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Bibliography for 'Madoff and Enron, studies in strategic deception'

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The bibliography citations for Madoff and Enron, studies in strategic deception are as follows:

 

Lesson #1 -- An Introduction to Options

Lesson #6 -- Collar & Butterfly Trades

Jeff Bishop

StreetAuthority

 

Hedge Fund Bibliography

Edge-fund

 

Bernard L Madoff Investment Securities LLC

Key Employees

Top Competitors

Insurance Business Review

 

Madoff Case Symptom of Widespread Problems, SEC's Kotz Says

By SARAH N. LYNCH and SIOBHAN HUGHES

WSJ

JANUARY 5, 2009, 4:24 P.M. ET

 

Madoff Chasers Dug for Years, to No Avail

Regulators Probed at Least 8 Times Over 16 Years; Congress Starts Review of SEC Today

By KARA SCANNELL

WSJ

JANUARY 5, 2009

 

The Lessons to Be Learned From the Madoff Scandal

By JAMES B. STEWART

WSJ

DECEMBER 31, 2008, 11:16 A.M. ET

 

How Fairfield Explained Its Madoff Ponzi Returns

Henry Blodget

ClusterStock

Dec 30, 08 9:28 AM

 

Fairfield Greenwich: Our Secret Is Perfect Market Timing

Henry Blodget

ClusterStock

Dec 29, 2008

 

No Wonder Fairfield Greenwich Loved Madoff--The Rest Of Their Funds Were Dogs

Henry Blodget

ClusterStock

Dec 29, 2008

 

What Happened To Madoff's Money?

By Zachary Roth

TPM Muckraker

December 29, 2008, 3:25PM

 

Madoff's Victims to Review His Wallet

By Erik Larson

Bloomberg News

December 28, 2008

 

Madoff 'Feeders' Under Focus

Jenny Strasburg

WSJ

DECEMBER 27, 2008

 

Bernard Madoff?

By: Veryan Allen

iStockAnalyst

Friday, December 26, 2008 10:59 AM

 

Madoff Dealings Tarnish a Private Swiss Bank

By NELSON D. SCHWARTZ

New York Times

December 24, 2008

 

Traders Say Madoff's Strategy Was Unworkable

By ROB CURRAN

WSJ

DECEMBER 24, 2008

 

With Roots in '70s, Madoff Scheme Takes New Toll

Vienna's Bank Medici Had About $2.1 Billion Invested; Earliest Suspicions About Returns Now Date Back to '91

By TOM LAURICELLA and SCOTT PATTERSON

WSJ

DECEMBER 24, 2008

 

Where did all of Bernard Madoff's money go?

Madoff's $50 billion Ponzi scheme raises questions about where all that money went

RACHEL BECK

AP News

Dec 23, 2008 14:11 EST

 

Authorities Put the Screws To Madoff Accountants

Handcrafted by Flip on December 23, 2008

 

Probe Eyes Audit Files, Role of Aide To Madoff

By AMIR EFRATI, AARON LUCCHETTI and TOM LAURICELLA

WSJ

DECEMBER 23, 2008

 

Fooled by Ponzi (and Madoff)

How Bernard Madoff Made Off with My Money

by Stephen Greenspan

eSkeptic

December 23, 2008

 

In Madoff’s Wake, Scrutiny of Accounting Firms

By MICHAEL J. de la MERCED

New York Times

December 22, 2008

 

Fund Of Funds Dirty Laundry: Get It While It's Hot

Posted by Equity Private

Dealbreaker

Dec 22, 2008, 11:25am

 

What We Wrote About Madoff

Our 2001 story, excerpted here, questioned Bernie Madoff's too-good-to-be-true track record well before his Ponzi scheme was exposed.

Barron’s

December 22, 2008

 

Bernard Madoff 'fraud': Increased scrutiny in hedge fund industry

The future for hedge funds such as the one run by Bernard Madoff is bleak as regulators seek to avoid further scandal.

By Andrew Cave

Telegraph

Last Updated: 10:43AM GMT 21 Dec 2008

 

A Scheme With No Off Button

By CATHERINE RAMPELL

New York Times

December 21, 2008

 

Madoff Created Air of Mystery

By ROBERT FRANK and TOM LAURICELLA

WSJ

DECEMBER 20, 2008

 

Thousands Appear to Be on Client List

By KARA SCANNELL

WSJ

DECEMBER 19, 2008

 

The Impressionable Elites Get Snookered

By MARK PENN

With E. Kinney Zalesne

DECEMBER 19, 2008, 11:42 A.M. ET

 

Unlikely Player Pulled Into Madoff Swirl

By STEPHEN LABATON

New York Times

December 19, 2008

 

Mass. investor saw inside Madoff scam

Massachusetts investor saw inside Madoff scam 9 years ago, but few listened

By Jay Lindsay, Associated Press Writer

AP

December 19, 8:30 am ET

 

Fairfield Extended Madoff's Reach

Investment Fund's Marketing Effort Helped to Raise Billions for Money Manager

By JENNY STRASBURG, PETER LATTMAN, CASSELL BRYAN-LOW and THOMAS CATAN

DECEMBER 19, 2008

(See Correction & Amplification below.)

 

Family Filled Posts at Industry Groups

By ELIZABETH WILLIAMSON and KARA SCANNELL

WSJ

DECEMBER 18, 2008

 

SPLIT STRIKE CONVERSION STRATEGY: BERNARD MADOFF PONZI SCHEME

CAMBRIDGE FORECAST GROUP BLOG

December 18, 2008 at 12:43 am

 

Madoff Misled SEC in '06, Got Off

By GREGORY ZUCKERMAN and KARA SCANNELL

WSJ

DECEMBER 18, 2008

PDF of WSJ article, ouside firewall

 

The Man Who Conned The World

$600 Million In Jewish Charitable Funds Lost        

By H. Rettig Gur and A. Hoffman

5 Towns Jewish Times

December 18, 2008

 

Update on the Madoff fraud case

Questions & Answers

Private and Confidential – for the sole use of UBP Investors

UBP Alternative Investments

Geneva 17 December 2008

 

WALL STREET VETERAN ARRESTED FOR RUNNING MASSIVE PONZI SCHEME…IMPLICATED IN $50BILLION FRAUD

by Fortune&Class

Fortune&Class Magazine

Posted on December 17, 2008

 

Madoff Scheme Had Early Skeptics

Michael Ocrant

Institutional Investor

17 Dec 2008

Michael Ocrant's 2001 article reveals early skepticism about the financier.

Madoff Tops Charts; Skeptics Ask How [Reprint of original]

 

What would Galbraith have made of Madoff?

Peter Moreira

Dealscape

Posted on December 17, 2008 at 2:04 PM

 

The 17th Floor, Where Wealth Went to Vanish

By DIANA B. HENRIQUES and ALEX BERENSON

New York Times

December 15, 2008

 

In Geneva, Spotlight Casts an Unwelcome Glare on Banks

By CHARLES FORELLE

DECEMBER 17, 2008, 10:29 A.M. ET

 

Congress poised to probe Madoff's alleged fraud

AP

Wednesday, Dec. 17, 2008

 

Madoff scam is part of "the bezzle"

Richard Parker, interviewed by Kai Vigeland

Marketplace, American Public Media

December 16, 2008

 

Schooled by scandal

Commentary: Madoff case shows investors the red flags of financial advice

By Chuck Jaffe, MarketWatch

Last update: 10:49 p.m. EST Dec. 16, 2008

 

Madoff scam is part of "the bezzle"

Richard Parker, interviewed by Kai Vigeland

Marketplace, American Public Media

December 16, 2008

 

SEC Didn't Act on Madoff Tips

Regulator Was Warned About Possible Fraud as Early as 1999

By Binyamin Appelbaum and David S. Hilzenrath

Washington Post

December 16, 2008

 

Inquiry Finds No Signs Family Aided Madoff

DealBook

December 16, 2008, 7:17 am

 

Madoff had early skeptic in Boston gumshoe

by Craig M. Douglas

Boston Business Journal -

December 16, 2008

 

Madoff ‘Tragedy’ Said to Have Escaped Scrutiny by SEC (Update4)

By David Scheer and Jesse Westbrook

Bloomberg

Dec. 15, 2008

 

Just Because Madoff Used It Doesn't Mean the Collar Strategy Is Tainted

by: Don Fishback

Seeking Alpha

December 14, 2008

 

Investment Adviser Aksia Warned Clients of Madoff ‘Red Flags’

By David Glovin, Karen Freifeld and David Voreacos

Bloomberg

Dec. 13, 2008

 

Hedge Funds Are Victims, Raising Further Questions

By MICHAEL J. de la MERCED

New York Times

December 13, 2008

 

I Knew Bernie Madoff Was Cheating--That's Why I Invested With Him

Henry Blodget

ClusterStock

Dec 12, 08 6:03 AM

 

Madoff's arrest in billion-dollar fraud case shocks Palm Beach investors

By JANE MUSGRAVE

Palm Beach Post

December 12, 2008

 

Be Smart, but Don’t Think That You’re Special

By RON LIEBER and TARA SIEGEL BERNARD

New York Times

Published: December 12, 2008

 

The original "Don't ask, don't tell" Madoff story

Posted by Palmoni at 8:27 PM

Wall Street Manna

December 11, 2008

 

Dear Clients and Friends [letter]

Jim Vos, CEO and Head of Research; Jake Walthour, Head of Advisory Services

Aksia

December 11, 2008 

 

Hedge fund managers 'funereal' in midst of crisis

More pain expected, but some look for opportunities in 'rubble'

By Alistair Barr

MarketWatch

Last update: 8:32 p.m. EST Nov. 7, 2008

 

Butterfly Trade

by John Jansen

Across the Curve

June 4, 2008 12:53 pm

 

Some Lessons on the Rescue of Long-Term Capital Management

By Joseph G. Haubrich

Federal Reserve Bank Of Cleveland

Program on Financial Stability and Contingency Planning

Policy Discussion Papers NUMBER 19

APRIL 2007

 

Critical Thinking and Intelligence Analysis

David T. Moore

NDIC PRESS

Occasional Paper #14

2007

 

STRATAGEM: Deception and Surprise in War

Barton Whaley

Artech House

ISBN-10: 1596931981

January 2007

 

So Many Ways to Lie: The Complexity of Denial and Deception

David T. Moore and William N. Reynolds

Defense Intelligence Journal

Vol 15, Number 2 (Fall 2006)

MIRROR

 

The World's Largest Hedge Fund is a Fraud

November 7, 2005 Submission to the SEC

Madoff Investment Securities, LLC

www.madoff.com

 

Ten Lessons Learned from the Collapse of Long-Term Capital Management

by Bill Coffin

Risk Management

Volume 55, September 2008

 

Signals, Sprignals and Noise: Deception Analysis in Financial Events

Gordon Housworth

The Journal, Stout Risius Ross

Fall 2005, Pages 20-22

 

Integrating Methods and Tools to Counter Denial and Deception

Ed Waltz

BAE SYSTEMS Advanced Information Technologies

2005 International Conference on Intelligence Analysis

Papers/Tutorials (sorted by Author)

May 2005

 

Enron and Andersen - What Went Wrong and Why Similar Audit Failures Could Happen Again

Matthew J. Barrett

Social Science Research Network (SSRN)

Date posted: September 07, 2005 ; Last revised: September 08, 2005

From: Enron: Corporate Fiascos and Their Implications, edited by Nancy Rapoport, Bala Dharan, Foundation Press, 2004, pp. 155-168

 

Detecting Deception by Analysis of Competing Hypotheses

Christopher Elsaesser, Frank J. Stech

MITRE, 2003

 

Enron & Arthur Anderson: to comply is not enough

Part One, Spurious Signals – The Culpable, Gullible and the Hobbled
Part Two, Mixed Signals – Sins of Omission and Commission, Cooptation and Valor
Gordon Housworth

CriticalEYE, The Competitive Intelligence magazine for Europe
August 2002, Pages 20-25

 

Lessons From The Collapse Of Hedge Fund, Long-Term Capital Management

by David Shirreff

International Financial Risk Institute (IFRI)

Also "LTCM : Lessons from its Collapse", Case Folio, April 2002

 

The Inevitability of Enron and the Impossibility of 'Auditor Independence' Under the Current Audit System

Sean M. O'Connor

March 1, 2002

Social Science Research Network (SSRN)

Date posted: March 11, 2002 ; Last revised: March 30, 2002

 

Foreign Denial and Deception: Minimizing the Impact to Operational Intelligence

By Brian P. Cyr

Naval War College

4 February 2002

 

Understanding The Butterfly Strategy

L. Martellini, P. Priaulet and S. Priaulet

Research and Innovation Notes (RI NOTES) No 2002-01

 

Madoff tops charts; skeptics ask how

By Michael Ocrant

MAR/Hedge (RIP) Page 1

No. 89 May 2001

 

Don't Ask, Don't Tell

Bernie Madoff is so secretive, he even asks investors to keep mum

By ERIN E. ARVEDLUND

BARRONS

May 7, 2001

Public MIRROR Full Text

 

Deception

Center for the Study of Intelligence

APPROVED FOR RELEASE 1994

CIA HISTORICAL REVIEW PROGRAM

2 JULY, 1996

 

Deception:  An Integral Part Of Warfare

AUTHOR Major Jack L. Hughes, USMC

CSC 1990

 

Deception

NEWSLETTER NO. 3-88       

prepared by Andrea Cozad, CALL, Ft. Leavenworth, KS

1988

 

Gaming: Prospective for Forecasting

Garry D. Brewer

RAND P-5178

February 1974

Gordon Housworth



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Madoff and Enron, studies in strategic deception

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As the Madoff affair began to unfold, my immediate thought was Madoff’s fund had to be bogus on the face of its size alone, i.e., at 30 to 50 billion dollars, the fund’s putative activities would have visible to all. Consulting a colleague, Michael Sheren, skilled in leveraged syndication, Sheren confirmed the assumption, noting that a half to one billion dollar fund could made discrete investments but that a 50 billion fund would have moved the market, thereby attracting wide attention. Had Madoff been making legitimate trades, he would presumably had to have been making countertrades to try to mask his strategy to those who would attempt to emulate him. There were apparently no such trading patterns, thus Madoff could not have pursued his advertized strategy.

 

Finding so many structural similarities between Enron and Madoff, I thought to examine Madoff with the strategic deception approach used on Enron. Europe were fascinated by both Enron and Anderson, the resistence of sell-side analysts to see trouble, and the failure of US regulatory agencies, notably the SEC, to intervene prior to Enron’s collapse. The 2002 Enron & Arthur Anderson: to comply is not enough dealt with the deception (spurious signals) by Enron and omissive and comissive behavior by Andersen. Many foreign nationals and not a few US nationals are surprised to learn that the SEC's budget and investigative directions are regularly hamstrung by congressional legislators under lobbying from the finance sector. After Andersen's dissolution, the Final Four did not mend their ways, but rather sought to insulate themselves from similar attack. This author believes that Madoff will again show the audit process as well as many of its practitioners to be flawed.

 

Red flags beyond number

 

A brief search revealed warning signs about Madoff's investment securities unit that should have frightened investors and regulators alike (Various sources from bibliography): 

  • Single party client asset management, trading initiation, trade execution, asset custody, produced client statements and paperwork administration
  • Stock broker managing client accounts
  • Clients (through FOFs) unaware of actual manager
  • Portfolio manager outside the hedge fund industry
  • Did not found own hedge fund
  • Hyper secretive black box investment approach
  • Irreproducible financial results from a common, widely known collar approach (Split Strike Conversion)
  • Uninterrupted performance in adverse market conditions
  • Near complete aversion to industry news coverage
  • Did not charge normal incentive fees and percentage of profits (1 and 20 to 2 and 20)
  • Aggressively funds raising at a size that would have hard closed other funds
  • "Special case" admission - false scarcity
  • No prime broker
  • Improper/insufficiently skilled external auditor
  • Family member, insufficiently skilled at that, as compliance officer
  • Full cash positions at quarter-end and year-end
  • High proportion of money raised from overseas sources

It is not yet known when Madoff became a full-fledged Ponzi scheme (Allen believes that Madoff was subsidizing returns from brokerage commissions early on), but 2001 is a reasonable guess: 

Then a watershed event occurred in 2001 from the potent combination of a sustained bear market and decimalization. The broking income probably became insufficient to smooth away the drawdowns... Certainly the divergence between the [Madoff feeder, Fairfield Sentry] and Gateway [GATEX, a mutual fund of similar age running the same split strike strategy] became startlingly wider than the previous just dubious disparity. The anomalous returns were noticed by some who pay attention and it is worth noting that two skeptical articles appeared that year.

Madoff, as Enron, is "essentially a story of executives and auditors deceiving investors about the true state of its business."  The secrecy, exclusivity, black box nature of Madoff’s business and the complexity of Enron's business "created extraordinary opportunity to obfuscate and conceal... The outcome was a substitution of fraud and self-dealing for legitimate growth."

 

I found it interesting that some investors said that they invested with Madoff because they felt him to be fraudulent, using insider trading, front running, or both to gain his returns. None appear to have assumed Ponzi.
It is reasonable to expect charges of fiduciary breach to be leveled at many; Fairfield Greenwich Group (FGG) may well merit consideration.

 

Primer on Denial and deception (D&D) present in Madoff and Enron

 

Deception, be it military, diplomatic, financial or political, has four components:

  • Security (deception demands controlled dissemination of supporting data and suppression of conflicting data)
  • Plausibility (deception must be plausible to the target set)
  • Adaptability (however elaborate, deception must adapt to the changing situation)
  • Integration (deception effort integrated at all levels and with all means)

Deception planning and deception countermeasures commonly applied to military and diplomatic spheres are conspicuously absent in analyzing commercial business endeavors.  These tools can provide advance notice saving investors money that would otherwise fall prey to spoofing and disinformation.

 

Denial and deception seeks to disrupt

the analyst’s decision cycle (what the military calls Boyd's OODA Loop) to "observe, orient, decide and act." Most people are poor at countering deception without training and rigorous analysis as they fall prey to:
  • Poor anomaly detection (missing contextual cues, or prematurely dismissing as irrelevant or inconsistent with other intelligence)
  • Misattribution (attributing a deception event to collection gaps or processing errors)
  • Failure to link deception tactics to deception hypotheses (noticing anomalies but failing to recognize them as indicators of deception)
  • Inadequate support for deception hypotheses (failing to link an assessment of an adversary's deception tactics and goals to the adversary's strategic goals; i.e., failing to test denial or deception course of actions against the available evidence)
Countering deception is difficult, made worse by the fact that commercial finance/risk managers often exhibit damaging characteristics:
  • Believe that they are well informed even when they are ill informed
  • Not invented here (NIH)
  • Arrogance
  • Inability to distill ("can't analyze what they have")
  • Competitive bad advice

Lapsing into the condition of being "better informed without the ability to act," too many do not "see" the data in first instance, do not see context, do not see relevance, do not see pattern at any time, and do not see patterns maturing over time. They are deprived of a meaningful means of prediction, must less deception awareness.

 

Frank Stech, MITRE’s head of counter-deception, observes that those being deceived “do not systematically consider alternative explanations for the evidence they observe and incorrectly weigh the evidence they do have.”  As a result, “people often dismiss important evidence, prematurely prune alternative hypotheses, and jump to conclusions.”  This makes “people and organizations easy to deceive.” [email, previously cited].

 

Designed to “make the enemy quite certain, very decisive, and wrong,” the current deception paradigm of strategic surprise contains these elements: 

  • Signals: legitimate information from or about the adversary
  • “Sprignals” or spurious signals: Information intentionally designed to deceive
  • Noise: Background and environmental information that may be legitimate or from various sources but is ultimately irrelevant and interferes with detection of signals and sprignals

Every deception effort involves a series of sprignals and signals that “hide the real while revealing the false”:

  • Dissimulation (hiding the real): The covert element that conceals truth from the enemy
    • Masking: Using means to evade detection.

    • Repackaging: Altering the appearance of an object to make it look like something else.

    • Dazzling: Confusing the sensory processing abilities of the target with stimuli.

  • Simulation (revealing the false): The overt element that reveals falsities presented to the enemy as truth
    • Mimicking: Creates a replica of reality using one or more distinctive characteristics of the object being mimicked.

    • Inventing: Displays the false by fashioning an alternative reality.

    • Decoying: Offers a distracting or misleading option with the intent of diverting an opponent’s attention away from the real focal point.

The analyst’s task is greatly complicated in a signal, sprignal and noise model as he must go beyond distinguishing between what is signal and noise to the authentication of both, recognizing that the perpetrator may deliberately inject both noise and sprignals.  Authentication validates signals, ensuring that those acted upon are genuine, as it deciphers the intent and method of deception so that warning systems can be tuned to recognize further deception.

 

Noise, Signals and Sprignals in Madoff:

 

Background “Noise” factors obscuring analysis

 

Contributing Factors in background “Noise”:

  • Bull market demanding higher stock performance despite declining fundamentals
  • CEO and senior management compensation disproportionately tied to share price
  • Federal Reserve resistance to non-bank securities regulation
  • Increasingly complex derivatives instruments with poorly understood, underestimated risk
  • New, increasingly opaque business models
  • Credulous acceptance of these models by analysts and investors
  • Conflicts of interest by both sell-side and buy-side analysts
  • Auditors’ weakened oversight
  • Expansion of Fund of Funds (FOF) that masked investors’ ability to assess risk
  • Congressional hobbling of public and private regulatory bodies

Sharing too many factors with Enron, an earlier comment applies now to Madoff: “While the “noise” category also includes invalid assumptions and stereotypes, faulty appraisals and dissemination of information, this author is of the opinion that attributing all of these factors to “noise” is exceedingly charitable in that some of the actions of investment analysts and auditors were contributory sprignals in and of themselves.”

 

Generating spurious signals that ‘hid the real while revealing the false’

 

Madoff was spectacularly successful in deception and denial, weaving a fabric of trust, exclusivity and success among primarily unsophisticated investors that continued to grow over time: 

  • Low risk, wealth preservation strategy attractive to those who had endured volatile, high return wealth generation strategies earlier in life.
  • High social trust among A-list investors, government and regulators.
  • Social and political influence via political donations and philanthropy.
  • Exclusivity - false scarcity - of access to funds under Madoff’s control, i.e., investor effort was gaining access, not performing due diligence.
  • Secrecy coupled with threat of expulsion for violation of investment guidelines (implications for both social standing and financial returns)
  • Create international feeder network of A-list personages and FOFs managed by A-list personages, effectively creating an uncritical, unlicensed dealer network.
  • Sufficient securities market presence to silence most critical examiners, i.e., those who would not invest or would withdraw funds already under investment but would not formally report to SEC.
  • Active and passive steps to avoid expanded SEC oversight beyond brokerage activities.
  • Sought investment targets that were not volatile in either withdrawals or payout expectations (retirees, the wealthy, charitable groups).

It remains to be seen how many others were directly involved with Madoff. Any member of Madoff Investment Securities and all adjacent firms on the limited access 17th floor are suspect. While Madoff’s children, who were involved in other practice areas, are said not to be a target of the current investigation, we use the term, ‘IQ of a cactus’ to describe such willful ignorance or incuriosity while in such proximity to Madoff’s core business. It would not surprise us to find an earlier dividend payment, in the Caymans perhaps.

 

Fund of Funds (FOF) feeder funds to Madoff bear greater culpability that Andersen in their de facto certification of Madoff. In what can only be described as a massive failure of due diligence, these “funds staked their entire competitive advantage on their ability to rigorously evaluate funds [that were] safe for their investors.” [email]

 

Contrast the inactions of these feeders to the independent hedge fund research and advisory firm, Aksia:

As many of you know, Aksia published extensive reports on several of the “feeder funds” which allocated their capital to Madoff Securities. Our decision to not recommend these feeders was never based on the existence or discovery of a smoking gun; however, there were a host of red flags, which taken together made us concerned about the safety of client assets should they invest in these feeders. Consequently, every time we were asked by clients, we waved them away from the Madoff feeder funds.

 

On the surface, these feeder funds had all of the makings of institutional quality funds. They had substantial assets under management and were audited by large and respected audit firms. They were managed and marketed by legitimate and registered investment managers. They had long and impressive track records and a roster of professional investors.

 

As a research firm we are forced to make difficult judgments about the hedge funds we evaluate for clients. This was not the case with the Madoff feeder funds. Our judgment was swift given the extensive list of red flags. Some of these red flags were as follows...

The Securities and Exchange Commission (SEC) and other regulators are classed as sprignal generators by virtue of their serial failure to act against Madoff, thereby continuing to confer legitimacy without which the fiction of stable returns would have collapsed. The lack of regulatory oversight allowed an easily detectable scam (witness those cataloged in this note below who pierced the veil without benefit of subpoena) to continue robbing billions. As noted in the opening comments, a legitimate Madoff would have been the elephant in the room. His trades on the boards would have been seen and processed; had he traded elsewhere, counterparties would have come to the boards to hedge.

 

The forthcoming congressional investigation should yield some clarity as to why Madoff escaped for so long. Barring causal conditions such as ineptness, absence of continuity, disbelief, complicity and criminality, it is likely that a number of Barrett’s nine auditing failures (see below) - which are far more human characteristics than breaches of statute - will be at play.

 

Signals suppressed - the incredulous but silent, often skilled traders or funds managers, that did not believe Madoff’s results, did not invest or withdrew investments under their control but did not act, presumably out of fear of reprisal directly or indirectly by Madoff. There is much to be learned here as to why these individuals felt that it was not in their professional best interests to be more vocal.

 

Who were the skeptics and why?

 

Despite Madoff’s seeming achievements (consistent, positive monthly returns), the skeptics looked at core fundamentals, performed pattern comparisons of Madoff against industry; were repelled by secretive, irreproducible black box strategies; and deflected the lure of monthly returns.

 

Doubters (here and here) saw numerous red flags a decade ago, including:

  • Lack of volatility
  • Inability to reproduce results
  • Lower returns from existing entities using similar strategy
  • Market timing
  • Ability to buy and sell underlying stocks without noticeable market affect
  • Willingness to charge mere commissions rather than incentives plus profit %
  • Refusal to establish separate asset management arm
  • Assumption that Madoff was using other stocks and options beyond the S&P 100 collar
  • Proprietary “black box” system
  • Use of FOF capital as “pseudo equity” to support market making activities or provide leverage
  • Secrecy

  • Aversion to publicity

Madoff's performance was indeed startling:

 

The best known entity using a similar strategy, a publicly traded mutual fund dating from 1978 called Gateway, has experienced far greater volatility and lower returns during the same period. The capital overseen by Madoff through Fairfield Sentry has a cumulative compound net return of 397.5%. Compared with the 41 funds in the Zurich database that reported for the same historical period, from July 1989 to February 2001, it would rank as the best performing fund for the period on a risk-adjusted basis, with a Sharpe ratio of 3.4 and a standard deviation of 3.0%. (Ranked strictly by standard deviation, the Fairfield Sentry funds would come in at number three, behind two other market neutral funds.)

In 2001 Arvedlund encapsulated the persistent failure to remember the recent past and the responses of the unskilled and rigorous investor: 

The lessons of Long-Term Capital Management's [LTCM] collapse are that investors need, or should want, transparency in their money manager's investment strategy... Madoff's investors rave about his performance -- even though they don't understand how he does it. "Even knowledgeable people can't really tell you what he's doing," [said] one very satisfied investor..."People who have all the trade confirms and statements still can't define it very well. The only thing I know is that he's often in cash" when volatility levels get extreme. This investor declined to be quoted by name. Why? Because Madoff politely requests that his investors not reveal that he runs their money.

 

"What Madoff told us was, 'If you invest with me, you must never tell anyone that you're invested with me. It's no one's business what goes on here,' " says an investment manager who took over a pool of assets that included an investment in a Madoff fund. "When he couldn't explain how they were up or down in a particular month, [I] pulled the money out."

Shirreff’s lessons from the collapse of LTCM are instructive and recommended. Of note is the “value of disclosure and transparency.” It was interesting to read Coffin’s lessons on the 10th anniversary of the collapse of LTCM, and prior to Madoff: 

#1. The secret is that there isn't one

Long-Term's reputation had been built, at least in part, on the notion that it was operating by a unique model that could predict things that others could not. By the time Long-Term was off and running, many Wall Street firms had similar models to Long-Term, and they used them extensively. Because of the high level of mathematical skill of Long-Term's principals, however, they could read their models with greater detail and get more information out of them. But in reality, Long-Term was using the same kind of tools as everybody else. The notion that they had unlocked a secret method of divining market movement was mere fantasy.

With LTCM as well as the present, the SEC and auditors had difficulty in tracking wider risk beyond a discrete set of players: 

The sad truth revealed by [testimony from Richard Lindsey, SEC's director of market regulation division, to the House Committee on Banking and Financial Services on October 1,  1998] is that the SEC and the NYSE were concerned only with the risk ratios of their registered firms and were ignorant and unconcerned, as were the firms themselves, about the market's aggregate exposure to LTCM. Bank of England experts note the absence of any covenant between LTCM and its counterparties that would have obliged LTCM to disclose its overall gearing. UK banks have long been in the habit of demanding covenants from non-bank counterparties concerning their overall gearing, the Bank of England says.

Save for Andersen, the current auditors that were present at LTCM's demise were active thoughout the past decade plus. Many of the same red flags were present with LTCM and Enron were present with Madoff.

 

Harry Markopolos was the most persistent Madoff investigator who, after being challenged by his employer to produce equal performance, analyzed Madoff's method and found it wanting as early as 1999. Markopolos sent increasingly more detailed submittals to the SEC, first in Boston, then New York, culminating in a 2005 report in which Markopolos laid out, in 29 "Red Flag" arguments with relevant conclusions, the case that Madoff was most likely a Ponzi scheme or, less likely, front-running customer orders. But unlike other public skeptics, Markopolos presented his concerns directly to the SEC largely in part due to safety concerns to himself and his family.

 

This restricted distribution is sad in that although Markopolous is a competent financial forensic analyst, his red flag arguments are understandable to a reasonably skilled lay reader:

 

The family runs what is effectively the world's largest hedge fund with estimated assets under management of at least $20 billion to perhaps $50 billion, but no one knows how much money BM [Bernard Madoff] is managing... However the hedge fund isn't organized as a hedge fund by Bernard Madoff (BM) yet it acts and trades exactly like one. BM allows third party Fund of Funds (FOF's) to private label hedge funds that provide his firm, Madoff Securities, with equity tranch funding. In return for equity tranch funding, BM runs a trading strategy, as agent, whose returns flow to the third party FOF hedge funds and their investors who put up equity capital to fund BM's broker-dealer and ECN operations... The third parties organize the hedge funds and obtain investors but 100% of the money raised is actually managed by Madoff Investment Securities, LLC in a purported hedge fund strategy. The investors that pony up the money don't know that BM is managing their money. That Madoff is managing the money is purposely kept secret for the investors...

 

Red Flag #3: Why the need for such secrecy? If I was the world's largest hedge fund and had great returns, I'd want all the publicity I could garner and would want to appear as the world's largest hedge fund in all of the industry rankings. Name one mutual fund company, Venture Capital firm, or LBO firm which doesn't brag about the size of their largest funds' assets under management. Then ask yourself, why would the world's largest hedge fund manager be so secretive that he didn't even want his investors to know he was managing their money? Or is it that BM doesn't want the SEC and FSA to know that he exists?

Prior to reading the 2005 submittal, I was aware that it had not found traction within SEC and regulatory circles, but after reading The World's Largest Hedge Fund is a Fraud, I found it difficult to believe that any securities specialist could put this document aside without action. One has to read it; just reading trade press about it does not do Markopolos' research justice: 

  • Red Flags 4 and 6 note that the total amount of OEX listed call options are insufficient to generate income on BM's total assets under management, and that BM would "have to be over 100% of the total OEX put option contract open interest in order to hedge his stock holdings as depicted in the third party hedge funds marketing literature."
  • Red Flag 5 shows that BM's put option costs would have put his fund under water during one or more financial crises.
  • Red Flag 7 states the counter-party credit exposures would be too large for credit department approval by firms such as Merrill and UBS.
  • Red Flag 9 speaks to the enormous paperwork involved in tracking putative BM OTC trading as well as the absence of Goldman and Citigroup from clearing BM's trading volume.
  • Red Flag 10 states the mathematic impossibility "for a strategy using index call options and index put options to have [virtually no] correlation to the market where its returns are supposedly generated from."
  • Red Flag 16 debunks Madoff's "perfect market-timing ability," e.g., getting to 100% cash before every market decline.
  • Red Flags 18 and 19 note Madoff's returns are inconsistent with GATEX, the only publicly traded option income fund of equal age to Madoff, and no option income fund IPOs could match BM's high returns.
  • Red Flag 26 notes that BM "goes to 100% cash for every December 31st year-end," where major quarter-end and year-end transactions are a major red flag for fraud.
  • Red Flag 27 again picks up the argument that BM's split-strike conversion strategy cannot "achieve 12% aver annual returns with only 7 down months during a 14 1/2 year time period." (Item 7 on page 5 had already dismantled the split-strike conversion approach said to be used by BM.)
  • Red Flag 29 notes BM's comments to "third party FOF's that he has so much money under management that he's going to close his strategy to new investments" yet an unending number of FOF managers continue to get “special access,” a “special relationship” to Madoff.

An investor merely had to ask for trade tickets, then compare them against the Options Price Reporting Authority (OPRA) time and sales price feed. If the Madoff tickets don’t match OPRA time and sales reporting, the putative trades must be bogus. (OPRA is a “registered securities information processor” pursuant to the Securities Exchange Act of 1934 which collates trading activity of the American Stock Exchange, Boston Stock Exchange, Chicago Board Options Exchange, International Securities Exchange, New York Stock Exchange, Philadelphia Stock Exchange and Nasdaq.)

 

Markopolos reports that at least one counter-party to an HFOF did just this and “concluded that Madoff was a fraud and pulled significant assets out of the fund.”

 

After Markopolos’ persistent traffic to the SEC, the SEC halted an investigation of Madoff investment securities (BML) in 2007 with only the superficial violation of correcting BML’s role in Fairfield Greenwich Group (FGG) as investment advisor above and beyond that of executing broker. Left untouched were the trading legitimacy and fraudulent activities of BLM. By positively and ‘willingly’ cooperating with the SEC, Madoff escaped scrutiny of his core fraud.

 

All this after Madoff had already come to the attention of the SEC in 1992 as the secret investor behind the Avellino & Bienes “unregistered investment company” It is quite possible that Madoff was illegal in the 1980s: 

The best evidence that the returns were very attractive: the size of the pools mushroomed by word-of-mouth, without any big marketing effort by the Avellino & Bienes partnership. The number of investors eventually grew to 3,200 in nine accounts with the Madoff firm. "They took in nearly a half a billion dollars in customer money totally outside the system that we can monitor and regulate..."

 

In the mid-1980s, one investor says, the limited reports that Avellino & Bienes sent to investors changed, and investors stopped being told in which securities their money was invested. The interest rate on some new notes sold by the accountants was also lowered to 16% or less. One investor who complained about the vaguer reports and lower returns was told that if he didn't like them, he could withdraw his investment. He chose to remain.

 

Perhaps the biggest question is how the investment pools could promise to pay high interest rates on a steady annual basis, even though annual returns on stocks fluctuate drastically. In 1984 and 1991, for example, the stock market delivered a negative return, even after counting dividends. Yet Avellino & Bienes -- and Mr. Madoff -- maintained their double-digit returns.

HFOFs make a mockery of diversification strategies

 

Diversification by both strategy and manager is a primary rule of any portfolio, yet investor diversification becomes problematic in a Fund of Funds (FOF) environment in which an investment fund holds a portfolio of other investment funds rather than making direct investments in securities, shares and bonds. Without transparency, the ability of the investor to make reasonable risk assessments become clouded. The problem becomes reentrant as the investor’s portfolio funds make investments in other funds, i.e., a nested FOF environment. Add the secrecy that Madoff demanded of many of his associated feeder funds and an investor’s original diversification strategy can collapse with disastrous results. (Also here)

 

The failure of audit in particular and due diligence in general

 

Audit throughout the HFOF chain from Madoff to investor is flawed, and I believe negligent. From the data on offer, it appears that this audit chain never performed a rigorous due diligence at any stage, unlike the venture capital sector where at least the lead investor undertakes rigorous due diligence (which secondary investors too often consume without further investigation):

Though Bernard L. Madoff Investment Securities itself was audited by small firms, questions are arising over how major firms like PricewaterhouseCoopers and KPMG overlooked several red flags related to the operations over a number of years. The big accounting firms are likely to face queries about why they gave their seal of accounting to the astoundingly steady positive returns booked by a fund manager whose investment strategy was nearly completely opaque...

 

With many of the feeder funds’ managers having taken losses from their own personal exposure to Mr. Madoff’s firm, the accounting firms may be a likely target for investors seeking to recoup at least some of their money...

 

PricewaterhouseCoopers was the main auditor for Sentry, the largest fund run by Fairfield Greenwich Group, the $14.1 billion investment manager that has lost the most money so far in the Madoff scandal. The accounting firm was tasked with minding Sentry, which had about $7.5 billion invested in Mr. Madoff’s firm...

 

But the Madoff case presents an unusual situation.... Previous cases focused on the auditors of the firm at the center of the scandal, not the auditors of investment managers one rung removed.

Barrett identified nine symptoms inherent in auditing Enron that this analyst expects to see conspicuously at play with Madoff: Unconscious bias, Ambiguity, Attachment, Approval, Familiarity, Discounting, Excalation, Culture and ineffectual professional standards unit, and Significant conflicts of interest and self-interest.

 

Analyzing auditor independence in the wake of Enron, O'Connor is recommended for his review of the development of the accounting-audit profession, rise of securities law, private and public regulation of accountants providing audits, and changes in the the business environment for professional services. His summary of Enron confirmed my view that the accounting process is flawed and open to exploitation at will:

The most surprising thing about the recent spectacular collapse of Enron [may] be that this kind of colossal public audit failure did not happen sooner. While greed and power likely played a role in the reasons that the Enron Corporation set up dubious partnerships to hide company debt and assets, the question remains, where were the auditors? The kind of ploys that Enron executives seem to have been involved in are not new: the fact that some corporate officials may not always act in the best of faith was one of the primary reasons why the federal securities laws were enacted in the first place. But it is precisely the public company disclosure and audit procedures created by the securities laws that established a watchdog in the form of accounting firms to certify the books and financial statements of the company to curb rampant abuses by corporate officials. Accordingly, the accounting firms are supposed to be "independent" of the audit client and act on behalf of the public, not the audit client. The problem is that, however well this audit system worked at its inception, it is fundamentally flawed now, such that as a practical matter it is impossible for auditors to be "independent" of their audit clients.

Barrett dispenses with the fiction of operational auditor independence by categorizing the pressures on the audit process within a professional services organization:

Aren't audits supposed to be sign-offs on the appropriateness of a company's financial statements? Not exactly. Before we examine what went wrong in Andersen's audits, we should clarify what an audit hopes to accomplish. In an audit, the auditor evaluates the various representations that an enterprise's management asserts in the financial statements and related notes about the firm's assets and liabilities at a specific date and transactions during a specific accounting period so that the auditor can render a report on (and almost always express an opinion about) those financial statements and accompanying disclosures. Ultimately, the auditor seeks to express an opinion as to whether the financial statements present fairly, in all material respects, the enterprise's financial condition, results of operations, and cash flows in conformity with generally accepted accounting principles. If the examination of the entity's procedures and accounting records allows the auditor to reach an affirmative conclusion, then the auditor will issue an unqualified or "clean" opinion. Even an unqualified opinion, however, does not guarantee the accuracy of financial statements; such an opinion provides only "reasonable assurance" that the financial statements fairly present, in all material respects, the enterprise's financial condition, results of operations, and cash flows in conformity with generally accepted accounting principles...

 

Unfortunately, even in a properly planned and executed audit, fraud can more easily avoid detection than unintentional errors. As a result, investors set a higher standard for auditors to uncover fraud than to discover errors and their expectations exceed the assurance actually provided. The accounting profession has labeled these misconceptions as the "expectation gap."

 

To reiterate, an audit provides only reasonable assurance against material misstatements, whether intentional or unintentional, in the financial statement. In reality, an audit does not guarantee that error or fraud has not affected the financial statements. Similarly, even an unqualified report does not offer any assurance that the enterprise presents a safe investment opportunity or will not fail. At the same time, however, then-existing generally accepted auditing standards required an auditor to assess the risk that errors and fraud may cause the financial statements to contain a material misstatement. In addition, the auditor faced a professional obligation to design the audit to provide reasonable assurance that the examination would detect material errors and misstatements, to exercise professional skepticism, and to perform and evaluate audit procedures to attain the required assurance...

 

So why did Andersen fail to catch the problems at Enron? Although numerous conflicts of interests permeated the relationship between Andersen and Enron, unconscious bias - the propensity to interpret data in accordance with our desires - best explains why Andersen's audits failed. Other explanations include the culture and organizational flaws at Andersen...

From a risk analysis viewpoint, Barrett's list of human and organizational pressures against accurate audit are far more indicative of the accuracy of an audit than are the financials presented:

  • Unconscious bias: Auditor-client relationships, more so in longstanding and financially important relationships, "create significant opportunities for bias to influence auditing judgements. [Three] aspects of human nature - familiarity, discounting, and escalation [amplify] auditors' unconscious biases."
  • Ambiguity: "financial accounting requires various estimates that affect the amounts shown in the financial statements... generally accepted accounting principles often allow alternative treatments for the same transaction or events and may not address a particular situation because business transactions evolve more rapidly than accounting principles"
  • Attachment: "auditor's business interests in fostering a long-term relationship with a client's management encourage auditors to render "clean" audit opinions in an effort to retain any existing engagements and to secure future business. Auditors that issue anything but an unqualified opinion frequently get replaced."
  • Approval: "audit essentially endorses or rejects the accounting choices that the client’s management has made."
  • Familiarity: Resistence to harm individuals that are known as opposed to strangers, more so in considering harm to "paying clients, or individuals they consider paying clients, with whom they enjoy ongoing relationships."
  • Discounting: "Immediate consequences influence behavior more than delayed ones, especially when uncertainty accompanies the future costs."
  • Excalation: Acceptance of "small imperfections in a client’s financial statements" which become material over time. Rather than restating, auditor may escalate "unconscious bias into fraud" by attempts to conceal the problem.
  • Culture and ineffectual professional standards unit: Various means by which revenue generation and revenue stream protection superceded accepted standards of practice. Professional standards unit is gelded, overruled.
  • Significant conflicts of interest and self-interest: Careers and regional offices at risk, "revolving door" employment between auditor and client staff, auditor’s professional standards unit's evaluation of its own consulting unit's services, et al.

The investor is as much or more at the mercy of management’s intent than he is under the protective eye of external audit. Risk analysis must extend beyond the financials into the softer metrics of the guardian-client relationship.

 

Full bibliography citations in separate note. See: Bibliography for 'Madoff and Enron, studies in strategic deception'

 

Gordon Housworth



InfoT Public  Risk Containment and Pricing Public  Strategic Risk Public  

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ICG's Supply Chain-Outsourcing Abstracts, April 2004 - December 2008

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ICG's Supply Chain-Outsourcing Abstracts

 

Supply chain analysis must extend beyond the piece part cost, beyond purely commercial aspects, in order to prevent surprise, interruption or termination.

 

Commercial calculations are the essential first step in risk evaluation; they are necessary but not sufficient to define total chain risk. Supply chain analysis must go beyond piece part cost to include Intellectual Property (IP), IT, criminal, terrorist, cyberterrorist and environmental issues - and their interactions.

 

Good supply chain analysis on the manufacturing downstream and outsourcing upstream must be an all-source risk analysis effort in order to preempt strategic surprise.

 

And in order to be effective, risk guidelines must be harmonized between downstream manufacturing and upstream outsourcing. Too often they proceed in isolation, or risk guidelines of either or both are faulty.

 

 Why steal COTS products or processes?

 4/25/2004

 

Targeting countries appear to wait for a successful US commercial application of a technology before seeking to acquire it as the kernel of capability for military use is often contained in the commercial variant. An airborne IR sensor is a good example that applies to all dual-use technologies.

I would stress that "failed" applies to collectors' time horizon and that the early securing of a commercial variant will act as a "gap filler" in both their defense and commercial posture and will act as a development seed in their research institutions.

As developed countries suffer legacy drag as we do, preferring not to change computer systems when an upgrade is needed, they target absorbable enhancements. Not so encumbered developing countries will attempt quantum leaps in capacity by acquiring newer, more advanced systems... more

Similar mitigation trajectories: Intellectual property theft and quality

6/4/2004

 

I had the opportunity to share some opinions on the impact of intellectual property (IP) theft, some already posted to this list, with a large, global supplier of parts and subsystems that was known for its production and quality focus but it had not been clear to me that the supplier was also ahead of many of its peers in its understanding of the diversion risk that it and its subsuppliers faced in certain regions.

I mentioned certain points from Hemorrhaging intellectual property to Asia, notably that on the established industrial side:

[The] OEMs (Original Equipment Manufacturers at the top of their respective supply chains) have been virtually ordering their suppliers explicitly or implicitly to China (a) to produce lower cost products for resale back to the OEM or one of the subsuppliers in the chain, or (b) support OEM plants in-country. The demand for cost reduction is the pole star. Our prediction is that the OEMs, whose hubris leads them to mistakenly feel themselves above the risk horizon, will not protect their suppliers as new Chinese or other low-cost country providers come on line and will shift purchases to those new firms, hollowing out their own industrial infrastructure, even as OEMs press those same suppliers for cost reductions on a year-to-year basis.

To this, I added that since the OEMs had financial pressures of their own and would not relent in their demands for immediate direct cost reduction such that the supplier had no opportunity to not go to the desired low cost area, that it was up to the supplier to address the incursions against the intellectual property of their firm and the subsuppliers in any critical path of their supply chain... more

The defender's dilemma: common threads in exploiting commercial supply networks
8/17/2004

We devote substantial research to asymmetrical warfare exploits involving COTS (commercial off the shelf) openly available dual-use equipment and processes... Tools and weapons derived from such sources are perfect tools "for the asymmetrical warrior, and devastating to US commercial and military installations."

It is a truism in every COTS weapon system production capacity that we investigate that investigating authorities place self-imposed blinders upon themselves, too often assuming that their opponent is a mirror image state opponent, such as Russia, or state-sponsored opponent, such as Libya, and thus compelled to access the same production base, employ state-of-the-art production processes, assume a continuous production level when manufacturing is involved, observe common industrial manufacturing and recovery processes, and expect similar military delivery means.

Just as military forces habitually look for mirror image adversaries instead of an asymmetrical opponent exploiting a key weakness that you have overlooked, so does the FBI too often look first to new, retail commercial purchase instead of looking for "good enough" components from the used, resale, internet, closure, overstock, bankruptcy, or theft sources. The perp's goal is path of least resistance and not path of greatest production... more

Invisible reallocation of supply chain vendors based on perceived threat to buyers

9/22/2004

 

It has been my experience that while many industrial firms have made a strategic IT commitment to the likes of Microsoft or Cisco in volume purchases that significantly lower the per seat product cost, they exhibit a very different -- lower and more transient -- loyalty to the suppliers in their product supply chains.

Based upon our work in the automotive sector, we can say that OEMs (Original Equipment Manufacturers) -- or vehicle manufacturers -- in this relentlessly cost sensitive sector have less than rigid loyalty to suppliers and certainly feel "hostage" to certain suppliers, especially those suppliers who dominate the market in a specific part/subsystem or even a high percentage of overall industry production to all OEMs. OEMs are reacting by reallocating their part production awards to other than the industry leader, irrespective of that supplier's ability to provide a technically and financially acceptable component.

This does not mean that OEMs will award business to firms with substandard performance, quality, and robustness, but rather that they will select among a group of suppliers capable of providing a peer level of performance in order to reduce the dominance of particular suppliers in critical market subsystems. I hasten to add that "critical" may be based upon internal OEM criteria not available to the supplier who would otherwise presume that they have the business based upon being the incumbent supplier offering a competitive cost and functional bid for a subsequent model year... more

When clients for risk assessment/risk pricing take on a risk of their own
10/10/2004

 

While virtually every risk client will subscribe to the idea that there is added value in managing risk, i.e., shifting from the default condition of accepting risk to the pricing of risk though such mechanisms as mitigants, offsets, and transfers, the client rarely sees themselves as among the criteria of risk. Risk clients commonly divide themselves into one of three categories:

  • Finance/risk managers without operations skill
  • Finance/risk managers with operations skill
  • Operations/in-country managers ... more

The merger of Inability to distill, Not invented here, and Competitive bad advice

10/11/2004

 

The merger of Inability to distill, Not invented here, and Competitive bad advice give rise to a persistent condition we see among many that are party to risk assessment or risk pricing: Deming's "They don't know that they don't know." Furthermore, there is little time to teach them, especially without causing embarrassment to one party or another.

Under Inability to distill, I had noted that they "can't analyze what they have," and so lapse into the condition of being "better informed without the ability to act." This is the crux of the operable decision problem, i.e., they do not "see" the data in first instance, do not see context, do not see relevance, do not see pattern at any time, and do not see patterns maturing over time. They are deprived of a meaningful means of prediction... more

Brief introduction to China risks

10/12/2004

Before turning to a brief introduction to China risk, space limitations in the previous post required that I defer the operational component.

Operational, in-country side of the commercial client:

1. These people are close to the problem and bear the pain

They are often the wariest depending upon their corporate structure and whether true P&L responsibility resides at this operational level. A reasonable indicator of local control would be a local partnership or other tax effort that limits US asset consolidation.

2. They feel risk keenly in all aspects of the business

While this is true, situations vary as to whether it is more effective to approach the financial/risk group or the operations group -- even if on-the-ground people have contracting authority. Working with operational units can be daunting if the financial/risk group is in denial (see part 1) as any counter-corporate views quoted by local operators, and sourced back to us, complicate our ability to support the client... more

Starter questions to begin -- just begin -- to understand country risk

10/13/2004

 

Here is a starter list of questions for the novice to begin -- just begin -- to understand the risk in your country of interest. Or you can charge in with your risk unmeasured and unpriced. Many do.

1. Judiciary

  • Is there an independent judiciary?
  • Is there a mechanism for independent arbitration?
  • Is the country subject to bilateral treaty with the US?

The PRC does not have an independent judiciary.

2. Intrastate conflict between state, province and enterprise zones

  • Which country to the casual observer seems more risky?

You can never, ever judge this from afar. Yes, there is enormous interference from Beijing and enterprise zones, but substitute the relevant government agency, and this pertains to almost any almost-developed nation; even democracies like India, Argentina, Brazil, and Australia that to the uninformed may appear benign or less risky... more

Refining a China forecast

12/3/2004

 

Continuing our effort to refine a prediction for Chinese economic direction, I believe that China will:

(1) Increasingly digest and take advantage of foreign technology to create increasingly effective and efficient local products (and only then will it more rigorously enforce anti-piracy laws -- akin to what Japan is now doing in such areas as flat panels)

(2) Go beyond commercial, increasingly commodity products to embed unique Chinese standards that bar or slow foreign entry, i.e., increasing Chinese price-volume curve efficiencies while damping foreign efficiencies and denying revenue to Chinese competitors (e.g., DVD, CMDA, PC chipsets, Red Flag Unix, encryption algorithms)

(3) Continuing reduction or elimination of foreign royalty payments for any and all products - a corollary to (2) - be they products made for domestic Chinese consumption or export (the recent Microsoft contract cancellation is a mere tip of this iceberg)... more 

Using SARS to predict H5N1 Avian Flu impacts on regional & global supply chains, Part 1

1/22/2005

 

Suspected human-to-human Avian Flu H5N1 transmission has occurred in Vietnam, and is the kind of trigger news that could launch the epidemic/pandemic "event" noted in The flu season not yet underway and uncomfortable signs that 'when, not if' is shifting to 'soon, not when'. Worse, the lack of reliable or widely available tests may be masking other cases. H5N1 is vastly more fearsome than SARS (Severe Acute Respiratory Syndrome).

In the case of SARS and now Avian Flu, governments are voting short term economic gains, reducing the flow of accurate infection information, impeding inspection by foreign epidemiological staff, and forestalling destruction of infected fowl, thereby blinding themselves - and us - to the tipping point of a pandemic.

Independent actions by local, regional, and national governmental entities effectively conspire to make the situation opaque. Vietnam, Thailand, and China are now repeating news suppression and denials in avian flu animal-to-human and human-to-human transmissions... more

Using SARS to predict H5N1 Avian Flu impacts on regional & global supply chains, Part 2

1/22/2005

 

Host nation (PRC and HK) "Public" or core event hierarchy:

  • Restaurant activity
  • Public small to medium group activities
  • Mass transit
  • Tourism revenue
  • Airline revenue
  • Service industries (restaurants, hotels, airlines, cinemas, and theaters)
  • Host nation quarantine commences
  • Service industries suppliers (air navigation services, wholesalers, food providers)
  • Discretionary products (notably luxury goods)
  • Global airport sales of all items
  • Foreign (offshore) quarantine rises
  • Host nation quarantine methods increase in intensity
  • Host nation (PRC) mismanagement of news/story continues
  • 'Phonecam nation' collects and provides data about virus spread to unofficial databases beyond government control
  • Asian markets/indices... more

Cost pressures on supply tiers prompt loss of supplier intellectual property

2/2/2005

 

Suppliers worry that design reviews by an OEM prior to contract award are efforts to extract price concessions, extracting information to compare (1) proprietary cost buildups and (2) ideas among competing suppliers. OEMs, for their part, may be mistaken in asking the supplier for full disclosure of the supply chain during this period of minimum trust and maximum fear, a more common occurrence among the three "US" OEMs than Toyota or Honda.

In reality, the supplier has often not gone to the cost and effort to fully detail the part. OEM staff profess outrage when they 'find out' this is the case. We ask them what they expected. Would they not do the same were circumstances reversed?

The following [sanitized] exchange involves AutoCo and CarCo, two automotive OEMs, MetalCo, a Tier One supplier, and MasterCo, a related subsidiary. AutoCo is under financial pressure to produce improved results. Such pressure always creates hot spots under excruciating demand, to the point of program cancellation and (participant) job loss... more

Lenovo's transition to Dell and HP peer competitor should be measured in months rather than years

2/3/2005

 

Market Assumption: The transition period between (1) Lenovo's purchase of IBM's PC group and (2) the appearance of robust Lenovo desktop and laptop products (products that challenge the likes of Dell and HP) is to be measured in terms of years.

Our Forecast: The transition period between Lenovo's purchase of IBM's PC group and the appearance of robust Lenovo products is far shorter than what the perceived wisdom (years) would indicate. The transition could easily be accomplished within twelve months, less with a more concerted effort, requiring little or no additional dependence on intellectual property (IP) diversion.

Rationale: Lenovo has already positioned itself to climb out at the top of the electronics supply chain. It lacks only in brand and distribution (both of which it believes it has purchased). Pricing pressures in the electronics industry are no less fierce than those between automotive manufacturers (OEMs) and their Tier One suppliers.  Dell, HP, and IBM, among others, have placed unrelenting pressure on their Taiwanese suppliers for price reductions.  It is understood in the sector, but seems not to have reached the level of actionable risk analysis, that this pricing pressure has driven much "Taiwanese" electronics to China with supplier badging remaining in Taiwan. (See activity location 2003 versus 2006.)... more

Pan-industry “beggar/maker-prince/maker” initiatives in supply chains

2/4/2005

 

Enter Intel, a chipset manufacturer that is promoting "white box" (generic PC) and "white book" (generic notebook) devices using generic designs, cases and hardware modules. Intel's intent is said to be the creation of a family of more compliant suppliers and so escape their current vulnerability to the two US giants - Dell and HP. 

Intel seems to be pursuing an approach that mimics the "beggar/maker-prince/maker" process that we see emerging among US automotive OEMs.  (As Intel provides roughly a fifth of the world's server products (at higher margins than PCs) and so competes with their server customers, it may be to Intel's advantage to suppress their current troublesome generic PC vendors while created a wider market for their chip sets.)

For those readers unfamiliar with beggar/maker-prince/maker, we see OEMs in a number of sectors, automotive included, that perceive themselves increasingly captive to powerful Tier One suppliers. To escape that burden, we believe that the OEMs are in the process of elevating smaller suppliers (making princes out of serfs) while taking business away from the leading suppliers for future models (making beggars out of kings).  The result in both automotive and electronic market sectors is to leave the top of the manufacturing tier in stronger control of its supply chains... more

Implications of absence of liability: shifting the cost from perpetrator to consumer and bystander

2/27/2005

 

Absence of liability in software design and data aggregation share a common theme: The absence of liability or responsibility for human action in any system leaves a massive open loop in which damaging action is allowed to rise, and to continue, without impact to the perpetrator's finances, equity and reputation. The unregulated impact of such action is a form of collateral damage to consumer and bystander as the cost to correct wrongful action or inaction is transferred to them.

The politico-economic system is as much at fault as are the perpetrators as the latter are only responding to the risk-reward calculations that the system presents them. If I am producer of product, tangible and intangible, and am not held accountable for the quality of those products, I will devote more attention to 'features' than to the quality of those features. If I am an aggregator of information and not held accountable for the security and accuracy of that information, I will focus on gathering/acquiring more information and designing data mining tools to exploit that information than to securing and updating that information. In both cases, it comes down to the consequences of shabby 'product.'... more 

At what point does a decision maker bound the system that describes options with the least destructive outcomes?

3/3/2005

 

Just as customers had to "take either the horse nearest the stable door or none at all" from Thomas Hobson's livery stable, so must Microsoft decide between stopping piracy revenue loss or driving clients elsewhere or indirectly propagating vulnerable installs; and the US must decide between US-EU cooperative agreements that permit transatlantic technology transfer underlying cooperative programs such as the Joint Strike Fighter (JSF) or accelerated EU, principally French and German, arms exports to China.

Choices in complex systems are increasingly maddening, and in geopolitical systems those choices can have disastrous consequences. Many have written on the short term thinking of certain political elites that lead to an endless string of unintended consequences, so I am not the first to suggest that setting width of scope and length of timeline is essential in defining a solution space with the least damaging outlines. (Whenever clients task us for a solution to an especially vexing problem, we find that the solution space is not large enough to define a solution and that we have to widen the solution space, i.e., reset scope, in order to define one or more solutions that can be presented to the client for evaluation.)... more

China: a planners' preference defense industry succeeds in spite of systemic shortcomings

3/30/2005

 

China's military-industrial complex is a study in contrasts. Effectively unique in the third world/developing world in that it produces a complete range of military equipment that includes "small arms, armored vehicles, fighter aircraft, warships, submarines, nuclear weapons and intercontinental ballistic missiles; is one of the oldest and largest defense sectors, yet faces system shortcomings that have evinced difficulties in "translating theory and design into reliable weapon systems":

  • Technologically backwards defense industries (much indigenous design equivalent to 1970s-1980s technology
  • Critical R&D gaps (aeronautics, propulsion, microelectronics, computers, avionics, sensors and seekers, electronic warfare, and advanced materials.
  • Systems integration and program delays
  • Inefficient, wasteful production dogged by excess capacity
  • Consistently poor production quality control
  • Small and sporadic production runs
  • Inadequate funding
  • Centralized and personality-centric production management leading centralized, hierarchical, bureaucratic, and risk-averse state-owned enterprises (SOEs)... more

The world is flat save for the depression that we occupy: Friedman on global opportunity and competition

4/8/2005

 

The head of Infosys (India) told Tom Friedman that "the playing field is being leveled" as decades of massive investment in technology, computers, global broadband connectivity, education, communication and information processing tools created a condition in which "countries like India were now able to compete equally for global knowledge work as never before -- and that America had better get ready for this."

Friedman made a great tag line leap from 'leveled' to 'flattened' to 'flat' with the observation that: When the world is flat, you can innovate without having to emigrate. The impacts are enormous in terms of economic, political, military, and demographic changes at the level of shocks - and an inability to predict when and where those leaps will occur... more 

Supply chain paradigm shifts: read the tea leaves and add minor twists

4/21/2005

 

Chrysler's consideration of a Chinese JV to make Chrysler vehicles in China and export them to North America and SeaCode's intent to anchor a used cruise ship converted into a 24/7 floating programming factory off the US coast are seen by some as a shock, a new departure, but are in reality a tweaked progression of trends already in motion.

DaimlerChrysler's 'export Chryslers' made in China

DaimlerChrysler's effort is an attractive proposal to a Chinese firm in that it:

  • Builds a new substitute supply chain in China for "a totally new [DCX] segment"
  • Provides technological assess to the technology and design of that new segment
  • Offers an early export exit path against other Chinese competitors
  • Reduces buyer reticence as the Chinese vehicle is sold as a 'Chrysler' and not as an unknown Chinese badge
  • Provides an opportunity to intimately study Chrysler marketing and brand awareness process (much like two of China's largest state-run tobacco companies will do as part of permitting Altria/Philip Morris to manufacture and sell Marlboros in China)... more

Supply chain paradigm shifts, part 2: SeaCode's floating Maquiladora

4/24/2005

 

Continuing our review of 'tweaked progressions of trends already in motion,' SeaCode's very near offshore seaborne platform solves a number of nettlesome problems:

  • H1B visa requirements avoided by anchoring the vessel outside US territorial jurisdiction
  • Lack of communication and poor program management that dogs so many offshoring projects is remedied by clients being a short water taxi ride away while the vessel is always within the client's 'day' window for telephone access
  • High performing programming staff as I wager that good programmers and engineers will vie for the 600 positions if the pay and working conditions remain as advertised
  • High output as teams will work in team "pods" of overlapping shifts, thereby shortening development time
  • Higher security and potentially better intellectual property (IP) control
  • Total costs to clients are commensurate with genuinely offshore project costs but a goodly portion of costs are envisioned to revert to US firms and coffers
  • Client staff trips to offshore destinations for project collaboration conferences are eliminated... more 

Commercial blindness: a "twofer" attack on the Indian state and US and European outsourcing assets

6/28/2005

 

One must wonder how inattentive major US outsourcers can be, and how 'missing in action' that major consultancies such as Forrester can be, so as to not recognize the physical threat to core outsourcing facilities in India. Perhaps it is the mere continuation of the lesser lapse of failing to factor intellectual property (IP) theft risk in supposedly low cost areas. (See Intellectual property theft: the unspoken unknown of offshoring.) Even more curious is the effective absence of concern by Europeans who would normally have an attentive ear to the near and middle east. (The UK has a term EMEA for Europe, Middle East, and Africa to describe their version of the 'Near Abroad.')

The threat to IT and outsourcing assets in Bangalore and Hyderabad should be taken seriously despite the bland denials from Indian authorities who are understandably anxious to protect what amounts to the core of Indian economic revival... more 

Threat of H5N1 avian flu pandemic rises to point that business must actively consider contingency plans

7/26/2005

 

The threat of an avian flu H5N1 human-to-human outbreak - which holds the specter of a global pandemic - is now at a point that I submit that firms that do not address the potential impacts to their global supply chains are at a point between a near total supply chain interruption and fiduciary breach. This is cheap prose to firms that are struggling with financial and competitive demands and who can rightly retort that they are no different from the federal government in ignoring the rising warnings from WHO, CDC and others. The supply chain impacts, leave aside the death toll, are going to be stunning. I draw readers to a January 2005 two part series, Using SARS to predict H5N1 Avian Flu impacts on regional & global supply chains.

The tipping point could occur at any time but the forthcoming fall flu season could see the crossover from avian to human transmission as many of those falling prey to human flu chance to be in proximity with animals and birds with avian flu. Once genomic reassortment occurs in one or more doubly infected humans, the game is up for an unprepared globe. SARS was a cakewalk as a disease vector as it is actually hard to transmit in comparison to H5N1... more

Threat of H5N1 avian flu pandemic rises to point that business must actively consider contingency plans, part 2

7/27/2005

 

China is again failing to provide requested urgently information and samples, this time about three outbreaks among migrating wild birds in the remote western provinces of Qinghai and Xinjiang where avian flu outbreaks now threaten all of previously unaffected countries of Central Asia and Russia... Based upon prior Chinese performance over SARS reporting, one is left unsatisfied with the Chinese response that "the infection in Xinjiang has been contained." Independent Chinese scientists that report on avian flu outbreaks are again under attack by the Agriculture Ministry while foreign researchers are quiet lest China bar them from entry. The stakes are rising as the virulence of H5N1 rises. Infected domestic flocks now die in a day rather than many... more 

 

Multisourcing: belated recovery of forgotten first principles

10/18/2005

 

Having long held that "insultants" outnumber consultants, and mindful that certain consultancies prey upon the short attention spans of their clients even as certain clients use their consultant's opinions as 'security blanket' surrogates for omissive decision making, I am displeased that the consulting community has ridden the outsourcing pony for years and only now is actively turning on the outsourcing concept as its political and structural impacts are becoming increasingly obvious. In point of fact, the consulting community is beginning to issue a new prescription for a disease which they themselves helped to construct.

I would like to offer a realistic assessment of why and how firms outsource. Firms almost universally devolve the problem to a divisional or unit level, thus the means, omissions and results that are achieved will vary on a case-by-case basis. The upshot is that the same problem is solved in differing ways, as a colleague said, "to avoid some organizational consequence" such as cost savings, headcount reductions (which can be to protect existing staff or to get credit for any reduction), functionality (that is missing, failing or inconvenient), or at the personal level, a positive annual personnel rating (which may be measured against suboptimizing criteria). What is missing is a decision making framework that integrates global and national aspects of need, technology, business considerations, risks, scope, duration, cost implications and ultimately solutions (there is always more than one solution, depending upon the desired outcomes and the bounds of monies, mindshare, and timing available)... more 

Multisourcing: belated recovery of forgotten first principles, part 2

10/20/2005

 

For those of us that come from a background of a Counterterrorism (CT) and Counterintelligence (CI) threat analysis, a Governance Model that Gartner belatedly embraces is the essence of effective performance definition, and the Design Basis Threat (DBT) becomes an integral, inseparable part of that governance model as the mechanism that informs the Command or Senior management of the types of threats it may face over time and allows them to define the threats that are in or out of scope, the level of deflection or defense that will be committed to each threat, and the cost for that level of deflection or defense. The commercial side could learn much the military in essential risk management starting with Field Manual FM 100-14, Risk Management, which is the commander's principal risk reduction process to identify and control hazards and make informed decisions... more

 

Failing the Manwaring paradigm: Surprise over jihadist targeting Muslim oil transport and refinery assets

3/1/2006

 

The wide surprise over the public posting of a two year old jihadist document sanctioning the targeting of Muslim oil transport and refinery assets is a failure on multiple levels:

  • Failure to read already published jihadist strategy documents
  • Failure to see the rising capacity of the "new jihad"
  • Failure to transpose the value to insurgents of attacking Iraqi electrical and oil infrastructure to other Muslim "near enemy" regions
  • Failure to grasp the value of a "twofer" attack against a neutral or "near enemy" state in which the attack damages the local apostate government while damaging US and European firms indirectly -- where an attack on US soil would be prohibitive
  • Failure to understand the impacts of the Manwaring paradigm to both attacker and defender

In June 2004, I addressed an infrastructure attack in Exceeding $100 USD a barrel in a stroke: attack Ghawar, Abqaiq, and Safaniya ... more

Symbiotic and predatory relationships between immigrant migration chains and supply chains
3/14/2006

As migration patterns have long been a staple of ethnographic research, I have begun to extend the term 'Migration Chain' as an analog to Supply Chain in that they form symbiotic relationships and can be another predictor of future events. Reflecting over the Latin migrations into the US which I am coming to broadly class as legal, illicit (immigration), and illegal (criminal), while admitting to some fuzzy boundaries between legal and illicit, if nothing else, for getting in illicitly and then having one's child born here. These migration patterns have both sheep and wolves. Here are the sheep... more 

 

Double edged sword of optimizing China-based and US/EU-based supply chains

6/16/2006

 

Bleeding our China-monitoring interests over to logistics, I highly recommend two articles by George Stalk at BCG on the trade-offs between China-based and North American-based supply chains. The first is the HTML article from Supply Chain Management Review, Surviving the China Riptide, and the more developed PDF article from BCG, The China Rip Tide: Threat or Opportunity? Stalk portrays the scope of the problem in trying to improve China-based chains as reaching epidemic proportions... more

Chinese mercantile absorption of Sub-Saharan and East African infrastructure, energy, mining, development, political and military

6/27/2006

 

Robert Mugabe and Zimbabwe are actually a stellar recommendation for China among African elites, i.e., no matter how despotically my clan and I behave, China will be my protector and lender of last resort against the international community. No one in the West is able, or willing, to make that bargain. I have the luxury of remembering a prosperous Rhodesia under Ian Smith, his UDI (Unilateral Declaration of Independence) from England, the rise of two black parties - Zanu (Zimbabwean African National Union) under Robert Mugabe and Zapu (Zimbabwe African People's Union) under Joshua Nkomo, the creation of Zimbabwe, the marginalization of Nkomo, Mugabe's period as a post-colonial liberation hero, and the trajectory of decline to what is now a prison camp of a nation. For those readers unaware of the sinkhole that nation has become see Frontline's Zimbabwe: Shadows and Lies. Were I an up and coming clan leader bent on control, I'd pick China... more

 

Globally dispersed, indigenously sited communities of terrorists upgrading to locally produced chembio agents

11/10/2006

 

The marriage of John Robb's GLOBAL GUERRILLAS IN THE UK with my Designer bioagents: Why a potential Iranian, or existing Pakistani or DPRK, nuclear weapon does not overly excite me creates the terrorist chembio agent landscape that the UK's head of MI5, Eliza Manningham-Buller, has elected to describe in a rare public address.

Manningham-Buller uncloaked to "set out my views on the realities of the terrorist threat facing the UK in 2006; what motivates those who pose that threat; and what my Service is doing, with others, to counter it"
... more

 

The continuing strategic failure to address our slide in Pre-K through 20+ education

12/8/2006

 

During the preparation of Islamic flashpoints: Even adjustments may be outside Western control,... which was a requested deeper dive on Iraq, Iran, Syria, Lebanon and Palestine from the survey of Colonial/Western-Arab relationships in Islamic territory from North Africa to South Asia: No solutions, only adjustments,... I found myself frequently thinking of vital national issues that have been neglected as Iraq continues to divert US attention, manpower, diplomacy and money to Baghdad:

  • China's growing mercantile net
  • Russia's kleptocracy class armed with the energy weapon
  • Eclipse of US dominance of technologically sophisticated, major weapons systems
  • Pre-K through 20+ education
  • Conservation policy and conservation technology
  • While it is transient - resolving the Republican struggle from the Bush Family struggle

In keeping with my view that 'The hole is as good as the donut,' that is, a thoughtful observer needs to look at what is missing as well as what is present, I opened the presentation with these six issues as I felt that they increased the gravity of the Iraqi situation in particular and the Middle East in general. It is one thing to be succeeding in Iraq, Afghanistan (we were, but we relocated attention and assets to Iraq and have likely lost it as well) and the Middle East so that one could argue that the tradeoff was worthwhile, but it is quite another to be singularly failing in those conflict areas as well as neglecting strategic areas of need... more 

Deducing IP collection targets among military, commercial and dual use applications from Chinese science and technology core competencies

1/12/2007

 

The identification and analysis of the science and technology core competencies of China permits much deduction, from a targeting standpoint, of Chinese interest against foreign military, commercial and dual use technologies. A first in the unclass area, this Office of Naval Research (ONR) comparative effort contrasts the impact/quality of all of China's research (versus India and Australia) and research investment emphases/strategy (versus the US); Its algorithmic data is of interest to those of us interested in automated search.

This analysis has rising interest as China surpassed Japan in 2006 to "become the world's second highest investor in R&D after the United States"
... more

 

Chlorine is only the beginning of a spectrum of instant asymmetrical chemical weapons

2/25/2007

 

A chemical weapon (CW) in the hands of an asymmetrical attacker or terrorist will generally not be 'WMD-scale,' certainly not in the context used in connection with Iraq under Saddam Hussein and OIF, but it will be a chemical weapon nonetheless. (Under current (but not future) means of delivery, the most likely "WMD chemical event" will be the placing of conventional explosives in an existing chemical plant.)

We must recalibrate our definition of a chemical weapon in order to understand how a terrorist can add chemical leverage to their attacks, likely using one or more items (mixtures greatly complicate defensive responses) drawn from local industrial chemical and pesticide stocks. In conflict situations where hazmat protection greatly complicates combat operations and/or local infrastructure is inept or unprepared to deal with chemical events, a simple chemical additive (even a benign additive if the defenders momentarily believe it to be a chemical additive) can be a significant force multiplier - directly against combat formations and indirectly against domestic public opinion... more

Informationalization in Chinese military doctrine affects foreign commercial and military assets

5/31/2007

 

Informationalization, the computerization of business, industry, and military, has entered Chinese military thinking in earnest, affecting both foreign commercial and military assets. US and EU commercial assets have already suffered serious predation from Chinese military assets and Chinese commercial assets operating under military direction.

In the absence of a US counter-cyber warfare strategy, Chinese IT technologists enter all but the most secure US systems, exceeding the limits of passive examination and surveillance. Naval Network Warfare Command (Netwarcom) and others observe... more

Prediction: the Cisco-Huawei IP debacle repeated itself with Denso, and likely for the same reasons

6/2/2007

 

In briefings three years ago to some of the largest tier one automotive suppliers, we forecast that Toyota/Denso would be the wholesale Automotive OEM target for IP theft as it was one of the few (the only significant) OEM that retained the capacity to design and manufacture everything that they purchased. (All other OEMs were in the process of surrendering their production technology via joint ventures so the only items worthy of hostile collection were their vehicle designs, preferably the mathdata CAD files thereof.) Another forecast was that any Toyota/Denso JV with a Chinese entity would be an IP siphon to the Chinese. The first forecast has now come true, and is likely only the beginning of the loss. The second is undoubtedly in progress.

In March Kyodo News reported that a Chinese engineer, Yang Luchuan, 41, at Denso's facility in Kariya, Aichi Prefecture, was suspected of "embezzling [Dowjones prefers "stealing"] information on about 1,700 types of products, including sensors and industrial robots [of which] about 280 types were considered top secret by the company."... more

The Mu shu pork Index for predicting Chinese propagation of inflation

6/12/2007

 

If you manufacture product in China as part of your global supply chain or purchase Chinese products for inclusion into your manufacturing or processing efforts, you should pay attention to what we are calling the Mu Shu Pork Index in the spirit of the Economist's Big Mac Index (1986) and Starbucks Tall Latte Index (2004). But whereas the Big Mac and Starbucks Indices are based on the theory of purchasing-power parity (PPP) that argues that exchange rates will, over time, equalize the price of identical baskets of goods and services in any two countries, our Mu shu Index will define a basket of effects that will flush rising costs and inflation through the Chinese economy and out into the global supply chain that absorbs Chinese product... more

A China facet: Defective materials and products driven by greed and ineptitude

9/13/2007

 

Our clients are familiar with our longstanding forecast of Chinese 'thrifting' in materials, coatings and platings, more so when they occur on interior surfaces, on in internal components, where testing is more difficult. Such thrifting occurs frequently in Chinese supply chains, often evidenced by multiple, substandard parts from different suppliers in the same subassembly.

This thrifting is matched by an aggressive IP theft/harvesting by the Chinese as these same materials areas are key to significant cost and structural improvements in sectors such as autos and elsewhere. Often the US/EU supplier possessing these skills is a tier two or three almost completely unaware of the attack. This bifurcation is understandable as the thrifting and the thefts are being executed by different entities with different goals in the greater Chinese supply chain. No one ever said that China was not a land of contrasts. Unrecognized by many, the risk has been there... more

Trends point towards Mexico's destabilization

9/25/2007

 

How will you deal with the assassination of Calderon?: A working example of all-source risk analysis was my quickly assembled presentation when asked to step in and address the monthly meeting of the regional NAPM (National Association of Purchasing Managers) chapter this September.

I chose the title purposefully even though I might be accused of "profiting on assassinations and other terrorist acts" as was DARPA's Policy Analysis Market (PAM) futures market which actually was a superb idea designed to trade in, and gather knowledge of, "things that the US and incidentally the target country would be deeply interested in."

As an all-source risk analyst, I know that supply chain analysis must extend beyond mere commercial aspects, that while commercial calculations are an essential first step in risk evaluation, they are necessary but not sufficient to define total chain risk. Intellectual Property (IP), IT, criminal, terrorist, cyberterrorist and environmental issues - and their interactions - must be included... more

Confluence of thinking on Chinese outsourcing and supply chain risks from DSB and USCC
11/17/2007

 

Rather than selling US securities, consider China restricting microchip supplies to the west at a critical junction (which would hit Taiwan, the current global producer of electronic componentry). This is no more implausible than Russia restricting energy flows to the Ukraine which despite the repercussions remains a viable distress option. (Think of combining securities with chips.)

Consider a foreign nation-state or its proxy embedding malicious code somewhere in a software developer's global outsourcing tier. (If bugs get in, certainly purpose-crafted malicious code can get in.) The state actor can be camouflaged by the nationality and location of its proxy. Think of the implications of the Defense Department "inadvertently outsourcing the manufacturing of key weapons and military equipment to factories in China."... more 

The triple canopy of infection, birds over cats over pigs cascading feces, urine and DNA, returns

12/12/2007

 

I've appropriated the tropical term triple canopy forest (also here) to describe the triple canopy of infection prevalent in China and Asia, birds over cats over pigs cascading feces, urine and DNA to a new 'forest floor' on traditional wet markets (photo, video) where recombination can work wonders in proximity to man. Similar cage stacking of wild and domesticated animals was widely seen in the SARS epidemic:

SARS, or severe acute respiratory syndrome, first appeared in China in 2002. It spread widely in early 2003 to infect at least 8,098 people in 26 countries, according to the World Health Organization. The disease died out later in 2003, and no cases have been reported since.

A refresher on SARS, including its timeline... more

In-the-wild attacks against electrical utilities coupled with extortion demands: implications for response to criminal and terrorist action
1/20/2008

 

CIA announced what appears to be the first, documented in-the-wild successful SCADA (Supervisory Control and Data Acquisition) attack against utilities infrastructure. Surely more to follow but with the agency making the announcement, it appears to be a concrete example unlike the staged attack against a captive diesel powered generator (video, text, more text):

US Central Intelligence Agency senior analyst Tom Donahue told a gathering of 300 US, UK, Swedish, and Dutch government officials and engineers and security managers from electric, water, oil & gas and other critical industry asset owners from all across North America, that "We have information, from multiple regions outside the United States, of cyber intrusions into utilities, followed by extortion demands. We suspect, but cannot confirm, that some of these attackers had the benefit of inside knowledge. We have information that cyber attacks have been used to disrupt power equipment in several regions outside the United States. In at least one case, the disruption caused a power outage affecting multiple cities. We do not know who executed these attacks or why, but all involved intrusions through the Internet."

Said to be "virulently allergic to hyperbole," Donahue would not have made a public announcement, nor would the agency have granted permission, "if he didn't think the threat was very large and that companies needed to fix things right now."... more

Themes and variations in Chinese and Indian Intellectual Property protection
2/1/2008

 

Protecting your Intellectual Property in China and India was produced in response to GlobalAutoIndustry's request to contrast issues in Chinese and Indian Intellectual Property protection as part of China and India: Decreasing Costs Across Global Operations, a look at factors, advantages and concerns in Low Cost Country Sourcing (LCCS) to these automotive and component manufacturing areas.

Readers can treat China and India as the 'low cost is not low risk' abstract to separate presentations devoted to each country... more

Submarine fiber optic cable breaks: a study in hysteria and ignorance against analysis

2/10/2008

 

The global submarine fiber optic network almost perfectly mimics the global electricity grid in its inability to mount any reasonable defense against attack. (I say 'almost' as the fiber optic industry is far less aware of its being a target than is the electricity grid.)

Here is Richard Clarke in 2000 speaking of cyberwar as "a threat that US government cannot defend solely by federal means"... more

Supply chain blowback of cocaine production hopping the Andes to Argentina and Uruguay

2/24/2008

 

In attempting to study the unintended blowback of forcing cocaine production to move from Andean states to Argentina and Uruguay, it is not new news that:

  1. Cocaine production shifted to Argentina and Uruguay because of an ill-thought-out restriction of precursor chemicals entering Bolivia which drove starved cocaine production east where the precursors were cheap and easily available - and actually improved shipping costs to Europe.
  2. Byproducts of cocaine production had long ago ravaged the poor of Bolivia who could not afford the higher order product, cocaine.
  3. The byproducts of this migrated production has been ravaging the poor of Argentina and Uruguay for five years.

The news value of this note is occasioned more by the intersection of... more

Semi-autonomous "killer robots" are already within reach of asymmetrical attackers
2/28/2008

 

As part of my work revolves about inverting toys, technical gadgets, and industrial "found objects" into asymmetrical weapons, I was attracted to Noel Sharkey's presentation at RUSI's The Ethics of Autonomous Military Systems as well as his earlier efforts in venues such as Robot Wars and Techno Games. I have come to see Sharkey inhabiting the intersection of engineering, the application of engineering and ethics of application... more

 

Asymmetrical air force opportunities in interstate and intrastate conflict

3/3/2008

 

This asymmetrical air force series rose from a recognition of the operational similarities between the Air Tigers of the Liberation Tigers of Tamil Eelam (LTTE) against the Sri Lankan government and the Biafra Babies of the secessionist Biafran Air Force against the Nigerian government, forty years earlier. Apart from the "convergent evolution" of their operational profiles, there were also important differences in sourcing aircraft, pilots, ordnance and maintenance, not to mention understanding the value of going offensive against a superior power in an audacious, headline-grabbing manner.

The exercise to optimize the best characteristics of these asymmetrical attackers while reducing the retaliatory effect of the superior power leads quickly to Unmanned Aerial Vehicles (UAVs) operating in place of, or along side, manned aircraft... more 

Intellectual Property (IP) risks in Brazil and Mexico

4/14/2008

 

Protecting your Intellectual Property in Mexico, Brazil and China was a recent presentation done in response to a request to compare IP risks in key Western Hemisphere states with those in China. As it is difficult to address three such diverse regions in a short presentation, readers are recommended to also look at:

The Brazilian IP risk is new to the list as it contains:

  • Unique Brazilian characteristics
  • Brazil as a mixed threat environment
  • Condition of ungoverned areas, ill-equipped lawenforcement agencies and militaries
  • Endemic IP abuse environment
  • Moderate anti-IP intellectual environment
  • Pressure to remain preferred Southern Cone regional automobile supplier
  • Brazil as part of China's mercantile strategy
  • Brazil's attractive IP targets... more

Foreign vulnerability inherent in US globalization of its commercial and defense supply chains
5/6/2008

 

The US and, and to a lesser degree, Europe have lost control of their defense and commercial industrial supply chains. Exporting capability rather than capacity, the US has increasingly retained only a top tier or integrator role while exporting its tier 2-tier n base. Worse, the US cannot realistically define discrete and net risk as the chains are too opaque for identification and there is decreasing ability to direct sourcing to less risky tiers.

The loss has not come without warning, especially in the seminal analyses of the mid-1980s to early 90s (much of which is cited here) and near-disaster supply chain bottlenecks that nearly sidelined front line equipment during Desert Storm (1990-91).

Having surveyed four decades of research on globalization impacts, we can state that there are virtually no metrics in open source. There are drivers and characteristics but there are no actionable metrics of sufficient robustness to pass the test of falsifiability. At a macro level we are secure that we and some others have the compass right, but actionable information about a specific chain condition and greatest risk at component at tier in the chain is fuzzy at best. Given our supply chain analytic experience, we can see the tracks of bland assumptions without the understanding of how supply networks actually work. Defense and commercial sides of the house share the same problem - insufficient granularity of analysis which if they get there they find that they do not have accurate and timely data. At this point the commercial side generally gives up. The defense side can't so spends much time... more

 

FBI Cisco counterfeit investigation is live fire demonstration of failed supply chain oversight

5/15/2008

 

The recent bureau investigation outlined in FBI Criminal Investigation: Cisco Routers of counterfeit Cisco routers, switches, interface converters (GBIC), and WAN interface cards (WIC) is a long overdue spotlight on the failure to properly manage and assess critical supply chains. Two themes stand out:

  1. Validation of insufficient supply chain analysis at tier: From a supply chain analysis standpoint, the problem is worse that the FBI notes. If the tier 0 is the OEM or top level consumer as it is in the manufacturing sector, then the malicious entry is coming in at tier 4, not tier 3, as the “GSA IT Vendor” is the tier 1. The ‘tier 3’ to the tier 1 is thus a tier 4 to the OEM/top tier consumer and thus well below superficial oversight limits. Alternately, federal purchasing guidelines were so loose that malicious equipment could be effectively sanitized at tier 2 as noted in the eBay and federal credit card procurement paths. As noted in Foreign vulnerability inherent in US globalization of its commercial and defense supply chains, the lack of effective means and metrics had led to complacency and ignorance.
  2. Probably PLA participation at overt/covert subsidiary: From a motivation standpoint, this analyst believes that the question of “For profit or state sponsored?” is not an ‘or’ but an ‘and,’ i.e., both motives are cooperating within the People's Liberation Army (PLA) and have been for well over a decade... more

Israel was planting malicious chips in US assets before China
5/20/2008

 

Reporting on the FBI investigation of Chinese counterfeit, some possibly malicious, electronics has made no mention that Israel had embedded malicious chips in nothing less than the White House phone system by 2000. Outside of members of the intelligence community and attentive technical readers of the period, this will come as a surprise, possibly coupled with the erroneous assumption of anti-Israeli bias, to many readers.

 

Nothing in open source then or since has convinced me that the US telecommunications network is either secure or immune to further interruption or breach. Whereas SCADA control networks, primarily for power grid generation, transmission and distribution applications (genco, transco, disco), and recently fiber optic networks have been identified as vulnerable to attack, little has been made publicly of telco vulnerability until the China Cisco counterfeits. The vulnerability of the US/EU telco network to a variety of state and nonstate actors is so great that it should be ranked adjacent to the vulnerabilities of our SCADA networks, for all applications, and fiber optic networks... more

 

Realistic Intellectual Property (IP) Protection in China, Updated: 26 Jun, 2008

7/4/2008

 

Realistic IP Protection in China, 26 Jun, 2008, is the latest in our series on Intellectual Property (IP) threat and remediation given at the GlobalAutoIndusty (GAI) conference on 26 June.

In preparation of this particular conference, GAI asked for "What you will learn" bullet points to include in their trade press. My immediate response was this set of six key takeaways:

  1. Define IP and its loss
  2. Redefine the nature of IP loss into a workable global framework
  3. Understand the nature of supply chain "risk at any tier" as opposed to "risky countries"
  4. Learn the common "solutions" that do not work, that actually leave the user more vulnerable
  5. Overview an approach that does work, drawn from counterintelligence practice
  6. Know that most of your advisory firms are less skilled in IP protection than you are... more

Collapsing US supply chains preclude independent US action
10/7/2008

 

Collapsing US supply chains preclude independent US action: The intersection of loss of supply chain control and emerging, reemerging threats is a recent presentation outlining the hollowing out of US and EU supply chains and the vulnerabilities that ensue. Current reality is defined as:

  • The People's Republic of China can prevent the US from commencing or maintaining the ops tempo of a future Desert Storm or Operation Iraqi Freedom.
  • If the PRC is the adversary, it can preclude our ability to conclude combat operations.
  • PRC has the ability to induce trap-doors into HW and embedded SW assemblies.

Hollowing of the supply base nationally has mimicked effects in the automotive sector between OEMs and their tier base: 

  • US and Europe have lost control of their defense and commercial industrial supply chains.
  • Exporting capability rather than capacity, the US has increasingly retained only a top tier or integrator role while exporting its tier 2-tier n base.
  • US cannot realistically define discrete and net risk as supply chains are too opaque for identification.
  • Decreasing ability to direct sourcing to less risky tiers.
  • Loss has not come without warning... more

Intellectual Property and Investment Risk in Russia
10/30/2008

 

Individuals and firms that are used to a US or EU business and legal assumptions are at a great disadvantage in the Russian Federation. It it still difficult to listen to skilled attorneys describe an "effective compliance program" for a US and Russian relationship but the reality is that the compliance program is for the US Sarbanes Oxley, SEC, FCPA side of the relationship.

 

The Institute of Corporate Law and Corporate Governance (ICLG) is correct to say that "no due attention is paid to corporate governance risks" and that the "fundamental problem in the area of corporate governance in Russia is the fact that company insiders (managers and controlling shareholders) abuse their position to the detriment of minority shareholders, including expropriation of assets" through transfer pricing, asset stripping, capital dilution, restructuring/mergers, and lack of transparency.

 

We would add brazen cash stripping to that list but it still understates the Russian condition as things are much more fluid and opaque on the Russian side. A European colleague schooled in Russia and skilled in dealing with Russians advised thusly... more

 

US auto sector must immediately perform a critical path supply chain risk review

11/17/2008

 

US automakers must immediately perform a critical path supply chain risk review of what interrupts first, why, and how can the effects be attenuated. To not do so - for auto OEMs and individual suppliers - is grounds for fiduciary breach. Arguments, often uninformed, over the merits of bailout versus bankruptcy, obscure this need for a supply chain risk review that becomes an operating document. The contingency analyses of such a review will be needed regardless of which path all or some of the OEMs embark...

 

Automotive OEMs and their suppliers form a tightly woven industrial supply network in which many suppliers provide parts to multiple OEMs. The failure of one OEM - and even a few large Tier One suppliers - will have a cascading effect on the network that will take out the suppliers that service other OEMs, furthere accellerating the industry’s decline. This unraveling will affect both commercial and defense capacity... more

Ejecting executive automotive management may or may not help; energizing the usually inert and risk averse middle management can

12/8/2008

 

The calls for GM's Wagoner and others to resign are akin to the murmurs in the Coliseum for more Christians to be fed to lions. Satisfying spectacle perhaps, but in my experience, it induces lockdown in the already risk averse junior and middle management whose credo becomes one of hoping to be the last inept to be discovered and removed. As far as I can ascertain, the focus is on a few individuals and not the corporation.

 

Were I to fault Wagoner, it would be for three reasons... more

 

Gordon Housworth

 



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Ejecting executive automotive management may or may not help; energizing the usually inert and risk averse middle management can

  #

 

Part 1: US auto sector must immediately perform a critical path supply chain risk review

 

The calls for GM's Wagoner and others to resign are akin to the murmurs in the Coliseum for more Christians to be fed to lions. Satisfying spectacle perhaps, but in my experience, it induces lockdown in the already risk averse junior and middle management whose credo becomes one of hoping to be the last inept to be discovered and removed. As far as I can ascertain, the focus is on a few individuals and not the corporation.

 

Were I to fault Wagoner, it would be for three reasons:

  1. First in arrogance during the first trip to congress on 18 November. Yes, there was ample tone deafness from all the Detroit Three, but Wagoner's testimony and demeanor unfortunately became the lighting rod of animas against the domestic auto industry. That misstep alone may be enough to require his removal: "What exposes us to failure now is not our product lineup, is not our business plan, is not our employees and their willingness to work hard, is not our long-term strategy. What exposes us to failure now is the global financial crisis, which has severely restricted credit availability and reduced industry sales to the lowest per-capita level since World War II."
  2. Failure to more quickly redress an increasingly losing struggle by engineering against the increasingly winning efforts of finance to secure profit at the expense of innovation. Worse, when innovative programs such as the EV1 and the Saturn did secure initial backing and funding, they were later starved and fell behind. (One of the seven core members of Saturn told me that they escaped much of the control common at GM as the expectation was that they would fail and so most did not want to associate with them. (Saturn's success was apparently a surprise to many in the company.) Conversely, he noted that many in the company were all too glad to attach cost to the Saturn project under the guise of achieving the operational changes needed to 'support' Saturn.
  3. Failure to more quickly streamline GM’s too many brands (now some seventy models across eight brands) in the face of excess capacity, falling demand and changing tastes.

Yes, GM and the Detroit Three have made significant strides, many of which are unknown or overlooked by their critics. Yes, the new Chevrolet Malibu is a remarkable family sedan, all the more so in that it targeted the market leading Toyota Camry and Honda Accord on cost, features and quality. The distress of analysts like myself is that GM could have easily done the Bu a decade earlier. No new technology emerged in order to build it; the new Bu was a long overdue matter of will, focus and good process.

 

I have had long time GM employees tell me that hybrids, for example, had long been around GM design but that a cost decision kept them off the market. In contrast, Toyota made a marketing decision to launch hybrids even as they negated the environmental value of the cars by employing larger engines to achieve customer-satisfactory acceleration. (Also here.) Toyota buyers failed to notice this exquisite bit of bait and switch.

 

GM retirees and insiders have flagged Alex Taylor’s GM: Death of an American dream to me as a sympathetic but critically accurate picture of GM’s decline: 

Ford executives tend to be scrappers skilled at bare-knuckle office politics, while the top brass at Chrysler traffic in bravado and charisma. Not at GM. Guys like Wagoner set the tone: smart, sincere, diligent - modern-day Eagle Scouts.

 

But in working for the largest company in the industry for so long, they became comfortable, insular, self-referential, and too wedded to the status quo - traits that persist even now, when GM is on the precipice. They prefer stability over conflict, continuity over disorder, and GM's way over anybody else's. They believe that hard work will overcome adversity, and that tomorrow will be better than today - despite four decades of evidence to the contrary.

 

In many ways the story of General Motors since the 1960s is a tale of accelerating irrelevance. Customer preferences changed, competition tightened, technology made big leaps, and GM was always driving a lap behind. It became a red-state company, its Buicks and Pontiacs seldom seen in California or New York City. GM has been losing market share in the U.S. since the 1960s, destroying capital for years, and returning no share price appreciation to investors...

 

Wagoner's biggest flaw may be that he has been too forgiving. Here is a company that has lost more than $72 billion in the past four years, and yet you can count on one hand the number of executives who have been reassigned or lost their job. After spending $1 billion to shut down Oldsmobile, Wagoner has allowed GM's other weak divisions to live on despite their fading resonance in the marketplace. (A competitor says Wagoner is "too fundamentally decent" to cut off dealerships and put their employees on the street. GM says closing divisions isn't cost-effective.)

It was not the financial crisis that nicked GM; Taylor cites Carol Loomis’ 2006 The Tragedy of General Motors that already saw GM facing bankruptcy. It was the slowness in reversing too little innovation, too much capacity and too many vehicles across too many badges. Wagoner is not, as they say, a "car guy". Yes, he (re)hired Bob Lutz, and for that GM owes Wagoner a great favor, but there remains a disproportionate number of finance as opposed to design and engineering resumes at GM.

 

When longtime GM employees describe the parallel accounting organization that shadowed every operating unit, I remark that it sounds remarkably similar to the Soviet political commissars and political officers (also here) assigned to oversee and, in certain conditions, countermand military orders. In each case, I find wide agreement. Innovation and prudent risk taking have suffered in GM’s quest for profits.

 

This note is a companion piece to US auto sector must immediately perform a critical path supply chain risk review. Its purpose is to describe what I have seen as a significance resistance to change below executive level and what I would prescribe as criteria for reversing it.

 

Driving everyone with the same whip

 

Bureaucracies absorb change. They suffocate change. They perpetuate themselves at the expense of the companies that house them. Achievement of divisional and functional metrics accentuates the problem; I have seen managers knowingly make the 'wrong' decision for their companies solely because a poorly or inappropriately defined metric benefits them. As I like to say, money moderates behavior.

 

Performance and reward metrics work best when everyone shares the same metrics; in other words, everyone sees the problem in similar terms and gains a similar reward for the performance of the entire group and not their respective unit. HP chose the inclusive metric by tying each individual’s bonus to the performance of the entire firm. Such a wide metric reduces competition and withholding. Motorola at one time allowed - and may still allow - employees to pass on the fit and competence of a prospective employee. Properly formed key performance indicators (KPIs) (also here) comprised of leading indicators prompt good behavior and early detection and preemption of problems.

 

I would meld these approaches with a key modification: all fixed salaries change to base plus performance, much like the compensation for most sales forces. Yes, the risk averse would leave but there are many that would leap at the chance to join. Everyone in the firm tracks to the same metrics, assuming the same risks. Congress can mandate these and other criteria in exchange for loan guarantees.

 

I would further mandate that before congress specifies any silly or unworkable metrics on the automotive OEMs that all members, no exceptions, pass through two of W. Edwards Deming’s tests: Red Bead Experiment and Funnel Experiment:

  • The Red Bead Experiment shows all participants that managers can often tamper rather than manage their processes when they act without understanding the systems under their control. Managers see that they may make silly demands, even damaging demands, of the people in their organizations. "In less than an hour, the demonstration exposes people to some high-level concepts... It allows an environment for examining how we use data, common ways it’s misused and the pitfalls of those processes." Graduates of the Red Bean learn such insights as:
    • Typical illustration of bad management, e.g., too many employees, inspectors involved, rigid procedures bar worker suggestions for improvement.
    • System variation is found to be present in any process, operation or activity.
    • Knowledge of one source of system variation does not determine the total effect of system variation.
    • Workers perform in a system beyond their control.
    • Some workers, through no fault of their own, will be above the average while others will be below the average.
    • Workers' positions in the ranking will likely vary.
    • Workers shouldn’t be ranked as what is being measured is a "ranking of the effect of the system on the workers."
    • Only management can change the system.
  • The Funnel Experiment shows the damage that tampering can do to a process; it demonstrates that a process in control delivers maximum results if left alone. 'Adjusting' a controlled process always has the undesirable result of increased process variability. Online simulator of the Funnel Experiment here.

Immediately after congress comes automotive executive management who must take the tests and then teach them to their subordinates. One rarely manages the same way again after the red bead and the funnel.

 

Following are two examples of institutional drag that were never overcome:

 

Inability to overcome the one trick pony addiction to trucks and SUVs

 

All the Detroit Three suffer from this affliction; this is one example: By 1998, we had observed that much of the usable vehicle benchmarking data at Ford was in the hands of senior management or limited engineering groups. The working vehicle program engineer did not have a comparative benchmarking process for current model and forward model programs that captured best features, design, packaging and costing of Ford and competing vehicles. Extrapolating processes we had earlier done for Japanese badges, in early 1999 we proposed a process that sequentially dismantled and analyzed Ford and competitor vehicles by subsystem, seeking applicable costs savings without impacting functionality, quality and robustness. The pilot was set up at arm’s length so that in the event of failure only we and the participating plant would be held accountable.

 

Proving highly successful, the process was formally rolled out in both North America and Europe as the Competitive Analysis Benchmarking (CAB) process. Originally estimated to have an 18-24 month usable lifespan, the CAB process was used for more than six years until diminishing returns undermined the process. (The second half of the CAB process, the gap analysis and feature projection based on competitors’ development directions, was never implemented.) In response to the May 22, Ford's trouble: $4 gas is here to stay, I commented to colleagues:

Our question posed to many CPEs (chief program engineers) at Ford regarding the salability of large frame SUVs and trucks has come to pass: We had designed a process called Competitive Analysis Benchmarking (CAB) to put current full vehicle benchmarking data into the hands of working engineers on forward (future) models. Ford SUVs were using truck frames, in fact, both SUVs and trucks were decked (body mated to chassis) on the same assembly line. Customers were buying for the capacity, the elevated "command seat" visibility, presumed safety, and other features, even as they were beginning to complain of "truck-like steering" as they asked for passcar (passenger car) handling. (Frame-based SUVs and trucks can be "tricked-out" with suspension componentry to improve handling but at the offset of increased cost and weight and diminished gas mileage.)

 

Frequent CAB events, each involving many current competitor vehicles, were, however, began to show foreign badges incorporating SUV designs into passenger car suspension and chassis elements, i.e., producing an "SUV with car handling," better on-road performance (despite the ads, these vehicles "only went off-road when they missed the driveway"), and better mileage. As the CPE was the ultimate client of each CAB event, we took each opportunity to mention this to each CPE, recommending that Ford shift to a similar design. Each time, the CPE would explain to us the cost and lead-time required and that it was too costly to Ford. Each time, our reply was the same, "How costly will it be when you can’t sell these anymore." [email distribution]

Sisyphian exercise to overcome inertia, conflicting measureable metrics, and turf protection 

 

We were invited to attend Business Leadership Initiative (BLI) meetings for a number of Ford forward model programs in 2000. One, for what became the Ford Freestyle Crossover SUV (D219) and the Ford Five Hundred sedan (D258), gave us hope that Ford was moving beyond its one trick pony luck with trucks and SUVs. In retrospect, it demonstrated how difficult it is to affect change within large organizations.

 

Having facilitated Hoshin Kanri (Policy Deployment) (also here) interventions to create actionable corporate mission statements such that each management and operational tier knows how to make the statement actionable in their area of responsibility, measure results and apply correction, we know how hard it is to execute this class of change. Too often, the most critical message one learns from such efforts is, "The more an organization has been washed over by successive managerial 'isms,' the only 'ism' that sticks is cynicism.":

There was straightforward conversation to mixed Ford and Supplier management regarding Morgan Stanley Dean Witter (MSDW) speech by Auto analyst Steve Girsky, a few weeks ago - and whose comments knocked down the stocks of the Big Three - 'This is as good as it gets. From now on it will be more difficult for all three OEMs. Ford is making no serious effort in cars, Europe and South America. The US is a one-legged stool of North American trucks and SUVs.' They continued with the responses from Noel Tichy's BLI awareness for the International Supplier Advisory Council (some 15 supplier CEOs): 

  • Alignment and relationships are essential to success
  • Ford is worse than Chrysler in terms of teaming and relationships between OEM and supplier [Chrysler was then basking in the glow of Tom Stallkamp’s Extended Enterprise, since declined]
  • Ford is worse than Toyota in terms of program execution
  • Ford is "maybe, maybe, better" than GM - and this really hurt
  • Ford is not their #1 or #2 customer in terms of interface and relationships - thus we don't get first choice, best people, or new ideas
  • They agreed that there is a Definitive Competitive Advantage in our supplier relationships.

Mike O’Sullivan said that 'We must have this to survive.' He went on to reinforce the same message that I see coming out of Saab, Vauxhall, Rover, etc., regarding the halving of the [Tier One] ranks in the supply chain. Mike added, 'It used to be that when the OEM caught cold, the supplier caught pneumonia. Today, if either of us catches cold, both suffer an infectious disease.'

 

If the 60s were Safety, the 70s were Fuel Economy, the 80s were Quality, then the 90s may go down as Affordability. The OEM that wins will have the best Affordability. Having seen the targets for these programs, this affordability is tough love for many supplier folks, but it is long overdue. Remember that great line - The only people that don't think cars cost too much are those people that make them.

 

They spoke of joint design/total cost teams where even if suppliers build supplier owned tooling, that Ford had an obligation to help them become efficient, and that serious attention must be paid to extending this effect to T2s. Is this really the early stirrings of an Extended Enterprise... [It was not to be.]

 

[It was refreshing to hear] the CPE, Trevor Rudderham, discuss Program Attribute Targets, and 'Who is the Taurus customer?' by noting that we turned a corner by training senior management and senior program management to ask, "What would Kathy and Lewis want in their Taurus?" and not, "What do we want?" If this company can break the habit of Voice of Engineering replacing Voice of Customer, it will be a banner day for Ford and its customers.

 

I head the whole Happy Land discussion (from Larry Sullivan's analysis of characteristics of successful and unsuccessful firms) tracking average revenue growth and return on sales: The only Ford vehicles that fall into Happy Land quartile are trucks and SUVs. The only marginally profitable car line, although not in that quartile, is the Panther CV/GM. Most of Ford's vehicles cluster in the worst quartile.

 

I loved [Jacques Nasser's] film clip in which he says that, We are earning a failing grade in terms of almost any criteria. Failing in terms of resource allocation, in terms of creativity, in knowing the market and our customer, and in knowing the capital market. We are spending 9 billion dollars to feed sick cats and we work like dogs when we do it. We have an incredible attachment to "bad business." ... I could have waited beyond the first few months of assuming my current position, but I moved against lines that were hemorrhaging money. The capital market said, "About time!" The customers couldn't care less - those vehicles had low customer satisfaction to begin with (such as Thunderbird, Cougar, Mark VIII). Dealers said, "We were losing money, too." Suppliers didn't like slow-moving lines that shut down and started up (intermittent).

Business Week's cover story showed little improvement to Ford a year on. Girsky painted a demanding picture of the Big Three in November 2003 that was largely unchanged a year later. Some snippets from 2003:

Auto Outlook: It’s not how many cars you sell, it’s how much money you make

  • Global Dilemma: Most participants spending for growth yet the industry does not grow.
  • North America; Economic & Demographic factors suggest auto sales may be bottoming, but the recovery is likely to be modest.
  • Big Three profit recovery is likely to lag

Excess Capacity at 25%-30% or 20mm units

Conclusion: Zero Sum Game

  • Slow growth and excess capacity suggest deflation/revenue pressures likely to continue.
  • Everybody can’t be a winner.
  • Winners will be low cost producers who deliver a good product that consumers are willing to pay for.

Price Reductions Pressure Manufacturers

  • Every 1% Decline in Prices is Worth
    • $1.0bn at GM
    • $850mm at Ford
    • $550mm at DCX 

Excess Capacity & More Is On The Way

Every 1% Pt. of Market Share Translates into $1.0bn in Profits

1.1mm Units of Added Capacity is 6.3% of NA Capacity, or $6bn in Pretax Profits

 

The Big Three

Each Company Faces Unique Challenges

Foreign OEMs are likely to continue to add capacity in NA. Imports are likely to rise.

On the bright side, the Big Three product is the best its ever been.

 

Supplier Update

  • Supplier stocks have rallied YTD despite:
    • Lower volume
    • Challenging pricing environment
    • Lower margins
  • Investors have focused on the prospects for an economic recovery in 2004.
  • While the economy is likely to recover, suppliers face several challenges including:
    • Tough pricing
    • Declining operating margins
    • Declining ROIC
    • Higher spending to support current/new business
    • Threat of competition from emerging markets.

Girsky's 2004 presentation adds (both are worth reading):

  • Detroit Three dogged by revenue disadvantage in Actual vs. Perceived Quality by Brand
  • Detroit Three market share slides continue
  • Ford remains a "one product company"
  • Toyota’s Asset Turns vs. Operating Margin are stunning in comparison to GM, Ford and DCX.

The bibliography of this note contains ample evidence of slow action or insufficient action in the face of competitive pressure by all of the Detroit Three. Problems described two decades remain with the industry today. I maintain that economic crisis did not get the Detroit Three; it merely caught them in the middle of a very slow turn.

 

[Revised 14 December, 2008]

 

G.M.'s Lutz: Wagoner Is Being Made a 'Sacrificial Lamb'

From Micheline Maynard, a DealBook colleague

Deal Book

December 8, 2008, 11:32 am

 

Dodd Says GM Chief Should Step Down

By Lori Montgomery

Washington Post

December 7, 2008; 2:50 PM

 

At G.M., Innovation Sacrificed to Profits

By MICHELINE MAYNARD

New York Times

December 6, 2008

 

Democrats Set to Offer Loans for Carmakers

By DAVID M. HERSZENHORN and BILL VLASIC

New York Times

December 6, 2008

 

Chrysler's Friends in High Places

By LOUISE STORY

New York Times

December 6, 2008

 

7 myths about Detroit automakers

BY MARK PHELAN

Detroit Free Press

December 5, 2008

 

Get Back in Your Jets and Go Away

by Rich Galen

Townhall.com

December 05, 2008

 

Big 3 car executives agree to take orders from Washington

Senators skeptical but open to $34 billion auto bailout

By Rex Nutting

MarketWatch

Last update: 3:37 p.m. EST Dec. 4, 2008

 

U.A.W. To Modify Contracts in Bid to Help Detroit

By BILL VLASIC

New York Times

December 4, 2008

 

Pursuing U.S. Aid, G.M. Accepts Need for Drastic Cuts

By BILL VLASIC and DAVID M. HERSZENHORN

New York Times

December 3, 2008

 

Lead Director Pins G.M.’s Hopes on Federal Rescue

By BILL VLASIC

New York Times

December 3, 2008

 

GM: Death of an American dream

General Motors was the Great American Company. But by clinging to the attributes that made it an icon, GM drove itself to ruin.

By Alex Taylor III, senior editor

Fortune

VOL. 158, NO. 11 - December 08, 2008

Last Updated: November 25, 2008: 4:32 PM ET

 

Big 3 plead for aid, get no traction

By Jim Puzzanghera and Richard Simon

LA Times

November 19, 2008

 

Text: GM CEO's prepared remarks to Congress

Detroit News

November 18, 2008

 

An Open Letter to Thomas L. Friedman

Steven J. Harris

GM Vice President, Global Communications

GM FastLane Blog

November 18, 2008

 

UAW forms an army to get its piece of GM merger

by Douglas McIntyre

BloggingStocks

Posted Nov 3, 2008 8:30AM

 

Debt Rattle, November 3 2008: Y O'Bama

The Automatic Earth/Silobreaker

11/03/2008

 

PE exec to help UAW on potential GM/Chrysler deal: source

By Megan Davies

Reuters

Mon Nov 3, 2008 4:52am EST

 

Hoshin Kanri

The Strategic Approach to Continuous Improvement

Chapter 1

David Hutchins

Gower

ISBN 978-0-566-08740-0

September 2008

 

Ford's trouble: $4 gas is here to stay

Gas prices are causing consumers to shun pickups and SUVs, leading to losses at the car maker's North American auto unit.

By Chris Isidore

CNNMoney.com

First Published: May 22, 2008: 9:49 AM EDT

Last Updated: May 22, 2008: 2:23 PM EDT

 

Comparison Test: 2008 Four-Cylinder Family Sedans

Revitalized Malibu Takes on Accord and Camry

By Erin Riches, Senior Editor

Edmunds

Date posted: 01-01-2008

 

New 2008 Toyota Camry Hybrid Performance Review

US News Rankings & Reviews

 

Chrysler Suicide Watch 14: Tom LaSorda: From Zero to Hero and Back

By Frank Williams

The Truth About Cars

May 8, 2007

 

The Tragedy of General Motors

The Detroit giant is a weird, scarred combination: a carmaker doing poorly, and an insurance company engulfed by its obligations. It's heading for a wreck -- which is why CEO Rick Wagoner has the toughest job in business.

By Carol Loomis

Fortune Magazine

February 6, 2006: 12:09 PM EST

From the February 20, 2006 issue

 

Hybrid Cars Burning Gas in the Drive for Power

By MATTHEW L. WALD

New York Times

Published: July 17, 2005

 

G.M.'s Brands to Cut Back on Variety

By DANNY HAKIM

New York Times

May 20, 2005

 

Tough Times at U.S. Makers of Auto Parts

"Unemployment prevails at U.S. Makers of Auto Parts."

December 28, 2004 (Press Release) -- By DANNY HAKIM and JEREMY W. PETERS

Published: December 24, 2004

 

Can GM Be Saved?

Stocks by Will Swarts

Smart Money

Published March 23, 2005

 

Review and Preview

Ted Wieseman/David Greenlaw (New York)

Morgan Stanley

Jan 10, 2005

 

Auto Parts & Auto Dealers: Follow the Food Chain

Presentation to the OESA

Stephen Girsky 914 225-4811

Morgan Stanley Autos Team

November 9, 2004

 

Changing Dynamics of the Automotive Industry

J.D. Power III

J.D. Power and Associates

AICPA National Auto Dealers Conference

Las Vegas, Nevada

October 22, 2004

 

Bill's Brand New Ford

It was panic stations at the start, but Bill Ford never doubted he had the right stuff to revive his great- granddaddy's car company. Now he has to prove that his controversial strategy will keep Ford in business for another 100 years.

By Alex Taylor III

FORTUNE Magazine

June 28, 2004

 

Is Ford Back in Top Gear? The stock price says yes. But the automaker still has a long way to go before it can regain its old strength

By Cybele Weisser

MONEY Magazine

March 1, 2004

 

Ford Automotive Strategy Conference

Original Equipment Suppliers Association

Stephen J. Girsky

November 2003

 

Noel M. Tichy: The Thought Leader Interview

By Randall Rothenberg

Strategy + Business

Spring 2003

 

The Chrysler Extended Enterprise System

Allpar.com

 

Is Wall Street Losing Its Clout?

Kevin Kelly

Ward's AutoWorld, Jan 1, 2002 12:00 PM

 

Ford: Why It's Worse Than You Think

Quality, morale, and market share are down. Can Jacques Nasser get this company out of reverse?

By Joann Muller

Business Week

JUNE 25, 2001

 

Grassroots Leadership - Ford Motor Co.

"We want people at all levels who will take risks and who can make decisions."

By: Keith H. Hammonds

Fast Company

Issue 33, March 2000

 

Building the Teaching Organization

by Noel Tichy, Ph.D. and Patricia Ricci

Innovative Leader Volume 8, Number 9

September 1999

 

Chrysler's "Extended Enterprise" Philosophy and Supplier Relations

Supplier Relationships Key to Computer Program Generation And Analysis (C.P.G.A.) Development, Reports Chrysler

Auto Channel

11 May 1998

 

Hoshin Kanri: Policy Deployment for Successful TQM

Yoji Akao, editor

Productivity Press

ISBN 0915299577

1991

 

Political commissar

Nation Master

Source: The Soviet Military Encyclopedia

 

Party Control in the Armed Forces

Soviet Union – a country study

Data as of May 1989

 

Gordon Housworth



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discussion

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US auto sector must immediately perform a critical path supply chain risk review

  #

 

US automakers must immediately perform a critical path supply chain risk review of what interrupts first, why, and how can the effects be attenuated. To not do so - for auto OEMs and individual suppliers - is grounds for fiduciary breach. Arguments, often uninformed, over the merits of bailout versus bankruptcy, obscure this need for a supply chain risk review that becomes an operating document. The contingency analyses of such a review will be needed regardless of which path all or some of the OEMs embark.

 

Failure to see systemic impacts of a networked, interdependent supply base

 

Automotive OEMs and their suppliers form a tightly woven industrial supply network in which many suppliers provide parts to multiple OEMs. The failure of one OEM - and even a few large Tier One suppliers - will have a cascading effect on the network that will take out the suppliers that service other OEMs, furthere accellerating the industry's decline. This unraveling will affect both commercial and defense capacity.

 

US suppliers are already verbalizing, albeit anonymously, that as GM takes three months to pay, parts shipped now may never be paid for. I have heard many things from suppliers but this anonymous voicing of refusing to ship parts under the rising certainty that they will not be paid is breathtaking. It is easy to see multiple supply chain breaches that halt production before GM runs out of cash or into Chapter 11 or all of the above.

 

While US suppliers largely operate without credit insurance, the credit insurers of Europe and Canada have acted:

Euler Hermes, Atradius or Coface, which control more than 80 per cent of the world's credit insurance market, are refusing to write policies for suppliers trading with GM or Ford on credit. GM and Ford are two of the biggest groups ever to be blacklisted. The cut-off of cover will primarily affect the companies' large operations in Europe, where the insurers do the bulk of their business...

 

The withdrawal of credit insurance - which covered suppliers against the risk of the car companies' failing - has previously hastened the demise of a string of European companies, with suppliers to retailers and construction companies finding cover increasingly hard to come by... Ford and GM will be two of the largest companies to have seen their coverage terminated this way. Euler Hermes has gradually reduced cover for suppliers trading with the two companies over the past three to six months... Without credit cover, suppliers can choose to trade uninsured, cease trading, or demand payment up front - none of them appealing scenarios...

The situation must be dire as the European insurers have "risk assessors working closely with the companies and are party to details not released to the market" and insurance cover withdrawal is a late stage event, "done because a company has stopped providing insurers with enough information to analyse their credit risk, or because their risk profile has deteriorated."

 

The problem in Europe is such that Opel has appealed to the German government for a 500 mil euro guarantee in the event that GM fails. Payment risk, it should be noted, also extends beyond automotive, e.g., Atradius reduced credit insurance for companies supplying some UK retailers. Canada has voted against the weakest of the US Big Three:

Export Development Canada is no longer taking requests from auto parts makers for insurance against receivables due from Chrysler LLC... EDC is owned by the government of Canada and backstops mainly small and medium-sized businesses by providing insurance covering up to 90 percent of losses if a customer refuses to pay. That includes when a customer goes bankrupt, declares insolvency, or cancels a contract... [For the moment, the] EDC said it's business as usual for suppliers wanting to insure receivables with Ford and GM...

Uninformed bailout comments obscures impact of auto sector on US economy

 

Uninformed comment on the virtue of a bailout obscures the fundamental contribution of the US auto industry to US infrastructure, employment, technology and R&D. Center for Automotive Research (CAR) recently addressed the impact of two contraction scenarios on US industry: 

  • 100 percent contraction in which the Detroit Three cease all US operations.
  • 50 percent contraction "in overall Detroit Three employment and production" of its US operations.

The 100 percent scenario assumes that Detroit Three and international makers production falls "to zero in the first year." CAR assumes, I think correctly, that US domestic production by international auto makers will be seriously affected by a Detroit Three contraction due to the high likelihood that many US suppliers supplying both domestic and international badges would become insolvent.

 

The 50 percent scenario assumes that "Detroit Three production and employment falls by 100 percent in the first year but recovers to 50 percent in the second and third years." CAR assumes that "surviving Detroit companies would restore production to 50 percent of the former combined level by the second year and maintain this level in the third year." CAR assumes that domestic production by the internationals will "fall about 50 percent in the first and second years [but] would recover fully by the third year."

 

Both scenarios marked contributions (losses) from direct, indirect and spin-off employment:

  • Direct employment: "fall in the number of people employed at the Detroit Three companies reduces the earnings of those employees and the tax revenues derived directly from their income and spending."
  • Indirect employment, AKA the "supplier effect": "changes in employment, compensation and tax revenues [resulting from] cancellation of purchased inputs to automotive production (any employment, compensation or personal income taxes related to firms that sell commodities, products or services directly and indirectly to the Detroit Three automakers). The supplier effect includes both manufacturing and non-manufacturing suppliers to the industry as well as suppliers to suppliers."
  • Spin-off employment: "expenditure-induced effects in the general economy [due to] reduced spending of employees of the Detroit Three and their suppliers in the U.S. economy."

The employment multiplier of the auto sector on the US economy is profound. One of the better estimates (confirmed by phone with CAR's Deb Menk) of the auto sector's economic multiplier on the US economy is 5.7, i.e., every 1 job in autopart manufacturing and assembly spawned an additional 4.7 jobs in business/professional; retail/wholesale trade, transportation; health, education; and raw matierals and construction. We discussed an earlier CAR item that used a mulitplier of 7.5 (which included 2.5 for new vehicle dealers); Menk noted that multipliers could range higher depending upon the factors included but that she was comfortable with the 5.7 figure.

 

Spending even a modest amount of time with this CAR report (also here, here, here, and here) will make most readers far less cavalier in their presumed prescriptions for the auto sector. The potential loss of up to 3 million Detroit Three jobs and $150 billion USD in tax revenues over three years becomes a walkable equation. Considering a US base of 138 million jobs, Menk noted that a 2.5 milion impact is 1.8% of the nationally employed while 3.0 million is 2.2%. [phone conversation, 18 November] Both legislators and regulators should pay heed before they tinker, or refuse to tinker. Once the cascading supply chain interruptions commence, the interlocking system will begin to fail, taking down those firms that might otherwise be able to continue operations.

 

Uninformed bailout comments obscures genuine improvement

 

In a panel discussion, CAR's Dave Cole summarized some real improvements in the US auto sector price structure that are not getting sufficient coverage:

  • Satisfying pentup demand following any turnaround, even stabilization.
  • US union labor contracts negotiated last year, and to be implemented in 2009, significantly lower US labor costs.
  • US union labor health care costs have been reduced by virtue of a union-run health care trust (voluntary employee benefit association, or VEBA) into which OEMs cap their exposure with early pay-ins.
  • Excess manufacturing capacity is being removed from the market. (Yes, there is more to be removed, but the process has begun.)
  • Lower costs in concert with pent-up demand could reduce or eliminate recent rebates of one to two thousand USD per vehicle.

These points made by Cole are soundly based (and are flagged in the five citations immediately above as well as the bibliography at end). It should be noted that Cole used a higher industry multiplier of 10 for the value of each automotive manufacturing job, a figure that may rise from a 2003 CAR report that is now seen as overly broad.

 

wRatings performs competitive advantage analysis on a quarterly basis drawn from a blend of a firm's economic profits and consumer advantages. wRatings' 2008 survey notes three drivers for a potential uptick in auto sales:

  • Expectations for consumers have increased for the past 3 years as innovation drives more and more purchases.
  • Consumers are willing to pay more if auto companies could meet their expectations, indicating that pricing power exists but the current models and business framework are unable to deliver enough for consumers to open up their wallets.
  • As consumers delay their auto purchases yet expectations for more cost efficient and better design continue to rise, a flood of opportunity is coming over the next few years. Existing players are likely to fold or merge, and new players will emerge that can meet consumer demand. The winners will have visionary CEOs that can transform the industry similar to how Steve Jobs did with the iPod.

Resistance to OEM automotive overtures to congress obscures need for immediate short-term steps to quantify risk, preclude rolling shutdowns

 

AIG missteps have further spoiled public, even congressional, receptivity to automotive OEM overtures to congress for assistance. Just as there is blame for AIG, regulators and congress, there will be similar blame for whatever is, or is not, done for the Detroit Three. We have the elements of political paralysis before us as no one can tell if they have a British Leyland or a Renault on their hands.

 

Yes, there are ample grounds for accusing both OEM and UAW management for not having moved faster; these are large organizations with legacy drag at both the facility and personnel level. State and federal government supported the auto sector in opposition to trends seen clearly outside the automotive sector.

 

(I would note that UAW's Gettelfinger understands the threat to his union and the nation rather well but has to move along a constituency that retains troglodytes. We have worked with both US and foreign auto plants; the difference in acceptance and employment of lean metrics and kaizan between US and foreign badges could not be more stark. Yes, some plant labor understands the need better than others and embraces lean methods; yes, improvements in lean and manning flexibility have been made, but resistance remains far too high overall in US plants.

 

I also note that blame is being directed at OEM senior management without attention to an often obdurate, risk averse middle management that were rising when economic and technological challenges were more remote. Such tools that they learned are now ineffective in the current competitive atmosphere. Their response has been reduced risk taking. One particular OEM virtually denies that risk exists in its program management process; everything is on track, is coded green, until shortly before delivery when there is a flurry of yellow and red flags that are rebundled into new delivery dates. This is not a recipe for adaptability, much less success.)

 

The Detroit Three are burdened by the inability to negotiate from a position of strength. Returning to wRatings, their 2008-2007 auto comparison shows the Detroit Three brands ranked against other OEMs. (Firms that do not report financials, such as Porsche and BMW, are not ranked.)

 

wRatings looks at KPIs such as stable or increasing market share within their industry, and high returns on invested capital (ROIC). A "W Score" or "Company Worth" rankings is performed by measuring categories of Trust, Fair-Price, Leader, Unique, Durable. The company is then summarized individually and ranked against Category and Industry by National Rank, Pricing Power, Expectations, Company Delivery, Consumer Strength and Financial Strength.

 

Note the Moats scores in the following table. "Total Moat" scores are wRatings' leading indicator of a company's long term economic profit. Moats are a wRating process measurement of a company's ability to "create and build competitive advantage to protects profits and grow revenue" by erecting barriers to entry or "moats" in three business areas: supply chain, products, and delivery chain.  (wRatings tracks "three unique moats" in each area for a total of nine measurables for competitive advantage.):

 

 

Low Worth and Moat scores coupled with an economic downturn that robs the Detroit Three of operating capital makes it more likely that without external assistance other badges will profit at the expense of the Detroit Three. Here are snippets from the 2008 Chevrolet company worth and summary rankings:

 

 

Companies in this condition have difficulty in matching the willingness of top tier firms, for example, in Europe that are offering cash to stricken suppliers, even considering purchasing the supplier. The top tier conversation about their supply base has shifted from their suppliers' ability to match demand to their suppliers' ability to remain solvent. (The top tiers are also reaping the result of leaning their supply base, thinning their suppliers' margin and extending payment terms.)

 

In the defense sector, VT Group (formerly Vosper Thornycroft) in the UK and Safran and EADS in France are telling suppliers to contact them rather than banks before the suppliers reach a supply breach. Safran has established a "crisis cell" to monitor the group's 4,000 suppliers in "a preventative manner". In the automotive sector, Daimler and BMW are already "helping some suppliers with cash".

 

Counterparty risk - the risk of default of a party to an agreement - has leapt out of the financial sphere and into the operational world. Global supply chain risk analysis is now mandatory; on the high end remediation is bridging a supplier, on the low end remediation is attempting an orderly shutdown (which is a contradiction in terms in the auto sector).

 

US automakers and individual suppliers must immediately perform critical path supply chain risk reviews so that they can either smooth or attenuate in a preemptive rather than reactive manner. Available monies can then be allocated. The distractions of bailout versus bankruptcy cannot interfere with this timely risk analysis, otherwise we have a reactive cascade of defaults across the industry.

 

Part 2: Ejecting executive automotive management may or may not help; energizing the usually inert and risk averse middle management can

 

Detroit Chiefs Plead for Aid, to Little Avail

By BILL VLASIC and DAVID M. HERSZENHORN

New York Times

November 19, 2008

 

Advantage of Corporate Bankruptcy Is Dwindling

By JONATHAN D. GLATER

New York Times

November 19, 2008

 

A British Lesson on Auto Bailouts

By NELSON D. SCHWARTZ

New York Times

November 18, 2008

 

Clout Has Plunged for Automakers and Union, Too

By MICHELINE MAYNARD

New York Times

November 18, 2008

 

A Bridge Loan? U.S. Should Guide G.M. in a Chapter 11

By ANDREW ROSS SORKIN

New York Times

November 18, 2008

 

The Fate of the Auto Industry

Diane Rehm

Guests: James Politi, David Cole, David Shepardson, Paul Ingrassia

November 17, 2008

AUDIO

 

EDC to stop insuring Chrysler receivables: paper

Reuters

Nov 17, 2008 8:54am EST

 

Failure of the Big Three would impact defense supply chains

By Chad Halcom

Crain's Detroit Business

1:25 p.m., Nov. 17, 2008

 

How Many Jobs Depend on the Big Three?

By Catherine Rampell

Economix

November 17, 2008, 8:57 pm

 

'Meet the Press' transcript for Nov. 16, 2008

Sen. Carl Levin (D-MI), Sen. Richard Shelby (R-AL), T. Boone Pickens, Tom Friedman, Katty Kay, Andrea Mitchell, Tavis Smiley

MSNBC

updated 12:19 p.m. ET, Sun., Nov. 16, 2008

VIDEO

 

Sum of the parts

By Richard Milne

FT

Published: November 16 2008 19:58 | Last updated: November 16 2008 19:58

 

European companies launch supply chain rescues

By Richard Milne in London

FT

Published: November 16 2008 18:16 | Last updated: November 16 2008 18:16

 

A Power Duo, Dingells Battle on Two Fronts

By JOHN M. BRODER

New York Times

November 16, 2008

 

Opel wappnet sich gegen GM-Pleite

Bitte um Staatsbürgschaft

Sueddeutsche.de

14.11.2008, 16:58 Uhr

 

UPDATE 2-Insurers pull cover from suppliers to GM, Ford -FT

Reuters

11.14.08, 01:20 PM EST

 

Insurers pull cover from suppliers to GM, Ford: report

Reuters

Fri Nov 14, 2008 7:09am EST

 

Insurers pull cover from GM and Ford suppliers

By Kiran Stacey, John Reed and Jonathan Guthrie in London

FT

Published: November 13 2008 21:11 | Last updated: November 13 2008 21:11

 

Industry Risk - Auto Industry Poised for Turnaround While Utilities Could Reach Profits of Their Oil & Gas Peers

Beth Green/GARP

Date: 2008-11-10

November 10, 2008:

 

2008 Ranks: Auto, Gas & Utilities

wRatings

November 2008

 

Help Steve Jobs (Or GM) Design The iCar

Posted by Tom Steinert-Threlkeld @ 10:33 am

ZDNET

November 13, 2008

 

Steve Jobs for President. Of GM?

Posted by Tom Steinert-Threlkeld @ 8:33 am

ZDNET

November 12, 2008

 

Steve Jobs, the iCar, Barack Obama, and John Doerr

Posted by smoothspan

Smoothspan

November 12, 2008

 

How to Fix a Flat

By THOMAS L. FRIEDMAN

New York Times

November 12, 2008

 

G.M.'s Troubles Stir Question of Bankruptcy vs. a Bailout

By MICHELINE MAYNARD

New York Times

Published: November 12, 2008

 

Failure of auto industry could set off catastrophe

Advocates: Collapse of US auto industry could set off catastrophic chain reaction

Tom Krisher and Ken Thomas, Associated Press Writers

Wednesday November 12, 2008, 6:30 pm EST

MIRROR WaPo, 12 Nov

MIRROR IHT, 13 Nov

 

Obama asks Bush to provide help for automakers

By Jackie Calmes

IHT

Published: November 11, 2008

 

Aides: Obama suggested more help for auto industry

By JENNIFER LOVEN

AP

Nov 11, 2008 8:17 AM (ET)

 

Help wanted: Skilled auto workers

With carmakers in trouble, auto industry jobs in Michigan are scarce. But for some, there are opportunities elsewhere.

By Jessica Dickler, CNNMoney.com staff writer

Last Updated: November 7, 2008: 12:56 PM ET

 

CAR Research Memorandum: The Impact on the U.S. Economy of a Major Contraction of the Detroit Three Automakers

Authors: David Cole, Sean McAlinden, Kristin Dziczek, Debra Maranger Menk

Center for Automotive Research (CAR)

November 4, 2008

 

The Big Leave the Future of Automotive: Presentation February 2008

The Program for Automotive Labor and Education

"Beyond the Big Leave"

2008 Automotive Management Briefing MBS 2008

Aug 15, 2008

 

Beyond the Big Leave: The Future of U.S. Automotive Human Resources

Authors: Sean McAlinden, Kristin Dziczek, Bernard Swiecki and Yen Chen.

A Report to the Charles Stewart Mott Foundation and the Mid-Michigan Innovation Team/U.S. Department of Labor Workforce Innovation for Regional Economic Development (WIRED) Initiative

2008

 

Steering Through Discontinuous Change

Automotive - The Road Ahead

Wednesday Morning and Afternoon and Thursday Morning, August   8 & 9

David E. Cole

Chairman, Center for Automotive Research (CAR)

2007 Automotive Management Briefing MBS 2007

 

Obscure Health-Benefit Scheme Is Central Issue in Auto Talks

By Catherine Rampell

Washington Post

September 22, 2007

 

Issues facing the Auto Industry: Alternative Fuels, Technologies, and Policies

ACP Meeting

Eagle Crest Conference Center

June 20, 2007

 

The Future Auto World: Round or Flat?

David E. Cole, Chairman

Center for Automotive Research (CAR)

13thAnnual Automotive Outlook Symposium

Federal Reserve Bank of Chicago

Detroit, Michigan

June 2, 2006

 

Economic Contribution of the Automotive Industry to the U.S. Economy - An Update

A Study Prepared for the Alliance of Automobile Manufacturers

Sean P. McAlinden, Kim Hill, Bernard Swiecki

Economics and Business Group

Center for Automotive Research

Fall 2003

 

Gordon Housworth



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Obama’s campaign operation is an unrecognized, nascent third party in American politics

  #

 

Pattern detection is everything in our business and there are those 'Ah-ha' moments when a pattern leaps off the page, out of the data. One of those moments crystallized yesterday when reading Wallsten and Hamburger's Vast Obama network becomes a political football. The analogy that leapt to mind was the Baltian, the "Tiny Little Green Man [in] a small control room inside [the android] Rosenberg's head, with gearshifts and viewing screens all around the inside of the skull" in Men in Black.

 

Obama's campaign operation is an unrecognized, nascent third party in US politics. But while third parties are not unique, this one is because it sits at the core of a recognized party. The question now is whether to graft, or not graft, it into the tissue of the larger organism, and in either case, what will be the health risks to each:

It is the biggest and broadest American political force ever created -- a vast, electronically linked network of activists, neighborhood organizers and volunteers who raised record amounts of money and propelled Barack Obama to the White House... Traditionally, the new president would blend his campaign operation with his party's national committee. [Those] who built the grass-roots organization, worry that linking it too closely to the party could cause the unusual network to unravel -- and squander an extraordinary resource. The Obama machinery relied heavily on idealistic political outsiders committed to breaking free from old ways of doing politics. The worry is that these enthusiastic activists might drift away if they are turned over to the Democratic National Committee, where the party might ask them to support Democrats and target Republicans. Instead, Obama advisors involved in building the force think it should remain an independent entity -- organized around the "Obama brand." The goal, they say, is to integrate Obama's political organization into his new role as president without damaging its zeal for a candidate who promised to change Washington.

Obama is going to need to use this campaign operation to overcome entrenched issues within his own party as well as carry out grass roots implementation. Taking it into the existing Democratic Party will likely strangle it, causing members to spall off. This first wired POTUS has to keep it and if he keeps it he has to grow it, at least until its DNA supplants that of the host.

 

The US, UK and Canada, for example, employs a ""first-past-the-post" or winner-takes-all simple plurality voting system as opposed to a proportional representation system as used in Israel's Knesset, for example. First-past-the post promotes a two party system:

The American system is commonly called a "two-party system" because there have historically been only two major political parties with candidates competing for offices (especially in federal elections). The first two political parties had their origins in the debate over the ratification of the Constitution--the Federalists and Antifederalists. Today, the Republican and Democratic Parties dominate electoral politics. Almost every federal or state-level elected official in the United States is either a Republican or Democrat...

 

The American two-party system is the result of the way elections are structured in the United States. Representatives in the Congress and in state legislatures are elected to in single-member districts where the individual with the most votes wins. Because only one party's candidate can win in each district, there is a strong incentive for political competitors to organize themselves into two competing "teams" or parties. By doing so, party members and their candidates maximize their chances of winning elections... Other features of the American system of elections, such as campaign finance rules, the electoral college and rules giving party candidates ballot access further solidify the two-party system in the [US].

In addition to the winner-take-all system (at both the individual election and the Electoral College), third parties face obstacles in: 

  • Organization "around a single personality or a single issue and that can lead to less popularity among voters."
  • Historic American belief that they "are relatively moderate and they can operate comfortably within a system where one party is slightly to the right and the other slightly to the left," i.e., there is no "great need for an alternative."

  • Fear that "a vote for a third party candidate is "wasted" since he or she is unlikely to win."
  • Federal campaign finance laws that influence "who can enter presidential debates" and who will receive campaign funding.
  • Lack of media attention.
  • Significant paperwork "required to become a viable candidate."

While the framers of the Constitution distrusted parties, "once parties did emerge, the system that the framers set up tended to encourage coalitions that fight it out and those coalitions tend to be two in number." Despite the efforts of the major "two party" actors, currently the Democrats and Republicans, to either ignore, disparage or force third parties off the ballot, they have been prolific: 

[An] estimated 1100 of them have come and gone (mostly gone) since the early 19th century. Their traditional function in American politics has been to propose new ideas and to advocate reform. And they have been most successful in this role. Indeed, third parties originally proposed a substantial proportion of the programs associated with modern government, including the progressive income tax, broad voter suffrage, the direct election of US Senators, and many of the nation's social welfare programs. What they are not so good at is winning elections. Just 12 times in our national history have third parties received more than five-percent of the vote. They have never won a national election since the Republicans emerged from third party status in 1860 to elect Lincoln and only rarely are victorious for statewide office.

Richardson had done a remarkable four volume set (citations below) on third parties that conclude with the 1928 presidential election, thus we may yet see more from him on American political alternatives. Suffice it to say that despite their minority votes, the impact of third party candidates cannot be underestimated.

 

Were it not for two antebellum third parties, the Free Soil and Know-Nothing parties (led respectively by former presidents Martin Van Buren and Millard Fillmore), it is unlikely that the 1850s anti-slavery Republican Party would have gone on to see Abraham Lincoln elected in 1860. The importance of George Wallace's 13.5% of the popular vote, and 46 electoral votes, in the 1968 presidential election vastly outweighed the raw numbers:

Wallace's third-party presidential campaign nearly threw the 1968 election before the US. Congress. A change in Alabama state law allowed him to run for Governor again, and in 1971 he returned to power... He used the governorship to stay in the public eye, announcing to the national press that he'd always been a moderate and no longer believed in racial segregation. He courted the black vote he had formerly despised, trying to build a new image as a presidential candidate. In 1972 he ran as a Democrat, upsetting the political establishment by winning the most primary votes of any candidate. A Gallup poll of America's most admired men showed Wallace in seventh place -- just ahead of the Pope. All was going well for George Corley Wallace -- until five bullets stopped him and his national aspirations cold.

Seeking attention through assassination, Arthur Bremer found Nixon vastly more satisfying as a target but had to settle for Wallace by virtue of accessibility. Had it not been for this sad, unremarkable person whose bullets did not kill Wallace, instead paralyzing him from the waist down and ending his national political aspirations, Wallace might have gone on to wreak further havoc on the US political scene. Although Wallace recanted his racism late in life, many of the platform issues of Wallace's American Independent Party found their way into a later Republican Southern Strategy.

 

The Obama network that I describe as a third party is vastly "more expansive and sophisticated" than its predecessors. This may be the first third party that not only generates ideas and issues for the wider electorate but becomes a national party in its own right:

Rooted in the street-level tactics learned by Obama when he worked in the 1980s as a community organizer in several Chicago housing projects, the network grew to include thousands of full-time organizers, many in their 20s and new to politics, who were trained to help create neighborhood teams led by volunteers. In California, Obama's campaign developed an e-mail list with more than 790,000 names. That included 40,000 volunteers "who did real stuff like make over 10 million telephone calls"...

 

Top organizers such as Ganz, who created the training program called Camp Obama, view the network as a mass movement with unprecedented potential to influence voters. Temo Figueroa, another top Obama campaign organizer who headed Latino voter outreach, said he was hearing from community activists across the country who wanted the network to remain intact -- but who were not necessarily party loyalists. "A lot of these warriors on the ground are not Democrats, and that's by choice, [so] creating a different organization might make them more apt to join it."

Say Goodbye to BlackBerry? Yes He Can, Maybe

By JEFF ZELENY

New York Times

November 15, 2008

 

Vast Obama network becomes a political football

Some Obama advisors want to blend his campaign operation with the Democratic National Committee. Others worry that such a move could cause the grass-roots organization to unravel.

By Peter Wallsten and Tom Hamburger

LA Times

November 14, 2008

 

Volume IV

Others: "Fighting Bob" La Follette and the Progressive Movement: Third-Party Politics in the 1920s

by Darcy G Richardson

iUniverse, 2008

 

Volume III

Others: Third Parties from Teddy Roosevelt's Bull Moose Party to the Decline of Socialism in America

by Darcy G Richardson

iUniverse, 2007

 

Volume II

Others: Third Parties During the Populist Period

by Darcy G Richardson

iUniverse, 2007

 

Third Party Follies

Center for Politics & Public Affairs

Franklin & Marshall College

August 10, 2006

 

Let's (Third) Party

By THOMAS L. FRIEDMAN

Published: May 3, 2006

 

Third Parties in the U.S. Political Process

Politics 101Third Parties

PBS, VOTE 2004

 

Volume I

Others: Third-Party Politics From the Nation's Founding to the Rise and Fall of the Greenback-Labor Party

by Darcy G. Richardson

iUniverse, 2004

 

Proportional Representation vs. First-Past-The-Post

From Robert Testa, for About.com

2003

 

The History and Economics of ISP Liability for Third Party Content

Matthew Schruers

Virginia Law Review, Volume 88, No. 1, pp 205-64, March 2002

 

George Wallace: Settin' the Woods on Fire

Steve Fayer, Joseph Tovares

American Experience

2000

 

Full cast and crew for Men in Black (1997)

IMDb Pro

 

Men In Black Script - Dialogue Transcript

Transcript that was painstakingly transcribed using the screenplay and/or viewings of Men In Black

 

Men In Black

by Ed Solomon

IMSDb

 

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Hillbilly Sudetenland

  #

 

"Hillbilly Sudetenland" is the term I've coined in reference to the scimitar stretching from Oklahoma to West Virginia the comprises the 'more-red' (properly termed "Became more Republican") ranking in comparison to 2004. This modern Sudetenland is less global, more conservative, more reactionary, and more insular; it responds to social and religious conservatives. Yes I remember that Fulbright (also here) came from Arkansas but this arc is a new 'dagger pointed at the heart of' the republic.

 

Of the Election Results and President Map, the now familiar red-blue divide shows in the "expected to win easily", "expected to win narrowly", and "battleground states" of Election Results as well as the state winners, county bubbles and county leaders of the President Map.

 

The frame in the President Map that is arresting is the "voting shifts" that compares 2008 country results to 2004, 2000, 1996 and 1992. The Hillbilly Sudetenland is intensely visible in 2008-2004 comparison, made more remarkable for its "10%" or "15%" "Became more Republican" rankings. A similar intensity was present in the 2008-2000 figures but its size was larger, less distilled, in comparison to the current election cycle:

[The] South is no longer a solid voting bloc. [The] "suburban South," notably Virginia and North Carolina, [have] experienced an influx of better educated and more prosperous voters in recent years, pointing them in a different political direction than states farther west, like Alabama, Arkansas, Louisiana and Mississippi, and Appalachian sections of Kentucky and Tennessee.

 

Southern counties that voted more heavily Republican this year than in 2004 tended to be poorer, less educated and whiter... Obama won in only 44 counties in the Appalachian belt, a stretch of 410 counties that runs from New York to Mississippi. Many of those counties, rural and isolated, have been less exposed to the diversity, educational achievement and economic progress experienced by more prosperous areas.

Oklahoma is archetypical; McCain won all Oklahoma counties with 65.6% of the vote, the highest state percentage for McCain, despite higher overall Democratic voter registration: 

Although McCain was considered more moderate than the conservative Bush, he did better than the president did in 2004 in rural areas of Oklahoma, where social conservatism is dominant. His best performance was in the "Little Dixie" region of southeastern Oklahoma... McCain pulled in 70 percent of the vote to Obama's 30 percent in five Little Dixie counties... Bush got 56 percent in those counties in 2004.

 

That region is where Sen. James M. Inhofe (R), who easily won reelection this year, said his "guns, God and gays" strategy was born, in 1994 at a cafe in Hugo. That strategy emphasizes protecting Second Amendment rights to own guns, stressing his Christianity and opposing expansion of rights for gay people. [Race] was "probably a factor" in some rural areas after folks became frightened by false information that Obama "was a Muslim who would take away their guns."

 

"People really believed that. It reminded me of when I was a youngster. I was brought up in the Baptist Church, and I was taught that if John Kennedy was elected president, the pope would be running the government." Exit polls found that more than half of Oklahoma voters identified themselves as white, evangelical or born-again Christians. Of those, a heavy majority went for McCain.

It is telling that Oklahoma continues to reelect one of the more odd and internationally tone deaf senators in Congress, James Inhofe, who is remembered for claiming climate change is a hoax (2003 and 2005 floor speeches) and for dismissing the abuse at Abu Ghraib, in his words being "outraged" at the national and international outrage over the excesses at Abu Ghraib. (Videos here and here.) Compare Senator Leahy's comments to those of Inhofe.

 

Adjoining Oklahoma, Arkansas went for McCain with 58.8% of the vote. Opposition to Obama was so great that conservatives were able to pass a measure blocking the adoption of children by unmarried couples, despite opposition by notables such as Bill Clinton and Beebe, the Democratic governor. Strong opposition to the candidacy of Barack Obama in Arkansas may have helped conservatives pass a measure blocking the adoption of children by unmarried couples: 

Conservatives mounted a grass-roots campaign, mainly through church groups, that framed the state's case-by-case approach to adoption requests as an affront to traditional family values... The ban affects all unmarried couples but was written with the intent of preventing gay couples from raising children in Arkansas... Exit polls found that the ban was primarily supported by conservatives, supporters of Mr. Bush and evangelicals.

De facto one-party government

 

Democrats may have reestablished a one-party system in American politics for the foreseeable future. Some assumptions that a colleague and I have been discussing:

 

Two term presidency for Obama

 

Given the organizational and managerial the Obama campaign has demonstrated to date, there is no obvious reason to suspect that he will not win a second term. A two-term Obama allows the opportunity to develop substantial successors for 2016.

 

Democratic greed and cupidity does not (soon) reemerge

 

While I believe that an Obama executive branch can hold to its mission, a Democratic congress could again become slothful and greedy. My point is that I believe there is a very different risk calculus between the ability of the executive and the legislative branches to retain their focus and unity, as opposed to simply lumping all together as 'Democrats'.

 

While it took Democrats some forty years to become a takeover target for Republicans, it does not have to take that long the next time. As previously noted, I wager that Emanuel's appointment as chief of staff was more to keep Obama's own troops in line as opposed to assaulting the Republicans. I infer that Obama is already working to shape and prioritize a longer term agenda than the pork barrel folk have interest. Herding cats will become a useful metaphor.

 

Successful management of the new minority

 

Hispanics are displacing African-Americans as the primary minority. If Democrats can manage Hispanics as they have African-Americans, they stand to double their ethnic support base. The reverse to this is what a colleague calls large "promissory notes" to the new Hispanic community and the existing African-American community.

 

Demographics remain firm short of catastrophe

 

The white vote is voting increasingly liberal on the low age range, i.e., Democrats may not have to capture all the Hispanic/African-American vote in the medium term. In the longer term, white vote is diluted by demographic changes. While minorities are "predicted to represent 39 percent of the total population by the year 2020", the pendulum shifts in 2050:

The nation will be more racially and ethnically diverse, as well as much older, by midcentury, according to projections released today by the U.S. Census Bureau. Minorities, now roughly one-third of the U.S. population, are expected to become the majority in 2042, with the nation projected to be 54 percent minority in 2050. By 2023, minorities will comprise more than half of all children...

 

By 2050, the minority population - everyone except for non-Hispanic, single-race whites - is projected to be 235.7 million out of a total U.S. population of 439 million. The nation is projected to reach the 400 million population milestone in 2039.

 

The non-Hispanic, single-race white population is projected to be only slightly larger in 2050 (203.3 million) than in 2008 (199.8 million). In fact, this group is projected to lose population in the 2030s and 2040s and comprise 46 percent of the total population in 2050, down from 66 percent in 2008.

Conservative (Traditionalist) Republican party worldview hardens

 

If Brooks is correct in his assessment of the post-election struggle of Traditionalists versus Reformers in the Republican Party, Traditionalists will hold sway in the near-term as they control: 

  • Congressional Republicans [now that] Republicans from the coasts and the upper Midwest are largely gone.
  • Republican institutions [comprising] a movement of activist groups, donor networks, think tanks and publicity arms. The reformists [have] no institutions.
  • Donors... Reformist Republican donors don't seem to exist.
  • Conservative mythology [of] a small, heroic movement marching bravely from the Heartland into belly of the liberal elite. [Anyone] who deviates toward the center, who departs from established doctrine, is a coward, and a sellout.

Brooks also feels that Republicans will become "an ever more rigid" movement. While Appalachia and parts of the Deep South may no longer be able to dictate Democratic ideology, they should provide a fertile ground for Traditionalists:

Less than a third of Southern whites voted for [Obama], compared with 43 percent of whites nationally. By leaving the mainstream so decisively, the Deep South and Appalachia will no longer be able to dictate that winning Democrats have Southern accents or adhere to conservative policies on issues like welfare and tax policy...

Forecasting future Republican national candidates, Brooks believes that all - just as with McCain - will have to "immediately tack right to be acceptable to the power base."

 

The race genie is managed without explosion

 

The "poisonous controversy" ignited when Theodore Roosevelt invited Booker T. Washington to dinner in the White House in 1901 is alive and as explosive today as it was then. The good news to a majority of voters is that a color line has been crossed in the White House; that same news is a stain to be eradicated and rolled back to a violent minority.

 

One only has to review the tracking of extremist groups by the Southern Poverty Law Center. (See The Intelligence Project and its Intelligence Report (current issue and archives link) and the Active U.S. Hate Groups map.) We periodically have to look at Neo-Nazi, Patriot Right, and other paramilitary groups and I can assure you that it is not pretty. See:

How the US as a nation and individual interest groups manage or ignite race as a political issue will say much about the future of the US in the 21st century.

 

The next Smedley Butler is another Smedley Butler

 

Next: If the next Smedley Butler is Erik Prince

 

Darkness at Dusk

By David Brooks

New York Times

November 11, 2008

 

As Much of Nation Went Blue, Okla. Applied Extra Coat of Red

By Ron Jenkins

Associated Press

November 9, 2008; A18

 

Antipathy Toward Obama Seen as Helping Arkansas Limit Adoption

By ROBBIE BROWN

New York Times

November 9, 2008

 

The Underside of the Welcome Mat

By GARDINER HARRIS

New York Times

November 8, 2008

 

Hackers and Spending Sprees

Highlights from NEWSWEEK's special election project.

Newsweek

Nov 5, 2008, Updated: 5:01  a.m. ET Nov 5, 2008

 

Barack Obama, Forever Sizing Up

By JODI KANTOR

New York Times

October 26, 2008

 

'Ready for War'

Thousands Join Militant Black Supremacists

Intelligence Report

Southern Poverty Law Center

Fall 2008

 

The Intelligence Project

Tracking the Threat of Hate

Southern Poverty Law Center

 

Active U.S. Hate Groups

Southern Poverty Law Center

 

An Older and More Diverse Nation by Midcentury

U.S. Census Bureau

US Department of Commerce

AUG. 14, 2008

 

Complete List of Population Profiles

U.S. Census Bureau

 

The Population Profile of the United States: Dynamic Version (Internet Release)

[Latest Data]

U.S. Census Bureau

 

James Inhofe Republican Jr Senator (OK) (2008 race)

OnTheIssues

2008

 

Members of Congress / James Inhofe

U.S. Congress Votes Database

 

Indicator 1: Population and Geographic Distributions

Status and Trends in the Education of Racial and Ethnic Minorities

US Department of Education

2007

 

Senator Inhofe on Climate Change

by Michael Mann, Stefan Rahmstorf, Gavin Schmidt, Eric Steig, and William Connolley

Real Climate

10 January 2005

 

Special Edition: Coverage of Iraqi Prisoner Abuse Scandal

CNN RUSH TRANSCRIPT

Aired May 16, 2004 - 11:00   ET

 

Waiting for 'Torture Fatigue'

By Bill Berkowitz

AlterNet

May 12, 2004

 

The Deranged Mind of James Inhofe

Maybe the Dumbest US Senator of the All

By Bruce Jackson

CounterPunch

May 11, 2004

 

In His Own Words: Jim Inhofe & Torture

YouTube video capture

 

Guantanamo Inhofe CNN

YouTube video capture

 

Statement Of Senator Patrick Leahy On The Abuse Of Prisoners In U.S. Military Custody

U.S. SENATOR PATRICK LEAHY

Office of Senator Leahy, 202-224-4242

May 5, 2004

 

Climate Change Update

Senate Floor Statement by U.S. Sen. James M. Inhofe(R-Okla)

January 4, 2005

 

The Deranged Mind of James Inhofe

Maybe the Dumbest US Senator of the All

By BRUCE JACKSON

CounterPunch

May 11, 2004

 

The Science of Climate Change

Senate Floor Statement by U.S. Sen. James M. Inhofe(R-Okla)

Chairman, Committee on Environment and Public Works

July 28, 2003

 

Serving Christ in the Senate

Today's Pentecostal Evangel

June 30, 2002

 

Crackpot Theology Makes Bad Foreign Policy

by Doug Bandow

Cato Institute.

June 4, 2002

 

Gordon Housworth



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"We are all American" - again, and if not squandered, for some time to come

  #

"We Are All American", Le Monde editorial by Jean-Marie Colombani, Sept. 12, 2001

With the close of the 2008 US presidential elections, "We're all Americans" - again, and if not squandered, for some time to come. In private email in May 2008, I echoed earlier conversations with conservative colleagues:

When people ask me about Obama, I say that the thing that most stands out in my mind is his ability to rally people to commit and to sacrifice; if anyone could get a draft through short of war, it is him. Short of a military draft, he could easily build a form of civilian draft. Our infrastructure and population surely needs it.

 

Why does this interest me? All studies of effective organizational change show that it was preceded by a cultural change that would implement without cynicism or self-interest. Absent the culture change, lip service is paid, another level of cynicism is laid down, and the pioneers soon get arrows in their front and their back. The US desperately needs a sum-sum recommitment. [private email]

In late October on the eve of the election I noted:

The US hold of hyperpower was brief and it is now going to need assistance from so many corners of the world, not just to obtain its foreign policy guidelines but to keep from slipping further. Only Obama has instilled that sense of hope. Wielded wisely, he can get sacrifice and commitment [globally] that another candidate could not." [private email]

While the US was absorbed in its presidential election, little notice was paid to rapt international attention:

It is 2 p.m. in Beirut. On Al-Jazeera TV, a correspondent is talking live from Arizona on how Republicans are preparing for the voting to start. A few minutes later, at the studio of the Qatar-based Arab satellite news channel, an American analyst is commenting on the results of the newest polls. For Arab media, the U.S. presidential election is far from being simply another item of foreign news. At least today, the election is being covered with almost the same intensity as on any U.S. news channel.

 

Starting this morning, the big satellite channels throughout the Middle East started extensive coverage of the election with commentators from around the world discussing the effect of the vote on the Middle East, charts and maps explaining where each of the two candidates are favored and several correspondents describing live the atmosphere of the voting day from various U.S. locales such as Virginia and  Florida.

 

The satellite channel Al Arabiya carried a report from Chicago's South Side showing images of the church where Obama attended services and the building where he worked as a community organizer. On Al-Jazeera, a talk show addressed the future of Iraq after the election and whether the Democratic Party candidate Barack Obama was prepared to end the war there. The channel interviewed Iraqis on the street on whether security in their country would be improved under a new American president.

 

Many Arab newspapers clearly expressed their hope for Obama to win in their opinion and editorial articles and headlines published this morning...

From the Netherlands:

During the past eight years, two bright and powerful moments in European-American relations stand out... On 12 September 2001, Le Monde proclaimed, "We are all American." And on 24 July 2008, Senator Barack Obama addressed 200,000 cheering Germans, many holding American flags. To an outside observer who knew nothing of the intervening years, Europe's enthusiastic response to Obama might seem to be a natural progression from Le Monde's declaration of support for America. We know, however, that a great rift separates those two events.

 

After the 9/11 attacks, President Bush had an opportunity to harness the sympathy and support offered by many parts of the world to establish a new era of cooperation and understanding. Instead, he offered 'Freedom Fries,' the war in Iraq, derisive attacks on 'Old Europe,' and a refusal to partner with other countries to address major issues such as climate change. He also gave his growing cadre of critics an easy target for blame and an excuse for inaction. Yet those who have been quick to criticise the United States and to lay the responsibility for global problems at the feet of one man in Washington will soon be deprived of their familiar bogeyman...

Such comments mirrored the global reaction to an Obama presidency (see other bibliographic citations below). The thoughts that follow reflect the concepts that shape my worldview. From Islamic territory from North Africa to South Asia: No solutions, only adjustments

  • Lord Palmerston - "We have no eternal allies and we have no perpetual enemies. Our interests are perpetual and eternal and those interests it is our duty to follow."
  • Sir Harold Nicholson - Describing diplomacy as "the understanding that for intractable problems there are only adjustments and not solutions."
  • Realpolitik - Politics based on strictly practical, even modest, goals rather than overzealous, idealistic goals.
  • Gregory III - "What fairness suggests, What the law allows, What will work."

I believe that Obama will exhibit a "ruthless pragmatism" that will discomfit many of those on the democratic left, will surprise and please many of the moderate and centrist democrats, independents and republicans, and will elate most of our international community. By July 2007, Obama was asking Brzezinski questions such as "What can a new president accomplish in foreign policy in his first 12 months in office that he can't achieve later?... How should a new president reorganize his national security team so that the structure fits the problems of the 21st century?" Ignatius echoes Brzezinski in stating that "change and caution" are "the two channel markers for Obama foreign policy."

 

After decades of anti-intellectualism (beyond the studied educational condescension of Bush43, Clinton too often played to his bubba side), it will be interesting to watch this administration unfold:

"What is beginning to take shape is a group of people that are unified in their purpose but diversified in their perspectives and views... All of them are rooted in pragmatism and reality in the context of accomplishing demonstratable results. [Obama's] going to have a group of people that from Day One all know what they're doing, are deeply committed to Senator Obama's philosophy, but isn't a 'yes' group, not at all."

It will be more interesting if Brzezinski's view plays out:

[This] election means first of all that a very negative chapter in American foreign policy and American domestic affairs has come to an end. I particularly mind the various unfortunate moves that characterized the past eight years of the Bush administration. But secondly, I think it means something much more positive. Namely that America is now defining itself increasingly as a 21st century universal society, in which membership in that society is based not on ethnicity or on race, but increasingly on shared values, fundamentally universal values, democratic values...

Speaking of al Qaida early on, I noted that the strategic options were "cure, kill or contain" and that "Two don't work; the third is merely exceptionally difficult." If a US administration can hold Brzezinski's image, if not its substance, abroad after the debacle of Abu Ghraib (also here), it will materially lighten both our military and diplomatic burden. Shachtman confirmed as much in this impromptu interview:

In late January, shortly after the Iowa caucuses, I found myself at a conference, sitting next to a flag-level officer. He was an unapologetic Christian conservative -- sent his kid to Jerry Falwell's Liberty University, saw the fight against terror as a religious war. So he was not exactly inclined to say nice things about a Democrat running for president. Yet here the officer was, praising Obama.

 

You see, this officer oversaw special operations work around the Horn of Africa and the Middle East. Sensitive stuff, that requires delicate negotiations. And already, just as one among many candidates for president, Obama was making this officer's job easier. Officials in other governments were more willing to provide his troops access to their countries. Foreign intelligence services were more willing to share information.

 

One of the themes of this conference was information operations, or "IO" -- how the U.S. can influence others around the world. This officer and other conference-goers were disgusted, by how badly the U.S. had bungled this war of ideas, and allowed opinions about America to sink so low. Candidate Obama, the group concluded, was the best IO campaign America had had in years. Allies were more ready to listen. Enemies' narratives about America were being undercut.

Domestically, I predict that the selection of Rahm Emanuel as chief of staff has more to do with keeping the Democrats in check than assaulting the Republicans, despite their charges of partisanship against the president-elect. Obama is already working to shape and prioritize a longer term agenda than the pork barrel folk have interest. With only one Democratic administration in 28 years, there will be great pressure among Democrats to apportion the spoils. (We should not forget the role that constituents play in rewarding their congressional representatives, especially in a down economy where demands will be high.) Herding cats will become a useful metaphor. In the face of this, Obama and the executive branch must maintain an exceptionally high level of focus on mission while minimizing fractures in Democratic unity.

 

Sadly, this governance more from the center than from the left will not reach either the liberal left or conservative right as they will filter it out:

Westen describes an experiment he conducted in the fall of 2004 on committed Democrats and Republicans. Subjects had their brains scanned while they viewed slides containing pairs of contradictory statements from their favored candidate (George W. Bush or John Kerry). Confronted with the unwelcome contradictions, each subject's network of neurons associated with distress and regulating emotions... lit up. But soon the subjects found ways to deny that there was any significant contradiction, and calm returned. "The neural circuits charged with regulation of emotional states seemed to recruit beliefs" - even false ones - that would eliminate the distress each subject was experiencing... Meanwhile, the reasoning centers of the brain [were] quiet. What's more, the neural circuits responsible for positive emotions turned on as soon as the subject found a way to resolve the contradictions - reinforcing the faulty reasoning...

 

Westen and his associates [found] that committed supporters were essentially doping their own neural circuits: "The partisan brain didn't seem satisfied in just feeling better. It worked overtime to feel good, activating reward circuits that give partisans a jolt of positive reinforcement for their biased reasoning. These reward circuits overlap substantially with those activated when drug addicts get their 'fix,' giving new meaning to the term, political junkie."

Next: Hillbilly Sudetenland

 

Sometimes Continuity Trumps Change

Three Bush Appointees in Crucial Positions Likely to Remain Under Obama

By Alec MacGillis and Ann Scott Tyson

Washington Post

November 10, 2008

 

Economy won't stop Obama's priorities, aides say

By Andy Sullivan

Reuters

Nov 9, 2008 2:42pm EST

 

Obama Positioned to Quickly Reverse Bush Actions

Stem Cell, Climate Rules Among Targets of President-Elect's Team

By Ceci Connolly and R. Jeffrey Smith

Washington Post

November 9, 2008

 

Preparing for the Obama Era

Bush Officials and President-Elect Working Together On Pressing Issues

By Robert Barnes, Dan Eggen and Anne E. Kornblut

Washington Post

November 9, 2008

 

Emanuel to Be Chief of Staff

Obama's Choice Could Signal Rapid Succession of Cabinet Picks

By Anne E. Kornblut and Karen DeYoung

Washington Post

November 7, 2008

 

Obama's choice of Emanuel shows switch in tone

By LIZ SIDOTI and NEDRA PICKLER

Associated Press

November 7, 2008; 12:34 AM

 

PostGlobal: World Reactions to the U.S. Election

Transcript of queries/replies

David Ignatius

Co-Moderator, PostGlobal

November 6, 2008; 2:30 PM

 

All Deliberate Speed

On Foreign Policy, Change and Caution

By David Ignatius

November 6, 2008

 

U.S. Again Hailed as 'Country of Dreams'

Around the World, Obama's Victory Is Seen as a Renewal of American Ideals and Aspirations

By Kevin Sullivan

Washington Post

November 6, 2008

 

Europe, say once again: 'we're all Americans'

By Nathan Rodgers

NRC Handelsblad

5 November 2008 10:25, Changed: 5 November 2008 10:25

 

Republicans Confront Formidable Task Ahead

Leaders Agree on Need for Party Restructuring

By Michael Abramowitz

Washington Post

November 5, 2008

 

What Obama Means to America's 'Info Ops'

By Noah Shachtman

Wired

November 05, 2008 12:02:27 PM

 

Suddenly, it may be cool to be an American again

By William J. Kole

Associated Press

Nov 5, 2:58 pm ET

 

IRAQ: Mesopotamia ponders Obama

Babylon & Beyond

12:50 PM PT, Nov 5 200

 

ISRAEL, WEST BANK: Neither side expecting a major Obama effect

Babylon & Beyond

11:55 AM PT, Nov 5 2008

 

LEBANON: News of Obama's victory spreads via Facebook, text message and TV

Babylon & Beyond

10:33 AM PT, Nov 5 2008

 

IRAN: Obama election inspires even if played down

Babylon & Beyond

09:06 AM PT, Nov 5 2008

 

EGYPT: Mixed feelings among Arabs about Obama's victory

Babylon & Beyond

05:11 AM PT, Nov 5 2008

 

MIDDLE EAST: Blanket coverage of U.S. presidential elections

Babylon & Beyond/LA Times

12:06 PM PT, Nov 4 2008

 

Dominance In Presidential Debates: Barack Obama's 'Rope-a-dope' Style

ScienceDaily

Oct. 30, 2008

 

'America Has Reinvented Itself'

Interview With Head Of American Council On Germany

Spiegel Online

11/10/2008

 

Case Study

By ALEXANDRA STARR

New York Times Magazine

Published: September 19, 2008

 

Brzezinski Endorses Obama; Calls Hillary Clinton's Foreign Policy "Very Conventional"

Steve Clemons

Washington Note

Aug 24, 2:59PM 2007

 

Psyched: A psychologist looks into voters' minds and draws a lesson or two for Democrats.

'The Political Brain' reviewed by Chris Lehmann

Washington Post

July 15, 2007

 

US Headed For Change, Says Former National Security Advisor

Interview: Anna Kuhn-Osius with Zbigniew Brzezinski

Deutsche Welle

07.11.2008

 

Renewing the French-American Alliance

By Nicolas Sarkozy

Real Clear Politics

November 07, 2007

 

Counseling Democrats to Go for the Gut

By PATRICIA COHEN

New York Times

July 10, 2007

 

The Political Brain: The Role of Emotion in Deciding the Fate of the Nation

By Drew Westen

ISBN-10: 1586484257

PublicAffairs (June 25, 2007)

 

Are We Still 'All American'?

If you want sympathy from France, just elect John Kerry.

by Jean-Marie Colombani

Wall Street Journal

Saturday, March 13, 2004 12:01 A.M. EST

 

Gordon Housworth



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Intellectual Property and Investment Risk in Russia

  #

 

Intellectual Property and Investment Risk in Russia was presented 30 October, 2008.

 

Individuals and firms that are used to a US or EU business and legal assumptions are at a great disadvantage in the Russian Federation. It it still difficult to listen to skilled attorneys describe an "effective compliance program" for a US and Russian relationship but the reality is that the compliance program is for the US Sarbanes Oxley, SEC, FCPA side of the relationship.

 

The Institute of Corporate Law and Corporate Governance (ICLG) is correct to say that "no due attention is paid to corporate governance risks" and that the "fundamental problem in the area of corporate governance in Russia is the fact that company insiders (managers and controlling shareholders) abuse their position to the detriment of minority shareholders, including expropriation of assets" through transfer pricing, asset stripping, capital dilution, restructuring/mergers, and lack of transparency.

 

We would add brazen cash stripping to that list but it still understates the Russian condition as things are much more fluid and opaque on the Russian side. A European colleague schooled in Russia and skilled in dealing with Russians advised thusly:

If you want to protect your IP in Russia, don't bring it. If you want to protect your asset in Russia, don't invest...

 

Every law exists... on paper... Everything is possible [in Russia]; everything is impossible...

 

[You are] wasting time and money trying to go to court with a Russian company. [You must] Use Russian strong points; use Russian weak points... If you use US or British law you will pay, pay, pay and pay.

 

[Largest corruption risk is] any business condition where cash exists. No cash and you are [a] little safe.

For those of you who must invest or must bring IP, read Intellectual Property and Investment Risk in Russia. You must:

  • Question everything you hear.
  • Listen for what you do not hear, what is omitted.
  • Treat minor steps (such as connecting to a "nearby" power drop) as a rigorous supply chain analysis.
  • Test every assumption of what will work or not work, how long it will take and at what cost.

Even the simplest steps in any given transaction become opportunities for unexpected cost-ups. The same issue, something as simple as documentation and certification of goods becomes an opportunity to incur repeated costs on the same item.

 

You will need assistance. And that assistance will need to be working solely on your behalf and not unknown counterparties. The analogy is relying on the counterparty's translator during a negotiation. What is translated and how it is translated are at the whim of the counterparty and not your side.

 

Beyond traditional financial support in regulatory compliance, you will require non-financial support in regulatory compliance and corporate governance programs:

  • Establish third party valuation, handling non-financial aspects (undisclosed valuation-relevant issues, such as liabilities relating to key personnel).
  • Structure investments and engage new counterparties (interests, background, reputation, litigation, and other factors that may transfer risk to you).
  • Mitigate exposures beyond reach of contractual and financial risk management options.
  • Support requirements for governance, FCPA) and Patriot Act (funds, contacts, customers, and adverse relationships with unseen third parties).

In terms of business strategy you will require assistance in: 

  • Actionable, timely information about specific industries, markets, prospects, and counterparties.
  • Monitoring specific risk areas.
  • Business facilitation support, due diligence on local staff, and support for development personnel as they review in-country prospects.
  • Vetting local partners and identify undisclosed issues to build good local relationships operating under optimal terms.

You will need assistance in realistic IP protection as opposed to "feel good" security steps that will lull you into complacency. Russian law requires that you set up "trade secrets regime" at your Russian workplace otherwise your trade secrets do not legally exist. (IP law in Russia is now in Part Four of the Civil Code.)

 

In what amounts to your identifying a target set to an IP collector, you must state the IP, state who has access to the IP, identify it as such to all employees, and then establish workplace rules that are reflected in your workplace labor agreements. All this must occur under the cumbersome Russian union canopy.

 

It is refreshing to see some attorneys acknowledge Russia's systematic commercial corruption and its effect on legal matters. (Medvedev has made a public effort to improve the legal environment but Russians do not take his actions seriously. At best these steps are seen to be directed internally rather than externally.)

 

Problems still occur when Western attorneys reflexively apply US concepts to the Russian environment. For example, when asked what was the "optimal stake" to acquire in a Russian entity, a good, Russian speaking US attorney replied "100% as you then have full control." The reality is that '100% control' leaves you vulnerable as you own 100% of the responsibility. Not a recommended condition in Russia.

 

You will need assistance going to Russia. Call us.

 

Governance & Anti-Corruption

World Bank Institute

 

Indicators of Governance & Institutional Quality

World Bank Institute

 

Doing Business - Economy Rankings

World Bank

Doing Business 2009

 

Doing Business - Russian Federation

World Bank

Doing Business 2009

 

Russian Economic Survey

Keith Bush, Research Director

US-Russia Business Council

October 2008

 

Doing business and investing in the Russian Federation, 2008 edition

PricewaterhouseCoopers

2008

Ruissian Federation thumbnail summary

 

2008The Russian Economic Survey - ALL ISSUES

Comprehensive review of the Russian economy, produced monthly by Keith Bush, the Council's Director of Research.

 

Corporate Governance and Emerging Markets: Lessons from the Field

Cally Jordan, Mike Lubrano

U of Melbourne Legal Studies Research Paper No. 356

July 29, 2008, Last revised: September 19, 2008

 

Russian Economic Report

The World Bank in Russia

No 16, JUNE 2008

 

Governance Matters VII: Aggregate and Individual Governance Indicators, 1996-2007

Daniel Kaufmann, World Bank Institute; Aart Kraay, World Bank - Development Research Group (DECRG); Massimo Mastruzzi

World Bank Policy Research Working Paper No. 4654

World Bank Institute

June 24, 2008

 

2008 CORRUPTION PERCEPTIONS INDEX

Persistently high corruption in low-income countries amounts to an "ongoing humanitarian disaster"

Against a backdrop of continued corporate scandal, wealthy countries backsliding too

Transparency International

2008

 

The Global Competitiveness Report 2008-2009

The Global Competitiveness Index rankings and 2007-2008 comparisons

World Economic Forum

PDF

2008

 

Russian market special commentary

BNP Paribas

Flash Report

July 2008

 

Worldwide Governance Indicators: 1996-2007

World Bank

Released - June 2008

 

Governance Indicators: Where Are We, Where Should We Be Going?

Daniel Kaufmann, Aart Kraay

The World Bank Research Observer, vol. 23, no. 1 (Spring 2008)

 

Expanding Overseas: The Best Large Markets

by Jennifer Alsever

Bnet

April 2008

 

Dmitri Medvedev, in His Own Words

Excerpts of speeches by and interviews with Dmitri A. Medvedev, President Vladimir V. Putin's hand-picked successor, as posted in English on his campaign Web site.

New York Times

February 28, 2008

 

INTELLECTUAL PROPERTY: Risk and Enforcement Challenges

Statement of Loren Yager, Director, International Affairs and Trade

Testimony Before the House Judiciary Subcommittee on Courts, the Internet, and Intellectual Property

GAO-08-177T

October 18, 2007

MIRROR

 

Transparency of Russian companies: results of the study conducted by Standard & Poor's with the support of the MICEX Stock Exchange in 2007

MICEX

November 15, 2007

 

A Decade of Measuring the Quality of Governance

The International Bank for Reconstruction and Development / The World Bank

Governance Matters 2007

Worldwide Governance Indicators, 1996-2006

 

New Concerns in an Uncertain World

Foreign Direct Investment Confidence Index

A.T. Kearney

2007

 

Deloitte Study: Emerging Market Innovation

The management consultancy surveyed 446 top executives to profile business practices of U.S. companies in developing countries

by Reena Jana

Deloitte Touche Tohmatsu

Page Last Updated: July 23, 2007

 

Asia/Pacific Cities Among Frontrunners in MasterCard Ranking of the World's Centers of Commerce

New MasterCard Research Explores Strategic Role of Cities in Driving Global Commerce

Report Names 50 Cities as Hubs of the New Worldwide Economy

Auckland, 13 June 2007

 

Special Report: Russia Post-2008: Road To Riches Or Slippery Slope

RatingsDirect

Reprinted from http://www.ratingsdirect.com/

Jan 19, 2007 22:50 Europe/London

Publication date: 19-Jan-07, 17:50:41 EST

 

Global Threat Research Report: Russia

Eli Jellenc, Senior Threat Intelligence Analyst

Kimberly Zenz, Senior Threat Intelligence Analyst

An iDefense Security Report

Jan. 10, 2007

 

Bribe Payers Index 2006

Transparency International

2006

 

INTERNATIONAL PROPERTY RIGHTS INDEX (IPRI) 2007

International Property Rights Index (IPRI)

By Alexandra C. Horst

2006

 

A Decade of Measuring the Quality of Governance

Worldwide Governance Indicators

Governance Matters 2006

 

World Bank Puts Russia on Par With Swaziland

Russia is comparable to Swaziland, Zambia and Kazakhstan in how it governs, according to a World Bank report released Friday.

Moscow Times

18 September, 2006

 

Timeliness of Financial Reporting in the Russian Energy Sector

Robert W. McGee

Florida International University - School of Accounting

April 2006

 

Global Sourcing: Destination Russia

Eugene Kublanov, Paul Melling, Art George, Michael Mensik

Baker & McKenzie LLP

February 23, 2006

 

Corporate Governance in the Oil and Gas Industry

Cases from Poland, Hungary, Russia and Ukraine in a Comparative Perspective

Andreas Heinrich, Aleksandra Lis and Heiko Pleines

Koszalin Institute of Comparative European Studies (KICES)

KICES Working Papers

ISSN: 1895-0450

No. 3, December 2005

 

International Trends in Corporate Governance

Justin Reynolds

ISS Europe

Vienna, 4 October, 2005

 

Russian Companies Show Themselves Only by Half

Kommersant Moscow

Sep. 23, 2005

 

Russian IT Seasons Seminar
Arthur L. George
Partner, Baker & McKenzie, Chicago
Chicago, September 22, 2005

 

Corporate Governance and Corruption: A Cross-Country Analysis

XUN WU, National University of Singapore

Governance: An International Journal of Policy, Administration, and Institutions, Vol. 18, No. 2, pp. 151-170

ISSN 0952-1895

April 2005

 

Russia BusinessWatch

US-Russia Business Council

Vol 13, No 1

January-March 2005

 

Transparency And Disclosure By Russian Banks: Disclosure Practices Of Russian Banks Currently Dismal

Julia Kochetygova, Nick Popivshchy, Oleg Shvyrkov, Levon Atanassian, Elena Pastukhova

Standard & Poor's Governance Services

October 26, 2005

 

Transparency And Disclosure By Russian State-Owned Enterprises

Standard & Poor's Governance Services

Julia Kochetygova, Nick Popivshchy, Oleg Shvyrkov, Vladimir Todres, Christine Liadskaya

Prepared for the Roundtable on Corporate Governance

organized by the OECD in Moscow on June 3, 2005

June 2005

 

Russia: Investment Destination

A survey of foreign investors

Conducted by PBN

Foreign Investment Advisory Council (FIAC)

March 2005

 

The links between intellectual property crime and terrorist financing

Text of public testimony of by Ronald K. Noble,

Secretary General of INTERPOL

Before the United States House Committee on International Relations

One hundred eighth congress

July 16, 2003

 

An American Compliance Officer at a Russian Bank

For Your Information

Bankers' Association for Finance and Trade (BAFT)

Volume 8, Number 1

February 2003

 

Corporate Governance in Russia

Investor Perceptions in the West and Business Reality on the Ground

SRU Limited

October 2002-January 2003

 

Gordon Housworth



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The rise of authoritarian social conservatives: coming to terms with a temple to incuriosity and anti-intellectualism

  #

As a geopolitical analyst my primary focus is on external events, though I am well aware that domestic and international issues are intimately intertwined. The 2008 presidential campaign thrust a set of questions into the foreground, questions that had occupied my second tier for some time:

  • How could any party exhibit such sustained incuriosity, such anti-intellectualism?
  • How could any party exhibit such unforgiving, authoritarian behavior without significant complaint from its rank and file?
  • How could any party seek the lowest common denominator instead of the highest without revolt?
  • Why is there no counterpart to Jon Stewart on the right for piercing questions to media and players alike?

The igniter: How could any party pick such a shallow incompetent [see narrative 4], a blooming race baiter that lures the worst of the party to her side, as VPOTUS candidate? This is not the Russian Federation, or Belarus, or Kyrgyzstan. We advertise ourselves as the inheritor of Augustine's "shining city on a hill."

 

Despite McCain's producing his spry mother from time to time, the actuarial tables are not favorable for a male of McCain's age. Even conservative friends have noted to me that his years in North Vietnam prisons have taken a toll on his health. Palin has a rather good chance of ascending while in office. To steal a page from Oliver Wendell Holmes, Palin's succession constitutes a "clear and present danger" to the state.

 

Full disclosure

 

I subscribe to the ideal that a good analyst cannot be, must not be, a member of a political party. I have never made a political contribution to any candidate or any party. Every party has its group instincts, reinforced to varying degree, as it looks to its interests and perceptions rather than reality on the ground. Members are expected to obey the group's direction regardless of outcome, and penalized when they do not. That obeisance was never me; I go where the data takes me.

 

I do not discuss personal political leanings in this weblog as it rightly or wrongly prematurely flags the reader depending on his or her leanings. I want the reader to get to the end and then form their opinion. Googling my name periodically to see how my material is cited, I am pleased that groups say they can't tell my leanings, consider the material well researched, and generally get grudging approval from both my left and right.

 

I declined an introduction to a colleague of Rove as I felt that it would reflect poorly on the referrer. I have written critically of an administration that preferred approval regardless of outcome and felt that I could pass neither the loyalty test or the contribution expectation.

 

I can say that I am a living fossil of a Republican, i.e., an admirer of the likes of Everett Dirksen and Henry Cabot Lodge, Jr. I admire the comity, intellectualism, world view, relative conviviality and negotiation of that era while despising the zero-sum politics practiced today. I often watched William F Buckley's Firing Line (also here)both for its language and its content. Now his son, Christopher, has been effectively ousted from the National Review, founded by his father, for advocating for Obama. Ousted rather than engaged. As Goldwater noted in his diary, the party had already moved rightward to the point that he could not gain ascendance were he entering the party anew.

 

I score a 29 on the Right-Wing Authoritarianism (RWA) scale for personality evaluation, the implications of which are developed in the note.

 

Goldwater saw the fork in the road and didn't like it

 

For those unfamiliar with, or mistakenly think that they know, Goldwater, I recommend this obituary, interview after retirement and sample of his inclusiveness. Goldwater's direct tone put off some and opened a warmonger fear that was exploited by the Daisy Girl ad spot (video here) for Johnson. It is ironic that while Goldwater set the stage for Reagan's presidency, Johnson went on to win the 1964 election, greatly exceeding Goldwater's promises for Vietnam in the process.

 

I leave a deeper dive to readers as my focus here is Goldwater's concern over changes in the republican party. From Goldwater's To be conservative, Congressional Record, September 15, pp 20589-20590:

There is no position on which people are so immovable as their religious beliefs. There is no more powerful ally one can claim in a debate than Jesus Christ. Or God, or Allah, or whatever one calls his supreme being. But, like any powerful weapon, the use of God's name on one's behalf should be used sparingly. The religious factors [sic] that are growing throughout our land are not using their religious clout with wisdom. They are trying to force government leaders into following their positions 100 percent. If you disagree with these religious groups on any particular moral issue, they cajole, they complain, they threaten you with loss of money or votes or both...

 

I am frankly sick and tired of the political preachers across this country telling me as a citizen that if I want to be a moral person, I must believe in "A," "B," "C," and "D." Just who do they think they are? And from where do they presume to claim the right to dictate their moral beliefs to me? And I am more angry as a legislator who must endure the threats of every religious group who thinks it has some God-granted right to control my vote on every rollcall in the Senate. I am warning them today: I will fight them every step of the way if they try to dictate their moral convictions to all Americans in the name of conservatism...

 

Being a conservative in America traditionally has meant that one holds a deep, abiding respect for the Constitution. We conservatives believe sincerely in the integrity of the Constitution. We treasure the freedom that document protects.

See also Goldwater's The political movement of the New Right. Congressional Record, September 11: p20342, and Moral organizations in politics, Congressional Record, September 24: p21957. (These early 1980s items appear to be available in microfiche and are not online.) Elsewhere:

Mark my word, if and when these preachers get control of the [Republican] party, and they're sure trying to do so, it's going to be a terrible damn problem. Frankly, these people frighten me. Politics and governing demand compromise. But these Christians believe they are acting in the name of God, so they can't and won't compromise. I know, I've tried to deal with them...

 

When you say 'radical right' today [1994], I think of these moneymaking ventures by fellows like Pat Robertson and others who are trying to take the Republican Party away from the Republican Party, and make a religious organization out of it. If that ever happens, kiss politics goodbye.

Addressing the new right wing of the party: 

Do not associate my name with anything you do. You are extremists, and you've hurt the Republican party much more than the Democrats have.

This latter quote is from Bugliosi's The Betrayal of America. While not appearing elsewhere, Bugliosi was a prodigiously effective federal prosecutor. I find it unlikely that he would tamper with the evidence.

 

Saturated by social conservative agenda, implemented by diktat

 

Goldwater was unsuccessful in staying the party's shift towards social conservatism and away from classic conservatism. (Federal budgets were balanced or under control only in two Democratic administrations (Johnson and Clinton) with startling rises under Reagan, Bush41 and Bush43.) Out of scope for this note are the effects of that shift save for the impact of rising authoritarian behavior on governance and obeisance, especially where it intersects with the Protestant evangelical community.

The most critical yet sympathetic and accessible (external) view of Christian Reconstructionism and Dominionism that I have read are those of Chris Hedges, a religious man and son of a minister that had himself strove for fairness and inclusiveness. See his address American Fascists. Hedges posits that Dominionists share characteristics with fascism: "a claim for moral and physical supremacy of a master race, in this case American Christians; blind obedience to a male hierarchy that often claims to speak for God; intolerance towards non-believers; and disdain for rational intellectual inquiry."

 

Beyond the obsession with political power, many themes stand out in his work but I noted three: 

  1. National Socialism's singling out of homosexuals as the first deviants by National Socialism, a similar path of demonizing pursued by the Reconstructionist community.
  2. Reconstructionists' caution to never attack the military and police; on the contrary, they entreat and preen these groups, enlisting in their ranks. The upshot is a ready paramilitary when it is demanded.
  3. Reconstructionists' cherry picking of the bible in pursuit of their aims mirrors that of Islamic militants' treatment of the Koran. Example: Reconstructionist eschatology enshrines rapture at endtime yet it is not in the bible. 

Hedges notes that Reconstructionists attempt to form alliances with traditional conservative groups; I agree with his assertion that it is the neocons who are Lenin's useful idiots on behalf of Reconstructionists and not the reverse. (The most authentic US fascists are the Ku Klux Klan.)

 

John Dean and Goldwater had been friends for decades; after Goldwater's retirement from the senate, the pair had intended to coauthor a book on the party's subsequent "hard turn to the right" but Goldwater's declining health would not permit it. Dean ultimately released Conservatives Without Conscience in 2006 to fulfill the mission:

Conservatism is not inherently moralistic, arrogant, condescending, and self-righteous. Nor is authoritarian. Yet all of these are adjectives that best describe the political outlook of contemporary conservatism. I make these observations not as an outsider, but as a conservative who is deeply troubled by what has become of a treasured philosophy. Conservatism has been co-opted by authoritarians, a most dangerous type of political animal...

 

Conservatives once looked to the past for what it could teach about the present and the future. Early conservatives were traditionalists or libertarians, or a bit of both. Today, however, there are religious conservatives, economic conservatives, social conservatives, cultural conservatives, neoconservatives, traditional conservatives, and a number of other factions.

 

Within these factions, there is a good amount of inconsistency and variety, but the movement has long been held together through [a focus on] its perceived enemies. Conservatives once found a common concern [with] communism [only to replace it after the fall of the USSR with] anything they perceived as liberal. [Liberal was defined as] any point of view that differed from their own, whether it was liberal or not...

For those who have yet to read Conservatives Without Conscience, I suggest Dean's short introductory trilogy in FindLaw: 

Also recommended is this video of Dean discussing the book and its antecedents:

Had I read CWC at the time, my question set would have been answered far sooner as Dean, in addition to asking what drives this new conservative elite, also asked my question: "why do their compliant followers seem to never question or criticism them?" Dean tapped a vein of research that rose in the postwar period in an effort to determine if fascism could root in the US. Paralleling studies of fascism was the related authoritarian leader and follower personalities that have symbiotic characteristics. This subset is disturbing in its implications:

 

Authoritarian Leaders

Authoritarian Followers

typically male

male or female

dominating

submissive to authority

opposes equality

aggressive on behalf of authority

desirous of personal power

respectful of those with power

amoral

moralistic

manipulative

trust untrustworthy authorities

exploitive

uncritical toward chosen authority

takes advantage of others

gullible

fear-mongering

prone to panic easily

may or may not be religious

highly religious

knowingly cheats to win

highly self-righteous; little self-awareness

intimidating and bullying

bullying

highly prejudiced against race, women, and homosexuals

prejudiced against women, homosexuals, and those of different religions

nationalistic

demands and returns loyalty

militant

strict disciplinarian, dogmatic

 

Leaders are characterized by dominance, economic conservatism and a belief in inequality. Followers are characterized by:

  • Submissiveness to established authority.
  • "General aggressiveness" toward others when such behavior "is perceived to be sanctioned" by established authorities.
  • High compliance with "social conventions" endorsed by society and established authorities.

Sondrol characterized the differences between authoritarian and totalitarian (extreme form of authoritarian) dictators as follows:

 

Totalitarianism

Authoritarianism

high charisma

low charisma

leader as function

leader as individual

public power

private power

low corruption

high corruption

official ideology

no official ideology

no pluralism

limited pluralism

legitimacy

no legitimacy

 

While not addressed in the core authoritarian material, I was struck by the potential for religion to supply 'official ideology' and a charismatic preacher to supply 'charisma', thereby achieving the worst of both worlds.

 

Defining the authoritarian personality and its characteristics

 

In order to understand authoritarian behavior, Dean reached out to a principal researcher, Robert Altemeyer, a US national teaching in Canada, responsible for much of the sustaining authoritarianism research. After walking Dean through the technical literature, Altemeyer wrote two lay-accessible works that deliver the essence of the personality and its implications. Having completed a dive on primary material - see bibliography at end of note, I believe Altemeyer succeeded. (A more complete postwar research chronology can be found here.):

From chapter one of The Authoritarians:

Right-Wing and Left-Wing Authoritarian Followers... usually support the established authorities in their society, such as government officials and traditional religious leaders. Such people have historically been the "proper" authorities in life, the time-honored, entitled, customary leaders, and that means a lot to most authoritarians. Psychologically these followers have personalities featuring:

  1. a high degree of submission to the established, legitimate authorities in their society;
  2. high levels of aggression in the name of their authorities; and
  3. a high level of conventionalism.

Because the submission occurs to traditional authority, I call these followers rightwing authoritarians. I'm using the word "right" in one of its earliest meanings, for in Old English "riht"(pronounced "writ") as an adjective meant lawful, proper, correct, doing what the authorities said...

 

In North America people who submit to the established authorities to extraordinary degrees often turn out to be political conservatives, so you can call them "right-wingers" both in [the psychological and political sense]... But someone who lived in a country long ruled by Communists and who ardently supported the Communist Party would also be one of my psychological right-wing authoritarians even though we would also say he was a political left-winger. So a right-wing authoritarian follower doesn't necessarily have conservative political views. Instead he's someone who readily submits to the established authorities in society, attacks others in their name, and is highly conventional. It's an aspect of his personality, not a description of his politics. Rightwing authoritarianism is a personality trait...

The RWA personality test ranges from a low of 20 to a high of 180, 100 being the midpoint. Low RWAs are below 100 and high RWAs are above 100: 

What is a "high RWA"? When I am writing a scientific report of my research I call the 25% of a sample who scored highest on the RWA scale "High RWAs" with a capital-H. Similarly I call the 25% who scored lowest "Low RWAs," and my computer runs wondrous statistical tests comparing Highs with Lows. But in this book where I'm describing results, not documenting them, I'll use "high RWAs" more loosely to simply mean the people in a study who score relatively highly on the RWA scale, and "low RWAs" will mean those who score relatively low on the test.

Authoritarian submission and aggression

 

No wonder that I see dead air in this demographic when I look for challenge to received wisdom:

 

Authoritarian submission 

Authoritarian followers seem to have a "Daddy and mommy know best" attitude toward the government. They do not see laws as social standards that apply to all. Instead, they appear to think that authorities are above the law, and can decide which laws apply to them and which do not--just as parents can when one is young. But in a democracy no one is supposed to be above the law. Still, authoritarians quite easily put that aside...

 

High RWAs trusted President Nixon longer and stronger than most people did during the Watergate crisis.11 Some of them still believed Nixon was innocent of criminal acts even after he accepted a pardon for them...

 

High RWAs felt [Bush43's] policy was "both necessary and appropriate"" because of terrorism... authoritarian followers blissfully tolerated many illegal and unjust government actions that occurred... 

In Milgram electric shock replications authoritarian followers excuse higher authorities:  

high RWA students tended to blame the Experimenter less [the one who is telling the subject to administer the shock and "said, if pressed, that he would accept responsibility for whatever happened"] for what happened to the victim than most students did. [High RWAs blamed the subject ] ordered to deliver the shocks, and the victim, more than most others did.

Authoritarian Aggression

 

High RWAs appear to aggress anyone unloved by authorities. Altemeyer started with a proposal to persecute Communists, homosexuals, religious cults, "radicals" and journalists out of favor with government. High RWAs responded positively. Altemeyer then tried to organize an attack group that: 

liberals would join, to go after the Ku Klux Klan. But high RWAs crowded out everyone else for that job too. Then I offered as targets the very right-wing Canadian Social Credit Party, the Confederation of Regions Party, and the mainstream Progressive Conservative Party of Canada. These were the parties of choice for most authoritarian followers at the time, yet high RWAs proved more willing to persecute even the movements they liked than did others...

high RWAs... aggress when they believe right and might are on their side. "Right" for them means, more than anything else, that their hostility is (in their minds) endorsed by established authority, or supports such authority. "Might" means they have a huge physical advantage over their target... Women, children, and others unable to defend themselves are typical victims. [A]ttackers typically feel morally superior to the people they are assaulting in an unfair fight...

 

High RWAs tend to feel more endangered in a potentially threatening situation than most people do, and often respond aggressively.

Dean said that Altemeyer told him that "I look at the numbers in the [US], and I see about 23 percent of the population who are pure right-wing authoritarian followers.  They're not going to change.  They're going to march over the cliff.  The best thing [is] to deal with them - and they're growing.  And they have tremendous influence on Republican politics.  The best thing, the best defense is understanding them, to realize what they're doing, how they're doing it, and how they operate...

 

From the above, it appears that I have a one in five chance of potentially being harmed by a US citizen who will set aside statue law to harm me, despise me for no valid reason, and will continue to inflict harm on me for an indeterminate period until the higher authority relents. Heretofore, I thought that it was an external actor - an Islamic terrorist perhaps - that would do that.

 

I have many of my answers now. I suggest readers refresh themselves with the Stanford Prison Experiment:

Why Barry Goldwater Couldn't Support Obama

Barry M. Goldwater, Jr.

Huffington Post

Posted October 23, 2008 | 08:38 PM (EST)

 

Why McCain Has Lost Our Vote

CC Goldwater

Huffington Post

Posted October 23, 2008 | 10:28 AM (EST)

 

The Making (and Remaking) of McCain

By ROBERT DRAPER

New York Times

October 22, 2008

 

National Review Boots Buckley Son For Obama Boost

By Howard Kurtz

Washington Post

October 15, 2008

 

McCain and the politics of mortality

By ALEXANDER BURNS

Politico

9/3/08 4:50 AM EDT

 

United States National Debt

An Analysis of the Presidents Who Are Responsible for the Borrowing

By Steve McGourty

21 September 2008, fourth Revision

 

Replicating Milgram: Would people still obey today?

Burger, J. M. (in press). [as of 2008]

American Psychologist.

 

Decades later, still asking: Would I pull that switch?

By Benedict Carey

IHT

Published: July 1, 2008

A Famous Experiment [Slide Show]

 

Scheherazade in the White House

How George Bush's wartime administration used a magician, Hollywood designers and Karl Rove telling 1,001 stories to sell the invasion of Iraq.

By Christian Salmon

Translated by Morag Young

Le Monde diplomatique

January 2008

 

Table of Contents and Preface to Beyond the Hoax: Science, Philosophy and Culture

Manuscript, not published book, version

Alan Sokal

2008

 

The Milgram Experiment Today?

The Situationist

Posted by The Situationist Staff on December 22, 2007

 

State report: Multiple failures after prank call leads to shocks

By Associated Press/Boston Herald

Friday, December 21, 2007

 

Personality and Prejudice: From Big Five Personality Factors to Facets

Bo Ekehammar and Nazar Akrami

Uppsala University, Uppsala, Sweden

Journal of Personality 75:5

DOI: 10.1111/j.1467-6494.2007.00460.x

October 2007

 

Case Study

By ALEXANDRA STARR

NYT Magazine

Published: September 19, 2008

 

Understanding the Contemporary Republican Party: Authoritarians Have Taken Control

Part One in a Three-Part Series

By JOHN W. DEAN

FindLaw

Sep. 05, 2007

 

Why Authoritarians Now Control the Republican Party: The Rise of Authoritarian Conservatism

Part Two in a Three-Part Series

By JOHN W. DEAN

FindLaw

Sep. 21, 2007

 

The Impact of Authoritarian Conservatism On American Government: Part Three in a Three-Part Series

By JOHN W. DEAN

FindLaw

Sep. 25, 2007

 

A short version of the Right-Wing Authoritarianism (RWA) Scale

Anna Maria Manganelli Rattazzi, Andrea Bobbioa and Luigina Canovaa

Department of General Psychology, University of Padova, Via Venezia, 8, 35131 Padova, Italy

Personality and Individual Differences
Volume 43, Issue 5, October 2007, Pages 1223-1234

doi:10.1016/j.paid.2007.03.013   

Received 27 September 2006; revised 12 March 2007; accepted 21 March 2007; Available online 23 May 2007

 

Language's Affect on Culture: A Research Design

Michael White

PSY 6347 Developmental Psychology

Fall 2007

 

Recent Developments in the Study of Prejudice

by Michael R. Parker and Uwe P. Gielen

St. Francis College, the Institute for International and Cross-Cultural Psychology

Eye on Psi Chi

Vol. 11 Iss. 4

Summer 2007

 

American Fascists [video speech/Q&A]

by Chris Hedges

Learn Out Loud

LearnOutLoud.com Product ID: A026429

 

John Dean: Conservatives Without Conscience [video speech/Q&A]

by John W. Dean

Learn Out Loud

LearnOutLoud.com Product ID: J026612

 

Liberals Without Logic: Inconsistencies and Irrationality in John W. Dean's "Conservatives Without Conscience"

By Peter Thomas

Published by Lulu.com, 2006

ISBN 1847285252, 9781847285256

 

Retreat from Empiricism: On Ron Suskind's Scoop

By Jay Rosen

PressThink

December 18, 2006

 

Conservatives Without Conscience

Current conditions in US seem to align with Robert O. Paxton's nine "mobilizing passions" of fascism

Review of Conservatives Without Conscience

By John W. Dean

Viking, New York, 2006

David Neiwert

Media Transparency

September 18, 2006

 

John Dean Reflects on the 'Conservatives Without Conscience' Who Currently Run Our Country

A BUZZFLASH INTERVIEW

Submitted by BuzzFlash on Wed, 08/09/2006 - 4:02pm.

 

The Authoritarians

Bob Altemeyer

Department of Psychology

University of Manitoba, Winnipeg, Canada

2006

 

CONSERVATIVES WITHOUT CONSCIENCE

Review by NICK GILLESPIE

New York Times

Published: July 30, 2006

 

The Authoritarian Streak in the Conservative Movement

By John Dean

AlterNet

Posted July 22, 2006

 

Triumph of the authoritarians

JOHN W. DEAN

By John W. Dean

Boston Globe

July 14, 2006

 

'Countdown with Keith Olbermann' for July 10

Transcript to the Monday show

updated 1:38 p.m. ET, Tues., July. 11, 2006

KEITH OLBERMANN, HOST

Guests: John Dean, Paul F. Tompkins

 

Conservatives Without Conscience

by John W. Dean

Viking (July 11, 2006)

ISBN-10: 0670037745

 

A Few Bad Men

Ten years after a scandal over neo-Nazis in the armed forces, extremists are once again worming their way into a recruit-starved military.

by David Holthouse

Southern Poverty Law Center

July 7, 2006

 

Hate Groups Are Infiltrating the Military, Group Asserts

By JOHN KIFNER

New York Times

Published: July 7, 2006

 

Does authoritarianism predict post-9/11 attitudes?

H. Michael Crowson, Teresa K. DeBackera and Stephen J. Thomab

Personality and Individual Differences
Volume 39, Issue 7, November 2005, Pages 1273-1283

doi:10.1016/j.paid.2005.06.005

 

Construction of a short version of the Right-Wing Authoritarianism (RWA) scale

Ingrid Zakrisson

Department of Social Sciences, Mid Sweden University, SE-831 25 Ostersund, Sweden

Received 25 June 2004; accepted 1 February 2005

Available online 5 July 2005

 

The Social Psychology of Hatred

Evan R. Harrington

Paper presented at the Conference to Establish the Field of Hate Studies, Spokane, WA, March 20, 2004

JOURNAL OF HATE STUDIES

Vol. 3:49 2003/04

21-DEC-04

 

Without a Doubt: Faith, Certainty and the Presidency of George W. Bush

By RON SUSKIND

New York Times

October 17, 2004

 

Highly Dominating, Highly Authoritarian Personalities

Journal of Social Psychology

ISSN 00224545. ISBN 00224545

Volume 144, issue 4, pages 421-447

2004

 

The 2004 Essay: The Conscience of a Conservative

by Barry Goldwater

Foreword by Edwin J. Feulner

President's Essay 2004

Heritage Foundation

PDF

 

What Happens When Authoritarians Inherit the Earth? A Simulation

Bob Altemeyer

University of Manitoba

Analyses of Social Issues and Public Policy, Vol. 3, No. 1, 2003, pp. 161-169.

MIRROR

 

When Do We Sacrifice for Our Leaders?

Mark Van Vugt

School of Psychology

University of Southampton

The Psychologist, in press

2003

 

VINCENT BUGLIOSI V. THE FIVE JUSTICES OF THE BUSH V. GORE MAJORITY: A Review Of the Betrayal Of America

By LAURA HODES

Findlaw

Friday, Aug. 10, 2001

 

Right-wing authoritarianism, social dominance orientation and personality: an analysis using the IPIP measure

Heaven P.C.L., Bucci S.

European Journal of Personality

John Wiley & Sons, Ltd.

Volume 15, Number 1, January/February 2001 , pp. 49-56(8)

 

The Other 'Authoritarian Personality'

Advances in Experimental Social Psychology

Academic Press

Volume 30, p. 47-92, 1998

MIRROR at University of Kentucky, Lexington

 

Trailblazing Icon of Conservatism Dies

LA Times

May 30, 1998 in print edition A-1

 

Goldwater had a way with words

The Arizona Republic

May. 29, 1998 12:00 PM

 

The Authoritarian Specter

Harvard University Press

ISBN 0-674-05305-2

November 1996

 

Barry Goldwater's Left Turn

By Lloyd Grove

Washington Post Staff Writer

Thursday, July 28, 1994; Page C01

 

Totalitarian and Authoritarian Dictators: A Comparison of Fidel Castro and Alfredo Stroessner

Paul C. Sondrol

Journal of Latin American Studies

Vol 23, No. 3, pp 599-620

October 1991

 

Arizona legend talks politics

The warrior comes home

John Kolbe

Phoenix Gazette political columnist

Dec. 3, 1986 12:00 PM

 

The Perils of Obedience

Stanley Milgram

Harper's Magazine

Abridged and adapted from Obedience to Authority

1974

 

Classic Political Ad: Daisy Girl (1964)

 

Behavioral study of obedience

Stanley Milgram

Journal of Abnormal and Social Psychology 67:pp 371-378

doi:10.1037/h0040525

1963

Citation Summary

 

The Conscience of a Conservative

by Barry Goldwater

Hillman Books, New York

1960

2007 version edited by CC Goldwater, Princeton Univ Press

 

Gordon Housworth



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