Profitable Fraud Follows Form

I find another example of completely FUBARed control systems in our society nearly every time I open any of many news sites.  This DuPont amazing continuing crime, fully aided and abetted by the local political and legal systems, cannot have EVER been in anyone’s interest, yet things equally stupid are everywhere all the time.

Nobody will be responsible.  This is 2016 in corporate America, and our legal system has all such threats to the minions of the oligarchy under complete control.  Yes, the solution is costly, a huge stack of corporate administrators, but those are shared over larger and larger corporate entities as financialization continues, so the development of such legal protection is still profitable.  That structure of corporate governance guarantees failures like this, and it is meant to, it is still profitable.

If it wasn’t profitable, they would use corporate structures which reliably prevent such malfunctions, which are a well-known part of business management, and adopted by all corporations and other organizations which intend to be honest.  They aren’t even hard, and save costs, just a general transparency. Want to come in and look at our books, go through receipts for my office?  “Sure, let me introduce you to my wonderful assistant Nancy.  Nancy, this is J Random Stranger who wants to know whether he can trust us. Nancy will help you find all of the paper records, will give you RO access to the computer records, and here is a read-only copy of our books. If you have any questions, I am in the office most of the day.”

Or the on-line equivalent.  That is an organization I can trust to the extent that I can grasp their operations.

Perhaps a bit idealist, and hard to run a competitive business being so open*, so our society has developed many forms of governance for institutions of all kinds and we know what can work with what reliabilities.  Town clerks embezzle at a known rate, and are detected at a very high probability if you do your accounting  and overseeing in a few particular ways, etc. for all of the other positions of responsibility in a society of many responsibilities and many new functions.

But absolutely nobody adopts very deep management structures of quite vague responsibility in so many titles if they intend to make or spend money honestly.  You can predict what DuPont’s high-level, serious internal investigation, run by a $5K per hour lawyer hired out of the Justice Department to be the independent council but later becomes their Chief Legal Officer (I should write their scripts), empowered to take testimony under oath and with each person testifying told by the CEO himself and Chairman of the Board herself (quite a prominent politician less known for honesty than than bad decisions), both in all sincerity, to be completely honest and disclose everything for the corporation’s best future, and the investigation having full access to every email ever sent through the entire company, will find. There won’t be a shred of evidence of any management knowledge or responsibility for this corporate, social and ecological catastrophe.

And there won’t be because there can’t be, the structure of the organization and the function thereby forced on every individual, prevents any such from being generated.  And if nobody is in a position with a function to generate such, nobody can be guilty of anything, and never need to feel guilty.

So, enough management layers and “not my responsibility to watch that” and “I just passed along my interpretation of the evidence given to me from my direct reports, you may fault my judgement, but I am not responsible for higher level’s decisions”, layer by layer meanings are shaded and deep dark stupid black becomes a light-enough shade of grey to pass for white, if you squint enough in bad enough light and there is something even worse in the organization’s recent past, relative to which this doesn’t seem important, etc. and decisions are so diffused and all of the people in the organization who could have/should have an overview didn’t, and for so many so good reasons so long in gestation, way before my watch, nobody told me to change the structure under me.  None have to feel guilty in the slightest, they were all doing their jobs and getting awards for outstanding leadership, bonuses for originating another cross-function team to check for excess and obsolete inventory, getting that off the books saved $Ms by our estimate.

The similarity of cultures allows executives to move smoothly between and among large corporations and the various bureaucracies of government.

And probably the same has been true through this entire historical cycle of “increase the complexity of the system until it breaks, followed by barbarians and chaos, eventual recovery of civilization”, now entering the “cascading failure” stage.

I hope I am not being optimistic, but it seems to me that this system we are living in has dramatically and completely failed.  And it failed because it escaped political control of anyone really independent who could look at the books, look into the operations and make judgments about what needs corrected, and thus there is no responsibility.  Responsibility is requires openness and operations simple enough for human minds to grasp, whereas our elites have systematically closed their interests to the views of the rest of us by complexity, stealth and concealment.

It inevitably escaped control because of evolution, sort of a Constructal Law of the flow of information and social structures being improved by gradually accreting people looking over each other’s shoulders.  In the Roman times, an engineer given charge of a bridge project pretty much owned everybody involved, so it got done exactly as he specified and over-saw.  He was given gold to accomplish the task and kept whatever $ was left over from allocated funds.  In return for total control, if the bridge fell down, they killed him and his family.  Even 2000 years later, those structures have to be torn down, they don’t fall down.

Modern times, a 3rd-level manager has to get approval for a $10K routine order, and the Pope is involved for getting someone fired.  Managers either have personal credibility, or nothing gets done in their organizations, because the structure of the organization diffuses everything, it takes constant push to get departments to move, people to do their job. Nobody wants responsibility if they don’t have enough control to affect anything, and that is the modern structure in civilization.

Most people work in businesses that have grown so large and been through so many changes of law and corporate ownership, accounting software and management structure, so many reorganizations and realignments of tasks and product lines and …, all on 2 and 3 year cycles of management impatience with the lack progress in industries that require 10 years for a cycle of R&D to produce the burst of a new product line that puts them at the front of the industry again, plus some number of changeovers of management at customers before they forget about the effects of your last products on their product lines, performance reviews and individual careers.

That accountability has vanished because the complexity of the laws and size of the organizations needed to share the cost of the many government-interface functions : the many authorities looking into every area of business, with ever-increasing reporting and inspection requirements.  The major ‘synergy’ attained in all of the industry consolidations has been in personnel, tax accounting, SEC and Sarbanes-Oxley, which costs a public corporation $10M per year (last I heard, there were efforts to change it, I don’t think they did).

The government does the same thing, e.g. the entire sad story of lead, coming to the fore again with Flint MI and the realization that lead has never been cleaned up.  That article is very careful not to point fingers at anyone, but the people who passed the environmental laws made the people dumping lead into the environment immune from legal liability with those laws.  Then the cleanups proceeded at rates acceptable to everyone, without of course, any little black kids ingesting lead at home and school being asked what they thought.

Without government intervention, legal liability for lead paint in places you are renting or gasoline you are selling would have cleaned everything up in a few years.  Lead in paint in an apartment is not exactly a big deal, sandblaster + vacuum + filter would probably do it, and we wouldn’t need EPA’s contractors making $Bs.

Of course, the article conflates all that with the good that clean water did.  The same gov authorities that provided clean water, a technology known since Greek times, also put flouride in it, a policy that costs IQ points.

Emotionally, it would be so satisfying to conclude “All we can know is that situations like DuPont are intended, and must be profitable, or they wouldn’t run a company that way”.  I so wanted to.

But reality is that maybe someone in their various chains of commands has an overview which would allow coming to that conclusion, but what could they do?  The system binds everyone in its structure and assigned functions. Chairman of the Board on down the organization couldn’t deal with that realization any better than it does anything else, and nobody could be rewarded for bring the issue up.  Military, police, judiciary, education, banking, regulatory agency, … all recruit the same minds from the same universities and apply the same management incentives and structures.

And organization behavior becomes the same around the world. Go along to get along.  Keep your head down and do your job by satisfying your boss, who doesn’t want to hear bad news.  People who deliver bad news do not do well in management unless the news can propel their career, so bad news tends not to be noticed as soon as good for the organization.

Now do you understand the DNC and RNC and all the candidates?  None are able to see the herds of elephants and other wildlife in the living room.  The corruption revealed by 9/11 FF and Sandy Hoaxen are probably tips of the icebergs, shimmering images of kleptocrats at work.  You could not profit from those realizations in any party made up of Status Quo minions.

This cannot be intended, it is rarely in the interests of the elites to have their civilization crushed and so many of them killed or enslaved, but the same escape from responsibility has been a feature of all end-stage civilization.  Their armies, governors of provinces and other bureaucracies cease to function because they do not allow dealing with reality.

There is no reform short of making the world simple again by repealing laws, opening institutions and allowing people to take responsibility for their lives and work once again.

*Although more and more companies, especially those with Six Sigma and such programs, go through their supplier’s operations with a fine-tooth comb, on the theory the product can’t be better than the organization.  This approach seems to work for complex technologies, the Roman’s management theories do not work, however emotionally appealing we may have found them at different times.

A possible counter-example are the companies with serious QA built into their management structures.  IBM, HP and a few other companies had Personnel as QA on management, the Japanese manufacturing companies had QA in the product as a serious measure and long-term employment allowing more depth of evaluation.

Hypothesis : industry-wide profit margins are inversely related to the reality-focus of the major companies in that industry.  Pharma vs non-Detroit autos as an example.

Shortly after posting this, I was reading Woodpile Report and found this :

Such innocents may want to do a serious rethink. After the reunification of Germany, Hubertus Knabe  worked as a researcher into the infamous Stasi, East Germany’s secret police, and revealed how they routinely destroyed dissenters without all the fuss of due process.

The Stasi often used a method which was really diabolic. It was called Zersetzung. The word is difficult to translate because it means originally “biodegradation”. The goal was to destroy secretly the self-confidence of people, for example by damaging their reputation, by organizing failures in their work, and by destroying their personal relationships. Considering this, East Germany was a very modern dictatorship. The Stasi didn’t try to arrest every dissident. It preferred to paralyze them, and it could do so because it had access to so much personal information and to so many institutions.
Hubertus Knabe: The dark secrets of a surveillance state, TED Salon, Berlin, 2014

The average resume I see is so full of water it is clear nobody has accomplished much in their life, effectively E Germany.

And later, this.

2 thoughts on “Profitable Fraud Follows Form

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