Sunday, March 25, 2018

In the Image and Likeness of What God?


For the past week, I’ve been on an observer mission.  I was generously invited to Rwanda to witness the African Continental Free Trade Area (AfCFTA) Extraordinary Session of the African Union.  Among the many events of the week, I took part in the AfCFTA Business Forum promoted under the title “Leveraging the Power of Business to Drive Africa’s Integration.”  Witnessing the sage pluck with which H.E. Olusegun Obasanjo, Former President of Nigeria, confidently challenged sitting Presidents to improve their knowledge of business and the world was poetically brilliant theater.  The polished sagacity of H.E. Emmerson Mnangagwa, President of Zimbabwe responding to journalists with flawless reference to constitutional rule of law was legendary.  And the social adept positioning of issues like cross-border freedom of movement demonstrated by H.E. Cyril Ramaphosa, President of South Africa, put many of the deflection-oriented world leaders to shame.

But as I listened to the speeches at the African Continental Free Trade Area Business Forum on 20 March, 2018 and as I traveled to universities, businesses, and ministries this week, I kept hearing Genesis 1:27 echoing in my mind.  Into What Image and Likeness is Rwanda Being Crafted?  When the Germans saw the region as a coffee production opportunity, was that a Rwandan vision?  When the Belgian’s saw the region as an agriculture and religious colony, was that a Rwandan vision?  When Louvain Catholic University’s Reverend Canon Achille Salee and F. Delhay conducted the geological surveys to provide the basis for Rwanda-Urundi Tin Mines Company (1930) and the Muhinga-Kigali Mining Company (1934) did the casserite, wolframite, and coltan serve a Rwandan-defined vision for the land or its people?  And when UN, IMF and other Development Agencies tell Rwanda that it must be an ICT hub today, does anyone in Rwanda know the wheel or the car to which that hub is attached?  Is becoming an educated, low labor cost cog in a global supply chain the aspiration of the country or is it a necessity of the callous colonial industrial engine that eats the souls and lives of the laborer-consumer mandate?

I watched Heads of State and their agents recite the catechism of “Development” that has been the grist for the industrial colonial overlord’s mill for decades.  Without a moment of consideration, the following doctrinal invocations were hypnotically dispensed:

The pursuit of business is for the sake of profit.
The population of a place must be seen as consumers.
The aggregation of wealth by the few will inure to its distribution to others.
And of course, economic growth is the only path to a better society.

Past President Obasanjo offered the only glancing deviation from the dogma when he observed in unprepared remarks that “Education without employment is very dangerous.”

Should we lament the location in which this summit occurred?  While Rwandan President H.E. Paul Kagame has, in fact, presided over the pacification and social reconciliation of a country torn apart by colonial-power fueled genocide barely 3 decades ago, I saw a disturbing narrative emerge.  Rwandans have modeled the power of reconciliation between themselves to be sure.  And well done there!  But no voice was raised to indict the colonial influence of the Catholic Church and the largely European (and now Asians) “developers” who continue to see the region and the continent as indentured laboring consumers.  The establishment of ICT training and call centers received more attention than the reconsideration of enterprise at its essence.  If one country in Africa can finally consume and use more computers and smart phones built on the relentless trade of conflict metals from slave-labor conditions in another part of Africa, have we “developed”?  If Rwanda’s economic success comes at the expense of its neighbors, is it success?  And to be clear, President Kagame IS an out-spoken voice for a new narrative but he's constantly bombarded with loud voices reinforcing a dominant narrative that has derailed many visionaries before.

What if business was for the balanced stewardship of both resources and utilities in which the primary objective was to achieve maximum benefit with the least inefficiency?  What if social impact and reputation for quality and access were valued above the profits derived from capital and ignorance arbitrage?  After all, to be a “better market”, governments had to provide inducements to foreign corporations that include tax concessions, profit repatriation, and land appropriation.  Is that success or is it seduction?  When Africa is described as a “market of 1.2 billion people”, have any of us stopped to consider the colonial dependencies not only on what is on offer but who is doing the offering?

In my lecture at the University of Rwanda at the generous invitation of Amb. Dr. Charles Murigande I discussed the subtle – yet important – distinction between what it means to “Choose” an outcome or “Select” from what’s on offer.  To choose, I argued, is a process in which observation, discernment, valuation, and consideration are fully engaged.  To select, on the other hand, is to be presented with a series of options and rank them.  In the case of the former, the individual or community is encouraged to become highly informed and engaged.  In the latter, the individual or community is cowed into opaque motivations by anonymous actors.  In the AfCFTA summit and its appendages, selection – not choice – was on offer.  Education – defined by governments and institutions controlling the narrative – is for jobs in sectors that serve a global product and service mandate – NOT an African-defined vision.  Infrastructure is selected to satisfy the multi-national corporation’s production and distribution mandates.  After all, no one questioned whether the Africa of tomorrow could transcend the addiction put in motion over 100 years ago by Edison and Westinghouse.  Electronics are assumed, not chosen.  No one considered whether within the biome, topography and culture of Africa there are options for power, transport, health, nutrition, and an array of other opportunities that leap-frog the last century’s addictions and inefficiencies.  In short, the summit was not about Africa as the birthplace of humanity but rather the cul-de-sac of Western and Asian consumption-fueled economic models. 

If We The People want to evidence a “better” version of business, social interactions, political structures, or our own existential improvement, its time to CHOOSE wisely.  Rather than selecting from the buffet designed to make us compliantly obese, let’s emancipate ourselves to critique what’s been on offer and choose a new path.  And maybe, with a little bit of luck, Africa can model for the rest of the world A More Perfect Union!


Saturday, March 17, 2018

Don't Bother Your Father While He's Bankrupting You


On November 15, 2017, the Director of the Pension Benefit Guaranty Corporation W. Thomas Reeder told America what I’ve been saying for several years.  The PBGC and the 40 million Americans who count on it to preserve the promises made to working Americans are out of luck.  The 840,000 people served by the 4,845 failed pensions currently managed by the PBGC have seen their anticipated benefits reduced and, by 2025, the Multiemployer Program (in spite of the Multiemployer Reform Act of 2014) will run out of money. 

When the Employee Retirement Income Security Act of 1974 (ERISA) was established, the PBGC was created to make good on the promises of single and multi-employer pension plans.  Ironically, the latter typically are created in collective bargaining scenarios with unions and classes of workers (eg. transportation, construction, mining, hospitality, etc.).  Massive unfunded pensions like Sears, Nortel, Avaya, Durango Georgia Paper Co. present one form of challenge while the closure of other pensions have another.  In FY2017, 1,480 pension plans ended for companies like Kroger, Accenture US Pension, Bright House Networks, INOVA Health Systems, Samsonite, Sunoco and institutions like Deseret Mutual.  The unfunded risks are self-evident.  If a plan doesn’t have assets, PBGC has to cover these costs.  But when plans are terminated, the premium income from those plans goes away.  And while the investment allocation to Public Equities returned 17.6% in 2017 helping to diminish some of the program’s deficits, the extremely low fixed income returns (0.7% in 2017 compared to 10% in 2016) spell on-going trouble for investment income.  The $75 billion deficit facing PBGC means U.S. pensioners are blindly going into an illiquid future and it was spelled out for all to see… and no one seemed to pay attention.

Oh, and one of my favorite bits from page 40 of the FY 2017 Annual Report was the adoption of new “generational mortality tables” that offered the encouraging fiscal stimulus of “shorter longevity” decreasing the presumed liability.  That’s right, part of the official statistics about when PBGC runs out of money is buoyed by the fact that new data suggests that you’ll live shorter lives!  And where you live those shorter years will matter if misery loves company.  Forty-three of America’s 50 states have pension funds that are underfunded.  Pennsylvania, Colorado, Connecticut, New Jersey, Kentucky, Illinois, Oregon and Minnesota are all vying for the unenviable position to out do each other for breaching the public confidence of their pension programs.  While the Fed plays around with raising interest rates (a few fractions of percentage points which will cause equity markets to go down full percentage points), the pension cliff these states are facing is too politically charged for policy-makers to discuss.

But if the several billions of shortfalls here and there aren’t bothersome, Brian Riedl’s The Entitlement Crisis Ignored article in the National Review (March 1, 2018) echoes the alarms that I’ve been raising in Inverted Alchemy for nearly a decade…only louder.  By adding the interest calculations on the funding of the Social Security and Medicare shortfalls I’ve discussed, he projects a whopping $82 trillion “avalanche” that will bury the U.S. economy and economies dependent thereupon.  He concludes with this ominous observation:
Frédéric Bastiat long ago observed that “government is the great fiction through which everybody endeavors to live at the expense of everybody else.” Reality will soon fall like an anvil on Generation X and Millennials, as they find themselves on the wrong side of the largest intergenerational wealth transfer in world history.

If you’ve made it this far into my post, you’ll also know that I find it desirable to make tangible suggestions about how to go about offering a positive outlook where most pundits see the problem.  And, despite the tone of this communique, I would offer that, as a point of departure, you’re already more solution than you know.  Like many other observations I make, this post is not drawn from my extrapolations of loosely woven strands of logic.  This is the incredulous reality that We the People are being told that the promises upon which we rely are being broken already!  By reading this, you’re at least capable of inquiring into what can be done.  But that’s not enough.

There are three approaches that we can adopt.  In varying degrees, we will whether we chose them or not.  But as with most interventions, the choice to constructively engage prior to crisis is far more desirable (albeit less frequently engaged) than waiting until calamity befalls us.

Over the past 5 years, I have established and run an investment fund – Purple Bridge Management – that provides evidence that informing investment activities with non-consensus information can lead to superior market performance.  Over the past year and a half, we’ve replicated the evidence of this in the CNBC IQ100 U.S. equity index.  In this case, by measuring what we call Innovation Alpha, we can identify companies that are capable of exceptional performance based on their ability to create, aggregate and deploy innovation.  Together with others, we’re demonstrating that financial data doesn’t tell the whole story about the prospects of companies and that measuring other factors that are opaque to the market provides a more precise way to achieve investment returns with no additional risk.  Our pioneering development of Intelligent Alpha has clearly demonstrated that consensus beta – letting the market dictate through size what is best – is a suboptimal path out of interest rate and equity market manipulated deficits.

There’s a big world beyond the reach of most of us.  It’s a world with billions of people who have been marginalized and neglected in the last 250 years of Adam Smith’s industrial imperialism.  Across Africa, Asia, and the other Americas, these people live with the capacity to influence the future of energy, agriculture, water and other essential elements of life.  Engaging with communities of diversity now will build networks of resilience for the unraveling future of the consumer-fueled industrial insanity surrounding us.  And the old models of indenturing resources through old debt and corruption are giving way to newly informed strategies of engagement.  Out of sight neither means out of mind nor out of the reach of information parity.  In short, the informed local is a new reality best met with collaboration and engagement – not with ignorance arbitrage.

And most of all – the illusion of hording for a “future” will end with this generation.  There isn’t enough to pay $400,000 for medical bills per retiree when they deposited less than $150,000 in their life.  Getting really clear on the personal responsibility each of us has to see our well-being as our own accountability rather than disease management being the public responsibility placed on others from our own neglect is the only path we can take today to get our public pensions through the next decade.  Comic isn’t it?  That the best path to financial health in the future is health today!  So, after you’ve read this post and shared it with your network of influence, get up, get outside and take a walk.  The journey to your fully living future is just beyond the doorway.  Enjoy!