Suppose you had first-hand experience in both radical leftwing activism and the world of finance. How does the Occupy movement look to you? And what makes you say things like: "Karl Marx would have made a fantastic hedge fund manager"?

Brett Scott is a thoughtful yet lively guy in his late 20s, of South African origin, with long curls that jump in all directions. A fervent leftwing activist throughout his early 20s, he took an unusual detour from the road to become a full-time academic when he deliberately immersed himself in the financial sector. Recently he wrote an article here on Comment is free: Has the Occupy movement considered subverting global finance from within? In it he proposes that activists complement traditional forms of protest with a novel strategy he calls "impact anthropology". It involves, he wrote, "submerging oneself for the explicit purpose of internalising the rules and inner codes of the system you wish to impact. Gaining access allows one to obtain internal knowledge, and that leads to legitimacy within the system. This leads to an ability to create an impact."

It's an intriguing idea: not to make the long march through the institutions to change the system from within, but to gain inside knowledge in order to target the system and influence the people in it from without. How would that work?

We are meeting in the Paul coffee shop of St Paul's, where the seating area on the first floor has good views of the London Occupy tent camp. Brett's immersion in finance was a two-year stint as broker in so-called "exotic derivatives", which we'll come to in a minute. Let's do Marx first.

"I've discovered that in some senses there's this artificial dichotomy between 'bankers' and activists. In the anarchist movement you've got really smart and hyper-critical people on the one hand, but you've also got a lot of group-think on the other. It's the same thing in finance. If you look at hedge fund managers, the really successful ones are often the type of people who dare to think against the grain, constantly looking for divergent, big-picture views and ideas. That's why I think Karl Marx would have made a fantastic hedge fund manager."



It's a comfortable myth, Brett says, that finance and radical activism are two worlds entirely apart and opposed. Another comfortable notion is that the problems of the financial sector are due to "a group of elite people in a dark room somewhere, and that all you need to do is find those people and take away their power to solve the problem". The fact is, Brett has come to believe, that the problem is much more deeply rooted, and that many more people are implicated in this crisis.

"The banks are just one manifestation of the more general consumerism and aspirational structures in broader society, which permeate right down into the activist movements themselves. Changing the banks is as much about subverting yourself as it is about subverting some external structure. If only it was as simple as finding that dark room."



His time in both worlds left him "with a hybrid identity, halfway between the radical and the mainstream". It is strange, he says, how sometimes he feels as much an understanding and empathy for his former colleagues in finance, as for his fellow activists in the tents. Some things he liked better in finance than in activism.

"In the activist movement, conflict is often regarded as an aberration, hence this need to maintain appearances of harmony and constant consensus. In finance you can clash with somebody and the next day you're cool again. It's not personal."



His hybrid identity leads him to ask painful questions of the activists, such as: would you sacrifice your identity to bring about the change you want? What he means is that the Occupy camp exudes a very strong counterculture feel which must put off a lot of potential allies. Adds the man with one leg in both worlds: "It is understood in activist circles that you overshoot, you deliberately go over the top to create space for less radical alternatives." The model here is the bra burners: they knew many people would be put off by their actions, but their radicalism made the moderate demands of other women look more mainstream.

Still, it is worth asking: where is the tipping point, where "going over the top" actually alienates the people you set out to create space for? It is striking how few of the 99% have come forward to support a movement that claims to defend them from the 1%.

If there's one change Brett would like to see, it is that we "drop the myth that finance is terribly complicated". That misconception actually serves the interests of the industry, he thinks, and activists seem to find it comforting too. "Just count the number of times that the term 'derivative' comes with the word 'complex' attached to it. This creates a barrier to knowledge."

Also, he says, "one of my personal crusades is to break down stereotypes and encourage more financial engagement from the leftwing movements – there's way too much unproductive mudslinging and misinformation that helps no one".

Now imagine we go back 30 years and do one of those teach-ins. How would Brett explain the dreaded word "derivative"?

"A derivative is a bet, but it's a bet you can also use to protect yourself from future risk, a bit like insurance. Let's take a derivative instrument like an inflation swap. It can be used to offset the risk a pension fund faces with the risk a water utility faces. A pension fund suffers if inflation goes up, and benefits when it goes down (the higher the inflation, the higher the pension liabilities that the fund has to pay out). Thames Water, on the other hand, benefits from higher inflation because it is allowed to charge more for water when inflation goes up. So an investment bank designs an inflation derivative for them which says: if inflation is higher than, say, 3%, then Thames Water pays what it gains from that to the pension fund. And if inflation is lower than 3% then the pension fund pays Thames Water. The net result is that both institutions have controlled the risk that a change in inflation brings to their business operation. They have 'hedged' against the unexpected."



"The derivative also means they eliminate the possibility that a change in inflation in the other direction benefits them. But a pension fund or Thames Water is not a casino; they are conservative institutions that want to run a predictable business, and derivatives help them do so. In practice, the transaction takes place via a bank which acts as a middleman, bringing the two parties together and taking a cut in the process. Things can get a lot more complicated and 'exotic', and derivatives can be used for damaging speculative purposes, but in essence, many derivative transactions are pretty straightforward and potentially quite useful."



I don't know about you, reader, but before I started doing this banking blog, I had no idea how derivatives worked.

So what might people gain from understanding this, in terms of activism? Suppose you have worked in finance for a few years, and now you want to change things.

Before his finance days, Brett says:

"I was limited in how much I could go about achieving anything (ie I could take part in a protest, volunteer to do something, write a scathing article etc). Nowadays I'm using my financial knowledge to directly assist NGOs in issues like food speculation campaigns, shareholder activism and climate change finance. The traditional model of activism is to use public opinion to exert pressure on the policy debate. Say you are pissed off at Shell for what it does in Nigeria. The traditional way is to get stories out that affect public opinion, which in turn creates pressure on the government, helping you to lobby them and affect the policy debate." "An equally viable way though, may be to target money flows within the financial sector directly, for instance by going straight to the fund managers that invest peoples' money on their behalf. When the fund manager is deciding whether to invest in Shell, they build a picture of what the company is worth by predicting how much cash the company will make in the future, relative to the amount of risk it takes on. If you want to alter the value of Shell negatively, find a way to show the fund managers that the company is actually riskier than previously thought. For example, argue that it doesn't pay enough attention to the social discord it creates. Argue that it will be exposed to future climate change legislation and reputational damages. If fund managers revise upward their assessment of the risk of investing in Shell, then Shell's value suffers in a very direct way." "If an activist could approach fund managers in a language they will respond to, with an understanding of her work and awareness of the culture, incentives and constraints fund managers operate under … then they could make the most convincing case possible that Shell's operations in Nigeria actually pose a much bigger risk than the fund manager has hitherto believed."



This approach is the complete opposite to the insider-outsider, '1% versus the other 99' dichotomy that Occupy seems to be pursuing.

For activism of the 'impact anthropology' kind you need to have empathy for the financial professionals you target. But would they respond in kind?