase flows of finance to the SMEs that are excluded from the formal banking system, ultimately too much of the activity on the P2P platforms was characterised by what we term ‘transactional ambiguity’ and ‘legal fluidity’: it occurred on the fringes of legality, often amounting to Ponzi schemes, fraud or unlicensed banking activity. In contrast to the banking sector, where their intermediation role ensures that banks are the focal point in the event of borrower default, and conventional moneylending, where moneylenders bear the risk of default, defaults and platform failures in the P2P sector distributed losses far and wide around the country, often to lenders who were not capable of bearing them. Whilst the central government did not formally stand behind the P2P sector (as it does with banks because of the systemic implications of their operations), the government could not help but become involved where P2P lending transmitted losses to lenders who were dispersed around the whole country. Ultimately, central government announced a wholesale reversal of policy that led to the sector effectively being closed down. The episode cautions against overly optimistic claims that technology can eradicate the risks of fraud and fundamental uncertainty inherent in lending, and reminds us that, without appropriate regulation and adequate internal controls, financial institutions will always operate in ways that result in instability.

Negotiating incomplete contracts

When planning is possible, as in predictive environments, comprehensive contracting is not only desirable, but also useful. However, under conditions of fundamental uncertainty, as is the case in non-predictive environments, incomplete contracting approaches likely prevail. In this study, we explore how trust in such environments affects the way in which venturing professionals negotiate, and how the outcome subsequently manifests itself in the negotiated agreement. In particular, building upon a sample of Norwegian firms, we find that stewardship relationships are more prone to incomplete contracting approaches than agency relationships, paving the way for a relational approach to contracting when uncertainty is high. Implications for theory and practice are discussed.

An exploratory study of heuristics for anticipating prices

PurposeThis research explores how investment and central bankers cope with strategic uncertainty when they anticipate prices. The uncertainty originates from others' decisions and their consequences, and cannot be meaningfully reduced to risk. The authors postulate that, in order to cope with this type of uncertainty, bankers use simple rules, also called heuristics. This study aims to identify such heuristics and the psychological processes that underlie them.Design/methodology/approachThe authors interviewed 22 managers of teams tasked to anticipate prices, in two leading investment and central banks. The primary data came from in-depth, semi-structured interviews lasting 30–60 min, supplemented by our observations during the on-site visits, emails and phone calls when preparing the interviews, and reports published by the banks. Data were coded and heuristics were induced over multiple rounds by multiple researchers.FindingsBankers (1) construct simple game representations of markets, (2) make inferences to gauge opponents, (3) become alert when they see too much agreement and (4) communicate coherent narratives. Heuristics (1)–(3) are employed when the pace of decision-making is fast, whereas (4) is used for longer time scales. In sum, bankers exhibit reciprocal bounded rationality, wherein interaction partners are mutually aware of and adapted to the fundamental uncertainty of the task and their limited resources.Originality/valueHeuristics for anticipating prices have not been studied empirically outside the lab. The findings may help integrate conceptualizations of heuristics in the simple-rules and fast-and-frugal-heuristics research programs and improve market efficiency.

The Spirit of Democracy

How does one revitalize democracy in times of crisis? Democracy is today challenged by populism and elitism, as well as by the resurgence of new forms of authoritarianism. The Spirit of Democracy: Corruption, Disintegration, Renewal shows that while we have good reasons to worry about the corruption of democratic practices and ideals, these worries are often attributable to questionable assumptions about what democracy is. Drawing on Montesquieu’s classical work on the spirit of laws, the book sets out to reconceive the ways in which we understand and conceptualize modern democracy: from sovereignty to spirit. According to Montesquieu, different political forms are animated and sustained by different spirits: a republic by virtue, a monarchy by honor, and a despotic form by fear. This book argues that modern democracy is a sui generis political form animated and sustained by a spirit of emancipation. The removal of divine, natural, and historical authorities in political affairs unleashes a fundamental uncertainty about the purpose and direction of society. In a democracy, we respond to that uncertainty by sharing and dividing it equally. It emancipates us from a state of self-incurred tutelage. Based on this argument, the book develops a new theoretical framework for studying the corruption, disintegration, and renewal of democracy: what it is, how it begins, and where in society it plays out.

Estimation of cancer cell fractions and clone trees from multi-region sequencing of tumors

Multi-region sequencing of one or multiple biopsies of solid tumors from a patient can be used to improve our understanding of the diversity of subclones in the patient's tumor and shed light on the evolutionary history of the disease. Due to the large number of possible evolutionary relationships between clones and the fundamental uncertainty of the mutational composition of subclones, elucidating the most probable evolutionary relationships poses statistical and computational challenges. We developed a Bayesian hierarchical model called PICTograph to model uncertainty in the assignment of mutations to subclones and an approach to reduce the space of possible graphical models that postulate their evolutionary origin. Compared to available methods, our approach provided more consistent and accurate estimates of cancer cell fractions and better tree topology reconstruction over a range of simulated clonal diversity. Application of PICTograph to whole exome sequencing data of individuals with pancreatic cancer precursor lesions confirmed known early occurring mutations and indicated substantial molecular diversity, including multiple distinct subclones (range 6 - 12) and intra-sample mixing of subclones. As the complete evolutionary history for some patients was not identifiable, we used ensemble-based visualizations to distinguish between highly probable evolutionary relationships recovered in multiple models from uncertain relationships occurring in a small subset of models. These analyses indicate that PICTograph provides a useful approximation to evolutionary inference, particularly when the evolutionary course of a patient's cancer is complex.

Agile Approach Versus Classical Approach in Project Management with Regard to Leadership Change

Agility is a term which is modern and present nowadays in all levels and areas of companies. The increasingly changing situation on the market and the fundamental uncertainty forces companies to be more flexible and this flexibility cannot be covered only by classical existing approach. Therefore, this article results from the need to introduce a new approach and to compare it with the existing classical approach. This article gives a definition for agility, discusses different scientific theories about agility and describes why agile approach is necessary in companies and where the differences between the previous classic approach and the agile approach is. The change has to be supported by leadership and for this reason in this article are introduced leadership types that support the agile change in the company.

Promoting Resilience in the Face of Fundamental Uncertainty

Complex systems at different levels (states, organisations, individuals) undergo phase transitions when faced with a sudden shock. The phase transitions are unpredictable and can lead to unstable states and also introduce a source of fundamental uncertainty about the future. In the face of this type of fundamental uncertainty, we know from pioneering work on population health that social determinants (e.g. education, employment, housing, etc.) will have a substantial influence on the ability of individuals and society to be resilient and recover from these shocks. This chapter will start with an overview of complex systems, phase transitions and the nature of fundamental uncertainty. These concepts will then be discussed in light of the COVID-19 pandemic. The importance of social determinants in promoting both mental and physical health, and thus resilience at individual and population levels, will be described and the chapter will finish with an exploration of historical and contemporary examples of means that can be used to support individual and collective resilience in the face of fundamental uncertainty.

THE MAIN TASK IS TO RENEW SUSTAINABLE SOCIO-ECONOMIC GROWTH (INTERVIEW)

Fundamental uncertainty about the pandemic development remains the main factor determining the further development of the world economy and hindering the assessment of the balance of risks. The decline in GDP may turn out to be less severe if the economic situation normalizes faster than expected. Academician of the Russian Academy of Sciences Abel Gezeevich Aganbegyan told the editorial office about what awaits the Rus-sian economy in the future, what complex of measures must be taken to overcome stagnation and resume sustainable socio-economic growth, as well as the situation in the global economy.