Mr Putin will need to be put in line!

Like someone said, the scales should fall of Europeans´eyes now at the latest, if they haven´t fallen before. Mr Putin is clearly a Hitler-Stalin-Napoleon -hybrid, who will understand only force and military threat at this point. With a serious Napoleon-complex this little man will now stop at nothing. He is also pushed forward with nationalist fervor rising from his view that the great Russian superpower has been pushed to the sidelines after the fall of the Great Soviet Empire. No more, he thinks, now is time to take back all that prestige and power!

Having practised with Georgia annexing few parts of that independent country back in 2008 successfully and with impunity, he won´t stop at Crimea and will not be deterred without military force. NATO will have to stop with military action the Russian forces from penetrating the rest of Ukraine - it will be too late to act if Russia already controls most of Ukraine.

I hope the Europeans and the US have woken up to the reality that Mr Obama´s soft touch will never work here. Mr Putin now understands only force and will only sneer and snigger at sanctions. If NATO has not prepared and mobilised for fast action, it most probably will be late this time next week or the following week. Hopefully, at least Nato´s Secretary General seems to have woken up.

Mr Putin´s strategy here is clearly to move fast before the West realises what really is happening. He and his administration is busy laying the groundwork by steadfastly denying they have any intention to gobble up more of Ukraine than Crimea and hoping the West is still blue-eyed enough to believe them. When the time comes and occupation is a fact, they will simply state that the situation changed rapidly and they had to act quickly to protect ethnic Russian population in Ukraine.

Truth is, that this Mad Conqueror won´t stop with Ukraine. The next countries in line are the ones that were in the sphere of Soviet influence. Putin´s New Russian Empire will force their will either militarily or with blackmail on other countries of their choice. Economic blackmail is also one of Mr Putin´s favourite tools and it will be all the more efficient with military threat looming on the horizon.

In behavioural game theory terms,  this moment in Ukraine is the Game of Chicken. Who will blink first? Putin won´t, not without military action. A grave error on the part of the Western World was to take military threat off the table in this crisis like they did when the world leaders opined, that "there is only political solution to this crisis". You never take your options off the table before you even enter negotiations! That is a child-like error and needs to be corrected soon as at this point in time Putin is convinced that NATO will not act and he can do what he likes with total impunity.

Western World, this is a watershed moment. The Mad Dog of Russia, Mr Putin, will need to be put down like the rabid dog he is. Or at least caged...

Putin will invade Ukraine, it is now a given!

There is no doubt in my mind anymore that the Russians will invade Ukraine. The surest sign of this is Russian foreign minister Lavrov's adamantly today denying any Russian plans of invading Ukraine. The only question is the timing. Will it take place right after Sunday's "referendum" or  later?

Maybe Putin needs a few more days to mobilise an overwhelming occupation force and to produce an excuse to attack. However, they have been busy working for the excuse and that won't take long anymore. My quess would be right after the "referendum", Sunday or Monday at the latest. I sure hope NATO is prepared to stop the Russians and at the same time I fear the USA and Nato haven't taken this seriously enough...

In these articles you will see clearly how the next steps of this process is being orchestrated from Moscow:

http://www.theguardian.com/world/2014/mar/14/russia-west-collision-course-ukraine-talks-fail-london

http://www.theguardian.com/world/2014/mar/14/russia-warning-fatal-clashes-ukraine-donetsk-protect-compatriots

My deepest sympathies are with you, Ukrainians! I dearly hope the Western World will not leave you behind when the push comes to shove...

Examples of Russian mentality

Is it the old tradition or just brainwashing by Mr Putin? Either way, these examples illustrate a totally sick mentality...

Example number One:

A scuffle followed - that was when the police intervened to arrest Alexei for violating public order. It was probably just as well, as he could have been seriously beaten. A woman then offered to fabricate a more serious charge against him. "I can testify that he was beating up a child," she suggested, enthusiastically. The policemen decided not to take her up on it.

Example number Two:

Andrei Zubov, a highly respected professor at the prestigious Moscow State Institute of International Relations, wrote an article in Vedomosti newspaper comparing a Russian annexation of Crimea to the German Anschluss of Austria in 1938. He was immediately told to resign or face the sack but the threat was retracted after colleagues rushed to his support.

 Example number Three:

The editor of the influential Nezavisimaya Gazeta, Konstantin Remchukov, has meanwhile spoken out against the idea of holding an "illegal" referendum in Crimea. In a radio interview he also criticised, in no uncertain terms, the Russian establishment's apparent readiness to quarrel with the West. As he uttered those words listeners started calling in to brand him a "traitor" and worse.

 Example number Four:

Last week small improvised protests were held in some Russian cities. In St Petersburg, 75-year-old Igor Andreyev was fined 10,000 roubles for holding a banner saying "Peace to the World".In Moscow, hundreds of protesters were detained by police, many of them also later fined, though city authorities have now given permission for a bigger March of Peace, planned for Saturday.

Examples 1-4 can be found in  http://www.bbc.com/news/magazine-26531310


Example number Five:

Russian TV's role in the current crisis has been crucial because it has been widely watched in Ukraine, especially the mainly Russian-speaking east and south of the country.In Crimea, Russian TV channels have now almost completely replaced Ukrainian ones.Ukraine's media news website Telekrytyka has been at the forefront of efforts to confront what it calls the "manipulation of facts" and "overt lies" disseminated by Russian TV.It pointed to a Rossiya 1 report from 1 March, which appeared to show a gun battle outside a government building in Crimea. "An analysis later showed the video was staged," Telekrytyka said.Reports like this were used to justify Russia's stepping up its military presence in Crimea and supporting the separatist movement there.

Example number Six:

Russian TV has also repeatedly alleged that Ukrainian "extremists" have been harassing and terrorising journalists, though until recently it had provided little actual evidence for this.That is, until pro-Moscow journalist Sergey Rulev told several of Russia's leading TV channels how he had been set upon by a gang of nationalists who had punched and kicked him, and tried to rip out his fingernails. A report on Gazprom-Media's NTVon 6 March even showed YouTube footage of the alleged attack.But, as Ukrainian blogger Pauluskp pointed out, the full video of the incident (which took place on or before 20 February) clearly shows that Rulev was attacked not by nationalists but by ex-President Yanukovych's hired heavies - the so-called titushki.

 More to read and ponder:

http://www.bbc.com/news/world-europe-26546083

Activists at StopFake, a website set up by Ukrainian journalists to monitor media coverage of the current crisis, have compiled a whole dossier of what they call "distortions and propaganda"

Showing how Russian TV passed off disturbances in Kiev as violent clashes on the streets of the Crimean capital Simferopol

Highlighting evidence that contradicts Russian media claims of a mass exodus of refugees from Ukraine to escape the violence and chaos there

Collecting extensive photographic and video evidence that appears to show that parts of Crimea are occupied by Russian troops - something flatly denied by President Vladimir Putin and ignored by Russian TV.

Continue reading the main stOne of the most respected figures on the Russian media scene, she has been at Lenta.ru from the start and became editor-in-chief in 2004.The abrupt removal of Ms Timchenko is being seen as yet another blow to the Leonid Volkov, he was also a media adviser on the campaign that helped elect Sergei Sobyanin, an ally of President Putin, "The problem is not that there is nowhere left for us to work. The problem is that there is nothing left, it seems, for you to read.

Background motives of Mr Putin

In trying to understand Putin´s motives behind the current skirmish in Ukraine,  it is important to look at the broader picture and understand what are the deeper motives for Putin´s behaviour and actions.

He has been in power for a long period of time and has ruthlessly cleared his path also domestically and even inside the ruling elite in Kremlin. He has placed his confidantes in important places in the bureaucratic machine as well as in the Russian government-controlled business machine. His grip on power is an iron grip and he has masterfully silenced dissent and free speech of which a perfect example is the latest initiative by Putin-controlled parliament of a law criminalising dissent a.k.a wrongful reporting. In other words, if a reporter writes something Mr Putin dislikes, he/she can be conveniently convicted and put away.

If a minor slap on the wrist is deemed adequate, the end result could remind us of Khodorkovsky, Pussy Riot etc. with a few years or decades behind bars. If Mr Putin is most dissatisfied with an individual, the end result could be more final like in the cases of Anna Politkovskaya, Aleksei Litvinenko etc.

I have long ago independently surmised that Vladimir must also have accumulated wealth along with his quest for unrestricted power, but the book "Mafia State" by BBC correspondent Luke Harding nicely corroborates it. I have also long ago realised that he must be afraid of giving up power and possibly facing the same fate he fed to Khodorkovsky. So, Vladimir and his band are facing an enormous problem in the future they are desperately trying to figure out.

I believe Vladimir is not going to be able to successfully resolve this future dilemma. I also believe the Ukraine skirmish is not going to end well for him. If it ends in a humialiating defeat for him, he may yet face a successful Russian Revolution at home absolving him of power. That must be a source of nightmares for this KGB-educated dictator.

This excerpt from Mafia State by Luke Harding sums thing up perfectly (pages 27-28):

"In the dying days of 2007, then, the question of who will succeed Vladimir Putin as the president preoccupies the Kremlin´s twitchy elite. This isn´t just a question of political preferences but of financial - possibly even personal - survival. In theory, any new president can take away the old elite´s assets, just as Putin did with Yeltsin-era oligarchs like Khodorkovsky. Yeltsin was canny enough to strike a deal with Putin, his successor: Putin´s first act as president was to grant Yeltsin and his family immunity from prosecution.
"Once Putin leaves power he will be accused. Inevitably. It´s the great tradition. When Putin quits he faces the question of how to legalise his funds, and all his friend´s funds and assets in the West."
...
But for Putin, Medvedev´s selection is entirely logical. In an illuminating Wikileaks dispatch, the US deputy assistant secretary of state David Kramer refers to Putin´s "hidden assets", and suggests that they play a crucial part in Russia´s Byzantine succession process.  Citing opposition sources, Kramer repeats the view that Putin won´t stay on as president for an unconstitutional third term. Instead, Kramer writes to Beyrle, Putin is "nervously trying to secure his future immunity from potential law enforcement investigations into his alleged illicit proceeds."

How to handle Pussy Riot in Sochi Olympics the Putin way...

A perfect example of Putin's way of resolving problems...

This little excerpt from a BBC article sums it up perfectly. This is Putin's way of resolving problems:

It started peacefully. Ukrainians - many of them middle-aged women - waved flags and sang songs to celebrate the birth 200 years ago of Ukrainian poet Taras Shevchenko. They see him as the father of the Ukrainian language.But by the end of the rally, pro-Russian demonstrators had turned up to gatecrash the celebrations. A line of young men and Cossacks with whips stood and glared at the rally menacingly - tension rose, and arguments broke out, both sides telling each other that Crimea is "our country".Then it turned nasty, very nasty. The pro-Russians chased a group into a nearby car park. First, they set upon the driver of a white van, smashing his windscreen. He tried to drive through the mob to get away but crashed into another vehicle and was attacked again.Another person was dragged into some bushes, kicked, beaten and lashed with a Cossack's whip.We were threatened, too, by the pro-Russians and ran away before they set upon us as well. It was a terrifying moment, and a glimpse into the abyss that Crimea now teeters over.

The whole article can be read here:
 http://www.bbc.com/news/world-europe-26503478

I really hope that this international and national bully and dictator is soon stopped. My belief is that Putin is afraid of West´s economical and political sanctions, but they won´t be enough to drive the Russians out of occupating Crimea.

When Ukraine gave up its nuclear weapons, Russia, Great Britain and USA committed to quarantee the security and integrity of Ukraine. If the Brits and the Americans can´t soon stomach putting military threat with concrete actions on the table in addition to economical and political sanctions against Russia I believe Russia will keep occupating Crimea and may also annex it to Russia. My quess is that without concrete military threat the sanctions will not be enough.

Poland, Baltic states etc. know very well that if Russia is let to keep Crimea and perhaps soon also other parts of Eastern Ukraine, other European and Eurasian countries may in the future face forced annexation to the New Soviet Empire. Near future will tell if the West can stand up to Putin with his unquenchable thirst for unrestricted power, political clout and wealth.

This article of a legal analysis of the situation in Ukraine is also well worth a read: http://www.bbc.com/news/world-europe-26481423

OS-ishockeyfinalen 3- 0 och Sveamammans småpojkar...

Sveamammans småpojkar gråter...

http://www.aftonbladet.se/sportbladet/os2014/article18425237.ab

Efter presskonferensen fortsatte Pär Mårts att prata med de svenska journalisterna.
Han var förbannad över att Sverige fick beskedet två timmar före nedsläpp.
– Det känns som en lek det de håller på med, så här gör man bara inte, säger Mårts.
– Jag tycker att det är ett justitiemord. Nicklas har inte gjort det minsta fel, det är de andra. IOK har bestämt. De ska ta beslutet 36 timmar innan, inte två timmar innan.

Och gråter... sku nån hjälpa torka deras tårar och skicka tillräckligt med krishjälp åt dom stackars...

http://www.aftonbladet.se/sportbladet/os2014/article18425017.ab

"Skulle ha spelat största matchen i min karriär”

http://www.aftonbladet.se/sportbladet/os2014/article18427315.ab

Erik Karlsson vill sälja silvermedaljen
”Det kommer att ta tid innan jag kommer att kunna reflektera”

... och äntligen någon säger något klokt...

http://www.aftonbladet.se/sportbladet/os2014/article18426524.ab

”Någon ljuger”
Mysteriet kring Bäckströms dopningsprov: ”Det är något som inte stämmer”
...
Både Tre Kronors ledning och Internationella Ishockeyförbundets medicinskt ansvarige Mark Aubry tog "Bäckis" i försvar på den efterföljande presskonferensen.
– Det är ingen dopning utan medicinering, säger landslagschefen Tommy Boustedt.
Men nu reser flera experter frågetecken för svenskens testvärde på 190 mikrogram/liter, 40 mikrogram över den tillåtna gränsen.
Arne Ljungqvist var delaktig i arbetet med att återinföra substansen på Wadas dopningslista igen hösten 2009.
– Eftersom det var kontroversiellt att ta tillbaka den på listan så sattes ett högt gränsvärde, och kommer man över det gränsvärdet så är det ett fall, säger han till Sportbladet.
...

http://www.aftonbladet.se/sportbladet/os2014/article18428268.ab

"Stefan Holm oförstående till Tre Kronors anklagelser
Den svenska landslagsledningen har rasat mot IOK.
Men Stefan Holm, medlem i IOK:s aktiva råd, slår tillbaka.
– Bara för att det är en svensk idrottare som åkt fast riktas konspirationsteorier mot IOK. Det håller inte, säger han."

http://www.aftonbladet.se/sportbladet/os2014/article18426055.ab

"Även från svenskt läkarhåll är kritiken hård.
I en inervju med Expressen i dag är han förvånad över Bäckströms testvärden.
– Oj. 190, det är riktigt jäkla högt. Han måste ha haft världens klantigaste läkare eller så tog han kanske två eller tre tabletter, säger Ericsson."

http://www.aftonbladet.se/sportbladet/kronikorer/wennerholm/article18426753.ab

"Finns inga ursäkter
Wennerholm: Landslagsledningen har orsakat en av de största skandalerna i svensk idrottshistoria
SOTJI. Nicklas Bäckström åker fast i ett dopningtest i OS och det enda jag hör är ursäkter.
Det jag ville höra?
Att det inte finns några ursäkter.
Att en nation som Sverige klantar till det så fullständigt är helt obegripligt i mina ögon."

Who really are the most fooled by the Republican hypocrisy?

As there are interesting developments in the Arab world with probably Libya's and Bahrain's autocratic governments as next to go, there are also interesting developments in the USA. Developments that once again highlight perfectly the hypocrisy of the Republican - or Repuglican, rather - establishment. If you take at face value what they say instead of thinking and following what they really DO, you really are fooled. And the most fooled are the majority of Republican voters. Why? I'll get to that later...

This round of development has started in Wisconsin with their newly elected Repuglican governor Scott Walker opening the play. He is trying to muscle through a legislative bill that would strip worker unions of most of their bargaining rights and make their existence as difficult as possible. In other words, he's trying to make them disappear. He also demands some cuts to their entitlements and the unions have signaled they are willing to absorb them, but that is something he really doesn't care much. He really wants an end to labor unions.

When he acquired the governorship a few months back the Wisconsin budget was either a little on the surplus side (according to liberals) or seriously on the red (according to Repuglicans). As I did some googling I couldn't really discern the truth. I found out that the official budget two years back put the 2009-2011 budget shortfall at $5.363 billion and the then-governor's plan was to bring it at $245 million in surplus at the end of that budget period. I couldn't find out what the end result looked like. (Edit: Later it turned out that the current two-year budget was balanced, but the long term budget billions in the red, partly due to the economic recession of the last few years. Check the links and excerpts in the end of this article!)

Be it as it may, the governor's first order of business was to give tax breaks to the businesses to the tune of 120-150 million. After that, he sounded the alarm that there was a bugdet crisis! So, according to the Repuglican playbook, there is always room for tax cuts for the businesses and the wealthy. After that the usual move is to cut benefits from the poor and middle class families and make them pay for the shortfall. Pretty much what George W did after he inherited a massive projected government surplus from Clinton. He hammered through massive tax breaks for the rich and for the big businesses and so, in effect, gave them the surplus. He kept other big items out of the official bugdet so that it looked more rosy than the real situation and created massive debts with his wars and such and helped the economic crisis to come about by deregulating as much as possible. Idea here was to benefit certain wealthy interest groups and run the budget to the ground in silence so that the middle class and the poor would have to foot the bill. And when things get a little better economically, do it all over again - skim the cream of the cake for the wealthy through tax breaks etc and therefore create huge debts until the situation once again proves untenable and the taxpayers will have to foot the bill...

This is exactly the same pattern in miniature form in Wisconsin - the Governor either creates a budget crisis or makes it worse and immediately after that he tries to force the average citizen to pay one way or the other. This time, however, he is not only interested in making average citizens to foot the bill, but he also wants to strip labor unions of most of their bargaining power so that in the future they couldn't put up a fight. That way the unions couldn't annoyingly finance the Repuglican opponents in the future and the only campaign financing would be supplied by big business interests for the Repuglican benefit.

That is pretty much the plot in this play and other Repuglican governors are simultaneously doing exactly the same thing. And why am I saying that the majority of the Republican voters are the ones most fooled by this? That is because majority of them are more or less average workers and don't stand to reap in any benefits from the Republican policies that favor bigger earners at the expense of middle and low income earners. According to Pew Center, "Republicans have a median annual family income of $64,000; Democrats have a median annual family income of $46,000, according to a February, 2008 Pew survey".

That means that half of all the Republican households earn less than 64,000 USD every year, making them part of the majority that has to foot the bill. Just like they have to foot the bill for the economic crisis of 2008. Even then they still vote Republican for their own demise. So, either they don't realise that the politicians they vote for work to their detriment instead of for their benefit or they are just ideologically so driven that they don't care if they harm themselves. Either way that makes them the biggest fools in this game. Sad.

I've often wondered why the situation in Finland is not as extreme. The politicians and their tendencies are the same, but still I don't see the same excess here. I am sure there are a myriad of reasons for this, but I see a couple immediately. Here the big business hasn't been able to grab as much influence and is mostly in check compared with the US where they seem to run rampant and are gaining more and more influence each passing year. And the businesses here are not that BIG, so they may not have as vast resources of cash at their disposal. As the other reason I see the versatility and greater competition in our political landscape. In the US, they have in effect only two possibilities, the Democrats and Republicans and therefore limited choices and competition. Here we have three bigger political parties and lots of smaller parties, and soon we seem to have four bigger parties in our political spectrum. You know, like in business world there's monopoly, oligopoly and free competition. China is one-party-monopoly, the US has two-party-oligopoly and the real free competition happens where you have more than two dominant players. So, two-party-oligopoly is apparently only one step better than one-party-system...


Links and excerpts:

New York Times: Wisconsin Power Play

Wisconsin Legislative Fiscal Bureau: General Fund Tax Collection Projections

2010-11 General Fund Condition Statement
Based upon the November/December reports, the administration's general fund condition statement for 2010-11 reflects a gross ending balance (June 30, 2011) of $67.4 million and a net balance (after consideration of the $65.0 million required statutory balance) of $2.4 million. Our analysis indicates a general fund gross balance of $121.4 million and a net balance of $56.4 million. This is $54.0 million above that of the administration's reports.

New York Times: Wisconsin May Take an Ax to State Workers’ Benefits and Their Unions

But the plan in Wisconsin, which faces a $137 million shortfall in the current budget and a gap in the billions for the coming cycle, is among the most far-reaching of such proposals to be delivered to lawmakers. Mr. Walker expects swift approval.

Among key provisions of Mr. Walker’s plan: limiting collective bargaining for most state and local government employees to the issue of wages (instead of an array of issues, like health coverage or vacations); requiring government workers to contribute 5.8 percent of their pay to their pensions, much more than now; and requiring state employees to pay at least 12.6 percent of health care premiums (most pay about 6 percent now).
...
Mr. Walker made several proposals that will weaken not just unions’ ability to bargain contracts, but also their finances and political clout.

His proposal would make it harder for unions to collect dues because the state would stop collecting the money from employee paychecks.

He would further weaken union treasuries by giving members of public-sector unions the right not to pay dues. In an unusual move, he would require secret-ballot votes each year at every public-sector union to determine whether a majority of workers still want to be unionized.

He would require public-employee unions to negotiate new contracts every year, an often lengthy process. And he would limit the raises of state employees and teachers to the consumer price index, unless the public approves higher raises through a referendum.

Conservative mindset versus liberal mindset

Well, well. For long I've wondered about the fact-defying fanatic attitudes and beliefs that the right wing nut-cases and conservatives share. Now there's scientific evidence of a certain - at least partial - explanation.

Neuroscientists have found that there's a difference in brain chemistry between conservatives and liberals. In conservatives the emotional side was more dominant whereas in liberal brains there was more activity in the areas that deal with decision making and analysing of information. Conservatives were more reliant on emotions and more resistant to new ideas and tended to cling to what they had learned previously - therefore to what their emotions were telling them.

This explains a lot to me. I would consider myself more of a liberal leaning person than anything else, and it has often totally mystified me how some conservative people can so adamantly defy and deny logics, reason and facts. Now here we finally have some kind of explanation. They simply seem to be hard-wired that way and their learned beliefs and emotions are to them more important than facts and logic.

I've often wondered how e.g. GWB or the Dark Prince Mr. Cheney can live with themselves and what they've done, but apparently they believe so strongly in what they've done that no simple facts bother them. That would also explain why their off-spring is oriented in the same way - they have clearly been subjected all their live to similar ideas, beliefs and values than their parents and therefore their brains are similarly hard-wired.

Interesting, if a tad scary... Here are a couple of articles on the subject and some excerpts:

Independent: Konservatiiveilla on erilaiset aivot

Political affiliation could be all in the brain

Right-wing brains 'different'

Study finds left-wing brain, right-wing brain

Exploring the neurobiology of politics, scientists have found that liberals tolerate ambiguity and conflict better than conservatives because of how their brains work.

In a simple experiment reported todayin the journal Nature Neuroscience, scientists at New York University and UCLA show that political orientation is related to differences in how the brain processes information.

Previous psychological studies have found that conservatives tend to be more structured and persistent in their judgments whereas liberals are more open to new experiences. The latest study found those traits are not confined to political situations but also influence everyday decisions.

The results show "there are two cognitive styles -- a liberal style and a conservative style," said UCLA neurologist Dr. Marco Iacoboni, who was not connected to the latest research.

...

Sulloway said the results could explain why President Bush demonstrated a single-minded commitment to the Iraq war and why some people perceived Sen. John F. Kerry, the liberal Massachusetts Democrat who opposed Bush in the 2004 presidential race, as a "flip-flopper" for changing his mind about the conflict.

Based on the results, he said, liberals could be expected to more readily accept new social, scientific or religious ideas.

...

"The latest study found those traits are not confined to political situations but also influence everyday decisions."

This emotion-based decision making seems to affect everyday life as well. This fits well with my observation that there seem to be religious-like fervor and beliefs also in the area of economics. Some people tend to believe for instance in the free market theory so much in the extreme, that they seem to be ready to strip all regulations and let the free markets find their way.

I don't really know if these fanatic sounding free-market-theorists would really strip off all economic regulations given the chance, but apparently they would aggressively rush to that direction! That is also a bit scary thought, because I liken that situation to circumstances where you have little or no laws in place in a society. And in a more or less lawless situation, personal interests would conquer and I would expect a chaos to ensue.

Another interesting thought. What about the scientists, who have very conservative beliefs or background? When they practice science, and there's a major conflict between their beliefs and what the factual information tells them, which side will conquer? Will they let the facts and science win, or do their beliefs take over like in the case of Intelligent Design theorists?

The Russian Way in business - part 2

Just to verify my previous writing about the Russian Way, please check out this article in New York Times: Guilty Verdict for a Tycoon, and Russia

Here are a few delicious excerpts from the text:

But Mr. Putin’s line is just that — a line. In addition to tossing Mr. Khodorkovsky in jail on trumped-up charges, the Russian authorities also brought bogus tax claims against Yukos itself, shoving it into bankruptcy. Then the government created a dummy corporation to take over its assets, which it sold off, for far less than they were worth, to state-run oil and gas companies, primarily Rosneft, a poorly run company that is now the biggest oil producer in Russia.

“I have never witnessed a state steal such a large amount from investors,” said James A. Harmon, who, as president of the Export-Import Bank of the United States in the late 1990s, spent much of his time dealing with Russia. Said Edward Donahue, a Massachusetts accountant who had invested in Yukos: “They stole my investment,” Mr. Donahue was among a group of investors who tried to sue Russia to get their money back. (The case was thrown out of court.)

Even since the Yukos affair, corrupt Russian politicians and businessmen have routinely used arbitrary laws and regulations to grab assets that didn’t belong to them. Royal Dutch Shell was the majority partner in a group that included the state-owned monopoly Gazprom to develop a giant oil and natural gas field. Suddenly, in 2006, it ran into severe environmental and regulatory problems — problems that disappeared as soon as Shell ceded majority ownership to Gazprom.

A few years ago, BP was the controlling partner in a huge joint venture, amounting to 25 percent of its reserves, with a Russian company called TNK. TNK wanted to control the venture — so, naturally, BP suddenly had visa and other problems. Its business began to be disrupted. Robert Dudley, an American who was running the venture — and is now the chief executive of BP — had to flee the country and go into hiding for a time. Needless to say, the joint venture arrangements were rewritten.

And here's an another interesting piece. This is pretty much the same argument I floated in my writing...

To put it more bluntly, assets that were stolen from Yukos investors like Mr. Donahue six years ago are now being recycled to a new group of investors via Rosneft. Plainly, this doesn’t bother the Russian government, and it probably won’t bother whichever investment bank handles the Rosneft deal. But it should bother the rest of us — a lot. After all, if you can steal the assets once, what’s to prevent you from stealing them again?

So, by all means, go and invest in Russia. Your money's perfectly safe... not.

The Russian Way in business

Russia seems to have a peculiar culture in business and politics, probably the heritage of communist years mostly affecting it. What I find mostly abhorring is the culture where the powers-to-be can twist everything the way they want with no regard to justice, human rights or other aspects of democracy.

In Russia, this culture is clearly thoroughly ingrained in the society and its structures, where most frightening is the way even the judicial system is subjected to the will of the ruling class. Most abhorrent examples where how, for instance, Mikhail Hodorkovski was sentenced to a lengthy imprisonment and stripped of his wealth just because Vladimir Putin wanted it so. And the judicial arm of government rushed to do his bidding, quite probably out of fear of falling out of his favor. I am also more than a little bit suspicious that the government might have its hand in Anna Politkovskaya's murder as well. If not, at least it is very clear that the government was behind the poisoning of Alexander Litvinenko in London in 2006...

Well, that is the darker side of the Russian way of handling things. It is not always that tough in business life, especially in international business, where they can't always use as absolute methods of solving a problem. However, they know how to extort and use dirty ways to get their way.

Concrete examples, you say? Ok, let's start from the big ones, where foreign businesses have been blackmailed into submission. The Royal Dutch Shell's project called Sakhalin-2 springs to mind. You can read about it here. It was one of the biggest oil and gas projects in the world, and the Russians wanted control of it. They had made a deal with Shell about developing this area that gave Shell the majority ownership and control over the project. Shell had started the project in 1994 and had invested something in the area of 10-20 billion euros in it. So, the Russians let the Shell invest and build the field, and when it was nearing completion and it was time to collect the fruits, the Russians grabbed it. The operation was camouflaged as environmental problems and certain environmental permits were suspended to up the pressure and prevent production in the fields. Putin's boys also used some legal threats and in the end Shell had to submit. Suddenly all the environmental problems disappeared after the power-and-wealth grab was successful...

This is the way Russian government operates. They invite foreign companies to invest in Russia and when those foreign companies are hostage to the investment they have made, Russians take what they want by blackmail. And then they are surprised when foreign companies are a little reserved in investing in Russia? Go figure...

Let's take a couple of smaller examples, where we Finns have also tasted the rotten culture of our dear neighbour. First, import of Russian birch. Russia is mainly an exporter of raw material and their forest and paper industry is rather primitive. In comparison, Finland is known for its high tech forest and paper industries over the world and exports lot of its knowledge, technology and machinery abroad.

Vladimir Putin wanted Finnish companies to invest in Russian forest and paper industries and, supposedly, to develop them to the same high level as in Finland. He decided to force them to create paper mills etc. in Russia and do the refining of raw materials there, instead of exporting the materials and doing the added value work elsewhere. Vladimir decided that he would make the Finns to bring the high tech know-how and the capital required into Russia for free. After they would have made their investment, he could once again hold them hostage and demand what he wanted. Birch was what the Finnish forest industry required, so he decided to set big export tolls on birch. This way he would soon have the technology and the Finns would fix their primitive forest industry into a global success. And naturally, the Finns would pay for everything. Brilliant thinking!

However, Vladimir's plan backfired. The Finns didn't want to be held hostage and adjusted to the situation by stopping birch import from Russia. Finnish forest industries were forced to close a few factories to do so. So, Vladimir didn't get his way but lost the birch export to Finland. He tried to rectify the situation by promising to postpone the tolls by a few years, but it was too late. Finns didn't want to invest in opening anew the already closed factories, especially when the trade partner was so unreliable. What guaranteed that Vladimir wouldn't pull the same show all over again?

Here, things would be different, if Vladimir had tried to buy the technology and consultation and had formed a partnership with Finnish companies to that end. He would have gotten what he wanted in the first place, but he would have had to pay for it. Instead, he decided to get it for free by blackmail. Russians really would need to learn new, honest ways of doing things. Coercion and manipulation only works to a certain extent.

Examples can be found in abundance, but let's mention two more, briefly. First, the Russians took most of the export and import traffic on wheels by these same sort of tactics a few years back. Much of the export from Europe to Russia goes through Finland and 5-10 years back Finns did most of the transportation on wheels. Finns had great quality trucks and everything required, Russian trucks were very unreliable and oftentimes down right dangerous on the roads. However, Russian authorities at the border started to make things so miserable for the Finnish trucks, that soon Russians started to take over. Russian trucks got through the border with no problems, but Finnish trucks had to wait days on end, were punished with arbitrary and changing extra costs and regulations etc. At times the Russians authorities even demanded that Finnish trucks had to have an escort to drive to Moscow. With horrible costs, of course.

With all this happening, Finnish transportation suddenly became much more expensive and slow and business started to move to Russian firms. This even forced many Finnish companies to move their company's official headquarters to the Russian side to acquire Russian plates for their trucks. After that, they could circumvent the difficulties and costs that Finnish trucks had to absorb.

Finnish department store chains have also had their share of problems. Stockmann had to move one of it's department stores in Moscow after having no help from the police in a row with the owner. Stockmann had rented a building, which was later sold. The new owners wanted to extort a huge rent and cut off electricity when Stockmann didn't give in to their demands. The police was of no help, and eventually Stockmann had to find another location and move its store.

So, this seems to be the Russian way in business and I am afraid it's going to take decades before that changes. One thing that helps this change is the transparency provided by internet and other means of instant communication. It is no longer so easy to hide things, so even the Russian bureaucrats have to respect publicity...

Nuclear deterrent and game theory exemplified

Speaking of North Korea's case and the bilateral nuclear threat some interesting questions emerge. For instance, I've asked myself questions like "would North Korea have the 'courage' to strike with nuclear arms" and "would US be forced to retaliate or what would happen afterwards"?

Game theory can give you precise answers to these questions posed here, but as well you can figure out the answers by yourself. I have to believe that North Korea would never take the risk of nuclear strike, unless it thought it has been struck first with nuclear arms. And why is that, then? That is because the US would be forced to strike back with no other alternatives and the Mad Emperor of North Korea wants to live, not commit suicide.

And why would the US be forced to strike back, you ask? Why couldn't they just leave it be and negotiate a peace with North Korea, because the damage is already done and striking back won't alter that? This is where the game theory comes into play. The US would be forced to retaliate because otherwise their nuclear weapons would no longer work as a deterrent. If they did not retaliate, other rogue countries with nuclear weapons might think they can strike with no fear of US retaliation. Even North Korea would probably think they can do it again with no consequences. That's why the US would have no other choice than to strike back. A deterrent is a deterrent only as long as the other parties BELIEVE that you will strike back regardless.

So, the BELIEF that you will strike back is essential here. In other words, the CREDIBILITY of the fear of retaliation is everything. This fear of retaliation also works in business life, in price wars for instance. Credibility is the key word, whether it is about the fear of retaliation or your good business reputation or something else. That's why organizations and people cling so desperately to their good reputation and try to keep it untarnished. It is not because they are such decent people or decent organizations as much as it is the fear that business or other possibilities in the future are in jeopardy if they lose their credibility. If someone cheats once and it becomes known, nobody wants to do business or anything important with them any more out of fear of getting cheated, too. Because this is about the future possibilities, sometimes businesses getting out of business altogether cheat in the end. That's because they have no fear of retaliation and losing a reputation doesn't mean anything to them any more.

That's also why people want to have a good reputation in business life as in real life, too. You might find it very difficult to land a good job, if it came known to the employer that you occasionally cheat. Even if you do it once, it is a strong deterrent enough against hiring you, because your credibility as a trustworthy person is compromised. However, if the employer doesn't know it and you look the part, you're fine. So, in the end it is once again about beliefs. BELIEFS and CREDIBILITIES.

Back to the nuclear issue. What about Iran's run for the nuclear arms? Iran must have certain motives to pursue the nuclear issue so adamantly, as Israel and the US must have certain motives to try to stop that from happening. I'll not discuss the Iranian motives as I am more interested in the other side, for now.

Israel and the US strongly state that a nuclear-armed Iran would pose a threat to the whole international community and Israel explicitly states that Iran might want to totally destroy Israel. Is that a credible statement? I don't think so, even if all the free thinkers in the US seem to also describe it as the real reason. I suspect they just don't want to voice the real reasons.

Let's examine this in some detail. Would Iran's nuclear arms pose any more threat than some of those little pre-Soviet countries with nuclear arms? I don't think so. Bear with me and try to follow my logic a bit. Let's try two different scenarios here. In the first, Iran would try to strike Israel with nuclear arms itself. Let's call this scenario A. In scenario B Iran would provide some terrorist organizations with nuclear arms.

In scenario A, Iran would strike Tel Aviv and/or Jerusalem with nuclear missiles. Or they could try to "wipe Israel off the map" with all their nuclear arsenal at once. What would happen? Even if Israel was totally destroyed, its submarines in the Mediterranean would launch a devastating counter-strike with nuclear weapons at Iran. Also the United States would nuke Iran, so Iran would stand to absorb terrible destruction from these two countries' armies. The first priority of Israel and the US would probably be to make sure that Iran never again fires another nuclear missile. Second priority, at least to the United States, would probably be to make sure that there would be as little damage to the oil fields as possible. Therefore the US would probably want to limit the nuclear strikes to some of the biggest cities in order to not to make the whole country uninhabitable so that no oil production could take place afterwards. Iran is one important producer of oil and that happens to be of great importance to the world economy. Anyway, all the bigger military installations inside Iran would probably be totally wiped out with conventional weapons by Israel and the US. They would not want to run the risk that Iran could strike again with nuclear weapons.

To complete the picture, it is good to notice that Israel and the US would also quite probably want to immediately take out the highest leadership in the country. Those who made the decision to use nuclear weapons in the first place. So the leadership of Iran would vanish amazingly fast either vaporized by nuclear arms or destroyed with conventional weapons.

Now, if you have followed my reasoning this far, I think you're ready to answer if Iran would ever dare to try the scenario A and strike Israel with nuclear weapons? My logic tells me that Iran would never dare, because it would amount to national suicide as well as personal suicide for the leadership. They would not dare.

What about the scenario B? No, they would not dare to sell nuclear arms to terrorist organizations for if those weapons were used and could be traced back to Iran, Iran would be held responsible. I happen to believe that the consequences of that would be quite identical to those in scenario A. So, I really don't believe Iran would try this alternative either because it is suicidal as well.

If you're still not convinced enough think about the economic repercussions on Iran's economy. What would happen economically if Iran ever struck first with nuclear arms? Even if we assume that the US and Israel would not retaliate for some reason and would even leave the Iranian leadership in tact, what would happen? Not many countries would want to trade with Iran any more and their economy would collapse. Even now they are importing about half the gasoline they need because they don't have the capacity to refine enough of their own oil. That import is plummeting right now because several international companies have recently stated that they have stopped deliveries to Iran due to the new economical sanctions approved by the United Nations. They are also having great troubles at this time with foreign investments and foreign capital and expertise they desperately crave, because international companies are less and less willing to invest in Iran because of the sanctions and the volatility of the situation. If Iran's exports and imports would plummet totally due to a nuclear strike, it's economy would collapse fast.

So, I think we have concluded clearly, that Iran would never strike first with nuclear arms for obvious reasons. Therefore I don't buy the official reasons that both Israel and the USA offer us. Israel and the United States probably have quite different motives for their efforts to keep Iran from acquiring nuclear weapons, but they obviously don't want to state their real reasons.

Comment if you agree or disagree, that would be interesting to read. I would also be intrigued to learn of your opinions on what are the real motives of Israel and the US? As well as what are the motives for Iran to try to acquire nuclear arms?

North Korea - the disobedient and misbehaving child of international community

North Korea and its notorious and cruel leader Kim Jong-il tends to pop up every once in a while, usually when NK is throwing a fit or having a tantrum as the Washington Post so eloquently put it. While I watch the show, I can't help but think about the psychology behind the North Korean behaviour. Or how the game theory, especially behavioural game theory, is a useful and applicable tool in appreciating what is happening in this international show. Or how this setting reminds me of a disobedient and misbehaving child trying to manipulate his or her parents.

This is how the son of a gun behind all this looks like. And of course his father was similar in all aspects and raised his son to have a serious character flaw of which we all now get to enjoy. Not.

As I don't have enough information on the objectives and interests of the important players I won't even try to do an analysis of the situation game-theory style. I'll just list some thoughts on the subject.

North Korea is a poor country and its economy is in shambles. It can only manage with food aid from foreign countries and even so its people go malnourished and starved - the ruling class excluded, naturally. At this time China is its main food supplier due to the fact that South Korea finally understood the foolishness of giving massive amounts of free food aid to North Korea to no avail. North Korea's conduct has usually been like the disobedient and ungrateful child - after it gets its way it reneges on its promises and is never grateful for received free help but demands more. It's like a child stamping his/her foot to the ground and making never-ending and unreasonable demands.

For a surprisingly long time it has gotten away with it, but it can't continue indefinitely. As long as the parents - the international community - is divided it easily gets its way. As a cunning child tries to drive a wedge between his/her parents and thrives when the parents don't have a unified front and a unified voice, the same way North Korea manipulates the international community wiggling and squirming any which way it can. China still seems to adamantly back the mad emperor, but it will be interesting to see if Obama can manage a successful approach. In many a fight Obama has proved in my eyes to be a master strategist with great knowledge of human psychology and I wouldn't be surprised if he could manage to pull it off. He may need another term for it even though North Korea might crumble in just a few years. I believe Obama is the greatest president the US and A has had for several decades and I hope he might get even this North Korean problem at least on the right track if not solve it.

These two photos show well who is doing the starving and suffering in North Korea. In the first picture you see a North Korean mother and the other picture portrays the fat cat himself...





Back to the psychology. It is intriguing how well and analogously these two entities of a disobedient and manipulative child and a misbehaving and manipulative country - or its regime - compare. Even though the country is a much much larger entity, it can be seen to act as an individual entity much like the child. The way this country acts and tries to milk every possible benefit is very much like the child. In this case the child has been given his/her weekly allowances despite not keeping his/her side of the bargains made. Perhaps now is the time the parents finally wake up and take notice.

In all this, most surprised I am of China's attitude. Even though China has been fairly recently humiliated as North Korea in the nuclear debacle took action contrary to China's public suggestions and later North Korea has been caught red-handed in the sinking of Cheonan, the South Korean warship, still China seems supportive of the mad emperor. The most obvious reason stated for China's attitude is the fear of massive stream of fugitives from North Korea to China if North Korea was to fall. However, I find this hard to believe. I believe it wouldn't be a total catastrophe for China if it was to take care of 10-20 million North Koreans. Maybe it's more probably the fear of a nuclear capable government succumbing to total chaos if the government and communist system was to totally unravel in North Korea? And maybe even the communist pride not wanting to see a communist fellow country falling apart? And maybe North Korea is a convenient little buffer between China and the US forces in South Korea? Who knows? Anyway, it will be interesting to watch what happens in the near future...

Read more of the situation here: www.northkoreanrefugees.com

The Old Hypocrite

I have been following closely the pedophile scandal evolving in the Catholic Church. I am happy that they are finally forced to admit their sick mistakes and even more glad I am about the example of Belgian earthly powers taking over an abuse investigation. Church clearly seems to have conflict of interest when investigating it's own priests' abuses of children. Those priests should be investigated and punished according to the earthly practises and laws. The so-called punishments the Church has meted out are ridiculous when compared to the gravity of the crimes. Or do you think it is enough of a punishment to move an abusing priest to office duty and not even take away his priesthood after he has molested dozens of children? No jail time?

I believe one problem in the Catholic Church contributing to these problems is celibacy. It is quite unnatural for a human being and may contribute to these sick occurrences. At the same time I am pondering about how widespread these problems really are? For instance, how widespread sexual abuse of children is in the churches that don't preach celibacy? Is there less sexual abuse? And what about the islamic world? Does it happen there as well?

During these latest waves of this scandal the Catholic Church has tried to whitewash the Old Hypocrite, the Pope, as an ardent and fierce advocate against child abuses and a strict punisher of abusers. I didn't much buy into that earlier and now, according to a New York Times article, some newly unearthed documents paint a completely different picture. Here are a few brief excerpts from that article:

"But church documents and interviews with canon lawyers and bishops cast that 2001 decision and the future pope’s track record in a new and less flattering light.

The Vatican took action only after bishops from English-speaking nations became so concerned about resistance from top church officials that the Vatican convened a secret meeting to hear their complaints — an extraordinary example of prelates from across the globe collectively pressing their superiors for reform, and one that had not previously been revealed.
...

The office led by Cardinal Ratzinger, the Congregation for the Doctrine of the Faith, had actually been given authority over sexual abuse cases nearly 80 years earlier, in 1922, documents show and canon lawyers confirm. But for the two decades he was in charge of that office, the future pope never asserted that authority, failing to act even as the cases undermined the church’s credibility in the United States, Australia, Ireland and elsewhere.
...

But the future pope, it is now clear, was also part of a culture of nonresponsibility, denial, legalistic foot-dragging and outright obstruction. More than any top Vatican official other than John Paul, it was Cardinal Ratzinger who might have taken decisive action in the 1990s to prevent the scandal from metastasizing in country after country, growing to such proportions that it now threatens to consume his own papacy. "

Perhaps it would now be time for the Old Hypocrite to step down? The Onion previously published a funny article on the subject heavily criticizing the actions of the Catholic Church and the Pope. You can read it here: Pope Vows To Get Church Pedophilia Down To Acceptable Levels

Raping languages

Me thinks it is time to write some lighter stuff for a change. Perhapsly I've got this all wrong? Perhaps all the writings in a blog don't have to be full of substance and facts and rationale?

This time I am gonna rant and rave about raping languages, my favourite hobby. Rape a language or play with words, whatever which way you wanna put it. I've found I am constantly doing it, so I must have some kinda weird urge to do so. I seem to rape all the languages at my disposal, pretty much every day of the week.

Anyways, this topic reminds me first and foremost of Borat and his fine documentary called "Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan". I found it hilarious. What first springs to mind are occurrences where a man mentions "mormons". Somehow - quite unintentionally, I think - Borat picks up the word as "moron" and talks of morons ever since. Another occurrence at a dinner table - a man tells Borat he is "retired" and Borat instantly recognises the word as "retarded". The whole table then rushes to help and tells Borat that the man is not retarded... And so forth...

Probably most of the "document's" scenes are real, but most likely the climax where Borat tries to kidnap Pamela Anderson is not a real world occurrence but staged. I first thought they might have been that crazy, but I've come to realize there would be legal implications. However, some of those poor people in the movie are fooled in so a humiliating and total fashion that they must have felt grossly insulted when they saw the film or learned of it. I absolutely couldn't have done what Borat did.

One of my own inventions in the field of language-rape is the word Repuglican. It is a combination of the words repugnant and Republican. From there you might quite unequivocally figure out my opinion of the Republicans in the US and A.

Right now, no other word plays come to mind. Feel free to add your own wordplay examples in the comments, if you remember any. Funny thing, I found the concept wordplay was even defined in Wikipedia...

The short of stock market corrections

Someone strayed to this blog by asking Google "how much the stock market would correct at present". That's a good question! Let's try to answer his/her question at least in part and discuss how big stock market corrections usually are.

Before we do that, let's try our hand in predicting (=guessing) market movements a bit. Some people are afraid of a double dip where the second dip recessionwise would be on its way in the near future. However, I don't believe there will be a second dip even though it is always possible. I believe the fundamentals are so strong that there will eventually be a good surge in stock markets. No later than this fall I'm expecting a good surge, hopefully at least 10 per cent in the stock markets at least in the emerging markets and Asia. I am also hoping there will be a smallish downward plunge during the summer due to low demand in the summertime and fears that the markets are not yet through the rough patch. Therefore I took all the money under my control out of the stock markets for the summer and I am planning to put it back in come fall. So I am hoping to avoid possible 5-10 per cent downward plunge during the summer and benefit from the hopefully at least 10 percent surge between August and January. Usually trade picks up after summer and the economic news are probably by then looking continually better and all this I believe is leading to a little surge! Time will tell if my guessology will hit the mark this time...

Back to the original question. In my observations the corrections in stock markets usually hit the area of 15-30 percent of the highest values. The economic crisis in 2008-2009 was far worse and is a very exceptional and rare occasion. Typically different markets around the world lost 60 per cent of their highest market capitalization and the Russian market really hit the floor. For example the RTS index in Moscow lost about 75 per cent of its value causing total panic also in Russian government. A good reminder for Moscow, I would say, that not everything can be dictated by order of Mr Putin...

The opposite side of the coin here is that if you bought funds investing in Russian stock markets when they had lost 75 per cent of the peak value you would stand to gain 300 percent in profits when they someday reach their previous peak. Even if they don't reach the previous peak the opposite movement is certain after so rapid a plunge and you will certainly make big profits. The problem is guessing when you're close to the bottom, but I did some buying close to the bottom and when a month ago I sold everything, the Russian investment had already doubled in value.

One interesting question is how often do these plunges or crises occur? Based on my observations that would be in the range of 6-10 years, but economists put the length of these business cycles at 5 to 7 year range. That means that peaks as well as crises in stock markets occur every 5-7 years, usually. That also means that now you could probably put quite safely money into some interesting market funds and let them grow in value there for the next 3 or 4 years before the next crisis or correction is at hand. That should be a safe bet. And in any case, usually you start hearing market rumours or negative expectations in the public at least half a year prior to anything happening. So, when you start hearing these rumours more and more, it's time to get out of the market.

About the real business cycles. If my memory serves me right, there was a depression/recession in 1991-1992. The next one I remember was when the dot com bubble burst in around 2000. And then the current crisis started in earnest in 2008. These numbers, if correct, would point to around 8 years between crises.

Now, hopefully these observations will help you to develop your own Guessology ideas of future market fluctuations. I would be interested in hearing YOUR thoughts on the subject!?!

Printing money - legally...

Have you ever noticed that public companies - that is, publicly traded companies in stock exchanges - in effect have the right to print their own money? Me neither, until one public company CEO pointed it out to me...

What this CEO meant was that a public company is free to issue new shares and sell them to the public or other entities. As these publicly traded shares are worth money and easy to liquidate in stock exhange, it is pretty much the equivalent of hard dry cash. Instead of issuing and offering these new shares to the public and investors, a public company also has another choice. These new shares can also be issued to a certain entity as a form of paying at least part of an acquisition price of another company, public or not. In other words, if you're a public company you can print your own money - that is to say, issue new publicly traded shares - and buy other companies with this "money". I had the perfect opportunity to watch from close range how this was done with masterful strokes by this previously mentioned CEO. I was privy to all the details and plans before they happened, and this CEO had predicted all the events with alarming precision. All the events took place pretty much exactly as predicted and in a little over year's time a smallish private company with a yearly turnover of 5-8 million euros morphed into a smallish international conglomerate with a yearly turnover of 80 million euros. In short, the company grew tenfold in a blink through acquisitions and mergers. That's like a fairy tale come true in business life!

To tell you an anecdote within an anecdote, I'll mention that I also learned a lot about negotiating from this CEO. He used some fairly inventive methods in negotiations and I wasn't always happy to end up with the shorter straw. I didn't make any too bad deals with him, but I felt I had given in a little too much. My own managing director at the time laughed at my complaints, but I was later vindicated. It so happened that our managing director was to renegotiate a little deal with this CEO. He did it over the phone and just a little later he came and told me that he was totally overwhelmed by this CEO. He had ended the call having renegotiated the little deal with new terms and felt happy about that. Very soon he realised that he had agreed to even worse terms than the original deal had, and he was forced to once again call him up on the issue. And our managing director was no new puppy to the game and still he had fallen. I felt some satisfaction listening to his story and how he now understood my complaints about this CEO's negotiating skills...

Back to the original story. I had made an acquaintance with this company and its CEO several years earlier when they hired me as a consultant to help them with their object oriented software development efforts. After that we ran into one another every once in a while and 5-6 years later I went to work for them full time. Their plans of going public and growing rapidly sounded very interesting to me and I saw the opportunity of doing something big and worthwhile. Therefore I joined their ranks at that point.



I was invited by their CEO to their Board of Directors' meeting where I heard their plans in detail. All the members of the Board were co-owners of the company and I was the only outsider in the meeting. The CEO detailed his plans and described every step of the way in vivid detail. I remember thinking that it's a wonderful and bold plan, and if even half of it were to come true it would be an unbelievable achievement. The basic idea was to first turn public and then use issued shares to buy other companies, first small and then bigger and bigger until the last one to be gobbled would be the biggest prize of them all. All of the acquired companies would be in the same business to enable greater synergies and financial efficiencies to be exploited. In these acquisitions almost no cash was to be used.

Most critical step in this CEO's plan was to go public because without that step completed succesfully there would be no currency to go on that wonderful shopping spree. The original plan was to go public in spring 2000, but the CEO had recently concluded it would be too late. He believed there would be too many IPOs for the last ones to succeed and therefore he wanted to expedite the initial public offering to take place half a year earlier, in fall 1999. He expected a great rush of IPOs of small companies and needless to say, he was right. Public interest might have greatly waned in the spring and the public offering might not have succeeded. I can only admire his foresight even though I know he had great contacts. Even if you have great contacts and are greatly positioned, it is not easy to interpret right the soft and weak signals you detect. You have to be visionary and in some small measure a true clairvoyant... :-)

He also envisioned the order in which the acquisitions would take place. First we would acquire several smallish Finnish companies in the business and after that we'd go on an international buying spree all over the world. And finally, we would gobble the big fish, much bigger than we were. All these acquisitions were friendly, not hostile takeovers, so I later realised that he had probably tested the waters previously and discussed his plans with the other parties to a certain degree. This makes it all the more extraordinary performance in my eyes, for he has been able to sell his vision to all these prominent and capable business people and make them come under the same umbrella, if you will. They all heard his call and came, and he himself landed on top of the new company as their CEO. I find it just amazing. Amazing.

As I mentioned earlier, the events took place quite exactly as he had envisioned they would. In a little over a year, a smallish private company with a yearly turnover of 5-8 million euros morphed into a smallish international conglomerate with a yearly turnover of 80 million euros and business literally all over the world. When the new company build-up was finished, I was assigned to the new position of Product Development Director of our Finnish subsidiary. I had in my unit half a dozen software development or software testing teams to run, each with a competent and experienced team leader, so I felt it was time to do great things. For me it was a dream assignment and it felt like tailor-made for me. Unfortunately, I wasn't to enjoy that for long, for soon I fell severely ill and was forced to give up that dream position. Even though that was a great disappointment I feel privileged to have been part of the process and having been able to watch the events unfold from a close range. Great experience!

That's it for today, folks!

Stifle financial "innovation"?

Now I really am disgusted. I once again read in the news the stupid banking-community-generated warning not to "stifle the financial innovation" with too much regulation. Innovation? Really? What productive innovation the banking sector really has to offer? More than what the bankers already shoved our way during the financial crisis of 2008?

This was Mr. Henry Paulson, the Treasury Secretary during the Bush administration, that this time used that stupid "financial innovation" theme in his testimony to the U.S. Congress. Well, that shouldn't surprise anybody, because this guy comes from the Wall Street. He used to be the CEO of Goldman Sachs until 2006 and he still seems to speak for the Goldman Sachs and the like.
(Check this USAToday's story: USAToday - Geithner and Paulson say more financial regulation is needed )

I don't think we need any more of that kind of financial "innovation". And I think it is VERY misleading to call those Wall-Street-inventions innovations, because it gives you the feeling that there would be something PRODUCTIVE about them. Now, if you're talking about software innovations, technical innovations or other physical product innovations, there you quite easily may have some real PRODUCTIVE innovations. However, there are no PRODUCTIVE innovations in these far fetched derivatives that only give you the possibility to bet on different things. What's worse, these derivatives based on subprime mortgages have given the possibility to endlessly bet on the same thing, which means effectively and endlessly multiplying the risk. It's a little bit different if farmers want to use some simple derivatives to insure their crops, but if you just want to bet on things and make money on that - or make money on other people betting on them - don't call them "financial INNOVATIONS". That's bogus. Like someone said well, if you really need to bet on things, that's what horse races are for.

Banking sector has some very important functions to help lubricate the machinery in the economy, but besides the basic functions I think it would be best to stifle their "innovations" a bit. Or a lot. I don't think we would be losing anything much if it was stifled a lot. There's not exactly much productivity we could lose and we could do much better with a bit smaller and less "innovative" banking sectors in the developed economies.

Off the top of my head, I would list these services the banking sector provides essential. Other than these, we could stifle the other services and "innovations" to death for all I care...

- basic banking functions (cash, withdrawal, savings, lending etc.)
- services for trading in stocks and other basic instruments
- investment bank services for mergers, acquisitions, public offerings and other BASIC operations
- raising of funds for nations, organizations and businesses
- simple basic derivatives for productive businesses to have some insurance-like-coverage against market fluctuations (NO Abacus-like highly sophisticated traps where even their creator Fabrice Tourre has no idea what they really do...)

If I left something out, feel free to complete my list. I am not an expert in financials, but I have some basic understanding of the markets thru my MBA training. These are, in my opinion, the essential services required from the banking sector and other than these, I don't think we need much of this financial "innovations" stuff. Those are mostly for making some serious extra money for the banking sector, but they don't offer anything resembling productive services to the economies.

So, don't buy into this crap that Paulson and other bankers are serving you. Think about the role of the banking sector. Its role is servicing the other sectors of economies and those other sectors of economies are the ones that take care of producing something and being productive.

Usually the gross domestic product - the GDP - is used to measured a nation's economy, its productivity and the rate of economic growth. That's a fairly good measure on how things work in our economies.

Now, how much do you think the banking sector adds to the GDP and economic growth? Exactly. Pretty close to NOTHING. Financial services are admittedly included in the GDP, as services. Services are, however, in the role of enablers in business and supporting the actual production. Consider the fact that the contribution of an item called "financial services and insurance" accounted to less than 10 percent of GDP in United States economy in 2009. Count out insurance and you probably end up with financial services accounting to less than 5 percent of GDP. See how little that could influence economic growth positively even if it was to produce something useful beyond basic services? Badly functioning banking sector may hinder economic growth, but it doesn't add anything to it, cause it doesn't produce anything, really. So much for financial "innovations"...

Personal interests versus organizational interests

One of the most intriguing forces I've come across in human psychology is the individual's personal interests and their clash with the interests of a bigger entity. This conflict of interests is also a very powerful force and often much unappreciated.

This conflict of interest was, I believe, the main reason why communism failed and went down in flames. Communism and socialism had many great and noble ideas, but they ignored personal interests of human beings and presumed personal interests would give way to greater interests, the interests of the whole society. Sadly, that was not the case.

Individuals lacked any good incentives to do their job properly in the socialist system, because they didn't benefit directly from the work they did and common benefit was not enough to compel them to take their input seriously. Their output benefited all the others in the society, but not themselves directly and people lost their interest. They didn't have much to gain, so they just did what they had to do, but nothing extra. They didn't care to invent ways to make things more effective and we know the result. One big reason was probably also authoritarian leadership, but I strongly believe the lack of personal incentives played a very vital part in the collapse of socialism.

These powerful forces are still at play today as well, and will stay in play as long as humanity exists. In this conflict of interests there is also another side to the coin, and that also causes problems. Namely sometimes people have too strong individual interests at play and that may in some cases prove detrimental to bigger entity's welfare and interests. What organizations can do to change that is to try to align an individual's interests with the interests of the organization. In business world this is one important aspect of an area called organization design, which is a complicated science all on its own.

Before we plunge into how to align employee's interests with organization's, let us take a look at a greater framework first. In this context, I would ask you why exactly do we need laws and regulations and law enforcement in our societies? You guessed it already? Yes, through them we can align individual's interests with the whole community's interests. If there were no laws and regulations, it might very well be in persons' individual interests to rob people and places of their wealth so that they could themselves enjoy them. This kind of situation would lead into chaos and continuous crimes which would not be in our community's and mutual interests. In our community's interests is a situation where people can tend to their work and businesses in peace and create prosperity for themselves and for the community. That is why we have laws and regulations.

Laws and regulations and law enforcement efficiently align that above mentioned individual's interests with the society's interests, because it's not any more in that person's interest to rob other people. He stands to lose the loot and his freedom as well, and this way it is not any more in his best interests to try to rob other people but to try to create a wealth of his own by non-violent and legal means. In well thought out organization design we use rules and reward system practices in a way that aligns individual interests with the organization's as much as possible. The principle is therefore the same as in the laws and regulations governing our societies.

One simplified example of the interest debacle would be salesman's priorities. Let's assume your organization's salesman Mr. A is rewarded by paying him a certain percentage of the overall sales figure he can create in a month. So, no matter what the profitability of the deal is to the company, he get's his bonuses based on the euro value of the sales. In this situation, he might sometimes in tough competitive bids be tempted to make deals of zero - or even negative - profit to the company just to get a deal and his respective bonuses. Why would he care if the company doesn't make money on it?

If you now change his reward principles so that he earns a percentage of the deal's perceived profit to the company, suddenly his interests are more aligned with the company's in this regard and he's not any more interested in making unprofitable deals. Interesting, isn't it?

Now, how would you align the interests of different departments in your company so that they wouldn't fight so much with each other with such a different sets of objectives? And how would you align the interests of the conglomerate's subsidiaries which you would like to see co-operate efficiently instead of fighting for their own petty interests?

You could also apply this same principle to the situation where one company's individual interests differ from the interests of the nation it operates in. For-profit companies are after profit and that is their most important goal. They don't much care if their actions are not beneficial to that nation's economy either in the short or longer term, as long as they themselves can profit. Therefore the nation has to regulate individual companies' behaviour through laws and regulations and law enforcement. So, there are multiple levels of conflict of interests between an individual (a company or a person) and a bigger entity.

One interesting example of this is also the 2008 financial crisis and the involvement of investment banks in it. It most certainly wasn't in the interests of the owners of the investment banks that went bankrupt in 2008 to make those risky bets and cover their liabilities off the sheet, but it was in the interest of bonus earning employees' to make those risky bets and collect the respective huge bonuses. From the standpoint of those employees they didn't have much to lose. They had nothing to lose financially except their work and does it matter much, if you have been able to reap in a few million in bonuses in previous years? Why not try it also this year, if that is what the company pays for? "If it is not sensible in the longer term, do I have to care? I can laugh all the way to the bank, even if the company in the end goes under and I lose my job..."


That is exactly what the problem is: interests of an employee and his employer are in contradiction and they are not well aligned. Interesting example in this regard comes from the Brazilian banking system. It seems that they did not lose much of their own accord in this financial crisis and neither has there been need for a bank bailout in Brazil for several decades! Their banking system is considered VERY SAFE! And why is that? That is because the bankers are responsible for their banks' losses or bankruptcies with all of their own assets. In other words, they stand to lose their personal assets as well if the bank goes under. That means that their interests are almost totally aligned with their company's interests, in other words, their personal financial interests pretty much equal the financial health and future of their own organization. For some peculiar reason, these bankers suddenly feel the need to play it safe. Read more about the subject from this article in Finnish:

Taloussanomat - Tässäkö maailman turvallisin pankkijärjestelmä?

In other parts of the world, there clearly has been too much deregulation in the banking world. Presently new financial regulation is a hotly discussed topic in the United States. One often voiced opinion is that the banks and financial institutions that are "too big to fail" need to be chopped to pieces and kept smaller by regulatory means. New York Times columnist Paul Krugman thinks this is off the point and I happen to agree with him. In my opinion, chopping these big institutions into smaller ones is not the key issue here, it is the alignment of individual interests with the bigger interests. And if banks' and financial institutions' owners can't or won't do it, it is up to the regulator to align the interests. Name of the game has for too long been "Heads I win, tails you lose!"...

eReader and ePaper defined

When previously writing about eReaders I failed to define what an eReader is and what ePaper is. I will try to do so here briefly and in layman's language.

EReader is an electronic device meant for reading. EReaders are more or less some kind of computers, either full-fledged ones or highly specialized and developed for reading only. There's a wide variety out there and someone has counted that including this year's product announcements there would be at least 50 different kinds of eReaders to choose from.


Amazon Kindle DX


EReaders can have paper-like screens called ePaper- or eInk-screens, or basic computer-like LCD screens or both. What is also important is the content. Most of the eReader manufacturers try to provide their customers with both paid and free content. Good example here is Amazon's Kindle eReader (picture above).

You can download to your Kindle classic books that have already lost their respective copyrights and are in the public domain. These ones you can read for free. You can also buy electronic books or eBooks from Amazon's service on the net as well as electronic newspapers and periodicals. For example, you can subcscribe to newspapers like Washington Post or New York Times and have them delivered wirelessly to your Kindle every morning. With Kindle you can also browse the web and read what you like in paper-like format and of course you can read your personal PDF files on Kindle. So, in a thin and light Kindle device you can carry your whole library and your personal files with you where ever you go. Fairly neat, wouldn't you say?

In Kindle there's an ePaper screen. It is not suitable for watching videos or any moving pictures and most ePaper screens are still black-and-white screens. So right there LCD screens have an upper hand. In plain reading, however, ePaper has the upper hand. It is easier on the eyes, it doesn't flicker and it doesn't have any background light to drain the batteries, and neither does it fade in the sunlight like LCD screen does.

How does ePaper work and how does it imitate real paper, then? There are several technologies, but let's examine one called eInk and let's simplify it for easier understanding. Like normal computer screens, these ePaper screens are divided into very tiny points or pixels that can produce a certain colour at a certain intensity. These very small points all put together constitute a picture that the whole screen presents to the viewer.

In eInk technology there are transparent microcapsules each of which represents a pixel. Each of these microcapsules contains positively charged white pigments as well as negatively charged black pigments. These pigments float in transparent oil and can via electric charge be caused to move to the front side of the screen and therefore become visible for the viewer or they can be forced to the back side. After the electric charge the picture is formed and stays as such until a new charge is applied. Therefore the created picture doesn't require any more electricity once formed.

As the ePaper picture forms, it brings forth the black particles where required and therefore it mimics normal paper very closely. The black particles, the electronic equivalent of real ink, really physically are positioned on the surface of the screen much as real ink is positioned on the surface of the real paper. The only differences are that the ePaper Ink can be newly positioned and that there is a thin foil between the "ink particles" and the ePaper outer surface. Otherwise the arrangement closely imitates the physical representation of normal paper and is therefore called ePaper.



Things develop very fast in this arena. Fujitsu has already announced it will start the consumer sales of its new eReader FLEPia (pictured above) which is equipped with a COLOUR ePaper screen! Here you can read more about FLEPia:
Fujitsu Begins On-Line Consumer Sales of World’s First Color E-Paper Mobile Terminal FLEPia

America's rich are in deep deep trouble...

In The Know: Are America's Rich Falling Behind The Super-Rich?

And here's more proof of the sorry state of things:
The Onion: Rich Guy Feeling Left Out Of Recession