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Entries in new rules (48)


(RESILIENT BLOG) The Extremes To Which Non-Resilient National Medical Systems Must Go When Facing a Potential Epidemic

LATIN AMERICAN COUNTRIES, EXPERIENCING OUTBREAKS OF A PREVIOUSLY MUNDANE VIRUS (ZIKA) THAT HAS APPARENTLY MUTATED TO THE POINT OF TRIGGERING DEVASTATING BIRTH DEFECTS, ARE TAKING THE UNPRECEDENTED STEP OF ASKING WOMEN TO DELAY PREGNANCIES - IN ONE CASE UNTIL 2018. Mosquito-borne, Zika seems to be expanding its reach with climate change and the heightened international travel dynamics associated with globalization. In other words, this growing medical challenge feels like a glimpse of the world's near-term collective future, one which places unusual and profound pressures on the resilience of national medical systems. (The map above comes from the CDC) ...




(RESILIENT BLOG) Transparency Begets Measurability Begets Improvement Begets Resilience

YOU CANNOT IMPROVE AN INDUSTRIAL ACTIVITY THAT YOU CANNOT MEASURE, BUT YOU CANNOT MEASURE THAT ACTIVITY IF THE INDUSTRY ISN'T BEING HONEST. The world's fisheries are under a great deal of stress right now, between pollution and rising ocean acidity triggered by higher CO2 absorption rates. Unsurprisingly, the more regulated Western nations, having themselves long overfished, now do a much better job of measuring and managing fish stock. But with the ballooning middle class emerging across the East and South, two global regions even more given to eating fish than the West, the pressure for bigger catches is immense among those very nations featuring weaker governments and regulatory oversight, begetting a classic "tragedy of the commons" that is now being addressed by an aggressive expansion of aquaculture (fishing "farms") across Asia, which, in turn, generates new and profound environmental stresses along that continent's littoral zones ...




(RESILIENT BLOG) The Big (Ratings) Short(age), or Why a Soda-Straw View of Enterprise Resilience Doesn't Cut it Anymore

WE HAVE LONG DEFINED ECONOMIC RESILIENCE OVERWHELMINGLY IN TERMS OF CREDIT RATINGS, AND IT IS THAT SODA-STRAW VIEW OF MODERN COMPLEXITY THAT LEAVES US FATALISTIC ABOUT "TOO WHATEVER TO FAIL" SCENARIOS.  As the book/movie, "The Big Short" made abundantly clear, we expect far too much from our classic credit rating systems (Standard & Poor's, Moody's), which are themselves subject to the same competitive pressures (in effect, rating-shopping by customers) as any other business enterprise. Now, a depressing NYT article about a recent SEC industry review suggests that little has changed since the 2008-09 Subprime Crisis . . .



(RESILIENT BLOG) Strategy & Culture as Dimension of Resilience: Uber’s Strategy Lacks Cultural Awareness

UBER IS A FASCINATING COMPANY THAT'S STEAMROLLED ITS WAY GLOBALLY TO A VALUATION ON PAR WITH HONDA AND GM, but the Achilles heel of its planet-conquering strategy is the assumption that it can transplant its northern Californian business values to any society and watch them remake the local cultural landscape.  Resilient Corporation's focus on Culture & Strategy as one of its Ten Dimensions of Resilient might, at first glance, suggest a rating of inner functionality only, but, in truth, both enterprise strategy and enterprise culture are meaningless measures when glimpsed in isolation from the external environment.  In short, strategy without cultural awareness is closer to self-deluding hallucination than genuine vision . . .



(RESILIENT BLOG) EU Leapfrogs US On Data Privacy Rules – And Punishments, Creating A Regulatory Disruption

Earth within a water drop. Ecosystem conceptTHE EUROPEAN UNION FANCIES ITSELF AS A "RULES SUPERPOWER," meaning it creates new rules within its ranks and, by the power of its economic heft, they are effectively "exported" to other regions in a sort of regulatory osmosis (you do business with Europe, you adapt to those rules, those rules spread throughout your enterprise).

Fair enough, and certainly something the U.S. has been doing on trade for decades ...




(RESILIENT BLOG) Lack Of Enterprise Resilience Is Often . . . The Rest Of The Story.

RADIO PERSONALITY PAUL HARVEY LOVED TO REVEAL "THE REST OF THE STORY" in his regular segment of the same name.  He'd lay out some well-known story of success or failure, describe the great turning point in that trajectory, and then provide the hidden historical nugget that explained that triumph or tragedy from an entirely new perspective.  In many ways, his stories were about resilience, with "the rest" always being some description of an inner strength or weakness unmentioned by history . . .




(RESILIENT BLOG) Cyber Resilience in the Age of Terror: The False Conundrum of Encryption

THE ECONOMIST RUNS A GREAT "BRIEFING" ON CYBER SECURITY in its 28 November issue, asking "how to balance security with privacy after the Paris attacks"?  It starts off by noting that the US and UK intelligence services proactively vacuum up the largest amounts of data based on the structural advantages they enjoy - namely, America is home to many of the world's largest Internet firms and Britain sits astride some of the world's biggest undersea fiber-optic cables.



Getting Arctic hydrocarbons will be a lot harder than anticipated

FT special report on Canadian energy that highlights the difficulties of accessing Arctic oil and gas and bringing it economically to market.

First is the sheer remoteness.  Then there's the extremely hostile environment.  Even with the ice-clearing in the summer, the genuine window for exploitation is still measured in weeks.  Everything you use must be special built, platforms with extreme reliability.

And the fields in question need to be big - really big - to cover the high costs.  

In short, only the majors and supermajors should apply, because only they will have the "financial firepower."

This is all before governments issue ever stringent safety requirements to protect the environment, a bar that rises with each Deepwater Horizon.

Finally, there's how you get it to market, with the big choice being between fixed pipelines and ice-class shuttle tankers.  Neither is cheap.

Just a bit of cold water thrown on the anticipated "bonanza."

I note it with interest as I write the final report (while traveling most of the week) for Wikistrat's recent "How the Arctic Was Won" simulation.


Basel III derided further

Ft full-pager says Basel III et al will have the cumulative impact of driving investment money from banks to non-banks.  The killer quote from an expert on financial regs:  "It's now one-third more expensive to do business with banks, a powerful incentive to use non-banks" like hedge funds and other entities.

So the question becomes, how much of the money will escape "sectoral regulation."

A found description of non-bank lending:

Non-Bank Lending

Non-banks are ordinary intermediaries.  They act as a conduit between those with funds to lend and those in need of funds.  By pooling the funds of investors from whom they borrow, they can then lend in various amounts and periods.  For their service they charge a fee, usually in the form of periodic interest payments.  Their borrowing and lending increases the total credit market debt but has no direct effect on the money supply.  Non-banks simply intermediate the transfer of funds from the bank accounts of the original investors to the bank accounts of the ultimate borrowers.  

Non-banks usually borrow short-term at lower rates to lend longer term at higher rates.  That means a non-bank must be able to roll over its short-term debt at favorable rates.  It must also be able to borrow on short notice to manage any cash flow problem.  For that reason it must maintain an excellent credit rating, or it may not be able to borrow at all.  

A general rule:  for every crisis there is a new rule set, the response to which (either going overboard or escaping its grasp) usually sets the table for the next crisis.  Such is life.

Martin Wolf is among those unimpressed by Basel III, describing it as "the mouse that did not roar" (a great Peter Sellers' film):

To celebrate the second anniversary of the fall of Lehman, the mountain of Basel has laboured mightily and brought forth a mouse. Needless to say, the banking industry will insist the mouse is a tiger about to gobble up the world economy. Such special pleading – of which this pampered industry is a master – should be ignored: withdrawing incentives for reckless behaviour is not a cost to society; it is costly to the beneficiaries. The latter must not be confused with the former. The world needs a smaller and safer banking industry. The defect of the new rules is that they will fail to deliver this.

His basic complaint is that the amount of equity required is "far below" the levels markets would naturally demand if there was no chance of government bailout--so bad pricing of risk.  He then makes a case for much higher levels that he says wouldn't crimp the industry as much as feared.


Basel III--the directors' cut

FT, a while back, ran a full-pager analysis that said Basel III?  Ho hum, as the banking industry's regulators were cowed by the efforts of industry lobbyists into diluting the new rule-set package.

Still, when the deal was done last weekend, a lot of pubs hailed its historic nature.  So yeah, higher capital standards for banks, but not so high that most don't already meet them.  As for smaller banks?  Tougher row to hoe

Basel III is described as being different from what the US did under Obama:  "prescriptive rules to steer U.S. banks away from past errors."  Instead, Basel III allows the risky behavior to continue so long as the banks set up bigger capital cushions to absorb losses.

As rule-set resets go, a sort of reversal of the usual philosophies, with the global rules being more passive while ours are more active.   

The big thing, of course, is that some global rule-set package was agreed upon in the first place.

And yeah, markets around the world seemed to like that.

Is the reset finished?  Mebbe . . . mebbe not.  Some banks fear their national regulators will now step in with tougher standards, leading to "regulatory arbitrage" whereby banks seek out the locales with the loosest rules and shun those with the toughest.

A never-ending struggle . . ..


The sheer discovery that is simply analyzing all this new connectivity

Cool Economist piece on the social web in its Technology Quarterly, but it's really about business intelligence, a field that is skyrocketing in its ability to monitor, analyze and create new marketing strategies from the wealth of info that is naturally captured by online behavior.  Similar thing is coming down the pike in the healthcare industry with the advent of electronic medical records--huge bonanza.

In the first instance, a lot of biz intell used to simply keep existing customers by making them happier.  The most sophisticated stuff will be used to sniff our fraud and criminal behavior.

A classic example of an old concept of mine--actually the heart and soul of the "new map":  with connectivity comes circumscribed behavior because each connection reveals you to others, but in return you are offered fabulous access and efficiencies and the more tailored meeting of your desires.  It is a transaction: the more you reveal, the more respondents can predict your needs and wants and behaviors--both good and bad.

And the mapping technology (like my wonderful Google maps on my Motorola Droid) only kicks that process into high gear.

An amazing amount of new rules to work out on all of this--a fascinating process to witness in coming years.


Crowdsourcing request: interview subjects for cyber governance

For a side writing project I'm working on, I'm looking to do some interviews (either by email or phone) on the subject of cyber governance.

What interests me:  What are the models out there in the real world for doing this?  What's the experience base of success and failure?  What are the major schools of thought?  Where is this debate heading and what does the future of cyber governance look like--especially as we migrate from the early perceptions of a totally free Web to something more fenced off?

You can either submit a comment or just email me at

Trying to wrap this up quickly, so speak up if you want a conversation.  Nobody needs to know everything; just make sure you've got something to say or can get me someone with an interesting perspective/experience base.

Likewise, if you know of some great citation on the subject, pass it along.


State on top! No, Big Business back on top! No, tougher state rules!

So much back and forth on who's ruling the universe--states or big business.

Strong arguments that states take the upper hand as a result of the global financial crisis (like Bremmer's book, "The End of Free Markets"), but now that the dust settles (to include, apparently, last-minute changes to Basel III that make that new banking rule-set seem more robust), we get arguments saying that not all that much has changed.

From an FT full-pager analysis by Patrick Jenkins and Edward Luce:

On some level, it seems the best of both worlds:  pols confident of their new rules and bankers not feeling too unduly hemmed in.

Only time will tell, but clearly, not nearly the great or permanent shift predicted by many--meaning Bremmer's actual conclusions inside the book hold up better than the bold title on the cover.

Still, I would expect perceptions of who's "winning" to shift back and forth repeatedly in the months ahead, with all sorts of conflicting analysis--meaning only time will tell.


New banking rules underwhelm--by default

FT full-page analysis on new banking rules out of Basel, to be known as Basel III (the third great rule-set to emerge over the years).

The main changes:

. . . tightens the definition of what banks can count as highest-quality "tier one capital"--the main assets they hold to protect against losses.  It also requires lenders to hold liquid assets sufficient to see them through a 30-day crisis and sets a global "leverage ratio" to limit overall bank borrowing.

Why many experts are underwhelmed:  on every point, the initial draft of new rules was more stringent, only to be watered down after heavy lobbying by big banks.

But the FT says, on the basis of a quiet survey of the regulators themselves, that the real reason why the rules were watered down was fear of sabotaging the weak recovery--not the lobbying of banks. The initial draft, say the regulators, simply created too much fear across the industry.  The original liquidity rule, for example, was considered exorbitant.  As one regulator put it, "There isn't enough stable funding in the world to meet the requirements."

My take-away:  the global financial system remains too heterogeneous for a tough new blanket of rules.  We have varying levels of maturity across the board--as in, so many frontier economies, so few rules that everyone can follow to the same degree.

The financial crisis hit the system too early for such tough, across-the-board regulations, and so we await the Great Rebalancing (which no one is quite sure how to achieve without great trade protectionism on the part of the debtor states) for such rules to emerge.  Until then, we have too many differing economies trying to do too many different things for uniform rules to emerge.


Waiting on the first civil suit: GPS-aided stalkers

Phone companies pretty much always know where you are--to within 100 feet.  Annually, about 25,000 people are stalked across these United States.

Eventually the two trends meet, to the detriment of the stalked.

Therapists who work with domestic-abuse victims say they are increasingly seeing clients who have been stalked via their phones. At the Next Door Solutions for Battered Women shelter in San Jose, Calif., director Kathleen Krenek says women frequently arrive with the same complaint: "He knows where I am all the time, and I can't figure out how he's tracking me."

In such cases, Ms. Krenek says, the abuser is usually tracking a victim's cellphone. That comes as a shock to many stalking victims, she says, who often believe that carrying a phone makes them safer because they can call 911 if they're attacked.

There are various technologies for tracking a person's phone, and with the fast growth in smartphones, new ones come along frequently. Earlier this year, researchers with iSec Partners, a cyber-security firm, described in a report how anyone could track a phone within a tight radius. All that is required is the target person's cellphone number, a computer and some knowledge of how cellular networks work, said the report, which aimed to spotlight a security vulnerability.

Inevitably, protections will be put in place, and those who are lax about respecting them will be sued by victims--in part because their pockets are deep and they should know better.

Now abuse shelters tell women to turn off their phones the minute they walk through the door, but this is a sad state of affairs.  Eventually, the phone companies will have to become part of the solution.

How that might work:

The organization put that policy in place after a close call. On Feb. 26, Jennie Barnes arrived at a shelter to escape her husband, Michael Barnes, according to a police affidavit filed in a domestic-violence case against Mr. Barnes in New Hampshire state court. Ms. Barnes told police she was afraid that Mr. Barnes, who has admitted in court to assaulting his wife, would assault her again.

Ms. Barnes told a police officer that "she was in fear for her life," according to court filings. The next day, a judge issued a restraining order requiring Mr. Barnes to stay away from his wife.

Later that day, court records indicate, Mr. Barnes called his wife's cellular carrier, AT&T, and activated a service that let him track his wife's location. Mr. Barnes, court records say, told his brother that he planned to find Ms. Barnes.

The cellular carrier sent Ms. Barnes a text message telling her the tracking service had been activated, and police intercepted her husband. Mr. Barnes, who pleaded guilty to assaulting his wife and to violating a restraining order by tracking her with the cellphone, was sentenced to 12 months in jail. 

The cat and mouse on this one will be fascinating to watch.  New rules galore.


Personal data as a sellable asset

Our Bynamite heroesNYT story that I've been waiting a while to read:

On the Internet, users supply the raw material that helps generate billions of dollars a year in online advertising revenue. Search requests, individual profiles on social networks, Web browsing habits, posted pictures and many Internet messages are all mined to serve up targeted online ads.

All of this personal information turns out to be extremely valuable, collectively. So why should GoogleYahooFacebook and other ad businesses get all the rewards?

That is the question that animates Bynamite, a start-up company based in San Francisco. “There should be an economic opportunity on the consumer side,” said Ginsu Yoon, a co-founder of the company. “Nearly all the investment and technology is on the advertising side.”

Bynamite, to be sure, is another entry in the emerging market for online privacy products. The business interest in such products, of course, is being fed by worries about how much personal information marketers collect. Also playing a part are recent outcries after Facebook changed its privacy practices and Google introduced a social networking tool, Buzz, that initially shared information widely without users’ permission. Venture capital has been pouring into Web-based monitoring and privacy protection products like ReputationDefender and Abine, as well as services that help parents protect children’s privacy online, like SafetyWeb and SocialShield.

Bynamite brings a somewhat different perspective to the privacy market. “Our view is that it’s not about privacy protection but about giving users control over this valuable resource — their information,” Mr. Yoon said.

Both the protection and the value approaches to the privacy market could well pay off, says Randy Komisar, a partner at Kleiner Perkins Caufield & Byers, the venture capital firm. “What’s intriguing about Bynamite,” he said, “is its emphasis on privacy as revolving around choice and ownership of data, and ultimately a notion of an exchange of value.” (Kleiner Perkins is an investor in ReputationDefender but not in Bynamite.)

I think this is a great step forward toward an inevitable future. In my mind, the Googles of the world are largely ripping us off and achieving way too much power.  The backlash will come, but this is the right way to channel it.


California toques the lead on legal pot!

Economist story on how California always leads with new rules, and always leads on pot, so inevitable the two strains shall meet in this age of stressed state public finances.

Not that America leads the way on decriminalizing pot--far from it.  We're bringing up the rear in the Core.

A bill now working its way in Sacramento:  treat pot just like alcohol.  

I think this is the path we're on.

Much shturm und drang to follow, but I see this happening eventually.


Dodd-Frank will not lead to global imitations

Economist editorial on the 2,300-page bill.

What it got right was dealing with the fragmented regulatory nature of our financial system.

But the rule-set's global influence will be limited:

At the G20 Mr Obama boasted of “leading by example” on financial reform. In fact, Dodd-Frank is too idiosyncratically American and too incomplete to be a true template for others. And his claim that it would keep a financial crisis like the one the world just went through “from ever happening again” is bound to prove wrong. Yet imperfect though it is, the reform is proof that even a government as fractious as America’s can move with impressive speed when the motivation is there.

Expecting more or better in this age of globalization's rapid expansion is simply unwarranted. We may have birthed the system, but it has grown in complexity and heterogeneity beyond our ability to lead by example in rule-set resets.


The rule-set clash heats up on medical pot


NYT story on the growing complexity of new rules regarding medical marijuana, with Colorado as ground zero for experimentation.

Opening bit:  don't assume you can get rich quick selling medical pot, because the restrictions are dazzlingly complex.

“You’d never see a law that says, ‘If you want to sell Nike shoes in San Francisco, the shoes have to be made in San Francisco,’ ” says Ms. Respeto, sitting in a tiny office on the second floor of the Farmacy. “But in this industry you get stuff like that all the time.”

As usual, the economics races ahead of the politics, but the politics is struggling to catch up.

One of the odder experiments in the recent history of American capitalism is unfolding here in the Rockies: the country’s first attempt at fully regulating, licensing and taxing a for-profit marijuana trade. In California, medical marijuana dispensary owners work in nonprofit collectives, but the cannabis pioneers of Colorado are free to pocket as much as they can — as long as they stay within the rules.

The catch is that there are a ton of rules, and more are coming in the next few months. The authorities here were initially caught off guard when dispensary mania began last year, after President Obama announced that federal law enforcement officials wouldn’t trouble users and suppliers as long as they complied with state law. In Colorado, where a constitutional amendment legalizing medical marijuana was passed in 2000, hundreds of dispensaries popped up and a startling number of residents turned out to be in “severe pain,” the most popular of eight conditions that can be treated legally with the once-demonized weed.

More than 80,000 people here now have medical marijuana certificates, which are essentially prescriptions, and for months new enrollees have signed up at a rate of roughly 1,000 a day.

As supply met demand, politicians decided that a body of regulations was overdue. The state’s Department of Revenue has spent months conceiving rules for this new industry, ending the reefer-madness phase here in favor of buzz-killing specifics about cultivation, distribution, storage and every other part of the business.

Whether and how this works will be carefully watched far beyond Colorado. The rules here could be a blueprint for the 13 states, as well as the District of Columbia, that have medical marijuana laws.

The rule-set reset unfolds . . .


Another era when it comes to child labor on farms

NYT story on how Labor Dept. is cracking down on farms that employ children and pay them less than the minimum wage.

Story caught my eye because I spent a few years as a child (above 12 but below 18) working on a local farm for what was then less than the minimum wage (I got paid $3/hr and thought that was pretty good in the late 1970s).  A 1938 US law allows kids 12 and over to work on farms with almost no limitations or rules, but Labor is changing that landscape because nowadays, it's most migrant kids doing the labor.

The Obama administration has opened a broad campaign of enforcement against farmers who employ children and underpay workers, hiring hundreds of investigators and raising fines for labor and wage violators.

A flurry of fines and mounting public pressure on blueberry farmers is only the opening salvo, Labor Secretary Hilda L. Solis said in an interview. Ms. Solis, the daughter of an immigrant farm worker, said she was making enforcement of farm-labor rules a priority. At the same time, Congress is considering whether to rewrite the law that still allows 12-year-olds to work on farms during the summer with almost no limits.

The blueberry crop has been drawing workers to eastern North Carolina for decades, but as the harvest got under way in late May, growers stung by bad publicity and federal fines were scrambling to clean up their act, even going beyond the current law to keep all children off the fields. The growers were also ensuring that the workers, mainly Hispanic immigrants, would make at least the minimum wage of $7.25 an hour.

“I picked blueberries last year, and my 4-year-old brother tried to, but he got stuck in the mud,” said Miguel, a 12-year-old child of migrants. “The inspectors fined the farmers, and this year no kids are allowed.”

Child and rights advocates said they were encouraged by these signs of federal resolve, but they were also waiting to see how wide and lasting the changes would be. Across the country, hundreds of thousands of children under 18 toil each year, harvesting crops from apples to onions, according to a recent report by Human Rights Watch detailing hazards to their health and schooling and criticizing the Labor Department for past inaction.

Most definitely a different era, but hard to argue against improving the lot of low-tech, low-education workers in this country, because impoverishing them serves nobody's needs.

I remember my farm labor with a certain romanticism, although I don't know any grown-up former farm kids who do, because they worked the longest hours and didn't really get paid.  Plus, there was no quitting the family farm until adulthood got them an out, which most took, happy enough if they left with all their fingers in tact.