Archive for the ‘Eye Opening Experiences’ Category

From Napa to Jerusalem: Levensohn Vineyards Goes to Israel

I recently returned from an extraordinary trip to Israel with the four winners of the Levensohn Vineyards Auction Napa Valley 2014 live auction lot. Joined by my friend and Israeli wine collector Yitz Applbaum, we co-hosted the first ever Napa Valley Vintners tour of Israel’s wine country. Our group visited important religious and archaeological sites in Jerusalem and Galilee that are not generally open to the public and met with some of the driving forces who are at the leading edge of the Israeli food and wine culture. While I have been to Israel many times, our four guests, who are not Jewish, had never visited Israel before.

In the Galilee, guided by Norma Franklin, PhD, from the Zinman Institute of Archaeology at the University of Haifa, we visited an active archaeological dig at the site of a winery estimated to be close to 3,000 years old. The winery overlooks a site that can be traced to the Biblical story of the treacherous Jezebel and her scheme to appropriate Naboth’s vineyard, as told in the Book of Deuteronomy.

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Naboth’s Vineyard winery?

Fast forwarding to 2015, we all were positively surprised by the high quality of the wines that we tasted and greatly enjoyed meeting the New Wave of Israeli winemakers, professionals who have trained in centers of wine making excellence including Napa, Burgundy, and Bordeaux. Many hold oenology degrees from UC Davis.

Most importantly, we developed a sense of the distinctive terroir of the three different wine regions of Israel that we focused on—the Golan Heights, the Judean Hills, and the Jezreel Valley in Galilee.  More on the wines we tasted in the posts that follow….

Governance Models That Don’t Scale: The World According to Charles T. Munger and Jean Jacques Rousseau

JJRMungerCan you name five benign dictators who have ruled successfully for any meaningful period of time (non-fiction)? Can you name five successful, long serving CEO’s (excluding Warren Buffett) whose governance histories are free of the “high-beta” associated with outliers such as Larry Ellison and Steve Jobs?

It’s not easy. Why? Because enlightened dictators and their corporate CEO equivalents are very, very rare; maintaining immunity to the intoxicating effects of power challenges basic human nature.

It is in this context that I found “Corporate Governance According to Charles T. Munger”, a brief article from the Stanford Closer Look Series, thought provoking if not practical. The article was written by David Larker, Director of the Corporate Governance Research Program at the Stanford Graduate School of business, and Brian Tayan, a researcher with Stanford’s Corporate Governance Research Program.

The authors summarize and explain Berkshire Hathaway Vice Chairman Charles T. Munger’s unorthodox view of a model for corporate governance.    According to the article, Munger believes that corporations and their boards should empower their CEO’s more, not less. Munger’s effective CEO, modeled, of course, on Warren Buffet, should be unencumbered by rigid process and freed of unnecessary, excessive checks and balances. Why? So that the CEO can lead effectively. How? In Munger’s construct, CEO’s police themselves, holding themselves accountable to their loosely overseeing directors by binding themselves to a trust based system. And corporate directors should reward these CEO’s for creating shareholder value, while deliberately underpaying them in terms of their annual salary-based cash compensation. According to Munger, and as quoted in the article:

“Good character is very efficient. If you can trust people, your system can be way simpler. There’s enormous efficiency in good character and dis-efficiency in bad character … We want very good leaders who have a lot of power, and we want to delegate a lot of power to those leaders…The highest form that civilization can reach is a seamless web of deserved trust—not much procedure, just totally reliable people correctly trusting one another.”

I agree with Mr. Munger completely, while asking the same questions raised by the authors at the end of this article:

“The trust-based systems that Munger refers to tend to be founder-led organizations. How much of their success is attributed to the managerial and leadership ability of the founder, and how much to the culture that he or she has created? Can these be separated? How can such a company ensure that the culture will continue after the founder’s eventual succession?”

Unfortunately, and founders notwithstanding, the collective global capitalist experience since private property rights were invented and enforced has shown that there aren’t enough of those people on this planet.

kozlowskimug1For a specific cautionary example, I am reminded of Tyco International and its former CEO, Dennis Kozlowski. Kozlowski was recently paroled, almost twelve years after his indictment, ultimate conviction, and after serving over eight years in Attica, for a $134 million corporate fraud (this amount represents a small fraction of the losses suffered by public shareholders). The disgraced former directors of Tyco International (vintage 1999), seemingly highly trustworthy and accomplished men and women, also come to mind. This group, along with the enterprise builders at Enron, Worldcom, and Adelphia, to name just a few, are at the top of my list of examples of poor corporate stewardship and help explain why Mr. Munger’s model for corporate governance is still-born.

But I did say the article was thought provoking, as Charles Munger’s corporate governance philosophy, in my view, evokes Jean Jacques Rousseau’s concept of the Lawgiver.  Author Alex Scott summarizes Rousseau’s core thesis from the Social contract succinctly in this excerpt from his book, The Conditions of Knowledge: Reviews of 100 Great Works of Philosophy :

“The general will always desires the common good, says Rousseau, but it may not always choose correctly between what is advantageous or disadvantageous for promoting social harmony and cooperation, because it may be influenced by particular groups of individuals who are concerned with promoting their own private interests. Thus, the general will may need to be guided by the judgment of an individual who is concerned only with the public interest and who can explain to the body politic how to promote justice and equal citizenship. This individual is the “lawgiver” (le législateur). The lawgiver is guided by sublime reason and by a concern for the common good, and he is an individual whose enlightened judgment can determine the principles of justice and utility which are best suited to society.”

I agree! Let’s find that individual and give him (or her) the keys to the public policy car! Munger’s corporate lawgiver, the enlightened CEO, is also an admirable model worth aspiring to emulate.

As with Rousseau’s 1762 treatise, history has sadly shown us that we lack sufficient incorruptible raw material across the entire history of mankind to render the “lawgiver” experiment successfully scalable, be it in public government or corporate governance.

The unbridled exercise of power is the ultimate intoxicant, and very few humans can responsibly limit the flow of that drug, especially not when they have are given the opportunity to administer it to themselves.

 

 

Father’s Day Special: Reflections on Baby Clothes

3 D Baby clothesFathers Day 2I am blessed with three wonderful children. The oldest two are now over twenty, and my youngest is 7 months old. As an older father, I’ve experienced a sense of déja vu and even surprise when I can do something really well on the first attempt, such as swaddling or changing a diaper, even though I had totally forgotten that I knew how to do it.

But one thing I still absolutely can’t understand, twenty years later, is baby fashion. Seriously, who makes all these ugly baby clothes?

Fathers Day1My wife sent me clothes shopping the other day, and it was a tough mission.

In my view, most baby clothes are plain ugly. They feature staggering color combinations that make disco lights look dull. From baby-shirts to pants, blouses to bibs, everything is plastered with weird looking creatures. A dreadful pink bear with a scary smile, an oversized violet dog with a square snout and brown stripes, a red elephant with blue polka dots and a yellow palm tree. How would YOU like to wear this to anything other than a Halloween party?

It gets worse when it comes to gender management. Store shelves, and most salespeople, dictate two iron rules for infants: 1: Girls are condemned to wear pink in all its forms and variations: light pink, dark pink, pink with pink dots, pink with light pink stripes, pink with pink animals and lots of pink bows. And if you have a boy, of course, there is the inevitable, inescapable blue. Blue pants with dark blue ladders, blue with blue little cars, light blue shirts with very light blue hippos…

 

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My daughter has piercing blue eyes, and we love to dress her in matching blue (if we can find anything without a printed tractor, a car, or a sailboat, which is tough). Of course, every person we meet in the street or in the park admires our “cute little boy”.

And I can’t understand baby clothes sizes! In the US, baby clothes are indicated with “NB – 3 months”, “3-6 months”, or “12-18 months” etc. This sizing can only make sense to people who don’t have children. I wonder who came up with this bizarre matrix that ignores the fact there are small babies, big babies, thin babies, and plump babies – and all of them may be of the same age.

My daughter fits nicely into baby suits for 18-month olds, a sleeping bag for newborns, and pants for 4 month old babies — all at the same time. I don’t know what to buy! Do I have to bring my baby into the shop to try everything out? Adult clothes aren’t sized by age… Why can’t we have real baby sizes?

Let’s address the actual design of those clothes and their functionality. In my view, three things are essential to a great design for babywear:

(1) It must be easy to put on (even for Dads) without hearing squeals of discontent from your little one;
(2) It must be easy to remove (especially for Dads), and especially under the following use case: baby just spat up a small sea of milk on you, herself, and innocent bystanders; and
(3) It must be easy to open on the bottom in order to change diapers whenever and wherever that task must occur.

Sounds straightforward, right? Nope…  Small sweaters with tiny openings for her head, requiring an experienced pair of hands to pull through her unwilling, wiggling baby head; Tiny buttons that need to be opened and closed each time you attempt to dress your child (do that when she is crying, hungry, or with a colic, and you will understand what I mean). And there are those heavily adorned suits with cool pockets, zippers, and other bells and whistles, but no buttons on the bottom. Which means you have to take off the entire suit just to change a diaper.

Fathers day 6And there’s plenty of fancy, tight pants with an even tighter waistband that don’t allow for important things like breathing, and that’s without a diaper (did I mention these tights pants are for a baby?).
The 2-piece outfits with a bright-colored shirt and matching pants crown my “pointless” list. Babies move constantly, and the shirt always gets pulled up around their neck, leaving them with bare bellies – unless you also dress them in a body suit. But if your baby isn’t eating yet with a fork and knife, and if your baby has a habit of spitting up, you will spend most of your day with her on the changing table.

And those “cute” little nightgowns and dresses that her flying legs kick up and over her waist as soon as you put them on, they leave three-thirds of her body naked.

I ask again, who designs this ugly and impractical baby clothes? We didn’t have the Web when I first became a father. I am hopeful that help is on the way! I can’t wait until I can have my own 3D printer to design and print my own baby clothes at home, maybe a designer will see that there is a bigger 3-D clothing market for babies than for Victoria’s Secret models.

 

 

I’m Back!

DSCN2594After a one-year hiatus, I am back.  Stay tuned for new posts on venture capital, corporate governance trends, and current public policy issues that impact investors and entrepreneurs. I have also done a lot of hiking throughout America and Europe in the last year and will share highlights from my hiking experiences as a new topic.

Over the past year I’ve made meaningful personal and professional changes. Today I am healthier, happier, and more energized than ever. I look forward to sharing my thoughts with readers and welcome all constructive comments.

Thoughts on Innovation and Competitiveness– From Aeschylus to (Norman) Augustine

0309112230 In 2007 the National Academies published an important essay by Norman Augustine, former CEO of Lockheed Martin and a deep thinker on America's slipping global competitiveness, titled "Is America Falling Off the Flat Earth?".  This brief monograph is required reading for anyone seeking facts about how America's global competitiveness is declining– as well as clear recommendations for the way forward.  Mr. Augustine touches on the declines in education, in business, in technology, and he diagnoses the self-inflicted nature of a society's successful development that leads in this direction. At its core, this essay is a passionate  appeal for coordinated national action to catalyze a multi-disciplinary program designed to win in a radically new global playing field.

What Mr. Augustine refers to as the competitiveness ecosystem includes the innovation ecosystem.  It is clear today that the global financial crisis which began in early 2008 has only accelerated the negatives, both by catalyzing further spending cuts in critical areas of long-term research and by worsening the odds that our government will recognize the immediacy of the need for the allocation of critical financial resources to get America's innovation train back on track.

A couple of my favorite quotes from the essay follow:

Perhaps the most incisive summary to be found, as far as the nation's competitiveness ecosystem is concerned, comes from the 2,500 year-old writings of Aeschylus:

So in the Libyan fable it is toldImages
That once an eagle, stricken with a dart,
Said, when he saw the fasion of the shaft,
"With our own feathers, not by others' hands,
Are we now smitten".

 

In America, we are to a considerable degree living off past investments, the comparatively strong position the nation held at the end of World War II, and the prevalence of English as the predominant language of business, government, and technical education.  But the impact of those discriminators appears to be diminishing.  Simply stated, we have been eating our seed corn. . . . We are witnessing a gradual, albeit accelerating, erosion rather than a single cataclysmic wakeup call. . . . Charles Darwin observed that "it is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change."

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While there's been a lot of "Change" in Washington in the last few months, we are still at the bottom of the mountain.   The challenge ahead of us requires our policymakers to understand that the Change we must be investing in now is open-ended, risk-tolerant, and all-consuming. It is the long-term change that will protect our nation's posterity, and, by its very nature, is not politically expedient.  Sadly, the posterity baby has been thrown out with the bathwater many times in the course of the development of America's national obsession with immediate gratification, and we are paying a heavy price for this short sightedness today.     

Excuse Me– Have You Seen My Hard Drive?

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Believe it or not, according to a report from the Washington Post, “the National Archives lost a computer hard drive containing a large amount of sensitive data from the Clinton administration, including Social Security numbers, addresses, and Secret Service and White House operating procedures, congressional officials said yesterday...”

Apparently, the drive was lost between October and March, and it contained one terabyte of data — enough material to fill millions of books… According to California Republican Rep. Darrell Issa,  the hard drive was moved from a "secure" storage area to a workspace while it was in use. The inspector general explained that at least 100 badge-holders had access to the area where the drive was left unsecured… Besides those with official access to sensitive material, the inspector general said janitors, visitors, interns and others passed through the area… Further, the workspace is in an area that Archives workers pass through on their way to the bathroom…

Many things trouble me about this report—but the biggest one is that inexpensive, commercially available solutions that would have made the hard drive useless to unauthorized parties have been around for years.  These solutions cost less than $100 and there are numerous quality systems available.  For example, John Muir and Bill Bosen of Trusted Strategies first built one in 1987, and this solution eventually became Pointsec. There are Federal security standards that should have enforced encryption. What were these people not thinking?

People in the National Archives are charged with organizing, preserving and protecting data, there are Federal requirements to do so, there have been numerous previous incidents from which to learn, and the means to provide adequate security are readily at hand. How can there be any excuse for this?

There is a lot to worry about when we talk about our nation’s cybersecurity vulnerabilites.  But we are talking about a fundamental breakdown in process here, and this worries me more than anything.  This incident is striking evidence of the truth that security is only partially a technology problem, and is largely an issue of personal and social responsibility.  Until people grasp that reality,  security will be elusive…

How can we expect to protect our country, even if we do manage to enact reforms that will allow innovative solutions to find their way into the hands of those who need them, when the barn door is being left wide open?
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Getting From Here to There– It’s Time to Engage in Common Sense Approaches to Public Policy

I usually try to keep my blog posts short. Today I have failed in this endeavor but urge you to please read through to the end of this important post. The current issue of Foreign Affairs Magazine features an excerpt from Leslie Gelb's new book, Power Rules: How Common Sense Can Rescue American Foreign Policy.  This essay is exceptionally good, and, in my view, Gelb's thesis should be applied to all forms of statecraft and to promote the resolution of both newly emerging and long stagnating public policy debates.

Gelb accurately diagnoses the "weakening fundamentals of the United States.  First among them is that the country's economy, infrastructure, public schools, and political system have been allowed to deteriorate.  The result has been diminished economic strength, a less vital democracy, and a mediocrity of spirit."

Several paragraphs in this powerful essay deserve highlighting:

"The bases of the United States' international power are the country's economic competitiveness and its political cohesion, and there should be little doubt at this point that both are in decline.  Many acknowledge and lament faltering parts here and there, but they avoid a frontal stare at the deteriorating whole.  It is too depressing to do so, too much for most people to bear. … The United States is now the biggest debtor nation in history, and no nation with a massive debt has ever remained a great power.  Its heavy industry has largely disappeared, having moved to foreign competitors, which has cut deeply into its ability to be independent in times of peril.  Its public-school students trail their peers in other industrialized countries in math and science. They cannot compete in the global economy.  Generations of adult Americans, shockingly, read at a grade-school level and know almost no history, not to mention no geography.  They are simply not being educated to become the guardians of a democracy.

These signals of decline have not inspired politicians to put the national good above partisan interests or problem solving above scoring points.  Republicans act like rabid attack dogs in and out of power and treat facts like trash.  Democrats seem to lack the decisiveness, clarity of vision, and toughness necessary to govern.  This tableau of domestic political stalemate begs for new leadership.  The nation that not so long ago outproduced the rest of the world in arms and consumer goods, the nation lionized and envied for its innovation, can-do spirit, and capacity to accomplish economic miracles, has become overwhelmed by the tasks it once performed competently and with relative ease."

This is the most succinct and gut-wrenching summary of our national predicament that I have read.  Gelb puts his finger directly on the jugular vein of America's innovation ecosystem and diagnoses the multiple layers of dysfunction that have launched our country into such a deep crisis.  I share his fear of a new global reality developing along the following lines:

Images-1"The real danger in this universe of primitivism and plenty is not new wars or explosions among major states, or a world war, or even a nuclear war.  It is the specter of nations drowning in a flood of terrorism, tribal and religious hatred, lawlessness, poverty, disease, environmental calamities, and governmental incompetence.  Many nations are going under because they are simply unable to cope, and they will drag others down with them."

 

Gelb closes this essay with an impassioned plea for action, and most important, he retains a strong sense of hope and pride in our country:

"Every great nation or empire ultimately rots from within.  One can already see the United States, that precious guarantor of liberty and security, beginning to decline in its leadership, institutions, and physical and human infrastructure, heading on the path to becoming just another great power, a nation barely worth fearing or following.  It is time to send up flares signaling that the United States is losing its way and its power, that it is in trouble. But it is even more important to reaffirm the belief that the United States is worth fighting for both across the oceans and at home.  There should be no doubt that the United States, alone among nations, can provide the leadership to solve the problems that will otherwise engulf the world.  And for all the country's faults, there should be no doubt that it remains the last best chance to create equal opportunity, hope, and freedom.  But to restore all that is good and special about the United States, to rescue its power to solve problems, will require something that has not happened in a long time: that pragmatists, realists, and moderates unite and fight for their country."

ImagesI've been sending out flares to other realistic moderate pragmatists on this and other topics that demand a "common sense" approach for years.  Through groups such as the Council on Foreign Relations, the Aspen Institute's Socrates Society, the Working Group on Director Accountability and Board Effectiveness, and, most recently, the Security Innovation Network, I have joined and helped forge communities of interest bound together by empowered individuals who are thoughtful and constructive agents of change.  As Gelb points out, we have a lot of wood to cut, but I remain energized and, most importantly, hopeful that we can make a difference because we have to.  Given where America stands today, fomenting pragmatic and realistic change is not an option, it is a requirement.

  

 

Sarajevo, Lehman Brothers, and the Panic of 2008

Franzferdinand
The assassination of Austrian Archduke Franz Ferdinand at
Sarajevo on June 28, 1914, is commonly cited as the “proximate trigger” which
ushered in World War I.  The
resolution of this first Great War led not only to the collapse and fragmentation of the Austro-Hungarian Empire, the Russian Empire, and the Ottoman Empire.  It also sowed the seeds for World War II, and, in redrawing
the map of the Middle East, laid the foundations for the strife that continues to plague
this entire region today.

In my view, financial historians will commonly cite the death
of Lehman Brothers on September 15, 2008
 at the hands of Treasury Secretary Henry
Paulson
  (with the consent and support of other US financial policy makers), as America’s
Financial Sarajevo.  The death of Lehman will become generally recognized as the “proximate trigger” which led to the financial Panic
of 2008
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Why? In short, the Lehman Brothers bankruptcy brought home
the reality that counterparty risk actually mattered in the murky world of
financial derivatives and the now infamous trade known as a Credit Default Swap
(CDS)
.  The demise of Lehman, in
one fell swoop, changed everything in the opaque world of the CDS, fueling a
cascading contagion of fear between buyers and sellers of all types of
derivative securities. 

Most damaging, the reality of Lehman’s failure brought
global financial markets to a virtual halt by causing banks to fear trading
with each other, essentially draining the oil that lubricates global bank
liquidity.  The second order impact
of Lehman’s failure was to ravage the razor thin balance sheets of CDS
underwriters from AIG on down
, requiring massive infusions of government
capital to prevent a post-Lehman domino effect of insolvent financial
institutions around the globe.

Of Sharks and Men

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I've been a PADI certified scuba diver since 1991 and just recently obtained my advanced diver certification.  I've dived over 100 times, always in the ocean, and, of course, every diver is fascinated by, if not afraid of, shark encounters.  We've all read about the shark feeding programs that have developed at dive sites around the world, from Cape Town to Honduras– and there is plenty of controversy about whether sharks should be fed by humans– especially in close proximity of divers.

I went on my first shark feeding dive last week in Fiji in the Yasawa Islands.  

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The dive was arranged by the Coral View dive center, which is a professionally run operation, and I personally felt very safe throughout the dive.  At a depth of 60 feet, the divers were positioned about 20 feet away from where the sharks were fed, with the ocean current and swell surge flowing in a direction away from the divers.  A strong metal cable running about 20 feet in length set the diver perimeter beyond which we were not allowed to pass.

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Upon returning from my trip, I looked up some shark diving information on the web and found a couple of interesting sites including one that describes various types of shark feeding techniques– different from the one shown at right on our dive.

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I also found a pretty interesting video on YouTube from a shark dive in Roatan, Honduras.  This video is a good example of what I believe is unsafe diver positioning– frankly this video, while very beautiful to watch, feels like an accident waiting to happen.  Judge for yourself…
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“Bailing Out Wall Street” Commonwealth Club Panel Broadcast on KALW 91.7 November 11 at 7PM PST

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KALW 91.7 FM, the local San Francisco National Public Radio station, will be broadcasting "Bailing Out Wall Street", the lively election-eveCommonwealth Club INFORUM panel on which I participated, tomorrow at 7 PM PDT.   In front of a live audience of over 200 people, we shared differing views on the wisdom of the Federal Government's emergency relief and assistance program to the banking and finance industries– commonly tarred as the "Wall Street Bailout".  Our vigorous discussion was fueled by the nature of the panelists, as I joined Dave Callaway, Editor-in-Chief, MarketWatchJonathan Berk, Professor, Graduate School of Business, Stanford University, and Maggie Mui, San Francisco Market Regional President, Wells Fargo.  The panel was expertly moderated by Kathleen Pender, Net Worth Columnist, San Francisco Chronicle.



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Dave Callaway, Maggie Mui, Jonathan Berk, Pascal Levensohn, and Kathleen Pender

Some of the thorny questions we addressed: 
  • Will the bailout work and is it really a bailout?
  • Did the Treasury's decision to throw Lehman Brothers under the proverbial bus on September 13 light the match for the panic that subsequently routed financial markets?
  • What are the current prospects for entrepreneurs and for continuing innovation in Silicon Valley during these recessionary times?
  • Are we going to drown in new securities regulations with unintended negative consequences?