Don't Look a $400 Billion Gift Horse in the Mouth

…unless you live in Troy

Well into its adolescence or awkward 20-somethings, the Knowledge Economy just got its birth certificate of sorts.  To a rather fumbling thud, the Bureau of Economic Analysis (BEA) decided to include research and development into the calculation of GDP in their March 2013 Comprehensive Revision of the National Income and Product Accounts reported this past week.  This nearly 3% upward revision comes at a time when the economic headwinds of sequestration - notably the shrinkage of the defense sector - is placing considerable and growing drag on the economy.  If timing is everything, than the BEA's announcement is nothing.

Now to be clear, the headline value of this week's announcement is two decades late but still important.  The fact that we've failed to account for the engine of economic expansion - the genuine innovation of products and services that have marked the past expansion cycles - is moronic.  The fact that economists officially have waited until 2013 to decide that their 1805 GAAP Accounting logic derived from France has failed to describe our economic condition is an indictment on academic and professional economists and their comprehensive anticipatory ineptitude.  While they can precisely describe partial past conditions that conform to their limited assumptions with better than random accuracy, they have failed entirely in their ability to anticipate or respond to forward-looking considerations and risks.

There's no small bit of trouble with the BEA's late arrival into modernity.  Research and development is expensed under GAAP accounting into oblivion.  In taxation, the nuance of the In-Process Research and Experimentation Tax Credit (the IRS' most abused tax shelter that it is "incapable" of policing) is the subject of billions of dollars of tax fraud each year.  Politically desirable as the pork that every good Congressional representative can bring home to the district, this $76 billion dollar loop-hole doesn't support economic expansion.  Rather it shrinks legitimate tax collection and defrauds the taxpayer for the benefit of abusing corporations and their interest holders.  In banking, Fed Chairman Ben Bernanke is "not aware" of the use of intangibles (the by-product of research and development) as collateral despite the Federal Reserve's own 2007 report in which they estimated that there are over $3 trillion in borrower assets that are not counted in bank collateral assessments.  In short, we can have our little welcome to the Brave New World economics party but, beware.

I hate to break some news to you but I'm the Cassandra to the BEA's Trojan Horse.  And if you don't know this metaphor, go back and read the account of the fall of Troy.  Cursed by Apollo with the "gift" of prophecy, this daughter of King Priam knew that the horse left by the Greeks was the harbinger of the downfall of Troy but her warnings were unheeded.  In the U.S., we'd scarcely recognize research and development if it were a snake biting our face.  Since the 1970's we've used R&D as a mechanism to flow federal and state support to universities due to our social apathy towards funding education; we've inefficiently underwritten R&D to accommodate state-sponsored enterprise through our statutory agencies; and, we've built a highly inefficient corporate tax regime that allows venture capital to pour cash into enterprises and harvest tax losses in over 80% of the failed endeavors.  Real R&D - the stuff that actually makes the world a better place; that brings new products and services to the world - is endangered on the best of days and bordering on extinction.  Basic research - the kind that made solid rocket fuel, that suspended magnetic signals in tape, that figured out dyes on fabric, that understood the chemistry of the elements that describe our world - is barely present.  While we nuance the edges of consumer electronics to jam more video processing into smaller devices so that we can have a virtual world, the real world is more illusive today than it was 100 years ago.  

                                                                                                     

The social schemes of Natural Philosophy enabled a world of inquiry and debate.  Great societies learned how to disagree with reasoned arguments using more than 140 characters to communicate a thought.  Hash tags and contractions did not navigate the oceans or plumb the depths of space.  In our make-believe world, we pretend that Boston's carnage was a new phenomenon.  How quickly we forget Northern Ireland, Spain, and Germany!  Within my lifetime, terror hasn't emerged on the scene.  In point of fact, it is the innovation of the marketing of terror which has been refined to an art form!  London wasn't safer because of police action.  London became safer because the citizens of London were unwilling to be cowed by terror and reopened pubs and restaurants in the face of carnage.  New York didn't become safer because of end of violence - it became safer by a public that would not relent to the dereliction of the city in the 70s and 80s.  See, even when it comes to social innovation, we're innovating less today than just 30 years ago.  And when it comes to that $400 billion - it gets really messy.

Our R&D and "innovation" in the majority are proxies for legal costs and capital markets inefficiencies.  When Apple and Google buy "innovation" from Nortel or Motorola, they're not making new products.  They're making sure that extortionists cannot hold them hostage in patent lawsuits.  When a government contractor selling satellites misrepresents their ownership of technology and falsifies an indemnity for this lie, it is the government and the taxpayer that loses.  Our GDP, buoyed by innovation risk management does not grow our economy - it memorializes our demise.

 

Equo ne credite, Teucri. Quidquid id est, timeo Danaos et dona ferentes. 

Virgil's Aeneid, Book II.

We the People should count innovation and celebrate the inquiry into the unknown, undeciphered, and forgotten.  We should not mislabel our litigious and capital inefficiencies as innovation.

Pulling the Plug

The International Monetary Fund (IMF) 2013 Spring Meeting wrapped up this weekend with some staggering insights into just how devoid of creativity the world's economic and defacto thought leadership has remained.  

Financial Committee Chair, Singapore's Finance Minister Tharman Shanmugaratnam, summarized the 'growth and jobs' agenda with the following statement:  "There was also a strong and common recognition that achieving growth and jobs cannot rest on one policy alone. There is no single bullet that will get us to normal growth and some normality with regard to jobs."  IMF Managing Director Christine Lagarde clarified the Chair's statement with the hard-hitting: "Every policymaker is keen to develop jobs and to respond to the demands of the young population in particular;" adding that, "Anything that works to create jobs is on the table."

In the coming months, the IMF's focus will look to "Advanced Economies" to provide "accommodative monetary policy" to strengthen the financial sector - particularly bank balance sheets.  "Emerging Markets and Developing Countries" will need to be "recalibrated and build buffers and guard against financial vulnerability."  "Low Income Countries" will need to manage their "robust growth".  Hold on one second!  The world's elite financial minds just wanted to make sure that the "Low Income Countries" manage "robust growth." 

Let's take a moment and reflect on a few of the assumptions underpinning the august IMF.  From 1944 until the U.S. gold default that collapsed the fixed exchange rate manipulation authorized in the Bretton Woods Agreements (carefully branded to avoid any designation of the dollar as unstable or the U.S. as a credit risk), the 1970's saw IMF intervention on two primary fronts.  On the first, the maintenance of the illusion of the dollar's critical role in denominating international trade - a concession of a defeated Continental Europe and Imperial Japan.  Second, the preservation of the one exchange that the dollar ruled:  the trade of oil.  Some of us can recall that neither of these worked too well:  massive international 'developing debt' collapses attended by despotic puppet government abuses rife with human rights carnage set up and sponsored by the "Advanced" lot.  Who can forget the heady days of oil crises checkering the 1970s? 

So here's a question.  Precisely what period of time do any of the Finance Ministers in 188 member countries point to as the standard for "recovery", "resilience" or economic "health"?  If the IMF was the General Manager of a Football Club, they'd be hauled off the pitch and fired.  If the owners (aka the "Advanced Countries") of the IMF were owners of a Football Club, the franchise would be sold.  Ironically, the folks who love football and would love to buy the franchise are the very economies that are those pesky "robust growth" ones! 

As the Chairman of a company that is in a growth transition, I've been fortunate to meet with countless professionals across the capital markets.  With few exceptions, I am perplexed to see the cognitive sclerosis evidenced by individuals who were credentialed during this past economic cycle.  The irrational self-entitlement afforded to modest performance - the error of thinking that presiding over market inertia is equivalent to savvy leadership and strategic management - is epidemic.  I've seen well meaning people who think that their individual contribution to a venture involving hundreds is worth 10-50% of the resulting productive enterprise!  Seriously?  The malignant irrationality attending something as modest as the business I steward is merely the microcosm of the carelessness evidenced in the IMF's Spring fling.

Being in the room when a deal was negotiated does not make you competent to find, design and execute the deal on your own.  Being in graduate school in business or economics during the Clinton Administration does not mean that you understand anything about an economy or how it works.  God forbid, being an economist within the marketing arm of a country desperately trying to preserve an illusion of hegemony may get you VIP access to a few clubs on the Continent but it in no way qualifies you to understand youth, productive engagement, or system level size optimization.  If it did, you wouldn't hear the MIT, Chicago, and Harvard monotony of "jobs" and "growth" as the mantra for the world.

Many of the countries that are experiencing economic engagement and expansion at present have made considerable strides in expanding education; limiting near-slave labor conditions which supported G-20 profitability conveniently out of the eye-sight of an ignorant consuming public; and, coming up with post-colonial models for domestic natural resource stewardship.  Ironically these things don't stabilize bank balance sheets in the near term but they sure reduce long term political risk which… well… would stabilize balance sheets! 

On October 18, 2008, I posted by first Inverted Alchemy entry:  "Bailout Solutions Use the Wrong Economic Model".  On January 30, 2009 "The Defibrillator is on the WRONG patient" was another observation that the economists charged with 'fixing' the symptoms that surfaced in 2008 were evidencing their incompetence by applying the wrong intervention on the wrong anatomy.  This week's IMF mania not only reinforces these half decade old observations but suggests a more critical intervention.

The "Advanced Economies" (formerly known as militant interventionalists, colonialists, imperialists, and otherwise entitled) have been brain dead for a long time.  Nothing wrong with the rest of the organism called the global community - just a brain that barely responds to reflexes and surely evidences no higher function or creativity.  Like the entitled executives who ran the businesses that were the machine sustaining the illusion of the past 25 years who think they are equity holders of a future that they did nothing to steward into being, the IMF can be an organ donor.  Take the pieces that work and use them with gratitude to build an institution that addresses: wealth distribution; productive engagement; and the harnessing of the ingenuity of youth to rehabilitate that which has atrophied and synthesize what needs to be new.  Take out the tube!  Unplug the ventilator!  Let nature take its course.  Let's run into tomorrow without entitlement but with commitment to be a productive svelte athlete.

By Any Other Name

'Tis but thy name that is my enemy;
Thou art thyself, though not a Montague.
What's Montague? it is nor hand, nor foot,
Nor arm, nor face, nor any other part
Belonging to a man. O, be some other name!
What's in a name? that which we call a rose
By any other name would smell as sweet;
So Romeo would, were he not Romeo call'd,
Retain that dear perfection which he owes
Without that title. Romeo, doff thy name,
And for that name which is no part of thee
Take all myself.

Act II, Scene II - Romeo and Juliet, Shakespeare

We are crossing that fateful anniversary of Edward Smith's command in the icy waters of the North Atlantic.  One hundred and one years ago at this moment, all of the necessary objects in motion were in motion to conspire to bring about maritime's most celebrated disaster.  Smith, known both as a "safe" and "the Millionaires'" captain was, by the turn of the last century one of the most renown captains sailing the upper class from Liverpool to destinations far flung across the Atlantic.  Having credentialed himself as the 'safe' choice for the aristocratic class of intrepid seafarers who wanted crystal and chandeliers rather than timber and grog, he sailed right past his little 1911 collision with the HMS Hawke in which he sheered the bow off of a warship.  While he damaged the RMS Olympic in the collision and nearly sunk the White Star Line financially, his reputation for safety among the monied elite put him on the collision course with history 101 year nights ago. 

'Safe'?

Gold is the 'safe' investment in economic turbulence.  Treasuries are the 'safe' haven in the current cycle.  Why is it that after millenia of experience, the havens where the wealthy coalesce for 'safety' happen to be the same places where contagion and destruction are most cataclysmic?  With quantitative easing manipulating the price and supply of 'safe' assets and creating an El Niño superstorm-in-waiting, Bloomberg went as far as to suggest that we're seeing a "safety bubble" forming.  Once again blurring the ontology of "safety" and "risk", the market continues to see massive asset relocation into assets that are shrouded in near perfect market ignorance, laden with sovereign manipulation experience, and promoted as 'safe' and 'low risk'.  

What would happen if we called 'safety' what it actually is?  The 'safety' that the market seeks is a preservation of money so that an isolated individual can horde resources in the present to manage expectations about a future in which money will have equivalent utility.  Is it the individuated, miserly, hording impulse that seeks insure that self-interest will be financed at some point in time when distress happens?  'Safe' investments celebrate past performance rather than investing capital in productive engagement.  They represent capital holders disengaging from a expansive future; from geographies of heterogeneity; from financial products that invite broader participation and activism.  When will we realize that safety may actually attend those who build networks of shared trust and success in which mutual aligned interests are celebrated in success and resilient in times of want?  

What would happen if we actually took a step back and measured risk?  I have spent the past decade working with private wealth managers, families, and institutional investors.  To date, I've yet to meet a single one who can actually explain what they mean by risk with a definition that does not include: a) consensus beliefs unsubstantiated by data; and, b) complete lack of understanding regarding the conditions in which they could preemptively discern that the 'risk' would change.  In other words, 'risk' in the market is a barrier to inquiry - ignorance arbitrage as I've called it - rather than a quantifiable unit of expected loss.

If we called safe, low risk investments by their other name - reclusive miserly ignorance arbitrage - we'd celebrate it a lot less.  We'd also spend more time informing ourselves about the investments we make and the degree to which they build networks of resilience around our present engagement and future sustainability.  

Greedy for the Sun

April 1 was no joking matter for me this year.  At 12:01 AM I had the opportunity to put a real price tag on my value for stewardship - it's greater than $50 million dollars.  In the monotony of unconsidered capitalism, I was asked to put in jeopardy the interests of investors in one of my enterprises for great personal advantage and benefit.  It would have been 'good' for my interests as I would have been in more direct line to greater monetary benefit, more influence, and less headaches from the nuisance of governance that attends a world including many inconsiderate, passive shareholders.  While some of you were reading my fresh blog post in the Pacific, I was pressing 'send' on an e-mail that said "No" to an offer of a lifetime.

"And so in war; if the campaign is in the summer the general must show himself greedy for his share of the sun and the heat, and in winter for the cold and the frost, and in all labours for toil and fatigue… the princely leader and the private soldier may be alike in body, but their sufferings are not the same: the pains of the leader are always lightened by the glory that is his and by the very consciousness that all his acts are done in the public eye."

When I said "No" to a massive capital partnership, I was not diminishing the value of provisions for our enterprise.  In fact, I neither rejected the money nor the party offering to fund; rather, I was rejecting the form in which it was offered.  To achieve what we seek to manifest, the utility of capital is a critical component of our endeavor.  Without it, the market perceives risk where little actually exists.  But the idea of dishonoring those who have provisioned our enterprise to this point for the excessive benefit of the latest to arrive on the scene is beyond the pale.  And, quite frankly, illogical.

Imagine a world in which you are to be trusted with the resources of others.  You will be held to public and private scrutiny - success or failure.  You will be asked to apply yourself each day to the productive deployment of resources for greater returns.  The only catch is to start out, you must disavow pledges - actual and implied - that you've made to those who, with similar expectations, merely had the curse of preceding the present beneficiaries.  Gregory Bateson sought to disentangle this paradox in his effort to explain the roots of schizophrenic pathologies in what he referred to as the "double-bind".  

"I want you to be loyal," pleads the new investor, "so I want you to abandon the returns expected by all those who came before."

"But if I'm prepared to be disloyal to those who came before, how can you expect my loyalty to persist for you?"

"What I will do is place golden handcuffs on you so that you are penalized for any act of future disloyalty," the new investor stipulates.

"Than you don't seek my loyalty - you seek my indenture for which one day I will loathe my condition and you."

What on earth could be salutary in this social dynamic?  I was advised that the answer is the non-answer: "That's just how the system works."

Well, on April 1, 2013, that system stopped working, at least for one instance.  I said, "No." 

"Now some of his scholars showed such excellent aptitudes for deception and overreaching, and perhaps no lack of taste for common money-making, that they did not even spare their friends, but used their arts on them.  And so an unwritten law was framed by which we still abide, bidding us teach our children as we teach our servants, simply and solely not to lie, and not to cheat, and not to covet, and if they did otherwise to punish them, hoping to make them humane and law-abiding citizens. But when they came to manhood…, the risk was over, and it would be time to teach them what is lawful against our enemies."

Cultivate values of accountability and stewardship, loyalty and integrity through life but to succeed, be prepared to apply them selectively!  Is it any wonder that we see our system in the throes of collapse with integrity failings at both great and small?  Is it any wonder that remarkable abuses of law and public trust go unprosecuted when those who take oaths to uphold and defend are blissfully suckling at the tit of the treacherous?  

"Many have won the very wealth they prayed for and through it have found destruction."

There are many who seek some karmic or eschatological resolution for this consensus delusion of selective accountable stewardship.  For them, I am afraid that you'll find ample evidence of perpetrators of ill intent who were enriched by their treachery and who die fully sated in the life that they led.  Equally, paupers' graves are filled with principled folk who took the road of morality and died ignominiously.  The ends-and-means justification question is a naïve catechism.  It neither informs critical moral development nor does it resolve the shrouded reality.  I cannot tell you that the decision I made on April Fools Day was astute or absurd. 

Here's what I can tell you.  For the past six days, my life has been surrounded with dozens of remarkable people - some in disbelief - who have seen a decision taken on principle and have rallied to the notion that there is path that does not require acquiescence.  Exposed at the vanguard, I have been surrounded by allies and together we press on.  Bring on the sun, the heat, the cold, the frost because our toil has been lightened!

(All quotes in italics are from Xenophon's Cyropaedia)

Off By 6,371 Kilometers and Losing Our Way

What does 6,371 kilometers have do with the economy, social systems, and how we rationalize our understanding of the world?

Work with me on this because it’s actually an important conversation that was born with the sunrise on Friday and through trigeminal neuralgia (TN) carried into my office Thursday afternoon by a noble soul successfully treated with a gamma knife procedure that interrupted a case of the "suicide disease".  The sunrise, with it's apparent relentless northern progression across the mountain upon which Monticello sits opened a conversation with Colleen about horizons and perspectives.  Experiencing a brilliant person who was reconstructing cognitive function after being afflicted with TN for years and realizing that triangulated focus of gamma radiation pivoted his journey from suffering to healing reminded me of the imprecision of perspective.  In a world where we fail to contemplate the dimensional simplicity to which we cling in our metrics, social schemes, and religious myth narratives thereby neglecting the more rich, complex adaptive reality that is, the consensus perspectives we celebrate lead to our collective impoverishment.  As surface dwellers and myth tellers, we begin at a layer of concentricity which we mistake for ‘center’ and this makes all the difference.

Here’s the literal answer to my opening question.  When Persian and Arabic astronomers contrived a mathematical model of the universe, they began with, not surprisingly, where they were standing.  This spot happened to be concentrically ‘off’ by 6,371km – the radius of the Earth.  And from that horizon-circumscribed vantage point on the apparent plane, they discerned that the cosmos contained intersecting orbital planes defined in altitudes and azimuths. Watching the stellar lights pass above them and being inspirationally transcended from the plane on which they stood they began to form metrics and tools to discern their place on earth and their relative position in the cosmos.  They were not standing in the center – neither of the Earth nor the cKosmos (note: I use the 'cK' combination intentionally.  To my secularly predisposed friends, I'm comfortable with cosmos describing the expansive universe.  To my spiritual friends, I embrace the Kosmos metaphor to define the 'intention' dimension of the universe.  My adaptation is motivated by respect of both perspectives.)  

I stand in mathematical and spiritual awe of these careful observers who were drawn into this inquiry not merely for the complexity intrinsic therein but to the impulse to understand the precession of terrestrial and celestial events and discernment of auspicious seasons.  But I’m equally stunned by the elementary skewness evidenced in that, while looking up, their impulse failed to correct for the distance from center. What if stellar paths were not projections of orbital bodies in circles or spheres but more complex dances?  What if, from the center, the observations would be devoid of horizon?  Standing at 'the center' informed of no horizon, what cKosmology would we form and how dogmatic would be hold the correctness of our view?  What new tools would we devise to make sense of our place and the trajectory of our journey?

Our denominated and consensus ‘sense-making’ accessories are artifacts of a sensory state that deflects our ascension to our deeper core - both in our understanding of ourselves and the world in which we operate.  And yes, I mean the literal, non-paradox of a rising to a deeper core.

Those of you who are astute will appreciate the link between Aristotle's understanding of the basic human senses and the trigeminal neuralgia where this musing began.  The vital trigeminal nerve is the approximation of all sense into one cranial nerve.  It links the opthalmic, maxillary and mandibular nerves and, without its function, we are incapacitated in our effort to communicate perception.  Imagine a world in which Aristotelian basic senses were embodied singularly in five individuals.  One sighted, one olfactory, one tasting, one touching and one hearing.  These people are placed in a room with a candle.  In total integrity, they describe the completeness of the essence and state of their observation. They, like surface dwellers, could have a series of experiences.  In our present state, they could generously label as ‘spirit’ or ‘belief’ that which they apprehend ‘described’ by the other sensates.  Having no frame of reference (no planar 'horizon'), our disintegrated sensates would never apprehend a knowing state regardless of their individuated intention.  However, if they were to add a center – in this case transference integrity and trust into a transcendent collective – they could share a common sense of ALL and be lit, fragranced, carboned, warmed, and serenaded by a literal common narrative from the center – the candle.  This would have room for no dogma, no catechism, no tradition.  It could be informed by the sensory utilities refined in traditions but it would be harmed if these were anything but utilities for sensory acuity enhancement.

On all days of the planar, temporal and incorrect Gregorian calendar, Easter is the best of all days to reflect on this human paradox.  On a day which is meant to celebrate the incarnate human transcendence over death by a force that absolutely embodies the sacred and the profane we see the Celebrated enshrined in denominated discord by adherents rather than seeing an impulse to comprehensive union.

There is no unknowable phase or state.  There are several phases and states that defy our observation and our quantification because we have been incapable of refining our discernment and acuity to apprehending their signals.  The more firmly we hold our dogma of the unquestioned and absolute nature of our spatially distorted perspective, complete with building complex astrolabes and sensors to confirm that which we're sure we know, the less aware we are of the absolute phases and states and the more prone we are to pointless myths to rationalize that which does not comport to our vantage point.  Our social and ontological calluses, anesthesia, and cataracts limit our accession and our narratives preclude our collaborative impulse to engage in integrity transference in favor of our stale myths and beliefs.  Our efforts seek to confirm the certainty of our vantage point and our navigation therefrom without holding open the possibility that we are uncentered and, in fact, narrating our story from an indeterminant concentric horizon some distance away from the center.

On this Sunday, set by the First Council of Nicaea in 325 A.D. to be the 'right' time to celebrate the culmination of Passion, ask yourself a transcendent question:  Is there one 'other' perspective that might help inform my view of the world?  If I triangulated my perspective with one other observer clearly holding another vantage point, could our shared view more completely inform our experience?  Can 'wealth' and 'poverty' find shared purpose and stewardship?  Can 'powerful' and 'subordinate' gain operating effectiveness through alignment of interest?  

Sounds impossible or unlikely?  No, just uncommon in our times.  But our times, they are a changing!

Open Letter to Shareholders - Be Accountable!

I had the occasion this week to be invited to state some of my personal principles around enterprise provisioning.  In current capital market behavior, there are several assumptions which, while being implicit, create the plastic failure of our system rather than facilitating the elasticity that expands collaborative success.  I use the term "provisioning" rather than "financing" for an intentional reason.  Without exception, NO enterprise's success is solely arbitrated based on access to, or command of, money.  Therefore the myopic obsession which places money at the heart of economy defiles what centuries of evidence show: namely, that shrewd multi-dimensional asset stewardship, experience, leadership, innovation and countless other tangible inputs are necessary for any phenotypic success. 

That said, tragically our current system favors what is known as "the last man holding the bag" principle.  This principle simply states that there must be a series of inefficient extractors in a system who need to withdrawal excessive benefit just until the point of plastic failure at which point in time, there's nothing left for the last man holding the bag.  Market price rises, put another way, are heralded as "success" but what is forgotten is that monetary flow means someone's gain is being extracted from someone else's loss.  The current public equity surge is NOT the sign of a great economy - it's the evidence of a wealth transfer in which subsidized monetary policy from the FOMC is transferring money from public future productivity to present isolated private investors.

In the interest in giving you a personal window into my views in my daily business, the following is excerpted from a letter I sent to a board and to some potential joint venture partners on one of my business activities.  For those of you who seek to miss the point of this post to decipher the parties, here's the paradox.  This week I've been embroiled in issues arising from several multi-billion dollar mineral and energy transactions, an exceptionally large banking transaction, and the initiation of a large health-care transaction to treat one of the world's most virulent diseases.  The letter excerpted below is not TO one alone but generalizable across several.  I trust you find the points helpful as a point of departure for deeper conversation.

With respect to an impulse to effectively "cram down" the interest of prior shareholders in one business for the benefit of new joint venture investors, I wrote:

1.                  Honoring Fiduciary Stewardship:  Any predatorial instinct to dishonor fiduciary commitments made in the past to sate future greed is unethical, offensive and the basis of the highest form of dishonor.  While the majority of (a venture's) shareholders have acted with callous neglect in many instances…, this does NOT entitle them to our dishonor.  Any deal that moves forward …, that lays in its foundation the evidence of dishonoring fiduciary interests is a deal that will not happen.  (S)hareholders’ capital will have a mechanism to be returned or be attached to a minority participation…. (New) management would be ill-advised to assume that this venture can succeed if it begins by asking me as the opportunity creator and steward to defile my absolute fiduciary commitment. 

  

While my second point, as written, contained enormous amounts of proprietary information which I will not reproduce here, the principle should be highlighted:  Honoring Assets / Asset Stewardship.  So, allow me to share an example from my company's activities.  I am fascinated by the impulse to seek "control" of assets which provide no utility to one enterprise in an effort to "contain" or "focus" management efforts in another.  In our history, we have developed countless technologies and information platforms which have been placed in perpetual public trust - things like the Global Innovation Commons and the Heritable Innovation Trust.  We also have capabilities that have been placed in service to numerous interests including global humanitarian crisis response, security concerns, law enforcement, and other activities.  While these activities do not evidence monetary productivity on conventional financial statements, their value is inestimable.  The notion that one can, in the name of one enterprise, remove or restrain these vital Asset Stewardship opportunities which benefit millions around the world is an evidence of a system that defines value and success far too narrowly.  Similarly, if one stipulates value only in what they apprehend as the extractive "value" (e.g. copper out of the ground), defiling forests and fouling streams are merely artifacts of sociopathic greed and represent impulses devoid of trustworthy stewardship.

The third has to do with how future benefit should be allocated in the face of a proposed joint venture bringing together capital, talent, technology, market knowledge, and, in this case, capital arbitrage.

3.                  Honoring the Meritorious Team:  Money is a utility – not the agency of control.  A funding party has every right to a fiduciary return of stewardship and reward.  This is a principle that I warmly embrace.  That said, if this program moves forward, our mutual wealth will be derived from the effort, intellect, experience, technology, relationships, monetary and non-monetary provisions, and instincts of the team that we assemble.  As a result, while economic returns are reasonably, and may (in early majority) flow to risk capital, insofar as that capital has NOT been truly at risk, then returns for perceived and illusory risk will be commensurate with its actual role.  This does not diminish (a partner's) role AT ALL.  In fact it places it first in (monetary) returns.  But greed – when one is relying on the dedication of credentialed access and talent – is evidence of shortsightedness.  This attribute predisposes the enterprise that we’re building to failure. … (Success)… will only be realized if we honor ALL THE CONTRIBUTIONS at the table and realize that while I seek no majority or control, neither do I tolerate predatory, short-sighted greed.  Our wealth will be commensurate with ALL OF OUR CONTRIBUTIONS.  If we don’t share that vision, than we don’t share a common table.

These principles are as relevant to our structured finance programs as they are to our work in Asia and the Pacific with the ethical reframing of existing agricultural and extractive industry businesses.  Systems that fail to integrate: complete appreciation of all Commodities; sufficient time and effort investment to establish shared Custom & Cultural values; transparent Knowledge sharing; alignment of Monetary resources; full integration of Technical capacity; and, full team engagement for the Well-Being of all participants; are systems that cannot flourish.

Call Me Ishmael

Queequeg (played by former JPMorgan Chase & Co's Ina Drew) was in front of the Senate Permanent Subcommittee on Investigations explaining how a harpooner could personally net $29 million in blubber alongside Starbuck (played by supervisor Achilles Macris) and his $32 million haul.  Meanwhile Fedallah (played by the celebrated Chief Investment Office London trader Bruno Iksil) - long bloated on the seabed having been entangled in ropes and drug down to the abyss by Moby Dick- was once again the object of great theatrical wrath served by a court of landlubbers who, themselves, have been incapable of a single rational fiscal decision in the past decade.  More harpoons.  More ropes.  And still more tragedy meted out by a system long unmoored from the safety of Nantucket.  One can only imagine what Herman Melville could do with this week's latest episode in the ongoing saga to tame the great white bull whale or the maniacally fixated Ahab.  But reader, take heart!  The Pequod (played by the inestimable JP Morgan Chase & Co.) though taking on water according to the stress test results in which the Fed concluded that there is "weakness in their capital planning process", is not yet sunk.  Still clinging to the rope around his neck and now fated to join Moby Dick in whatever fiendish designs the bull whale contrives, Ahab remains steadfast. 

Melville's 1851 MOBY-DICK or THE WHALE served as an amicus indictment on the hubris of both an industry and a human condition in which monocular and cruel task-masters could expend humanity for the pursuit of an iconic purpose.  Within a decade of its publication, the pretextual metaphor of 'white' and 'black' would animated a nation to draw over 3,000,000 men from their homes into the field of battle where over a third would pay with life and limb.  Within 50 years, mining and smelting would overtake whaling as the leading temple of Kali drinking the blood of thousands for the enrichment of the few.  And 150 years later, we'd replace industry with indenture and make trillions of dollars in bets against humanity's performance (in the form of credit default swaps) and further entangle humanity in the harpoon lines of previous greed-fueled quests.

The Senate's inquiry happens to be a hubris exceeding that of the Ahab they so revile.  While Jamie Dimon's "tempest in a teapot" dismissal of $6.2 billion in losses inflames vindictive public servants, these same judges fail to recall that just a few weeks ago, their failure to accept accountability invoked over ten times Jamie's teapot and their careless neglect still fails to consider the looming $3 trillion in debt and entitlement liabilities the country is not prepared to honor.  

"All that most maddens and torments; all that stirs up the lees of things; all truth with malice in it; all that cracks the sinews and cakes the brain; all the subtle demonisms of life and thought; all evil, to crazy Ahab, were visibly personified, and made practically assailable in Moby Dick. He piled upon the whale’s white hump the sum of all the general rage and hate felt by his whole race from Adam down; and then, as if his chest had been a mortar, he burst his hot heart’s shell upon it."   Replace "Moby Dick" with any of our present too-big-to-fail or too-big-to-hold-accountable institutions and we realize that it's not JP Morgan, Jamie Dimon or the rest of the lot that we really revile.  It's our own incapacity to start with our own accountability and realize that we can only ever require of others a standard that we are willing to hold faithfully.  What we most revile is likely that which, in our own view, we're most unwilling to confront.  As the magnitude of our vindictive impulse grows, so too should the reflected consideration of our own loathing of the points in life where we've traded purpose-filled engagement for the expediency of self-interest.

Victimized by our own surrogacy, we can join Ahab in shrieking:  

"Towards thee I roll, thou all-destroying but unconquering whale; to the last I grapple with thee: from hell's heart I stab at thee; for hate's sake I spit my last breath at thee."

Or, we could take another view.  We could realize that the gear of the great machine that is represented by JP Morgan Chase & Co. and the United States Senate is a machine built to serve a system dedicated to perpetual growth without consideration of sustainability.  As long as we celebrate any portion of that system or seek to consume its oily production for our own sloth (marketed as "convenience"), we have no place to critique.  It is not until we actually establish new paradigms for engagement and live within the means sustained thereby that we realize that vindication and blame serve no purpose.  In a realm of personal accountability and communities of responsible citizens, we can finally realize that there is no 'other'.  Just We The People.

Here's to krill and plankton.  Like the lilies of Solomon's field, they grow in elegant, frail complexity, neither toiling nor spinning, yet I tell you, even Solomon in all his glory was not arrayed like one of these!  Consider and want not!