Social Security: Soaring with Vultures

So I was sitting at the table this morning, overlooking the ponds and the forest, when I was struck by the stark Roman insignia gracing the top of a dead poplar tree.  While we’ve become accustomed to the Americanized view of Roman standards resplendent with eagles (in our version, drawn by Secretary of Congress Charles Thomson in 1782, clutching arrows as if talons aren’t intimidating enough), we overlook the historical basis for the standard – the vulture.  Even Thomson’s “eagle” holds his wings as a vulture to match the vulture of the founding of Rome.  Mythology states that the selection of the site for the city of Rome was informed by the auspicious omen seen by Romulus – 12 vultures – as opposed to Remus’ 6.  More vultures = better omen!

“Why have we celebrated the majestic bald eagle rather than the prolific vulture,” I thought as I grabbed my camera to snap a few pictures in the barefoot-warm December rain?

The family of birds - Accipitridae - to which both vultures and eagles belong is distinguished with its capacity to soar on the thermals and rip flesh and sinew on the earth.  And while the thrill of the eagle’s hunt is more glamorous than the rotting carrion of road-kill on a lazy summer afternoon, were we given a choice, a world without vultures would be a lot more stinky and less livable – just saying! 

Now, fasten your seatbelt as we take another whirlwind turn in our ornithological time machine.  And trust me, it’s worth the ride.  For millennia, empires and their egomaniacal leaders have sought to instill admiration and fear in all others by selecting predatory animals as their insignia.  Xerxes and the Achaemenid Empire had their fighting stags and vulture-winged lions.  The Sumerians put vulture wings on the backs of lions – an image that has survived to the present as an iconic symbol of power.  The Greeks put vulture wings on Hermes and his shoes (as if wings on your back need a bit more turbo charging).  And as far back as 3,000 BCE, Egypt’s goddess Nekhbet was depicted as a vulture symbolizing purification.  Reminiscent of the Cherokee who referred to the vulture as the ‘eagle of peace’ as it kills nothing but purifies the land, humanity’s appreciation of the vulture has been forgotten at a considerable price.

Thanklessly cleaning up messes.  Capable of soaring.  Purifying the land.  You can learn a lot from a vulture! 

In 1935, Franklin D. Roosevelt signed into law the Social Security Act.  This “Old-Age, Survivors, and Disability Insurance” program is to the U.S. what Pericles’ Athenian Constitution was to Ancient Greece.  FDR forgot to study Pericles when he advocated for the Act or he would have recognized the inherent flaw in “making gifts to the people their own property.”  Falsely labeled “entitlement programs”, the social security system then as now is a great political ruse – a vulture in eagle’s feathers.  And with the coming charade in Washington D.C. early in 2014, we’re going to be treated to another episode of “Debt Ceiling IV: Attack of Tea-drinking Zombies”.  Let’s be clear, the word “ceiling” – implying upper limit – is a misnomer.  The Federal Government has no real “limit” on how much indebtedness it can take on.  It does, however, have a limit on how much debt it can service.  It makes theater of the former and entirely ignores the latter.  It is, after all, the latter that is most paradoxical.  What we’re doing when we raise the “debt ceiling” is authorizing issuance of debt to pay for debt – a necessity directly caused by an economy that does not collect enough revenue to support its obligations.  Inspired by the flamboyant eagle, it loves the thrill of the hunt but is ignoring the growing heaps of plague-infested carrion – carrion too numerous for the available vultures. 

Artificially low interest rates have been great to keep the Federal debt service from further exacerbating the debt crisis (thus described as we have borrowed more than our economy can reasonably service through productivity-linked revenue).  But the Federal Open Market Committee’s policy is to our economy what Dichloro-Diphenyl-Trichloroethane was to eagles.  In solving the short-term pestilence problem, the capacity for future productivity in progeny is forced into certain extinction.  Because, even though low rates today mean you can borrow more cheaply now, it means that your investment in debt is not earning enough to cover the expected returns required for the ‘benefit’ your investment was supposed to generate.  When Paul Hermann Muller’s Nobel Prize winning WWII mosquito-killing ‘invention’ was unleashed on the world, DDT became the panacea for crop infestation and mosquito control.  Neither he nor its proponents knew that the effect of DDT on the aqueous food chain would lead to the extermination of countless desirable life forms including our national emblem – the bald eagle.  Rachel Carlson’s 1962 book Silent Spring suggested DDT’s still unknown effects on human health including the possibility that profligate use of DDT may have vastly expanded cancers in the fumigated populations it was promoted to serve.

Out of the $16 trillion in notional debt we owe, more than 60% is owed to ourselves.  According to the GAO and the U.S. Department of the Treasury, nearly $5 trillion of debt represents ‘investments’ made by trust funds like Social Security and Medicare.  Another few trillion is owned by the Federal Reserve.  And then any one of us who participates in a planned retirement program ‘invests’ heavily in these ‘assets’.  When ‘debt ceiling’ tirades are unleashed in Washington, the public is being duped.  On the right, we’re told that we should decrease revenue while on the left we’re told that we should care for the 99%.  The fact is that neither left nor right is facing the facts: we don’t have an economy to pay for promises we made in 1935 and we don’t have a society that soars together.  With interest rates maintained at record low rates, we have ALREADY defaulted on the Social Security, Medicare and Pension promise we’ve made.  This is a problem that cannot be fixed using the current paradigm.  Pumping more public expectations into a system that is hopelessly broken and broke just increases the scale of calamity.  As a matter of policy, the yield on our investments is so low that we have forced the future into a lower standard of living, less liquidity, and a greater inability to pay for the life-styles to which many have become accustomed.  And while this is not necessarily a negative on the global stage, the broken promises and the irrational responses that they engender are avoidable only if the public is informed today.

In 1966, the Endangered Species Preservation Act put in process the protection of the Bald Eagle so that we wouldn’t exterminate our national emblem and with it a piece of our identity.  Six years later, the use of DDT was banned.  Our industrial ‘progress’ took the estimated 100,000 nesting pairs of bald eagles in 1782 down to 487 in 1963 only to have it celebrated in its rebound to just under 10,000 today.  We’re 1/10 the greatness we were when we started killing our national emblem, metaphorically.

Nearly 30% of America presently relies on an endangered entitlement with over 51% ultimately counting on it for a significant portion of their ultimate livelihood.  We know today that the DDT-effect of our monetary policy is softening the nest eggs of this population to the point that they will not hatch when needed thereby harming our economy as a whole.  We have chosen the individuated eagle metaphor at the expense of the security provided by the rookery of the vulture where the young are protected, the old are fed, and the generations share responsibility at the community level for their collective well-being. 

So this morning’s omen: be warned.  Pericles’ Athens thrived on entitlements while he was alive.  But as the fallacy of gifting the public what was already theirs (the definition of our entitlement systems) unraveled, the great experiment of Greece fell under the talons of Rome. 

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Not Worth Living

In Plato’s Apology, he attributes to Socrates the frequently quoted maxim: “The life which is unexamined is not worth living.”  Adjacent to this quote is the unquoted, but potentially more profound statement, “I would rather die having spoken in my manner, than speak in your manner and live…. The difficulty, my friends, is not in avoiding death, but in avoiding unrighteousness; for that runs deeper than death.” 

I reflected on these lines from the Apology in a most improbable of moments this week – at the engagement and wedding ceremonies of some dear friends in India.  As I watched a priest chant mantras in Sanskrit, I inquired of several of the guests how many brides and grooms knew the meaning of what they were reciting during the marathon, smoke and fire-filled rituals. 

“We don’t know what these mean,” was the near universal response.

Sanskrit has been around for at least 3,500 years – potentially one of the world’s oldest languages.  It is reasonable to speculate that more philosophy, religion, sociology and cosmology has been contemplated in Sanskrit than in any other tongue.  This language of wisdom, scholarly inquiry and culture contains not only literal essence but also harmonics and tonal elements that are considered to integrate frequencies and vibrations that literally embody meaning.  Its use in ritual and meditation persists while the wisdom and experience of humanity from which it arose is increasingly eclipsed in the fluorescent glare of emoticons and hashtags.  And why, in independent India has the siren of materialistic artifact been so compelling as to induce the amnesia to the wisdom of ages past?  Why, having cast off the colonial regimentation of industrial empire has India elected to chase the fleeting futility of even greater triviality? 

The answer, in part, lies in the unquoted Apology.  And there’s a bit of irony here.  When Socrates stated that he would rather die speaking his understanding than conform and live, he wasn’t being melodramatic or forming an argument.  In fact, he recognized that to acquiesce to what he knew to be untrue and inconsistent with observable reality was as much death as drinking hemlock for speaking out in a manner so compelling that those around him, “deliberately attached themselves” to him “because they enjoy hearing other people cross-questioned” (the origin of the concept of Socratic learning).  The unrighteousness to which Socrates referred was the willingness to adopt consensus in the evident face of its fallacy.  Preceding Gregory Bateson’s theory of the psychopathology of what he called the Double Bind (in which schizophrenia results from serially observing reality and seeing trusted persons or the crowd act in what appears to be diametric opposition to, or ignorance thereof), Socrates could not tolerate living in a world in which consensus error was reinforced by mercenaries while inquiry and truth were castigated.

Socrates used as evidence of his character his commitment to the transmission of knowledge for free.

“If you doubt whether I am really the sort of person who would have been sent to this city as a gift from God, you can convince yourselves by looking at it in this way. Does it seem natural that I should have neglected my own affairs and endured the humiliation of allowing my family to be neglected for all these years, while I busied myself all the time on your behalf, going like a father or an elder brother to see each one of you privately, and urging you to set your thoughts on goodness? If I had got any enjoyment from it, or if I had been paid for my good advice, there would have been some explanation for my conduct, but as it is you can see for yourselves that although my accusers unblushingly charge me with all sorts of other crimes, there is one thing that they have not had the impudence to pretend on any testimony, and that is that I have ever exacted or asked a fee from anyone. The witness that I can offer to prove the truth of my statement is, I think, a convincing one – my poverty.”

The notion that wisdom and its acquisition cannot be defiled with monetary compensation opens a more poignant inquiry into the phenomenon I witnessed in the rituals of Brahman priests.  Education – conventionally thought to be the orderly conveyance of knowledge, skills, practices, and norms from one generation to the next – has transformed over time and with it wisdom has been subordinated to technical proficiency to qualify for rent wages mandated by the industrial age.  Value in the transmission of knowledge for the sake of considered inquiry has fallen victim to the opiate of employment.  Proficiency and competency have replaced mastery and transcendence.  Why?  Because we can measure the unit output of trained automatons in monetary rents while we have no conventional mechanism to attribute value to the genius or idiot outlier.  And, by the way, this unit of mercantile productivity includes what was once considered sacred.  I was told by several of my fellow wedding goers that the Brahman caste once shunned money to the point of refusing to come into contact with it.  Now, in the middle of rites, the officiating priests were interrupting the event with overt cash exchanges.  Is it any wonder that a social order that has chosen to defile their own priestly class with commercialism has become untethered from the agency of its heritable essence?

Millennia from Socrates’ celebrated embrace of monetary poverty for the wealth of wisdom and its transmission, post-independence India (like many others), has adopted the language of consensus powers rather than exporting its heritable wisdom inclusive of all of its intricacies and nuances.  Ringtones now replace mantras and this is a mark of success.  Why?  Because having ‘things’ has become more important than examining the essence of life.  Education for job placement is celebrated above incarnating and transmitting persistent, unfathomable wisdom.  And this is happening exactly at a point in the arc of the mercantile industrial paradigm where its utilitarian deficiencies are becoming glaringly obvious. 

As the wedding crowd waned, a group of recent graduates from some of India’s finest schools approached me to ask me how I became a ‘successful’ entrepreneur.  After disavowing the title in its conventional use, I went on to explain the dimensionality of wealth that I describe using the optics of Integral Accounting.  These young men – all in their early to mid-20s – were enlivened by a conversation that included topics like my involvement with the National Innovation Foundation, the Global Innovation Commons, grass-roots initiatives around the world, quantitative text-based trading algorithms, and innovation-based, productivity-linked capital solutions. 

“Why aren’t we taught about these things in business school,” several asked, their faces evidencing a yearning for greater purpose?

As I reflect on our exchange, I realize that these young men, like me, want to live vibrant, examined lives.  Sure, we want to be productive and be capable of interacting in many dimensions of life.  But we don’t have the School of Athens.  We don’t get to “attach” to our Socrates with whom we can “cross-question” and learn.  In a generation and a half, their world has done its best to diminish what millennia of wisdom sought to build.  Until We The People actually end the rush towards automated digital consensus, we run the risk of deepening our version of the European Dark Ages.  It’s high time some of us step up and evidence an alternative: one that seeks to gain knowledge rather than train; to collaborate rather than prevail.  Starting today, read something from a field about which you think you know nothing and find out how great it feels to exercise your mind.  Speak to someone from a different culture or language and find the joy in imperfect communication with perfect intention.  See your world through the smoke of rites and flavored with all the spices of a palate that’s as foreign as you can imagine.  Examine your life and in so doing, we may rekindle the joy of unfettered learning and thereby forge a More Perfect Union.

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Quantum Entangled Wormholes in Your Wallet

In their recently published work, Kristan Jensen of the University of Victoria, Canada, Andreas Karch of the University of Washington, Seattle and, Julian Sonner of MIT, Cambridge have been offering theoretical models regarding the nature of quantum entanglement of quarks “separated” by considerable distances.  Describing the Einstein-Podolsky-Rosen (EPR) pair dynamic in which the measurement of one particle simultaneously imparts an effect on the other in the pair, they applied two different mathematical models to ‘measure’ entanglement.  Using different approaches, Jensen & Karch’s model of quarks accelerating through oppositional distance and Sonner’s model of the Schwinger effect of quark/antiquark creation, both suggest that wormholes (in which space, time and other dimensions are extremely contorted) may be capable of facilitating transfer dynamics between black holes.  The theoretical framework suggesting that black holes (massive matter and energy dynamos) and quarks (infinitesimally minute subatomic particles) traffic in wormhole-laced interactions is a delightful reprise of millennia’s past wisdom stating that things are more connected than they seem.

Now before you get concerned that you are reading the wrong blog here, rest easy.  There’s a wormhole between this preamble and the economics to which you’ve become accustomed.  And I’m being a bit more literal here than you might first expect.  The Einstein-Rosen (ER) Bridge that theoretically links two (or more) points in space for simultaneity of existence is thought to be devoid of information transfer potential.  In other words, while parallel universe expressions are certain, progressive or simultaneous sentience is theoretically implausible.

This week, WikiLeaks released information from Stratfor, a strategic advisory consultancy serving government, energy, and industrial clients.  Their threat anticipation advice regarding environmental groups’ opposition to fracking and other North American fossil fuel ventures failed to anticipate their own ‘black swan’ event of being hacked and having their advice made public.  Apparently, they also failed to anticipate being stiffed $14,890 for work that they had done for Suncor.  They correctly estimated that energy firms should pay limited attention to most environmental activist efforts because many of these groups have “too little political influence” to rise to the level of concern.  They bet on the quantum entanglement between fuel ventures and politicians (near infinite mass and energy condensing in infinitely dense space) and won.  But they seemed to overlook that what’s good for the black hole is also good for the quark. 

It was amusing to see that the purported clients sponsoring the presentations that were leaked deny having seen them.  The hubris (the idea that information cannot be deciphered through wormholes) of giving misleading or false responses when ‘caught’ or ‘found out’ is a malignancy that seems to be metastasizing throughout the political and corporate ecosystem.  Sociopathic self-preservation at all costs seems to be the default mode rather than the nostalgic Watergate extravagance it once was.  Extractive industries lie about environments and profits, Apple lies about innovation, Government Sponsored Enterprises lie about fiduciary liquidity, and We the People are simply supposed to accept this fare of deceit as the status quo.

But here’s the problem that strikes me as the evident conclusion from the work of Jensen, Karch, and Sonner; what if events are connected?  What if a $4 trillion Federal Reserve balance sheet actually has to be monetized?  What if tens of millions of permanently discouraged workers get tired of being told that unemployment is stabilizing or improving because they’re no longer being counted in any statistic?  What if the apparent ineffectiveness of intervention is actually building an amazing amount of energy in a system we’re not perceiving nor measuring? 

These are theoretical and rhetorical questions on one level but they’re quite tangible on another.  In 2008-2009, the public was awestruck with the notional value of credit default swaps (CDS) which exceeded the world’s GDP by a considerable margin.  Now, if you go back to 2006, you’ll see that the public was in love with CDS – they just didn’t know it by its name.  Back then it was called mortgage refinancing and it was all the rage.  I heard numerous friends and colleagues celebrating massive ‘interest only’ loans, super jumbos, and other irrationally labeled products.  They were building black holes in one dimension without discerning the worm holes connecting excesses of the mid-2000s to 2008.  When was the crisis?  Spoiler alert – it’s not when you are paying for the consequences of bad behavior; rather, it’s during the mindless preamble during which care and attention is neglected.

In the dimension in which Stratfor operated – a dimension in which their own self-importance is a reflection of the arrogance and confidence of their clients – their assessment was correctly focused on the risk of getting caught by someone who could have sufficient influence to alter behavior they and their clients knew had damaging consequences.  Like last week’s post reflecting on the Union Carbide environmental liabilities, it was not about whether behavior should or should not be engaged.  Their focus was on getting caught and the associated risk to self-interest.

But we’re not better for WikiLeaks.  We didn’t find out anything that we didn’t already know.  And now that we know that a few oil companies didn’t give any mind to a few environmental groups, is there anything about our behavior that we’ll change?  Is there any action that will be altered?  The same protestors will protest.  The same condescending business executives will hold humanity in disdain while cashing the funds flowing out of the self-righteous wallets of fuel-addicted protestors.  And neither will be paying attention to the point in space across the wormhole – that space where consequence and consciousness actually cohabitate.

The Stratfor-gate (doesn’t have the same ring to it, does it?) is another example of irrelevant vigilante fuel on both sides of the fracking battleground.  The likelihood that any part of North Dakota or Canada will be undrilled because of this week’s revelations is measured in single digits, … to the right of the decimal point.  The likelihood that consumers will pay more for their fuel addiction is certain.  Like the patent litigation, agriculture subsidies, and trade wars that tack immoral tariffs on our various addictions, we mysteriously pay more for behavior that we appreciate less and less.  We are entangled particles in an entangled ecosystem.   The more you defend yourself in ‘not knowing’ or ‘not caring’, the more you’re fueling the problem – and giving Stratfor more reason to hold you and your world in contempt.

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29 Years and Not a Day Closer to Accountability

We didn’t wake up.  Neither did 3,787 officially.  They didn’t because they were dead.  We didn’t wake up because we don’t want to.  And just a little reality check.  The combined death toll from the World Trade Center, Pentagon, and Pennsylvania conspiracy of terror was 2,996.  Under the guise of seeking justice, we have prosecuted a series of wars which have cost Iraqis and Afghanis over 1 million lives and have cost the U.S. and its allies more than double the lives lost on 9-11.  But the reason why most of you are scratching your heads wondering what mass casualty event took place 29 years ago this week is because the terror gas attack wasn’t a radical Muslim gundamentalist (a term coined by my dear friend Moustapha Sarhank).  It wasn’t a born-again, pro-life Evangelical listening to voices in his head tell him of the depravity of civilization and his god-given role in bringing judgment on sinners.  No, this act of terror was perpetrated by an organization that was founded in 1917 with the union of two organizations which were launched in 1898 and 1886 at the birth of the industrial movement. 

No stranger to death, this organization killed 476 of its own between 1927 and 1932.  Foreshadowing their deadly attack in 1984, this mass killing was also done with an aerosolized agent.  Untold thousands died from other airborne toxins unleashed by this organization silently killing workers and consumers alike.  From 1976 until 1984, insiders and external observers reported deaths and disabilities but the lure of the organization’s ideology was so intoxicating that these were neglected.  And, according to the official inquest following the December 2-3, 1984 mass killing, safeguards installed by the organization were switched off to “save money”. 

And as we see mind-controlled, sedated Americans stampede into the temples built by Sam Walton to worship the same golden calf of “saving money”, it dawns on me how few of the Citizens of the World will actually bother to read this blog post or share it.  Why?  Because taking on this religion (and yes, even religion owes its existence to the same pagan, blood-lusting idolatry) is a heresy too great to stomach.  And 29 years later, no war has been waged by those who were attacked.  No reprisals have been prosecuted.  In fact, the architect of the attack was flown out of the country he attacked in the government’s own plane.  How’s that for a twist?  And in their Deloitte & Touche LLP audited financial statements, they callously footnote that they probably have liabilities for breathing-related illness and death that may be about $2.2 billion.  This figure eclipses the total out-of-court settlement the organization reached with those attacked of $470 million including generous payments to victims with permanent life-altering health effects the stunning sum of $380 and the families of the dead the whopping sum of $950.

If you’ve ever enjoyed a fresh garden vegetable on a tossed salad, you’ve probably ingested a non-lethal dose of Sevin®, the Garden Insect Killer.   This lovely little toxin is now proudly distributed by the “Science For A Better Life” company, Bayer.  And to produce this compound which thankfully is illegal in the United Kingdom, Austria, Denmark, Sweden, Iran, Germany (how’s that for a paradox?) and Angola, you can use a very complicated sounding word (for those of you who think my blog is too difficult to read and understand, I’m warning you… Big Word Coming!) methyl isocynate (MIC).  This little organic compound - CH₃NCO – can be highly unstable in the presence of a lot of things, including water.   And MIC was the toxin of choice used by the organization that elected to kill its neighbors – neighbors in the city we all breathlessly read about 29 years ago this week – Bhopal.

The reason why 3,787 people had to die three weeks before Christmas was because Union Carbide needed to save money to boost shareholder profits.  The reason why miners in West Virginia died of silica poisoning was to boost profits.  The reason why audited financials describe “potential” liability is because the actual liability exists and the question is whether they’ll be held accountable.  And the reason why we collectively don’t care is because we want to have our tomatoes and garden vegetables untouched by insects so bad that we’ll kill for it!

Just the cost of industrial economies, right?  Twenty thousand dead in Bougainville courtesy of the abuses of Rio Tinto and, to this day, the world turns a blind eye while Bougainville Copper Limited seeks to pass a mining law illegally so they can do it all over again.  Nearly all of my ‘socially conscious’ friends compose their rants about morality on Apple computers and tablets while the 40,000 workers in China continue to suffer from “numerous labor abuses” including those egregious enough to lead to another 4 documented suicides this year.  Apple, in the spirit of the holidays, agreed to cap workers’ hours to 60 hours per week (wow, really generous of them!).  And their apologists rail against the most recent report of labor abuses by lauding the nearly $500 a month salaries generously paid to workers so that Apple can not return profits to shareholders but rather pump helium into its already bloated stock price.

Next week we celebrate the 72^nd anniversary of Hitler’s declaration of war on the United States.  But eight years earlier (80 years ago) another industrial power decided that the lives of its own and others were expendable for ideologies of supremacy and “exceptionalism” (thanks, B.O. for bringing that wonderful term back for us after GW gave us the SS Homeland Security reprise).  Turning a complicit blind eye towards injustice, a great culture and people allowed their inertia to be hijacked into tyranny.  As then, we now have evidence that we could care less about the lives that have been rented, purchased, or killed so that we can consume at a discount.  Twenty-nine years later, we still out-source our consciences to lands remote enough to avoid confronting the cost of our consumption.  And one day, history will ask, where were those who actually had a conscience?  It’s a chilly night.  It’s the night before cyber-Monday!  See if you can actually put your credit card down long enough to find out what your products really cost before you decide that they’d make the perfect gift!  And stop B.S.ing yourself into believing that the dollar you saved didn’t come at a cost!

Hugs and Kisses – Scrooge

Duty of Candor

I was speaking with a group of investors this week regarding the patents held by one of the world’s most recognizable mobile telephony companies.  As this company has navigated its way, with varying degrees of success, through a tangled maze of consumer expectations, technical improvements and feature modifications they have hastily trodden on the intellectual property rights of others.  They, together with their industry cohorts have filed thousands of patents on everything from the shape of a phone to the resolution of images on diminutive screens – few of which represent actual fundamental innovation but rather hollow impediments to use in an effort to modulate the severity of infringement assertions made by competitors or would-be trolls.

In this particular case, nearly 75% of the patents owned by this firm not only fail to represent bona fide innovation but, in many instances, are clearly direct adaptations (plagiarisms or the more politically correct term I coined years ago “conceptual annexations”) of the developments made by others.  That is not to say, by any stretch of the imagination, that the company does not have some amazingly valuable innovations.  Among their assets include some patents on mobile device payment systems, geo-location, and power management that may be of greater value to others than the entire market capitalization of the firm. 

For years, this firm has been audited by one of the world’s top 4 accounting firms.  When they were taken public, their Initial Public Offering (IPO) was underwritten in the U.S. by investment banking firms that no longer exist having collapsed during the financial crisis of 2008.  Neither their auditors nor their bankers ever asked the question of whether the firm actually had valuable intellectual property assets.  Rather, they asked the question: “Does this company have patents?”

On the eve of this past week’s miscarriage of justice in California (the erroneous jury damages award to Apple assessed against Samsung), the United States Patent and Trademark Office (USPTO) found U.S. Patent No. 7,844,915 (‘915) invalid.  What this means is that when Apple filed for patent protection for the idea of zooming an image on a mobile phone by pinching fingers on the surface of the screen, they actually hadn’t “invented” anything.  In fact, Andrew Platzer and Scott Herz in partnership with the law firm of Blakely, Sokoloff, Taylor & Zafman LLP, had breached the Constitutional intent of the U.S. patent system by cutely describing the movement of fingers to expand or contract an image as “scrolling” “gestures”.  Setting aside the absurdity of presuming that one could “invent” in 2007 what had been in Hollywood movies for two decades already, Andrew, Scott and Apple’s legal eagles misled the USPTO and confused Patent Examiner Xiomara Bautista into awarding a patent on a feature that was neither novel nor non-obvious (two of the three standards which must be met for a patent to be issued).  Quite correctly, the USPTO found this grant to be in error and unfortunately did so in such close proximity to Judge Koh’s schedule for a decision that Samsung wound up having to pay for use of an “asset” that did not actually exist.  Apple knew it.  Samsung knew it.  Even the judge knew it.  But expediency and injustice were more powerful than upholding the law and Samsung has to pay.

Now what’s relevant in these two stories is the fact that the telecommunications company referenced at the top of this post has over 12,000 patents which would, if challenged, likely be found invalid just like the thousands of faux patents held by Apple.  They know it.  Their competitors know it.  But tragically, neither the media nor agents of accountability (auditors, ‘expert’ advisors, the SEC) are willing to inform the public about this giant fraud being conducted under the aegis of “innovation”. 

Under what is referred to as Rule 56, there is a “Duty of Candor” which requires all persons involved in applying for a patent to disclose all of the information they know which could adversely affect the grant of a patent for the invention they seek to protect.  This rule is similar to the accounting principle of what’s known as the “Duty of Care”.  Both of these Duties suggest that the potential for harm arises when a person knowingly fails to fully inform himself or herself with knowable information which could contradict assumptions being made carelessly.  The line between careless ignorance and negligence is one that is frequently gray due to the hurdle of effort (and cost). 

In the U.S. we have laws that are supposed to protect the public consumer from abuses like Apple’s enforcement of a wrongfully procured patent.  When parties knowingly prosecute legal cases against one another with dubious or invalid patents, they both thwart these laws and harm the public.  This will be the case with the telecommunications company’s patents referenced above.  By failing to separate the “wheat from the chaff”, investors and the market will presume that tens of thousands of patents exist in legal enforceability and have value.  This is not the case.  And when those patents are licensed or sold, they will be a real cost involving real money flowing between real parties.  Billions of dollars later, the public will wind up paying inflated prices for a fraudulent conveyance that was knowable (and known) today and the harm will be done.

It is time for the investing public to discontinue their benign neglect of the Duty of Candor and start paying attention to the abuses of law that are going unchecked.  It’s time that companies and the service providers they engage are held to standards that don’t seek camouflage in the ignorance of the public to the systems of proprietary market controls.  True innovation will not be put in jeopardy and consumers will stand a chance to actually see innovative solutions to substantive and meaningful challenges.

 For more, check this out.

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November 17 and the Last 1479 Years

Happy 99^th Birthday, Federal Reserve Bank.  And Happy 1,479^th Birthday Codex Justinianus (Civil Law).  In her Congressional testimony this week, Fed Chairwoman-in-waiting Janet Yellen said, “I don’t think that the Fed even can be or should be a prisoner of the markets.”  In this comment she probably truly stated an imaginary desire for an alternative bank in an alternative universe.  However, in this comment, both she and her Congressional inquisitors failed to recall the founding history and practical reality of the very institution she’s being nominated to head.   

Benjamin Strong, the first Governor of the Federal Reserve Bank of New York who opened the august institution 99 years ago on this day stated that the bank was not only created, “to serve the banker, the farmer, the manufacturer, the merchant or the Treasury of the United States… but to serve them all.”  When Strong opened the bank on this day, he had seven bank officers, 85 clerks and $99,611,670 in deposits from member institutions.   In his early tenure, his mission, together with his warnings and admonitions are as eerie as the dense fog that shrouds this morning in Charlottesville, Virginia.  It’s as though he was looking across the future that lay before him and anticipating the moment we’re now embracing.  He wrote:

“And a seventh and last difficulty, although this may not indeed be all of them, is the one which I regard as more serious than any of the others – the exercise of the powers conferred by the Reserve Act upon the Reserve Banks by this rule of personal discretion, I fear, would develop inevitably in time a bureaucratic attitude of mind on the part of the managers of the Reserve banks which would be unfortunate indeed for the welfare of the whole banking System.  Power excites appetite for more power.   Bankers in time would rebel and the public would rebel.”

“Its future depends upon its own good behavior and upon its success in winning and holding the confidence of the public.”

Strong was running a well-funded start-up.  Ms. Yellen is inheriting a bloated balance sheet, obese, unwieldy, diabetic, and Alzheimer’s-afflicted institution.  Strong, by education or intuition, was acutely aware of the Justinian Codex which preceded his leadership which, in its second title, subsection 11, states that, “the laws of nature… are established by divine providence… but the municipal laws… are subject to frequent change, either by the tacit consent of the people, or by the subsequent enactment of another statute.”  Congress and Ms. Yellen would be well-served to read Title 14 of the Codex in which the Romans were good enough to recognize that civil society depends on real contracts and obligations to insure that those who take on obligations understand the nature of their obligations and are bound to restitution in the event that those obligations are unfulfilled. 

Ms. Yellen’s aspiration for the Fed to be emancipated is going to take more than a Lincoln proclamation.  If the markets have told us one thing over the past 5 years it is simple:  the Fed’s lofty goals of employment and inflation management have been weighed in the balance and found wanting.  Employment has not improved and the record number of employment-eligible people who are without adequate compensation is growing at an alarming pace.  And inflation control is an illusion supported by a mutual-assured destruction currency cold war that is allowing manipulation to override the markets that would be evidenced if Free Trade was Free.  While the U.S. has barely returned to 2008 levels in critical areas like Gross Fixed Capital Formation (still well below 2007 levels), the GDP effect of this fixed capital utilization is nowhere near where we were in the mid 2000s.  So, despite pumping trillions of dollars into balance sheet expansion, the desired effect has not manifest.

Moving the goal posts doesn’t win the game if the players know the rules and are paying attention.  Like the Affordable Care Act and the Administration’s response thereto, failed policy is not ethically managed by stating that the rules no longer apply.  The Roman Civil Code clearly recognized that The People will either have “confidence” or they will “rebel”.  If an emperor figured that out fifteen centuries ago, is it reasonable for us to ask for at least equivalent accountability?

It’s time for each of us to realize that our persistent neglect to holding public officials accountable for lack of oversight and integrity is not their failure but our own.  The impulse to criticize is nearly universal.  The integrity to accountably operate evidencing a better path is the road less traveled.  And on this day, in the yellow wood, I, delighted not to travel both, am not standing long and looking down both.  The one well-worn, fair and heavily trodden is one that has led to massive asymmetries of wealth and inhumanity.  The one whose leaves are untouched and overgrown for want of wear is a different path, one less traveled by, and traversing that path has, for me, made all the difference.

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Starting From Scratch

I’ve spent a considerable amount of time this week reviewing the creative writing of Australia National University’s Fellow of State, Society & Government in Melanesia Program Mr. Anthony Regan.  Having “specialized in constitutional development” in Papua New Guinea, Sri Lanka, East Timor and Uganda, Mr. Regan has recently submitted a proposed “transitional mining act” to the Parliament of the Autonomous Region of Bougainville. 

And, for those of you who are not familiar with Bougainville, a little history lesson is in order.  Under a dubious entitlement mandate from the United Nations following the Second World War, the Australian government decided that it needed to take possession of the massive metal reserves in the island at the end of the Solomon chain and, in 1967, confiscated Bougainville for their exploitation while ‘facilitating’ independence for the state of Papua New Guinea.  Over the well-documented opposition of many local communities, the Australian Administration and their appointees in the Papuan Administration, the 1967 Bougainville Copper Agreement Act became a supra-Constitutional Agreement between a territorial administration and Bougainville Copper Limited.  As if to prove that they knew that they were violating international legal standards, clause 4 of the amended Act states that “no other law of Papua New Guinea, affects this Act or the Agreement.”  In clause 5 of the amended Act, the Prime Minister (remember, the State had not yet been established) is granted the power to exclusively administer the Act without any consent, approval, or any other law.  In other words, the Australians, in what amounts to unlawful territorial seizure, enacted a law above ANY sovereign law directly expropriating land for their exclusive economic exploitation.  Oh, and for their $5 million trouble of exploring the mineral reserves, the Company (BCL) had to pay the extraordinary sum of 1.25% of ‘applicable revenue’ from the mine! 

In an elaborate scheme reminiscent of the first theft of Bougainville’s assets, Mr. Regan has complied with the wishes of his paymasters and drafted a new mining bill that preserves nearly all the abuses embodied in the 1967 Act.  To add insult to injury, his proposed bill reinforces the corruption quotient by burying in Clause 26 the nullification of the over 200 provisions with the simple empowerment of the Autonomous Bougainville Government to act unilaterally and without consideration of any law as it wishes.  Using his “constitutional” expertise, he’s taken to the U.S. government’s definition of Constitutional Law – if it is expedient, do it and tread on the Constitution to get what you want (thanks GW and BO!). 

Now Mr. Regan and BCL (along with Rio Tinto – the 54% owner of BCL) want to take advantage of the pro-autonomy movement in Bougainville and pull off another heist of gargantuan proportion.  But they forget that the world is more interconnected.  And while they and the BCL shareholders desperately want to take another malevolent trip around their merry-go-round of abuse, they are ignoring the simple fact that their “advice” and extra-governmental manipulation are now available for the world to see.  

Whether the Panguna Mine opens or not is an issue that should be decided by the citizens of Bougainville – including those who participated in the armed uprising in 1989.  But more fundamentally, we should examine what it would take to run an ethical, transparent operation – one that doesn’t require Australian academics to serve as advisory mercenaries to launder unethical behavior in the name of progress.  If the citizens of Bougainville determine that they would like to see their land utilized for mineral extraction, that’s a call that they should make fully informed of all the facts.  They should be informed of the state-of-the-art in development, mining, environmental management, power generation, and market participation at all capital levels.  If Rio Tinto and BCL want to be candidates as future operators, they should step up to the damage that they’ve already done and evidence their candidacy for action not by manipulating the law but by being responsible citizens accountable for past harm. 

This week, Australia has a chance to amend a blight on its post-War legacy in the Pacific.  It can intervene in this miscarriage of due process.  Together with the citizens of Bougainville, Australia can start from scratch and see if it can win in the full light of day rather than in the veiled obscurity of manipulation and corruption.  We’ll see.

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