Notes of Note from John F. Ince

Archive for October, 2011

Bob Burnett: Who Killed the Economy? Accounting Parasites

Corporate accountants’ dogmatic focus on profitability drives out humanity. There is no room for entrepreneurial creativity, much less the wellbeing of the larger community or the “common good.”

This parasitic perspective caused commercial lenders to issue sub-prime mortgages beginning in the late nineties and continuing until the housing credit bubble burst in 2007. In 2005 the majority of housing loans made by lenders such as Countrywide Financial and Washington Mutual were “interest only” back by little or no documentation — so called NINJA loans. Accountants advised financial-industry executives they could improve profitability by selling sub-prime (adjustable rate) mortgages and bundling them into mortgage-backed securities. Later the same parasites told executives they could further improve profitability by decreasing the loan documentation requirements.

In one industry after another we find examples where nearsighted pursuit of profits has trumped common sense and devastated the common good. Most California private timberland is owned by Sierra Pacific Industries that advocates clearcutting where all trees in a given area are cut down, the valuable timber hauled away, the residue burned, and the ground scraped bare and sprayed with herbicides. This process makes more money for SIERRA PACIFIC but it passes on environmental damage to the public and drastically diminishes the amount and quality of the watershed.

Most public utilities have a similar narrow focus on profits at the expense of the common good. For example, TECO Energy operates the massively polluting Big Bend power plant in Apollo Beach, Florida, because it has low operating costs due to its construction before modern standards for pollution control.

The advent of accounting parasites is the ultimate triumph of the nerd: hundreds of thousands of corporate finance people who care more about numbers than they do humanity. A culture of parasites who think nothing of firing workers, or stripping them of their benefits, in the name of profitability,

Accounting parasites have neutered our entrepreneurs, sucked the humanity out of corporate culture and ruined the economy. They don’t understand that the U.S. consumer economy will not function properly unless there is full employment.

Fixing the U.S. economy doesn’t mean replacing capitalism with socialism — that would bring another set of equally dire problems. The solution first requires taking parasitic accountants out of the corporate driver seat and replacing them with entrepreneurs — like the late Steve Jobs. And second, replacing the current corporate ethics and the relentless emphasis on profitability, with values that consider both workers and the environment; an ethical system that recognizes the American economy won’t function unless we all have a stake in it.

via Bob Burnett: Who Killed the Economy? Accounting Parasites.

The Revolution at Home – Nilofer Merchant – Harvard Business Review

Through the financial crisis in the later part of 2008, far too many people have lost their homes and their jobs, with the banking industry paying bonuses to the executives involved. Umair Haque describes what we are experiencing, as a “metamovement, an increasingly resonant reverberation of people challenging a brutal state of malfunction, challenging the Great Splintering of institutions and social contracts.” As Tom Friedman puts it, were not entirely clear what exactly “it” is, but somethings happening here.Whatever is happening, there are economic and moral challenges involved. And it creates new challenges for businesses.In their 2009 book The Spirit Level, Richard Wilkinson and Kate Pickett argue that gross inequality tears at the human psyche, creating anxiety, distrust and a range of mental and physical ailments. They back up their argument with mountains of data. Most every measure of well being — from life expectancy to mental illness, violence to illiteracy — is affected less by how wealthy a society is on average, and more by its level of income inequality. Societies with a bigger gap between rich and poor are worse for everyone in them, including the well off. And America now has the widest gap in income inequality of every developed country measured.Inequality undermines the trust, solidarity, and mutuality. And yet these elements of trust, solidarity, mutuality are the core of a culture of innovation. When anyone discounts the human stuff that enables people to create together, all the quantitative business stuff gets harder. Business performance goes up when engagement and collaboration go up.Engagement and collaboration sit at odds with extreme inequality. When only a few titled leaders set direction and the rest of the talent are meant to simply execute, organizations end up with a culture in which people wait to be told what to do. Ultimately, this slows the companys growth velocity and hurts every aspect of performance. This is the subject of my first book. When we open up the spigot of an organizations talent, and combine it with a culture that lets all people contribute to innovation, we can and will come up with endless ways to create a better prosperity. Some are calling this direction a human economy, which captures a certain truth.Many question if this set of protests mean anything, or if anything will change. But there is an undercurrent worth listening to, of people seeking a shared narrative that will unite more than divide. Whatever you choose to call it, the point is this: together, we win. More often, and better. We no longer live in a world where a few create and the rest do. We no longer live in a world where we are talked at. This shift means were all responsible for co-creating what comes next.

via The Revolution at Home – Nilofer Merchant – Harvard Business Review.

Steve Jobs’ Mantra Rooted in Buddhism: Focus and Simplicity – By SUSAN DONALDSON JAMES | ABC News

Steve Jobs’ Mantra Rooted in Buddhism: Focus and Simplicity


Long before Steve Jobs became the CEO of Apple and one of the most recognizable figures on the planet, he took an unconventional route to find himself — a spiritual journey that influenced every step of an unconventional career.

Steve Jobs’ Mantra Rooted in Buddhism: Focus and Simplicity (ABC News)

Jobs, who died Wednesday at the age of 56 of pancreatic cancer, was the biological child of two unmarried academics who only consented to signing the papers if the adoptive parents sent him to college.

His adoptive parents sent a young Jobs off to Reed College, an expensive liberal arts school in Oregon, but he dropped out and went to India in the 1973 in search of enlightenment.

Jobs and his college friend Daniel Kottke, who later worked for him at Apple, visited Neem Karoli Baba at his Kainchi Ashram.  He returned home to California a Buddhist, complete with a shaved head and traditional Indian clothing and a philosophy that may have shaped much of his corporate values.

Later, he was often seen walking barefoot in his trademark blue jeans around the office and reportedly often said that those around him didn’t fully understand his way of thinking.

“I wouldn’t say Steve Jobs was a practicing Buddhist,” said Robert Thurman, a professor of Buddhist studies at Columbia University, who met Jobs and his “Tibetan buddies” in the 1980s in San Francisco.

“But he was just as creative and generous and went outside the box in the way that he looked to Eastern mental discipline and the Zen vision, which is a compelling one.”

“He was a real explorer and very much to be mourned and too young at 56,” said Thurman. “We will remember the design simplicity of his products. That simplicity is a Zen idea.”

Thurman met Jobs in San Francisco in the 1980s with Grateful Dead drummer Mickey Hart and actor Richard Gere. The discussion was about Tibet.

“It was before the Dalai Lama, and he was very sympathetic and had advice for the Tibetans,” he said. “But he was into his own thing and didn’t become a major player.”

Jobs used Dalai Lama in one of Apple’s most famous ad campaigns: “Think Different.”

“He put them up all over Hong Kong,” Thurman said of the computer ads. “But then the Chinese communists squawked very violently and as my son says, ‘He had to think again.'”

Zen Buddhist monk Kobun Chino Otogawa married Jobs and his now widow, Laurene Powell, in 1991.  Jobs could have just as easily taken his philosophy from the hippie movement of the 1960s.  The Whole Earth Catalogue was his bible, with founder Stewart Brand’s cry, “We are as gods.”

The catalogue offered an integrated and complex world view with a leftist political calling.  Jobs later adopted the catalogue’s mantra: “Stay hungry. Stay foolish.”

Buddhism a Wake-Up Call for  Steve Jobs ?

The catalogue also delved into spirituality.  In one 1974 article, author Rick Fields wrote that Buddhism is “a tool, like an alarm-clock for waking up.”

That may have been the case for Jobs.  He said in his now-famous 2005 Commencement speech at Stanford that he lived each day as if it were his last, admonishing graduates not to “live someone else’s life.”

“Don’t be trapped by dogma — which is living with the results of other people’s thinking,” Jobs said.  “Don’t let the noise of other’s opinions drown out your own inner voice.”

In that speech he told students to relish the time to follow their passions, recounting the time after he dropped out, but continued to audit non-credit classes like calligraphy.  The elegant typefaces — serif and sans serif — were later introduced for the first time in the Macintosh.

“I didn’t have a dorm room, so I slept on the floor in friends’ rooms, I returned coke bottles for the 5 cent deposits to buy food with, and I would walk the seven miles across town every Sunday night to get one good meal a week at the Hare Krishna temple,” he said. “I loved it.”

Jobs was also influenced by Richard Baker, who was head of the Zen Center in San Francisco from 1971 until 1984, when Baker resigned after a scandalous affair with a wife of one of the center’s benefactors.  But Baker helped the center grow to one of the most successful in the United States.

Jobs was receptive to Baker’s message of change, “helping the environment and empowering the individual.”

Jobs admitted to experimenting with the hallucinogenic drug LSD, which he has said was “one of the two or three most important things” in his life.

In an unauthorized biography by Alan Deutschman, a college friend said that Jobs had even been a lover of folk singer Joan Baez, who was 41 at the time, and the attraction was largely because she had also been intimate with another ’60s icon, Bob Dylan.

He was a fan of the Beatles, who also embraced spirituality and made a similar pilgrimage to India.  Jobs told television’s “60 Minutes” he modeled his own business after the rock group.

“They were four guys that kept each other’s negative tendencies in check; they balanced each other,” he said.  “And the total was greater than the sum of the parts.  Great things in business are not done by one person, they are done by a team of people.”

Jobs said that “focus and simplicity” were the foundation of Apple’s ethic.

“Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple,” he told Businessweek in 1998.  “But it’s worth it in the end because once you get there, you can move mountains.”

Even the minimalist design of his products — from the first Macintosh to the sleek iPad have a “aesthetic simplicity and keenness of line” that smacks of Japanese Zen, according to Columbia’s Thurman.

Former Pepsico President John Sculley, who eventually fired Jobs, said walking into Jobs’ apartment had the same design feel.

“I remember going into Steve’s house, and he had almost no furniture in it,” Sculley said in a 2010 interview with Businessweek.”He just had a picture of Einstein, whom he admired greatly, and he had a Tiffany lamp and a chair and a bed.  He just didn’t believe in having lots of things around, but he was incredibly careful in what he selected.”

Jobs reportedly convinced Sculley to work for Apple when he asked, “Do you want to spend the rest of your life selling sugared water, or do you want a chance to change the world?”

Jobs Gave People Computer Power

Thurman contends Jobs’ greatest success was not necessarily financial.

“It was his initial role in making the PC available to individuals to give them computer power,” said Thurman.  “He was democratizing computer power.  It was his own inspiration of things and not accepting the status quo and breaking through the power of the people.”

Though Jobs may not have been a devout practitioner of Buddhism, his personal and corporate vision certainly struck the same tone — “wisdom and compassion,” he said.

“Zen vision is that human beings can understand reality if they focus their mind on it and develop wisdom,” said Thurman. “When you do, you have the greater capacity to arrange the nature of things and to help people.”

But the irony of Jobs’ spirituality was that as much as it reflected the most beautiful aspects of the products he made, those very “machines” have in some ways enslaved a generation of users, according to John Lardas Modern, a professor of religious studies at Franklin and Marshall College in Pennsylvania.

Jobs made computers and hand held devices that have allowed people to become “disembodied” on a certain level — “to escape and transcend the mundane reality of bodily existence,” according to Modern.

Such spirituality begs for freedom from the trappings of tradition, he said, but they have a down side.

“These machines are amazing,” said Modern. “For the last 12 hours, I have been seeing people on Facebook and Twitter in praise of how the devices he made allow ease and convenience and empowerment.”

“I love my iPad, precisely because it feels like an extension of my mind and I can’t live without it,” said Modern. “The irony is, these products ground us in a chair behind a desk, behind a computer and in a sense they have pushed us inward? and you don’t have physical connections with others.”

“It cuts both ways,” he said.


When Is A Startup “Venture Fundable?” | VentureArchetypes Blog: Seed Stage Capital

Being strategic about when to raise capital is important, since a full-court investor press takes a huge amount of time and effort to do right.  Fundraising essentially becomes a full time job, and can easily become a distraction for founders who should be focused on growing their businesses.  I’ve seen worst-case scenarios in which the fundraising becomes so consuming that important business milestones slip, which then derails the fundraising—a dangerous spiral.

To try to bring some clarity and structure to the critical decision of when to raise capital, I have attempted to boil down the basics of what constitutes a “fundable” company in today’s market.  In a nutshell, the main factors are:

1.  The “Big Idea.”  A good first filter is to honestly and objectively assess whether your startup is doing something truly novel.  Novelty and originality are surprisingly rare traits; many startups are highly derivative– a slightly better mousetrap or an incremental improvement over what’s being done today (think: Groupon clones).  While a better mousetrap can certainly be the basis for a profitable niche business, it is not usually venture fundable (or at least, not easily fundable—it becomes more so, with #3 below).

By contrast, pitching something truly unique, big, and audacious—what Mike Maples calls the “thunder lizard” startup—creates an entirely different response from investors.  I’ve worked with startups doing something interesting but not game-changing, and I’ve worked with startups with ideas that seemed crazy—but if they worked, they’d be huge.

The latter situation is much preferred, and makes the tiring work of raising capital exponentially easier. A really cool technology with the “wow” factor or a big, audacious, disruptive concept is almost magical in the way it can cut through the noise and generate buzz amongst jaded investors. At a minimum, VCs will take a meeting to hear what the hell you’re talking about.

2.  A Story, Well Told.  While the Big Idea is the cornerstone of the foundation, the pitch is what gets people to stop and take a closer look.  Investors are pitched by literally thousands of good companies each year; an outstanding pitch will break through the noise and set your company apart from the unwashed masses.

A solid pitch neatly packages the company, vision, and deal in a compelling manner (typically via your slide deck, exec sum, and model), with a narrative crafted to appeal to the nuances of what investors are looking for.  It involves telling a clear and exceedingly simple story, so the message is frictionless and can be circulated among the partners at the VC firm and among other VCs in a syndicate.  In other words, the pitch is portable (and often somewhat “viral”).

A solid pitch also includes polished and practiced Q&A, and an overall story that strikes both rational (how do I make a return on my investment?) and emotional (why do I want to be part of this vision?) chords.  Bringing all these elements together is surprisingly difficult, but when done well it is a beautiful thing.

3.  Supporting Evidence.  This is the clincher, and the one most startups miss.  VCs fund businesses, not concepts.

via When Is A Startup “Venture Fundable?” | VentureArchetypes Blog: Seed Stage Capital.

Ron Pauls chump change –

Wow.  To paraphrase the quote often attributed to the late Sen. Everett Dirksen, “A million here, a million there, pretty soon, youre talking real money.”Sure, the nation’s economy is ailing. But in corporate America today, you can be sure of this: There may not be money for new workers,  there may not even be money to keep workers,  but there is always money for two things:  bonuses for executives and funding for political candidates and causes. And why is there plenty of political money?  What, you think its a coincidence youre eating poison cantaloupe? Or that Wall Street got bailed out but your line of credit got canceled?  Or that a company wants to build a pipeline through a precious aquifer?  Paul put a positive spin on his fundraising:”If you get $8 million … and you get it from small individual donors who are fervently engaged in campaigning for you, that’s a lot different than getting money that more than likely might have come, for the other candidates, from special interests,” Paul said at a luncheon at the National Press Club. “All donors are not equal. I will take my small donations, with the enthusiasm of the people who send me the money.”Sure, thats one way to look at it.  You could argue that Paul got about $80 each from 100,000 people.  And that Perry got about $775 each from 22,000 people.And the Tooth Fairy brings me $1 every time I lose a molar.Look, Im not trying to pick a fight with Pauls supporters. They are fervent; they believe hes leading a revolution.  Its very American.  But in American politics today, money talks.  And big money talks the loudest.Pauls supporters may be digging into their pockets for loose change to fund someone they believe in.But I dont think those pockets will be nearly deep enough to offset the ones in those nicely tailored suits in the corporate suites.

via Ron Pauls chump change –

Western banks: Danger everywhere | The Economist

“THIS brutal lack of confidence” is how the chief executive of one of Europe’s biggest banks describes the situation facing his firm and its peers. The catalogue of troubles afflicting the institution (call it Bank X, so as not to punish it for its candour) shows how worrying the outlook has become for big banks, and hence for the real economy.

A bank-funding crisis that started on Europe’s periphery with worries over Greek, Irish and Spanish banks has now infected the core of the West’s financial system. The governments of France and Belgium said this week they would stand behind the debts of Dexia, a perennially troubled lender, while also engineering a break-up of the bank. Across the Atlantic shares in American banks whipsawed on worries about a Greek default and rumours of policy breakthroughs.

For Bank X, the most pressing issue is a freezing of funding markets as investors ponder the potential impact of losses that banks may take on their holdings of euro-zone government bonds. American money-market funds have almost completely withdrawn dollar funding from European banks over the past few months. This is forcing them to sell dollar assets. Some of these transactions will do no harm to the sellers: there are buyers at reasonable prices. But Bank X is also cutting traditional banking activities denominated in dollars. Some of these include critical functions such as trade finance.

A bigger worry is a freeze in euro funding. Institutional bondholders such as pension funds and insurers have refused to buy unsecured European bank debt in any meaningful quantities since early summer, and balk entirely at durations longer than two years. “There are a lot of banks that would be willing to give away assets if they could, just so they don’t have to fund them,” says one investment banker. Bank X is trimming euro assets, accelerating plans to cut the size of its balance-sheet. Other lenders are doing the same. That risks driving down asset prices, forcing lots of banks to mark down equivalent assets and erode capital. Deleveraging also means a reduction in lending activity.

Equity investors are running scared. The shares of European banks have fallen by 40% over the past three months.

via Western banks: Danger everywhere | The Economist.

Steve Jobs Message To Internet Startups – Forbes

Jobs believed that the longer time you spend developing a product or company, the luckier you become. Asked by Fortune Magazine in 2000 what he thought of the younger generation of internet startups, Jobs’ response was:It’s hard to tell with these Internet startups if they’re really interested in building companies or if they’re just interested in the money. I can tell you, though: if they don’t really build a company, they won’t luck into it. That’s because it’s so hard that if you don’t have a passion, you’ll give up. There were times in the first two years when we could have given up and sold Apple, and it probably would’ve died.Steal great ideas. “We have always been shameless about stealing great ideas,” said Jobs in a 1996 PBS Documentary, Triumph of the Nerds. In fact, in Michael Malone’s, Infinite Loop: How Apple, The World’s Most Insanely Great Computer Company Went Insane, it was allegedly after a visit to Xerox in the summer of 1973, when a programmer from Apple laid the foundation for the Macintosh.Don’t be intimidated by the competition. During the trying years when Apple struggled and flopped, Microsoft successfully launched Windows.  After much vigorous competition, Jobs finally said this at the Boston MacWorld Expo of 1997: “we have to let go of the notion that for Apple to win, Microsoft needs to lose. The era of competition between Microsoft and Apple is over, as far as I’m concerned.” Later, Apple would emerge with innovative products that would change the scope of technology.Become a change agent. Lance Ulanoff, former editor of PC Magazine, said this about the man he also called friend, “he was written off in the mid 80s and came back as a new man.” Jobs left Apple by most accounts he was ousted from Apple to found NeXT software and to work on the animation studio, Pixar. Later, when asked to come back and help Apple rebound, Jobs brought over his NeXT software and his team of visionaries; turning Apple’s 1996 first-quarter loss of $740 million to a third-quarter profit of $30 million.

via Steve Jobs Message To Internet Startups – Forbes.

Sheared by the Shorts: How Short Sellers Fleece Investors: Ellen Brown

“Unrestrained financial exploitations have been one of the great causes of our present tragic condition.” — President Franklin D. Roosevelt, 1933

Why did gold and silver stocks just get hammered, at a time when commodities are considered a safe haven against widespread global uncertainty? The answer, according to Bill Murphy’s newsletter, is that the sector has been the target of massive short selling. For some popular precious metal stocks, close to half the trades have been “phantom” sales by short sellers who did not actually own the stock.

A bear raid is the practice of targeting a stock or other asset for take-down, either for quick profits or for corporate takeover. Today the target is commodities, but tomorrow it could be something else. When Lehman Brothers went bankrupt in September 2008, some analysts thought the investment firm’s condition was no worse than its competitors. What brought it down was a massive bear raid on 9-11 of that year, when its stock price dropped by 41 percent.

The stock market has been plagued by these speculative attacks ever since the four-year industry-wide bear raid called the Great Depression, when the Dow Jones Industrial Average was reduced to 10 percent of its former value. Whenever the market decline slowed, speculators would step in to sell millions of dollars worth of stock they did not own but had ostensibly borrowed just for purposes of sale, using the device known as the short sale. When done on a large enough scale, short selling can force prices down, allowing assets to be picked up very cheaply.

Another Great Depression is the short seller’s dream, as a trader recently admitted on a BBC interview. His candor was unusual, but his attitude is characteristic of a business that is all about making money, regardless of the damage done to real companies contributing real goods and services to the economy.

Here is how the short-selling game is played: stock prices are set by traders whose job is to match buyers with sellers. Short sellers willing to sell at any price are matched with the low-ball buy orders. When sell orders overwhelm buy orders, the price drops. The short sellers then buy the stocks back at the lower price and pocket the difference. Today, speculators have to drop the price only enough to trigger the automatic stop loss orders and margin calls of the big mutual funds and hedge funds. A cascade of sell orders follows, and the price plummets.

via Ellen Brown: Sheared by the Shorts: How Short Sellers Fleece Investors.