The Social Networking Bubble

I wanted to inform my limited participants that I have created an additional WordPress blog entitled The Social Networking Bubble.  I have created this additional blog for a few reasons.

First, my original incentive to create this blog, Contemplating the Human Direction, was inspired by the fact that I was continuously censored from commenting on a WordPress blog that supported Enron.  This occurred before I even knew what WordPress was and I had never considered creating a blog.  Enron, as you may or may not know, was a prime example of a corrupt United States business enterprise that robbed naive investors and employees of millions and billions of dollars through a Ponzi scheme and cooked books.  The corruption and Ponzi scheme was conducted not only by the executives of the company, but also by audit firms, big banks, investment banks, and Wall Street.  Some also implicate members of the government including the Bush family.  Look up Enron if you are interested in the details, but don’t be lazy and read Wikipedia as they are owned by the crooks that control Wall Street and Investment banks so they paint a limited picture.  A good movie to watch on Enron is called “The Smartest Guys in the Room”.

Second, I was also disgusted and nauseated with what caused our financial collapse in 2008.  The corruption, greed, and politics involved with that collapse is truly the pinnacle of our country’s decline.  And the fact that the crooks and current power construct behind this financial collapse are still free and conducting business as usual takes me to the edge of my peaceful tolerance level.  In order to control my anger, I write as opposed to taking other actions.

One of the primary points of this blog is that man’s focus on economics and money prevents us from evolving to greater heights as a species.  There are many other high-level subjects (and personal subjects) discussed in this blog, but I sincerely believe that our hyper-focus on economics is the obstacle preventing us from moving onward and upward.  So many of our problems can be linked to this man-made invention and I have covered these arguments within this blog.

The new blog, The Social Networking Bubble, deals with a very narrow and focused subject matter.  More than likely, many of the posts will be uninteresting to many of you poets, creative writers, philosophers, artists, and broad thinking people.  But the final results of this new blog, if my hypothesis is correct, will be very enlightening and powerful because it will be based on facts.  We will all be able to witness through the Social Networking Bubble how our country has become hostage to a corrupt Ponzi scheme at the expense of driving towards true worthy and valuable goals.  We will see how those that are well connected and entrenched in the power structure work together to make billions and further increase the gap between those that have most and those that have little.

This new blog will also enable me to channel more economical thoughts in that direction which will free me up to post more broad and philosophical posts on this blog that is more focused on the direction of the overall human species.

I am sorry that I haven’t been in the right frame of mind to get to your blogs as of late, but this additional blog has consumed much time and energy.  I look forward to catching up with you and your thoughts.

Executive Bonuses — Whistleblower

WARNING: This post is a long one with just one picture…so bear with me WordPress bloggers.

I have spent over a decade in the Fortune 500 business environment and at some relatively high levels — therefore I may be considered as an insider.  Although my limited experience can’t be assumed as the truth for the entire Fortune 500 population, I will nevertheless offer my perspective and blow my whistle.  All other entities innocent until proven guilty.

Executives in the large corporations I have worked for had a high probability of hitting or exceeding their bonus incentives.   As you may know, bonuses can be very lucrative in addition to a multiple six figure base income.  So how do they have a high probability of hitting or exceeding their bonus target?

First, the Chief Financial Officer (CFO) is himself part of the executive crowd so he has an interest that he and his colleagues get “in the money”.  The creation of the annual budget, which is under his or her control, is the mechanism used to determine bonus payouts.  If you hit the budget for revenue and profit, executives get 100% of their target bonus.  If they exceed the budget, a multiplier is applied such that they can make exponentially more bonus payouts.  Conflict of interest?  You think. 

Second, the Chief Financial Officer reports to the Chief Executive Officer (CEO).  As such, the CFO is in an inferior position and must meet the needs and demands of the CEO.  In short, although the CFO can recommend budget targets for revenue and profit, it is the CEO that has the final say.  Conflict of interest and no power – a problem?  You think.

Third, the Board of Directors, which consists of high-ranking business men from other companies, have to approve the budget.  The problem here is that they don’t really understand the business or the details of the company’s operations and financials.  Sure, they are successful business men or women, but they don’t have a clue about the nuts and bolts of the business at hand.  And since they have a vested interest (stock options) in the company exceeding budget and the expectations of Wall Street, they have little incentive to stretch the budget targets. 

So, here is how the budget is created in my experience.  First, those in the regions or in the field, the folks actually driving the results, receive a revenue and profit target.  There is much negotiation that occurs in setting those targets, but in the end, the targets are set.  Once these targets are set, the corporate executives often create a “hedge”.  For example, those in the field or regions will receive their bonus if they hit $5 billion in revenue and 15% profit off that revenue.  Corporate executives will then create a “hedge” for themselves such that their actual revenue target is just $4.5 billion and 10% profit.  These softer targets increase their chances to hit their bonus targets.  In short, hold those responsible for actually doing the work to tougher targets than they themselves, the Executives, must endure.  Of course, when they report goals to Wall Street, they communicate an even less aggressive target than the “hedged” revenue and profit targets they enjoy. 

So, the folks responsible for executing the company goals are given aggressive targets to hit their bonus, the Executives give themselves less aggressive targets, and finally, the Executives and Board of Directors give Wall Street even less aggressive targets.  Who makes out on this deal?  The Executives, the Board of Directors, and Wall Street.  Keep in mind that the Board and Executives (stock options) and Wall Street (Stocks) have a vested interest in results exceeding “expectations” that are simply communicated by “management”.  

And, think about all the tools Executives have at their disposal during the year to ensure they hit the budget targets.  They can lay people off and claim these are “extraordinary expenses” and exclude them from Wall Street expectations and their own bonus calculations.  They can find cheaper labor in other countries that will gladly perform mundane activities for a ridiculous hourly rate, they can adjust pricing, they can play with reserve accounts, and so much more.  Remember, the external auditors are in their pockets.  Remember Enron? 

Well, I blew my whistle.  More than likely the sound will be unheard like the fall of a noble tree in a dense people-less forest…if such a forest still exists.  I fear…and I could be wrong…that this is just the very very very tip of the iceberg.  Enjoy your weekend

The “Human World” without Money, Debt, and Financial Institutions

When you look at the economic state of America, the former beacon upon a hill and economic dynamo, one cannot help but to muse about how the country has fallen so hard and so fast.  But rather than dive too deeply and get into facts and figures and economic / political theory, I want to get to the point and highlight what I think is the core problem — our creation of money, debt, and financial institutions. 

At some point in time, human civilization decided that money, pieces of paper and coins, could represent value and value created. http://www.pbs.org/wgbh/nova/ancient/history-money.html  Here is the first step we took into obscurity.  I find it very strange that a piece of paper or coin can accurately represent value.  Trade and barter made sense.  Give me your basket of fruit in exchange for my hunk of meat and we have a fair deal.  Imagine, if we could put a modern man back in time, and he was to offer a hunter a ten-dollar bill in exchange for a hunk of meat.  The hunter would look at the piece of paper and say, “what in the hell am I supposed to do with this?”  I have a broad question when it comes to assuming money has intrinsic worth.  How much money would it take to buy the sun, fresh rivers, a bountiful ocean, clean crisp air, and fertile soil?  These elements have immense value for they are the basis for life, yet we can’t put a monetary value on what they are worth — although I am sure there are some economists modeling out the worth of the elements to support the new green economy.  Good luck with those calculations. 

The next step into obscurity was the idea that the money supply could be increased or in current terms printed.  Hey, we are out of money so lets just print more.  Brilliant! There is a limited supply of gold, jewels, and goods and therefore one can make a reasonable leap of faith that these limited items could be linked in some shape or form to value.  But when you can simply print more money it obviously waters down the relationship between approximate value and true value.  At one point money was linked to the gold supply (gold standard), but apparently the powers that be didn’t like that restriction and elected to sever the relationship.  

But Man didn’t stop there.  He also came up with an even more entrepreneurial and innovative concept — the loan.  Why wait until you have earned enough money to buy this or that when you can have it today for a small monthly fee and the promise you will pay back the original amount some time in the future?  Finally, man capped it all off with the invention of financial markets.  Thus the invention of Wall Street and Investment “Bankstas”. Now you could print more money and take out a loan and then throw it all into the financial market and make more money without actually doing any work.  As long as you made a good guess where to invest your money you can hit the jack pot!.  And if your are connected and obtain inside information your chances to hit the jack pot increase.  And if you are a trader controlling huge funds and can move the market up or down with rumours or a touch of a button, your chances increase exponentially to make lots of money for doing nothing of value. 

Currently, vast amounts of money flow so fluidly and rapidly (thanks to electronic flows of money…yet another step into obsurity) through financial, business, and government institutions that nobody understands what is going on.  Watching the talking business heads on tv is a true comedy.  “Well, the Dow went down 100 points in the morning due to the debt crisis fears in Europe but rebounded in the afternoon because an article mentioned that China might step in to help stabilize Italy”.  The most comical aspect is that these talking heads  claim to understand what is going on with the economy and interpreting what is causing the stock market to go up and down on any given day probably make over six figures.  This leads me to my next point.

Money, which has a watered down assumed intrinsic worth as previously mentioned, flows rapidly to sources that we “perceive” to have value equal to that already inflated assumption of the intrinsic worth of money.  If our “perceived” value of the source receiving vast amounts of money is wrong, then we have really dug ourselves in a hole.  And I would argue that our perception of what is valuable is off-base in many cases.  From a big picture perspective, looking at the earth from space and then zooming in on our society, is a rookie NFL quarterback fresh out of college really worth $20 million?  I enjoy watching football especially college, but the amount of money we pay folks for hitting or throwing balls is out of line.  Is the latest and greatest reality star that has suddenly emerged from obscurity worth millions of dollars?  Those Jersey Shore celebs sure are valuable human beings.  I have watched the show a few times so I am guilty of increasing the net worth of these boneheads.  Is the hottest rap or pop star worth multi-million green backs?  I do think Rhianna is pretty hot.  Guilty again.

Jeff Skilling -- President Enron (currently in jail)

Was Jeff Skilling (Enron president) or Bernie Madoff ever worth the huge sums of money they earned through compensation and stock grants?  Do the top earning 20% of Americans really generate 84% of the value in America?  Are 40 million people in the United States (and 1 in 5 children) that are below the poverty line really worth what their measly earnings say they are worth or could be worth?  Clearly, something is out of whack.  And in my opinion,the distortion is caused by the possibility that our perceived value of what has value is way off base and we have made an erroneous assumption about the intrinsic value of money.  Combine the above flaws with loans, debt, and financial speculation and you have a house of cards and misallocated “wealth”.  Two movies worth watching on this topic are “The Smartest Guys in the Room” (documentary on Enron implosion) and “Too Big to Fail” (the mortgage-backed security frenzy).

But what would we do without money, loans, credit, debt, banks, Wall Street, and Investment “Bankstas”?  How would society function?  This may come as a surprise, but every society on this planet, excluding the “Human World”, operates without money and the related baggage.  And man himself at one point operated without money.  In every other society on Earth, including the Apex species, value is pretty clear and money has no meaning or intrinsic worth.  And there certainly aren’t any problems with “perceived” value.  The currency in all other societies on earth is energy.  Some of the more advanced societies combine their energy via cooperation to obtain one of the ultimate valuable prizes — food.  They also work together for protection and ultimately survival.  And many of these societies have been around much longer than ourselves. 

Imagine the sense of freedom these apex predators enjoy without money and particularly debt!  But their societies aren’t free from stress or hardship.  If the society or individual doesn’t find food, they die.  No one is going to come to their aid.  But that doesn’t mean that these apex predators don’t find time for fun or enjoy being alive.  The bond between members of these societies is strong for without each other it would be a very lonely and dangerous world.  Not all members of these societies are treated completely equal — Only the lucky few earn mating rights through various competitions and the prize certainly has value and a bit of pleasure!  Although some inequality exists, they each play a crucial part such that the whole has access to the fruits earned through cooperation.  Of course we would be in position to adapt lessons from these societies because we have an opposable thumb, a large brain, and free hands since we walk upright.  We have the power to create and manipulate the environment around us.  All we need to do is define true value, define our missions, use our brains, thumbs, free hands, and spend our currency (our energy) to make it happen. 

Otherwise, the vast majority of us will remain like domesticated pigeons huddling together looking up at the few fortunate hawks.