Inverted Alchemy: An Integral Economy

We Are The 0.00000021928% and We Vote

2012-01-28T17:54:00.000-08:00

Alright all you conspiracy theorists, Occupites (#OWS), adherents to the economics of Republican Presidential candidate Ron Paul, and inquiring minds who just want to know; it’s time to finally name names. It’s time to establish beyond all reasonable doubt who it is that really runs the show. It’s time to get into the weeds and I’m not talkin’ about this nonsense 99% / 1% divide that has galvanized so many for so long. No, I’m talkin’ about the real, hardcore, scientific notation kind of global population derived REAL power behind the entire global economy.

In no particular honorific order save the inspiration from the seventh century BCE Etruscan, Greek, Phoenician, proto Semitic, Visigothic mash up we now know and love as our alphabet (props to the Visigoths!):

Bank of America*
Barclays*
BlueMountain Capital*
BNP Paribas
Citadel LLC*
Citibank
Credit Suisse*
D.E. Shaw Group*
Deutsche Bank*
Elliott Management Corporation*
Goldman Sachs*
JPMorganChase, N.A.*
Mizuho
Morgan Stanley*
Nomura
Pacific Investment Management Co. LLC (PIMCO)*
Societe Generale
The Royal Bank of Scotland
UBS*

*Indicates an entity that has determination control over the Americas, Asia Ex-Japan, Australia and New Zealand, Europe/Middle East/Africa, and Japan.

The most recent action taken by these folks is a wonderful Kodak Moment which offers a snapshot (which you can print on some EktaChrome, well, not so fast) of the constitution of the group that holds Damocles’ Sword over the global economy. Their meeting reportedly took place on Thursday, January 19, 2012 when they unanimously voted to determine that Eastman Kodak Co. had indeed become bankrupt. I would have loved to have been a fly on the wall to hear the debate on this one. After all, the company had filed its Chapter 11 business reorganization petition in the U.S. Bankruptcy Court for the Southern District of New York on, are you ready for this, January 19, 2012. The actual proceeding is even more fascinating.

The first question voted on by this august body was, “Has a Bankruptcy Credit Event occurred with respect to Eastman Kodak Company?” There were 15 recorded “Yes” votes and 0 recorded “No” votes. The second question – which is slightly more existentially mysterious given that they had just determined that Kodak was BANKRUPT was, “If a Credit Event did occur, is that date of the Credit Event January 19, 2012?” Once again, a unanimous vote in the affirmative. Then the third question, “Is the date on which the DC Secretary first effectively received both a request to convene the Committee and Publicly Available Information that satisfies the requirements of Section 2.1(b) for the Credit Event with respect to Eastman Kodak Company January 19, 2012? (This question is asked to determine the Event Determination Date.)” Yet again, all voting “Yes”. And the final question, “Should ISDA hold one or more auctions to settle Relevant Transactions with respect to which a Credit Event Resolution has occurred in accordance with the terms set out in the form of Credit Derivatives Auction Settlement Terms with respect to Eastman Kodak Company?” By now, I bet you’re on pins and needles with the suspense kind of like watching the NY Giants stick it to the 49ers in OT. But no surprise here – they all voted “Yes”. This model of democratic process and consensus should make our hearts beat in patriotic unison as, finally, we see a group of independent parties come together with such magnanimous unanimity to confirm…well, let’s see, an undisputable, publicly disclosed event that had ALREADY BEEN PUBLICLY REPORTED marking the long heralded demise of one of America’s iconic industrial brands.

Alright, so what’s up here? What is ISDA and why is there democratic process so important when determining when a publicly reported event has, in fact, been publicly reported. The International Swaps and Derivatives Association “… fosters safe and efficient derivatives markets to facilitate effective risk management for all users of derivative products.” It’s pretty important to understand that, while nominally representing as much as the entire world’s GDP at their peak in 2007 and now representing notional value exceeding that of any sovereign nation on Earth, these swaps are (and I will simplify) quasi-insurance products sold by financial institutions like banks to investors who buy a bet against one day owning a defaulted credit.

My personal favorite part about the ISDA and its mission is the fact that the decisions on when a “default” has been triggered is NOT based on what you and I would necessarily see as rather empirically derived from a credit agreement. Say that you don’t make a payment on your credit card or mortgage. That’s an event of default and, based on a series of remedies set forth in your contract with the financial entity, you may have a time during which you can cure the breach of your contract after which the financier can take action such as foreclosure on your assets. By the way, that’s been happening a lot lately. But the institutions that extend this debt financing to customers do not agree to play by the same rules. For them, they get to decide when a literal default is actually a default. And remember, they are NOT disinterested third parties with ANY independence. Every decision they make triggers an event when the bank, for example, has to lose the ‘asset’ of the defaulted loan, and the investor has to pay up on the insurance policy and ‘own’ the defaulted instrument. So it’s no surprise that the board is made up of a mutually assured destruction membership of sellers and buyers who get to decide when they have to pay up to each other.

ISDA is made up of real people who work for real institutions with real names. And before you start feeling squeamish about this conspiratorial sounding event fixing (note my diplomatic avoidance to suggest that any of these actions should be reviewed by the Justice Department under the Sherman Act despite the fact that ALL competing institutions agree on prices), be delighted to know that you are likely one of the beneficiaries of this scheme. If you’ve got a retirement plan, a life insurance policy, or any other managed fund where you don’t know the company into which all of your money is invested, you’re assuredly pumping liquidity into this dance.

And, not surprisingly, it is this system that gives us the seemingly endless headline about whether Greece has “defaulted”. For those of us who actually live in the non-collusive illusion world of swaps, the answer is that Greece defaulted when their capacity to service their debt ended. Kind of like when you don’t make your mortgage payment because you’re out of work. But that’s not the world that counts. The world that counts is made up of the arbiters of consequence identified above and these are the ones who would have to pay up big time if a default was declared. The “Determination Committee” – an unregulated group of real people – gets to decide whether they are accountable when the chips are down. And, I know you’ll be stunned to find this out but they have a remarkable track-record of deciding that their problem is… well, not their problem.

Let’s face it. ISDA isn’t “them”; it is “us”. It has 825 members who happily benefit from the complete opacity that the public has with respect to their specific activities. During the heady up markets when “wealth” was being created, no one was occupying anything screaming for transparency from this legacy of the Reagan Administration. And now that they control more financial instruments than the notional value of any nation’s GDP, they have become the un-elected, unaccountable, inaccessible, arbiters of all of our futures. It is OUR blind participation with blind investments that pumps the blood that animates this supranational organism and it’s OUR conscious decision to reclaim our individual responsibility and accountability that is the ONLY path to build A MORE PERFECT UNION!

If you didn’t know about ISDA before reading this, send this blog link to 10 of your friends and see if we can all start waking up!

To understand the importance of this group, you may want to refer to this sample Auction document to get a clearer picture on how the economy in which you’re participating actually works.

Intrepid Into the Unknown

2012-01-22T10:40:00.000-08:00

From last Spring’s loyalist cavalry punctuated protests in Tahrir Square to the shivering tired, huddled masses yearning to breathe in #OWS enclaves and police lines dotting chilly cities across America, the rhythm of disenfranchisement seems to undergird the vox populi. Ironically, this primordial stirring seems to gyrate combatants on both sides of the 99th percentile battle lines. From the 20-something Occupite who cannot find gainful employment with her liberal arts degree with a specialization in conflict studies to the recently engorged Goldman Sachs executive wondering how he’s going to make ends meet with his paltry slice of his government-subsidized $1 billion profit sharing bonus, the future holds terrifying opacity for both. With the eurozone in free-fall, the U.S. in insolvency denial, and the BRIC hunkering down with protectionist policies for the foreseeable future, our economic and social system failures are now well past transient and have become a fixture.

This week we saw the media, the government, and the markets callously misrepresent the employment picture yet again as the Department of Labor released its January 19th data. The alleged improvement to a seasonally adjusted rate of 325,000 new benefit seekers (supposedly good news) was the statistical façade for the ACTUAL number of people seeking state benefits which was a whopping 521,316. Civilian Federal employee unemployment rose nearly 100% in the week’s data and newly discharged veterans’ unemployment rose as well. And most alarming, while totally neglected by media and markets, is the fact that from 2008 to the present, we’ve permanently lost close to 6 million ‘covered employment’ jobs. In other words, with unemployment still placing millions in distress, our government and its interlocutors have shrunk the denominator by 4.7% placing even the flawed statistics at an unemployment rate pushing 13%. Getting better? No chance in hell.

In the face of these blatant abuses of data to evoke the illusion of progress, it is no wonder that many in the public find themselves certain of the fallacy of the established order. In this conclusion, they are correctly taking the measure of things. Regrettably, however, I have encountered, during this same time, the thus-repulsed masses clinging relentlessly to the agents of the incumbency as they clamour for an alternative experience. “Give me change,” they cry, “but make sure that it comes in a form that I find palatable.”

Georg H. W. Hegel (German philosopher; 1770 - 1831) in his Philosophy of Right ponders the question of public deception in ways few modern thinkers dare inquire.

“A great mind has publicly raised the question, whether it be permitted to deceive a people. We must answer that a people does not allow itself to be deceived in regard to its substantive basis, or the essence and definite character of its spirit; but in regard to the way in which it knows this, and judges of its acts and phases, it deceives itself.”

“No matter what passion is expended in support of an opinion, no matter how seriously it is defended or attacked, this is no criterion of its practical validity. Yet least of all would opinion tolerate the idea that its earnestness is not earnest at all.”

“Public opinion deserves, therefore, to be esteemed and despised; to be despised in its concrete consciousness and expression, to esteemed in its essential basis. At best, its inner nature makes merely an appearance in its concrete expression, and that, too, in a more or less troubled shape…. Who does not learn to despise public opinion, which is one thing in one place and another in another, will never produce anything great.”

Allow me an example. Last May, I wrote a blog post in which I challenged the world to get engaged with a dislocated community that needs to have its basic needs addressed including developing reliable access to clean water. Since then, hundreds of people have ebbed and flowed around the idea; some passing through the arena as spectators and some suiting up to go out onto the field to play in the match. For over two decades – first in Mosaic Technologies and then in M•CAM – I have become accustomed to the voyeurism inspired by our fusion economy ethical engagement structures that indict all conventional business and social narratives. I have also become somewhat immune to the wistful attraction predictably preceding the near unanimous passive or violent repulsion experienced when individuals become aware of the completeness with which we animate our activities outside the realm of conventional thinking and acting. But what I find the most amazing is the number of individuals who profess a desire to learn how to engage transformative processes that we’ve demonstrated can be reliably replicated throughout the world but would like them to have boundaries of time, budget, logistics, and hierarchical (un)certainties – NONE of which exist when you’re truly operating outside the enslavement of the mechanized colonial industrial complex and memes.

Which brings me back to Hegel and the succor provided by his nearly two century old wisdom. Incumbency (the ‘bad guys’ in many popular circles) and transformationalists (the ‘good illumined beings’ in many popular circles) too often find themselves equivalently enslaved by “acts and phases” by which they deceive themselves. The axiom which states that “Problems cannot be solved with the same consciousness that created the problem,” needs to embrace the corollary that “Solutions cannot be manifest through the application of metrics conventionally used at the time the problem was defined.” (This corollary is my humble contribution to the greatest philosophers of all time!) Your impulse that ‘something needs to change’ is an intuition that is trustworthy. Your reflex to look for both the utilities with which you’ve become comfortable (schedules, budgets, creature comforts, etc.) and the validation of others (encouragement, praise, peer validation, etc.) through which you’ve come to expect affirmation are in absolute error. If We the People seek to engage the needs of humanity and the ecosystem in ways that alter our collective experience of enslavement and extractive wont, we must embrace a liberty from the trappings of convention at all levels and accept that the world we seek will be unrecognizable through the optics with which we’ve existed in the consensus illusion of the present.

Alchemie invertere - Mission Accomplished

2012-01-15T23:28:00.000-08:00

Plumed serpents, white horseman, a passing comet, morphogenetic butterflies, you name it – all cluttering up the metaphoric pantheon of heralds of the end of one era and the dawning of the new. In some myths, the new is prophetic fiery cataclysm that melts everything into an apocalyptic puddle save those with fire retardant robes. In others, a celestial harmony vibrates the plaque from the incumbent order and allows the diaphanous-clad vestal light-beings to emerge. For me it was a ball cap wearing, green shirted fellow – we’ll call him ‘M’ to protect his identity – at the Airways Hotel in Port Moresby yesterday afternoon (Sunday the 15th for those of you wondering what timezone I’m referencing at the moment).

M had heard that I was in town working with several landowner groups in our on-going effort to encourage the government of Papua New Guinea to stand-up to the innumerable national mining, tax, customs, employment, firearms, and international securities laws abuses relentlessly perpetrated by gold mine operators from Australia, Canada, and the United Kingdom. The exploration license for gold mining in his home had lapsed and he wondered if there was any possibility that I would be willing to consider helping to sponsor his village’s effort to apply for, and obtain the license. If, he argued, we would help his people we could form a joint venture where we could develop a gold mine without having the brutality – burning homes, beating local community members, forced removal of people from sacred lands – all manner of blights that had been visited upon the village by previous explorers. He had a written proposal personally addressed to me identifying all of the clans including the names of the 48 clan elders. The letter contained their statement of unanimous endorsement of our invitation to work with them to use their market resources “so that goods and services such as education, health, roads and bridges, airports can flow to the communities to improve the standard of living so that poverty and law and order problems can be reduced.” He laid a giant map in front of me and pointed to two mountains.

“This is my home where my family lives,” he said pointing to a spot on the middle of the map. “And over here is the mountain that is a spiritual man. Here, when a man enters this mountain, the time clock ticks faster making it dark quickly.”

He described the area between the two mountains where the land was given a Western name because there were gold nuggets “hanging all over the mountain”.

I sat for nearly 10 minutes while M gave his impassioned pitch for our involvement in this project.

“Tell me about the people who live on these mountains,” I inquired at the first moment he paused in his carefully rehearsed presentation.

He shifted gears and went into an explanation about the matrilineal and patrilineal dynamics of the major clans separated by a valley but united in marriages and traditional Customary practices and a common language. During the whole of the first 15 minutes of our interaction, he never looked me in the face preferring to look down and to the left, his head slightly bowed.

At the next pause, I slowly inquired, “M, tell me about Custom. If you are from your village but the gold is spread across several villages, are the wishes of the people all in alignment to actually have a mine here?”

His head snapped up and he looked at me perplexed.

“Yes, we want the license to develop the mine,” he replied.

“I understand what you’re saying,” I replied, “but that’s not what I was asking. If a decision is made in your village to mine in an area where the other village has a Customary use of the land – gardens, burial plots, ceremonies, etc – is there a way in which you build consensus about how such decisions are made? For example, if the sacred mountain has a lot of gold but it has more Customary value, would you and your people agree to leave the gold untouched and preserve your values?”

He looked at me for about 30 seconds with his eyes wide open. “I cannot believe this!” he exclaimed. “I’ve never heard of a white man who would even know to ask about this question. When I tell my people the words you are saying, they will think that you are one of us – one of our clan.”

For the next hour, M and our team discussed the ways in which we have engaged other situations similar to this in other parts of Papua New Guinea. His near constant refrain was, “I cannot believe I’m hearing our language from a white man!” The afternoon wore on as we laid out the sequence that we would use if we were to engage in a review of the entire spectrum of values held by the communities and how one might go about aligning community desires with the abundance over which they had stewardship.

As our time grew to a close, I was transported to a conversation that I had with Peter Buffett, the collaborating composer of “Blood Into Gold". Prior to writing the song for the U.N. commemoration event of trans-Atlantic slavery, I shared a dream with him. The dream had visited me after he and I spoke of a bit of his creative writers-block in coming up with a song commemorating slavery. In my dream, a small child – a girl – wandered through humanity’s history visiting alchemists - from Egypt to Greece to Europe to the Americas to Asia - all chasing the elixir that would turn the mundane into gold. As she watched, each alchemist from all parts of the globe and every epoch of human existence, in desperation, would lash out in exhaustion and pour human blood into their potion and, each time it was human blood that would ultimately be transformed into gold. In my dream, the girl looked at me and asked, “Will anyone ever turn the gold back into humanity?”

Wherever that little girl is on this 15th day of January, 2012, the answer is, “Yes.” It just happened. And if you would like to learn more about our Inverted Alchemy efforts, you’re just an e-mail, phone call, or visit away.

Imagine All (Imaginal) the Butterflies

2012-01-08T16:28:00.000-08:00

a.k.a. In Praise of Reptiles

“Why do I feel that the more I ‘wake up’ the more dead I feel?” lamented a dear friend over the holidays. He, like so many others is realizing that the great Adam Smith consumption of the human soul – exchanging passionate, purposeful engagement for a paltry salaried existence as a consumable unit of finite production – is bankrupt. And, along with the disillusioned hordes of similarly trafficked, transacted lives, he was struggling with the seduction of the post-modern puff-pastry spirituality which celebrates the birthing of a new humanity with rhinestone encrusted rouge optic consciousness. This oily elixir can be purchased by attending just the right number of over-priced weekend retreats where purveyors of positivism piously promote panaceas for the pernicious proclivities of the pedestrian populace. Like Epaon inspired penances in 517 (later laundered in the fourth Lateran Council), this vacuous promise of a post-enlightened effervescence seems, all too often, to smack into a very different reality. Namely, the more aware, awake and turquoise you become, the more dizzyingly seasick you feel.

Over the course of the last several months, I’ve been intrigued by the frequency with which I’ve encountered the Deepak Chopra credited “Caterpillar Effect”. In glorious simplicity, this metaphor of the potential for humanity goes something like this…

The caterpillar eats ravenously and it starts to ‘die’… then some cells (creative “imaginal cells”) imagine a new future … they do some ninja moves on immune cells in a primordial soup inside the carcass of the caterpillar … they tag team into making a beautiful butterfly and, viola, flight!

You can hear the extended play story here. You see, if just enough creative imaginal cells get together, the metaphor implies, we’ll have a new emergent, metamorphic experience on Earth. And, the illusion invites, there’s something aspirationally beautiful about this experience. You know, it’s a butterfly.

Which got me thinking; “I wonder how a post-modern guru has been credited with this phenomenon and why so many people think that butterflies are a good metaphor for the next phase of humanity?” So, like I do, I tried to find out what metamorphic biologist unleashed this timely narrative which has become the transcendent ideal of New Agers, Birthers, and Enlighten-nexters. Turns out, we can thank Chester I. Bliss (damn, who would have thought we could have had such a perfectly apropos last name?) who, in 1926 unleashed Deepak’s Imaginal Imaginarium in a paper entitled “Temperature Characteristics for Prepupal Development in Drosophila Melanogaster,” published in the Journal of General Physiology. Oops! Not very recent. Not very with it. And, hold on, isn’t Drosophila Melanogaster the fruit fly? Why, yes it is. And Bliss cited the original work on imaginal disks studied in metaphorically less suitable bugs like the blow fly and the apple maggot. I wonder how throngs of enlightenment seekers would ooh and aah if they’d hear their transformation heralded as blow flies and apple maggots?

Now we can all chuckle about this little selectivity in our speciation of transcendent metaphors and pass it off as of little consequence. But that’s before you take into account my friend and the thousands like him who, having gorged themselves on the leafy foliage of a system that rewards gluttonous consumption, pupate into a nutritious gooey ooze and imagine waking up to beautiful wings warming in the sunlight ready to waft freely on the lilting breezes in a post euphoric reward for having transmografied. Imagine all the people… yes, go ahead and hum the song, … waking up to find no wings, no breeze, and overcast skies. Imagine finding out that when you awaken, you apprehend the cost of your unconsidered consumption. Imagine finding out that your monetary system – the same money that you paid the enlightened expert at your retreat – has led to the enslavement of a humanity you didn’t recognize before. Imagine finding out that the minerals and energy that you use are costing the lives of thousands who are murdered and displaced by corporations who feed your 401(k).

Might I propose, a more mundane, possibly more appropriate metaphor more aptly aligned with the consciousness that our species evidences on a far more reliable basis? And for this proposal, might I remind you that in every culture that has perpetually inhabited their homeland for over 5 millenia, it is the reptile – turtles, crocodiles, and serpents – that are the metaphor for spiritual source and transformation. These animals, far more like the typical experience of human awakening don’t molder into a soup only to emerge in a glorious, fragile butterfly. No, when the skin that served one phase of their existence no long serves its purpose, they molt. They scrape and slough against rocks and obstacles breaking loose the flaking, dead encrustations that keep them from moving into life with the flexibility and dynamism they need and, when they’ve removed the last old dead skin, they’re a more beautiful, fresh version of themselves – just improved.

Let’s turn the 2,000 years of anti-serpent mythology on its head and start embracing the wisdom of the ancients. Last time I check, National Geographic has some amazing pictures of lizards eating butterflies… but that’s another blog post.

Right Scenario, Wrong Waterway

2011-12-31T16:58:00.000-08:00

Over the past six weeks oil prices and their inextricable correlated dollar cousin have been allegedly responding to the reported threat of Iran’s interruption of the Straits of Hormuz. As tired as this war-game scenario is, for some inexplicable reason, it still seems to scare globally myopic investors into playing volatility games with currency and energy. Actually, the explicable part of the scenario is the timeless adherence by Evangelical Christians and their apocalyptic allies to manifest their desire to see certain horseman bridled for some prophetically mandated showdown in Israel. And given the number of Prince-of-Peace advocates who fantasize about the bloodbath orgy that will usher in their new earth – a fanaticism that cannot be discounted given how many prayer breakfasts portend would-be tactical launch code initiations – the relevance of the geography in the global economic scheme of things is correlated to religious blinded ‘gundamentalists’ (a term coined by my dear Egyptian friend Moustapha Sarhank). While I have long ago tired of trying to tackle this sociopathology, I find it amazing that the global markets are overlooking the true waterways that could truly disrupt global trade.

One of the most problematic contributors to global economic instability are marginalized – frequently financially disenfranchised – communities who, in desperation fueled by the world’s collective blindness to their plights, turn to asymmetric violence to gain recognition. And while the number of groups thus defined are too numerous to count as we continue to ignore ever widening swaths of humanity, there are a few geographies that, unless we awaken to their destitution in 2012, will be catalysts for epic instability in the near term. So, on this first day of the New Year, let me encourage you to wake up and at least figure out where these places are. Better yet, learn about the people that live in the vicinity and see what you can do to make a difference for them before they make an explosive difference for the world.

Somalia. Now if it weren’t for the collective intelligence and media co-opting during the Bush-Cheney regime, we would all be conversant about the increasing volatility coordinated by individuals – armed by Europeans, Russians, MENA interests, Asians and, yes, military suppliers from the U.S. – who have callously seen the starvation and torture of their fellow countrymen as expedient tactics to build allegiances built on terror aimed squarely at the base of Maslow’s hierarchy of human needs. Al-Shabaab and their extensive sectarian adherents and competitors continue to expand while we spent hundreds of billions chasing our Congressional and CIA-supported (yes, remember when we were arming ‘Freedom Fighters’ during the Soviet occupation of Afghanistan before they turned into modern-day, al-Qaeda militants) ‘enemies’ into the hinterlands of Pakistan, Afghanistan and countless other countries. Had we invested a bit in feeding Somalis and insuring that starvation caused by infrastructure failures wasn’t such an effective recruiting tool for militants, we could have lessened the risk now posed in the Indian Ocean and the Gulf of Aden. Rather than the Straits of Hormuz, the more relevant risk is expanded technical sophistication – proven in the successful U.S.S. Cole attack – in Yemeni and Somali operatives who, armed with unmanned undersea vehicles can disrupt 30% of global shipping and well over 50% of energy shipments from the Middle East. Do something as a blog reader? You bet. Look at who is arming the conflict and who’s benefiting from the East African instability – particularly the banks that are funding deals in the region and become a voice to inform your investment managers and your friends.

Indonesia, Malaysia, Singapore. No place in the world represents a greater single point failure than the Straits of Malacca. In the relatively accessible areas of the waterway – like Rupat, Alor Gajah, and Meral Tebing – well placed naval strikes could not only disrupt seafaring trade but could profoundly disrupt key economies that rely on transshipment – Malaysia and Singapore. Sinking freight ships or blowing up LNG or CNG vessels thereby creating massive kinetic and thermal damage would have a long-tail effect on the flow of trade into and out of the Bay of Bengal, the Gulf of Thailand and the South China Sea. While the security infrastructures of Singapore and Malaysia are acutely aware of these geopolitical risks, little is being done to address growing micro-insurgency in Indonesia and the growing ties between them and other disaffected groups. Once again, failure to address factors that contribute to recruitment now will spell disaster later. And since there’s no radio preacher in Virginia or Texas yapping about the return of a savior in this part of the world, we’re ignorant of issues impacting this region at our collective peril.

California. Whether it’s the unmanned subs transporting drugs from Mexico and Central and South America or the undetectable, anti-cavitation, silent propulsion subs owned by Pakistan and other nations within range of the Pacific, the West Coast of the U.S. is remarkably vulnerable. While we’ve focused unfathomable naval attention on the Middle East, we’ve largely ignored our vulnerability in Southern and Central California. Drug dealers can penetrate our defenses with narcotics and guns. It wouldn’t take much to have other payloads onboard and, for the right price everything from Long Beach to San Francisco is in range.

Our government – at every level – has demonstrated remarkable blindness to our real vulnerabilities. We’ve got more Achilles’ heels than we have feet which is not a good position in which to find ourselves. This leads me to my recommendation that we very publicly, very intentionally focus conversations and attention on matters that are camouflaged by 24-hour talking head media puppets of the regime. Companies are entering their season of Annual Meetings. They all ship goods and energy through the waterways of import. They all rely on goods and services that transship these regions. They all have supply chain vulnerabilities that are impacted in material ways by these issues. And you, some of whom are shareholders who get anonymous proxy statements and invitations to Annual Meetings can become active in asking the questions that we all ignore at our collective risk of great instability and destruction. The system isn’t too big to address. It just needs a few people with the courage to pose the question nobody is asking. Be one of those people. Understand the supply chain of the companies in which you’ve invested BEFORE you blindly return your pro forma proxy and ask questions about what your investments are doing to mitigate the human factors that, if ignored, will spell calamity for more than just the markets. In this New Year, make a resolution to be informed and act on that information. Maybe we can dodge the bullet meant for the Archduke Ferdinand. Look it up!

Images courtesy of Google Earth

Seeing Red

2011-12-27T13:30:00.000-08:00

This post needed to wait until the reports of the Christmas Day meeting needed to be made public. Expect another post on the New Year!

As most of the Occident celebrated the 4th century fiat which misplaced the lambing season (the reason why shepherds would be in the fields with their flocks for those of you without an agricultural background) at the Roman winter solstice – Dies Natalis Solis Invicti – a star was rising in the East if you were a Wiseman looking for such a thing. Somewhat ironic that the Roman church – the same Rome that reportedly executed the venerated New Born – chose this day less as a celebration fit for buying plastic imports from Asia and more as an affront to the pagan traditions of, well, here it gets a bit circular, Rome. And while we’re at it, I am intrigued, in light of last week’s post, about the near silent astronomer geeks (silent, save the little whirring sound made by the minute gears in their telescope mounts) who try to figure out what the Iranians (Persians, Magi, etc) saw that was the “star in the east”. One of my favorites is the work of University of Notre Dame’s theoretical astrophysicist, Grant Mathews who suggested that the ‘star’ wasn’t a star – rather the April 17, 6 B.C. alignment of the sun, Jupiter, the moon and Saturn in the Constellation Aries sandwiched by Venus and Mars. So ironic that so much of our consumer based economics revolves around a capricious date when a shepherd to the poor and outcast was allegedly born in abject poverty. Uh oh, I may be sounding a bit Scroogy!

But back to the real star of December 25, 2011 – the meeting of Chinese Premier Wen Jiabao and Japanese Prime Minister (for now) Yoshihiko Noda in Beijing. Marking the epiphany of their 40th anniversary of normalized relations in 2012, these two men announced their intentions to move the economic fulcrum of the globe Eastward while most Americans and Europeans were pickling themselves in eggnog – carbo-loading for the post Christmas sales orgy. This largely dismissed meeting is more symbolic than substantive in the minds of most Western-educated (and compensated) economists. And, in the near term, there may be some truth to this. However, as one of the few people who has been sounding the horn for nearly a decade about the structural instability of our Bretton Woods inspired system, I must, yet again, remind you that this is NOT to be taken lightly.

The disintermediation of the dollar happened precisely as I had forecast. As of this agreement – entered into in 2011 – China and Japan have agreed to formally demote the dollar as a conversion or clearing currency. However, of greater import is Japan’s agreement to buy Chinese bonds. It is this latter point that is more likely to keep modern-day Herod’s awake in their bed chambers. Because if you want to go out and exterminate future threats, this bond exchange in the East is the real long-term currency and economic threat. Japan’s relevance as the postwar reconstructed manufacturing behemoth is gone. This position has been taken by China, Vietnam, Thailand, India and, to a lesser extent, Korea. However, its currency reserves of $1.2 trillion are being tactically deployed to insure that it still has influence in key markets. And it’s placing its bets on China, India, and Korea.

At this time, it would be prudent for those who find themselves uncomfortably jittery about what feels like a collapsing empire to look to the Oriental Star and see where it’s moving. You may find a swaddled baby or you may find a newborn power that will shape generations to come.

Wake up! There’s more than a New Year coming.

Following A Star

2011-12-18T16:45:00.000-08:00

Amelia Earhart started the year with the first solo flight from Hawaii to California in January. Beer was canned in the United States for the first time in the same year. The no-fly zone over the White House went into effect while Franklin D. Roosevelt was putting the finishing touches on the New Deal’s 3 Rs: Relief, Recovery and Reform. Social Security was born and, in December, so too was my father, Aaron Martin. Within his life time, many of the technical barriers that were surmounted in his natal year have been vaporized. So it is slightly ironic that 76 years later, on this day, FDR’s Social Security and New Deal – in their modern form – are as ill-advised as they were when they were born. In his nomination acceptance speech, Roosevelt was indistinguishable from politicians today – same rhetoric and same empty logic.

“There are two ways of viewing the Government's duty in matters affecting economic and social life. The first sees to it that a favored few are helped and hopes that some of their prosperity will leak through, sift through, to labor, to the farmer, to the small business man. That theory belongs to the party of Toryism, and I had hoped that most of the Tories left this country in 1776.”

“But it is not and never will be the theory of the Democratic Party. This is no time for fear, for reaction or for timidity. Here and now I invite those nominal Republicans who find that their conscience cannot be squared with the groping and the failure of their party leaders to join hands with us; here and now, in equal measure, I warn those nominal Democrats who squint at the future with their faces turned toward the past, and who feel no responsibility to the demands of the new time, that they are out of step with their Party.”

“In the years before 1929 we know that this country had completed a vast cycle of building and inflation; for ten years we expanded on the theory of repairing the wastes of the War, but actually expanding far beyond that, and also beyond our natural and normal growth. Now it is worth remembering, and the cold figures of finance prove it, that during that time there was little or no drop in the prices that the consumer had to pay, although those same figures proved that the cost of production fell very greatly; corporate profit resulting from this period was enormous; at the same time little of that profit was devoted to the reduction of prices. The consumer was forgotten. Very little of it went into increased wages; the worker was forgotten, and by no means an adequate proportion was even paid out in dividends--the stockholder was forgotten.”

“And, incidentally, very little of it was taken by taxation to the beneficent Government of those years.”

“What was the result? Enormous corporate surpluses piled up-- the most stupendous in history. Where, under the spell of delirious speculation, did those surpluses go? Let us talk economics that the figures prove and that we can understand. Why, they went chiefly in two directions: first, into new and unnecessary plants which now stand stark and idle; and second, into the call-money market of Wall Street, either directly by the corporations, or indirectly through the banks.”

Anybody up for occupying something or somewhere? We could, in this moment, conclude that within my father’s life, we have done little to advance our state of affairs. And if you want to come to that conclusion, you can look at this weekend’s failed WTO intransigence where the zombie Doha-round still refuses to die.

However, if you’d rather not find yourself beset with the hopelessness of our long-bankrupt sense of socio-economic advancement evidenced by a life-time or more of redundant colossal inequities and injustice punctuated by ill-advised wars promulgated in the name of freedom to promote our infantile, imperial quest for the resources stewarded by others, than there’s a lesson in the stars that merits telling in advance of nativities and Persian astrologers.

I was standing in the morning sun at Zama – the Mayan walled city misnamed by the Spaniards Tulum when mistaking the Mayan word for “wall” as the name for the city – taking in the another deep drink from the cenote of wisdom that punctuates the Yucatán. My love affair with the legacy of the Inca, Maya, and Aztec is directly attributable to my father’s amazing life and his most enduring Muse – his love for the heavens. Throughout most of his life (and all of mine) my Dad has stood under night skies in wide-eyed amazement peering into the expansive astral canopy. As a college teacher, he transmitted his transcendent love for the heavens to thousands of students. While I’m incapable of anything but casual observations of a few planets and a handful of constellations, there is no night sky that doesn’t immediately transport me to my amazing Dad. My father, like the Mayans who built their great temples and observatories, understands something that neither FDR nor any current occupant of either the White House nor the halls of Congress can comprehend. And it struck me, standing on the cliffs perched atop the crystal blue water of the Caribbean Sea, that I owe much of my capacity for insight to that thing that both seem to embody and teach. Namely, that to understand a thing, you need to put yourself in the right place removed from the pollution of human illumination, understand your role as a participating observer, and take in knowledge through triangulation.

Let’s unpack this a bit more. First, finding the right place. Many ethno-sensitive historians postulate that the Mayan’s valued astronomy and mathematics – including quite critically, geometry – as much, if not more, than most other human civilizations. Their fanatic obsession with time – not our petty hours or Gregorian days and years – was to insure their participation in the rhythm of the universe. Understanding when to plant, when to harvest, when storms may be coming, when eclipses warranted the revitalization of sacred myths. To inculcate knowledge into millennial records, they built temples and erected stones to illumine with the equinoxes and solstices thereby mapping the dance of the heavens INTO their everyday lives. Rather than trying to enclose nature to serve them, they placed themselves IN nature to live at a cosmologically appropriate scale. It wasn’t lamps and torches that lit their path to knowledge – it was the celestial keepers of time and seasons.

The Mayans, like my Dad, did not wait for someone to tell them the mysteries of the world. They ground stones, polished rock, understood optics, and undertook massive civil engineering projects – like my Dad hand grinding his first telescope mirror at his farm in Pennsylvania – so that they could actively participate in observation. Over the past 76 years, and notably, in the past 76 days of discontent about the injustice of our economy, how few have actually engaged in UNDERSTANDING what’s really going on? We know that there’s something amiss but we complain about being neglected rather than engaging in deep understanding about the systems that impact our lives.

And finally, all wayfarers, both then and now, understand that confidence comes through triangulation – not through the careless observation of a single point. In her amazing work with island navigators of the Pacific, Elizabeth Kapu'uwailani Lindsey was taught the synthesis of multiple factors including stars, horizon lights at dawn and dusk, wave patterns, the movement of living things and the sounds of the water during her sojourn in Satawal with some of the esteemed remnants of our world’s wisdom keepers. Like their Mayan counterparts, they knew that hunches could be birthed by individual impulses but navigation required the integration of multiple perspectives. My Dad and Mom lugged their troop of young sons to the great Aztec pyramids for the total solar eclipse in 1970 to experience the 3 minutes 28 seconds of darkness in which we learned so much about light. Climbing Teotihuacán’s steps (many of which were as tall as me), some ancient spirit must have pulled my still beating heart out of my chest and replaced it with a passion for as much breadth of experience as any life could hold. Throughout my life, my Dad and Mom invested heavily in literally moving us around and – in so doing – gave us a world of vantage points from which to triangulate our course through life. We would all do well, should we wish to Form A More Perfect Union, to get out of our myopic redundant environments and embrace perspectives as divergent as possible. In so doing, we just might find our way.

Happy Birthday Dad! Thank you for teaching me so many tools to navigate a path through life. And, by the way, Happy Anniversary tomorrow, Colleen. One more year until our quarter century and – just think, that’ll be on the eve of the Mayan’s 2012! Here’s to the return of the winged serpent!

Hey Buddy, Can You Spare Buffett a Buck?

2011-12-11T17:08:00.000-08:00

a.k.a. Why Warren reminds me of my mom

a.k.a. Congressional Bribes Suck

In the early 1970s, I remember my mom and dad debating whether we should fill up our car’s gas tank for $0.33 a gallon or drive a little further because the price might be $0.31. At the time, we were driving an American-made gas guzzler that would have had a curb weight of well over 3,000 lbs – not including the six occupants. During this time, my dad was an employee of the State of California and as such, a family of six living on a teacher’s salary in California did not push you over the poverty line very far so saving a few cents here and there made sense. Then, as now, food & gas – the products where most families spend much of their income – didn’t count in the CPI calculations and that wouldn’t much matter anyway.

This past week, while President Obama was extolling the financial merits of extending the Bush-era tax reductions on the much ballyhooed ‘middle class’, media outlets were reprising Warren Buffett’s ‘tax the wealthy’ faux challenge. Democrats and Republicans were exchanging barbs across the aisle trying to figure out who can pander to an electorate who has, since the installation of the Bush-era financial accountability deferral malfeasance of 1992 (complete with over 70 targeted tax breaks), evidenced a willingness to sell out the country for an extra $1 thousand bucks of somebody else’s money. Whether it is saving a few bucks at the pump in the 70s, getting a few bucks back on tax returns at the expense of the nation’s economy, or saving a few bucks at Wal-Mart, the single worst enterprise that has hit the consumption universe since humans evolved opposable thumbs, or at Buffett’s Dollar General, we seem to think that ‘a deal’ is something to which we’re entitled regardless of how that ‘deal’ came into being. For some reason, the generation born between 1930 and the Baby Boom, seems to share a rather extraordinary post-Depression frugal sense of acausal, synchronistic entitlement that seems to be resurging of late.

Which leads me to consider why Warren Buffett reminds me of my mom. It seems that both are eager to look for a deal. It seems that both are willing to consider a sense of shared responsibility in which there is room for generosity within a frugal self-discipline – both of them are extraordinarily willing to use their resources to help numerous others. By the way, whether it’s my mom’s work with Habitat for Humanity and similar causes, her tireless volunteerism or Warren’s philanthropic gestures (to say nothing for the generosity he’s encouraged in his children), I find this attribute most admirable and inspiring. And, while moderately aware that there are structural forces at play that make the system appear to be unsustainable, both seem to operate with a perspective that frankly puzzles the heck out of me. How on the one hand can social awareness be relatively high while consequence is so illusive? My parents work with future homeowners to build houses for the marginalized or under-employed – many of them displaced laborers who lost their jobs when U.S. manufacturing was sent overseas – yet they can still extol the merits of frugal shopping at the very stores that drove the production overseas. Warren can call for a tax on the rich to have ‘everyone pay their share’ yet Berkshire Hathaway’s largest public equity holdings are rife with corporations that are optimized for U.S. tax avoidance. Once financial resources are in their respective hands, they both do great things. But there seems to be a missing puzzle piece between frugal stewardship and the macro-system that is expanding economic imbalance at a remarkable pace.

In October 1973, during the U.S. airlift arming the Israelis during the Yom Kippur War in a program known as Operation Nickle Grass, OPEC countries decided to impose an oil embargo. They did so because they knew that Americans had become complacent with bloated oil supplies. To shock America into realizing the folly of its airlift, they reasoned, they’d discontinue or greatly curtail the supply of oil. Mind you, the Nixon Administration’s departure from the Bretton Woods Gold Standard accord had already added plenty of instability into the OPEC countries. Neither the Israeli-policy nor the oil-dependency lesson was learned. Part of the reason for this educational failure was due to the simple fact that Americans then, as now, live in remarkable ignorance of the interdependencies that support the supply chain for our consumptive excess. And while, for political expediency we decided to rename the Anglo-Persian Oil Company to the more palatable British Petroleum or BP by the end of the 70s because a certain friendly someone was no longer giving away his country’s wealth for the benefit of a few investors, we didn’t get more aware as a society.

Now, Warren Buffett’s Berkshire Hathaway has done well holding a big chunk of Exxon. And his Exxon holdings have, in a significant fashion, contributed to a modern political quagmire in Papua New Guinea where Exxon’s LNG program has fed on government corruption, forced community dislocation, and this week’s political unrest. Warren can be indifferent to this as he lives in Omaha – far from the people he’s raiding. And my mom is working to help take care of some of the Exxon displaced persons – corporate refugees. And for that effort, I salute her. But, until we realize that it is our duty as human beings to understand the cost WE place on this planet – including the mini lottery winnings we get from slashed prices and discounts – we’ll have more corporate refugees needing water in PNG and houses in Georgia and North Carolina.

Which leads me to my extreme disappointment in Congress. First of all, millionaires don’t create jobs, so enough with the blatant lies about tax breaks getting people employed. You want to buy votes from your constituents and donors. That’s fine but call it what it is. You want the “Silent Generation” and their Baby Boom and Generation X off-spring to fall for a few shekels when we all know that we’re already fiscally bankrupt. News flash… we know that opaque consumption got us into this mess. While your pandering may work for card-carrying AARP members, there are millions of us that are not suckered into your illusion so shape up. Why don’t you have the courage to stand up and tell us that the country is broke, that entitlements will be raided and curtailed, and that without a return to productivity, we’ll all be worse off than we were in 1973? Let all the Bush-era cuts expire. Starting with your own appropriations, start paying the country’s bills and ask us all to do our part.

And, Warren, here’s a better suggestion that would show that you care about this country. Why don’t you make an investment policy that mandates that EVERY Berkshire Hathaway public equity investment is predicated on insuring that no off-shoring of assets or revenues evade one dollar of legal tax collection or tax liability. You see, once the money gets to you, it doesn’t make that much of a difference. But if you had the courage to encourage corporations to build wealth (and have it taxed) in the U.S., you could really make a difference. So there it is – are you part of the Silent Generation or can you find the audacity to defy the odds and call for accountability where profiteering has enriched you?

Dark Matter Generation – Faster than the Speed of Light into Infinite Mass

2011-12-04T10:08:00.000-08:00

Maybe it was waking up early this morning and looking out over the frigid Wasatch Mountains dusted with a thin layer of snow on my bride’s birthday. Maybe it was contemplating heliocentricity’s bitter struggle with incumbent knowledge that held the Earth and Man at the core of created order. Maybe it was my compulsive accounting that accompanies the end of each Gregorian succession in which I assess the consequence of my actions and inactions – for good, indifference, or ill – as I observe the temporal serpent consume its tail only to reemerge in the coming of the new cycle.

I can’t put my finger on what centered my first thought this morning but I certainly know what it was. I want you all to know about my friend, Michael Richardson-Borne. I met Michael one late afternoon in Los Angeles as I was preparing for a presentation at a nameless, faceless convention center. Together with his friend (and now a friend of mine) Jeff Bellsey, he came to eke out a brief meeting sandwiched between my frenetic schedule. For some time before our meeting, Michael had been struggling to rationalize his impulse to convene a massive celebration of humanity’s potential – what he called ‘Summer of Heart’ – with the Hydra of monetary sponsorship. How, he asked, can you call forth transformation without giving up the soul of the impulse for the demands of funders? In a series of e-mails and phone calls, I offered little solace. Instead, I asked him to acknowledge his life’s abundance at the time he had the impulse to create ‘Summer of Heart’ and, rather than looking for the illusive ‘other’ resources, honor those that were in his path when the idea first coalesced. Rather than hearing a rejection for his vision, Michael set out on a journey that will be a vital part of our collective story. And his story is…, well, his. But what he’s stewarding is ours. And it’s that piece that draws my attention.

Michael has launched The Renaissance Project. This initiative invites the flirtatious floral impulses of the 60s into the gritty digital interconnected world. Hosting a venue for borderless voices to share creativity, art, and humanity, he has transformed his event-based artifact into a utility for global creative engagement. In short, Michael found that, in reflecting on his first impulse, his destiny in the moment of inspired animation was less about the muscle and more about the blood. After all, the heart, while getting entirely too much emotional attention, is important. But, its importance is manifest by delivering the vital oxygen and nutrients to the active cells throughout the body. In our effort to awaken humanity to its higher potential, our medieval impulse is to focus on the center of power – the contracting, driving muscle. However, the awakening now, as it was in the 14th century, was the decentralized exchanges that took place by those red blood cells that traveled to the furthest reaches and returned knowledge nutrients to the mind of Europe, then seated in Italy.

The lexicon of The Renaissance Project is a treasure-trove of wisdom. There are three terms that have ‘shown up’ in Michael’s project that I’d like to highlight for deeper consideration.

First, in his introductory video, Michael speaks of ‘Generation’. Now here’s a shock. According to the frenetic cultural anthropologists, a bizarre Moore’s Law acceleration has happened which has allegedly separated Michael and me by THREE generations. Oh, for the nostalgic Dark Ages days when generations were at least 20 to 30 years! This made me reflect on the birth of the term generation (no pun intended). “Generation” was first used in the transition from Old English to Middle English in the 13th century. Derived from the Latin generatio which meant ‘to bring forth’ or ‘to birth’, the notion that generation was a term to divide groups was introduced around the same time that our current view of humans being time-limited production assets was born. In the spirit of reclaiming Michael’s impulse, here’s one 60’s baby that is standing shoulder to shoulder with the age agnostic to call for the ‘bringing forth’ of a new story. Taken together with Joshua Gorman’s passionate efforts in Generation Waking Up, Todd Goldfarb’s Worldwide Tipping Point, Dori, Emily, Dustin… the extended family of the San Francisco guild, I see phenomenal potential rising from the erasure of time as a unit of division but rather as a utility of perspective and wisdom.

Second, I’m intrigued by the reclamation of the concept of Renaissance. There is no philosopher that more embodied the polymath of the Italian social movement than Pico della Mirandola, author of the courageous De hominis dignitate in 1486. Della Mirandola, unlike the artists who sold their creative souls for the patronage of the banking and clergy elites, had the audacity to stand before the establishment of the Church and boldly proclaim that both Mosaic and Christian teaching, along with Persian, Greek and ‘ancient’ theologies, all showed that humanity had the potential for inspired greatness. While I encourage all readers to taste the wisdom of this amazing mind and orator, I am struck, in particular, with the following passage in which an Italian philosopher tries to explain to conceited intellectuals of his time wisdom that defied their intellects:
“…the magic of Zoroaster is nothing else than that science of divine things in which the kings of the Persians had their sons educated to that they might learn to rule their commonwealth on the pattern of the commonwealth of the universe.”
For any of us from any period in time to actually find our higher purpose, we must realize that it is in the synthesis of wisdom that the seeds of cultural awakening germinate. Renaissance, then, is a companion to Generation. What Michael is offering is the birthing room for a reawakening – a remembering of that which humanity has known, understood, and for far too long, forgotten.

Third – and my personal favorite – he describes members of his community of artists and contributors as ‘Seers’. There is the witness aspect of this term – one who sees and documents – which is as vital to the Arab Spring and the OWS movement as it was to the Civil Rights marches, Kent State, and the etchings of the Martyrs Mirror. But, beneath the surface, a seer is far more than a witness. From Nostradamus to the Patriarch Joseph in Egypt, the ability to receive prophetic impulses and share them in a manner that can be seen and understood is a human trait that is sorely needed in our time. Ironically, in our post-modern science induced stupor, we can marvel at birds that change their flight patterns in advance of tsunami. We can accept that indigenous traditions can move in advance of volcanic eruptions by divining signals from nature. But we have become so digitally addicted that we’ve lost our powers of observation in the infinite orthogonality of the cosmosystem in which we live. A Seer is not an oddity. Rather a Seer is a soul unencumbered by consensus optics – someone or something that can perceive and communicate that to which others are willfully or culturally blinded.

I honor Michael for a host of reasons. First, he chose to Act. Emboldened by an impulse to follow his passion provisioned by the Abundance that was in his ecosystem, he rallied people, resources and passion around his vision and it became reality. Second, having been despondent after chasing financing for an artifact of an event, he found out that this phase of his journey needed HIM, not somebody else’s money. Few modern, young entrepreneurs have the capacity to untether their vision from the incipient paralysis associated with ‘funding’. Finally, as evidenced in the care with which he’s constructed the language and the framework for The Renaissance Project, he’s giving us all navigational cues so that we can find the song that sings us home…. (Thanks, Elizabeth and the elders for that one!).

Pie à la mode

2011-11-27T19:48:00.001-08:00

Before I digress into this week’s post, I must settle one of the great questions plaguing humanity for millennia (or at least for a few weeks). If you are having pecan pie, it is acceptable to serve it warmed with vanilla ice cream. If you’re really pretentious, you can make that vanilla bean ice cream. If you are serving grape pie warm, you can go with either vanilla ice cream or whipped cream. However, if you are serving grape pie room temperature or cool, than whipped cream is the only acceptable topping. And, let’s face it, pecan pie was made to be served warm so don’t even think about serving it cold with whipped cream. That’s simply not the way nature intended it! Grape pie clearly beats pecan pie when it comes to versatility but, don’t deduce from this empirical truth a judgment against pecan pie because, when served correctly, pecan pie is down right transcendent. If you want to access the sanctum sanctorum of my incarnation, add some dark chocolate chips into the pecan pie and I sublimate into pure white light – ice cream, whipped cream, at that moment, both are merely inconsequential annoyances to my state of bliss.

Which brings me to my digression for this week. In the midst of the festivities over the Thanksgiving holiday, I was inundated with four orthogonal fragments of the ghoulish mosaic of our current economic system. They came, as the geometric statistical metaphor suggests, from seemingly uncorrelated worlds but all converged on Thanksgiving Day.

First, I had the opportunity to peruse a series of videos recorded a few weeks ago at Zuccotti Park during the ‘occupy’ phase of Occupy Wall Street. Juxtaposing the video of voices of Occupites with the Department of Homeland Security’s impulse to ‘protect’ our social order from harmless people united by their generalized sense of disenfranchisement reminded me of the lunacy of Magistrates John Hathorne and Jonathan Corwin, the presiding judges that launched the Salem Witch pogrom. For the record, the Obama Administration’s henchmen, operating in concert with mayors across the U.S. is, at present, as pathetic as the ‘adults’ who turned petty childish vendettas into justification for capital punishment in 1692.

Against this backdrop, I was intrigued by the accounts of schisms in the Occupy movement around financial transparency. Apparently, the very group that sought to hold the “1%” culpable for their collective anguish, when organizing to confront injustice, scarcely made it one fiscal quarter before confronting their own autogenously generated financial inequality.

Concurrently, I was being repeatedly contacted by a number of short traders who wanted to use information provided by my company to out one of the more egregious public equity frauds of late. A company grossly misrepresenting its patent position to defend a market that will be energized by consumer electronics titans seeking to sate the appetite of the mobile device-addicted market is, at best, making misleading statements and, at worst, lying. Best of all, the SEC turned a blind eye as the company was allowed to issue a redacted securities filing from which ALL material information was deleted.

And finally, on the day that a mining license to one of the world’s largest metals deposits expired, a representative of the company’s European shareholder’s groups decided that, rather than engaging the landowners in a civil discourse about ways to develop mineral resources with some sense of equity, the best strategy was to sit in the Principality of Andorra and berate people half a world away for their desire to educate themselves about the capital markets. This group, officially endorsed by the chairman of the non-operating mining interest, is currently conducting a poll on its website to support a Chinese takeover of the mining operation while publicly suggesting that they have the interests of the local communities foremost in their consideration.

Which brings me to my opening point. In a zero sum, thermodynamic world, one participant’s gain is precisely offset by losses (or reductions) to all other positions. In short, the bigger piece of pie – in this case, pecan – I choose to eat, the less pie is available for all others. In the ‘ideal case’ of this proposition – the Nash Equilibrium in which choices made by one is the ‘best’ when taking into account all choices each other party will make – there are two assumptions. First, there’s an assumption of scarcity and finitude. In short, there are only a defined number of options for slicing the pie and there’s no more pie. Second, and Nash simply improved on Cournot’s oligopoly theories over one hundred years earlier, that the distribution of possible responses is a modelable set of conditions. But undermining both Nash and Cournot is the greater threat – namely the potential that neither the model nor the presumed actors have ‘perfect’ information in which case the game, model, and equilibrium are all useless.

When one steps back from my four cases of entities all seeking their ‘piece of the pie’ that is, in their illusion, fair, just, or equivalent, one can readily discern the spoiler in each of these cases. Not only do all the parties in the Nash Games suffer from imperfect information but in each instance, all actors are willfully abusing known information asymmetry to imbalance the equilibrium. Whether it’s the Department of Homeland Security missing the obviousness of their club wielding law & order minions (by the way, have I taken a ‘long’ position AECOM, Atkins, BAE, Booz Allen Hamilton, CACI Federal, CH2MHILL, CSC, Fluor, General Dynamics, IBM, ICF, ITT, L-3, Lockheed Martin, Microsoft, Northrop Grumman, SAIC, Boeing, Unisys, and Wackenhut – some of the proud American and European companies that are arming our “Crisis Response” units) or short sellers seeking to monetize the outing of a public equity fraud, keeping someone in the dark long enough to prey upon fear seems to be the best bet around. And, in true Inverted Alchemy form, the bigger point is simple. When actions rely on fear and information asymmetry to propagate a message that transacts monetary benefit to the message holder, there is no instance where this is morally or practically justified. More importantly, one of the oldest standards in contract law is that this action is not just reprehensible: in Common Law, duress renders a contract voidable.

Which brings me to the Common Defense. We The People have been parties to countless contracts that were entered into under duress. Under the threat of scarcity and violent reprisals, we’ve been asked to forfeit our humanity in the name of ‘Security’. Contract voidable. In the name of rising against economic tyranny, we’ve organized ourselves around a debt-based currency system that is illiquid and degrading in value. Contract voidable. In the name of fairness, we have relied on oversight agencies like the SEC to mandate transparency for public companies – an unmitigated disaster in confidence and performance. Contract voidable. And, when no longer capable of confronting our colonial tyranny, we seek to pawn our interests off on the Chinese after which we will deride them for the abuses we have initiated. Contract voidable. We The People are NOT helpless victims of a manipulative system. As long as we aspire to being the one holding the knife that’s cutting the pie, WE are the problem. It’s time that we step away from this Euclidean flatland illusion and take our role as the makers of pies – not merely their consumers.

One Foot In the Grave

2011-11-19T20:07:00.000-08:00

“What on Earth Will It Take” is a question posed by a recent film produced and released by Foster and Kimberly Gamble. It’s the question paralyzing so many these days. Institutional and private money managers are beyond caring about return. They just want to know if a currency is going to be around tomorrow, next week, or next month. Unemployed and under-employed hear politicians tell them to get a job as though that’s a novel idea that hadn’t occurred to them as they were out golfing at the club. Peace activists call for an end to the military and the industrial complex feeding its yawning jaws while offering no solution to the fact that such an end would expand unemployment by over 20%. Occupites demand equitable economic power distribution without realizing that the object of their derision (albeit many would love a bit more money in their own pockets) is but one tired illusion in the overall scheme of wealth.

Tragically, the solutions that are promoted – End the Fed; Cut the Military; Shrink Government; Stimulate Employment – all are both structurally ill-conceived and untenably amorphous to the point of convincing many to give up because there’s nothing that an individual can do. Beyond the obvious impotence felt by the average citizen when encouraged to dismantle vaunted institutions, these suggestions are so outlandish that they actually lessen the resolve of individuals to engage in transformative acts. More egregiously, these recommendations are utilizing the very Keynesian tools (when fueled by consumerism) that architected our current quagmire.

We don’t need to ‘End the Fed’. We need to discontinue our use and abuse of debt as the primary means of transacting value. Actively promoting geopolitical, social and economic justice reduces our actual and perceived threats. After all, when the Goldman Sachs structured, World Bank-endorsed mineral and energy resource heists lead to sovereign indebtedness and domestic unrest, it’s our 401(k) and investment plans that are fueling the violence. Actually researching the companies into which each of you invest and moving your money from tyranny will disarm more conflicts than any placard-carrying marcher has ever done. When Australian apologists like Papua New Guinea’s Chamber of Mines and Petroleum Executive Director Greg Anderson threaten sovereign officials with lies about “foreign investment” fleeing equitable resource development, where is the Australian government or public outcry for integrity? We need governments that are accountable stewards irrespective of their size. Stimulating employment perpetuates the illusion of a humanity that is fodder for Adam Smith’s productivity illusion. We need purposeful, productive engagement – not anonymous ‘employment’. The inflated illusion of employment fueled property accumulation as a proxy for ‘successful development’ has enslaved the masses to enrich the few.

This blog has been my Sisyphean quest for years to open minds and inquiry into unconsidered topics. Through these posts, I’ve shone the light on several topics that require expanded awareness and action. However none is more important, more central to the core of our systemic crisis than the one that has evaded the attention of most if not all of my readers. And so, while I could expand on all of the topics above ad nauseum, I’m going to take another stab at what I see as the root of our problem – our fear of Death.

Now, having just dismissed ending the Fed or eliminating the military industrial complex as too big a bite to chew without the benefit of Dr. Heimlich, many of you probably just recoiled with the existential impossibility of tackling fear of death. Some of you are probably shouting, “Actually, I think I’ll work on the dismantling of the Fed as that’s more doable than Dave’s silly notion.” You may be right. But hear me out before you jump to that conclusion.

I’m not referring to the cosmological pretzel that enshrouds the hereafter, the there-before, or the ‘whatever’. I’m specifically referring to an innovation that was created by a bunch of cheap Protestant Christians (and I am circumspect of maligning the term with a capital “C”) in the 18th century who decided to force clergy to call their own bluff by taking smaller salaries in life with the assurance that a ‘widows and orphans’ fund would be established to care for their loved ones after they were ‘called up yonder’. This ecumenical poker bluff lead to the creation of life insurance. Not by accident, the collusion between the hell-fire preachers of the post-Civil War revival heartland and the emergence of life insurance was a match made in…, well, let’s see. What’s the adage? “By their fruits you shall know them.” And it was Life Insurance – yes that ‘investment’ you are encouraged to make so that you don’t stiff your family in death with your over-expenditures and indebtedness in life – that was the DIRECT JUSTIFICATION and ANIMATING MANDATE for the creation of the Federal Reserve.

As I’ve pointed out on many occasions, 30 year debt, the hallmark of our debt currency, was thusly termed not because a Charlton Heston character descended from a mountain with tablets engraved with this sacred duration. No, 30 years was the productive life expectancy of a laborer for whom life insurance was justification to swindle people’s income to line the pockets of folks in New York and Connecticut. And, since the ‘risk’ of insuring had an actuarial table that expired with your productive life – 30 years – an inventory of investments needed to be created to park the money. It’s no accident that the founding shareholders of Reserve Corporation were LIFE INSURERS, not solely the exclusive, shadowy, nefarious New World Order bankers (sorry to all the Rothschild Bank of England provocateurs) so many seem to think are at the root of the tree of the knowledge of evil. Mind you, I’m not suggesting that there aren’t overlaps in ‘interlocking directorates’ as they were called but, let’s face it. It would make more sense to ‘Occupy’ Greenwich, CT and Metropolitan Life than it would to harass Wall Street brokers with over-priced lattes. And who is calling out the brokers of pre-destination and its evil demonic minion, eternal damnation? Oh, now did I cross a line with that one? You bet I did and it’s a line that few are willing to discern but many more ought to cross.

You see, if you really want to unravel the noose that is choking our collective economic order, you start by confronting your life… and your death. If you don’t accumulate vast indebtedness, life insurance is largely irrelevant. Yes, this means that you start living (uh oh, here it comes) within your means. If you don’t fall for the siren seduction of ‘tax-deferred pensions’ – that lovely managed account that has lost MORE VALUE being mismanaged by ‘professionals’ than your tax bill could have ever mustered – and actually invest in yourself, your community, and enterprises that you endorse and support, you will find that your present and future are both understandable and manageable. In short, if you simply step into a relationship with your life that doesn’t presume that responsible stewardship means outsourcing your end of life and death you’ll notice a few very important, system altering things. The U.S. Treasury and Fed will have a diminished role. Your investments will follow your values and, in many instances, these will be less likely to support anonymous human rights abuses and injustice that support tyranny and violence. Your communities will become places where your engagement and that of your fellow citizens will reflect your values. And, you just may find that more people find purposeful engagement where their livelihoods are linked to their contribution to value being provided – actual productivity measured with all the dimensionality of integral accounting.

Putting your debt based currency into a credit union is not going to change the world. For the record, your deposit in Wells Fargo or BofA was booked by them as their liability and they weren’t deploying it anyhow. They didn’t use it and holding it for you was not the source of their profits. And, as I’ve reported on numerous occasions, the FDIC is neither insurance nor funded so your money wasn’t safe. Re-aligning your life insurance premium into investments in credit unions, community banks or enterprises aligned to values you hold will actually change your world and THE WORLD. Falling for the tax-deferred illusion will not stabilize your future. It will enrich those who are currently failing to outperform indexes. Investing (money, time, knowledge, technology, commodities, and culture) in communities – both at home and abroad – will render annuities and indices far less relevant. And, by the way, you may not leave hordes for future generations. Guess what? They’ll gain something that few of us have: evidence that humanity can wrestle itself back from the throes of collective destruction. And that, my friends, is something we can all start doing today. We may have to amputate the gangrenous limbs that have atrophied beyond repair, but better that than follow our feet into our insured and certain grave.

Shakespeare at Zuccotti Park

2011-11-13T15:49:00.000-08:00

Now is the winter of our discontent
Made glorious summer by this sun of York;
And all the clouds that lour'd upon our house
In the deep bosom of the ocean buried.

Yellow leaves swirled in the breeze blowing around the corner of 180 Maiden Lane. The midday sun reflecting off the gilded façade sharpened the color as they blew past the blank windows and unkempt glass. Ten years ago, this monument to innovation in structured finance and risk management bustled with Asian, European, and American businessmen all paying call to the court. The nobles, clad only in the consensus of their exalted state (yes, read, the emperor has no…) deigned accommodation to the obeisance paid at their doors while holding the masses in total contempt. Today, only the last tenacious leaves rose to the upper levels of the tower whose grandeur suffered the fate of Clarence in Shakespeare’s Richard III.

Walking up Maiden Lane from the Hudson River where once women and young girls passed to launder the household linens for the houses and vestries on the southern tip of Manhattan, I was overwhelmed by the absence of any human form. This country lane, marked and paved in the dawn of the 18th century once carried the ropes, tackle and stones from privateer ships to raise the form of Trinity Church. The irony that this lane would be honored to bear the name of the New York Federal Reserve’s toxic mortgage and credit default financial frauds – the legacy of Bear Stearns forced rescue by JP Morgan and AIG’s collapse hospiced with billions of dollars of tax payer funds – was not lost on me. Remarkably, in the winter of discontent just a few blocks away at Zuccotti Park not a single Occupite seemed to have an answer for my question as to why banks and traders have earned their collective wrath while the actual structural source of greatest wealth misappropriation is occupied only by a few autumn leaves.

For the past several weeks I have been advised by many friends, colleagues, and advocates, that the Occupy effort is evidence of a humanity waking up. I am certain that, in the midst of the tents, signs, and drum circles there are endangered voices that actually seek to call attention to substance over the cacophony of generalized discontent. However, from San Francisco to New York, I am convinced of one thing more than any other. Occupy Wall Street and its massing throngs are providing vociferous outlets for dissatisfaction while the actual perpetrators go untouched. Rather than ‘waking up’ what I’ve observed is a perpetuation of illiteracy that is nothing short of staggering.

Walking up to a young man who held a sign nostalgically extolling the virtues of Glass-Steagall Act (an Act whose date he couldn’t recall and which he acknowledged never reading despite his printed insistence on bringing it back), I asked him why he was advocating for broader powers for the Federal Reserve. Which part of the currency provisions or rediscounting government and commercial debt was he advocating? He looked at me in complete bewilderment. He and several other Occupites ‘knew’ that this Act’s return would wedge depository banks and investment banking activities apart. And, having explained to him the actual effect of the 1932 and 1933 legislative efforts of Senators Carter Glass (D-VA) and Henry Steagall (D-AL), he responded, “I never knew what this meant,” and then proceeded to walk away, text a message into his iPhone and then move comfortably away before re-hoisting his sign.

Here’s the Shakespearean irony: the young man is pretty sure that something is wrong. He’s right. But calling for an Act that set in motion many of the actual problems which have enabled the greatest wealth transfer in the world’s recorded history leading to the greatest financial resource disparity (still burgeoning with each drumbeat at the Park) is like asking the Inquisitor for extra wood at the stake. Responding to the reflex of injustice without taking the time (or having the attention span to understand the root of injustice) not only perpetrates greater abuse but allows the perpetrators to persist in anonymity. In short, mass uprisings in ignorance are NOT indicators of positive social change. We don’t need ‘ideas’ for organizing – we need in-depth inquiry and financial literacy. In our faux embrace of pluralistic catharsis, we’ve created a smoke-screen behind which the actual Machiavellian tragedy plays on.

There is a path to be informed. The system is easily understood. And, as a person working to build a new economic framework, I am convinced that the 99% occupying parks are as connected by and complicit in their ignorance of the system they perceive to be abusing them as their alleged 1% foes. In fact, since the movement started, I’ve found more openness to transformation and creativity among the ‘them’ 1% than I’ve found in the “99%”. Perpetuation of collective ignorance is not enlightenment. We The People must elevate the dialogue, pick up the baskets of soiled linens dumped behind AIG’s Pine Street offices onto Maiden Lane, return to the Hudson, and wash our greed-soiled obliviousness before we’re all taken to the cleaners.

'Occupy' Your Mind

2011-11-06T13:30:00.000-08:00

Returning from Salt Lake City to Charlottesville via Chicago provided a suboptimal venue to listen to the audio of Ken Wilber’s interview conducted by my friend Todd Goldfarb (http://worldwidetippingpoint.com/). It turns out that cheap courtesy headphones from a hotel gym have no sound damping value to overpower the engines on a CRJ-700. The good news was that the audio quality was so dreadful that I had to concentrate. So, I sat next to the window, focused on the ground passing below and listened to Ken describe the passage of humanity’s transitions. And it was in the observation of the millions of acres of industrial farmland over which I was passing at 38,000 feet that I settled in on the puzzle that is this week’s InvertedAlchemy: Is it possible to perceive human transformation as a first person actor or are evolutions of consciousness only discerned in retrospect?

Let me provide a bit of background. Todd and Ken were discussing the notion that we’re on the edge of a new inflection of the human experience. This edge is, in part, defined by previous inflections (from archaic to magic to mythic to rational to modern to post-modern to…?), has several particular characteristics that were noteworthy. In his description of the ‘Integral’ transformation, Ken suggested that, in contrast to previous inflections, rather than rejecting past human narratives, a hallmark of this inflection is the explicit inclusion of wisdom and experience from all previous epochs. And, for a moment over Iowa, I found myself trying to reconcile this vision with the reality from which I had just come. You see, I had just been at a board meeting where I had heard representatives from one of New York's leading investment banks talk about the merits of fixed income investments and had heard them discuss the fact that they were encouraging investments in revenue-based instruments – like water – rather than debt issued by cities and counties. After all, they argued, even unemployed poor people have to drink! The neatly groomed fields below me, the echo of merchants peddling water as a safe investment, and Ken all converged in an unholy trinity between Cedar Rapids and Oxford Junction. I can recall the moment. Ken was in the middle of one of his many “never before in human history” generalizations.

Who do we think we are?

We’ve got a real problem. You’ve read me describe – with effusive affection – my respect for Karl Popper on numerous occasions so I will not belabor his criticism of our Occidental hubris again. As I have commented in my recent posts on the Occupy movement, what I find most disturbing about our present consensus delusional state is the intersection of our belief that we access information and our resulting belief that we’re informed.

Has capitalism ‘worked’ when:

1. The largest communist country on earth actually owns a controlling interest in our debt and supplies a considerable amount of our consumables;
2. We have never – since the Land Act of 1820 and the Morrill Act of 1862 to our modern military, technology, and service profit-subsidized government procurements of today – actually had a phase in our nation’s history where we actually had open, unsubsidized free markets; and,
3. Our income distribution and growth is at its all time greatest asymmetry?

Has our social conscience evolved when:

1. Ken Wilber describes our evolution past slavery, for example, at a time when there are more humans (per capita) in slavery today than at any recorded period of history;
2. When we continue to promote 19th century narratives about wisdom traditions ranging from Egypt to Peru to Mongolia without consideration of the possibility that these civilizations actually may have out-engineered our self proclaimed modern marvels; and,
3. When ‘Hope’ and ‘Change’ has led to more remote control assassinations than the notorious Bush / Cheney regime?

It would be lovely to imagine a world in which we would hold ourselves to an abiding commitment that ‘evolution’ would actually involve some notion of improvement. Improvement of the means by which we interact with the Earth. Improvement in the manner in which we engage cultures diverse from our own. Improvement in how we assess the qualities of ourselves and our ecosystem. Improvements in how we engage in dialogue and discourse holding genuine respect for alternative points of view. But, alas, the evidence shows us that we seem to be more drawn to evolution that involves the selective repression of ever larger numbers of voices – voices who have long memories and have alternative views to our own. Is humanity at a tipping point or are we walking past the masses from whom our ignorance has extracted humanity?

The fulcrum around which a real tipping will occur will be discerned when it is set into place by the hands of all tribes, communities, families, and peoples. We’ll know it by their presence – not tell them in their absence.

You Can Learn a Lot from a Centenarian (+2)

2011-10-30T15:13:00.000-07:00

In an effort to reduce frivolous spending, politicians looked to environmental regulations as a critical obstacle to economic development and job growth. Republicans were divided on balancing the importance of income tax as a means of addressing the economic pressures of a country reportedly emerging from a deep recession. Patent fights were breaking out as technology competition – particularly threats coming from international trade – was fierce. The French and Germans were trading diplomacy and barbs as the economic future of Europe seemed to be increasingly tenuous. 3-D entertainment was emerging as a radically new way for audiences to consume media. China was weighing its economic and military options as the United States imposed increasingly protectionist policies to deal with the economic imbalances created by labor out-sourcing. The President was advocating massive ‘shovel ready’ infrastructure projects to jump-start an economy that was not responding to other stimulus. Ford and General Motors were both trying to navigate financing for the revitalization of the automotive industry. These events described the state-of-the-world my Grandmother, Elizabeth Martin – turning 102 on Monday – entered on her birth, October 31, 1909.

I just spent part of my weekend with Elizabeth and sat in rapt amazement as I heard her describe events from the 1920s and 1930s as though they had just transpired last week. Recalling freak October snow storms where the tree limbs snapped up and down the East Coast as I watched the snow pile up 4 inches outside the window; describing the reuse of feedbags to make dresses; recalling the bumper crop of peaches canned in two quart jars with an apricot thrown in for a bit of color and flavor; all memories as present today as they were the day she imprinted them. As I sat with her, my mind took two simultaneous paths. The first impulse was to rush home and open one of my favorite books – The Illustrated World History: A Record of World Events From the Earliest Historical Times to the Present Day published in 1937 – and reread the entries from 1909. I wanted to revisit John Maynard Keynes’ first economic publication, “Recent Economic Events in India”, and see whether from these and other sources, I could find any evidence of an awakening in our times. And, rather than opining on a conclusion, let me share with you the words of Sir John Hammerton and Dr. Harry Elmer Barnes from the conclusion of the Illustrated World History in 1937. After you read it, I wonder what you’d tell my Grandmother on her 102nd birthday to convince her that we’re on the edge of something “NEW”.

“The period since 1929 has been on of the most critical in world history. It is an era comparable to the opening of the sixteenth century. Then the typical and familiar medieval institutions – the feudal political order, the agricultural economy dominated by the manorial system, the guild organization of industry and commerce, and the unity of the Catholic Church – were being challenged, and most of them were on the eve of breakdown. A new epoch – the modern – lay ahead. That slowly developed from the sixteenth century to the twentieth. It produced capitalism, nationalism, representative government, pure and applied science, our mechanical age, the factory system, urban life and the like. Now, in the second third of the twentieth century, there are grave signs that the modern world order is to be superseded by other institutions and ideals. Capitalism has all but broken down. Nationalism threatens the collective suicide of mankind. Representative government, parties and democracy are being forced to retire before the onslaughts of Fascism and the growth of dictatorships. Imperialism is curbed by the shortage of capital for export, the collapse of foreign credit, and the exhaustion of virgin areas for investment and the export of capital. Our technology for production has far outrun the mass purchasing power of man necessary to utilize this increased volume of products. City life produces new strains and stresses and leads to a great increase in mental and nervous instability. World war, using the deadly methods of destruction now available, may drag all civilization down once more to the level of barbarism. Only in the degree to which we understand the critical and transitional character of the contemporary age shall we be able to avert calamity and build a world order which will not only be new and different but better, when measured by standards of general human well-being.”

Hammerton and Barnes, in 1937, saw the dimly lit vision of a world where humanity would wake up. They, like thousands before them in epochs stretching across humanity died with that world unfulfilled. Until we see that it is not the time we’re in that calls us to transformation but the nature of ourselves and our communities, we’ll see inflections come and go unaltered. We’re not on the verge of transformation. We The People are in need of transformation of our responses to the world – the one variable that past inflections and the current – seem to be ignoring. After all, it is the ‘man-in-the-mirror’ that is the constant and those optics lead us to a very tired, very monotonous end. Let’s remove the silver from the glass so that we can see into a world of opportunity rather than seeing a reflection of our own arcane tedium.

Ninety Nine Percent of the Time It Works Every Time

2011-10-23T15:47:00.000-07:00

My week began walking out of the BART station at Embarcadero in San Francisco and heading towards the water and my hotel. A few steps out of the station, I encountered several Occupites (my term for the participants in the various ‘Occupy’ protests around the country and across the world) huddling over coffees and under blankets in the chilly evening air in front of the San Francisco Federal Reserve building on Market St. As I am wont to do, I read all of the placards and posters to see if from them I could divine any notion of precisely the focal point of outrage / angst / etc or what was being proposed in lieu of the source of the grievance.

Let’s set the record straight. The present financial system, wired into our laws and modern social concessions since the birth of the industrial revolution is working very well. For those who are the current heirs of its architecture, there is no crisis. In fact for many of them, they made reckless bets for a decade or more and, when the ‘crisis’ metastasized in ’07 and ’08, they went to the government that they had long ago bought, demanded to have their behavior exonerated and rewarded, and, without a glance, the government gladly paid them using the full faith and credit of the very Americans who now call themselves 99%. And to be clear, when the U.S. Department of the Treasury demanded that banks issue 1 share of Common stock for every $2 of TARP funds repaid, only Citibank complied, according to the Inspector General’s report, while all other recipients balked and walked. And after receiving over $250 billion, the reason most frequently given by banks seeking to have favorable repayment terms was concern for the ‘stigma’ associated with having to receive Federal intervention.

Like many others, I have read the OWS statements, blog posts, and commentaries on every side – from Huffington Post’s ‘Dignitarian’ piece to neo-con screeds – and have been fascinated to see that the closest thing that comes to an actual system critique and, as a result, a demand (or at least recommendation) is the repeal of the misnomer repeal of Glass-Steagall Act (the Banking Act of 1933). Ironically, this Act’s relevance, popularized by an incorrect Wikipedia entry describing it, was the same Act that: a) seduced Americans to place their money in bank holding companies with an illusory ‘guarantee’ in the form of the Federal Deposit Insurance Corporation (neither an insurance for depositors in the truest sense, nor a Federal entity); and b) allowed the Federal Reserve far greater flexibility to participate in both government and commercial debt issuance and pricing. One wonders if any OWS Occupite has actually stopped and realized that their anti-Gramm-Leach-Bliley position actually strengthens the incumbency of the Fed and the centrally controlled monetary system? While we can agree that the conflict of interest avoidance of Glass-Steagall may be laudable and necessary, being 99% right in hitting a target means you MISSED.

The other piece of the consensus OWS message – the call for the humanization of humanity and the removal of human treatment for corporations – makes tons of sense and is an issue as old as the corporation. And it was this issue that lead me to wonder who lives at 11400 West Olympic Blvd, Suite 200, the address of the registered url occupywallst.org? I wondered if they / it were / was a person or a corporation? While researching the OWS structure, I was: a) intrigued to find the Alliance for Global Justice – 501(c)(3) corporation – which, while doing a lot of really interesting things is, itself, a corporation; and, b) was fascinated by the fact that AFGJ charges 7% for use of its tax exempt status. In his discussion about meeting with the ‘Finance Committee’ for the OWS movement, Chuck Kaufman seems to admirably describe an impulse to engage but seems to miss the point that, by using the tax exempt corporation, the message of the OWS must avoid lobbying, political action, and several other prohibited acts that are potentially required should OWS actually ever seek to change the system.

This brings me to my bewilderment surrounding the notion that OWS is ‘transformational’ and a sign of some new awakening in the U.S. that, in the minds of some, is a continuation of the Arab Spring. If we use the agency of incumbent systems – a call for the return to a reflex born in the chaos of the Great Depression – and muffle our message to insure tax exemption for our donors – precisely what transformation do we expect to see in ourselves or the systems around us? For change to come, we actually need some contextual learning to actually know what is really behind the impulses we see as unjust, the degree to which we are complicit in supporting the same, and the awareness of what will be required at a systemic level if transition and transformation is possible.

To contribute to this dialogue, a group of friends in San Francisco have proposed building a financial literacy curriculum that addresses these themes by examining, among other things, the Four Pillars that support our current financial system:

1. Fear Arbitrage – the centrality of insurance (a Protestant innovation based on the doctrine of pre-destination and apocalyptic judgment from the Almighty) as the primary utility in our economic system (remember that the first Federal Reserve Bank was principally organized by life insurance companies, not bankers);
2. Unitary Currency – since the formation of the Central Banks in Europe and the U.S., and fully inculcated with the 1944 Bretton Woods agreement, the notion of a singular currency by which we all transact and through which we all denominate value;
3. Commodity of Humanity – throughout the Industrial Revolution, the notion that humans are free units of productivity who must stand in subservient opposition to ‘capitalists’ and, when completed with their ‘useful life’ are to be relegated to some lesser state; and,
4. Dominion over Earth – the presumption that all matter and energy is the domain of those who harness and exploit it.

So long as these Four Pillars are unconsidered – a state currently fully manifesting in the OWS and the systems it protests – transformation will be as fickle as the steam on a latte blowing off a cup in Justin Herman Plaza. And speaking of Justin Herman, the man for whom the SF OWS protest location is named…his use of Federal Funds for the redevelopment of the city of San Francisco involved some rather controversial ‘class warfare’ behaviors that would make most Occupites cringe.

Far from transformational, the historicism-anemic vector of the OWS movement suggests that we’re more of a 1790’s France on our way to the Revolution of 1848 leading to… well, France as it is today. So here’s an idea. Let’s look at structural transformation that actually builds a future that we’d want, not reproduce a failed exercise of ‘enlightenment’ that has found itself at the edge of dissolution once more.

‘Fixed’ Income Gets Neutered and Spayed

2011-10-16T20:33:00.000-07:00

I have watched in waking nightmarish horror over the past few months as one of the great pillars of investment doctrine has crumbled like a prophetic Nebuchadnezzar statute failing under an assault to its feet of clay. In my dreams, Bob Barker from The Price Is Right has a stack of banks and countries on a glitzy, gaudy stage and advises bidders that the only sure way to lose is to over-bid. And, as mindless mildly obese contestants line up to guess how low they can go, Bob keeps screaming into that crazy little microphone some nonsense about getting neutered and spayed. Finance ministers from the G-20 all gather for photo ops in the background as the band plays Nearer My God To Thee.

Let’s dispense with the punch-line up front. If you have a 401(k), you know, that ‘big government’ siren song inducing you to pump froth into investment banks today for the ‘benefit’ of paying tax to an insolvent government later (wow, I’m out of control here), you have ALREADY LOST. Sitting in your pension allegedly securing your retirement, backing your insurer and your bank, and hijacking your mortgage are over $25.6 trillion dollars of investments that are NOT WORTH WHAT YOU’RE BEING TOLD (according to the Securities Industry and Financial Markets Association or SIFMA, municipals at $2.9 t, treasuries at $8.9 t, mortgage-backed securities at $8.9 t, federal agency debt at $2.7 t, and asset backed debt at $2.2 t – and the “t” stands for trillion). And, while I’m a big fan of debt issued by corporations that are actually making stuff – a sizable chunk of the $7.5 trillion in corporate debt – some of that’s fluffy too. Here’s the bummer. As we saw with the bankruptcy of Harrisburg Pennsylvania this week and as we’ve watched play out over the past several months and years with sovereigns reneging on their fiduciary obligations, this stuff was supposed to be the reliable means of preserving capital and earning a predictable return.

Here’s the problem. Long ago, in a land far, far away, there was a bad piece of legislation drafted that said that, to meet tax-deferral criteria, certain types of investments HAD to be purchased by pension managers and other statutory buyers. Oh, for those of you who don’t know your own history, this investment stalwart goes all the way back to the tax code of 1913! In collusion with the indictable rating agencies (by the way, when are we going to see some of these cases actually move forward as they were complicit in the theft of billions of dollars?), debt issuers continued to produce ‘inventory’ for a market that had to buy. And, as the quality of investments went down, the buyers were forced to keep buying. Why? Because the debt was good? Because somebody was up to repay obligations? NO! They had to keep buying because the law said they had to. And, worst of all, when governments decide to stick it to the bondholders – a rather populist impulse lately – they are sticking it… are you ready for this … to YOU!

‘Fixed’ income is a neutered, one-eyed, three legged mongrel dog at the SPCA currently awaiting euthanasia. It existed long enough to actually effectuate a season of wealth redistribution where prime brokers and agents got rich off your money. And now, now that we’re seeing pensions seeking liquidity for things like retirement and entitlements, the cupboard is bare. PIMCO’s Bill Gross got lambasted by professional investment advisors when he railed against fixed income dogma. Erroneously, market analysts, pundits and other charlatans lined up and pointed at buying statistics to tell him that his quality critique was wrong. Well, here’s some bad news for all you Harvard Business School and University of Chicago promoters. Just because someone buys something doesn’t mean that: a) they want to and; b) they wouldn’t buy something else if they had the chance. A market that is coerced by statute is…, well, a fraud. Bill’s right. Our economy is NOT producing and, if the ‘no-big-government’ Republicans actually catch the bus that they’re chasing at the moment, you will see that, like the Democrats of the current administration, the only way to prop up the illusion of the U.S. economy is for the government to keep spending. Take government procurement and government contractors out of the mix and we’re 25% more unemployed and 30% deeper in Depression.

“Full faith and credit” is an illusion. When Federal Reserve Chairman Ben Bernanke says that the “recovery from the crisis has been much less robust than we had hoped for,” what he means is that the ability to repay our financial obligations has just gotten more remote. To have ‘Fixed Income’ you need that critical component – INCOME!! Otherwise the game is FIXED (and, for those of you who didn’t grow up in an organized crime family, that’s actually a bad thing). In his speech to Congress a few days ago, he issued the most honest words of his tenure: “In sum, the nation faces difficult and fundamental fiscal choices, which cannot be safely or responsibly postponed.” The bummer is that, following that sentence, he provided NO sign of confidence. Instead, he detailed the long-dating of Treasury assets to put their illiquidity safely out of range of the next two Presidential election cycles pushing maturities out to 6 to 30 years instead of the current trove of 3 years and less. And, in an amazing no-confidence vote, after discussing the failing of the housing market to levels not seen since World War II, he announced that the Fed would be investing principal payments in mortgage-backed securities because, clearly, they’re a better bet than the U.S. Treasury?

So why is it that, against all compelling data that evidences that the wheels have come off the bus and it’s careening off the cliff, do ‘fixed income’ promoters still look at investors and tell them that this is where their money is safe? Simple. First, because they’re already taking fees from you – fees that you’ll never recover. And second, because they don’t have the courage or intellect to come up with a more accountable strategy. What investor in fixed income would choose to lose all of their money over the risk that they may have to pay tax on INCOME? Presiding over the extermination of wealth, ‘managers’ are paralyzed by the fear that they may be irrelevant – pawns in a chess game that was rigged in 1913. For the past 13 quarters, household debt has been shrinking. Business and state debts have been relatively flat. This means that the inventory of investment debt has spent 13 quarters being shifted towards sole source production by the worst possible debt originator – countries with flat or negative GDP.

So, if you want to look at why PIMCO’s Bill Gross is correct in his assessment, look at the September 16, 2011 Federal Reserve’s Flow of Funds data on pages 60-64. You’ll see that we’ve got a structural problem in that ‘fixed income’ is missing its income (or asset) confidence. Oh, and by the way, for those of you who are big fans of S&P or other index public equities – tiny piece of bad news – there’s a strong correlation between the financial health of these companies and the credit behavior of the government. Bottom line. If the 80’s was the era of out-sourced heavy industry manufacturing; if the 90’s was the era of out-sourced consumer manufacturing; and, if the 00’s was the era of out-sourced services… then the 10’s will be the era of out-sourced investment income. And, for the record, the correlated returns to the positive will come from countries most of you have never visited. So here’s an idea. Before you lose more money from your 401(k) abysmal fixed income collapse, buy a plane ticket to a place with GDP growth in excess of 5% and get yourself a world-view. You may actually find out that there’s a bigger world out there and, heaven forbid, you may just come to like it.

Anyone Up for a Sweeter Song

2011-10-09T13:46:00.000-07:00

Against the cacophony of Occupy Wall Street, Chancellor Merkel’s call to recapitalize German banks, and the growing chorus of those wailing about the coming Depression, I just wanted to remind us that there is a different narrative. When one realizes that the scarcity that has defined 150 years of industrial economies is simply an illusion created by those who seek some vestige of control, the path to an alternative space is readily discerned. For this week’s blog post, I turn to two alternative paths. First, a path that has been shared by my dear friend, collaborator and colleague, Palma Vizzoni. In this attached piece, she takes Integral Accounting and weaves it into a tapestry of West African narratives forming a beautiful view of what’s possible if we change our optics.

And second, as a reminder, I’ve included a piece from antiquity to remind us of the cost of drowning out the Sweeter Song and those who seek to offer it into a universe of frantic fear.

METMORHOSES BOOK 11, Translated by Brookes More
DEATH OF ORPHEUS

While with his songs, Orpheus, the bard of Thrace, allured the trees, the savage animals, and even the insensate rocks, to follow him; Ciconian matrons, with their raving breasts concealed in skins of forest animals, from the summit of a hill observed him there, attuning love songs to a sounding harp. One of those women, as her tangled hair was tossed upon the light breeze shouted, “See! Here is the poet who has scorned our love!”

Then hurled her spear at the melodious mouth of great Apollo's bard: but the spear's point, trailing in flight a garland of fresh leaves, made but a harmless bruise and wounded not. The weapon of another was a stone, which in the very air was overpowered by the true harmony of his voice and lyre, and so disabled lay before his feet, as asking pardon for that vain attempt. The madness of such warfare then increased. All moderation is entirely lost, and a wild Fury overcomes the right.—although their weapons would have lost all force, subjected to the power of Orpheus' harp, the clamorous discord of their boxwood pipes, the blaring of their horns, their tambourines and clapping hands and Bacchanalian yells, with hideous discords drowned his voice and harp.

At last the stones that heard his song no more fell crimson with the Thracian poet's blood. Before his life was taken, the maenads turned their threatening hands upon the many birds, which still were charmed by Orpheus as he sang, the serpents, and the company of beasts—fabulous audience of that worshiped bard. And then they turned on him their blood-stained hands: and flocked together swiftly, as wild birds, which, by some chance, may see the bird of night beneath the sun. And as the savage dogs rush on the doomed stag, loosed some bright fore-noon, on blood-sand of the amphitheatre; they rushed against the bard, with swift hurled theirs which, adorned with emerald leaves had not till then been used for cruelty.

And some threw clods, and others branches torn from trees; and others threw flint stones at him, and, that no lack of weapons might restrain their savage fury then, not far from there by chance they found some oxen which turned up the soil with ploughshares, and in fields nearby were strong-armed peasants, who with eager sweat worked for the harvest as they dug hard fields; and all those peasants, when they saw the troop of frantic women, ran away and left their implements of labor strown upon deserted fields—harrows and heavy rakes and their long spades after the savage mob had seized upon those implements, and torn to pieces oxen armed with threatening horns, they hastened to destroy the harmless bard, devoted Orpheus; and with impious hate, murdered him, while his out-stretched hands implored their mercy—the first and only time his voice had no persuasion. O great Jupiter! Through those same lips which had controlled the rocks and which had overcome ferocious beasts, his life breathed forth, departed in the air.

While his loved harp was floating down the stream, it mourned for him beyond my power to tell.

Conflicting of Interests

2011-10-02T13:45:00.000-07:00

Early in this coming week, the United States Senate will be taking up a bill that is innocuous in name: The Currency Exchange Rate Oversight Reform Act of 2011. If you read the posturing running up to the procedural vote, you see the likes of Sherrod Brown (D-OH), Chuck Schumer (D-NY) and others talking about this vote as a ‘Jobs’ bill. Senator Brown would do well to reflect on his experience becoming an Eagle Scout when he and his colleagues choose to tell the public one message while executing an entirely different transaction. For the record, the Scout Oath is:

On my honor I will do my best
To do my duty to God and my country
and to obey the Scout Law;
To help other people at all times;
To keep myself physically strong,
mentally awake, and morally straight.

And, for completeness, the Scout Law (referenced above) is:

A Scout is:
Trustworthy, Loyal, Helpful,
Friendly, Courteous, Kind,
Obedient, Cheerful, Thrifty,
Brave, Clean, Reverent.

A few Senators have forgotten these Oaths and Laws in their most recent public statements. By putting the Secretary of the Treasury and the Federal Reserve in the role of chief arbiter of international trade policy, they are failing the public. The problem with the Currency Exchange Rate Oversight Reform Act of 2011 is that it solves nothing while ignoring the true economic disease. The bigger problem with it is that the sponsoring Senators are using anti-China rhetoric to try to get it passed. And the biggest problem with it is that this Act ignores the hundreds of U.S. corporations who – to satiate the demand of U.S. consumers for ever more, ever cheaper products – turned to foreign markets to enable the production that once happened here.

What does it mean to be ‘physically strong’, ‘mentally awake’, and ‘morally straight’? During the post-World War II period of American enterprise, the industrial machines of war were repurposed into the manufacturing envy of many countries. In an effort to show the world that the American version of Freedom and Democracy was desirable over all other social orders, we instituted policies designed to help us enjoy great, short-term benefits. Consumption, home ownership, credit, employment, tax incentives and countless other market aberrations were demanded to insure that the nation accelerated its ascendancy into the realm of super powers of the past. However, beginning with the Nixon Administration’s policies in 1970-71 through the present, we’ve systematically refused to see that, when we encounter challenges, it’s not appropriate to respond with blame. America is harvesting the fruit of its addiction to cheap goods – where Wal Mart was more of a strategic asset than jobs – and, now when we realize that we’ve gutted our domestic economy’s ability to recover, we seek to label the Chinese as the problem.

We didn’t ‘lose’ jobs to China. The stalwarts of the S&P, Dow Jones, and NASDAQ SENT those jobs to China, Vietnam, Thailand, Korea, Taiwan, and India to inflate profits which flowed AWAY from domestic employment and into the corporate coffers of a few and the financiers to whom they deigned ingratiation. Outsourcing - which sounded so good at the time - has left us with inadequate GDP to grow our economy. And until we solve that problem, outsourcing blame for bad corporate decisions will do nothing but harm us and the fragile relationships upon which we depend.

In a rare turn of events, I actually have profound sympathy for Timothy F. Geithner and the Federal Reserve Bank, who, under the Act, become responsible for policing a geopolitical risk that is well beyond their office. The U.S. Treasury and the Fed are neither structured to, nor capable of, remedying the ill advised industrial and employment policies of the past 40 years. Furthermore, this Act places Secretary Geithner and the Fed in an untenable conflict of interest. On the one hand, they are required to assess the manipulation of currencies done by foreign interests. However, at the same time, they have no choice but to acquiesce to the demands of their largest external shareholder – you guessed it, the very country that Senators Brown and Schumer want to demonize.

Honesty, conspicuously absent from the Oath and Law above, is a prerequisite for moral leadership. If this Act were referred to as the Secretary of the Treasury and Federal Reserve Geopolitical Appropriations Act, or the Treasury and Federal Reserve Appropriating the State and Commerce Department Act, it would face greater resistance and more appropriate public scrutiny. This Act is a bad idea. It’s morally unsavory as it fails to hold any domestic factors accountable for our own challenges. And, in the final analysis, no job will be created from this Act’s passage – including the dude that hands out the smiley face stickers at Wal Mart!

Another…! Boy Who Cried Wolf

2011-09-25T17:24:00.000-07:00

Cameron McRae, Rio Tinto’s country manager for Mongolia is the latest in the long line of fear mongers who are willfully misleading the markets. “An unstable environment, where changes to agreements are forced, leads to investors being very apprehensive,” was his comment on September 24 in Ulaanbaatar when it was suggested that Mongolia may ask for a properly negotiated agreement for the Oyu Tolgoi mine. He joins, in the Hall of Shame, the likes of Graham Hancock of the World Bank, Robert Friedland of Ivanhoe Mines, and Greg Anderson of Papua New Guinea Chamber of Mines and Petroleum for misleading countries regarding their capacity to participate in resource development projects. Under the guise of ‘scaring away investors’, his recent comments are the broken record of firms who have chosen willful fraudulent inducement to enter into sovereign contracts to prop up short term investment windfalls while directly contributing to the instability of countries. Somehow or another, his allegation of scaring investors ignores the risk to a young democracy – like the one being led by President Elbegdorj in Mongolia – which leads to civil war, violent conflict, and nationalization when a public learns that its leaders have been defrauded (or participated in a fraud).

To be abundantly clear, the following message is for the benefit of the intrepid (albeit frightened) investors in Ivanhoe Mines (NYSE: IVN) and Rio Tinto (LON: RIO) – a significant number of whom are readers’ pension and 401(k) institutional managers. Failure to renegotiate a grossly out-of-market agreement, advised in part by Goldman Sachs, presents far greater risk to your investment than listening to the empty cries from insipid, patronizing puppets.

The following information prepared by our team at M-CAM was presented to the Mongolian government in the late winter 2010 and early spring 2011, and to the Canadian Broadcasting Corporation in March 2011 for an interview which they never published. While representing the authors’ opinions, CBC failed to even publish the raw text of the agreements with Ivanhoe Mines or Rio Tinto for any reader to formulate his or her own opinion.

It is important to premise any discussion of the Oyu Tolgoi LLC Shareholder’s Agreement (the “SA”) with a reminder of the fundamental policy and structural failures embedded throughout the document and the project as a whole. On the policy/project side, it is, in this author’s opinion, an utter failure to protect the interests of the State of Mongolia (“Mongolia”) that any transaction involving the deployment of a strategic national asset (much less one the size and global consequence of OT) should leave Mongolia with ANY debt (particularly before any cashflows have been received) when it should have been paid a SIGNIFICANT (into the billions of USD) and UPFRONT fee just simply for granting a suitor the right to have the honor to steward such a unique and strategic asset.

On the structural side, the most significant and damaging items are:
1) The Capital Structure. The existence of, and extremely restrictive terms of, the Debt and/or Preferred Shares issued by OT (defined as Shareholder Debt or Funding Shares) as well as the Debt directly from Ivanhoe to Mongolia (defined as Existing Shareholder Loans) representing at least 40% of its entire GDP(!) which have the effect of transferring the value of OT from Mongolia’s equity stake to Ivanhoe as largely illustrated by:
a. Severe limitations on repayment of the debt
b. Exorbitant interest rates - far beyond any legitimate capital market rate
c. An inability to stop Ivanhoe from continuously authorizing the issuance of further debt under the same restrictive terms

2) The Illiquidity of Mongolia’s Equity. An impairment of Mongolia’s equity stake leaving it with no identifiable pathway to ANY Dividends OR the ability to monetize (e.g., sell or borrow against) its equity stake as partially evidenced by:
a. The irrevocable direction of ALL dividends (including Mongolia’s share) to Ivanhoe so long as any debt is outstanding
b. The inability for Mongolia to repay the “dividend absorbing” Debt or force OT to refinance the debt under more favorable terms
c. Restrictions on transfer of ownership (e.g., right of first refusal) and pledging of shares (as collateral to borrow money) that effectively block any ability to receive cash for its equity stake

3) The Lack of any Mechanism to Protect Mongolia’s Assets or Control Adverse Behavior by Ivanhoe. Mongolia has no contractual/legal pathway in which to block and/or remedy any adverse actions contemplated by Ivanhoe, including a protection of Mongolia’s minority equity stake or, more broadly, an ability to protect one of Mongolia’s most strategic assets as demonstrated in part by:
a. The complete absence of any protective representations & warranties and/or ongoing covenants (e.g., minority shareholder rights, performance obligations on Ivanhoe with associated rights and remedies)
b. The control of EVERY corporate governance and management decision through the control of: 1) all day-to-day operations, 2) the Board of Directors and 3) any Shareholder vote including, but not limited to:
i. The unhindered ability to force OT to enter into transactions to “leak” cashflows out of the Company, including approval of bonuses to Ivanhoe’s management
ii. The ability to unilaterally define the meaning of “available cash” for Dividends
iii. The ability to bury OT under Debt or sell its assets
iv. Ability to monetize Ivanhoe’s equity stake explicitly at the expense of Mongolia’s equity stake
c. The EXTREMELY out-of-market Management Services contract which pays Ivanhoe at least 3-5x what Rio Tinto (the 3rd largest mining company in the world) is conventionally compensated.

In summary, the SA effectively and elegantly cuts Mongolia completely out of the primary capital markets value chain around OT. Further, it straddles Mongolia with enormous liabilities and no legal way to protect itself or its strategic assets. It effectively delivers to Ivanhoe the entirety of OT’s value, including 100% of the economic value of Mongolia’s 34% equity stake, while leaving Mongolia with bankruptcy-inducing indebtedness and a lack of control or oversight mechanisms. The Shareholder Agreement should be renegotiated to remedy these structural failures and should hold, as the audacious standard, an agreement that meets or exceeds the standards of the agreements negotiated by Rio Tinto in G-20 countries.

It’s time for actual shareholders to step up and demand that corporate governance rules be a minimum standard for mineral and energy investment. If Rio Tinto and Ivanhoe can’t make money by operating in a form that doesn’t destabilize governments, than they shouldn’t be the recipient of managed funds and should not blight the public equity markets in New York, London and the rest of the world.

A complete review is available upon request.

Scarcity in Search of Abundance

2011-09-18T14:18:00.000-07:00

I just completed a weekend workshop with several intrepid University of Virginia students organized by the Student Entrepreneurs for Economic Development (SEED @ UVA). Over the course of the two day session, my concern for what passes as business education heightened as I watched students struggle with a lack of practical awareness of cross-border business. That this weekend seminar followed on the heels of a much more intensive workshop last week with an expanded group of exceptional globally minded collaborators, made my impulse to broaden commerce and finance literacy grow all the stronger.

While I could select countless topics to unpack in today’s conversation, the theme that struck me most profoundly is our unconsidered assent to the Malthusian principles of glut and scarcity. Its corollary – that economic goods exist when scarcity is present while abundance is ‘free’ – serves as a fundamental animating fallacy of our current economic understanding. To understand Malthus, one must apprehend his critique of his secular predecessor, Adam Smith in which he commends a deeper inquiry into the relative contribution of a consuming and working population in light of access to resources, command of application of labor thereto, and the consumption capacity of systems. The Reverend Thomas Malthus has a particular seat at today’s table as an Anglican clergy and Professor at the East India Company College – two sources of inspiration and patronage that undoubtedly shaped his work and are ignored at our present peril.

What neither of these seminal economists and (a)moral philosophers adequately addressed or understood was the tyranny of colonialism that shaped their understanding of systems. It is then, no accident, that in the application of their principles, colonialism (in its modern incarnation – mercenary military interests serving anonymous corporate patrons) is an absolute necessity. As treated in previous writings, the notion that ‘resources’ are ‘free’ is a principle that can only be promoted in an Occidental world view in which humans are sovereign ‘over’ all things. The notion that it is the role of human enterprise to manufacture economics around the controlled use of scarcity is as Anglican now as it was two and a half centuries ago.

However, there is a particular form of scarcity economics I find instructive and inspiring. It is a component of a very complex economic system which, by most historians’ accounts, led to an economic system lasting over 1,500 years. Credited to be the innovation of the great Chinese diplomat Chzan Tsan in the first century BCE, the Chinese refinement of industrial scale silkworm husbandry led to an impulse to use this manufacturing mastery to launch one of the most audacious efforts in global trade. Sending caravans from Beijing and Xi’an to Venice by way of Kyrgystan, Tajikistan, Kashmir, Pakistan, Afghanistan, Turkmenistan, Uzbekistan, Persia, Iraq, Syria, and Turkey, and then by boat to modern Italy, a great economic mystery unfolded. When one embarked on this journey, an elegant dance between abundance and scarcity played out in a rhythm and syncopation unfamiliar to modern business. Imagine the following.

When I’m leaving Beijing, my pack animals are laden with an ABUNDANCE of silk. For my own PROVISIONING, I pack some porcelain dishes, some paper and calligraphy in SCARCITY , and sufficient food and water to feed my crew and our animals. By the time I reach Turfan, several of my animals have been eaten as they passed through the inhospitable deserts and mountains and, as they die, I need to trade bulky silk for other artifacts. These trades have a particular dynamic. My ABUNDANCE of silk meets a relative SCARCITY of the same in the Gobi desert. In the Gobi desert, gold, weapons and some precious stones exist in ABUNDANCE. I trade my ABUNDANCE for local ABUNDANCE and the value of the trade is the uniqueness and SCARCITY made visible through my enterprise. At no point in this transaction is there any absolute SCARCITY or ABUNDANCE – just a shared IGNORANCE of each others’ context and provisioning. Along the way, my ABUNDANCE of silk is transacted across relative ABUNDANCE to local ABUNDANCE trades informed by the capacity I have to transact. Gold, and precious stones – much smaller and more transportable – start moving in relative ABUNDANCE until I reach Tashkent, Blakh and Merv where I trade more silk now for the local ABUNDANCE of spices. I even amplify the value of my trade by trading my SCARCE porcelain for even more local ABUNDANCE. In Qom, I trade for silver and smith work. In Baghdad, I trade for art and clothing and by the time I reach Tyr, I have relative equivalence of the legacies of my trading. All along the way, my endeavor brought my ABUNDANCE – unknown to my trading partners – into local ABUNDANCE – unknown to me – and in my transaction, I find neither Adam Smith, Thomas Malthus, John Maynard Keynes, nor Milton Friedman.

What makes this model compelling – beyond its obvious millennial success (in contrast to our barely 40 year old failed post-industrial model) – is that I realize that the enterprise value exists in the systematic REMOVAL OF INFORMATION ASYMMETRIES. Unlike the ignorance arbitrage that is central to all of our current economic systems where we rely on cabalistic monopoly collusion between governments and their corporate patrons, true value was discerned through the uniqueness and cultural enrichment of trading partners. And rather than pulling a ‘duty-free’ regression to ‘globalized monotony’, the value of the network is maximized when local uniqueness is celebrated and optimized.

It is regrettable that the commerce and business schools across the globe – including places once central to the Silk Road economy – fail to learn from the brilliance gleaned from principles of this amazing trade innovation. Seeking to pretend that modern economics somehow transcends these core principles insures that our students are incapable of functioning as moral citizens in a global community of transacting parties. It also blinds us to the ABUNDANCE from which we can be empowered and through which we can engage those around us. Here’s to Chzan Tsan – let his wisdom inform us again.

Remembering a Day in September

2011-09-11T19:14:00.000-07:00

On this day, the lives of many around the world still hold the fresh memories of unspeakable tragedy and loss. On this day, those who contributed to the events leading up, and subsequent to the tenth anniversary we mark continue to operate without public accountability or any consequence for the humanity that they took for granted, take for granted, and callously continue to exploit and deny. And, as long as their actions go anonymously by in the macabre parade of carnage in insensitivity, We The People continue to await the next predation which will, once again, rob us of vitality, purpose, and a sense of a productive future.

My tribute to these families is embodied in the dedication to my freshly published first novel, Coup d’ Twelve: The Enterprise that Bought the Presidency. In its pages, I trust that you find stories, warnings, points of illumination and a vision for the deep need for all of us to call for light where darkness continues to prey on the lives and fears of millions. Inspired by its premise, I trust that a few of us will begin to call for accountability before the next scene is acted out on their macabre stage.

The dedication page reads:

Dedicated to
My Lady
Spud & Zuke
and
The families and memories of those who have suffered and died in the stories rendered herein. That they neither died in vain nor suffer for the clandestine interests of those who breach their public duty.

Enjoy the journey at... http://www.weinterruptthisconspiracy.com/

Gain the World, Lose Your Soul

2011-09-05T14:36:00.000-07:00

For how is a person benefited if he gains the whole world, but suffers the loss of his real self? Or what will a person give in exchange for his real self?

Gospel of Matthew 16:26

Wisdom traditions across time and geography are filled with admonitions against the supplanting of lasting value for the seduction of short-term gain – or so we are taught to construe the maxim above. In the Mediterranean cultures from which this famous quote arose, the idea of transacting was inextricably part of the tapestry of social systems. Two thousand years ago, traders of knowledge, military power, goods and services plied the seas and organized caravans overland to trade what was locally controlled for what could be remotely obtained. Built on the understanding derived from a legacy of Babylon, Persia, and Egypt and inspired by influences from the Indus to China, the literal answer to this rhetorical question could very well have been a new question: Having gained the world, who would ever trade it for the smallness of a singular, individuated identity?

In the traditional King James translation, the question is asked: “For what is a man profited, if he shall gain the whole world, and lose his own soul?” My attention was drawn back to this phrase when I was reading a few Shareholders’ Agreements establishing the roles and responsibilities of the parties to gold mines in the Pacific. Specifically, I was intrigued by the aspirations I heard with respect to a much promoted, yet mythical benefit in what was described as a “profit-sharing” agreement. Now to be clear, most junior (and for that matter, senior) miners in the Pacific, South America, Asia and Africa know that many of the endeavors they fund will not materialize. Without exception, their rewards and those they share with their funding partners are initially and principally derived from financing activities (sale of speculative equity; trading in equity; debt-financing of local ‘participation’; treasury management and investment income; and tax losses or jurisdiction efficiencies which offset unrelated income). In the countless agreements I’ve studied, I have yet to see a single country benefit from the place where the majority of early value is created or exchanged. And, ironically, communities and governments around the world are seduced into trading their environment, their land and their water in exchange for future ‘profit’ never knowing that profit may never be the intention.

Bear with me as I ask that you, for the moment, ignore this most egregious injustice long enough to see the next level of madness in ‘profit-sharing’ arrangements. There are two costs in speculative mining ventures which erode profitability (in the majority of instances, the actual operating costs are handsomely contracted to related-owned entities and assessed against the actual producing mine). The two variable costs are: 1) royalty payments; and, 2) local employment. In other words, if a ‘profit’ is going to be declared in which a ‘sharing’ can happen, in most instances this comes on the back of an EXPLICIT REDUCTION in the benefit coming to, you guessed it, the very people with whom ‘profit-sharing’ is promoted.

Gain the world and lose your soul? Worse than that, using the carefully constructed shell corporations under Rio Tinto, Newcrest and Nautilus you can lose both!

But this inquiry leads down a pathway that felt to be a predictable, tired moralistic trap. And while, in no way do I wish to lessen the focus on this pathetic behavior of unscrupulous actors, I began asking a question that is going to be the subject of considerable future inquiry here in Inverted Alchemy and in conversations to come. I wonder how often ‘profit’ is a foil for a rather elaborate purveyance of ignorance. Is an enterprise ‘profitable’ if it is paid higher value than its contribution warrants or is it the case that it is over rewarded for something that has perceived, yet not substantiated value? Alternatively, is it possible that ‘profit’ is actually a surrogate for the amount of value that is explicitly NOT being measured in the cost of production? If I manufacture a garment that I sell at $50 profit, is it really profit or have I underpaid the laborer and, in so doing, established an unsustainable, volatility-predisposed ecosystem? If I lumber a forest, have I profited if I allocate no funds or resources to reforest the land? Does a ‘for-profit’ company exist or is it the case that in most, or all, instances, profit is a surrogate metric for the degree to which all-in-costs have NOT been factored?

These are questions. They are an inquiry inspired from a new look at an old problem. But what did surface in this inquiry was yet another look at the ancient (and possibly, future) models of commerce. The principle of ‘provisioning’ is a very different reality that seems to evoke a more viable enterprise. When I seek to provision the present, I seek all resources and utilities to achieve my objective. Throughout the course of my endeavor, I seek adequate provisioning to see it through AND, when applicable, be prepared for the next. Unlike a linear metric of temporal profit, the concept of provisioning says that the utility and productivity of the present must prepare me for both the certain present and the confidently uncertain next.

Emerging in this image is an ideal of an enterprise that achieves its effectiveness through the perfect optimization of resource utilization where appropriate inputs are aligned to produce optimal productivity without waste. By now, my frequently quoted Bloomberg interview in which I stated that Google had acquired “crap” from Motorola is one manifestation of the malignancy of ‘for-profit’. By falling for the siren song of the patent cold war strategy, Google paid $12.5 billion to buy protection that, had it used any disciplined inquiry whatsoever, would have been seen for its inadequacy. For a fraction of its Motorola acquisition – made possible from unconsidered ‘profit’ – it could have seen that EVERY patent it acquired has an equivalent that is in the public domain. Both Google AND its customers could have benefited. But in a world of unconsidered profit, they sold their soul. There is another path and, one day, I hope more of us find it.

Willful Practice of Ignorance

2011-08-28T12:44:00.000-07:00

Plato could have scarcely imaged a state of civilization in which the Court of Appeals for the Federal Circuit would coin as obtuse an argument as the ‘willful practice of ignorance’. In my Pantheon of the Ludicrous, just beyond my Foyer of Incredulity, abutting the verdant Courtyard of Folly, the notion that anyone would actively ‘practice’ ignorance is embodied with a marble deity with a considerable portion of his cerebral structure deeply embedded in his own lower digestive, alimentary and excretory tract. This idol, affectionately known as Occidentus, is bathed in modified corn starch three times a day. The effluent of this offering fattens his priests while starving his worshipers with a bizarre famine of cerebral nourishment. Note that visiting my pantheon is not for the faint hearted.

While I encountered the far flung consequences of Occidentian adherents during my recent sojourn in Papua New Guinea and Australia, I was most intrigued by the juxtaposition of these encounters.

The first encounter was the published interview of one Mr. Greg Anderson, Executive Director for the PNG Chamber of Mines and Petroleum. When confronted with statements made by newly appointed Mining Minister Byron Chan regarding the constitutional and Organic Law fact that the resources of the land and sea belong to the people of the country (this is where you should recoil in horror at such a heretical idea), he stated that such an allegation is ‘playing with fire’ as it will ‘scare off investors’. Now, I’m sure that Mr. Anderson has a literal truth defense. If, by investors, he means the operators who have robbed the country of its resources with the cunning use of shell corporations, overt financing tactics to evade sovereign commitments, and explicit dealings to remove cash-flow from the reach of their local ‘partners’, he may be telling the truth. Alternatively, he may also be stating a truth if, by investors, he means the ventriloquists who have their hands firmly placed within him and by whom, if he doesn’t yell bloody murder at such a benign recollection of the law, his cushy compensation may be ‘down-sized’. In a world where China has declared a de facto policy intonation advocating for a commodity (possibly metal) currency standard, what he doesn’t mean is bona fide financial investors seeking to participate in genuine, risk managed resource production.

His fear mongering is analogous to the driver of a getaway car who, while dozing off fails to alert the robbers that police are on the front steps of the bank as they run out with bags of money. Such a driver should be appropriately scared of: the police who might nab him; his robber buddies for whom he was supposed to keep watch; and, any future hope at being a driver for another group of thugs. There’s plenty of fear available for those who have willfully exploited ignorance but, to ascribe it to a resource endowed country is, well, the evidence of an Occidentus adherent behavior. Given that billions of dollars are being minted on the hype of companies exploiting PNG and this wealth is accumulating on the expanding impoverishment of the country, it’s time for investors to stop turning a blind eye towards this behavior and start realizing that stable cashflows and sovereign risk are best managed with ethical treatment of sovereigns and people. The intangible assets – the rights granted by the government – are the key to economic engagement and it’s time that the global markets participate with, rather than exploit, the granting interests.

Far from the specter of ‘nationalization’ (reignited in the public with recent statements by Venezuela’s Hugo Chavez), Minister Chan was merely reminding current operators that he intends to enforce the constitution and the law. And while the World Bank and IFC may exert strong-arm tactics to intimidate this affirmation of an appreciation for law and order at the bidding of their patrons, the rest of the world should be encouraged that a member of the new government is actually referring to the law as a standard.

The second encounter was in the Sydney Morning Herald in which I read about the grave concerns about the faltering Australian economy with specific focus on the manufacturing and technology sectors. Following – belatedly – in the footsteps of the U.S., Europe, Singapore, South Africa, India and China, Australia made a number of untimely economic and policy choices. The one that struck me the most in reading about the sagging manufacturing and technology sectors was the ill-conceived notion that providing domestic proprietary pseudo-protection in the form of Australian ‘innovation’ patents (an internationally unrecognized proprietary seduction to make people believe they’ve invented something when they’ve really just incrementally modified other stuff). Promoted as a way to ‘stimulate’ entrepreneurial activity and venture capital, this policy has backfired. Not only have countless technologies developed by CSIRO and Australian universities and businesses been reverse engineered and expropriated by others, but, in some instances, the recklessness around this policy’s implementation has enticed investors into the illusion of value that has neither export nor domestic market value. Peddled by well-positioned consultants who plied their empty Silicon Valley wares across Australia just as the indictments of failure were surfacing in the U.S., the charlatans failed to point out that entrepreneurial success is about customers, not investors. And, as an island, continent nation, constraining innovation to domestic relevance alone is antithetical to a global, export-denominated world. Regrettably, unlike Japan and China (and the U.S. back during the creation of Silicon Valley’s illusion), the government as a primary and premium purchaser from entrepreneurial ventures did not materialize and, without this absolute necessity, the model fell like an ill-prepared soufflé.

Ironically, these events were unfolding as a macro-system reality was playing out on the global scene. In the past several weeks, Google, Apple, and Microsoft have been engaging in an unprecedented intangible asset buying spree. Rewarding bankrupt and defunct companies for thousands of patent artifacts with billions of dollars of transactions, these titans have been validating the existence and notional value of assets which are key to solving our looming second global financial crisis in banks. Every bank holds liens within their security agreements on intangible assets. Yet, to date, no bank on Earth can count the value of these assets against the collateral entered to calculate credit quality – a criteria for determining reserve capital. BIS and other regulators appear incapable of considering the possibility that accounting behavior last reformed in the post-World War II industrial era needs to be updated if there’s any hope of stabilizing a future banking system. Whether it’s resource rights in PNG or intangible innovation rights in Australia, these assets which govern all marginal cashflow from enterprise productivity are being ignored by financial institutions precisely at the moment that they’re achieving their most publicly recognized value.

Which leads me back to my mythical idol whose presence seems to be anything but mythical. Like Demetri Martin’s Paradoxataur – a creature that only exists if you don’t believe in it – current policy behavior seems to observe changing conditions and growing uncertainty and then willfully respond with solutions known not to be applicable. Word has it that Occidentus is riding across Jackson Hole on a Paradoxataur. Keep your eyes shut and persist in disbelief and in so doing, we just may have a chance of seeing some order emerge from the madness.

“Talking Business” in New Ireland

2011-08-20T16:12:00.000-07:00

Mediocrity is self-inflicted. Genius is self-bestowed
-Walter Russell, 1946

During a meeting of Local Level Government leaders and landowners at the Sentral Neu Ailan (Central New Ireland) town of Konos yesterday, I had the pleasure of sitting with a number of individuals who share a deep passion for finding paths to increase their participation in the value being extracted from their land. In his opening remarks, the President of the SNA LLG zealously advocated for ‘outsiders’ to treat his community with respect. “If we’re here to talk business, then let’s talk business. Let’s negotiate,” he said with an impassioned pitch.

In my experience during the years I’ve spent working in Papua New Guinea, I have found countless paradoxes. From the vestiges of occupier language – particularly German – in Tok Pisin (the primary language) to the repurposing of Customary traditions to accommodate the growing number of tourists, I am constantly reminded of the cost of inconsiderate opportunism which has been visited on this, and countless other communities. When the nexus of nature – metals, energy, and food – coincides with people who have lived with these abundances without the perceived need to exploit the same, conquistadors have often exaggerated willful ignorance to coerce concessions of unspeakable proportions. ‘Talking business’ and ‘negotiating’ were occupier code for an implicit assumption of transacting the removal of value by an outsider in a manner and for consideration that was, at best, vaguely perceived.

For the next several hours, I transacted ‘information’ under the assumption that, with information would come a greater awareness of the effects of past ‘negotiations’. This information included almost two hours of detailed reviews of financial statements and corporate machinations of a multi-national corporation who, through the cunning use of ignorance, has succeeded in extracting millions of dollars from the country and from international investors – willfully duping both. Ironically, just as the company misrepresented its benefit to the country, it also recently extracted funds in excess of $120 million from the World Bank’s International Finance Corporation, a Canadian Bank, and London investors without disclosing countless material legal and civil issues. Using predatory ignorance in Papua New Guinea, they merely constructed a stage upon which they could prey on the ethnographic and geographic ignorance of markets. Just like it was a safe bet that no one would ever inform local communities about the games being played with debt-filled shell companies, it was an equally safe bet that no one would ever inform the capital markets of the material mis-representations of the company.

So it was particularly poignant that, as I boarded my flight from Kavieng to fly over the Bismarck Sea, I pulled out my stowed reading: “The Man Who Tapped the Secrets of the Universe”. This short essay by Glenn Clark on the life and thoughts of Walter Russell is dense illumination into the experience of a man of great consequence. Russell’s Five Laws of Success (Humility; Reverence; Inspiration; Deep Purpose; and, Joy) served as a generous invocation on the dawn and benediction on the day past. More impactful in my reading, though, was Russell’s treatment of the essence of Cause and the simplicity of Source.

“Thus I was made to see the universe as a whole and its simple principle of creation as one unit, repeated over and over, endlessly and without variation, as evidenced in the universal heartbeat to which every pulsing thing in the light-wave universe is geared to act as one unit of the whole.”

In his understanding of this unity, he explains that toxicity, pathology, and destruction are merely evidences of things out of phase and in dissonance with the unifying, animating pulse. In his admonition, I hear the echo of the simple axiom I conveyed to my children each time I gave a bit of life advice. “Focus and balance,” I would say, “are the only two abiding principles. Hold these and the rest of life will fall into clear alignment.” What I experienced through the oration of the SNA LLG President was that out-of-phase dissonance that evoked a response in me. To address the diffuse EFFECT of exploitative ignorance, one must discern SOURCE rather than CAUSE. In the linear hubris of regression, we could assume that the CAUSE was a company who chose to mislead and, in a single dimension, we may be correct. However, that company is a component of an ecosystem in which the SOURCE of the dissonance comes from a theme we’ve been addressing in several recent posts – namely, surrogacy. By allowing an unaccountable ‘other’ to procure anonymous, hoardable wealth, we all foster predation in which suffering is a by-product. And tragically, the ‘prey’ turn to the language of the predator to seek solace from their abuse and, in so doing, perpetuate their injury.

Yesterday, the careful application of information dissemination took a first, tentative step towards the emergence of a new narrative – not just for the people of New Ireland but for the investors unknowingly, primitively isolated from their own awareness and complicity.

My soul quickeneth with the beauty of the dawn.
Today is, and will be.
Yesterday was, and has been.
I will reach out my hand into the darkness and lead him that asketh into the light.
My day shall be filled to overflowing, yet shall I not haste the day; nor shall I waste the day.

- from The Message of the Divine Iliad, Walter Russell

Somewhere Over the Rainbow

2011-08-14T11:15:00.000-07:00

"In your light I learn how to love.
In your beauty, how to make poems.
You dance inside my chest where no-one sees you, but sometimes I do,
and that sight becomes this art."
— Rumi

Today I got to be a Dad. Yes, technically ever since that snowy gray day in Goshen, Indiana over 22 years ago when we found out that Katie was on her way into the world, I have been legitimately a member of the fraternity, but today was far more than biology. Today, we moved Zach into his dorm to launch his university career and, with this move came a haunting of the ghost of me in years past.

I remember sitting in the Purl St. house in Goshen with a few friends right after Katie was home from the hospital. John and Mark were standing with me looking down into the rocking cradle that my Dad had made for me (now sitting in our basement among other memories). Laying in a pillowy mass of blankets and fluffy things was a beautiful baby girl.

“What are you thinking when you look at her?” either John or Mark asked.

“You know,” I responded, “the truth is that I hope to see her get to college age having a foundation of confidence and with the certainty that she is loved. If that happens, I will be the proudest, most grateful man I could imagine.”

I don’t know which one of them asked me the question and, in truth, it doesn’t matter. Because what does matter is that today I got to see the other end of aspiration and got a rare opportunity to look back across 22 years to a me then. I had more hair on my head. I couldn’t stand without braces and canes from my many surgeries. I was embarking on a life that bore no resemblance to what I had expected just a few short years earlier. Whatever was left of a fantasy of ‘ideal life’ was either dead or comatose. I would learn to walk with my children – literally and figuratively.

And what an awesome journey! In Katie I got to see the power and the sorrow of a person gifted with a quick mind, deep perception, refined intuition and walked into life with her as we both learned how to be ‘different’ in communities and cultural contexts which regress masses to a mean. In Zach I got to learn the strength of compassion – compassion for everything: animals, nature, people. Through their eyes and in their words I was given a constant path to see my insights, words and actions reflected in admonishing brilliance. Zach taught me to look beyond my conscious perception to ‘see’ what wants to be seen. Katie taught me to embrace influence without striving to manipulate.

Wealth and the metrics we use to assess it are illusive vapors. Depending on context – defined by time, geography or external factors – they may be as fickle as a light summer breeze. Moving into his dorm room (complete with his signature rumpled bed sheets; his abundance of t-shirts, his immediate embrace to jump confidently into his nervous, illusive unknown next) Zach gave me a gift of perspective. Across two decades, I got to visit me. And beyond just a nostalgic reflection, I got to tell younger me that I got it right. Having two amazing kids successfully embark into life with a foundation of confidence and the certainty of love did, indeed, live up to its billing. I am a proud Dad and a grateful man. And when I arrive in Papua New Guinea in two days and embrace Katie, the arms around her are those not just of a Dad and man, but of a person, who in deep reverence and appreciation, acknowledges that as teachers and masters, my kids have refined my path. Thank you.

_

S&P and the tale of $2 trillion (or $4.2 trillion)

2011-08-07T15:28:00.000-07:00

_

In Alfred North Whitehead’s 1933 Adventures of Ideas, he joins other mathematician physicist philosophers from the period who admirably sought to reconcile societal dissonance evidenced in monetary policy, war, and the transforming gestalt of the role of Christian morality in a globalizing world. Whitehead is well known for his critically acclaimed principle of the “fallacy of misplaced concreteness” in which he shows the consequence of the failure to apprehend the nature of the essence of things and the conventional understandings of the same. He explores the social derivatives of this fallacy in which people separate, enter conflict (including going to war), and engage in destructive acts over ‘truth’ that is neither ‘true’ nor ‘reality’ – simply an unconsidered consensus.

The events of Friday of this week – the capping of a contentious and fallacious closely averted disaster around the U.S. government’s inability to find a path to accountability which, like the gusher in the Gulf, will emit even more toxic sludge when it fails in a few short months – provide a wonderful opportunity to consider Whitehead’s long forgotten wisdom.

Written in 1933…

Ironic, isn’t it, that the “remote chemical discovery” (don’t you love his resistance to using the term ‘alchemy’?) that would render gold of little value was anticipated to be more readily replaced by paper currency whose “number can increase…at their arbitrary will.” Who would have thought that a mathematician philosopher in 1933 could have seen into the mind of Ben Bernanke?

This week, the markets and politicians provided a plethora of fodder for InvertedAlchemy. However, what struck me most was the concrete fallacy that emerged around the controversy triggered by S&P’s decision to downgrade U.S. debt. Let’s be clear, S&P and the rest of the government-protected monopolist rating agencies (NRSROs), are incapable of rendering meaningful risk assessments due to the fundamental detachment they all share from assessing future productivity. Sell-side rating agencies, given the fact that they must serve as the concubines for two equally maniacal lovers – the debt sellers who buy favorable treatment and statutory buyers (like pension funds, banks, insurance companies and others) who are required to hold ‘investment-grade’ investments – couldn’t be objective if they tried. In their deal with the devil, they get monopoly protection through legislation in exchange for always saying nice things about those who protect their monopoly. If this sounds corrupt, it does because it is.

So, imagine the ‘gotcha’ thrill that happened when someone at the Treasury (represented by John Bellows, Acting Assistant Secretary for Economic Policy) found S&P’s much ballyhooed $2 trillion mistake. Clearly, the argument went, if you subtracted the $2.1 trillion estimated cost savings from the CBO analysis rather than adding it (which by the way, folks at the Treasury, makes this a $4.2 trillion mistake), the economy would look much better – so much so that a down-grading wouldn’t be justified. Tragically, by focusing the public attention on the gnat (o.k., rather large pterodactyl, but who’s measuring these days) of the error, the public fell for the S&P bashing without looking at the real numbers. So, to be clear, rather than being over $90 trillion in the hole – based on the error – we’ll only be something over $82 trillion in the hole. Don’t you feel better? Moody’s and Fitch should feel great that our nation is falling faster into unsustainable growth of debt and entitlements at a pace that would require us to more than quadruple our GDP growth and, because of their august wisdom and impeccable insight, they still see ‘investment grade’ when they’re looking at the U.S. debt.

The Chinese are right. We must get our financial house in some semblance of order. Note that I wish we would actually begin telling ourselves something that more closely approximated the truth but I’m not sanguine that that’s likely anytime soon. But between now and then, we need to revisit Whitehead’s axiom. Ratings are not truth. Ratings are not derived from independent, forward-looking assessments of productivity. Ratings are illusions created to fulfill a demand for a specific type of investment instrument whose production is required by statute. If we want transparency, we’ll have to tackle it through banking, insurance, pension, ERISA, and securities reform and that’s unlikely given the House divided. S&P is neither the cause nor the effect that people have made them out to be. They were complicit in the failure of financial products in 2007 and 2008 and, with their co-monopolists at Moody’s and Fitch, they will contribute to more market carnage in the future. But, let’s be clear, it’s all of our reliance on a fallacy of misplaced concreteness that precludes We the People from raising our voices to advocate for greater risk assessment and future productivity insight. And that’s something we can all change today.

Beyond Surrogacy – Gathering in the Meadow at Runnymede

2011-07-30T21:18:00.000-07:00

“If, then, the control of the people over the organs of their government be the measure of its republicanism, and I confess I know no other measure, it must be agreed that our governments have much less of republicanism than ought to have been expected; in other words, that the people have less regular control over their agents, than their rights and their interests require.”

“Funding I consider as limited, rightfully, to a redemption of the debt within the lives of a majority of the generation contracting it; every generation coming equally, by the laws of the Creator of the world, to the free possession of the earth he made for their subsistence, unincumbered by their predecessors, who, like them, were but tenants for life.”

…from Thomas Jefferson’s Letter to John Taylor, Monticello May 28, 1816

“Wherefore we will and firmly order that the English Church be free, and that the men in our kingdom have and hold all the aforesaid liberties, rights, and concessions, well and peaceably, freely and quietly, fully and wholly, for themselves and their heirs, of us and our heirs, in all respects and in all places forever, as is aforesaid. An oath, moreover, has been taken, as well on our part as on the part of the barons, that all these conditions aforesaid shall be kept in good faith and without evil intent.”

“Given under our hand - the above named and many others being witnesses - in the meadow which is called Runnymede, between Windsor and Staines, on the fifteenth day of June, in the seventeenth year of our reign.”

…from the Magna Carta, 1215

I had the privilege of gathering with about twenty five magnificent people in San Francisco last week to engage in a dialogue about the foundations of our economy. During this interaction, we considered the degree to which our social systems – from our relationships with the Earth, our fellow humanity, and with our values and the exchanges thereof – are based on surrogacy (from the Latin meaning “cause to be chosen in place of”). Surrogacy exists in a number of forms, a few of which include:
- our use of currency and notes to represent value and the exchange or accumulation thereof;
- our unconsidered, yet ubiquitous use of Aristotelian concepts of causation and regression every time we ask the question, “Why?” (y = mx +b for the mathematicians, and Why = Measured phenomenon + unexplained error for the philosophers and drunks);
- our Aquinian view of hierarchies in which someone or something is ‘responsible’ for some or all portions of our temporal and existential experience;
- our notion of dominion and entitlement in which we, without consideration, allow others to act on our own behalf to supply our unconsidered conveniences of materials, services, and animating energy / power; and,
- our use of religious constructs, narratives, and idols to absolve ourselves of present accountability for future ‘judgment’, ‘reward’, or ‘retribution’.

As we have discussed in previous essays, an accessible example of surrogacy is the relationship that takes place when one transacts a purchase with money. When I walk into a café, I carry a few dollars, approach the counter and place an order. In the name of convenience and efficiency, I hand the money to the person at the register and, in so doing, I’m explicitly stating that with this transfer of an artifact (existing only in a consensus illusion of value without any intrinsic value), I have absolved myself of any future need or desire for any form of relationship. The matter is finished. When I receive my beverage there is no persistence of humanity between me, the clerk or the server. We’re done. But embedded within that transaction, I’ve also allowed the money to insulate me from the grower of coffee, the roaster, the shipper, the grinder, the barista – none of whom I need to consider (nor may I want to consider). Further, I require no knowledge, consciousness, or concern regarding the wood pulp pressed into a disposable cup, the resin molded to form the plastic lid nor the engineer of the espresso machine. A corollary of the notion of surrogacy is the mantra of ‘efficiency’. In our post-modern mode of detachment, the more we can insulate ourselves from our actions and the field effects thereof, the more ‘efficient’ we hail the system.

At the most superficial consideration, we may conclude that, in the frenzy of our tempo, stopping to think about the entire field effect of our actions and engagements is either impossible or unnecessary. However, I would suggest that this impulse finds itself at the root of our incapacity to effectuate a more suitable experiment with the world in which we find ourselves. Would we consume that which we do if, in so doing, we would look into the faces of all of the people that played a role in putting a good or service in our hands or at our disposal? Would we regress towards a monetary system if we could use abundance within our direct stewardship as a means of engagement and exchange? In the Magna Carta, referenced above, is it any wonder that the document is relatively neutral with respect to money but highly energized with the means of production – things like lands, forests, title, and community?

One of the structural weaknesses of our systems built on surrogacy is our ill-founded notion that somewhere there must be an expert, a guru, a master, or a diety who is watching out for, or over us. By convincing ourselves that we need to be ever outward in our quest to find sustenance, morality, or justification, we fail to understand that all externalities are merely utilities of manifestation for which personal and community stewardship can be exercised. The ‘good’ and ‘bad’, the ‘powerful’ and ‘weak’, the ‘sacred’ and ‘profane’, the ‘rich’ and ‘poor’ are but poles on a magnet – holding no intrinsic value but rather serving as attractors and repellers of energy and animation. Placing this energy and animation in the hands of others – whether through social systems, community hierarchies, or artifacts – robs each of us from our ability to fully engage in our ecosystem.

Jefferson was deeply concerned with the separation of people – as individuals and generational cohorts – from the consequence of their actions. He warned against political and religious systems that reinforce such detachment. In the Magna Carta, the barons explicitly stated that, for them to enter into agreements with the sovereign, they would take full responsibility for all of their physical and emotional impulses – both positive and negative. These sources of inspiration share a number of phenotypic similarities but, principle among them is the complete rejection of surrogacy without constant accountability from those who assign powers to a surrogate. In other words, no surrogate can work if there is not constant, informed vigilance on both the artifact of stewardship appropriated from the right holders to the custodian and the actual behavior and performance of the surrogate.

Which brings me back to San Francisco. During our conference, it became quite evident that notions of productivity and utility were unconsidered. It was clear that the difference between debt, equity, and credit were indistinguishable in the minds and lives of most of us. The principle of First Order accountability – actually consciously engaging at every level of all elements of our existence and the enablements thereof – was an inaugural, disciplined journey for all.

Not under the leadership of a master or guru, not under the banner of sovereign or politician, we the people need to reconvene at our Runnymede and reconcile ourselves to the fact that we’ve entrusted far too much with neither conscious consideration nor the means to maintain vigilance and accountability. And, having arrived at a considered review, we need to, once again, elect those things for which we’re willing to literately transfer surrogacy and those things that require our direct supervision and responsibility. As we watch events unfold this week in the madness in Congress around the nation's and the world's finance, we must all remember that we are not victims. We are those who ceded our stewardship and accountability and we now need to reclaim and animate the same.

Electromagnetic Money – A Novel…

2011-07-25T11:59:00.000-07:00

The following post is entirely for amusement value only. This is a work of fiction. Names, characters, places and incidents are the products of the author’s imagination. Any resemblance to actual events, locales, persons living or dead is entirely coincidental. After all, sometimes, serious people like me need to have a bit of fun. Enjoy!

On July 22, 2011, the Washington Times published a report on information from a classified assessment from 2005 in which the National Ground Intelligence Center suggested that China may have electromagnetic pulse (EMP) weapons that could be used in future conflicts. This was not news. For years, China, Taiwan and others have joined the U.S. and Russia and several European states in assessing the viability of high altitude and non nuclear EMP (HEMP and NNEMP, respectively) as a means of crippling computers, communication systems and infrastructure. Like the Pakistani submarine capabilities developed using French and U.S. technology, the Chinese unmanned undersea vehicle programs which use seabed magnetism and topography for undetectable navigation and countless other systems, this ‘breaking news’ is neither breaking nor news.

In 1962 and in the subsequent years, projects like Operations Fishbowl, Starfish and others successfully tested EMP and HEMP devices with devastating effects to power grids and communication systems in Hawaii. The ability to detonate a nuclear device – and other impulse generators – and, in so doing, create blankets of electromagnetic disruption has been well known. The Commission to Assess the Threat to the United States from Electromagnetic Pulse (EMP) Attack issued its Critical National Infrastructures Report in 2008. The report details the nature of the threats and provides numerous indicators to individuals and institutions whose work is well documented. And, in recent years, Congress and the White House have publicly (if you actually pay attention) expanded budgets for shielding of Department of Defense Infrastructure.

So I was intrigued by the release, in the past week, of several reports about the Asian ‘threat’ of EMP and HEMP attacks. And I wondered whether these trickling leaks may have more to do with Leon Panetta’s June 9, 2011 confirmation hearing testimony than first meets the eye. While exceptionally well documented since the mid-2000s when the EMP commissions were organized, we’ve known about capabilities held by our nation and potential threats across the globe. However, as we’ve been nearing our unraveling fiscal crisis of confidence and accountability, the Secretary of Defense (the same man who had ample access to classified intelligence briefings of foreign and domestic capabilities at the CIA) decided to float the notion that an electromagnetic attack or cyber attack would enter military doctrine as a means to justify hostile reprisals on perpetrator states.

After taking a quick look at the GAO reports (from 2001 forward) about the infrastructure risks associated with the data centers that keep track of U.S. Treasury, Federal Reserve, and taxation records of the United States, I began to wonder if we may be building a narrative to explain one path to catastrophic resolution of our economic challenges.

Let’s take a step back. Facing a collapsing economic confidence in tandem with mounting costs of the Vietnam War, the U.S. balance of payments and trade deficits were undermining confidence in dollar investors. As foreign investors lost confidence in policies that failed to control domestic financial recklessness, many began demanding to redeem gold notes for gold. Switzerland, in July of 1971 demanded redemption of $50 million in gold. France, with considerably greater proportional exposure, decided to pursue redemption of nearly $200 million. With Congress recommending dollar devaluation during the summer and during acrimonious ‘debates’ between Democrats and Republicans, France decided to amp up their demand for the government to honor its commitment. And then, on a sultry weekend in August (really, we can’t even be creative with the dates when we choose to be dishonorable?) President Nixon closed the gold window sticking it to all of the Bretton Woods investors. Having defaulted in August 1971, Nixon began looking for a new interest who would be willing to invest in the U.S. and, lo and behold, he found an unlikely buyer – China.

Part of France’s incentive to support the dollar was the U.S. commitment to fight the war of liberation and democracy in French Indochina. When it was clear that neither the war nor our alliance with France was going to prove to be a winning strategy, we decided to target them to bear the brunt our accountability collapse and stuck them with the closed gold window. Now, in a world of digital and electronic records of trillions of dollars of Treasuries and in the face of a collapsing resolve from China to support our forty year excesses, we are beginning to condition the public to believe that China may ‘attack’ us with an EMP device. Is there a chance that we’re actually contemplating our own doomsday closure of the ‘Treasury Window’ by detonating, or inviting an erasure of the record of our obligations with, a giant EMP blast which, according to GAO reports, would wipe out considerable evidence of domestic and international financial transactions and obligations?

And wouldn’t it be convenient if, in the “I told you so record” (analogous to our post facto awareness about our terror enemies) we could show that Defense Secretaries and Directors of the CIA had been testifying that Iran, North Korea, China, or others were developing and testing EMP devices? You see, at 400 kilometers above the Earth’s surface, it’s hard to find the “Made in China” label on the side of the missile. All you see is what looks a bit like the sun. And then the power goes out, computers stop working, communications shut down, and the only thing left to work is propaganda. The whodunit story would be only told by the perpetrators / victims and the public would never know the truth. Best of all, we would have an opportunity to simply ‘forget’ that which we never intended to honor.

Measuring intent is a delicate and dangerous proposition. But, one thing’s for sure. You don’t have to be a rocket scientist (though it might be helpful if you were) to see that the recent co-emergence of default talks and the flurry of ‘news’ regarding information that was known for over a decade seem to make strange bedfellows. Having disclosed the EMP technology in patents issued to the U.S. Navy and U.S. defense contractors going back to 1969, our sudden concern seems to be responsive to some new, emerging narrative. And with the evidence of our obligations to the world’s investors all sitting in digital archives in centralized centers, and given our past willingness to default on those who assisted our economic growth, I sure hope someone’s watching the horizon a few minutes before a second sunrise over New Jersey, Virginia or Texas because following that contrail will help us figure out who erased our memory.

And if it never happens, it sure would make one killer Hollywood blockbuster…

From Russia with Love

2011-07-17T20:35:00.000-07:00

This week saw the economies of scarcity – manifest in the Bretton Woods denominated (and now indicted perversions of) ‘promissory notes’ – teeter ever closer to the edge of their own demise. And we saw the soothsayers scurrying about in their frantic, ghoulish orgy of empty deferral as they rushed to find yet another potion to push back the hands of time (or defer the inevitability of accountability). No August 2 fix – neither by Democrats, Republicans, nor Tea Swillers – will alter the reality that the current system of disembodied consensus irresponsibility is irreparably damaged and is ripe for transformation. So, this post is NOT about the economy of the past but the agents of transformation. Specifically, this post is about a few great people who are working to transcend the requiem of scarcity into the anthem of abundance.

Years ago, I met Ken Dabkowski who, at the time, was working at The Arlington Institute. Tireless in his dedication to take the visions of TAI’s founder and render them accessible to a larger community, Ken struggled to find a path to help humanity wake up from the discordant stupor of present illusions. As TAI downsized, I invited Ken to sojourn with M•CAM for a season while he found a meaningful path to engage his passion and his destiny.

I can’t say I know, with any precision, where we are in that process but what I can say with absolute certainty is that Ken has found a path to render visions into reality. One year ago, Ken and I spent several weeks in Mongolia. Traveling from a camel herder nomadic community in the South Gobi to the highlands of Arkhangai – the ancestral core of the great Khan Empire – we noticed that, no matter where we went, the landscape was punctuated with old Soviet installations beside which resided vast mounds of vodka bottles. In fairness, present day Mongolians are adding their fair share of new glass to these troves but, there’s no question that vodka and its associated bottle litter is more pervasive than many other fixtures across the landscape.

During our journey, we were confronted with the refrain of need for better food security and agriculture infrastructure. Occasionally we saw greenhouses that had been built by Korean aid and development agencies. However, these aluminum frames, plastic draped constructions did little to withstand the violent sandstorms – a signature of the Mongolian climate – and as a result, many stood tattered in the windy desert and plains.

Using our Integral Accounting framework, we launched a program to take the native abundance – namely, vodka bottles – and use these to build windstorm resistant greenhouses. Ken undertook to develop this project and, in less than one year, we went from idea to construction. In partnership with people like glass engineer and artisan Bill Hess, beetle-kill lumber construction engineer Greg Smith, M-ICP logistics master Nergui Dorj, the ‘SoNo’ M•CAM Heritable Innovation Trust interns (lead by my daughter, Katie Martin), UVA’s Jefferson Public Citizens student grant recipients, Professor Bob Swap and a team from the Mongolian Academy of Sciences, together with countless others, the possibility of using the legacy of Russian vodka bottles to enhance food production in Mongolia went from concept to reality. None of this would have been possible were it not for the inspired leadership of Ken.

Is it possibly the case that if we look at the unconsidered litter of our industrial frenetic consumption, we may find that we have bypassed opportunities to confront today’s challenges with yesterday’s abandoned resources? Is it possible that the foundation for tomorrow’s transformation may come from a repurposing of today’s neglect? Is it possible that we could actually begin transforming our models for future engagement by repurposing what once served to foster dependency and addiction? Maybe the vodka bottle greenhouse is an anomaly that cannot be repeated. Maybe the world’s challenges are too great to be confronted with a re-imagined view of the ignored and abandoned. But then again, maybe not. What is important is that each of you knows that there’s a phenomenal young man who inspired an international team to transform the legacy of an addictive past into a fruitful future. His name is Ken and we’re all more fortunate to know that he’s in our world.

Make sure you take a look at the amazing slideshow at the bottom of the following website:

http://www.globalinnovationcommons.org/blog/mongolian-greenhouse

Let Them Eat Cake

2011-07-10T16:49:00.000-07:00

As the Bureau of Labor Statistics reported its June 2011 employment data, I found myself nodding off in complete boredom as the pundits and economists recoiled in now predictable shock. Their much heralded recovery, it seems, was neither heralded or a recovery. Rather it was Mary Poppins-esque, you know, “if you say it loud enough, you almost sound precocious.” And yes, the several-week run up in stocks that we’ve seen is, well, in a word, a fattening for the coming slaughter. There is no data on any front that suggests that U.S. equities - save the defense industry - are ideally situated to weather the reckoning but, alas, we’re heading for a most intriguing convergence. As I have stated on several occasions, with all the haranguing about the debt ceiling, we seem to be overlooking the fact that, once issued, we need to have a buyer for the debt. There’s no question that the shuffling of a few trillion in assets in late July or early August is going to trigger another sweep by the keepers of the house as the giant roulette wheel of sovereign default continues its frenetic dervish impression.

I was intrigued by the acquiescence to national security-inspired socialism represented by the ‘no big government’ advocates who had nary a whimper when, this week, they passed the Defense budget which, for those of you who didn’t read it, is organized around the following four themes: 1) taking care of people; 2) rebalancing and enhancing military capabilities; 3) efficiencies and reforms; and 4) supporting our deployed troops. While even the most casual observer realizes that much of this $650 billion budget goes to fund pensions and health care (uh oh, sounds like pesky entitlements to me) while another significant component goes to supporting employment in key conservative Congressional districts (can anyone say ‘pork’?), it is somewhat ironic to see this budget for our ‘security’ when put in the context of the present and future enemies we seek to defend against.

With the migration of our campaign against ‘terror’ moving eastward with all eyes now on Pakistan, we are confronted with the recognition that, according to the most aggressive estimates, including all Saudi, Pakistani ISI, U.S. CIA and other covert support from the late 1990s to the mid-2000s, our official ‘terror’ enemies have a budget between $2.5 and $3.0 billion. Pakistan’s total budget – spent in part with U.S. defense contractors – is about $6.4 billion. Iran’s budget estimated at slightly over $8 billion (not including the contingent funds they may have on reserve to purchase nuclear devices from Pakistan or other armed states) is in line with other regional defense allocations. Rounding out the all Bush-proclaimed Axis of Evil states, we’re looking at a total combined threat of less than $30 billion. And in spite of our willingness to out spend our enemies by 20 times, we still seem to be philosophically and actually losing our campaigns.

To put our $650 billion in context, the People’s Republic of China’s budget is just over $100 billion with France ($62 billion), the United Kingdom ($57 billion) and Russia ($52 billion) rounding out the top five. In point of fact, if you take the top 20 nations ranked by military expenditure, the U.S. accounts for 51% of the total global budgeted defense expenditure. And, our defense industry contractors, subsidized as they are by a very generous Congress and White House, supply a considerable amount of the defense hardware and systems for the top twenty nations’ militaries. So I was particularly intrigued to see that, in the face of protected government concessions insuring their on-going profitability, the defense industry has actually been one of the top employment terminators for the 6 months ending in June. According to the Challenger, Gray & Christmas report, the defense industry has been the third most job-cutting trailing only the government/non-profit, and retail sectors.

Among the G-20, there’s no question that military expenditures have been a significant component of the economic engine in modern economies. In the past two hundred years, the largest spikes in economic activity have included expansion of defense spending. However, there is a growing chasm of uncertainty around what is happening as we see Timothy Geithner’s August 2 looming on the horizon.

One of the last times the world saw conflict-fueled indebtedness at current scale was the Napoleonic Wars. France and Great Britain took economically divergent paths to fund their campaigns with far-reaching consequences. While both France and Great Britain went deeply into debt to fund their conflicts, Great Britain’s willingness to impose austerity and tax increases, combined with their commitment to maintaining a metal standard currency, made their debt a desirable investment at home and abroad. In contrast, France’s profligate indebtedness combined with its revolutionary ‘tea-party-like’ revulsion to taxes, put its debt in dubious desirability and, in the end, resulted in greater taxation and ultimate sovereign bankruptcy.

Where does this all come together? Well, for starters, we need to understand that the fiscal conservatism which seeks to achieve financial controls with the reduction of social programs while continuing to debt-finance ‘national security’ at a rate that is ten fold greater than the sum of all of our present and contemplated foes is, in a word, disingenuous. The notion that we can stabilize our war-thirsty budget without revenue increases has, as its historical justification, Napoleonic logic. Who would have thought that our Tea Party friends would be so 19th century French? On, or about August 2, 2011, the only winners will be those who fate and ignorance have protected. However, their win will be short-lived. The very dollars they seek to control will, shortly after the 2nd, erode in value and, in the end, their role in distracting fiscal discipline may lead the public to conclude that our fears made us less secure. Congress and the White House have looked at the American people and said, “Let them eat bullets.” That’s likely to be as popular as it was for Louis XVI and his lovely bride, Marie. And, after our current monarchists have been disarticulated, our economy will be well-suited for Napoleon and his economic genius. Here’s a thought. Let’s wake up and care BEFORE this happens!

Declaration of Interdependence

2011-07-04T12:51:00.001-07:00

_

Sitting on a beautiful boat in the Rock Hall marina last night I was captivated by one of the most delightfully comic July 4th dramas. Over the loudspeakers poised just inside the breakwater came the mournful strains of the ‘Star Spangled Banner’ sung in a dirge tempo followed by twangy crooners lauding their American pride. Just beyond the barge, a respectable quantity of explosives lit the night sky for a solid sparkling shower of what was probably 15 – 20 minutes. And on the bridge, a dozen of us celebrated the camaraderie of old and new friends. Anonymously assured yet clamoring for no attention in the towering skies behind the foreground antics was one of the most terrible and beautiful thunderstorms I’ve seen. With thunderheads scratching the ceiling of the atmosphere, massive discharges danced in antiphon with the Chinese pyrotechnics showering into the Chesapeake Bay. During Lee Greenwood’s ‘I’m Proud to be an American, where at least I know I’m free’, the lightning was flashing once every 7- 10 seconds, ever brighter and ever higher as if to say, “Look at me. Freedom, unconstrained, can soar to the heavens.”

Those who saw the lightning – and I’m fairly certain that there were a few – probably spent their time, in the main, commenting how glad they were that the thunderstorm was passing to our southwest so as not to rain on the festivities. But as the sparks persisted, I was lost in the discharges high above finding myself reveling in the enormity of the explosive power of polarity derived from wind, water and magic. And in the midst of my thoughts, I found a path towards another window on our present state of affairs.

Sitting on the waters of the Chesapeake, so many ironies flooded into the celebration of the birth of a nation which, in no small way, has a total incapacity to understand its roots or its destiny. Our national anthem, which has no connection to the birth of the nation, is the product of Francis Scott Key’s impotent musings on board the HMS Tonnant as he sat with American Prisoner Exchange Agent Colonel Skinner in the morning hospitality of British Officers Vice Admiral Cochrane, Rear Admiral Sir Cockburn and Major General Ross. Written during the bombardment of Baltimore in September of 1814 (during the optimistically named War of 1812 despite its 3 year duration with over 20,000 casualties), the poem questioned destiny rather than its modern wistful, illiterate celebration of assurance. Entrenched as our national anthem 80 years ago by the Hoover Administration during the carnage of the Depression, it is fascinating to see our modern fervor around the hymn in the face of looming certain erosion of our confidence and arrogance.

Ironic, too, that our celebration of independence from the tyranny of George is, once again marred by our desire for independence from the tyranny of another George – this one a wayward Republican who, as spender-in-chief, led the nation in an orgy of consumption befitting a thoughtless monarch for whom we are now all paying dearly. With his court still entrenched under the current administration, we find ourselves using Chinese explosives to mark our independence from… oh, that’s right, the makers of the fireworks.

And how fitting it is that our very name, the United States of America is unraveling as state after state confronts insolvency in the face of economic mismanagement and entitlement debauchery? One wonders precisely how many horses are in the stable of the apocalypse? Mind you, this is no catastrophic world-ender event. No, this is the apocalypse of our tired illusions in which Independent Supremacy is a fallacy around which we are all supposed to stand in Roman attention.

The pen that wrote our national anthem was sitting, at peace aboard the civil hospitality of an enemy. The President who, two generations ago vainly attempted to remind Americans of their manifest destiny, used a pensive supplicant poem as our anthem rather than a rallying march of confidence. And our celebrations of independence prophetically allow Chinese technology to define our highest moment of national pride. Are any of us capable of allowing the scales to fall from our eyes and realize that our aspiration to an exalted isolation is not only self-defeating but actually worsens the pain of our coming economic and civil realignments and necessitated austerity?

Chinese and Hindu tradition is filled with parables of the futility of these narrative-imposed conflicts. Morsels of wisdom fall from a table set rich with admonitions surrounding the conflict created by self-imposed illusions. I am particularly drawn to the wisdom lessons of Sun Wu Kong (the Monkey King in Chinese mythology) who is the audacious creature who, armed with invincibility and perfect clarity, spends his early incarnations fighting heaven, nature, demons, and everything with whom he can pick a fight. While he does a capital job of wrecking havoc throughout the universe, he finds it exhausting. Ironically, when cowed by the Goddess of Mercy, he finds obedience equally exhausting. It’s not until he sees his destiny to be a catalyst for change and an inspiration towards elevated purpose that he finds his place in the cosmology of the Buddha.

And, with a final stroke of irony, this mythical figure showed up in the lightning punctuated eve of our Independence Day. Thriruvananthapuram, home of one of the notable temples to Lord Hanuman (the Hindu deity counterpart of Sun Wu Kong) was the site of an archeological unveiling this week when a team found what may be one of the largest hoards of gold, diamonds and emeralds ever found in a single location. Reports of this cache predictably characterized it as ‘worth an estimated $17 billion’ which amounts to approximately 1 percent of India’s nominal GDP or 10 percent of the nation’s total revenue for fiscal year 2010. In a country so rich with cultural and religious awareness, I found it fascinating that such a revelation would be discussed in its Occidental, monetary consequence rather than its religious and metaphysical significance.

I wonder if we can, above the din of ‘bombs bursting in air’, take a moment to reflect on the experiment that is this country. We the People, are of necessity, not Independent. We are, in fact, fully dependent on a heterogeneous world. While our politicians debate debt ceilings and limits on expenditures, we seem to neglect a pathologically obvious assumption which is NOT a certainty – namely, that our neighbors across the globe actually will continue to extend us credit. This arrogance led the Federal Reserve into its uncomfortable position of having to be the buyer for U.S. Treasuries (conveniently termed Quantitative Easing). And, we will, before August 2, be confronted with a trillion dollar conundrum. Once again, we will need to present the world with a credit-worthy story about a country which honors its commitments. So, between the beer and hot dogs, toss a little tofu on the grill, douse it with some soy sauce and ask yourself what kind of neighbor are you? Because if we want interdependence to be palatable, we’d best learn to be guests on board a ship of another flag at least for a moment. Ponder that. Xie xie, Arigato, Danke, Shokran… you get the point.

Covalent Commerce

2011-06-26T20:37:00.000-07:00

Chemists Gilbert N. Lewis and Irving Langmuir should be household names given the degree to which their contribution to chemistry is mentioned daily in the press. And 92 years ago this month, it was GE’s Irving Langmuir – the patent holder on the incandescent light – who introduced the principle of ‘covalence’ into our understanding of the chemical structure of molecules (Journal of the American Chemical Society, Vol. XLI, January – June 1919, pgs 868-934). While we wouldn’t understand things like carbon dioxide or water without this basic understanding of the cooperation of electrons within molecules, what I find more intriguing is the wisdom contained inside the code of Lewis’ and Langmuir’s treatises. And, for those regular readers of InvertedAlchemy, you’ll recall my affection for the Coulomb Effect, described by Charles-Auguston de Coulomb two centuries ago which helped Lewis and Langmuir understand atomic polarities and helped us describe what I have called ‘Fusion Enterprise’.

A decade ago (and posted in reprise last week), I gave a speech on the ‘Knowledge Economy and the Cross of Gold’. In this address I focused on the systemic risks that I saw emerging in our delusional migration from productivity to disembodied ‘knowledge’ economic principles and practices. My concern, borne out entirely since then, was that dissociation between commerce and productivity would threaten the very core of our economic ecosystem. Further, I suggested that, as we saw the expanding chasm between productive engagement and irresponsible detachment, we would undoubtedly see a frenzy of phantasmal ‘solutions’ to our accountability failures. In short, as we found ourselves increasingly foundering in the cold dark seas of our own illusions, we would simply play ‘Nearer My God To Thee’ louder to drown out the noise of the sinking Titanic and its passengers.

The ‘knowledge economy’ is dead. Tragically, it died because we failed to learn from our Greek forbearers the difference between knowledge borne of consideration and experience and knowledge derived from passive, superficial observation. In our made-for-sound-bite world, we mistook the noise of cacophonic ‘information’ hawkers for knowledge. Inquiry and careful analysis withered with our obsession to quantify learning through standardized tests and, at its zenith, standardized knowledge became the ultimate oxymoron. We adopted a consensus and it was an illusion.

This proclamation is not a calamity in any form. It is, in fact, the cause for great celebration. It turns out that the term ‘Knowledge Economy’, attributed by Peter Drucker’s Age of Discontinuity (1969) to the work of his colleague and fellow Austrian, Fritz Machlup in 1962, was popularized by a man who also posited in 1984 that compensation inequities (CEO’s making anything in excess of 20 times the rank and file) were “morally and socially unforgivable and we’ll pay a heavy price for it.”

Preening its wings in the early dawn of the Covalent Commerce economic cycle is a red-crowned crane – historically Sinic symbols for longevity, peace, friendship, fidelity and good luck. Arguably one of the most painted life forms in China, I find the crane as an interesting metaphor for the economic cycle to come.

Covalence is a bond that is formed by the sharing of electrons. However, what makes covalence particularly poignant is not the presence of shared energy but the fact that, for the bond to work, the electrons are sharing utility in action. And what makes this principle so attractive as a commerce metaphor is the recognition that covalent bonds exist between identical and dissimilar atoms alike. The atomic nuclei in molecules that enjoy covalent bonds retain their unique identities however achieve their molecular destiny through shared energy. As with the iconic crane, each individual has grace and elegance in isolation but achieves its symbolic utility in the presence of others.

The principles of covalent commerce are quite simple. Priorities shift from divisional, defended enclosures, to marginal benefit optimized collaboration. Benefit is derived from bounded, quantified recognition of interdependence rather than extractive tariffs on intersections and intermediaries. And, above all, detached isolationism is rejected for jointly accretive associative action in which greater utility is a direct consequence of entanglement.

In a world where the captains of the incumbency have all become marionettes in an macabre dance of destruction and denial, it is appropriate to consider that, We the People, are confronted with an opportunity to take stock of our future. We can listen to the chaos of desperation as we figure out how to concoct euphemisms for default, dereliction of duty and breach of public trust or, as the red-crested crane, take flight and find our fortunes in fidelity with other covalently bound energy.

The Knowledge Economy and a Cross of Gold

2011-06-19T19:21:00.000-07:00

The following is the text of a speech presented nearly a decade ago. Next week, I plan to publish a follow-up to this perspective.

2001 Bluffton College Presidential Leadership Lecture
Dr. David E. Martin, CEO M•CAM
October 2, 2001

“I come to speak to you in defense of a cause as holy as the cause of liberty – the cause of humanity.”
- William Jennings Bryan, 9 July 1896

Winds of change fanned flames of controversy one hundred years ago. Across the country, upheaval caused by geopolitical and economic power realignment left Americans searching for a standard, a basis upon which they could denominate their existence. With the industrial machine drowning out the sound of the plow and scythe, a revolution was brewing – one that would change the landscape of the globe for a century. Productivity, industrial might, and cash now measured wealth, once denominated by property ownership. The idle holders of idle capital vilified by William Jennings Bryan at the Democratic National Convention in 1896 were the educated industrialist elites who, according to him, turned a deaf ear to the working masses. While all acknowledged the need to establish a currency standard, fierce battle lines were drawn on the 11th meridian of the Periodic Table of Elements with impressive skirmishes in the “A” section.

In the face of this tumultuous time, another debate was growing equally rancorous. As the 20th century dawned a movement was afoot to establish the infrastructure to consolidate the movement of wealth throughout the nascent continental country. Financial panic, alleged by many to have been instigated by proponents of a central bank, provided a stimulus to create the Federal Reserve Bank by 1913. The centralization of the mode of wealth and knowledge transfer, be it tangible or intangible, has long been known to be the path to dominance. After watching the Duke of Wellington defeat Napoleon at Waterloo, Baron Nathan Rothschild was reportedly quoted as saying, “I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man that controls Britain's money supply controls the British Empire, and I control the British money supply.” While observing that, “whoever controls the volume of money in any country is the absolute master of all industry and commerce,” President Garfield provided the inspiration for today’s presentation in his words spoken in 1880. “I am an advocate for paper money, but that paper money must represent what it professes on its face. I do not wish to hold in my hands the printed lies of the government.”

One might reasonably ask, at this moment, “How do Bryan, Garfield, Rothschild, and Morgan find themselves visiting us in October, 2001?” After all, isn’t today the day most of us mourn the 1780 hanging of British Intelligence Officer Major John Andre and celebrate the President Johnson’s swearing in of Supreme Court Justice Thurgood Marshall? An appropriate question may be the most eloquent uttering of the 1992 Vice Presidential Candidate Vice Admiral James Stockdale, “Why am I here?”

Today, we will explore the realities of a crisis of humanity more polarizing than the debate of gold or banking. We will probe the enigma of the knowledge economy that has no standard – a wealth without denomination. We will address the challenge presented by President Garfield 120 years ago and resolve to valiantly seek to address the problems we encounter. What is knowledge, how is it’s quality assessed, and who controls its distribution? Informed by the debates of yesterday, we will seek solutions for the challenges we face today.

Let me begin by making the following observations. At the turn of this century, the International Leadership Forum estimated that the adult global literacy rate was 73%. That means that the written word was meaningless to over 1.3 billion adults. With many countries boasting rates of 95%, many had rates under 50%. An UNESCO report estimates that approximately 250 million children between the ages of 5 and 14 are working and going to school. Fifty percent of this group works full-time. When one considers the numbers of people trained beyond nominal literacy, the numbers are more poignant. Less than 40% of the world’s population, over the course of their lifetime, can enter tertiary educational institutions. Sixty three percent of the world’s literate population lives in economically “developed” countries with African, Central and Southeast Asian countries disproportionately illiterate. These statistics should, in themselves, hold considerable weight. However, this is not a lecture on education of the masses. No, today, I’m concerned with a far more complex topic that, while impacted by the numbers above, is far more unnerving.

We find ourselves at a point in history where considerable acclaim is cast upon those who have achieved greatness in the pursuit of corporate goals. Forbes and Fortune herald one after the other multi-millionaire whose fame is built on success in entrepreneurial imperialism of one sort or another. During the last four years of the past decade, more millionaires and billionaires (in economic adjusted terms) were created than in the cumulative running of all of human history. Are we really that much smarter and that much more productive than all civilizations that preceded us? Are our institutions of higher learning producing genius with every diploma? Do we live in Garrison Keillor’s mythical town where, “every student is above average?” Or is it possible that we have built a tower of Babel?

Let us examine three elements of the knowledge economy.

First let us ask the question posed by Mr. Bryan. In the knowledge economy, we must ask ourselves the unsettling question of basis. In antiquity, wealth was denominated by raw materials. Those who had the most land, the most gold – in short, the most tangible property – were the wealthiest. In the evolution of economies, these basic elements were replaced by the metrics of the industrial age. In industrial economies, productivity, distribution, and market share served as the more abstract surrogates for the wealth of ages gone by. Now, in the knowledge economy, we find ourselves confronted by an economic reality without basis. Prior to the dot bomb, we were told that value was measured in “eye-balls” and “stickiness”. Billions of dollars flowed into the creation of a virtual presence that conveyed virtual information virtually anywhere. Pause; let us consider what virtual means. Our faithful Webster tells us that virtual refers to a hypothetical particle whose existence is inferred; being in essence though not formally recognized. In other words – NOT. When value is ascribed to virtual reality, how is it denominated? More importantly, how is one to know whether it is real or imagined? As the educator and the educated, how can we learn to discern reality from that which is not? Revisiting President Garfield’s conundrum – we need to know that face value is based on value or it’s a lie. Is “knowledge” the presence or absence of literacy, the letters of degree conferred on an individual, the prestige of institution or commercial affiliation, nationality, race, creed? Or, is knowledge something more than these?

I would suggest the sine qua non of knowledge economy is the need for a gold standard. Copyright law of the United States established that facts have neither owner nor value. The organization and presentation of facts in various expressions have value. Our society is filled with data; our challenge is to transform that into usable information leading to wise deployment creating value. Yes, here’s where I appeal to the student populous movement – educational assessment should not be based on the recitation of facts established by U.S. law as valueless – now here comes the part where I shamelessly pander to the faculty – but in the useful synthesis and application of the same. Knowledge built on rout memorization is valueless, knowledge built on application and problem solving has value.

Second, we explore the problem of ownership. There was a time when ownership was rather unambiguous. Possession was 9/10ths of the law. Land, buildings, shipping lines and trade names were clearly defined by title. In the knowledge economy, we are confronted with the timeless problem of counterfeit. When he realized that conventional warfare was not swinging in his favor, Hitler, in an effort to decimate the United States and Great Britain economies began the process of printing counterfeit dollars and pounds. The French tried the same technique in Vietnam and the U.S. introduced 20 Peso notes in Cuba for the infamous Bay of Pigs invasion. Why is it that from Duke Sforz of Venice in 1470, to Napoleon, to Hitler, to Kennedy counterfeiting has been an integral part of war? Because savvy tacticians know that economic chaos is one of the world’s most effective weapons. Introducing counterfeit undermines all economic systems as confidence is lost in the representation of legal tender.

So too, in the knowledge economy, counterfeits are an untold tactical weapon. In a recent study made of United States patents, our company found that over 35% of all current patents are intellectual forgeries. This means that the patent claims rights already secured by another party or already existent in the public domain. One cannot help being overwhelmed in Malaysia with copies of Microsoft Office being sold for $2 in the shopping malls of Johor Bahru. Passing off as proprietary that which is not is an unmitigated disaster looming over our current economic system. For the knowledge economy to have any viability, forgery detection must be implemented.

Last Spring, the University of Virginia gained national attention when one of its faculty implemented a computer system to determine whether term papers submitted by students were plagiarized or authentic. In certain sections, as many as 25% of the papers were copied, in part or in whole from other sources – often the papers of classmates. Is it any wonder that we go on in life to copy the works of others in business, education, and other walks of life when, in high school and college, we get away with intellectual theft? I think not. However, I believe that educators and students alike must realize that these patterned behaviors establish foundations that lead to ruin.

Finally, let us consider trade. Many have proposed that with the ubiquitous nature of the internet, we are becoming a boundary-less world. Traditional geopolitical barriers are eroding. People are interacting with one another irrespective of time zone, language, tradition, or status. In real time, I collaborate with business partners overlooking Tiananmen Square, Big Ben and Tierra del Fuego. However, in these times of heady multinationalism, we must consider the often-overlooked dependency that is being created in this unrestricted world wide web. Knowledge must be transferred and shared for it to achieve its greatest impact. However, as we see the expansion of telecommunications-facilitated trade, we see an equally expanding malignancy of inadvertent isolationism.

Local vendors close their doors while we shop on-line. All the while, we lose the priceless, informal interactions with our neighbors telling us of places, people and events that once were intrinsic to the broadening of our minds and perspectives. We miss the touch of the hand, the warmth of a smile and the sharing of a friend’s tear – in our wealth, we gain poverty of soul and mind. In the midst of this efficiency, what has the knowledge economy lost? Is the local ISP the Rothschild of the knowledge economy?

We have sacrificed human interaction. In our global economic conquests we have lost the innovative impact of observation. Rather than go to places, we visit them virtually (remember, that means we DON’T). I would like to suggest that one of the greatest threats of the knowledge economy is that we will actually see a reduction in global understanding.

We will see, hear and trade with only those who are wired into the web. Rather than learning from the wisdom of the cultures that have passed before us, we will see only that which the content providers deem appropriate and, in so doing, we will see a contraction, not an expansion of knowledge. In short, we will choke the inventory of innovation and inquiry in the morass of irrelevancy. We must resist the centralization of information and knowledge. Efforts must be made to learn from the richness of indigenous knowledge that may never find its way to a web browser. We must develop multiple venues and vehicles for the exchange of knowledge so that the trade routes are not the monopolistic empire of the few.

So today, we must heed the warnings of history and listen to the voices of the past so that we build a legacy of renaissance, not repression. We need to encourage one another to add value, not volume, to the knowledge of the ages. We must commit ourselves to respect and value the uniqueness of the intellectual property of each member of the human race and decry piracy of the same. And finally, we must vigorously resist the temptation of sloth and in its place actively participate with the global community. We must resolve to move forward the democratization of knowledge and be relentless in our efforts to bear the standard of substance in the face of maelstrom of virtual value.

Let now ring true the statement made by Mr. Bryan on that hot July day in 1896, “The humblest citizen in all the land, when clad in the armor of a righteous cause, is stronger than all the hosts of error.”

Uneven Integrity

2011-06-12T08:59:00.000-07:00

Fed Chairman Ben Bernanke has been desperate to find the linguistics to encode his self-imposed integrity paradox. This week, he referred to the “frustratingly slow” and “uneven” recovery. Thank heavens he’s not a doctor. “You may walk with a limp,” he would advise a patient prior to bilateral amputation of both legs. “Your feet will not recover as quickly as the rest of your body.” Really? When the evidence is overwhelmingly against the much heralded repair of the carnage of the debt fueled spending frenzy of the past decade, one has to wonder why, prior to the election cycle, he finds it impossible to tell the truth. The Chinese SAFE reports at the beginning of the week – so damning that the government had to censor their own transparency by removing public comments on U.S. economic instability from their own websites setting a new standard for censorship – leave no doubt that the market for more U.S. debt has soured beyond already abysmal standards.

In a ‘shocking’ and ‘unexpected’ turn of events, equities ended the week at a low that wiped over $1 trillion in market value away in 6 weeks – the longest slump since October of 2002. The financial media concluded the day on Friday with a record number of “weaker than expected” and “less than estimated” hyperbolic descriptors of the events of the past 6 weeks. Blackrock’s Bob Doll was quoted in Bloomberg saying, “We’re at the end of the recovery and the beginning of the expansion.” And, the casual reader may carelessly overlook the fact that his enthusiasm has more to do with Blackrock’s international exposure – including their massive Asian market interest – than reflecting bullishness on the U.S. economy.

I’ve frequently commented on the fact that sound-bite information is, in fact, misinformation. If a comment is taken out of context or, worse yet, presented without context, it may contain literal ‘truth’ without being contextually true. Most bank executives have basked in the comfort of this defense when they perjured themselves in Congress by ‘truthfully’ answering questions all the while knowing that they were hiding behind the error in the inquiry.

Visa and MasterCard both were appalled that Congress wouldn’t delay the imposition of new fee limits on charges to debit card transactions. In May, the Republican controlled House Agriculture Committee – yes, you read this correctly – AGRICULTURE – voted to delay implementation of transparency and regulation of credit default swaps. For those of you who aren’t familiar with CDS, you would be pleased to know that these traded bets against organizations meeting their financial commitments have ballooned to over $600 TRILLION – over 10 times the inflation-adjusted world’s GDP. To be abundantly clear, in addition to nonsensical deferrals of accountability like the Federal Reserve and U.S. Treasury Ponzi scheme – sorry, I mean Quantitative Easing or QE2 – the ‘recovery’ which has been so illusive is a hologram created by illegal and illusory utilities. And, the deferred enactment of regulation on CDS has been cued perfectly for the electoral calendar. You see, just before the Presidential elections, the Agriculture Committee, supported by the House Financial Services Committee - has set the CDS device to detonate just before the election.

To be clear, financial institutions like Bank of America, JP Morgan Chase, Goldman Sachs and Citigroup – all beneficiaries of the largesse of government bailouts and other concessions have achieved significant profitability arranging CDS trades. An estimated $55 billion in annual revenue is generated from these products and, without these bets and the speculation around the bets (yes, I know, this could seem confusing but this is what the recovery has been all based on, so you’ve all been drinking this illogical cool-aid), we wouldn’t have a recovery.

If you take one step back from the pathologic lying that passes itself off as news and analysis, you may be wondering why detonating another market melt-down on the eve of the next election would make sense. Apart from the obvious response seen in the Bush Administration’s eleventh hour ‘intervention’ which pumped billions of dollars into financial interests and the automotive industry as massive bonuses for aiding and abetting his 8 years of post-9-11 fiscal distractions, there is a more intriguing thesis that could be explored.

Over the past two weeks, the Department of Defense has decided to socialize a theme that I discussed years ago – namely, the growth of ‘cyber-threats’ against the U.S. Now, what follows is merely my musings around why one may want the CDS implosion and the DoD’s cyber threat marketing to be introduced at the beginning of the Presidential campaign season. CDS exist in digital form. They are private transactions and, courtesy of the Agriculture Committee’s crack oversight (please read the disdain-filled sarcasm) they have no regulation to speak of. As of this week, the U.S. and Europe are on track to break the all-time record for financial institution security breaches (at least the ones that are reported). Bear in mind that just at the end of this week, the IMF was reportedly ‘hacked’. Is this news or is it socializing a concept to make the actual event more plausible? Just a question.

So wouldn’t it be convenient if, long about September of next year, on the verge of a complete collapse of the government’s giant CDS – Ponzi racket, for a cyber attack to wipe out the records of CDS obligations? Rather than facing the messiness of the Greek bankruptcy predicament, a simple electromagnetic pulse (and EMP blamed on a hostile source) could wipe out all the records just in time for all of them to be on a single clearinghouse. If you could add Treasury records on the same platform, we could actually ERASE our financial obligations and, voila, get a fresh start. Best of all, we could blame the cyber attack on, say China or Iran, and get ourselves a whole new economic stimulus in the form of another war. The Department of Defense RF and EMP hardening budgets wouldn’t have anything to do with this scenario, would they? And best of all, in May and June of 2011, we could have been told the ‘truth’ of the plan and, as a society, ignored it.

Now, I’m not suggesting that this Dan Brown-style conspiracy could ever happen. Obviously our leadership wouldn’t be that nefarious. Obviously, somebody with integrity would insure that such a cataclysm of conscience wouldn’t actually happen. Nobody would seriously consider aggregating opaque financial obligations in a single place and then create a terrorist event to justify equally opaque wealth transfer. Right?

We, the People, need to stop hiding behind the complexity of synthetic financial products dismissing them as ‘too difficult to understand’. There’s been no recovery. There’s no plan in place to actually address our systemic problems. And chronic economist oracular failure is not due to complexity. It’s due to the fact that the court astrologers are being promoted to continue to sell the illusion. PIMCO’s Bill Gross has had the decency to try to set off the alarm surrounding the Treasury delusion and, for his recent activism, InvertedAlchemy applauds his efforts. Let’s hope that a few others decide to follow his lead and, together, we may avert a much larger crisis. Be informed. Put the puzzle together. It’s not hard – just sobering!

Looking for Hay in a Needle Stack

2011-06-05T19:08:00.000-07:00

“Economists had expected payrolls to rise 150,000 and private hiring to increase 175,000 in May,” reported CNBC and all the other media outlets as they once again struck the familiar refrain on the ‘unexpected’ anemic jobs report at the end of the week. These, remember, are the same economists who have been telling us we’re in a recovery; that the markets are coming back; and, that our economic woes are the product of a real estate crisis.

Nothing, save political melancholy delusions, could justify the expectations that were off by over 100,000 jobs in May. And the degree to which we’re still reporting and responding to data that we: a) know is manipulated and incorrect; and, b) is not predictive of any modern market dynamic (same predictable political pandering) is staggering. I was grateful to Mary Engle at MSN Money who had the decency of reporting the 16.6% (or greater) actual unemployment statistics when one counts those who are chronically without gainful employment.

As I made the rounds in D.C. this past week – visits with industry lobbyists and Congressional representatives – I was intrigued by the degree to which we find ourselves uniformly beyond the edge of utility with the navigational tools which have aided our captains in wrecking our economy’s prospects. Yet we’re still incapable of cutting ourselves free from these albatrosses (or albatrossi) and re-examining fundamentals. In a rather poignant moment with a free-market conservative freshman member of Congress, I was explaining the need for Congress to consider solutions to economic challenges from the private sector that would require NO NEW legislation and NO NEW appropriations. In fact, what we were discussing simply requires enabling laws that have been around since the Lincoln Administration. Confronted with a call for transparent application of existing law, the member placed his hand on his forehead and said, “I guess I’m not sure what you’re asking me to do.”

Moments earlier, in the same Congressional office, a lobbyist was briefing staff on ‘key issues’ that were relevant to the member’s District. “You know, we can really be helpful in keeping the Congressman’s staff informed,” she gushed. When asked to provide input on said matters, she rattled off a list of her lobbyist colleagues who could help as her area of expertise was health care but she had colleagues in a number of other disciplines. “Just let us know what you need information about and we’ll supply you with experts,” she generously offered.

The Court of Appeals has a wonderful term – the willful practice of ignorance. This term is applied to people who, knowing that there could be information that is material to their concerns, elect to move forward without any due effort to inform themselves. On Capitol Hill, this principle extends to listening to those who have evidenced a detachment from reality in the past who persist in purveying their nonsensical views.

As we move into an acrimonious election cycle and we see the sabers sharpened on the whetstone of consensus ignorance, I wonder what it will take for us to start applying some performance discernment to the voices we elect to consume. Medicare and Medicaid, pensions, municipal bonds, public sector employment, and the dollar are all among the institutions which will NOT pass unaltered in the coming weeks and months. China’s inevitable re-marking of the value of Treasuries – something that they’ve already broadcast in their recent ‘hospitality’ afforded to the Treasury Secretary and the Federal Reserve Chairman – is not a forecast but a certainty. Realizing that China and other sovereign funds will be necessary clients in the future, S&P and Moody’s are making trifling negative statements about the U.S. economic situation realizing that to do any less would guarantee them status as relics next to other paleontology exhibitions of those who could not evolve when the climate changed.

It’s not that the models don’t work. It’s not that the metrics are inaccurate. No, it’s that the consciousness that decided what to model and what to measure is at its terminus and we’re now at the natural consequence of the line to which we sought a regression of our standard of living and our hegemonic self-perceptions. Now, the outlier is the new metric and the aggregation of perturbations is the new model. We’re not looking for the one variable that will fix the ‘old’ models but we require focus with new lenses on new variables. There’s no needle in the haystack that will save us. We are ready to go back to our roots and reassemble ourselves around productivity and accountability. And that voice, my friends, is truly rare!

Full Faith and Confidence

2011-05-29T23:11:00.000-07:00

“Leadership is the capacity to inspire and motivate; to persuade people willingly to endure hardships, usually prolonged, and incur dangers, usually acute, that if left to themselves they would do their utmost to avoid.”

Sir Michael Howard

Over the past six months, I have been witness to a great crisis of leadership. Senior leaders of resource endowed countries and industrialized countries alike, when presented with incontrovertible evidence of grave financial inequities promoted by investment banks, treasuries, incumbent investors, and multi-lateral ‘development’ agencies have uniformly defended the abusers as a surrogate for not desiring reproach for ill-advised decisions.

“We’re already a long way down the road,” was a statement uttered recently by a head-of-state when confronted with a means to realign his people’s interests and benefit with their national resources. And, when pressed on public statements in which the same leader had stated that no decisions had been taken on resource development, the instant I recalled recent events which would suggest otherwise, his ire was raised as he knew that his indiscretions and misleading public statements were both knowable and known. “We know that your approach would have a good shot at stabilizing U.S. and European banks but it would require transparency that would not be accepted by corporations at this time,” was the response from a G-8 member. Lavish trade missions to Hong Kong, Macau, and Beijing for Pacific Islanders, African delegations and the U.S. Treasury and Federal Reserve. Goldman Sachs’ arranging for scholarships to prestigious universities and lucrative internships for the progeny of ministers and elected officials all reek of influence peddling – to say nothing of violations of Foreign Corrupt Practices Act violations in the case of U.S. entities. Promises of economic benefit and equity through shell corporations with neither governance control nor direct participation in cash flows. And, to add insult to injury, these illiquid equity interests are financed by allowing national treasuries to purchase their equity through operator-financed debt meaning that, in addition to gaining no economic value, countries are setting a certain course for bankruptcy and social reprisals – including high probabilities of civil violence.

If the risk of civil unrest was merely a theoretical abstraction in some far off land of disembodied despotism, one could almost understand a leader viewing self-interest expediency as an acceptable risk. But, what seems irrational is the fact that in every instance to which I have been privy, within the past few decades and in the adult memory of the leaders, civilian casualties have been the consequence of duly authorized, unconsidered, asymmetric excess. In many instances, the respective leaders who have defended the pillaging of their citizens’ futures have been buttressed with accolades on the international stage where multi-lateral agencies laud their emergence into the club of economic elites. It’s betting on the Titanic’s unsinkability AFTER the iceberg has rent open the hull. Could it be anything but greed-fed madness?

It was at a most recent meeting that I finally saw another explanation. More accurately, I heard it. “I can’t believe that a corporation would actually lie to a government to steal its national resources and destabilize a country,” a President said. “Great,” I replied, “I would hope that you don’t ‘believe’ anything I’m saying.” Recoiling from my unexpected reply, a bizarre window of truth emerged, his voice raising, “Well, why the hell are you wasting my time if you’re not wanting me to believe in you?”

And there it was. The real desperation. In a world filled with the certainty of oppression and wealth asymmetry, what was really lacking was not a genuine desire to democratically lead his people. No, what was really missing was evidence that an alternative could exist. I might as well have been standing before the Inquisitor suggesting that the Earth was merely a galactic dust particle in the expanse of infinite space, for my proposal and his response had nothing to do with observed fact and experienced reality. The objection was anchored in ‘illusory certainty’ that comes from ‘belief’.

The fact that an U.S. investment bank arranged for the country of Mongolia to indebt itself well beyond the country’s fiscal capacity while providing neither liquidity to service the debt nor any governance sufficient to insure expatriate management accountability is incontrovertible. The fact that the Federal Reserve and the U.S. Treasury have felt obliged to rename a Ponzi-scheme ‘Quantitative Easing’ is equally incontrovertible. The fact that the Chinese government sought to build an asset backed reserve based on the collapse of fiscal accountability in the U.S. government resulting in their massive resource imperialistic hegemonic drive has already been consummated. With energy and mineral asset deals negotiated in Iraq, Iran, and Afghanistan while their U.S. debt investments finance the United States’ loss of money, troops and integrity, one can easily observe that their calculus driving wealth transfer is both elementary and self-evident. If you stand at a vantage point of sufficient dispassion to observe what is, you can readily apprehend that desperation for an alternative narrative is fueling the paralysis of leaders across the globe.

Against this backdrop, one could find ample cause for seemingly rational despair. Will informed citizens rise up and, once again, return to violent revolt when faced with the failure of leadership that they’ll lay at the feet of their officials? Probably. Will such responses have equal consequence to all of the actual perpetrators? Definitely not. Regrettably, when lashing out against corruption, the easy target is the local leadership. But they were unlikely the sole responsible party. While international agencies point to corruption in countries across the globe as a scourge, what’s missing is the equivalent transparency on the companies, development agencies, and individuals who facilitated the same.

With a relentless commitment to effectuating alternative narratives based on actual experience, we can rise above vindictive responses and start demonstrating a more desirable condition. Remember it was the returning sails on the horizon which shook Spain, Portugal and the balance of power in Europe, not the impassioned pleas of an idealist navigator seeking funding.

So here’s an idea. Yesterday, Larry and I stood with community leaders on a hilltop just to the northeast of the airport in Port Moresby, Papua New Guinea. (By the way, PNG’s head of state is in the hospital in Singapore for those of you trying to guess who the identities are referenced above, so it wasn’t him, and it wasn’t PNG in my reference.) In an area of approximately 400 acres, 3,000 families are being moved into a model relocation village. The sweeping grasslands hide rocky clay that is not the rich volcanic soil of the New Guinea islands. However, adequate gardens are being planted and the place affords peace and tranquility not found in the choking settlements around the capital. The place is blessed with perpetual 10 – 15 knot winds, ample trees and undulating hills.

The only thing missing is a reliable water supply. A few windmills and a few wells would be sufficient to fill a gravity water tank that could be used to create a micro-utility. This public utility could be owned by the community and, once established, serve as a reliable micro business selling clean water at rates more affordable (and service more reliable) than the distant municipal supply. With a modicum of effort, local community members could meet their water and energy needs with the natural abundance of wind, light, and materials for suitably scaled propellers to supply water and electricity for lighting. Within the readership of InvertedAlchemy, there are enough people who could value seeing 3,000 families with fresh water that we could partner with the village and launch a partnership. Into it we could contribute technology, knowledge, engineering expertise, money, and time. From it we could receive custom & culture, knowledge, engineering expertise, money and well-being. Most of all, we could demonstrate that another path, one free from resource and power asymmetries, can blossom and flourish in a place where such an experience is not anticipated.

After all, if we are going to start addressing the systemic reflex of ‘disbelief’ we need to find ourselves in constant action. As long as we’re debating the lofty ideals of a more conscious humanity rather than knowing that we’ve actually tipped the balance in our present activities, we’re providing sanctuary to the malignancy that leads to persistent abuse. A cup of clean water sourced from a community-held utility indicts faith, belief, and ephemeral ideals. Whether it’s clean water for a settlement in Port Moresby or a community response obviating the illiquid obligations of the insolvent Medicare and Medicaid, which vie for the collapse of the U.S. economy, it is our actions which are called for, not beliefs. So, walk over to your sink, fridge, or water-cooler and ask yourself, “Would I like to share this experience with a stranger?” If you would, I’ve got a spot on Elder’s Hill waiting for you.

The Apocalypse Comes on Public Transportation

2011-05-22T19:51:00.000-07:00

_
On May 18, 2011 – just three short days before the Family Radio predicted rapture – a man and a white horse tried to board the 7:02pm service from Wrexham to Holyhead in the United Kingdom. You know, when you’re predicting the end of times from a mathematical formula derived from Noah’s flood, the Garden of Eden, and inspired texts (I reserve judgment on what precisely was the inspiration), and donor inflated prophetic delusions, forecasting the arrival of a Horseman of the Apocalypse and being off by about 3 days isn’t bad. Adjusting for leap years, the Gregorian calendar misprints, and obfuscated Papal Bulls, the only surprise is that the End of Times would come on UK public transportation. Then again, why not? If you’ve ever used public transportation in the UK, you’ve probably felt moments when the notion of hell and purgatory are quite real and possibly already upon us.

So, as the hours ticked on, I was particularly astute to pick up any subtle alterations indicative of the rapture. Different color sunrises, animal behavioral changes, you know the drill. On the 21st of May, to be clear, the world changed. The sky above the Rotunda at Monticello was bluer than I’ve ever seen it. Great visibility for inbound angels or outbound souls. The temperature was downright heavenly. And, without question, there were some ominous signs. The koi in my fish pond seemed to crawl half way out of the water to reach for the food that was in abundance on the ground surrounding the pond leading me to wonder if they’d be on at least four legs by the end of the End of Times at 6pm. Earthquakes happened – but then, again, they have been seeming to do that a lot lately. Martin Parkinson, Australia’s Treasury Secretary, exhibited the unbelievable candor of criticizing his PhD advisor Ben Bernanke’s departure from their co-authored paper published in 1990. And at the Preakness – after all, if you’re looking for an Apocalypse, what better a place to do so than at a horse race – Astrology came in third! Take that all you heathens! Shackleford was the Triple Crown spoiler and, as you all know, Shacklefords came from the “cradle of Christianity” (Northumberland, UK) known to be the centre of the Church’s greatest adherents back in the day. So there we have it. The UK, Shackleford, a white horse on a train… do you need any more convincing?

And, as you can see from this blog post, I made it. I’m writing to all of you from ‘the other side’. I am assuming, unless I hear otherwise, that I am know in the ‘after-life’ and, having awoken to another glorious day – sunny, fish still trying to walk, my lovely family being lovely – I’m pleased to report that the hereafter is remarkably similar to the here before. I feel a bit nicer. It seems that I’m a touch more tolerant. I don’t know but I think that the soft pretzels I made taste a little, I don’t know, softer or more pretzely. See, I can even make up words that you understand from the other side.

May 21 was a great day for a bunch of reasons. All of them had to do with the people with whom I spent the day. I had some of my dear family from South India in the house and we laughed, ate, and enjoyed life. I had Colleen, Katie, Zach and April around – making for a delightful family affair. Scooby was as affable and lazy as ever. I got to skype with some of my friends in Papua New Guinea. Yes, in fact, May 21 was a remarkable, transformative day. But most of all, the 21st was great because it let me reflect on the notion of an apocalypse.

You see, here’s my beef with world-enders and those pre-disposed to drink from their Kool-Aid chalices. I think that the notion of the giant reset button in the sky is an enemy of accountability. I think that if you actually have room in your head for the just-around-the-corner fire of destruction or eternal bliss, you’ll actually be far less motivated to make a difference with what you’re encountering today. By holding a plausible option that you really don’t have to concern yourself with, say, 1,000 year consequences for your actions because the world’s going to be toasted by some remote, vindictive recluse who is seriously angry with his own creation, you run the risk of exculpating yourself and others from actions which should be considered. Whether there is an existential hereafter or not is not the point. The point is what you do with the present. Are you showing up and making a difference in the lives you touch or in the places where you can affect consequence? If yes, tomorrow will be as rewarding as yesterday and you’ll have neither the time nor the motivation to obsess about some temporally defined shift, up, down or out. If no, May 21 will be the End of Time to make a difference that day and if you don’t wake up and show up, you’ll blow another day on the 22nd, 23rd, etc…

And, after you unwind the comedy and the irony of Family Radio’s fantasy, you see that the great tragedy is the hundreds of thousands – possibly millions – of people who, deluded by empiricism stacked on myth, chose to escape rather than engage. Whether it’s the advertisers who paid for the billboards, the vans guzzling gas up and down interstates, the pamphlets and brochures screaming out the warning of the End, or whether it’s the purveyors of fear who prey on the same fatalism to erode citizens’ confidence to create a ‘More Perfect Union’, the apocalyptic myth is destructive. The dissociation of people from consequence – temporally, spatially, or metaphysically – is a utility wielded by those who seek to manipulate and control. The sooner people of conscience and consciousness engage free from such influence, the sooner we’ll have a bit more bliss on Earth.

Happy tomorrow! Do something to celebrate being human, again.

State Coherence and Dissonance: Part 3 of 3

2011-05-14T14:43:00.000-07:00

You have to give them credit for creativity, nefarious though it may be. When Monsanto realized it was riding glyphosate (more commonly known as the weedkiller, RoundUp®) into a patent sunset, it changed the game. Rather than suffering the fate of pharmaceutical companies who, at the end of a patented drug watch generics gobble up market-share, Monsanto decided to out-fox the social contract of ‘acceptable’ market incentives for effective monopolies. Using their quasi-monopoly on seed which had been genetically modified to resist RoundUp®, they began entering into contracts with growers which prevented farms from storing or replanting seed. In addition, under perpetual contracts, they rendered pollination by bees, wind or any other natural cause a crime and, in so doing, enslaved farmers in industrialized and marginalized countries alike. In a brilliant, albeit possibly unconstitutional sweep, Monsanto insured Phase Coherence (the ever-greening of their monopoly) by creating State Dissonance (changing their market control strategy from chemical patent to seed supply contracts). In doing this, they insured that they would continue to use an ever-greening contract strategy to support their incumbency on herbicide use (State Coherence) – contributing to countless, unquantified long-term environmental and soil degradation risks – and, at the same time, disrupt the economic and social evolution of agribusiness by effectively outlawing natural pollination through their cunning use of contracts. And, by the way, all this was done with the explicit endorsement and enforcement of the WTO, the U.S. government and the World Intellectual Property Organization’s industrial cabal in Geneva under the guise of ‘promoting’ innovation.

The most common form of State Dissonance is money. Money – in the form of promissory notes – is an explicit means of disintermediating trusted relationships. When I purchase something with money, I am saying that, for the consideration given, my relationship with you is over; my obligations to you are fully defeased. And in accepting money, the receiving party is equally divorcing any future obligation with a finality that says you have given all the consideration you need. Economists and social scientists alike have argued that this disintermediation is necessary because material, energy, or event State exchanges are inefficient. However, none of them have been able to address the erosion of community accountability and social values of citizenry impacted by this consensus behavior.

Say I have a gold mine. And, say, I want a chicken that you have so that I can have eggs every morning before I go to my gold mine. I could give you some gold in exchange for your chicken. But, if you didn’t have anything to do with the gold and you didn’t really care for gold, then we would potentially reach an impasse. I want something you have but all I have is something you don’t want. As a result, I have no means of engagement, the argument goes. So, the simplistic, linear, unimaginative mind concludes, ‘We must have a neutral surrogate (money) – which has no intrinsic value whatsoever – so that we both engage an exchange with efficiency.’

What I find most fascinating about the animation of a surrogate – in this case money – is that, we decouple things that we respectively do value and subordinate it to something with explicitly no value. And that’s deemed efficient.

Now remember, this ‘efficiency’ came from somewhere. And that somewhere was an unholy alliance between hierarchy and religion. The neutral surrogate of currency or promissory notes did not appear ex nihilo. No, it appeared for the purpose of financing conquests of the physical and the spiritual realm. And, quite conveniently, it became an efficient tool to use in the creation of taxation – an inefficiency imposed by hierarchy for disintermediation of social values like law & order, defense, and social security.

State Coherence is a condition in which matter, energy, or experience require no transformation for their utility or manifestation to achieve its purpose. In Part 1, we discussed the coconut which, at one point is calories for food, at one point is caloric heat for cooking, and at one point is fertilizer for, you guessed it, another coconut. When I need to move water to a field, I can place a wheel or turbine in the river and, using State Coherence, I can have the water move the water. If I wish to have fresh water on the coast of East New Britain in Papua New Guinea, I can use cold sea water passing through coils to condense water vapor from solar copra driers thereby collecting distilled, fresh water using cold salt water as my extraction medium.

I am intrigued by the number of environmental activists who run around the world in airplanes to whip out their laptops or iThingy's to project screen-fulls of information about what’s wrong with extractive industries. The State Dissonance of this behavior is deafening. What you’re telling me is that you will use Jet-A (jet fuel) which was pumped from the ground, refined at least 3 times; you will write your screed on your conflict metals-filled device; you will use electricity to project a gazillion watt bulb onto a synthetic screen; and, you’ll do all this to tell me that extractive industries are bad? I’m sorry, I was drowning in the State Dissonance hypocrisy so thoroughly I must have missed something.

One of the reasons we use Integral Accounting in our business and community ventures is because it provides a framework to understand State conditions. When I consider Commodity, for example, I find myself looking at all of the matter, energy or experience which exists in an ecosystem and, by explicitly identifying it, I consider what can be repurposed within State Coherence without requiring any State alteration. For example, if I want to start a not-for-profit activity and I know that to do that from scratch would require legal expenses, time, and custom and culture awareness; I can find existing, aligned or under-utilized non-profits and use them as a commodity by aligning my purpose with theirs. In this way, an artifact of Custom & Culture (in this example, a non-profit corporation), because of its presence in my ecosystem can be viewed and used as a Commodity and can obviate my need for two State creations (the definition of activities in Custom & Culture and the expenses – money – associated with the establishment thereof). By appreciating the State condition in which matter, energy or experience exists in my observation, I can strive to minimize the need to pass States through value surrogates thereby increasing efficiency and decreasing the need for intermediaries.

In a recent conversation with university students I was discussing the notion of entrepreneurship and was intrigued by the creativity each manifest in their ideas of how to build commercial and social endeavors. However, what was profoundly disturbing was the fact that not one of them had even contemplated the compulsive impulse for: a) the formation of a company; or, b) the financing of the same with monetary capital. Asked whether any considered using partnerships with affiliated, established organizations or assessing redundant resource capacity (office space, computers, sales networks, etc) of third parties to accelerate their efforts and minimize their novice risk, not one had done so. In other words, while creative in one dimension of State condition, no awareness was evidenced or even contemplated to evaluate the complete State ecosystem. While policy makers around the world lament the failure of ‘small business’, what none of them seem to consider is that what failed was never a business – merely in impulse starved from a sustaining ecosystem.

The more refinement or utility demand required to take matter, energy or experience from its native condition to the utilitarian purpose, the greater the State Dissonance. The more dependencies are implicit or explicit in the process thereof, the greater Phase Dissonance is either present (or at least latent) in the system.

Here in Charlottesville, famed architect school dean turned resource utilization pioneer Bill McDonough popularized the ‘cradle-to-cradle’ concept in everything from habitation to transport. Our work on State Coherence optimization – while fully embracing McDonough’s principles – encourages the extension of the concept into Phase State Coherence in which an ideal is the State Coherence persistence across multiple Phase applications. In its most crude form, a rock, remaining a rock, serves as paper weight, door-stop, counter-balance and river-crossing where Phase-inspired context is the only required alteration.

At the heart of Phase State consciousness, we see the value in intentional and explicit consideration of Phase and State where we can maximize utility while minimizing dissonance created by exchanges or transitive impulses which require surrogacy, intermediation, or consumption solely for the purpose of Phase or State alteration. Every kilowatt thought to be required to light a room or produce aluminum is considered and utilized only when such consumption is the only viable means of achieving an outcome. Every climate change conference agrees to select locations based on the minimum travel required to assemble people under shade of trees rather than air-conditioned conference centers in hot tropical resorts. Each public procurement begins by mandatory inclusion of public domain solutions wherever they already exist rather than paying proprietary premiums for faux innovation generated by willfully ignorant purveyors.

Should you or your organization wish to do so, our team has been working with a number of organizations to learn and experience the process of Phase and State consciousness. We’d be delighted to have you join us in this journey towards more constructive and harmonious endeavors.

Phasing Out – Phasing In – Phase Coherence and Dissonance: Part 2 of 3

2011-05-07T16:29:00.000-07:00

During a presentation made by an Indian economist at a World Bank conference at PSG Technical College in Coimbatore, I did a double take when I heard reference made to the “mature call center industry” being on the wane in India. “Mature?” I thought. “How can anyone use that adjective for something barely a decade old?”

In Korea and Taiwan, semiconductor fabrication facilities took longer to build than the production cycle of products into which the devices would go. Singapore lured dozens of multi-nationals to the island nation with financial incentives only to find that Vietnam, Thailand and others offered skilled labor at a fraction of the price of Singapore’s citizens. Kodak famously bet its future on a phasing out of film and lost its legacy market dominance to digital five years sooner than the film obsolescence was predicted. GE was sure that technology transfer to India and China would be great for propping up sagging North American revenue but failed to anticipate the diaspora of engineers who were prepared to obsolete Connecticut-inspired innovation at a rate twice as fast as its own development cycles. Countless pension fund managers swooned with the promise of “fixed income-like” products – CDOs and CMOs – which promised great returns only to find themselves fleeced by the very investment bankers who pitched the sales (propped up by Rating Agency collusion) as investment grade. “Green” investors flocked to invest in carbon alternative energy ventures paying no attention to the infrastructure bond maturities which made grid-dependence an insurmountable obstacle for the adoption of new technologies.

When we think about Phase Coherence or Dissonance, it is important to realize that our present view of time has served us poorly. We are bombarded with “Breaking News” about a second kiss, the bombing of Tripoli, and a drunken celebrity ranting about his producer. In our careless intoxication with the immediate, we have lost all frame of reference for the consequence of the collective ‘field effect’ of inter-related – though possibly uncorrelated – events. When I was invited to provide some advice to the Japanese government at the request of the late Naoyoshi Suzuki and my friend, Norio Nakahara, I was gob-smacked when I heard them talk about the Japanese 100-year plan. Few Western politicians or strategists can comprehend the Chinese central government’s 5-year plans. We want quarterly financials, up-to-the-second stock quotes, real-time crawl on the bottom of our always-on TVs and PDAs. However, if one reflects at all, one realizes that we don’t see interconnected Phases – merely staccato, disjointed artifacts. I am humbled by my friends in Papua New Guinea who discuss time in thousand year memories and thousand year futures.

For an economy to optimally function, Phase serves as a critical, yet neglected dynamic. As I discussed in Part 1, the principle captures dynamism and consequence – not merely linear time nor punctuated periodicity. The absence of its recognition can be seen in 24-hours talking head causality banter. The markets rose on unemployment numbers. The markets fell on earnings which exceed analyst expectations. The markets couldn’t figure out what the hell the Fed was trying to do so they went…. you get the point. When you stand back from simplistic time dependent correlation and causation, you find that none of our present accounting, rating, trading, or reporting principles serve anything other than emotional reflexive behavior. Regrettably, this collective blindness fails to detect systemic risk or opportunity.

Phase, in my experience, is indecipherable without the capacity to observe systems from multiple perspectives. One cannot apprehend orthogonal convergence unless diverse, uncorrelated inputs are equally procured and valued. When Cisco was executing its acquisition frenzy a decade ago, it failed to understand interdependencies which, post-acquisition, would either cost multiples more to address or render the acquired company or technology useless. During the first three years of this millennium, we tracked over $1 trillion in write-offs of acquisitions where buyer’s remorse found it had overpaid for what was immature, obsolete or incomplete.

And this is not just a high-tech blindness. The central regions of Mongolia have fertile agriculture potential including vast tracks suited for the growth of potatoes. Devoid of the occupying Soviet central procurement aberration, over-production leads to episodic price suppression followed by post-consumption import requirements from neighboring China. Farmers, borrowing money from lenders for seed stock, become indebted at the beginning of the season and high rates of interest accrue until harvest. Without means of smoothing out crop distribution (like having cold storage for inventory preservation and phased sales), they are forced to sell en masse driving price and profit down. So, at the very pinnacle of commercial success, profitably is squeezed and debt-dependency is reinforced. With little gain left from a growing season, costly Chinese imports extract a toll which forces the farmer into indebtedness the following year. Tragically, this story is played out around the world. From the ancient story of Joseph stewarding the Pharaoh’s commodities in Egypt, we know that food storage and inventory management is central to wealth creation but, Phase blindness reinforces debt cycles which could be easily broken with rudimentary cold storage.

Governments around the world persistently engage in Phase Dissonance with public procurement. Military procurement routinely involves the acquisition of technologies in which the contracted deliverable is obsoleted or counter-measured before contract maturity. Municipalities use their credit-ratings to support public bonds for projects which have neither correlation to the implementation duration or the revenue derived from the project. Congresses, Parliaments, and Presidents alike most often budget and forecast financial performance with maturities incongruous with election cycles and, as a result, are correctly seen as charlatans rather than public servants. Infrastructure projects are budgeted and contracted without any visibility as to the innovation or obsolescence periods of the components and the public winds up paying multiples of budgeted projections in the form of ‘change orders’.

So what does Phase Consciousness look like?

In its most simple form, it looks like the formation of Rabobank – one of the great Phase Conscious historical successes. A bank started by and for the cooperative interests of grain growers and bakers, Rabobank’s roots came from financing the coherence of production cycles – both those of grain and those of bread-makers. By linking these interests in explicit interdependence, the bank became one of the world’s most well-capitalized and respected modern banks.

In another form, it looks like Sovereign Technology Credit Obligations. STCOs are financial instruments in which a company, municipality, or government can purchase a project and finance the component integration in synchronization with that component’s utility. By identifying all present suppliers and all parties innovating potentially obsolescing options, the buyer can invest in future innovation with money that would have been wasted on antiquated components or costly overruns.

In every instance, Phase Coherence serves to align value exchanges with underlying productivity or utility. Small-scale, distributed power is not promised immediately following a publicly financed 20 year bond issued for a central grid system. Pension funds are not put into speculative equities where maturities have no established basis. Corporations and municipalities resist the urge to raid pensions for short-term, politicized activities at the certain expense of the very constituency they seek to appease.

Now here’s the secret to the apparent prescience of this blog. The reason why I was able to identify the illiquidity of the FDIC and PBGC over 6-months prior to any media or economist reports was because I study Phase Coherence and Dissonance. The reason why we knew 2008 was what it would be as early as 1999 in a presentation to the Richmond Federal Reserve was because we observed incongruous short duration financial instruments wrapped into long duration instruments with long-established, uncorrelated default and insolvency profiles. The reason why we knew that business process outsourcing was going to irreparably harm many U.S. businesses is because we tracked university graduates returning to China, India, Korea, Taiwan and Vietnam for over 15 years before Jack Welch decided American innovation could never be challenged.

Phase Coherence exists when the magnitude, period, impulse or field effect of an action or effort aligns with the expectations built and performance manifest, around the value exchange between participants in the ecosystem participating therein. Phase Dissonance exists when asymmetries are formed in scalar misalignments which are opaque – either willfully or inadvertently – to one or more participants. The greater the Phase Coherence, in most instances, the more disintermediated are surrogates – both people and value intermediaries and currencies – as the absence of inefficiency derived deferral does not foster opportunities for mistrust and performance latencies. Phase Dissonance animates debt (derived from the Latin root for ‘one who owes’) while Phase Coherence animates credit (derived from the Latin for ‘one who trusts’). ‘Too good to be true,’ is an intuition of Phase Dissonance. ‘Beyond my wildest expectations,’ is a manifestation of Phase Coherence.

Take another look.

Phase and State Coherence - Part 1 of 3

2011-04-30T13:28:00.000-07:00

Note: Regular readers will note that I did not post on April 24. My lovely bride surprised me with a birthday trip to St. Martin and I connected to abundant nature rather than the net. I trust this post was worth the wait. If not, take a vacation to St. Martin and it will make more sense.

Should you wish to have your cognitive boundaries stretched, read Joseph Jaworski’s Synchronicity, Karl Popper’s The Open Society and Its Enemies, and Jared Diamond’s Collapse in the space of a month on the shores of three different oceans separated by at least one transit of the dateline. Immersed, as you would be, in consciousness and nature, the works take on dimensions that remain illusive if absorbed in an armchair sipping a beverage. In each of these works, you see the effort of diplomats – emissaries from both the prophetic and the prosaic – who passionately seek to awaken humanity from narratives of obsolescence, self-destruction, and shared epochal tragedy to illumine a possibility for a more suitable humanity. Along with my most recommended of authors – Gregory Bateson – they attempt to navigate dimensions of inquiry with words which belie the vision they seek to describe. Each one seeks the elixir of essence through the coarseness of language constrained by archetypal metaphor.

I am embarking on an expedition of sorts in this, the first of a series of three posts. Unlike the Homeric tomes referenced above, I will, in brevity, seek to convey essence which I have come to understand as an imperative in the understanding of our economic frameworks but, which through careless neglect, is passed over unconsidered. It is not accidental that most deist traditions include in scripture the prohibition of graven images. Divinity instructed that essence, not artifact, should be the object of veneration. It is also without puzzle that the epic of spiritual traditions involved journeys – not stasis. For it is in the physical and temporal transience that revelation can evoke clarity of purpose unimpeded by monochromatic redundancy. So too, we need to understand that in economies (remember the etymology of the Greek word meaning “management of the household”), it is in the journey through exchanges that value is manifest. In our insular view of post-Modern consumerism, we have lost the recognition that hording – an artifact of fear and mistrust – shares no association with wealth. Wealth, in its ideal form, is the capacity to engage fully without limitation, not the capacity to survive an uncertain (and feared) future.

Upon this canvas I would like to explore the concepts of Phase and State Coherence and Dissonance and the role these dynamics play in the understanding of value exchange. Notwithstanding the limitations of language mentioned above, I have chosen these terms as I see them representing a dynamism which is lacking from many of our economic nomenclature. Let me simply introduce what I mean by each of these and, in the weeks to come, I will attend to a deeper explanation of both in a variety of contextual frameworks.

Phase – the period or pulse (measured in time, magnitude, or field effect) in which essence and value are manifest, recognized, transacted, utilized, exchanged, and retired or unseated. This concept incorporates principles such as invention, innovation, incrementalism, obsolescence, duration, maturity, and life-cycle but transcends them in that Phase is perceived through cycles and consequence in totality – not in punctuated episodes.

State – the form (measured in commodity, custom & culture, knowledge, money, technology, well-being) in which community consensus coalesces to denominate a manifestation of matter, energy, surrogation or experience. This concept includes science, mathematics, social order and convention but transcends them in that State incorporates the unconstrained completeness of matter, energy, or experience.

Coherence – expressions in which amplification, propagation, transfer and transcendence are complimentary, promote efficiency, and optimize common access.

Dissonance – expressions in which interference and friction impede or restrict propagation, promote discord or obfuscation, and thwart transfer.

To understand these concepts in a practical application, let me explore a few examples and remind you of some earlier references to these principles.

When one prepares an umu in Samoa (a cooking method in which food is prepared on the ground with heated stones covered by leaves), one of the dishes which may be included is palusami (a dish that puts creamed spinach to shame). This mix of taro greens, coconut milk and salt is prepared in large waxy leaves and placed in the umu. The cooking stones are heated with a fire made from the coconut husk and leaves from previous umus. The State condition is that the whole of the coconut and the taro are used – in an unaltered state – to supply nutrition. The “waste” – in an unaltered state – is used for fuel to heat the cooking stones. The Phase involves a complete first use (food), second use (fuel), third use (ash to the garden) engagement of every State (coconut and taro). In this example, we find Phase / State Coherence as there is no point in the process where the State of a thing requires alteration and, save the caloric input of manual labor to collect, prepare and consume the food, the system achieves its utility without significant alteration. A State change occurs to the coconut husk at its burning, but is harvested for a Phase utility – the heating of stones. This example serves as a representation of an efficient value exchange with high coherence.

When, incentivized by Federal tax policy reinforcing the centrality of home (real estate) indebtedness as a means of serving innumerable purposes, the U.S. government encouraged patriotic consumption in the wake of the September 11, 2001 events, by inducing re-financing of home mortgages allowing them to serve as the ATM for stimulating consumer spending. Our economy didn’t grow. The illusion of perpetual asset value increase grew. The State of real estate did not alter. The Phase of indebtedness – that wonderful, insurance-driven actuarial 30-year intransigent fixture of Occidental finance – didn’t alter. But what did alter is the decoupling of actuarial assets – homes and real estate – to purchases of consumer goods and services. The Phase dissonance made the 2008 financial collapse perfectly predictable (as evidenced in my speeches in 2006) as the Phase of consumer credit operates in 3-5 year oscillation periods where, on the second attempt to prop up the illusion, the absence of assets becomes visible and, voila, the market fails. In short, the economic policy of the G-7 was to seek to create State dissonance (use real estate to prop up consumer spending) by forcing – albeit unconsidered by most economists due to professional courtesy and wholesale irresponsibility – Phase dissonance (attempting to blend 3-5 year duration risk with uncorrelated 30 year duration risk). In this instance, the combined Phase / State dissonance led to collapse and, to this day, no substantive policy or regulatory change has been possible as, to date, no one still is paying attention to the systemic dissonance.

CNN recoiled with the breaking news today that gasoline prices were crossing a $5.00 per gallon price. Economists quoted in the Wall Street Journal and Financial Times all talked about the effect of high energy prices on slowing consumer spending. Somehow missing from all these conversations is the Phase / State coherence of what’s driving gasoline prices. We know that states are all suffering economic shortfalls and we know that approving taxes has become taboo in Washington courtesy of the pro-limited government conservativism of tea party elephants (the same ones who spent like drunken sailors the last time they controlled the purse). The collusion between the oil industry and the government is a wonderful example of Phase / State coherence. States derive significant benefit from taxes levied on fuel. Many states collect revenue as a percentage of the price of fuel. Not surprisingly, states with the most bleak economic conditions represent a disproportionate number of those who also tax gasoline at high percentages. So, using State Coherence, the gasoline price is encouraged to spike in Phase with the revenue benefit to the state. While we may find this Phase / State coherence reprehensible (or, God-forbid, collusive), one thing is certain. We are having taxation incented energy price spikes where NO external Phase or State condition warrants the spike. And the reason why we won’t have anti-trust oversight on this (notwithstanding President Obama’s Facebook appearance where he wanted to ‘connect’ with real people), is that the State Attorneys General who would need to launch such an inquiry draw their salaries from – you guessed it – the racketeers.

We will explore, in the coming two weeks, a deeper discussion of Phase and State coherence. We will look at how, by viewing economic and social systems through these lenses, we can unravel inefficiencies and willful incumbent power systems which, when exposed, allow us to consider alternative forms of engagement.

CSI: US Senate – Autopsy on the Wrong Body

2011-04-17T10:30:00.000-07:00

NOTE: This blog post preceded S&P's April 18, 2011 'negative' outlook on the U.S. economy in which they warned of a loss of AAA rating but, as this post reveals, failed to have the independence to tell investors the true risks facing the illusion of investment grade.

Let me begin by saying that Senators Carl Levin and Tom Coburn had a thankless job. Together with their staff, they were asked to investigate the Wall Street and Financial Crisis of 2008 and following. To their credit, they did an amazing job of wading through documents and testimony and came up with copious evidence of theft, fraud, greed, and most of the customary Deadly Sins. And, if I had CEOs lying under oath in front of me, I would probably have to appeal to my higher angels not to want to submit a one page report – in lieu of the 639 pages – with a simple conclusion…

“They lied, we paid, our economy is toast. But, the real perpetrator is running amok and ready to strike again.”

Instead, in the hundreds of pages, they detail the breakdown of a system that was engineered to serve the interests of the likes of Goldman Sachs at the expense of the people but they conveniently ignored the real beneficiaries. Before I get to that, however, I thought it might be nice to comment on their ‘recommendations’ which, in the main, are agreeable. So, at the end of this post, I’ve copied their recommendations and added my commentary on what I see.

However, given that some of you might not get to the end, let me observe that the committee focused on the a) WRONG BODY; and, b) WRONG PERPETRATOR. And, no, I’m not going to rehash my now vindicated assessment from 2006 that this was never a ‘housing’ or ‘real estate’ crisis but rather a profligate consumer credit orgy that led to a persistent vegetative state of brain damage. Regrettably, that would sound like an, “I told you so.” No, rather we need to understand that the BODY that needed the autopsy was the Congress and its use of tax and monetary policy to incentivized mindless behavior. And the PERPETRATOR was and remains the Reserve Corporation and its progeny – the unholy alliance of life insurers and Fed banks – who led the monetary coup d'état in 1913 and who continue to staff both sides of the feeding trough.

Congress’ tax and monetary policy has been used to dictate unconsidered social policy for a long time. It is no surprise that it was in 1913, the same year that the Federal Reserve was established by, and for, fixed income investors in the life insurance industry, that the U.S. ratified the Sixteenth Amendment allowing Congress to levy income tax. By collecting income tax and apportioning it “without regard to any census or enumeration,” Congress solidified its capacity to use income tax (and deductions thereto) as a primary means of influencing public behavior. By allowing interest to be deducted from income tax in the same year the Fed was established, Congress introduced a statutory bribe to the American people to co-opt them into the belief that duration matched investments would be good for them and that the best way to insure systemic adoption would be to link mortgages, life insurance premiums, and federal bonds in actuarial, perpetual wedded bliss.

Oh, and anecdotally, is it any wonder that the fixed income terminal horizon of the past century – the much venerated 30-year duration (life insurance, bonds, and pensions) – matches the productive life expectancy of an adult male in 1913?

Linking home ownership – backed by the creation of the Federal Housing Administration in 1934 – to the hegemonic monetary returns for life insurers at the creation of the Federal Reserve; and by combining mortgage and life insurance as necessary public financial utilities, the Congress incented (and the public acquiesced to) the mindless embrace of debt-based citizenship. Our collective indebtedness on a personal and national level is NOT a surprise – it exists by statute. Wall Street is not the problem, it’s merely the utility used by the perpetrators. If Levin and Coburn really did their job, they’d realize that it is the tax and monetary policy of 1913 that created the Crisis and NONE OF THEIR RECOMMENDATIONS change that one bit.

As long as we have “fixed income” requirements in banking, insurance, and other regulated finance (including pensions) where independent rating of risk (including the ability to call U.S. Treasuries the junk that they truly are), we will have done NOTHING to treat the present contagion or spare us from future shocks. As long as we have a debt-based monetary system architected by and for life insurers and reserve bank members which continues to enslave every productive citizen to transfer wealth to the incumbent coup leaders (for the moment, Goldman Sachs), we will have done NOTHING to build a stable future.

The U.S. bankruptcy has little to do with mortgages. They were merely a symptom in the massive immunosuppressant-induced lethargy observed in the deceased prior to expiration. No, this virus was introduced by Presbyterians (in their corrupt invention of life insurance), was mutated by the likes of Metropolitan Life, Aetna and others (despite the valiant, albeit futile vaccination injected by the Clayton Act of 1914), and became contagious through the combined vectors of tax deductions, pensions, and life insurance. Our reincarnation – should it appear – will only be possible when we realize that 639 pages of evidence on the wrong body will neither solve the crime nor prevent the serial felon from striking again.

From the Senate Report
Recommendations on High Risk Lending

1. Ensure “Qualified Mortgages” Are Low Risk. Federal regulators should use their regulatory authority to ensure that all mortgages deemed to be “qualified residential mortgages” have a low risk of delinquency or default.

2. Require Meaningful Risk Retention. Federal regulators should issue a strong risk retention requirement under Section 941 by requiring the retention of not less than a
5% credit risk in each, or a representative sample of, an asset backed securitization’s tranches, and by barring a hedging offset for a reasonable but limited period of time.

3. Safeguard Against High Risk Products. Federal banking regulators should safeguard taxpayer dollars by requiring banks with high risk structured finance products, including complex products with little or no reliable performance data, to meet conservative loss reserve, liquidity, and capital requirements.

4. Require Greater Reserves for Negative Amortization Loans. Federal banking regulators should use their regulatory authority to require banks issuing negatively amortizing loans that allow borrowers to defer payments of interest and principal, to maintain more conservative loss, liquidity, and capital reserves.

5. Safeguard Bank Investment Portfolios. Federal banking regulators should use the
Section 620 banking activities study to identify high risk structured finance products and impose a reasonable limit on the amount of such high risk products that can be included in a bank’s investment portfolio.

InvertedAlchemy: The real problem here is the separation of Origination and Retention. When incentives are in place to induce the public to indebt, the ‘bank’ to loan, and the ‘fixed income market’ (as evidenced in statutory investment policies for ‘stable investment products’) to compulsively purchase bundled instruments, the demand for inventory of financial products to satiate the asset allocations mandated under statutory and pension policy will always favor origination at all cost. As a result, until we limit the appetite for ‘fixed income’ we will, unfortunately, persist in careless origination. The worse the U.S. dollar and economy get, the more illusory inventory will be required so we’re going to get worse – not better. Note that Goldman Sachs has upped its municipal exposures well out-pacing market wisdom not because these represent good investments but rather, because statutory rating bumps are valued when risk isn’t correctly measured.

Recommendations on Regulatory Failures

1. Complete OTS Dismantling. The Office of the Comptroller of the Currency (OCC) should complete the dismantling of the Office of Thrift Supervision (OTS), despite attempts by some OTS officials to preserve the agency’s identity and influence within the OCC.

2. Strengthen Enforcement. Federal banking regulators should conduct a review of their major financial institutions to identify those with ongoing, serious deficiencies, and review their enforcement approach to those institutions to eliminate any policy of deference to bank management, inflated CAMELS ratings, or use of short term profits to excuse high risk activities.

3. Strengthen CAMELS Ratings. Federal banking regulators should undertake a comprehensive review of the CAMELS ratings system to produce ratings that signal whether an institution is expected operate in a safe and sound manner over a specified period of time, asset quality ratings that reflect embedded risks rather than short term profits, management ratings that reflect any ongoing failure to correct identified deficiencies, and composite ratings that discourage systemic risks.

4. Evaluate Impacts of High Risk Lending. The Financial Stability Oversight Council should undertake a study to identify high risk lending practices at financial institutions, and evaluate the nature and significance of the impacts that these practices may have on U.S. financial systems as a whole.

InvertedAlchemy: CAMELS doesn’t work. The notion that we somehow play in a world where we can ‘call our own fouls’ doesn’t work in lacrosse and it doesn’t work in an economy. I completely agree with the OTS recommendation but I would encourage the OCC to actually amplify its own enforcement to take a more central role than it has in the past.

Recommendations on Inflated Credit Ratings

1. Rank Credit Rating Agencies by Accuracy. The SEC should use its regulatory authority to rank the Nationally Recognized Statistical Rating Organizations in terms of performance, in particular the accuracy of their ratings.

2. Help Investors Hold CRAs Accountable. The SEC should use its regulatory authority to facilitate the ability of investors to hold credit rating agencies accountable in civil lawsuits for inflated credit ratings, when a credit rating agency knowingly or recklessly fails to conduct a reasonable investigation of the rated security.

3. Strengthen CRA Operations. The SEC should use its inspection, examination, and regulatory authority to ensure credit rating agencies institute internal controls, credit rating methodologies, and employee conflict of interest safeguards that advance rating accuracy.

4. Ensure CRAs Recognize Risk. The SEC should use its inspection, examination, and regulatory authority to ensure credit rating agencies assign higher risk to financial instruments whose performance cannot be reliably predicted due to their novelty or complexity, or that rely on assets from parties with a record for issuing poor quality assets.

5. Strengthen Disclosure. The SEC should exercise its authority under the new Section
78o-7(s) of Title 15 to ensure that the credit rating agencies complete the required new ratings forms by the end of the year and that the new forms provide comprehensible, consistent, and useful ratings information to investors, including by testing the proposed forms with actual investors.

6. Reduce Ratings Reliance. Federal regulators should reduce the federal government’s reliance on privately issued credit ratings.

InvertedAlchemy: The Rating Agency industry is a Sherman Act violation and should not be exempt from racketeering and related civil and criminal penalties. The monopolistic nature of the industry is problem number 1. The compensation structure for incentivizing rated customer rather than public investor interest is problem number 2. These problems will be unaddressed until Rating Agency executives are jailed for their complicity in the theft of assets from municipal, academic and other pensions across the country. The Attorneys General from the 50 states should lead where no federal regulator will have the courage to go. Indictments, lawsuits, and recoveries are the only path to reform and waiting for the SEC to get there is a fantasy.

Recommendations on Investment Bank Abuses

1. Review Structured Finance Transactions. Federal regulators should review the RMBS, CDO, CDS, and ABX activities described in this Report to identify any violations of law and to examine ways to strengthen existing regulatory prohibitions against abusive practices involving structured finance products.

2. Narrow Proprietary Trading Exceptions. To ensure a meaningful ban on proprietary trading under Section 619, any exceptions to that ban, such as for marketmaking or risk-mitigating hedging activities, should be strictly limited in the implementing regulations to activities that serve clients or reduce risk.

3. Design Strong Conflict of Interest Prohibitions. Regulators implementing the conflict of interest prohibitions in Sections 619 and 621 should consider the types of conflicts of interest in the Goldman Sachs case study, as identified in Chapter VI(C)(6) of this Report.

4. Study Bank Use of Structured Finance. Regulators conducting the banking activities study under Section 620 should consider the role of federally insured banks in designing, marketing, and investing in structured finance products with risks that cannot be reliably measured and naked credit default swaps or synthetic financial instruments.

InvertedAlchemy: I would love to agree with this recommendation but for my knowledge of both regulators and policy makers and their collective illiteracy surrounding financial products, their use and abuse. The report is correct as far as it goes but Congress needs some serious IQ enhancement so that it can adequately understand what it thinks it’s regulating. And the Tea Party is NOT helping this at the moment. By appealing to sound-bites, they are diluting their message of accountability and making it come out sounding like pandering.

A Cinderella Story – If the shoe fits

2011-04-10T14:08:00.000-07:00

Long ago in the Ancient land of Egypt were the green water of the Nile River flows into the blue water of the Mediterranean Sea lived a young maiden named Rhodopis, she born in Greece but was kidnapped by pirates and carried down into Egypt where she was sold into slavery. Her owner turned out to be a kind old man who spent most of his time under a tree sleeping. Because of this he never saw how the other girls in the house, all servant girls, taunted and teased her because she looked differently from them. Their hair was straight and black while hers was golden and curly. They had brown eyes and she had green. Their skin had the glow of Copper, but she had pale skin that burned easily in the sun causing them to call her Rosy Rhodopis. They also made her work hard shouting at her all day, "Go to the river and wash the clothes," "Mend my robe," "Chase the geese from the garden, "Bake the bread."

Now she had no friends only the animals. She had trained the birds to eat from her hand, a monkey to sit on her shoulder, and the old hippopotamus would slide up on the bank out of the mud to be closer to her. At the end of the day if she wasn't too tired she would go down to the river to be with her animal friends and if she had any energy left from the hard day's work she would dance and sing for them.

One evening as she was dancing, twirling around lighter than air with her feet barely touching the ground, the old man woke from his sleep and watched as she danced. He admired her dancing and felt that one so talented should not be without shoes. He ordered her a special pair of slippers. The shoes were gilded with rose-red gold and the soles were leather. Now the servant girls really disliked her for they were jealous of her beautiful slippers.

Word arrived that the Pharaoh was holding court in Memphis and all in the kingdom were invited. Oh how she wanted to go with the servant girls. For she knew there would be dancing, singing, and lots of wonderful food. As the servant girls prepared to leave in their finest clothes they turned to her and gave her more chores to do before they returned. They poled their raft away leaving a sad girl on the bank.

As she began to wash the clothes in the river she sang a sad little song--"wash the linen, weed the garden, grind the grain." The hippopotamus grew tired of this little song and splashed back into the river. The splashing of the water wet her slippers. She quickly grabbed them up, wiped it off and placed them in the sun to dry. As she was continuing with her chores the sky darkened and as she looked up she saw a falcon sweep down, snatch one of her slippers, and fly away. Rhodopis was in awe for she knew it was Horus who had taken her shoe. Rhodopis now with only one slipper put it away in her tunic.

Now the Pharaoh, Ahmose 1, Pharaoh of upper and lower Egypt was sitting on his throne looking out over the people and feeling very bored. He much preferred to be riding across the desert in his chariot. Suddenly the falcon swooped down and dropped the rose-red golden slipper in his lap. Surprised but knowing this was a sign from Horus he sent out a decree that all maidens in Egypt must try on the slipper, and the owner of the slipper would be his queen. By the time the servant girls arrived the celebrations had ended and the Pharaoh had left by chariot in search of the owner of the golden slipper.

After searching on land and not finding the owner he called for his barge and began to travel the Nile pulling into every landing so maidens could try on the slipper. As the barge rounded the bend in front of the home of Rhodopis all heard the sounds of the gong, the trumpets blaring, and saw the purple silk sails. The servant girls ran to the landing to try on the shoe while she hid in the rushes. When the servant girls saw the shoe they recognized it as Rhodopis's slipper but they said nothing and still tried to force their feet into the slipper. The Pharaoh spied her hiding in the rushes and asked her to try on the slipper. She slid her tiny foot into the slipper and then pulled the other from her tunic. The Pharaoh pronounced that she would be his queen. The servant girls cried out that she was a slave and not even Egyptian. The Pharaoh responded with "She is the most Egyptian of all...for her eyes are as green as the Nile, her hair as feathery as papyrus, and her skin the pink of a lotus flower."

From Strabo 64 BCE – 24 CE

I was intrigued in the past few weeks by three encounters with ‘due diligence’. In one instance, the examination was directed at me; in one, the diligence was directed at a particular transaction upon which our team is working; and, yet a third where diligence was directed at the organization I lead. In each of these cases, I found myself amazed at the degree to which we’ve grown accustomed, as a society, to the assumption of mistrust. However, I’m equally perplexed by how we’ll ‘trust’ unknown ‘independent’ parties with whom we have no connection to confirm or deny the veracity of a fact or opinion giving no regard to their character.

In the personal due diligence, a firm was hired to inquire about my character and my background – academic, professional, and personal. The contracted firm was filled with former law enforcement and intelligence types who are accustomed to background checks. Not surprisingly, given their penchant for intrigue, they found artifacts of information on websites – many of which I monitor – and then sought to contact people with whom I interacted at events across the world. What I found most fascinating was the degree to which the artifacts collected and the persons solicited for opinions reflected a very narrow spectrum of my life – a life which, had I been asked, would have been more completely understood by asking me directly for a list of friend and foe – fan and detractor. Ignoring the subject of diligence and following a standard operating procedure for background checks, the contracted firm touched an insignificant amount of my life and, as a result, drew conclusions on an anemic set of observations. And somebody paid good money for that.

In the case of the transaction, a group elected to send some of their team to visit to explore a potential business relationship. The team was assembled in haste with limited knowledge of what we do as an organization and with even less knowledge about the environment in which the contemplated transaction existed. As I observed the delegates confront the unusual nature of our operation and the opportunity, I mused about what precise value was being served by having strangers in a strange context observe phenomenon for which they had no context. Could they really provide discernment or insight into anything that went on? Would anyone conclude that they ‘understood’ the opportunity based on the experience?

And in the third instance, a government entity with several decades of experience in being abused and mislead by countless business, NGO, and multi-lateral entities, decided to do ‘due diligence’ on our firm. Having worked for months with this entity and having performed countless services for them in business practices which they report never having experienced before, they elected to demand a ‘due diligence’ checklist prior to consummating a business for which they stand to benefit greatly. Ironically, the questions that they asked are questions that are drawn from convention. Ironically, the questions that they wanted answered have NO bearing whatsoever on the transaction. Yet, as if compelled by some unseen hand, they needed their diligence questions answered before they could move forward. In this instance, the true tragedy is that there is no person associated with the entity who would actually have the business or financial experience to understand the materials requested but, somehow, the knowledge that documents were exchanged would comfort those who have already experienced a transformative engagement – one that they simple can’t believe is possible.

In each of these three cases, I was entertained, in a Greek tragic sense of theater, in the delusion which is passed off as diligence. And central to the failings of each of the three exercises is a fundamental human assumption which is patently false. You see, when you ask a question, you are already making the assumption that: a) you know what you should ask; and b) you’d recognize the substantive answer or data when you saw it. These two assumptions are the height of hubris and are the proximate cause for most flawed decisions. If you want to know about a person, the only way you can truly understand or gain confidence in them is to actually interact with them and observe their behavior in a representative set of circumstances. By assuming that the right people to ask about me are people that show up in media, for example, the diligence firm gained no insight into how I interact with interns who build houses with me in Honduras or Mexico. By assuming that they knew how to judge a business opportunity, the transaction team relied on inferential projections of legal and business conditions familiar in their ecosystem but entirely foreign to the opportunity at hand. And by assuming that an enterprise is merely the sum of its shareholder communication, a government failed to trust its own experience of performance.

Every business and social undertaking in which I engage is done using insight and methodology which is unconventional. Whether it was establishing intangible asset collateral enhancement in the 90s or whether it’s optimizing international trade imbalances to realign national economic engagement, if you are working with me or with the organizations I lead, you’re not experiencing convention. That’s a given. So why in the world would you seek to understand something which you know defies convention with conventional questions? The reason you can’t find what motivates me is not because I’m not motivated. It’s because I’m motivated by values which you may not recognize. The reason why we find untraditional opportunities for business creation is because we look at the world through intangible asset lenses – lenses we’ve yet to meet any other organization who can use or even comprehend. The reason why we’ll work with governments for years without monetary consideration is because we believe in building ecosystems in which business can develop – not in taking resources from those who we know to be deficient in the capacity to fully and transparently engage.

“How can we make sure that our leadership can speak to the right people in the government?” I was asked by a diligent assistant of a business executive.

At once I felt compassion and grief. My impulse was to answer the only way I know how. In truth, the answer would be, “Have your leadership sit down with us for a few days and learn how we build trust. Then, have them go on a trip with us and experience our engagement methodologies as apprentices so that they can have mastery of skills built on experience.” However, what was being sought was a short answer. “Talk to this person.” “Address this topic”. And, yes, in expediency, you may get an outcome that you recognize as satisfactory but you’ll never get the full taste of what would be possible if you don’t change You – the questioner – to recognize that life’s answers are lived and experienced – they’re not on a two dimensional piece of paper.

Which leads me to the fascination of the story at the beginning of this post – in its modern incarnation – Cinderella. What I find fascinating about this story is the fact that, in truth, the story is more about the epistemology of inquiry than it is about a rags-to-riches transformation. You see, in every incarnation, the protagonist is beautiful. She was not made beautiful by looking like the others. In every version, she is a hard worker who overcomes adversity in ways that build envy and derision. And in every version, convention loses as there’s only one foot that fits the shoe. Anyone who has shopped for shoes with a woman knows that the idea that there’s only one shoe for one woman’s foot knows the delusion in the story. Women, of all people, can muster the illusion of things fitting better than men can ever do (O.J. Simpson notwithstanding). No, the point is that true transformation can only be achieved when the mode of inquiry opens up to an unconsidered possibility. And that, my friends, is a fairy tale that needs to be retold again.

The Bismarck Conspiracy

2011-04-02T13:14:00.001-07:00

29 March 2011, 0500 GMT

Heading: 5.22˚; Distance: 45 Miles; Winds: 8 knots NNW; Barometer: Falling

Some days just deserve remembering. So it is that I depart from my intended post to share with you an account of my crossing of Straits at the eastern edge of the Bismarck Sea between Tokua, East New Britain and Namatani, New Ireland in the Independent State of Papua New Guinea.

Courtesy of unpaid royalties to the customary landowners in Kavieng, the airport was closed. One charter company could fly us into Namatani but couldn’t manage a plane in the morning to get us back. One charter company had all its planes in service or being serviced in Brisbane. And no helicopters were available out of Rabaul. If we were going to make it to take part in Custom in Konos, we were going by boat. The boat was the Fire Fly – a 22’ open fiberglass boat with a 45hp outboard.

We landed in Rabaul and went across to the Ropopo Beach Resort to meet the Fire Fly. No boat. I walked down to the beach to make my habitual visit to the coral snakes which frequent the shallows off the coast of East New Britain and, instead of snakes I saw thousands of small fish feeding in the tepid water, darting en masse at once in one direction and then the next. Twenty feet off-shore, the glassy surface was punctuated by the occasional flying fish learning how to flout destiny but for a moment.

The Fire Fly came late, fully laden with locals seeking transport across to the St. Georges, a small collection of islands in the Straits. Our host sternly clarified that ours was to be a charter and sent them skipping across the eight miles to deposit their fares and return for us. As I watched the wake of the boat disappear on the water line, I could see massive afternoon cumulus clouds darkening over the distant New Ireland mountains. Still waiting, the deluge began its afternoon deposit long before the Fire Fly re-emerged speeding towards our impatient lot.

“You may need these,” Theresa said as she handed out recently acquired rain coats.

Securing our overnight cargo under well worn tarps and heavy plastic, we climbed aboard and slowed across the luxuriant coral in reverse until we were well beyond risking propeller and reef. Turning north, the engine snarled to life and we lit out across the water.

The Bismarck Sea holds the bluest water I’ve seen on Earth. Even with the sky shrouded in afternoon storm clouds, to look into the Bismarck is to look into a Utopian past long before seas were choked by the despoiling of humankind. These waters once embraced humanity’s oldest persistent cultures; entombed many Japanese, Australian, and American combatants (and their death machines) during the Second World War; and, now, once again were resplendent in deep azure. The white spray from the outboard launched hundreds of flying fish – now quite a bit larger as we left the shoreline – for their mature flights lasting from seven to ten seconds and transiting thirty to forty meters at an altitude of half a meter above the water. Life, in small scale was awake.

I have not seen marlin feeding in a pack before. On the occasional fishing show that I watch with Zach, I’ve seen an angler straining against a lone magnificent fish who, in panic launches from the sea in desperate defiance. But, in a flash, about twenty minutes into our crossing, a school of the mighty hunters were dancing – their great spears presaging the majestic fish as they pierced the surface in a feeding frenzy evidenced at times with smaller prey visible in their hungry mouths. Enchanting. This was worth the wait.

The seas roughened as we neared the St. Georges with the hull of the boat slapping the surface sending a hot sea spray across the boat and its occupants. And then, as soon as it roughened, in the tidal shadow of the Islands, it once again pacified into a pond.

Beyond the St. Georges, the inevitability of the burgeoning storm was apparent. Trying to circumnavigate the wall of rain would add hours to the lateness of our journey and would take a toll in fuel that, alas, exceeded our provisioning. So, steady at the tiller, we made for the wall.

And then They came. First, about fifty yards to port, three dolphins broke the surface. Soon another five and then several off starboard. We were in the middle of a multitude of the playful mammals as they darted and leapt all around the boat. The driver started a staccato foot stomp at the back of the boat and, with the stomps several dolphins would launch themselves into the air. He, in some communication beyond my grasp, was encouraging them to join us on our transit and they, filled with exuberance obliged. And then, cresting the water once again on the port side were massive porpoises, their giant dorsal fins slicing the water in advance of their graceful arc punctuated by tail splashes.

“We don’t see porpoises often – certainly not like this,” Byron commented.

All around us – abundant life – all racing for the storm.

They knew that intelligence dictated going underwater when confronted with airborne tempests. We didn’t have the option. The heavens opened and were most generous. The best of Chinese waterproofing did little but slow the ingress of water and, in a moment, water resistant utility was substituted for portable sauna as precipitation and perspiration locked in mortal combat inside of a plastic suit. There is a moment when resistance is futile and you surrender to forces well beyond any semblance of control. Being in an open boat in torrential rain happens to be precisely one of those moments. I reflected on how deeply I cherished my life and the richness of experience that has graced my days. I found myself celebrating the absence of flight without which the sky and sea’s bounty could not have been apprehended on this day. I found myself lost in the scale of the present where my pulse of life was merely one beat in the orchestra of All. The storm, the sea, the wildness all drenched me through.

Thirty minutes from our destination, the storm relented and gave way to late afternoon blue patches and broken clouds. A frigate bird drifted in the currents coming off the land. A freshly washed New Ireland materialized all around us and we raced the coming dark.

Three more hours of driving to Konos to share Custom with over 200 people from Simberi, Tabar, and Tatau Islands… but that’s another story for another day. For today, my celebration of sensing life is sufficient and we’re all wealthier for it.

Calling All Pens

2011-03-26T16:46:00.000-07:00

True, This! —
Beneath the rule of men entirely great,
The pen is mightier than the sword.

Richelieu; Or the Conspiracy , Act I, Scene II
Edward Bulwer-Lytton, 1839

The ink of a scholar is holier
Than the blood of a martyr.

Attributed to the Prophet Muhammad PBUH

On January 8, 2002, then President George W. Bush signed the “No Child Left Behind” law. Like dogs to the Pavlovian bell, governors across the country, together with state legislatures rushed to embrace either this clarion call for quality education for all Americans. Either that or they succumbed to the monetary inducement to “play ball” in which Federal funds could be used to offset dwindling state resolve to support education. Um, let’s see, I wonder which one of these might have been the case?

So when Wisconsin Governor and Tea Party darling Scott Walker decided to pick a battle on how to deal with the state’s budgetary profligacy, he ripped a page from the playbook of Pope Paul IV in 1559. After all, if you want to build an electorate who will warmly embrace nostalgic eras like, oh, let’s say the Inquisition; the place to start is by rooting out the evils unleashed by the “freedom of inquiry”. Anyone betting on how soon we’ll see the forests of Wisconsin cut down to stack around the stakes to rid the state of heretics? And, not to be outdone, governors and legislatures across the country and around the world are deciding that tough economic times call for drastic measures so, what better place to save than silly incidentals like education?

Now, before every NEA blogger places me on their most-favorite-blog referral, beware. Ever since organized education sold out to standardized testing and propped up pathetic attempts to show education metrics to justify their existence, they put their own tinder at their own feet. You see, long ago Educators abandoned their destiny for an Industrial Output model where “passing” and “minimum competency” replaced excellence at most turns. And, while there’s still room under the bus, parents, in their quest to “make ends meet” decided that schools were more daycare than life preparation and relegated discipline failures to schools while they were off selling their hours in pursuit of an American dream.

Prior to the storming of the Bastille in 1789, over 700 authors, printers and book dealers were reportedly held for sedition, radical thoughts and inciting rebellion in a legacy of the 1550s banner decade for edicts (the 1551 Edict of Chateaubriant and the 1557 Edict of Compiegne) setting forth death penalties for heresy and the burning of nobelwomen at the stake for promoting the reading of books. After all, when autocratic governments wish to control masses, their first line of defense is to attack the educated class and restrict the role of schools. It worked for the Church in the Dark Ages, in France in the 17th century and it will work for Wisconsin in 2011. Unless, a few people realize that both the governor and the educators are engaged in a meaningless Quixotic battle while the real tragedy goes unaddressed.

To be clear, most states (including Wisconsin) are in the pickle they’re in at the moment because of illiteracy. During bumper crop years of state surpluses; state pensions, union pensions, and the like were signed away to charlatans and swindlers who promised safe investment vehicles which would allow state coffers to fill on the heady markets. In the run up to 2008 and buoyed by the insanity of political forces in Washington who saw equity markets as the cure for all social programmatic ills, massive allocations were made to investments which were NOT investments. Why would state funds fall for such pathetically transparent schemes? Simple, because not a single legislature in the country has a modicum of financial literacy sufficient to make fiduciary decisions informed of all the facts. And we don’t have the literacy because we have failed to educate.

Our current education system is a product of an industrial system gone horribly wrong. Students are programmed to be consumables in an industrial system. Why is it that universities are rated based on their job placement success rather than their graduates’ contributions to the world? Why is it that we choose math and science as our flagship socialized priorities? Was this mandate a product of aspiring to greatness or were we playing out the madness put in motion by the Reagan Administration’s spectre of the Japanese dominating the world? Hey, Gipper, if you’re out there – Japan was never something to fear…. ignorance was and is!

I have been dealing with civil and criminal acts committed by mining companies – listed on the Toronto, Australian, and London stock exchanges – for the past several months. I have also been dealing with reporters who are conducting investigations into these abuses. Ironically, NO compliance arm of any of the markets in question have provided ANY evidence whatsoever in enforcing material disclosure requirements (and relevant compliance failures of the companies in question) which will directly and adversely impact the value of shares traded on their exchanges. Market regulators and the media believe that places like Mongolia and Papua New Guinea are “too far away” to really get a handle on the story. Mind you, they’re not too far away to rob and swindle. But they are too far away to warrant regulatory compliance oversight. If educated, they would realize that these countries are on the way to even more remote places where regulated markets flourish. They would realize that in both countries, English competency outstrips multi-lingual competency in their own countries. In the countries in concern, walking governments through basic agreements in which publicly traded corporations have ripped sovereignty from the hands of the country – in executed agreements – begins not with a sense of outrage but rather, incredulity. “Are you saying that they’re misleading us?” is a refrain that has echoed in every corner. “No,” I respond, “I’m saying that they’re stealing from you and insuring that you and your country remain impoverished.”

And then, the bough breaks.

Impoverished people, oppressed by the licensed tyranny of market forces which steal resources and leave no benefit for the communities, rise up and demand that their voices be heard and their interests served. Some countries chose to nationalize their assets and, in vindictive reprisal, rating agencies like Moodys, S&P, and Fitch down-grade the country as being “risky”. As long as you are being robbed and don’t complain, you’re an acceptable risk. Stand up against abuse and you’re “too unstable”. Some countries acquiesce and invite unfettered corruption while multi-lateral organizations stand aside and lament the “Dutch Disease”. And, We the People, stand by and shake our heads as bombs rain down on countries where, in a single day, we blow through more money in the name of national defense than we spend in a year in education in most states.

You see, it’s all related. Cartoon characters in State Houses, incensed labor marching in the streets, bombs in Libya. At the core, we have failed to truly hold up the standard of unfettered Freedom of Inquiry. Educators have too often abandoned their post of moral leadership insisting that a child prepared for a complex world needs excellence in communication and civil engagement – not monotonous drills for standardized tests. Public figures have succumbed to public opinion narcissism where short term is measured in CNN-years (7 times faster than dog – or is it Fox? – years). Market regulators have focused on post facto gotcha rather than preempting crisis. And We the People have elected to Twitter about Charlie Sheen.

Now, I know, this post has required some of you to actually re-read sentences. Some of you have actually opened up another browser window to do real-time Babel Fish on my selection of words. And, as I sit in Port Moresby, Papua New Guinea, that sight makes me laugh. For, in the end, my point is to preserve the hope that one day, we’ll regain the capacity to think in paragraphs and prose, we’ll regain the capacity to debate in rich metaphors and hyperbole, and that, We will once again value the inalienable curiosity of the human spirit and empower it with a rich, educated foundation.

Transforming our Economy At Last - Our World’s New Beginning

2011-03-20T11:40:00.000-07:00

A speech delivered on March 17, 2011 in Carpenter’s Hall, Philadelphia
By Dr. David Martin, Executive Chairman of M•CAM Inc
Batten Fellow, University of Virginia

O Lord our Heavenly Father, high and mighty King of kings, and Lord of lords, who dost from thy throne behold all the dwellers on earth and reignest with power supreme and uncontrolled over all the Kingdoms, Empires and Governments; look down in mercy, we beseech Thee, on these our American States, who have fled to Thee from the rod of the oppressor and thrown themselves on Thy gracious protection, desiring to be henceforth dependent only on Thee. To Thee have they appealed for the righteousness of their cause; to Thee do they now look up for that countenance and support, which Thou alone canst give. Take them, therefore, Heavenly Father, under Thy nurturing care; give them wisdom in Council and valor in the field; defeat the malicious designs of our cruel adversaries; convince them of the unrighteousness of their Cause and if they persist in their sanguinary purposes, of own unerring justice, sounding in their hearts, constrain them to drop the weapons of war from their unnerved hands in the day of battle!

Be Thou present, O God of wisdom, and direct the councils of this honorable assembly; enable them to settle things on the best and surest foundation. That the scene of blood may be speedily closed; that order, harmony and peace may be effectually restored, and truth and justice, religion and piety, prevail and flourish amongst the people. Preserve the health of their bodies and vigor of their minds; shower down on them and the millions they here represent, such temporal blessings as Thou seest expedient for them in this world and crown them with everlasting glory in the world to come.

Reverend Jacob Duché
Rector of Christ Church of Philadelphia, Pennsylvania
September 7, 1774, 9 o’clock a.m.

Two hundred thirty seven years ago this invocation set in motion the First Continental Congress and set the world alight in a war against perceived tyranny and oppression. Two hundred thirty seven years later, we gather this evening in a world alight in a war against perceived tyranny and oppression. Kneeling under the illumination shining through the south window of this hall, resplendent in the light of morning, the Rector of Christ Church of Philadelphia could not have imagined that his prayer, so passionately constructed, would, in two centuries find itself more prophecy than supplication.

Just this past week, China re-emerged after 500 years as the world’s leading producer economy while, we the People for whom this prayer was spoken, find ourselves in a relentless struggle to “defeat the malicious designs of our cruel adversaries.” However in a tragic irony, this time maliciousness and unrighteousness are not directed to foreign powers but at our own countrymen. Having fled the rod of the oppressor, we have, in larger part, been seen as the oppressor. Rather than assembling in honor for the “best and surest foundation” we instead have scorned wisdom for the tyranny of intolerance.

Once again, now in the light of the waxing Lenten moon, I would like us to consider our precise condition so that we can find a path to a supplication more fitting a New Beginning. Tonight, I would welcome you to consider the animating values of ourselves, our businesses, our nation and our world and recognize that it is in this consideration in which we can reconcile ourselves to our callousness and find a path towards a More Perfect Union.

Earth Dwellers to Resource Conquerors
On the waning notes of the prayer which opened this Hall, Adam Smith in An Inquiry into the Nature and Causes of the Wealth of Nations described the Earth as not our sanctuary and home but rather the compilation of commodities to exchange and consume. The Earth and its “resources” were objects of dominion and Labor – not human engagement and stewardship – serving as the determinant of value. In this view, and in its present manifestation, we find ourselves in persistent conflict to lay claim to perpetually lower “cost” resources and labor to leach profit from every source. In the late 1990s as we encouraged profit maximization by reducing domestic employment, did we profit or did we create an ecosystem where our own citizens have atrophied in their capacity to produce and contribute to a national wealth and identity? We prayed for nurturing care but decided that University of Chicago shareholder value maximization was supreme. Rather than seeing ourselves as stewards of an ecosystem, we sought piety through blood. Is it then, any wonder that the words “human trafficking” and “conflict metals” are as synonymous in our day as slavery and plunder were in 1774?

Sanguinary Purposes vs. Effectual Harmony
In the formation of the current Federal Reserve at the turn of the last century, we frequently recall the debate about States’ rights of currency. We remember William Jennings Bryan and J.P. Morgan variously advocating for agrarian interests in state currency and silver vs. gold and industrial credit, respectively. However, we spend little time considering the centrality of mortality in our Federal Reserve system. After all, it was the life insurers – like Aetna and Metropolitan Life – who provided life insurance premiums for the capital formation of our current monetary system (a practice persisted to this day). It was, after all, the cash compiled by insurers from 1905 to 1913 which provided the first “fixed income” capital to buy the first Federal Reserve debt. To this day, life insurance premiums and pensions require, as “safe investments” the very debt that animated the Fed’s founding. As founding members of Reserve Corporation and persistent members of its Board of Directors, what’s in your wallet is merely a debenture against your very mortality. And, given that most Americans die in debt, there’s no wonder why the dictum of near compulsory “death benefits” are structured to repay, in death what we failed to honor in life.

While we have layered equity markets, financial engineering, celebrated monetary hegemony on top of our modern, self-congratulatory assessment of our now threatened economic power, at what point in history did we actually stop and ask ourselves the considered question: “Does money based on actuarial management of Death serve as the best metric of performance or success?” Is a business the sum of returns to shareholders or is it an organizing endeavor which values the participants in a community; which builds value through employment; which spreads value through exchanges within and between communities; and, which engages value in practicing exemplary stewardship?

Expedient Blessings to Indebted Consumption
When the Reverend implored the Almighty for “expedient” blessings, is it conceivable that expediency and blessing are in existential tension? “Truth and justice, religion and piety prevailing and flourishing”? In this time, in fact our greatest perceived threat is coming from religion and piety prevailing and flourishing. The challenge for us is that, in our focus on our own interests, we failed to engage with our neighbors and, in the vacuum, other religions – built on strict adherence to the values of community and ideology over the individual and built on community values rather than isolated consumerism – flourished. While we can debate on the proximate causes for piety-animated extremism, there is no question that poverty is a fuel for radicalization and we were too busy swiping our credit cards using our houses as ATMs to recognize that we were contributing to the animation of our shared greatest fears.

Friends, we now live in the full measure of the prayer that opened this hall. Our manifold successes remain bound to tyranny and oppression. Our technological advances have been energized by resource exploitation which ravages countries and spreads the scourge of poverty-fueled reprisals to our shores.

Make me an instrument of peace;
where there is hatred, let me sow love;
when there is injury, pardon;
where there is doubt, faith;
where there is despair, hope;
where there is darkness, light;
and where there is sadness, joy.
Grant that I may not so much seek
to be consoled as to console;
to be understood, as to understand,
to be loved as to love;
for it is in giving that we receive,
it is in pardoning that we are pardoned.

In the Industrialization of the past century, we observed and were willing participants in an economic system which detached the value of business and human endeavors from the ecosystem, integral values, and a sense of perpetual stewardship not only for ourselves but for future generations. Rather than aligning capital and its flow to productivity, we sought extraction optimization and celebrated the same as the pinnacle of celebrity achievement.

We are more than the sum of this failing indebted currency metric.

What does the New Economy look like? How will we recognize it when it shows up? What can we do to align our efforts with its manifestation?

Productive Currency
Money is an artifact of value transfer – not the value itself. Since we stopped using metal coinage, this has been the case. Experiments in new currency – including Utah’s recent vote to reinstate gold and silver as legal tender – are emerging at community, State and international levels. Intrinsic to all of these is absolute commitment to reconnecting the exchange with productive engagement. Currency is a call option on future goods, services or interactions – not a draft against looming debt and mortality.

Collaborative Access
Humanity shares some basic traits – not the least of these is the shared impulse to be creative. Whether it’s the Inca pumping water up a mountain 800 years ago or the survivor of Hurricane Katrina in New Orleans, when water is where we don’t want it, we move it. From the farmer who goes from sharpened stick, to plow, to no-till agriculture to the metallurgist who goes from cast iron to single atomic thickness gas phase deposition of conductive materials, when we see our world, our impulse is to change it. This shared impulse must serve as the core for accessing active participation in the global exchange of value. Rather than seen as a commodity of labor, we will succeed when creative collaboration is a calling card equally valued regardless of race, creed or geography.

Transparent Accountability
Value is an inclusive experience which counts the all-in consequence of our activities. Coal isn’t free. It costs a forest, epochs of time, pressure, heat and space and our assumption that its value starts at its digging denies its replacement value. Metals don’t show up in ingots or bars but they start with a dynamic earth that quakes, heaves, and transforms phase and state. From materials to our final interaction with goods, services and experiences, accounting for ALL components of our experience is the only way we’ll manifest a viable economy for all. Poverty’s blight must be transformed from the absence of things to the willful disengagement from communities and networks. Wealth must take on the stewardship mantle where the best of us are the ones who remove the most barriers of access for the masses.

This is happening now.

So, in the waning hours of this evening, let us consider a new prayer for the New Economy.

Led by humanity’s Unquenchable Light,
We pledge…
… to live as stewards of our sanctuary Earth;
… to honor the inalienable value of the creativity intrinsic to all;
… to orient our actions to the removal of barriers of access and opportunity;
… to define our wealth by our character rather than our artifacts; and,
… to fully live in abundant grace in a spirit of tolerance and mercy;
So that we, dwellers of Earth, may be embraced in the illumination of everlasting glory.
Amen

Article III, Section 3 or Just AIG

2011-03-13T09:57:00.000-07:00

Anytime I hear that any government bailed out entity is acting in “the best interest of taxpayers” I smell a rat! When I hear AIG (NYSE: AIG) say that it wants to buy back “assets” from Maiden Lane II, I find myself wishing that the framers of the U.S. Constitution had anticipated the government declaring war on its own currency when Article III, Section 3 was drafted. When I find out that the New York Federal Reserve is actually not sure that it wants to take AIG’s offer of $15.7 billion in cash (yes, U.S. Dollars – THAT cash) in exchange for toxic assets which nearly cratered the company and the country just two years ago I lament for the absence of any public media capacity to actually tell the country what’s really happening.

Let’s review for a moment. The U.S. Treasury – that vaunted entity that is responsible for the financial assets of the United States – owns about 92% of AIG. For the record, that’s a controlling interest and, we, the people, allegedly are being served by the management thereof. The New York Federal Reserve, the Managing Member of Maiden II, together with the collateral agent, The Bank of New York Mellon, are actually the “owners” and “managers” of Maiden Lane II. You will recall, recently the Federal Reserve (a corporation having NO public accountability and having no interest in the taxpayers’ interests) authorized the purchase of approximately $600 billion in U.S. Treasury securities. Now I know this will come as a shock but this purchase explicitly violated the rules of independence set forth in the AIG bailout – specifically violating provisions of independence required under the Fed’s custodial role. By accepting AIG’s purchase of the Maiden Lane II assets, the Fed would receive an estimated $1.5 billion profit for selling securities for $0.50 on the dollar.

But, you’d have to be a real loser to spend this much time actually READING the evidence of the cover-up to know any of this. However, in the interest of demonstrating just how much a geek I am, I decided that there was a bigger rat behind the ludicrous statement being made by U.S. Treasury-owned AIG. So I went down the rabbit hole of the CUSIPs (the Committee on Uniform Security Identification Procedures) which are the records of the assets actually toxic enough to qualify for bailout but now so desirable to own that the U.S. Treasury has decided that holding them is MORE ATTRACTIVE THAN HOLDING U.S. CURRENCY! While I won’t bore you with all of the assets, I wanted you to see exactly the “quality assets” which are better than the U.S. dollar according to the U.S. Treasury and the Federal Reserve Bank of New York.

Mortgage Obligations originated by…

Countrywide Home Loans Servicing LP's

IndyMac Bank, F.S.B. - Chapter 7 bankruptcy

Newport Management Corporation

Wells Fargo Bank, N.A.

Deutsche Bank National Trust Company

Yes, you’re reading this correctly. Assets of failed, bailed out, and civilly indicted (soon to include the prospect of criminal charges) banks are officially “better” investments than cash. And this determination is made by the organization responsible for maintaining the quality of U.S. cash! I wish you could make stuff like this up but reality is far more tragic than fiction could ever imagine.

Now, if you’re sitting there thinking to yourself, “Certainly someone somewhere out there knows what they’re doing,” I wish I could provide you some solace. However, in a painful experience this week with one of North America’s most respected news entities, I found out how anemic fiscal literacy is in our media and how horrific their attention span is to outright fraud. So, for the record, let’s simplify it and see if you can use your forwarding capacity on your browser to make sure others you know find out the simple truth.

In the public announcement made by the U.S. Treasury (owner of AIG), the Treasury has said that its own money is less valuable than toxic mortgage securities. The New York Fed, actually having to reflect on the sales offer – the same Fed that bailed out the Treasury for QE2 (the politically correct term for certifying counterfeit currency as the sale was NOT backed by an independent buyer thereby defying the “willing buyer” requirement for an independent transaction) – seems to agree that holding toxic mortgages is better than holding the dollar. And, every major financial media outlet, in their pathetic pandering to the propaganda that led us down the primrose path to Maiden Lane, regurgitates the LIE that this is good for the American taxpayer and the U.S. government. Ah, for the good old days of clear cut treason when people sought to destroy the country with tired trinkets like muskets and cutlasses. Now, treason is death by a thousand paper cuts of unread securities agreements written to blind the public in plain sight.

For years I pointed out that the 2008 collapse was not a “housing market” crisis but the fully forecast collapse of housing market financials when houses were used as ATMs and real estate became the basis for reckless consumer credit. Well, now we’ve got it. We really have the 2008 crisis that didn’t happen then. In this wholesale robbery from the public and in the broad light of fraud, the New York Fed, the Treasury, and their puppet AIG, are now solidly collapsing the dollar. I guess the Utah legislature is prescient in their decision to move towards a state-minted legal tender gold and silver standard. Because, what’s in your wallet is the ghost of a system built in 1913 which has now fully failed.

While most of the time, I end my blog posts with a “happy ending” I can assure you that this one doesn’t end happy. It ends with a warning. When we construct the next economic system, accountability and transparency not only will require an informed and educated population but it will require people like you, having read this, and having independently checked the accuracy of what I’ve reported, taking the next step and forwarding this to everyone you know who has a dollar or who has ever used a dollar so that, “no one saw it coming” can’t be said this time.

So go ahead, take a challenge from a Virginian who had the courage to actually call for Liberty and hit the "send" button. If a tea tax got in the craw of colonies - let's see if you know treasonous behavior when you see it and then, let's see if you do something about it!

Polarity of Insight – Staring at the Sun

2011-03-06T12:04:00.000-08:00

When you grow up with a father who is an astronomer, you learn about optics long before others in your grade. As a little boy, I remember creating a pinhole camera in an attempt to see large sunspots or partial eclipses. I remember going to Rio Hondo Community College and using some of the telescopes to project images of the sun on white surfaces to resolve solar mysteries without blinding my beguiling eye. I also remember loving to start fires with magnifying glasses but that was not part of this story or part of my better childhood behavior so, enough about that! I remember driving across the desert and watching my brother Dan at a gift shop taking a pair of sunglasses and, while looking through them, turn them 90 degrees to see if they were polarized pronouncing to all of us younger siblings that this “polarization” was essential for some fantastical reason. From optics to audio, Dan could explain the importance of things with such a passion that you actually thought them to BE important. And so, at a National Park gift shop somewhere in the southwestern United States, I paid an extra couple dollars and got “better” vision. That I lost the glasses at the Grand Canyon is merely cause for you, the reader, to have great sympathy for me and then imagine what the loss of such value must have had on my psyche!

In collaboration with my M•CAM, Constellation, and other colleagues, I have revisited the notion of polarization realizing that this phenomenon is replete with natural philosophy and wisdom. Unwilling, however, to remain wed to conventional dimensions of polarization in which one filters perpendicular reflected light to reduce glare and sharpen edges, I would like to consider the values of the principles of polarization with infinite orthogonality.

In his most current work, my friend and colleague Richard David Hames explores the “civilizational worldview” in an epistemological criticism of unconscious sense-making assumptions. Using the context of global environmental changes, we work to see what ethnographic impulses can be deciphered when observing the SAME observed phenomenon by systematically shifting our observational vector. While we might, in the Occidental Lens, see crisis in climate change; in our Sinic Lens, we can see that the melting ice may be a godsend to those living systems that have been long starved for methane. By seeing things through different lenses, we find not only new perspectives on the same phenomenon but we… are you ready for this?.. might actually have sentient awareness of other facultative symbiots and see ourselves in-scale rather than in the glare of our own reflective Klieg egos.

Over the course of the past week, I have worked with a number of people to begin understanding the application and integration of Integral Accounting using the hexahedral optics (aka - a cube prism). Pulling a random article from a newspaper, I have asked people to annotate every word, phrase or concept in each of the six orthogonal dimensions of IA. An example is below. I am using a Reuters article entitled “US Corn Belt Braces for Major Flooding in Spring”.

In 2008 (Custom & Culture: time), rains (Commodity: water) pounded (Custom & Culture: evocative of destruction) the northern Midwest (Commodity: land; Custom & Culture: place) from early June into July (Custom & Culture: time) and caused (Knowledge: hydrology) tributaries into the vast Mississippi River watershed (Technology: natural water conveyance) to overflow (Commodity: abundant water), flooding (Custom & Culture: evocative of destruction; Well-being: loss of employment, land, shelter) some tens of millions of acres of cropland (Commodity: land).

Grain prices (Money: grain sales) soared (Custom & Culture: evocative of abundance) during the summer of 2008 (Custom & Culture: time) on fears of damage (Custom & Culture: social response; Knowledge: anticipation of consequence; Well-being: (-fear)) to the bellwether U.S. crops. Iowa farmers (Custom & Culture: class of labor) received nearly $1.1 billion in insurance payments (Money: insurance) in 2008.

Next, take the time to observe each artifact of integral value and shift your optics. When viewed on a global scale of a need for fresh water, are pounding rains destruction or essential to recharge fresh water? And if we take this view, are there pathways which we could imagine which would take the devastation into a new value by using technology, new social narratives, or alternative values on land-use? Are there people or places around the world where knowledge could be shared to turn a narrative from animations of fear, destruction and loss into opportunity? Did anyone win? Did anyone lose? Could any of those dynamics been altered?

By taking the time to apply the polarizing optics of value dimensions into something as simple as a CNBC article, one can also begin to resolve the fulcrum around which the narrative could change. In the story above, fear drove up prices. In the story above, farmers benefited from fear while insurers lost. In the story above, the consumer lost all the way around. Without considering the single dimension consequences in multiple, orthogonal perspectives, we animate a fatalistic, helpless worldview in which there are only winners and losers.

A challenge for the week: pick a story in your newspaper or favorite on-line media and look at it through the six dimensions of Integral Accounting. Then, tilt the image 66 degrees and look at every artifact through one other lens. Repeat at least two more times. See if you are inspired to ask, “Why didn’t someone see it this way?” See if you’re inspired to learn more about something you would have otherwise glanced over. See if you’re inspired to go through your day with a little less of your own reflected glare and a little more direct Light.

Pushing the Elephant in the Room

2011-02-27T05:50:00.000-08:00

Addressing an international audience of some of the world’s most influential CEOs, Rose Mapendo recounted her life experience as the recipient of the greatest forms of cruelty dealt at the hands of brutal, violent men. Listening to her presentation beginning with the haunting languid melody of the song of hope and forgiveness, the same one she sang for months as she heard the screams of the dying and the living tortured with physical and sexual abuse, one could not help but be transported to the anguish-filled nightmare of East-Central Africa. At the end of her presentation, the chorus of responses from the audience was singular.

“What can we do?”

When a room full of global industry leaders hear Rose’s impassioned plea for justice and peace and respond with a “what can we do?” impulse, I wonder which part of the orgy of consumer enterprise blinds so many from the recognition that it was the institutions celebrated as idealized titans of industry that are those who maimed, killed, raped, and tortured the very ones whose voices echo in the notes of Rose’s song. Do we ignore the fact that between 1950 and 1989, the U.S. delivered in excess of $1.5 billion in military equipment to the region? Under the sterilized name of Foreign Military Assistance – a code name for our subsidizing of U.S. defense contractors’ sales around the world – much of the military hardware came with our own name stamped on the weapons and munitions. And we are not alone. Chinese and European firms, with full knowledge of their ultimate genocidal use, continue to authorize the weaponization of conflicts which serve to distract local communities while their mineral, gem, and energy wealth is stolen.

But, to honor the question Ms. Mapendo asked, “What is the source, not the symptom of our violence?” we must confront a topic that is NOT addressed in sterile gatherings of global business executives. How many of us know the contribution of our own unconsidered consumption which funded the terror meted out to millions? Did we ask ourselves whether the imbalanced concessions provided to Chevron / Congo Gulf provided the liquidity that turned fossil fuels into human extinctions? Did we concern ourselves with the pension funds and investment banks that financed the oil, diamond, and metals businesses whose disproportionate wealth extraction created feudal despotism that erupted into genocide? When did any of us – from London to Toronto to New York to Australia to Hong Kong – actually demand that publicly listed companies in whom we invested report MATERIAL events – including known human rights abuses to local communities and expediency payments (the politically correct term for bribes) to “security” provided by governments or militias?

As the abolitionists of the 18th and 19th century faced the dehumanizing pragmatism of the profitability of slavery, in our modern economy, why do we refuse to see that genocide and abuse of human dignity are NOT relics of the past but utilities that give us cheap electronics, energy and extravagant luxuries? In a region with an estimated $26 trillion in energy, metals, agriculture potential, and other materials, why can’t we find any capital market that has the courage to stand up and say that, on our watch, humanity will refuse to create the economic disparities that lead to rebels deciding that shooting husbands and preserving wives, mothers, and daughters for sexual abuse and torture is “a good use of precious commodities like bullets?” With bilateral investment agreements with the U.S., Belgium, Canada, Denmark, France, Germany, Israel, the Netherlands, Switzerland, and others, which citizen will stand up and be the voice that turns Rose’s painful lament into a chorus of humanity?

Let’s be clear. We continue to dishonor the plight of the death camp survivors in Rwanda, the Democratic Republic of Congo and the rest of the region when we refuse to face the fact that it is OUR inhumanity that fuels genocide. But for the cash supplied by Chevron, Congo Gulf Oil, Citibank, Telecel, Mobil, Group Damseaux, Tabacongo/Rothman, BAT, PLC, and others, violence wouldn’t be directed at the tribal conflict over the single digit percentages of revenues and profits extracted from the region. In countries where foreign investors must invest at least 70 percent of their capital in foreign currency – making local despotism and mercenary arming far more convenient for the agents of death – why can’t we see that our money supply robbed Rose of her husband, her home, and peaceful dreams? When scarcity is manufactured in the face of abundance, violence has ALWAYS been there. We cannot, for one moment, sit back in horror and anesthetize ourselves from the reality that we are the torturer.

When a Chinese gaming company buys a U.S. gaming company for several hundred million dollars, can we see in the fantasy war-game the actual violence that made the graphics processor optimized with metals from the anonymous dead? In a culture of business executives that applauds the miniaturization of genomics processors so that science can automate the synthesis of “life”, can we see that the components that run the computers and sequencers rely on the lives of real humans for whom clean drinking water is a luxury for less than 1 in 12 and where life expectancy is 47 years?

It is time to change the narrative. “Corporate Social Responsibility” is not enough. If we are going to be remembered for anything other than the scourges of immoral and unconsidered consumption, we must practice – and demand from all parties with whom we do business – an accountability that says that profits built on the dehumanization of others are no longer tolerated. And let’s be honest. The only reason why we don’t take the time to inform ourselves about the source of the metals in our iEverythings and mobileApp everything else is because we want to remain blind. In a world which could watch in rapt attention as Egypt collapsed and Libya consumed itself with blood, we don’t want to know that with knowledge comes responsibility. We call it a knowledge economy but we’ve actively chosen a path of ignorance. This must end.

Every stock exchange on the planet must institute a listing requirement requiring every listed company to comply with the Universal Declaration of Human Rights in all business practices.

Every securities oversight authority must have a public reporting mechanism to enable transparency provided by local communities directly impacted by the businesses conducted by public companies.

Every public company must be required, at its annual meeting, to have local representation from the workers or landowners of every place where business is conducted.

Every pension fund and investment manager must represent and warrant (at pain of financial and International Criminal Court censure) that it confirms that no funds are used for the use of force to effectuate or optimize the conduct of business.

Too radical?

Tragically, in our present trajectory, the mournful song of a woman in a death camp is likely to join the massive choir of those whose songs have been extinguished until a few of us start singing a “sweeter song”.

Rose named her story “Pushing the Elephant” in honor of the traditional African story that teaches that, to move an elephant, one must act with others because a lone actor cannot push the elephant. I would suggest that Rose’s challenge is infinitely more difficult given our denial of the existence of the elephant.

Trickle Down Morality

2011-02-19T21:39:00.000-08:00

As I am wont to do, I left a conversation this week with an aspiring U.S. Foreign Service enthusiast puzzling over why, after millennia of seeing the futility of military ideological indoctrination, madness seemed more the rule than considered reason. In a country where, absent wartime procurement, we’d have a shrinking GDP for the 12th year running, I reflected on the roots of our incapacity to imagine an economy in which we genuinely built value on an aspiration for the reflected choice of liberty rather than the dogmatic zealotry of “freedom” at the end of a gun. Drenched in nostalgia for the heady days of the Reagan years – so banally celebrated on the centenary of his birth – and the glorious sponsorship of “Freedom Fighters” who in their modern incarnation, armed with our defense industry, have turned their weapons on us so as to be now referred to as “terrorists”, I mused at the intractable predictability of our impulse to support mayhem.

On a gloriously balmy day – more April than February – I probably would have let this topic pass but for a gnawing sense that a systemic, fatal error is lurking just under the surface of the Middle East and North Africa paroxysms. What struck me as alarming is the fact that I recognized the sequence of failures in governments corresponding with a very old, very forgotten, much abused law from the 1960s. To be precise, the collapsing countries of the past few weeks all seem to be the beneficiaries of the 1961 Foreign Assistance Act (Public Law 87-195). In fact, there is an ominous correlation between the nature of certain funding programs and the sequence of uprisings. This Act, which has been the proximate cover for overt and covert acts by the U.S. government for the past 50 years is worth the read if you want to see why we abandoned any hope of moral leadership on a global stage – unless you consider gunpoint to be a moral persuasion.

One only needs to read Section 620E of the Act to see precisely how far from a moral compass we’ve chosen to stray. Our assistance to Pakistan – including our arming of Afghans now killing coalition forces – was not only authorized under the animation of the Soviet occupation but, included providing Presidential authority to waive Arms Export Control Acts. My favorite section of the “Aid to Pakistan” program is the condition that, “lethal military equipment provided under this subparagraph shall be provided on a lease or loan basis only and shall be returned upon completion of the operation for which it was provided.” And who can forget the moral clarity of Section 620G which stipulates that the U.S. should withhold assistance to countries that participate or sponsor terror however, this can be waived, “if the President determines that furnishing such assistance is important to the national interests of the United States…”?

In the creation of the Foreign Assistance Act of 1961, the United States made a fatal error in judgment – neither the first nor the last. And the events of the past 6 weeks are showing the seismic risk of this error; the failure to apply Integral Accounting appraisal to a value exchange. You see, our thinking in the late 1950’s until well into recent history, was that we could exchange “aid” for politico-economic allegiance. If we fed, trained, armed, or defended a country, we reasoned, we would gain lasting stability and loyalty. While this type of bribery may work in postwar reconstruction in Japan, Europe, or at home (with our public works programs), it fails to adequately calculate the, “Commodity”, “Custom & Culture” and “Money” dimensions in Integral Accounting.

Since the first Mongol-Sino traders crossed Afghanistan to the ports in North Africa in the first century BCE, trading involved the exchange of tangible artifacts. What started in the East as silk or spices, could wind up in Alexandria or Tunisia as grain or gold. This transformation involved several principles that are present to this day in the cultural memes in the region and are immune from the hegemony of the Bretton Woods dollar. The trade routes of Asia, Persia, the Middle East and North Africa relied on a transitive commodity mandate as much then as now. Willingness to transport or trade was based on local needs or abundance as much as it was based on some remote “market demand”. If you needed food and had a bunch of gold, in the moment of the arrival of food, it had greater value than gold so you exchanged what was unusable yet reserved for what was usable and demanded. As a result, exchanges were seen in light of pragmatic expediency, not in terms of absolute supply and demand in invisible, distant markets.

In this ecosystem, value was a combination of the traded artifact with the reward of a “good deal”. Against this backdrop, it’s no wonder that when the Occidental moralists came calling with “aid” for which there’s no artifact exchange, mistrust is implicit. Clearly no one ever offers something for nothing. And in a world where the notion of artifact for ideology is the prima facie exchange, there is a certainty on the part of the recipient that a trap is being set. The Occidental policy failure was to mistake the counterparty who would accept our deal – the puppet autocrat who we’d promote into political supremacy – as an evidentiary party to the acquiescence of a country to our values and our proposed terms of engagement. We didn’t build alliances, we bribed malleable characters. And now, we’re watching as the façades fall.

While the covert abuses – from Reagan’s Nicaraguan Iran-Contra illegal activity to Bush-Cheney’s Bulf Oil and Greek Olympic “Security” financing of the weapons which are killing coalition forces – accelerate the failure of our misguided ideology, the overt, reported financing of moral exceptions to our stated values shows a level of hypocrisy which undermines any honor or credibility we might otherwise have. In the minds of an Asian or African observer, our willingness to place expediency as a paramount value when it comes to ideology amplifies the instability in countries around the world and erodes our ability to have any significant impact on transitions which are breaking out across the globe. In contrast, Chinese success in Nigeria, Afghanistan, Southeast Asia and even “liberated” Iraq, comes complete with good old-fashioned trading – not on ideology but on assets – the way it’s always been done. The Chinese are no more amenable to theocracies than their democratic, capitalist competitors. However, in commodity value exchanges, ideology is subservient to transactive interest.

Tunisia, Egypt, Israel, Haiti, Greece, Portugal, Russia, Jordan, Saudi Arabia, Taiwan, Bahrain, Burma, Cambodia, Cuba, Columbia, Peru, Afghanistan, Cyprus, Pakistan, Democratic Republic of Congo, Libya. If you made it on this list, you’re already in a fraternity where you may not want to be. You’ve been the recipient of a Cold War inspired doctrine which values frail ideological adherence over food, shelter and security. And if we, as conscious global citizens want to act before all the world is alight in unemployed, hungry anarchy, we would do well to figure out how to be part of a new narrative in these and related places around the world.

It is time for the U.S. to end the Foreign Assistance Act of 1961. Not because we shouldn’t actively assist those in grave need around the world. No, we should repeal the Act because it’s built on ideology long destroyed by termites and dry rot of our own fears and our collective neglect. In a world where the world’s fastest growing economy is communist (turned oddly market-capitalist), the end of the Act will be a wholesale loss of any last vestige of credibility. We’re not at war with communism – we’re in denial. We need to align our Foreign Assistance with those who are in need of genuine help so that they, and the world, can see a cascade of moral leadership in which those who genuinely care for humanity, the environment and the ecosystem of Earth champion wholeness rather than animus. Will this be an American enterprise or will it, at long last, be a global enterprise in which “isms” are placed into the realm of philosophical debates while we get about doing the work of being human? Let justice roll down.

Starting with the Universe

2011-02-12T16:10:00.000-08:00

"The function of what I call design science is to solve problems by introducing into the environment new artifacts, the availability of which will induce their spontaneous employment by humans and thus, coincidentally, cause humans to abandon their previous problem-producing behaviors and devices. For example, when humans have a vital need to cross the roaring rapids of a river, as a design scientist I would design them a bridge, causing them, I am sure, to abandon spontaneously and forever the risking of their lives by trying to swim to the other shore."

- R. Buckminster Fuller, from Cosmography

Muhammad Hosni Sayyid Mubarak was not attuned to new artifacts. As a result, history will remember him not as the man that stood with Egypt’s peacemaker President Anwar El Sadat – close enough to be injured in the grenade blast that killed Sadat and propelled Mubarak to the Presidency in 1981 – nor the man who did much to bring Egypt onto the international scene as a vital source of power and stability. No, he will likely be remembered for the legacy of his perpetuation of the Emergency Law 162 (1958) which gave him sweeping powers so expansive that he believed himself to be above the law. And, on this week in 2011 he departed on the 32nd anniversary of Iran’s Shah’s exile in Cairo. He will be remembered as one of the first globally recognized powerful elite to fall to a new breed of social activism. While the U.S. would never allow a change of government like the one that we just witnessed in Egypt to take place in Washington D.C. without far greater human rights abuses and loss of life, I wonder if leaders across the globe took this week’s message to heart. The 363 year old Nation State is ending and a new social order is emerging.

And what took down Mubarak’s illusion of power – and will take down many more in the coming weeks, months and years – is the failure to honor the third tenet of Westphalia; namely, the covenant not to interfere with the sovereignty of states by any non-state actors or foreign interests. While it’s easy to point to the United States’ violent intervention as a clear affront to this revered principle, the more profound and consequential violation of the tenet is the prohibition on letters of marque, reprisal, and privateering. As I’ve written and spoken many times before, the transnational Corporation State, launched in the banking and corporate coup d'état which began in Europe in the early 19th century and whose cancer killed representational democracies across the globe by the early 20th century, thought that it could hide behind the façades of puppet heads of state in perpetuity. But when you build systems which remove the wealth of nations through agreements with despotic leaders for the benefit of foreign interests, the system will fail. The most ominous specter in the demise of Mubarak is sharpening his scythe for parasitic corporations who saw themselves beneficiaries of heads of state who did not care for their people.

Ironically, the wisdom in the Peace of Westphalia came from a multi-ethnic consciousness awakening that recognized that, left unaltered, petty religious and territorial conflicts animated by control of resources and trade, would lead to violent ends. Seventeenth century humanity was more awakened than most of their progeny today. And, at the core, one can discern the consideration of four dimensions of social consciousness that is required for such awakening. In an effort to simplify the concepts that I believe represent the environment into which alteration and new artifacts need to be inserted, we need to first understand our roles as Citizens, Leaders, Parents, and Provisioners

Citizens. We’ve long abandoned the recognition of the centrality of citizenship to all human endeavors involving any social structure. In our race toward the cult of the isolated identity, we failed to see that we only apprehend full identity in a context defined by the community in which we operate. Our awakening requires us to see that our liberty empowers us only when we are aligning our efforts and resources for their optimal use benefiting ourselves while insuring that others have suitable equivalent benefit and use.

Those who evidence mastery of this efficiency and inspire others by their mastery are ones worthy of the mantle of Leadership. I am deeply disappointed to see universities and business schools promote “Leadership”. The world doesn’t need leaders. Leaders emerge as being worthy of being followed – not by perceiving the direction the masses are facing and then racing to the illusive “front” of the milling masses and being the loudest voice in the room. Quality leadership empowers others to teach those characteristics that bring about a more harmonious system without pandering to self-interest or the interest of loyal sycophants.

Parents (both biologic and those acting as mentors) need to reclaim their role as both the nurturers of emerging citizens and as models of deliberate action emanating from a confident, powerful center. Rather than teaching lessons of scarcity and fear-based hording and consumption, parents need to convey the wisdom of suitable adequacy to manifest the individuated role of the provisioner.

Most radical in this understanding is the replacement of the role of the “individual” or the “consumer” popularized by our psychological or commercial memes with the omni-dimensional Provisioner. Beginning with you making sure that your own identity and well-being are sufficiently sated, you take on the capacity to understand your own productivity, consumption, and access to resources directly or through networks and then create the capacity to keep all of these in balance. Having done so for yourself, you can both steward that which you have while also engaging your capacity in the milieu of providing for those around you. Inward directed provisioning recognizes that the impulse to consume is replaced with the impulse to be adequately equipped. Outward directed provisioning recognizes that the need to be identified with what has been horded is replaced with the impulse to demonstrate the capacity to expand provisions for and to others. Identity, in this dynamic sense, fosters a perpetual reminder of one’s role as Citizen and thus the fortuitous cycle persists.

When this system is fully functioning, Presidents and CEOs won’t spend the majority of their energy reinforcing their grip on power by the suppression of others. History has demonstrated that this Tolerant Citizenship model fosters unprecedented prosperity and stability. And, to that end, let us engage in transformation by introducing new artifacts whose utility will necessitate their utility for safe transit to new behaviors – not in futile revolution.

From the Land of Pharaohs

2011-02-05T16:35:00.000-08:00

Against the backdrop of CNN’s broadcasts of the protests in Cairo and throughout Egypt, I took a great deal of time to reflect on the events that served as catalysts for the new wave of self-determination evidenced across the Middle East and North Africa. For years, I’ve been lecturing, writing, and conducting business inspired by a central tenant that all value exchanges must, at their core, represent a bounded correlation to production. In the last several decades, under the guise of “financial innovation” the largest monetary asset transfer has occurred in which a select few have egregiously abused monetary systems for their benefit without considering the consequences of their amoral acts. The modern dead and the defiled reliquary artifacts in the Egyptian museum are but the latest casualties of this callous indifference to the global commons and its stewardship.

Egypt is no stranger to food-inspired social unrest. And, in point of fact, one of modern history’s oldest economic models was born at a time such as this. I decided to revisit the oldest known account of Egyptian unrest to see what wisdom could be discerned to inform events of today both in the region and in the broader macro economy.

In the Biblical account of the famine in Egypt (Genesis 47: 13-26), the following story is reported.

47:13 But there was no food in all the land because the famine was very severe; the land of Egypt and the land of Canaan wasted away because of the famine. 47:14 Joseph collected all the money that could be found in the land of Egypt and in the land of Canaan as payment for the grain they were buying. Then Joseph brought the money into Pharaoh’s palace. 47:15 When the money from the lands of Egypt and Canaan was used up, all the Egyptians came to Joseph and said, “Give us food! Why should we die before your very eyes because our money has run out?”

47:16 Then Joseph said, “If your money is gone, bring your livestock, and I will give you food in exchange for your livestock.” 47:17 So they brought their livestock to Joseph, and Joseph gave them food in exchange for their horses, the livestock of their flocks and herds, and their donkeys. He got them through that year by giving them food in exchange for livestock.

47:18 When that year was over, they came to him the next year and said to him, “We cannot hide from our lord that the money is used up and the livestock and the animals belong to our lord. Nothing remains before our lord except our bodies and our land. 47:19 Why should we die before your very eyes, both we and our land? Buy us and our land in exchange for food, and we, with our land, will become Pharaoh’s slaves. Give us seed that we may live and not die. Then the land will not become desolate.”

47:20 So Joseph bought all the land of Egypt for Pharaoh. Each of the Egyptians sold his field, for the famine was severe. So the land became Pharaoh’s. 47:21 Joseph made all the people slaves from one end of Egypt’s border to the other end of it. 47:22 But he did not purchase the land of the priests because the priests had an allotment from Pharaoh and they ate from their allotment that Pharaoh gave them. That is why they did not sell their land.

47:23 Joseph said to the people, “Since I have bought you and your land today for Pharaoh, here is seed for you. Cultivate the land. 47:24 When you gather in the crop, give one-fifth of it to Pharaoh, and the rest will be yours for seed for the fields and for you to eat, including those in your households and your little children.” 47:25 They replied, “You have saved our lives! You are showing us favor, and we will be Pharaoh’s slaves.”

47:26 So Joseph made it a statute, which is in effect to this day throughout the land of Egypt: One-fifth belongs to Pharaoh.

One cannot help but see in this narrative the harbinger of conditions which are being played out – merely by a new set of actors. Remember, that the context for this story was the storehouses that Joseph stewarded for seven years prior to the launch of the famine. In Genesis 41: 46-49 you read that an “immeasurable” amount of grain was collected during the seven year period preceding the food shortage – and this from excess abundance – not from forced scarcity. What is unspoken but implicit in this story is that the infrastructure and technology for food storage and security became one of the most significant public works projects in history. In a time when we don’t have food security for most of our population in any part of the world, ancient Egypt had abundance that afforded caloric resilience for 14 years!

When a food commodity price shock hits – like the famine of old – the first response was to collect all of the money. Remember, at the time, this meant that there was a “rush to metals” not unlike our present day. One can readily see how the Pharaoh had gold sufficient to line tombs when you realize that, in the first year of famine, nationalization of gold assets was the first step to a new economy. This is the first record of a national reserve bank impulse in human literature.

In the second year, Joseph provided grain in exchange for livestock. To understand the modern implications for this, one must revisit the ancient and modern understanding in much of the world that livestock was the primary indicator of heritable assets and wealth. In short, by taking all of the livestock, Joseph enacted an inheritance tax and created a state-owned pension monopoly. Sound familiar? This move is in ancient times what Social Security and entitlements are today. Further, this move represented a recognition that the units of wealth and status needed to be subordinated to a broader social good. At this point, I wonder how many of our religious right politicians take the time to realize that their Bible actually used nationalized socialism as a primary means of enacting “God’s plan”?

And then, the coup de grâce, the nationalization of private property. While the assumption of land and productive labor sounds harsh in modern times, this move is indistinguishable from the effective analog we have in the U.S. where all forms of enterprise and means of production have been usurped by the Federal Government under the guise of the Commerce Act. Once all artifacts of value and means of production were controlled, you have one of the most overlooked, yet vitally important concepts that can be deduced from this story – a flat tax. But, note the important differentiation between Joseph’s tax and what’s in place today. Tax was 20% of productivity – NOT a percentage of assets, efforts or wealth. And, while those with more communist leaning sympathies may loathe the carve-out for the priests – antiquities’ bureaucrats – note that they are NOT expected to be productive and are subsidized from the government’s share.

Upon close examination, I find this productivity-based national economic and revenue policy something dramatically missing in present day Egypt and in the rest of the industrialized world. Today, we don’t have the wisdom that allocates abundance for mass resilience; we don’t have leaders who understand the courage required to lead in time of crisis; and, we don’t have a sense of civil society and social responsibility that inspires the transcendence of the citizen over the self. Do we have a food price crisis in Egypt? Do we have a political crisis across the Middle East and North Africa? Is there a risk of contagion for violent populist uprisings around the world?

Absolutely and not really. What happened in Tunisia and Egypt is a symptom of a more fundamental problem. When the much heralded and lauded construct of “leadership” fails to stay rooted in citizenship and common accountability, volatility grows as a latent potential in any system. The more wealth transfer extremes lead to conspicuous, asymmetric consumption by the few in power at the perceived expense of the many, the greater the volatility. “Qu'ils mangent de la brioche” (“Let them eat cake”) was not a good idea in monarchist France and it’s not a good idea in Goldman-inspired modern economies. When markets preserve economic asymmetries in the face of known social inequities, there are no surprises when revolution breaks out.

So the wisdom awaiting re-emergence is the recognition that at this very moment, there are abundant excesses around the world which would meet the needs and ameliorate the fervor of the disenfranchised in Egypt. If we really want considered democratic reform, we should focus on insuring that change comes from satiated reflection, not from hungry desperation. Despotic leaders are half the problem; callous hoarders of wealth are the other. Until we address both, we will look primitive in the light of a Pharaoh and his visionary deputy.

Drinking Tea with Elephants

2011-01-30T10:31:00.000-08:00

President Obama, Republican responder Paul Ryan and rightward gazing Tea Party evangelist Michelle Bachmann all need a time-out. Together with their respective constituencies, the gross lack of awareness of structural deficits in both their diagnosis and proposed treatment for our economic ailments is reminiscent of the “nobody could see it coming” lunacy of 2008. And, before I waste more words – economies are built with customers exchanging value, not on investment. The next time you hear “access to capital” as an excuse not to succeed or as the treatment to enable success, realize that there’s no greater illusion in the global markets than the myth of private equity and venture capital carefully built over the past 45 years.

The siren song that venture capital is an integral component to stimulating an innovation economy has served to create a class of usurious despots, not economic efficiency. Despite its decades of existence, private equity in the form of venture capital has a hideous failure rate that is masked by those who have a few exceptional successes. Under the guise of “high risk”, funding failure rates in excess of 90% are not indicators of risk. Rather, they are indicators of a more problematic misconception and consistent, willful ignorance on the part of those who administer funds belonging to others. In short, not all innovations or technologies merit the creation of a business and, absent that merit, most fail along with the capital that supports them. No economy in the world has honestly and reliably developed the processes (or the courage) to recognize that an innovation does not a company nor an investment make. With over 95% of the world’s patents never associated with value accretion (most are useless and many others are defensive negotiating tools alone), the belief that patents and venture capital alone will create an economy is totally unfounded. These are among the many tools that can build value but they are not a prerequisite foundation. Missing from the calculus of economic promotion is the recognition that a customer, not an investor, is the key to creating enterprises. Every dollar of investment is a single dollar spent with subsequent investors often squeezing early investors out of the picture all together. The same dollar as a purchase can be leverage 3-10 times based on the form of capital sought by an enterprise. Governments who truly want to stimulate innovation economic development would be far better served by purchasing at a premium from local enterprises aligned with domestic innovation priorities rather than throwing investment dollars at everything that claims to be a company. Billions of dollars of wasted venture capital did not create IBM, Oracle, Siemens, or Sharp. Government procurement did and government procurement – often at premium prices – continues to be the lifeblood of many of the mislabeled equity successes of the modern economy.

When President Obama, Paul Ryan and Michelle Bachmann stand before the American public and the world and talk about fiscal discipline evidenced by decreased spending, they ignore the fact that the U.S. economy has been in a technical Depression but for the very spending they rail against. To be clear, if we didn’t have the public and private wars in Iraq, Afghanistan, and now Pakistan which support over 10% of our GDP and ALL of our national GDP growth, we would be pushing wheelbarrows full of worthless currency to buy loaves of bread. When the top five places the U.S. spends its money are ALL aerospace companies who deliver “shock and awe”, I find the government’s innovation mantra tragically ironic. The industry that we built on the minds of expropriated technologies from the Germans is the life blood of our economic life-support. Representing over $144 billion in market capitalization and over $112 billion in government expenditures last year, these five companies (Lockheed Martin: LMT; Boeing: BA; Northrop Grumman: NOC; General Dynamics: GD; and, Raytheon: RTN) are as much of the “too-big-to-fail” dynamics as their financial cousins that were bailed out in the last two years. We spend more government procurement money on private armies (KBR) than we spend on healthcare and medical technologies. And, for the record, let's remember that the last 4 years of the Bush - Republican administration (2005-2008)saw national spending rise by $1 trillion not counting the 2008 financial services bail-out set in motion by a lameduck President.

At the outset, we must understand that the last 30 years of Western economic development and hegemony have been built on several significant misconceptions leading many emerging economies into vast, inefficient policies and practices that fail to produce meaningful results. There are two fundamental misconceptions that we should examine.

First, we need to revisit the understanding of the mis-used term “innovation”. For the sake of loyal InvertedAlchemists, this is a reminder, for others, this is news. Without realizing it, this word has blurred the vital distinction between:

Invention: the process whereby something fundamentally new emerges from a flash of creativity and brilliance;
Innovation: the assembling of one or more components from prior existing knowledge for a new assembly or application that achieves a repurposed use not contemplated when any of the components were discovered or first assembled; and,
Incrementalism: the subtle modification of a thing for a particular market niche or the minute alteration of a good or service to impair a competitor’s activity.

Failure to distinguish between these three discrete concepts has lead to ruinous policy not only in the developing economies but has led to the wholesale failure of much of the private equity in the West. In the case of invention, a novel platform for highly diverse opportunities often emerges. However, invention infrequently serves as an ideal basis for a corporation as the enabled products or services are often much later in creation. Innovation, by contrast, often is integral to a successful commercial endeavor as innovators translate the creative work of invention into a context that people can use and consume. Incrementalism serves as no basis for entrepreneurial activity but rather is a tool for established businesses to defend or negotiate positions with the market place and modify pricing dynamics for consumers. Absent a clear process allowing policymakers to understand and differentiate these concepts, most economic development policy is grossly inefficient and capital deployment is wasteful. Neither the President nor the respondents following the State of the Union understand or animate responses with this awareness.

Second, we should closely examine the national innovation economic models that have lead to both the successes and challenges of the past. For the purpose of this discussion, I would like to provide four case studies which are informative about these models which include: Build It; Leverage It; Serve It; or Option It. I will explain each model when it is being discussed.

Build It – the greatest modern example of this model is Germany between the First and Second World War. Germany was (and remains) a very proud country that sought to control its own industrial and economic destiny. As the world increasingly isolated Germany after World War I, the national resolve to build a strong national economy led to the wholesale alignment of public funding priorities in both education and commercial activities in an unprecedented fashion. During this period, German enterprises, supported by strong government procurement incentives, created unprecedented advances in Chemicals, Materials Science, Communications, Transportation, and Finance. The significance of this work is evidenced by the fact that, until the very recent past, all scientists were required to study German to read the foundational work in any basic science field. By balancing a commitment to education (which enables the mind to creatively think) and training (which allows for efficient industrialization), Germany avoided the pitfall that most countries since have fallen into – namely, the subjugation of creativity at the expense of free and creative thinking. The great German companies of today stand firmly on the foundation built almost a century ago. In a modern irony, this same isolation policy is leading the Islamic Republic of Iran – also a very proud and educated people – to many of the same outcomes. In fact, if you want to look at some of the best bioengineering, materials science, and natural resource processing technologies today, many truly inventive and creative ideas are emerging from Iran. Iran, like Germany eight decades ago, has struck a balance between education and training that could serve as a vital development model.

Leverage It – There is no country on earth that has done more to leverage innovation (both its own and that of the rest of the intellects of the world) than the United States. Supported by two, irreproducible events – the Bretton Woods conference in 1944 establishing the dollar as the global trade currency and the post war expropriation of both German inventions and innovators which fueled a majority of the U.S. science and technology imperatives – the U.S. had the ability to sell its debt to finance unprecedented expenditures in technology. Most Americans, including every State of the Union pundit and protagonist ignore the fact that Obama’s “Sputnik” admonition was one of many off-spring of the Allies’ reparations in which they distributed German technologies and scientists as spoils of war. It was German technology that built our aerospace and computer industries – not American ingenuity. We were the post-war beneficiaries of the intellects of others and we make a grave and irreversible mistake when we claim American ingenuity to support our aerospace, chemical, and information technology supremacy. We didn’t invent it – we innovated. And, unfortunately, nobody in Washington has a clue how to actually stimulate an “invention” fueled economy! Technology in the U.S., measured both as R&D funding as well as vast commercial incentives is aligned on a mortality imperative. We fund technology for war and healthcare. In an ironic sense, our major S&T priorities are to develop military capabilities for use on others and, at the same time, spending an irrationally disproportionate amount of money on end of life “health care”. Our institutions of higher learning, over the past 40 years have educated the world’s scientists and engineers but, what is often forgotten is that those students, many of them from India, Taiwan, China, and the rest of Asia, serve to stimulate the productivity of U.S. laboratories. The contribution of graduate students – often seen as merely the beneficiaries of our educational largesse – is ignored at our policy peril. Without our global currency attraction which provides ready cash and our military spoils – including our ability to control energy priorities by force – our S&T would be severely impaired.

Serve It – Singapore serves as the ideal study in serving innovation. Realizing that the small island nation needed to rapidly distinguish its economy from its neighbors, Prime Minister Lee Kuan Yew instituted an inducement-driven economic policy to attract foreign companies to Singapore to exploit what he viewed as Singapore’s greatest natural resource – its well-trained, low cost workforce. While ExxonMobil’s roots in Singapore date back to the 1890’s, the first major coup for his post-Independence effort was attracting Texas Instruments to set up chip-making operations in 1968. The “Singapore Economic Miracle” was a fortuitous union of a new technology – the integrated circuit – with a new country. Selected as one of the first manufacturing locations for this burgeoning technology, Singapore rode a tsunami of success with TI that went on to include over 2000 companies, the vast majority of which are U.S. corporations. Singapore and its Economic Development Board have attempted to manage a delicate balance. How, on one hand, do you continue to serve as an attractive location for foreign direct investment while, on the other, stimulating endogenous economic opportunity? How do you provide constant training for multinational corporation (MNC) servicing while creating a creativity-based educational system that relies on local innovation and imagination? Singapore’s greatest challenge is its entire dependency on one foreign economy and, as a result, its fortunes will rise and fall on the same as the country did not build a foundation for creative autonomy in its abiding commitment to serve the innovation of others. Recently, an exodus of firms from Singapore is the first indicator that the differentiator of well-trained, low-cost workforce is no longer the competitive advantage it was 40 years ago.

Option It – Options are forward rights to purchase something that will have a differential value at a later date. The country that has optioned its innovation future in an unprecedented sense is the People’s Republic of China. In the latter part of the 1990’s, China instituted a policy of mandatory technology transfer, much to the chagrin of many MNCs. In addition to buying power generation, transportation, medical, or civil infrastructure technologies, corporations were required to sell the enabling proprietary know-how that underpinned the purchased technology. For years, the Chinese government was sorely abused as it had a problem (and still is impaired) in knowing whether such transfers were actually legitimate or complete. Many of them were not. However, over a decade, China has acquired options on vast innovation estates from many of the world’s largest companies. In addition, China elected to educate (in contrast to Singapore’s and India’s training focus) many of its citizens in basic sciences. Linking technical commercial know-how with basic scientists is an integral component of the long-term economic strategy of China, the first byproducts of which are emerging only recently. However, taking lessons from all historical models, the Chinese have the cognogenitive environment from which invention and innovation can organically emerge. Systemic challenges of establishing national S&T priorities in a country that is quite regionally governed presents obstacles in the short run and the emerging awareness of the degree to which China did not fully get what it thought it was buying in its technology transfer will impair the efficient execution of its strategy. However, it is reasonable to expect that with a growing population in a resource constrained and environmentally taxed world, China will achieve considerable breakthroughs as its survival and economy depend on it. In short, the Chinese government has acquired the world’s best technology and acquired, thereby, a series of innovation options at a very low cost. While the White House and Congress may wish that there was an innovation strategy that would save the economy from mismanagement, they’ve grossly underestimated the power of China, Brazil and other beneficiaries of technology transfer that propped up international business expansion over the past decade while no one was paying attention. Like the German technology expropriation at the end of the Second World War, the Chinese and others who were excluded by the superpowers at the Doha WTO meetings have exacted a more subtle revenge. They’ve optioned Occidental technologies and now they, not we, will control where growth happens next.

We are in a place no different from the foundational skirmishes at the birth of our modern economy. I find no modern public figure with the clarity of perspective rivaling James A. Garfield in his Congressional Address in 1866.

“Mr. Speaker, there is no leading financier, no leading statesman now living, or one who has lived within the last half century, in whose opinion the gentleman can find any support. They all declare, as the Secretary of the treasury declares, that the only honest basis of value is a currency, redeemable in specie, at the will of the holder. I am an advocate of paper money, but that paper money must represent what it professes on its face. I do not wish to hold in my hands the printed lies of the government. I want its promises to pay, signed by the high officers of the government, sacredly kept in the exact meaning of the words of the promise.”

“Let us not continue this conjurer's art, by which sixty cents shall discharge a debt of one hundred cents. I do not want industry, everywhere, to be thus crippled and wounded, and its wounds plastered over with legally authorized lies.”

And from his January 2, 1879 address to the Honest Money League of Chicago:

"Successful Resumption will greatly aid in bringing into the murky sky of our politics, what the signal service people call "clearing weather." It puts an end to a score of controversies which have long vexed the public mind, and wrought mischief to business. It ends the angry contention over the difference between the money of the bond-holder and the money of the plow-holder. It relieves enterprising Congressmen of the necessity of introducing twenty-five or thirty bills a session to furnish the people with cheap money, to prevent gold-gambling, and to make custom duties payable in greenbacks. It will dismiss to the limbo of things forgotten, such Utopian schemes as a currency based upon the magic circle of interconvertibility of two different forms of irredeemable paper, and the schemes of a currency, "based on the public faith," and secured by "all the resources of the nation," in general, but upon no particular part of them. We shall still hear echoes of the old conflict, such as "the barbarism and cowardice of gold and silver," and the virtues of "fiat money" but the theories which gave them birth will linger among us like belated ghosts, and soon find rest in the political grave of dead issues. All these will take their places in history alongside of the resolution of Varsittart, in 1811, that British paper had not fallen, but gold had risen in value, and the declaration of Castlereagh, in the House of Commons, that the money standard is a sense of value in reference to currency as "compared with commodities," and the opinion of another member, who declared that the standard is neither gold nor silver, but something set up in the imagination to be regulated by public opinion."

"When we have fully awakened from these vague dreams, public opinion will resume its old channels, and the wisdom and experience of the fathers of our constitution will again be acknowledged and followed."

"We shall agree, as our fathers did, that the yardstick shall have length, the pound must have weight and the dollar must have value in itself, and that neither length, nor weight, nor value can be created by the fiat of law. Congress, relieved of the arduous task of regulating and managing all the business of our people, will address itself to the humbler but more important work of preserving the public peace, and managing wisely the revenues and expenditures of the government. Industry will no longer wait for the legislature to discover easy roads to sudden wealth, but will begin again to rely upon labor and frugality, as the only certain road to riches. Prosperity, which has long been waiting, is now ready to come. If we do not rudely repulse her, she will soon revisit our people, and will stay until another periodical craze shall drive her away."

There was a time when public service and her stewards actually took the time to couch their analysis and recommendations in a context of reflected wisdom from the past. There was a time when Congress and the halls of power echoed with calls to accountability and integrity. It is time that, we the People, model such wisdom in our own practice and hold our leaders to the same standard. Otherwise, pull up a tiny chair in the playhouse and have an imaginary cup of tea with a forgetful elephant.

How Do You Get Paid?

2011-01-23T04:39:00.000-08:00

_

This week, I confronted one of my last and greatest personal foes. While I celebrate my capacity to have remarkable tolerance in settings where people are interested in a transformative experience around economics, global economic engagement, and the innovation that I’ve worked to manifest in countless communities around the world, I have a trigger that sets me off. And this week, that trigger was sprung by a friend. My response was far from friendly. After experiencing amazing engagements with highly diverse communities ranging from Pacific Island landowners to global capital market titans in New York, and seeing unprecedented responses from them all, I was innocently asked, “So how do you get paid for doing all this?”

Had I taken a moment to reflect on the question and the evidenced character of the inquirer, I would have understood that the question was not a literal one but rather a question of enablement. Had I heard in the question, “How do you align resources to make these things possible and what motivates you to persist in what you’re doing?” I would have been more graceful. Neither reflection nor intent kicked in and I followed my impulse to an emotionally charged, unconstructive response.

Several years ago, I had the opportunity to coordinate a series of investigations into treacherous acts of public officials ranging from corrupt contracting all the way to covert financing of publicly labeled “terrorist” organizations. Following a briefing in Washington D.C., a senior member of the U.S. military approached me and said, “Do you realize that you’re pissing off very powerful interests? You can’t seriously think what you’re doing is worth dying for!” My response perplexed him even more when he found out that there was no compensation for my work or my testimony. “What on earth would possess you to do this?” he muttered as he walked away.

I have founded a number of for profit and not-for-profit endeavors in the last 20 years. During that time, I count among my greatest satisfactions the reward that comes from knowing that the livelihoods of thousands have benefited directly from compensation derived from efforts I’ve launched. I am delighted that investors in my activities have uniformly been rewarded with multiples far in excess of any market returns. I am continuously in amazement with the numerous communities and cultures throughout the world that have become a part of my life experience and the people in each place that have directly contributed to the person I’ve become. However, in that time, the animating and motivating impulse for every endeavor – regardless of scale, mission, or consequence – has come from a clarity of purpose, not from an aspiration of a return.

Despite growing up in a non-traditional Christian family which sought differentiation from mainstream religion, I was exposed to thousands of purveyors of dogma promoting present suffering for an “eternal reward” with carefully manipulated messages that preyed on impulses of humanity to coerce adherence. I am certain that my volcanic fury triggered by the how-do-you-get-paid question emanates from a deep seated, conscious choice to manifest a life that can be animated by purpose, not reward. Listening to clergy across the globe who barter present compliance to their notion of truth at pain of damnation or to a illusory reward of eternal bliss was one of the earliest lies I could see through and watching millions enslaved by the same across time and space has done little to assuage my wrath for the oppression such impulses justify. Confronted with the prevalence of memes which presuppose that humans are little more than Pavlovian primates, I find myself increasing my resolve to manifest endeavors built on energy accretive fusion rather than on scarcity-animated exchanges.

While I, by no means, wish to imply that there is no beneficial purpose in the utility of a monetary system, I have become convinced that the cavalier isolationism created in a society animated by money as incentive and scorecard has sufficient toxicity to humanity that alternatives are not optional but rather they’re necessary for us to address what we see as intractable in our social and moral challenges. Neither the Presidents of the United States nor of China can be justified in their elocution around poverty elimination when their respective countries are endorsing horrific exploitation of communities across the globe to sate the energy and metals lust inextricably mandated by a scorecard measured in monetary wealth. While the Presidents dined in the opulence of a State Dinner in Washington D.C., ExxonMobil was building liquid natural gas extraction facilities in Papua New Guinea surrounded by razor wire so that landowners could not benefit from the opulent indulgence required to incent expats to live in a “hostile” place. While they dined, banks and investors in their respective countries rolled in excessive benefits derived from mineral and energy deals where local governments were willfully mislead into leveraging national treasuries to buy equity in shell corporations with the explicit intent of denying benefit via lawfully mandated royalty payments and ultimately bankrupting countries for even greater future exploitation.

And somewhere along the line, we, the People, stand by in passive indifference paralyzed by the belief that there are too many impediments for us to take on such entrenched injustices. However, somewhere in the cancer of our belief system, we actually rationalize that we are “entitled” to living in excess because we’re the ones “taking risk” or “developing countries”. In short, the cyanide leaching into rivers, the reckless death of a miner drilling a geothermal vent for electrical generation, the 4 year old child killed by chemical toxin in Papua, all can be justified costs because they’re just part of the process of us getting our reward for our version of development. When our incentive, reward, or compensation system in our personal space is reduced to an inanimate singular dimension of value – money – than we have little quarter to critique the macro system injustice that is just doing “us” at scale. After all, ExxonMobil is working to maximize profits to shareholders because they want to be paid. If, along the way, a few Pacific Islanders have to die through carelessness or direct violence, neither the company nor the shareholders will be bothered.

Transformative human interactions have a long history of an absence of compensation. The young Australian soldier who just received the Victoria Cross did not rush across enemy lines hoping that he would earn a medal. A mother nursing a child doesn’t calculate whether the child will turn out to be a good kid or not when she offers her breast. A teacher doesn’t sit with a struggling student after class because there’s a bonus for extra effort.

Getting paid. Worth dying for. What’s in it for me?

How about another view? My friend Anil was sitting with me in a cab in New Delhi one afternoon when we came to a stop at the light. Pulling up beside us on the right was a Rolls Royce limousine complete with a white gloved driver and dapper businessman in the back seat. I was taking in this scene when my attention was drawn to my left where a man sat begging on the curb. The man had lost both legs and part of an arm to a disease that was well on its way to working on what was left of his flesh.

I turned to Anil and said, “How do you live in a place where you’re constantly confronted with such harsh contrasts?”

He smiled and explained, “You just proved there is a God. You know, if you interviewed everyone who passed this intersection you would find that you may be the only person who actually saw both the wealthy man and the beggar. However you saw them both. God, you see, only allows you to see what you can do something about and you, David, are a person who can deal with the poverty of both men.”

I looked at him, perplexed. I discerned the poverty in the beggar in an instant.

He continued, “The tragedy, my dear friend, is that you had compassion for the beggar but you had no compassion for the man in the limousine. Imagine what must be broken in a person who, constantly exposed to the plight of humanity, finds it necessary to isolate himself like that. And you had no compassion for him.”

There were millennia of wisdom in Anil’s observation. Much wisdom that I needed was given on the wings of a beggar and a businessman. But the moment that sticks with me the most was the line about God only allowing you to see that which you can do something about. While I may take issue with the cosmology in his remark, I have found resonance with the spirit therein. Which brings me to the point. A purpose-animated existence does not ask, “How do I get paid?” Rather it commences in responding to an animating impulse and then asking the question, “How can I provision and sustain the thing that I know I need to do?”

And, at the expense of my thoughtless response to a friend this week, I have found a tool that I’ll use and that I’m inspired to share. In short, I desire to animate my listening to the questions of others and decipher them through the lens of Integral Accounting. For in that process, what I’ll hear is the genuine question arising from a desire to share a transformative experience rather than judging a reward based reductionism which has been a scourge to humanity. Along the way I may find a path towards greater tolerance myself and that, would be great compensation.