EBHA In Memoriam to Chris Kobrak

On 8th January our highly respected colleague and friend and member of the Council of EBHA, Chris Kobrak, passed away. He held the Wilson Currie chair for Canadian Business and Financial History at Rotman School of Management at the University of Toronto (Canada), and has been Professor of Finance at the ESCP Europe in Paris. He was an auditor (CPA), and for years engaged in international business as a business man before he dedicated a second time himself to history, undertaking his PhD with Fritz Stern at the Columbia University of New York. Due to his German-Jewish roots – his father left Berlin in the very last moment in the 1930s – his main research interest lay with the German big business during the Third Reich. He produced a book on Schering, „National Cultures and International Competition. The Experience of Schering AG, 1851-1950“ that was published in 2002. Only a short-while afterwards, he co-authored with me “Big Business and the Third Reich,” in The Historiography of the Holocaust (2004). At that time Chris was very much influenced and motivated by Gerald D. Feldman and Peter Hayes and their work on National Socialism.

These topics paved the way for Chris to become active in the German Association for Business History (GUG), where he engaged in the working group that studied the role of business in the Nazi period. Also, he gave the keynote in April 2000 at the GUGs annual meeting on “The German Entrepreneur in the World. From Internationalization to Globalization” in Berlin. He was a regular visitor at GUG’s conferences and quite often in Germany undertaking research such as for the book, Banking on Global Markets: Deutsche Bank and the United States 1870 to the Present (2007).

Beside his research interests in foreign investment, banking and insurance history, regulation, corporate governance and political risk, he interested himself continually in the methods of his research field. He was passionate discussing appropriate research methods and questions, he never tired in asking complex questions and could argue for hours on the possibilities of history. A joint article with me on “Varieties of Business History” in Business History (2011) was just one outcome, which resulted from a panel with Gerald D. Feldman, Christopher Kobrak and Andrea H. Schneider. He wrote many more articles with great colleagues like Jeff Fear, Mira Wilkens and Jana Wustenhagen. And he edited a series of books with Per Hansen and Gabriele Teichmann amongst others. He always remained open to new research areas, such as with the question of “Finance and Family-Ness: An Historical Assessment,” in The Endurance of Family Business (2013).

His international family molded Chris. With roots in Germany and Ireland, he was born on 21 January 1950 in New York. His life in business led him to Japan among other countries. For academic career and personal reasons directed him to Paris before he began to strike additional roots in Toronto a few years ago. Chris greatly appreciated the intellectual exchange with colleagues; he passionately engaged himself in networking, and helped to establish the World Conference in Business History.

After he accepted the chair in Toronto, his experience with the German business association (GUG) inspired him to establish the Canadian Association for Business History (CBHA), modelled after the GUG. He was driven by the deep conviction that co-operation between business and academia is not just possible, but fruitful and inspiring, since it creates a mutual understanding, access to additional sources and new avenues for professional research. With his positive, winning and integrating way, he was immediately successful in finding potent allies for his new pursuits. The founding of the CBHA was Chris’ initiative and brought him great joy.

He was involved in many associations: besides the American Business History Conference (BHC) – where he served as trustee, he was for years the auditor for the European Business History Association (EBHA); he was at last member of the Council. No duty was too much for him, and every duty he performed with gravity and devotion. Program-committees, brainstorming pools, funding groups or organizational committees – everything that helped to improve the field–was worth his time. And he was a great benefit for every group for which he involved himself.

Chris was a personality. He was disputatious – and winning. He was intellectually outstanding – and wonderfully entertaining. But most of all he was relational and could build connections. His long list of publications does not only show that he worked fruitfully on a variety of topics, but also that he was highly co-operative, working in teams along with many co-authors. These proved enriching experiences for those who worked with him.

With Chris Kobrak the field of business history is losing one of its most energetic and vigorous members, who could bridge nations and continents and languages, who stimulated intellectual discourses, and who did not forget to live well on top of all this activity. Even if our discussions easily extended over a very long time, accompanied as they were by classical music and a good glass of wine, they always felt too short.

Chris Kobrak loved magicians. With his sudden passing, he spirited himself away – from one second to the other. In the end, this is perhaps a worthy and dignified way to disappear, although his professional output and legacy of his passion will remain on the stage.behind him Even if those, who knew him and who were close to him are perplexed by his passing: this is what magicians aim for!

Andrea H. Schneider


Financial exclusion – how to fight it

This week I went to the formal launch of the CSFI report on “Reaching the poor:  the intractable nature of financial exclusion in the UK”.  This highlights shocking figures on financial exclusion:

  • more than a million adults in the UK still do not have a bank account:
  • about 2.5 million people use expensive and largely unregulated home credit
    (doorstep loans);
  • at its peak in 2012, an estimated two million people took out short-term, small value
    payday loans; and
  • more than 400,000 households use the extremely expensive “rent-to-own” sector
    to purchase essential household goods.

And yet, the financial sector makes billions out of providing financial products which are either beyond the reach of the poor or hugely more expensive than for the rich.  Progress is painfully slow.  How can this be speeded up?

Learning from the past

If we look at the history of savings and lending institutions, the role of the mutual, not for profit, local community organisation stands out.  Yet the building society has almost completely disappeared, credit unions need less crippling regulation aswell as restructuring, and friendly societies are a tiny portion of the market. Many of these institutions, such as the Trustee Savings Bank and most building societies, were swallowed up in the boom years after deregulation. They need help to grow again.

Understanding modern day needs

The banking system is based on the premise that we get a job, earn a regular wage, start saving, borrow to buy a house, climb the promotion ladder, and then live out our retirement on a generous pension. It ignores the fact that most young people, by their early twenties, are heavily in debt.  There is no longer a natural career progression – income can go down as well as up.  And with zero hours contracts, it is almost impossible not to go overdrawn or max the credit card and incur huge penalties. A broken-down boiler can take you over the edge.  What’s needed is a rainy day bank account which allows occasional overdrafts at fair, and not penal, rates.

Recognising the importance of regulation

Pay day loans are less of a problem now their rates have been capped.  Banks have been forced, by the EU, to provide a free-of-charge bank account. Regulation works. It needs to go further, helping not-for-profit institutions and regulating those profit-making institutions which exploit the disadvantaged.

 Turning the problem upside down

At the moment the poor pay more than the rich for less attractive products.  Why should they? There are many ways to save which offer tax advantages, such as pensions.  What if you don’t pay tax?  Why should the rich get better savings deals than the poor?  It is far cheaper to buy insurance if you can pay in a lump sum.  What if you can only pay in instalments?  Why should the poor subsidise the rich? That’s also happening with the state pension age going up.  Life expectancy is linked to income.  Why should the poor subsidise the rich?  We’re a far cry from the 1970s and 80s when the rich paid income tax rates of up to 83% and a further 15% if the income was from savings or investment.  Now, it’s the other way round.

Government should take the lead. It should ensure the provision of savings products which offer cash bonuses instead of tax relief to those who don’t pay tax.  It should help those on low incomes to buy goods on fair terms.  And it should encourage mutual and low-cost savings and credit institutions.  The banks should be shamed into providing accessible and affordable financial products, not just for the rich but also for the poor.  People have a right to financial inclusion.  It’s time they were enfranchised.



Another take on global diversification

In my previous blog, I identified three ways to diversify globally – diversify by market size, naively, or use historical data to ‘optimise’ recognising that there’s no consensus  on which historical data to use (one hundred years of history or the past five years, annual or daily data, real or nominal returns….?)

The problem is even greater than how to decide how much to invest in each country.  There are two additional issues to address when diversifying globally.

First of all, should you have a currency view when you invest overseas?  Many fund managers offer products hedged into sterling.  Why?  Surely the point is to diversify currency risk as well as equity risk?  Or is currency a separate asset class?  In that case, the investor hedges currency risk and runs a separate portfolio with just currency exposure.  Unfortunately, there’s no academic agreement on which of these is the right approach.  But individual investors typically take the currency risk of investing overseas – or even in the FTSE100  – without realising what exposure they are taking on.  Many could not say whether their funds are hedged into sterling or not.

Second, when buying international funds, investors have a choice.  They can buy funds which have a mixture of bonds and equities, or they can buy specialist equity or bond funds.  Research shows that, of the three investment strategies I outlined above, the retail investor favourite is the naive approach – equal amounts in each fund.  And, as GestaltU argues in his blog, since there are more equity funds than bond funds out there, and more equities than bonds in so-called balanced funds, the naive approach leads inexorably to a heavy equity bias.  That may be a good solution for many investors, but it may not.

International investment is not for the faint of heart.


The rise of global asset allocation

Since the Brexit referendum and Donald Trump’s election as President of the United States, investors have woken up to the fact that it makes sense to reduce risk by investing in a range of overseas markets in a number of different currencies. .  This is particularly true in the UK, where the FTSE100 index has done reasonably well post Brexit as most of the top 100 earn revenues in foreign currencies, whilst the more domestically oriented FT All Share index has done much worse.

Exchange Traded Funds (ETFs) now allow investors to create a global investment portfolio at relatively low cost. Just a few clicks and you can be tracking the S&P500, the Nikkei index, or an index representing non-UK European stock markets.

The dilemma the investor now faces is how much to put in each country.  In other words, what asset allocation strategy to pursue?  How much to put in the domestic market, how much overseas?  Traditionally, investors preferred to put most of their money in their home stock market. Their brokers recommended shares listed on the local stock exchange (and there were provincial stock exchanges until the 1960s).  They felt more comfortable buying shares in companies whose buildings they could see, like J. Lyons tea rooms, or whose products were advertised, like Liptons tea.  But there is no such thing as a home market now.  Famous British names, such as the Mini, are owned by foreign companies.  Buying UK shares is effectively buying a set of international securities with varying amounts of exposure to different countries and currencies.

So the 64 trillion dollar question is: how much to put in each country?  There are essentially three different ways to decide.

One is the Capital Asset Pricing Model (CAPM) approach, which says to buy what’s available. For example, North American stock markets account for 41% of global markets by value, Asian markets 33.3% and Europe 19.5% (including 4.7% for the London Stock Exchange).  You can amend these numbers to make allowances for double counting or illiquidity, but the implication is clear.  Put most of your money in the US, Europe and Asia, including less than 5% in the UK.  There’s no local bias in this approach.

The second approach is what is called naïve diversification, which was the approach recommended for global portfolios pre-World War I, the first era of globalisation.  This involves dividing the world into say ten different regions and putting an equal amount in each.  In those days, there was no currency risk; you could buy sterling-denominated securities relating to countries around the world. Today, that’s no longer the case. And this strategy could mean putting 10% into each of Africa, Australasia and South America compared with their combined importance in world markets of less than 5%.  And it definitely means putting no more than 10% in the UK.  An even more challenging strategy?

The third, most popular way is to adopt a Portfolio Theory approach, but tinker with it.  Portfolio Theory is a model which inputs historic returns, volatilities and correlations between markets, and comes out with the percentages to invest in each to get a good expected return for a minimum of risk.  This is the approach which many of the robo investor sites are offering.  Tell them your risk and return expectations and they’ll come up with an asset allocation strategy.  This will have what appear to be random percentages in different markets, neither related to size nor evenly spread. Although you can’t see it, these are the outputs from the PT model based on the risk and return characteristics of each market.   What you don’t know is how much the outputs have been tweaked to pander to local bias.  You can guess that they have tweaked if the UK percentage is higher than 5 or 10%.

There is no perfect solution.  But at least we know one thing.  No longer are we expected to put most of our money into UK securities or funds. Now, we are expected to argue the other way.  Why should I invest more than 5 or 10% of my portfolio in the UK?  Global asset allocation has come to stay.

Guide to the unprotected

Listen to a fascinating Radio 4 Money Box programme on an 1863 investment guide by a woman – Emma Sophia Galton – the sister of the eminent statistician Sir Francis Galton and, as her pseudonym reveals, the daughter of a banker.  Her target audience was women, especially the unprotected single women with no man to manage their affairs.  Her easy-to-read primer included advice on how to write a cheque, what to say to your broker when you wanted to buy shares, and how to diversify your investments.  She also recommended taking advice from one man of business (not two) and never to marry without a prenuptial agreement or ‘marriage settlement’.  Miss Galton lived to the ripe old age of 94, presumably living on her royalties, as the final edition came out in 1901.


Another celebration of Chris Kobrak’s contribution to humanity

See an intimate portrait of Chris by Jeff Fear

Reflections on the Death of Christopher Kobrak

Chris refereed my first finance history article and encouraged me to work in the area. He was a gentle giant.

The Past Speaks


I’ve just learned that the distinguished business historian Chris Kobrak has died. I’ve known Chris from conferences for a number of years and over the course of the last eighteen months I got to know him quite well. I deeply respected Chris as a human being and a scholar and proximity to him caused me to be a better person by being more international, more financially literate,  more generous with money, and to pay more attention to ethics. When I say pay attention to ethics, I do not  mean to suggest that I was unethical before I met Chris. Rather, I mean that I am more conscious of ethical issues when engaged in writing and thinking about business history and in thinking university teaching and life more generally.

To understand why Chris was an important figure in the global business history community, we need to consider his family background and career…

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