Is the Intellectual Elite Out of Touch with Reality?


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….


Harvard Business Review: Candid Arrogance or Just Plain Stupidity?


A few years back, I was in Hsinchu, Taiwan, (aka “Science City”) lecturing on technology strategies to 35 vice presidents and senior executives of one of the world’s largest and most prestigious Taiwanese high tech corporations. As we began to dig deeper into the true definition of “strategy,” a member of the audience asked for my view of the Harvard Business Review. He asked the question because we were discussing the difference between true strategy and what the business world usually passes off as strategy.

I immediately responded to the question by calling the Harvard Business Review a Trick-of-the-Month club. I explained that one month, HBR will say that the key to a company’s success is for it to totally focus on the customer. Two months later, the HBR will say that the key to success is to totally ignore the customer to avoid always being stuck in the present. In neither case does the HBR explain why the approach is sound, nor does the writer connect to any of HBR’s other previous “nuggets of wisdom.” I shared that I’ve noticed that in most cases, these “nuggets” are nothing more than isolated and superficial observations that HBR’s contributors and writers base upon fragmented, anecdotal information. HBR treats readers as nothing more than fat, dumb frogs willing to blindly jump from lily pad to lily pad, not caring that they have no ability to know which pad will be strong enough to support their hefty weight.

After I finished my answer, the entire room of white-shirted executives erupted in uncontrollable laughter. I was shocked and taken back because I didn’t think my answer was that funny, and from my experience, I thought I had just pointed out the obvious. On the next break, I pulled aside one of the executives whom I knew and asked him why that comment about HBR had gotten such a strong response. He smiled and said, “When we talk with American corporate executives about competitiveness and strategy, they tell us to faithfully read the Harvard Business Review. They act as if it is at the forefront of all the latest thinking and wisdom. But when we look at HBR, we see nothing more than a rambling bunch of disconnected tricks. And we are confused. You are the first American to actually state what we see. And you stated it as if it were obvious to everyone and no big deal. That is why your comment received such sincere laughter. You just confirmed what we all know.”

The reason Harvard Business Review can only address competitiveness and strategy, as a “bunch of disconnected tricks,” is that the foundational premise on which the publication addresses these two is incorrect. And it is not a matter of the premise needing updating to realign its focus (e.g., putting a higher priority on R&D) or to add another term (e.g., the gig economy). HBR’s entire premise is false, and we must discard it.

U.S. business schools share the premise that financial manipulation (i.e., finance-based planning) is the foundation for all decision-making for all functions within an organization private or public. In finance-based planning, the basis of all decision-making is the effective acquisition and utilization of funds — fund exploitation. In finance-based planning, the measure of success is how well the organization optimized fund exploitation to accomplish the objective. (The objective can be maximum profit or ROI, increased market share, or in the case of the military, a new tank.) But in all cases during the process, the bottom line question is, “How efficient are you or were you in your exploitation of the funds?” Organizations mistakenly either equate financial efficiency to competitiveness or ignore the need to be competitive.

The correct premise is that maneuvering technology to generate a competitive advantage is the foundation for all decision-making. How effectively an organization out-maneuvers the competition in the acquisition and application of the technology fully dictates the amount of other resources and how they must be utilized to generate a competitive advantage. The other resources include but are not limited to funds, manpower, natural resources, etc…

It is a fact that when dealing from the finance-based perspective, American companies see nothing more than an almost infinite number of disconnected market factors. As a result, the best that these companies can ever achieve from this view are fleeting insights on how some of these factors may correlate to support a competitive advantage. These “insights” mistakenly then become “principles,” and companies who elevate these “insights” erroneously refer to their new “principles” as “strategy.”

In contrast, the technology exploitation foundation (i.e., technology-based planning) abides by the laws of physics. The result is that it is a logically consistent, closed-set environment with no discontinuities.

Take the following simple example. Two young baseball players back years ago wanted to figure out how to hit one out of the park.

The first started observing some of the major league players who went long. He looked at the players’ weight, height, age, attitude, type of bat used, how their coach motivated them, if they used chewing tobacco and if so, what type, and their weight-training schedule. He then compared and contrasted what he observed, threw in a few statistics, and got some insights, (conventional U.S. business approach).

The second young player started with the laws of physics (e.g., Force = Mass x Acceleration, Torque = Moment Arm x Force) and used these laws to examine what he then knew to be the pertinent attributes to determine how players optimize all the variables at their disposal (according to the laws of physics) to generate maximum force at the correct angle and at the correct time.

After all their work, the first player determined that he must chew Red Man, weight train on Thursday nights, be 5′ 11.5″, weigh 195 lbs., and have a coach that hollers allot to be able to hit pitches out of the park.

The second player focused on skeletal alignment, strengthening the flexibility and power of the correct muscles groups, and keeping correct foot placement and weight distribution to generate maximum torque on the swing. Guess who knocked it over the back fence?

The bottom line is that if U.S. companies and America wants to be competitive and rebuild economic health, they must abandon finance-based planning and adopt technology-based planning.

They must move beyond a faulty, fragmented hit-and-miss approach with disconnected market factors that hope on a good day to deliver a competitive advantage in the marketplace and begin addressing the foundational structure — technology exploitation — that acts in a highly logical fashion and dictates how a competitive advantage can be won and lost.

History is written by the winners.

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


Smart v/s Wealthy


While you may think that being smart, motivated, and talented would logically make you wealthy, unfortunately, this is often not the case.

Smart and talented people often have a flair for the unusual, complicated, or different. They don’t like to follow the KISS principle (keep it simple, stupid), which is required to make money.

So, being smart or talented isn’t going to help you unless you can use those smarts to figure out a way to simplify those tasks that will make you money. This isn’t easy, because it goes against everything that you have ever done and is counter to how you were taught to think. However, it is necessary for a business to succeed and why smarts and talent alone don’t predict entrepreneurial success and hence wealth creation.

Too much to lose… and, with the most to lose, a wide range of other options available, and the penchant for more intricate, complex endeavors, don’t be surprised when the person “Most Likely to Succeed” from high school ends up in corporate America and one of the more average students finds success in his or her own business.

So what are the basics to know to make real money?

  1. Don’t get a salary. A salary will never make you money.
  2. Don’t try to save money by not buying stuff you need. That’s a myth. The best way to save money is to make more.
  3. Empower quality people by introducing them to each other. Introduce them and stay out of the way. This is real networking. Not fake networking where people hand business cards to strangers.
  4. When you have wealth, never invest more than 5% of your wealth in any one idea.
  5. Don’t enter regulated businesses or the ones with lots of competition. Enter a business with a monopoly. This means high profits, high perks, great education.
  6. Be around people who love you and whom you love. Eliminate people who bring you down.
  7. Look everywhere for what is hidden. The people who understand the wealth creation process hide the money very carefully. The people who don’t know have TV shows about it.
  8. Lose the bad habit of engaging in zero sum competitions with other smart people. Many smart people tend to flock to fields which are already saturated with other smart people. Only a limited number of people can become a top investment banker, law partner, Fortune 500 CEO or humanities professor. Yet smart people let themselves be funneled into these fields and relentlessly compete with each other for limited slots. They all but ignore other areas where they could be even more successful, and that are less overrun by super-smart people. Instead of thinking outside the box, smart people often think well within a box, a very competitive box that has been set up by other people and institutions to further someone else’s interests at the expense of the smart person.

Now that you know, go create the wealth you deserve … and maybe then I can start calling you “real smart”.


US Infrastructure Development: A Case for Public Private Partnerships


A nation is nothing without infrastructure. It is the literal blueprint which allows education, healthcare, commerce and trade to expand and progress within rural and urban areas alike. A country is identified and remembered by its most outstanding infrastructure, from longstanding historic monuments to major highways. Thus, it goes without saying that it must be primary business of federal, state and municipal governments to maintain replenish and expand physical infrastructure to ensure continued growth and communications.

Physical infrastructure within the US has historically been built on thorough, systematic urban and rural planning. As with most countries, new infrastructure projects tend to burgeon in the form of government centers, parks and recreation facilities and monuments based on the promises of newly incumbent regimes. However, basic infrastructure maintenance, specifically maintenance of roads, highways, commercial maritime ports, public schools, and public hospitals, are in need of redress. The maintenance of basic infrastructure, while not as glamorous as a new monument, is vastly essential. However, US fiscal policy towards infrastructure has fallen well over the past twenty years. While certain states and municipalities have an airtight dedication to capital improvements, overall less public investment has gone towards a basic infrastructure need. This is mindboggling. Basic infrastructure growth and maintenance is what differentiates developed nations from emerging counterparts.

The federal government has time and again stated that public funds are not adequate and forthcoming to manage the vast gamut of capital improvement needed. Yet, infrastructure maintenance is a must. Therefore we turn to the most viable alternative for capital improvement, the public private partnership (PPP). A PPP in its traditional sense represents a working, project-based agreement by which private firms partner with governments on public projects, providing either or both the building expertise, private capital investment and operating cost coverage for the project with the expectation of project revenue until a definite date. Past the aforementioned date, the finished, fully operating project is then returned to the public entity, and is then placed on public books as an asset/liability.

The PPP in the traditional sense has worked extremely well for new, short term infrastructure projects. Governments tend to be very flexible in funding allowance when it comes to new projects. However, in longer term transportation maintenance projects, even PPP built projects can lead to excessive costs to both the government and the private firms involved. PPPs used for new projects need to be structured differently from PPPs used for building retrofit or highway capital improvements in terms of project dictates and contract stipulations. It is very important to note that a PPP does not immediately guard against wasteful fiscal policy on the part of government. All PPP projects need cost-benefit analysis from the planning phase of the project, with input from both private and public sector teams. Taxpayer funds are too often mismanaged under the guise of capital improvements, and an effective PPP should seek to avoid such wastage of public funds.

Eduardo Engel, Ronald Fischer, and Alexander Galetovic of The Brookings Institution’s Hamilton Project have conducted an extensive study on PPPs’ effectiveness in both project and policy effectiveness on an international basis, with specific recommendations geared to US public policymakers. They found that the US has by and large developed policy to depend mainly on public funds for capital improvements in transportation. They also found that PPPs to date have been less successful than hoped for due to post-bid contract renegotiations. Post-bid renegotiations may allow for insider fund allocation, and may leave room for political lobbying and even kickbacks. Capital improvements are sunk costs, yet necessary and crucial. Therefore, we must develop our PPP structures to grow and maintain infrastructure in the most efficient ways possible. The Brookings Institution proposes many viable recommendations and suggestions to ensure effective PPP utilization.

The most pertinent, that in our opinion may yield the highest return on effort and investment, are as follows:

  • The projects [must all be] treated in the government balance sheet as if they were public investments. – This point allows for transparent tax use policy, even if the project future value is included in accounting footnotes during the leasing period of a PPP.
  • The internal structure of the public works authority (PWA) of state and local governments should be split between a unit responsible for planning, project selection, and awarding projects, and an independent unit responsible for contract enforcement and the supervision of contract renegotiations.
  • A strong argument for the PPP over traditional [build-only] provision is that the concessionaire internalizes life-cycle costs during the building phase. To the extent that investments during the building phase can lower maintenance and operations costs, efficiency gains should result.
  • Encouraging the private sector to generate innovative ideas can have merit…This requires the development of mechanisms for compensating the private parties for their ideas without affecting the transparency and efficiency of existing PPP awards.
  • PPPs often have beneficial distributional impact when they involve new infrastructure or a major improvement of existing infrastructure, as long as they are financed with user fees [e.g. toll roads], since those who do not use the project do not pay for it but may benefit from less congestion on free alternatives.
  • Some states, including Florida and Indiana, require legislative approval of PPP projects after the concessionaire has been selected [causing renegotiation conflicts of interest]. Award the project to the firm that asks for the smallest accumulated user fee revenue in discounted value, or the Present-Value-of-Revenue (PVR). This type of contract would compensate for the risk—and risk premium—by tying the length of the concession to [user] demand for the project.
  • PPPs will not filter [economically unprofitable] projects out if they are financed with subsidies or if there is an implicit guarantee that the government will bail out a troubled concessionaire. – In this instance it is pivotal to utilize cost-benefit analyses for all projects undertaken from the inception to planning stages.

The Brookings Institution points out that many traditional build-only and hybrid private sector infrastructure partnerships do not work effectively due to reactionary bureaucratic red tape. It is highly recommended to have public private partnership dictates be encapsulated in local and state ordinances. Legal enforcement on the local level for infrastructure undertakings may be the best remedy to combat bureaucratic hurdles.

The United States has lagged behind the United Kingdom and Canada both in terms of the development of and the effectiveness of public private partnerships, which is surprising, since the US private sector is stalwart. Again, PPPs refer not only to contract-build-release, which consists of the public sector employing private firms; this is common practice. Authentic PPP development is based on build-operate-release on the part of the private concessionaire. Canada has the most positive trend in successfully managing public private partnerships. Indeed, British Colombia has such a high success rate of infrastructure capital improvement completion, they have to date encountered the problem of completing project timeline in record early time. We personally are pleasantly astounded by the thought of having policy and practicality working so harmoniously!

Apparently, British Columbia and the Canadian Government in general have followed The Brookings Institution’s recommendation above concerning having a separate, business driven department within the public works authority (PWA) solely responsible for contract development, enforcement, supervision and completion of PPPs, or P3s as they are known in industry-speak. This internal separation of duties within public works is akin to a project management office or PMO, with added policy authority. It is refreshing to see tax utilization be so efficient, thus bolstering proper fiscal policy. The US has over the past decade created the Build America Transportation Center to foster and encourage PPPs within transportation infrastructure development, which is a step towards capital improvement. However, on the state and local level the US has yet to employ dedicated offices that deal with PPP development and monitoring on the ground level. We need to address this.

The US Government to date is struggling to find funding for capital improvement and development, and it shows. Urban centers, major highways in states without strong fiscal backing and without strong private investment are showing significant signs of overuse and under care. More important than the visual, is the utilization. Commerce, education, and healthcare are strongly affected by infrastructure incapacity. In a climate which is calling for expanded expertise and increased domestic and international trade, can we really afford to have our infrastructure crumble? We hope that from a federal to local level, the US may employ effective use of public private partnerships in capital improvement to support continued economic development and progress.


Engel et al. 2011. “Public-Private Partnerships to Revamp U.S. Infrastructure.” The Hamilton Project. The Brookings Institution. Pgs. 11 – 22.

Governing The States And Localities. 2013. “Why Isn’t the U.S. Better at Public-Private Partnerships?”

Will Wall Street ever be fixed?


When it comes to the financial industry, there is a major fallacy that exists: that Wall Street deals only with elite, rich people who deserve to lose their money, and that Mom and Pop are not directly affected by the antics and conflicted practices in the industry.

This couldn’t be farther from the truth. Even when Wall Street CEOs are hauled in front of Congress—as Lloyd Blankfein was amid the SEC fraud charges against Goldman Sachs, and as Jamie Dimon was after JPMorgan Chase lost $6 billion on bad trades—they try to make this argument. “We are all big boys.” “We are all sophisticated institutional investors who know exactly what we are doing.”

But stop and think about this for a second. Whose money is being played with anyway?

Look at just the recent scandals: Who gets affected when a county in Alabama trades a structured derivative with JPMorgan that goes sour, and brings the county closer to bankruptcy? Who gets impacted when a government such as Greece or Italy trades derivatives with Goldman Sachs or JPMorgan to cover up its debt and kick its problems down the road? Who ultimately loses when Morgan Stanley misprices the Facebook IPO and mutual funds lose billions of dollars of retirement and 401(k) savings?

Mom and Pop, that’s who.

Whose lives are affected when a sovereign entity such as Libya loses a billion dollars of its own people’s money betting on derivatives? Who loses when Barclays and other major banks rig the London Interbank Offered Rate (LIBOR), the interest rate that underpins trillions of dollars in student loans and mortgages? Whose savings evaporate when JPMorgan brokers sell underperforming mutual funds to their clients to generate more fees?

The list goes on and on and on. All this ultimately affects the citizens, teachers, pensioners, and retirees whose destinies are tied to these organizations that are managing their money. Mom and Pop are more affected by the bad behavior on Wall Street than anyone else—it is their money on the line. But how does Wall Street make so much money, anyway? Surely there are times when they must lose? Don’t count on it. Think about this:

There are certain quarters when a Wall Street bank makes money every single day of that quarter. Yes: ninety days in a row. One hundred percent of the time, it generates a profit. How is this even possible?

Two words: asymmetric information. The playing field is not even. The bank can see what every client in the marketplace is doing and therefore knows more than everyone else. If the casino could always see your cards, and sometimes even decided what cards to give you, would you expect it ever to lose?

Here’s how it happens: Because Wall Street is facilitating business for the smartest hedge funds, mutual funds, pension funds, sovereign wealth funds, and corporations in the world, it knows who is on every side of a trade. It can effectively see everyone’s cards. Therefore, it can bet smarter with its own money.

Worse, if Wall Street can persuade you to trade a custom-made structured derivative that serves the firm’s needs, it is as if your cards have been predetermined. Certainly not much scope for the casino to lose in this scenario.

Now consider where the gambling takes place. In a real casino, it is on a casino floor with cameras all over the place. Even if you don’t like Las Vegas gambling, it is regulated. On Wall Street, the gambling can be moved to a darkened room where nothing is recorded, observed, or tracked. With opaque over-the-counter derivatives, there are no cameras. In this darkened, smoke-filled room, there is maximum temptation to try to exploit clients and conflicts of interest. And this temptation and lack of transparency are what led to the global financial crisis in 2008.

Finally, think about the dealer. Your salesperson or trader might seem objective—like a friendly casino dealer who jokes around and is on your side—but there are times when he or she might be trying to steer you toward the thing that makes the casino the most money. If you were playing blackjack and you had 19, would you ever expect the dealer to tell you to hit? Sometimes, on Wall Street, they urge you to take another card.

Ironically, real casinos may actually be better regulated than Wall Street banks. The SEC and the U.S. Commodity Futures Trading Commission (CFTC) were not able to stop what led up to the crisis, and are still struggling to put appropriate measures in place to limit the conflicts I’ve described. With all these advantages, how can Wall Street ever lose? Even real casinos don’t make money every single day of the quarter.

As proof of this information advantage: Why do Goldman Sachs and JPMorgan Chase mutual funds —housed in their respective asset-management divisions on the other side of the Chinese wall—underperform their peers, as measured by Morningstar? Why do some hotshot traders from banks such as Goldman Sachs, Morgan Stanley, and JPMorgan go out on their own, start their own hedge funds, and flounder? Because they no longer have the advantage of being able to see everyone’s cards. No more asymmetric information, no more batting a thousand, when you are out on your own without unfair advantage.

The reforms Wall Street is pushing back the hardest against are in the areas it knows are the most profitable: opaque derivatives and proprietary trading. But these also happen to be the areas that are most dangerous to the stability of the financial system. The Wall Street lobby has already spent more than $300 million trying to kill measures to regulate derivatives (so that they are brought into the light of day and become transparent on exchanges), and to eliminate proprietary trading so banks can no longer bet against their customers using their information advantage as prescribed by the Volcker Rule. Wall Street hates transparency and will fight as hard as possible to prevent it from coming.

I am a hardcore capitalist. I am all for people getting filthy rich and for businesses making as much money as possible. It is the fuel that keeps our economy growing and wealth should be an aspiration to motivate entrepreneurs everywhere. But I want it to be done fairly. I just don’t believe that capitalism is embedded with some kind of assumption that ethical boundaries should be pushed as far as possible, and that deceiving your customers is necessary to generate maximum returns.

I believe in a business model that is long-term-oriented, where there is an intrinsic fiduciary responsibility to do right by your clients so they will keep coming back to you. Not only is it the right thing to do, but it is also better for business. You will make just as much money—but you will make it more slowly and steadily and transparently. This should be good for shareholders, too, who like a predictable revenue stream and a steadier book of business. Today’s take-the-money-and-run model is just not responsible, or sustainable.

How can it be that years after the crisis nothing has been done to fix any of this? Don’t we live in the greatest democracy in the world? People should be outraged that there is no political will to fix a problem that hurts everyone, enriches a super minority that has learned to rig the game, and could threaten the world with another calamity in a few years’ time.

People know that there is something deeply wrong with the system, but very few can put their finger on what the problem is. After the crash in 1929, the U.S. Senate conducted the Pecora Hearings, to investigate the causes of the crash. This inquiry led to real reforms that held banks accountable and eliminated the abusive practices that had caused the stock market crash. This was followed by decades of calm in the financial system.

If I ever achieve anything in my financial activism, I hope it will be to empower some people with enough understanding to call their congressman, congresswoman, or senator and ask this question: Why don’t you have the guts to do the same thing?

Share your thoughts…

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