Psychopaths Are Among Us

Here is a bit from an excellent article by William D. Cohan in Bloomberg News:

Did Psychopaths Take Over Wall Street Asylum?: William D. Cohan

It took a relatively obscure former British academic to propagate a theory of the financial crisis that would confirm what many people suspected all along: The “corporate psychopaths” at the helm of our financial institutions are to blame.

Clive R. Boddy, most recently a professor at the Nottingham Business School at Nottingham Trent University, says psychopaths are the 1 percent of “people who, perhaps due to physical factors to do with abnormal brain connectivity and chemistry” lack a “conscience, have few emotions and display an inability to have any feelings, sympathy or empathy for other people.”

As a result, Boddy argues in a recent issue of the Journal of Business Ethics, such people are “extraordinarily cold, much more calculating and ruthless towards others than most people are and therefore a menace to the companies they work for and to society.”

How do people with such obvious personality flaws make it to the top of seemingly successful corporations? Boddy says psychopaths take advantage of the “relative chaotic nature of the modern corporation,” including “rapid change, constant renewal” and high turnover of “key personnel.” Such circumstances allow them to ascend through a combination of “charm” and “charisma,” which makes “their behaviour invisible” and “makes them appear normal and even to be ideal leaders.”

Go read the whole article because the reporter includes a great deal more detail about Brody's thesis.

I found the book Snakes in Suits: When Psychopaths Go to Work to be useful in exposing this problem with modern corporations. This book has Robert D. Hare as co-author. It is Hare who developed the Psychopath Check List - Revised (PCL-R) which is the standard instrument for identifying psychopaths.

Bottom line is that these monsters create havoc and ruin many, many lives:

Then, according to Boddy’s “Corporate Psychopaths Theory of the Global Financial Crisis,” these men were “able to influence the moral climate of the whole organization” to wield “considerable power.”

They “largely caused the crisis” because their “single- minded pursuit of their own self-enrichment and self- aggrandizement to the exclusion of all other considerations has led to an abandonment of the old-fashioned concept of noblesse oblige, equality, fairness, or of any real notion of corporate social responsibility.”

Boddy doesn’t name names, but the type of personality he describes is recognizable to all from the financial crisis.

He says the unnamed “they” seem “to be unaffected” by the corporate collapses they cause. These psychopaths “present themselves as glibly unbothered by the chaos around them, unconcerned about those who have lost their jobs, savings and investments, and as lacking any regrets about what they have done. They cheerfully lie about their involvement in events, are very convincing in blaming others for what has happened and have no doubts about their own worth and value. They are happy to walk away from the economic disaster that they have managed to bring about, with huge payoffs and with new roles advising governments how to prevent such economic disasters.”

And if you need more scare put into you. Here is a bit from an article in The Los Angeles Times by Andrew Malcolm:

Using his law enforcement experience and data drawn from the FBI's behavioral analysis unit, Jim Kouri has collected a series of personality traits common to a couple of professions.

Kouri, who's a vice president of the National Assn. of Chiefs of Police, has assembled traits such as superficial charm, an exaggerated sense of self-worth, glibness, lying, lack of remorse and manipulation of others.

These traits, Kouri points out in his analysis, are common to psychopathic serial killers.

But -- and here's the part that may spark some controversy and defensive discussion -- these traits are also common to American politicians. (Maybe you already suspected.)

Yup. Violent homicide aside, our elected officials often show many of the exact same character traits as criminal nut-jobs, who run from police but not for office.

Kouri notes that these criminals are psychologically capable of committing their dirty deeds free of any concern for social, moral or legal consequences and with absolutely no remorse.

"This allCapitol Hill Domeows them to do what they want, whenever they want," he wrote. "Ironically, these same traits exist in men and women who are drawn to high-profile and powerful positions in society including political officeholders."

Good grief! And we not only voted for these people, we're paying their salaries and entrusting them to spend our national treasure in wise ways.

How US Companies Help Set Up Repressive Regimes

Here is a bit from a post by Cory Doctorow on the BoingBoing blog:

Two thirds of the way through the talk, they broaden the context to talk about the role of American companies in the war waged against privacy and free speech -- SmartFilter (now an Intel subsidiary, and a company that has a long history of censoring Boing Boing) is providing support for Iran's censorship efforts, for example. They talked about how Blue Coat and Cisco produce tools that aren't just used to censor, but to spy (all censorware also acts as surveillance technology) and how the spying directly leads to murder and rape and torture.

Then, they talked about the relationship between corporate networks and human rights abuses. Iran, China, and Syria, they say, lack the resources to run their own censorship and surveillance R&D projects, and on their own, they don't present enough of a market to prompt Cisco to spend millions to develop such a thing. But when a big company like Boeing decides to pay Cisco millions and millions of dollars to develop censorware to help it spy on its employees, the world's repressive governments get their R&D subsidized, and Cisco gets a product it can sell to them.

They concluded by talking about how Western governments' insistence on "lawful interception" back-doors in network equipment means that all the off-the-shelf network gear is readymade for spying, so, again, the Syrian secret police and the Iranian telcoms spies don't need to order custom technology that lets them spy on their people, because an American law, CALEA, made it mandatory that this technology be included in all the gear sold in the USA.

Here is the video of the talk which Doctorow attended given by Tor technologists:



It is depressing that US politicians pass laws that set up the basis for the spyware and then US corporations do the multi-million dollar R&D to develop the spyware that is then deployed by repressive regimes worldwide (plus the US government and big US corporations). We live in a "big brother" world. Orwell thought he was writing a cautionary tale with his book Nineteen Eighty-Four, but he was documenting the hellish future we now all live in.

Justice in America

Here is a bit from a post by Robert Reich in his blog:

— American Airlines uses bankruptcy to ward off debtors and renegotiate labor contracts. Donald Trump’s businesses go bankrupt without impinging on Trump’s own personal fortune. But the law won’t allow you to use personal bankruptcy to renegotiate your home mortgage.

— If you run a giant bank that defrauds millions of small investors of their life savings, the bank might pay a small fine but you won’t go to prison. Not a single top Wall Street executive has been prosecuted for Wall Street’s mega-fraud. But if you sell an ounce of marijuana you could be put away for a long time.

The above is the key issue in the 99% versus 1% fight now going on in the US. There is a "justice" for the poor and a "justice" for the rich. There is a government for the rich and the poor have no voice in government. In fact the US Supreme Court has made it official with its Citizens United case: corporations are "people" with no limits on their political donations, while real living and breathing human beings are limited -- by law! -- in their donations. So the "person" of a corporation is above the law that applies to "mere persons" as represented by the bottom 99%.

Here is the reality of today:

... the four hundred richest Americans, whose total wealth exceeds the combined wealth of the bottom 150 million Americans put together, pay an average of 17 percent of their income in taxes. That’s lower than the tax rates of most day laborers and child-care workers.

Read the whole post.

How the "Job Creators" Have Failed

In the US the Republican party continues to argue for tax cuts for the ultra-rich and for corporations on the myth that these are "job creators" and you need to do everything possible to encourage them.

Here is the reality. From a post by Ed Yardini:

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The rebound in [business] profits’ share of National Income has been spectacular. It jumped from a recession low of 7.9% during Q4-2008 to 14.7% during the third quarter of this year. That surpasses all previous cyclical peaks.

...

Compensation of employees continued to lose share of National Income during Q3. It fell to 61.4%, the lowest since Q3-1965, and down from a record high of 68.5% during Q2-1980.

Let me spell this out very simply for you: the rich get richer, the poor get poorer.

If you are working, all of your increased productivity has gone as profits to the corporations and the workers have received none of it.

Peeking into the Future

Here is an interesting film on the effects of the digital age and networking are having on shaping the future. I like this. This is optimistic about the future. We need more of this...

A Right Proper Philosophy for Today

Now here's a street corner guy who is a step up from the old-fashioned guy in a sandwich board sign saying "Repent! The End is Nigh!". This guy has managed to absorb and synthesis the complete "message of today". This is what the political right and the big corporations want you to not just believe but to feel down deep in your bones. This is the new religion:



I find it really helps to have this "message" delivered in a proper English accent. It gives it so much more respectability and authority. It makes you want to drop to your knees and swear "I repent! Forgive me for I have sinned against the corporations and the political right. Forgive me. Bring me home. Let me become a blind consumer who is properly politically ignorant."

Post script: I would like to see the Occupy Wall Street protestors to use more humour like the above to disarm the vicious right that wants to bring down protest as "Un-American". The political right in the US has the "talking point" that the Occupy Wall Street has no "coherent political agenda". If you want to see very succinct statements of the OWS agenda, look at these statements.

Here is what the Republican presidential candidates call an "Un-American mob who are threatening our democracy":



What I see is a peaceful demonstration which is the very heart of a vibrant democracy. These are citizens in the street making known their opinions. There is no violence. This is an on-going peaceful assembly seeking the redress of grievances, a non-political gathering petitioning the government and the political parties to work diligently to redress the imbalance in the social fabric by giving the bottom 99% social justice in the face of corporate greed and the buying and selling of politicians by the Wall Street elite.

More Corporate Crime in America

Not only do CEOs treat their companies as their own personal piggy bank and demand astronomical salaries...

Not only do corporations evade taxes and end up like GE paying no corporate taxes at all...

Not only do big Wall Street banks create fraudulent "securitized" paper out of liar loans and NINJA loans and have them stamped AAA-rated then sell them and watch them blow up and destroy the American economy...

Big corporations secretly have done a massive "heist" and stolen the retirement funds of millions of American workers. Here are the details from a Salon magazine article:

America is in the midst of a retirement crisis. Over the last decade, we've witnessed the wholesale gutting of pension and retiree healthcare in this country. Hundreds of companies have slashed and burned their way through their employees' benefits, leaving former workers either on Social Security or destitute -- and taxpayers with a huge burden that, as the baby boomer generation edges towards retirement, is likely to grow. It's a problem that is already affecting over a million people -- and the most shocking part is, none of this needed to happen.

As Ellen E. Schultz, an investigative reporter for the Wall Street Journal, reveals in her new book, "Retirement Heist," it wasn't the dire economy that led these companies to plunder their own employees' earnings, it was greed. Over the last decade, some of the biggest companies -- including Bank of America, IBM, General Motors, GE and even the NFL -- found loopholes, abused ambiguous regulations and used litigation to turn their employees' hard-earned retirement funds into profits, and in some cases, executive compensation. Schultz's book offers a relentlessly infuriating look at the mechanisms they used to get away with it.

There's more. Go read the whole article.

Here is the secret plan the corporations used:

Think of pensions as a debt. If a company can reverse a debt, it can record it as income. And that income is the same as if they got it from selling trucks or whatever it is the company sells. There were billions in promises to retirees for pensions and healthcare and death benefits and life insurance, and the companies figured out that if they cut or eliminated them altogether then they could get those billions in profit -- and even use them for executive compensation.

Ah yes... those poor CEOs having to make do with salaries of "only" tens of millions of dollars with stock options on the side. The poor souls were so desperate to bulk up their income they figured a way out of stealing from those workers making $40,000 or $60,000 a year. Doesn't everybody know that "average Americans" love their rich. That is why they keep throwing tax cuts at them. That's why the let their corporate criminals off without any jail time. And that's why they let them earn 500 or 600 or 800 times as much as an ordinary worker. They love their bosses!

Laying Blame where It Belongs

Here is a bit from a good post by Yves Smith on her Naked Capitalism blog:

But if you were to ask most people, they’d now blame the fall of American manufacturing on our workers. That scapegoating serves to shift focus from the top of the food chain at a time when executives have managed to greatly widen the gap between their pay and that of the folks reporting to them.

Let me give you an all too typical example of how American management has contributed to the demise of our industrial competitiveness, namely, the former Mead Corporation paper mill in Escanaba, Michigan, which is now part of NewPage, owned by Cerberus.

The Escanaba mill makes coated paper. Coated paper is shiny paper, the sort you find in most magazines, catalogues, and art books. Coated paper is fussy to manufacture, which makes it daunting in a continuous process setting like a mill. In a highly-capital intensive continuous process business, downtime is hugely expensive.

In 1969, Mead added a #3 machine in Escanaba. Paper machines are very long-lived; you’ll find machines over 100 years old in use, since older, well maintained, well-located machines (as in with access to comparatively cheap power and pulp) can be competitive on grades of paper which are made in small runs (as in the slow speed of the machine is not a negative). The #3 machine was world class at the time of its installation. There was no reason to think it could not be highly competitive through 2020 or 2030 if properly maintained.

Starting up a new machine, however, is not an easy process, and the #3 machine was not operating at the expected efficiency level. Management nevertheless pressed forward with a further mill expansion in 1970-1971, of a kraft-recovery system. The best workers on the #1 machine were moved to the #3 machine which did not solve the problems on #3 and worsened the results of the #1 machine. It took an over two year turnaround effort to get the mill operations up to a good level of productivity.

By the mid 1970s, the Escanaba mill had gone from being the dog to the star. Mead had reorganized to be decentralized, so the Escanaba mill had its own sales force and a true stand-alone P&L Escanaba was one of 40 divisions yet produced the majority of Mead’s free cash flow. Mead added added a #4 machine in Escanaba in 1982. The mill was recognized as one of the best coated paper makers in the US, and demanding publishers such as National Geographic, Smithsonian, and Playboy sought out its product

Mead has also had troubled period with its unions, in particular a bad strike in 1975-6. But a real turn came in the later 1980s. Mead had had a series of record-breaking profit years, each higher than the last, yet sought to squeeze the unions in 1989.

Go read the whole post to get all the gory details of mismanagement. It is a true horror story.

It is sad when workers get blamed for the greed and incompetence of management. But that is America of today. The top 1% are flushing that country down the toilet while they milk it for all the money they can extort out of it. They will leave a broken and truly bankrupt husk. Sad.

Misdirection and Ignorance from the Political Right

Here is a bit from a post by Mark Thoma in his Economist's View blow using some material sent to him by Gary Burtless:

A couple of hours after talking to an ABC correspondent about the woeful job numbers and what might be done to improve them, I was in the Bloomberg TV studios debating a guy from Heritage. He went on for several minutes about the damage being done by high taxes, excess regulation, business "uncertainty" about future tax hikes and regulatory burdens. I asked Bloomberg's host whether he was aware that corporate profits relative to national income had just hit a 60-year peak? He had heard rumors to that effect. Was he aware that taxes on corporate earnings were at a 60-year low? The Heritage guy had heard that might be the case.

Then why was uncertainty about taxes and the future burden of the Affordable Care Act holding back business investment and hiring right now? If managers thought taxes or regulatory costs might go up in the future, wouldn't it make sense to take advantage of today's low taxes and lower burdens to invest and hire today? According to the "uncertainty" argument, businesses are fearful they might face high taxes and extra health costs in 2016 or 2018. Shouldn't they expand hiring right now and scale back employment when they actually face higher costs (if they ever do)?

The "tax uncertainty" and "regulatory uncertainty" arguments would make more sense if, say, taxes were already high and might be going higher or regulatory burdens were heavy and might be getting heavier. But when taxes are at a 60-year low and the regulations are pretty much the same as they were in the 1990s boom, the argument makes no sense at all. As we used to say down on the farm, you should "make hay while the sun shines." In other words, if you think it's going to rain later in the week, it strengthens the case for cutting and baling right now.

The odd thing is, when businesses are asked why they're not expanding, "high taxes" and "heavy regulatory burdens" and "tax uncertainty" don't feature as prominent answers. They mostly say they don't see good prospects for extra sales. But right-wing economists have their talking points, even if they make little sense, and they're sticking with 'em. Another of their favorites is "... executives tell me they can't find good candidates for the job openings they have." Don't get me started on that one.

Sadly, the American people haven't caught on that the political right is simply lying about the economy and government. The right is blinded by its ideology and simply refuses to open their eyes and see reality. As long as they do that, America will continue to be caught in a decades long depression.

This is what eating your own seed corn and cutting your own throat looks like:

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A Worrisome Fact about the Financial State of US Companies

Brett Arends is a financial journalist with good credentials. He is raising a hue and cry against the common belief that US companies are is sound financial shape. This comes as a surprise to me but Arends is a credible source.

Here are some bits from an article in Yahoo! News:

American companies are not in robust financial shape. Federal Reserve data show that their debts have been rising, not falling. By some measures, they are now more leveraged than at any time since the Great Depression.

You'd think someone might have noticed something amiss. After all, we were simultaneously being told that companies (a) had more money than they know what to do with; (b) had even more money coming in due to a surge in profits; yet (c) they have been out in the bond market borrowing as fast as they can.

Does that sound a little odd to you?

A look at the facts shows that companies only have "record amounts of cash" in the way that Subprime Suzy was flush with cash after that big refi back in 2005. So long as you don't look at the liabilities, the picture looks great. Hey, why not buy a Jacuzzi?

According to the Federal Reserve, nonfinancial firms borrowed another $289 billion in the first quarter, taking their total domestic debts to $7.2 trillion, the highest level ever. That's up by $1.1 trillion since the first quarter of 2007; it's twice the level seen in the late 1990s.

...

Central bank and Commerce Department data reveal that gross domestic debts of nonfinancial corporations now amount to 50% of GDP. That's a postwar record. In 1945, it was just 20%. Even at the credit-bubble peaks in the late 1980s and 2005-06, it was only around 45%.

The Fed data "underline the poor state of the U.S. private sector's balance sheets," reports financial analyst Andrew Smithers, who's also the author of "Wall Street Revalued: Imperfect Markets and Inept Central Bankers," and chairman of Smithers & Co. in London.

"While this is generally recognized for households," he said, "it is often denied with regard to corporations. These denials are without merit and depend on looking at cash assets and ignoring liabilities. Cash assets have risen recently, in response to the fall in inventories, but nonfinancials' corporate debt, whether measured gross or after netting off bank deposits and other interest-bearing assets, is at peak levels."

...

But why is this line being spun about healthy balance sheets? For the same reason we're told other lies, myths and half-truths: Too many people have a vested interest in spinning, and too few have an interest in the actual picture.

Journalists, for example, seek safety in numbers; there's a herd mentality. Once a line starts to get repeated, others just assume it's correct and join in.

Wall Street? It's a hustle. This healthy balance-sheet myth helps sell stocks and bonds. How many bonuses do you think get paid for telling customers the stark facts, and how many get paid for making the sale?

You can also blame our partisan age too. Right now, people on the right have a vested interest in claiming businesses are in healthy shape. That makes the saintly private sector look good, and demonizes President Barack Obama and Big Government for scaring away investment. Vote Republican! Meanwhile, people on the left have an interest in making businesses sound really healthy too: If greedy companies are hoarding cash instead of hiring people, they can cry "Shame on them! Vote Democratic!"

As ever, the truth is someone else's problem and no one's responsibility.

I sure hope the above article is wrong, but I fear Brett Arends is the one journalist out shaking the bushes for the real story while the rest of the media is standing around repeating the "good news" stories put out by press releases and political spin doctors.

Bad News on Top of Bad News

The horror of last years Gulf Oil spill is back. Here is a bit from a report from Alabama Live:

Scientific analysis has confirmed that oil bubbling up above BP’s sealed Deepwater Horizon well in recent days is a chemical match for the hundreds of millions of gallons of oil that spewed into the Gulf last summer.

The Press-Register collected samples of the oil about a mile from the well site on Tuesday and provided them to Ed Overton and Scott Miles, chemists with Louisiana State University.

The pair did much of the chemical work used by federal officials to fingerprint the BP oil, known as MC252.

That horrible disaster is back. Just like the Fukushima nuclear reactor disaster that can't be brought to a close (see here). It is clear to me that governments have handed far too much power over to corporations. Rather than go into a 5 alarm fire drill, the US and Japan have acted "hands off" and let corporations clean up their own messes. But this has proved to be too little too late.

Governments need to militarize any disaster. Remove power from the corporations, mobilize national resources, and do a proper clean-up. Then present the corporation with the bill. If they can't pay, then the assets of the corporation should be seized and sold off to compensate the nation for the accidents and errors of the corporation.

Measuring Obama's Shortfall

In his NY Times blog, Paul Krugman provides some numbers to quantify just how short Obama fell in trying a Keynesian approach to the 2008 financial panic:

First, even in January 2009 the CBO was forecasting an “output gap” — a shortfall of the economy’s actual production over what it could and should be producing — of more than $2 trillion over 2009-2010. That told you right there that an $800 billion stimulus, much of it consisting of tax cuts of dubious effectiveness, was likely to fall short.

There were also good reasons to believe that the slump would be prolonged, that the economy would need help over a protracted period. After all, the two previous recessions had been followed by long periods of jobless recovery, and there was every reason to expect a repeat. Moreover, we had international evidence showing that the aftermath of financial crises is a long period of high unemployment.

The point is that even in January 2009 it should have been obvious that the economy probably needed a really major push. Maybe that wasn’t possible politically; but it’s clear that there was a complacency in the White House that remains very hard to understand.

What is particularly disturbing was at the time and ever since Obama has claimed that his stimulus was "just the right size" needed to help America recover. This inability to face facts and be honest with the America people is why he has lost all credibility as a "leader". I can understand a Saddam Hussein, a Stalin, a Hugo Chavez, a Fidel Castro, etc. assuring their public that their actions were "just the right medicine". But you expect the leader of a functioning democracy to be honest.

Oh... maybe it is because Obama followed a Republican leader, Bush, who practiced the black arts of denying reality that Obama felt he too could pretend that black was white and that down was up.

What America desperately needs is a (a) an honest leader who (b) admits that 25 million are suffering joblessness and (c) tens of millions have lost or are losing their homes because of crimes on Wall Street and (d) that everybody else is facing years of poor job prospects and low investment returns because of fraud and corruption rife in America, especially in corporate headquarters and in the highest political offices in the land.

The Ugly Truth of Citizens United

The US Supreme Court has accepted the argument in the Citizens United case that corporations have an unrestricted right to use shareholder money to buy politicians. Why? Because "corporations are people". Yeah, sure.

Here's a reminder from an article written by Michael Hudson, a research professor of Economics at University of Missouri, Kansas City, and posted on the Naked Capitalist blog:

Unlike real people, corporations cannot be sent to jail. Corporate shells shield owners and managers from criminal prosecution for the wholesale frauds that have left Countrywide Financial, Bank of America, Citibank, JP Morgan Chase and other pillars of the banking community free to make civil settlements for deceptive policies without admitting wrongdoing. And whereas individual crooks need to pay their own lawyers, corporations pick up the tab for their managers, while contributing generously to politicians who rewrite the laws to decriminalize fraud and deceptive business dealing. The corporate-backed media applaud politicians who insist that families “take responsibility” for their unemployment risk, debts and health care – while bailouts free the wealthy from having to suffer losses on bad loans.

Funny how the same Supreme Court which couldn't bother to let the ballots be counted in 2000 to decide the election has been able to sift the tea leaves and discover that corporations are "people". Well, if so, let's start sending corporations to jail! Take the whole kit and caboodle off and lock them up right down to the night watchman.

If we make corporations accountable as "persons" then people will be more cautious about taking a job at a corporation. They will want bigger salaries for the higher risk that they can go to jail as part of the "corporate body" that did a criminal act. That might be salutary for everybody. Better wages. Slower growth for corporations. More workers ready to be whistle-blowers about corporate corruption and crime.

Tim Harford's "Adapt: Why Success Always Starts with Failure"

This is an excellent survey of adaptation as a strategy to deal with complex environments in which a top-down rational planning simply can't find solutions. There are many excellent stories, but this one bit speaks to me, a 1960s generation person:

When the US Army faced the 'disruptive innovation' of guerrilla warfare in Vietnam, there was great reluctance to accept that it had changed the nature of the game, making obsolete the Army's hard-won expertise in industrial warfare. As one senior officer said, "I'll be damned if I permit the United States army, its institutions, its doctrine, and its traditions to be destroyed just to win this lousy war."

That ranks up there with the infamous statement by a US Major "It became necessary to destroy the town to save it." as reported by Peter Arnett.

This book is richly illustrated with examples of how an evolutionary strategy can find a solution where managerial dictum or top-down planning fails miserably. Some of the best examples are from business.

He does a very good job of reviewing:

• The disaster of the US invasion of Iraq and how a bottom-up effort by rebellious colonels and captains finally changed the US military tactics off their dangerous track and toward a more successful approach.


• The regulatory failures and coupled risks that led a meltdown in a constrained "sub-prime real estate" market to the globe straddling collapse of financial markets in 2008. He walks the reader through the failure to listen to whistle-blowers and the reluctance to effectively change the banking rules to prevent another catastrophe.


• The mindless simplifications of a greenhouse gas enthusiast compared to the known complexities of trying to identify a proper "green strategy". He walks through a day's choices of "green alternatives" and shows why each and every one was wrong because the underlying reality is far more complex than the simplistic green enthusiast ever could imagine.


• He examines nuclear safety and shows how the various catastrophes were waiting to happen because the systems are designed with too much complexity and coupled failure modes.


• He looks at two big oil rig diasters, the Piper Alpha in July 1988, and the Deepwater Horizon in April 2010. He walks through the failure in design and safety systems. He shows why these were accidents waiting to happen.

I like his discussion of Philip Tetlock who did a scientific study of the ability of pundits, gurus, and consultants to provide accurate predictions of the future. In a previous post I reviewed Dan Gardiner's book "Future Babble" that explores this topic more deeply.

I worked in a company where they paid lip service to the idea that "there is no failure, just a learning opportunity" and that projects, especially in the R&D lab, should expect a high failure rate. But in reality, failures were punished, so creativity was suppressed and lessons really weren't learned. Tim Harford gives a glowing review of Google as a learning environment with adaptive engineering practices, but I'm cynical. It is hard for managers to accept failure. Corporations are always going to get atherosclerosis. The big old successful corporations are always going to fall to the young, rising whippersnappers.

I also worked closely with QA (Quality Assurance) people and watched them play their role. In theory they were the frontline defence against obfuscation and deception on the part of managers and teams that are failing but want to pretend that things are going teckety-boo. The org chart showed them reporting independently right up to the CEO to ensure independent and timely information about project problems. But in reality project managers had a "right" to demand issues first be heard by them and they could muscle most QA auditors into silence. Similarly, I was involved in a ISO 9000 initiative within the company and quickly discovered that most of our "learning organization" capabilities, such as our extensive audited written procedures, were in fact window-dressing. In short: it is hard to build and maintain a truly adaptive organization that uses evolutionary strategies for problem-solving. Humans don't like uncertainty and they love hierarchical organizations. I like the message in Tim Harford's book, but I'm sure it will get more lip service than real implementation.

There is much wisdom in the book, much to learn, I strongly recommend it to everyone. It will open your eyes to the complexity that is out there. It will stun you to realize how badly our engineered "safety systems" have failed. And it will give you an appreciation for a need for more experimentation and a healthy acceptance of failure as the technique for learning.

Matt Taibbi on Graft & Corruption on Wall Street

The idea that the SEC would quash investigation and completely obliterate the record should be a crime. Taibbi is onto something big. The financial regulation of Wall Street is corrupt and appalling. I could understand that under George Bush and the Republicans, the party of corporate greed and billionaire demanding endless tax cuts. I don't understand Obama, who ran as a Democrat, has extended this seedy, corrupt, and illegal "system" of financial regulation. There needs to be a clean sweep of the corruption in Washington DC, otherwise the US will never recover from the last ten years of endless bubbles and corporate crime.

Here is Matt Taibbi on Keith Olbermann's show:



Here's a post by Matt Taibbi on this story:

Just a quick note about the "Shredded Justice" story, as I’ve had a couple of questions about some of the SEC’s responses to the story.

Several readers pointed to this story in which SEC spokesman John Nester said this:

"We do keep records of our MUI's and they're available to our investigators to learn about previous work on matters that have been reviewed."

Just so readers understand, the SEC in my communications with them on this story drew a distinction between the words records and documents. According to the SEC, they do maintain "records" of Matters Under Inquiry, and by that they appear to mean the line-item entries of the sort Darcy Flynn forwarded to members of congress, an example of which might be:

Party	MUI #	Open	Close	Issue
Wells Fargo	MSF-03174	8/24/07	10/23/07	Fraud /Issuer Disc.

So they keep that "record." On the other hand, any documents obtained in connection with the MUI would have been disposed of. So any documents gathered during the brief life of that preliminary investigation – any evidence gathered – would have been tossed. Just wanted readers to be aware and not be confused by any quotes in which the SEC claims it does, in fact, keep "records."

A crime is a crime is a crime. Obama is obstructing justice by allowing the SEC to ignore crimes, and worse, destroy the evidence of the crime.

Worse, Obama has come out against whistle-blowers. He claims he is for "transparent" government, but he is doing everything possible to hide the criminals and obfuscate the truth.

Be clear, Obama is far better than George Bush and the Republicans, but he is no friend of the bottom 90% of the population. He is a friend of Wall Street and billionaires. He isn't a friend of the middle class and the working class or the disenfranchised class at the very bottom. He is far more comfortable and happy backslapping and partying with the super-rich than with real people with real needs.

Update 2011aug26: Here is a The Leonard Lopate Show of WYNC interviewing Matt Taibbi about this Rolling Stone magazine article. Give it a listen...



Rolling Stone writer Matt Taibbi discusses his latest article, “Is the SEC Covering Up Wall Street Crimes?” For the past two decades, according to a whistle-blower at the SEC who recently came forward to Congress, the agency has been systematically destroying records of its preliminary investigations once they are closed.

The Business of Politics in America

Funny, the founders of America were worried about voters, but they didn't realize that elections would evolve into business deals. Here's an example of the "new politics" in America where Bank of America tells Republican candidate for president that "we will help you out". This is not just any BofA "employee", this is Bank of America’s director of public policy, James Mahoney:



I'm sure all those millions of holders of BofA mortgages across America would have loved to have a BofA bigwig drop by and tell them "we will help you out". But no. BofA is in the business of using its money to buy what it wants. It isn't interested in trying to fix the fraudulent mortgages it helped set up all across America.

The Role of Republicans in American Government

From a James Surowiecki artile in The New Yorker magazine:

There are, to be sure, all sorts of ways in which House Republicans are still useful allies for corporations. They’re trying to roll back financial regulation and to limit the E.P.A.’s power, and they’ve quashed any attempt to strengthen the power of labor unions. But it’s time for business to realize that, on the question of managing the economy, House Republicans will let ideology trump economic interest. After all, it was proto-Tea Partiers in the House who, in 2008, voted down TARP the first time around, erasing more than a trillion dollars in stock-market value in a single day. Now, once again, House Republicans have pursued a strategy that business doesn’t want and that will damage investors. The grim truth is that, at this point, we’d be better off if the House Republicans really were the handmaidens of corporate America, rather than ideologues who prefer crisis to compromise. As it is, the G.O.P. has put our money where their mouth is.

The economic right in America paid for a political right wing insurgency and now they are reaping the ills that delivered. It reminds me of 1932 in German when the political right thought it has found a sucker it could maneuver to maintain control in the Reichstag, Adolf Hitler. That didn't work out so well for all those big business men who saw their plants bombed to bits and the country destroyed by mid 1945. Big money needs to be careful when it picks it flunkies.

How to Squeeze Workers for More

Here is a bit from a post on the Stumbling and Mumbling blog that spots an odd discrepancy:

Oliver Letwin has been doing some blue sky thinking.The Guardian reports him as saying that it is

only through "some real discipline and some fear" of job losses that excellence would be achieved in the public sector.

I'm not sure Letwin really believes this. If he did, he would be also advocating introducing fear into corporate boardrooms, because there is at least some evidence that fines work better than bonuses in stimulating good performance. Funnily enough, though, he seems silent on this. He seems to subscribe to the asymmetric theory of motivation: bosses are motivated by big money, but workers are motivated by fear.

Personally I think the current situation should be reversed. Workers should be stimulated by money and bosses should be encouraged to stellar performance by fear, more fear, and yet more fear. Bring back the rack!

I would love to see the Wall Street titans have to give up their billion dollar bonuses and instead find themselves on the rack with a guy in a black hood asking "Why didn't you meet your performance goal of delivering a 20% increase in profits above last year's level?" I think we might hear squeals of enthusiasm about meeting new and higher performance goals from the top executives!

What Role is Obama Playing?

Here is an assessment by Matt Stoller, who worked on the Dodd-Frank financial reform law and Federal Reserve transparency issues as a staffer for Rep. Alan Grayson. This is the key bit from a post in Yves Smith's Naked Capitalism blog:

So why, if his Presidency has been such an unmitigated disaster, is he continuing to pursue this reckless course. My theory is that the key to the Obama administration’s political strategy is not compromise or incrementalism. It is, quite simply, fooling liberals. When you look at Obama’s governing role, he is clearly a servant of American oligarchs. But obviously he can’t explicitly tell liberals this (unlike Republicans, who are explicit in saying they favor “job creators”), because liberals like to think of themselves as favoring economic justice. So how do you acquire support from liberals, as he did in the primaries in 2008 and will need to do again in 2012, while pursuing oligarch-friendly policies?

You do it by ensuring that liberals only focus on the ceremonial non-governmental aspects of the Presidency. You do it by making sure that they focus only on the televised aspects of the Presidency.

When Obama is criticized as not fighting Republicans hard enough, it’s an implicit endorsement of the “legislator-in-chief” role. As such, the blame for illiberal policies like bailouts, poorly designed health care plans, cuts to entitlements – well, these are the Republicans fault. Obama is simply helpless before the onslaught. Similarly, every time an establishment liberal says in the newspaper that “Obama’s policy choices are jeopardizing his reelection chances”, they are implicitly endorsing the narrator-in-chief role, and ignoring his role as an incompetent and highly radical President causing enormous damage to millions of people. Again, he’s helpless before a mean-spirited press corps and Republican establishment bent on his destruction. This is easy to show on TV – just pop up some video of mean Republicans.

It is only by focusing on the governor-in-chief role that one sees a different focus of the Presidency. It is absolutely the case, as Krugman notes, that Republican detachment from reality is a threat to democracy. But it is worth noting that in ascribing to this the sole cause of our political situation is to diminish the notion that creatively using power can achieve good things for people. For instance, it’s true that having a press corps with more balance about the goals of Republicans and Democrats would create a healthier democratic society – but then, it’s probably also true that a real foreclosure prevention plan in 2009 would have dramatically restored faith in government by touching the lives of millions of people in an affirmatively positive instead of malevolent way.

All of this is to say that how one sees government is critical to how one judges Obama. And if the only consideration is the boundaries of television, then of course, Obama is going to look like a mediocre narrator-in-chief constrained by wild forces he cannot control. Of course, Congress will make him seem like a somewhat inept but well-meaning legislative leader or party leader. It is only in turning off the boundaries set by a narrow TV-dominated discourse that one truly sees Obama’s real handiwork – the wars, the bailouts, and most tragically, what could have been but never was.

It has become absolutely clear over the last two years that the Obama sold to the electorate is not the Obama who is governing. The 2008 election appeared to be a clear choice between right and left on the political spectrum. But in reality Obama has delivered a centre-right administration, so voters only had a choice between a radical right and a centre-right. In both cases, this means that govdernment caters to the top 1% while ignoring the needs of the bottom 90%.

The Failure of Capitalism

Capitalism is a great engine for economic change and wealth creation, but it is a terrible tool to achieve social justice, i.e. a "fair" distribution of economic rewards. That is the claim of Umair Haque:



The details of the accusation that capitalism has failed:

• The inability to create jobs


• Median income is stagnant


• The grotesque income inequality


• Prosperity is an illusion


• The creation of terrible pollution


• The pervasive slums it creates

He is willing to admit that capitalism can take a pre-industrial society and provide a great rise in incomes, but once you get to a post-industrial society, capitalism fails us.

I hope he is right about us being in a period of "transformative change", but my gut level assessment is that he is a glib business school type, i.e. he is a snake oil salesman (e.g. "institutions creating thicker more meaningful more authentic value"). His ideas glitter but there is no substance. I would rank him up there with business consultant Tom Peters who published the book In Search of Excellence identifying so-called "excellent" companies to be emulated just as these very companies all began imploding and going bankrupt.

When I compare him talking about technology, business, and change I don't hear the solid discussion of concepts and history that I saw in Peter Drucker. Instead, I hear a smooth talker with words that sound seductive but have no real substance that I can identify. I hope I'm wrong, but the impression I get from the above interview is that Haque is a will-o-wisp.