Blinded By the Obvious

I was in a 6^th floor hotel room on Grace Bay in Providenciales, Turks and Caicos Island on Tuesday, January 12, 2010 when I noticed the floor shaking under my feet.  Colleen was napping on the bed and, as I was watching, it slid on the floor.  “What was that?,” she asked as she roused from her post-sun nap.  “Just a little earthquake,” I responded.  About 191 miles away from our room, a quarter of a million people had just lost their lives and over a million lost their livelihoods.  At dinner, oblivious to the epicenter, we saw the news of the tragedy that had struck Port-au-Prince.  In the five years since the earthquake, cholera has impacted the lives of at least 100,000 people and has led to nearly 10,000 preventable deaths.  And, after 5 years, nearly one third of the cholera treatment centers have been closed due to lack of funding according to the latest UN statistics.  About five years earlier, the Indian Ocean had heaved off the coast of Sumatra killing another quarter million people in what was thought to be the 3^rd most powerful earthquake in modern recorded history (trailing the 1960 Valdivia Chile 9.5 and 1964 Prince William Sound Alaska 9.3).

This weekend, Katmandu experienced the latest mass-casualty earthquake with the death toll still mounting as I write.  It’s another springtime of death 5 years later.  It’s another moment of desperation as families seek to find their loved ones in the midst of centuries-old rubble and informally constructed brick and stone homes.  And it’s another moment when the instant response from everyone from Save The Children to the UN is to send money to jump-start relief efforts less than two months before the arrival of the monsoons… and cholera.

Two years ago, Santosh Gyawali, Senior Disaster Specialist for USAID Nepal wrote an article for Disaster Risk Reduction entitled “Implementing Building Codes to Save Lives.”  In his article he stated that, “a large earthquake would result in at least 100,000 deaths, 300,000 injuries, and 1.6 million displaced in the capital city alone.”  According to the study performed by Geohazard International, the majority of risk to humans in the Kathmandu Valley was not from mudslides and natural hazards but rather from “poorly constructed buildings not built to seismic codes.”  And while the last big earthquake to topple much of Kathmandu was in 1934, the population explosion that has happened since then led experts to warn of the impending loss of life and property.  In a July 28, 2014 article in Cosmos entitled “Kathmandu’s earthquake nightmare,” Kate Ravilious carefully laid out the anatomy of what happened on Saturday – a year before Saturday!

While we marvel at the nighttime lightning images from Chile’s Calbuco volcano and the emergence of islands in the Pacific – including one I saw rising from the sea in Tonga after watching a mini-tsunami in the hotel swimming pool! – we seem to be collectively missing a number of critical points as humanity despite the earth’s generous and frequent reminders to PAY ATTENTION!  While sociopaths in Washington, Brussels, Jerusalem, Moscow, Tehran, Kiev, Vienna and, Beijing play out their Freudian dysfunction jeopardizing the lives of billions, the earth is reminding us that it’s one active mother (fill in the expletive if you so desire!).  And if we’re listening to its rumblings, crashings, and torrents, we may be ignoring something far more important than our post-traumatic sympathy for people we’ve cared nothing about before this Saturday… this time! 

Kathmandu and its residents don’t need our sympathy now.  They’ve needed our attention for at least the past 20 years during which time more people have been killed in political insurgency than the earth did on Saturday.  The Maoist United People’s Front, the Nepali Congress Party, the United Communist Party of Nepal, the police and the armed forces have variously harmed and unified this poverty-ridden nation.  On April 24, 2006, then King Gyanendra laid the groundwork for the Constituent Assembly which governs the country today.  No breathtaking coverage from CNN and BBC when tortures and killings claimed 13,000 lives because We The People don’t care about the root causes of poverty and extremism around the world!  No calls for humanity to find all the other Nepals and Haitis before they become victims of “natural disasters”.  But most troubling is the fact that the disaster IS NOT NATURE!  It’s human callousness that fails to realize that a world built valuing Well-Being does not die at the hands of nature.  

And this is not some sort of naïve illusion.  My dear friends in Papua New Guinea live WITH volcanoes and earthquakes – many of which are more violent and powerful than the ones grabbing the headlines – and they’ve lived with nature for 40,000 years!  Stone walls in Saksaywaman outside of Cusco Peru sit atop highly seismic convergences and, based on their interlocking engineering, have stood for an indeterminate period of time.  And my team at M•CAM, working together with our visionary partner Krishna Gurung, President and Founder of the Kevin Rohan Memorial Eco Foundation, designed buildings using bottles (similar to the work we did in Mongolia to build greenhouses) in Kathmandu which did not fall when the earth shook! 

The earthquake is another wake-up call for us to realize that earthquakes and volcanoes don’t kill anywhere near the number of people that our careless neglect and predilection to violence does.  And while putting up emergency shelter, water and sanitation is an immediate need in this moment, it’s past time that we wake up and realize that focusing on economic, social, and trade justice pre-empts our pathetic impulse to act sympathetic after our indifference is evidenced by earth and war.  Among the many things that this earthquake did for me was to solidify my deeply held conviction that I’m no longer capable of engaging those who debate the existential merits of the ephemeral “meaning” in life if they don’t stand shoulder to shoulder with those who are actually working to live.  And, at the risk of heresy, it’s time for someone to update the New Testament timeless debate about “faith” and “works” which has received more attention than the citizens of Nepal.  In James 2:14-26, the following is written:

¹⁴ What does it profit, my brethren, if someone says he has faith but does not have works? Can faith save him? ¹⁵ If a brother or sister is naked and destitute of daily food, ¹⁶ and one of you says to them, “Depart in peace, be warmed and filled,” but you do not give them the things which are needed for the body, what does it profit? ¹⁷ Thus also faith by itself, if it does not have works, is dead.

¹⁸ But someone will say, “You have faith, and I have works.” Show me your faith without your works, and I will show you my faith by my works. ¹⁹ You believe that there is one God. You do well. Even the demons believe—and tremble! ²⁰ But do you want to know, O foolish man, that faith without works is dead?   ²¹ Was not Abraham our father justified by works when he offered Isaac his son on the altar? ²² Do you see that faith was working together with his works, and by works faith was made perfect?²³ And the Scripture was fulfilled which says, “Abraham believed God, and it was accounted to him for righteousness.” And he was called the friend of God. ²⁴ You see then that a man is justified by works, and not by faith only.

²⁵ Likewise, was not Rahab the harlot also justified by works when she received the messengers and sent them out another way?

²⁶ For as the body without the spirit is dead, so faith without works is dead also.

There’s no question that the wisdom that is captured in the 16^th verse above is the only prophetic voice we should listen to at the moment.  If we see destitution, we have a DUTY to ACT!  And until we see none without, we’ve always got something to DO!

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Not Equal Anymore

I was one year old when the Civil Rights Act of 1968 was signed into law by President Lyndon B. Johnson.  This law was an update of the anti-discrimination law passed in 1964 and was precisely aimed at insuring that racial housing discrimination would end.  It had been about 100 years (April 1866) since the bloody war that had pitted brothers against brothers and neighbors against neighbors animated, among other things, the final enactment of the first Civil Rights Act of 1866 twice vetoed by then President Andrew Johnson.  This law, also finally enshrined in April 1866, recognized that all citizens were to be afford equal protection under the law.  Two rather ineffective Presidents - both named Johnson and both President by virtue of assassination - presided over the country during two of the most pathetic legislative milestones in the United States - the recognition that People should actually be treated as People!  Regrettably, their less than enthusiastic patronage of these Acts reflected not only their own contempt for those not like the majority establishment, but the prevailing status of the citizens of the Republic.

During the summer of 2014, I had the privilege of hosting a racially and gender diverse weekend gathering at my home.  Anyone who has spent a weekend at the house will attest to the breadth of conversation that attends such gatherings.  Over flourless waffle breakfasts and savory dinners infused with fresh produce from the garden, any topic is fair game.  We discussed our respective upbringings and reflected on the way in which opportunity had manifest in our lives.  And while we all had ample evidence of our individual and collective successes and accomplishments I was intrigued by the unspoken sorrow I heard in some of the voices who clearly carried the pain of a society that still did not adequately account for the disadvantages imposed on persons based on skin color, heritage, and other social "differences".  For a twenty-first century conversation, it seemed to me that we were still living in some barely illumined 19th century paradigm.

So it occurred to me that we should examine the root of the social scourge rather than merely reflecting on its fruit.  And in the ensuing months, I spent a lot of time reading legislative debates, breathtaking oratory from visionaries and bigots alike, and laws allegedly aimed at breaking down barriers of access.  Some of these thoughts have surfaced in my previous writing.  What stood out to me was something that didn't fully gel until February 2015.  We established a glass floor with Civil Rights - not a ceiling. 

Let me explain.

I have been working with the University of Miami Executive MBA program for Artists and Athletes which matriculated its first class, largely comprised of current and former National Football League players, in February 2015.  During the opening weekend, I was invited to address the class and I pointed out two important insights.  First, I described the players as alchemists.  This was not some nostalgic illusion.  Think about it.  To play in the NFL, at some point in your life you have to find a way to take a game and turn it into not only a career but into an exceptionally lucrative proposition.  These gentlemen had all transformed their mettle into gold (some of them adorned with the same).  Second, I observed that each of these men met Plato's definition of genius.  Plato saw the capacity to hold two or more hypotheses simultaneously as the mark of genius.  Think about it.  If you're on the field on Sunday afternoon, you must have: full awareness of 21 analog inputs (not counting the zebras with whistles); complete recall of a week's worth of plays and drills; and, the capacity to engage cognitive and motor function in an instant when none of the above conform to expectations.  The best financial minds in the capital markets might focus on 4 or 5 variables and get most of them wrong most of the time.  A football player has to compute 441 analog functions in a single play with a 300 lb opponent getting ready to crush him. 

None of the guys in the room had ever been accused of possessing either alchemical or genius capabilities.  Why?  Because they're athletes and we "know" what that means.  Oh, and many of them come from historically disadvantaged communities so we "know" what that means too, right? 

What if we don't "know" anything underpinning our callous assumptions?  What if we lived in a world where we saw a disproportionate number of genius alchemists on the field rather than athletes cursed to wind up in the media fueled frenzy about post-professional sports bankruptcies?

I can go on and on about how pathetic our condescending attitudes impact the lives of others.  Or, I thought, I could do something different.

So I did.  Some of you know that I started a quantitative fund with my friend and business partner Bob Kendall.  Using work developed by our team at M∙CAM, we identify companies that have genuine innovative advantage in the marketplace and measure the degree to which the equity market prices this advantage.  When we see innovative companies in which this advantage is not appropriately priced, we invest in them and generate a targeted investment return we call Innovation a®.  In modeled and actual performance, we typically outperform the Dow Jones Industrial Index by as much as 108%.  I decided to take this exact same strategy and do something else.  Many companies voluntarily support minority and women-owned businesses as a meaningful part of their supply chain.  Under the National Minority Supplier Development Council (NMSDC), companies can work to become corporate citizens explicitly committed to economic development through enhanced commitments to diversity.  So, we took the list of all the Russell 1000 companies that have made these NMSDC commitments and integrated them into our quantitative fund to see if innovation and diversity commitment make for a good investment thesis.  Over the past 3 years, while the Dow Jones Industrial Average returned about 37% (Q3 2011 - Q3 2014), our strategy returned a modeled 89% - a 240% out-performance*. 

Which begs the question:  why don't we have a Diversity Quantitative Trading investment product on the market?  No ETF.  No Mutual Fund.  Nothing!  Why?  Because we still are striving for access and totally ignoring the possibility that Diversity OUTPERFORMS our bigotry and contempt-fueled models.  With police shootings, marches, and protests, we're being asked to accept a world where the best we can hope for is "equal access".  And in keeping the conversation in that sphere, we're conveniently supposed to ignore the reality that we're actually harming ourselves by not perceiving the extraordinary benefit of driving racism and any other schism from our behavior.  I'm relentlessly committed to bringing an end to the tyranny of prejudice and chauvinism and to finding a mountain top from which we will see the Promised Land.

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*Past Performance is not an indication of Future Results

The backtested performance of the proposed fund allocation is based on a “Dow Substitution” strategy, as disclosed herein.

Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended or undertaken by M•CAM) will be profitable or equal the corresponding indicated performance level(s). Moreover, you should not assume that any of the above content serves as the receipt of, or as a substitute for, personalized investment advice from your financial adviser.

Historical performance results for proposed fund allocation have been provided for general comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the occurrence of which would have the effect of decreasing historical performance results. It should not be assumed that your holdings in the fund will correspond directly to this backtested performance or any comparative indices.

The proposed fund allocation presented here represents backtested results from January 1, 2010 through June 17, 2013. The time periods selected were based on a minimum of 3 years backtesting. The performance of the proposed fund allocation was derived by backtesting our algorithm for selecting best Dow replacements not from actual client or firm accounts. Backtesting of performance is prepared using a computer program that starts with the first day of the given time period and evaluates performance of the recommended securities based on the proposed weighting for each allocation assuming quarterly rebalancing of the allocation.

Backtested performance does not represent actual account performance and should not be interpreted as an indication of such performance. Actual fund performance may also deviate from the index selected for comparative purposes. The index selected was chosen because we are replacing Dow companies and have shown risk that is approximate Beta equals 1 to the Dow. 

Maximum Consequence Fulcrum and Halal

In my February 8, 2015 post Rage and the Machine, I expressed my contempt for the principle of SyncDev's "Minimum Viable Product" or MVP.  This pathetic indictment of the superficiality which defines most of our enterprises was first used, according to their website, in 2001.  I am amused at the obsession that plagues everyone using the term to insure that, while Frank Robinson - reportedly the term's progenitor - came up with the idea and coined the phrase, it is Steve Blank and Eric Ries who popularized it.  Wikipedia can't even avoid plagiarizing the obsession surrounding the etymology of the term!  And, most of all, I love the post-modern hubris attending the notion that doing the absolute least to bamboozle a consumer-addicted population into paying a disproportionate premium for something with precious little improvement is the aspirational ideal of business.  "Think big for the long term but small for the short term," is the mindset for successful business!

Seduction and consumerism fuel the notion that human enterprise should focus on minimizing risk of failure for the fleeting illusion of advantage and instant gratification.  From the helium of Silicon Valley to the "social entrepreneur" educator, we're training ourselves to eschew intrepid courage to tackle our daunting challenges by conforming to consensus incrementalism.  And then we wonder why we get nowhere with geopolitical, social, religious, technical and interpersonal intractable challenges!  Give me a break!  The digital hybridization which defines our social framework has reduced our analog aesthetic into 1s and 0s and we wonder why we can't do complex computations anymore.  Buried within this incremental tedium is a more insidious reality.  Through apparent MVP thinking and acting, we're actually adding complexity by deferring thoughtful, arduous action.

The Wall Street Journal had an article on Saturday morning entitled, "The Fractured Legacy of The Mapmakers".  In this thoughtful and depressing piece on the post-Ottoman Empire recklessness of the French and British which have cost the lives of millions and the treasuries of the "Allies" trillions of dollars which could have been directed towards education, infrastructure, arts, and well-being, Yaroslav Trofimov reports the conversation leading up to the Sykes-Picot Agreement. 

""Tell me what you want," France's Georges Clemenceau said to Britain's David Lloyd George as they strolled through the French embassy in London.

"I want Mosul," the British Prime Minister replied.

"You shall have it.  Anything else?" Clemenceau asked.

In a few seconds, it was done.  The huge Ottoman imperial province of Mosul, home to the Sunni Arabs and Kurds and to plentiful oil, ended up as part of the newly created territory of Iraq, not the newly created country of Syria."

MVP.  I think not.  In the space of a few minutes (short term thinking), an innovation was hatched which has literally killed us.  Borders.  Cartographers throughout history realized that capitals, ports, and sacred cities were the basis of power and so, up until the 18th and 19th century, most maps focused on coastal edges, population centers, and natural transportation facilities or barriers.  But in the Adam Smith world of consumer resource hegemony, the focus on "who" became an obsession about a disembodied "what".  And with the most macabre irony, the simple innovation of lines on maps gave rise to despotism, corruption, conflict, terrorism and faux sectarianism which has elicited the most odious of human behavior. 

Making a map seems to be such an innocent undertaking.  But this simple and vile impulse is the evidence of the pen not only being mightier than the sword - it is the unseen hand that animates the sword.  Now to be clear, I'm not a nostalgic historicist.  We've had ample conflicts across the entire human narrative and I'm not saying that maps drawn in London or Paris created human conflict.  But what I am saying is that this innocuous intervention did create human conflict at industrial scale and this is taking humanity in the wrong direction.  Far from MVP, the cartographer is evidence of a far more powerful principle - the maximum consequence fulcrum or MCF. 

By the way - I coined that term and introduced it at business school lecture for the University of Notre Dame on Friday.  So, Wikipedia, make sure you give me credit when this goes viral by someone who explains it better than me!

What is a Maximum Consequence Fulcrum?  In its worst application, it is the use of remoteness, unverifiability, and anonymity to exert power that is taken, not given or earned.  It is the story of empires, of Krimea, of the colonial Middle East and Asian subcontinent, of First Nations dislocated from the Americas and Australasia.  Pick a place to which few travel, build a narrative about local practices which offend sensibilities, engineer fear of the foreigner and draw a map.  Next thing you know, you can justify expeditionary warfare, slavery and oppression.  Make up a story about Iran pursuing a nuclear weapon and then ask them to disprove the existence of what doesn't exist and you can get sophomoric Senators and Congressmen to grab pitchforks and lit firebrands to hunt and kill the witch.  Throw a little Israeli-sympathizing apocalyptic fervor on it and you can get Christians to pine for the nostalgic days of the Crusades!

But in its best application, an MCF can identify an equally ubiquitous human endeavor - say eating - and think about how proximity, transparency, and deep connection (the antithesis of the abuse) can radically transform interpersonal relations.  Tomorrow, I am giving the keynote address at the IFANCA 17th International Halal Food Conference in Schaumburg Illinois.  In an era of maximum fear mongering by those who use religion to divide people, the transformative opportunities are equal and opposite.  Since the 9th century, the religious mandates surrounding halal have not been about punitive and restrictive rules but rather about verifying that what we consume and how we consume should include a recognition of our interdependence on the bounty of the earth.  Knowing that the food supply should be without contamination is as important to the Sunni Arab as it is to the spandex-clad yoga aficionado in Whole Foods.   And there's every reason in the world to engage in a conversation that sees the wisdom that can be sourced from every tradition, every faith, every path and integrating that into the tapestry that is a life worth living.  Good for humanity is not pathetic and incremental.  It is bold, inclusive, and stretches convention.  So lets chew on this idea for a bit and see if it digests a bit better than the tripe we've been fed for the last couple hundred years.

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