Sunday, June 22, 2014

Between a Rock and a Siren


Situated on an island between Aeaea and the Rock of Scylla lived the seductive Sirens.  In the heroic journeys of Odysseus and Orpheus, these mythic seductive beauties figure mightily into the character refinement of the epic.  In the former, the Sirens were temptresses placed in the story to prove the capacity to suffer through the agony of self-imposed enticement.  In the latter, the musical enchantresses served as the counterpoint to the power of a persistent and inviolate "sweeter song".  These beauties enticed men to their watery graves by singing so sweetly that their irresistible attraction overcame self-preservation and security. 

I was reminded of this iconic myth at a recent conference.  Young men and women from across the globe were invited to "pitch" their entrepreneurial ventures to panels of acclaimed executives and investors.  One by one, they came on stage for their 3 minute catwalk.  They were attired in Silicon Valley chic.  Jeans, canvas sneakers, t-shirts, and, if you're lucky, a sport coat.  Fifteen years earlier, none of them would have been thusly attired and, for that matter, no one in their communities would have ever engaged in a solicitation for patronage without a remarkably different decorum.  But never mind that, we were in the Mecca of the Valley rather than the peninsula.  Each one of these "entrepreneurs" entirely conformed to their perception of what it takes to attract monied moths to their light and were doing their level best in projecting their desirability.  Longing for someone or something that would evidence non-conformist thinking or bold risk taking, I was offered tiny glimpses of possible exception but, in the main, saw global youth joining the vampirish chorus of the Sirens.

But what was more disheartening was what was being promoted as exciting new ventures.  Rather than identifying new technologies and utilities, the majority of creativity was localization of a narrow swath of social media where the only innovation was the millennia-old cipher called language.  From match making to job hunting to gaming - apparently what the Middle East, Asia, and Africa really need is apps in local languages.  And through the cunning use of - hold your breath for this - language - whole enterprises could be born!  Really?  Our brightest, most creative minds should be celebrated for coming up with the idea of translation?  And seriously, is the 25% unemployment of youth in the Middle East going to be solved by having an Arabic Linked-In or Monster?

When Edison decided to electrocute dogs, horses and elephants to prove that Westinghouse's idea of alternating current (which we now use safely) was dangerous, he was unaware that in a few short years, his proof-of-danger exhibition would usher in a more "humane" form of execution for humans.  On August 6, 1890, William Kemmler's 17-second almost death by electric chair was eulogized as evidence that this "culmination of ten years of work and study," allowed humanity to "live in a higher civilization."  He also couldn't have imagined that his epic battle with Westinghouse - in which Nikola Tesla played the role of mercenary pawn - would exterminate inquiry into distributed energy in any form other than electricity.  His innovation in harnessing current would in fact form the dominant animating force for human endeavors and concepts like wind, water, light, heat and gravity would be marginalized to the point of endanger relegated to serve as "alternatives" subjugated to feeding the electric currency-based industrial and social mandate.  Innovations that once harnessed manual, animal, gravitational, magnetic, thermal, and kinetic forces were enslaved to the 60 Hz, 120V archetype and to this day, "over unity" and "free energy" still holds itself hostage to "proofs" based on shoving energy into a 130 year old utility.

Social media and digital content - a miniscule fraction of the illegitimate offspring of the electrical age - now reign supreme.  Our modern innovators are encouraged and seduced into applying their energies into progressively narrower applications of an already constrained memetic scaffold.  But the Dawkinsian suggestion that replications of cultural units (memes) should be discerned and integrated based on the mandate that best serves their culture or "host" seems to be violated in the fact that we're celebrating the trivial at the expense of the consequential.  More Angry Birds in any language is just an expanding flock of mentally disengaged humans.  The Words-With-Friends substitution for conversations with friends does not a community make.

My friend Ed West has come up with a platform called Hylo.  It's a collaborative environment in which individuals can express their capabilities to act and serve and define places in which they could use provisions, support or assistance.  Ed's trying to suggest that all human endeavors - digital or analog - will benefit from an environment in which capacity and capability are ever-present and sufficient to meet the needs of all actors within a system.  And since its nascent stage, "it" (the impulse and the model) has manifest in real estate redevelopment, social spaces, inter-personal relationships, new media, and a host of other outcomes.  It's using the digital utility to enrich the analog world - not be dependent on or enslaved to it.  Ed's toiling to evidence a model for what it means to step away from the conformity impulse and - with Sirens as back-up singers - follow an Orphean tune.  

Monday, June 9, 2014

Thinking Small-ish


I was recently critiqued for thinking "too big".  My activities apparently exist on a scale that is "too big" to understand.  This assessment was most intriguing as it came from a person specializing in leadership.  As I reflected on this assessment, I found myself entering a rather intriguing vortex of inquiry. 

It's become fashionable to speak in hyperbole in Occidental business and civil society circles.  We're the "most connected generation in human history"; "unprecedented in our capacity to collaborate"; participants in "unrivaled opportunities to collaborate and co-create"; and our linear self aggrandizement rolls on.  When we contribute to a collective effort, our tendency is to grossly exaggerate our contribution (and its associated entitled reward).  Our "global private wealth" is greater than it's ever been according to a recent study by McKinsey with more millionaires than ever before.  Models of the Nobel Prize winning "Commons" celebrate the "longest running commons of the sea" and the "Charter of the Forest" as evidence of near eternal scale monuments to our capacity to organize great societal artifacts.  Our accepted ontological egos seem to be quite happy embracing "too big" when it comes to applauding our apparent advancement.

Like the peacock for whom displays of plumage create the illusion of vitality and grandeur on what is in fact a rather scrawny bird, I would like to suggest that the use of linear projections of "most", "greatest", "first time in human history" assertions is a thinly veiled admission of the terror of being infinitesimally irrelevant and small in all likelihood.  Fueled by our intuitive recognition of diminution of consequence and purpose we seek to inflate our delusional status at considerable personal and social peril.

Let's examine this a bit more closely.  I recently encountered an argument asserting that Christians out perform all other faiths in establishing institutions of mutual aid and civil benefit.  Devoid of any basis for this assertion save the carefully selected empirical evidence of U.S. records of donations through charitable organizations - already a biased sample - the argument was presented to reinforce a particular predisposition of its proponent.  What I found interesting was the abject failure of the argument to include the faith / religion called "The State" or the faiths and religions which, because of their ubiquitous assimilation into culture don't count as faith or religion.  While I'll certainly grant that there are numerous church affiliated hospitals in the U.S. (obviously the only place the assertion needs confirmation in a world of 7 billion), I wondered how many ashrams in India have fed the hungry, treated the sick, and cared for the ailing in the thousands of years before a certain itinerant prophet wandered the hills of Galilee and was patronized by a sword wielding Emperor a few hundred years later.  I wondered how many roads (human connection for societal formation and trade), aqueducts (public health and food security), and schools were built by tyrants and democrats alike - all relying upon the surrogated belief in hierarchical structures and faith in government.  And while those who subscribe to the notion of charity are certainly entitled to their motivations - the idea that comparative charity is relevant is divisive and unnecessary.

We're not more connected because we have social media.  Was Thomas Jefferson more connected to the world with his capacity to travel to France, speak French, read Greek, Hebrew and Arabic, then any iPad wielding blogger today?  Father Sorin - the founder of the University of Notre Dame - was capable of transatlantic relationship-building unaided by "Like" buttons on social media.  The Yongle Empire of China's 14-15th century mandate to share "all known knowledge" in flotillas equipped with libraries were more careful than Google in aggregation and dissemination of knowledge.  The Komgi in East New Britain who can listen to the movement of life in the sea from a rock atop a high mountain have been "wired" to the Earth for 40,000 years.  They perfected a commons-based economy that was over 30,000 years old before the civilization that would millennia later concoct the Magna Carta and the Charter of the Forest even settled the isles.

I think that our consensus position is to think small because we know that we've been in retrograde for a long time.  Thinking small is reinforced by dogma and faith that goes as far as to denigrate wisdom (labeling its aspiration "original sin") and pronounces that the "wisdom of the world" cannot fathom the divine.  Thinking small is rewarded by powerful incumbencies that want to cow humanity into narrow chutes in the abattoirs of labor-rent consumption.  Incremental minutia is celebrated as "invention" while quantum inquiry is suppressed and marginalized. 

But here's the irony.  I find that all the people I meet who advocate for thinking and acting "small" actually are overwhelmed with how many constraints they need to keep in their awareness.  In fact, the smaller one thinks and acts, the more likely it is that hyper-acuity attends fear of position, failure, scarcity, and extinction.  Far from small, the "small" thinker and "small" actor is constantly bombarded with messages of limitations and is more busied and distracted than I've ever been.  When I want to solve a national or global challenge, I spend less cognitive effort than I observe in the intricacy attendant to a conversation on someone's cousin's chemotherapy or a cat with diabetes.  I think that "thinking small" is actually maddening in its regressive complexity.  I think that acting incrementally and small involves rejecting a myriad of bests and nows for the exasperation of serial tedium.  The analgesic for the mental pain: hyperbolic statements of being the best, most advanced, and superior!

Nonsense.  Our world needs people who are willing to take bold action at a relentless pace.  We need audacity to animate ourselves from our collective coma inflicted by the constant pounding of conformity.  The greatest challenge facing humanity at present is to have the courage to open the aperture of our awareness to see that the ever-present unfolding of reality always conscripts us to engage to our fullest potential and if we rise to the challenge, the rewards are incalculable!

Monday, June 2, 2014

Too Many Holes in ‘Balance’ Sheets


I’ve been asked many times to explain my rationale behind not following consensus practices of reporting corporate performance with ‘traditional’ accounting.  “Yeah, I get that you do unusual things but just show us the financials that we’re used to seeing,” I’m asked by people who have just determined that the businesses that I’ve created are among the most fascinating and innovative they’ve seen.  I used to be amused and now I’m just vexed by the illogic of such a request.  The field effect of what I’ve done around the world is visible.  The powerful technology I’ve architected and deployed is working and continually proven.  The countless ventures around the world that have launched, revitalized, or restructured using a unique methodology are bearing fruit.  Then I’m asked to explain this unprecedented effect using a metric that was never a component of its manifestation.

I am reminded of my frustration as a member of the radiology faculty at the University of Virginia when we were working with technologies enabling digital mammography and use of gamma emitters to detect early stage breast cancer in young women.  One of the FDA’s leading advisors from a famous northeastern medical school in the U.S. (also on the advisory payroll of one of the largest medical device companies making conventional mammography machines) convinced the agency to require newer, better, technology to be tested for equivalence against inferior conventional technology.  “Substantial equivalence” was required to take precise instruments and sub-optimally run them to prove that they were “as good as” an antiquated standard.  This industry-endorsed (and funded) malpractice and wilful illogic cost the lives of many young women who suffered from aggressive cancers invisible to inferior x-ray technology.  Threats to incumbent infrastructure could only be eradicated by proving that the measured out-performance was “not equivalent”.  People died.  Hospitals and doctors were essentially bribed into acquiescence.  And the band played on. 

Russia and China look like they’re about to execute a 30 year Russian natural gas supply agreement “worth $400 billion”.  This proposed deal makes sense – reportedly – for China as it solidifies another critical energy source for its growth objectives.  It fulfills Russia’s desire to find a cash-rich buyer alternative to the contentious European buyers who have been a constant complexity made worse by recent events in Ukraine.  But I find it fascinating that both China and Russia seem to be ignoring the fact that this $400 billion deal is not going to cost or be worth what is alleged at present.  Why?  For the simple reason that a thirty year anything will not be what is proposed.  Ukraine has been independent since 1991 – a short 23 years.  From the 1654 Treaty of Pereyaslav and the 1686 territorial dispensations in the “Eternal Peace” between Russia and Poland which was neither eternal nor peace to 1991, over 10 million Ukrainians died in wars and famines directly caused by their benefactor caretakers.  Not surprisingly, the cost of pumping natural gas from Russia to Europe across Ukraine did not factor in the nearly 350 years of pent up animosity resulting from abusers carrying many flags.  Is it reasonable to assume that 1.34 trillion cubic feet of gas will flow from Russia to China for the next 30 years without political or social upheaval?  Absolutely not.  Do we know the true cost of Ukrainian transshipment of gas?  No!  But we do know that it’s cost hundreds of lives, the frail global economic cooperation of the former G-8 (now G-7) and G-20 (now G-19?), and massive energy price ambiguity harming manufacturing and employment across the Eurozone.

What is the price of political risk?  What is the price of social upheaval?  Is it simply the collapse of purchasing power parity or gross domestic product?  No.  Can the much ballyhooed risk premium in commodities and utilities “price” the certain instabilities built in short term impulses with long term malignant consequences arising from neglect of knowable instabilities?  Absolutely not.  And can business and finance credibly offer extensions of current accounting models that adequately describe current realities and future opportunities and threats?  The fact that we’ve been globally incapable of emerging any economy post-2008 into a robust intervention-free actor is evidence that our metrics fail… Empirically! 

Therein lies the irony.  Using our consensus metrics, we can see that our metrics are insufficient.  Yet we still press on as though their use will somehow manifest their adequacy.  Central bank intervention has provided ‘cheap money’ to enrich the paper wealth of a few and push a greater proportion of the celebrated ‘middle class’ into retrograde.  The economically poor?  Forget about them.  Their ranks are growing and their voices are being strangled.  While high end retailers like Tiffany and LVMH grew at 9% in the first quarter of 2014, sales of the bottom 99% of homes in the U.S. fell by 7.4%.  Elitist retailers like Walmart saw sales fall by nearly 5% while discount retailers at the lowest price points grew over 7%.  The middle of the distribution is getting weaker while the tails are getting stronger.  In other words – the economy isn’t working for the economy. 

So back to my opening.  Why would I build a business that is predicated on, or assessed for performance on a system that does not work?  How much did it cost me to uncover the fact that Rio Tinto and its closely held corporation Bougainville Copper Ltd is seeking to defraud Papua New Guinea of over $50 million?  It cost: years of plane fares, days of interactions with citizens of Bougainville including ex-combatants that multi-lateral peace keepers refuse to engage, three years of direct opposition and discouragement from members of my own organization, courage of my family in the face of ostensible security threats, creative economic modeling and years of forensic accounting, joyful community engagements, a partnership with a great business partner, and countless other inputs.  And in over 30 years, did anyone with any budget do the same work?  Absolutely not.  How much did it cost to build a financial structure that could flow billions of dollars of capital to business by rationalizing their intangible assets in a fashion that banks could understand?  Was it millions of dollars of investments?  Was it tens of millions of dollars of revenue?  No!  Others tried the same and have come up discredited and empty.  It took bold initiatives in the public arena, ridicule and celebration for taking a contrarian stance against the propaganda of mainstream economists, the tireless effort of loyal members of a team who saw their professional colleagues taking lucrative shortcuts to personal enrichment at the expense of the mission, advanced computational analytics that are unrivaled in any industry – analytics that actually outmaneuver super-computers that cost taxpayers in excess of $300 million each year and bureaucracies on both sides of the Atlantic that cost industry over $4 billion each year.

In a few weeks, my quantitative equity fund will celebrate its first year anniversary of active trading.  Measuring corporate stewardship and quality of innovation alone, we have outperformed the large cap equity markets in a year where the same markets have reached their all-time peaks.  In short, we’ve beat the best at their own game.  And by a considerable margin.  Does that make our metrics right?  Absolutely not.  But what it does show is that the market is not measuring what drives it.  And this incomplete view directly harms wealthy and poor alike.  Public dollars are spent chasing ephemeral objectives rather than addressing legitimate social and infrastructure needs.  Countless illusions are created around businesses that will never bear fruit.  From crowd-sourcing to Goldman Sachs, the measurable ignorance premium is growing and we’re the worse for it.

It’s time to account for it ALL – the stuff that we use, the frameworks around which we organize our impulses, the wisdom that we integrate, the capital we use to empower our efforts, the tools we use to build and propagate our impulses, and the success or failure we celebrate or shun!  A more complete embrace of reality will have a quantifiable effect.  Let’s throw out the sheets that no longer service us and recalibrate our world.