Monday, December 21, 2009


David Heath, HuffPo Investigative Fund

At Top Subprime Mortgage Lender, Policies Were Invitation to Fraud

First of two articles about the roots of the subprime lending bubble
Bad loans ultimately led to the collapse of Long Beach Mortgage and its owner, Washington Mutual, in the biggest bank failure in history.

An inside look at Long Beach Mortgage – many of whose lending practices were common among subprime loan companies – adds another dark chapter to the evolving narrative of the financial crisis.
read more ...

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William K. Black is a former senior deputy chief counsel at the federal Office of Thrift Supervision. During the savings and loan crisis of the late 1980s Black investigated accounting fraud. He spoke with Huffington Post Senior Reporter David Heath about how fraud can infiltrate entire corporations.

Saturday, December 19, 2009

“open source” investigation

Op-Ed Contributors - Show Us the E-Mail -

WE end this extraordinary financial year with news that the Treasury is in discussions with American International Group about selling the taxpayers’ 80 percent ownership stake in that company. The government recently permitted several banks to break free of its potential oversight by repaying loans made during the rescue. But with respect to A.I.G., the Treasury should not move so fast. There is one job left to do.

A.I.G. was at the center of the web of bad business judgments, opaque financial derivatives, failed economics and questionable political relationships that set off the economic cataclysm of the past two years. When A.I.G.’s financial products division collapsed — ultimately requiring a federal bailout of $180 billion — those who had been prospering from A.I.G.’s schemes scurried for taxpayer cover. Yet, more than a year after the rescue began, crucial questions remain unanswered. Who knew what, and when? Who benefited, and by exactly how much? Would A.I.G.’s counterparties have failed without taxpayer support?

The three of us, as experienced investigators and prosecutors of financial fraud, cannot answer these questions now. But we know where the answers are. They are in the trove of e-mail messages still backed up on A.I.G. servers, as well as in the key internal accounting documents and financial models generated by A.I.G. during the past decade. Before releasing its regulatory clutches, the government should insist that the company immediately make these materials public. By putting the evidence online, the government could establish a new form of “open source” investigation.

Once the documents are available for everyone to inspect, a thousand journalistic flowers can bloom, as reporters, victims and angry citizens have a chance to piece together the story. In past cases of financial fraud — from the complex swaps that Bankers Trust sold to Procter & Gamble in the early 1990s to the I.P.O. kickback schemes of the late 1990s to the fall of Enron — e-mail messages and internal documents became the central exhibits in our collective understanding of what happened, and why.

So far, prosecutors and regulators have been unable to build such evidence into anything resembling a persuasive case against any financial institution. Most recently, a jury acquitted Bear Stearns employees of fraud related to the collapse of the subprime mortgage market, in part because available e-mail messages suggested the employees had done nothing wrong.

Perhaps A.I.G.’s employees would also be judged not guilty. But we would like to see the record to find out. As fraud investigators, we would like to examine the trading patterns of A.I.G.’s financial products division, and its communications with Goldman Sachs and other bank counterparties who benefited from the bailout. We would like to understand whether the leaders of A.I.G. understood that they were approaching a financial Armageddon, and whether they alerted their counterparties, regulators and shareholders to the impending calamity.

We would like to see how A.I.G. was able to pay huge bonuses to its officers based on the short-term income they received from counterparties for selling guarantees that, lacking adequate loss reserves, the companies would never be able to honor. We would also like to know what regulators knew, and what they did with the information they had obtained.

Congress wants answers, too. This month, during hearings on Ben Bernanke’s nomination to a second term as chairman of the Federal Reserve, several senators fumed about being denied access to his A.I.G.-related documents.

No doubt, some of the e-mail messages contain privileged conversations among lawyers. Others probably include private information that is irrelevant to A.I.G.’s role in the crisis. But the vast majority of these documents could be made public without legal concern. So why haven’t the Treasury and the Federal Reserve already made sure the public could see this information? Do they want to protect A.I.G., or do they worry about shining too much sunlight on their own performance leading up to and during the crisis?

A.I.G.’s board of directors, a distinguished group of senior business executives, holds the power to decide whether to publish the e-mail messages and other documents. But those directors serve at the behest of A.I.G.’s shareholders. And while small shareholders of public corporations generally do not have the right to force publication of internal documents, in this case one shareholder — the taxpayer — holds an 80 percent stake. Anyone with such substantial ownership has effective control over corporate decisions, even if the corporation is a large public one.

Our stake is held by something called the A.I.G. Credit Facility Trust, whose three trustees are Jill M. Considine, a former chairman of the Depository Trust Company and a former director of the Federal Reserve Bank of New York; Chester B. Feldberg, a former New York Fed official who was chairman of Barclays Americas from 2000 to 2008; and Douglas L. Foshee, chief executive of the El Paso Corporation and chairman of the Houston branch of the Federal Reserve Bank of Dallas.

Ultimately, these three trustees wield all the power at A.I.G., and have the right to vote out the 11 directors if the directors are unwilling to publish the e-mail messages. In other words, if these three people ask A.I.G.’s board to post the messages and other documents, the board will have no choice but to comply. Ms. Considine, Mr. Feldberg and Mr. Foshee have the opportunity to be among the most effective and influential investor advocates in history. Before A.I.G. escapes, they should demand the evidence.

The longer it remains hidden, the less likely we will be to answer many questions about the A.I.G. collapse and the larger economic crisis — including the most important one: how do we prevent a repeat? Time is the enemy of effective investigation; records disappear, memories fade. The documents should be released — without excuses, or delay.

Eliot Spitzer is a former attorney general and governor of New York. Frank Partnoy is a professor of law at the University of San Diego. William Black is a professor of economics and law at the University of Missouri-Kansas City.

Tuesday, November 03, 2009

Complexity, by Roger Lewin: The complexity perspective, in business

Complexity, by Roger Lewin: The complexity perspective, in business

Pp. 198-202:

If, as complexity scientists believe, complex adaptive systems of all kinds -- in the natural world and the world of business -- share fundamental properties and processes, then the science offers a way to understand and work with the deep nature of organizations. Because the dynamics of complex adaptive systems are complex and largely unpredictable, accepting businesses as being such systems requires a mindset different from that associated with long-established business models: managers and executives cannot control their organizations to the degree that the mechanistic perspective implies, but they can influence where their company is going, and how it evolves.

In nature, species exist in an ecological community as part of a rich network of connections, forming the local ecosystem that has system-level properties. In the same way, companies operate within a rich network of interactions, forming the local economy on a local scale and the global economy on a global scale. An important point about the view of businesses through the complexity science lens is that businesses do not merely resemble natural ecosystems; rather, they share some fundamental properties -- specifically nonlinear processes -- because both are complex adaptive systems and thus follow the same deep laws. These laws will not play out in exactly the same way in economies as they do in biology, largely because in economies conscious decisions are made by people, whereas in biology there is no conscious intent of that kind. Nevertheless, an understanding of these laws in nature will lead to a greater understanding of the workings of companies and the economy of which they are a part.

The Origin of Mechanistic Management

In 1992, the Harvard Business Review carried an article titled "Is Management Still a Science?" The author, David Freedman, answered the question thus: "Management may indeed be a science -- but not the science most managers think."' In other words, the way scientists perceive the world has changed dramatically in recent decades, but many managers still follow an outdated scientific mind set, one that is now heading toward the intellectual scrap heap -- namely, the mechanistic, reductionistic perspective.

The prevailing style of management was developed early this century by Frederick Winslow Taylor, an American industrialist. His book, The Principles of Scientific Management, published in 1911, became a classic in management literature, and its effect lingers today. Taylor was strongly influenced by prevailing scientific thought, particularly Newton's laws of motion and the new science of thermodynamics, which together allowed scientists to calculate how a machine could operate with maximum efficiency. Taylor imposed this collective, mechanistic paradigm of science on the world of work, where he became obsessed with efficiency as applied to organizations. There was tremendous waste of effort, he said, because management was unscientific.

In the best reductionist tradition, Taylor analyzed the system down to its component parts, saw how each worked, and then sought the "one best method" to attain the greatest possible efficiency. Workers, he said, were to be viewed as "passive units of production," and the system, or the workplace, was like a machine. The job of the manager was to ensure that the machine ran smoothly. The workers, while offered financial incentives for faster work, were merely cogs in the machine. The system was extremely hierarchical, with workers expected simply to carry out their narrowly-defined jobs.

Taylorism was responsible for tremendous increases in productivity in the workplace, and effectively created modern Industrial Age management. Although management theory has undergone many revisions since the early decades of the century, particularly with the impact of Peter Drucker's thinking,2 Taylorism still remains the dominant influence today, with the machine model of business as its core, and embodied in a command and control style of management.

By contrast, complexity science implies that CEOs and managers must give up control -- or, rather, the illusion of control -- when they are trying to lead their organization to some goal. But they do need to create the environment in which creativity can emerge. The message of complexity science is not simply to stand back and wait for the right solutions to emerge. Too little control is just as misguided a business strategy as too much. Some structure is necessary. The degree and nature of control that CEOs establish in their companies strongly influences what emerges, in terms of culture, creativity, and adaptability.

The Complexity Perspective in Business

The recognition that businesses are complex adaptive systems allows us to learn more about business dynamics -- within and among companies -- based on what is known about such systems, in computer simulations and in nature.

In other words, complexity science offers a new management theory. Most management theories attempt to transform businesses into something new, something that is supposedly designed to make them more efficient, such as the recent (and now faded) enthusiasm for reengineering. Complexity science says, let us recognize that businesses are complex adaptive systems -- and always have been.

You don't have to bring complexity to the world of business: It is already there. We saw in earlier chapters that computer-based complex adaptive systems can be tuned to a static state, a chaotic state, or to a zone of creativity in between, the edge of chaos. A command-and-control, or mechanistic, style of management tends to keep companies close to the static state, because it minimizes interactions among its components, which in turn impedes the emergence of creativity from the level of front-line people. This model of management worked well enough in the Industrial Age economy, but is much less effective in the connected economy. The challenge for managers -- indeed, for anyone who works -- today is to find ways of enhancing the potential creativity of businesses as complex adaptive systems, from the level of the individual, through teams, to the organization as a whole and its interaction with other organizations.

It is important to recognize, however, that mechanistic management is sometimes appropriate, when goals are clear and there is little uncertainty in the prevailing business environment. Management practice guided by complexity science therefore does not replace mechanistic management.

Rather, it encompasses it in a larger context. As we said, it even welcomes periods of chaos as not only natural but sometimes desirable. For instance, when old ways of doing things have to be abandoned and new ways found, a brief period of chaos allows the exploration of many different possibilities in an innovative manner. So, just as natural complex adaptive systems fluctuate among the three states-stasis, chaos, and edge of chaos depending on the prevailing environment, so, too, will a company fluctuate among the three states. Such fluctuation represents the capacity to adapt to changing environments.

One of the key discoveries of complexity science, as we saw in chapter 3, is that computer models of complex adaptive systems often evolve themselves to a critical point poised between the chaotic and static states, the edge of chaos, where the emergent response is most creative. There are strong indications that the same is true in nature, as we saw in chapters 4 and 6. Order emerges at the edge of chaos -- this is the phenomenon of self-organization. The order that arises is not imposed from above; it flows from distributed influence through the interactions of the system's agents. It is hard -- and often impossible -- to predict in detail what emergent order will look like, but it is certain that order will emerge.

Complexity models also show that the emergent order will be richer, more creative and adaptable, if there is a diversity of agents in the system, agents with different characteristics and different behaviors.

The message for business leaders is obvious: encourage diversity if you want to achieve creativity and adaptability. Nurture distributed control -- that is, true empowerment -- and people will self-organize around problems that need to be solved.

P. 211:

These aspects of complex systems-unpredictability and the possibility of extinction because of changes in other parts of the system -- are distinctly unnerving to those who cherish predictability and control. Embracing complexity in the business context is not particularly comforting. The strength of complexity science lies in giving business a perspective that is grounded in reality.

Taleb quote from Black Swan

P. 21 The Black Swan:

So I stayed in the quant and trading businesses (I'm still there), but organized myself to do minimal but intense (and entertaining) work, focus only on the most technical aspects, never attend business "meetings," avoid the company of "achievers" and people in suits who don't read books, and take a sabbatical year for every three on average to fill up gaps in my scientific and philosophical culture. To slowly distill my single idea, I wanted to become a flaneur, a professional meditator, sit in cafes, lounge, unglued to desks and organization structures, sleep as long as I needed, read voraciously, and not owe any explanation to anybody. I wanted to be left alone in order to build, small steps at a time, an entire system of thought based on my Black Swan idea.

--NN Taleb

Herman Hesse: Siddharta

Govinda once spent a rest period with some other monks in the pleasure grove which Kamala, the courtesan, had once presented to the followers of Gautam. He heard talk of an old ferryman who lived by the river, a day's journey away, and whom many considered to be a sage. When Govinda moved on, he chose the path to the ferry, eager to see this ferryman, for although he had lived his life according to the rule and was also regarded with respect by the younger monks for his age and modesty, there was still restlessness in his heart and his seeking was unsatisfied.

He arrived at the river and asked the old man to take him across. When they climbed out of the boat on the other side, he said to the old man: 'You show much kindness to the monks and pilgrims; you have taken many of us across. Are you not also a seeker of the right path?'

There was a smile in Siddhartha's old eyes as he said: 'Do you call yourself a seeker, O venerable one, you who are already advanced in years and wear the robe of Gautam's monks?'

'I am indeed old,' said Govinda, 'but I have never ceased seeking. I will never cease seeking. That seems to be my destiny. It seems to me that you also have sought. Will you talk to me a little about it, my friend?'

Siddhartha said: 'What could I say to you that would be of value, except that perhaps you seek too much, that as a result of your seeking you cannot find.'

'How is that?' asked Govinda.

'When someone is seeking,' said Siddhartha, 'it happens quite easily that he only sees the thing that he is seeking, that he is unable to find anything, unable to absorb anything, because he is only thinking of the thing he is seeking, because he has a goal, because he is obsessed with his goal. Seeking means: to have a goal; but finding means to be free, to be receptive, to have no goal. You, O worthy one, are perhaps indeed a seeker, for in striving towards your goal, you do not see many things that are under your nose.'

Wednesday, October 21, 2009

contra negantem principia

contra negantem principia
non est disputandum

There is no disputing against one who denies first principles.*

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Or is there?

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Saturday, October 17, 2009

The White House - Blog Post - Weekly Address: Taking the Insurance Companies on Down the Stretch

The White House - Blog Post - Weekly Address: Taking the Insurance Companies on Down the Stretch

"But what I will not abide are those who would bend the truth or break it to score political points and stop our progress as a country."

AFP: Billionaire's indictment is warning to traders: US watchdog

AFP: Billionaire's indictment is warning to traders: US watchdog:

"'It would be wise for investment advisors and corporate executives to closely look at today's case, their own internal operations, and the increasing focus and scrutiny on hedge fund trading by the SEC and others,' said Robert Khuzami, director of the SEC's enforcement division."

Wednesday, October 14, 2009


War and Peace Book 15, Chapter V

IN 1812 AND 1813 Kutuzov was openly accused of blunders. The Tsar was dissatisfied with him. And in a recent history inspired by promptings from the highest quarters, Kutuzov is spoken of as a designing, intriguing schemer, who was panic-stricken at the name of Napoleon, and guilty through his blunders at Krasnoe and Berezina of robbing the Russian army of the glory of complete victory over the French. Such is the lot of men not recognised by Russian intelligence as “great men,” grands hommes; such is the destiny of those rare and always solitary men who divining the will of Providence submit their personal will to it. The hatred and contempt of the crowd is the punishment of such men for their comprehension of higher laws.

Strange and terrible to say, Napoleon, the most insignificant tool of history, who never even in exile displayed one trait of human dignity, is the subject of the admiration and enthusiasm of the Russian historians; in their eyes he is a grand homme.

Kutuzov, the man who from the beginning to the end of his command in 1812, from Borodino to Vilna, was never in one word or deed false to himself, presents an example exceptional in history of self-sacrifice and recognition in the present of the relative value of events in the future. Kutuzov is conceived of by the historians as a nondescript, pitiful sort of creature, and whenever they speak of him in the year 1812, they seem a little ashamed of him.

And yet it is difficult to conceive of an historical character whose energy could be more invariably directed to the same unchanging aim. It is difficult to imagine an aim more noble and more in harmony with the will of a whole people. Still more difficult would it be to find an example in history where the aim of any historical personage has been so completely attained as the aim towards which all Kutuzov’s efforts were devoted in 1812.

Kutuzov never talked of “forty centuries looking down from the Pyramids,” of the sacrifices he was making for the fatherland, of what he meant to do or had done. He did not as a rule talk about himself, played no sort of part, always seemed the plainest and most ordinary man, and said the plainest and most ordinary things. He wrote letters to his daughters and to Madame de Staël, read novels, liked the company of pretty women, made jokes with the generals, the officers, and the soldiers, and never contradicted the people, who tried to prove anything to him. When Count Rastoptchin galloped up to him at Yautsky bridge, and reproached him personally with being responsible for the loss of Moscow, and said: “Didn’t you promise not to abandon Moscow without a battle?” Kutuzov answered: “And I am not abandoning Moscow without a battle,” although Moscow was in fact already abandoned. When Araktcheev came to him from the Tsar to say that Yermolov was to be appointed to the command of the artillery, Kutuzov said: “Yes, I was just saying so myself,” though he had said just the opposite a moment before. What had he, the one man who grasped at the time all the vast issues of events, to do in the midst of that dull-witted crowd? What did he care whether Count Rastoptchin put down the disasters of the capital to him or to himself? Still less could he be concerned by the question which man was appointed to the command of the artillery.

This old man, who through experience of life had reached the conviction that the thoughts and words that serve as its expression are never the motive force of men, frequently uttered words, which were quite meaningless—the first words that occurred to his mind.

But heedless as he was of his words, he never once throughout all his career uttered a single word which was inconsistent with the sole aim for the attainment of which he was working all through the war. With obvious unwillingness, with bitter conviction that he would not be understood, he more than once, under the most different circumstances, gave expression to his real thought. His first differed from all about him after the battle of Borodino, which he alone persisted in calling a victory, and this view he continued to assert verbally and in reports and to his dying day. He alone said that the loss of Moscow is not the loss of Russia. In answer to the overtures for peace, his reply to Lauriston was: There can be no peace, for such is the people’s will. He alone during the retreat of the French said that all our manœuvres are unnecessary; that everything is being done of itself better than we could desire; that we must give the enemy a “golden bridge”; that the battles of Tarutino, of Vyazma, and of Krasnoe, were none of them necessary; that we must keep some men to reach the frontier with; that he wouldn’t give one Russian for ten Frenchmen. And he, this intriguing courtier, as we are told, who lied to Araktcheev to propitiate the Tsar, he alone dared to face the Tsar’s displeasure by telling him at Vilna that to carry the war beyond the frontier would be mischievous and useless.

But words alone would be no proof that he grasped the significance of events at the time. His actions—all without the slightest deviation— were directed toward the one threefold aim: first, to concentrate all his forces to strike a blow at the French; secondly, to defeat them; and thirdly, to drive them out of Russia, alleviating as far as was possible the sufferings of the people and the soldiers in doing so.

He, the lingerer Kutuzov, whose motto was always “Time and Patience,” the sworn opponent of precipitate action, he fought the battle of Borodino, and made all his preparations for it with unwonted solemnity. Before the battle of Austerlitz he foretold that it would be lost, but at Borodino, in spite of the conviction of the generals that the battle was a defeat, in spite of the fact, unprecedented in history, of his army being forced to retreat after the victory, he alone declared in opposition to all that it was a victory, and persisted in that opinion to his dying day. He was alone during the whole latter part of the campaign in insisting that there was no need of fighting now, that it was a mistake to cross the Russian frontier and to begin a new war. It is easy enough now that all the events with their consequences lie before us to grasp their significance, if only we refrain from attributing to the multitude the aims that only existed in the brains of some dozen or so of men.

But how came that old man, alone in opposition to the opinion of all, to gauge so truly the importance of events from the national standard, so that he never once was false to the best interests of his country?

The source of this extraordinary intuition into the significance of contemporary events lay in the purity and fervour of patriotic feeling in his heart.

It was their recognition of this feeling in him that led the people in such a strange manner to pick him out, an old man out of favour, as the chosen leader of the national war, against the will of the Tsar. And this feeling alone it was to which he owed his exalted position, and there he exerted all his powers as commander-in-chief not to kill and maim men, but to save them and have mercy on them.

This simple, modest, and therefore truly great figure, could not be cast into the false mould of the European hero, the supposed leader of men, that history has invented.

To the flunkey no man can be great, because the flunkey has his own flunkey conception of greatness.


& google books

Tolstoy on History

From War and Peace translation by Constance Garnett

TOWARDS THE END of the year 1811, there began to be greater activity in levying troops and in concentrating the forces of Western Europe, and in 1812 these forces—millions of men, reckoning those engaged in the transport and feeding of the army— moved from the west eastward, towards the frontiers of Russia, where, since 1811, the Russian forces were being in like manner concentrated.

On the 12th of June the forces of Western Europe crossed the frontier, and the war began, that is, an event took place opposed to human reason and all human nature. Millions of men perpetrated against one another so great a mass of crime—fraud, swindling, robbery, forgery, issue of counterfeit money, plunder, incendiarism, and murder—that the annals of all the criminal courts of the world could not muster such a sum of wickedness in whole centuries, though the men who committed those deeds did not at that time look on them as crimes.

What led to this extraordinary event? What were its causes? Historians, with simple-hearted conviction, tell us that the causes of this event were the insult offered to the Duke of Oldenburg, the failure to maintain the continental system, the ambition of Napoleon, the firmness of Alexander, the mistakes of the diplomatists, and so on.

According to them, if only Metternich, Rumyantsev, or Talleyrand had, in the interval between a levée and a court ball, really taken pains and written a more judicious diplomatic note, or if only Napoleon had written to Alexander, “I consent to restore the duchy to the Duke of Oldenburg,” there would have been no war.

We can readily understand that being the conception of the war that presented itself to contemporaries. We can understand Napoleon's supposing the cause of the war to be the intrigues of England (as he said, indeed, in St. Helena); we can understand how to the members of the English House of Commons the cause of the war seemed to be Napoleon's ambition; how to the Duke of Oldenburg the war seemed due to the outrage done him; how to the trading class the war seemed due to the continental system that was ruining Europe; to the old soldiers and generals the chief reason for it seemed their need of active service; to the regiments of the period, the necessity of re-establishing les bons principes; while the diplomatists of the time set it down to the alliance of Russia with Austria in 1809 not having been with sufficient care concealed from Napoleon, and the memorandum, No. 178, having been awkwardly worded. We may well understand contemporaries believing in those causes, and in a countless, endless number more, the multiplicity of which is due to the infinite variety of men's points of view. But to us of a later generation, contemplating in all its vastness the immensity of the accomplished fact, and seeking to penetrate its simple and fearful significance, those explanations must appear insufficient. To us it is inconceivable that millions of Christian men should have killed and tortured each other, because Napoleon was ambitious, Alexander firm, English policy crafty, and the Duke of Oldenburg hardly treated. We cannot grasp the connection between these circumstances and the bare fact of murder and violence, nor why the duke's wrongs should induce thousands of men from the other side of Europe to pillage and murder the inhabitants of the Smolensk and Moscow provinces and to be slaughtered by them.

For us of a later generation, who are not historians led away by the process of research, and so can look at the facts with common-sense unobscured, the causes of this war appear innumerable in their multiplicity. The more deeply we search out the causes the more of them we discover; and every cause, and even a whole class of causes taken separately, strikes us as being equally true in itself, and equally deceptive through its insignificance in comparison with the immensity of the result, and its inability to produce (without all the other causes that concurred with it) the effect that followed. Such a cause, for instance, occurs to us as Napoleon's refusal to withdraw his troops beyond the Vistula, and to restore the duchy of Oldenburg; and then again we remember the readiness or the reluctance of the first chance French corporal to serve on a second campaign; for had he been unwilling to serve, and a second and a third, and thousands of corporals and soldiers had shared that reluctance, Napoleon's army would have been short of so many men, and the war could not have taken place.

If Napoleon had not taken offence at the request to withdraw beyond the Vistula, and had not commanded his troops to advance, there would have been no war. But if all the sergeants had been unwilling to serve on another campaign, there could have been no war either.

And the war would not have been had there been no intrigues on the part of England, no Duke of Oldenburg, no resentment on the part of Alexander; nor had there been no autocracy in Russia, no French Revolution and consequent dictatorship and empire, nor all that led to the French Revolution, and so on further back: without any one of those causes, nothing could have happened. And so all those causes—myriads of causes—coincided to bring about what happened. And consequently nothing was exclusively the cause of the war, and the war was bound to happen, simply because it was bound to happen. Millions of men, repudiating their common-sense and their human feelings, were bound to move from west to east, and to slaughter their fellows, just as some centuries before hordes of men had moved from east to west to slaughter their fellows.

The acts of Napoleon and Alexander, on whose words it seemed to depend whether this should be done or not, were as little voluntary as the act of each soldier, forced to march out by the drawing of a lot or by conscription. This could not be otherwise, for in order that the will of Napoleon and Alexander (on whom the whole decision appeared to rest) should be effective, a combination of innumerable circumstances was essential, without any one of which the effect could not have followed. It was essential that the millions of men in whose hands the real power lay—the soldiers who fired guns and transported provisions and cannons—should consent to carry out the will of those feeble and isolated persons, and that they should have been brought to this acquiescence by an infinite number of varied and complicated causes.

We are forced to fall back upon fatalism in history to explain irrational events (that is those of which we cannot comprehend the reason). The more we try to explain those events in history rationally, the more irrational and incomprehensible they seem to us. Every man lives for himself, making use of his free-will for attainment of his own objects, and feels in his whole being that he can do or not do any action. But as soon as he does anything, that act, committed at a certain moment in time, becomes irrevocable and is the property of history, in which it has a significance, predestined and not subject to free choice.

There are two aspects to the life of every man: the personal life, which is free in proportion as its interests are abstract, and the elemental life of the swarm, in which a man must inevitably follow the laws laid down for him.

Consciously a man lives on his own account in freedom of will, but he serves as an unconscious instrument in bringing about the historical ends of humanity. An act he has once committed is irrevocable, and that act of his, coinciding in time with millions of acts of others, has an historical value. The higher a man's place in the social scale, the more connections he has with others, and the more power he has over them, the more conspicuous is the inevitability and predestination of every act he commits. “The hearts of kings are in the hand of God.” The king is the slave of history.

History—that is the unconscious life of humanity in the swarm, in the community—makes every minute of the life of kings its own, as an instrument for attaining its ends.

Although in that year, 1812, Napoleon believed more than ever that to shed or not to shed the blood of his peoples depended entirely on his will (as Alexander said in his last letter to him), yet then, and more than at any time, he was in bondage to those laws which forced him, while to himself he seemed to be acting freely, to do what was bound to be his share in the common edifice of humanity, in history.

The people of the west moved to the east for men to kill one another. And by the law of the coincidence of causes, thousands of petty causes backed one another up and coincided with that event to bring about that movement and that war: resentment at the non-observance of the continental system, and the Duke of Oldenburg, and the massing of troops in Prussia—a measure undertaken, as Napoleon supposed, with the object of securing armed peace—and the French Emperor's love of war, to which he had grown accustomed, in conjunction with the inclinations of his people, who were carried away by the grandiose scale of the preparations, and the expenditure on those preparations, and the necessity of recouping that expenditure. Then there was the intoxicating effect of the honours paid to the French Emperor in Dresden, and the negotiations too of the diplomatists, who were supposed by contemporaries to be guided by a genuine desire to secure peace, though they only inflamed the amour-propre of both sides; and millions upon millions of other causes, chiming in with the fated event and coincident with it.

When the apple is ripe and falls—why does it fall? Is it because it is drawn by gravitation to the earth, because its stalk is withered, because it is dried by the sun, because it grows heavier, because the wind shakes it, or because the boy standing under the tree wants to eat it?

Not one of those is the cause. All that simply makes up the conjunction of conditions under which every living, organic, elemental event takes place. And the botanist who says that the apple has fallen because the cells are decomposing, and so on, will be just as right as the boy standing under the tree who says the apple has fallen because he wanted to eat it and prayed for it to fall. The historian, who says that Napoleon went to Moscow because he wanted to, and was ruined because Alexander desired his ruin, will be just as right and as wrong as the man who says that the mountain of millions of tons, tottering and undermined, has been felled by the last stroke of the last workingman's pick-axe. In historical events great men—so called—are but the labels that serve to give a name to an event, and like labels, they have the least possible connection with the event itself.

Every action of theirs, that seems to them an act of their own free-will, is in an historical sense not free at all, but in bondage to the whole course of previous history, and predestined from all eternity.

Friday, October 09, 2009

peace prize

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Monday, October 05, 2009

Tuesday, September 29, 2009

Tom Ridge talks to Rachel Maddow - more video on the web

There is a beautiful moment starting around 6:30 when Maddow reads a quote from the book jacket contradicting Ridge's just stated, revised claims. A Woody Allen moment,

Tuesday, September 15, 2009


(via @jdlasica)

Welcome to AnyClip. Find any moment from any film, instantly.

The White House - Blog Post - Streaming at 1:00: In the Cloud

The White House - Blog Post - Streaming at 1:00: In the Cloud

(via @timoreilly)

Today, I am excited to announce that we have launched to help continue the President’s initiative to lower the cost of government operations while driving innovation within government. I'll be discussing this in a speech at the NASA Ames Research Center at 1:00 EDT... is an online storefront for federal agencies to quickly browse and purchase cloud-based IT services, for productivity, collaboration, and efficiency. Cloud computing is the next generation of IT in which data and applications will be housed centrally and accessible anywhere and anytime by a various devices (this is opposed to the current model where applications and most data is housed on individual devices). By consolidating available services, is a one-stop source for cloud services – an innovation that not only can change how IT operates, but also save taxpayer dollars in the process.
The federal government spends over $75 billion annually on information technology (IT). This technology supports every mission our government performs— from defending our borders to protecting the environment. IT is essential for the government to do its work, and it is essential that we have access to the latest and most innovative technologies.
However, federal agencies and departments encounter many difficulties in deploying new IT services and products. Procurement processes can be confusing and time-consuming. Security procedures are complex, costly, lengthy and duplicative across agencies. Our policies lag behind new trends, causing unnecessary restrictions on the use of new technology. Past practices too often resulted in inefficient use of purchased IT capabilities across the federal government. We are dedicated to addressing these barriers and to improving the way government leverages new technology.
Now, we can start to address some of these challenges by adopting the use of cloud computing in the federal government through Cloud computing is defined by the National Institute of Standards and Technology as a computing model where IT capabilities are delivered as a service over the Internet to many users. Like a utility such as electricity or water, cloud computing allows users to only consume what they need, to grow or shrink their use as their needs change, and to only pay for what they actually use. With more rapid access to innovative IT solutions, agencies can spend less time and taxpayer dollars on procedural items and focus more on using technology to achieve their missions.
We are just beginning this undertaking, and it will take time before we can realize the full potential of cloud computing. Like with, is starting small – with the goal of rapidly scaling it up in size. Along the way, we will need to address various issues related to security, privacy, information management and procurement to expand our cloud computing services. Over time, as we work through these concerns and offer more services through, federal agencies will be able to get the capabilities they need to fulfill their missions at lower cost, faster, and ultimately, in a more sustainable manner.

Vivek Kundra is the U.S. Chief Information Officer.

Monday, September 14, 2009

How We Decide by Jonah Lehrer P. 163-165

In chapter 5 of his book, How We Decide, Jonah Lehrer discusses back pain and what changed after the MRI became a "crucial medical tool. It allowed doctors to look, for the first time, at stunningly accurate images of the interior of the body.” Unfortunately without a proper context including a much better understanding of the human body, this ‘accurate evidence’ gave them a false confidence in their decisions. This appears to have resulted in lots of unnecessary tests, procedures and surgeries.

p. 163-164 How we Decide

“A large study published in the Journal of the American Medical Association (JAMA) randomly assigned 380 patients with back pain to undergo two different types of diagnostic analysis. One group received x-rays. The other group got diagnosed using MRIs, which gave doctors much more information about the underlying anatomy.

Which group fared better? Did better pictures lead to better treatments? There was no difference in patient outcome: the vast majority of people in both groups got better. More information didn't lead to less pain. The stark differences emerge when the study looked at how the different groups were treated. Nearly 50% of MRI patients were diagnosed with some sort of disc abnormality, and this diagnosis led to intensive medical interventions. The MRI group had more doctor visits, more injections, more physical therapy, and were more than twice as likely to undergo surgery. These additional treatments were very expensive, and they had no measurable benefit.”

I posted a video yesterday of Nassim Taleb, saying the same thing about certain financial metrics: the (false) precision of the measure gives a trader or bank executive a false understanding of the risk being taken and a false confidence in his/her understanding.

p. 165 How we Decide

“The problem with diagnosing the origins of back pain is really just another version of the strawberry-jam problem*. In both cases, the rational methods of decision-making cause mistakes. Sometimes, more information and analysis can actually constrict thinking, making people understand less about what's really going on. Instead of focusing on the most pertinent variable -- the percentage of patients who get better and experienced less pain -- doctors got sidetracked by the irrelevant MRI pictures.

When it comes to treating back pain, this wrong-headed approach comes with serious costs. "What's going on now is a disgrace," says Dr. John Sarno, a professional of clinical rehabilitation at New York University Medical Center. "You have well-meaning doctors making structural diagnoses despite a serious lack of evidence that these abnormalities are really causing chronic pain. But they have these MRI pictures and the pictures seem so convincing. It's amazing how perfectly intelligent people will make foolish decisions if you give them lots of irrelevant stuff to consider."

*Strawberry Jam problem: in blind taste tests, students’ tastes correlated with a panel of experts, but when asked to explain their decisions, another group of students showed no correlation. i.e there are situations when rational-decision making causes worse decisions.

“The old ways that led to this crisis cannot stand.”

On Wall Street, Obama Pushes Stricter Finance Rules -

"“I want everybody here to hear my words,” Mr. Obama said. “We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses. Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall.”

Mr. Obama touted the administration’s plans to increase capital cushions at big banks, give the Federal Reserve new powers to oversee system-wide risks to the financial system and establish a new consumer-protection agency, which would have broad powers over home mortgages and other consumer loans.

Mr. Obama also urged banks to adopt changes before Congress acts by simplifying the language they use with consumers, overhauling their pay structures or allowing shareholders vote on 2009 bonuses."
“At the same time, what we must do now goes beyond just these reforms,” Mr. Obama said. “For what took place one year ago was not merely a failure of regulation or legislation; it was not merely a failure of oversight or foresight. It was a failure of responsibility that allowed Washington to become a place where problems — including structural problems in our financial system — were ignored rather than solved.”

Thursday, September 10, 2009

Art by Novik | Blurb

Art by Novik | Blurb

I put together a cool little art book. It is 7 inches X 7 inches and its pages are graced with beautiful reprints of eighty-five paintings by my friend, the painter Novik. We are selling the book for a limited time at cost ($34 + tax and shipping), but after a short time the price will increase to $100. The idea is to let friends, etc. purchase this collection at cost, but then raise the price to better reflect its value. Eventual profits, if any, will first go toward paying for production expenses and then toward the continued promotion and advancement of Novik's work. The first fifteen pages can be previewed by following the link.

By Mark E. Merritt

Monday, September 07, 2009



While coverage of the health care reform debate has focused on yelling, booing and fistfights, not all engagements between lawmakers and constituents turn hostile. Sen. Al Franken (D-Minn.) discussed his beliefs and goals about health care reform at the Minnesota State Fair Wednesday with a group of constituents, and calmed down some who were upset, giving clear, honest answers to thought-out, sincere questions. "I thank you for your passion," he says to a vocal member of the crowd, "we need that, and we need to have these conversations."
And then, remarkably, she calms down, and everyone discusses the matter in a reasonable and cool-headed manner.
"We all want reform, the question is how do we do it," Franken said. A mixed bag of opponents and supporters gathered around as the senator explained his perspective, how he will vote, and how he believes the legislation will benefit the people of Minnesota and the nation.


Wednesday, September 02, 2009

Applied Rheology

Republican recounts lessons of the past
by Lisa Vorderbrueggen,
Contra Costa Times
August 21, 2009

David Harmer, a case study in Applied Rheology ;)

Thursday, August 06, 2009

Web Squared: Web 2.0 Five Years On: Web 2.0

Web Squared

Ever since we first introduced the term "Web 2.0," people have been asking, "What’s next?" Assuming that Web 2.0 was meant to be a kind of software version number (rather than a statement about the second coming of the Web after the dotcom bust), we’re constantly asked about "Web 3.0." Is it the semantic web? The sentient web? Is it the social web? The mobile web? Is it some form of virtual reality?

It is all of those, and more.

The Web is no longer a collection of static pages of HTML that describe something in the world. Increasingly, the Web is the world – everything and everyone in the world casts an "information shadow," an aura of data which, when captured and processed intelligently, offers extraordinary opportunity and mind bending implications. Web Squared is our way of exploring this phenomenon and giving it a name.

Read the whole thing here.

Saturday, July 11, 2009

Rule of Law

[I]n late June [US Attorney General Eric] Holder asked an aide for a copy of the CIA inspector general's thick classified report on interrogation abuses. He cleared his schedule and, over two days, holed up alone in his Justice Department office, immersed himself in what Dick Cheney once referred to as "the dark side." He read the report twice, the first time as a lawyer, looking for evidence and instances of transgressions that might call for prosecution. The second time, he started to absorb what he was reading at a more emotional level. He was "shocked and saddened," he told a friend, by what government servants were alleged to have done in America's name. When he was done he stood at his window for a long time, staring at Constitution Avenue. [p.4]

Friday, July 10, 2009

Joint IG Report re B43 Domestic Surveillance

Bush Administration domestic surveillance programs much broader than previously known. Spencer Ackerman has more. Here's the joint report from the inspectors general [& with bookmarks].
We're going through the report now, but for a frame of reference let me refer you back to this TPMmuckraker report by Paul Kiel and Spencer Ackerman from two Julys ago. I dare say we were on to something.


David Corn

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Bush | Gonzales | Card | Ashcroft | Hospital | Comey
  • 2009.07.10 TPM: Bush personally sent Card

  • 2007.05.15 g-bus David Corn re Comey testimony

Wednesday, July 08, 2009

B43 Justice

At long last Karl Rove faced congressional investigators today in the U.S. attorneys firings and related investigations of the politicization of the Bush-era Justice Department. He was deposed by House Judiciary Committee attorneys for most of the day, committee chairman John Conyers tells Politico.

. . .. ... .. . .

& WaPo


The news that Karl Rove has finally testified before lawyers for the House Judiciary committee about his role in the US Attorney firings and the prosecution of Don Siegelman represents, in one sense, the culmination of years-long battle. That fight has pitted Congress, determined to get to the bottom of the firings, against the Bush White House, which has dragged its feet at virtually every stage. And yet, the path from here to a full public accounting of what happened remains unclear at best.

Rove's deposition put a cap on a protracted legal standoff between the committee, chaired by Rep. John Conyers (D-MI) and the Bush White House. Conyers, investigating the late 2006 firing of nine US Attorneys, had first subpoenaed Rove in 2007. Citing executive privilege, the White House refused to let Rove testify. That eventually prompted Congress to hold Rove in contempt, and ultimately to file a lawsuit seeking to compel Rove to testify. A district court ruled in Congress's favor last year, but the White House appealed that ruling, and Rove continued to be a no-show at several committee hearings to which he had been called to testify. Eventually, in March, lawyers for President Bush reached an agreement with the committee, securing Rove's and Harriet Miers' testimony. Even since then, though, it's taken over four months to arrange for Rove's sit-down. (Miers had hers last month.) ....

Tuesday, July 07, 2009

Official Google Blog: Introducing the Google Chrome OS

7/07/2009 09:37:00 PM

It's been an exciting nine months since we launched the Google Chrome browser. Already, over 30 million people use it regularly. We designed Google Chrome for people who live on the web — searching for information, checking email, catching up on the news, shopping or just staying in touch with friends. However, the operating systems that browsers run on were designed in an era where there was no web. So today, we're announcing a new project that's a natural extension of Google Chrome — the Google Chrome Operating System. It's our attempt to re-think what operating systems should be.

Google Chrome OS is an open source, lightweight operating system that will initially be targeted at netbooks. Later this year we will open-source its code, and netbooks running Google Chrome OS will be available for consumers in the second half of 2010. Because we're already talking to partners about the project, and we'll soon be working with the open source community, we wanted to share our vision now so everyone understands what we are trying to achieve.

Speed, simplicity and security are the key aspects of Google Chrome OS. We're designing the OS to be fast and lightweight, to start up and get you onto the web in a few seconds. The user interface is minimal to stay out of your way, and most of the user experience takes place on the web. And as we did for the Google Chrome browser, we are going back to the basics and completely redesigning the underlying security architecture of the OS so that users don't have to deal with viruses, malware and security updates. It should just work.

Google Chrome OS will run on both x86 as well as ARM chips and we are working with multiple OEMs to bring a number of netbooks to market next year. The software architecture is simple — Google Chrome running within a new windowing system on top of a Linux kernel. For application developers, the web is the platform. All web-based applications will automatically work and new applications can be written using your favorite web technologies. And of course, these apps will run not only on Google Chrome OS, but on any standards-based browser on Windows, Mac and Linux thereby giving developers the largest user base of any platform.

Google Chrome OS is a new project, separate from Android. Android was designed from the beginning to work across a variety of devices from phones to set-top boxes to netbooks. Google Chrome OS is being created for people who spend most of their time on the web, and is being designed to power computers ranging from small netbooks to full-size desktop systems. While there are areas where Google Chrome OS and Android overlap, we believe choice will drive innovation for the benefit of everyone, including Google.

We hear a lot from our users and their message is clear — computers need to get better. People want to get to their email instantly, without wasting time waiting for their computers to boot and browsers to start up. They want their computers to always run as fast as when they first bought them. They want their data to be accessible to them wherever they are and not have to worry about losing their computer or forgetting to back up files. Even more importantly, they don't want to spend hours configuring their computers to work with every new piece of hardware, or have to worry about constant software updates. And any time our users have a better computing experience, Google benefits as well by having happier users who are more likely to spend time on the Internet.

We have a lot of work to do, and we're definitely going to need a lot of help from the open source community to accomplish this vision. We're excited for what's to come and we hope you are too. Stay tuned for more updates in the fall and have a great summer.