Innovation Corruption - Why Our Government Isn't Working

For those of you who follow my writing, you know of my admiration for Professor Lawrence Lessig. He is one of the most relevant thinkers of our time. His recent speech “Innovation Corruption” was delivered May 20th at the Yahoo! campus in Santa Clara, CA (video below). The message was clear: government and business are corrupted by money. This corruption blocks innovation because regulation is designed not for everyone's good but to maximize money paid to Congress. The system Lessig referrs to is the “economy of influence.” Our government is completely corrupted, that it is why it doesn't work and people better wake up and pay attention.

From the Obama presidency, to the food business, to the broadband deployment problem in the U.S. and EU, Lessig cites examples of money's influence from a number of sources. His plea to the audience was to do something: the public is very much a part of the problem when clearly there are corruptive patterns that no one does anything about.

Did you know almost half of all senator and house members become lobbyist when they retire or lose their office ? This is just the beginning. Watch to learn more about just how corrupt the system is.




The Era of Behavior

Tom Friedman's Op-Ed in the NYT's today was titled "A Question from Lydia". In it Tom addressed a question a 10 year old Greek girl wrote at the site of the Marfin Engatia Bank, which was firebombed a few weeks ago. The question was "In what kind of world will I grow up?". Tom answered, "that's a good question Lydia", and I agree. Good news is that world is changing to a place with great potential for not tolerating such bad behavior.

My writing proposes that 6 degrees of change are increasingly emerging as the result of the revolution created by technology, global ism and demographic shifts:

1. Transparency modality becomes essential;

2. Traditional institutions vanish;

3. Orchestration strategy dominates;

4. Participation explodes;

5. Wealth increasingly is redistributed;and

6. Human conciousness profoundly evolves.

The increasing adoption of transparency as a requirement for doing things cannot be ignored or discounted. This will be driven by hyper-connectivity and a world where people's behaviors will not be able to be hidden.

This view is shared by thought leader Dov Seidman, and articulated in his recent book: How, Why How We Do Anything Means Evertyhing . As Tom mentions in his NYT Op-Ed:

When Greeks binge and rack up billions of euros of debt, Germans have to dig into their mattresses and bail them out because they are all connected in the European Union. Lost in Athens, felt in Berlin. Lost on Wall Street, felt in Iceland. Yes, such linkages have been around for years. But today so many more of us are just so much more deeply intertwined with each other and with the natural world. That is why Dov Seidman, the C.E.O. of LRN, which helps companies build ethical cultures, and author of the book “How,” argues that we are now in the “Era of Behavior.”

Of course, behavior always mattered. But today, notes Seidman, how each of us behaves, consumes, does business, builds or doesn’t build trust with others matters more than ever. Because each of us, each of our banks, each of our companies, now has the power to impact, for good or ill, so many more people’s lives through so many more channels — from day-trading to mortgage-lending to Twitter to Internet-enabled terrorism.

Watch Dov's lecture below. Dov calls this , "The Era of Behavior". After reviewing the book, I recommend it highly thanks to Tom's editorial.

The Euro and World Economy - A Revolution is Underway

I've been writing that we are in the midst of a revolution driven by radical advances in technology, globalism and shifting demographics; the result of which is a time of rapid revolutionary change impacting all institutions and individuals. In the end many postive changes for humanity will result, but the process of going thru change will entail some great pain - partiularly as it pertains to large institutions like governments.

The Economist's, recent editorial Coming to a City Near You, reflects on the crisis in Greece that included chaos in the streets and the death of 3 people. Here's what it said:

IF THERE was ever a week to be depressed about the euro, this was it. After an age of dithering, Europe’s politicians cobble together a colossal rescue package for Greece, worth some €110 billion ($145 billion), nearly three times the level discussed only three weeks ago—and behold the results: carnage on the streets of Athens, where three people lost their lives, and no respite in the markets.

The idea that governments solve problems has become so mainstream yet is divorced from the reality of what they've been up to over the past few decades - spending more than they have to spend and borrowing the rest. More importantly these institutions and their populist participants have not been adequately changing how things are done or facing key problems. As a result the opportunity for needed improvements have not materialized. Read this excerpt from the Economist's recent article, The Sad End of the Party:

At the same time Greece’s worst habits—the plundering of state coffers, the hiring of cronies, the abuse of public office, impunity for the powerful—were multiplying. A handful of Cassandras said it would all end in tears but, while the party lasted, nobody listened.

This quote could be easily applied to the US or most of the other significant nations today. Putting aside the unique aspects of Greece's culture which includes the idea of a manipulating “foreign finger” as a recurring motif, what we are truly seeing in the EU, is that which we will see across many economies in the coming months and years. A reconciliation for irresponsible behaviors that created imbalances which will be addressed by the markets. Increasingly people will question the purpose of the government's they have in place and what they've been up to. Look for much more upheavel in the months and years ahead around this. Watch the video below.

How Laws Are Stiffling Creativity & Innovation

This morning I reaquainted myself with some of Lessig's past talks in reaction to a post I was reviewing Steve Lohr had tweeted on transparency. Recently I had an important business meeting with a group of executives to discuss a potential business acquisition, which required their input. The transaction involved a great number of copyright and other issues requiring (or not requiring to the point of this post) voluminous contracts. One of the 5 or so significant reasons the proposed transaction I was attempting was not achieved was, according to this group, my being too "legalistic".

I only use this example to make a point about where our laws have gone and the practical implication this has on commerce; particularly when it applies to innovation and progress. Attempts at progress are being impeded reguarly as the result of laws which have become disconnected from their original intent. Ironically, when I was told I was being too "legalistic" you should know, I am not a lawyer and the opposing group has multitudes of them employed, including one in the room at the time. I simply ask a lot of questions about lengthy agreements, the terms of which are prepared by others and the implications of which are often ignored until something goes awry. If you don't understand where I am coming from, watch this video of Lessig as he shows a good  example regarding a young woman's video on Youtube. So is it me being too legalistic or the world we live in ? Let me know. Perhaps upon viewing this you'll appreciate what I am refering to and next time reconsider where and when you play music and take pictures, these among many actions our law has deemed "illegal".

Private Insurance, Health Care & Corruption

Opening the NY Times this morning I read of record profits reported by the U.S. insurance industry in 2009. The nation's five largest for-profit insurers had a combined profit of $12.2 billion, according to a report by the advocacy group Health Care for American and overall the companies increased their profits by 56 percent in 2009, a year that saw 2.7 million people lose their private coverage.

As a student of economics I appreciate capitalism - but this is no free market scenario. I also understand the theory of insurance as  what it is supposed to be: a form of risk management used to hedge against the risk of a contingent loss. An equitable transfer of the risk of a loss, from one entity (the person) to another (the insurance company), in exchange for a premium. But in health care, from a public good standpoint, can we really continue to allow private companies to take the cream off the top of our imploding health care system ? What is the fear of the public option ? Its about money and corruption.

The insurance companies continue to drive profits up amid rising costs by paying out less and less in claims while charging more for premiums. This is irrefutable. As the PriceWaterhouseCoopers Health Research Report showed, payments for claims as a percentage of premiums have dropped significantly in the past 14 years, while Medicare outlays have stayed at 97% (see graph below).

The true reason the "public option" is so unpopular among some folks , particularly congressional types, is that when a publc option comes to the marketplace the price will be so much more competitive as to render the for profit insurance companies useless.  Its called competition. If one follows the money in the world of Congress, both for democrats and republicans, there is a high correlation between their views and contributions by the existing profiteers of our health care system - the insurance companies among others. Carl Bernstein recently lamented that the debate over and the writing of health care reform legislation has shown us "Congress at its worst."

The concept of author, professor and activist Larence Lessig "Good Soul Corruption" is a good idea to get your head around if you question why, given the huge profits of private insurance companies, many oppose a public option as some form of evil.

Watch the video below and learn how profit interests effect public policy.