stargeek
WHY ARE OUR STORIES ALWAYS ABOUT STRUGGLE?WHY ARE OUR
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 Take a look at the categories of movies in the video store, or the categories of fiction in the book store, and you'll discover that the vast majority of stories in our culture are about struggle, about conflict between 'good' and 'evil', and ultimately about heroes overcoming adversity. Dramas, biographies, sports stories, war stories, mysteries, action & adventure stories, even horror stories and most romances and fantasy stories fit into this category. Most video games are the same. The only exceptions seem to be pure comedies, some children's stories, and stories from other cultures. Why is this? Isn't there enough struggle in our daily lives already? Is it schadenfreude -- the secret pleasure we get from witnessing others' misfortune and knowing it is worse than our own? I remember as a child asking why the Lassie stories "were always about bad things happening", Once we get past the very earliest stories of infancy, most of the stories we are told involve struggle -- Grimm's fairy tales, Rudolph the Red-Nosed Reindeer, The Grinch etc. Or is it about adrenaline? Do we need stories to excite us, to vicariously involve us in danger? Or do we need stories to provide us with escape, a way to get away from our own unhappiness, boredom, misfortune? The other day I picked up an award-winning children's book called The Salamander Room written by Anne Mazer and beautifully illustrated by Steve Johnson. It's the simple, wonderful story of a boy who brings a salamander home, and wants to keep it in his room, and then in response to questions from his mother, imagines converting his room into a wilderness paradise where he and the salamander can both be at home. There is no struggle, no conflict, no hit-you-over-the-head moral. Why do adults find such stories so unsatisfying? I have been told that in many tribal cultures the stories rarely involve struggle, and are instead about discovery, exploration, learning from others, but when Westerners read them, they assume they are "just children's stories". And when I outlined my idea for my novel on one of the environmental discussion boards several people said I should place it in an apocalyptic future, not an idyllic one, if I wanted anyone to buy it. Why can we not be engaged by stories that don't involve conflict and suffering? What's wrong with us, anyway? |
 Some interesting stories this week, that, for
the most part, escaped major media
attention. They're all about complex issues with long-term
implications, so maybe the big media didn't want us worrying our
pretty
little heads about them. Republicans break into private Democrat databases, use and leak what they find for partisan purposes: First up, via Atrios, another Bush Republican scandal, this one very reminiscent of Watergate. What these clowns, including Novak, did, is completely illegal, and they should all be in prison. Here's the lead from the Boston Globe, with a link to the full story: Republican staff members of the
US Senate Judiciary Commitee infiltrated opposition computer files for
a year, monitoring secret strategy memos and periodically passing on
copies to the media, Senate officials told The Globe. From the spring of 2002 until at least April 2003, members of the GOP committee staff exploited a computer glitch that allowed them to access restricted Democratic communications without a password. Trolling through hundreds of memos, they were able to read talking points and accounts of private meetings discussing which judicial nominees Democrats would fight -- and with what tactics. The office of Senate Sergeant-at-Arms William Pickle has already launched an investigation into how excerpts from 15 Democratic memos showed up in the pages of the conservative-leaning newspapers and were posted to a website last November. [More] Canadian sues Ashcroft & Ridge for knowingly & illegally sending him to Syria for torture sessions: The US Torture Victim Protection Act, ironically passed by Bush I to extend Americans' ability to sue for torture overseas, makes illegal the practice of 'extraordinary rendition' -- the practice of using other countries to extract information through torture and other methods illegal in the US. Maher Arar, who was intercepted at an airport stopover on his way home to Canada from vacation, deported by US authorities without evidence, due process, or notification of Canadian authorities, and then tortured by Syrians for over a year before being released without charge, wants to prevent others from being subject to extraordinary rendition. In his case, Arar makes it clear his release was a Syrian screw-up -- he was supposed to 'disappear' in Syria's prison system to keep his case from coming to light. The second irony is that, although never charged with anything, he's banned from entering the US for five years so he can't testify personally in the case. Sixty Minutes has covered the story but the US print media have hardly mentioned it. [Full Story] Senior CIA advisors tell Bush of high probability of Iraq degenerating into civil war I've only made two major predictions on this blog and this was one of them -- that regardless of what Bush tries to do to 'impose' order, democracy and constitutional liberalism on Iraq (and Afghanistan), the people of those countries will determine their own future on their own terms and in their own time -- and that will inevitably be by way of further bloodshed, totalitarianism and civil strife. It's encouraging to see that someone in a position to get Bush's attention is saying the same thing. Not that he's likely to listen. Here's the lead from Knight-Ridder, picked up by Common Dreams and not many others: CIA officers in Iraq are warning
that the country may be on a path to civil war, current and former
U.S.
officials said Wednesday, starkly contradicting the upbeat assessment
that President Bush gave in his State of the Union address. The CIA
officers' bleak assessment was delivered verbally to Washington this
week, said the officials, who spoke on condition of anonymity because
of the classified information involved.
The warning echoed growing fears that Iraq's Shiite majority, which has until now grudgingly accepted the U.S. occupation, could turn to violence if its demands for direct elections are spurned. Meanwhile, Iraq's Kurdish minority is pressing its demand for autonomy and shares of oil revenue. "Both the Shiites and the Kurds think that now's their time," said one intelligence officer. "They think that if they don't get what they want now, they'll probably never get it. Both of them feel they've been betrayed by the United States before." These dire scenarios were discussed at meetings this week by Bush, his top national security aides and the chief U.S. administrator in Iraq, L. Paul Bremer, said a senior administration official, who requested anonymity. Another senior official said the concerns over a possible civil war weren't confined to the CIA but are "broadly held within the government," including by regional experts at the State Department and National Security Council. [Full Story] Photo above: Tens of thousands of Shiites demonstrate in Baghdad for an end to foreign occupation Oh, and my other major prediction? That the crushing Bush debt will plunge the world into economic collapse. The IMF are my strange bedfellows on that one. It's going to be a fun year. Environmental groups grapple internally with the explosive issue of population -- and immigration Last but not least, a story from the LA Times about how environmental groups like the Sierra Club are waking up to the terrifying prospect of One Billion Americans, with the consequence of coast-to-coast sprawl, eco-catastrophe and zero green space. The debate pits two core liberal values: environmentalism and openness to immigration, head-to-head. The result, not surprisingly, is a headache. The discussion is long overdue and important. The LA Times did a great job on this story, and since it's passed into the archives, I'm posting it, courtesy of the Ecological Weblog, in its entirety: An unusual alliance of
anti-immigration advocates and animal rights activists is attempting
to
take over the leadership of the Sierra Club, America's oldest national
environmental group, in what is emerging as a bitter fight over the
future of the 112-year-old organization founded by Scottish immigrant
John Muir. Leaders of a faction that failed to persuade the club to
take a stand against immigration in 1998 are seeking to win majority
control of the group's 15-member governing board in a spring election
-- this time, as part of a broader coalition that includes
vegetarians,
who want the club to denounce hunting, fishing and raising animals for
human consumption. In response, 11 former Sierra Club presidents have written a letter expressing "extreme concern for the continuing viability of the club," protesting what they see as a concerted effort by outside organizations to hijack the mainstream conservationist group and its $95-million annual budget. Some of the insurgent candidates vying for the five available seats on the governing board only recently joined the Sierra Club. If they win, they will control eight of the 15 seats. Members will vote in the board elections in March, with the results tallied in April. People who join the club by the end of January should be able to vote. The election has attracted the interest of anti-immigration groups, which are encouraging their members to join the club to help elect the insurgent candidates. "What has outraged Sierra Club leaders is that external organizations would attempt to interfere and manipulate our election to advance their own agendas," said Robert Cox, a past Sierra Club president. Moreover, club officials argue that members of the two insurgent groups share fundamentally anti-human views, in their opposition to immigration and in their belief that people should take a backseat to other species. The Sierra Club's "dominant perspective has been to protect nature for people," said Executive Director Carl Pope. "But by pulling up the gangplank on immigration, they are tapping into a strand of misanthropy that says human beings are a problem." Pope noted that 18% of Sierra Club members like to fish or hunt, and he worried they could be driven out by the new agenda from animal-rights advocates. "It's important to have hunters and fishermen in the Sierra Club," Pope said. "We are a big-tent organization. We want the Sierra Club to be a comfortable place for Americans who want clean air, clean water, and to protect America's open spaces." The list of insurgent candidates features some high-profile names, including former Colorado Gov. Richard Lamm, Cornell University entomology professor David Pimentel, and Frank Morris, former director of the Congressional Black Caucus Foundation. All three have been outspoken advocates of controlling population growth or restricting immigration. Lamm is coauthor of "The Immigration Time Bomb: The Fragmenting of America." Club officials say the campaign got underway quietly with the recent election of three activists, including UCLA astronomy professor Benjamin Zuckerman, a longtime champion of curbs on immigration; and Paul Watson, head of the Sea Shepherd Conservation Society, a marine environmental group perhaps best-known for ramming whaling ships. During their campaigns, the candidates downplayed the views they are now advancing. Club members who support the insurgent candidates accused the organization's old guard of trying to demonize them as radicals to head off the increasingly popular efforts to win a new majority. "I really think we ought to be judged on our merits and what we've done in the past, and not divide the Sierra Club," Pimentel said. Political squabbles are hardly new to the 750,000-member Sierra Club, whose members squared off just last year over whether to take a stand against the war in Iraq. But the dispute over this spring's elections is becoming especially rancorous. Some longtime Sierrans worry that a takeover by the insurgents would brand the organization as bigoted and xenophobic. "I don't think that Lamm, Pimentel and Morris are racists," Pope said. "But they are clearly being supported by racists." Zuckerman and Watson call those claims ludicrous. They argue that the club has a responsibility to take strong positions on the issues affecting the health of the planet. "Everything else the Sierra Club is doing is doomed to fail if the United States continues on its rapid population growth," said Zuckerman, 50, who was the leading vote-getter in the Sierra Club board election two years ago. "There are people who are being born today who will see a California that has more people than the entire United States when I was born," he said. Asked what the Sierra Club could do to curb population growth, Zuckerman said the group must "talk about the numbers -- how much immigration we should have and how many babies -- so the mix of fertility and immigration is debated and we can come to a level where the population will stabilize." Watson, who was a co-founder of Greenpeace but who broke ranks with that organization because he advocated more aggressive tactics, said he did not expect the Sierra Club to adopt the confrontational methods of Sea Shepherd. But the club, he said, should promote eating habits that protect Earth's other inhabitants. "Human beings are literally stealing resources from all the other species on this planet," said Watson, a Canadian immigrant. In an e-mail response to the letter by the 11 former presidents, Watson wrote, "Is the advocating of low-impact vegetarian diets a cause for concern? I guess it is if you have a vested interest in grazing or the beef or poultry industry. I fail to see how vegetarianism in the age of Mad Cow Disease, E. coli, PCBs in fish, etc., can be considered anything but practical and realistic." Sierra Club President Larry Fahn and the other prior presidents have pointed out that the club's members already voted to remain neutral on immigration in 1998 after a lengthy public debate, and said that revisiting the divisive dispute would detract from what board members have agreed is the most immediate action needed to protect the environment: unseating President Bush. The presence of the anti-immigration candidates has led civil rights leader Morris Dees of the Southern Poverty Law Center, which tracks what it considers hate groups, to join the Sierra Club and run for its board. Dees said he decided to throw his hat into the ring to generate publicity after his staff found that anti- immigration groups were urging members to join the Sierra Club and help swing the vote. "I'm not running to win a seat on the board," Dees said. "I'm running to sound the alarm of an attempt to take over this organization by the radical element of anti-immigration people. They are interested in keeping this country white." Earlier this month, VDare.com, an anti-immigration website founded by former Forbes senior editor Peter Brimelow, author of the book "Alien Nation," ran an article discussing the Sierra Club elections. The article referred to Dees as a "left-wing smear artist" and urged immigration-control activists to join the Sierra Club and vote for like-minded candidates in its upcoming elections. The article in turn was picked up by an anti-Semitic website and topped with a homophobic, anti-Semitic headline. The author of the article, Brenda Walker, said she was dismayed at that, but Sierra Club officials cited the recycled article as evidence of extremist support for the anti-immigration candidates. Roderick Nash, a retired UC Santa Barbara historian who has tracked the environmental movement, noted that since its early days, the Sierra Club has struggled with tensions over humanity's imprint on the environment. Gentlemen hikers and climbers -- who wanted to preserve America's beautiful places so the privileged could visit them -- wrote diatribes in the early 20th century about Anglo Americans being overrun by unsavory immigrants from Southern and Eastern Europe, he said. Nor is it the first time the Sierra Club has been the target of a supposed takeover. In the late 1970s, when the club was embroiled in a battle with Walt Disney Co. over a proposed ski resort in Mineral King near Sequoia, the ski industry ran a slate of candidates to push for support of more ski resorts, Pope said. Those candidates lost. |
 I've written
before about
stories being subversive.
Now, in the 2003 CBC
Ideas/Massey
Lectures,
Native author and scholar Thomas King shows they are much more than
that -- they are the very foundation and compass of our culture.In the first lecture, King tells a story about his (optimistic and self-sacrificing) mother, and about his (enigmatic and thoughtless) father, to illustrate how much these stories have shaped him. Then, shifting perspective, he contrasts the Judeo-Christian creation myth (the story in Genesis of the fall from grace after succumbing to the temptation to eat from the tree of knowledge), with a Native creation myth (the wonderful story The Woman Who Fell From the Sky, which relates whimsically how a woman named Charm worked with the animals she encountered after accidentally falling from the sky to a water-filled planet, to create the Earth on the back of a turtle). Then he explains: A theologian might argue that
these two creation stories are essentially the same. Each tells about
the creation of the world and the appearance of human beings. But a
storyteller would tell you that these two stories are quite
different...The elements in Genesis create a particular universe
governed by a series of hierarchies -- God, man, animals, plants --
that celebrate law, order and good government, while in our Native
story, the universe is governed by a series of co-operations that
celebrate equality and balance. And then King hits us with the hammer: The truth about stories
is that that's all we are.In Genesis, all creative power is vested in a single deity who is omnipotent, omniscient and omnipresent. The universe begins with his thought, and it is through his actions alone that it comes into being. In Native creation stories deities are generally figures of limited power and persuasion, and the acts of creation and decision are shared with other characters in the drama. In Genesis we begin with a perfect world but after the Fall we are forced into a chaotic world of harsh landscapes and dangerous shadows. In our Native story, we begin with water and mud and move by degrees and adjustments to a world rich in diversity, complex, wonderful and complete. In Genesis the post-garden world we inherit is martial and adversarial in nature, a world at war -- god versus the devil, humans versus the elements. In our Native story, the world is at peace, and the pivotal concern is not the ascendancy of good over evil but with the issue of balance and harmony... Perhaps that is why we (in the Judeo-Christian culture) delight in telling stories about heroes battling the odds and the elements rather than the magic of seasonal change. Why we relish stories that lionize individuals who start at the bottom and fight their way to the top, rather than stories that frame these forms of competition as insanity... Is it our nature? Do these stories reflect the world as it truly is, or did we simply start off with the wrong story? And if we'd started with a different story, what kind of a world might we have created? There's much more in the lectures, which I'm still working through. You can buy the book, The Truth About Stories, containing the full set of lectures, from House of Anansi. This guy is an amazing story-teller. His message to me, already, and his message perhaps to writers and bloggers all, is to stop preaching, interpreting, proselytizing, advocating, prescribing. Just tell your story. "Don't show them your mind. Show them your imagination." Much to think about. My head hurts. (Thanks to Chris Corrigan for telling me about this) |
 If
you're a regular reader of this blog, you probably know that I'm
opposed to unregulated 'free' trade, very worried about the
extraterritoriality of the WTO, NAFTA, Davos and other corporatist
captives, strongly opposed to domestic corporations 'offshoring' jobs,
using influence with the Bush regime and other right-wing governments
to circumvent social and environmental laws and responsibilities, and
a
great believer in taking the pledge to buy local, and in community
self-sufficiency.At the same time, I'm a strong supporter of the UN and other multi-lateral NGOs, and I believe that we each have a responsibility for the well-being of all the people and creatures of this world. Some readers have said this view is inconsistent, and I wasn't quite sure how to respond to such charges. Fortunately, Peter Singer, in his recent book on global ethics, I'll have more to say next week about Bush's fraudulent and despicable Earth Day media blitz, and the major media's shameless lack of critical evaluation of the utter nonsense that his propaganda machine has been churning out this week on the environment -- newspeak of Orwellian proportions. The first part of Singer's book deals with environmental responsibility, and his prescription for increasing it -- immediate ratification of Kyoto by the US and other holdout countries, and introduction of an emissions trading mechanism to make the realization of Kyoto feasible (subject to the need for some oversight on the disposition of the proceeds of such trading when it involves autocratic governments). The second part of the book deals with the global economy, and Singer adroitly tears apart the Economist's (and other neocons') naive assertion that economic globalization somehow benefits both rich and poor countries. He then goes on to prescribe a substantial reform of the WTO and the GATT, which could actually lead to more equitable distribution of wealth and more efficient production of economic goods, while safeguarding human rights, labour and the environment. Unfortunately, the multi-national corporations and corporatists who hold sway in the WTO would never tolerate Singer's prescription, since it would entirely divert the benefits of economic globalization from their pockets to those of the world's poor. The third part of the book deals with international law, and Singer lashes out at Bush for his unconscionable refusal to ratify the International Court of Justice, and for the UN's continued hesitancy to accept a duty (not a right) to intervene in situations of genocide and other humanitarian crises, even within a single nation. Singer is sanguine about the limitations and dangers of 'global government', but supports strengthening the UN to enable it to act as a 'protector of last resort', and including in its mandate the responsibility to supervise elections in all member nations. The fourth and final part goes back to ethical principles and proposes that countries must, in this world where national boundaries no longer have any logistic meaning, set aside national interest and embrace, once and for all, global interest, impartially. That does not mean cultural homogenization, but imposes a responsibility for the reduction of inequality, both of economic resources and personal rights and freedoms. Always the pragmatist, Singer concludes by worrying out loud about how the responsibility for a global ethic could be managed: It
is widely believed that a world government would be, at best, an
unchecked bureaucratic behemoth that would make the bureaucracy of the
EU look lean and efficient. At worst, it would become a global
tyranny,
unchecked and unchallengeable. These thoughts have to be taken
seriously. How to prevent global bodies becoming either dangerous
tyrannies or self-aggrandizing bureaucracies, and instead make them
effective and responsive to the people whose lives they affect? It is
a
challenge that should not be beyond the best minds in the fields of
political science and public administration.
I'd like to believe that this was possible, because if it isn't, we're in serious trouble. We cannot expect national governments to set aside parochial interests, especially when this entails accepting a responsibility that would, for the richer nations, inevitably lead to a drastic redistribution of wealth to poorer nations and hence a sudden and sharp reduction in, at least, economic living standards (if not necessarily well-being). But as John Ralston Saul has so eloquently argued, larger organizations and institutions, whether public or private, are almost always, and inherently, less efficient, less agile, more resistant to change, more hierarchic, and less transparent than smaller organizations. So the challenge is to achieve the best of both worlds, having organizations of global scope and authority and responsibility, but broken up into sufficiently small, autonomous and dynamic units that they are sensitive, resilient, responsible and responsive to the people and communities they serve. We can only hope that "the best minds in the fields of political science and public administration", wherever they are, are up to the task. |
 Some articles have a long shelf life. Case in point: This BusinessWeek cover story from four years ago called Why Service Stinks. Bottom line is that, like everything else in the US, and to a lesser (but growing) extent elsewhere in the West, your value as a consumer (and as a citizen) is a direct function of your wealth and your propensity to spend it. So if the computer of the person who's serving you says you're the buying rep for a ten billion dollar company, believe you're going to get great service. But it that computer says you've only bought one thing from them before, and it required service under warranty: "Sorry, we seem to have a bad connection." *click* This is part of a larger malaise that tries to make us believe, for the benefit of the corporatist aristocracy that owns and runs more of our lives every day, that we are only what we buy. If it's easier for you to buy a replacement for the shoddy item you bought, than to return it or get it fixed, then if you can afford to do so you'll replace it. The vendor will therefore make sure it's easier to buy new than repair or return it under warranty. And if you can't afford to buy a new one, the vendor doesn't want to know you. Companies know just how good a customer you are--and unless you're a high roller, they would rather lose you than take the time to fix your problem, says BusinessWeek. They explain how companies allocate service reps according to the amount of business they get from each customer group (which is why, for example, corporate Dell customers are routed to one 'help line' while 'retail and home' customers get the Indian help line). They call this practice of triaging customers by wealth and spending habits corporate apartheid and that's a perfect analogy for it. The world in which corporate aristocrats live today is increasingly separated from all contact with the masses: Private chauffeurs, private rooms in private clubs and restaurants, private schools, private jets (and Elite Class perks when they're forced to travel on the same planes as menials), private rooms in private health care facilities. The people who live in this bubble of fawning privilege have no idea what life in the real world is like: they never see it, and they never have to deal with it. This remains my #1 concern with the concept of The Support Economy (though its author, Ms. Zuboff, was gracious in trying to refute this concern in personal correspondence with me): That only the very wealthy few will be able to afford it. The BusinessWeek article shows that the customer experience is a function of wealth and spending no matter what industry is supplying the product or service: financial institutions, brokerage houses, retailers, machinery manufacturers, phone companies, airlines, insurance companies, you name it. It's no accident that the code for spending volume on many computerized customer information systems is called Status or Class or Value. A Maytag exec sees nothing wrong with this. People who buy top-of-the-line "not only want more service, they deserve it", he says. If he had been referring to a racial class rather than an economic one, such a remark would provoke outrage. BusinessWeek foresees a future in which "the service divide may become much more transparent. The trade-off between price and service could be explicit, and customers will be able to choose where they want to fall on that continuum. In essence, customer service will become just another product for sale." So the discrimination will depend not on your wealth or past spending volume, but on what you're willing to pay now for 'superior' service, or to jump the queue. Is that fairer? Do we all deserve the same level of service, or should service depend on what you can afford? Where do you draw the line? In Canada, we (most of us, anyway) consider the idea of the rich jumping the queue for critical medical services to be morally repugnant, but in the US this is accepted as natural, just 'the way things are'. So much for "give me your huddled masses". I remember a few years ago I was waiting in a long customs and immigration line-up in a sweltering third-world airport terminal at 1 a.m. chatting with the son of the British High Commissioner to that country who'd come in on the same flight. Suddenly, a boy came rushing up to me, asked my name, and then said "Give me your passport." When I looked alarmed, he pointed to a mezzanine gallery where the friend who was meeting me on my arrival was waving and nodding. The boy took my hand, walked me to the front of the long line, whispered in the ear of the customs agent, and I was whisked through, no questions asked, and into my friend's waiting car. "In this country, it's who you know, not how much money you have, that counts", she said. I was embarrassed and astonished. But is this any worse than the system that rushes first-class airplane passengers in many cities through shorter, less confrontational customs and immigration line-ups? Call me naive, and idealistic, but all kinds of apartheid offend me. The wealthy and the connected don't deserve any better service than the rest of us. To the corporations that believe that service should depend on what the customer's 'worth', and the rest should either self-serve or go away, my response is: Welcome to my Boycott List. Good-bye. |
 Graham Westwood of ProCarta gave me a copy of Bill Jensen's Simplicity, a book that claims
most business problems are a result of unnecessarily complex
decision-making processes. I recently
wrote
that if Knowledge Management were relabeled Work Effectiveness
Improvement, both the requirements of the job and the customers'
expectations would be much clearer, and we might finally get the job
done. Jensen's book offers a prescription for WEI.Jensen's thesis is that poor decision-making is the root cause of business error and ineffectiveness, and his diagnosis of the four causes for it is shown at right. Most employees, he says, want to do good work, but are impeded by these four causes, which produce unnecessary complexity in each of our jobs. I concur with this diagnosis, though I'm not sure large organization have either the capacity or the will to fix these four problems. At the individual and team level, Jensen suggests* five behaviour or learning changes that could alleviate these problems:
These are useful suggestions for improving work effectiveness and hence decision-making in organizations, but none of them is new. Those that would take up WEI (or KM) as a career need to understand why these techniques have not worked in the past, before they attempt to implement them in their organizations. In many companies, both employees and managers raise their eyebrows at 'soft skills' courses like time management, effective communication and story-telling. We know how to do that, they will say, the problem is more systemic, more entrenched than merely teaching common-sense skills can hope to solve. These critics are half-right. Many problems in business are structural, strategic, or systemic, and raising people's hopes by suggesting that these basic work management techniques are suddenly going to work bottom-up when they didn't work before, will merely create disappointment. Excessive size and hierarchy, poor managers, and inappropriate success measures (that reward executives more for cutting staff than for making staff more effective, for example) are at the heart of much work ineffectiveness, and need very different solutions. But these critics are also half-wrong. Each of us today is increasingly in charge of our own careers, our own jobs, and hence our own work effectiveness. The five skills listed above are critical skills for every entrepreneur and every front-line worker, and we should each ensure we have these 'core competencies'. If the big, cumbersome organizations we work for do not allow these skills proper exercise, then the answer is either to leave them or reform them, not to revel in our ineffectiveness and just blame management (even when they are to blame). The remainder of Jensen's book prescribes some higher-level organizational 'disciplines' that can enable improvements in work effectiveness:
Nevertheless, this book provides some of the much-needed definition for WEI, which I believe will be the next wave of organizational change, and will accomplish much of what reengineering and knowledge management failed to do. The #1 purpose of management must become empowering people to know and do what's important to achieve the organization's goals, and enabling them to stop doing the other stuff that, today, takes up most of their time. * Jensen uses different words for these, and for many of the key ideas in this book. As much as I liked his messages, I found sometimes his choice of labels for his key concepts confusing. |
 In an article in this month's Fast Company, Keith Hammonds profiles an unlikely hero of social and environmental progressives: Ashoka founder Bill Drayton. Drayton, a former Director at McKinsey and the Environmental Protection Agency, is now a philanthropist with a difference: Ashoka provides a 'leg up' to those with vision, creativity, entrepreneurship and a strong ethical sense, by making them Ashoka 'fellows', who receive a stipend, funding for project costs, and the legal, management, intellectual and networking support of the Ashoka team. From a modest start 25 years ago, the group has grown to over 1500 fellows in 53 countries, including some highly celebrated and astonishingly creative social entrepreneurs who are household names in their home countries. The support team includes representation from McKinsey (management consultants), Hill & Knowlton (PR) and the International Senior Lawyers Project (legal counsel). According to the group's website, "Ashoka Fellows are individuals who share qualities traditionally associated with business entrepreneurs — vision, innovation, determination, and long-term commitment — but are committed to systemic social change in Ashoka's areas of interest: learning/youth development, the environment, health, human rights, economic development, and civic engagement. Fellows receive up to a three-year financial stipend to allow them to concentrate fully on their programs, and in addition may apply for supplemental funding for collaborative projects and are eligible for training and technical assistance." Here are a few examples of what Ashoka fellows are doing:
|
 Figure 1 Richard Manning's book Against the Grain is a remarkable work -- succinct, well-researched, solution-oriented and mind-altering. It's an absolute must-read. Please don't settle for the synopsis below, and don't assume that because it's about the history and economy of agriculture it's a dull read. It's riveting. The issues that Manning describes in the book were first raised in his Harper's Magazine article last winter called The Oil We Eat. But the book goes much further. In my earlier root-cause analysis of what 'caused' us to invent civilization, to abandon our joyful hunter-gatherer cultures, the cause-and-effect went like this:
 Figure 2 The 'discovery' of grain monoculture in areas of recurring natural catastrophe (like floodplains) was only possible where man was already settled, which only occurred in areas where fish were plentiful, which is where all agricultural cultures began (the birthplaces of civilization) before they expanded and merged into the single civilization culture we know today. Sedentary life, and soft grain gruels, also allowed a higher birth rate, since babies no longer had to be carried for four years until they were weaned -- and the population explosion began. The ability to store food also allowed the provisioning of armies, and the need to keep people from going back to their instinctive hunter-gatherer ways and abandon the farms required the use of force, which required hierarchy and government. The provisioned armies conquered the remaining hunter-gatherers (most notably in Africa and the Americas) and made them slaves on the farms. To keep unnatural hierarchy1 from crumbling, the governors bribed subordinates with extra resources, larger homes, and their own 'private' land, as long as the subordinates kept the slaves and peasants in line2. Wealth, and its inevitable partner poverty, were born. Dependence on monoculture, which failed often, gave rise to the first famines. Average human heights plummeted due to disease and poor, unvaried diet, bone deformities from constant stooping became commonplace, and grain monoculture and crowded villages allowed previously rare diseases to flourish: anemia, arthritis, malaria, syphilis, and tuberculosis, and, finally, plague, all of them unknown before agriculture. And the high-carb diet of grain monoculture also brought with it other new and unnatural phenomena: tooth decay, obesity, diabetes, lactose tolerance, and alcoholism, which devastated many hunter-gatherer cultures when they were suddenly exposed to this deadly and seductive diet. So agriculture was irresistible to man, the ultimate devil's bargain. By doing so, man threw in his lot with a host of life forms that co-evolved with man and grain monoculture: this 'coalition' included the rat, insect pests, weeds and parasites as well as the aforementioned diseases and a handful of animals suited to domestication, all of which thrive with monoculture. In fact much of the 'conquering' of the hunter-gatherer world by 'civilized' man was really accomplished by our coalition partners: it was our diseases, to which hunter-gatherers had no exposure and hence no resistance, that killed most of them, not our weapons or their years of subsequent slave labour. The introduction of our domestic animals likewise altered the New World's terrain, since these animals had few natural predators and exploded in population, literally eating the natural flora to extinction. Like us, these domestic animals paid the price of civilization -- they are smaller, sicker and poorer than their wild counterparts, but the ultimate test of evolution is endurance, and our unholy coalition has passed that test with flying colours. Humans, members of the six domestic animal groups and the big five monoculture grains, and the rodents, insects, weeds and disease parasites that come with them have all flourished, at least in numbers, together, and together they now constitute a huge and growing proportion of Earth's biomass, while the millions of non-coalition creatures almost all face extinction. Although our diseases did most of the dirty work, Manning argues that our civilization culture committed systematic genocide against every hunter-gatherer culture on the planet, from the Cro-Magnon man in Eastern Europe (whose language, intriguingly lives on only in the tiny Basque community whose culture is still under siege), to the First Nations of the Americas and Oceania. The result was what anthropologists have called "remarkable cultural homogeneity" and "pathological conventionality". Its sustained hallmark has been ever-increasing famines, the "very badge of civilization". The worst famine ever, and one of the most recent, in Mao's China, killed 80 million people. The second worst, in Russia, was also in the past century. Famine, a sudden and severe shortage of vital resources, breeds hunger, and that always breeds imperialism in turn. The alternative, common and legal in China for millennia until quite recently, is an invention called "Swapping Children / Making Food" -- in times of famine you exchange your children for your neighbour's, and then kill them and eat them and use their bones for fuel. Modern mythology would have us believe that famine is a political problem -- a consequence of bad distribution of food and bad government -- and while this is in part true, famine is ultimately an inevitable consequence of our fragile monoculture and massive overpopulation. This quote, describing one such famine in Ireland, where potato blight in one year eliminated 90% of the monoculture potato crop and hence 90% of the food, has given me nightmares: In the first hovel, six famished
and ghastly skeletons, to all appearances dead, were huddled in a
corner on some filthy straw, their sole covering what seemed a ragged
horsecloth, and their wretched legs hanging about, naked above the
knees. I approached with horror, and found by a low moaning that they
were alive, they were in fever -- four children, a woman, and what had
once been a man. It is impossible to go through the details. Suffice
it
to say that, in a few minutes, I was surrounded by at least 200 of
such
phantoms, such frightful specters as no words can describe.
All of this because we threw ourselves out of the Garden of Eden, seduced by the lure of uniform plenty. Why and how did we get into this mess, and who is to blame? Manning recaps: "A population explosion generates the need to grow more food, but agriculture is the cause of that population explosion, and agriculture creates the need for government. The hierarchical, specialized societies that agriculture builds are wholly dependent on the smooth operation of their infrastructure, on transportation, on stability. Dams must be built, canals must flow, roads must be maintained and government must be established to order these tasks. Government leaders emerge from the social hierarchy that agriculture's wealth makes possible. Failures are human and inevitable. To hold agriculture blameless and government responsible for famine is like holding a lion blameless for a child's death on the grounds that it was the lion's teeth that did the damage. Poverty, government and famine are co-evolved species, every bit as integral to catastrophic agriculture as wheat, bluegrass, smallpox and rats." Our solution, of course, was not to blame agriculture, but to try to make it more efficient. Although we now produce a massively excess amount of monoculture food, famines, starvation and poverty remain commonplace. So lately we developed the Green Revolution to increase efficiency of grain production, to increase yields and edible mass per acre and per plant. The theory was that these high-yield crops could be grown closer to the starving. But fifty years later this has not solved the problem, and it has in fact increased the fragility of the system. Plants are now patented, and GM now threatens existing plant species and diversity and their utter homogeneity exposes them to new vulnerabilities as nature evolves new pests and diseases to try to bring back into balance this massive, ecologically unsustainable and undifferentiated surplus. And these higher yields come with a huge price tag. Whereas a calorie of your home-grown carrots requires less than a calorie of non-photosynthetic energy to produce, a calorie of grain requires ten calories of energy to produce3, mostly in the form of Mideast-oil-based, highly processed nitrogen fertilizers poured onto severely and evermore soil- and nutrient-depleted land. Ironically, that fertilizer replaces animal manure, which is no longer economical to truck from the new concentration-camp factory farms (also developed to improve 'efficiency'). So most of the oil-based fertilizer runs off into the water supply, along with massive amounts of pesticides, herbicides, antibiotics and other by-products of 'efficient' agriculture and the mountains of shit from the factory farms, which no longer has commercial 'value'. And if the smell of that shit makes living in the area unbearable, that's fine, too, because Archer Daniels Midland and the other handful of companies that run this entire system can then buy up and concentrate the farms more cheaply. Besides, we don't want nosy 'eco-terrorists' and news media poking around and seeing what really goes on in those factory farms anyway. The cost of this is so phenomenally high that government subsidies now exceed the entire 'commercial value' of the food produced. It's a massive corporate welfare scheme originally designed to keep families on farms and now accruing primarily to the few corporations that control the industry. Taxpayers pay for these corporations to produce and process an absurd excess of bad food and to finance governments who pursue Middle Eastern wars to get the oil needed for fertilizer. And in return the taxpayers get cheap, tasteless, unhealthy, polluted food, monstrous animal cruelty, massive pollution of the air and water, heart disease, obesity, diabetes, tooth decay, alcoholism, ruined land, and unemployment. And still there is famine. So what are we to do? Manning starts by pointing out what not to do -- try to get government to change the system. "The political system cannot be counted on to reform agriculture because the political system is a creation of agriculture, a co-evolved entity". Of course we should try to end agricultural subsidies, but Manning says we are unlikely to succeed. Vegetarianism can help, but not much: As long as the vegetables come from the same commodity system, they're still causing massive environmental and social damage and animal cruelty. And we couldn't go back to hunter-gatherer culture, at least not in our current numbers, even if we wanted to. But reducing human population is a necessary condition: "I do not take human population as a given; if we accept six billion as inevitable, we are doomed". Beyond that, Manning's solution is the same one that a rising chorus of radicals and revolutionaries is calling for: A walking away from this system and its products, and the creation of a new, healthy culture and economy. To Manning, focused on the food economy, this means:
|
(Fourteenth of fifteen*
instalments of
the
upcoming book Natural
Enterprise. ) "Find a need and fill it".
I have heard this quote from no fewer than a dozen successful business
leaders. Ted Rogers, son of the inventor of the alternating-current
radio tube (that allowed radios to be powered by electricity), and one
of Canada's most successful entrepreneurs in his own right, recognized
a need for more varied radio and television programming in Canada, so
he bought up some new and very inexpensive licenses, for FM radio
stations (when there were no FM stations and few FM radios), and for
Cable TV distribution (when there were very few cable distributors or
customers). Ted usually starts his speeches with the six-word quote
that began this paragraph.Entrepreneur Magazine lists 'find a need and fill it' as Rule #1 for business start-ups. Chuck Frey's 'Innovation Tools' says these six words lie at the root of any business success. It's the most important business advice you can give. But what does this mean? It means that every successful enterprise's offerings (products and/or services) meet four criteria:
The key to doing this is in research, the difficult, time-consuming (but usually inexpensive) process of discovering the who, what, when, where, why and how of unmet needs. There are two kinds of research: Secondary research entails reading and browsing online to gather information that has already been published about the market, and need, and the possible solutions to it. Primary research entails talking to people directly to answer these questions, gathering unpublished information and intelligence. Successful needs identification usually stems from primary, not secondary research. How do you go about doing this? To some extent it will depend, of course, on what the business idea is. You're going to have to be creative and patient and methodical in solving the all-important problem of identifying what the market needs, which is not already being satisfied by existing products and services. That means you're going to have to take the time to learn a lot about the marketplace, and about customers. Here are some ideas to get you started:
You'll also learn a lot about the research process, and you'll get better and faster at it the more you persevere. I know researchers who are the de facto Subject Matter Experts on a lot of subjects, far more informed, and better able to substantiate their opinions, than the gurus who have worked in the industry all their lives. Good primary researchers have the benefit of current information gleaned directly from the horses' mouths, a lot of them -- the Wisdom of Crowds. You might think it takes a lot of gall to get so many people to give you so much information and to offer their opinions free of charge. But entrepreneurs and researchers I know tell me people are often glad to help, and to offer their opinion, as long as the demand on their time is modest and that the solicitation is polite and personal. That means, ideally, face-to-face, with the telephone used only to secure an interview with them. Prepare to wear out a lot of shoes doing your research. Because business' products and services are so diverse, it's hard to generalize beyond this point about the process of Filling an Unmet Need. As the next three chapters will show, not only does going through this painstaking and time-consuming process almost guarantee you success, it can also dramatically reduce the amount of time, effort and money you need to spend promoting and marketing your product or service (you've already met a lot of your first customers, and if you fill their unmet needs they will spread the word to others -- and take some pride in having played a part in your success), and it can even reduce the amount of money you need to raise to launch the enterprise. But most importantly, you should follow this process, gruelling as it may be, because it works. If you doubt me, talk to any successful entrepreneur about the value of doing this, and you'll be convinced. In fact, this book, and the university-level Distance Learning course being built around it, came about precisely by this process: Prospective entrepreneurs, MBA students and professors I had been talking to over the past year kept telling me there was an urgent need for proven, comprehensive, practical business advice for entrepreneurs, both those looking to start their first business and those disenchanted with the struggle and disappointment that 'traditional wisdom' about entrepreneurship had led to. So I'm confident that this book will be a success and prove the entire point of this chapter, and without the need for a massive book publicity campaign. * As the book nears completion, I've taken the liberty of revamping the order and the organization of the chapters somewhat. Chapter 11 (Day to Day operations) will now become part of an expanded Chapter 5 (Improvisational Planning and Day to Day Management), with additional material on self-managed enterprises (defined goals, roles and collaboration processes), on entrepreneurial decision-making (communication, consultation and consensus-building), personal productivity improvement and management by 'walking around'. Chapter 10 (Launch & Life Cycle) is being renamed Business Evolution and will be the final chapter in the book (an excerpt from this chapter, describing organic life-cycles, complex adaptive systems, succession planning and 'natural death', will appear next week in this blog). The material on Innovation will be spread across three chapters: The Importance of Innovation (why it has been historically the #1 driver of business success); An Innovation Culture (including how to develop core innovation competencies); and The Innovation Process. Confused? A complete table of contents will appear with next week's instalment. The final book will also include about 50 'mini-case studies' drawn from my personal experiences with entrepreneurs, and from some of the leading literature on entrepreneurship: Success stories of companies that have exemplified Natural Enterprise, and war stories of those that, mostly, have not. Many thanks for all the comments from readers that have helped make writing the book a joy, and a truly collaborative experience! |
 Two weeks ago I reported on the upcoming June 28 Canadian election, and predicted that there would be a Liberal minority government, with the NDP holding the balance of power. Since then, groupthink has taken hold, and the anger that many Canadians feel about the incompetence of the federal Liberals to detect either wasteful spending or the 'sponsorship' fraud by some government workers, plus the anger of many Ontarians about the new Provincial Liberal government's reneging on promises to avoid tax increases, has led another 8% of Canadians to vow not to re-elect them. This 8% swing has been predominantly older men in Ontario, who seem unwilling to believe that the Conservatives are as right-wing as Liberal Prime Minister Martin has portrayed them, and younger people, whose support for the Green Party has significantly increased. The province-by-province projections now stand as follows -- 155 of the 308 seats are needed for a majority:
Next week we'll hear the all-important leader debates, but they are likely to change nothing. The Conservatives are muzzling their own right-wing extremists, who are virulently anti-abortion, gay-hating, anti-gun control, anti-immigation, pro closer ties with the US, anti-Kyoto accord, and militaristic (Stephen Harper, the new Conservative leader and former head of a Western separatist party, wanted Canada in the Iraq war). The Conservative strategists are determined to portray Harper as a moderate, despite the fact that he is on record as having taken right-wing positions on many social, economic and environmental position. If this sounds a lot like Dubya, and the spin doctor white-washing of his extremism reminds you of 'compassionate conservatism' in 2000, it should, because the tactics are the same -- say anything to get elected, and then trot out the real agenda of the people who paid for the campaign. But it's even more frightening than that. Small-c conservatives make up only 30% of Canadians, and the capital-c Conservatives are already above that point, with some of their voters coming from angry liberals. But if the figures above don't change, the Conservatives will get 38% of the seats with 33% of the vote. And the Bloc Québecois, the Québec separatist party that runs candidates only in that province, will get 19% of the seats with only 11% of the vote. Add them together and you get a distortion almost identical to what happened in the US in 2000, where Dubya 'won' with only 46% of the popular vote. If the Conservatives and Bloc combine their seats in a strange-bedfellows anti-federalist coalition, they'll have 57% of the seats with only 44% of the votes, while liberal-centrist parties will have only 43% of the seats, even though they will have received 56% of the votes. There is no other coalition that would have enough seats to form a government. Problem is, this coalition won't hold for more than a few months. The Bloc is a left-wing, Francophone party, liberal on all social, economic and environmental issues. The Conservatives have diametrically-opposed views on every issue but one: their dislike of federalism. The cost of Bloc support would be to grant Québec limited sovereignty, kind of 'independence light'. The very idea of this is repugnant to core Western Conservatives. And the Bloc has already said that it would not support any Conservative government that tried to recriminalize abortion, and has made it clear that it would not tolerate abandoning Canada's support for the Kyoto Accord, or anti-gay laws, both of which are bedrock principles of the Western Conservatives. And Ontario Conservatives would quickly cross the floor to the Liberals to save their political skin if the Bush-style right-wing social agenda of the Western Conservatives was trotted out. The role of the media in the final two weeks of the campaign will be interesting. Conservative media are likely to present Harper as the 'heir-apparent', the surprise winner and a fresh new face for Canada. Liberal media will be torn over whether to simply relate the campaign stories as they are spun out by the parties, or to go behind the scenes and surface what Harper has said, in writing, in past, on many issues he is now trying to paint himself as moderate on. The current Liberal campaign has attempted to do just that, but it has backfired, being portrayed as negative 'US-style' electioneering, sour grapes or desperation politics, so the liberal media could be subject to similar admonishments if they get proccupied with the 'secret agenda' of the Conservatives. But media being what they are, expect Harper, the new frontrunner, to face increasing heat over unanswered questions from his decidedly non-moderate past. Not to mention some of his decidedly wacko neophyte candidates. So what do I think will happen? The Conservatives will win a small plurality, and have to either form a coalition with, or try to manage with the tacit support of, the Bloc Québecois. Paul Martin will resign right after the election, and the Liberals will choose a new leader not tainted by the recent scandals. The Conservatives will start to self-destruct right after the election, with hard-line right-wingers expelled or resigning, and moderates crossing the floor to the Liberals, especially after it selects a new leader. The new government will last 3-6 months, accomplish nothing, and fall when the Bloc Québecois withdraws its support. Then we'll have another election, and perhaps even a third, until the 70% of Canadians with moderate-to-liberal social and political views get a government they can live with. Ontario and Québec have 60% of Canada's population, and no party has ever successfully governed the country without healthy support from both provinces. Stephen Harper is on record as opposing bilingualism, although he is now waffling on what his precise position on this is, which makes him unelectable in Québec. And his previously stated positions on many other issues will, if they become widely known, make him unelectable anywhere. It's going to be messy, and stay that way for quite awhile. And if the Martin Liberals hadn't been so politically stupid, it could all have been avoided. Cartoon by Tom Cheney -- buy his stuff at Cartoon Bank. |
| Well, thanks to readers much
more tech-savvy than I am, I think I may be able to get Google to
start
picking up my posts again, and, by tightening up the code of my
blogroll, also make the page load faster for those patient readers
with
dial-up access. So far I have moved the blogroll to the right hand
column, so Google will not get bogged down in the blogroll code and
give up before it gets to the actual posts. In the process I messed up
the masthead, so I've adopted a simple one-piece masthead
temporarily. If this post works properly, I'll then make an additional change to my blogroll, stripping out the table HTML and replacing it with a simple list separated by line breaks. Next post will report on the results of that. Keep your fingers crossed for me. |
 Médecins Sans Frontières (Doctors Without Borders) recently released its list of the ten most under-reported humanitarian events of 2003. The map above shows which countries these events occurred in. Although the MSF site is temporarily down, you can read the complete details of these stories here. The top 10 stories are:
Why aren't the media covering these stories? None of them is physically close to the West. None of them involves countries with resources of strategic importance to the West. Almost all of them are ongoing, so there is nothing 'new' to report each day. None of the people in these countries has resorted to terrorist attacks against the West to bring attention to our indifference to their plight. And all of them are intractible problems, and therefore issues that those of us in the West would rather not know about. |
(Warning: some financial math ahead.) A Ponzi scheme, named after its early 20th century inventor Carlo Ponzi, is a form of pyramid scheme. Basically it involves selling a nearly worthless security to a small group of investors, with the promise of great returns if they promote the security to more investors, and so on, ideally, forever. Like any pyramid scheme or chain letter, of course, it eventually collapses when it runs out of suckers. The first ones in get rich, and the last ones in (much greater in number) get shafted. As we all know, the stock market is focused on the short term, and fluctuates wildly in response to a single quarter's earnings, external economic events, even rumour. If you look at it holistically and long-term, however, it has all the markings of a century-long Ponzi scheme, the most lucrative, and potentially most devastating, in history. Let's take a look at the US S&P 500 as a surrogate for the entire stock market, the entire market for equity securities of listed public corporations. The index goes back to 1917, but was revamped in the 1940s and recalibrated so that the index for the average of 1941-43 was 10. It slowly rose to 100 over the next 50 years, and then to 1000 over the next 12 years. This broad index earned, in 2003, about $55 per average share of the component securities, using GAAP (generally accepted accounting principles). So at its current level of about 1100, it has a P/E (price-to-earnings) ratio of about 20. That means investors are willing to pay $1100 now for a share that will theoretically 'pay back' $55 next year, and hopefully successively more in future years, to justify the 'present value' of $1100. To think of ir another way, it's like a bank charging you $55 this year, $65, say, next year, and so on for at least 50 years, as 'interest' on a loan of $1100. The 5% interest in the first year isn't very attractive for such a risky 'loan', but since future 'interest' will be dependent on (hopefully rising) earnings, there is the prospect of a very lucrative return eventually. So the S&P 500, like all equities, is said to 'discount expected future cash flows'. A general rule of thumb says that the P/E ratio approximates the annual expected growth in earnings, so that means the investor in the market is expecting earnings to grow by close to 20% each year, essentially forever. How is that possible? Well, it isn't. Earnings grow because (a) prices increase, (b) costs decrease, and/or (c) volume increases. In a 'free' market economy, prices are determined (theoretically, now) by competition -- new competitors will enter the market, and/or existing competitors will adjust their prices, to the point that their return on invested capital is just high enough to justify the investment risk. That level, in a low-inflation economy where the alternative 'risk-free' investment in GICs and bonds is only 2%, is roughly a modest 7%, with the extra 5% compensating the investor for the risk implicit in equities. And, in the long run, volume can't increase -- there's only so much market for anything, and once it's saturated, earnings should therefore level off at a flat rate. Let's suppose we've more or less reached that state now. Let's also set aside the fact that the $55 earned last year by the average share is likely considerably inflated -- there are undoubtedly some more undetected Enron-type exaggerations out there in some of these 500 companies, and GAAP allows capitalization of stock options and other near-fraudulent practices that significantly overstate 'true' earnings. Is the $55 a fair return on investment in these companies? To answer that question we need to calculate what the investment is. According to the S&P, this $55 represents a 17% return on investment. In other words, the net assets or 'book' value of the average share is $55/17% or about $325. We already indicated that a reasonable return, given the risk, was 7%, which on $325 would be about $22 per share. Why are stocks earnings $55 per share when in a 'free' market they should only be earning $22? To answer this we need to look at the three components that make up ROI (or more correctly, return on equity -- ROE). These three components are: Margin (profit/sales), Turnover (sales/assets), and Leverage (assets/equity). Leverage can be inflated by excessive borrowing, which companies can get away with in times of low interest, but which boomerang when interest rates spike. Leverage can also be inflated by stock buy-backs, where the company essentially uses excess cash flow to buy back its own stock and hence increase the value per share of the remaining stock -- but this is a form of cannibalization, and leads to the same imbalance between debt and equity. Neither is sustainable. Turnover can be increased by lowering inventories, factoring and off-balance-sheet financing, but ultimately tops out -- you need to have a certain amount of money tied up one way or another in assets to be able to run an effective business. So you're left with Margin, which ultimately is the only explanation for the enormous ROE of $55/share, when in a free competitive market someone should be willing to accept $22/share. The truth is that the market, and big corporations, are far from efficient. Many industries are heavily subsidized by governments to the tune of billions of dollars in kickbacks -- er, I mean, support payments -- per year. Big corporations also work as oligopolies to prevent smaller companies from entering their markets and charging more reasonable prices for their products. We, the consumers, are in fact paying $55 for goods and services that could be sold for $22 and would still provide the corporations with a very reasonable return. If and when government subsidies end, oligopolies are broken up, and the market for goods and services truly becomes free and open, the S&P 500 should then generate $22/share each year, a 7% ROE, still an attractive return in a low-inflation economy. So we have a number of factors at work, conspiring to drive up stock prices in the unsustainable illusion that double-digit growth can and will continue forever, or at least until we're dead and it isn't our problem anymore. We have big corporations earning exorbitant returns, two and one half times a reasonable level given the risk, paid for by the taxpayer and consumer (the same people who then take what's left of their meagre paychecks and invest it, with insane trust in the brokers' unsustainable recommendations, in the stock market). And we have a P/E ratio that is already assuming that these wildly inflated, taxpayer subsidized, price-gouging levels of profit will continue to rise even further, at close to 20% per year, forever. Voilà, Ponzi scheme, par excellence. Let's do the math. Take the $22 per share that big corporations should be earning per share in a properly regulated and open market. Acknowledge that the assumption that these earnings are going to grow in the future, when markets are saturated, consumers, corporations and governments are already buckling under grotesque and unprecedented debt loads and cannot afford to buy or pay more than they already are. Discount that annual stream of $22 of earnings for 50 years at a reasonable 7% discount rate. Know what you get for the fair value of the S&P 500 with these calculations? About 300. That is what, when you strip out the growth hype, the subsidies, the price-gouging, and the unsupportable P/E valuation, the S&P 500 should be trading at. Not 1100. Eventually the Ponzi scheme will collapse. There may yet be time to con yet more foolish investors into believing that it will rise from 1100 to 1500 to 2000 or 5000 or higher, and if investors can be duped into believing that's what shares are worth, that's what they'll trade at. This scheme has been running for a century, and made many people millionnaires. But eventually we, or our children or grandchildren, will realize that the S&P 500 should be at 300, and since stocks always trade at what people think they're worth, that's where the S&P 500 will end up. The millions left holding the bag will lose most of their life savings, their pensions, everything. (Oh, and if you change the assumptions about inflation and interest rates, the above valuation doesn't change. Future values and discount rates both go up proportionally, so the inflation-adjusted present value stays the same.) Even the brokers can see the writing on the wall. They will now try to convince you that by wise investing you can 'outperform the market' by buying low and selling high, even if the market is ultimately doomed to do no better than go sideways. This is another great variant on a Ponzi scheme. It's the stuff that has hooked the new breed of gambling addicts called 'day traders'. For every investor whose holdings 'outperform the market' there will be, of course, at least one loser. But the magic of Ponzi is that it's always the other guy, the next guy, the not smart enough guy, who will get burned. You'd be better to play slot machines or buy lottery tickets -- at least the potential payout isn't overstated by 250%. In addition to the perpetual-growth Ponzi scheme, and the 'outperform the market' con, brokers also make scads of money from IPOs -- initial public offerings. As James Surowiecki has elegantly pointed out, the IPO is a scam by which an aptly-named 'syndicate' of investment firms ('underwriters') buy a mass of shares from the company 'going public', at about half the price per share they know they can flog them to gullible investors, many of whom rely on these very brokers for investment advice. They then dump their shares on these investors, knowing that the price will promptly drop back close to the IPO price. The underwriting brokers get rich, and the unsuspecting customers get burned. That's the reason Surowiecki and others, most recently Lawrence Fisher in yesterday's excellent analysis over at our mother ship Salon.com, have urged Google, potentially the most lucrative IPO of all time, to screw the brokers and either sell all the shares directly to the public by auction, or, even better, not to go public at all, and save the delirious investors the grief they will suffer when they find out Google has no direct line to God, and hence isn't worth a million dollars a share. Eventually we, or our descendents, will learn (or have no choice but) to 'just say no' to dysfunctional stock markets and all the evils they breed. Until then, we'll continue to be addicted to short-term thinking, the illusion of perpetual growth, paying too much for everything we buy, subsidizing public companies with our taxpayer dollars, downsizing and outsourcing and offshoring as 'productivity enhancement', and putting up with the atrocious greed, corruption and devastation of insatiable global corporations that pull the strings of politicians like puppeteers, all in the name of 'maximizing shareholder value'. It's addictive gambling with a staggering cost, it's insane, and it's fraud. |
 I've written recently about the future state of business, a world incorporating powerful, versatile social networking tools. And I've played with most of the first-generation social software and read volumes about how it will, or won't, work in business and ultimately affect our daily lives. The concept is wonderful, and the technology is fun, but the tools developed so far suffer from three fatal flaws:
|
I've now finished Jim
Merkel's book 