Risk Rap

Rapping About a World at Risk

We Deserve Better (Part 1): Tea Party Fundamentalism

You hear it all the time.  All the candidates running for office are horrible.  The democrats and republicans both stink.  But this guy ain’t as bad as the other guy.  “He is the lesser of two evils”.  So we make our choice based on two evils.  We deserve more then the lesser of two evils.

When you think about it, a lesser evil is still an evil.  Even if its a lesser evil, the essence of its nature will soon enough turn on us as it seeks to actualize the essence of its nature.  It brings to mind Aesop’s Fable of the scorpion and frog.  The scorpion comes to a river that it can’t cross and calls on a passing frog to let it ride on its back to the other side of the river.  The frog was suspicious because it knew of the scorpions venomous nature but finally relented and let the scorpion mount its back for the ride across the river.  When they were halfway across the river scorpion delivered a fatal sting to the frog, dooming them both.   As the deadly venom took its hold, the frog asked the scorpion why it delivered its sting that would destroy them both?  The scorpion answered “it is my nature to sting.”  In a nutshell that is the nature of evil.  It will eventually deliver its sting.  So if we want to be safe we must avoid evil whenever we can.  This is most true when we are considering political candidates.

In many respects The Tea Party has done this country a favor.  They have energized the country by reigniting passion back into the political process.  Their raucous demonstrations and appeal to populist sentiments has served to remind America of its activist heritage and the many protest movements that have been central to the creation of our republic.  America, the great democratic experiment,  is the result of a history of struggle to claim and extend democratic rights and privileges to all citizens.  The great social justice struggles that fought for universal suffrage, women rights, living wages and labor laws, civil rights, environmental protection and antiwar movements are important chapters in America’s story that are often neglected and too often forgotten.  The Frederick Douglas admonition that “power concedes nothing without demand” is a keen wisdom that Tea Party activists have taken to heart.

The Tea Party has adamantly asserted that the elite class of professional politicians is beyond reformation.  The political elites cannot change their nature.  The Democrats and Republicans are well beyond redemption.   A more astute truism has never been spoken.  Here the Tea Party rhetoric diverges from their practice because they advocate support for GOP candidates.  So the first lesson we can learn from the Tea Party is to do what the Tea Party says “don’t trust either party,” not what they do, support the GOP.

I am convinced that both parties are totally bought and controlled by big money channeled through K Street lobbyists doing the bidding of large corporate interests. The final nail in the coffin was Citizens United v. Federal Election Commission.  This decision has altered the democratic scales of our Republic.  They have been dis proportionally tipped against the individual citizen.  The law of the land  has codified this inequity by protecting the right of deep pocketed corporate institutions to purchase the favor of political elites that rule America.  This will further strengthen the entrenched class of the two party monopoly.  This leaves the citizen to content themselves in the illusion that America is still a participatory democracy.  Dressing up in Minuteman costumes to pretend we are racing off to meet the dreaded enemies of our republic; and proclaiming an intention to water the tree of liberty with the blood of tyrants makes for amusing political theater in a land where  the value of one man one vote is severely distressed.

Here the mendacity of the Tea Party’s populism is made clear.  Tea Party candidates are the principal recipients of corporate money.  This money finances expensive media campaigns that flood the airways of critical electoral districts with advocacy ads  in support of Tea Party sponsored candidates.  This money is also used to attack liberal Democratic Party opponents.  The populist claims of the Tea Party are bankrupted by the heaps of corporate gold flowing into their campaign war chests.  This prompts conservatives to parrot “global warming is a liberal fiction” and “God placed oil on this earth for our use and its our divine right to extract it.”  They condemn government regulations as an assault on the economic liberties expressly protected in the Constitution.  It is as if they believed the  natural resource of the land was theirs and not the property of a faceless global corporate entity.

We can also be thankful to the Tea Party for revealing how the core values of conservatism are put into practice.  Property rights trump all rights.  Militarism and nationalism is our salvation.  Tolerance is the hallmark of ignorance.  Compromise and negotiation is a sign of weakness and consensus born from a democratic process must be repressed.   The stridency of their pronouncements seep with homophobia, Islamophobia and insistence on closing the southern border and eradicating illegals within our midst expresses deep cultural and racial fears born from an eroding cultural supremacy.

The geopolitical reality of the changing demographics of America’s ethnic and cultural landscape fuels a desire to arrest the democratic political process.  The populism of  the Tea Party is based on summoning the support of the declining population of Caucasian America.   They give voice to the anger of  the ebbing dominance of a demographic group;  screaming, crying and cursing its economic, political and cultural pain.  Barack Obama manifests the threat in a stark contrast of black and white.  He fuels the fear that gives pointed political focus to the racial aspects of Tea Party politics.  The nations first Afro-American President conveniently offers cover to an undercurrent of racial animus prevalent in Tea Party slogans and images.

The Tea Party’s professed love of the Constitution is disingenuous.  I ask where was their righteous outrage as Bush and the Republicans violated some of the basic tenants of the Constitution.  Most were out front cheering him and his fellow Republicans on.  Their support of positions that deny the basic civil rights to the LGBT community; the clamoring silence concerning violations of privacy rights under the Patriot Act; the failure to recognize religious freedom and the right of Muslims to build mosques; their practice of advocating the selection of circuit judges on the basis of ideological commitment to the GOP and the endorsement of torture and unlimited imprisonment without due process for enemy combatants in the war on terror are examples of their disdain for constitutional protections and basic human rights.

Fundamentalism is a strain of thought that is psychologically appealing in a complex world with no easy answers.  With fundamentalism the cosmology is all figured out.  There is no need to ask any questions because the answers are self evident truths that confirm the ideology before the question is asked.  The Tea Party raises the US Constitution with a fervor that rivals any Bible thumping Born Again Christian or Quran fueled Taliban operative.  I heard a Tea Party member once advance the idea that no new legislation can exceed 30 some odd pages in length because that was the length of the original US Constitution.  This thinking fetishizes the Constitution.  It believes the original document to be a holy tablet that the Founding Fathers brought down from the highest peak in the Appalachian Mountains.  It fails to take into account that the United States of 2010 is a vastly different place then it was when it emerged on the world scene as the first democratic republic in the late 18th Century.  This fundamentalism fails to remember that some of the original framers of the Constitution were slave holders, considered people property, disenfranchised women and perceived Native Americans as savages and worthy targets of genocide to annex their lands for the new and growing republic.   No the reality of the 21st century nation state and the rights and responsibilities of its citizens in an interconnected global ecosystem has evolved and is vastly different from the time when the Constitution was authored.  The foresighted crafters of our Constitution sat through a sweltering Philadelphia summer and sweated out this hollowed document  through intelligent compromise and a respect for consensus and the democratic process.  It is a vital lesson lost on Tea Party zealots content to wave copies of the document as some righteous proof of their love of country while they profane the spirit and enduring truths of the Constitutions essence.

The Tea Party’s political fundamentalism is mirrored in many respects by the religious fundamentalism held by many of its members.  If the Constitution anoints true believers with political righteousness, religious fundamentalism provides theological justification for a social agenda advanced with nasty intolerance, celebratory bigotry and cultural exclusion.  Religious fundamentalism has long been the cornerstone of the conservative movement.  They attack secularism as an obscene manifestation of the liberal welfare state.  It threatens civil liberties for everyone as it seeks to exclude the full rights citizenship  for all citizens.   It is a dangerous foil aimed at the heart of public education.  It is a tool employed by education reformers to underfund school programs, transfer monies to charter and private schools and transform humanities based curricula. It seeks to replace science in our public schools with stories from the Bible.  Evolution, natural selection, and big bang theories are replaced with creationism and  a 6,000 year old world that was created in 6 days.  Civil law and cultural mores will be guided and enforced by a moral code of prohibitions written 3,000 years ago to bring order to a nomadic tribal people assembling the nation of Israel.

The future competency of our nation and its ability to compete in a complex world is at stake.  America cannot hope to maintain its leadership in the world economy if it allows science to be politicized, its schools to crumble and a segment of its people not fully enfranchised with the rights and responsibilities of citizenship.  The greatest danger is the installation of a bifurcated society where well to do Judeo-Christian Caucasians are in a position to purchase the best education, access health care services and enjoy a full pallet of rights and freedoms not available to the growing stable of “others” lawfully excluded from their rightful inheritance of citizenship.

The Tea Party has crystallized the choice in the coming election.  Beware of the Bible thumper.  Beware of the Constitution waver.  The stridency of  Tea Party proponent’s and their religio-political fundamentalism may stand like “Old Hickory” on a timely quote from their sacred tomes but  resorting to such a defense reveals an inherent weakness in their argument.  No dialog, no consensus, no possibility of arriving at a democratic resolution to problems.  Tea Partyer’s may offer factual recitations from the books but no understanding and less truth can be found in pronouncement of their words.

You Tube Music Video: Art Tatum, Tea for Two

Risk: Constitution, secular democracy, education, civil rights

October 21, 2010 Posted by | Bible, Christianity, Civil Rights, class, culture, democracy, elections, government, labor, LGBT, politics, Quran, religion, republicans, social justice, Tea Party | , , , , , , , , , , , , , , , , , , , , , , , | 1 Comment

Intellectual Capital Deflation

balloonBearingPoints Chapter 11 filing represents a watershed type event.

The filing by the global consulting firm BearingPoint puts it on life support or at the very least in an intensive care unit. BearingPoint the bulge bracket consulting firm that was spun off from KPMG due to regulatory mandates concerning the separation of accounting and advisory businesses is in serious trouble. It has been struggling under a mountain of debt and the bankruptcy filing will give the firm protection from creditors while it seeks to reorganize its business.

BearingPoint’s filing is an interesting metaphor about the deflation of intellectual capital.  Ideas, creativity, knowledge, productivity and innovation are some of the words that that we closely associate with intellectual capital.  Once we may have even thought this form of capital to be immune from the vicissitudes of the banality of markets.  I surmise that the recent business cycle exposes that idea as based more in our narcissistic prejudices then the cold objective realities of efficient markets.  As we witnessed radical capitalism’s continued drive of extreme rationalization through monetization we discovered the price of anything but seriously lost sight of the value of everything.

During the 1990’s I remember always being impressed and astonished by the reports of the rising productivity of the American workforce.  Year in year out the rising productivity was the proud boast and confirmation of American managerial brilliance.  But today that claim looks spurious at best.  Rethinking this proclamation may reveal this was accomplished not by brilliant management innovation but by outsourcing operational functions to subsistence based economies; and some artful balance sheet wizardry that aligned business performance ratios to maximize shareholder returns; particularly senior managers whose stock options were critical design considerations as to how those ratios were engineered.  Indeed if productivity is a proxy for innovation, the productivity of  American capitalism was outpacing the most aggressive predictions of Moore’s Law.  True technology contributed to massive gains in productivity but in many ways was an economic rent seeking agent that enabled a flawed economy to sustain itself through over leveraged economic and misdirected intellectual capital.

Today we are confronted with the evaporation of massive social wealth that the IMF estimates to be almost $4.1 trillion in the financial service sector.  I suspect a good portion of this value was carried on the balance sheet as good will.  And anyone that has been living close the plant earth the past couple of years can attest to how the good will of corporations has been severely discounted.  Perhaps this wealth never really existed and as the saying goes “you can’t lose what you never had”.  We can take comfort in that and perhaps we can look on the bemused folly of central governments eagerly trying to stimulate economic growth to levels of our recent unsustainable past.  I must admit that my sympathies and conviction stand with the Keynesian but I am beginning to wonder if they are chasing the long tails of ghostly economic shadows cast by AIG’s worthless CDS franchise.  Once considered a revolutionary innovation cooked up by the finest minds of the capital markets financial engineers are now perplexing conundrums wrapped in a riddle and remain valuation Level Three FAS 157 mysteries.

To be sure intellectual capital deflation is a huge subject.  I must also admit that this blogger lacks the time, skill and brain power to elucidate and articulate the numerous nuances and depth this assertion deserves and requires.  I guess we could sum it up in a sound bite like the “dumbing down of America” but I believe that merely addresses the race to the bottom marketers skillfully cultivated to gobble up a greater portion of that ever fickle and fluid market share pie.  In a way the deflation we speak of turns this dumbing down on its head and now claims the purveyors of fine ideas and clever tactics devised by the corporate marketing geniuses who were able to enrich themselves by conceiving the brilliant plans to convince us to buy so they can sell as much useless junk to as many people as possible.

The monetization of intellectual capital by incorporated consultants are increasingly becoming inefficient.  New technologies that are enablers of strategic thinking has large consultancies disappearing into the computing cloud.  Large bull pens of gray matter are inefficient as innovation in small firms are more efficient purveyors of thinking large to solve small problems or thinking small to solve larger problems. The large corporate dinosaurs that protected bloated bureaucracies enmeshed in group think stasis increasing showed an inability to be agents of innovation.  They boldly proclaimed best practices to justify and position themselves in the executive office but now that the large corporations have been decapitalized their value creation mantras dissipated as markets capitalization fell.

In appears that the bulge bracket firms viability were dependent on knowledge transfer initiatives to underdeveloped economies to support outsourcing; and rent seeking business models dependent on regulatory mandates of Sarbanes Oxley, GBLA, COBIT, EURO conversions, Basel II, Y2K, PATRIOT ACT, HIPAA, FISMA etc etc. Their business models profited from significant business drivers of the past two decades the reallocation of capital to emerging markets and the guarantee of market protection due to governmental regulatory mandates.  In both instances value creation from the deployment of intellectual capital proved to be unsustainable.

Consider the financial services industry and hedge funds.  Hedge funds claim to offer uncorrelated investment products but most of the hedge funds performance fell in lock step with the market index averages.  Investors pay premiums to participate in absolute return strategies offered by hedge funds.  Fund managers make the claim of absolute returns based on their superior insights that their intellectual capital confers on their investment strategies.  Last year that claim was demolished to devastating effect.

Newspaper publishers are also experiencing a decline in the portfolio value of their intellectual capital.  But many believe that it is more of  a question of their antiquated business model and once they figure out how to Googlize their business model to sufficiently monetize its intellectual capital shareholders will once again be rewarded with an appreciation in its investment and the true value of their intellectual capital will be realized.

The markets are dramatically changing. Today the question is not so much about ideas and strategy its a question of execution. Just as in the recent past it was about raising capital and acquiring assets now its about making informed capital allocation decisions and liquidity. Its true you need the target to shoot at but you also need munitions, a good scope with adjusted cross hairs and a gun. The value proposition of consultants is quickly becoming marginalized.

Its a poor business model. It scales poorly, its racked with inefficiencies, its built on protected markets and knowledge segregation. Now that those barriers are falling and more and more MBAs are out of work the value of this form of intellectual capital continues to fall.

Consultants all to often are beholden to their process biases. They find it difficult to get out of the box and routinely ask their engagements to climb into the box with them. That said it is an absolute necessity that business redefines its business model to address current market realities. It needs to do so with dispassionate dispatch and it needs to create a unique value proposition that differentiates the brand and adds identifiable alpha in an expanded value delivery chain.

Its a big challenge that many professional services firms need to confront. Our firm went through that transition 6 years ago. We went from a strategic sound practices consulting firm to a product creation and marketing firm dedicated to the commercial application of sound practices. For Sum2 creating value was a very different value proposition then delivering value. The need to build equity in our business was our principal concern. Building and marketing tangible product value is how you create a sustainable business model.

Corporations are becoming disenthralled of their self perceived cleverness. Many believe that major investments in applied intelligence create a culture of insularity that hedges all risks and builds enterprise value. In the past it allowed executives to hide behind a wall of opaqueness. They bought the best and brightest minds from our esteemed business schools convinced that this treasure of intellectual capital would protect them. They believed the digital blips of risk models to be sparkling Rosetta Stones containing the secrets that unlock the mysteries of effective risk management, value creation and business sustainability. The codified results of these algorithmic exercises are revered as holy Dead Sea Scrolls that offers the protection of an supernatural mojo. This is the thinking of a bankrupt brain trust.

You Tube Video: Nena, 99 Luft Ballons

Risk: Group Think, sustainable business model, value creation

April 24, 2009 Posted by | banking, bankruptsy, Basel II, business continuity, economics, FASB, investments, media, risk management, Sum2 | , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 1 Comment

Too Much Sugar

I’ve heard that too much sugar can lead to diabetes. If you take too much of it over a long period of time it alters your body chemistry and produces an imbalance that leads to this dangerous and life threatening disease. Once you have contracted the disease and if it remains untreated it takes an awful toll on your body. As the disease progresses doctors start to cut off fingers and toes to try to arrest a growing gangrene. In its final stages of the disease, the diabetes sufferer sacrifices legs and arms to the surgeon’s knife in order to keep the body alive. Its a terrible disease and it leads to an ugly death.

I believe that the disease of diabetes is a fitting metaphor for our current economic crisis. The last 20 years have been a sweet run for our nation. We denied ourselves nothing. The economic and political powers let us eat cake. They never asked or suggested that maybe we need a diet or should alter our consumption because of our overindulgence and our inability to stop. The large financial institutions were never asked to stop taking great risks and vigorously fought oversight and regulation. Our elected officials never denied themselves a privilege or opportunity to serve the interest of their paymasters.

This nations citizens over indulged and gorged themselves on unbridled consumerism fueled by the perception of an infinite credit limit and an insistence on a sense of entitlement. People believed that the rampant acquisition of houses, cars, cloths, gadgets and leisure accoutrement’s had no limits and the party would never end. Hell as the Iraq War developed W insisted it was a patriotic duty to run up our credit card balances at the Mall Of America.

The Masters of the Universe on Wall Street set another dangerous example for the world to follow. They too indulged in an orgy of speculation that created unimaginable levels of riches for themselves. They gave no thought to the extensive collateral damage their financial transactions and structured products would create. They truly believed that everyone could live in a McMansion if only they had more faith in free markets.

Our elected officials believed the highest expression of patriotism would be to send tribute to finance their reelection. They prostituted themselves to any special interest lobby group for as little as a cheap junket to the nearest exotic offshore isle. They sold their votes and sold out their constituents to line the pockets of special interests with taxpayer money. Party leaders like Tom “The Hammer” DeLay is actually on trial for money laundering. DeLay now claims that he was unfairly victimized by the anti-money laundering provisions of the Patriot Act. Its either a supreme sublime irony or a startling cosmic karmic correction depending on your political bias.

So here we sit today. Rudderless, bereft of political leadership. Waiting for the next cut. Everyone should start searching the deep recesses of their sofas to look for some loose change. We might need it to help get us through this crisis. I fear it won’t be enough to avoid the next slash of a surgeons knife to cut out the growing gangrene metathesizing in our body politic.

Music: Eurythmics, Sweet Dreams Are Made Of This

Risk: depression, existential dread, consumerism

September 30, 2008 Posted by | Bush, credit crisis, culture, economics, pop | , , , , , , , | Leave a comment