Losing Your Head...Sir Walter Raleigh Style

Three hundred and ninety nine years ago today, “Sharp Medicine” ended the life of Sir Walter Raleigh in the Old Palace Yard at the Palace of Westminster.  Having been the beneficiary of Elizabeth I’s interest in exploring and colonizing “remote, heathen and barbarous lands, countries and territories, not actually possessed of any Christian Prince or inhabited by Christian people,” Raleigh was one of the more colorful characters in the 16^th century expansionist era.  Given a 20% interest in all riches he found, stole, privateered or came by in any fashion by Elizabeth, his fortunes were as volatile as his lodgings.  In and out of the Tower of London for all manner of offenses, the amplitude of his state swung wildly – at one time prisoner in the Tower only to arise to Parliament and the Queen’s court.

I had the great fortune of seeing Sir Walter Raleigh’s last correspondence with King James I written on the eve of his execution which is in permanent archive at Hatfield House.  This rare moment was at the generous invitation of Robert Cecil, 7^th Marquess of Salisbury during a stay at Hatfield.  In rather grandiose flair, Raleigh’s letter regaled the regent with every manner of flattery and, at the bottom of the page, wrote his final plea for mercy – oozing with his self-deprecating unworthiness -  in the smallest script I’ve ever seen in quill and ink.  The flattery got him nowhere and a few short days later, his head was embalmed and given to his widow.

Now while the fascination with Sir Walter Raleigh’s life and grisly death could occupy pages of intrigue, I’m particularly interested in the notion of one legacy of his life (and what may have very well contributed to his death).  That’s the notion of the 20% commission granted by Elizabeth I.  To this day, this rather arbitrary commission lives on in modern compensation.  And what I find fascinating is the historical context in which this number appears to emerge.  You see, in Jewish and Christian traditions, 10 percent (also known as a tithe) were the conventional tax for the ecclesiastical establishment.  So it is somewhat intriguing that a Christian regent would bestow on a single individual a sum equivalent to twice the tithe due the church.

In Mesopotamia, the notion of a 20% rate of interest was considered commonplace for several millenia.  It is thought that the Abrahamic traditions’ opposition to usury may be in response to the oppressive effect this rate placed on the poor and disadvantaged.  The Council of Nicea confirmed the prohibition on usury in 325 CE.  For the next 900 years, various Popes allowed those with resources to charge interest or take collateral in rather direct correlation to their need to be on the take from the wealthy to fund their aspirations.  In Italy, France and Spain, rates of up to 20% were not uncommon with the church taking its cut and the moneylender taking his.  The 10% tithe never seemed to be in question.  To make money, a lender would need to charge the church’s 10% and then add his take on top.  But Elizabeth’s 20% commission seems to establish an explicit authorization for an individual to personally benefit without cutting the church in on anything.

Today, the amount of money charged by investment managers retains this 20% legacy.  What gives rise to the notion that an individual’s actions represent one fifth of the community interest of their actions?  When Sir Walter Raleigh confiscated the treasure-laden Spanish ships, was he entitled to 20%?  By the Queen’s order, yes.  But when King James I negotiated peace with Spain, was he entitled to Spanish treasure or commission – unfortunately for him, no.  Twenty percent motivated Raleigh to act out of self-interest.  Today, 20% motivates many investment managers to act also out of self-interest.  One wonders if the 20% interest is in part a presumed tithe (the community interest) and in part an incentive.  And when these are given equal weight, one wonders if the self-interest piece can blind the community interest.

I’ve been amazed, during my recent meetings with investment managers in the U.S. and Australia, the number of managers who have entirely lost the plot when it comes to fiduciary responsibility.  Mangers and the sovereigns that regulate them are turning a blind eye towards fees that are assessed to the public for returns that fail to even match passive market returns.  Large asset managers and financial services firms are racing each other to the bottom on fees in recognition of the fact that they are delivering no value to their clients.  But no one is looking behind the curtain to see where these same firms are making their money.  How can billions and trillions of dollars of pensions be managed by firms that are charging negligible fees?  When Exchange Traded Funds (ETFs) are now charging less and 1/10 of one percent, how can the titans make it?  Tragically, the public is being duped into believing that their investments are being managed for nearly nothing.  But this is NOT the case.  What the public doesn’t know and cannot see is where the incentives are.  When a fund fails to return passive market rates, someone somewhere took that money.  And the SEC, ASIC and regulators around the world are not probing this because they’re either unable or unwilling to deal with the answer. 

How much is management worth?  Is Elizabeth’s 20% correct?  Well, it seems that the answer to that question is a resounding, “It depends.”  If someone is committed to transparent delivery of value, it may be correct.  If someone is hiding their real benefits while misleading the public into thinking that they’re doing something, it is certainly wrong.  And on this anniversary of Sir Walter Raleigh’s cerebral dispatch, it may be prudent for us to use our heads while their affixed and start paying attention to the fact that someone is preying on the public ignorance.

x

America Saudi Divorce...Save it for another Knight

In my 10 Years Hence lecture The Emergence of the Fusion Economy at the University of Notre Dame’s Mendoza College of Business, I correctly forecast (to the month) the “news” that has markets buzzing this week.  When Chief Economist and Managing Director at High Frequency Economics Carl Weinberg posited that “yuan pricing of oil is coming” it was neither news nor newsworthy.  Yes, China and Saudi Arabia struck the framework of an economic cooperation agreement in March – 10 years after my forecast of the exact event.  But it was not news then either. 

And because the “fake news” is being treated as “news”, the derivative concerns are as much in error as the attribution of news.  This is not about the nearly $800 billion in oil related dollar exchanges.  This is much more profound.  But let me first digress.

I learned a very important lesson from my divorce.  For three decades, I operated under the mistaken assumption that my loyalty and fidelity were a gift to my marriage.  With the world echoing with the cacophony of dishonor and infidelity, I thought that I was offering something of great value.  Unfortunately, I didn’t realize that these were assumptive attributes in my partner.  “Of course you're loyal,” she thought.  “That’s what being married means.”  She couldn’t value what I worked at each day because I conflated my identity as a husband with loyalty and thus saw both devalued.  She didn’t devalue me.  She just didn’t value my principle attribute the way I wanted.  And I couldn’t understand why my efforts were not seen as effort worthy of recognition.  For the past 73 years, the U.S. has assumed that the world agreed to Bretton Woods accords.  While the U.S. variously subsidized and manipulated commodity supply and demand across the globe, it blamed others for “manipulating” currencies and market dynamics.  Like my partner, the U.S. assumed loyalty just is – an effortless assumption requiring no recognition or appreciation.  Like me, the rest of the world said, “Hold on a minute!  We’re sick of being taken for granted.”  Let me abundantly clear.  Neither party is “right”.  What is wrong is the absence of dialogue and deep, reflective understanding on fundamental expectations.

We live in a perverse society in which the narratives of chivalry echo in our collective value consciousness for a few more waning moments.  A gallant knight swears to serve and protect.  In the rare event that he does, his beneficiaries go back to the feast when the danger is past and the knight rides off alone with nothing but his elusive monastic honor – something he values, something for which he trains each day, something that sets him apart…and curses him to a life of being alone.  Saudi Arabia was our knight.  With the reciprocal agreement that the great democracy of the west would prop up the monarchy of the peninsula, the U.S. could go about its global hegemonic consumptive orgy without genuinely appreciating the Saudis.  Sure, they were invited to a ball or two.  Sure, the U.S. gave them access (at a price) to some powerful weapons.  But, at the end of the day, the Saudis did not get to sit at the table with the kings.

And now, with the One Belt One Road diplomacy of another global power (and, notably with a new king in Saudi Arabia), China is not “compelling” a damn thing.  They are sitting down with a respected new leader, treating him with respect, and notably NOT taking his resources (or loyalty) for granted.  This is NOT about oil or petrodollars.  This is about a generation of economic model transformation.  This is about the end of Bretton Woods.  It’s America’s great divorce.

Remember, with oil wealth came purchases of arms.  And with arms came alliances.  The U.S. has long confused alliances with loyalty.  Just because someone is an ally does not mean they’re LOYAL to you or your cause.  It simply means that in a pragmatic assessment, alignment is self-serving.  And the dissociation of oil trade from the dollar means that China is now positioned to be an arms, chemicals, and power technology supplier destabilizing MUCH more of the U.S. economy than simply the “petrodollar”.  China is not making a “power grab” as much as they are recognizing the consequence of the U.S. government’s blatant disregard for the value of loyalty.  And into that emotional void, they realize that engagement and cooperation lead to a “harmonious relationship” (language that the State Council has lavished on their partners for years).  Harmony sounds a lot more attractive than hegemony.  And while there’s no question that China is being shrewd, it will be a massive shame if the U.S. doesn’t pull itself up and examine its role in the great divorce.

From August 23-25, 2017, Chinese Vice Premier Zhang Gaoli signed about 60 agreements worth about $70 billion with Saudi Arabia.  Xinhua reported that the agreements covered investment, trade, energy, postal service, communications, and media.  What most Western media overlooked was the rather important meeting with 31 year-old crown prince Mohammed bin Salman.  Sure, he’s the crown prince and the President of the Council for Economic Development Affairs.  But most importantly, he’s the de facto Minster of Defense and China knows that very well.  Giving this young prince honor and respect is an excellent example of a Confucian / Lao Tzu diplomacy that eludes the West.  We just witnessed the first step on the Journey of a Thousand Miles.  And, because we don’t value loyalty, we didn’t report on it.  That’s the real news.  And it will have more than a 10 years hence effect.

x

Digital Educational Delusions - Adding ROOTs and LEAVES to STEM

Bill Gates and Paul Allen dropped out of Harvard and Washington State University to build Microsoft.  Oprah Winfrey left Tennessee State University in her second year to become a media juggernaut.  Michael Dell’s pre-med aspirations were abandoned at 19 to start Dell Computers.  Steve Jobs couldn’t last a year at Reed College before following video games to a pilgrimage in India where he got the inspiration for Apple.  Mark Zuckerberg left Harvard after two years to start Facebook.  Oracle’s Larry Ellison dropped out of University of Illinois and University of Chicago – completing neither – when his CIA project at Ampex led to one of the greatest corporate successes in modern times.  JetBlue Airways founder’s learning disability made the University of Utah inaccessible to David Neeleman and he became a titan in the airlines.  Henry Ford ended his academic career at 16 and built the largest business of his time.  Buckminster Fuller was expelled from Harvard for “irresponsibility and lack of interest.” Walt Disney left school at 16 and developed one of the world’s most iconic media brands.  Richard Branson, Elizabeth Holmes, Adele, Evan Williams… these and hundreds of others who have achieved unprecedented commercial success made impulsive, adolescent decisions which shape all of our lives today. 

Do these social, technological, and industrial icons demonstrate the irrelevance of education?  No. Do they demonstrate a fundamental challenge incumbent models of education?  Absolutely.  The data is irrefutable that secondary and tertiary education offers socialization advantages at a far greater level than it equips young people to thrive in a rapidly changing environment.  Those who graduate – heavily indebted in most of the G-20 through their own investment or the public subsidies upon which they rely – do earn more than those who do not.  However, Australia has lower return on investment than the OECD average and lags the U.S. and the EU[1].  In a study of over 900 tertiary education providers in the U.S., nearly 1/3 of arts and humanities graduates were economically worse off than had they invested the same amount of money in U.S. Treasuries[2].  In short, education is not serving most of its consumers with genuine ROI.  And, employers are increasingly bearing the brunt of this social disservice – and are noticing. 

Education must transform to be relevant.  The student of the 21^st century will not be known by professional affiliation or “proper noun” titles.  Rather the paradigm for the 21^st century will take inspiration from Buckminster Fuller’s comment:

“I am not a thing – a noun.  I seem to be a verb, an evolutionary process – an integral function of the universe.”

What does this mean?  First we must examine the core capabilities of the fully functioning education ecosystem.  As the abject failure of pundits and analysts have shown in the recent U.S. Presidential election, if you measure consensus assumptions, your conclusions are entirely wrong.   Therefore we must examine the context in which we are commencing inquiry and engagement rather than assuming we know that linear assumptions that are required by consensus.  In short, before we can analyse, we must learn to sense and perceive the analyte!

Therefore, we examine the nature of the student of the 21^st century.

In a world where industrial production STEM obsession has resulted in Japan’s over 20-year retrocession, we must have explicit programs and experiences which challenge antiquated models of inquiry by expanding digital and analog powers of observation.  From this point, we can begin to understand systems and formulate models to understand and critique them.  This gives rise to explicit, integral value awareness and exchange that informs the design and techno-experiential frameworks in which we operate.  This fully sensory, fully engaged, and values-based engagement builds the foundation for the productive and purposeful global citizen.

From this awareness, we then directly see the emergence of a new paradigm for what would have been considered “disciplines” or “core competencies”.  Now, rather than focusing on reifying existing assumptions, we invite the student and faculty to engage in mutual development integrating the six domains of functional relevance for the enterprises of the 21^st century.

These serve as our organizational principles for the pedagogical and experiential delivery of education in the 21^st century.  And this does NOT mean that we take the broken system we have and "digitize" or "virtualize" it.  "Digital" learning in the 21st century is as laughable as it would have been to have "electrical" learning in the middle to latter 19th century.  When when mistakes a Utility for a Social Mandate, the consequences are inhumane and destructive.  STEM failed to produce critical thinkers and collaborators - it produced iPhone consensus zombies doing automatable tasks.  And it ignored the ROOT (Regenerative Organismal Orthogonal Training) and the LEAF (Life Experience Application Facility).  When we make the mistake of imagining only that world that industrial consumption dictates, we put our very existence in jeopardy.  

Our times call for high degrees of adaptation.  Our modes of education and socialization reward consensus.  It's time to prune the stem and let a new shoot emerge.

---

[1] http://theconversation.com/university-a-worthwhile-investment-for-individuals-and-society-oecd-31516

[2] http://www.economist.com/news/united-states/21600131-too-many-degrees-are-waste-money-return-higher-education-would-be-much-better

Nuclear Twilight's Last Gleaming

Seventy two years ago today, aboard the USS Missouri, the Japanese government signed the Instrument of Surrender bringing to an end their involvement in World War II and permanently barring them from engaging activities that would allow them to “re-arm” for war.  This week, without provocation from Japan, the Democratic People’s Republic of Korea launched a missile that flew above Japan.  Within hours, the global media was buzzing with the prospects of re-arming Japan.  In 1945, the U.S., China, the United Kingdom, the USSR (Russia), the Commonwealth of Australia, the Dominion of Canada, the provisional Government of France, the Kingdom of the Netherlands, and the Dominion of New Zealand stood united in their resolve to end hostilities, to defend the Pacific, and to work towards a common good in the world. 

Seventy two years later the situation is quite altered.  The U.S. is engaged in militant rhetoric with North Korea.  Russia and China are both advising negotiations and talks.  The U.K. is so engaged with its protectionist agenda it is blissfully on the side-lines.  Australia is spending record amounts of money to subsidize U.S. and European defense contractors to arm themselves and the region with “strategic assets” for a defense doctrine that is patently absurd.  Australia is preparing to defend itself against the threats posed by China and “terrorists” despite the fact that its largest trading partner is China.  Over 34% of Australia’s exports go to China followed by 15% to Japan.  No other trading partner even makes it out of single digit percentages.  Oh, and for the record, Australia intends to spend 5600% of its export trade with France for its submarines and 1100% of its export trade with Germany for its land vehicles.

Hiroshima (August 6, 1945) and Nagasaki (August 9, 1945) are the only two populated cities to be bombed by the United States of America with nuclear weapons.  The same U.S. that insists that North Korea shouldn’t have a bomb is the perpetrator of history’s only evidence of the use thereof.  With an immediate death toll of estimated between 129,000 and 220,000 people and with a subsequent physical and mental toll in the millions, this unspeakable technological depravity took the murderous business of war to an inconceivable scale.  And while perpetrators and historians alike defend the barbarism as a necessary evil to end Japan’s resolve in the war, the seduction of mass destruction went viral.

So when, over the past few weeks, President Donald Trump has sought to goad North Korea into precipitous foolishness (on both sides, let me assure, both sides), I reflect on some of the mercantile facts that seem to be eluding the real and fake media alike.

Saudi Arabia and the United Arab Emirates are armed by the U.S.  Rounding out the top 10 countries we officially arm are Turkey, South Korea, Australia, Taiwan, India, Singapore, Iraq, and Egypt.  Oh, and then there are the top recipients of foreign military financing leading off with Israel, Egypt, Jordan, Pakistan, and Iraq.  Isn’t it ironic that Pakistan – a nuclear power and nuclear proliferator – is being financed by the U.S. while they are also inextricably linked to the North Korean nuclear program?

Over 1/3 of the world’s disclosed arms trade originates in the United States making it the largest exporter of armaments. 

The U.S. doesn’t export arms directly to North Korea but would certainly like to have ample reasons to diversify its sales to Japan, Taiwan, and South Korea.  And with 40% of its weapons currently flowing to the Middle East, market diversification is vital to the commercial interests of the U.S.

Missile defense systems are big business.

Having evidence of the “need” for missile defense is a vital market development tool.  Remember how valuable Iron Dome was for Israel?

Missile intercept technologies are a much more competitive marketplace and owning the future of missile defense business will put the U.S., Russia, China, India, Israel, and France in fierce competition for dominance. 

The world has lived with the experiential specter of nuclear weapons for 72 years.  This menace to human decency fueled the Cold War mercantile interests of a few for the better part of 35 years.  We’re now in an era where the diffuse enemies created by cartographers, ideologues, and despots (on both sides, really, on both sides) do not conveniently create industrial efficiencies.  Variously arming thugs – from Toyota’s ubiquitous presence in land transport for all manner of vigilantes, to unmanned air, land and sea vehicles, arms and explosives – industrial scale defense contractors would benefit from a more robust and sizable threat.  And missile defense is just the right target.  Let’s face it.  If we really cared about state and non-state actors having nuclear weapons, we’d realize that Pakistan’s Punjab Province nuclear arsenal is as likely put in service to North Korea or Iran as it is to “deter” India from attacking.  And Pakistan is capable of putting their nuclear arsenal in any neighborhood on the globe with submarine and surface delivery efficiency rivaling the U.S., Russia, or France.  We don’t want a “nuclear free” Korean Peninsula.  We want armaments markets that serve our commercial interest.

So 72 years later, have we as world citizens learned anything?  Precious little!  Using our taxes, governments are rattling sabers in an effort to instill fear and uncertainty in the populace.  Unquestioningly, a cowed public is taught to fear and surrogate their sense of security to the architects of the menace in the first place.  And, when we all blindly call for defense and security, the government acting on our behalf and with our blind confidence, obliges with more technologies of terror.  This genius, nefarious system has been working with remarkable efficiency for thousands of years.  And it will until we realize that putting real people under flying missiles does not advance an ideology or moral “right”.  It merely puts real people in real harm.  It’s time for us to realize that governments and their benefactors are NOT serving their headline missions.  Instead, they’re creating instability into which those who prey thereon can serve their gluttonous ends.  And it’s time, on this anniversary of the end of hostilities, that We The People stop falling for the lies and start building our common defense – namely, erasing fear and rage with engagement and understanding.  Salam, Pax, Paz, Nyimbur-ma, Achukma, Heiwa, Peace, Heping, Mir, you get the point.

xx

Terra Nullius of the Mind - Anyone Up for Change?

“Pleased as we are with possession, we seem afraid to look back to the means by which it was acquired, as if fearful of some defect in our title; or at least we rest satisfied with the decision of the laws in our favour.”

Commentaries on the Laws of England (18^th Ed.) Vol. 2.  1823.

King George V, King of the United Kingdom and the British Dominions and Emperor of India was the grandson of Queen Victoria.  In 1910 under his seal, the British Parliament passed a series of laws dictating the form and substance of education in Australia – laws that to this day define much of how Australian education is delivered.  This same King and Parliament, during the same period, were operating with the sublime consciousness that determined that Aboriginal children should be wards of the State justifying the kidnapping of children from their own parents.  This same King and Parliament promulgated a series of laws in which the term “Caste” and “Half-Caste” were commonplace.  To this day, the system that King George V put in place in Australia serves as the defining structure for the caste-based education system of Australia in which the elite and entitled are afforded one path to learning while the disenfranchised are ushered into trades and technical skills that don’t require “disinterested thinking” (Sir Eric Ashby, 1946).  

Portrait at Government House, Melbourne

Today, King George V is dead but his legacy is alive and well.  His Education Act 1910 (Law No. 2301 enacted 4 January 1911) put into motion what is now the Technical and Further Education (TAFE) tertiary education system in Australia.  Organized to efficiently provide the labor to extract the wealth of a land colonized under the genocidal terra nullius principle which suggested a land and resources that belonged to no one, technical education was not for the betterment of the mind or of the learner.  Rather, as with the doctrine of terra nullius, it presumed that the rank and file Australian – the common laborer – was as vacant-minded as the land they were trained to pillage.  And missing from the vast reaches of the humanity of the citizens of Australia is the equivalent to Mabo v. Queensland (1992) and Wik Peoples v. The State of Queensland (1996) – the sentinel cases that began to unravel the carnage wrought by the colonial unconsciousness. 

When enacted, the technical education mandate was to confirm basic competency for laborers to meet the proficiency standards for the tasks they to which they were to indenture their lives.  During the Depression in the 1930s, the system took on a broader social mandate as a means to deal with rampant unemployment.  In 1957, the Committee on Australian Universities warned that technical education, “may be led by a false sense of values to try its hand at producing another type, the professional engineer or technologist and so lessen its effectiveness for its own particular task.”  As recently as 1998, the Review of Higher Education Financing and Policy concluded that technical training institutions should teach “competencies and maintain the strong focus on skills and higher education should cultivate attributes.”  And with Liberal and Labor Governments from the 1970s to the present assuring the population that technical education should be seen as an equivalent alternative to higher education at the university level, each of them have failed to add substance to the diaphanous veil of caste separation implicit in the very system they allege to laud. 

For every recognition of the structural inadequacy of the educational and social engineering model, the response is to form a commission, generate a report, and then perpetuate the same social and commercial irrelevance as the preceding, equally ineffective impulse.  To read the history of technical education in Australia is to hear the echo of Charlton Ogburn’s 1957 quote misattributed by an Australian scholar to Emperor Nero’s Arbiter Gaius Petronius (AD66), “we tend to meet any new situation by reorganizing...a wonderful method it can be for creating the illusion of progress while producing inefficiency and demoralization.”  Ironically, had either the public or the government familiarized themselves with the actual writings of Petronius, they could have encountered the quite apropos admonition, “A man who is always ready to believe what is told him will never do well.” (Section 43 of Satyricon). 

What makes the emancipation of the mind as important as the reconciliation with the First Nations?  What difference would it make if serious reform were contemplated in the education framework of Australia? 

Well, let’s start and the uncomfortable reality that faces the caste system.  Australia doesn’t have – nor has it ever had – a holistically functioning economy.  From the first Dutch navigator Willem Janszoon (1606) that rocked up in Perth to the celebrated First Fleet, to the gleaming titans of today’s skylines in Brisbane, Perth, Adelaide, Melbourne, and Sydney, Australia’s terra nullius legacy has meant that its celebrated history has been that of a price taker – not a market maker.  And while we can localize, assemble, and extract with trained and qualified aplomb, there’s no part of the Australian ecosystem that fosters the ability to integrate synthetic critical thinking with foresight to play in a market leading role at transformative scale.  From mining and agriculture to financial services and defence, Australia’s default posture is to acquire and assimilate. 

But here’s the trouble with that.  Purchasers of services and technology surrogate their confidence on their suppliers.  The resident talent to approach the world through synthetic systems engineering logic and commercial industrial experience is anemic.  We can spend $150 billion in France, Germany, and the U.S. to defend ourselves against a threat manufactured by those who sell us their defences but when I discuss hydrogen gassing batteries, anti-cavitation propulsion, combined projectile land vehicle vulnerabilities, cyber security, concentration capital risks, or intelligent covaler conductive laminates, I’m met with incredulity, or worse.  In a world of competency-based training (both at the technical and university level), critical assumptions are accepted as stipulated by an anonymous other rather than independently examined or verified.  (The very gullibility Emperor Nero’s chief aestheticist warned against in the first century.)  The two largest defense procurements in Australia suffer from known vulnerabilities (both technical and financial) and the response is inaction.  Over $400 billion dollars are invested in pensions and superannuation funds in the U.S. and U.K. and no one can explain why performance lags retail index market performance (or the undisclosed fees that Australian’s are charged).  In short, the university elite are sure that there’s a technical someone somewhere doing their job and the technical skills masses assume that there’s someone smarter than them looking over the details.  And NEITHER is right or capable of verifying the assumptions.

Someone else.  Somewhere else.  It’s no surprise that a system built by a near Russian oligarch who sat on the throne in Britain in 1910 expressly for the purpose of taking riches from a land he presumed was devoid of any one has failed modernity.  It is sad to see the amount of effort poured by so many into the maintenance thereof.

But what if we had a different narrative?  What if we built the next 150 years about regenerating the land through the engagement of ALL its inhabitants?  What if we explicitly built an economic and social model around the repatriation of value that has been distributed across the globe?  What if we had the audacity to become social and technological innovators and exporters to a world currently in the throes of moral and leadership bankruptcy?  What if we defended ourselves not against manufactured foes that serve ideologues but instead against the predilection to classify, denigrate, and appropriate?  What if our national infrastructure was conscripted to serve as a model for – not an acquiescent beneficiary to – the rest of the world?  Sound interesting?  Has a better ring than “caste”, doesn’t it?

Well, to do so will require more than an overhaul of the education system and its delivery.  It’s going to require each individual to step up and engage in a more thoughtful process.  We’re going to need to learn about the matter and energy around us – not for its export and commodity value but for its regenerative engagement.  We’re going to need to examine our worldviews and the metrics that constrain our insight and emancipate the same to enhance our awareness.  We’re going to need to learn from others – not rote facts and figures but deep structure narratives of new organizational thinking.  We’re going to re-evaluate our values so that we don’t keep running up a real-estate bubble, inflating the already over 180% indebtedness to earnings gluttonous consumption, and indenturing our future for acquisitions and procurements that serve the needs of others oblivious to our own.  We’re going to need to engineer rather than acquire the innovations we use taking advantage of the vast open-innovation resources that the world has laid at our fingertips.  And finally, we’re going to have to seriously decide that our liberty doesn’t come when we diminish and indenture those around us.  It’s time to replace minimum competencies with informed confidences.

Or…we could go to school again on Monday and keep serving an anonymous monarch.  It’s time to choose

Risk Aversion: A Statistical Primer for Public Servants

This is a rare post for me as it is the prequel to a series that I suspect will grow more macabre in each installment.  My grandfather, William H. Parsons Jr. advised me to, “never attribute to malevolence what is ignorance.”  This aphorism – variously ascribed as the work of Goethe, Jane West and many others – was likely known to my grandfather as his contraction of the Albert Camus observation in his 1947 work The Plague in which he states:

“The evil that is in the world always comes of ignorance, and good intentions may do as much harm as malevolence, if they lack understanding. On the whole, men are more good than bad; that, however, isn’t the real point. But they are more or less ignorant, and it is this that we call vice or virtue; the most incorrigible vice being that of an ignorance that fancies it knows everything and therefore claims for itself the right to kill. The soul of the murderer is blind; and there can be no true goodness nor true love without the utmost clear-sightedness.”

Therefore, in the interest of addressing the vice of ignorance, I offer the following.

It is nearly daily that I hear public servants and bureaucrats admonish me that, “Australians are risk-averse.”  This, along with other dismissive excuses for inaction and breach of public duty, has become a fascination of mine leading me to wonder if statisticians in Australia forgot to teach classes on two-tailed distributions of hypothecated metrics.  “Risk” is a deviation from an expected return or outcome.  And deviation happens both in the positive and negative sense.  After living in this country for nearly 9 months, I can confidently state that I’ve seldom, if ever, found a population more risk tolerant (and blind) than Australia’s public sector.  The risk that the public sector takes with the profligacy of a drunken sailor is the near certainty that the public in Australia will be incapable of holding them accountable for avoidable ill-advised actions. 

Clearly, Australian investors will never find out that their pensions and superannuation funds have returned less than passive market exposure would have delivered.  And not just a little less.  Median performance for superannuation in 2016 was about 7.7%.  During the same period, internationally managed passive investment products returned over twice that amount.  But Australians would not want the additional $33.8 billion they could have received last year and the Australian Treasury wouldn’t have wanted the taxes on those earnings. 

Clearly, Australian tax payers will not ever concern themselves with the over $30 billion spent annually on procurements ranging from submarines to combat vehicles to ships and planes.  At no point will the public learn of the propulsion and battery systems in submarines that could expose Australia’s navy to detection with known counter-measured technology included in the current plans.  That is no point until a submarine filled with Australians is sunk in the South China sea at which point we will officially mourn the loss of life that was potentially avoidable today.  At no point will the public know that local businesses supporting the land and sea vehicles will last only as long as the procurement after which known patent estates held by European defence companies selling to Australia will block or control Australia’s export market.

Oh, and before I go any further, two advertising and media relations agencies have advised me that the Australian public and media are unable to see the “relevance” of information like this. 

But, I digress.

Risk is deviation from an expected or modeled outcome.  In a country that tells itself dogmatically that it has had 26 years of uninterrupted economic growth – purportedly holding the record for the longest recession-free growth for developed economies – it’s nearly impossible to discuss risk.  That’s because, like the definition of “risk”, Australia also has a univariate view of the term “economy”. 

Let’s get something abundantly clear.  Australia is the world’s 22^nd largest exporter.  And over 60% of the exports from Australia have little to no value add.  In other words, the $191 billion in exports are largely Iron Ore, Coal, Petroleum and Gas, Copper Ore, Gold, Aluminum, Nickel, and Zinc.  The price for these – that’s right – the thing that fuels the “economy” are not set by or in Australia.  By luck of the geology on land (who’s elders past and present, we give lip-service to respecting), the economic record is based on the rest of the world’s demand for the periodic table we live on – not the industries we build or the products that we design and export.  And over the past 50 years, Australia’s Economic Complexity Rating has fallen from 22 to 53. 

Unfortunately, what this means is that Australia is allowing inertia – not innovation – to animate its economy more than many other countries.  And this is VERY RISKY!  Somewhere between 30-40% of Australia’s investment capital is off-shore in funds that are underperforming reasonable benchmarks.  This is VERY RISKY.  Australia’s reliance on imports of technology and usable products – in excess of its exports – means that we’re dependent on a world more than being depended upon.  Oh, and in the recent comedy of education budget conversations, Vice Chancellors are quite ready to admit that the “education sector” is being underwritten by foreign students  With about 1/3 of the student population from overseas paying as much as 400% the Australian tuition rate, one can readily see that Australia’s leading institutions of higher learning are reliant on the influx of students from overseas – not on the productivity of innovation and scholarship from their institutions – to keep them afloat.  Risk averse?  Hardly! 

Allow me to make the following uncomfortable observation.  Stewardship and public accountability are in short supply across the globe.  That’s not unique to Australia.  But the reflexive defense of a status quo alleging risk aversion puts Australia on a collision course with the likes of Japan – an economy that hasn’t recovered from the 1998 financial crisis.  Because, like Japan, unconsidered complacency fueled by exogenous factors that are not explicitly acknowledged leaves Australia vulnerable to significant and possibly permanent negative growth risk.  Ireland’s tax haven economy (now busted by the EU and U.S. tax appetites) lasted 78 quarters.  It’s GONE.   Poland’s “cheap” labor market worked until accession was in full bloom and those 77 quarters aren’t coming back soon. 

But not to worry…recent studies published by Drs. Michael C. Clarke, Duncan Seddon and Mr. Greg Ambrose in the Ausimm Bulletin (December 2014) have suggested that Australia’s next “mineral boom” may be to dislodge the waning U.S. monopoly on Helium.  And pumping that out of the ground and into the illusion may keep the music playing while the public continues to lose. 

[Image from AnaesthesiaUK http://www.frca.co.uk/article.aspx?articleid=100375]

With Laws Like These, We’re In Our Own Prisons

When Gordon Moore published his article “Cramming More Components onto Integrated Circuits” in Electronics in 1965, he had no idea that he’d promulgated a “law”.  He was making a series of hypothecated observations limited to semiconductors in electronic machines.  And his observation – far from being a “law” – was an interesting convergence of a technical and technological challenge to the 1767 Sir James Steuart law of Supply and Demand (also not a law) built on John Locke’s 1691 treatise, “Some Considerations on the Consequences of Lowering of Interest and the Raising of the Value of Money.”  Locke, Steuart, Adam Smith (1776), Alfred Marshall (1890) and Moore and their respective “law” contributions are appropriated in every conversation about the “Knowledge Economy”, the “Digital Age”, and the “Internet of Things” with wanton negligence both of their substance and their extrapolation. 

I have been watching the flying wing race formerly known as the respectable America’s Cup – once one of the world’s most storied sports.  Chasing the Auld Mug since 1851, sailors pitted their mastery of the elements against one another to demonstrate valor and tactical brilliance befitting the Cup.  In 2010, the America’s Cup was raced in multihull 27m boats and in 2013, CIA engineer turned billionaire Larry Ellison poured money and lawsuits into the once elegant cup transforming racing into one of the saddest comedies of our time.  Now the winged hydrofoils reach speeds over 44 knots (50mph) at over 2.5 times the speed of the wind!  But comically while technology made the boats flying machines with horizontal airplane wings it also introduced another alarming feature.  The race cannot be conducted if the wind is too strong.  That’s right.  All the digital design brilliance cringes in the face of… you got it…, THE WIND! The race must be sailed in winds ranging from 5 to 25 knots.  And if you’re a Kiwi, you know how devastated you are to win multiple races only to have your sailing victory vacated because Oracle’s boat couldn’t handle the wind speed… in a RACE!  We’ve engineered our way into a world in which a sailing race can only tolerate moderate winds.

Those who extol the misapplication of “Moore’s Law” or the “Law of Supply and Demand” share a common fallacy.  These social maxims describe a constrained two-dimensional projection of a system in which analog reality is necessarily rejected.  Supply and demand presumed that people would consolidate their views of value exchange through the sole utility of state-associated monetary units.  Supply never calculated the regenerative or replenishment costs of inputs and required a persistent state of colonial expropriation of energy and elements from enslaved lands kept in abject poverty and political impotence.  Demand never contemplated conscious use as opposed to linear consumption to extinction.  Missing from the “law” was the human corollary of commons-based access and beneficial use exchange.  Moore presupposed hegemonic reliance on electricity without contemplating a world in which light, acoustics, kinetics and other energies may be superior and more widely applicable.  And in both cases, by reciting these conjectures as dogma, what passes for science, technology, innovation, and progress serves to further limit and attenuate the consideration of competing and superior options as to do so would represent an existential threat to the very fiber of manipulated social engineering – the communications and monetary system. 

At a recent conference, I was impressed with the negligence of “thought leadership” in perpetuating the catechism of digital sclerosis.  Ironically, I pointed out that the convergence of these two laws – digital fiat currency and exclusive digital animation of systems upon which we depend – means that we as a society have provided state and non-state actors a single point failure which is easily exploitable.  Now a miniature electromagnetic interference can appropriate or erase our economic system and disrupt the very nature of living.  Rather than heterogenous multi-modal adaptive systems, brittle susceptibility is the unchallenged sequalae of what we call innovation and advancement.  Reckless prattle from the celebrated likes of Elon Musk and Stephen Hawking about the dominion of machines – that the robots will one day turn on humanity – is relevant only in a world in which humans continue to build their prison cells and shackles using ever shrinking, increasingly myopic views of matter, energy and their digital organization.  Artificial Intelligence is an oxymoron at the collective scale.  Those who extol or fear it are probably least capable of apprehending the nature of intelligence.  For intelligence comes not from the diminution of contemplated options but from the expansion thereof.  It comes from the considered critique of unquestioned assumptions.  Oh, and it comes from actually reading the fantastically narrow sources from which sweeping generalizations and “laws” are derived. 

The America’s Cup is a harbinger of the Moore’s Law fallacy.  Yes we may get more precise.  Yes we may go faster.  But we will be less capable of handling the analog diversity of the real world and it will be that very world that will welcome us to reconsider our arrogance with dynamism at speeds exceeding 25 knots.  Time for the intrepid sailors to muster to humanity’s stormy dawn.