Archive for the ‘Hot Topics’ Category

The Competition Paradox

Competition is good! Is this necessarily so in all cases? Certainly, no competition is a bad thing – state control, or monopolies are inefficient, and reward the few at the expense of the many.

So if no competition is bad, and competition is good, then it only stands to reason that more competition can only be better. It provides consumers with more choice, and forces the producers to up their game. This then is the classic non-sequitor, the Noble Lie supporting our cult – the Cult of Capitalism!

The greater the competition, the greater the pressure! In the beginning, producers work better, and smarter to beat the competition. The problem starts when they run out of ways to improve their competitiveness, but the pressure within the system keeps growing. What happens next?

Sooner or later, out of sheer necessity some of the competitors start bending, or even breaking the rules. If these few are successful in avoiding detection, the others will be compelled to follow suit if they wish to avoid falling behind. Ultimately, the situation arises where the player in the game is left with a simple choice – break the rules and risk the penalty, or stick to the straight and narrow, and go under.

Now let’s turn to the BP oil spill in the Gulf. This is very likely what lay behind the scenario that led to the disaster. The drilling company was ordered to increase capacity. Wishing to remain in business, they complied. The person at British Petroleum demanding the increase was no doubt under similar pressure, and this would then carry all the way up the line to the top. In the pressure driven environment the ultimatum presented to all those in positions of authority is: do what it takes, or we will find someone else who will.

This paying forward of pressure cannot go on interminably. Sooner or later it comes up against an immovable object – in this case Mother Nature herself. Singling out one of the links in the chain, and attempting to attribute blame to it is a complete waste of time. Once the decision to deep sea drill was made, an irreversible chain of events was set in motion that could have but one final outcome- disaster. We cannot know which rig will be the one to fail, or when it will fail, but that some rig somewhere will cause a catastrophic failure is almost guaranteed.

We can improve technology, tighten regulations, but so long as the pressure keeps building and building we can only expect more of the same. What was deemed as an acceptable risk turned out to be unacceptable? How many other similar decisions have been made, where risks are high, corruption is systemic, under highly specialized conditions is involved just waiting to explode?

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What do the BP Oil Spill and the Greek Financial Crisis share in common?

Over the last month two events have dominated the economic news: the Gulf oil spill caused by the mechanical failure on a British Petroleum offshore drilling rig, and the insolvency of the Greek Federal government. It seems on both sides of the Atlantic we’re beset with scandal and crisis.

Starting with the oil spill – the drill was operating in extremely deep water which places enormous pressure on equipment which in turn greatly increases risk. A further complication is that should anything go awry remedial action is difficult and uncertain. Under such conditions one would anticipate that the equipment would be over- engineered by a safe margin, in order to compensate for the risk.

No such luck! Instead, it turns out we have quite the opposite. A critical piece of equipment specifically designed to prevent such disasters, which is required by regulation in other parts of the globe, is not mandatory in American waters. Next we find out that should there be a calamity, according to some other government regulation, British Petroleum is only on the hook for $75 million.

This is all particularly confusing in light of the statements made by the young CEO on TV (presented in open collar and rolled up sleeves in a general office setting as the background), earnestly assuring us that despite the fact that the accident was not their fault, they intend to foot the bill.

Turning to the Greek situation – on television we see graphic pictures of rioting in the streets in response to the austerity measures demanded by the European Union. This was to be its penance for defaulting on their debt. In return they were promised $1trillion in additional financing. The editorial message to the world conveyed being that the Greek populace has been living well beyond their means, and is now behaving badly when called to task.

The news presents this as a crisis unfairly thrown in the laps of the financial mandarins in Europe. However, it is certainly no secret that living a relatively comfortable existence, and avoiding paying taxes has become something of a social contract in Greece. In light of this, the so called crisis was nothing short of inevitable. Also, the crowd’s reaction came as a surprise to no one, in the same way that the ultimate conclusion of the crisis – after much debate, wringing of hands, and gnashing of teeth, the Greeks got their money – was equally predictable.

All over the world financial markets react to the news about these two events by shooting up and down with each sound byte that comes over the news-wire. This distracts us from the underlying reality- that our systems are completely permeated, subsumed in fact, by corruption. Words such as ‘sustainability’, a big part of British Petroleum’s PR over the last decade, and ‘austerity measures’, a favorite of the EU Bankers, have become nothing more than meaningless verbiage.

In the meantime, the pressure keeps building and building. British Petroleum’s spill continues to gush out toxic crude, the Greeks carry on with their lifestyle till the new money runs out, and in the end nothing will change. Sooner or later the public will lose interest in these calamities, only to be titillated by the next one that comes along. It would seem that all of us are so preoccupied with just surviving today; we don’t have the psychological capacity to even engage with the singularity towards which we are accelerating.

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The Basic Flaw in the Linear Competition Model

Theory posits that competition motivates performance and in the process optimizes efficiency, innovativeness, and resourcefulness. The problem is that this can only hold true when there is perfect transparency- one can always objectively assess performance and clearly identify accountability.

The problem is that in life there is never true transparency, therefore those skilled in the management of impression and perception can always gain the edge.

Also, as the market matures and an increasing number of competitors participate in the market, the amount of effort required to gain the edge on the others, either through improved efficiency, good administration, or creative financing diminishes. At this point the incentive to not play by the rules, to make false assertions about either your products strengths or your competitors’ weaknesses increases. Also, when there is not enough to go around, the likelihood of creating artificial barriers to entry which effectively restrict competition, increases as well.

Where all this is leading is that the capitalist free-market competitive model, left to find its own equilibrium, actually leads to a sub-optimal result. It leads to corruption, collusion and nepotism. Once corruption reaches a certain critical mass within the system there is no way out and everyone becomes complicit.

An example from personal experience was when I was engaged as the crisis manager to run a meat processing company in southern Hungary. The regular production flow was to purchase the meat from a local slaughterhouse, process it and then export it to the German market. Because of anomalies in the meat prices caused by subsidization in the EEC, it was significantly less expensive to purchase Danish beef then it was to buy the local produce. The margin on the meat conserves was very small, and the price difference made a huge difference in the profit margin, making the locally sourced conserves uncompetitive on the export market. The catch was that the regulations prohibited it and there were regular veterinary inspections to enforce compliance. Any company wishing to purchase the Danish beef in larger volumes was certain to get caught, and fined severely. The only way around this was to pay off the local inspectors.

As the manager I was faced with one of two choices. Buy locally, in which case my potential markets and margins where severely reduced, in some cases completely eliminated, or to bribe the inspectors.

As a foreign consultant I could hardly entertain the option of bribing the inspectors. However, had I been a locally sourced executive, I would have had little option but to play the game and pay the “unofficial market tax”, if I wished to retain my position.

The point is that as an industry matures it reaches a point where corruption, nepotism and collusion simply become a part of doing business. Ironically, there is a kind of “the lady doth protest too much” attitude that develops among those in the inner circle privy to what is really going on, that this reality is simply not mentioned. Here in the West, we even go to great pains to cover it up with laws and codes of conduct. In the end the only people taken in by this subterfuge are those in the upper and middle ranks of the company- the players and the drones. Everyone else takes it as almost self evident that those in charge are lying and have something to hide. It remind me of a former girlfriend’s cat who, despite being a full grown cat, used to try to hide behind a chair leg.

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The Road Less Travelled

When confronted with a world in which the ruling ethos is ‘catch as catch can’, looking out for number one would appear to be the logical survival strategy. The problem comes when you ask yourself: where will this lead me? For if you subscribe to the zero-sum game metaphor created by the Hidden Games of life you reduce life itself down to one of two possible outcomes – winning or losing. Losing is not an option, so everything you do is now channeled towards winning. In your thoughts, in your choice of friends, in your beliefs, winning becomes the filter that decides what you keep, and what you discard. It is not so much that you have to win; you have to look like a winner.

Since society, through the media, is provided with a narrow set of templates regarding what a winner is supposed to look like, act like, think like –we make every effort to sublimate our innate tendencies, and idiosyncrasies and become as close to the ideal template as we can get. The only way this is sustainable over the long term is if we can hypnotize ourselves into believing that this is who we truly are.

Some of us try to deceive ourselves into believing that we can play a kind of double game. One in which on the outside we give every indication to those around us that we conform to the template, while on the inside, we remain true to who we really are. What we forget is, that like it or not, we are integrated beings, rather than a collection of subroutines (as adherents of NLP would have us believe). The boundary between this inner and outer self is extremely porous – we cannot play a part for our whole lives and not have it impact us in some way. Over time, if the actor plays a character long enough, he cannot help but become the character.

From another perspective, having ‘sight in the valley of the blind’ will drive you mad in the long run. It only isolates you and creates a tension between your outer and inner world. Over time as this tension grows, one side or the other must give way. Either you leave the Game and pursue your passion, or you become the ‘mask’ you have been wearing.

The path you ultimately follow is not so much a matter of choice but of character. The overwhelming majority will naturally follow the path of least resistance (or that which appears to be so). A small minority will then follow the road less traveled. This will be a hard road indeed!

The Game that engulfs society is a kind of trance. Any trance only work so long as all are complicit. Those who will not play, the moment they declare themselves as such, become an immediate threat to those who wish to maintain the illusion. Therefore, those who still remain under the spell will have a driving need to marginalize these mavericks, to discredit them in any way they can. For if there is even a speck of truth in what these outliers suggest, than their world is exposed to be nothing more than a huge sham. What group, what family, what religious sect, or what organization, could ever tolerate that?

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Creating the disease and providing the cure

Over a year ago, before the Wall Street fiasco, I had a conversation with an investment banker at a local café I like to frequent. He was just in the process of studying for his CFA exams and one particular course was giving him a great degree of difficulty- it was ethics! Our conversation drifted towards the kinds of deals he was working on and what his role as an investment banker was in these transactions. At a certain point I could resist the temptation no longer and asked him “And what is your value added in these transactions? “Information!” he exclaimed, without even pausing so much as a second to think.

The young banker went on to explain in a pedantic, somewhat patronizing tone that through his circles of connections, and his knowledge of the little loopholes in the process, he could connect those wishing to sell their companies with those wishing to buy them. He would also provide assistance by putting together a team of high level experts needed to traverse the labyrinth of regulations which govern such transactions. As a final note, he then added that his value added was usually far in excess of the fee charged, even thought to those on the street it might not appear that way.

We live in the information age. The average individual has access to far greater information than at any other time in history. Yet despite this ready access to information, the brokers of this world have risen to a position of unparalleled prominence in today society.

An economist will argue that the investment banker adds value by providing a valuable service in addressing the needs created by the imperfect distribution of information in the system. The problem lies in the fact that this ‘inefficiency’ of the market is the only raison d’etre of the investment bankers, and they lobby hard to preserve it.

Under the guise of protecting the interests of the public the financial system is governed by innumerable regulations. Instead of safeguarding the investor, their only discernable impact is to force all the investors in the market to require the services of gatekeepers such as investment bankers, corporate lawyers and an assortment of other advisors. The great irony is that when the system breaks down under the weight of all these intermediaries, the reflexive response is to add yet another layer of regulation, which only serves to further embed these ‘indispensable’ individuals in the system.

Now a year on, the crash has passed, the system was saved from collapse, bonuses were paid, and Christmas sales are up from last year. Some might interpret this as proof of the robustness of the economy and the system. Another perspective might be that this is all a setup for the coup de grace soon to come.

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The Importance of Being Gracious

In today’s go-go, time is money world, graciousness and style have all but disappeared. We simply do not have time for them. On those rare occasions when we do encounter them, they seem so archaic and out of step with how the others conduct themselves, it can appear almost cartoonish. The reader might say to themselves: well this is all very sad, but time moves forward and really why should we really care? Kurt Vonnegut, in his book Slaughterhouse Five, provides an answer to this question.

American and British POW’s were interred together in a POW camp situated in a former slaughterhouse in Dresden Germany, near the end of the war, just prior to the major firebombing that wiped out the entire city. The British officers made a regular practice of putting on plays –the men playing both the male and the female parts as was done in Shakespearean Times.

The main character, Billy Budd, asks one of the British officers why they observe this seemingly absurd ritual. The officer repied by recounting an anecdote related to one of his fellow officers. He told Billy, that one day this officer came to see the theatre as an absurd, pointless exercise, and he subsequently bowed out of the acting troupe. A few weeks later he stopped participating in the morning exercises with the rest of the officers. After another few weeks he ceased brushing his teeth and observing personal hygiene. A few weeks on he just stopped getting out of bed. A few weeks later he was dead!

As time passed in the prison camp the British maintained their decorum, the plays went on as scheduled, the British remaining defiantly indifferent to the deprivation that surrounded them. Meanwhile the situation with the American troops was quite different. Discipline became progressively more lax. The prisoners began to steal from one another, fights broke out, morale plummeted.

Life can be thought of as a box of chocolates or as a fickle mistress – we never know what we’ll get it. One day you can be on top of the world, the next day you can be down in the gutter. Sometimes you have only yourself to blame for your misfortune, sometimes you’re just swept along by the tide of events around you. Perhaps the only things we really do have under your control is whether you maintain your standards, or descend to the behavior of the mob. The choice is yours!

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The Limitations of Coaching

“The greatest track to the devil ever played was making us believe he does not exist.”- The motion picture All the Usual Suspects.

In the sanitized, politically correct world of corporate coaching everything gets a positive spin. Through the alchemy of political correctness anything negative is turned into a euphemism. Conflict is translated into disagreement. Lies are transformed into misunderstandings. Manipulators are turned into persuaders. To say otherwise, immediately conveys the impression that the speaker is either immature, or simple minded.

One reason for this could be that the corporate world is so deeply permeated by narcissists that they simply see this as the way it is, always has been, and always will be. The point being that if you buy into this nonsense you are severely restricting your vision in dealing with the jungle you inhabit. The odds of your being blindsided will then multiply. Most coaches, for a number of reasons, cannot violate this taboo. Some of them are listed below:

1. It will jeopardize business – corporate training is one of the best sources of income for coaches. Few organizations are likely to support a “negative” approach to in-house training.

2. It will alienate them from their peers within their own profession –each profession as its own groups think if which then generates a kind of orthodoxy. Any realpolitik approach to the corporate environment is considered heresy by a world dominated by Pollyannas.

3. It is not a cookie cutter approach –once we open the Pandora’s box of the shadow of the corporate jungle, it introduces new variables into the equation which complicate the issue of how to get ahead. It is disquieting to think that instead of being engaged in a orderly process with a predictable outcome, we are instead in a game where success is no longer guaranteed if we work hard, do our job brilliantly, and follow the rules. Quite the contrary.

As in every sphere of life in corporations there is the Hidden Game and the inner circle of Players who enjoy the inside track to success. So now you are thrust into the cold reality: life makes no promises. You can do all the right things and still lose. But at least now you’re in the game!

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Religion vs. Spirituality

It is not difficult to make the case that religion, particularly fundamentalist religion, is one of the greatest negative forces in human history. How many wars, how many tortures, how much suppression, how much sadism, has been created by religion? Christianity, despite being based upon the preaching of a messiah who emphasized compassion and tolerance above else, is unsurpassed in the number of people it persecuted in Gods, Mary’s, and Jesus’ name. it is a sin to take the Lord’s name in vain, yet who has done so more than the Church itself?

All of this notwithstanding, if this still continues to be a seed of truth in each of the great religions. The problem lies in attempting to weed out the truth from the fiction. The four gospels that communicate the story of Jesus to us today themselves have major discrepancies. In the centuries immediately following Christ’s death, there were as many as 50 gospels. At this point it is impossible to determine which of these were the most faithful to the true story.

Manipulators and deceivers are not creative; their lies are not pulled out of thin air. Instead they find it much easier to take the facts, shuffle them and then rework them into a pattern that best suits their purpose. They are the “knaves who twist your words to make a trap for fools”. There is no better way for Satan, if he does indeed exist, to undo God’s work than by bending and twisting it until it bears only the vaguest resemblance to the original.

Looking at the story of Jesus – what if Judas was not the villain, but the fall guy? Peter denied Christ’s name no less than three times before the cock crowed. What if it was he who was the true villain of the story? When one stands beneath the dome of Saint Peter’s basilica, it is hard to imagine that its pomp and splendour are what Jesus had in mind when he sacrificed himself on the Cross for our sins.

The movie, The Passion of Christ, is yet another example of how the intent of Christ’s sacrifice is manipulated to serve the intentions of his persecutors. By focusing the attention upon the act of the crucifixion and the enmity of the Jewish Elders towards him, it incites rage on our part, instead of forgiveness. Pontius Pilate, a conspicuously cruel and incompetent Roman magistrate, who was not shy to crucify anyone who challenged Roman rule, a governor who lined the road to Jerusalem with crucifixes to send a strong message to all who traveled there, is miraculously recast as a soulful, contemplative intellectual upon whose conscience Jesus’ death weighed heavily.

This story could not have been interpreted in a more flattering way to the Roman occupiers if it was the Romans who are the authors. Indeed we are the Romans. we seek power, status and comfort if not forgiveness. We as a culture esteem those who win, not those who play by the rules, or are good sports. in some sense we are in fact worse than the Romans – at least there was a certain brutal honesty in their hedonism, while we need to shroud ours in moral rectitude.

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“It’s an act of bravado then?”

At the liquor store I got into the elevator with my bag of liquor. In a couple of seconds or another passenger joined me. “You should be more careful should be careful not to trip on your shoelace” he said with a smile. “When I leave the house and make an important decision-whether or not to tie up the laces of my shoes. Then I keep to that position if for nothing else of sheer spite.”

I replied. “It’s an act of bravado then?” he said and smiled. “Exactly!” I said returning his smile. Within a few seconds the short a liberator ride was over. We said goodbye in each of us went our own way. This is the magic of the game has no way to counter. If no matter what they do if it will always find a way through the cracks.

In the end it is all that we have. Styles, graciousness, the twinkle in the eyes, are those quintessential traits that make us human- that make us bearable to ourselves. Moments like these, and the memory of them stay with us always. Any attempt to capture what such moments truly represent can only fail and diminish them in the process.

It defies compartmentalization and analysis. It is as ephemeral as life itself.

Let us celebrate these moments and leave out all the rest. Such a philosophy will not help drive the economic engine of the economy. Such an approach to life will not sustain us producing more, faster drives technological progress. But in the end it is the only force that can endure.

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The Game is a Gigantic Trance

As mentioned in book one in order for the game to work it needs to be concealed. A mechanism employed to achieve this result is what Plato referred to as a noble lie. Is a settlement which induces everyone in the society to believe that the social order, the laws, the caste system, the customs are all divinely ordained to be so. The Middle Ages this was done by teaching the people that the tamed ruled the population by divine right in. Therefore, to go against the King’s wishes, or his judgments, was tantamount to going against God himself. Defying authority was not only regarded as treason but as sacrilege. In the home this translates to father knows best. On the American dollar can read the inscription in god we trust?

Now the question remains as to how this myth can be sold to the entire population in other words how can you ensure that your fool all the people all the time? If you try to sell it by appealing to reason, some might buy in, but others will not. Also even those who are gullible enough to fall for the ruse will not stay fooled forever. So then how can people be made to wholeheartedly except the noble lie and then regardless of what happens stay faithful? There’s only one way: hypnosis!

If the people need to be entranced, brain watched, so thoroughly that becomes part of who they are and is simply seen as the way it is. Current example of this Barrett the phenomenon is the big risk, almost hysterical, debate over Medicare medical reform in the United States. The Unites states is a democracy that a lot each individual man and woman happened equal vote in deciding the destiny of the nation. the vast majority of the population stand to benefit from the socialization of medicine. Over 30,000,000 people are currently without coverage of any kind. Almost half the bankruptcies in the country are related to the inability to pay medical costs there is a mountain of documented evidence supporting the fact that the HMO and drug companies are in collusion of is that there is not only corrupt but extremely inefficient as well.

Yet, despite this, the president is going to have an uphill battle to get the law passed. Even if he is successful in passing some sort of legislation, by the time it goes through both the Congress and the senate it also be so diluted, that it will lack the essence which was needed to make it work. Therefore in the long run, the likelihood of the entire process them into a positive conclusion with universal Health Care provided to everyone in the United States is extremely low.

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