Tag Archives: capitalism

How To Embezzle $100 Million

Step 1. Start a financial services firm.

Step 2. Make sure you are the only person in the company who sees the bank statements.

Step 3. “Using a combination of Photo Shop, Excel, scanners and both laser and ink jet printers… make very convincing forgeries of nearly every document that came from the Bank.”

At least, that’s how Peregrine CEO Russell Wasendorf Sr. did it – for over 20 years.

He wrote a suicide note explaining the whole scam before attempting suicide. He failed at that and has now pleaded guilty to fraud and embezzlement.

What about the Regulators? Why didn’t they catch him?

“It was relatively simple to deceive the Regulators” according to Russ. Good to know.

He ended his suicide note with “I am ready to die. I guess this is the only way out of a business I hate so much.”

It’s a far cry from his most recent “Chairman’s Letter”, where he wrote

“At PFGBEST, our consistent hallmarks remain: respectful and conscientious care of customers and their accounts; a keen sense of their evolving needs; and, the talent and resources to provide analytical, flexible and customized solutions.”

Guys like Wasendorf are fascinating to me. How high would he score on a test for psychopathy? Surely he would score highly on many of those factors.

You have to wonder how many CEOs, politicians and entrepreneurs are psychopaths? And what is it about capitalism that allows them to prosper?

Of course, the history of socialism and communism has it’s fair share of psychopaths as well. Why is it so hard for us to design a socio-economic system that weeds out psychopaths?

 

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Does Deprivation Fire Ambition?

In the NYT today, David Brooks makes some interesting points about motivation, reflecting on Romney’s latest gaff:

The final thing the comment suggests is that Romney knows nothing about ambition and motivation. The formula he sketches is this: People who are forced to make it on their own have drive. People who receive benefits have dependency.

But, of course, no middle-class parent acts as if this is true. Middle-class parents don’t deprive their children of benefits so they can learn to struggle on their own. They shower benefits on their children to give them more opportunities — so they can play travel sports, go on foreign trips and develop more skills.

People are motivated when they feel competent. They are motivated when they have more opportunities. Ambition is fired by possibility, not by deprivation, as a tour through the world’s poorest regions makes clear.

If rich people really think benefits don’t help you, then they wouldn’t send their kids to private schools and elite universities. They wouldn’t use their personal networks to land their kids high-paying jobs in friends’ companies. They wouldn’t buy them a car, or give them a credit card or a mobile phone.

And we know this isn’t how it works.

So the next time one of your wealthy right-leaning friends tells you that the welfare system destroys ambition, you might want to point our their hypocrisy. If they really believed it, they would send their own kids to live by themselves in Kabul for a few years.

I grew up on the poverty line (by Australian standards) and I’m grateful that we had healthcare and education made available to us. If we hadn’t, I’d probably still be living in Bundaberg, either unemployed or doing some kind of manual labour. I’m not suggesting there is anything wrong with those things, but it was only because I had a decent education that I could explore other opportunities.

Yes – growing up poor made me hungry. And in my 20s that was a hunger to be rich. In my 30s and 40s that turned into a hunger to improve the system.

What people like Romney don’t understand is that altruism is about enlightened self-interest. If you build a strong society of people with a decent education and decent healthcare, you will get rewarded a thousand-fold. These people will become the next generation of doctors, inventors, engineers, artists, authors, journalists, film-makers, musicians, scientists and historians that improve society for all of us.

(HT to @NikolasKozloff for the NYT link)

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Socio-Economics Is Like Soccer

economics is like soccer

We understand and accept this fact in sport. I tell my kids all the time “every member of the team is important”.

The same is true in socio-economics. The CEO can’t run a billion dollar company without the rest of the employees. The brilliant entrepreneur can’t bring that new gadget to market without the people who sweep the streets, pick up the garbage, grow the food, staff the supermarket, wait tables, and manage the petrol station. It’s all a giant web of interrelation. If we all need each other to make the whole damn thing work, then we should share the profit as well. This whole bizarre idea that the people who run companies or invent something deserve the 1% because they worked harder or are smarter is complete bullshit and easily falsifiable. I love Ayn Rand’s book, but the premise of Atlas Shrugged works both ways. Yes – when the entrepreneurs pack their bags and move to an island, society feels their loss. But if the rest of society up and left the entrepreneurs alone on the mainland, how long do you think they would survive on their own, without anyone to sweep the streets, grow the food and, by the way, BUY THEIR WONDERFUL PRODUCTS?

We all need each other. As Lester Freamon might say “All the pieces matter”.

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Lonmin Marikana Police Massacre

Around the world this year we have seen police violence whenever the people don’t submit themselves to the elite. Whether it is against Occupy Wall Street,  students in Pennsylvania or against rioters in Greece, the story always has the same ring to it – the people must submit or face violence.

Today the news out of South Africa’s third-largest platinum producer, Lonmin‘s Marikana mine, is the most chilling of all. Thirty striking miners were shot dead by police.

Al Jazeera has horrifying footage of the slaughter:

This is on top of the 8 workers who were killed last week at the same mine.

As of the time of posting, there is no mention of the latest round of violence on the (British owned) Lonmin website.

lonmin marikana website

According to Al Jazeera, the miners were getting paid about $500 a month and wanted a pay rise to $1500. They wanted Lonmin management to come down to negotiate with them but the management refused.  Possibly because their CEO, Ian Farmer, has recently been diagnosed with a serious illness. Lonmin has a market cap of $16 billion.

There had been a stand-off between the protestors and the police for a week and today it came to a bloody end.

The footage only starts with the protestors, who were wielding machetes, running towards the police when the shooting starts, but we can see what looks like tear gas behind them. Is it possible that the police shot tear gas into the crowd, who then panicked, and were mown down?

The AMCU (Association of Mineworkers and Construction Union) claims that Lonmin management might have been behind the initial violence via their indirect support of the National Union of Mineworkers (NUM), a rival union. Management setting up rival fake unions to create tension and conflict in the workforce isn’t a new tactic. See here and here.

http://www.miningweekly.com/article/amcu-blames-lonmin-management-for-mine-unrest-2012-08-14

 

I wonder how this incident maps to Lonmin’s stated corporate mission and values?

lonmin values

 

 

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The Olympic Games Bleeding The People Dry

Well it’s nearly Olympics time again and, as usual, the hype goes into overdrive. As usual it strikes me as a MASSIVE WASTE OF MONEY, particularly when most of the world is still suffering the effects of the financial crises.

The typical argument is that hosting an Olympics, while massively expensive and disruptive, drives long-term economic benefits so it’s a worthwhile exercise. Of course, you’ll see very little analysis of this argument in the media, because it wouldn’t be in their interests to actually ask hard questions about this particular topic. Why not? Because they benefit from the whole charade.

Even papers such as The Guardian are claiming that London will derive an economic benefit from hosting the Games. But how much of this is media hype to justify yet-another waste of public funds and how much of it stands up to a Cost/Benefit analysis?

Obviously many large corporations benefit from having an open faucet from the public Treasury, for example:

  • Construction companies get big dose of public funds;
  • Media companies get a bump in their advertising from an increase in viewership / circulation (hence their reluctance to criticise the whole affair);
  • and Tourism-related businesses, hospitality, etc, get a short-term bump.
Politicians from the host country get to hobnob with the sporting elite and various political, entertainment and corporate elite who visit (for example, even I got to attend a private dinner with Rupert Murdoch and Bill Gates when they visited Sydney for the 2000 Olympics).
Now of course some of this translates into trickle down economics, with more employment opportunities for a few years for some people. But we can look at countries that have hosted the Olympics in past years and ask whether or not they have benefited economically or if it has been run at a loss and the funds could have been better spent on public infrastructure, education, and healthcare.

According to this report from Monash University, the Sydney Olympics Games actually cost the Australian public $2.1 billion.

According to Time.com, the Greek Olympics blew out big time:

It cost Greece about $11 billion, at least double what the Greek government had initially budgeted — and that doesn’t include the money the country has spent trying to maintain its rarely used Olympic facilities over the past eight years. It was forced — mainly by the U.S. and the U.K. — to spend $1.2 billion on security alone because of fears over terrorism, and in the months leading up to the opening ceremonies, Athens had to rush its schedule just to get construction projects completed on time.

For years, studies have shown that holding the Olympics often has severe negative economic effects on host cities, despite the temporary burst of tourism and global attention.

In 2005, Andrew Zimbalist, Robert Woods Professor of Economics at Smith College, wrote in Sports Business Daily:

Montreal’s 1976 Olympics left the city with $2.7 billion of debt that it is still paying off. The financing of the Moscow Olympics in 1980 is opaque.

The Los Angeles Games in 1984 left the organizing committee (LAOC) with a modest surplus of $335 million, but the LAOC got 67 percent of the TV money and spent little on infrastructure or new facilities. The physical legacy of the 1984 Games is close to nil.

The Barcelona Organizing Committee in 1992 broke even, but the public debt incurred rose to $6.1 billion.

Similarly, the Atlanta Organizing Committee in 1996 broke even, but the bottom line there is not encouraging. An econometric study using monthly data found that there was insignificant change in retail sales, hotel occupancy and airport traffic during the Games. The only variable that increased was hotel rates — and most of this money went to headquarters of chain hotels located in other cities.

In his paper “A Cost-Benefit Analysis of an Olympic Games”, Darren McHugh concludes that the “bottom line will be negative by hundreds of millions of dollars” (he analysed the Calgary and the Vancouver Games).

In their paper “Should Cities Go for the Gold? The Long-Term Impacts of Hosting the Olympics“, Stephen B. Billings and James Scott Holladay conclude:

Insignificant impacts for measures of population, real GDP per capita and openness is consistent with the theory that host cities bid away potential benefits in an effort to win the right to host the Games.  

I think the whole exercise is about corporations having yet another excuse to legally stick their snouts into the public trough and inhale deeply.  Instead of politicians spending those billions of dollars on education or healthcare, it goes into the pockets of the elite.

And don’t give me any nonsense about the actual sporting competition. That could be accomplished for a LOT less money and fuss, quietly, over the course of four years, in places with existing infrastructure (as many sporting events already do).

The whole exercise is another corporate capitalist scam, bleeding the 99% dry for the benefit of the 1%.

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