In the last blogpost, I gave six practical examples of how useful ratios can be.
Rates of change
They’re even more useful when the decision-maker has an idea about thow these ratios change over time; i.e. what their rate of change is.
Take the first example from the last blogpost, quoted in full below:
- How many large companies? How many medium-sized? How many small?
There are winners and losers in the current crisis (see section 4 of The food supply system into the second month of lockdown) and larger predatory companies are already eyeing up to take over large highly geared companies as well as smaller ones made vulnerable by illiquidity and/or insolvency.
- I’ve heard large service providers give ball park figures of 300 large companies on their books, 3500 medium-sized companies and 350,000 small ones, roughly a ratio of 1:10:1000.
- What is the optimal ratio within the agrifood sector, and in sub-sections of it (e.g. primary producers, packers, processors, distributors, wholesalers, retailers)
- And what policy and fiscal interventions need to be trialled to establish an optimal ratio?
All but ‘essential’ firms were shut down at the beginning of lockdown. When firms re-open, many will be faced with liquidity issues, as cash flow will have dropped, perhaps catastrophically with the sudden, steep decline in economic activity. SMEs are particularly vulnerable.
The kinds of policy and fiscal interventions required as lockdown restrictions are lifted will be different from those required later on as businesses succeed or fail. Moreover, fiscal and policy measures need to prepare the UK economy for the next crisis, whether short term (e.g. to respond to a second or even third surge of Covid-19 infections) or mid to long term and whether anticipated or not
We’re talking change here, and the speed of change. And the rate of change matters.
Policy and fiscal measures need to change over time
Robust socio-political decision-making needs to take into account what’s effective and ethical. And what’s appropriate at one time may well be inappropriate or or ineffective at another.
In the current rapidly changing economic landscape this outs undue pressure on decision-makers. We therefore suggest five guiding principles for socio-political decision-makers in the immediate short-term:
- Focus on a “new normal” which will be continuously changing. This means trial and error and, ideally, fast fail. Transparency is therefore vital to ensure trust and confidence.
- Favour companies that supply healthy foods, including takeaways and composite foods (such as ready meals).
- Supporting existing and new SMEs, and be transparent about recognising the [aggregated] economic and social contribution they make, and their contribution to the resilience of the UK food supply system.
- Enable the innovative and agile in SMEs and micro-organisations (including the self-employed).
- Favour children and the disadvantaged (the newly so as well as the previously so).
The importance of graphs
Change is dynamic. Rates of change are a dynamic upon a dynamic.
Dynamics are really difficult for humans to ‘see’, let alone measure. Our ever-ingenious specie has invented ways that our visual perception can perceive what’s going on.
We’re primates. And like all primates, nearly all of us depend heavily on sight. (People who are visually impaired or blind invent a range of workarounds, some in the world, such as guide dogs and techno-kit, some in their brains.)
A familiar example is the speedometer on a car dashboard.
It’s always some kind of graphical information. And herein lies the usefulness of graphs, two of which (a line graph and a pi-chart) are in the image above, as the examples below.
Two examples of how of graphics that help us ‘see’ rates of change
1: The three maps below are from the European Centre of Disease Protection and Control.
Map A shows the geographic distribution of Covid-19 cases worldwide on 1st March. Maps B and C show the geographic distribution nearly 12 weeks later on 21st May, each presenting slightly different data. Even a superficial glance gives a sense of the rate of change over the twelve weeks.
2: The three graphs from the Food Foundation below represent rates of change in fruit and veg prices. The line graph represents the changes over the last 16 months (Jan 2019-April 2020). The two block graphs compares 2019 and 2020 prices for fruit and vegetables respectively.