Syzygeist

Ray Joslin, 1936-2013, In Memoriam

Journal entry, Friday, Sept. 20, 2013

To Ray at his Memorial

Today is Ray Joslin’s memorial service, to be held at 2 p.m. at Christ Church in Greenwich, Connecticut, and I am to speak among four others who will give eulogies. What would I wish to say that he might hear in the ether, and in which those who also knew and loved him might find something to recognize and to hold?

I met Ray when I was a new reporter covering City Hall in Stockton and he was the face/voice of Continental Cablevision trying to comply with the city’s rules for undergrounding cable. The economics, he testified, did not favor undergrounding costs in all the subdivisions. He had “run the numbers” and it simply could not work at the penetration rates they were seeing and expected as the city grew.

Wanting to be thorough (as the City Hall reporter) and get some kind of proof of his claim, I asked if I could see the numbers and he invited me to visit his office the following Saturday morning when he would be alone working. There he pulled out an immense accounting book, the original bound, paper spreadsheet acccounting book that might have existed in Charles Dickens’ time. Written into every row and every column on both sides for some extraordinary numbers of pages were numbers – digits scripted in No. 2 pencil, each one touching on all four sides the tiny boxes they occupied – and I saw in that instant the meticulous, methodical, thorough, driven, compulsive, ambitious, determined, exceptionally bright, numbers-literate man that Ray was, then and throughout the 37 years in which I came to know him as a friend. (He left several years later to become the first head of Hearst Cablevision and built that division from 1980 onward.)

I came to appreciate
that these were just some of Ray’s exceptional gifts and because they were so exceptional they would contribute to his great success in many areas and also to a kind of loneliness that can often accompany exceptionality. He had a vivid business imagination and a relentless analytical turn of mind. He was also a helluva lot of fun when he was in a good mood and let himself indulge his great curiosity and enthusiasm.

We once traveled to some desert-like place in Nevada together to speculate how a massive watering operation could transform it to productive land. We decided Stockton needed a state-of-the-art mini golf land and Ray “ran the numbers’ and suggested a partnership operation to the owners of the Bay Area Peninsula miniature golf facility that had set us off on this notion. As I got the story later, they liked the idea and the numbers and decided to do it themselves on Pacific Avenue in Stockton, and we were never part of it, although we always enjoyed knowing it was our idea.

Ray loved ideas, but he also loved making them real and he was tireless in his energy. If it is true that our angels and demons live close together I will speculate that Ray’s relentless activities expressed a desire to arrive someplace that was perhaps unreachable on this plane. In the meantime he cared deeply about the prospects of others, which I know that from my own relationship to him.

He once asked me to sing at his annual Christmas party at his home in Stockon – Silent Night, I think it was – and I remember being very moved that he asked. How did he know that I wanted to, but also was afraid, unprepared to face that particular crowd in that way? But he urged me to and I still can picture him watching me, smiling with a mix of paternal and fraternal support, taking pleasure in a moment that he created for me. I don’t think I performed particularly well but the point was in the moment Ray was creating for someone else. He gave Ruth, Emily’s mother, her first opportunity in cable marketing to put her Sarah Lawrence and Stanford writing skills to work and she turned that into a considerable career. He believed in hiring and promoting women before many others in corporate business took this view and he applied it more than many did. He believed in giving people a break, a start, support, a leg up.

He was immensely generous, not only to his children and friends – he helped with his Goddaughter’s tuition in her first year of Haverford – but also gave mightily to Trinity College and, it seemed to me, anyplace he thought he could make a difference to others in ways that would expand or benefit their lives.

At my own personal level of “life with Ray” I can still see him at the bridge table at my house in Stockton. It was about 1977 and we were stoned and no one was exactly sure whose bid it was and we laughed as one did in those days, in that state, until we were weeping and begging each other to “shut up!” because our faces and sides hurt so. I see him navigating a houseboat on the south fork of the Mokelumne River in a rare few days of vacation. I was telling him that if I could quit smoking cgarettes then maybe so could he, and I would never bring it up again, although I did (and it made no difference.) I was sitting in a vast ballroom in New York City soon after coming back East in 1996 and Ray was being honored for all his contributions to film and media and the broadcast industry. He could run in any crowd, more than hold his own at the highest levels of business, fill every room he ever entered no matter how big, make big ideas come true and find ways to express his capabilities and good fortune with those less fortunate or less capable but whose prospects he wished to enhance for reasons he carried deep within him that might never be fully known to others, even or perhaps most to those closest to him.

I loved Ray – as a friend and man of great energy, integrity, commitment, determination, enthusiasm, curiosity, generosity, intelligence, humor – I could go on. He was always dapper as hell.

And he was also a flawed human man who struggled for intimacy and understanding and true comradeship in a world where not everyone behaves with the same interest in others in mind and where, frankly, the pressures and realities of business can make it a treacherous place, where the most deserving do not always get what they deserve and, unfortunately, the least deserving do not either.

I remember in 1993 trying to eulogize my father and confronting the sheer impossibility of capturing who he was or what he meant to me and that, thankfully, is the nature of knowing another person well over time. In the end you cannot say all there is or even all there is you might wish to say to try to capture all that you saw, and felt, and felt you knew.

Ray, I see your grin, I hear you laugh. I can feel you quicken to a great idea. I know you could imagine more than many and do what even fewer were able to do. I am grateful for your coming here, for your way of being in my life and I shall always be a friend and support to your family in any way I can.

God bless you. .

Row Row Row Your Boat, Gently...

With uncertainty and complexity abounding, too much information flooding over most of us and the Global Happiness Index (GHI) challenged by much in modern life, it's worth noting that the best advice is often wrapped in a children's story or rhyme, which only endures to be repeated through generations and across cultures because it is quintessentially true. 

Few can beat the little song we used to sing in rounds while on summer holiday before anyone held a hand-held anything to amuse them during those seemingly endless hours in the car. (And kids singing verses together don't squabble.) 

This one has its origins in English nursery rhyme and American minstrel songs and supposedly first appeared in print in the U.S. in 1852.

Row row row 

your boat

gently

down the stream

merrily merrily merrily merrily

life is

but a dream. 

Why should this have become such a repeated mantra for children? Full of advice for getting through life, it has inspired many to reflect on its deeper meanings. As a sailor who has often rowed back and forth between shore and a sailboat, I have had plenty of time to think about it - and enthusiastically sung it many times with my own children when they were small.

Row row row 

Rowing requires both hands, applied equally for the most part (and use your back and legs if you want to bring real strength to the action) and a sense of direction. 

Balance! Don't pull too hard to one side unless you want to turn or you will soon be off course. Steady and rhythmical is almost always better than too much effort expended in bursts. Repetition and self control matter. Practice makes perfect.

Your boat 

Not someone else's. You're in it so you need to take care of it. It's the only one you've got. And it is uniquely yours - in what it's made of and contains and where it's going (or could go).You are on your own in most respects. So care for your boat like no other.

Gently 

Of all the adverbs in the language to appear here, why this one? Think about the way you conduct yourself. How does it feel, and feel to others? Considerate, tender, gradual, refined, of good family - and the word hints etymologically "of the same clan." So row with a sense of belonging among others - congenially.

Down the stream 

Yes, go with the flow, not fighting the current (although this may be necessary sometimes) but using the nature and direction of the stream to help you along. A stream is always moving and never exactly the same in any other place or at any other time.  So keep paying attention to the stream wherever you find yourself in it.

Merrily merrily merrily merrily 

"In a joyous manner" is one definition offered, but also consider that this adverb (any word that describes action) is repeated four times. No other word is given as much space or attention. So attitude matters a lot! And this attitude should live in the world of delight, pleasure, humor and joy.

Life  

Ah, life itself - everything around you that you see, feel, touch, smell, know, imagine, desire, fear, revile or revere...  

is but a dream. 

Images, ideas and emotions that seem to come upon us or that we may conceive spontaneously are all in us. This complex of perceptions are "real" but also "imagined" in the sense that they are the unique images we take from - or bring to - the world. That world is in us too. (Some might say it had its origins in us from birth, or even before that!) 

Is life not as we imagine it to be?

Row row row your boat, gently, down the stream… 

Merrily merrily merrily merrily - life is but a dream... 

Amen.

Four Principles to Guide a Life

Years ago I listened to noted columnist James Kilpatrick give a talk about writing. He said every good piece should follow the same formula:

"Let me take you by the hand and show you a place I know, which for seeing, will change you forever."

I would be delighted to think this is about to happen here and now for someone reading the words that follow!

In the autumn of 1996 I had just moved back East to New York City from California to work for Morgan Stanley after a 20-year career as a journalist and a half decade as a scenarios-to-strategy consultant -helping companies decide what they should do in light of the uncertain future.

It was a beautiful autumn day. I stepped off the curb in front of the public library, Fifth Avenue yawning full of traffic to the north and people bustling to work. I can still see all the details of that moment as clearly as on that day.

Four phrases appeared on the screen of my mind, as it were, and I stopped to write them down in a little notebook I always carried with me. (Retelling it now reminds me now of something that my scenario work has taught me - the most important idea can come from anyone at anytime, anyplace. But is anyone listening? And will they DO anything?)

The words were four separate thoughts in sequence, which have become principles in my business and I try hard to apply them in my life:

1. Clarify the Intention

2. Define the Sacred

3. Understand the Commitment

4. Act to Be

At one level - the words themselves, and the phrases, are simple enough. It is in their application that we can discover the value of them, as I have found in working with individuals and organizations over time.

Clarify the Intention.

It was Yogi Berra who allegedly said that if you do not know where you are going it is hard to know when you get there. We also learn that a journey of 1,000 miles begins with a single step - but a step of what kind, and in which direction? Directly toward the target, or just "west," as in "Go west young man?"

What is it you want and need to do, which in the doing will bring you closer to something you deeply desire? This may be a big question about what you want to become in your life, or a smaller one about where you want to live, or it could be an enterprise issue of defining a strategy for the next year or three or five.

Often in exploring this question - and it is valuable for executives of organizations to apply scenario thinking here - we discover that the intentions we thought we had are not as important as the ones we have determined to clarify for ourselves from this moment on, and pursue in a new way, for reasons that become clear in the present work. Our perceptions of the future can - and should - influence present action.

We want to "become," but become what? What is your intention, that you most need to express because in so doing you will fulfill what is very if not most important to you? You can apply this to a day, a week, a year or a lifetime. It's up to you - your clear intention.

Define the Sacred.

I directed a re-visioning effort at Morgan Stanley in the late 1990s to clarify the intention, so to speak, for the "new company" that was formed by the Dean Witter-Morgan Stanley merger. One company was all about retail investors, the other was all about institutional finance. Two cultures. What were they to become as one company?

They had different intentions, different value systems. A lot has been written about what happened there, and since, and I won't explore that now. My research at the time revealed that a visionary company is six times more profitable that one without a vision, and no visionary company succeeds without core values, lived and expressed by the people doing the work. Top-down, bottom-up, side-to-side.

What do we mean by "core value?"

A core value is one of a few closely held convictions that you actively express and do not abandon just because things are hard or the audience is hostile. You deeply believe it and stick to it. And you can't fulfill your vision - your intention, if you like - without core values.

So what are the few things that you believe deeply and do not want to abandon no matter what challenges you face because these values are deeply a part of you?

Perhaps you know them, and live them. Perhaps you know them and don’t live them. Perhaps you are not sure. They are worth thinking about, and worth expressing in your life if it is to become the life you want.

Understand the Commitment.

It is in some respects easy enough to declare an intention and lay claim to sacred beliefs, but the fulfillment of these requires resources - time, effort, expertise - and an understanding not only of
your course of action but of all the known elements required to "get there." 

It is not useful to declare an intention to be fit, and a belief in a healthy lifestyle, if you are not willing to do - and not do - the things required. We can all think of things we say we want to do but are unwilling seriously to undertake because of the commitment required. 

Before I went sailing alone in the ocean for the first time, I realized how much I had to learn, how much preparation the boat and I both required, and how the effort to prepare us would draw not only on all the

resources that I had but required that I add more abilities and understanding to my effort before it would become credible - or even safe - to undertake. 

As an old sailor warned me then, "The sea lies in wait for the unwary, but she stalks the reckless." It can be reckless to set off on a journey for which you are truly unprepared.

Act to Be.

Those of you who studied French philosophy might recognize this as the existential challenge. I heard it first clearly from a somewhat infamous land developer I interviewed in Hawaii after I arrived there
after sailing in alone from San Francisco.

His name was David Murdock. He was a controversial figure who had overcome considerable family tragedy as a young man and now was building hotels on Lanai amid objections that he was ruining one way of life in favor of another. I was interviewing him for a business story for the San Francisco Examiner for whom I worked then and he made a case for action that stuck with me.

"It's not bad to have an ego," Murdock said, "It's bad to have no ego. You understand this because you identified something you wanted and needed to do and you did it. You sailed alone in the ocean for 25 days to get here, and you got here, and now it is part of you forever. That is the lesson. Act to be." 

As it happened this decision I had made to sail alone to Hawaii and back at that moment in my life changed the course of it. It led me away from newspaper writing, started me on a book that took me 20 years to finish and also into scenario thinking as an business-like approach to uncertainty. This turned out to be a fascinating way to use possible stories about the future to change the story of the present – how you understand it and how you act on the possibilities before you. 

Scenario thinking, which was a perfect practice in many ways for a journalist - created an unexpected career that brought me to Morgan Stanley for one of the most extraordinary decades on Wall Street, and finally - or so far – here. As a consultant and writer and sometimes speaker – and father of three from two prior marriages - I am still trying to live certain ideas in my life to become the person I had in mind.

Or perhaps I should say, “have in mind” because intention is something we are expressing now, whether we are doing so clearly and intentionally or not. We are becoming as we behave. Intention is our guide, a compass of our own design. Perhaps if you accept this metaphor you should examine what seems to attract you most essentially.

These four principles are easy enough to remember and say aloud but challenging to apply. They are valuable insofar as you make them about you and your life, day-to-day, week- to-week, personally and professionally:

Clarify the Intention. Define the Sacred. Understand the Commitment. Act to Be.

It is up to you.

Unsettled World Hints at Extremes to Come

Syzygeist, the name for this blog, is a made-up word to suggest sudden convergences that you should think about and perhaps act upon. (Look up syzygy for the root idea and think also zeitgeist).

Now after a hiatus from this space to undertake two personal projects - racing my 47-foot ketch Feo from Newport, Rhode Island to Bermuda with my three children, and buying-to-renovate a wreck of a cabin in the woods near NYC - I return to contemplate the world of troubled Europe, politically and economically stalled US and numerous other uncertainties that could change the game for businesses and individuals in short order, and to which various corporate clients (and others) wish to apply their attention. 

What to do? If it is a time for "flight to safety," where is safety? (Presumably a house in the woods is one answer, or part of  one, but only in extremis.)

Yesterday a client with deep experience in global finance dismissed US Treasuries as any longer a safe haven, calling them instead a crowded trade that is bound to reverse, and reverse violently when the time comes. Interest rates will not stay low forever. What then?

This market is about convergences - of conditions, beliefs, behaviors - and also about instability, or the tendency of things not to stay the same, perhaps radically. Racing to Bermuda provided real examples, with the lead boat smashing the record by 15 hours over the 635-mile course to finish in just 39 hours. Why?  A rare and persistently powerful northeasterly gave the swiftest boats perfect conditions for record sailing and we found ourselves for 24 hours in the fastest conditions of our lives to date.

Once in Bermuda, the fleet found a tropical depression forming in the Gulf of Mexico. Those of us needing to return with our boats to US shores had to ponder whether this depression would defy history and come across Florida into the Atlantic, or do what all the prevailing weather models suggested it would do, which was to move north into Texas to  be dissipated there.

As it happened, "Debbie" came across Florida - given only a 10 percent chance or less - and did little damage. More to the point it reflected unsettled conditions in weather these days - a jet stream that is behaving uncharacteristically, an Atlantic high pressure system that has not taken its usual position - resulting in more surprise storms than usual, more violence in local weather. 

Call it unsettled.

I draw the parallel here between weather and political-economic conditions affecting business and our daily lives. Unsettled is the key word.

We have not previously been in a world where major structural elements have converged as they are now - a troubled and fiscally/politically challenged Europe with rising unemployment; China as the engine of emerging markets facing a possible hard landing; the UK and US both slowing down with apparently limited growth prospects; and, in the case of the US, a political stalement as structural fiscal problems worsen. Will the choice of the next US president be as important as whether the collective political or domestic will addresses the real problems? And will it? Consider the number of other countries where political transitions are imminent, and problems rising.

The implication of unsettled conditions in sailing is often to stay in port or get to a safe anchorage. In our case we believed the weather models and we departed, reasonably certain that Debbie would not catch up to us. And she did not. 

Instead, on the second day out, a spontaneous (unforeseen by the "experts") Force 8 gale - winds of 35-42 and waves above 20 feet - set upon us for 20 hours. It had not been part of anyone's model-prediction. Fortunately, our steel ketch is designed for the roughest seas and the crew was able. But the lesson was clear, even if the implications were not entirely so. 

When things are unsettled you must be prepared not only for what the models say might happen, but also for what they do not say at all. Unprecedented also implies unforeseeable. Powerful forces converging in new and unexpected ways can create extreme conditions - and you had best be ready for them.

 

Act to be!

James Holding is a 37-year-old British marine biologist who, in his own words, “saw the race on the news and couldn’t believe it was possible.”

I was unable to meet James personally under the circumstances

to ask how he was faring after the ninth and 6,000-mile leg across the Pacific from China to Oakland, where the “Clipper Round The World” http://www.clipperroundtheworld.com/index.php sailing fleet was now about to depart on its 10^th leg to Panama, another 3,000 miles south. The 10 specially designed masthead cutters will then begin their last big push with a penultimate stop in New York en route to the UK where the race originated nearly a year ago. 

In Oakland at the StrictlySail Pacific Boat Show to give my seminar “Getting Out There Alone,” I was about to talk about the special experience of solo sailing, the beauties of the ocean and the challenges of making one’s dream into reality. My own days at sea had changed the course of my life in ways I was still coming to appreciate. Some of these apply to anyone wishing to turn their own deeply felt desires into a specific plan of action, as these sailors were all doing.

The crew of the boat “New York” posed for a photo

with at least one crewmember’s parents looking on. They had journeyed all the way from southern England to greet their daughter, Elizabeth Allan, for whom this was a first sailing experience. And what an experience! She would be one of 14 women on a crew that included 44 individuals from varied walks of life - eldest 72, youngest 22 - and an average age of 46.

The 68-foot matched racing sloops are operated for profit under the chairmanship of renowned solo circumnavigator Robin Knox Johnson. They host crews of 18 aboard to give people a chance in global match racing to live the dream of sailing around the world. James was just one of hundreds who saw the opening and took it.  (How many considered it but did not?)

James’ father scanned the crews as they prepared to disembark from Jack London Square April 14 under clear skies and a briskly rising northwesterly breeze, which would give them fast initial sailing south. He explained that James had suffered a back injury on the race into Australia but fought to get back aboard in China to continue the trip, toward which he had devoted nearly three years of his life and about 50,000 English pounds.

The 40,000-mile yacht race is not for the faint-hearted. A few days earlier, about 400 miles off the coast, a rogue wave estimated at 60-feet tall had rolled and damaged one of the fleet during the night and sent two crew members – airlifted off the disabled craft - to hospital. 

Speaking of pounds – the other kind – one crew member on Qingdao reported a weight loss of about four stone so far, or roughly 70 pounds, although it was evident in scanning the crews that despite burning 5,000 calories-a-day at sea some had either gained weight or lost precious little along the way. 

Food, one of the race spokesmen declared to the public gathering, becomes a subject of fascination if not obsession at sea. Everyone aboard will serve as cook and bottle-washer in an intensely shared and inter-dependent experience. Taking turns in the galley and cleaning up the boat teaches a mutually respectful behavior in which crewmembers realize that however they behave, “they will get their own back.”  And, noted one of the organizers, the ocean has a way of bringing out important truths because “you learn a lot more about yourself when times are tough than you do when times are good.”

“Act to be!” would be my central theme, an exhortation first uttered to me by an interested observer after I arrived in Honolulu, where I had docked for repairs after a 25-day passage.  Diligent planning (I thought) had not prepared me for the truly unexpected – it never can – and I had learned some crucial things about my own life and life in general. As you behave, so you become. The sea brings out certain truths, however difficult they might be. 

Many consider embarking on sailing journeys – or other life initiatives – but are stymied by conditions that seem to obstruct them. The truth is that if you want rare or possibly life-changing experiences you must make your way from imaginings to intention and then action. And you may be far more ready than you think.

It is axiomatic that you know more today than at any prior time in your life. It follows therefore that you are now as capable as you have ever been. 

What many people fail to appreciate of themselves is that whenever they have been clear about their intention and wholly committed, they have nearly always accomplished what they set out to do. (Or they have learned something valuable that they did not anticipate but could only have learned by ‘going out there.’) 

Moreover, as my own experience would attest, the universe has a way of providing what is needed – in ideas, people and resources – to those who demonstrate their passionate and personal commitment to a course of action. While fear may be the most powerful human emotion, and fear of the unknown the most influential of our fears, we have the capacity to learn as we go. Life is a path that you beat as you walk it. Or sail it.

Those were to be my core messages. Years ago I had bought an ocean-going boat with a famous pedigree. Its original sister ship excelled in the first single-handed round-the-world race in 1968 under the hand of French soloist Bernard Moitessier – which suggested it might safely take me anywhere I might wish to sail. And that had been true. My sail from San Francisco to Hawaii and back aboard Feo, my 47-foot ketch, enabled me to confront difficult elements in my life and changed my course from journalist to corporate strategist to author and executive coach. And she has given my three children rare opportunities afforded by life on the water and the lessons of boat handling. 

As I now stood among proud parents and well-wishers watching the “Clipper” fleet prepare to leave, I felt inspired by the initiative and courage in the crews, many of whom - like James Holding - had made their own leaps of faith to act on internal inspiration to go where so few had gone before. 

James’ father confided that more people have climbed Mount Everest than have ever sailed around the world. I held that thought as Derry-Londonderry, festooned with streamers flying, slipped her lines and backed away from the dock, just one 68-foot ship of dreams crewed by people “acting to be” in ways that would change them forever.

 

Europe Scenarios - The Zone of (Negative) Expectation

In our now traditional pre-Christmas convocation of former and present Morgan Stanley bankers held last Friday at the Asia Society, we applied scenario-thinking to the challenges of Europe and the world. The result wasn't pretty.
The two most important uncertainties for markets and economies reduced to two - global growth and the outcome of Europe's financial and fiscal crisis. (Middle East unrest, North Korea, Iran, US elections and social reactions are not ignored here but play into these larger uncertainties.)
Plot these two major uncertainties as axes and you have a matrix with positive growth and positive European restructuring in the upper right quadrant, and a sharply declining world (slow/small to negative growth and European de-structuring) to the lower left. The challenge is to develop these "four worlds" as plausible, then ask how they influence your intuitions about what may occur, and how to best prepare.
Throughout the afternoon's discussion, the lower left emerged as our "zone of expectation," in which global growth is flat to down, and Europe cannot get out of its own way, slipping further into recession (or worse, in some countries) while banks and sovereigns continue to weaken. The ugly realities of European banks - highly levered and full of sovereign risk - continue to come home to roost, with knock-on effects in China and US trade, and a possible meltdown in the derivatives market.
In the negative scenario, Germany continues to refuse the "print money" option through the ECB, which one analyst in the room described as "Europe's bad bank." The EFSF is revealed as a non-solution to the problem as the debts cannot be paid either by the sovereigns nor any combination of ECB-IMF or external sources. If you speak fluent banker-ese, think of the EFSF (so described by one expert), as "a two-tranche CDO with the key difference that the "guarantors" of the structure could "opt out" of the structure and become "obligors," modifying the subordination structure and adding to the credit risk."
What that means simply is that 'I was in the deal as a guarantor, then I decided to leave and now I am guaranteed by those left behind.' Huh? (Yes, it's that bad.)
Among other ideas that surfaced to consider, these from Asia experts, is that China is not interested in saving Europe from itself as China has too many challenges of its own (and has been managing all of them successfully so far.)
Clearly possible is a world in which Europe really begins to unravel in 2012, when its banks have to raise 573,613 Billion Euros (!!). Assuming Europe's sovereign debt maturities are refinanced, they need collectively to raise 1.073 TRillion Euros, with Italy and France needing just under 500 Billion of those. For those unversed in capital markets, these are giant, daunting numbers. Despite talks of "recapitalizing" European banks, the numbers there do not add up in many cases, as numerous banks are beyond help (Dexia and Monte Dei Paschi being examples.)
The darkest pronouncement on the economic scene came from one European banker who arrived late to declare, "Depression! That's where we're headed, and the Germans are leading us there."
He went on to elaborate that he believes Germany under Merkel will fight the idea of monetization (some form of extensive bond-buying and money-creation via the ECB) and urge for liquidation, a policy error in his view that could victimize much of Europe, and in the worst case spill over to the rest of the world.
As with all scenario deliberations, the insights and "aha's!" varied for participants, who would draw their own conclusions about what actions seem prudent and necessary for them in the face of these uncertainties. It was hard to see how Europe in the near or medium term could overcome the the financial realities or politics as demonstrated so far. How could Europe find an answer without further volatility and declines?
The only plausible positive scenario, one old hand suggested, was a world that will go sideways (as Europe goes down) for another 5-6 years, and then the US (somehow magically resolving its own fiscal crisis) would come out the other side advantaged (presumably by its diversity, dynamism and willingness/capability to take action.) Europe as a region would simply become less relevant in a more globalized world.
Well, that's a scenario to consider, and perhaps it smacks of local bias. In any event, a lot has to be addressed in Europe and the US between here and there, and the numbers are not forgiving.
In the near term, Merry Christmas and Happy New Year.

Listen to the (Not Very Honorable) John Corzine!!

"I never intended anyone at MF Global to misuse customer funds."
The gist of MF Global CEO John Corzine's testimony is "deny, deny, deny" before the Senate Committee today. It bears watching for a lesson in elusive and dodgy answers to sometimes fuzzy questions.
Oh, and "I do not know where the (missing $1.2 billion?) money is," as Corzine and his COO Bradley Abelow and CFO Henri Steenkamp uttered in sequential chorus - three monkeys who apparently saw no evil, heard no evil and are speaking no - evil? Well, no sense, certainly, and perhaps little truth. To suggest that they are outright lying would not seem to stretch the apparent facts.
What I want the senators to ask is:
What exactly were you getting paid for, Mr. Corzine, if not to oversee the proper functioning of your firm?
What form would this oversight take in a firm whose sole purpose is to invest money - your own and others - making various long and short trades in various securities to (hopefully) make more money?
You might as the CEO be expected to know at any given moment how much money your firm had, how much you were putting at risk and whether you were ahead or behind. Whether your clients were winning or losing would be among the most important facts for you to have at any given moment under any market conditions. And keeping funds appropriately separate would be among your most important daily operational functions.
In a business where the law specifically prohibits the commingling of client with proprietary funds, whether you were misusing client funds - or how exactly you know that you are NOT misusing client funds - would appear to be in the top three facts the CEO is paid to know and to which his human and technology systems should be dedicated.
This testimony from Corzine & Co is reminiscent of an old New Yorker cartoon, which shows a young adolescent staring at a pile of something dark on his plate and saying, apparently to parents who want him to eat his vegetables, "I say it's spinach and I say the hell with it."
In this case it is not spinach, but something worse. Corzine should be - like Sandusky at Penn State - at least under house arrest and perhaps a $5 million bond until it can be proven that his firm - still unable to "find the funds" - did not steal the money and defraud his clients. This is case where missing money should mean the man has to prove his innocence.

Joe Paterno, Greece and OWS

What do Joe Paterno's firing, the state of things in Greece and Occupy Wall Street have in common?

Paterno (in whose name we find the Latin word for "father") failed to respond adequately to personal corruption in his immediate environment. More than that, it was taking place within his specific area of direct responsibility. In the family, you might say. (If you are reacting in a way to defend Paterno, please read the Grand Jury report before making any final judgment on his innocence here.)

Greece has in not so recent years fallen into a state of personal and political corruption best characterized by the failure of a tax and judicial system that holds almost no one accountable for failure to pay, flagrant lying, misrepresentation and virtually all other known forms of evasion. Basically the country is crawling with cheats who are seeking their own advantage and colluding in the advantage-taking of others by turning a blind eye. Why anyone would buy a Greece-backed bond at any interest rate is beyond me - unless you think the Germans will make it good.

Greece has no reliable public book-keeping system nor a functional tax regime nor mechanisms (or will) to enforce laws, which are therefore routinely ignored. For more color and detail here read Michael Lewis' latest book "Boomerang," in which he devotes a very entertaining chapter to the Greece he found when he visited recently. He reports that his sensibility as a journalist seeking illustrative anecdotes was dulled by the sheer repetition of one horrifying example after another.

Occupy Wall Street (or Oakland or Denver or San Francisco or any of the other cities expressing inchoate outrage) is a movement against corruption of these types - the failure of people in high places to do the right thing when it is obvious what needs to be done, or failing to establish and enforce a set of reasonable rules and mechanisms to protect against the darker side of human nature.

That side of human nature is the self-gratification-seeking side that believes the self comes first, and anyone who doesn't play that way is a fool.

At the most grotesque level we have a coach at Penn State sexually exploiting boys as young as 10 years old and not being held accountable by people in a position to intervene once the behavior was known. This story you can find in the Grand Jury report, which should make any reasonable person furious.

At the cultural or state/social level of Greece, we have a kind of moral rot in which citizens of all kinds exploit a system designed by citizens to be exploited. Everyone is in on it, and anyone trying to address it is punished, frozen out, vilified - maybe even scared into shutting up.

Occupy Wall Street and its associated movements are propelled in part by a reaction against corruption at the top, the self-seeking and exploitive behaviors that require collaboration among the elite, but also require participation among those who want to get on or stay on the gravy train, and who don't want to upset their own apple cart (Pardon the mixed food metaphor here.) Congress is fueled by money that pays them to support laws that are not good for the whole but serve the campaign-contributing part.

Years ago at a Harvard seminar I listened to a high-level lawyer experienced in business and government who was asked what was the most important challenge or weakness in the United States? At the time (1983) the country was coming out of 1970s stagflation and worried about the rise of Japan. 

His answer was unexpected, at least by me.

"Intellectual dishonesty," he said, "From the highest levels on down." He went on to say that this weakness was often accompanied by collusion and moral cowardice.

Please count me among those who believe Joe Paterno absolutely deserved to be fired, notwithstanding his years of service on the football field and being beloved by many. He failed to uphold the father's first duty - to protect his children - and also to clean house when it was evident that rot had set in. And we might call this rot of the very first order because it violated every child's right to feel safe - and be kept safe - from adults who would exploit them.

Greece will not easily be able to un-corrupt itself because the social/political rot is too pervasive, deep and broad. The country is feeding at the trough of its own making and they have run out of slops.

The corruptions that have insinuated themselves into the US system may be in some ways as difficult to address, as we try to undo some of the self-dealing practices in the financial service and other big-money regulated industries. Let's start by bringing back the Glass Steagall Act, which should never have been repealed. Those in authority knew that well well enough.

To take another example we should also start undoing some of the most extreme retirement packages granted US Senators or other public servants (check your local police retirement package for some scary examples), just as Greece will have to address its "retire-at-50" program. Oh, and all those Californians enjoying absurd property taxes made possible by Proposition 13 will have to give some of that up.

It might seem overwhelming to tackle the breadth and depth of corruptions of these kinds because they take so many forms. So just look around for simple examples close to home, stand up for what you think is right and speak against what you know is wrong.

That might be called government by the people. It should occupy us.

Acting Amid Europe's Uncertainties

Having conducted three recent scenario sessions (in Switzerland and Germany) in the last month to consider the current European debt crisis, I find most notable that the range of futures conceived by deeply experienced European and global business people all turned up bleak in the near to medium term.

It is rare not to imagine in any thorough set of scenarios one that is relatively positive. The theory and the practice of scenario thinking suggest that there should be an upside where the most important uncertainties resolve in a constructive and positive fashion, even in ways that will surprise you.

In this case, however, positive scenario construction was frustrated by some obvious obstacles and the negatives seem to logically feed on themselves.

Could you imagine European leadership converging to solve the problem in time? Could you see a super financial institution (IMF or ECB on steroids) emerging in time with the relevant power and legal frameworks in place to satisfy the investing world?

If the ECB really could “print money,” would that solve the problem?

Could you imagine that the Greek populace would move quickly to accept austerity and then change entrenched cultural and political behaviors to deliver on it? Would a populace vote for a decade of lower living standards to remedy past excesses (a question the US may have to face at some point)?

As uncertainties mount and assets continue to flee the danger zone, can you imagine a European recession being avoided? Would the south be much worse off than the north, or would all suffer equally together?

These were some of the issues that made a near-term positive outcome hard to construct. And negative implications are then difficult to explain away. If Greece cannot be “saved,” then what about Italy? Would Berlusconi get out ofthe way in time, or fashion a solution that was not in his own (problematic) image?

As some banks become more troubled, will they all be rescued or will some be allowed to fail? (Not Dexia, apparently.) What would be the results of that, either way?

Little wonder that markets remain roiled as these questions continue to rankle. Of real significance for the client involved was the sense of urgency around asset decisions to be taken in the Euro-zone regarding real estate and other business interests. These decisions are of course proprietary but the overarching implication was to act sooner than later and not in the vain hope of a magic bullet. Kicking the can down the road stops working when you run out of road, and Europe is already there.

One source of insight and perhaps comfort is that in Japan in 1997 - a similar strategic moment in a country's history where internal reform was required that the country could not actually manage - a scenario process for Morgan Stanley revealed a similar dilemma. It was not in the nature of the country to get out of its own way and markets would not be kind.

It turned out that money could be made in the anticipated “bad scenario” if the firm developed a robust approach to it and followed through on it.  (They did, and saved themselves from a costly ($1.2B) acquisition that a competitor dove into, much to its later chagrin.)

Taking action at such points in time requires nerve in the face of uncertainty, conviction about the course to set and resolution to follow it. We shall see as Europe's sovereign debt crisis continues to play out whether the early pessimists fare better than those who are still hoping for a solution to emerge and who continue to believe Europe can get there from here.

Uncertainty continues to dominate the news but the need to act resolutely remains.

Moving Against Massive Mis-Allocators

In 1983 I took a fellowship year as the journalist I was then to address my own ignorance about economics, both the theory and the practice of the "dismal science." I thought I would understand capital allocation (what do you do with the money you have?) by studying banks.
Prof. Bill White, who taught at the Harvard Business School and had written their textbook on capital markets, disabused me of the notion that banks themselves allocate capital. 
"No,' he explained, "Capital is allocated through a host of other agents and agencies - consumers, businesses, governments, military spending policy, waging war, etc."
Years later came the crash of 2008. With it dawned the realization that banks - mostly investment banks, allowed by Congress to do what the post-depression Glass Steagall Act had forbidden them to do - had engineered the single largest mis-allocation of capital in human history. Let's use the number $2 Trillion. True, others were involved, but it could not have been accomplished without banks acting outside the public interest for the private gain of the few.
Now the United States stands on the brink of collapsing its own economy in the face of global competition, unsustainable domestic and public debt and with a leadership paralyzed by ideological conflict. Little wonder that a movement called "Occupy Wall Street" has sprung up and spread as people who lost life savings, homes and the prospect of continued employment - or getting their first job in an activity worthy of human energy - have sought to express their discontent.
Private economist Andy Xie, based in Shanghai, has written about the "grim statistics":
 - nearly 10per cent of US households have lost homes to foreclosure since 2008; 
 - 28 per cent of homeowners with mortgages have negative equity; 
 - 25 million people who want to work are unemployed or underemployed; 
 - real median household income has fallen by 10 per cent since 2007. 
  -the average premium for the household of employer-sponsored health insurance has risen by 9 per cent this year - about 28 per cent of median household income. 
I am currently running a scenario exercise in Germany for a European-based global company that wants to better understand the risks and potential reverberations of the sovereign debt crisis. What has emerged in two days is a strong view that recovery is NOT just around the corner, and the rest of the world is likely to be involved in the recession or deflation or even depression that could unfold. All this because governments have borrowed too much, consumers have overspent and banks have been more than willing to play and to promote the debt game, often through sophisticated financial engineering that is arguably unproductive, and possibly counterproductive in the extreme.
An economist here has laid out the alternative policy responses to massive indebtedness, and what history suggests. Germany tried to money-print its way out of debt in the 30s and hyperinflation ensued. The US followed an Austrian model and tried to let the "bad companies" fail so the "good companies" could be rewarded, but the failure of too many "bad" companies led to depression. Since 1990, Japan has pursued a "buying time" model in which the can is kicked down the road (as long as there is road) by government support. Japan, unlike the US, began its crisis with massive domestic savings (12 trillion yen at the time). Its economy languishes now in part because institutions that should fail are not allowed to.
President Obama has unveiled a tax-funded plan for infrastructure maintenance (necessary roads, bridges, school) as an economic stimulus that leaves something productive in its wake. Funded by taxes rather than debt, such efforts are shown historically to contribute a dollar to the economy for every dollar spent, and they do not leave higher levels of debt in their wake. (It should not require much economic training to understand that debt cannot be solved simply by more debt.)
It appears the increasingly rapid Republican ideologues, who would rather damage Obama than address the economic problems now, may get their way. This will be another form of "misallocating capital" because it will mean we are doing nothing to address our crisis except failing to act in one of the few ways that history and economic theory/practice suggest we should. 
I so fondly remember the late Professor White, a brilliant and kindly man who devoted his life to teaching students about how capital can and should work - only to learn that it is easily mismanaged by the relatively few humans who are in a position to allocate it intelligently - for the good of the many.