Key Financial Regulations To Monitor

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Fourth quarter 2015 was a hard precursor to 2016 both in capital markets and financial corporate governance. Highly volatile commodities and equities markets, an overall slowing of economic growth and a cooling of tech business growth have left the investing landscape bearish. In addition, corporate governance of major financial and business institutions showed signs of increased shakiness; in 2015 HSBC took the governance world by storm with tax evasions, Bank of America and Citi continued to fail bank stress tests and capital requirements and JPMorgan’s stock has significantly underperformed analysts’ expectations. We now open the year 2016 with an SEC fraud charge against the entire executive management and Board of Superior Bank for overstating loan performance. In this light, 2016 will be a year of continued US Federal Reserve and Securities and Exchange Commission (SEC) financial regulation.
It is noteworthy to mention that the US Federal Reserve may raise rates for 2016. However, in this outlook we have decided to focus on specific regulatory requirements linked to the Dodd-Frank Act of 2010 and to Securities and Exchange Commission rules that will also shape the regulatory framework of financial institutions and corporations for 2016.Key regulations are as follows:

Capital Requirements and Asset-Liability Management:
The Dodd-Frank Act of 2010 has clearly stipulated capital requirements for financial institutions, of which systematically important financial institutions such as Bank of America and Citibank have failed within the past two years. For assurance that banks are better capitalized, the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) plan to enforce further Basel III agreement factors, requiring higher leverage ratios and a larger liquid asset base. The Financial Services Roundtable, a top US Financial Service advocacy group, has cited the Net Stable Funding Ratio as the standout rule which banks will need to apply for asset-liability management to comply with Basel III requirements. The upside to continued monitoring of capital reserve requirements is financial stability. The downside is, of course, further dampening of bank earnings growth.
Single Point of Entry and Source of Strength:
In 2015 regulators called for stronger resolution strategies of 12 major banks operating in the US, to ensure that if these financial institutions needed to be liquidated there would not be significant strain on US financial stability. The Federal Reserve and FDIC have demanded that bank holding companies be able to be resolved within themselves as well as for all subsidiaries. Ten out of the twelve major banks have opted for the Single Point of Entry (SPOE) resolution strategy under Title I of the Dodd-Frank Act of 2010. Under this strategy, banks will rely on the holdings company as the major “source of strength” for all operating subsidiaries, before FDIC intervention. Sharon Haas et al. of Columbia Law School’s Corporate Governance Program explain that SPOE is different to the Bridge Bank resolution strategy, by which the bank automatically goes into receivership under the FDIC. The Financial Services Roundtable has stated that regulators will seek a firm implementation of the source of strength stipulation for banks in 2016.

Stress Testing and Risk Management For Non-Bank Financial Institutions

The non-bank financial industry is of equal importance to major banks as systematically important financial institutions. In 2015, the SEC played a major role in setting risk management parameters for investment funds, mutual funds and ETFs. Under 2015 amendments to the Investment Company Act of 1940, the SEC stipulates more stringent liquidity risk management, requiring set minimum cash and liquid asset quotas based on the fund’s net assets, with a three day time to liquidation. In addition, the Financial Services Roundtable cites more implementation of stress testing, securities disclosure requirements and qualified standard of conduct from investment advisors on all investment company types for 2016 via the US Department of Treasury’s Financial Stability Oversight Council (FSOC) in conjunction with the SEC, under Section 913 of the Dodd-Frank Act.

Executive Compensation And Clawback Policy

In 2015 the SEC majority voted to implement firmer requirements with regards to executive compensation within financial institutions and major corporations, in cases where the financial institution displays significant noncompliance with financial reporting standards. SEC Rule 10D-1, based on Section 954 of the Dodd-Frank Act, requires a corporation that seeks financial recovery due to an accounting restatement for compliance purposes to seek recovery from both current and former executive management who obtained “excess incentive based compensation” over the course of prior three fiscal years. Public companies are thus required to file a detailed clawback recovery policy with each 10-K. In addition to a stronger enforcement of SEC Rule 10D-1 in 2016, the Financial Services Roundtable cites a need to have a stronger enforcement of Dodd-Frank Section 956, which requires regulators set specific standards to “prohibit salary arrangements that encourage “inappropriate risks.”” To date a final draft on executive compensation guidelines for banks has not been produced; however, with the implementation of the claw back policy we expect to see more examination of executive remuneration by regulators in 2016.

Commodities Income and Payments To Governments

This SEC regulation is non-financial institution related. Regulations on tracking the income flow of oil trading are now a highlighted part of the regulatory landscape, given the commodities markets climate as well as the geopolitical nature of commodities trading. The SEC has proposed a rule to enforce Section 1504 of the Dodd-Frank Act, which requires “issuers that extract natural resources” to specifically delineate all payments, transactions and income made to the US government and to foreign governments for any commercial development of commodities. Elizabeth Ising et al. of Gibson Dunn & Crutcher LLP via Harvard Law Corporate Governance explain that all resource extraction issuers are required to publicly file an annual report stating all government payments, with only case-by-case country exemptions. This disclosure would be required of all holding companies and subsidiaries under the issuer. In addition to payment amounts, all fiscal years when payments were made, as well as the actual geographical areas linked to these payments will be mandatory to disclose. In a geopolitical atmosphere of terrorism funding linked to oil and commodity trading, it is most acceptable to see strong SEC commodities income disclosure requirements for 2016.
Sources

Haas, Sharon et al. 2015. “PwC discusses Resolution: Single point of entry strategy ascends.” The Columbia Law School Blue Sky Blog.

Hatch, Robert. 2016. “10 Regulatory Issues the Financial Industry Is Watching in 2016.” Financial Services Roundtable.

Ising, Elizabeth et al. 2015. “One More Time! SEC Seeks to Re-Adopt Resource Extraction Disclosure Rules.” Gibson Dunn & Crutcher LLP. Harvard Law School Forum on Corporate Governance and Financial Regulation.

Ising, Elizabeth et al. 2015. “SEC Propses Rules Regarding Clawbacks.” Gibson Dunn & Crutcher LLP. Harvard Law School Forum on Corporate Governance and Financial Regulation.

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Success and Ego – Two sides of the same coin?

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I believe there is a very thin line between success and ego.  You cross that line and you could be in big trouble. You straddle the two variables carefully and your upside has no limits.
So what have I learned in life to manage both and use them to the best of my capabilities?

Let’s start with the ego part…

Everyone has an ego. It’s rare that people these days are devoid of it.

Ego is nothing but an attachment to a wrong image of yourself.

When you start identifying yourself with your academic achievements/failures, a successful/failed career or even with the image that you are a benevolent/kind person or bad or perverted, that is ego. People generally think that success leads to ego. But on the contrary, ego leads to both superiority and inferiority complex.
It is not the ego which is bad, but the impact which it has on our personality that makes it disastrous. When you start seeing the world through these spectacles, you are full of yourself and this makes you a very proud person or you feel worthless when you are in the company of successful” people.
In my opinion, Ego is the false impression on a person’s mind that forces him/her to believe that he/she is superior to others by pulling curtains over the fact that we all, made up of same matter, will eventually end up in the same earth.  In simple words, ego is not you but what you think yourself to be. It’s an image, not the object (you) and we all know the images are virtual.
So, if we don’t identify ourselves with these labels, then what do we identify ourselves with? What would make us ego-less?
This was the question I pondered upon for while for which I got the answer one day. The answer I got was from a daily spiritual television show.
When we identify ourselves by the roles we play, there is either a high or a low feeling attached to it. Instead if we identify ourselves as beings (which they called the soul, in the T.V. series) playing the roles of a student, a professional, a kind person, then there would be no superiority present in this state and ego would collapse. The same applies when you feel inferior. It is the “being”, playing the role of an inferior person. So ego-less stage is going from being role conscious to soul conscious.
Since this concept has always helped me to be stable and centered in my daily life, I now never jump with euphoria or somersault when I experience high success or I never go suicidal or into extreme depression when things are not in my favor.
I still have a long way to go to become ego-less… At least, I know now that I am on the right track.
Now moving to the success part…
In my dictionary, Success is living a life that gives you satisfaction as well as happiness, irrespective of how much you earn or how popular you are among the folks.
I know that in a world where there is cut throat competition for earning money and fame in order to be recognized as a successful person by the society, my definition may seem somewhat naive. But I have seen rich people craving for little happiness and have heard about the insanely famous celebrities craving for real friendships. Many of them are successful in the eyes of society but they are not happy. If that’s the scenario, what’s the use of such success? No doubt, money is important but earning money and running after it are completely two different things. And I am glad that I now understand the difference.

So what has ego to do with success? How does it creep in? 
When you achieve something and think that it’s you who own the whole credit for your success, you give way to ego. If being grateful is not your nature, success will surely get to your head. Your parents fed you; your teachers taught you; your friends- good ones supported you and false ones taught you lessons. And when you succeed, you forget how they helped you to become who you are, eventually ending up in a false belief that you did it all by yourself.
Ego is the sister of ignorance. You may have a high IQ and may be a gold medalist in academics, but that knowledge has nothing to do with wisdom. You may be an experienced person in your forties, but again the age has nothing to do with maturity and wisdom.
Remember that all the matter in this universe, including you, is made up of atoms. These atoms come together and create a new life. And then one day the whole pattern falls apart (which we call death) to put an end to that life in order to create a different one. We live, we die and born again. This is a cycle of changes. And this life which we are proud of is a journey with only change being the constant. Whether you accept or not, we are always changing, bit by bit. So when you yourself will not stay alive forever, how can you take the guarantee of the success you achieve?
People feel superior to others because they assume that what they have will stay with them till eternity. Almost everybody knows this, but very few accept it. With the acceptance comes the wisdom. And wisdom never lets ego creep in.
What should you know to avoid it?
If you are for example a girl and think that you are so pretty and being friends with an unattractive /rural girl may tarnish your image or better to say lower your standard, remember that life’s so uncertain. Those acid attacks, cases of fire and other mishappenings can knock your door anytime without your permission, thus, stealing from you your priced possession. So be humble.
If you are holding a high status in society and consider that as the reason to feel superior to the rest, I can give you the web links of great celebrities whose stardom ended in a flash. So be humble.
If you escape everything, there will be another devil waiting for you whether you are at the top or at the foot of a mountain. That devil is none other than LOVE. Trust me, it will shatter your nonsensical ego to the pieces and will not free you from its claws till it succeeds in teaching you the lesson of humility.
Just remember that time changes, situation changes and so does the life. Never take anything for granted. Nothing belongs to you because you can’t escape death. Whatever you have will end with you in the grave.  Enjoy what you have. Dream what you want. Work for passions and get that damn thing what you yearn for. But don’t look down upon anyone. The rich and the poor- the ugly and the beautiful- you and me- all are humans. Be humble.
If I have to sum up my answer in a line, I will say : It’s not success, but you- your ignorance- that builds ego. Avoid it.
Share your thoughts…

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When Will We Stop Blindly Pissing Away Money Down the R&D Rat Hole?

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Let me start by saying that I am a physicist and have been involved with many of the leading U.S. research facilities over the years — Los Alamos National Laboratory, Sandia Laboratories, just to name two.  I also directed the Socrates Project under the Reagan administration.  So the quick knee-jerk reaction to the title that “I don’t understand research and development or the value of technology” holds no water at all.  Please don’t even try to argue this point.
Research and development (R&D) does not equate to a competitive advantage in the marketplace or on the military battlefield.  Knowledge for knowledge’s sake is a worthwhile pursuit.  Totally agree.  But it is conceptually flawed and detrimental to the objective — being competitive — when companies and governments use the need to increase economic and military might as justification for higher expenditures on R&D.  But yet this is the rapidly rising battle cry among the leading thinkers in Congress, the Pentagon, academia, think tanks, and the press — “Raise R&D funding levels, and America’s future will be secured.”  How so far from the truth.
One highly critical set of decision makers who suffers from this R&D is the key to competitiveness thinking is the leadership in the office of the Secretary of Defense.  But this was all avoidable.
In the late 1980s, I “assisted” in writing legislation that would force DoD out of this R&D is the key to competitiveness thinking.  As a member of the intelligence community, working directly with the U.S. Congress was considered a hanging offense.  But I was willing to risk it because I foresaw that DoD thinking in this manner would lead to the massive dilemma that DoD is now at a loss to address — the rise of China as a military threat and the almost total erasure of U.S technology leadership on which our military strength is based.

The legislation mandated that the Secretary of Defense develop and present a Department of Defense technology strategy to Congress every year.  It was a process that would force DoD out of its R&D is the key to competitiveness thinking.  The legislation passed, and for all intents and purposes, lies dormant and unexecuted to this day.

But let me go back to the beginning of the story — The Socrates Project.

Throughout the 1980s, I was the Director of the Socrates Project within the U.S. intelligence community.  I also initiated the program.  The Socrates Project had a two-fold mission.

1/ Utilize the full range of intelligence to determine the true underlying cause of America’s declining economic and military competitiveness, and then 2/ use this understanding to develop the required solution.  We were fully successful in both aspects of our mission.

What we determined (and covered in our last blog but is worth restating) was that the cause of the decline was America’s shift from technology-based to finance-based planning that began at the end of World War II.

In finance-based planning all decision-making is based upon manipulating the acquisition and utilization of funds, and the final measure of success is how well we optimized the fund exploitation to achieve the objective — generating a profit.

In technology-based planning, the foundation of all decision-making is the outmaneuvering of the competition in the acquisition and utilization of the technology.

How effectively an organization or a country outmaneuvers the competition in the technology exploitation fully dictates the level of other resources and how they must be utilized to generate a competitive advantage.  The other resources include but are not limited to manpower, natural resources, time and funds.

Where technology-based planning starts with the foundation of maneuvering in technology for a competitive advantage that then dictates the rest of the business plan, finance-based planning leaves technology exploitation, which dictates competitive advantage, to chance.  The manipulation of funds, which is the focus of finance-based planning, often leads counter to generating a true competitive advantage in the marketplace or the military battlefield.  The finance-based planning organizations of the U.S. pride themselves in being highly effective in what equates to rearranging the deck chairs on the Titanic.

What is competitive advantage?

All competitive advantage is a matter of satisfying the customers’ needs better than the competition, where the customer needs are defined from the customers’ perspective and covers the full range of their needs.  This goes for both commercial and military competitive advantage.  If you are not excelling at satisfying one or more customers’ needs, no amount of slick marketing, branding, or financial optimization — Financial shell games — matters.  The organization is going to die.  Or in the case of DoD, be totally ineffective.
Outmaneuvering the competition in the acquisition and utilization of technology is a multi-faceted, fluid, on-going chess game played with the technologies of the world.  Winning at this technology chess game requires a technology strategy.  When I use the term “strategy,” I am not using the simplistic, conceptually flawed term that is traditionally passed off as “strategy” in the business community.  Strategy is not the same as a vision statement, a target list of products or services, a road-map, an exercise in consensus building, or glorified trend analysis that really belongs at the racetrack.
In the case of a technology strategy, the limited resource is technology, where technology is properly defined as any application of science to accomplish a function.
A technology strategy consists of a coherent set of offensive and defensive technology acquisition and utilization maneuvers.
The set of technology acquisition maneuvers consists of the full range of means to acquire the technology that the organization requires, and prevent or hinder the competitor from acquiring the technology that it requires.  At some points in time, the technology strategy may be executing maneuvers to acquire technologies for the organization, while at other times, it will be executing maneuvers to retard the competitors from acquiring technology, and at other times it will be doing both.  Research and Development (R&D) is just one of the mechanisms in the full set of technology acquisition maneuvers.  But when this one mechanism is used, it is both very precisely and accurately targeted and is done in a systematic coherent process interconnected with a full range of precisely planned offensive and defensive acquisition and utilization maneuvers.
Just executing the one mechanism of R&D is extremely costly and highly ineffective for generating and maintaining a competitive advantage.
The U.S. using R&D as the sole means to address technology exploitation for a competitive advantage makes it a one-trick-pony knuckle-dragging Neanderthal event next to a modern agile fighter with a full range of fighting techniques and weapons at his disposal.   The Neanderthal may get in one or two good hits, but the modern fighter will consistently outmaneuver him until he is fully exhausted, and then he is simply and unceremoniously eliminated.
So, from Socrates’ intelligence-based view, who was the modern agile fighter?
It was then and now has developed into the China we know today.  China was executing very aggressive, highly coherent countrywide technology strategies that, if left unchecked, were guaranteed to enable China to evolve to sole super-power status faster than any country in history.
It was seeing the utter futility of the DoD R&D approach to technology exploitation, and China’s aggressive technology strategies that caused me to risk my neck and career to draft the legislation that would transform DoD into the agile, multi-faceted fighter needed to ensure our military super-power status and contain China’s aggressive technology-based strategies for military, economic and political dominance.
The legislation passed but has never been executed. Since then, as we all can see now, China has gone from barely being on the Pentagon’s threat radar and even then only because of its massive manpower and communist government to, by some people’s estimates, being the #1 threat to the U.S. with that threat rapidly growing by the day.
Is R&D important?  You bet it is — We have some of the best researchers and research facilities in the world. But R&D is only effective when it is a coherent element in a complete, holistic technology strategy to achieve and sustain competitive advantage.
We need to stop being the Neanderthal before it’s too late.  We must evolve or expire.

By Michael C. Sekora – Past Director of the Socrates Project, President of Quadrigy, Inc. affiliated with Operation U.S. Forward

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The Activist Investor: A True Ally of Corporate Governance

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Activist investors: Publicly listed companies fear them. Corporate governance pundits generally do not trust them. Retail investors quietly applaud them, and most laymen do not understand them. However, it is clear that in today’s complex corporate world, we need them. Activist investors may be the only players in the game that can effectively “Occupy Wall Street”.

We have entered the twilight zone when it comes to corporate governance. The zone where many Boards bury their head in the sand when it comes to breaches in compliance, as in the case of HSBC and the tax evasion scandal of February 2015. Certain Boards passively bow to the dictates of executive management, throwing all accountability on the corporation-as-entity, with no individual responsibility. All other stakeholders, from shareholders, to suppliers, to workers, to humble taxpayers are left to peck at what is left of net worth after the share price dives, and are left to fork out money for regulation and reconstruction.

To be fair, in the recent past activist investors have been noted for short-termism. Short-termism is the process by which an activist fund may coerce target companies to conduct strategies that may yield high profit in the short term, but that may be detrimental to company performance in the long term. For instance, it is common practice for activist funds to demand significant reduction in Research & Development activities; yet, R&D is needed for long term competitive and innovative advancement. Most activist fund activity increases the stock market price of the target company. However, best practice professionals argue that the temporary increase in share price is misleading and cannot offset long term business hazards that occur if the activist investors short the target company’s stock. There is truth in this belief. However, we need to take a closer look at activist investors’ strengths when it comes to financial strategies and business growth.

Bernard S. Sharfman in his Columbia Business Law Review article Activist Hedge Funds in a World of Board Independence: Creators or Destroyers of Long-Term Value does an excellent job of delineating the benefits of shareholder activism and Board governance. The author’s main premise calls for an integral approach to investor activism in Board decision making, as opposed to the present “Authority Model” that exists within Board and executive management’s line of communication, a model that excludes shareholder participation and creates a passive acceptance of managerial decision making as ultimate, without proper analysis and foresight. Poignant highlights from Sharfman are as follows:

  • Shareholder activism can be defined as “any action(s) of any shareholder or shareholder group with the purpose of bringing about change within a public company without trying to gain control.” – In its essence, shareholder activism is more inclined to correct core business discrepancies before the market reads any sign of trouble via share volatility.
  • Value investors such as Warren Buffett are lauded in the industry while activist investors such as Carl Icahn and the Vanguard Group are called out for short-termism. However, Sharfman clarifies that while value investors cannot practice activism based on their own long holding period strategies. In reverse, activist funds impede their own shareholder wealth creation if they have long holding periods, since their strategies are based on intervention.
  • Since most activist fund strategies are based on intervention, activist investors can be viewed as financial engineers that can offer very timely and effective financial restructuring advice to a Board. Such advice may not come from executive management caught in day to day operations and so may not have an adequate view of the broad financial picture. It sounds humbling, but in reality it may work to a company’s advantage to have a short-termism in financial engineering from an actual shareholder.
  • The threat of a proxy contest may be the most important weapon the activist hedge fund has in its arsenal to effect change. While activist investors have become notorious for proxy contests, the authors found that only 13% of hedge fund activism resulted in proxy contests. Thus, the simple idea of a proxy contest may be enough to spark strategy change at the Board level.
  • The Board of Directors must have a strong outside director composition to allow investor activism to work in a positive fashion for long term company performance. A non-executive director stronghold on a public board gives the Board more authority to listen to both the dictates of activist investors and executive management, and so allows broader decision making for company strategic direction.

Consider activist investors as the best devil’s advocate. A company can hire an independent consultant to assist the Board in setting strategic direction; however, an activist investor literally has more to lose with company profit at stake! And these investors are the savviest investors in the industry – as bullying as their tactics may seem, they are top financial engineers that can truly structure profitable companies. Many companies are embracing the activist investor style of C-Suite leadership. The Vanguard CEO William McNabb has advocated forming a “Shareholder-Director Exchange” to have clearer communication between activist investors and Boards, to facilitate such financial engineering and prevent negative market reads in a proactive manner. Former Texaco CEO and Director of Abbot Laboratories Glenn Tilton further encourages public boards to be one step ahead of shareholder activists in terms of strategy and risk management expertise. Prevention is better than cure.

Carl Icahn has defended his position as activist investor, saying “I look at companies as businesses, while Wall Street analysts look for quarterly earnings performance. I buy assets and potential productivity. Wall Street buys earnings, so they miss a lot of things that I see in certain situations.” Activist investors challenge companies’ core competencies. However, they challenge Wall Street’s investing myopia as well. Devil’s advocates they may be, yet the activist investor may well be the true change catalyst for practical, no frills, efficient corporate governance.

Bebchuk et al. 2015. “The Long Term Effects of Hedge Fund Activism.” Harvard Business Law Discussion Paper. Columbia Law Review. Pages 1064 – 1154.

Harvard Business Review. 2015. “Your Board Should Think Like Activists.”

Sharfman, Bernard S. 2015 “Activist Hedge Funds in a World of Board Independence: Creators or Destroyers of Long-Term Value.” Columbia Business Law Review. Pages 103-139.

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Is the Intellectual Elite Out of Touch with Reality?

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It has been a central conceit of the progressive movement since the early 1900’s that simply getting enough smart people together will cure all our problems.

This is the approach of technocracy — rule by experts.  We tried it.  Wilson and his ilk “solved” the problem of world peace after WWI, Kennedy and his brain trust “solved” the Bay of Pigs crisis with Cuba, Reagan and his A-Team of savvy business people “broke down” the Soviet Union, George W. Bush and his close circle of neo-cons “prevailed” over evil in the Middle East.

All of them with their elite “Ivy leaguers” thought they were going to redraw the maps of the globe.  All what they did was create a bigger mess than ever in every single corner of the globe…. We’re still cleaning up the mess in the Middle East caused by acts of hubris and years of “rookie” foreign policy. We now have practically every country in the world on our back resenting our actions after having lost all trust in us to say  the least…. and this is just the beginning.

Other examples — ones that some would rather forgot — include the progressive eugenics movement, the attempt to purify the blood lines and improve the race via forced sterilization, birth control, etc….  Fortunately for us it never took off as much in the United States as it did in other countries.

It is high time to wake up and start realizing that very smart men, with PhD’s and holding distinguished chairs at elite universities does not mean that all intellectuals are wrong, but it does mean that mere academic pedigree is an insufficient credential for developing public policy.

The conservative position is that tradition embodies the collective intelligence — the best of what has been thought and done — over generations, and it deserves to be given its due weight, that human social systems are extremely complex and that unintended consequences often outweigh good intentions.   This does not mean that we never change, but it does imply that we imperfectly understand how society actually works and that human nature is not infinitely malleable.

Conservatives are not opposed to intelligence, but they lack the naiveté needed to trust that intelligence alone solves real-world social/political problems.  Ultimately we must relate to each others as persons, as real flesh and blood individuals, not as abstractions of the intellect.  Where society has lost touch with this it has caused the greatest misery.

As Thomas Sowell’s book, “Intellectuals and Society” states:.

“If you have an elite that thinks the voters are stupid, then the voters end up just being their political plaything. Notice as well that the political effort to hide details from voters influences how the policy is implemented, which is going to have both intended and long-term unintended consequences.  If voters try to make an intelligent argument, they are rebuffed and suppressed, because the elite think of themselves as the smartest people in the room, and they don’t want anyone contesting them”.

Precisely what’s happening today during the 2016 Presidential elections. Anyone outside the “elite Establishment” is a plain idiot who does not know what he/she is talking about. Anyone inside the “beltway” is someone we should closely listen to… How far from the truth.

Another issue I have with the intellectual elite is that they don’t engage in quality leadership.  They think that just saying what the research says is correct is sufficient for leadership and governance.  However, with a large diversity of population, you have to more directly engage in cultivating relationship and explaining policy.  You never liked it when you parents just dictated policy versus explaining it.  Voters are no different.

Leadership, particularly at large scales like government, isn’t about telling people what to do, it’s about bringing people with you.  If you aren’t bringing people with you, you functionally aren’t leading.

Communication is a key part of politics in our age.  And the relational and EQ piece of the overall leadership package is critical if you want to be a real representative of the people.

The intellectual elite are generally significantly smarter than average, but they also tend to (depending on how you look at it) either underestimate the difficulty of solving large complex problems, or overestimate their ability to reason through them.

Their egos write checks their intellects cannot cash.

My hope would be that political leaders one day develop the good judgement to know when to call on intellectual elites and when not to.

I would say we do want an intellectual elite contributing to society, but we would benefit a lot from more epistemological humility from many of them.

Share your thoughts….

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