A Networked World

Joining the race to the bottom

Seth is one of my favourite thinkers, although I don't read him often enough and I'm catching up today. This one rang a bell.
Seth's Blog: It's no wonder they don't trust us

The digital world, even the high end brands, has become a sleazy carnival, complete with hawkers, barkers and a bearded lady.

Its more than that, much more. I knew the economy was in the can nearly a decade ago when I walked into my local Coles supermarket in Sydney and say adverts for a TV magazine on the little plastic bar that you use to separate the orders on the checkout conveyor.

I knew, for absolute certain, at that moment, that business was in trouble. I'm sure some bright spark was rewarded for "capturing the checkout bar marketing space" but the fact that they had to do that meant to me that there were no places left for companies to try and squeeze out a profit and that they were scraping the barrel.

That was the day, pretty much, that I started planning my urban homestead because when a big supermarket chains needs the few cents they would get for each checkout bar advert, and the TV mags need to spend it to prop up their sales, we had reached the end of the growth phase of business development and the thing that was about to change was the whole system.

More sustainability BS

I can't believe that we are still reading this stuff. We have secret to sustainable paint. Don't get me wrong, there is every reason to try new stuff and push the limits as far as they can go but where the hell was the journalist's mind here?

Resene believes it has identified the secret ingredient that will allow it to produce the world's first sustainable paint.

In August the paint-maker was the inaugural winner of What's Your Problem New Zealand?, a competition set up by the Crown research institute Industrial Research.

The prize was $1 million of research, and Resene has wasted no time in getting its project under way to develop a waterborne paint that is based on resins made up of 80 per cent sustainable ingredients.

Waterborne paints at present use acrylic as a resin, and existing environmentally friendly alternatives contain only 30 to 40 per cent sustainables.

The key is to find a substitute that will allow it to make a paint based on resins made of 80 per cent renewables.

The company will only say that the ingredient will be non-cropping (it won't compete with food crops for space) and is likely to come from existing industrial waste streams.

So lets go through that again shall we?

Resene believes it has identified the secret ingredient that will allow it to produce the world's first sustainable paint.

sustainable - Wiktionary
1. able to be sustained
2. able to be sustained for an indefinite period without damaging the environment, or without depleting a resource; renewable

OK? Simple; at the end of the day we have as much of the same quality of resources as we started with. So, how does it measure up?

The prize was $1 million of research, and Resene has wasted no time in getting its project under way to develop a waterborne paint that is based on resins made up of 80 per cent sustainable ingredients.

Weasel number one. to put it another way, this paint is 20% UNsustainable. Now, unless you can throw out of the formula the 20% that is not sustainable, then as soon as you run out of the unsustainable ingredients, you stop making the paint. Here, take enough food for a walk across the Nullabor plain and 80% of the water you will need. Have a nice trip. There is no such thing as percentage sustainability, your ability to produce anything is absolutely limited to the least available element. When that runs out, you are done.

Waterborne paints at present use acrylic as a resin, and existing environmentally friendly alternatives contain only 30 to 40 per cent sustainables.

See above, it doesn't matter whether your sustainable elements are 10% or 99%, its the non-renewables that will kill you. Now, not adding to the environmental load is in itself a good thing so 80% renewables is better than 30%, but sustainability it isn't.

The company will only say that the ingredient will be non-cropping (it won't compete with food crops for space) and is likely to come from existing industrial waste streams.

More weasels. If the sustainable elements comes from existing waste streams then they are absolutely dependent on the continuance of those waste streams in sufficient quantity to feed the sustainable paint mix. If those waste streams are legislated out of existence, or if they are generated by non-renewables, they too are going to stop and the sustainable paint is wholly dependent on the least renewable constituent of the other company's waste stream.

Furthermore, if the recovered ingredients are themselves composed of non-renewable atoms, Resene has shifted the problem exactly one step and, while they may have reduced some costs by being able to discount the waste content of their providing industries, they have exposed themselves to all the uncertainties that those industries have to deal with. I would bet they have increased their business risk by 50% or more.

I'm all for safer paint, I'm all for products that remove anything from the waste stream that can be reused as something else, but I'm 100% against misrepresenting this as sustainable, it's not even close.

Reality checks and data points

This piece from CIO.com is a nice reality check and the general principles apply to everyone, not just IT people. Retire? How About Never?

Overall, the recession has had far more of an economic impact on late-middle-aged adults. In an April Pew Research Center study of 2,969 adults aged 50 to 64, nearly 75% said the nation's economic problems are making it difficult to afford retirement.
Click here to find out more!

Nearly two-thirds of those surveyed in that age bracket said their 401(k) accounts or individual stocks have been clobbered, with two in 10 claiming that their investments have lost 40% of their value and another four in 10 saying nearly 20% to 40% of their retirement funds have been erased.

I have never believed that I would be able to retire, not just because I could not save enough to do so, but because I have known half my life that when the moment came to kick back I would be doing it with millions of other boomers whose removal from the "productive" economy would shrink that economy and make it too small to support us.

I've also been pretty much convinced that rule number one of investing is "never give your money to someone else to play with on your behalf, never, ever, no, I really mean it, never"

So I have paid off my mortgage and I'm building an urban homestead where we are aiming to be able to live, not just survive, on about $200 a week in current dollars.

While most of the rest of my peers have spent their lives trying to get rich enough to retire, I've spent mine learning to live poor.

My wife is a teacher on a 4 year contract and she has 2 years to go. Here's how I rate that contract.

• Chances of it being renewed on similar terms - 20%
• Chances of being significantly cut on renewal - 40%
• Chances of not being renewed 20%
• Chances of being bought out before the end 20%
• Chances of surviving any of those otucomes, pretty good.
  

Now eher are some more data points.

1. 56 year old family member on contract for a company that provides training to large insurance and financial companies. Unpaid for several months, yesterday asked me for a loan to get through Christmas
2. 58 year old CFO for several medium sized north American companies. Laid off in march, 10 months on global search for new job. Nothing
3. 58 year old former exec and successful business man. Lost his company 3 years ago, still no job and about to run out of money

Just people close enough to hear about their actual problems and 2 of those in the last 4 days. Interestingly, all three are still in denial about their real situation, still looking for the silver lining that tells them all is going to come back to what they fondly believe is normal.

Economic recovery? Not close.

This thing hasn't even cleared its throat yet and as the CIO peives goes on to say, "there is no place to hide in this economy"

Too good to be true

I have a rule. If someone calls me or comes knocking at my door with a special deal for anything - anything at all - I send them away or hang up on them. And that goes double for the deals that are too good to be true. Like this.
Crossed lines: phone scam dudding small business

For Mr Holroyd it began late last year when a well-dressed man in his 30s appeared at his car parts and plumbing business in Ingleburn offering a package of cheaper phone calls with the added incentive of $5000 worth of free equipment for the workshop.

Mr Holroyd signed up and took delivery of a phone system and a bandsaw that did not work, and an air compressor that did.

Two months later he took a call from Macquarie Bank telling him he was in arrears and owed them $30,000. Mr Holroyd, who was not even aware he was in business with Macquarie, pleaded for more information. Finally he discovered that the documents he signed had left him tangled in a lease agreement with two other companies he had never heard of, who had taken out finance with Macquarie.

There is no suggestion that Macquarie had engaged in any wrongdoing, although the bank was unmoved by Mr Holroyd's predicament. It hired the debt collection agency, which came banging at his door.

Which bit of "we will give you $5,000 worth of equipment as a sweetener for a cut-price phone deal" failed to ring any of this bloke's warning bells? How does he imagine the world actually functions? Does he believe in magic?

These scammers are no different from the Nigerian money scams or the NZ Finance company scam or most superannuation scams, they offer something for nothing. Whenever anybody tells me that something is free I know they are lying to me and that's pretty much the end of the conversation.

Nothing is free. Somebody always pays and the problem is that everyone involved in these deals, including the banks, don't actually care who that is. It can be you, it can be the slaves that work in some Northern Marianas sweatshop, it can be the whole communities living in the midst of vile pollution that shortens their lives and damages their genes, it can be our grandchildren who will find their climate untenable. But somebody always pays. Without exception, ever.

What these con artists depend upon is that you and I are basically corrupt, we all want something for nothing and if they tie it in the appropriate bow we will look away long enough for them to profit.

I don't actually blame the scammers that much, there is plainly a market for their business, if nobody ever accepted anything for "free" it would stop.

We need to teach our kids from kindergarten the simplest of rules; if it looks too good to be true, it is, someone is laying to you and someone, probably you, is going to get hurt. How hard is that to learn?

Do we still have the leisure to be "creative"?

As usual, Johnnie points to some interesting ideas that kick me off. Change and diversity

Jack Ricchiuto has some thoughts on how change happens in networks.

...the possibility space for change opens up when we connect different people who can begin resonating together around shared stories, opportunities, and dreams. It’s a process of liberating people from the confines of clusters of sameness and ideological colonialism so they can move toward more diverse connections and pragmatic alignments.

The phrase clusters of sameness resonates for me and I think organisations often clog up with those. He continues:

the fusion of difference and resonance is a powerful approach because in that space, people move away from trying to change each other, which opens the space for the possibilities of creating innovative.. changes.. Resonant listening to one another’s differences allows us to join in both-and innovations that could never be possible in an either-or constrained world

I agree about the processes, but I think the crucial thing that gets left out of all this is that there is no way to steer the process towards a "desirable" (for whomever) outcome, nor can we determine the result in advance.

We live in a control-oriented mindset, change that we do not initiate frightens us and we try to reassert whatever control we thought we had, change that we do initiate gets out of control very quickly and we waste more resources trying to get back in control.

In every case we resist any change that we don't think we can determine in advance. But we live in a real world where change is permanent and uncontrolled. Hell I remember writing in an essay in high school something to the effect that "in order to maintain a constant relationship with a constantly changing world, we have to change, constantly".

I thought it was pretty cool then and I still agree with its foundation, the only thing I'd add is that the constant relationship is itself impossible, that changes too.

The whole idea of change management is a crock. Change, like shit, happens. Our biggest problem is that we are not inclined, nor do we learn, nor are we taught as part of our education, to understand, adapt, participate in or benefit from the changes that happen. Still less are we able to abandon changes that are short term wins but long term failures.

For me, this is about opening space so that we can explore experiences fully, without the pressure to problem-solve.

I'd love that to be true but I think we are running out of the lleisure we've had to be purely creative. The number and urgency of problems that we are going to have to solve, on a personal and daily basis, as well as a community and national one, is getting bigger, faster. Those of us, like me, who have had it damned easy all our lives and had the luxury of being able to invent, innovate and think about the world rather than get our hands dirty in it are going to spend the rest of those lives working much harder for much less money and often less return of all kinds.

With dwindling resources, the small problems that we simply threw some money at are going to become harder to deal with and the big problems such as climate change and PO are starting to cause medium sized problems such as landslips and crop failures that just wont go away. We've had 2 generations of cruising on the capital, from here on we will be paddling like hell to stay afloat.

If anything we need tools like open space and theatre sports as a form of rapid prototyping; spaces where we can bring hard problems, trial a bunch of possible solutions and take them away to work on them.

Some days I despair of the media

Read this and tell me if I'm nuts. House prices too high, warns expert

Auckland's house price surge has prompted a warning that over-valuations are creating a bubble that will burst and cause a painful property recession.

Barfoot and Thompson's November figures, out yesterday, showed a 23-month price high in the city of $550,217 although the number of sales was fairly low.

Institute of Economic Research principal economist Shamubeel Eaqub said the trend could have far-reaching and damaging effects.

"House prices are showing renewed over-valuation," he said. "This will intensify as interest rates rise. A correction in the housing market is necessary to reduce the economy's vulnerability to house price movements. The sooner there is a change, the less the likelihood of a larger and more painful recession further down the track."

Prices were now near the previous peak, suggesting valuations were also becoming very stretched.

"While prices are rising, sales volumes are slowing after adjusting for seasonal patterns," he said.

So, while prices have reached their all time high again, the number of houses being sold is falling. Lets take a limit case; 3 houses only are sold in the city during December. All three sell for exactly a million bucks. Will we see a headline saying that the average house price in Auckland has now reached a million? And will there be further warnings about an unsustainable bubble?

A bubble happens when two things align, too much money in circulation and a mania for a single type of object (tulips, houses, gold - anything in relatively, but not absolutely, limited supply).

We had a housing bubble and, as it deflates, there will be periods when the prices rise again for a variety of highly local reasons - including someone sells their Brisbane house at last and moves back to NZ where they buy a bit over the odds just to get the family settled etc.

But the fact is that banks are not lending if they can avoid it, people are feeling unsafe as their jobs look increasingly shaky and aren't going to take on new debt, in fact they are trying to unload their overpriced assets when they can.

I have a mate who was looking for an apartment in the city. The news reported a few weeks ago that real estate prices were rising again and 2 days later about 400 properties hit the market.

Tell you anything?

Apparently not our ever-boosting media who seem to see their job as "keeping our chins up" in tough times, mostly so we don't look down and, like Wile E. Coyote, realise that there is a gaping hole under our feet.

Bunnies.

Jim Kunstler asks the question

While he can go over the top a bit, Kunstler is definitely on my team when it comes to the reality-based life. And once again, in Self-jiving Nation he asks the question that nobody else seems to have thought of:

I'd like to know what folks imagine we are recovering to. To a renewed orgy of credit-card spending? To yet another round of suburban expansion, with the boys in the yellow hard-hats driving stakes out in the sagebrush for another new thousand-unit pop-up "community?" For a next generation of super-cars built to look like medieval war wagons? That's the "hope" that our officials seem to pretend to offer.

Exactly, the talking heads all talk about this recovery, but its always a recovery "from" the crash and never, ever, about what our lives and communities and economies will look like once we have "recovered".

It's completely inconsistent with any reality-based trend-lines, by the way.

When the Australian Government commissions a report that says nearly a million homes are in direct danger of rising sea levels and that it should consider compulsory acquiisition and demolition of some homes as an option, the destination of the recovery looks a lot less sunny than most of the discuission would have us assume.  Make evacuation plans

Urgent action to cope with the impact of rising sea levels needs to start now, including improving evacuation routes for coastal communities during extreme storms and flooding.

As well, a sweeping federal parliamentary report calls for an overhaul of the building code to make homes more resilient and for the legal liability for future property losses to be sorted out.

Warning that ''the time to act is now'', the bipartisan report brought down last night states that thousands of kilometres of coastline have been identified as at risk from the threat of rising sea levels and extreme weather events caused by climate change.

The only note of compulsory cynicism I can muster for this one is that, coincidentally, the coastline is disproportionately owned by the wealthiest members of society who would probably be handsomely bailed out by such legislation.

A few years ago they were squawking about their properties being protected and told they would have to suck it up and take the hit because the community could not afford to protect coastal landscape to that degree. Looks like they may have found a good fairy after all.

Retaining value - what exactly does that mean?

James West has an interesting piece at Midas Letter - Gold Price Prediction

When anything, be it stock, bond, currency or commodity, reaches a new high, the impetus for selling into strength and taking profit off the table are enhanced dramatically. With gold’s new record high, there are plenty of holders of bullion who started acquiring it in the first years of the millennium who are now sitting on profit equivalent to 3 times the money.

The question is, however, sell gold in exchange for what?

Certainly trading gold for U.S. dollars is akin to forward selling gold at an incrementally lower price. Anyone smart enough to own gold since 2001 is unlikely to be so silly.

Renmibi might seem like a good trade. The only problem with that is you can’t easily spend renmibi at Home Depot or Safeway or Nordstrom.

No, there’s really no substitute for gold at this point in the global currency landscape. And so, the normally present impetus to sell and take profit has been castrated by the lack of anything else capable of retaining its value.

OK. I get that. But the question then becomes, what exactly does he mean by retaining value? If there is nothing that you would accept in exchange for it, how much "value" does it have?

I always look at the extreme case such as me having the last plate of food on earth and you having all the gold. How much of that gold would you give not to starve to death? How much gold would I accept to commit suicide?

Since the person who survives gets all the gold anyway, the only thing that has "value" is the food and even that is losing value the longer I remains uneaten.

I completely agree that exchanging gold for fiat money is a fools bargain, but once you have the gold you too can get fooled by seeing its exchange rate (as distinct from its value) constantly rising against all other possible "stores of value". Storage of any kind only has value if it is able to be released. from water in a dam to grain in a warehouse to savings in the bank, the storage part only works if the release part can take place. So how do you release the value stored in gold?

At some point you have to exchange it for something in the certain knowledge that you will never be able to get it back at that price, it will always go higher.

Well it will until all those left holding all the gold realise that it can't be eaten, worn, lived in, burned or used as medication, and if all anyone else wants is food, shelter, clothing, fuel or medication, how exactly do you sell your "assets" in exchange for something you actually need.

In complex societies the location of value is seriously camouflaged, and we can get carried away by the idea that, just because gold is durable and unchanging it has some kind of intrinsic value that can be locked away. I don't believe it.

Show me the mechanism.

Towards the new normal

Whenever I'm with Steve barnett, he's usually drinking and I'm the designated driver. Mostly because he and my wife are members of a wine club and when they go on high-class pub crawls (or winery tours) and I of the cardboard palate drive the people mover. When he talks about business he reminds me a lot of Johnnie Moore and Rob Paterson; and me. Learn fast: things aren’t (ever) returning to “normal”.

National Bank (NZ) Chief Economist Cameron Bagrey... confessed he’s embarrassed that his profession’s consistently got it wrong: failed to predict the current recession and doesn’t have a clue how to fix.

He says only one thing’s for certain: we can’t go back to the way it was. Anyone who thinks that things will return to “normal” is stupid. The policy makers are determined it won’t; determined we figure out new ways to do, manage and teach business and the economy. Previous answers are wrong.

[...] I seriously doubt NZ Business Education can change from its prescriptive right-answer model any time soon, hobbled as it is by administrators and their anti-professional, centralised rules and controls, and know-no-better student and employer market.

I’m sceptical too that NZ business managers can abandon their manager-knows-best, right-answer approach any time soon: go deeper than recite the superficial lists of “secrets” peddled in popular business management literature.

Actually, if Steve thinks its only NZ managers, he's dreaming. The managerial class is global, its largely responsible for the problem and will cling to its paycheque till the collapsing businesses they parasitise crumble in their hands.

[...] Here’s the guts: (really) involve everyone; confess ignorance (starting at the top); spend time together generating a long term goal that everyone’s passionate about but not sure how to achieve; get very clear on the medium term strategy and short term goals that stand to take you towards the long term; openly generate and agree clear individual and collective accountabilities in achieving the change; openly measure progress to keep individuals and groups (at all levels) openly accountable for their contribution; continually review and revise in the light of individual and collective experience; take every opportunity to talk about the long term goal and the actual action and progress towards it.

I think he's optimistic here.

In the new normal, we have so little idea of what will work that the idea of goals and strategies may be a waste of time as well. As our energy and financial resources are decimated we will gain new appreciations of those resources that are left.

I think there might be some new parameters that will have more power in the future.

• We will demand much higher value returns for any of those irrecoverable resources that we expend, especially if we hand them to someone else.
  
• We will increasingly trade time for goods and services. Where we have invested a lot througout my lifetime in "saving time" we will now "spend" or invest, that time ratrher than use a resource like energy.
• Things will slow down in some areas such as travel and material flows
• Information shipping will speed up as we reduce even further the documentary exchanges and rely more on electronics (saving paper, energy etc)
• Discretionary spending will evaporate and the industries based on them will disappear. If we spend more time waiting, travelling or producing things we will have less liesure time and less money to spend in it.
• Energy and material flows at a personal, community and business level will become a critical part if every economic model and activity.
• The idea of waste will disappear, we will be much more conscious that we can't 'afford" it any more. The idea that we should pay for packaging, then pay to have it taken away and pay again in opportunity costs merely to have a wrapper will become laughable, if not criminal
• Product design, durability, ease of use and fitness for purpose will become absolute criteria for everything
• We will all need to try many, small actions that may or may not succeed. We will need to be deadly honest about the outcomes and rethink those that fail while iterating those that seem to succeed.
• We will need to acknowledge that, at a time of paradigm shift, nothing will be reliable for quite a long time; what worked yesterday may not work again tomorrow. That is why small, iterative actions will be the only safe ones, there will be no more going large.
  
• Your turn. What other geenral rules do you think might fit here and does this make any sense at all?

I'm planning some renovations to my house - we have been since we moved in 2 years ago - and the other night I was using Google Sketchup (a brilliant bit of software) to turn the 2D plan into a 3D model so we could try stuff out.

I put in a work bench for building things and a wet area for wine making and a pot still for recovering essential oils from the flowers and herbs and plenty of space for creating stuff and storing it and for tools and consumables like glues and screws and so forth.

And then I stood back and realised that I am making not just a workshop a small artisanal factory that would fit in the 19th century or earlier. I'm doing it because it is the logical outcome of thinking about local production andtrying to close the energy and material flow loops as tightly as possible.

When i build stuff, I use screws not nails so that everything can be dismantled and used again in something else. More rules.

• Low energy dismantle-ability
• Repurposing all manner of manufactures
  
• Building things that can be applied to new uses
• Shared spaces, shared tools, shared skills
  

What else?

Expertise and analysis

This in Marketwatch today. U.S. job losses accelerate to 263,000 in September

Nonfarm payrolls fell by a greater-than-expected 263,000 in September, the Labor Department reported. It marked the 21st consecutive month of job losses.

None of that is a surprise to anyone paying attention to what is happening in the world but something that troubles me is beautifully shown in the attached graphic.

The orange marker is what the experts and analysts agreed would be the number. But it was wrong, not just a bit wrong, but badly wrong. Its been happening all over the map; the only thing that experts these days appear to agree on is something that is wrong. How come they are still experts? I'm a bunny, I dropped out of University in my first year but not only did I see all this coming, I took actions to prepare for it and I now work on the assumption that my analysis of the situation is pretty good - supported, led, guided etc by other people for sure, but people I have chosen because they appear to have a realistic understanding of the world, ie, my analysis of their performance is also good. So I have to wonder what the hell these experts are looking at and how they are able to reach their inevitably erroneous conclusions. And when it comes to analysts, what in hell are they, in fact, analysing, and what kind of analytical tools are they using on these data?

And above all, why don't they seem able to learn that what they are doing is SNAFU? seems to me that the only part of their title that is valid is the anal part, they seem to be pulling a lot of their work from there.

The only answer that I can come up with is corruption. There's almost certainly some of the "if you give me the words I want I'll pay you lots of money" kind of corruption, but I think it goes further. I think we have reached the point of "this file cannot be opened because it is corrupted". Somewhere deep in the workings of our system, things are not right, the DNA appears to have been corrupted, mutated into a form that may not be compatible with survival. Convince me I'm wrong

Updated responding to Brane and Robin below

Pretty much agreed with both of you.

It seems to me there has been a marriage (make that a prostitution) between mathematics and magic called economics.

But what really gets me is that we are all dealing with pretty much the same data and drawing such hugely divergent conclusions. Which means that there is something seriously wrong with the psychological algorithms governing their thinking.

You and I look at the entrails of a dead chicken and we see entrails, and maybe dinner, they see things that make their owners happy.

There is a market for economic theories and those that feed the preferences and predilections of those already in power will get the attention, regardless of how wrong they may be.

Or to use the infamous words of Tony Blair and co, they "fit the facts around the policy"

Unfortunately, this works pretty well for a long time (the universe appears to be very tolerant of stupidity and corruption) right up till the moment when it fails completely.

No doubt the Roman divines managed to read endless success for their owners until the barbarians smashed down the gates of Rome. If only those smashing our gates were no more than a more successful tribe. They are not, we have pushed our habitat to its limits and now we are hard up against the laws of physics and genuine mathematics.

BTW, I tried to post this in the comments field and got the response "We're sorry we cannot accept this data. Anyone else experienced that?