Monday, September 29, 2014

Inherently Inanimate Individuals


In his collaboration with E. J. Applewhite, Synergetics: Explorations in the Geometry of Thinking, Buckminster Fuller postulated that if we don't allow our minds to exercise their "supreme power" within the decade of the 80's, "it will be curtains for all humanity within this century."  When they were proposing what evidence conscious mental capacity would manifest they went to great lengths to critique individuated specialization and the isolating limits that it imposes on the human condition and its facility to thrive.  Multi-orthogonal interdisciplinarity at the individual and collective experience is, according to them, inextricably linked to the evasion of extinction.  If we seek to operate in isomorphic optimal performance, we, like nature must engage in radiational divergence and gravitational convergence.

So why is it that we've been seduced to atomic isolation where each of us is supposed to be a stable isotope dependent solely on monetary transactability?  Why is it that an idea begets the impulse to enclose; the impulse to enclose begets the impulse to form the individuated inefficiency of a company, group, or movement; and the form begets a demand for economic succor to succeed as mediated by the ultimate exit through sale or extinction?

A few days ago I sat with a lovely scientist who is operating at the edge of intelligent biochemical nano-scale technology.  She is passionate about finding ways to radically transform diagnostics and therapeutics so that complex human ailments can be detected and intermediated at cost and temporal efficiency.  Having found her experience with academic bureaucracy intolerable, she was encouraged to "start a company" and "file patents" based on research that was years away from commercial use.  With the support of investors and grants, she formed a laboratory, hired business people, and put in motion an interminable dance - at once seeking to pursue her science and training herself to communicate with investors and business types for whom she had mild (and at times profound) intellectual contempt.

By forced individuation, her access to collaboration was strangulated through contracts, patents and countless impediments to the flow of information and insight.  Casting her efforts towards fulfilling investor-mediated application of research at the cost her passionate inquiry harmed both her professional purpose as well as her capacity to fully appreciate the capital that had sustained her.  When asked about several companies that were intimately involved in direct competition and derivative innovation, her awareness of other actors in her precise ecosystem was significantly impaired.

I've had the privilege of interacting with numerous individuals and groups who have statements of purpose and expressions of intent that are so similar as to be indistinguishable.  But, when offered the opportunity to synthesize a geometrically complex tensile structure that could be resilient, appropriately flexible and scalable, identity and proprietary individuation explicitly preempts the evident efficiency of covalent bonding.  "We don't know who is in charge."  "How will we divide the equity?"  "How will people be trusted to perform?" These and countless other objections - all aligned towards preservation of isolation - stand in lieu of expressions of gratitude and synthesis.  At a recent meeting, the suggestion that I offer one of my trading platforms to another organization for their integration and use was met with an initial suspicion that my generosity was a covert attempt to mask a clever co-option of distribution channels.

If we seriously consider our existence, we can recognize that each of us - regardless of our metaphysical proclivities - are the organization of inert, allegedly inanimate atoms which, at some fuzzy margin, are imbued by us with animate specialization.  Where our calcium, carbon, and hydrogen cease being anonymous commodities on the Periodic Table and become Being is a puzzle that is unconsidered by most.  But what we can agree is that we are, at our organic essence, non-specialized heterogeneous amalgamations.  So why is it offensive for us to default towards intraspecies interdependence and interoperability?  Why do we draw the line of proprietary or individuation at the limit of our physical or psychic perimeter? 

We are relentlessly pursuing a rather simple model that we think makes sense.  For every "new" idea we have, our goal is to find the counterparty who can already integrate or deploy it and work with them to build a stronger existing institution rather than "creating" new.  And, whenever possible, we're looking at our existing institutions to see which, if any, can be partnered with organizations that need innovation where we can consolidate our efforts.  In short, our view is to be additive to existing impulses even when our contribution is radically disruptive.  It's too early to tell whether this is a "better" model from an economic return but the one thing that's clear:  it's much more rewarding to work with business people than to work with the noise of corporate formation.  And in the end, if the livability of a model is better then that's better all around.

Sunday, September 21, 2014

BABA…and the 40 thieves


This week's record-breaking IPO for Alibaba (NYSE:BABA) was significant for a number of reasons.  First of all, at no time in the history of modern economies has a single day wealth transfer  between capitalists and communists rivaled what just happened.  Founder Jack Ma's holdings are worth about $25 billion and with a company trading at 60X projected earnings, that number is likely to climb.  Japan's SoftBank - the largest shareholder in Alibaba (with about 32%) - and Yahoo (the second largest shareholder albeit an unwelcome and soon to be exiting one at 22.6%) are obviously delighted to pocket and book significant value for this pathway into the cave of wonders called the Chinese consumer.  Singapore's Tamasek and Russia's DST round out the top five holders. 

This deal, naysayers notwithstanding, does not represent a market bubble-type valuation nor does it signal the irrational exuberance of the tech bubble experiences of the past.  Alibaba is a business.  It makes money.  And its market outlook signals not just a high probability for growth but it also signals a watershed moment for the Communist Party's attempt to control the ideology to which they still firmly hold.  5,000 Chinese employees of Alibaba are not a significant minority on any scale but the viral effect of their capital - flowing into everything from hedonism to entrepreneurial empowerment - is a bit more destabilizing than the government currently understands.  In short, there's a lot of positive market rationale behind what happened this week on the Alibaba IPO.

But, as the children's story portends, this story is not all about the cave filled with gold in the form of Chinese e-commerce (ala Amazon) and retail (ala WalMart).  Alibaba ripped a page from a number of U.S. tech companies in creating a capital structure in its IPO that gives shareholders virtually no meaningful governance.  With Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan Chase, Morgan Stanley and Citigroup all in the syndicate of underwriters, there was little question that the offering would be fully subscribed.  Investors didn't buy the actual Chinese company for a number of practical and governance reasons.  They purchased shares in a company registered in the Cayman Islands which profoundly impacts shareholders' access to any venue for damage recoveries or legal recourse as the assets and management all reside outside the incorporated jurisdiction.  In their S-1, they disclose that the Alibaba Partnership (22 of the 28 of whom are affiliated insider managers) has the exclusive right to nominate board members.  There is no mechanism for civil or financial accountability anywhere in the capital structure. 

Among the businesses that Alibaba performs are the obvious - retail and e-commerce - but also the not-so-obvious: e-payment systems and cloud computing.  In their S-1, they disclose a major and growing dependence on technologies and businesses that they use but do not control.  When one considers the margins that have buoyed this business into its profitable position, it is notable to consider that a globalization impulse around Alibaba will necessarily put them in a position where the expediency of doing business will meet the intellectual property that others believe to own in the business of Alibaba.  When these conflicts arise - and with a stratospheric valuation, they will - how much of the wealth in this stock will flow to the company and its affiliates and how much will be "taxed" by those who believe to have the right to some or all of the wealth? 

It's reasonable to assume that none of this story is actually precisely as it appears.  The company's name comes from Antoine Galland's 18th century transcription of a likely Syrian story in Les Mille et Une Nuits.  The company's business is neither novel nor inventive.  In fact it's the proof that context is more valuable than content in the fickle world of capital markets.  The company's promoters did a fabulous job of pricing the stock low enough to make many of their network first day multi-millionaires on the back of institutions and pensions.  And we've still not seen what happens to Cassim, his gold-laden donkey, the tailor Baba Mustafa who has to stitch together what the robbers cut into pieces, the mysterious dancing beauty misericord Morgiana, and, of course, the 39 surviving thieves. 

The moral to the this story is simple.  We've just seen the poor woodcutter open the cave of wonders with the ring of the bell on the NYSE.  "Open Sesame".  Now we've got to see what happens when the myth and the legend meets the reality of a global market.  There are a lot of thieves in the forest and one day, I bet we'll see behaviors more befitting a Syrian fable than a transparent market deal. 

"Close Sesame."

Sunday, September 14, 2014

Good Luck… for a Person Like You


These words were the last words uttered by a mid-Western wealth manager and his team as they walked out of the house of an NBA superstar several days ago.  For the preceding 90 minutes, we had methodically dissected a financial report that was filled with material misstatements, opaque investment instruments, and responses to questions which were evasive and untrue.  "For a person like" - the wealth manager's racist epithet meaning "for an African American athlete who, in his early 30's is retired and unlikely to understand how he's being duped" - was the justification for:
  • not disclosing management fees;
  • not reporting actual investment returns for normal periods (like years or quarters);
  • not publishing performance benchmarks;
  • not explaining the construction of an asset allocation; and,
  • numerous negligent acts.
At one point in the conversation, when pressed on why the senior manager couldn't opine on whether a gross portfolio return of less than 4.5% in 2013 was good or bad (with a portfolio with nearly 50% U.S. equities exposure when the market was up nearly 30%), the investment advisor alleged that I simply "didn't understand the family's objectives," like their team did. 

This week the media jumped all over the latest professional athlete domestic violence cases with predictable ferocity.  In a week when thousands of women and children were beaten and abused by bankers, factory workers, accountants, politicians, and preachers, breathless coverage advised us about the desperate condition of families in professional sports.  Let's be totally clear.  Domestic violence is categorically unjustifiable.  Period!  And psychopaths - from malevolent sociopaths to religious corporal punishment apologists - are all perpetuating a culture of violence and abuse that destroys the fiber of humanity.  But we don't speak about the persistent helplessness experienced by many abusers which contributes to inflaming their terrible acts of violence.  Like having a 60+ year-old, white, paternalistic "wealth manager" steal money under the banner of a globally recognized bank and know that he can do so with impunity.  Like having "advisors" begin sentences about investments, careers, and accountability with a demeaning and derogatory preamble of "For a person like…".

When I first met Chris Uma of the Mekamui Defense Force in Bougainville, I knew of his militant activities and was warned that I should fear him.  After 45 minutes of deeply personal conversation, he and I were able to share enough information to realize that the real enemy in his world was the opaque colonial exploitation that was happening in Australia, the UK, and America - not simply from their agents on the ground in Bougainville.  No one has held the mining companies in Australia accountable for well-documented (and admitted) illegal acts.  The ASX, the SEC and the UK Serious Fraud Office have ignored every alert and notice to hold accountable companies trading on their exchanges that are in violation of national and international law.  Why?  Simple.  Because, "for a person like…" the person living around Arawa or coming from urban America our espoused civil standards of transparency, truth, and accountability simply don't apply!  And then we wonder why "they" become militant. 

Worse still, what we're unwilling to face is that while at the surface, we want to applaud what we wish were advances in dealing with racism and ethnic delusions of superiority, in fact the "for a person like…" is an antecedent to countless racist expectations of cognitive capacity, entitlement to transparency, and consensus social values.  And, while we can tirelessly roll the tape when violence and abuse erupts, there are no cameras when the systemic abusers callously rob, willfully misadvise, and gratuitously pander to those they see as the class (or classes) beneath their accountability. 

What was never supposed to happen in the predictable elitist world is that the NBA player was never going to be provided the opportunity to see the game film on how credentialed wealth managers steal money while blaming the player and his family for living an extravagant lifestyle.  What was never supposed to happen is a tenacious combatant was never supposed to be taught about stock price manipulation and securities laws violations to understand that his government - not just foreign corporations - were in fact shielding each other from accountability.  From sports agents to mining ministers - the same graft and corruption have the same effect: desperation and hopelessness.  But….

Things changed.  You can put names like Rio and Merrill in front of your corruption but that won't hide what crooked individuals are doing any longer.  You can sit in Raleigh, Columbus, Sydney, or Port Moresby and think that the veil of ignorance will never be rent.  But here's the part that you never calculated in your insular opulence.  If you're one of the world's best athletes or a military commander, you've probably got extraordinary capacities to learn and assimilate.  You've probably developed unusual capacity for strategic thinking and tactical adaptation with speed and precision that is deadened by countless steak dinners at country clubs.  And if "a Person like" is provided with the language and the strategy on how the game has been played against them, there's an outside chance that they may change the equation.  Dismissive contempt for any population has a half-life of the maintenance of segregation x completeness of ignorance.  Change one of those variables and you achieve a linear effect.  Change both and it's a logarithmic function.  And that's just the unwinding piece. 

What we're doing now is introducing a whole new calculus in which the genius of high level performance manifest in one domain can be adapted to perform in markets, political systems, and social reality.  By assuming that excellence is derived from integration and knowledge, we're not beating the system at an old game - one in which we merely change the abuser - but we're actually changing the paradigm altogether. 

Good Luck?  Where we're going, we don't rely on luck, gimmicks, tricks, or deceit.  Where we're going is a place where we're measured by the content of character rather than the conceit of consensus.  Let Justice roll down!

Sunday, September 7, 2014

Monetary Intelligence Agency

Excerpted from Golden Handcuffs - An Essay on Money

We've been indoctrinated to eschew this conversation.  And the reason is quite simple.  If you want to control a society, the single best way to do so is to create an idol so inextricably linked to everything so as not to invite the meddling examination of a conscious mind at liberty.  Make the idol seemingly innocuous - maybe out of something entirely impermanent like paper - so its gravity cannot be considered.  Let it be the seduction whereby parents first instill incentives for good behavior or household chores with their children.  Encourage religions to use it as the agency of laudable values like charity.  Separate society between those "with" and those "without" to instill the essential dogma of scarcity and control.  And before long, power, greed, dominion and oppression become entirely justifiable based on an alleged uniformity of perverted human 'nature'. 

Let's get a few things straight.  The notion that human beings can benefit from representational artifacts which signify the conveyance of value - money - has some practical utility.  Yet why are we vaccinated against challenging the consensus illusion we call money today?  What would be so dangerous if people actually remembered the obligations they've made and repaid them in appropriate form or scale?  It's appropriate to examine the underpinnings of what we call "money" so that we can tell the difference between community recognized stored value units and imposed agencies of power, seduction, and control.

Money: Imperial State Succor

In the version of history we promote to justify our incumbent systems, we see taxation and tribute as far back as the first records of civilization on the fertile plains of the Tigris and Euphrates and the Nile Delta.  As with all systems, the impulse for perpetual growth gives rise to the expediency of subterfuge schemes promoted as efficient or in the public interest.  After a certain scale, a conqueror can no longer consume the fruit of the land and the product of labor and, refusing to discern sufficiency or enough, dictates monetary tax and tribute to fund greater expeditionary tyranny.  Far from responding to the exigencies of seasonal value storage, money served as a means of anonymizing both production and the producer.  And the more imperial the impulse, the more important the control of mintage.  After all, it's not just gold or silver - it's gold and silver imprinted with the visage of the deity.

Building absolute reliance on state-controlled money serves as the most efficient basis for taxation.  Anytime money moves, its movement can trigger a moment to reinforce the hegemony of the state.  Whether it is perpetual indenture by citizenship or reification of trade and the restraint thereof, nothing serves incumbent power as pervasively as the control - and the assent of the controlled - of money.

Barely a century after the American colonies revolted against what they saw as the tyrannical British impulse to levy taxes for the explicit purpose of maintaining an occupying military force they turned to taxation regime to pay for the Civil War.  The consolidation of the banking and monetary system in 1913 with the formation of the Federal Reserve was accompanied by the 16th Amendment to the U.S. Constitution which gave Congress the authority to levy taxes and paved the way for the financing of a century of World Wars.  And to be sure, in their haste to impose income tax, the government came to the painful realization that taxing to excess those who were wealthy was a risky proposition.  With general taxation came massive concessions to the extremely wealthy who, if willing to participate in the encumbrance of the general population, would be given the capability to shield their wealth through tax deferral and outright avoidance.  It is no surprise that money - not personal character and integrity - define the players on the political landscape in much of the Occidental world. 

Emancipation from the monetary addiction is the ultimate act of liberty and, when suggested or practiced, is met with fear from the enslaved and suppression by the threatened state.  The mere suggestion that one can act and engage in community and elect to give and receive value that is not denominated is received as treason both by the oppressor and the oppressed. 

Money: Network Intelligence

Through the contrivance of monetary unit reductionism, agencies of control can understand the associations of people and their engagements.  One of the primary uses of the not for profit corporate designation is to provide governments the capacity to know who is supporting what.  On taxation forms, itemized deductions for charitable contributions, certain educational or business expenses and the like provide intrusion in the name of "savings".  Monetary and taxation authorities are relentless in their insistence of representing all human exchanges in their monetary equivalent in part to extract tariffs but equally for the intelligence of association that such exchanges represent. 

Value for human exchanges of physical reality or services and experience are assumed to be reducible to a monetary quantification.  This taxation of ephemeral value - an innovation of the Napoleonic accounting schemes in the early 1800s (also to pay for war) - encroaches into numerous social experiences.  Illusions of appreciation of monetary value of physical artifacts (like real estate) are used to manipulate national economies and provide socialized subsidies for certain sectors (like banks and insurers).  Equally, illusions of depreciation encourage consumerism and extinction of natural resources - another subtle socialized subsidy for industrial producers.  We're not encouraged to discuss either of these illusions nor the masters they serve as doing so could destabilize entrenched interests.

Money: Agency of Separation

We're bombarded with statistics (counting money) telling us of massive asymmetry in monetary wealth between strata of society and between nation states.  "Rich" - measured by horded retention of profit vs. "Poor" measured by the absence of horded reserves are ubiquitous distinctions that are recklessly reinforced by incumbent and anarchist alike.  Ironically, the unconsidered nature of the very notion of profit is the manifestation of this agency of separation. 

And after all, what is profit?  Profit can be an excessive rent charged by one party over the cumulative cost to provide a good or service to another in which case a premium is demanded by the purveyor of said good or service.  Alternatively it can serve as an explicit metric of the failure to account for the true cost of the production of a good or service.  And in both cases, incentives for perverse separation are inextricably bound.  From Adam Smith to Karl Marx, the neglect of the planet and its inhabitants are intrinsic to the odious addiction to profit.  If, for example, I am an industrialist seeking a consumer base, my objective is to pay for resources and compensate labor at the marginal rate that allows the earth and laborer to barely make it with just enough excess income to buy what I want them to have.  The more I can reinforce the perception of scarcity or the illusiveness of my offering, the more I can appeal to the aspirational identification that inspires indebted consumption.  In the best of all worlds, I can price my product just beyond the transactional cost that would be deemed "affordable" so that I can charge additional rent (in the form of financing) to actually extract greater than market value in the form of interest.

I'll post the complete link to the article when it is published upon request