A Networked World

Breaking the 3 rules of investment

Why am I not surprised by this story about Failed Hanover Finance Director Mark Hotchin? Hotchin was promised 160pc interest

Hanover director Mark Hotchin invested $560,000 in a Ponzi scheme that promised a 160 per cent return over just two months.

His ill-fated foray into what his lawyer described as "Looney Tunes Investments", is thought to have lost him about $225,000.

The investment was of his own money, but when the Ponzi scheme fraudsters were prosecuted, Mr Hotchin gained a court order to keep his involvement secret from investors and protect Hanover.

He was a victim of the sham get-rich-quick schemes in 2002 but the director and co-owner of the Hanover group of companies can only now be named after a legal challenge by the Herald to overturn the suppression order.

Kerry Finnigan, a director and chief executive of the Hanover group at the time, was also a victim investing $120,000 but ending up out-of-pocket by just a small amount. He also succeeded in having his name suppressed when the case was prosecuted by the Serious Fraud Office in 2004-05.

Yesterday, investor Tom Brosnahan, who poured a "substantial sum" into Hanover-owned United Finance in 2008, said the pair's involvement in the Ponzi scheme and then name suppression was the latest in a long line of injustices.

So here we have more people claiming to be better at managing our money than us bunnies ever could be, getting sucked into a scheme that promises, up front, 160% return per annum. Imagine if you will the mindset needed to even half believe such twaddle; then imagine what it takes to dump half a mil of your own money into such a scheme, then the level of cognitive dissonance needed to continue to claim that you "know" what you are doing.

Of course, they DID understand that if anyone ever discovered his blind greed and all-consuming stupidity his "business" was finished, which leads to a pretty clear deduction that these people knew exactly what they were doing, and it wasn't managing other people's money.

Still, I have little sympathy for the "investors" in these finance companies. When you hand your hard earned dollars to someone who makes that kind of claim you cannot possibly know enough to feel safe, as this story shows. To do so breaks my 3 rules of money management.

1. Never let anyone else make decisions about your money
2. See rule 1
3. No, really, see rule one.

I also have rule 3a which is that if I am not smart enough to understand, and explain to someone else exactly how a particular scheme works, I should not go near it.

It helps that I have rule 3b as well which states that I am at least as smart as these guys and if I can't figure it out, its probably a scam and if it isn't, I don't deserve to share in the benefits because I'd be a free rider. and that ain't ethical.

But then unethical financial activity and free riding is now the modus operandum of our society. Its a good thing its ending and we are moving back to the model of work hard, spend less than you earn, save the difference, have no debts and stop dreaming about life in the fast lane.

He DOES go on don't he?

Late last year I did a keynote for MS at their Connecting Communities one-dayer in Aucklamnd. Apart from learning again the lesson that you should only have ONE version of your pressie on the thumb drive, I think it went down pretty well.

State of Play by Earl Mardle: Microsoft NGO Day Auckland 2010 from Connecting Up on Vimeo.

I'll be doing updated reruns at both the NZ and Melbourne Connecting Up conferences this year, plus anywhere else that fancies hosting a bit of a trouble-maker.

The real Wikileaks secrets

Most of what we have seen from the Wikileaks cables is mere confirmation of what we suspected all along, mostly that our politicians and other leaders routinely lie to us about what they are doing and, especially, why they are doing it.

In some cases that leads to dead people as have illegal or unwinnable wars such as in Iraq and Afghanistan and it is seriously rich to have people with buckets of blood on their hands lecturing Wikileaks about the possibility that people may be compromised.

There is a difference between those who cause harm inadvertently while trying to out a criminal and those who commit the crimes in the first place. Ask any cop who has accidentally killed someone who walked into the line of fire at the wrong moment, for example.

But the real secret that is causing so much panic is not the diplomatic chitchat and scandal, schadenfreude-inducing though that may be; what is causing all the sturm und drang is the meta message that is coming down the line and will get much liuder and much clearer as the commercial and banking data comes out.

That message is this, the game is rigged. Like this, for instance

TORONTO (miningweekly.com) – A WikiLeaks cable indicates that BHP Billiton tried to sabotage a proposed investment by China's Chinalco in rival Rio Tinto, according to the Australian Broadcasting Corporation.

“The cables sent from Federal Treasurer Wayne Swan's chief of staff to US officials describe how BHP "played its cards with consummate skill" in lobbying the government to delay a decision on a deal between Rio Tinto and Chinalco,” the ABC report said.

In February 2009, Chinalco agreed to invest $19,5-billion in Rio Tinto and its operations to obtain an 18% stake in the world's third-biggest mining company, which at the time was battling to shift debt.

But Rio broke off the deal in June, opting instead for a big rights issue and a since-scrapped iron-ore joint venture in Australia with BHP.

The Chinalco agreement had followed an earlier failed hostile takeover bid by BHP Billiton for Rio Tinto.    

All of the players involved knew what was going on, not one of them lacks the resources to know what the others are actually doing behind the scenes, the only people who must not find out that the pollies and the captains of industry are rigging the game is us.

As long as we can be convinced that we have to play the capitalist (or communist or theocratic) game and that there are rules which, if followed, can lead to "success" we will keep doing our best and blaming ourselves for any failures.

But once we see clearly that the whole game is rigged by those who have been playing longest, we will first withdraw our participation and, when they try to enforce play, out will come the torches and pitchforks.

THAT is what is getting so many panties in a bunch in the capitals of the world.

The damage done by Wikileaks

I'm sure that it comes as absolutely no surprise to any diplomat nor their employing government, that their counterparts from other nations routinely lie to them about pretty much everything. Nor should it come as a shock that some of their counterparts think of them as idiots or worse.

A diplomat is someone who lies professionally for his country and any diplomat not fully aware of that is a liability and should be fired forthwith.

So it is unlikely that the Wikileaks data dump provides anything more than confirmation of normal suspicions and, being diplomats, these people will have no trouble whatever continuing both to deal with, and lie to, each other with unruffled feathers for many years to come, their personal flutterings soothed by regular application of canapes and booze.

On the other hand, what the leaks can very much damage is the credibility and safety of governments at the hands of their employers, viz, us.

While most of us have a default position that our masters, elected and otherwise, treat us and our aspirations and needs with dismissal when it is not outright contempt, it is another thing altogether to discover how regularly and egregiously they betray our interests in the pursuit of their rarefied and esoteric goals in the Great Game.

Wikileaks has the mission of fleshing out and adding fine detail to those betrayals and in doing so they undermine the pretenses and obfuscations and credibility, the authority of nation states in relation to their own people.

THAT is why the bastards are screaming in moral panic; that is why they are plotting the destruction of the torchlight shone straight into their corrupted hearts.

That is why we all have a duty to support Wikileaks, because it has the potential, at last, and in fact, to keep the bastards honest.

Update:  What is the betting that, if sweden is able to have Julian Assange extradited, the rape case will be dropped but he will be held because there is an application from the US for his extradition to their jurisdiction? I'm going with about 80%.

Plus, after spending so many uyears in a very happy association with sweden and its reputation for openness, I'm bloody horrified by their role in this.

They NEVER give up.

You have to hand it to the right wing ideologues; they really do never give up trying to create their corporatist state. I wonder how much we paid disgraced former leader of the national Party and, god help us, former head of the reserve bank Don Brash for this odorous pile.

'400,000 will leave in next 15 years' New Zealand will lose another 400,000 people to Australia over the next 15 years, based on current projections of the income gap between the two countries, the 2025 taskforce says. The taskforce, chaired by Don Brash, is charged with providing recommendations on how to close the income gap by 2025. In its second report, released yesterday, it says OECD projections of each country's growth prospects would see the gap widen from 35 per cent to 42 per cent. "Can we close the gap?" Brash asked yesterday. "To paraphrase President Obama [in a recent appearance on The Daily Show]: Yes we can, but it may take a little time." 

It would require an unwavering focus on policies that would see the New Zealand economy grow nearly 2 per cent per annum faster than Australia over that period.Some steps the Government had taken over the past two years - like income tax cuts - are likely to have improved the country's growth prospects, Brash said, but others - like tax changes which have effectively increased the tax burden on business - are likely to have detracted from them.

"On balance New Zealand is still a long way from the kind of policies needed to have any chance of closing the gap with Australia by 2025, or even of making serious progress towards that goal."

The report recommends cutting Government spending and tax rates, and a rapid return to a structural fiscal surplus. It wants to "shift the boundary" between private and public sectors, with more of the former and less of the latter, including in health and education.

It favours at least the partial privatisation of state-owned enterprises. It calls for more robust and transparent cost/benefit analyses of major infrastructure projects, including plans for ultra-fast broadband. It is sceptical of the return on public sector research and development and advocates a freeze on that spending coupled with less micro-management of how it is distributed.

It wants a more inviting regime for foreign investment and is critical of the uncertainty recent Government statements and regulatory changes have engendered. And it favours "institutionalising" better processes for vetting Government spending and regulation - either in the form of a taxpayer's bill of rights or an "independent fiscal council" akin to the Congressional Budget Office in the United States.

The whole thing is predicated on current conditions, conditions that are changing more rapidly than ever in my lifetime and that are a long way from done in this phase.

Meanwhile Australia is a very small chain of overpopulated Islands of dubious fertility surrounded by sand and salt water. Its prosperity comes entirely from its willingness to dig up its mineral resources and sell them overseas, principally to China which depends for its demand on the US as buyer of first, middle and last resort. And the US just voted to rush headlong into a major depression, if not actual financial collapse.

Meanwhile the UK, a favourite destination of many Kiwis is also diving into a major financial and social mess.

Far from an exodus of population we should be preparing for a return of the diaspora as thousands of our kin find that they can't survive, or stand, living in the US and UK and come home. They will also be coming home broke and bearing skills such as investment banking that will be of little or no use to them here.

When China undergoes its own inevitable meltdown as its global customer base dries up and its US dollar reserves turn to fertiliser, Australia too will find itself in rather a surplus position vis a vis kiwis and they too will start coming home.

But Don Brash and his ilk don't want us to think about the really big picture, they just want to scare us into accepting their corporatist agenda, to hand over the private enterprise every possible thing that someone might possibly make a profit from if they drive down the quality enough, this especially applies to those things like health and education where the demand is pretty much inelastic.

And they have apparently decided that fear and envy of Australia is our biggest goad but since we have been rated as one of the top 5 nations in which to live, based on pretty much anything worth having, catching up with Aussie doesn't seem to have much point and, unless we suddenly discover that we have a million square miles of mineral rich desert in demand from a massively consuming global population, trying to do so is about in the same category as taking that LSD and thinking you might just catch up with that passing seagull.

As usual, life continues to be an intelligence test, and if we fall for this one again we will deserve the mess it lands us in.

Demonstrating strength

Seth Godin is a fine stirrer and I like this list a lot. Demonstrating strength

1. Apologise
   I remember years ago a staff member taking me to task for apologising to a client for something that, almost certainly was the client's fault and from which I was defending another client. First client took exception to being stepped on and demanded an apology. She got one, without hesitation or qualification. My staff member didn't get that the apology took off the table the form of the issue, leaving only the substabnce to be dealt with, that said client was, in fact, an asshole and a bully and needed to be controlled.
2. Defer to others
   Best way to learn anything is ask someone else to help you, its a pretty good way to make other people feel better about the day. Being helped is OK, being thought able to help is much better.
3. Avoid shortcuts
   Ack!, guilty.
4. Tell the truth
   It's cost me more than one contract. But then, I have no debts, no mortgage and a big garden, I can afford to tell the truth.
5. Offer kindness
   I hope so. Especially to those close to me.
6. Seek alliances
   I'm not as good at this as I might be, partly because of 4.
7. Volunteer to take the short straw
8. Choose the long-term, sacrificing the short
   I have a little mantra for those who always want to pluck the "low hanging fruit" or "get some easy runs on the board", do the hard stuff first, the easy stuff is always going to be easy, but going from the easy to the hard just makes the hard seem even worse." Most people aren't interested.
9. Demonstrate respect to all, not just the obviously strong
   Yep. Doing my best when I'm taking potshots at the strong.
10. Share credit and be public in your gratitude
    One of my trustees once said to me as we stood at the back of a room while a politician took all the glory for our hard work, "you can get a lot done if you don't mind who takes the credit".  Yes

Risking the appearance of weakness takes strength. And the market knows it.

My one disagreement. The market doesn't know anything. Look at the state its in.

1. Apologise
   I remember years ago a staff member taking me to task for apologising to a client for something that, almost certainly was the client's fault and from which I was defending another client. First client took exception to being stepped on and demanded an apology. She got one, without hesitation or qualification. My staff member didn't get that the apology took off the table the form of the issue, leaving only the substabnce to be dealt with, that said client was, in fact, an asshole and a bully and needed to be controlled.
2. Defer to others
   Best way to learn anything is ask someone else to help you, its a pretty good way to make other people feel better about the day. Being helped is OK, being thought able to help is much better.
3. Avoid shortcuts
   Ack!, guilty.
4. Tell the truth
   It's cost me more than one contract. But then, I have no debts, no mortgage and a big garden, I can afford to tell the truth.
5. Offer kindness
   I hope so. Especially to those close to me.
6. Seek alliances
   I'm not as good at this as I might be, partly because of 4.
7. Volunteer to take the short straw
8. Choose the long-term, sacrificing the short
   I have a little mantra for those who always want to pluck the "low hanging fruit" or "get some easy runs on the board", do the hard stuff first, the easy stuff is always going to be easy, but going from the easy to the hard just makes the hard seem even worse." Most people aren't interested.
9. Demonstrate respect to all, not just the obviously strong
   Yep. Doing my best when I'm taking potshots at the strong.
10. Share credit and be public in your gratitude
    One of my trustees once said to me as we stood at the back of a room while a politician took all the glory for our hard work, "you can get a lot done if you don't mind who takes the credit".  Yes

Risking the appearance of weakness takes strength. And the market knows it.

My one disagreement. The market doesn't know anything. Look at the state its in.

A nail through it from Jim Kunstler

I've been reading him casually for a number of years, I check his weekly screed more to take the temperature than get any actual information because I'm already right on board with his perspective. But this week has two special points.

One is that his usual colourful rant has the darkest tone I have ever seen him use and two is this section.

Scary People, Scary Times - Clusterfuck Nation

The most striking feature of the current scene is the absence of a coherent vision of our multiple related predicaments and how they add up to a valid picture of reality. To be precise, I mean our predicaments of 1.) energy resources, 2.) vanishing capital, and 3.) ecocide. This inability to decode the clear and present dangers to civilized life is a failure of leadership and authority without precedent in the American story.
On the eve of the only other comparable national convulsion -- the lead-up to the Civil War - a strenuous public debate was able to focus on the salient question of the day, namely whether human slavery would continue in this country. Lincoln and Douglas parried for hours in the hot sun, arguing unscripted in complete sentences without the aid of teleprompters or offstage spin doctors. Yet no one above age of nine failed to understand what was at issue.
Note the diminishing returns of technology at work in our time, making it impossible for us to think straight, despite the proliferation of snazzy devices, programs, networks, blog-clouds, and the pervasive, non-stop spewage of so-called information all intended to enhance communication. What did Lincoln have to work with? A pencil.

The issue is not how cool are our tools, the issue is what we use them for and I have long said that ICT is a huge accerlerator. It wont change who you are or how you or your organisation wporks at first, but it will massively amplify everything about the information environment you inhabit.

I'm pretty sure we have all, always, been about as deluded and ignorant and resistant to change as we are now. But with the advent of these technologies we are being exposed to both the best and the worst in us at very speed; whatever and whoever we are is laid out in an instant for the world to see in all its icky, mindless detail.

As well as its massive positives, electronic communications of all kinds have enabled the publication of our anger, hatreds and perversions and my view is that the good has outweighed the bad by a long way.

But, as Kunstler suggests in this piece, it is now amplifying our fear, ignorance, confusion, desperation and panic.

18 months ago I watched one Saturday morning as my old dog trotted up the garden path, cast around the hedges and the shed, under the Pururi tree and flopped down under the cool shadow of the worm farm, panting as he tried to escape the pain inside. I said to my wife then what I am feeling now as I read Kunstler's piece, "that's not good". In three days my old dog was dead.

Got that feeling again.

The dead web

Little flurry at the moment on whether "the web" is dead or not and Rob Beschizza has an interesting take on the Wired article Is the web really dead?

In fact, between 1995 and 2006, the total amount of web traffic went from about 10 terabytes a month to 1,000,000 terabytes (or 1 exabyte). According to Cisco, the same source Wired used for its projections, total internet traffic rose then from about 1 exabyte to 7 exabytes between 2005 and 2010.

So with actual total traffic as the vertical axis, the graph would look more like this.

Clearly on its last legs!

Assuming that this crudely renormalized graph is at all accurate, it doesn't even seem to be the case that the web's ongoing growth has slowed. It's rather been joined by even more explosive growth in file-sharing and video, which is often embedded in the web in any case.

I've been saying for years that the web is just a transitional phase of the net on the way to whatever is coming next but that I had (and still have) no idea what that next was.

I was pretty clear though, about what I meant by "the web" was websites as such.

Browsers force us to "go" to a web "site" to get information or interact with people on "forums", a website is not an end, its an intermediary between me and the person who posts the information to it, its a middle and a technology dedicated to disintermediation will leave it behind.

The WEB used to be the end in itself, but now it has been swamped by all these other tools. Is it dead? No, although the whole IPv4/6 shemozzle could be a nasty blow to the groin, but it is shifting from being the destination to being the carrier. Newspapers probably wont die out completely, neither will radio or TV, so I don't expect html to disappear any time soon, but for those of us who still remember the excitement of "having a website", that web is going fast.

Counter-cyclical thinking

As a bit of a cotnrarian, I'm interested in this. The nitty-gritty of whittling down your possessions

Boing Boing readers had a lot to say regarding yesterday's post about Kelly Sutton, the fellow who has gotten rid of almost everything he owns apart from his digital / Internet technology.

Right now we are in the process of adding things rather than taking them away for a very simple reason; redundancy.

Kelly's (new) way of life is utterly dependent on lean supply chain dynamics and the ubiquity of the power grid at the very moment when both of those models are coming to an end.

He assumes in his piece that, if something needs fixing, he can buy the tools he needs for the job at an affordable price, then dispose of them, buying new ones as needed in the future, same with his bed and remaining household furniture.

While he claims to be more environmentally friendly, he is in fact depending on a enviromentally destructive model. Right now I'm buying things that I hope will last, will serve me and my family for a long time and, even if they are only needed once a year, are to hand immediately to perform the task so I can get on with my life.

Image that, instead of just whipping down to the hardware store for a drill and bit, you had to wait in line for 2 hours before the store opens to see if the shipment of drills had arrived, then hope to get one and hope that they also sent bits in the package or risk having to do it all again tomorrow.

Think it can't happen? I have a mate whose partner has a container of chinese vaccum cleaners at her yard, the hoses don't fit the machines. the company in China that she pays to ensure that this thing doesn't happen almost certainly didn't actually check, even though they now have to ship the container back to China, repalce all the hoses and reship to NZ.

Why would that be? Because as long as it happens only once in 100 times, the profit from being paid for something you don't actually do, then rectifying the problem, is still higher than employing reliable staff to actually do the work.

Then there is the power grid. A full-on commitment to a digital life is wholly dependent on having electricity, not just in his home, but everywhere that he might be. Right now, today, there are counties in the US ripping up tarmac country roads and replacing them with gravel because they can't afford to maintain the blacktop any more. How long before their grid maintenance goes the same way?

Living the lean life is great, right up till the moment when some critical part of the system fails. And BTW, in lean systems the only parts that are left are all critical.

Which is why I'm investing in redundancy. In the last month I have loaned a power cord to one neighbour, a hedge trimmer to another, taken my pruning shears to the kiwi fruit vines of a third and nailed up a board over the window of a fourth who was burgled while they were out of town.

Not-often-used stuff that I have been able to provide.

• Spare power cord
• Hedge trimmer that I haven't used in months
• Secateurs
  
• Lopper
• Board
• Nails (I have a couple of kilos of about 10 different sizes because you can't nail up a piece of 3 ply on a window frame with a 100mm nail)
  
• Hammer
  

Now think about what would have to happen if all of us were living the same way that Kelly does.

Couldn't put it better

Dave Snowden nails it. Cynics are the ones who care

In any organisation the ones who enthusiastically take up the latest management initiative are with the odd exception either happy clappy idiots or self-promoting sycophants. The cynical guys at the back of the hall are generally those who care about the organisation.

Yep.