mind-blown, mindful, or just thinkin' bout stuff. Some links

As I troll through some stuff for that Black Triangles follow-up post on managing innovators, the saved links are like a tsunami. Let us unspool some and maybe a pony or moonshot might pop out.

[Update: down-post, we reference the multi-tasking hydra in 2 links from the NYT and The Atlantic. Slackermanager.com has posted something cool on taming the beast: Multi-tasking Must Die: 5 Ways to Single Task

Here's something on how emotion and its cascade of neuro-chemicals is like a nail-gun for those post-it notes we call memories--Via mnemosyne:

Describing the brain as a big circuit board in which each new experience creates a new circuit, Hopkins neuroscience professor Richard Huganir, Ph.D. says that he and his team found that during emotional peaks, the hormone norepinephrine dramatically sensitizes synapses – the site where nerve cells make an electro-chemical connection – to enhance the sculpting of a memory into the big board.

Norepinephrine, more widely known as a "fight or flight" hormone, energizes the process by adding phosphate molecules to a nerve cell receptor called GluR1. The phosphates help guide the receptors to insert themselves adjacent to a synapse. "Now when the brain needs to form a memory, the nerves have plenty of available receptors to quickly adjust the strength of the connection and lock that memory into place," Huganir says.

Via Seed Magazine, about how we arrange what we know and perceive (what we've noted, experienced, and remember) affects what we can imagine: The Future of Science is... Art?

...[Niels] Bohr had spent time analyzing the radiation emitted by electrons, and he realized that science needed a new metaphor. The behavior of electrons seemed to defy every conventional explanation. As Bohr said, "When it comes to atoms, language can be used only as in poetry." Ordinary words couldn't capture the data.

Bohr had long been fascinated by cubist paintings. As the intellectual historian Arthur Miller notes, he later filled his study with abstract still lifes and enjoyed explaining his interpretation of the art to visitors. For Bohr, the allure of cubism was that it shattered the certainty of the object. The art revealed the fissures in everything, turning the solidity of matter into a surreal blur.

Bohr's discerning conviction was that the invisible world of the electron was essentially a cubist world. By 1923, de Broglie had already determined that electrons could exist as either particles or waves. What Bohr maintained was that the form they took depended on how you looked at them. Their very nature was a consequence of our observation. This meant that electrons weren't like little planets at all. Instead, they were like one of Picasso's deconstructed guitars, a blur of brushstrokes that only made sense once you stared at it. The art that looked so strange was actually telling the truth.

That's from Jonah Lehrer of Frontal Cortex blog. Leonard Shlain's book, Art and Physics: Parallel Visions in Space, Time, and Light predates it and covers lots more. Basically, how art, artists and imagery makers work in precognitive realms, paving the way for scientists to cognitively grasp, accept and explain previously abstract concepts like black holes or even fluid dynamics. In a way, it's the Overton Window at work -- an idea is "foolish" and "impossible" until someone finds a way to make it graspable and therefore viable. Applies to 30-minute pizza delivery guarantees or to Quantum Mechanics.

For more fearless scouts, IBM has a long but intriguing Dave Snowden/Cynthia Kurtz paper on The New Dynamics of Strategy: Sense-making in a complex and complicated world. A snip...

The Cynefin framework

The name Cynefin is a Welsh word whose literal translation into English as habitat or place fails to do it justice. It is more properly understood as the place of our multiple affiliations, the sense that we all, individually and collectively, have many roots, cultural, religious, geographic, tribal, and so forth. We can never be fully aware of the nature of those affiliations, but they profoundly influence what we are. The name seeks to remind us that all human interactions are strongly influenced and frequently determined by the patterns of our multiple experiences, both through the direct influence of personal experience and through collective experience expressed as stories...

We consider Cynefin a sense-making framework, which means that its value is not so much in logical arguments or empirical verifications as in its effect on the sense-making and decision-making capabilities of those who use it. We have found that it gives decision makers powerful new constructs that they can use to make sense of a wide range of unspecified problems. It also helps people to break out of old ways of thinking and to consider intractable problems in new ways. The framework is particularly useful in collective sense-making, in that it is designed to allow shared understandings to emerge through the multiple discourses of the decision-making group.

Economic Stimulus idea: Brake the constant chase to multi-channel stimulation when possible. Memo to me: Stop pretending you can track, kill, skin and cook the bear. And the rabbit. And the deer. All at once. And well. First, The New York Times:

But the paper also found that “beyond an optimum, more multitasking is associated with declining project completion rates and revenue generation.”

For the executive recruiters, the optimum workload was four to six projects, taking two to five months each.

The productivity lost by overtaxed multitaskers cannot be measured precisely, but it is probably a lot. Jonathan B. Spira, chief analyst at Basex, a business-research firm, estimates the cost of interruptions to the American economy at nearly $650 billion a year.

That's a short sober piece on the modern illusion of busy-ness as good for business. Next, The Atlantic has a longer, more entertaining and personal view: Walter Kirn's odyssey through the nightmare of infinite connectivity begins when his girlfriend sends him a nude cellphone pic and he send his car through a fence while enjoying the, uh, stimulating composition.

...Much of the problem is the metaphor. Or perhaps it’s our need for metaphors in general, particularly when the subject is our minds and the comparison seems based on science. In the days of rudimentary chemistry, the mind was thought to be a beaker of swirling volatile essences. Then came classical physical mechanics, and the mind was regarded as a clocklike thing, with springs and wheels. Then it was steam-driven, maybe. A combustion chamber. Then came electricity and Freud, and it was a dynamo of polarized energies—the id charged one way, the superego the other.

Now, in the heyday of the microchip, the brain is a computer. A CPU.

Except that it’s not a CPU. It’s whatever that thing is that’s driven to misconstrue itself—over and over, century after century—as a prototype, rendered in all-too- vulnerable tissue, of our latest marvel of technology. And before the age of modern technology, theology. Further back than that, it’s hard to voyage, since there was a period, common sense suggests, when we didn’t even know we had brains. Or minds. Or spirits. Humans just sort of did stuff. And what they did was not influenced by metaphors about what they ought to be capable of doing but very well might not be equipped for (assuming you wanted to do it in the first place), like editing a playlist to e-mail to the lover whose husband you’re interviewing on the phone about the movie he made that you’re discussing in the blog entry you’re posting tomorrow morning and are one-quarter watching certain parts of as you eat salad and carry on the call.

Geez. After all that, the band's gonna take a break. Listen to Tom Chapin sing "Not on the test" to mellow us down a bit

Black Triangles

[updated x 2] Between the occasional inaguration and not a few meetings, it was a crazy week and so much to blog about. But it's Friday, I'm tired, so all I gots right now is Black Triangles.

All the dev team had after month of effort was a black triangle on a screen...but it was more than that.

Afterwards, we came to refer to certain types of accomplishments as "black triangles." These are important accomplishments that take a lot of effort to achieve, but upon completion you don't have much to show for it -- only that more work can now proceed. It takes someone who really knows the guts of what you are doing to appreciate a black triangle.

When working on complex projects, the black triangle moment is always the high point for me; it's when success occurs. Before you've got a framework built, there's significant doubt about how the project will turn out, if can even be done. After you get that first little result through the whole maze and it's clear how the whole thing will work, the rest becomes almost inevitable. (via migurski)

Truth spoken well, stolen verbatim, from Jason Kottke.

[update]Okay, I'm feeling guilty about the lifted post so let's at least add something to the mix: a mash-up from work in progress. Jason and others might identify with this, especially the hi-lited bit, and I suspect Johnnie Moore will not. Doesn't matter. It's not for them. It's to explain the difference between tigers and horses and dogs to those who have difficulty making the distinction.



[update some more 01-25-09] Got a facebook msg/question on this. The 4 cycles idea is from experience, and from conversations with people around the question of what makes people naturally comfy with change and others not. Handy stuff to be aware of if you're in the change/challenge status quo business. Maybe I should be less flip and explain better in a post. I'll link to it when it's done.

The Gig Economy - The New American Hustler

Tina Brown of The Daily Beast wakes up

Now that everyone has a project-to-project freelance career, everyone is a hustler.

No one I know has a job anymore. They've got Gigs.

Gigs: a bunch of free-floating projects, consultancies, and part-time bits and pieces they try and stitch together to make what they refer to wryly as “the Nut”—the sum that allows them to hang on to the apartment, the health-care policy, the baby sitter, and the school fees.

....

A full one-third of our respondents are now working either freelance or in two jobs. And nearly one in two of them report taking on additional positions during the last six months.

Just as startling, these new alternative workers are not overwhelmingly low-income. They’re college-educated Americans who earn more than $75,000 a year.

Welcome to the age of Gigonomics...

There is a real poll: PDF

And a synopsis:

There are two kinds of new American hustlers:

• At the lower end of the salary spectrum, lower- and middle-class Americans are being stretched in ways they didn’t seek. Americans with incomes below $40,000 per year are more likely to hold multiple part-time positions, and the reason why they hold second jobs tends to be a critical financial situation: They’re behind on bills and need extra income (43%).

• At the top end, those with higher incomes and a college education are more likely to work freelance or multiple jobs as a way of expanding their scope. This upper-class population often has both a full-time job in addition to one or more part-time jobs, often freelancing. The top motivation for taking on additional work? A second job was actually a hobby that turned into a money-making operation (48%). Not surprisingly, this group is also more likely to feel stretched by their responsibilities.

Yup. Long after Unicornomics* has been settled on as a huge distraction and waste of talent and resources, there's still gonna be rasslin' over what to call the last 3 decades starting with Reaganomics and ending in Gig-o-nomics. Somehow, despite the indelible imprint of B. Boomer on the registration and paperwork, calling them the The Wonder Years 2.0 seems a longshot.

And, maybe, just maybe, there's an explanation within, and tying together, both sets of years.

----

* Q: How do you buy a unicorn? A: With imaginary money. Q: How do you buy 2 unicorns? A: Declare the first unicorn and the rides you give as an asset and revenue stream for your CapitalOne card application.

daily beast link via fimoculous

LandAmerica. From Sea to shining C-minus

Then on to BBB-minus, ending with an "F." Come on boys and girls, Fortune 500 companies are hard to come by and nice to have around. Richmond Times-Dispatch, today:

The chairman and chief executive of the bankrupt LandAmerica Financial Group Inc. is stepping down and the Henrico County-based company will sell its remaining business units, it said today.

...

What was once a top employer in the Richmond area and won "most admired" recognition from Fortune magazine for the past two years filed for Chapter 11 protection Nov. 26.

The Dirt Lawyer (a Chicago commercial real estate attorney who's worth keeping up with) gave us the name of the poison in November.

The skinny? LandAm apparently had a toxic exchange subsidiary that invested about $290 million in auction rate securities that may take forever to get rid of. And you need to access that money to faciliate the exchanges. In short? Liquidity crisis.

Yeah, something's all wet. Or maybe too cut and dry? Saying "liquidity crisis," as so many are, is like blaming the fork for your high cholesterol level. A quick Google offers us (via a Deloitte management guy no less) something [from 2006] that might be viewed as irony, what with all this gate-keepered "sudden news":

Fortune 500 blog project: #500 LandAmerica needs blogs

Oct 23, 2006 ... I love your explanation of why LandAmerica needs a blog (or multiple blogs!). I' ve said the same thing over and over of several blogless ...
it.toolbox.com/blogs/blogpotato/fortune-500-blog-project-500-landamerica-needs-blogs-12452 - 66k - Cached - Similar pages -

Come on Genworth, we're rooting for you!

Unicornomics - Thomas Frank gets it, Andrew Sullivan does not.

Thomas Frank, for the Wall Street Journal no less...

I asked Bill Black, a professor of economics and law at the University of Missouri-Kansas City and an authority on the Savings and Loan debacle of the 1980s, what he thought of the latest blame offensive. He pointed out that, for all their failings, Fannie and Freddie didn't originate any of the bad loans -- that disastrous piece of work was done by purely private, largely unregulated companies, which did it for the usual bubble-logic reason: to make a quick buck.

Most of the mistakes for which we are paying now, Mr. Black told me, were actually made "by four entities that under conservative economic theory should have exercised effective market discipline -- the appraisers, the originators of the mortgages, the rating agencies, and the investment banking firms that packaged the subprime mortgage-backed securities." Instead of "disciplining" the markets, these private actors "served as the four horsemen of the financial apocalypse, aiding the accounting fraud and inflating the housing bubble." It is they, Mr. Black says, who "turned a crisis into a catastrophe."

...

There is no way to measure the number of people who took out mortgages they knew they couldn’t afford, of course, but for what it’s worth, a 2007 report by the Mortgage Bankers Association reports that the FBI estimates “80 percent of all reported fraud losses arise from fraud for profit schemes that involve industry insiders.” That means the lenders, not the borrowers.

Just imagine the flights of fancy that the theory of borrower malevolence and Wall Street victimization requires conservatives to take: All these no-account folks, you see, got together and forced investment banks to engineer subprime mortgages into highly leveraged securities. Then they tricked all manner of hedge funds and pension funds and financial institutions into buying these lousy products. Just for good measure, these struggling homeowners then persuaded bond-rating agencies to misrepresent the risk associated with these securities.

Indeedy. And now, our patient, Andrew Sullivan, taking one of those flights of fancy, except it's really more a noisy tumble down a flight of stairs.

Andrew Sullivan

Finally, George Will puts in a column what I said on Bill Maher. Much if this crisis stems from rank greed and irresponsibility from ordinary Americans on a massive scale, who bought homes they couldn't afford on credit they couldn't repay, or who leveraged their property with loans they had no reason to take out. If this crisis hits Main Street hard, it will also hit a great number of people who also deserve their comeuppance. We need a fix to solve the credit problem. I understand that. But a little delay is important and salutary. And the real, long term fix requires weaning Americans off credit - and giving enough of them a taste of what their greed and recklessness can do.

Gracious me!

Does Sullivan realize the above is actually an indictment of a raft of sacrosanct conservative principles dating back 25 years? Hell, it's an indictment of modern consumer societies. What's more, he misses the actual culprit: Soullessness. That is is surprising given his "expertise" on the subject: The Conservative Soul: How We Lost It, How to Get It Back by Andrew Sullivan.

The last 30+ years of American growth have been predicated on revolving credit, medium-term loans for autos and durables and, yeah, the boutique products of Unicornomics like credit-swaps and various derivatives-based cleverness. AKA: you CAN have it now! That greed is the culprit goes without saying. What Sullivan and others just can't get their heads around is that we keep seeing this movie over and over. It always ends badly, predictably, and Andrew wants us to believe it's the audience's fault the movie got made because, well, because they bought tickets to the spectacle.

Later today, we'll take a look at things through the prism of William James and maybe through that of accidental behavioral economist, Otto Rank...

I mentioned the other today how ticked off I was to hear Republicans say that the Community Reinvestment Act was to blame. Well, I knew CRA. I worked with CRA. I marketed CRA alongside high wealth products. And, umm, Andrew, Rush, et al? This is no CRA probem.

Unicornomics vs. Mark-to-Market

Barry Ritholz @ the big picture gives us the halftone dots re: mark-to-market and touches on the real bugaboo of bullshit mark-to-model pie in the sky valuation...

That is one of the key elements of the current situation. A decision was made to bypass the broad, deeply traded traditional markets (Equities, Fixed Income, Commodities and Currency) and instead create new markets for new products. No one should be surprised that the net result was a flawed system of garbage paper, with too little room at the exits in case of emergency.

Let's puts this into some context:

"Accounting is a way of portioning economic results by time periods. It doesn’t affect the cash flows, but tries to allocate economic profits proportional to release from risk. If we were back in an era where the financial instruments were simple, then the old rules would work. But once you introduce derivatives, and securities that are called bonds, but are more akin to equity interests, you need to mark them to market."

-David Merkel

Exactly. Otherwise, you are left with public companies, who have made capital allocation and investment decisions that are hidden from their owners (shareholders) and the investing public.

Now that the garbage is on the books, no one wants to admit the original error of purchasing this class of assets. Its not just that the trade has gone bad, its the original buying decision was so flawed even if the trades were not such giant losers.

Fear and Greed or Hope and Seriousness. Today's the day.

Well, we just dipped 700+ points, faster than a feather tied to an anvil, in increments of 10 and 15 and 20.

The folks who've stood on their soapbox for years now--the conservatives, of both parties--bemoaning awful intrusions on the free market are now stuck. The laissez faire free market got us here, and now, as paid-for shills of psychedelic finance, they have no answers. None. Nada. Bupkis.

The cruel joke is a joke, one my older brother told me years ago in the midst of the last Gekko-like, junk-finance age gripping London as in New York: What happened to all the hippies? They're stockbrokers too, they just don't wear underwear.

"If it feels good, do it." It fits the times now as it did then. Remember that, and today, the next time someone makes a joke about hippies. Maybe ask them if it's cheaper for an unemployed investment banker to fill up a Range Rover or a Microbus?

On to today's business, the worst DOW point drop in US history. Proof that railing against evolution is a niche concern compared to the many who want to deny fiscal gravity. And, oh joy, my congressman, Eric Cantor, wants to cry that Nancy Pelosi hurt his feelings after his party's obtuseness and obstructionism today; called him out on the unhappy ending of his ideology's fairy tale. Impossible, I know, Eric, but grow up.

The bottom line, congresspeople, is you're screwed if you do, and we're screwed if you don't.

The bottom line, voters for said congress-people, is that the fairy tales reanimated since Reagan are now a box. It finds you worried about payroll and receivables and yet also makes you send calls and emails to Washington DC, 100 to 1 against calming the world's markets. The antidote, thanks to laissez faire procrastination, is anti- everything that so many supposedly "stand for." Well, there's nothing laissez faire nor Invisible Hand about the need for a heart needle or a crash cart and some paddles.

No, it's not fair that taxpayers are gonna have to be the grownups and bail Junior and Cissy Smitherington-Farqhuar out of jail. You didn't ask for this, but you ordained it.

As others much smarter than me are coming to realize, this is a crisis of a now non-operational ideology more than one of finance. The Freeze of Credit is a consequence of this failure, not cause. Trust is dead. And Greed is the fickle new bastard-son King.

Many are saying they can't "aid and abet American Socialism." Newsflash: You've been doing that for years. When you allow private sectors and their industry lobbyists to write laws in their profitable favor, such as the repeal, with Gramm-Leach-Bliley, of major solvency safeguards in Glass Steagall--itself a result of the hard lessons of 1929, you are explitly socializing risk--laying bare a swath of the economy to unfettered myopia and mugging called the Crisis of the Commons.

And when you firewall consumers/voters from remedies for their own small financial crises--either from foolishness or, far more statisitically likely, from bankruptcy due to crushing catastrophic healthcare debt--well, what you do there is a weirder, crueler perverse and un-American version of Socialism called Corporatism. The fruits of their PowerPoints™ and K Street working lunches? The 2005 Bankrupcty Bill, more accurately labelled the Financial Services Foolishness and Greed Do-over Act.

Voting for that pre-emptive bailout bill were 229 Republicans and 73 Democrats. Opposing were 125 Democrats and one independent, Vermont's Bernard Sanders. Ironic that the Congress' one socialist voted against a unique form of Corporate Socialism. Maybe he wasn't paying attention.

That Act was explicitly written NOT because Wall Street or Hartford was stupid. On the contrary, they knew exactly how far they were leaning over the edge on their exposure and risk-models. And they wanted a safety net for the crap--dodgy mortgages, credit cards, auto loans--they knew they were peddling to keep their quarterly numbers botox-pretty. That was Phase One. Paulson's and Bernanke's POS cash-grab first offering last week was Phase Two.

They knew today was very likely coming, and they gambled that since nobody knew for sure--that since no one could offer dead solid perfect proof trhat derivative WEREN'T magic--they'd keep moving forward with their fantastical Unicornomics. They'd dig their spurs in and shout "What's in your wallet?" or "Better call DiTech!"



But the CGI special effects in those crap commercials isn't the only technological advance. The creep of IT also brought "super-genius" powers of "knowing things." A big-shot financial services executive once described it to me as, "the ability to see around corners!" "Yes," I asked, "but can you bend light?" He didn't get my sarcasm. "Soon!" he said, "Soon!" he said.

It's not news to many, I'm sure, that this silicon-augmented power tends to make you at first awed, then confident, then embarrassingly, arrogantly ignorant of your vulnerability. They knew that their vast databases and instantaneous tracking thanks to tech advances meant they could "monitor" known iffy credit risks at point-of-purchase right up to the line of "yes" or "no" on a half tank of gas or a full one. That these risks (some call them people) were living paycheck to paycheck in an increasingly shock-prone economy was 'backstopped' by the program "to reduce the downside."

And there was Joe Dokes, taunted to "Go for it!" by ads made by guys like me. Get that HELOC or 3rd refi -- shop till you drop and to Flip This House! The fees, the fine print, the floating nebulous and changeable rules of their contract with us were all designed to render the "customer" into a commodity to be squeezed, harvested, pandered-to. Until it wasn't useful to do so anymore. It's a weird existence living in the parallel universe of pretend public care (Customer Advocacy™) and jeering private disdain.

Except now, the disdain is leaking out.

These are folks--parallel in their desires to Wall Street's appetites, much more limited in their means--that suddenly Big C conservatives are calling crass, greedy, irresponsible consumers. They just followed the program. Told to "go shopping," post 9-11, they're "un-American" dolts today. Or, and this gets my viens popping, Talk Radio clowns are now suddenly trying to float the minority and low income beneficiaries of Community Reinvestment Act loans as the cause of Fannie and Freddie's downfall, and the broader market's collapse. That talk-radio meme, the machine gun nature of pre-emptive blame spraying is tear-inducing and rampage-making, and I can't decide which has more general utility.

Back to today, to the sudden crisis of philosophy due to a failure of that philosophy. A vote failed, the market tanked. It clawed back, then it tanked some more. Maybe that will shock some out of their pantomime. Somehow I think that those who weren't so concerned in 2005 about the solvency and resilience of the average family's economy will betray their Harlequin Romance view of Adam Smith to prop up the American Exceptionalism™ of our wheezing National Economy.

In the end, philosophy be damned. The vote will be made in favor of unfreezing liquidity, because Arthur Jensen wants it.

The question nodody asks: Why is Credit Frozen?

A few days ago I posted that this is a crisis of ideology not finance. That was not fully clear. The Credit Collapse is a symptom of an organ failing, a part an organism that has been bingeing because it's been told it can do no wrong, no harm can come to it if it pursues it's desire for pure self-interest. Some call this consumerism. Some call it the American Dream--life, liberty and all that.

How'd this discrepancy happen? Well, absent grownups to remind me that things that go up invariably come down, I tend to get used to the idea that things going up will always do so. These absent grown-ups? They, or it, would be called functional, diligent oversight. Or the belief in it.

To me, this isn't about liquidity per se but rather, about the reality of reality itself catching up to the mark-to-model and mark-to-market methods of financial services of the last few decades. (Mark to model is the theoretical accounting of Enron and other recent flameouts--basically rosy scenarios on crack.)

Sounds complicated? Most of the blameworthy would like us to think so. Let's try and clarify.

Look at it this way, from their perspective: IF YOU'VE been selling smoke and confusing ponzi schemes for years you start to worry that too MANY OTHERS are doing the same and suddenly if only types like you are available to deal with--in a market ostensibly reliant on trust and sentiment--well, then, MAYBE NOBODY's TRUSTWORTHY and the best thing to do is reset and take a mulligan. Or, to continue the golf parlance, to turn in your card and self-disqualify.

But no one in positions of responsibility is willing to do that latter thing, to banish themselves as the abject giddy and greedy failures they have been. They have PhDs in Economics and Finance, after all. They write the fine print!

And that's where we are - top tier banks and investment houses doubled down serially, and so often, that everybody's bluffed out and faithless. Nobody trusts anybody, and everybody's in flopsweat. And when the titans start sweating, and conserving any capital they have "just in case," we mere mortals feel it shower as a gear-rusting, road-blocking downpour that shorts out our ability to do day-to-day business. That, in my goofy metaphor-drenched opinion, is where we are.

That the market is choking off "liquidity"--cashflow and credit flow--is a symptom of its overdue diagnosis: too much play, too many lies, too little seriousness.

The problem is limbic and fundamental. Stop lying, stop avoiding responsibility, stop hiding behind the cleverness; it's over. Admit the failure you knew was coming long ago, and that which is still half-hidden under the rug. Take your medicine is what the market is saying. And also, what the public thinks ought to happen - "I get no pass, no bailout for stupid greedy choices." That would be the way, in a truly free market, death and destruction a la Lehman, IndyMac Bank etc and so on.

But it isn't. Their best answer to an anxious and desperately curious electorate could be construed so far as: Flounder, you fucked up. You trusted us.

Can I ramble some more in search of some clarity?

We have something like 45 trillion of US home ownership paper, maybe 15% added in the last 10 years, that are potentially, really worth 30 trillion in a true free market. Underlaying this are myrid financial instruments, an alphabet soup of insurances, derivatives, IOUs and promissory notes, worth tens of trillions more, and few of which can be reliably valued in a world with laws of actual financial gravity.

This soup, then, is as much if not more of the worry that Fed Chief Bernanke and Treasury Secretary Paulson used to most likely drain the blood from the faces of Congressional leaders over a week ago. And so consists the huge discrepancy borne of wishful thinking and a culture desperately told that having more means you are more meaningful. I believe Bush quaintly called it "An Ownership Society" not long after he told us the patriotic thing to do was "go shopping" after 9/11.

In this environment, the market is not so much free as it open to the highest bidder, virtue and values not being a requirement. The resulting "market" is one jiggered by various narrow interests and by functions convinced through the lure of fees to go along with the asset inflation and reindeer gamers.

What Interests? Whose Functions? A bunch. Such as...

* Such as ordinary local home appraisers all the way up to big-ticket national debt ratings agencies like Moody's, Fitch, S&P and others. Some in the bag, some not, with the nots struggling against the tide.

* Such as regulatory agencies staffed at the executive level with anti-regulatory ideologues, believers in the virtues, and fantasy, of Free Market wisdom. Yes, political appointees, mostly conservative due to who's in the White House these 8 years, and almost all necessarily hewing the party line: HANDS OFF, whenever possible.

* Such as too clever by half Wall Street theorists known as quants delivering to their bosses new, arcane and faith-based methods to do what those CEO bosses are hired to do: Make lots of money for shareholders. That they were exotic and barely understood mattered not. At the end of a blackboard long equation, like that at right, was a big $ sign with several !s next to it. "Say no more Boys and Girls, make it so!" said the bosses.

• Such as mayors and building trades desiring two intertwined things: Jobs and building permits. Both public and private sector glommed onto the fact that all kinds of goodies bloomed from a structures-based boom comparable to the telco/internet booms of the 90s. Manufacturing had long since been packing up for destinations Latin and Asian. No jobs there. However, building retail shops and big boxes and homes and suburbs and all that 2nd and 3rd level economic activity that came with them was like a mirror of the 50's Levittown postwar surge. Manna from heaven for car dealers to Applebees' to Hollister.

* Lastly, such as homeowners themselves--also called Mortgage product consumers. Many had homes prior to this mess, homes with lots of equity. Some were newer homeowners--consumers--getting their piece of the dream thanks to newly 'friendly' bankers who before might have shooed them out of their office. Each of these crudely described demographics are part of the "Shopping as Patriotism" culture referenced above. For the 'house-rich", all that equity could be viewed as an ATM. HELOCs (Home Equity Lines of Credit) became that ATM device. Some got patios to add value to the underlying asset. Many bought plasma screens or took a cruise. This was obviously all well and good when, like Wall Street, they trusted that their ONE Dollar of investment was really worth FIVE today, because home prices were skyrocketing and that dollar in the not so distant future (so they were told, or wanted to believe) would be worth TWENTY in almost no time at all.

And then home prices in far flung suburbs got two successive shocks: 1. The housing market had climbed to saturation. Home Buyers--also known as Mortgage Customers--started by by 2005-6 to be harder to find. And when that happens, you do what? You dig closer to the bottom of the creditworthiness barrel to keep the graph moving up and to to the right. 2. Prices on hydrocarbon fuels started climbing--gasoline, to natural gas to heating oil. It cost more to get places from those newly built and bought houses. It cost more to get the materials to those building sites. Anything petroleum-based like plastics, cladding, vapor barriers and roofing started climbing. Hell, Tupperware was getting more expensive.

And the thing that stopped climbing was the dreamed of ONE to FIVE to TWENTY. The ATM didn't work anymore if it hadn't already been tapped out. Maybe this is obvious to readers and others. It seems, though, not so evident how it all fits together to many I speak with between 9 to 5. When credit card debt, another aspect of our recent fun-fest is added to the mix (how many apps in the mail have you gotten in the last 10 years? what's in your wallet?), well, it becomes easy to see how easy credit afflicted and addicted both the Titans of Wall Street and the merely mortal. Each has played fantastical games of head-in-sand in pursuit of the ultimate market bubble, one perfectly suited to an age of hyper-real experience-seeking and of lives lived virtually: Call it Unicornomics.

Q: How do you buy a unicorn? A: With imaginary money.
Q: How do you buy 2 unicorns? A: Declare the first unicorn and the rides you give as an asset and revenue stream for your CapitalOne card application.

That, unfunny as it is, for me, explains where we are. It doesn't make sense, but it didn't have to be so if people in positions of responsibility didn't abandon their integrity. Now those people want our help as taxpayers, because we have the only pockets collectively even close to deep enough to rescue them from their folly. Did we play along? Yes, we did. Did somebody wonder "where is all this easy money coming from?" Some did, some didn't, but very few buyers of those plasma screens or Palladian mini-mansions wanted to look a gift-unicorn in the mouth. And very few carpenters or lawn services or auto-detailers complained sincerely of too much business.

And it was fun, while it lasted, eh?

Well, this may suck, but it is time to pay. And because it sucks, in differing degrees and varieties, many refuse to step up without some clarity...

Joe on the Street thinks: This sucks because it's more of the same--free market, sink or swim for me, and parachutes, pontoon party boats and do-overs for those who claim to have the right stuff.

Doctrinaire Conservatives: This sucks because government sucks. It has to suck, and to be awful at everything or my reason for living and my guiding stars are gone. Sucks because we have no answers beyond more deregulation. And yes, even though it's a 40 Trillion unregulated Credit Derivatives shadow economy that's at fault here, more deregulation and reducing capital gains for exactly these players is the ONLY solution here.

Republicans: This sucks because Business guys are the Pros from Dover, right? They know and see all! Sucks because we've spent 20 years admiring and defending these Money Types and flying on their jets and playing golf with them and, dammit, they never once said what they did was sorta like my day job - making shit up and selling knee-jerk perceptions, not product.

And there we are. Fine Americans abused by the beatitudes of our tales of woe and wonder, each right and wrong.

But only one has the pull to do this thing.

As unjust as it seems, it IS time for taxpayers to come to the rescue. Because only they collectively can finance this fix of financial and political malpractice. To do it in a way that doesn't offend our sense of justice or capitalism. That means equity for bailouts. It means no pay for non-performance. It means reasonable rules replacing the fairy tales of deregulation that got us here. It means an explanation and an apology of some sort from somewhere and from some people who should have--and did--know better.

And even if that unlikely apology is forthcoming, for God's sake, exact righteous vengeance at the ballot box next month. But do it for reasons that will do you, do us all, some good. Know who's been selling you a bill of goods based upon a thing you know but were willing to overlook: There's no such thing as unicorns, or a free lunch. Ask why cops are seen, and encouraged, in a Farmers Market but virtually banished from our Credit Markets? Ask how government grows more, and also more useless-feckless, under "small government" boosters? Ask why your kids' bill for your choices, the national debt, has ballooned so ridiculously? Ask, are my ideas really sound when I rail against this party or that? Is tax and spend or borrow and spend the model you choose? Is law and order a thing for urbanites of various colors but something unnecessary for people wearing pinstripes and Rotary Club pins? Ask for useful explanations. And vote accordingly

If there is one thing that all of us need, it is explanations beyond spooky and cloudy requests for 700,000,000,000-plus checks.

Now is the time to explain this--Barney, Nancy, Harry, Hank, Ben, Warren, John, Barack, somebody--just as FDR did in his fireside chats weekly through the Great Depression to a bewildered and beat population.

As we have just seen, George W. Bush is woefully equipped to do the job.

That he is the first MBA president is both hysterically funny and metaphysically cruel.

And yes, God bless America. We're gonna need him.

The Crisis is Ideological not Financial

I'm working on a fouro-style daisycutter on why the bailout is more about forgiving stupid moves by still-solvent companies before the election and new agendas take hold. And how easy credit was easily seen as a poison steroid pill, enabled by unreasonable expectations of corporate growth. Later on that.

It's obvious already via Paulson on Capitol Hill that the rush-job is just a copy of the Patriot Act and Homeland Security 'gotta do it' power grabs that have little to do with democracy or actual problem solving-- so let's hope the Congress-critters keep their new-found spines.

The nut of where things are: As Sam Zell noted just now (4:19) on CNBC: " in many cases the borrowers shouldn't have borrowed and the lenders shouldn't have lent." Good--no, excellent--point. And yeah, this isn't about liquidity but rather, about the reality of reality itself catching up to the mark-to-model methods of financial services of the last few decades. Look at it this way: if you've been selling smoke and confusing ponzi schemes for years you start to worry that too many others are doing the same and suddenly if only types like you are available to deal with--in a market ostensibly reliant on trust and sentiment--well, then, maybe nobody's trustworthy and the best thing to do is reset and take a mulligan. And by god, do it before some new Democrat president gets to commit that available money elsewhere to useless stuff like, say, infrastructure rebuilding or Apollo-style energy R&D plans.

A 700 billion to 2 trillion mulligan. Easily. Except if you're a homeowner who's been watching too much Flip This House instead of the other, similarly, fantastical shows like Squawk Box.

It's about deleveraging real values from pretend booked asset values, not about liquidity or some unforeseen calamity.

Fratto insisted that the plan was not slapped together and had been drawn up as a contingency over previous months and weeks by administration officials. He acknowledged lawmakers were getting only days to peruse it, but he said this should be enough. [bold mine]

A simple phrase that needs to be heard more from one candidate is "no pay, no relief for non-performance" and that applies to CEOs or Shareholders. And, yes, to the truly greedy home-equity-as-ATM mortgagees, too.

But let's remember to differentiate the greedy from the truly dumb/unfortunate in the majority of troubled mortagages--the ones who did what most of us do--"It's the usual paperwork legalese, just sign next to these 12 red paste-on plastic tabs and here's your bottle of champagne!"

Right now, Maria Bartiromo is trying, loudly and stridently, again on CNBC to sell that this is a liquidity problem, that firms can't raise capital. WRONG. The money is there, it's access to capital that's choked due to the glut of lies. Trust is broken and 700 billion won't miraculously make saints out of sinners. The saying is "It's only a principle if it costs you something." These companies want to preserve/recover their asset values and their balance sheets without admitting that their principals and staff abandoned, or never had, sustainable principles.

The market is choking "liquidity"--cashflow and credit flow--as a symptom of its overdue diagnosis: too much play, too many lies, too little seriousness. The problem is limbic and fundamental. Stop lying, stop avoiding responsibility, stop hiding behind the cleverness; it's over. Admit the failure you knew was coming long ago, and that which is still half under the rug. Take your medicine like a real frontiersman not a kid in a Roy Rogers outfit from WalMart.

The lower half of Manhattan is now discussing the "awful" impact of losing several 10s of thousands of Financial Services jobs. Guess what? Job losses are what Wall Street has viewed as prudent responses for failed business plans and models for years. And for good models too: They happily make companies like Costco suffer for viewing quality pay and job security as weaknesses.

The fans of deregulation and dismissers of government suddenly want it to make the booboos not hurt so much and for us to play cop and arrest and fine the market that bit them so badly. In the face of all evidence, they want us to call a self inflicted wound some kind of mugging. And to refashion reality and call their dramatically failed ideological war on spadework, physical worth, and accountability just a failure of financial markets.

Bullshit. Grow up.

Complicated or Complex?

Puzzle or Mystery?

Smithsonian

There's a reason millions of people try to solve crossword puzzles each day. Amid the well-ordered combat between a puzzler's mind and the blank boxes waiting to be filled, there is satisfaction along with frustration. Even when you can't find the right answer, you know it exists. Puzzles can be solved; they have answers.

But a mystery offers no such comfort. It poses a question that has no definitive answer because the answer is contingent; it depends on a future interaction of many factors, known and unknown. A mystery

cannot be answered; it can only be framed, by identifying the critical factors and applying some sense of how they have interacted in the past and might interact in the future. A mystery is an attempt to define ambiguities...

Wanna say more on this, particularly some of its examples, but I'll have to come back later.

Innovate? But it's raining, Fouro.

Innovate? But it's raining, Fouro.

Been quite bz around here in the first qtr, so, in lieu of catching up with some lame posts I thought I'd upload some of what we've been exploring and sharing. These are sized down so a click or two to "view image in new window" should make them legible. See any patterns?









































I'll bet your brain hurts after all that.