reinforced, further supporting long - term investors. the patience gene thrives, the impatience gene dies. natural selection results in a self - improving cycle, as with dieting, happiness and exercise. but there is a second equilibrium where this cycle operates in reverse gear. with a large fraction of momentum traders, prices deviate persistently from fundamentals. among untested investors, momentum strategies now flourish while long - term fundamentalists fail. the speculative balance of investors rises, increasing the degree of misalignment in prices. the patience gene falls into terminal decline. natural selection results in a self - destructive cycle, as with drug, alcohol and food addiction. for example, mcnamara ( 2004 ). christakis and fowler ( op. cit. ). these self - destructive dynamics would have been familiar to economist, and some - time investor, john maynard keynes. he quipped : “ markets can remain irrational for longer than you or i can remain solvent ”. in the sketch model, a keynesian dynamic selection process is at work. myopic finance bankrupts the long - sighted. this echoes an earlier evolutionary game in finance – gresham ’ s law. named after english financier sir thomas gresham in the 16th century, this refers to the tendency for bad money to drive out good. the first paper money example of gresham ’ s law pre - dated gresham. it came from china during the yuan ( 1271 – 1368 ) period. then, paper money drove out silver coinage. 22 this bad money dynamic has since been replicated across many monetary economies. china also provided the world with its first example of the reverse phenomenon – a selfimproving cycle of good money driving out bad. during the ming ( 1368 – 1644 ) dynasty, paper money was swept away by commodity money. 23 this dynamic has also since been replicated across a number of monetary economies, including dollarizing emerging market economies over recent decades. today, finance faces its own gresham ’ s dilemma – the patient or impatient path. innovation has, of course, transformed finance over the intervening years. liberalisation has resulted in far greater information and liquidity in financial markets. perhaps these developments have helped good finance drive out bad, nudging money towards the patience path? not necessarily. take information. in an evolutionary game, information is a double - edged sword. it supports the cause of the long - term investor, by allowing them more

economy ; 9 % of wages and salaries in the year to march compared to 4 % of employment. and within london its share is even greater. the average earnings of someone working in london ’ s financial intermediation sector in 2006 were around £90, 000. on that basis, the financial sector might account for around 20 % of remuneration in london. however it is still far from the only game in town. for example the work foundation ’ s fascinating new report on the creative industries suggests that their growth has contributed at least as much as the city to london ’ s overall performance. moreover, while the trend is upwards, there is a marked cycle in the financial sector. over the last 10 years, for example there has been a striking swing in employment with rapid growth during the dotcom boom followed by a sharp fall and subsequent recovery ( chart 5 ). the uk is a net exporter of financial services, running a surplus in 2006 of £26 billion ( or 2 % of gdp ) on financial services and insurance. north sea oil production peaked in 1999, and in 2006 was nearly 40 % below this peak. that reflects a strong cycle in financial sector profits ( chart 6 ) which is an international phenomenon – indeed, in the last 10 years major european financial firms and us securities dealers saw an even bigger cycle in their profitability than major uk financial firms ( chart 7 ). the same is true for earnings ( chart 8 ). this reflects the importance of bonuses which account for around 20 % of remuneration in the financial sector compared with around 5 % across the economy as a whole. the figures in the city itself can be considerably higher. a figure of 50 % is common in investment banking, in which a rough rule of thumb is that firms distribute about half their pre bonus profits to staff. it is estimated that 4200 workers in the city received bonuses worth more than £1million in 2006 / 07. of course the growth in those bonuses is contributing to the widening inequality of incomes at the top of the earnings distribution. chart 9 compares the 90th, 95th, and 99th percentile with the median and shows that the main change is at the top. if we break that top percentile down further, we see a more dramatic widening. this is not just true of the city or of the uk. the average ceo in the uk earns around 100 times more than the average worker but there is an even wider gap in the us, with the average pay