Business Ethics – Page 6 – education and deconstruction.com

Digital Gold

The Book of the Week is “Digital Gold– Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money” by Nathaniel Popper, published in 2015.

This ebook is about Bitcoin, a bookkeeping system used on various websites that distributes, records and stores the value of units called Bitcoins.

The system was created in 2009 by a computer geek who called himself Satoshi Nakamoto. His vision was to create a worldwide means-of-exchange to be used online that would be:

a decentralized network of users so that no one central authority has the majority of power over the system– unlike the current situations in the world; in other words, place power in the hands of the users, rather than the economic royalists. (Nevertheless, the irony is that Bitcoin has largely stayed in the realm of the wealthy computer geeks- so there has basically been redistribution of wealth among the wealthy);
created and maintained by users of the system on a consensus basis rather than by the powers-that-be, whose political campaigns are funded by financial institutions, and who stay in power by doing their will;
anonymous (like cash– no third parties acquire the information of buyers and sellers);
secure (no one point of failure would mean vulnerability for the whole system, plus have protections against identity theft, malware, counterfeiting etc.); and
offered at a lesser cost than the current system (avoiding financial institutions with their fees).

However, no utopian vision is perfect. Various tech-startups around the world have been created to store and exchange Bitcoins. That is all well and good. In the last seven years or so, a “remarkably engaged online community” has sprung up to discuss the ideology and all the different issues attendant to the new system. Even the major American financial institutions, fearing competition, have begun to rethink the security of their online dealings, and so have assembled task forces to research how to harness Bitcoin’s loss-prevention technology.

Bitcoins are acquired by computer users who log on to a specific site on the Internet. The users get the virtual “coins” for free, but might have to pay to store them elsewhere to keep them secure.

Bitcoins are more like a security than a means of exchange like cash because:

The system distributing Bitcoins is like a combination slot machine and a financial market where instruments are bought and sold, and the value of Bitcoins fluctuates.
There’s an inherent unfairness in the system in that– technologically astute users of the system have banded together to create devices that mine Bitcoins at a significantly faster rate than individual users.
People can acquire a national currency such as the American dollar in many more ways than they can Bitcoins, most of them honestly– earning, borrowing, begging or stealing.

Anyway, the purpose of Bitcoins as a means of exchange has yet to catch on among mainstream consumers of industrialized countries. There is no sufficiently compelling reason for consumers to start to buy things online with Bitcoins rather than credit cards. “Why should they trust a digital code that had nothing backing it but the computers of some libertarian nerds?”

Argentina is one country where Bitcoins have been useful. The super-speedy inflation of the peso there has meant people must spend their Argentinian money the minute they acquire it or risk the inability to buy anything because they wouldn’t be able to afford it– even food. In China, Bitcoin is popular because the government regulates the yuan exchange rate in order to stem “capital flight” and sell more of its own goods to the world.

As with all human-created systems that rely on the honor system, ALL users must act ethically. One American Bitcoin-processor in particular created a drug-distribution entity called Silk Road that was deemed illegal according to U.S. law.

Another bad actor hacked into a company called Mt. Gox in Japan. All users of that service suffered. “Bitcoin users eventually went to government authorities that Bitcoin had been designed, at least partly, to obviate.”

Besides, the Treasury Department’s Financial Crimes Enforcement Network has been examining the legal aspects of Bitcoin as a virtual currency. Homeland Security is concerned about the fact that Bitcoins could be anonymously sent to terrorist cells overseas.

Read the book to learn much more about the good and bad consequences of the creation of Bitcoin.

Red Notice

The Book of the Week is “Red Notice, A True Story of High Finance, Murder and One Man’s Fight For Justice” by Bill Browder, published in 2015. This suspenseful, emotional saga should be made into a motion picture, as it is not only entertaining and engaging, but is a comprehensive picture of the extremes of human nature.

Rebelling against his left wing intellectual family, Browder became a capitalist. During his career, he worked under two big bosses who died under mysterious, suspicious circumstances– Bob Maxwell and Edmond Safra. As a young whippersnapper, he longed to do investment consulting in Eastern Europe, but had to settle for London. Browder got in on the ground floor when the Russian securities industry was in its infancy in the early 1990’s.

In early 2000, the power of Russian Federation president Vladimir Putin, was actually held by “… oligarchs, regional governors, and organized-crime groups.” Browder started a hedge fund called Hermitage. What with complex economic and political goings-on, his hedge fund became the victim of the Russian mentality. In 2006, Hermitage had to “… sell billions of dollars worth of Russian securities without anyone knowing.” That was just one of many traumatic episodes in Browder’s career.

The author had the brains and skills to become not only a successful financial consultant and investor, but a muckraker; however, this made him a “Darwin Award” candidate. He became involved in a true thriller with intrigue, greed, power hunger, human rights abuses and karma. Russia struck at his attorney, Sergei Magnitsky. Numerous Russians in positions of authority– in the government, prisons, the police– all lied to the world about what happened to Magnitsky. Under Putin’s rule, Russia had reverted to the Stalinism of the 1920’s, with thousands of dissidents tortured and killed.

The few people whose eyes were open, who were raising the alarm– were risking their own lives. The rest of the world didn’t want to get involved because they were of the mentality that the violence was confined to Russia, and it wouldn’t spread to them. And they might end up like those dissidents if they rocked the boat. Besides, in the 2000’s, people have become desensitized to human rights abuses due to the widespread, propagandized publicizing of them (like video clips arousing viewers’ morbid curiosity, of the alleged beheadings of journalists by Middle Easterners on YouTube).

(Please excuse the legalese in this paragraph- but it is the briefest way of explanation) Some people would say that Browder had “unclean hands” and there was “contributory negligence” on his part, so his story should not have deserved the special attention it got. Admittedly, he was out for revenge, not because he truly wanted to stem uncivil behavior in the world. He made his living in an industry full of greedy people whose scruples are less than stellar– securities. He made a ton of money by engaging in “self-dealing” and insider trading, which would be considered violations of American securities laws. He was from America, the country that gave rise to the corrupt economic system in Russia in the first place. It might be recalled that Harvard economist Jeffrey Sachs gave bad advice to Boris Yeltsin (to put it generously), convincing him to adopt “shock capitalism” — a ruinous financial plan. Lastly, Browder had “constructive knowledge” that doing business in Russia was especially risky (not just financially), compared to other countries. Arguably, he was trying to apply American morals and laws to get justice in a situation in which he had profited from Russian morals and lawlessness. Some people would say, “Pox on everyone’s house.”

Browder wrote, “There was something almost biblical about Sergei’s story, and even though I am not a religious man, as I sat there watching history unfold, I couldn’t help but feel that God had intervened in this case.” This blogger thinks that, but for Browder’s powerful professional and political contacts who intervened in this case, it would be just another infuriating, depressing, suppressed, and eventually forgotten human rights abuse story.

Read the book to learn the details of the story, including the actions taken against the morally bankrupt, brazen Russian criminals, and learn whether justice was done.

The CBS Murders

The Book of the Week is “The CBS Murders” by Richard Hammer, published in 1987. This is the true story of the murders of two women, and three men who were by-standing CBS employees– in a parking lot in midtown Manhattan’s far west side in April 1982.

The ugly crime was the culmination of a white-collar crime spree committed over a number of years by a family named Margolies, in the jewelry business. The major perpetrator of the crimes, Irwin, schemed to blame the company bookkeeper, but complications arose.

The case was unusual in that criminals like Irwin generally do not hire a hitman, but only hire fancy attorneys to weasel out of legal trouble. Irwin and his wife Madeleine behaved like a dictatorial couple, like the Perons, Caucescus or the Marcoses. Read the book to learn the details of this suspenseful business story.

Silvio Berlusconi

The Book of the Week is “Silvio Berlusconi” by Paul Ginsborg, published in 2004. This is an extended essay on the media mogul/powerful politician in Italy. It examines the issue of whether Berlusconi practiced Fascism, not necessarily through creating an atmosphere of fear and intimidation, but through monopolistically broadcasting propaganda in the guise of education, to the masses. He combined his business dealings with politics to amass a staggering amount of power, with the usual conflicts of interest that come with the territory.

Over the course of three decades starting in the 1970’s, operating out of Milan, Berlusconi, a construction contractor, founded an ad agency and purchased TV stations that accounted for the bulk of Italy’s visual information sources. Later, he entered politics and bought a professional European football team. He was accused of racketeering, bribery and money laundering, among other crimes.

Berlusconi proved to be teflon, escaping punishment in the 1990’s. Not only that, he made a comeback– legally, economically and politically. As of 2004, he was still dragging his feet on answering the legal charges against him, in order to invoke the statute of limitations to weasel out of going to jail.

Read the book to get the details, and the author’s take on whether Berlusconi’s political career would survive much longer, given his outrageous exaggerations when recounting his endeavors for the people of Italy in 2004. The nation’s cost of living had soared and real wages had fallen significantly beginning in 2002.

The following video of Al Franken’s speech on America’s fiscal deficit is well worth watching in its entirety; he mentions a few recent American presidents’ economic policies (starting just after 23:00)– some of which can be compared to Berlusconi’s:

https://youtu.be/hHUDPU7_2qA

Lastly, Berlusconi’s reputation for alleged extensive law-breaking had been a “thing” for a long time.

God’s Hotel

The Book of the Week is “God’s Hotel” by Victoria Sweet, published in 2012. This is a medical doctor’s account of the radical changes that occurred at a county-funded hospital, formerly an almshouse in the San Francisco area that treated mostly disabled and elderly patients who were indigent.

The author describes the series of consequences stemming from an ever-increasing annual budget, a power struggle, office and mayoral politics, and bureaucratic shenanigans. There was a tug-of-war over turning the hospital into a psychiatric facility.

Florence Nightingale summed up the field of medicine in a nutshell when she said there have to be checks and balances in connection with practicing medicine, doing nursing, and handling administration. If doctoring becomes too powerful, patients get overtreated; if administration becomes to powerful, too little doctoring is done. When there is excessive nursing (emotionally and spiritually caring for patients), medical progress suffers.

Over the course of several years, a Justice Department investigation and a special relationship with the mayor’s office prompted the hospital’s executives to increase the administrative staff even as the number of patients fell. The additional staff was required to generate assessments, policies and procedures. When an incident resulted in the death of a demented patient and the media gave the facility bad publicity, the executives pointed to budget cuts that caused the understaffing that led to a compromise in safety. The hospital then hired a PR firm, an in-house director of government and community relations, and an assistant medical director to help with all the new paperwork, decisions and questions. Quietly, even more draconian budget cuts were being made to the hospital. Yet there was still enough money to hire the mayor’s communications consultant.

Read the book to learn how misdiagnosis and home care (rather than hospital care) make healthcare significantly more expensive, and of the controversies surrounding the push for progress on one side, and preservation of personal patient care on the other.

Dragon Sea

The Book of the Week is “Dragon Sea” by Frank Pope, published in 2007. This ebook describes the lives of sunken-treasure hunters– people who go SCUBA diving to recover material assets of ships that have sunk in prior centuries.

Such a pursuit interests marine archeologists, too. They should have knowledge of art, ancient history and the sea. The oil industry has developed the technology that allows the least expense and the fewest complications for conducting underwater research and exploitation of the seabed. However, the exploitation part is still life-threatening and very expensive. A gruesome death might await divers at any time, so they make big bucks.

Many divers take a chance by attempting to retrieve treasures from a sunken ship whose contents might be claimed by its country of origin. They risk confiscated cargoes, impounded vessels and court cases, not to mention plunder, if pirates find out what they are doing before they can finish grabbing the ceramics, coins or other valuables from the ship. Those items might end up at a big-name auction house or at a museum. Or on eBay.

Read the book to learn about the salvaging of ceramics from one particular ship– along with the dangers, complications and conflicts that arose, the equipment used, worker interactions in light of the situations they encountered, and the financial results of the project.

The Strange Case of the Mad Professor

The Book of the Week is “The Strange Case of the Mad Professor” by Peter Kobel, published in 2013. This ebook recounts the sordid story of a petty, vengeful university professor who was passionate about his field of study, lemurs.

Professor John Buettner-Janusch (aka “B-J”), of German and Austrian descent, was born in 1924. He grew up in the United States, but went to jail for evading the draft during WWII. “His desire for attention was enormous, and he never seemed to care much whether that notice was admiration, disdain, or loathing.”

B-J eventually rose through the ranks of higher education while collecting a menagerie of lemurs that were subjected to primate research. People either loved him or hated him. He was like a “Dr. Jekyll and Mr. Hyde”. It became apparent that he was also a sociopath.

Starting in the late 1970’s, he was charged with serious crimes. “…But much of B-J’s pretrial testimony formed a farrago of lies and half-truths, of the incredible or incomprehensible.”

Read the book to learn what became of this colorful character.

The Real Deal

The Book of the Week is “The Real Deal, My Life in Business and Philanthropy” by Sanford Weill and Judah S. Kraushaar, published in 2006. This career memoir describes how, over the course of about fifty years, Weill became a major change agent in the American financial services industry. His specialty became leading the execution of mergers and acquisitions for the investment, banking, and insurance companies of which he was an executive and board member.

In spring 1960, he started a securities brokerage, actually on Wall Street, with three partners. The stock market was bearish in 1962 and 1963. Interesting Side Note: “The typical stock in the Dow Index had a price 23 times its earnings as this downturn began, compared to a multiple of only 10 times in the early 1950s.”

Through the years, he gained more and more power and accumulated more and more wealth. When he attended events at which he had to speak to stockbrokers, he adopted a policy of brevity, saying, “You’ve heard enough speeches– what questions do you have for me?”

Although the author fostered a corporate culture of informality and “Management By Wandering Around” at his own company, in many instances, he failed to take into consideration the culture of the target company. His strengths lay more in bringing the top executives of the parties together to do the deals, and negotiating the new management structures. It was ironic that he was such a poor judge of how the two cultures would mesh once the integration process began.

At times, Weill tapped the power of his friends in high places, one of which was the government. It helped him change federal law to allow transactions to proceed. For instance, prior to 1999, certain banking and investment banking services could not be legally offered by the same company, due to financial conflicts and possibilities for abuses. He and his cohorts had a hand in making the historic change so that people within the same company could offer their clients all kinds of financial services.

Weill describes a whole bunch of instances that provided evidence for the necessity of strict financial auditing laws. In just a few years at the turn of the 21st Century, greed had spun out of control in the industry, leading to the accounting scandals of Enron and WorldCom, the dot-com crash, and a major hedge-fund crash that required a bailout. A terrorist attack didn’t help, either. By 2002, the chickens had come home to roost in the form of a bear market. “The regulators, the press, and politicians of all stripes…” played “the game of pointing fingers.”

And yet Weill writes, “…governance rules mandated by Sarbanes-Oxley (enacted in summer 2002) made it seem likely that bureaucratic needs would trump the fun of the business.” He also complains that businesses would have to spend more money preparing their financial statements. Sorry about that, Mr. Weill. Yes, pesky, bureaucratic, expensive laws reining in greed are no fun.

Six years later– same song, different verse… a whole lot worse. Need it be said– The more things change, the more they stay the same. History will continue to repeat itself, given human nature.

Read the book to learn the details of Weill’s career ups and downs and trials and tribulations. This blogger skipped the last chapter, in which Weill merely rambles on stating his opinions, and the endnote, which is an interview with his wife, whom he lavishly praises as loving and supportive throughout this ebook.