From the Land of Pharaohs

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

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?

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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.

Infinitely, Suitably Scaled

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You can all imagine how relieved I was when I saw that the Federal Reserve got its AIG loan repaid this week. Clearly for all those institutional financiers and oligarch wealthy victims of speculative investments – like credit default swaps – this represents the long awaited closure on part one of the unspeakable angst they must have felt knowing that their recklessness was less guaranteed as long at the Fed was short on cash. I’m sure I speak for us all when I breathe a collective sigh of relief that the “system” has been recharged to once again be ready to step into the all important role of making sure that reckless speculation undermining the fabric of our economy can be reanimated. And, I’m thrilled to see that the Fed repayment was applauded by the market with its heart-felt vote of confidence which was expressed as the destruction of 12% of the value of the taxpayer’s stock! Looks like the people who should win came out on top and the public has the opportunity to be grateful that very smart people are looking out for their best interests!

Oh, and I forgot to mention one of those teensy-weensy details that will make you all puzzle a bit (until you just get tired of puzzling) – Maiden Lane II and III loans from the Fed – the “investment” vehicles that were created to hold toxic assets – have NOT been repaid but, never fear, they are to be paid from the “assets” contained therein. So, just to be clear, “The Federal Reserve Bank of New York today announced the termination of its assistance to American International Group, Inc. (AIG) and the full repayment of its loans to AIG as a result of the closing of the recapitalization that was announced on September 30, 2010. As of today, AIG will no longer have any outstanding obligations to the New York Fed,” means that the legal entity – AIG – isn’t on the hook but the behavior leading to the collapse of the financial system done by AIG – not to be mistaken as AIG – is still as virulent as ever. But, it’s nicely named.

Why would the Federal Reserve, the U.S. Treasury, and AIG executives willfully mislead the public with Friday’s announcement? Carefully couched in legally defensible technicalities – it is, after all, AIG that they exculpated – the announcement is a critical requirement of a system that MUST grow at all costs. For a government that lied about everything from the wars on communism to drugs to terrorism, this week’s announcement must be child’s play. Faced with the political necessity to further extend our debt limit beyond the staggering $14 trillion, we the People must be misled to endorse the illusion that someone knows what they’re doing.

But at the core of this system resides a more fundamental challenge. Passive debt – decried by sages and saints alike as usury – requires detachment. And this detachment must be sociopathic – and, yes, I mean behavior that lacks a sense of moral responsibility or social conscience. To hold the assumption that any human endeavor – be it farming, mining, manufacturing or trading – will always grow at a rate that sustains uncorrelated interest imposed by debt can only be animated with antisocial impulses. If one were to actually understand both the commercial endeavor and its actors, one would encounter an attachment to humanity which must be avoided. If one were to actually enter into a deep understanding of the commercial or property pursuit under consideration, one may elect not to enable it. If one were to understand the dynamics of an endeavor and see that the underlying cash-flows or market dynamics are episodic, one would need to require returns that mirrored cash-flow reality rather than perpetually compounding returns. In the name of capital efficiency, we’ve agreed to participate in a system which cannot think, innovate, or act in any manner other than its own preservation. And, in our current model, we insure complicity by making sure that our very currency is the foundation for all the madness built thereon.

So we’re at the point in the system where the only beneficiary (and as a result, the only interest that is relevant in assessing the health or injury of the economy) can be the Fed and the Treasury and their benefactors. The idea that there is any semblance of a public interest is unthinkable in a world where the People finance the madness of the Establishment. In short, it is as unrealistic to animate energy seeking logic or justice from schemes of sociopaths as it is to expect different behavior from the actors themselves. And as long as we the People are complicit in our acquiescence to the madness, we have no standing to seek redress or accountability.

Or, we could take a different path. I fondly recall a lecture hosted by my father where a really smart astrophysicist was lecturing about the expansion of the universe and was trying to wrap the audiences’ mind around the notion of the finitude of the universe. “Space,” he said, “while thought to be infinite and infinitely expanding, has limits.” After an hour of physics and cosmology that would curl the toes of Mayan and Incan astronomers, he ended with a question and answer session. A short way into the Q&A, my wife, Colleen, mused, “Well, space may be finite but, since it’s expanding INTO something, ROOM must be infinite because it has to have a place to go.” Her logic was unassailable. There are, in all likelihood, things that are without boundary. However, when it involves the more terrestrial affairs of value exchange, it’s high time we start grounding ourselves in the discipline of a commitment to Suitably Scaled Finitude. By this I mean that we must become active members of value exchanges, wealth and its stewardship. We need to know the scale, velocity and contour of value in its recognition and exchange and engage in finance within that knowledge. The “knowledge economy” is oxymoronic until we first commit to the exchange of Knowledge and then deploy the fullness of the same in economic exchange.

In this process, we need to see growth with more dimensionality than is currently contemplated. Growth may be linear and compounding. It may also be a phase within a necessary cycle of birth, growth, maturity, and re-birth. Great benefit may accrue from an understanding that natural cycles of abundant production include composting, decay and replenishment. Using the wisdom emerging from our colleagues studying biomimicry, we may find that the temporary, cyclic use and repurposing of materials or processes is actually more value accretive than our current linear waste production compulsions. In short, our financial systems based on passive detachment must be replaced with wisdom and kinetics that are suitable at scale. If we are to learn from the 50 year experiment in sociopathic, debt-based perpetual motion growth-at-all-costs that leads our leaders to lie, we must resolve to be more fully aware. We must begin exercising the discipline of living at a suitable scale in our own lives so that we can learn accountability in the broader human experience. Engage!

A Letter to Mr. Davis

Saturday, January 8, 2011 was a cold day in Charlottesville. As my wife and I went out to run a few errands, we turned off Fifth Street onto the entrance to Interstate 64 when I saw Mr. Davis standing next to two wheeled duffle bags on the shoulder of the on-ramp. We stopped to ask him where he was headed and he replied that he needed to get across the mountain to Interstate 81 where he could meet up with truckers headed towards Nashville, Tennessee where he would look for work in warehouses. I gave him enough bus fare to head south and went into town. Two hours later, returning home, Mr. Davis was still standing beside the road and, when I stopped to check in on him, he was visibly, extremely cold. A Greyhound bus had just passed by and he hadn’t been able to get onboard. So, duffels loaded into the trunk of my car, Mr. Davis came home long enough to warm up, get some potato soup and grilled cheese sandwiches. As my brother and I prepared to drive him to Interstate 81, he gratefully took a winter coat, some Wolverine work-boots (my favorites), and a pair of gloves in case his ride didn’t come along. As the sun was setting, we set him on his way south. I don’t know if he made it but this letter holds my thoughts…

Dear Mr. Davis,

Thank you for spending part of your day with us yesterday. For the few hours you stayed as a guest in our home, you gave me an opportunity to reflect on why I’ve been working so hard for so long to find a new way for people to engage in an economy that leaves so many like you so far behind.

Insights about the migration of warehouse and trucking work are hard to come by if you don’t have your perspective as a day laborer who has no regular job, no health benefits, and no place to call home. I haven’t considered how hard it would be to find work if you didn’t have a drivers license, a credit card or an address. I didn’t take the time to think about the fact that industrial parks and warehouses being on the outskirts of town mean that people like you, who want to work, can’t do so because there’s no transportation to get to and from work. With the gentrification of warehouses in downtown areas, I can’t say I gave much thought to the degree to which the industrial park has actually compounded poverty by making jobs less accessible.

I haven’t had a guest sit at my table for a long time wearing his sunglasses throughout the meal. But I couldn’t help but notice the fact that your left eye looked like it had been injured. I suspect that the constant exposure to the cold at this time of year makes that all the more difficult to manage. Regardless of whether Congress mandates universal health care or repeals it, I suspect that you’re one of our fellow Americans who simply won’t have much access when you need it. I wonder how many thousand people drove by you on their way down the highway – people who think that big government is a burden – without stopping to see if you needed anything. If our paths cross again, I hope that I can provide enough sanctuary that you can actually feel comfortable enough to remove the glasses so that you and I can actually look into each others’ eyes.

This weekend, Secretary of Labor Hilda L. Solis and President Obama told the country that the economy was looking better because the private sector added over 103,000 jobs in December. They glossed over the part about the fact that, during the same reporting period, the Bureau of Labor Statistics reported that November saw 1,586 mass layoff actions impacting 152,816 workers. And, they seemed to ignore the fact that hourly labor compensation fell while hours worked increased. They also seem to have ignored the fact that their enthusiasm over unemployment rates is still based on the inhumane, sociopathic belief that only those qualifying for unemployment benefits should be counted. With over 16% of the population without work – the real number of people without jobs – I wonder if anyone in Washington (or Charlottesville) has listened to you. Given how insightful your conversation was at our table, it seems that you would have a ton of valuable inputs in describing what the national economic and employment picture really looks like. It is unthinkable that “We the People” officially don’t think you exist and that we have a system in which you don’t – and can’t – count.

While I hope your travels lead you to the destination you desire, I hope that when you get your feet on the ground, you reflect, for a moment, on your sojourn here in Charlottesville. I hope you pursue your passions to write music and produce albums. I hope that you find a nice piece of real estate to start putting some roots down. Most of all, Mr. Davis, I hope that you have the opportunity, one day, to see a man by the side of the road and invite him to lunch. And when that happens, I trust that he has size 10 and a half feet so that you can pass along the best steel toed boots I ever had.

Godspeed, Mr. Davis… and, keep the collar up on that jacket and know that you’re in my thoughts.

_

MDCLXXXVII – MMXI – A Life Unconsidered

Would Moriarty be animated without Sherlock Holmes? Do “good” and “evil” merely serve the Tao in a perpetually fatalistic Newtonian harmonic in which “equal” and “opposite” are Laws of Nature? When I work to illuminate pathologic economic and social injustice in Mongolia, Papua New Guinea, and Sierra Leone perpetrated for the benefit of investment bankers and pension funds in the U.S. and Europe, do I merely spread the carnage to the next venue where political dysfunction will be co-opted yet again?

The turn of the year has always provided the context for an inventory the past year’s endeavors and an intention-setting for the year ahead. For the majority of 2010, I was profoundly perplexed by the schizophrenic behaviors manifesting in common and extraordinary situations. Where were the No Big Government Tea Party lunatics applauding New York Mayor Michael Bloomberg’s pronouncement that “snow happens” when the streets of New York remained impassable? After all, we don’t need anachronistic snowplows 360 days of the year! Where were the picket lines from Labor-backed liberals when the U.S. government (under a Democratic President) became “The Man” by owning the automotive industry (with the notable exception of Ford)? How do you even have a labor movement when you are “The Man”? Hypocrisy fully metastasized throughout the world as the cancer of ignorance was fed by modified corn starch-laden talking heads on what used to be called the media – now appropriately derided into “entertainment”.

In my reflection (inspired by BBC’s brilliant re-make of Sherlock – a modern rendition of Sir Arthur Conan Doyle’s master works co-created by Steven Moffat and Mark Gatiss) I found my thoughts coalescing around the work of one of modernity’s greatest influencers who few know and even fewer understand - Sir Karl Raimund Popper. This London School of Economics professor is credited with popularizing empirical falsification in 1934 with the publication of his book, Logik der Forschung in which he both defined scientific method of repudiation of the null hypothesis as well as his more philosophical critique of historical materialism. Few scientists today fully apprehend the ontological dependency their method has on the post-Marxist thinking of Popper who was knighted by Queen Elizabeth II in 1965. Popper’s later work on Absolute Tolerance earns him a role in my pantheon of celebrated philosophers (along with Cyrus the Great) but it’s his scientific method that drew my thoughts at the turning of the year.

In the 21st century, we’ve come to accept a simplistic dualistic world view. Things are “good” or “bad”. Countries are “willingly coalitioned” or are “harboring terrorists”. We want “no government spending” but insist on government bailouts, unemployment insurance and gargantuan defense and security employment. The tragedy of our dualism is the fact that we don’t consider its consequences at all. Popper, in his rejection of empiricism, was trying to distinguish what was or was not scientific. To be “scientific”, a thing had to be falsifiable. This means that there must be a method by which sufficient observation can be reproducibly made such that the disproving of a thing would be possible. Truth, was not established by empiricism or science but rather was approximated by conditions which appeared to correspond with an accumulated, experiential knowledge.

Which take me back to 1687 – the year that started this blog. I would argue that the humanity that stands on the precipice of 2011 is far more Newtonian – predisposed to Laws of Nature and dualism – than it is Popperian. The irony of this observation is that we’ve actually regressed in our capacity to think, engage, and transform to a period of time when we were still debating what calendar best measured the occurrence of Easter! Poppers 1936 publication of The Poverty of Historicism was dedicated “In memory of the countless men and women of all creeds or nations or races who fell victim to the fascist and communist belief in Inexorable Laws of Historical Destiny.” If he were writing today – rather than in the throes of the conflict riddled first third of the 20th century – he would add the modern victims of Reaganomic-inspired nationalists beside the fascists and communists. Why? Because the application of Historicism – popularized to refuel anti-Japanese and anti-Russian American nationalism in the early 1980s put us on the tracks that dead-ended in 2008 in the collapse of our Wal-Mart inspired consumerism at all costs.

Laws are the bureaucratic projections of consensual languor (and remember that one of the deadly sins is sloth, along with its cousins, avarice and greed). Newton’s Laws and Popper’s scientific method were ontological evolutionary steps in the march of the collective consciousness towards greater understanding of the world in which we live – not immutable Truth. Werner Heisenberg’s 1927 uncertainty principle – one of the boldest confrontations to reductionism – comes the closest to the recognition that it is matter and energy in dynamism, not in opposition, that best describes the essence of all. Should we wish to pursue a more enlivened engagement with our planet, a more rewarding relationship with our cohabitants on this Earth, and a more fruitful experience of individual actualization and awakening, we are well served to liberate ourselves from our unconsidered cognitive shackles.

Act in moral transparent resonance. You may not be “right” or “wrong” but you will be approachable and fit for engagement.

Speak in total candor. You may miscommunicate and even offend but your practice will refine both yourself and those with whom you interact.

Favor multi-sensory observation over acoustic listening (bring your holistic sensory capacity to every interaction). Most misunderstanding arises from a misapplied literalism without a sentient apprehension of intent.

Free from the tyranny of judgment and dualism, celebrate the joy of considered living in Absolute Tolerance.

_

Calling All Wisemen

Gold, frankincense and myrrh… and a vulture in a pear tree.

Looking out the window at the 5 inches of fluffy snow hanging on lifeless tree limbs, I took the time to compare Treasury Secretary Tim Geithner’s testimony to Congress with the December 9, 2010 Federal Reserve Flow of Funds data which I’ve encouraged you all to read regularly. I guess I was looking forward to some glimmer of holiday cheer which would suggest that, at some point, now that the Treasury and the Fed are co-conspirators in their Ponzi scheme to undermine the US economy for the largest expropriation of sovereign wealth in modern history, they’d at least agree on each other’s chimera. Alas, I was disappointed. You see, if you’re printing money supported by uncollateralized debt purchases, it’s nice to know that you’re at least lying consistently. Wishful thinking!

In his report card of the TARP, TALF, HAMP, HOPE, 11 pipers piping, 10 lords a leaping, a bunch of damn birds swimming and pointlessly sitting in trees, and a red-nosed reindeer, the Grinchner decided to perjure himself before Congress. In keeping with the on-going desperation to manufacture the illusion of economic recovery to anesthetize the American consumer against confrontation with the reality that we’re now in a Depression, he painted a picture that has more hallucination than a fat, red-suited man dropping down nonexistent chimneys could ever muster aided by all the egg-nog in the world. And worst of all, the indicting data is published by the Federal Reserve and is in print for all to see.

Since the government intervention in 2008, the rate of access to credit available through mortgages worsened by 100% in 2010 (when compared to 2009); consumer credit continued to shrink an additional yearly rate of -2.9%; and, that great hallmark of “job creation fantasy” – corporate credit – barely nudged 5% growth. All the while, the Federal Government continued to borrow at an expanding rate of over 20% year-on-year growth. The cold facts are that the Federal Government’s programs have been less effective at rebuilding the economy than had they simply borrowed from the Gulf and Asian countries, handed out per capita distribution of cash, and switched the lights off in D.C. In fact, we’ve actually failed to return one quarter of the economic return that would be required simply to support our debt.

What I find most puzzling about all of this is that we sit idly by as the corporate borrowing – the only positive inflection in the on-going Depression period credit collapse – is being used, among other things, to pay DIVIDENDS to Microsoft shareholders. That’s right, it’s cheaper to pay Goldman bonuses and Microsoft dividends with subsidized DEBT than actually take cash out of international growth market investment funds. By the way, this is what I mean when I talk about the expropriation of sovereign wealth. Using nonsensical debt and currency policy, the government (courtesy of Secretary Grinchner and his elf Ben) has made it possible for subsidized debt to incentivize U.S. domiciled corporations to deploy their capital in the international markets while riding cheap debt to pay domestic shareholders and employees their dividends and bonuses. Bottom line… the system is working provided that you’re riding the dividend / bonus wave of subsidized incentives.

When we look back on 2010, one thing is certain. While pensions were hollowed out, entitlement programs were cannibalized for short-term liquidity, and EVERY national government guaranty program (aka “insurance” programs like PBGC and FDIC) were mismanaged into official insolvency, the alphabet soup of capital intervention has provided a few banking and corporate interests the opportunity to leverage the country’s credit future for their own immediate benefit. Conveniently, they’ve set up pathways for capital flow and hording far beyond the reach of an incompetent IRS and the theft of country is nearly complete.

And not surprisingly, their bets with your taxpayer-subsidized special drawing rights (because the dollar is even too risky for the World Bank now) are in markets like China, Brazil, Southeast and Central Asia. And just for fun, China has decided to plop a lump of coal in the Christmas stocking by decoupling the renminbi from the dollar 25 basis points more. Occidental economists should puzzle – going into the New Year – over the century-in-coming William Jennings Bryan populist revenge… yuan in Chinese means “lump of silver.” It looks like the “cross of gold” speech may, at long last, be vindicated!

All we really needed for Christmas this year was a little bit of Truth and Accountability. It looks like we’ll have to wait for next year to see if that’s possible. So, if you’re out there Wisemen, be warned… take a different way home. You’ll probably want to find a bunch of tax havens along the way because you’ll need to store your gold, frankincense and myrrh well out of reach of Americans who, when they wake up from their long winter’s nap and see that their country has been stolen, will be a bit more disgruntled than King Herod. Silent night… bah humbug!