Around Town - Francis Fukuyama and the Freeman Spogli Institute

It has been another busy week with lots of stuff going on at Beladora HQ.
Fortunately this week, I had the opportunity to step out of the internet and into the academic with a reception for political scientist, political philosopher, global security specialist, professor, author and all around super smart guy Francis Fukuyama, who is now the Nomellini senior fellow at the Freeman Spogli Institute for International Relations at Stanford.

The event was held at a private residence in Brentwood and hosted by FSI founders and LA private equity tycoons, Brad Freeman and his business partner (and former US Ambassador to Italy), Ron Spogli.
How a little jewelry girl like me got invited to a well heeled event is a convoluted story, but let's just say that I was very happy to attend because I am a huge fan of Francis Fukuyama.

Fukuyama is now focusing on the subject of development and approaching the issues involved from an interdisciplinary approach.  In his brief talk, he emphasized that governments and international institutions  can't just deal with  developing nations on economic or political terms.  Both must be in place to be effective for the long term.  If massive amounts of capital are loaned to or invested in a developing country without solid institutions and the rule of law, vast kleptocracy, corruption and cronyism will be the (cough Afghanistan cough) result.

All of this seems obvious doesn't it.
I'd like to see the big brains at the FSI shift their focus from the global to the local, because the State of California is shifting from a 1st World nation to 2nd World status.
With our local banana republic, also known as the City of Bell, we've got our own kleptocracy, corruption and cronyism right here at home.
I could go on and on about all the things that ail our State
but for your sake I won't.

The Power Paradox - Snap!

An interesting article by Jonah Leher from the Wall Street Journal

The Power Trip

Contrary to the Machiavellian cliche, nice people are more likely to rise to power.  Then something strange happens: Authority atrophies the very talents that got them there.

When CEO Mark Hurd resigned from Hewlett-Packard last week in light of ethics violations, many people expressed surprise. Mr. Hurd, after all, was known as an unusually effective and straight-laced executive.

But the public shouldn't have been so shocked. From prostitution scandals to corruption allegations to the steady drumbeat of charges against corporate executives and world-class athletes, it seems that the headlines are filled with the latest misstep of someone in a position of power. This isn't just anecdotal: Surveys of organizations find that the vast majority of rude and inappropriate behaviors, such as the shouting of profanities, come from the offices of those with the most authority.

Psychologists refer to this as the paradox of power. The very traits that helped leaders accumulate control in the first place all but disappear once they rise to power. Instead of being polite, honest and outgoing, they become impulsive, reckless and rude.

So contrary to Machiavelli's advice to "The Prince"  being feared over being loved doesn't lead one to a place of power.  Power is rewarded on likable people who are diplomatic and successful in forging social relations or networks.

Sounds great doesn't it?

Yet,

Now for the bad news, which concerns what happens when all those nice guys actually get in power. While a little compassion might help us climb the social ladder, once we're at the top we end up morphing into a very different kind of beast.

"It's an incredibly consistent effect," Mr. Keltner says. "When you give people power, they basically start acting like fools. They flirt inappropriately, tease in a hostile fashion, and become totally impulsive." Mr. Keltner compares the feeling of power to brain damage, noting that people with lots of authority tend to behave like neurological patients with a damaged orbito-frontal lobe, a brain area that's crucial for empathy and decision-making. Even the most virtuous people can be undone by the corner office.

Now, as to why this happens you need to read the entire article because it is too much too long for me to quote here.

Besides, don't we already know power corrupts and absolute power corrupts absolutely.

And for some reason all of this reminds me of a favorite song from my days as a young matron.

Real or Fake?

Watch to the end
and I just can't wait until the tax cuts get rescinded so that more of our tax dollars can go to China, the world's 2nd largest economy.

Billionaires Behaving Badly or Those Pesky Problems With Yachts

Oh those yachts....they can be such headaches!

First we have John (taxes are for the little people) Kerry and his brand new $7,000,000 yacht 'Isabel' which he chose to dock in Rhode Island instead of his home state of Massachusetts in order to save $500K in taxes.
If the Isabel were kept at the 2004 Democratic presidential nominee's summer vacation home on Nantucket or in Boston Harbor near his city residence, he would be liable for $437,500 in one-time sales tax. He would also have to pay $70,000 in annual excise taxes.

Pretty little sloop, isn't she?
I do love this quote from Boston.com
"While we can fault the senator for his hypocrisy on taxes or having his boat built halfway around the world instead of here in the USA, John Kerry proves an important point that taxes in Massachusetts are too high. If they are too high for someone as rich as Senator Kerry, they are absolutely too high for working-class taxpayers who are being squeezed at every turn," said a statement issued by party Chairwoman Jennifer Nassour.

And then we have billionaire US Democratic Senate Candidate, Jeff Greene and his yacht 'Summerwind'.

From Tampabay.com
Summerwind — like a 14-story building turned on its side — accommodates about 10 guests in five suites. Greene boasted to Forbes in 2008 that he practically stole it for $6 million in 2002. It may have been a bargain purchase, but it costs about $100,000 to fill up the tank on Summerwind, which burns about 50 gallons of fuel an hour.
Apparently tax savvy Jeff Greene registered his yacht in the tax haven Marshall Islands instead of in his home state of Florida.

God, I so hate hypocrisy and the 'Do as I say, not as I do' politicians who vote for taxes for everyone else, yet avoid paying their own.
And...while I'm on a rant...as if the US House isn't already enough of an embarrassment
WASHINGTON – House Democrats and Republicans have put aside their differences this year to honor the likes of golfer Phil Mickelson, the Chicago Blackhawks hockey team, NASCAR driver Jimmy Johnson and the Penn State women's volleyball team.

But when it came time this week to memorialize the start of the 142nd season of the Saratoga race course in New York, one freshman lawmaker decided he'd had enough.
"It's an absolute embarrassment," said Rep. Jason Chaffetz of Utah, announcing on the House floor a vow to vote against all future sports resolutions.
Why is it the business of the US House of Representatives to honor or memorialize any sports related person or event?  Is that was they were voted into office to do?
Apparently last year in the House there was a vote to commemorate the 2560th anniversary of the birth of Confucius...why is that deemed worthy of the time of our elected leaders?

Wouldn't you think that they would be more concerned with dealing with the $1.47 trillion deficit  or the fact that The median duration of unemployment is higher today than any time in the last 50 years. That's an understatement. It is more than twice as high today than any time in the last 50 years.

And don't even get me started on the $604K spent on bottled water or the $563K spent on new carpets, the $317K spent on new drapes and the $2.5 million spent on new furniture for the US House...during a recession
What Congress Bought Itself With Your $1 Billion
 
OK, rant over....I'm going to go read fashion blogs now and think happy thoughts

The Scam Of The Century

If you haven't already read this book, I highly recommend that you do. Go now and order it from Amazon or download it onto your ipod. No one, and I really mean no one, could tell this story like Michel Lewis.

You don't need to know all the details about collateralized debt obligations and credit default swaps to understand that something was indeed very, very wrong. From the ratings agencies such as Moody's to the whales on Wall Street, only a handful of people truly understood the underlying risk of the sub-prime backed debt and its shockingly wrong AAA rating, and how to hedge against it.
Until Solomon Brothers led the way for the big firms to go public, effectively transferring the risk from the firm's partners to the shareholders, these kind of prop trading debacles couldn't have happened. Finally, when the whole system broke down, the cost of Wall Street's bad bets, and they were indeed bets, in fact pure speculation, not reasoned investments, the taxpayer had to foot the bill with TARP funding. OK, so there was a little shuffling. Bear Stearns was sold to JP Morgan for $2 a share. Bank of America was forced to take over Merrill Lynch. Lehman Brothers went all the way under. Morgan Stanley got absorbed into Citigroup.
Meanwhile, the Wall Street whales still got their huge bonuses at the expense of the taxpayer.

Was fraud committed, well that depends on how you define "fraud". Surely CDSs weren't being marked to market by Goldman Sachs and Morgan Stanley in an equitable way and CDOs were purposefully overvalued. Did Goldman Sachs take trading positions against their clients, well that depends on your definition of "trading positions" and "risk management". Goldman's smart guys clearly acquitted the firm in their Senate testimony.

By the way, if all of these financial scams are reminding you of the 1920s, we all have Sandy Weill and Robert Rubin to thank for the repeal of the Glass-Steagall act. Thanks guys for enriching your posse and leaving the little people to pick up the bill.

Paying Attention To The Pork Report

Do you ever wonder where all that money that you cheerfully pay each April 15th to the Federal Government actually goes?

Well you can get a basic idea on how the Government spends it from this book

Here's an example:

XI. State and Foreign Operations

Once again the House and Senate certified the fiscal year 2010 State and Foreign Operations Appropriations Act as “earmark free.” Unfortunately for taxpayers, there are seven earmarks and they were not free – they cost $209.4 million. This is a 56.3 percent decrease in projects from fiscal year 2009, when there were 16 projects, and an 18.2 percent decrease in dollars from the $256 million in fiscal year 2009.

$17,000,000 added by the House for the International Fund for Ireland (IFI). According to information on IFI’s website, the program was established in 1986 to promote economic and social advance and encourage contact, dialogue and reconciliation between nationalists and unionists throughout Ireland. In a review of a glowing book about IFI released in January 2009, author Sean Donlon admitted, “While the fund will continue its work for the next couple of years it would be unreasonable to expect external support thereafter, especially in the current relatively stable political and security situation in Northern Ireland.” On June 17, 2009, Rep. Jason Chaffetz (R-Utah) introduced H.R. 2915, which would prohibit funding for the program amid indications from supporters that IFI will be phased out in the near future. Language in the conference report indicated that fiscal year 2010 would be the last year the United States would contribute to the program. CAGW has identified $281 million for this project since 1995. It appears that only if taxpayers find a four leaf clover will this unnecessary program die.

$17,000,000 this year for dialogue in Ireland....really? $281 million over the last 15 years???

No wonder I'm going to need a shot of this tonight after I write that check.