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Thursday, 21 June 2018

Seeking advantage

In my 5 July 2017 blog, I concluded that seeking advantage is what "separates humans from anything else on this planet". It’s the fundamental force in human behaviour. To some extent, I was wrong. Seeking advantage is the main driver of all Life, including animals, humans, plants, trees. Why? Seeking advantage is a coping mechanism with Change, an absolute force.

If you look at any plant then you will see that it grows towards sunlight. It adapts to Change. In a garden, each plant strives for competitive and comparative advantages (eg, colours, height, smell). In 1817, David Ricardo formulated the Law of Comparative Advantage within free trade. Competition is a human phenomenon at sports, studies, at work, and even at home.

DNA shows constant minor changes as a result of changes in our environment: an astronaut's DNA no longer matched that of his identical twin (my 2018 blog). A gene mutation of 5,000 years ago caused lighter skin to adapt to less sunlight in Europe (my 2016 blog). This environmental advantage led to the philosophical belief of White supremacy (my 2015 blog, 2016 blog).

The imminent U.S.-China trade war - and a possible US-EU trade war - is another example of seeking (economic) advantage. Trump does not believe - or understand - Ricardo’s Lawimporting cheap Chinese products is less expensive for American consumers than producing these same goods in America. In Trump’s psychology, life is a zero-sum game of Winners and Losers. Hence, he is always seeking for advantage (ie, winning).

To some extent, Trump is right: we all prefer winning over losing. Most of our efforts are rooted in seeking advantage. Even expressing empathy towards friends or strangers is an example of seeking advantage. Expressing empathy makes us feel better about ourselves. Hence, we win.

Helping a stranger could turn into a valuable friendship. Helping a friend strengthens a friendship and creates a future IOU. Helping your parents removes guilt or cashes an IOU. Networking is perhaps the clearest example of seeking advantage (eg, assignment, info, job).

The above examples may feel cynical but cynicism is something entirely else than a falsehood. I do think, feel and believe that all human efforts are about seeking advantage.

All life forms need competitive and comparative advantages to survive (ongoing) Change. Some more intelligent life forms want these advantages and started using tools (eg, birds). Humans believe in seeking advantage (eg, my blogs on Transhumanism). These basics represent my concept of Needs-Want-Beliefs (excluding Awakening).

The human brain had a vast memory storage. It made us curious and very creative. Those were the characteristics that gave us an advantage - curiosity, creativity and memory. And that brain did something very special. It invented an idea called 'the future.' A quote by David Suzuki

Advantage McEnroe (1983) by The Brat - IMDb, lyrics, my blogvideo, Wiki

Note: all markings (bolditalicunderlining) by LO unless stated otherwise

Wednesday, 20 June 2018

Is auditing a failing pyramid scheme?

Last Monday, the UK industry regulator for audit firms (FRC) published a critical report. The FRC report "says the overall quality of the audit profession is in decline" and one firm experienced an “unacceptable deterioration” in the quality of its work (Guardian). As a former auditor, I suddenly got a strange notion: is auditing a failing pyramid scheme?

The business model of audit firms roughly is like this: 
1. Organisation: a pyramid with few on top, supported by a constant influx of new recruits;
2. People: top-earning partners and well-paid staffers, who work exceptionally long hours;
3. Clients: (i) inadequate fixed fees for top-notch clients, and (ii) hours x top rates for clients that are not able to negotiate, for whatever reason (eg, due diligences, investigations);
4. Profits: the big profits are in the 2nd group of clients ("the feast").

This reminded me of a pyramid scheme: "A pyramid scheme is an illegal investment scam based on a hierarchical setup. New recruits make up the base of the pyramid and provide the funding, or so-called returns, the earlier investors/recruits above them receive." Note LO: italic markings in quote by me.

American novelist John Grisham had a similar notion in his 1991 book and 1993 movie The Firm. At "my" audit firm, some of the partners were thrilled by this new book. They recognised similarities in the underlying business models, and recommended this book to new recruits, like me. Fortunately, overbilling and money laundering were unfamiliar, unlike The Firm.

The decline in the overall quality of the audit profession is "firmly" rooted in its business model: client fees are often fixed, hours spent are variable, and hourly rates are ever-increasing. The quotient between Cost of "Goods" Sold and Sales is called the realisation rate. Partners and managers must maximise this benchmark, by maximising billings and minimising hours spent.

The ongoing efforts to minimise hours spent has resulted in several changes, like methodology (eg, risk management) and computer-assisted audit techniques (CAATs). In principle, comprehensive audits no longer exist. However, such efforts have mainly caused increased reputation risk for audit firms, following ongoing audit scandals (eg, GuardianTimes).

Once, the founders of the audit profession saw auditing as a public service (Guardian). Today, audit firms are commercial enterprises. However, industry regulators are moving back to the founding principles in order to (i) minimise audit scandals and (ii) restore public trust. Most likely, this difference of opinion will create a bend-or-break situation.

Recent news suggests that the UK might be the first country breaking up the audit oligopoly. Unfortunately, big "audit only" firms may have a (loss-making) business model that is too risky and unsustainable. The solution might be: better the devil you know than the devil you don't.

Walk Like an Egyptian (1986) by The Bangles

All the old paintings on the tomb
They do the sand dance, don't you know?
If they move too quick (oh-way-oh)
They're falling down like a domino

Note: all markings (bolditalicunderlining) by LO unless stated otherwise

Tuesday, 19 June 2018

Absolute thinking - the Truth as a Belief system

Recently, an Aeon article made me aware of a new concept: absolute thinking. Whenever you read random online comments, you quickly discover this concept: (very) simplified comments to (very) complex issues. Possibly, such comments express irony, or are provocations for creating angry responses ("trolling").

The problem is that "human beings, regardless of race, religion or culture, are likely to embrace any belief that is absolute. This is because absolute beliefs are simple, easy to comprehend, and false positives that offer us a false sense of security." (PsychologyToday, 2011) Note LO: markings in quote by me.

Politicians always face this same dilemma: absolute thinking versus nuance. There might even be a correlation between the (apparentincrease in absolute thinking and the decline in IQ since the 1970s. The 45th President appears to be an expert in absolute thinking; his nuance is mostly absent, ignored or neglected.

Absolute thinking is the connection between my concept of the 7 Belief systems and extreme beliefs. All extreme beliefs require absolute thinking and the loss of all nuance. Absolute thinking is an example of the Truth as a Belief system: the right to your own personal truth. Also see my 2018 blog: You don’t have a right to believe whatever you want to (Aeon).

These quotes from a 1999 study on absolute thinking and health show this connection:
  • "Absolutist thinking has been identified in therapeutic studies as a style of thinking which is believed to promote emotional distress, particularly anger, when people are confronted by situations which do not conform to their demands concerning what ought to happen."
  • "It is not a discrete thought process, however, but a key aspect of a framework of beliefs and reactions which are thought to make people vulnerable to poor psychological and physical health when faced with personal, domestic or work problems."

Absolute thinking might be of American origin. Aeon: "The term cognitive miser, first introduced by the American psychologists Susan Fiske and Shelley Taylor in 1984, describes how humans seek the simplest and least effortful ways of thinking. Nuance and complexity is expensive – it takes up precious time and energy – so wherever possible we try to cut corners."

I wonder whether American gullibility stimulates absolute thinking and extreme beliefs. These may be the hidden psychological drivers of American mass shootings. The perpetrators seem to follow their own truths. The huge availability of guns cannot be its main explanation (NYT-2017). 

“Absolutes are coercion. Change is absolute.” An intriguing quote by Allen Ginsberg (1926-1997), American poet, philosopher, writer, and activist.

Absolute (1984) by Scritti Politti - artists, lyrics, video, Wiki-1, Wiki-2

Note: all markings (bolditalicunderlining) by LO unless stated otherwise

Monday, 18 June 2018

The relationship between CO2, ice, water and (greenhouse) gases

The end of an interglacial period - or intermittent warm periods between ice ages - is marked by the total melting of the polar caps. Wiki: "Outside these [ice] ages, the Earth seems to have been ice free even in high latitudes." From a scientific point of view, the current melting of the polar caps is consistent with Earth's history and - moreover - to be expected.

There is an interesting relationship (see graph) between carbon dioxide (CO2), ice, water and vapor (or "greenhouse gases").

Carbon dioxide acts like an accelerator for storing in dry ice (solid CO2) up to a certain temperature. Above that tipping point, carbon dioxide works as an accelerator for melting of ice (Nature, Phys, ScienceDaily). Carbon dioxide is mainly stored in oceans (93%), and only 0.04% in (greenhouse) gases.

The current interglacial period started 21,000 years ago. Initially, sea levels rose slowly but accelerated some 15,000 years ago until about 7,000 years ago (5,000 BC). 

During these 8,000 years, the sea level rose by +120-140 meters, which is beyond human comprehension. In cultural legends, this period may have been "The Great Flood" (BBC).

The future melt down of all ice may cause a further sea level rise of some +70 meters to +80 meters. Compared to current sea levels, the "recent" Pleistocene interglacial highstand was 75 meters lower, but the older and warmer Pliocene climate was higher: +10 to +40 meters (BBC, Wiki). The current climate is the Holocene.

The +120-140 meter sea level rise wiped out ancient civilisations as humans typically build their cities (and harbours) close to coastal lines (BBC). This may explain why scientists still believe there was no advanced civilisation before 5,000 BC. Hence, the "sudden" emergence of the "first" advanced - and sea-faring - Sumerian civilisation is still a scientific "mystery". 

The Neanderthal survived for some 700,000 years including 8 Ice Ages until they were wiped out by viruses, carried by the influx of homo sapiens who arrived from Africa around 40,000 years ago (Guardian-2016my 2015 blog). The fragility of our current society (eg, food distribution, fuel, internet, technology, water) may not even survive the start of a new Ice Age. 

The high(er) amount of greenhouse gases in our atmosphere has already delayed the next Ice Age by some 100,000 years (Bloomberg-2016, CNN-2016, Guardian-2016, Independent-2016, NYT-2003). Indeed, every cloud has a silver lining.

Cold as Ice (1977) by Foreigner featuring Lou Gramm as lead singer

Note: all markings (bolditalicunderlining) by LO unless stated otherwise

Sunday, 17 June 2018

Father and daughter/son

Father and Daughter (2002) by Paul Simon

As long as one and one is two
There could never be a father
Who loved his daughter more than I love you

Father and Son (1970) by Cat Stevens

Find a girl, settle down,
if you want you can marry
Look at me, I am old, but I’m happy

Saturday, 16 June 2018

Brexit is a sideshow for Germany (FT)

"UK problems are trivial compared with strained ties between the US and its allies" (FT)

"During a visit to Berlin this week I was struck, not for the first time, by how small a corner Brexit occupies in the minds of most Germans. Not only does Brexit diminish the UK’s strategic importance for Germany, it is also the least serious of several emerging threats to Germany’s national interests.

All the talk in London this week was about the struggle of Theresa May’s Conservative government to win various House of Commons votes on its EU withdrawal bill. In Berlin, the political theatre at Westminster seemed almost trivial.

More important, for German policymakers, was an acrimonious G7 summit in Canada that had just plunged relations between the US and its leading democratic allies to their lowest level in living memory.

In German eyes, Brexit is certainly not good news. But the G7 debacle conjured a spectre of immeasurably larger dimensions than Brexit. It was the nightmarish prospect that the US, the chief creator of the western alliance and the rules-based, liberal international order that took shape after 1945, might be turning into its chief destroyer.

It is hard to exaggerate how alarming this is for German business people, mainstream politicians and a majority of the public. No country has gained more than Germany from seven decades of US-backed western unity and the rules-based global order.

These arrangements have been Germany’s passport to democracy, political stability, prosperity, security and a full return to global respectability after the shame and horror of the Nazi era. They paved the way to peaceful national reunification in 1990 after Germany’s division during the cold war.

No wonder, then, that Germans have been stunned by events in Washington since President Donald Trump took office in January 2017. They are aghast at the way he appears to reserve a particular animus for Germany. By comparison, Brexit is a sideshow.

These German attitudes were captured in an opinion pollcarried out by the Forsa research institute and published in April. It showed that 82 per cent of Germans were concerned about the Trump presidency; 75 per cent about crises in the Middle East; 71 per cent about North Korea; 66 per cent about European tensions with Russia; and only 39 per cent about Brexit.

Precisely because Germans do not regard Brexit as a priority issue, they see no need for their government to concede ground to London in the negotiations over the UK’s departure from the EU. According to the Forsa poll, 65 per cent want the EU to stick to its firm line against Britain.

Naturally, German business is concerned about the potential negative consequences of Brexit for trade, investment and profits. Take a report by the DIHK, one of Germany’s leading business associations.

It says that German trade with the UK is already “decreasing significantly” because of Brexit. One in every 12 German companies with investments in the UK is planning to move them to other markets.

Above all, however, the DIHK report undermines the argument of pro-Brexit UK politicians who for years have confidently forecast that business pressure on the German government will force concessions to London in the Brexit talks.

“Individual companies . . . point out that Brexit must not jeopardise the stability of the internal market in the remaining 27 EU countries. They warn against affording the UK too many privileges in the course of the negotiations,” the report says."


For Trump, Power and Values Matter Less Than Dollars and Cents (NYT)

"SINGAPORE — President Trump’s eager embrace of Kim Jong-un of North Korea this week, on the heels of an acrid falling-out with Prime Minister Justin Trudeau of Canada, raised an obvious, if confounding, question: Why would an American president offend allies and cozy up to adversaries?

If there was an answer in Mr. Trump’s tumultuous week on the global stage, it may be that he disregards the traditional preoccupations of American foreign policy — power and values — in favor of a more narrow worldview shaped by his experience as a businessman.

“The theme that comes up, over and over, is money,” said Jeffrey A. Bader, a diplomat who advised President Barack Obama on China.

Mr. Trump’s bitter clashes with Canada and Europe over trade, as well as his solicitous courtship of North Korea’s brutal dictator, all reflect this mercantile perspective. In his transactional approach to foreign policy, considerations of financial profit or cost — often measured in ways that economists deem simplistic — can outweigh virtually any other consideration.

“What that means is that Trump, like a lot of businessmen, doesn’t pay much attention to Canada, or Europe, or Japan,” Mr. Bader said. “Businessmen pay attention to the growth markets: Vietnam, Brazil, India, China.”

Or, as was on vivid display in Singapore this week, North Korea.

That does not mean Mr. Trump is necessarily interested in North Korea as a trade partner or an investment opportunity for the United States. But his view of the challenges posed by the Korean Peninsula are colored — and perhaps limited — by his background in business.

In Mr. Trump’s meetings with Mr. Kim — the first for a sitting president and a North Korean leader — he soft-pedaled traditional American concerns like regional security and human rights. Instead, he celebrated North Korea’s economic potential and pitched Mr. Kim like a property developer proposing to build condominiums on a reclaimed Superfund site.

A slick promotional video that Mr. Trump showed Mr. Kim sketched out a gleaming vision of a prosperous, nuclear-free North Korea, with swooping construction cranes and high-speed trains. Though it also framed the life-or-death nature of North Korea’s nuclear showdown with the United States, the four-minute film had the inspirational tone of a Chamber of Commerce testimonial.

”They have great beaches,” Mr. Trump said to reporters. “You see that whenever they’re exploding their cannons into the ocean, right? I said, ‘Boy, look at the view. Wouldn’t that make a great condo behind?’ And I explained, I said, ‘You know, instead of doing that, you could have the best hotels in the world right there.’”

North Korea may consider its position between China and South Korea, with Japan across the water, as reason to be worried about military security. But Mr. Trump considers it a prime location amid booming economies. “Think of it from a real-estate perspective,” he said.

Mr. Trump brought a similarly bottom-line view to the 28,500 American troops stationed in South Korea, as well as to the military exercises the United States conducts with the South. He reiterated his desire to bring the troops home and announced he was halting the exercises — much to the surprise of the Pentagon and the South Korean government, neither of which had been warned.

“We save a fortune by not doing war games, as long as we are negotiating in good faith — which both sides are!” Mr. Trump said on Twitter.

The president expressed particular spite at the B-52 bombers that the United States has flown over South Korea in missions from Guam. These planes, which can carry nuclear weapons, are a potent manifestation of the American commitment to protect its Asian allies. But to Mr. Trump, they burn a lot of fuel and serve little purpose circling in the skies over the Korean Peninsula.

“I know a lot about airplanes,” he said. “It’s very expensive.”

Mr. Trump’s sense of economic injustice runs even deeper when it comes to Canada and the European Union. Asked on Tuesday about his clash with Mr. Trudeau after the Group of 7 meeting in Quebec, he answered with a long list of grievances — some based on erroneous data — about the trade deficits the United States runs with Canada, Germany, and other allies.

“We are being taken advantage of by virtually every one of those countries,” Mr. Trump said. “They don’t take our agricultural products, barely. They don’t take a lot of what we have and yet they send Mercedes into us. They send BMWs into us by the millions. It’s very unfair.”

The president made no reference to the wars that Canada and European allies have fought alongside the U.S.; the counterterrorism operations they have coordinated; the world trade system they have managed; or the democratic political systems and respect for human rights that they share. If anything, experts said, this common history is a red flag to Mr. Trump.

“A consistent theme of the Trump administration has been to downgrade the value of allies and alliances,” said Richard N. Haass, the president of the Council on Foreign Relations. “To the contrary, they tend to be judged as military free-riders or economic rivals or both. That many are assertive, independent-minded liberals that regularly challenge the president only makes it worse.”

Officials in Japan and South Korea have been more reluctant than those in Europe or Canada to push back against Mr. Trump. But analysts in Asia said his comments in Singapore about withdrawing troops and canceling the joint military exercises left both countries rattled.

The widening fissures in America’s Pacific and Atlantic alliances, experts said, carry implications that go beyond bruised feelings or potential trade wars. In his single-minded focus on economic gain, sometimes poorly defined, critics say Mr. Trump risks undermining an international order built by the United States to bolster American security and values as well as prosperity.

In Europe, Russia could feel emboldened to bully its neighbors, confident that a divided West will do little to stop it. In Asia, the fraying of America’s nuclear umbrella could encourage China to increase its military adventurism in the South China Sea.

The paradox of Mr. Trump’s transactional approach to statecraft is that the joint statement he signed with North Korea looks like the kind of deal he once derided. It does not commit the North to the complete, verifiable and irreversible denuclearization that his administration has long demanded. It does not address the North’s fleet of ballistic missiles. It does not even set a deadline for next steps.

“The bottom line,” said Daniel R. Russel, a former assistant secretary of state for East Asian affairs now at the Asia Society, “is that President Trump paid retail for a few warmed-over promises and appears to have given away both leverage and deterrence.”

Or, as Mr. Haass put it in a tweet on Tuesday, “The containment doctrine has given way to the condominium doctrine.” "