Archive for the 'Technology' Category

The Crisis in Cancer Research and Treatment

Friday, January 24th, 2020

The First Cell; and the Human Costs of Pursuing Cancer to the Last, Azra Raza, 2019

Dr. Azra Raza and Dr. Harvey Priesler

This book is intended as a wake up call for all of us that may have assumed cancer research was making progress. The articulate Dr. Raza has spent her career helplessly watching patient after patient die with only fifty year old therapies available (slash, poison, burn), including her own husband Harvey, himself a specialist in the very cancer that killed him. The book combines introducing us to some of her special and unique patients with a description of the complexity of cancer that is impenetrable reading for us laymen, to a plea for rebooting the entire field of cancer research and treatment. It is best to present the very articulate argument for rebooting our approach in Dr. Raza’s own words.

Over the twelve-year period from 2002 to 2014, seventy-two new anti cancer drugs gained FDA approval; they prolonged survival by 2.1 months. Of eighty-six cancer therapies for solid tumors approved between 2006 and 2017, the median gain in overall survival was 2.45 months…A study published in the British Medical Journal showed that thirty-nine of sixty-eight cancer drugs approved by the European regulators between 2009 and 2013 showed no improvement in survival or quality of life over existing treatment, placebo, or in combination with other agents.

Identifying predictive markers that allow for individualizing therapy by matching drugs to patients remains the treasured yet elusive holy grail of oncology… More than 90 percent of trials ongoing around the county make almost zero attempt to save tumor samples for post hoc examination to identify predictive biomarkers…Who is pushing this short-term agenda driven by the singular goal of getting a drug approved with alacrity as long as it meets the bar of improving survival by mere weeks in a few patients?

A pioneering and revolutionary paper was published in 1976 by Peter Nowell. His clairvoyance about cancer being an evolving entity has been largely ignored. From “The Clonal Evolution of Tumor Cell Populations”:
Peter Nowell

Tumor cell populations are apparently more genetically unstable than normal cells, perhaps from activation of specific gene loci in the neoplasm, continued presence of carcinogen, or even nutritional deficiencies within the tumor. The acquired genetic instability and associated selection process, most readily recognized cytogenetically, results in advanced human malignancies being highly individual karyotypically and biologically. Hence, each patient’s cancer may require individual specific therapy, and even may be thwarted by emergence of a genetically variant subline resistant to the treatment. More research should be direct toward understanding and controlling the evolutionary process in tumors before it reached the late stage usually seen in clinical cancer.

…in 2009, Gina Kolata reported in her New York Times column the jaw-dropping statistics that despite the infusion of more than $100 billion into cancer research, death rates for cancer had dropped by only 5 percent between 1950 and 2005 when adjusted for size and age of the the population. The war on cancer was not going well.

A review of where the research funds go reveals the inherent biases perpetuated by the peer-review process as detailed by Clifton Leaf in his eye-opening book, The Truth in Small Doses: Why We’re losing the War on Cancer and How to Win It. Enormous sums of money from the government continue to fund the same institutions and universities over and over…The saddest part is that upon serious examination of what is published, 70 percent of the basic research is not reproducible and 95 percent of clinical trials are unmitigated disasters.

A recent study titled, “Death or Debt? National Estimates of Financial Toxicity in Persons with Newly-Diagnosed Cancer,” published in the October 2018 issue of the American Journal of Medicine, tabulated the chilling economic burden borne by patients with newly diagnosed cancer. Using the Health and Retirement Study Data, this longitudinal study identified 9.5 million estimated new cases of cancer between 1998 and 2012 in the United States. Two years from diagnosis, 42.5 percent of individuals had depleted their entire life’s assets, and 38.2 percent incurred longer-term insolvency, cancer costs being highest during treatment and in the final months of life. The most vulnerable groups were those with worsening cancer, older age, females, retired individuals, and those suffering from comorbidities like diabetes, hypertension, lung and heart diseases, belonging of a lower socioeconomic group, or on Medicaid.

The unfortunate reality is that not a single marker for response is examined in the majority of clinical trials being conducted even today. Why? Because this is how the system has evolved. The pharmaceutical industry sponsoring the trials is only interested in reaching a statistical end point to get their agent approved. The companies have usually invested almost a billion dollars already to bring an agent to the point of a phase 3 trial. It would add a staggering amount of money to their stretched budgets to perform such detailed biomarker analysis. I suggest saving all the money being squandered on testing the agents in pretherapy, preclinical models of cell lines, and mouse models and instead investing the resources in biomarker analysis. Some bold changes are needed at every level. To harness rapidly evolving fields like imaging, nanotechnology, proteomics, immunology, artificial intelligence, and bioinformatics, and focus them on serving the cause of cancer patient, we must insist on collaboration between government institutions (NCI, FDA, CDC, DOD), American Society of Clinical Oncology, American Society of Hematology, funding agencies, academia, philanthropy, and industry.

Contrast the putative scientific gold standard of a reproducible animal model with the known fact that every patient’s cancer is a unique disease, and within each patient, cancer cells that settle in different sites are unique. When a malignant cell divides in two, it can produce daughter cells with the same or radically different characteristics because during the process of DNA replication, fresh copying errors constantly occur. Even if two cancer cells have identical genetics, much like identical twins, their behavior can differ depending on genes expressed or silenced according to the demands of a thousand variables, such as the microenvironment where they land, the blood supply available to them, and the local reaction of immune cells. The resulting expansive variety of tumor cells that exist withing tumors are unique within unique sites of the body. Multiply this complexity further by adding the host’s immune response to each new clone and you get a confounding, perplexing, impenetrable situation in perpetual flux.

So what is the solution? The first step is to descend from our high horses and humbly admit that cancer is far too complex a problem to be solved with the simplistic preclinical testing platforms we have devised to develop therapies. Little has happened in the past fifty years, and little will happen in another fifty if we insist on the same old same old. The only way to deal with the cancer problem in the fastest, cheapest, and, above all, most universally applicable and compassionate way is to shift our focus away from exclusively developing treatments for end-stage disease, and concentrate on diagnosing cancer at its inception and developing the science to prevent its further expansion. From chasing after the last cell to identifying the footprints of the first.

The heyday of reductionism, looking for one culprit gene at a time and searching for the one magic bullet, is over. The era of big data, cloud computing, artificial intelligence, and wearable sensors has arrived. The study of cancer is evolving into a data-driven, quantitative science. Merging information obtained from liquid biopsies (RNA, DNA, proteomics, exosome studies, CTC), with histopathology, radiologic, and scanning techniques, aided by rapid machine learning, image reconstruction, intelligent software, and microfluidics can–and will–revolutionize the way we diagnose and prevent rather than treat cancer in the future. The ideal strategy will emerge from harnessing cutting-edge technology for a multidisciplinary systems biology approach through a consilience of scientists with expertise in molecular genetics, imaging, chemistry, physics, engineering, mathematics, and computer science.

Research is also ongoing in all these areas funded by the National Institute of Health, but the investment remains paltry compared to funding provided for studies conducted on cell lines and animal models. Through redirection of intellectual and financial resources from the same old grant proposals to grant incentives for early detection using actual human samples, and by posing exciting challenges to competitive scientists, progress will be accelerated dramatically. The piece that is missing from the equation is an admission of failure of current strategies and a willingness to take a 180-degree turn to start all over again.

Antonio Fojo of the NCI extrapolating the implications of one trial:

“In the lung cancer trial, overall survival improved by just 1.2 months on average. The cost of an extra 1.2 months of survival? About $80,000. If we allow a survival advantage of 1.2 months to be worth $80,000, and by extrapolation survival of one year to be valued at $800,000, we would need $440 billion annually–an amount nearly 100 times budget of the National Cancer Institute–to extend by one year the life of the 550,000 Americans who die of cancer annually. And no one would be cured.

This is how complex cancer is. It is pure arrogance to think the problem can be solved by a few molecular biologists if they put their minds to it. Cancer is a perfidious, treacherous, evolving, shifting, moving target, far too impenetrable to be deconstructed systematically, far too dense to lend itself in all its plurality to recapitulation in lab dishes or animals.

Ed Snowden In His Own Words

Thursday, November 14th, 2019

Permanent Record, Edward Snowden, 2009

Ed and Lindsay out in Moscow

Ed Snowden was only 29 years of age when he blew the whistle on NSA’s mass surveillance of all Americans (in fact on everyone in the world). Here is the story of his own arc of growing up, engaging in a highly successful technical career, and then deciding to throw it all away to tell journalists and the world what their government was secretly doing.

Ed was born in 1983, the year that ARPA (Advanced Research Projects Agency, later DARPA adding Defense to the title) made the ARPAnet (using the TCP/IP protocol) publicly available for the first time. In 1983 the Mosaic pioneer browser existed at the University of Illinois. The world wide web (WWW) was invented at CERN in 1989 by Tim Berners-Lee. IBM introduced the PC in 1981, and Ed’s first computer, a Commodore 64 was introduced in 1982. In other words, Ed grew up at precisely the time that PC’s and the Internet were new. Ed became a very young, natural self described Geek and is mostly self educated since computers and the Internet were far more interesting than school and Ed was very talented in this new world.

Ed claims to be able to trace his ancestry on his mother’s side from the Mayflower itself and his fathers side to fighting in the Revolutionary War and every war thereafter. Early on his family moved from North Carolina to Maryland where his father worked on technology for the Coast Guard, and his mother worked at the NSA in human resources. Both parents held security clearances. Government service was the natural career path for his family. Unfortunately, modern government service requires a college degree and Ed finished high school with a GED. When the 9/11 attacks happened, Snowden signed up for army special forces and at 5’9″” and 124 pounds he went off to Fort Benning for basic training. He stress fractured a leg and the army, to avoid liability, granted Ed release from service with no black marks. While recovering from his injury, Ed came up with plan B. He would apply for a high level security clearance (requiring one year of vetting). The security clearance was granted and the CIA, much reduced after its failures in the 9/11 attack, hired Ed to babysit its headquarters computer systems. Thus started Ed’s meteoric but short career of government service which saw Ed stationed at the US embassy in Geneva Switzerland, and then, with the NSA, a stint at the Yokota Air Force Base on Honshu in Japan, and finally assignment to the NSA facilities near Waipahu Hawaii.

In 2009, while Ed was in Japan, a single document was flagged by the NSA’s repository as not belonging there. He noticed the document was classified TOP SECRET//STLW//HCS/COMINT//ORCON/NOFORN. STLW stands for STELLARWIND. Ed says only a few dozen people would have access to this document (plus system administrator Ed Snowden). This document was the authorization for mass surveillance of all American’s communications. Neither anyone in Congress nor the White House would have access to this document. The NSA continued to deny it was mass surveilling Americans. Daniel Ellsberg, in his Doomsday Machine book about our nuclear program describes the security classification system and security clearances that are understood by almost noone in politics nor the public.

Meanwhile the age of surveillance capitalism was fast arriving with Google, Facebook, Amazon, Microsoft, Apple, etc. gathering and exploiting users data for profit. Worse, they were freely sharing this private data with the government. Ed says he (his right to privacy) was first betrayed by his government, then by his beloved Internet, and finally, by his own body. He was diagnosed with epilepsy (not the grand mal seizure variety) and took the job in Hawaii to reduce his level of stress. In Hawaii, he had the leisure to start collective data to prove the NSA was spying on everyone and to further understand the different programs and tools available to the NSA and its contractors. His final exploration was of the program XKEYSCORE which allowed the government and its contractors to find anything about a persons digital history.

Bill Binney

Ed here honors his whistleblower predecessors from Daniel Ellsberg and Anthony Russo to Thomas Tamm who reported extensively on warrantless wiretapping in the mid 2000’s. Included are Perry Fellwock, who in 1971 revealed the existence of the NSA for the first time. He also lists Bill Binney, The Good American, Drake, Wiebe, and Loomis. Finally special mention of Chelsea Manning for leaking war crimes documents via Wikileaks. He gives special thanks to Sarah Harrison, journalist and editor for Wikileaks, who arrived in Hong Kong to assist Ed in his search for asylum and who accompanied Ed to Moscow.

Poitras Greenwald Lindsay Citizenfour Oscar

Ed does a good job of describing the ever increasing use of contractors by the government. He attributes this trend to budget issues and seems unaware of the worldwide neo liberal political movement to attempt to privatize all previously public functions of government from education to defense to incarceration to water. This privatization is highly profitable, leads to corrupt revolving door policies where government officials are able to grant contracts and special privileges to private for profit corporations with the understanding that they will be rewarded when they leave government to join the very companies they enriched.

For more on the surveillance state, see this work that includes Snowden’s disclosure.

Ed believes that the only current way to control surveillance is through the extensive use of encryption which the government cannot break. He also advocates the use of TOR or “onion routing” which uses a worldwide network of TOR servers to break the connection between the originating IP address and the destination IP address making it impossible to track communications using IP addresses. TOR was developed by a mathematician and a computer scientist at the Naval Research Laboratories and was designed to protect military and government communications using the public Internet. Ed was teaching classes in these subjects in Hawaii when he blew the whistle. Ed was also handing out printed copies of the US Constitution to his coworkers. This at the same time a supposedly constitutional law professor, Barrack Obama, was in the White House busily ignoring the very Constitution he was supposedly so expert at.

Ed decries the rise of cloud computing as a return the bad old days of centralized mainframe computing and points out your cloud computing authorization contract passes ownership of all your data to the cloud’s owners. If your data including photos are in a cloud they are no longer yours.

The Kochs – Hypocritical Libertarians

Saturday, October 5th, 2019

Kochland; The Secret History of Koch Industries and Corporate Power in America, Christopher Leonard, 2019

The Fred C. Koch Family
Fred C. Koch died Nov 17, 1967 Mary R. Koch died December 21, 1990 Charles Koch died Aug 23,2019.

Charles Koch

In a 1974 speech (Charles) Koch attacked the entire narrative behind the New Deal (based on Keynesian Economics), claiming that Roosevelt’s legislation was not, in fact, in response to a lack of federal-level regulation. Koch said that when the New Deal was passed, the economy was already “polluted by massive governmental manipulations of the money supply.”…The business community needed to wage a long-term campaign that would change the way Americans thought about the markets and the role of government (Hayek, Mises, Friedman). Koch said that the campaign should have four elements; 1) Education; 2) Media outreach; 3) Litigation; and 4) Political Influence.

David and Charles Koch

Based on his long term vision, Koch founded the Cato Institute, contributed to the Heritage Foundation and other right wing think tanks; rebuilt the law and economics departments of George Mason University near Washington in the image of the Chicago school, and created the Mercatus Center another free market think tank. This center offered free seminars to more than 4,000 federal judges from all 50 states. Koch was central to the creation of ALEC, the American Legislative Exchange Council, which writes right wing laws and pressures state legislatures to pass them. Koch is behind the Americans for Prosperity lobby that was central to defeat of the Obama era cap and trade legislation in 2010, the only serious effort by congress to limit carbon emissions. In the 2010 midterm election, the Republicans gained control of the house and senate, in large part due to the emergence of tea party candidates and Koch’s Americans for Prosperity efforts.

David and Charles Koch

Koch Industries was to benefit enormously from Federal Action, particularly from the Clean Air Act of 1970. Refineries already operating in 1970 (Koch had two) were “grandfathered” in to the era of clean air regulation. The unintended consequence of this legislation was to halt the construction of new refineries, assuring that no new competition would enter the business. Existing refinery owners immediately started gaming the act; for example companies could be exempted if curbing pollution would be unreasonably expensive. This assured that new technologies would never be implemented in the existing refineries. The EPA was to enforce the New Source Review program which prohibited new refineries from entering the game. The last refinery built in the US was completed in 1977. The EPA needed to rely on state regulators to enforce the New Source Review and these state regulators were simply outgunned and overwhelmed by the giant refinery corporations. Koch’s two refineries were able to increase their capacity more than ten fold and were able to introduce new outputs and products at will. Much of this expansion was achieved without first obtaining permits that would have limited pollution from the plants. Koch refused to invest in suggested new pollution control measures.

Pine Bend Refinery Rosemount, Minnesota

In mid 1996 a sour water stripper that limits the amount of ammonia that was pumped into the wastewater treatment plant ceased operating properly. Repairing the stripper would require shutting down the refiner which Koch refused to do. Instead Koch flushed the ammonia rich waste into large detention pools on the far end of the refinery. When these filled they began spraying the contaminated water onto the surrounding wetlands and fields. In January 1997, Heather Faragher, The only employee trained in waste water management at Koch’s refinery but without the authority make changes at the refinery, told the Minnesota Pollution Control Agency, which was responsible for enforcing federal EPA standards, everything that Koch had been doing at the refinery. in 1998 the MPCA fined Koch $6.9 million for pollution. Federal criminal charges in 1999 resulted in a criminal fine of $6 million, $2 million to the County Park system. Koch also agreed to pay the EPA a $3.5 million fine. Similar events happened at Koch’s Texas refinery, causing Charles Koch to initiate a new program to assure that Koch was in compliance with all state and federal regulations (100% compliance, 100% of the time). He hired a group of regulatory compliance attorneys locating them at company headquarters in Wichita Kansas with the authority to force all company divisions to comply with regulations and with the authority to shut facilities down if necessary. He was driven to this measure to avoid future big fines, to protect Koch’s now tarnished reputation, and to prevent state and federal officials from inspecting and investigating his operations. Privacy and secrecy are Charles Koch’s highest priorities.

A big disappointment in this 600 page book is the failure to address the extent to which Koch benefits financially from direct government subsidies. The topic receives one short mention with no figures of the scale of corporate welfare or crony capitalism enjoyed by Koch. Charles Koch often speaks about his opposition to government subsidies but there is no evidence in this book that Koch has ever turned down a single subsidy. The book does mention that fracking was developed largely due to government subsidies and Koch indirectly benefited as fracking increased the production of oil and natural gas so that the US is now energy independent. One would dearly love to know the extent to which Koch’s remarkable success was due to direct government subsidies.

The fossil fuel industry has always depended on trading, the buying of crude oil, natural gas, etc. and on selling refined or manufactured products. Historically this trade has not been done using established commodity markets. Koch established a separate trading division located in Houston. Charles Koch insisted that his traders have the best available information including the best weather forecasts. Koch invested heavily in computers and developed elaborate models of the relevant markets. Central to the success of Koch trading was the availability of inside industry information which can be used freely and legally in Koch’s markets. Market volatility is what drives profits in trading and Koch’s traders became expert in exploiting volatility. In the cold winter of 2000, one trader placed large bets on the volatility of natural gas prices and earned Koch $75 million. The trader’s base salary was $60,000 and he earned $4 million in a bonus. Koch keeps a close leash on its traders and knows on a day to day basis company exposure to its trader’s bets. Unlike banks, wall street firms and insurance companies, Koch has never experienced unexpected losses from a rogue trader. In 2000, as Clinton was leaving office, his administration passed the Commodity Futures Modernization Act, leaving the market for derivatives unregulated and in the dark. Thus Clinton set the stage for the 2008 subprime mortgage crisis. This book explores how fossil fuel industry traders quickly learned and adapted to this new age of unregulated financialization. We think of Wall Street, the banks, and the insurance companies, but the fossil fuel industry reaped enormous profits from exotic and dark trades.

How Koch Became an Oil Speculator Powerhouse

Companies like Enron and Koch all engaged in illegal trading activity, best exemplified by California’s electric utility deregulation fiasco that started in 2000. ALEC was instrumental in getting the disastrous neoliberal bill passed in 1998. The New Deal Era public utilities system for electrical power was replaced by a radical new system. The existing utilities retained their geographic monopolies with set maximum electric rates, but they were stripped of their generators. Power generation was privatized and the utilities were required to buy power on a daily basis. An emergency state agency was created to buy electricity when the markets failed. A massive daily trading system emerged. The new system was quickly overrun by unusually hot weather. The scale of Koch’s illegal trading activities in California electric power were dwarfed by the scale of Enron and other huge energy companies and largely escaped being tarnished further by its illegal trading. Charles Koch’s 100% compliance order somehow did not include the trading division. Enron’s fraud and illegal activities forced it out of business in 2007.

California Electricity Crisis of 2000-2001

Charles Koch was a keen student of the latest management theories. Early in his career, he adopted the teaching of Edward Deming who revolutionized Japanese manufacturing practices after WWII. His typical management hire was a young graduate of a midwestern university often with an engineering degree and often someone raised on a farm with midwestern work habits. Charles Koch believed he could educate the young graduates to his philosophy and new hires spent hours in seminars and training. The new hire would then be assigned a job and his performance closely watched. If he was successful, he would then be reassigned to another position that might be totally alien to the experience and training of the employee. They might find themselves moved from a refinery to a trading desk where a whole new set of skills is required. If successful there, the employee might be moved to another position, maybe in fertilizer or pipelines or most anything. If the employee does not succeed in their new assignment they are terminated from Koch. Its a bit like the father that throws his child in the deep water to see if they sink or swim. In spite of this style of management, employees at Koch, if they succeed, seem extremely loyal to Charles Koch and enjoy long careers. In 1969, two years after Charles Koch became CEO, Laurence J. Peter published a book describing what became known as the Peter Principal. Organizations continue to promote their workers until they reach a point where they are no longer able to successfully perform the functions required by their position. This book makes no mention of the Peter Principal but Charles Koch, whether he knew the principal or not, seemed to embrace it and used advancement within Koch to test and challenge his employees until they break at which point they are removed.

In 1987, an investigative report published in the Arizona Republic charged that the oil companies were stealing oil from native American reservation oil fields. Several US Senators got interested and the largest oil companies told them to look at Koch. The Senators got an FBI agent assigned to investigate and he started observing Koch trucks and gaugers as they pumped oil from the field tanks to their trucks, measuring the amount of oil taken using gauge sticks inserted into the field tanks before and after the pumping. The drivers would record the amount of oil taken and leave a ticket at the site. This ticket determined what Koch owed for the oil taken. When the truck was emptied at its destination an accurate measure of the oil taken could be obtained. The work of the guagers is only approximate and Koch trained the drivers never to be short, i.e. never to have the oil actually delivered be less then the ticket left at the site. To be short meant an immediate termination. The drivers were never instructed to steal oil, they were instructed never to deliver less oil than Koch was obligated to pay for. The obvious and only was to assure that they were not short was to always be long. The Senate passed the investigation to the Justice Department which made Koch hand over its records for three years. In each of these years Koch received an average of 400,000 Barrels of oil per year worth about $10 million that they didn’t pay for. The Justice Dept. didn’t want to charge individual drivers but thought it would be difficult to charge the top executives for the theft. The case did go to trial and was settled for an undisclosed amount. There was bad publicity for Koch but no lasting consequence. This is just another example of Koch pushing beyond the limits of legal and normally understood ethical behavior.

Additional Details on Oil Theft from Christopher Leonard

Two sections of the book deal with Koch treatment of unions, first the union at the Minnesota refinery, and second the Georgia Pacific division unions. The stories are different but similar. Koch refuses to negotiate, changes the work rules, slowly squeezes wages, moves union pensions to 401K s and interferes with health care programs. It is pretty miserable to work a union job at Koch but the alternatives are worse. Charles Koch’s toughness is illustrated by his reaction to a union strike at the Pine Bend refinery in Minnesota, which in 1970 was still a strong union state. Charles Koch hired a Texas oilman whose hero was George Patton to run the refinery. When the workers voted to go on strike, he hired enough non union workers to keep the refinery running and flew them on site by helicopter. The skeletal crew lived on site with their boss. When the teamsters refused to cross the picket line, Koch negotiated a deal whereby Koch drivers would replace the teamsters for the drive through the picket line, load the truck, and return it to the teamster driver. When the strike extended, Koch built a separate road entrance bypassing the picket line and convinced the teamsters to drive their trucks through the new entrance. For specialized maintenance requiring workers from other unions, Koch eventually convinced them to make repairs in spite of the strike. In this way the refinery union was slowly isolated and weakened. They eventually settled on Koch’s original terms, but after losing more than a year of wages.

Georgia Pacific’s plants and warehouses were subjected to modern software systems designed to increase worker productivity. This increased productivity was accompanied by a corresponding increase in injuries, some of them fatal. These injuries would result in OSHA investigations and modest fines, but any government interventions were anathema in Koch’s culture. While trying their best to prevent injuries, the numbers stayed stubbornly high. Stressed employees will make mistakes and the only solution is to decrease the pressure. On the contrary Koch would fire employees that were considered too cautious and careful because that meant they worked slower. Had the OSHA fines been in the millions, I have no doubt Koch would have figured things out to reduce or eliminate injuries.

Koch created a Value Creation Group but this got subdivided and one of the subdivisions was Koch Agriculture. Koch had virtually no experience in agribusiness volatility. In 1997 Koch saw an opportunity to buy century old Purina Mills headquartered in nearby St. Louis. The problem with private equity acquisitions is that is drew Koch into businesses where it had no expertise. They agreed to pay $670 million for a company worth $109 million. Koch borrowed $570 million and put up $100 million of its own money for the purchase. Koch tried to impose the Koch culture on a company with its own very different and well established culture with the result that key employees left the company in droves. Due diligence failed to uncover massive contracts between Purina and hog feedlots which required Purina to produce piglets that the feedlots were under contract to buy and grow using Purina food. When the hog market imploded, the feedlots defaulted on their contracts (that Koch didn’t know existed) and Purina was forced into bankruptcy. Purina and the creditors lawyers believed the Koch corporate veil that was supposed to protect the holding company, was flawed, and Koch was forced to settle by putting up another $60 million in cash to get rid of Purina. Charles Koch fired everyone associated with this disaster and closed the entire acquisitions division.

Koch began a complete reorganization of the business in 1999. Over the years Koch had acquired a wide hodgepodge of unrelated businesses. Koch unloaded many of its pipelines, sold a small chemical company and other odds and ends. At the core of the new structure, Koch Petroleum was rename Flint Hills Resources. Others were simplified and reorganized into Koch Minerals, Koch Supply & Trading, and Koch Chemical Technology Group. New leaders were appointed to run these consolidated businesses. Koch Industries became little more than a holding company protected by a legally impenetrable veil to protect it from problems in its divisions. Charles Koch also finally put to rest the 20 year long legal feud with brother Bill and could totally focus on growing Koch. Koch’s spectacular growth after 2000 was the result of operating one of the largest private equity operations in the country. Private equity finds distressed public companies that can be purchased cheap, converted from publicly traded or coop into privately held companies. Charles Koch from the beginning wanted his company to remain private, to operate in secret, and to forego dividends in favor of reinvesting profits to grow the business. He was proving that he could learn fast from past mistakes, correct them mercilessly and move on. He initiated his “10,000 percent compliance” program discussed earlier at this time to keep the government and regulators off his back. Clinton ushered in the age of financialization in 2000 and George W Bush from Texas and Dick Cheney entered the White House. Koch was set for a decade of spectacular growth.

In 2003, Farmland a depression era coop headquartered in Kansas City wanted to sell a group of liquid nitrogen fertilizer plants all located close to their midwest farm customers. The most expensive component, at 80% in the production of liquid nitrogen is natural gas and domestic natural gas was very expensive. Lower cost imported fertilizer had undermined Farmland’s market. Koch had inside information that fracking was about create a vast increase in the supply of natural gas and prices would plummet. This purchase would mean a significant reentry into agribusiness and the acquisition team didn’t know if Charles Koch was ready to forget the Purina experience but he fully backed acquisition. Natural gas prices plunged and the fertilizer plants became immediately profitable.

Also in 2003 Georgia Pacific approached Koch to see if they were interested in purchasing several struggling pulp mills in Georgia and Washington – Oregon. The mills came with several unionized warehouses for the mill’s products. When the Koch team visited Georgia Pacific’s Atlanta headquarters (51 stories tall) they saw a bloated, hyper luxurious operation. At the same time DuPont came on the market. Overall, Koch was looking at corporate takeovers worth more than $25 billion. Koch acquired both DuPont’s Invista for $4.4 billion and Georgia Pacific for $21 billion. Charles Koch had always disliked borrowing, but borrowing is the foundation of the private equity business. Find an under performing company with lots of cash flow and buy it with borrowed money. Make sure the holding company is protected from the creditors, turn the companies around and use the resulting cash flows to repay the loans. Koch was now willing to borrow seemingly unlimited money to fuel its acquisition appetites. Both DuPont and Georgia Pacific were heavily dependent on the building of new housing which was a hot market right up to the sub prime mortgage crash of 2008. Charles Koch did not panic but scaled back operations at all affected acquisitions and waited to weather the downturn storm.

June 29, 2012 (Reuters) – DuPont Co has settled a $745 million lawsuit brought by Koch Industries Inc’s Invista unit over safety and environmental problems at plants once owned by the large chemical company.

How The Kochs Are Fracking America

The crash of 2008 made fracking economically viable and the supply of natural gas exploded. Then drillers in North Dakota applied fracking to crude oil successfully for the first time. There was an area called the Eagle Ford Shale region near Corpus Christi where Koch’s second light crude refinery was located. Koch’s planners decided on a plan to build pipelines between Eagle Ford and Corpus Christi and to buy and build a ship slip to export any excess crude oil. Charles Koch embraced the plan immediately and only wanted to assure the plans were big enough. Oil from fracking start to flow in 2010 when by the end of the year 139,000 barrels a day were being produced. By 2014 production hit 1.68 million barrels a day roughly 20% of all crude oil produced in the US that year. Because the 1970 Clean Air Act effectively prevented the building of new refineries, Koch’s Corpus Christi refinery enjoyed enormous profits from the newly available light crude.

Koch Brothers War on Renewable Energy

Through this same period the Kochs focused their political attention on fighting renewal energy initiatives at the state level (ALEC), fighting any carbon restrictions at the state and federal level, and rolling back CAFE auto efficiency standards. Charles Koch and his company became much more visible as a result of these massive anti environmental efforts and he started experiencing demonstrations at his gatherings and now requires constant security protection. Gone were the days when Charles could drive his modest old station wagon from the family home to Koch headquarters.

How Power Hungry Car Lover Single Highhandedly Destroyed New York

Wednesday, June 5th, 2019

The Power Broker; Robert Moses and the Fall of New York, Robert A. Caro, 1975
This classic Pulitzer Prize work at 1162 pages details the 44 year career from 1924 to 1968 of Robert Moses, the most powerful builder in New York history. Born in 1888, Moses grew up at the birth of the automobile, was educated at Yale and Oxford and earned a PhD degree from Columbia. Starting his career as a reformer helping Governor Al Smith reorganize the government of the state of New York, he asked Smith to be named Commissioner of Parks and Parkways for Long Island and Moses drafted the legislation creating the position from which he could not be removed and in which he had absolute power of property condemnation, which he called “appropriation”. He built a reputation for incorruptibility and non partisanship; a man who got things done. Politicians including FDR in 1932, while disliking Moses and his methods, relied on his accomplishments in their campaigns. Moses took over New York City’s parks consolidating the system into a single commission under his total control. He next took over the stalled Triborough Bridge effort drafting his own Triborough Authority legislation to allow his absolute control including bond issuance. His legislation allowed him to hold simultaneously state and city positions, previously not allowed.

Robert Moses Building Randalls Island in 1936
He completed the Triborough system and the West Side Highway including the Henry Hudson Bridge. When traffic levels assured that the bonds could be repaid in eight years or less Moses redrafted the legislation to extend the Authority to cover any bridge or highway in the New York Area and to allow the bonds to be refinanced which allowed the Authority to live forever. The surpluses from tolls were to give Moses a funding power independent of city, state, or federal influence.

The entrance and exit ramps would have required demolition of historic Castle Clinton and much of Battery Park.

Ole Singstad Rendering of the Battery Park Bridge

Just before WWII, Moses proposed a huge bridge connecting Battery Park in Manhattan to Brooklyn. A tunnel, designed by Ole Singstad who finished the Holland tunnel and designed the midtown and Lincoln tunnels, was already planned for the same route. Conservationists were unable to stop Moses proposed destruction of the historic park and contacted Eleanor Roosevelt who told FDR of the plans. The bridge required War Department approval which was denied. Moses was never able to prove FDR was behind the War department decision. For revenge, Moses moved the hugely popular at 2.5 million visits per year, free, Aquarium out of the CLinton Castle and threatened to destroy the Castle itself. He didn’t and Battery Park was later given to the Federal Government for preservation.
Moses added the East River New York Tunnels to his bridge and highway authority and Singstad, who played a significant role in defeating the bridge never designed or built a tunnel in New York again. His existing tunnel plans were implemented exactly as he had drawn them up.
In the mid 1950’s Moses joined with the separate Port Authority, which operated the George Washington Bridge and the Hudson river tunnels to New Jersey, to take advantage of the new Interstate Highway Federal program. Moses was nominal head because of his long relations with Washington. Under the agreement, the Port Authority would add a second level to the George Washington bridge and build interstate highways in New Jersey and connect Staten Island to New Jersey to handle traffic from Moses Verrazano Narrows bridge which he would build between Long Island and Staten Island as well as connecting highways. Tolls were not allowed under the Interstate Highway program.
The Port Authority had opened, in 1950, a multi level commuter bus station on 8th Ave one block from the Lincoln Tunnel entrance. The buses had their own road connecting the station to the tunnel and dedicated lanes through the tunnel assuring that bus commuters would never be stuck in traffic. Under the station was a subway station. When the Port Authority planned the World Trade Center they made provision for subway stations directly under the Center with high capacity escalators to the mall and offices. They also planned a direct PATH link from Hoboken NJ to the Center. Hoboken NJ was the location of the commuter train and bus station connecting to PATH. Imagine if Moses had this foresight into mass transit when he was building Idlewild and the Expressways.
As if this were not enough power for one man, Moses became head of New York electric power where he built huge hydroelectric dams on the St. Lawrence near Niagara. After WWII he extended his power to include nuclear power generation.
At his peak, Moses held 14 independent power positions simultaneously.
During Moses’ entire 44 year career the city and state of New York never spent a single dime on mass transit development and the city and state even failed to maintain the existing plant. In 1924, when Moses came to government, New York Subways were the envy of the world. By 1968 these subways were perhaps the worst in the world. When building his expressway to Idlewild (now Kennedy) airport Moses refused to consider adding a center median rail system. He did the same for the Long Island Expressway denying requests to add a center rail for mass transit. The long Island railroad was allowed to deteriorate even though large numbers of city commuters were dependent on it. It was around this time that planners discovered that Moses had built his many parkways with bridges and overpasses so low buses were precluded from using them. Moses, who never had a driver’s license and had never experienced a traffic jam doomed the entire New York metropolitan area to perpetual traffic jams. His vision was for scenic drives along the water so he built the West Side Highway right on the Hudson River denying Riverside park users access to the River except for exclusive yachting clubs.

His thinking had been shaped in an era in which a highway was an unqualified boon to the public, in which roads were, like automobiles, sources of relaxation and pleasure. Changing realities could have changed his thinking but he was utterly insulated from reality by the sycophancy of his yes men; by his power, which, independent as it was of official or public opinion – of, in fact, any opinion but his own — made it unnecessary for him to take any opinion but his own into account; by, most of all, his personality, the personality that made it not only unnecessary but impossible for him to conceive that he might have been wrong; the personality that needed applause, thereby reinforcing the tendency to repeat the simplistic formula that had won him applause before; the personality that made it possible for him to relate to the class of people that owned automobiles and were repelled by the dirt and noise, such as the dirt and noise he associated with trains; the personality that made him not only want but need monuments and that saw in highways- and the adjunct suspension bridges (“the most permanent structures built by man”) – the structures that would leave a clean, clear ineradicable mark on history; the personality that, driven by the lust for power, made him anxious to build more revenue- (and power-) producing bridges and parking lots (and highways to encourage their use) and that made him indifferent or antagonistic to subways and railroads which would compete with his toll facilities not only for users but for city construction funds. He was insulated from experience. Most of the millions who used his roads were now using them primarily not for weekend pleasure trips but back and forth to work twice a day, five days a week, and driving was therefore no longer a pleasure but a chore; but for Moses, comfortable in the richly upholstered, air conditioned, soundproofed rear seat of his big limousine, driving was still as pleasurable as it had always been. Robert Moses, who had never had to drive in a single traffic jam, really believed that his transportation policies would work.

This blogger experienced the result of his work in 1977 when a group of us traveled by van from Tarrytown NY, home of Washington Irving, to Kennedy Airport on a Friday afternoon following a week of training. Our driver didn’t use a single highway during the entire trip. When we asked him about the route, he explained that side streets were the only to get us to our flights on time. We traversed the entire city from the north and couldn’t use even one of Moses’ creations.

The press treated Moses uncritically with the New York Times leading the cheers until a couple of young, unintimidated investigative reporters with smaller papers started, in 1959, digging into his Title I Federally subsidized housing and slum clearance programs. Soon the reporters were inundated with tips and material on the corruption and suffering. Targets for slum clearance were often not slums at all but stable well maintained neighborhoods. “Slum” clearance was destroying of lives of tens of thousands if not hundreds of thousands of New Yorkers including hard working respectable families. The resulting deluge of stories of horror and corruption forced even the NYT to assign investigative journalists to the stories.

The Incorruptible, Uncorrupting, Apolitical, Utterly Selfless Public Servant Moses had been a synthetic character, largely puffed up by the press. That character had endured for thirty-five years. But in 1959 the process of deflation by the press-a process that had been going on intermittently for several years-had begun in earnest. In that process there had been a large amount of unfairness. But that process had in the end arrived at the truth. At the beginning of 1959, the Moses image had stood in most of its glory, intact except for a few small chips. At the end of 1959, it lay in unsalvageable ruins. Popularity, Al Smith had warned him, was a slender reed. Now the reed was broken.

Moses resigned his position as head of Title I but his reputation was forever tarnished.

Moses with Nelson
Moses had survived many attempts by governors and mayors to reduce his power and all, including FDR had failed.
Then, in 1959 Nelson Rockefeller became governor of New York. Nelson was 50 and Moses was in his 70’s. Nelson was a Rockefeller, with access to power never before seen by Moses in a mayor or governor. Nelson was tougher than Moses. Rockefeller pressured Moses to give up all his parks posts so Nelson could give them to Nelson’s brother Laurance, a man with impeccable credentials in New York’s conservation movements serving for 27 years on the Palisades Interstate Park Commission. The well conceived and run Palisades Interstate Park had been funded heavily by the Rockefellers. Moses made a huge mistake, accusing Nelson of nepotism in the press. All Moses’ park positions were stripped but in compensation Nelson offered Moses Presidency of the 1964 Worlds Fair to be held in Flushing Meadows.

Moses at Flushing Meadows Park
The position came with very attractive compensation which could help Moses pay for care for his ill wife. Moses took the job thinking he could turn Flushing Meadows into a huge Park after the fair ended. The Fair, as the earlier one in 1930 was a financial disaster complete with Moses lavish contracts to friends. In the end Moses had less than $8 million to pay off $24 million in loans. He used the $8 million to create a small park on the site and the creditors were given nothing. Nelson stripped Moses of his remaining highways position and Moses was down to one title, the one that counted, head of the Triborough Authority.
Nelson moved slowly in his efforts to create the Metropolitan Transit Authority (MTA) to encompass mass transit and bridges and highways. Nelson ambiguously offered Moses a significant role in the new setup which Moses interpreted as head of Triborough and a position on the board of the MTA. Moses believed he held a trump card that the bondholders would have to approve any change to their bond contract which they would never do without Moses’ approval. The bondholders had agreed that any dispute which arose would be handled in litigation by Chase Bank’s lawyer Thomas Dewey. Moses prepared the Triborough Authority to bring suit. Chase was at that time a private bank owned by the Rockefellers and controlled by David Rockefeller who Moses had worked with for decades. The Rockefeller brothers met at Nelson’s apartment and agreed to a plan. Moses held fire believing Nelson would keep him on at Triborough but on March 1 1968 Triborough went out of business merging into the MTA. Moses was stripped of control of Triborough and offered a consultant’s position at $25,000 per year plus his limousine and driver and secretaries. He was never consulted or given meaningful work again. Moses, at age 79, took the job. Moses lived to the age of 92 dying in 1981 on Long Island.

Uncontrollable Corporate Megalomania Google, Facebook, etc.

Wednesday, March 27th, 2019

The Age of Surveillance Capitalism; The Fight for a Human Future at the New Frontier of Power, Shoshana Zuboff, 2018

This is a look at the transformation of Google, Facebook, and others from their initial mission to serve their users to the exploitation of those users by selling their privacy to the highest bidder to achieve enormous personal wealth and power.

In her personal experience Zuboff describes sitting as a nineteen year old in the back of a seminar where Thomas Friedman (founder of the Chicago school of economics) instructs doctoral students who will soon run the economy of Chile after the CIA inspired coup and assassination of elected President Salvador Allende in favor of the Pinochet military dictatorship in 1973.

Thomas Friedman and Friedrich Hayek, economics as ideology and their opposite John Maynard Keynes

Zuboff also briefly alludes to debates she had at Harvard with the aging and discredited behaviorist BF Skinner, author of the novel Walden Two. She spends time in the book discussing Alex Pentland of the MIT media lab who she considers a BF Skinner intellectual successor armed with the tools Skinner could only dream of having and using. She calls Pentland a high priest of Surveillance capitalism. Pentland helps provide the intellectual justification that legitimizes instrumentarian (a new word coined by Zuboff) practices. Pentland never mentions Skinner in his work but his behavior modification goals are the same.
BF Skinner at Harvard and Alex Pentland of MIT Media Lab

Zuboff explains why user consent through opt-in or opt-out has been rendered meaningless under Surveillance Capitalism. To read a single contract agreement in detail might take hours and with third parties almost always involved there may be 1,000 individual contracts to read and digest. If you opt out surveillance capitalists will threaten to downgrade your system and will probably still collect and distribute your information without your permission. You have no way to find out what they are doing. If you ask for the information collected, as a Belgium privacy attorney attempted to do of Google, they are unable to retrieve it for you. It is buried somewhere in a second tier of automatic computation technology. The user has no way of determining what software is currently running on your computers or smart phones or what peripherals like GPS, cameras, microphones, etc. have been usurped for external control. To add insult to injury, you will pay for the transmission bandwidth they secretly steal from you to illegally surveil your activities. If you have installed smart home devices like thermostats or security systems you have no way to know what these smart devices are observing and collecting. Your car driving behavior can be monitored with bad insurance consequences, not only by your new car, but by your smart phone. Your new car can be disabled by the finance company and its GPS location sent to the REPO people to come get your car. Then imagine advances in voice and face recognition and you start to get the terrifying idea. Then imagine all of this surveillance capability in the hands of a non democratic government like China. You can’t do anything at all without the state monitoring (and influencing) your behavior.

What does older capitalistic history teach us?

It (government interventions into free market capitalism) appeared in the trust busting, civil society, and legislative reforms of the Progressive Era. Later it was elaborated in the legislative, judicial, social, and tax initiatives of the New Deal and the institutionalization of Keynesian economic during the post-World War II era; labor market, tax, and social welfare policies that ultimately increased economic and social equality.

In fact the Bretton Woods conference of 1944 created a new world economic order based on a US-centric dollar based fixed exchange rate system, created the IMF and World Bank, and was a complete repudiation of Keynesian economics. This system worked only so long as the US remained the dominant manufacturing power, creating large trade surpluses that the US could recycle as investments. When trade reversed around 1970 and the US became a trade debtor nation, the American economy shifted from manufacture to financialization, convincing trade creditors to invest their surpluses with Wall Street, who kept inventing new and innovative ways to use the mountains of cash suddenly at their disposal. The Neoliberal contribution to all this was the erosion of government regulation of corporations and the use of IMF and Worldbank loans to vulnerable nations and colonies whose defaults resulted in the massive transfers of state owned commons into private hands like Wall Street hedge funds. See Greek Spring by Yanis Varoufakis. None of this history is clear from her book. For an excellent introduction to macro economics from Bretton Woods to the present see Yanis Varoufakis’ minotaur book. The breakup of the Soviet Union in the 1990’s was another opportunity for the Neoliberals who descended on the former Soviet Union members with plans to transfer all public commons into private hands. The result was to create a new class of asset owners in each country that more resembled a mafia than capitalists. We remain in this condition to this day. The massive and fundamental shift of the American economy from manufacture to financialization is not mentioned by Zuboff.

To her credit, Zuboff does site French economist Thomas Piketty’s monumental work on wealth and income distribution in England and America from the eighteenth century to the present.

A market economy…if left to itself…contains powerful forces of divergence, which are potentially threatening to democratic societies and to the values of social justice on which they are based…If we are to regain control of capital, we must bet everything on democracy.

Our present economic system has been accurately described as corporate welfare with massive government subsidies for agriculture, energy, extraction, and other industries. Hayek and Friedman would turn over in their graves if they knew where American capitalism has taken us. This trend reached its pinnacle (we only hope) with the Bush-Obama massive bailouts of the financial institutions and Zuboff’s beloved General Motors after the sub-prime financial scandal-crisis of 2008. Shiela Bair (W appointee to head the FDIC) was fully prepared to break up the big banks starting with Citibank using her FDIC authorization and charter, but was prevented from doing so by Tim Geithner who was shockingly appointed by Obama as his treasury secretary. See more at Scamming a President. No meaningful reforms were enacted to prevent a recurrence of this collapse and we anxiously await the next iteration.

Zuboff mentions Rand Corporation futurist Herman Kahn’s 1967 book The Year 2000, where the author anticipates the future possibilities of computer power intrusions into our lives characterizing this as “a twenty-first century nightmare”. She says Kahn was the model for the character of Dr. Strangelove in Stanley Kubrick’s 1964 movie. No!

Herman Kahn wrote an earlier book published in 1960 “On Thermonuclear War” where Kahn speculated that it would be possible to create a “Doomsday Machine“; a vast collection of nuclear weapons connected to an automated trigger mechanism that, upon detection of a threat and without any human intervention, would initiate nuclear holocaust. Most experts at the time believed such a system could not be built. In fact the Soviet Union built just such a secret machine called The Dead Hand whose current status is unknown. See Daniel Ellsberg’s Doomsday Machine book. Kahn’s 1960 book was the inspiration for Kubrick’s movie where the Soviet Union have successfully built a doomsday machine but have kept it secret from the US. The character Dr. Strangelove is a caricature of a former Nazi scientist, not Kahn. Kahn was a consultant on the movie.

Zuboff uses a discussion of totalitarianism to illustrate how slow academics and intellectuals are to understand completely sui generis unprecedented developments. Our understanding of totalitarianism came into focus only in the 1960’s, well after the demise of European Fascism and dramatic changes following Stalin’s reign of terror. She points out that between 1930 and 1953 Stalin appears ten times on the cover of Time magazine. She leaves out any discussion of Mao’s China, but China emerges later in her discussion of State uses of surveillance capitalism.

She introduces and coins Instrumentarian power as a contrast to totalitarian power.

Instumentarian power moves differently and toward an opposite horizon. Totalitarianism operated through the means of violence, but intrumentarian power operates through the means of behavioral modification, and this is where our focus must shift. Intrumentarian power has no interest in our souls or any principal to instruct. There is no training or transformation for spiritual salvation, no ideology against which to judge our actions. It does not demand possession of each person from the inside out. It has no interest in exterminating or disfiguring our bodies and minds in the name of pure devotion. It welcomes data on the behavior of our blood and shit, but it has no interest in soiling itself with our excretions. It has no appetite for our grief, pain, or terror, although it eagerly welcomes the behavioral surplus that leaches from our anguish. It is profoundly and infinitely indifferent to our meanings and motives. Trained on measurable action, it only cares that whatever we do is accessible to its ever-evolving operations of rendition, calculation, modification, monetization, and control.

Deng Xiaoping Architect of Democracy Free Capitalism in China

Instrumentarian power in the hands of non democratic States like China is almost beyond comprehension in its potential power. Yanis Voroufakis describes Singapore under Lee Kuan Yew and his disciple Deng Xiaoping who transformed China’s economy using the Singapore model as democracy free capitalism.

Voroufakis primary point in Voroufakis Ted talk is that Western capitalist corporations are hording massive mountains of profit, investing only in corporate consolidation, and are in direct contradictions of Keynesian economics to recycle surpluses to level the cycles of boom and bust. These uninvested surplus mountains may doom democracy and life as we know it.

Industrial capitalism depended upon the exploitation and control of nature, with catastrophic consequences that we only now recognize. Surveillance capitalism…depends instead upon the exploitation and control of human nature. The market reduces us to our behavior, transformed into another fictional commodity and packaged for others’ consumption.

Surveillance capitalism’s successful claims to freedom and knowledge, its structural independence from people, its collectivist ambitions, and the radical indifference that is necessitated, enable, and sustained by all three now propel us toward a society in which capitalism does not function as a means to inclusive economic or political institutions. Instead, surveillance capitalism must be reckoned as a profoundly antidemocratic social force.

As Thomas Paine noted in the Eighteenth century; “…a body of men holding themselves accountable to nobody, ought not to be trusted by any body.”

Surveillance capitalism’s antidemocratic and anti egalitarian juggernaut is best described as a market-driven coup from above. It is not a coup d’etat in the classic sense but rather a coup de gens: an overthrow of the people concealed as a technological Trojan horse that is Big Other…It is a form of tyranny that feeds on people but is not of the people.

The young people we have considered…are the spirits of Christmas yet to come. They live on the frontier of a new form of power that declares the end of a human future, with its antique allegiances to individuals, democracy, and the human agency necessary for moral judgment. Should we awaken from distraction, resignation, and psychic numbing…it is a future that we may still avert.

Zuboff starts her book with the assertion that Surveillance capitalism cannot be controlled or contained through the lens of antitrust or privacy. She mentions the EU regulation the General Data Protection Regulation (GDPR) which only went into effect in May 2018 and only within the EU. It is too early to see if this ambitious effort will have any impact as it works its ways through EU regulators and the courts. She appears sceptical. For the Guardian’s take on GDPR. So what do we do?

If democracy is to be replenished in the coming decades, it is up to us to rekindle the sense of outrage and loss over what is being taken from us. In this I do not mean only our “personal information”. What is at stake here is the human expectation of sovereignty over one’s own life and authorship of one’s own experience. What is at stake is the inward experience from which we form the will to will and the public spaces to act on that will…That Surveillance capitalism has usurped so many of our rights in these domains is a scandalous abuse of digital capabilities and their once grand promise to democratize knowledge and meet our thwarted needs for effective life.

For more on the despotic behavior of Facebook and Google

Facebook, Tool for the Despots

Monday, October 29th, 2018

Anti-Social Media; How Facebook Disconnects Us and Undermines Democracy, Siva Vaidhyanathan, 2018

Even when we post and share demonstrably false stories and claims we do so to declare our affiliation, to assert that our social bonds mean more to us than the question of truth…How do we train billions of people to value truth over their cultural membership when the question of truth holds little at stake for them and the question of social membership holds so much?

The social aspect of social media trumps any effort to build or spread civic responsibility into the system. Facebook is a pleasure machine. The pleasure is light and fleeting. That’s what keeps us coming back. But Facebook is also an anxiety machine, an anger machine, and a resentment machine…but the resentment is deep and durable.

Facebook attracts us, hooks us, encourages us to declare our affiliations, divides us, and tracks every single interaction along the way. Facebook’s surveillance system is part of its pleasure system. They cannot be severed.

The influence of Facebook on the violent attacks in Charlottesville is difficult to trace but important to address. I live in a nation that no longer seems able to filter out of its public sphere the most odious calls for an ethnically pure state, that has a major political party that can no longer resist fringe elements, and has a media ecosystem that rewards the most alarming and spectacular claims and is now willing to take seriously the claims of white supremacists. One man sympathetic to white supremacists even assumed the presidency in 2017 because the established filters all failed. Facebook did not generate these problems. It did amplify and normalize them by scrambling our senses of truth and justice and fracturing a sense of collective national fate. Mostly Facebook makes it hard to think.

Between Google and Facebook, we have witnessed a global concentration of wealth and power not seen since the British and Dutch East India Companies ruled vast territories, millions of people, and the most valuable trade routes. Remarkably, and unlike the East India Companies, Google and Facebook have achieved this feat nonviolently and with only tangential state support…They did all this by inviting us in, tricking us into allowing them to make us their means to wealth and power, distilling our activities and identities into data, and launching a major ideological movement – what Neil Postman described yet only predicted in 1992: technopoly.

Postman: “It (technopoly) consists of the deification of technology, which means that the culture seeks it authorization in technology, finds its satisfaction in technology, and takes its orders from technology.” This ideological domination demands a sacrifice of all previously stable belief systems. So trust in institutions, ancient or modern, erodes. Local identities and traditions are rendered valueless except as raw material for remixes, parody, tourism, tapestries, and games rather than expressions of deep human narratives and connections.

Postman: “Technopoly eliminates alternatives to itself in precisely the way Aldous Huxley outlined in Brave New World. It does not make them illegal. It does not make them immoral. It does not even make them unpopular. It makes them invisible and therefore irrelevant.” If it didn’t happen on Facebook, it didn’t happen.

The problem is, Facebook by 2013 already was so dominant that for may people absence from Facebook meant invisibility

The most fruitful response to the problems that Facebook creates, reveals, or amplifies would be to reinvest and strengthen institutions that generate deep, meaningful knowledge. We must support scientific communities, universities, libraries, and museums around the world. We must foster deliberation through publically funded better journalism, forums for debate, and commissions that could harness expertise to address our most pressing challenges.

Modi Duterte Trump

The book is very good on the exploitation of Facebook by despots such as Rodrigo Duterte in the Philippines, and Narendra Modi in India. He talks about the efforts of the Trump campaign to target potential Hillary voters with negative information, such as highlighting the Bill Clinton record of criminalizing crack cocaine, black incarcerations, and Hilary comments on blacks. These efforts probably further suppressed Hillary’s votes in key states like Wisconsin, Michigan, and Pennsylvania.

In the meantime, Vaidhyanathan continues to use Facebook.

Greenwald almost blows the biggest story of his life

Sunday, November 9th, 2014

No Place to Hide; Edward Snowden, the NSA, and the U.S. Surveillance State, Glenn Greenwald, 2014
This book seems to be a collection of five articles. For this reader, Part One, Ten Days in Hong Kong, is the most interesting.
On Dec 1 2012 (The first published article, featuring the FISA Verizon order appeared in the Guardian on June 5,2013, more than five months later.) Glenn Greenwald (GG) receives an email from “Cincinnatus” saying he has important documents to share but GG must first install PGP (Pretty Good Privacy) encryption on his computer. GG ignores the email. Three days later he receives another email from C asking him to confirm he received the first email. GG immediately says he got it and later that day he receives an email with detailed instructions for installing the encryption program. GG does nothing for seven weeks. He thinks encryption would be useful for his work so he emails C on Jan 28, 2013 saying he will get someone to help him install the encryption. GG still does nothing and C steps up his efforts, producing a ten minute video “PGP for Journalists” on how to install the program. GG does nothing.
PGP Public Key Encryption public-key-encryption-example

On April 18, GG flew to New York to give some talks. On landing GG receives an email from Laura Poitras (LP) the documentary filmmaker saying she needs to meet him in person the next time he is in New York. GG had written an article detailing all the times Poitras was detained at US airports and her equipment seized. After the article the harassment at the airports stopped. GG arranged to meet LP at a restaurant in Yonkers. She changed tables several times at the restaurant and told GG to remove the batteries from his cellphone. She then showed GG a couple of emails she received asking LP to work with GG. GG thinks the sender is real but they do nothing and GG returns to Brazil.

On May 11 GG receives an email from a technical expert he and LP had worked with in the past asking GG if he is ready to install the PGP encryption. He responded yes and was told to expect a Fedex package in Rio de Janeiro. The package was held in customs for a week enhancing the paranoia. The day after the package finally arrives, GG receives an email from LP saying they need urgently to talk but only via OTR chat. GG figures the source must have sent LP some documents. LP is far less a technophobe than GG so must have installed PGP. GG had used OTR in the past and now managed to install it and sign up for an account. LP tells GG they need to go to Hong Kong immediately to meet the source. GG thinks the source has to be guy in his late fifties with a thirty year career with the NSA living somewhere along the Washington beltway. Hong Kong makes no sense.

The source was getting upset with LP and GG delays and was discussing involving the Washington Post. That finally got GG into gear. The source agreed to chat over OTR and GG assured him he was committed to the story but he still can’t make sense of Hong Kong. LP had shared some PRISM material with the Washington Post and they responded with an army of lawyers and foot dragging, greatly worrying the source. GG asked to see some documents before he came to Hong Kong and the source patiently walked him keystroke at a time through the PGP installation process. GG was embarrassed by his lack of proficiency but the source assured him he had lots of free time then. Once installed, the source sent GG about 25 documents, the tip of the iceberg.

The documents convinced GG that he needed to go to Hong Kong immediately and that He would need major institutional support to get this material out. GG had been working at the Guardian for only nine months but had little contact with their editorial staff. GG immediately Skyped Janine Gibson British editor in chief of the US edition in New York gushing about the material. Gibson told GG to get off Skype immediately. GG flew to New York and agreed to meet LP in New York. GG arrived in NY May 31. GG and LP book a non stop flight from New York to Hong Kong but then Gibson drops that the Guardian insists on involving long time Guardian journalist Ewen MacAskill who will fly with them to Hong Kong. LP is furious and GG doesn’t know their minder MacAskill. LP was afraid a third person might freak the source but GG understood that the Guardian wanted a long time company man on the scene. LP relents but only if MacAskill stays away from the source until she and GG are ready to introduce him.

Snowden Journalists MacAskill, Greenwald, and Poitras MacAskill Greenwald and Poitras

LP insists that GG buy a new air gapped (never connected to the Internet) laptop before they leave. As they drive to the airport LP gives GG a tutorial on secure computer systems and hands him a thumb drive (with the full collection of documents). For the 16 hours of the flight GG can’t stop reading. He is amazed by the level of organization and pre thought put into the document archive. He immediately locates the FISA Verizon order that all domestic phone metadata records must be handed to the NSA.

We now enter the realm so well captured in the 1997 Norwegian movie Insomnia where the crime detective sent north of the Arctic Circle to the land of midnight sun finds he can’t sleep. GG doesn’t sleep for the next 10 days. When he is about to collapse, he pops a pill and drops off for a couple hours and is then back at work. Part of this is because constant communication with New York Guardian staff is necessary but mostly that he is too excited after chasing the NSA story for years, proof of the whole horrible reality and scope of their surveillance activities has fallen in his lap.
Snowden’s Hideaway MIRA mira room

GG wants to meet the source immediately but LP thinks that would look suspicious so they wait til tomorrow. The source gives LP elaborate spy trade-craft instructions of how and where to meet. GG is expecting a hideaway but instead they go to a Kowloon five star hotel. They are instructed to find a meeting room with an alligator (not real) on the floor where at a precise time they are to wait for exactly 2 minutes. If the source doesn’t appear they are to leave making sure they are not being tailed. Twenty minutes later they are to return to the alligator for exactly 2 more minutes. If the source does arrive they will recognize him carrying a Rubiks cube (GG laughs). GG is expecting an older very senior Washington bureaucrat and is shocked when a young kid (Snowden was 29 but looks younger in a tee shirt jeans and nerd glasses) shows up carrying a Rubiks cube. GG thinks this kid can’t possibly have had access to all those top secret documents. But they are now committed so follow Snowden to his room.

GG was once a practicing lawyer and treats the first meeting with Snowden as a legal deposition where the lawyer tries to trip up a witness forced to answer all questions. Snowden is calm, articulate, very organized and thoughtful and GG can’t find any holes in his amazing story. GG can’t contain his excitement. LP films the deposition. They plan the first release of articles and the time when Snowden wants to reveal himself as the whistle-blower.

The first article will be the FISA Verizon order and the Guardian plans to tell the government ahead of publication as has become standard practice. Gibson calls the government the morning of planned publication and then total silence. At 3PM an army of White House, NSA and other officials call Gibson back. They want to meet in about a week to explain why the Guardian shouldn’t run the story, Gibson says they have until she hangs up to convince the Guardian. The government tries bullying and threats. They don’t work. Their reasons are totally lame and Gibson decides to publish. London and the lawyers agree. At 5:40 May 5, 2013 the story goes live. GG spends the rest of the day and night on the phone with interviews, then starts the next cycle for the PRISM story where nine internet providers are giving the NSA all their data.

The same cycle between the Guardian and government repeats but this time someone in government give lap dog Washington Post a heads up and they rush to post the story they have been holding without publication. GG reads the Post story and realizes they haven’t even asked the internet services for comment. The Guardian story which goes live 10 minutes after the Post’s includes denials from all nine providers that they were cooperating with the government. GG figures the providers and NSA can fight out their denials in public. GG suddenly remembers Cincinnatus and sends an email to thank him for suggesting the PGP program. Snowden immediately emails back you are welcome. GG has never connected Cincinnatus to Snowden. Several more articles follow.

Finally the time arrives to announce the identity of the leaker who the NSA has been unable to identify. LP wants to include a video of Snowden but can’t use the disjointed GG deposition. LP writes down a list of 20 questions and asks MacAskil, who everyone has come to trust, to read the questions while she films. The result is the 12 minute video we have all seen introducing us to Edward Snowden for the first time.

About the time of this release a Guardian lawyer is sent to Hong Kong who asks what is being done to protect Snowden once his identity is released. GG and LP and even Snowden seem to have given this little thought. As the last story began breaking an acquaintance of GG’s, who lives in Hong Kong, called GG pointing out that everyone would now be looking for Snowden in Hong Kong and asking if they didn’t need some qualified Hong Kong lawyers. He suggested two human rights specialists with good contacts in the Hong Kong government. The Guardian lawyer quickly vetted them via the Internet and decided they were good choices. GG agrees to meet and the friend tells him they are already in the Hotel lobby. When GG opens his door a swarm of reporters are waiting. They follow him into the elevator and GG finds still more reporters waiting in the lobby. He decides to give a short impromptu interview and within 15 minutes most reporter have left to file their stories.

GG was finally able to locate his friend and the lawyers. They suggested the lawyers accompany Snowden to a UN mission and from there to a safe house. But how to get Snowden out of his five star Hotel? Snowden is now ahead of them with a prepared disguise and he makes his way safely to an exit where the lawyers are waiting. So that is how the biggest story of GG’s life got told.

Also featuring is GGs Brazilian partner David Miranda who comes across as a wise, intuitive advisor without whom GG would be even more indecisive. It is Miranda that first concludes the source is for real. He advises GG to pressure the Guardian so the story gets out there. Later, he becomes a story himself when LP and GG decide to use him to courier Snowden material from Berlin, where LP lives to Rio de Janiero where GG lives. It never occurs to either that Miranda is in danger as he transits the London airport. Miranda is stopped, his possessions seized and he is threatened and bullied for nine full hours under a British terror provision. Under pressure from the Guardian and Brazilian diplomats, Miranda was released to continue his journey after the full nine hours allowed under this dangerous law. Miranda arrived in Brazil a returning hero, but very frightened. Presumably the British government (or the US) has the thumb drive he was carrying but GG doesn’t say.

Snowden prepared thumb drives for both LP and GG with all documents. He also prepared a separate thumb drive for the Guardian containing the documents pertaining to the British GCHQ activities. British authorities later descended on Guardian London offices demanding all Snowden documents. The Guardian refused but agreed to let the GCHQ supervise and observe the destruction of all computers at the Guardian. Before this happened, the GCHQ materials were forwarded to the New York Times where they must be sitting in limbo.

Snowden encrypted the documents and assured GG and LP that neither China nor Russia would have the capability to break the encryption. This reader assumes the US could break the encryption but only if they dedicated some super computers for several years to the effort. Even if the Miranda carried thumb drive is in either British or US hands, it is unlikely any attempt will be made to decrypt the material. It is likely that the NSA is still unaware of the full extent of the documents in the archive unless all are now located in the new Intercept archive.

One of the big lessons learned by GG in this adventure is the absolute necessity for investigative journalists to use encrypted communications. Their work will be impossible in the future without these tools. GG further advises all activists and any lawyer engaged with litigation against the government to encrypt all their communications. He uses the example of David Petraeus to illustrate how easy it is to destroy a career if unencrypted emails fall into the wrong hands.
nsa-yes-we-scan nsa cartoon

Part twoCollect it All” highlights documents emphasizing the worldwide and universal scope of NSA ambitions.

Part three makes a strong case for the harm that Surveillance causes in a democracy. His strongest point comes in his conclusion. The public sector operates in total darkness and secrecy and privacy while the private sector is subjected to total surveillance of their activities with no place to hide. Somehow our system has become completely inverted. Snowden had expected Obama to reign in the illegal abuses and held off his release until it was clear things were worse than before.
obama whistleblowers

Part Four is a discussion of the forth estate much of which (the corporate media) have become mere tools of the corporate state. GG was shocked that media personalities were at the forefront of attacks suggesting GG be prosecuted for his reporting. This is new. News organizations used to come immediately and strongly to the defense of journalists under Government attack. They no longer do this. The Obama administration has felt free to conduct open warfare against whistle blowers and their reporters who are trying to do investigative reporting as guaranteed in the Constitution. The Guardian’s own lawyers suggested GG should avoid returning to the US and repeatedly failed to get assurances from the US government that GG would not be arrested and prosecuted should he return.
David Gregory shocks Glenn Greenwald gregory arrest greenwald
David Gregory Calls for Greenwald to be Arrested for Snowden Reporting Live on Meet the Press.
Seymour Hersh (who broke the My Lai massacre and Abu Ghraib prison abuses stories) suggests that journalism would be greatly improved if about 900 corporate media types were to lose their jobs.

LP has now released her new documentary Citizenfour in a theatrical release. It will doubtless receive Academy Award nominations.

Climate Change and the Death of Capitalism

Thursday, November 6th, 2014

This Changes Everything; Capitalism vs the Climate, Naomi Klein, 2014
Naomi Klein in Vancouver BC. Photo taken by Jeff Chant Naomi Klein

This was supposed to be a book to give hope to those that want to transition from greenhouse emitting fossil fuel consuming that will make the Earth uninhabitable to a world of renewable and sustainable energy. Klein starts by discussing the many studies that show, not only is such a transition possible, but that it can be accomplished with existing technologies and can happen very quickly, well within the time frames necessary to avoid catastrophic climate change. Great, lets get going. In fact Denmark and Germany have transformed large parts of their energy sources to wind and solar more quickly then predicted, so quickly that existing German coal burning power plants are exporting their power to other countries. Unfortunately, the reader starts to feel like cartoon character Charlie Brown. Every time he gets ready to kick the football, Luci (Klein) yanks the ball away and the reader falls flat on his back.
charlie brown lucy football
Klein start with Genesis 1:18 written about 500 B.C.

God blessed them and said to them, “Be fruitful and increase in number; fill the earth and subdue it. Rule over the fish in the sea and the birds in the sky and over every living creature that moves on the ground.

The entire Judea-Christian culture is based on the fundamental notion that the Earth and its resources were created especially for man and man is to rule over them and use them however he wishes without limit. Klein contrasts this to the typical indigenous native view that the Earth provides for all living things but man with his intelligence has a particular responsibility to care for the Earth and all living things in it. Guess which view dominates.
She then gives us a brief history of industrialization which started its unstoppable acceleration with James Watt’s invention of the steam engine in the 18th Century. Our burning of fossil fuels has been accelerating ever since. Most of the carbon in the atmosphere is the responsibility of the oldest large economies.

Klein returns to one of her favorite topics; neoliberalism (see The Shock Doctrine)

Indeed, the three pillars of the neoliberal age – privatization of the public sphere, deregulation of the corporate sector, and the lowering of income and corporate taxes, paid for with cuts to public spending – are each incompatible with many of the actions we must take to bring our emissions to safe levels.

We measure the success of our economies by the growth rate of the national GDP. A recent long term economic study by French economist Thomas Piketty shows that low GDP growth rates and low population growth has been the typical state of large economies from 1700 until 1914 (WWI) and he expects that in the 21st Century we will return to those stable states baring another major catastrophe like global climate change. But today’s capitalism puts enormous pressure on executives to grow grow grow. No wonder they will go to extreme means and measures to achieve this unnatural growth. This form of unsustainable expansive capitalism must change or the Earth will be uninhabitable.

The deregulating Clinton administration and his climate change alarmist VP Al Gore pioneered worldwide trade agreements starting with NAFTA and creating the WTO that have brought into existence a global economy based on industrial agriculture, the search for lowest labor costs, and massive increase in the need to transport the resulting products and food; in other words an explosive increase in fossil fuel consumption. These same trade agreements have been used effectively to block locally generated alternate energy projects. Clinton also introduced the cap and trade carbon system late in the Kyoto talks and Gore pushed the idea through. There is little evidence that cap and trade has done anything to reduce emissions but it has created a world wide derivatives market (think sub prime mortgages) where a company in India is paid a large sum to produce ozone destroying refrigerants banned in most countries. Figure that one out. Carbon credits and derivatives are an open invitation to game the system.

Where is the environmental movement? Big green sold out to the energy companies who use them in PR campaigns to make them appear to support alternate energy sources – but we need a “transition period”. Many of the biggest environmental groups receive most of their funding, some secretly, from big energy. The biggest, The Nature Conservatory, was given 2303 acres in southeast Texas by Mobil in 1995 to provide a preserve for the endangered Attwater prairie chicken. In 1999 the Conservatory put a gas well on the property. This was discovered and reported by the LA Times in 2002 forcing a promise not to drill again but the Conservatory put in an oil well in 2007. Big green – big carbon producer. By the way, the prairie chickens are all gone from the preserve. Guess they don’t like oil drilling. The Sierra Club (setting a few personal scandals aside), Greenpeace, and are exceptions to the sellout.

Attwater Prairie Chicken estimated 60 remain in the wild attwater prairie chicken

What do you do when your fortune and livelihood is dependent on producing a deadly product? Or you are a politician dependent on those producing that deadly product? You engage in magical thinking. Step 1 denial. The midterm election that swept Republicans into control of congress will assure that all environmental and energy committee positions will be filled with climate change deniers. Climate Denier James Inhofe new Senate Environment Chairman The alternative is that you are out of a job. Step 2 green billionaires will buy a solution. Richard Branson promised to use $3 Billion in profits from Virgin to develop alternate fuel sources. He also offered a $25 million prize for the inventor of a carbon sequestration system. Virgin flies more routes than ever, the $3 Billion never materialized and the prize has not been awarded. Brilliant PR campaign though. Gates, Pickens are others who have made some alternate energy noises, remain deeply invested in fossil fuel energy. Step 3 Bio engineer a solution (see Climate Engineering) This is the one where you put a sulphite shield in the stratosphere to simulate the cooling effects of a volcanic eruption. The effects on the climate worldwide are unknowable because you can’t experiment to try it. What is really scary is that Klein admits that if she was desperate enough she might be willing to try it.

Big energy needs to grow and to do so they need to resort to more extreme methods and to extract closer to those more able to fight them, for example attempts to frack natural gas in Ithaca, New York, home to Cornell University – Big mistake. Cornell is the originator of some of the best studies showing how dirty fracking is in the release of methane gas, pollution of water, and earthquakes.

Coal mining in Montana with plans to ship the coal to China ran into the Indian – Cowboy collation with local ranchers joining with native tribes to prevent the hauling of coal over beautiful but dangerous Highway 12, prevented the building of a special rail line and, so far the building of a big port somewhere in the Northwest. Big energy better stay away from the Northwest. Lummi Totem Kwel Hoy (We Draw the Line) traveled 1300 km to the Montana coal site. Kwel Hoy has been planted near Vancouver looking out at the Pacific.
Kwel Hoy at proposed coal port in Bellingham kwel hoy bellingham Kwel Hoy visits Seattle kwel hoy seattle

Klein is Canadian with a special interest and concern with the Alberta tar sands. She is on the board of directors of Her big hopes here are that the pipelines needed to move the oil can be stopped (choke points like the Montana coal routes). Central to these efforts are native treaty rights and a series of recent court decisions upholding the native treaty rights. It seems, at least in Canada, that the native population never gave up their rights to much of Canada beyond the reservations but agreed to share the land. How to you share something that somebody else destroyed. The liabilities for the Canadian government are in the Trillions. But when natives asked the person responsible for Canada’s AAA credit rating how this rating can be maintained in face of this liability, the individual responded basically you and what army are going to enforce those reparations? Can the native treaties be used to stop the tar sands pipelines or coal routes? We don’t know.
Alberta Tar Sands before-after-en

Klein talks about the growing divestment movement and hopes it is joined by an equally robust reinvestment in alternative energy sources. What is clear is that most of the stock value of energy companies relies on energy reserves and that extraction and use of those reserves will make the Earth uninhabitable. You can deny the science maybe but Mother Nature is non negotiable. There is now a group of divestment investors whose primary rationale is that values dependent on unusable reserves are not real and energy stock prices must crash at some point. Energy companies won’t continue to be profitable and the window of opportunity is short to use energy profits for reinvestment in alternate energy.

So lets review our situation. The dominant world culture believes that the Earth was created for us to exploit. Capitalism must grow or perish. Globalism requires exploitation of the cheapest resources wherever they are found, prevents regulation of trade, and greatly expands energy needs. Big agriculture requires massive chemical inputs and massive transport and is unsustainable. The climate gets more extreme and unpredictable and climate disasters are vastly more expensive now. Worldwide, politicians are largely neoliberal favoring austerity measures to further their agenda and dependent on corporations for their survival. Courts are largely manned by pro corporate judges. The handful of billionaires that own half the world’s wealth are insensitive to other’s suffering to the point of allowing entire nations to be drowned in the rising seas believing their wealth will protect them from anything. Klein says you can buy an apartment in NYC where you can live underwater like in a submarine if necessary. I wonder what you eat in your submarine. Most of the world’s population won’t be able to grow food or have access to clean water.

Klein is clear that a broad based worldwide grass roots populist movement is the only thing that has a chance to change things. We know the alternative is possible. We just don’t know how to force the changes needed to get there.

Put another way, only mass social movements can save us now. Because we know where the current system, left unchecked, is headed. We also know, I would add, how that system will deal with the reality of serial climate-related disasters: with profiteering and escalating barbarism to segregate the losers from the winners. To arrive at that dystopia, all we need to do is keep barreling down the road we are on. The only remaining variable is whether some countervailing power will emerge to block the road, and simultaneously clear some alternate pathways to destinations that are safer. If that happens, well, it changes everything.

Hence the title of the book. Hope you feel better.

High Frequency Extortion

Wednesday, June 11th, 2014

Flash Boys, A Wall Street Revolt, Michael Lewis, 2014

This book is about the fast changing character of market exchanges, the big banks, and their collusion with high frequency traders that have made trading into a totally opaque dive into the shark tank. The book was rushed to market with incorrect words, syntax, and spelling problems, but it is still worth reading.

Wall street has undergone a technological revolution into electronic trading led first by NASDAQ . A few years ago there were three stock exchanges plus the Chicago futures market where an individual stock could be listed on only one exchange. Now there are countless exchanges and stocks can be traded on any of them. After September 11, 2001 there was an exodus of the markets from Manhattan to the suburbs of New Jersey. In 2007 the SEC implemented Reg NMS which required brokers to find the best market price for investors. This new regulation was in response to a growing epidemic of front running in the markets, but its implementation actually increased the opportunity for front running because brokers were required to pass their orders to more exchanges leading to more opportunities to front run. Wikipedia defines and explains front running as follows:

Front running is the illegal practice of a stockbroker executing orders on a security for its own account while taking advantage of advance knowledge of pending orders from its customers. When orders previously submitted by its customers will predictably affect the price of the security, purchasing first for its own account gives the broker an unfair advantage, since it can expect to close out its position at a profit based on the new price level. The front running broker either buys for his own account (before filling customer buy orders that drive up the price), or sells (where the broker sells for its own account, before filling customer sell orders that drive down the price).

As if things were not complicated enough many financial institutions have created something called dark (or black) pool as a total alternative to the mess with the public exchanges. Again Wikipedia defines a dark pool as:

dark poolA great white shark … look out for one near Britain soon.

In finance, a dark pool (also black pool) is a private forum for trading securities that is not openly available to the public. Liquidity on these markets is called dark pool liquidity.The bulk of dark pool trades represent large trades by financial institutions that are offered away from public exchanges like the New York Stock Exchange and the NASDAQ, so that such trades remain confidential and outside the purview of the general investing public. The fragmentation of financial trading venues and electronic trading has allowed dark pools to be created, and they are normally accessed through crossing networks or directly among market participants via private contractual arrangements.

One of the main advantages for institutional investors in using dark pools is for buying or selling large blocks of securities without showing their hand to others and thus avoiding market impact as neither the size of the trade nor the identity are revealed until the trade is filled. However, it also means that some market participants are disadvantaged as they cannot see the trades before they are executed; prices are agreed upon by participants in the dark pools, so the market becomes no longer transparent.

The main focus of this book is high frequency trading defined again in Wikipedia:

hft chart

High-frequency trading (HFT) is a type of algorithmic trading, specifically the use of sophisticated technological tools and computer algorithms to rapidly trade securities. HFT uses proprietary trading strategies carried out by computers to move in and out of positions in seconds or fractions of a second.

As of 2009, studies suggested HFT firms accounted for 60-73% of all US equity trading volume, with that number falling to approximately 50% in 2012.

High-frequency traders move in and out of short-term positions aiming to capture sometimes just a fraction of a cent in profit on every trade. HFT firms do not employ significant leverage, accumulate positions or hold their portfolios overnight. HFT firms make up the low margins with incredible high volumes of tradings, frequently numbering in the millions.

HFT may cause new types of serious risks and dangers to the financial system. Algorithmic and HFT were both found to have contributed to volatility in the May 6, 2010 Flash Crash, when high-frequency liquidity providers rapidly withdrew from the market.

High Frequency traders trade with perfect information and their speed advantage assures that their trades incur no risk of loss. HDTs never lose money unless their algorithms or machines blow up.

Katsayama with Lewis katsayama lewis

Personalizing this mess, Lewis focuses on Brad Katsuyama a young trader at the Royal Bank of Canada who, in 2006 noticed that whenever he placed an order, the price instantly changed. Welcome to the brave new world of trading. What Brad discovers is that HFT and other financial institutions act on his orders before the actual traders can do so. These leaches co locate their equipment with the exchanges and pay fortunes for fast communications links. To gather information they troll tiny orders for a wide variety of stocks and when these tiny orders get a nibble they determine by the stock involved and the trader that this may be a part of a large trade and they rush throughout the exchanges to beat the traders to the stocks being offered. Once owned the front runners can change the price and sell them back.

Katsuyama eventually leaves RBC to start his own “honest” exchange, IEX. The trick is to ensure that his exchange IEX support only the few most common trading types and to guarantee that all connections to IEX are slow enough to prevent front running. If you trade exclusively on IEX, HFT and other financial institutions cannot front run your orders. IEX is new and its survival and success were unknown at publication time. Goldman Sachs placed its first large order on IEX on Dec 19, 2013 which IEX took as a very hopeful sign. Because stocks seldom trade exclusively on IEX, HFT and other financial institutions systematically troll IEX for information that they can exploit on other exchanges. Life goes on as usual.

Sergey Aleynikov and his attorney Kevin Marino serge and kevin marino

Lewis includes the side story of Sergey Aleynikov charged by Goldman Sachs with stealing proprietary software when he left the company. Sergey was acquitted on appeal but, for this reader, the interesting details concerned the use of open source software defined again by Wikipedia:

Open-source software (OSS) is computer software with its source code made available and licensed with a license in which the copyright holder provides the rights to study, change and distribute the software to anyone and for any purpose. Open-source software is very often developed in a public, collaborative manner. Open-source software is the most prominent example of open-source development and often compared to (technically defined) user-generated content or (legally defined) open-content movements.

Open source software is often used by developers to shorten their development time and to produce better software. The trick is to find the right software on the internet that can be modified for the user’s purposes. Sergey’s stolen software was modified open source software that, according to the license of its use must remain open and the modifications made available to the public open source community. Goldman Sachs removed the license notice from the software so it was actually Goldman Sachs, not Sergey who illegally stole the software.

Internet as Monopolistic Paradise

Monday, May 20th, 2013

Digital Disconnect; How capitalism is turning the internet against democracy, Robert W. McChesney, 2013

This book is really depressing. If you are at all suicidal you may want to pass this one up. Mercifully, the book is relatively short. About half the book is given to the death of the forth estate, journalism. McChesney attributes this death, not to the internet, but to the media “consolidation” that preceded the public introduction of the internet. Once a handful of huge corporations got control of newspapers, television stations, and cable operators, they slashed costs, fired the journalists and killed journalism. He estimates that 85% of what passes for news on television and in newspapers and magazines are unattributed press releases from corporations and the government. No one has the staff to fact check or even edit these pieces, rendering the “news” organizations pure distribution channels for the corporation and government, i.e. propaganda arms. The absence of journalism allows unparalleled levels of corruption and scandal to go unreported and unknown by the public. The corporations and government both enjoy operating with complete impunity and secrecy. Add to this Obama’s acceleration of classification of documents and his war on whistle blowers and you have a prescription for producing one of the most ignorant publics in the world.

Wasn’t the internet supposed to give us better journalism by making production and distribution of news free? For 150 years journalism has been supported by an advertising model where sponsors were willing to pay to have their ads appear in targeted magazines, newspapers, and news broadcasts. A funny thing happened with the introduction of the internet. As late as 2000 Google had no idea how it was going to monetize its search service and make Google profitable. For Facebook the date of this discussion was much later. The answer for both was to collect personal information from their customers, give that information to corporate (and government) touts who would pay to have their ads or infomercials delivered to a targeted audience of one. The touts proved to be total agnostics about where their increasingly intrusive information appeared (porn sites or news sites) so long as the target met the appropriate (secret) criteria. Advertisers or propagandists no longer needed to subsidize journalism and journalists today have no viable means to support themselves.

McChesney documents that European countries use public subsidies to support journalism with no apparent cost to democratic government. Germany, followed by Scandinavia have the highest levels of subsidy and are among the most economically egalitarian in the world. With corporate control of government, public subsidy of journalism has no chance in this country. The US used to subsidize news distribution via low postal rates for delivery of newspapers and magazines. McChesney estimates that the equivalent government subsidy in today’s dollars would amount to $35 billion annually, enough to support considerable internet journalism. Instead the government today spends $5 billion a year on defense public relations.

McChesney spends some time documenting the unprecedented concentration of wealth in this country. He concludes that the secret to accumulating wealth is monopoly, the elimination of all competition. 40% of Americans have only one choice for broadband internet access. A sizable percentage of Americans have no broadband access at all available because the controlling companies have deemed them insufficiently profitable to serve (too poor or too remote). In the early days of electricity and telephones, the government, through subsidies and regulation, made sure almost everyone who wanted it had access to affordable power and phones regardless of where they lived. Today, a few enlightened small municipalities unserviced by the giants have built their own broadband networks. In reaction, ALEC inspired legislation has been passed in 19 states to make community broadband illegal. What a country. The giants have also been allowed to monopolize the public airwaves often warehousing the spectrum with no use. Television broadcasters increasingly move popular broadcasts (sports and entertainment) to their cable subsidiaries or to satellite providers. A large portion of public airways broadcasting today are paid advertisements with no content whatever. And those are the public’s airwaves.

Far from promoting innovation, the monopoly giant corporation is best at suppressing innovation. Television was delayed at least 20 years by American corporations (RCA). Likewise DSL was invented by BellCore in 1988 but it was 20 years before DSL found its way to our house via baby bell Qwest. So much for innovation. Our cell networks are at least a generation behind the rest of the world and provide lousy service at astronomical public cost. We live in the heart of Phoenix and get no usable cellular signal from any carrier at our house so we use IP voice communication over DSL broadband. You don’t even own the right to use the cell phone you paid for on any other service. This restriction on your own property’s use might be challenged in court but don’t hold your breath. If you unlock your own cell phone today you may be breaking the law.

McChesney also spends time on copyrights that never expire and patents that seem endlessly extendable. In addition to corporate consolidation and bigness, copyrights and patents have the become the tool of choice for corporations to preserve their monopoly. Originally intended to protect individual creators, patents and copyrights have now become the exclusive property of the big corporation. Coogle recently acquired Motorola’s moribund cell phone division for 12.5 billion dollars, not because Google wanted to build cell phones (although they may) but for Motorola Mobility’s 17,000 cell phone related patents. Now Google can hold its own in the cutthroat legal patent battles for the mobile phone market.

Speaking of cell phones, one wag has suggested that “smart” phones should be relabeled trackers because with their built in GPS and massive information collection, that’s primarily what they are good for. Cell phone service is among the most unreliable, antiquated, and expensive anywhere in the world, and almost certainly the most intrusive. Did you know that the government actually pays the corporations when they request phone records and other private usage information? And the government retroactively immunized the companies from privacy invasion lawsuits. Opt out of information disclosure? That’s as useless as adding yourself to the government’s “do not call” list. The public can’t read, much less understand the privacy policies of companies like Google and Facebook. The policies along with the information shared are secret. A few executives at these companies have called the sharing process “icky”. If you knew what was going on, it would make you sick. This from the executives themselves who have no intention to stop doing it.

Icons of the New Gilded Age

The internet has reshaped the corporate landscape. Apple, Google, Amazon, Microsoft, and Cisco are now among the richest and most powerful corporations in America. Facebook will soon join them. Google (70% of US market 85% in Europe), Amazon, and Facebook all share a tendency toward monopoly. All hide billions in profits offshore to avoid taxes. Periodically, (last under W) a tax repatriation holiday is declared to allow the corporations to bring their stashed hordes home without paying taxes.

McChesney extensively quotes economists Joseph Stiglitz and Paul Krugman (characterized as apoplectic) and reformed neocon Jeffrey Sachs. His best quote is from former Clinton Treasury Secretary Robert Rubin:

Don’t you see. Too big to fail isn’t a problem with the system. It is the system.

Rubin’s Citibank would have tanked were it not for the government’s bailout. The banks today are bigger than ever. Is there hope? Probably not until the whole country crumbles. The revolution will not be televised (or streamed).