The Ultimate Risk

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The Ultimate Risk

I have been traveling a great deal and advising some companies on due diligence processes to better ferret out unknown risks. In particular, I have been thinking about how to anticipate several government’s odd and violent rule changes while at the same time I have been re-reading The Prince by Niccolo Machiavelli along with some good old Raymond Chandler noir private eye fiction.

I was struck in my work how Machiavelli’s pen and the hard bitten investigators from Chandler’s typewriter mesh to describe the ultimate risk of rulers and regulators.

The Prince asks the question whether one human being, be it a ruler or regulator, should possess both right and unquestioned ability to make terrifying impromptu amoral decisions. After all, the essence of power is that real power possesses the authoritative use of violence to enforce the rules, their rules, for the benefit of the state. (Emphasis added). In finance, it is the right to grant or suspend license or to fine a firm into receivership.

It matters to the very soul of the state that the violence, when used in its defense, should never be gratuitous. The exercise of this power should never be self-serving or corrupt. It is not ethical to value action for its own sake. Machiavelli praises restraint when it serves the state. Machiavelli insists on the need for a no-nonsense view of how men are, how we are created and how we behave, as opposed to the doe-eyed citizen’s opinion about how rulers ought to be. This also assumes the leader is to serve the state and not themselves or themselves concurrently while cozy with the highest bidder. It states that the power of law and violence to enforce the law must never self-serving.

Yet, modern rulers and regulators are venal animals, the growth of industries; the huge costs of the welfare state, combined with the incessant pressure of confiscatory taxation make them more and more venal. The rulers, without accountability or transparency, choose to serve the states wants, not needs – as well as their own wants. This behavior forces the average business man into a corner. It is the corner of being tired and scared, and a tired, scared man can’t afford ideals.

I have witnessed regulators dream up new rules on the spot with little or no warning. They are aimed at the man already cowered and cornered. Their businesses started and succeeded under one set of rules are made to collapse under a new set. While this may be considered progress by some, there is an undeniable ambivalent cruelty applied concurrently with these changes. It is a taking of value without recognition or compensation. Combine the taking with no warning, no hint, no telegraph of what the future might hold and a whiff of self-dealing for image sake and you develop an entire population of scared, tired and cornered businessmen. The rebuff directed at the rules and regulators requires that the rulers and regulators waste half their time protecting the self-proclaimed sovereign dignity they squandered or never even possessed.

I sat down with one of these dreamy regulators, the type that dream up new rules that haunt our nightmares. This one looked about as innocent as a tarantula sitting on a piece of angel food cake. From 30 feet away the regulator looked like a lot of class. From 10 feet away the regulator looked like something made up to be seen from 30 feet away.

Are these sovereign inspired violent changes proffered and perfected done out of ignorance, fear, weakness, callousness, or sheer bumbling idiocy? I am sure I do not know. The regulators rarely remove ambiguous dualities from their own dreamy self-examinations, why would they play it straight with me – or you for that matter. The answers I did get to my few questions looked as though they were sticking out four inches from my back. It’s not that these folks will die young, from their venality and cruelty, oh no. The tragedy is that they remain in place and grow older, meaner and more practiced at their dark arts.

A leader who is guided by public necessity, their actions, maybe efficient and swift, but they are not cruel and vicious. However the ones guided by religious visions and incessant moralizing is to be regarded as fear incarnate. After all, someone who believes God and the forces of justice are on their side is capable of anything at any time. When you meet them you come through the door with a lawyer in each pocket and vague advance quotes from a judge on the cost of a writ to fix. These are not the politicians, public servants, lying awake at night, wrestling with the conflict between private morality and the public good. Their self-absorbed high tone ‘up talking’ speakers would sicken a goat raised on barbed wire and broken bottles. Here is the moral politician; it is by his dirty hands that we know him.

When I had the opportunity to question the objectives of the venal regulators I could see the regulators beginning to think, even after that short of an acquaintance, I could see that thinking was not going to be a bother for them. I could see that their answers were more about killing time and time was going to die hard.

It is then, after time has died an agonizing death, they passed me on to Head Honcho, the big man. Big men are mostly little men with fancy offices and a lot of money. A great many of them are stupid little men, with reach-me-down brains, small-town arrogance and a sort of animal knack of smelling out the tastes of the stupidest part of the public. They have played in luck so long that they have come to mistake luck for enlightenment. While I admire people who do things – again, help me, what is it that they do?

It was a grand meeting. Had my insight into things been worse, I would not have been invited to the meeting. Had my insight been a bit better, I would have never come. I laid my case before Head Honcho on dreamy regulators and the whiff of self-dealing and violent finance. He told me that I was kind of smart. I apologized, I didn’t mean to be. His answers were long-winded and pleasant, the ones that can be heard just on the edge of sound. It was suggested I not be a hero as there was no percentage in that. Honcho was a nice enough fellow, in an ingenuous sort of way.

It was an acrid reminder that he holds the reins (the chosen) guide the stage coach, he who has the keys drives the car, he who has the bucks and can make Buck Rodger sing – and dance, and can go where, when, and with whom they choose. I am not one of the chosen.

The best thing about violent rule changes and dead business left in their wake, if you will allow, make for the perfect fall guy. It clears the stage for the next act, like the consequence of arson clears a forest. The new rules come about, as we are told, in an effort to prevent a race to the bottom, to correct flawed business model, or to update processes that reeked of obsolescence. These are the under-lying excuses proffered for the need of violent finance. The tidy thing about a dead business is that is doesn’t talk back. The commercial stage is left to those permitted (chosen in advance) to live.

Self-dealing by rulers and regulators is a problem, look at Bell City – CA, Detroit – MI, Ukraine. The rulers and regulators made victims of business and whole populations in their venal efforts to line their pockets by selling off rule accommodations to the highest bidders. Government and Business have become too close to trust either. Rulers and regulators have become criminals to serve business. Violent changes in the law favor the prepared (the chosen) or those who had paid to have the violence done (lobbyists). It’s called an economic hit clause. All that is needed to deploy and economic hit clause is a bit of capital to accommodate the rulers / regulators. That’s the difference between crime and business. For business you have to have capital first, the crime by rules and regulators just acts as a selected act of redistribution – but as a ruler or regulator you don’t even need front money – though you always fix the vig in advance. Sometimes I think it’s the only difference between the two. Sooner or later we have to ask why a ruler or regulator likes being kept like lap dog poodle!

My problem as a critic is that if I know enough to speak with some authority, as I always do, I know too much to speak with detachment, which I do not have.

The ultimate risk, rulers and regulators that are as straight and transparent as the Mississippi, and as hard to buy as a haircut.

(My apologies to Nick Machiavelli, and Ray Chandler for heisting their ideas and the words attached to them.)


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