Saturday, October 26, 2013

Go Jump in a River

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I suppose that I was in one of those ‘been-in-the-air-too-long hazes’ flying over Ur or Sumer en route to the Kingdom of Bahrain when I finished reading the Wall Street Journal, the Financial Times, and the Gulf News.  The monotony of the media’s coverage of troubled banks, EU protestations over U.S. spying, and, pompous morality policing (and scandals) overwhelmingly drowned out all other voices.  Loss of trust, inhumane treatment between citizens of the globe, and deceit are epidemic and, unlike the avian influenza, there’s no quarantine underway.

For the reason I cited above, I decided to break out my favorite cuneiform reference – the Code of Hammurabi – to see whether a journey over the same globe 4,000 years ago would have been much different.  For those of you who don’t have it handy, a quick refresher.  In the slightly over 280 laws, the “wise king Hammurabi” (that’s what he called himself) set forth laws that were to remain unaltered for all time.  The general themes of the law cover topics like Justice (5%), Human Trafficking (3%), Property Rights (8%), Agroeconomics (8%), Money (21%), Marriage and Prostitution (24%), and Civil Penalties (28%).  But one of the more curious elements of the Code of Hammurabi is introduced right at the beginning: Law 2 to be exact.

“If anyone bring an accusation against a man, and the accused go to the river and leap into the river, if he sink in the river his accuser shall take possession of his house. But if the river prove that the accused is not guilty, and he escape unhurt, then he who had brought the accusation shall be put to death, while he who leaped into the river shall take possession of the house that had belonged to his accuser.

It turns out that the Jump-In-A-River test was actually pretty common in Ur and Sumer and is, by no means, the comedic basis for the Monty Python Holy Grail witchcraft mob logic.  Which begs the question of whether or not the first club fitness program for ne’er do wells would have been advisably swimming lessons.  To prove one’s innocence, cast yourself into the river and, if you don’t drown, whatever allegation has been made against you is proven to be false with grave harm befalling the accuser.

Now what on earth does this have to do with the headlines that graced my interminable night of flying 1/3 of the way around the world?  Well really, it’s quite simple.  In the past 4,000 years we’ve not seemed to learn much about human behavior, integrity, or accountability.  And it may be because, like Hammurabi, we’ve been focused on a rather profane and diminished view of humanity.  Personal injury, gender-biased faux morality defined for the benefit of domineering males, and money – the preponderance of Hammurabi’s obsessions – are still prevailing themes today.  And, as was the case 4,000 years ago, life (or the indenture and extermination thereof) and monetary penalties (fines for indiscretion and abuse) are the only two tools we can concoct to mete out a wretched form of justice.  In a world in which we label those who disclose egregious violations of international law “traitors” (despite the justifiable global condemnation for the acts they are unveiling) while in the same moment extract less than 25% of JP Morgan’s 2012 net income in a settlement for massive fraud, can we really continue to suggest that the 4,000 year old system of justice is working?  I think not.

Edward Lee Thorndike is credited with the modern conception of “behavior modification”.  In his dissertation, Animal Intelligence: An Experimental Study of the Associative Processes in Animals (which happened to credential him just in time to become a psychological testing expert to qualify soldiers about to be sent to their deaths in World War I based on their measured proclivity to accept orders), Thorndike reinforced the illusion of stimulus-dependent enculturation and responsivity.  Thorndike and Hammurabi both assumed a linear view of humanity that sought to distinguish ‘man’ from savage or beast.  Thus aspiring to something just above savagery as the laudable trajectory for humanity, is it any wonder that we still find ourselves deceiving, philandering, injuring, and pillaging?

Why does a mercenary NSA spy for its paymasters?  If you seriously buy the “war on terrorism” malarkey, you’ve been watching too much Fox News.  There’s never been a war on terror; rather a war on liberty.  There has been an assault on humanity for the preservation of an unsustainable dichotomy of power dominating the masses.  The U.S. is not sorry that it spies any more than it’s sorry that it maintains power and wealth imbalance across the globe.  It has abused its technology, reputation and power and has acted without consideration of consequence.  Wrapping lies and subterfuge in the American flag does not ameliorate the abrogation of the humanist ideals of liberty and morality once celebrated as the grand experiment of the United States.    It has, in fact, proved one of Thorndike’s assertions – action precedes interaction and association.  Thorndike was credible enough to supplant his own argument about ‘connectionism’ in recognizing that behavior first happens and then is judged with pleasure or aversion. 

“I wish to also say that whoever thinks that, going along with the current which parallels the association, there is an accompanying minor current, which parallels the pleasure and which stamps the first current when present with it, flies directly in the face of the facts.  There is no pleasure along with association.  The pleasure does not come until after the association is done and gone.”

The U.S. is sorry that it got caught.  It’s ‘investigating’ how it found itself, um, … with its hand in the cookie jar (or in Angela’s cell phone as the case may be).  Which begs the fundamental question.  If 100 years ago Thorndike was able to successfully conclude that behaviorism failed a prima facie neurological and logical argument, why are his observations ignored when it comes to our current memes?  Why are we still focused on attributing blame, seeking justice, and penalizing those who violate social order and laws?  We know that this has been ineffective for 4,000 years yet we still persist in the illusion that it preserves order.  We spy to gain an unfair advantage to the detriment of all others.  We perpetually prop up and vilify the global banking system with oversight and then accommodation with such frenetic convulsions so as to insure that no one can have faith and confidence in money or its purveyors.  We abuse one another in ecstatic intimacy and benign neglect.  We are who we’ve been.

How about a different path?  How about living a life in voyeuristic transparency?  By this I mean living in such a way as to celebrate the essential best of humanity so that you see and can be seen not for the fa├žade you deem suitable but for the essence of yourself.  What if you welcomed surveillance to demonstrate the potential of a life unencumbered?  What if you conducted your affairs in such a manner as to proudly take attribution for your successes and failures?  What if you actually lived within your means and strove to insure that others could equivalently do so?  Rather than falling into the ancient social reflex of causality, could you actually see yourself living accountably?  And by this I don’t mean seeking attribution for egoic benefit.  Rather I mean taking full responsibility for the fact that you are, in fact, the perpetrator of your life – not a helpless victim of carnality or causality.  In such a world, NSAs, banks, social conventions, and the like become impotent in the face of a human with nothing to hide. 

So here’s a swimming lesson.  Survey the river to find out where the stones are.  This is important for two reasons.  First, if you choose to dive in, you may want to avoid hitting your head on the way in.  But equally important, once in the water, you may need to display your innocence and, if your arms fail you, you may need to know where to stand.  Strip off your tired clothes and come on in.  The water’s cool and refreshing.


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Sunday, October 20, 2013

Selling Souls for $13 Billion

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Word on the street is that the price of justice has just been auctioned at $13 billion.  Reportedly this past Friday afternoon, JPMorgan Chase Chairman, President, and CEO (can anyone say too many titles?) Jamie Dimon connected with the indulgences-minting Attorney General Eric Holder to see what the going rate for crime is these days.  There’s no question that JPMorgan defrauded investors.  There’s no question that they were not acting in isolation.  There’s no question that the actions they initiated were in violation of numerous laws designed to protect investors and the general public from misdeeds that triggered the Great Depression.  And there’s no question that the U.S. government has sold integrity before and has every intention of selling it again.  The part of the about-to-be-settled complaint that I find priceless is claim 686 on page 260 where the government alleges that, “GSEs justifiably relied on false representations and misleading omissions of J.P. Morgan Acquisition,” (et al) and Claim 687 on the following page, “would not have purchased the GSE certificates,” had they been exposed to the true facts.

Now grab your box of tissues because, according to the civil and criminal complaint, the “immediate victims” were Fannie Mae and Freddie Mac – two dignified, upstanding government sponsored entities whose mission is to provide “affordable housing to millions of Americans.”  The SHAME!  These poor, helpless co-conspirators (oops, how did that get in there?) were too dull minded to know that they were being duped and they – not the ignorant public – were the victims.  The Federal Housing Finance Agency’s (FHFA) September 2, 2011 complaint identifies over $30 billion in securitizations that were subject to the alleged frauds enumerated in the over 260 pages of Quinn Emanuel billable hours.  Over 50 persons and corporations listed as defendants created over 100 “investments” that turned out to be gross misrepresentations of Americans’ ability to live within their means.  Uh oh!  Who is the victim now?  Oh, and the Securities and Exchange Commission (not named as a co-defendant) reviewed the Prospectus for each of the securities and no one there is culpable?  Seriously?

Just when you thought the criminality of the system couldn’t get more outlandish, Warren Buffett dismissed crimes against investors with the pandering statement that, “If a cop follows you for 500 miles, you’re going to get a ticket.”  Well Oracle of Omaha, thank you for punctuating the indictment on the market and any sense of propriety.  “You can’t be active in a big business without making some mistakes, and sometimes they may be big ones,” he clarified. 

Mistakes?  Getting a ticket?  Warren, get a grip, man!  These are not misdemeanors and accidental oversights.  These are crimes perpetrated against millions of people for billions of dollars of damage.  And when the public is told to just look the other way courtesy of $100 million here and $13 billion there, the contempt for justice and the rule of law actually goes up.

In his testimony in January 2010, Jamie Dimon blamed most of his firm’s troubles on “some unscrupulous mortgage salesmen and mortgage brokers.”  He also stated that, “you know, that home prices don’t go up forever and that it’s not sufficient to have stated income in home [loans].”

Now before you go off and conclude that I find Jamie and the JPMorgan gang unique in their behavior, think again.  The one place where I agree with Warren Buffett is in his observation that everybody is doing it.  And there’s no question that when the government was trying to staunch the bleeding in the ’08 meltdown, Jamie was asked to pull a whale of a task in swallowing the toxic Jonahs – WaMu and Bear Sterns – and refer to both as ‘strategic business combination transactions’.  So, while we’re throwing criminals under the bus, let’s think about who was in the White House, the Treasury and the Fed and add them to our perp walk.  He played ball with the cover-up of government endorsed fraud and, in a warped moral contortion, could actually blame the government for a chunk of his problems.  Oh, that’s right, he has!

If the U.S. wants to gain a modicum of credibility for the rule of law, Attorney General Eric Holder and New York Attorney General Eric Schneiderman should walk away from the $13 billion and actually take the real list of defendants to court.  But that would actually demonstrate that the victims weren’t; that the public harm was actually the public’s economic indiscretion orgy coming back to bite all of us; and, that the system hasn’t gotten one bit better since 2008.  There will be no justice in this case because there cannot be any.  In his A Theory of Justice, John Rawls postulates that people determine their perception of justice behind a “veil of ignorance.”  Worse still is a public where justice is ignored in cold, sterile contempt for the rule of law.  Our recent debt drama in Washington, our neglect for our own accountability, and the collective cataracts that blind us to what is being done in our name for our own ‘benefit’ are all symptoms of our incapacity to apprehend morality.  We have, in fact, sold our souls.


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Sunday, October 13, 2013

Render to Caesar

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Silver is the instrument and measure of commerce in all the civilized and trading parts of the world.  It is the instrument of commerce by its intrinsic value.  The intrinsic value of silver considered as money, is that estimate which common consent has placed on it, whereby it is made equivalent to all other things, and consequently is the universal barter or exchange, which men give and receive for other things they would purchase or part with for valuable consideration: and thus, as the Wise Man tells us, Money answers all things.

In his 1691 treatise entitled “Concerning Raising the Value of Money”, John Locke laid the foundation for the single most pervasive and destructive myth of his time and of ours.  Ironic that this text was the opening of an attempt to advocate for the Parliament to actually increase faith and confidence in sovereign monetary systems – a novel and tenuous proposition at the time.  In the same manifesto, he paved the way for Adam Smith and others who would come to see the productivity of humanity through the distortion of rented anonymous labor for which humans prostitute their lives until their disability or, more often death.  Paradoxically, while the White House and Congressional Republicans were exchanging epithets about each other’s dereliction of responsibility ignoring the self-evident reality that the capital exoskeletal remains of the U.S. economy are rapidly desiccating, I was listening to a cacophony of those who would seek to change the world clamoring for monetary funding for their endeavors.  Projects that would power civilization by harnessing energy from the Earth and cosmos, would nourish, shelter, and hydrate the world – technologies that could be harnessed for ‘free’ – all were held in embryonic suspension waiting for monetary sufficiency to set them “free”.

John Locke was wrong.  His progeny are wrong.  And the charade in Washington D.C. is also wrong.  On the 100th anniversary of the Federal Reserve, we know that the core assumptions derived from Locke are grossly flawed.  We know that the Fed has not succeeded in its publicly stated mission of controlling and facilitating a healthy labor market and controlling inflation.  But further, we know that the current theatrics do nothing but confirm that no one in D.C. (nor in their European counterparts) is yet willing to confront the central failure inspired by Locke’s maxim.  Our shared problem is not the cost of energy, the size of our national debt, or the tirelessly maligned capital intermediaries.  Our problem is our addiction to Locke’s maxim.

Just a quick reminder.  When the Federal Reserve was born, the long-dated asset (the 30 year Treasury) was meant to serve as a stabilizing economic keel for the economic ship called the United States.  In its first maturity cycle, we entered the Second World War masking illiquidity with massive wartime consumption.  In its second maturity cycle, we had the combined suspension of the Bretton Woods gold standard and Congress and the White House paved the way for foreign governments – including the Communist People’s Republic of China – to purchase our debt and call it an “asset”.  In the third turning, we had a string of atrocities in September of 2001 which distracted the nation from the grave statements made by the Bush Administration regarding “trillions” of dollars of fiscal holes in the coffers of the country.  And, when the government was unable to respond, it turned to the assets held by citizens – their homes – and induced the abuse of mortgages as ATMs which in turn blew up in 2008.  The “monetary system” that we extoll as our succor has, in fact, never completed a full cycle without war or manipulated intervention and has never stood on the full faith and confidence of American productivity.  Rather it has relied on propaganda and inducement of foreign interests to be buoyed as the most tolerable illusion.

Einstein is quoted to have stated that, “No problem can be solved from the same level of consciousness that created it.”  In the company of those who seek to transform our energy dynamos from centralized fossil fuel combusting grids to whirring magnets and toroidal vortices, Einstein’s quote is the staccato to the underlying pulsating beat of Tesla adoration.  And to be sure, both of these brilliant minds were both genius and fodder for the industrialist hegemony into which they were born.  Both were set upon by those who sought to control the mercantile future of their work and both were manifestly dependent on purse strings to their own undoing.  I find it fascinating that in all the adoration of Nikola Tesla, J.P. Morgan is the villain.  With all his brilliance, did Tesla genuinely remain ignorant of the source of the funds that were his remuneration?  Did he really think that capitalists in the late 19th century were overcome with such a philanthropic sense of humanity as to not desire a metered power system?  Was his genius, and that of so many suppressed and derided inventors to follow, so monotonic as to ignore the ancient truism: “Render to Caesar what is Caesar and to God what is God’s?”  Not at all.  The desire for the coin of the realm was too loud a siren to ignore and, when recompense was due, lately acquired morality had departed.

So here’s my adaptation of Einstein’s postulate.  I offer it as my Archimedean Theorem VII:
No systemic breakthrough can be provisioned solely reliant on the same currency that maintains the incumbent status quo.

Think about it.  We want politicians accountable to the electorate but we fall for those who have spent the most donor money in their campaigns.  In the name of peace, we acquiesce to persistent terror.  We want connections with people so we intermediate flesh with Facebook and Skype.  We want knowledge so we drown ourselves in the edited, curated content Google chooses to render visible.  And in a room full of would-be inventors for a “new” humanity, references to “non-disclosure” and “patent” out-numbered the clarion calls to collaboration.  Why?  Because that which separates us and ‘protects’ us is beholden to money.  Must we accumulate the life-blood of the system we deride because in our hands we’ll do better?!  Hogwash.

Now let’s be abundantly clear.  Money – a transitive and temporary unit of stored value – serves a vital role in intermediating time and pulsatile seasons of production and consumption.  Money provides exceptionally efficient neutrality in denominating social consensus in transactions.  But money as judge, jury, and executioner of ideas, technologies, social benefit or power attribution is an offense to a mercantile system.  It is a utility devoid of wisdom, ignorance, or any other attribute.  And its utility, when celebrated as the artifact of supreme importance, is lost in its obsession.  Now is the time for We The People to call John Locke’s bluff and start answering the exchanges between humanity with values that are as diverse as humanity’s capacity to apprehend.  Only then will conscious enterprise stand a chance.


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Saturday, October 5, 2013

Hashtag #Don’tFallForIt

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In their audited financials, Twitter vividly reveals one of the lessons clearly NOT learned by the market in the faux ‘tech’ bubble of the late 90s.  From 2010 to June 30, 2013, the 140 character “conversation” platform has lost over $181 million on revenue of $705 million.  This money-losing corporate enigma is seeking to raise $1 billion on a projected valuation of nearly $15 billion.  And, if history is any indication, they’ll get a swarm of investor interest for their IPO just in time to have a Facebook-style swoon.  In a time when Facebook, Instagram and others are suffering backlash for pushing advertisements onto social media platforms and in an era where Google and Bing are increasingly ineffective and unreliable given search engine optimization algorithm result manipulations, the Twitter S-1 filing relies on many of these rejected ‘business strategies’. 

Twitter states that it has “6 issued U.S. patents and approximately 80 patent applications on file in the United States and abroad.”  Being a geek, I wanted to check out the Twitter portfolio and, as of October 5, 2013, the United States Patent & Trademark Office records two patents issued to the Assignee Twitter Inc. (8,448,084 and 8,401,009).  To find the rest of their patents, you have to weed through acquisition records that are not publicly indexed – something that the average investor will not do (nor their advisors).  And, the two that they have publicly associated with their name have already drawn the attention of other patent holders (including infringement allegations by TechRadium, Inc) along with a recent lawsuit by Cooper Notification Inc.  Adding sales, promotion, video, or news feed as push features – all contemplated in the S-1, will vastly increase the size of the bulls-eye on Twitter’s little blue tail.

Now Page Mill Road legal sensation Wilson Sonsini Goodrich & Rosati, P.C. has certainly done their customary diligence on the proprietary rights of Twitter, its current, and proposed future business.  But what they may have overlooked is the potential plaintiffs who could be waiting in the wings with rights that a profitable Twitter could experience coming back to pluck their feathers – patent holding firms like Microsoft, IBM, Intel, Research in Motion, Nokia, Cisco and others.  During Twitter’s money-losing launch and ascent, 1,812 patents have been issued to third parties including over 580 that include direct reference to the platform.  Goldman, Sachs & Co, the lead underwriter for the IPO (along with BofA Merrill Lynch, Allen & Company, J.P. Morgan, Deutsche Bank, Morgan Stanley, and CODE Advisors) have no underwriting standard that includes an independent review of S-1 filing’s statements about the proprietary rights surrounding the businesses they promote to investors.  And in a world where fighting over intellectual property is a certainty, this opacity directly harms investors.  However, as the Securities and Exchange Commission turns a blind eye to this issue, they’ve got no reason to care.

Why is it that Twitter, like the hundreds of ill-advised IPOs that have preceded theirs, continue to extoll the merits of unprofitable business models, ignore the proprietary landscape into which their plans are directed, and seduce investors with the siren song of meteoric casino returns?  One simple reason: fees.  If you take a look at the S-1, you quickly see that the “sell-side” promotion of this venture – like many others they collectively promote – generates gargantuan fees for the promoters and advisors.  It lands a couple people on the stage at Davos or TED to talk about “innovation” and the “digital economy”.  The problem is that we don’t need more of these types.  And the only thing that’s digital is the certain loss that investors will experience when the avoidable risks surface.

Twitter’s IPO is another sell-side win with a buy-side yawning loss crater waiting to swallow the blind capital of Vegas-style managers.  #badidea.


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