Yom Kippur 2013

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Meet The Dread Pirate Roberts, The Man Behind Booming Black
Market…
Microsoft’s Lost Decade
Lottery Winner Jack Whittaker's Losing Ticket
The Bitcoin Bubble and the Future of Currency
Global Economics
Facebook, One Year Later: What Really Happened in the Biggest
IPO…
Jeffrey Levitt Stole $15 Million
Why We Keep Playing the Lottery
Sleeping Together
A Solution From Hell
The Killing Machines
Yes, Healthful Fast Food Is Possible. But Edible?
The Long Con
Politics & Policy
DAVID FOSTER WALLACE, IN HIS OWN WORDS
How Much Is a Life Worth?
Cocaine Incorporated
The Chase Is the Thing and the Thing Is the Chase: Learning to
Love…
The Extraordinary Science of Addictive Junk Food
The New Geopolitics of Food
Original: https://www.readability.com/articles/rcqugm8v
Title: Meet The Dread Pirate Roberts, The Man Behind Booming Black
Market…
Author: forbes.com
Summary: An entrepreneur as professionally careful as the Dread Pirate
Roberts doesn’t trust instant messaging services. Forget phones or Skype. At
one point during our eight-month preinterview…
Meet The Dread Pirate Roberts, The Man Behind Booming Black Market
Drug Website Silk Road - www.forbes.com - Readability
An entrepreneur as professionally careful as the Dread Pirate Roberts doesn’t
trust instant messaging services. Forget phones or Sky pe. At one point during our
eight-month preinterview courtship, I offer to meet him at an undisclosed location
outside the United States. “Meeting in person is out of the question,” he say s. “I
don’t meet in person even with my closest advisors.” When I ask for his name and
nationality, he’s so spooked that he refuses to answer any other questions and we
lose contact for a month.
All my communications with Roberts are routed exclusively through the
messaging sy stem and forums of the website he owns and manages, the Silk
Road. Accessing the site requires running the anony mity software Tor, which
encry pts Web traffic and triple-bounces it among thousands of computers around
the world. Like a long, blindfolded ride in the back of some guerrilla leader’s van,
Tor is designed to prevent me–and any one else–from tracking the location of Silk
Road’s servers or the Dread Pirate Roberts himself. “The highest levels of
government are hunting me,” say s Roberts. “I can’t take any chances.”
If Roberts is paranoid, it’s because very powerful people really are out to get him.
In the last two and a half y ears Silk Road has grown into the Web’s busiest bazaar
for heroin, methamphetamines, crack, cocaine, LSD, ecstasy and enough strains
of marijuana to put an Amsterdam coffee shop to shame. The Drug Enforcement
Agency won’t comment on whether it’s investigating Silk Road but wrote in a
statement that it’s aware of the site and is “very proactive in keeping abreast” of
the digital underground’s “ever-evolving technological advancements.” Senator
Chuck Schumer has demanded Silk Road be shut down and called it “the most
brazen attempt to peddle drugs online that we have ever seen … by light-y ears.”
Any one can download and run Tor, exchange some dollars or euros for the digital
currency Bitcoin and go shopping on Silk Road for drugs that are vacuum-sealed
and discreetly mailed via the U.S. Postal Service, right under the federal
government’s nose. By the measure of Carnegie Mellon researcher Nicolas
Christin, Roberts’ eBay -like service was grossing $1.2 million a month in the first
half of 2012. Since then the site has doubled its product listings, and revenue now
hits an annual run-rate of $30 million to $45 million by FORBES’ estimate. One
analy sis of the Tor network performed by a student at Dublin’s Trinity College
found that Silk Road received around 60,000 visits a day, mostly users seeking to
buy or sell drugs, along with other illicit items including unregulated cigarettes and
forged documents. Silk Road takes a commission on all of its sales, starting at 10%
and scaling down for larger transactions. Given that those commissions are
collected in Bitcoins, which have appreciated close to 200-fold against the dollar
since Silk Road launched in 2011, the Dread Pirate Roberts and any other
stakeholders in Silk Road have likely amassed millions in profits.
Despite the giant DEA crosshairs painted on his back and growing signs that the
feds are probing the so-called “dark Web” that Silk Road and other black market
sites inhabit, Roberts spoke with FORBES in his first-ever extended public
interview for a reason: As with phy sical drug dealing, a turf war has emerged.
Competitors, namely a newly launched site called Atlantis with a real marketing
budget and a CEO with far less regard for his privacy, are stealing Roberts’
spotlight.
“Up until now I’ve done my best to keep Silk Road as low profile as possible …
letting people discover [it] through word of mouth,” Roberts say s. “At the same
time, Silk Road has been around two and a half y ears. We’ve withstood a lot, and
it’s not like our enemies are unaware any longer.”
Roberts also has a political agenda: He sees himself not just as an enabler of
street-corner pushers but also as a radical libertarian revolutionary carving out an
anarchic digital space bey ond the reach of the taxation and regulatory powers of
the state–Julian Assange with a hy podermic needle. “We can’t stay silent forever.
We have an important message, and the time is ripe for the world to hear it,” say s
Roberts. “What we’re doing isn’t about scoring drugs or ‘sticking it to the man.’ It’s
about standing up for our rights as human beings and refusing to submit when
we’ve done no wrong.”
“Silk Road is a vehicle for that message,” he writes to me from somewhere in the
Internet’s encry pted void. “All else is secondary .”
While Roberts waxes philosophical, his competitors are finding motivation enough
in grabbing some of Silk Road’s lucrative drug trade. On June 26 a video ad for
Atlantis appeared on YouTube telling the story of “Charlie,” a friendly -looking
cartoon hipster. Charlie, according to text that popped up around the video’s frame
as jingly music play ed, is a “stoner” who moves to a new city for work and can’t
find any marijuana. That is, until he discovers Atlantis’ “virtual black market,”
orders some pot and gets “high as a damn kite.”
YouTube removed the video within day s for violating its terms of service but not
before it had received close to 100,000 views and pulled the new Bitcoin-based
black market into the public Internet’s awareness. Atlantis’ ad took a direct shot at
Silk Road, calling itself “the world’s best anony mous online drug marketplace.”
(See our tests of the three top black market drug-selling websites here.)
The next day, an employ ee of Atlantis named “Heisenberg” held a group chat
with reporters where he described the site as the “Facebook to [Silk Road's]
My space.” In comments now deleted from an ask-me-any thing session on the
social news site Reddit, Atlantis’ chief executive, who goes by the name
“Vladimir,” listed advantages over Silk Road like less downtime and smaller fees
for sellers. “The road has more users,” he wrote, “but our site is better (to put it
bluntly ).”
The battle for the Web’s drug corner is on.
***
THE DREAD PIRATE Roberts isn’t shy about naming Silk Road’s active
ingredient: The cry ptographic digital currency known as Bitcoin. “We’ve won the
State’s War on Drugs because of Bitcoin,” he writes.
Bitcoin, which came into widespread use around the same time as Silk Road’s
creation, isn’t exactly the financial-privacy panacea some believe it to be–its
transactions can be traced using the same mechanisms that prevent fraud and
counterfeiting within the Bitcoin economy. But unlike with dollars, euros or y en,
the integrity of the nearly $1 billion worth of Bitcoins floating around the Internet
is maintained by the distributed computing power of thousands of users who run
the cry pto-currency ’s software, not by any bank or government. That means
careful users never have to tie their accounts to their real-world identity. As a
result Bitcoin-funded services deep within the dark Web, masked by anony mity
tools like Tor, claim to offer every thing from cy berattacks to weapons and
explosives to stolen credit cards.
Mix up y our coins in one of many available laundering services–Silk Road runs
one automatically for all transactions on the site–and it becomes very difficult to
follow the money. Even the FBI, according to one of the bureau’s leaked internal
reports, worries that Bitcoin’s complexity and lack of a central authority “present
distinct challenges” for tracking criminal funds. The result is a currency as
convenient as Pay Pal and theoretically as anony mous as cash.
“We’re talking about the potential for a monumental shift in the power structure of
the world,” Roberts writes. “The people now can control the flow and distribution
of information and the flow of money. Sector by sector the State is being cut out
of the equation and power is being returned to the individual.”
Of course, Roberts’ lofty words on individual liberties provide a convenient
veneer to justify his profitable business selling illegal, dangerous and addictive
substances. But Roberts argues that if his users want heroin and crack, they should
have the freedom to buy it and deal with the consequences. Unlike other Bitcoinbased underground sites, Silk Road bans all but what Roberts defines as victimless
contraband. He won’t permit the sale of child pornography, stolen goods or
weapons, though the latter is a gray area. The site has experimented with selling
guns and may y et reintroduce them, Roberts say s.
Original: https://www.readability.com/articles/qzcbyyo7
Title: Microsoft’s Lost Decade
Author: vanityfair.com
Summary:
YOU TALKING TO ME? Microsoft C.E.O. Steve Ballmer
delivers the keynote address at the 2012 International Consumer Electronics
Show, in Las Vegas, on January 9. To the saccharine rhythm of a Muzak…
Microsoft’s Lost Decade - www.vanityfair.com - Readability
Less than two weeks later, Allchin tried out a music device being developed for
Microsoft by an independent hardware vendor. He reviewed the experience in a
November 13 e-mail to a group of executives. “I have to tell y ou, my experience
with our software and this device is really terrible,” he wrote. “Apple is just so far
ahead.”
Years passed. Finally , on November 14, 2006, Microsoft introduced its own music
play er, called Zune. Fifty -four day s later, Steve Jobs unveiled the iPhone, which
combined a mobile phone, a music play er, Internet capability, a camera, and
other features not available on Zune. But the iPod was still around for customers
who didn’t want a phone. In fact, Apple had already introduced its fifthgeneration iPod, its less expensive iPod Mini, and was about a y ear away from
marketing the least costly of its music play ers, the iPod Nano.
Zune was blown away . By 2009, iPod maintained an astonishing 71 percent of the
market, the kind of numbers rarely seen any where outside of a North Korean
election. Meanwhile, Zune limped along with less than 4 percent. Last October,
Microsoft discontinued it, in hopes that customers would instead purchase a
Windows Phone that, like the iPhone, has a music play er.
Jobs Creation
Apple blasted ahead even on operating sy stems—Microsoft’s bread and butter—
during the lost decade. In May 2001, Microsoft undertook a project code-named
Longhorn, which was expected to ship in late 2003 under the name Windows
Vista. Executives had a number of objectives for Longhorn, including competing
with the free operating sy stem called Linux by supporting a programming
language named C#, which allowed for easier development of other software;
creating a Windows File Sy stem, or WinFS, which could save different ty pes of
files into a single database; and creating a display sy stem, code-named Avalon,
that would give software the same appearance as a Web site.
As development took off, Microsoft engineers dumped a grab bag of functions
into Longhorn. Huge teams were assigned to the effort, but despite all the work,
the launch was postponed again and again. The program took as long as 10
minutes to boot up. It was unstable and frequently crashed.
Then, in June 2004, Steve Jobs announced that Apple was releasing its new
operating sy stem, called “Tiger.” And inside Microsoft, jaws dropped. Tiger did
much of what was planned for Longhorn—except that it worked.
E-mails flew around Microsoft, expressing dismay about the quality of Tiger. To
executives’ disbelief, it contained functional equivalents of Avalon and WinFS.
“It was fucking amazing,” wrote Lenn Pry or, part of the Longhorn team. “It is
like I just got a free pass to Longhorn land today .”
Vic Gundotra, another member of the group, tried out Tiger. “Their Avalon
competitor (core video, core image) was hot,” he wrote. “I have the cool widgets
(dashboard) running on my MAC right now with all the effects [Jobs] showed on
stage. I’ve had no crashes in 5 hours.”
The videoconferencing function? “Amazing,” Gundotra wrote. Scripting
software? “Very cool.”
The Gundotra e-mail was sent to executives throughout Microsoft headquarters,
including Allchin. He forwarded it to Gates and Ballmer, adding his name and one
word: “Sigh … ”
Longhorn was doomed. A few months later, Allchin brought together the
Longhorn team and made the announcement: Microsoft couldn’t complete
Windows Vista in time to hit the latest planned release date. In fact, the company
couldn’t foresee any launch date. So a decision had been made at the most senior
reaches of Microsoft: after three y ears of work, throw every thing out and start
over. It was decided, at least for now, to drop or modify many of the original
objectives; no more using C#, abandon WinFS, and revise Avalon.
Apple was already in the market with those features; Microsoft was basically
giving up in its effort to figure out how to make them work. More than two y ears
passed before Vista was available in stores, and the public response was scathing.
PC World, the industry magazine, declared it the biggest tech disappointment of
2007. Apple had won hands down on Microsoft’s play ing field for operating
sy stems.
Then came Bing. Cue the evil laughter and organ music.
By the fall of 2004, Microsoft faced a huge challenge from Google, because the
smaller enterprise was snagging so many talented y oung software designers.
Google was emerging as the new “It” company, with lots of cachet. The searchengine titan had gone public in August and, just like the Microsoft of old, was
minting millionaires from stock options dished out to employ ees. And, it seemed,
day after day, a few more Microsoft executives announced their plans to jump
ship to the upstart competitor.
One topflight engineer, Mark Lucovsky , met with Ballmer on November 11, 2004,
as a courtesy to let him know that he had accepted an offer from Google, which
at the time was led by Eric Schmidt. And, according to a sworn statement
submitted by Lucovsky in an unrelated lawsuit, Ballmer exploded.
He threw a chair against the wall. “Fucking Eric Schmidt is a fucking pussy !”
Ballmer y elled, according to the court document. “I’m going to fucking bury that
guy ! I have done it before and I will do it again. I’m going to fucking kill Google.”
Internet search emerged as Microsoft’s newest top priority. At that point, the
company already had a mediocre search engine, called MSN Search, but it didn’t
hold a candle to Google. So, Microsoft developed Windows Live Search, which
also proved inferior. Following more revisions, with a few features discontinued,
Microsoft announced its new platform, called Live Search. Finally, in May 2009,
Ballmer unveiled Bing. But by then the unit working on online search had become
encrusted with Microsoft bureaucracy and the usual destructiveness that came
along with it.
“It was a bloated mishmash of folks,” said Johann Garcia, a former Microsoft
product manager who worked on the Bing project. “They had two or three times
the number of people they needed. There were just so many lay ers of people.”
Working in the online division evolved into a miserable experience, members of
that unit said. Most of the homegrown innovations were shoved aside. Instead,
managers spent their day s study ing Google and telling the employ ees working on
Bing to match whatever that competitor brought out.
“There was this never-ending demand to keep up with Google, and after a while
we saw no more innovation for Bing,” Garcia said. “Google was so far ahead and
we had so much infighting. A lot of people became so unhappy and just lost all
momentum.”
To date, Bing has lost about $6 billion for Microsoft; add in the earlier search
products and the amount of money poured into the effort rises to almost $10
billion. Microsoft did have some success making deals for Bing, in particular with
Yahoo. In 2009 the two reached an agreement—controversial among investors—
under which the Bing search engine would power the Yahoo Web site and the two
would share revenues.
In the y ears since, Microsoft has boasted that Bing’s share of the search
marketplace has grown significantly. All of Microsoft’s search sites accounted for
15.3 percent of the domestic market in March, according to ComScore Inc., up
from 11.7 percent in March 2010. Dig a little deeper, though, and the numbers
aren’t quite as impressive. During that same time, Google’s share of the market
went up. Most of the increase in business for Bing came from users switching
from Yahoo.
Bing’s improved performance was coming at the expense of Yahoo, its erstwhile
partner. Microsoft was eating its own.
When Apple introduced the iPhone, Steve Ballmer laughed. “No chance that the
iPhone is going to get any significant market share,” he said in 2007, adding that
same y ear, “iPod is a hot brand—not Apple.”
He pooh-poohed the iPad when it came out, in 2010, and it has been busting down
the barn doors ever since, selling more than 55 million units. As for Google,
Ballmer’s predictions were equally off base—according to court records, in 2005
he proclaimed, “Google’s not a real company . It’s a house of cards.”
Plenty of people can make predictions that prove boneheaded. But Ballmer’s bad
calls have been particularly damaging for him inside Microsoft. Until his dy ing
day s, Steve Jobs could not only predict the direction the marketplace would be
heading, but help drive it there. Google continues to pop out feature after feature
and is now shooting directly at Microsoft’s main business lines: Google Docs is a
free Web program competing with Microsoft Office. Google Chrome OS is a
free operating sy stem targeted at Windows.
Original: https://www.readability.com/articles/cn8pzdap
Title: Lottery Winner Jack Whittaker's Losing Ticket
Author: businessweek.com
Summary: Jack Whittaker, a 55-year-old contractor from Scott Depot, W. Va., had worked his way up from backcountry poverty to build a water-andsewer-pipe business that employed over 100 people. He was…
Lottery Winner Jack Whittaker's Losing Ticket - www.businessweek.com Readability
Jack Whittaker, a 55-y ear-old contractor from Scott Depot, W. Va., had worked
his way up from backcountry poverty to build a water-and-sewer-pipe business
that employ ed over 100 people. He was a millionaire several times over. But
when he awoke at 5:45 a.m. on Christmas morning in 2002, every thing he’d built
in his life held only passing significance next to a scrap of paper in his worn
leather wallet—a $1 Powerball lottery ticket bearing the numbers 5, 14, 16, 29,
53, and 7.
Whittaker had purchased his lucky ticket, along with two bacon-stuffed biscuits, at
the C&L Super Serve convenience store in the town of Hurricane on Dec. 24,
2002. That night, Whittaker went to bed thinking he’d missed winning the lottery
by one digit—only to wake up on Christmas Day to find that the number had been
broadcast incorrectly and the winning ticket was in his hand. “I got sick at my
stomach, and I just was [at] a loss for words and advice,” he later remembered.
When he returned to the convenience store on Monday, he quietly told the
woman at the cash register he’d won. “No y ou didn’t,” she replied. “You’re not
excited enough to win the lottery .”
The day after Christmas, Whittaker put on his Stetson cowboy hat, black suit, and
white shirt—he alway s dressed this way —and appeared on live TV together with
his wife Jewel, daughter Ginger, and 15-y ear-old granddaughter Brandi Bragg, to
accept a check for $10 million from West Virginia Governor Bob Wise. It was the
first portion of a jackpot that had been building since Halloween. On Christmas
Eve, when he bought the ticket, the prize stood at $280 million. A late surge of
buy ers pushed it to $314.9 million, making Whittaker the winner of the biggest
single undivided jackpot in lottery history .
“The very first thing I’m going to do is sit down and make out three checks to
three pastors for 10 percent of this check,” Whittaker announced in a half-hour
press conference watched by many citizens of his state, which, along with 23
others (plus the District of Columbia and Puerto Rico) is part of the multistate
Powerball lottery pool. He also said he planned to rehire 25 workers he’d laid off
before Christmas and to fund schools and other programs to help West Virginians
better themselves. “Seventeen million in the state of West Virginia will really do
good for the poor,” he said.
Photograph by Stuart Ramson/AP PhotoDay s after hitting the jackpot, Jewel and
Jack talked to Today ’s Matt Lauer ...
He also had his ey e on a helicopter and wanted to send his wife Jewel on a trip to
Israel. Bragg, his granddaughter, a beautiful girl with blonde hair, hazel ey es, and
her grandfather’s broad smile, said she wanted to meet the rap star Nelly and buy
a custom blue Mitsubishi Eclipse.
Whittaker’s good fortune was immediate and contagious. Larry Trogdon, who
owned the C&L, got $100,000 from the lottery for selling the winning ticket. The
state would receive approximately $11 million for school and senior-citizen
programs from the 6.5 percent tax bite it levied on Whittaker’s prize. Whittaker
told the biscuit lady at the C&L to pick out a new Jeep, gave her a check for
$44,000, and then bought her a house worth $123,000 more. He also made good
on his promise to help the poor: He donated $7 million to build two new churches
and set up the Jack Whittaker Foundation with an initial grant of $14 million for the
purpose of aiding the needy. The Foundation gave money to improve a Little
League park and buy play ground equipment and coloring books for children. It
was also able to help with some of the thousands of requests for aid of every kind
that poured in from across the state.
Yet there was something about Whittaker’s lottery winnings that felt different
from the money he’d earned as a businessman. “I’ve had to work for every thing
in my life,” he said at that first press conference. “This is the first thing that’s ever
been given to me.”
The state announced Whittaker had won $314.9 million—it said so right on the
giant check they gave him on TV—but Whittaker never saw any thing near that
amount of money. Instead of taking annual installments over 29 y ears, he chose a
one-time pay out of $113,386,407.77. After taxes, he was left with about
$93 million, approximately 30 percent of the sum reported in the newspapers and
advertised by Powerball. The false impression left by reports of Whittaker’s
record win was nevertheless a powerful lure for West Virginians to keep play ing
a lottery in which their chances of winning were negligible. (Where New York
and Massachusetts, the two biggest lottery -play ing states, take a mere 34 percent
and 20 percent of the pot from their winners, West Virginia takes a full
41.5 percent.)
Photograph by Michael Appleton/NY Daily News/Getty Images... and rode
through New York City in a stretch limo
There is no shortage of lottery winners who go broke—enough to fill many
seasons of reality television—but there was good reason to think that Whittaker, a
successful businessman whose journey from rags to riches was the product of
self-reliance and hard work, would make good use of his new wealth. The idea
that 10 y ears later he would wish he’d torn up his winning ticket and thrown away
the pieces would have struck the man and every one who knew him as nuts.
Jack Whittaker’s downfall began at the Pink Pony strip club in Cross Lanes, W.
Va., a crenelated building with pink-frosted stucco walls and black glass doors.
The club’s unsettling combination of girlish innocence and highway -access-road
menace might serve as a metaphor for the lottery winner’s inner life. At
approximately 5 a.m. on Aug. 5, 2003, Whittaker called the police from the
parking lot of the Pink Pony complaining that he’d been drugged and that a
substantial sum of money was missing from his Hummer. “There’s no confusion
on the fact that he didn’t have all his faculties,” a police spokesman told reporters.
Whittaker gave the police a urine sample for analy sis, and his private investigator
found $545,000 in cash behind a trash bin an hour later; the strip club’s manager
and his girlfriend were charged with robbing Jack, but were never indicted. “I’m
simply a businessman who has seen his share of failures and successes,”
Whittaker told reporters. “My personal life is my own, and I make no excuses for
my actions.”
Whittaker’s faith that he could handle his enormous lottery winnings with the same
qualities of self-reliance, hard work, and aggression that had allowed him to
master previous challenges was tragically misplaced. Less than three months
after the incident at the Pink Pony, Whittaker was arrested after driving his
Hummer into a concrete median on the West Virginia Turnpike. The arresting
officer, M.J. Pinardo, reported that he smelled alcohol, but Whittaker refused
sobriety tests and became “extremely belligerent.” The police found a small
pistol and $117,000 in cash on Whittaker. “It doesn’t bother me, because I can tell
every one to kiss off,” he explained to reporters outside the local courthouse after
his arrest. His reply to criticism of his gas-guzzling Hummer was equally
succinct: “I won the lottery ,” he said. “I don’t care what it costs.”
The cost of Whittaker’s insouciance went up sharply the following y ear. On
Jan. 25, 2004, according to a police report, he got drunk, parked his car in the
middle of the street, went away, returned to find that $100,000 he had left on the
passenger seat was stolen, and was charged with drunken driving when the police
arrived. Vernon Jackson Jr., also from Scott’s Depot, was indicted on charges
including breaking and entering an automobile and grand larceny, but it was also
possible to imagine that Jackson had simply taken money Whittaker no longer
wanted. After all, he’d left the cash out in plain sight on the passenger seat.
Later, Whittaker was arraigned on charges of try ing to assault and threatening to
kill Todd Parsons, the manager of Billy Sunday ’s Bar and Grill in St. Albans, after
previously being banned from the establishment. Further lawsuits followed. In
March 2004, Whittaker was sued by a floor attendant at the Tri-State Racetrack &
Gaming Center in Nitro named Charity Fortner, who claimed he’d forced her
head toward his pants while he gambled at the dog track. The suit was settled out
of court for an undisclosed sum.
In September 2004 three men broke into Whittaker’s home, even as a fourth man
lay dead inside. The dead man, Jesse Joe Tribble, 18, had died of a drug
overdose, though it was never exactly discovered when. The three burglars—J.C.
Shaver, 20, James Travis Willis, 25, and Jeffrey Dustin Campbell, 20—were
captured on Whittaker’s security cameras stealing stereo equipment and other
valuables. (A wrongful death suit brought by Tribble’s family against Whittaker
was settled.) The four men were friends of Whittaker’s granddaughter, whose
spectacular public disintegration soon overshadowed that of Whittaker himself.
Whittaker’s transformation from successful businessman and loving grandfather
to disheveled and obnoxious strip-club patron took less than two y ears and
alienated many of his friends and family members—beginning with his wife,
who soon filed for divorce. While a reflection of Whittaker’s own flaws, such
personal upheaval is more common than not among jackpot winners, according to
Mike Kosnitzky of Boies, Schiller & Flexner, a law firm in New York. Kosnitzky
has been involved in the representation of half a dozen large lottery winners; his
clients include a former attendant at a parking garage in Midtown Manhattan
named Juan Rodriguez, who in 2004 won a Mega Millions jackpot worth
$149 million.
In his experience, Kosnitzky say s, most lottery winners suffer tremendous guilt as
the result of their good fortune; they ’re also troubled by family members and
friends who feel entitled to their winnings and who become angry when they
don’t get what they feel they deserve. Without access to financially and
psy chologically sophisticated advice, winners quickly find themselves easy marks
for every kind of manipulation and often take refuge in preexisting addictions,
which are compounded by seemingly inexhaustible wealth.
Contrasting lottery winners with professional athletes—who are often also from
poor backgrounds, and suddenly find themselves blessed with great wealth—
Kosnitzky say s lottery winners generally do much worse. “With most athletes,
there’s enough attention on them from an early age that there’s a vetting process
before that circle is created,” he said, pointing out that most professional athletes
complete at least a y ear or two of college. “LeBron James has his friend
Maverick [Carter], and they surrounded themselves with educated people who
knew every aspect of law, finance, accounting, contract negotiations, and all the
things he needed to know to build his brand. A lottery winner doesn’t have that. It
happens suddenly.” Professional sports leagues, Kosnitzky say s, are well aware
of the perils of sudden wealth and prepare athletes accordingly, adding, “There’s
no rookie course for lottery winners.”
Whittaker’s combination of self-reliance, arrogance, and money were
particularly dangerous for his granddaughter, a teenage girl whose father had
committed suicide when she was small. Bragg’s mother, Ginger, Whittaker’s only
child, had suffered from recurring ly mphoma. As a result, the girl had lived off
and on with her grandparents and became particularly close to her grandfather.
When she got out of school, she telephoned the man she called Paw-Paw to tell
him about her day ; when she wasn’t in school she often came with him to work. In
their spare time, one friend told a reporter for the Washington Post, they liked to
flop down on Bragg’s bed together to watch movies and eat popcorn.
It was Whittaker’s dream that Bragg would inherit every thing he had amassed; he
planned to give all of his companies and associated properties to her when she
turned 21. “She was the shining star of my life, and she was what it was all about
for me,” he later said. “From the day she was born, it was all about providing and
protecting and taking care of her.”
Photograph by Jon C. Hancock/AP PhotoWhittaker two y ears later, after a stint in
rehab
Whittaker lavished her with money and gifts, including the pale-blue custompainted Mitsubishi she had wanted and at least four other cars. According to her
friends, it wasn’t unusual for him to hand Bragg $5,000 in cash to spend in a single
day, which didn’t bring her happiness but an entourage of drug dealers and petty
criminals. Within a y ear of Whittaker’s windfall, Bragg went into rehab for
Oxy Contin addiction, but she quickly relapsed. “They want her for her money
and not for her good personality,” Whittaker complained a y ear after his win to a
reporter from the Associated Press. “She’s the most bitter 16-y ear-old I know.”
Surrounded by enablers and local kids who wanted to share in her wealth, Bragg
dropped out of school and spent her day s sleeping and shopping and her nights
driving aimlessly and buy ing large quantities of junk food to keep her entourage
fed. She also smoked “a lot of crack. Big rocks of crack,” according to J.C. Shaver,
one of the men who broke into Whittaker’s house in September 2004. According to
a reporter who peeked inside, the interior of Bragg’s Mitsubishi was littered with
candy wrappers, soda bottles, DVDs, and loose 5-, 10-, and 20-dollar bills—the
change from the stacks of hundreds Whittaker gave her as spending money.
Hundred-dollar bills would fly around inside the car and sometimes out the
window as she cruised around with friends, one of them recalled. “She doesn’t
want to be in charge of the money. She doesn’t want to inherit the money. She
just looks for her next drugs,” Whittaker told a reporter in 2004.
He had plenty of problems of his own. At one point, Whittaker estimated that he’d
been involved in 460 legal actions since winning the lottery —an estimate quickly
superseded by further arrests, along with more lawsuits, some of which were
thinly veiled attempts at extortion. His attempts to recover money he’d loaned to
friends and acquaintances were often expensive and usually in vain. He was sued
by a casino for debts totaling more than $1 million; in a countersuit, Whittaker
claimed the casino owed him money —for a new kind of slot machine he’d
invented, which they ’d promised to buy. In the hope of keeping trouble away,
Whittaker hired off-duty sheriffs’ deputies to guard his house and serve as
body guards. The move appears to have discouraged law enforcement from
pursuing drunk driving cases. It also reinforced his belief that his lottery wealth
had put him bey ond the reach of the law.
On Dec. 9, 2004, Whittaker decided to stop fighting a drunk driving charge in
court, surrendered his driver’s license, and checked himself into rehab. He also
called the police to report that Bragg, now 17, had been missing since Dec. 4.
Photograph by Craig Cunningham/Charleston Daily MailBragg’s body was found
behind a junked van in Scary Creek
On Dec. 20 a girl’s body was found wrapped in a plastic tarp behind a junked van
in Scary Creek, an unincorporated area outside the town of St. Albans. The girl’s
body was in bad enough shape that police needed to use tattoos on the corpse to
formally identify her as Bragg. Bragg had pills and a sy ringe hidden in her bra
and cocaine and methadone in her sy stem at the time of her death, which was
ruled to be the result of an accidental overdose. Services were held Christmas Eve
at the Ronald Meadows Funeral Parlors in Hinton. Jack and Jewel Whittaker sat
side by side in a packed funeral home listening to a song by the rapper Nelly.
White doves were released at Bragg’s graveside.
Things didn’t get much better for Whittaker after Bragg’s death. In April 2008 his
divorce from Jewel was finalized, ending nearly 42 y ears of marriage. In July of
the following y ear, his daughter Ginger Whittaker Bragg was found dead in her
opulent home on Lake Drive in Daniels. She was 42 y ears old.
On Jan. 25, 2008, Jack Whittaker once again bought a lottery ticket at the C&L
convenience store in Hurricane. Lottery spokeswoman Nancy Bulla stated that
Whittaker had “matched four numbers plus the Powerball number for a $10,000
prize”—meaning he had been one number off from winning a second megamillion-dollar jackpot. His run of bad luck had not y et ended.
In the ten y ears since he became the wealthiest lottery winner in history,
Whittaker has spoken rarely with the press. There have been reports that he’s
broke. His name isn’t listed in the phone book, and none of his businesses—which
include a bewildering variety of names and addresses—seem to be currently
operating. At the rural address on the tax returns of the Jack Whittaker Foundation,
there’s little more than a muddy lot with a few trailers and rows of used
construction equipment. At the end of the lot, a small single-story building with a
sign on the door reads “Please ring bell for assistance.”
In October, I rang the bell and waited in the rain. Through the glass of the door, I
could see a photocopied color snapshot of a smiling blonde girl with hazel ey es,
whom I recognized as Bragg. The plant by the front desk was dead, and judging
by the leaves on the carpet, had been for a while. Around back a man in work
clothes was sitting in his Jeep, waiting for the tank to fill up with diesel. “You won’t
find him here,” he said. He offered a rough location for another Whittaker office,
half an hour away .
There, opposite a tractor dealership, was a modest house that served as an office.
On the license plate of a gold Hummer in the driveway was a picture of a smiling
Bragg. I left a note under the door and another note on the windshield of the
Hummer.
When I came back the next morning the Hummer was gone. I knocked on the
door. Whittaker’s secretary was there and let me wait in a set of rooms with a
space heater. After half an hour I got back in the car and headed north. Five
minutes later, I passed a gold Hummer heading south, with Whittaker behind the
wheel. I followed him at high speeds down a two-lane road for a while, until he
doubled back toward the house.
I parked by the side of the road and walked up to the door of the house. Whittaker
was standing outside by his mailbox and talking with a bearded man in a pickup
truck. I nodded, giving him time to finish his conversation, and went inside to wait.
Whittaker came in 10 minutes later with the man, whom he introduced as his
pastor.
Dressed in his usual black suit, white shirt, and black Stetson hat, his barrel chest
protruding over a sizable gut, Whittaker looked like a man who had done battle
with the devil in a backwoods ghost story. “Today is my birthday —I’m 65 y ears
old,” he said, and then explained his policy of not giving interviews, except for
money. I suggested that he’d been through experiences that no sane man would
want to go through, that others might benefit from being able to understand, and
that was why he should speak to me for free. I told him that his story was an
American story, about the belief in luck and the damage people can do while
meaning to do good.
He looked me up and down and shrugged. “I don’t care what people think I am.
That doesn’t bother me one bit,” he said. “I know who Jack Whittaker is. And
some day s I don’t like who I am.” He knew Christmas would be the 10th
anniversary of his big win, a thought that seemed to fill him with pride and
bitterness. “Yeah, I’m not even the biggest single winner any more,” he said.
“Somebody about a month ago won $327 million somewhere, so that kicks me out
of the Guinness Book of World Records.” The charge for an interview would be
$15,000. Otherwise, he said, he wasn’t interested in talking.
Photograph by Jeff Gentner/AP PhotoWhittaker during a rare interview in 2007
He kept talking any way. He hardly needed the money, he explained; reports that
he was broke were false. His refusal to give interviews wasn’t the result of shame,
but rather his response to the lies that have been printed about him and broadcast
on TV. “That’s the only way that I can live with the way they print things, and if
I’m getting paid, they can write whatever they want to about me,” he said. “I’ll be
their whore, I don’t care.”
He gestured over to a stack of papers on top of a file cabinet. “I got a stack of
screenplay s this big that people are offering to me about my life, and they all
have something wrong with them,” he said. “They don’t have what’s right.”
His pastor smiled. Whittaker had built his church and funded his missions to
Africa. They went hunting together. He knew that there was good and bad in
Whittaker, just as there was good and bad in every one. “Somebody needs to take
it back to the beginning, the old sawmill day s, when there was nothing there,” he
offered. “When y ou and y our dad and them, they built that Mary Jane Church.”
“You were a millionaire before y ou won the lottery , right?” I asked him.
“Nobody knew I had any money,” Whittaker said. “All they knew was my good
works.”
“Life was easier then too, wasn’t it,” the pastor said, in the instructive tone of
voice one might use with a bright but headstrong child.
“Yeah, it was a lot easier then,” Whittaker said sadly .
Original: https://www.readability.com/articles/g0kfo8fl
Title: The Bitcoin Bubble and the Future of Currency
Author: medium.com
Summary: A few days ago, the value of all the bitcoins in the world blew past
$1 billion for the first time ever. That’s an impressive achievement, for a
purely virtual currency backed by no central…
The Bitcoin Bubble and the Future of Currency - medium.com - Readability
A few day s ago, the value of all the bitcoins in the world blew past $1 billion for
the first time ever. That’s an impressive achievement, for a purely virtual
currency backed by no central bank or other authority. It’s also temporary : we’re
in the middle of a bitcoin bubble right now, and it’s only a matter of time before
the bubble bursts.
There are a couple of reasons why the bubble is sure to burst. The first is just that
it’s a bubble, and any chart which looks like the one at the top of this post is bound
to end in tears at some point. But there’s a deeper reason, too — which is that
bitcoins are an uncomfortable combination of commodity and currency. The
commodity value of bitcoins is rooted in their currency value, but the more of a
commodity they become, the less useful they are as a currency .
Still, it’s worth taking a look behind the bitcoin bubble, because there are
fascinating implications for any body who cares about pay ments, or currencies,
or trust.
First, though, let’s go back to the night of Sunday June 12, 2011. That was the date
of the first big bitcoin heist: a theft of such simplicity and audacity that it might
well be considered the perfect crime. A man — we know him only as “All In
Vain” — went to bed that night with his Windows computer turned on and
connected to the internet. On that computer was a wallet containing 25,000
electronic coins. When he woke up on Monday morning, the wallet was still there.
But the money was gone.
Those 25,000 coins were, at the time, worth some $500,000; today, they are
worth about $3.5 million. If All in Vain had noticed the theft within a couple of
minutes of it happening, it’s conceivable that he could have got his money back.
But he was asleep — and ten minutes after the theft occurred, it was utterly
permanent and irrevocable. The only way All in Vain could get his money back
would be if the thief were to simply transfer it back into his wallet.
No one will ever find the person who stole All in Vain’s coins. That’s because the
coins were designed, by another pseudony mous internet denizen known only as
Satoshi Nakamoto, to be the perfectly anony mous pay ment mechanism for a
digital world. That’s one of the things about bitcoins: once y ou send them, they ’re
sent. Similarly, if someone sends you bitcoins, y ou know for sure that y ou own
them. You don’t need to know or trust the sender — all y ou need to know is that
the coins have arrived in y our virtual wallet, ready for saving or spending.
Bitcoins were designed to be – and, in many way s, are – the perfect digital
currency : they ’re frictionless, anony mous, and cry ptographically astonishingly
secure. For any body who’s ever suffered the incompetence of a bank, or bristled
at the fees involved in just spending money, either domestically or abroad – that
is to say, for all of us – the promise of bitcoin is the holy grail of pay ments.
Especially since, to all intents and purposes, bitcoins are invisible to law
enforcement and the taxman.
Those strengths are also weaknesses. No one wants to risk losing millions of dollars
worth of currency overnight, just because they were outsmarted by some
computer hacker.
Still, for the time being, bitcoin is in many way s the best and cleanest pay ments
mechanism the world has ever seen. So if we’re ever going to create something
better, we’re going to have to learn from what bitcoin does right – as well as what
it does wrong.
The source code for bitcoin is free and public, which means that just about every
hacker and cry ptographer in the world has had a crack at it. And they ’ve all come
to the same conclusion: it really works. There are question marks over just how
anony mous it is and just how scalable it is, but when bitcoins first arrived in early
2009 – right at the height of a massive global crisis of capitalism – they had
immediate and magnetic appeal to the anarcho-utopian crowd of technolibertarians who drive an enormous amount of innovation online.
Such people, including Satoshi Nakamoto, are far from unique in their mistrust of
all existing financial institutions. What sets Nakamoto apart is that he turned that
mistrust into a philosophy, the most important driving force behind the bitcoin
project. When he introduced bitcoin to the world in February 2009, Nakamoto
boasted that his new currency was “completely decentralized, with no trusted
parties”. And he explained in some detail what he saw as the problem in need of a
solution:
The root problem with conventional currency is all the trust that's required to
make it work. The central bank must be trusted not to debase the currency,
but the history of fiat currencies is full of breaches of that trust. Banks must
be trusted to hold our money and transfer it electronically, but they lend it
out in waves of credit bubbles with barely a fraction in reserve. We have to
trust them with our privacy, trust them not to let identity thieves drain our
accounts.
Nakamoto’s no paranoiac crazy : what he’s say ing here is not all that different
from what Warren Buffett wrote in his 2012 letter to shareholders.
Investments that are denominated in a given currency include money market funds, bonds, mortgages, bank deposits, and other instruments. Most
of these currency -based investments are thought of as "safe." In truth they
are among the most dangerous of assets.
Over the past century these instruments have destroy ed the purchasing
power of investors in many countries, even as these holders continued to
receive timely pay ments of interest and principal. This ugly result,
moreover, will forever recur. Governments determine the ultimate value of
money, and sy stemic forces will sometimes cause them to gravitate to
policies that produce inflation. From time to time such policies spin out of
control.
Even in the U.S., where the wish for a stable currency is strong, the dollar
has fallen a staggering 86% in value since 1965, when I took over
management of Berkshire. It takes no less than $7 today to buy what $1 did at
that time.
If y ou hold dollars, y ou’re trusting the US government not to destroy y our wealth.
Bitcoin, by contrast, is based on mistrust — it’s specifically designed so that it’s
every man for himself. All in Vain was blamed by many in the bitcoin
community for his stupidity : what was he thinking, keeping his wallet on a
Windows computer attached to the open internet?
But even with bitcoin, people nearly alway s end up trusting someone – and the
entity they ’re trusting often turns out to be unreliable. My Bitcoin, turned out to be
a fraud; Mt Gox was hacked. The latest hot new bitcoin company is Coinlab, but
given how much money can be made by hacking into these companies, and given
that law enforcement authorities are unlikely to make any attempt to go after the
perpetrators, there will alway s be a pretty substantial risk that clients will lose their
money .
The level of mistrust built into bitcoin is both feature and bug – most of us actually
like being able to outsource our wealth-hoarding to some large trusted institution,
rather than bury ing $1,000 under a black volcanic rock in a dry stone wall next to
an old oak tree, or wrapping $90,000 in hundred-dollar bills in aluminum foil and
hiding it in the freezer. Looking after y our own coins is dangerous, and requires a
pretty substantial level of tech-savviness. But trusting someone else to look after
y our coins requires the very trust that bitcoin was designed to circumvent.
Bitcoin’s built-in mistrust of institutions doesn’t just set it apart from fiat currency,
it also sets it apart from other virtual currencies, such as Facebook credits in the
US, QQ coins in China, or Linden dollars in Second Life. All those currencies are
closely controlled and guarded by the companies that invented them – and have
very little value outside that particular ecosy stem. (That said, credits in World of
Warcraft are valuable enough that Chinese prison guards reportedly force
convicts to perform monotonous tasks within the game for 12-hour stretches at a
time, building up credits which can then be sold for many times the guards’
official salary .)
Some of these virtual currencies are roughly the same order of magnitude as
Bitcoin in size, although it’s hard to make apples-to-apples comparisons. Revenues
from Facebook credits are running at a rate of about $1 billion a y ear, for
instance, and the market in QQ coins was so big in 2007 that the Chinese central
bank, fearing that it was losing control of the money supply, cracked down on
their use, calling on companies to stop trading in them. In this latest bubble, bitcoin
transaction volume has managed to exceed $30 million in one day , and most day s
are seeing volumes of more than $5 million. That works out to about $2 billion in
volume per y ear, so long as the bubble doesn’t burst.
But the biggest difference between bitcoin and other virtual currencies is that
bitcoins are the only one which have speculative value. What’s more, because
they ’re not tied to a corporate parent, bitcoins appeal to the web’s anarcholibertarians in the way that no other virtual currency can. Bitcoins hold exactly
the same gleaming promise for techno-utopians as gold does for Glenn Beck.
They ’re a scarce resource, and there’s no government or corporation which can
control that resource.
Bitcoins, like gold, are beholden to no government; they can’t be printed by any
central bank, and they certainly won’t be subject to hy perinflation, since the
global supply of bitcoins will never exceed 21 million. Like gold, bitcoins are
mined; but unlike gold, no one can stumble over some large seam and make a
fortune. Mining for bitcoins involves an enormous amount of computer power,
and very little luck, and the global rate at which new bitcoins will be mined is both
predetermined and slowing down. There were about 3 million coins outstanding at
the beginning of 2010, there are about 11 million coins outstanding today, and
we’ll get to 14 million in early 2014. Come 2021 or so, assuming bitcoins are still
used then, the rate of growth of bitcoins will be so low that to a first approximation
the money supply will be constant. This carries with it its own problems, as we’ll
see. But there’s no risk that some central bank will print millions of new bitcoins,
thereby diluting or inflating away the value of existing ones.
As the reverberations from the financial crisis continue to echo, people betting on
a decline of trust in government have been stocking up on gold and bitcoins. (Or
rather, gold or bitcoins: although they can be equally zealous and vehement about
their respective asset classes, there’s surprisingly little overlap between goldbugs,
on the one hand, and the bitcoin community, on the other.) These are the perfect
assets for rugged individualists, who trust their guns or their ultra-secure
passwords more than they do their country. And in times of global turmoil, as
we’re seeing today , such assets can perform very well.
The immediate impetus for the current spike in bitcoin prices, of course, is the
events in Cy prus. There, the government, under extreme pressure from the
European Union, first proposed taking all bank accounts – even the insured ones –
by at least 6.75%. That didn’t work, but now uninsured account holders at Cy prus’s
two largest banks stand to lose most of their money. It’s a stark reminder of the
dangers associated with depositing money in a bank.
Bitcoin has become suddenly popular in Cy prus for obvious reasons: no
government can confiscate y our bitcoins, or prevent y ou from transporting them
out of the country. (On the other hand, if y our bank account is frozen, it’s hard to
find the money needed to buy coins.)
More generally, bitcoins could be emerging as a very useful currency in police
states, or any where that monetary policy could fail catastrophically. At the end
of 2011, for instance, there was a significant uptick of bitcoin activity in Belarus
and Ukraine, two countries at severe risk of hy perinflation. If y ou want to protect
y our wealth from the policies of y our national government, or from the
inflationary policies of a heterodox central bank, then bitcoins can be a very good
way of doing so in a largely undetectable manner.
Of course, acquiring bitcoins in such countries can be non-trivial: there’s not a lot
of liquidity on the major internet exchanges from people looking to sell bitcoins
and buy the Ukrainian hry vnia. And even if there were, y our local Ukrainian bank
might frown on sending lots of hry vnia to Mt Gox. But it’s conceivable that people
in Ukraine and Cy prus, especially information workers, might start working for
bitcoins, spending them on goods and services, and introducing them into the local
economy that way. At which point one can envisage the coins getting the same
kind of status, at least among the information elite, that dollars had in the Soviet
era.
Bitcoins, then, are like cash — but they take the idea a step further than has ever
been possible. If y ou give me a $100 bill, the transaction is anony mous and
untraceable, but we both need to be in the same place at the same time. And it
helps if we both live in a country where the US dollar is an accepted unit of
currency .
With bitcoins, transfers can take place across continents and timezones with no
problems, no timelags, and only minuscule transaction fees. No banks are
involved; no central bank controls the money supply ; no taxes ever need to be
paid. Once y ou’ve obtained a stash of bitcoins, they ’re y ours to do with as y ou
like.
And there’s lots that y ou can do with bitcoins. You can convert them into any of a
dozen currencies, on various online exchanges. (Although at that point y ou’re
going to start needing a bank account.) You can gamble with them in online
casinos. Or y ou can just go out and spend them. The list of things which have
been bought with bitcoins is very long, and is by no means confined to laptop
computers and computer-programming services. Hotels take them, a sock
manufacturer in Massachusetts is famous for accepting bitcoins, and the more
enthusiastic members of the bitcoin community regularly do things like split
checks at a restaurant – even one which doesn’t take bitcoin itself – by transferring
coins to the person pay ing in dollars.
And then, more notoriously, there’s Silk Road – a site which is not only a hub of
bitcoin activity, but also play ed an important role in the first bitcoin bubble, the
vertiginous rise in market value of bitcoins in 2011 which made the rest of the
world sit up and pay attention to what was going on.
Silk Road — and bitcoins — hit the public consciousness on June 1, 2011, a couple
of weeks before the All in Vain heist. That’s when Gawker’s Adrian Chen
published an article headlined “The Underground Website Where You Can Buy
Any Drug Imaginable”. His post was viewed more than 1.5 million times, and
caused a sensation, with Senators Joe Manchin, of West Virginia, and Chuck
Schumer, of New York, writing an outraged (and entirely ineffective) letter to the
Attorney General and the head of the Drug Enforcement Administration,
demanding Silk Road be taken down.
Bitcoins were – and still are – the only currency accepted on Silk Road, and
overnight they became a speculative bet on the online future of illegal trading.
The price of bitcoins, which had never before traded in the double digits, soared in
just one week to as much as $33 apiece.
The value of bitcoins, it turns out, is highly sensitive to media coverage: a y ear
earlier, in July 2010, the influential technology site Slashdot posted a short item
about bitcoin which sent the price soaring tenfold — from less than a cent to about
7 cents per bitcoin — also in a few day s. And a single post on Time.com in April
was enough to double the price of Bitcoins in a week, from 80 cents to $1.60. Even
the article y ou’re reading now is appearing now because of the current bubble,
and will, at the margin, help to continue to inflate it.
For speculators, the math is incredibly compelling. If y ou spent $100 on bitcoins
the day after the Slashdot article came out, those coins would have been worth
$72,500 when the Gawker article came out just under a y ear later. And they
would have been worth $250,000 a week after that. Today, they would be worth
more than $1 million. There aren’t many perfectly legal investments which offer
that kind of return.
All of which helps explain the current bitcoin bubble as well. Each time the value
of a bitcoin hits a new high or a new milestone, there’s more press coverage of
the phenomenon, drawing new people in, and sending the value of bitcoins even
higher. Indeed, if y ou chart the value of bitcoins against the number of times that
they ’re being talked about on Twitter, y ou’ll see a very strong correlation. And
because of the Cy prus connection, mainstream publications have a handy realworld news hook, now, with which to explain the bitcoin phenomenon.
This is actually a serious problem, if y ou’re try ing to put together a currency,
rather than a vehicle for financial speculation. If the currency of a country ever
fluctuated as much as bitcoins did, it would never be taken seriously as a medium
of exchange: how are y ou meant to do business in a place where an item costing
one unit of currency is worth $10 one day and $20 the next? Currencies need a
modicum of stability ; indeed, one of the main selling points of bitcoin was that it
couldn’t be destabilized by government institutions. But that comes as scant
comfort to people watching the value of a bitcoin behave like some kind of
demented internet stock during the dot-com bubble.
And just like demented internet stocks, bitcoins have seen busts as well as bubbles:
in the second half of 2011, for instance, the value of bitcoins retreated from their
peak around $30 each to a low point closer to $3. (Today, they ’re trading above
$140.)
In reality, then, bitcoin doesn’t really behave like a currency at all. In terms of its
market value, it looks much more like a highly -volatile commodity. That’s by
design: bitcoins were created to be the most fungible commodity the world had
ever seen – to the point at which they would effectively erase the distinction
between a commodity and a currency .
But is that a good idea?
Dollars are a universally accepted unit of account: if something in the world has a
price, it has a price in dollars. Dollars are not, on the other hand, phy sical
commodities. The overwhelming majority of dollars in the world are deposited
safely and electronically in banks: there’s something weird and self-defeating
about the kind of people who keep their savings stuffed under the mattress. In
Holly wood, if y ou show someone counting out huge sums of cash, that’s an easy
way for the director to say that he’s a criminal.
Bitcoin was constructed to behave like a currency : it’s very easy to use bitcoins to
pay for goods and services, especially if what y ou’re buy ing is in a different
country. Right now, there’s literally no way to build a website selling some kind of
service, and have a meaningful fraction of the world’s online population be able to
pay y ou for that service. Bitcoin was designed to solve that problem; to be, in
effect, the lingua franca of online commerce.
But it’s very hard to be a currency when y ou’re also a commodity, governed by
rules of scarcity and subject to speculative attack. And it’s also very hard to be a
currency – or even a commodity, for that matter – when y ou’re as small as
bitcoin is. Even now, at the top of a huge bubble, the total value of all the bitcoins
in existence is the equivalent of about 2,000 standard gold bars -- not remotely
enough to revolutionize the global pay ments and currency sy stems as we know
them. Given the choice between something old and solid, on the one hand, and
something new and virtual, on the other, the market is still voting for the asset class
which has proved its worth over millennia.
On a good day, at the top of the bubble, the trading volume in bitcoins can be
more than $20 million. But by the standards of global currency markets, those
kind of figures aren’t even a rounding error. The foreign exchange markets see
volume of $4 trillion per day . That’s 200,000 times greater than what we’re seeing
in the bitcoin market, and it happens on a regular, day -in and day -out basis.
On top of that, there are really no traders in bitcoins, since for the time being it’s
(almost) impossible to bet that the price of bitcoins will go down. As a result,
there’s no reliable source of liquidity in the bitcoin market: there’s no bank or
trading house which y ou can be sure will be there if and when y ou want to sell
y our coins.
And just to make bitcoins even less attractive, it’s far from clear that bitcoins are
even legal. The FBI is on the record as say ing that “it is a violation of federal law
for individuals… to create private coin or currency sy stems to compete with the
official coinage and currency of the United States”. And laws against operating
an unlicensed money -transmitting business have been used against electronic
currencies in the past, and would seem to apply equally to bitcoin.
The biggest problem with bitcoins, however, is conceptual: if they succeed, they
fail.
If millions of people started using bitcoins on a regular basis, the soaring value of
bitcoins would actually be disastrous. You’ve heard of hy perinflation: this would
be hy perdeflation. Take a gold bar valued at $600,000. At $60 per bitcoin, the
value of that bar is 10,000 BTC. But then assume that bitcoins rise in value to $600
apiece, and then to $6,000, and then to $60,000 — as would have to happen if the
fixed number of bitcoins was being used to store hundreds of billions of dollars in
value. Then the value of the gold bar would plunge, in bitcoin terms — to 1,000
BTC and then 100 BTC and finally just 10 BTC. The same thing would happen to
all other goods and services in the world, including y our own salary. Everything
would be constantly going down in price, if y ou thought in bitcoin terms.
Inflation is bad, but deflation is worse. The reason is that in a deflationary
environment, no one spends money — because whatever y ou want to buy is sure
to become cheaper in a few day s or weeks. People hoard their cash, and spend it
only begrudgingly, on absolute necessities. And they certainly don’t spend it on
hiring people — no matter how productive their employ ees might be, they ’d still
be better off just holding on to that money and not pay ing any body any thing.
The result is an economy which would simply grind to a halt, with massive
unemploy ment and almost no economic activity. In a word, it would be a
Depression. In order to have economic growth, y ou need monetary growth as
well — and that’s something which is impossible to achieve in a bitcoin-based
sy stem. Currencies such as the dollar, with a central bank which can print money
at will, have succeeded for a reason. As economies grow, the money supply has
to be able to grow with them. And that’s why bitcoin can never really succeed
over the long term.
Rick Falvinge, then, the founder of the Swedish Pirate Party who has invested his
entire net worth in bitcoins, might be a multi-millionaire right now, but he is
doomed to end up a poor and disappointed man unless he changes his mind. His
coins will, at some point, become worthless, rather than turning him into some
kind of visionary cy berbillionaire.
But that doesn’t mean Falvinge isn’t onto something. There’s a lot to be said for a
fast, efficient, peer-to-peer pay ments sy stem which by passes centers of
authority and which has negligible transaction costs. It just doesn’t need to be its
own currency.
Historically, the government has subsidized the most common forms of pay ment
– coins (which are often worth less than they cost to mint), notes, and checks. But
it stopped doing that when credit and debit cards came along: Visa and Amex and
Mastercard, as well as their web-savvy successors like Pay Pal and Square, are all
run on a for-profit basis by companies looking to make billions of dollars by
skimming off a small slice of every transaction.
A peer-to-peer pay ments sy stem, allowing any body on the internet to pay
any body else on the internet without having to sign up with some financialservices behemoth first, could revolutionize global commerce. It would have to be
able to work with any currency, including bitcoin; it wouldn’t need its own unit of
account. It would have to be flexible, too: some transactions would be cashlike and
irreversible, while others would allow some kind of chargeback.
And, most importantly, it would work with, rather than against, today ’s established
monetary institutions. Yes, it would be disruptive, and could cost them quite a lot
of money in terms of lost interchange fees from plastic cards and ATMs. But it
wouldn’t aspire to delegitimize them – quite the opposite. Because it turns out that
financial-services companies are a very important part of any democracy .
It’s because we place so much trust in banks, after all, that they are forced to take
on a great deal of responsibility. Banks and central banks are given an important
job to do, are regulated and scrutinized, and can be held responsible for their
actions. The population of the entire country, as represented by the government,
stands behind bank deposits and promises to honor them even if the bank goes bust.
Money, in other words, is a key ingredient in the glue which keeps the social
compact together. (What we’re seeing in Cy prus is in large part a demonstration
of what happens when that compact starts becoming unglued.)
Bitcoin, in that sense, is anti democratic. It’s based on mistrust rather than trust, it
refuses to take any responsibility onto itself – indeed, it doesn’t even have a self to
take responsibility onto. It’s nihilistic, and an attractive alternative only to things
which are downright bad.
And in any event, bitcoin is never going to work as a global pay ments sy stem. Not
only does it suffer from having a slow-growing money supply and a
metastasizing transactions file which has to live on every user’s computer, it also
encourages destructive computer hacking. The way that the money supply grows,
in the bitcoin sy stem, is by people harnessing the power of hundreds or thousands
of computers to solve very complicated mathematical tasks, earning bitcoins for
doing so along the way. And the easiest and cheapest way of doing that is to do so
illegally, by stealth: set up a “botnet” of hacked computers to do y our bidding for
y ou. The incentives, here, are very bad indeed.
I do have hope that in the future, someone, somewhere, is going to learn from
bitcoin’s mistakes, and build a better sy stem. One which needs less technological
expertise to use; one which can grow organically, instead of only at a
predetermined rate; one which is designed to be used primarily as a pay ments
mechanism, rather than as a store of value and a unit of speculation.
When that happens, cash will start looking decidedly anachronistic, as will wallets.
We’ll have every thing we need on our phones and in our web browsers, which
we’ll be able to use for every thing from pay ing for on-street parking to sending
flowers to a friend in New Zealand to buy ing and selling shares of Google and
Apple on the New York Stock Exchange. If we want to keep our money in a bank,
we can; if we don’t, that’s fine too. And of course we can keep it in any mix of
currencies we want as well.
In the very early day s of the world wide web, there were attempts to build a
pay ments tag deep into the very architecture of HTML web pages. Those
attempts failed, killed by a financial-services industry very suspicious of any thing
new. And as a result, the web has evolved along an advertising model, where
instead of users pay ing for content, we have advertisers pay ing for users. But a
universal pay ments sy stem with no friction or interchange costs could change that
model dramatically. And it would certainly help to level the play ing field – for
good and for bad – between skilled service-sector workers in countries like India
and Russia and China, on the one hand, and their counterparts in countries like
Germany , Japan, and the US, on the other.
Pay ments walls, these day s, are extremely effective barriers to trade, and if they
come down, then we’ll get much more trade, with transactions getting orders of
magnitude smaller than what we’re seeing now. The disruption – and the global
wealth creation – could be truly enormous.
It’s impossible to know when – or even whether – this is going to happen. Bankers
in general, and central bankers in particular, tend to be extremely conservative,
and any thing which could facilitate money laundering or other illegal transactions
is going to have a lot of difficulty getting traction. Bitcoin took off quickly because
it never asked for permission; its successor is going to have to be a lot more
diplomatic.
But whatever it looks like, in the end, we can be sure of one thing: it will owe a
very large debt to Satoshi Nakamoto and his audacious attempt to invent a whole
new currency . Bitcoin isn’t the future. But it has helped to light the way ahead.
Original: https://www.readability.com/articles/easizy4n
Title: Global Economics
Author: businessweek.com
Summary: Click the image to see how the cover got made
Global Economics - www.businessweek.com - Readability
Click the image to see how the cover got made
Outside an unmarked green metal door in the hallway of a suburban Athens high
school, Tina Stratigaki waits for a job interview. It’s a Tuesday in mid-July.
Stratigaki, 29, applied for the job as a social worker weeks ago and had taken an
hour-long test the Friday before. Based on the list of applicants posted on the wall
outside the exam, she estimates there were some 2,000 candidates for 21 open
positions. This is the last interview she’s likely to get before Greece shuts down for
the summer holiday s. Her unemploy ment benefits—about €360 ($475) a month
from her previous job working with disadvantaged women and children—have
just run out. “I’m a little bit stressed,” she say s.
Jobs of any kind are scarce in today ’s Greece. Nearly six y ears of deep recession
have swept away a quarter of the country ’s gross domestic product, the kind of
devastation usually seen only in times of war. In a country of 11 million people,
the economy lost more than a million jobs as businesses shut their doors or shed
staff. Unemploy ment has reached 27 percent—higher than the U.S. jobless rate
during the Great Depression—and is expected to rise to 28 percent next y ear.
Among the y oung, the figure is twice as high. Meanwhile, cuts to Greece’s
bloated public sector are dumping ever more people onto the job market. In July,
25,000 public workers, including teachers, janitors, ministry employ ees, and
municipal police, found out they would face large-scale reshuffling and possible
dismissal. An additional 15,000 public workers are slated to lose their jobs by the
end of 2014.
Greece’s jobs crisis is a window into a wider emergency that threatens the future
of Europe. Across the continent, a prolonged slump has disproportionately
affected the y oung, with nearly one in four under the age of 25 out of work,
according to the European Commission. (In the U.S., y outh unemploy ment is
16.2 percent.) That understates the severity of the situation in Italy and Portugal,
where y outh unemploy ment rates have soared above 35 percent; Spain’s is 53.2
percent, the second-highest after Greece, at 55.3 percent. European Union
leaders have announced an initiative aimed at guaranteeing that all y oung people
receive a job, apprenticeship, or more education within four months of joining the
ranks of the unemploy ed. Governments have pledged €8 billion over two y ears to
combat unemploy ment in Europe’s worst-hit countries, and the European
Investment Bank is offering €18 billion in loans to encourage hiring by small and
midsize businesses.
Such pledges of help come too late for Greeks like Stratigaki, who are already
spending what should be the most productive y ears of their lives poring over
notice boards and alternating long periods of unemploy ment with all-too-brief
periods of work. Absent a rapid and dramatic economic turnaround, an entire
generation in Southern Europe faces y ears, possibly decades, of dependency and
disillusionment—with consequences that can’t be measured in economic terms
alone. “Our generation has depression,” say s Stratigaki. “We are at the best age.
We have the power to do every thing. And we can’t do any thing.”
Personal happiness can often be measured in the difference between what was
expected and what reality delivers. Stratigaki and her peers came of age as
Greece seemed set to cement its place in the ranks of the world’s richest
countries. The 2004 Summer Oly mpics were presented to the country and to the
world as a coming out party for a nation that had long been seen as one of
Western Europe’s stragglers. It didn’t last. The global financial crisis revealed
deep corruption in the Greek economy and an unwillingness on the part of its
fellow European states to continue to prop it up. Greece quickly turned from
success story to pariah. Just when Greeks of Stratigaki’s cohort were looking to
launch careers and start families, the floor fell away .
Photograph by Finn Tay lorPatsa makes ends meet working for her sister’s startup
and with help from her father
In Athens the crisis isn’t conspicuous. Family networks have kept the majority of
the afflicted from landing on the streets. Empty storefronts are common, but so
are cafes doing a brisk—if reduced—trade. Time has y et to work its fingers into
the cracks and weaknesses of the city ’s infrastructure. That said, it’s unusual to
walk more than a few blocks in central Athens without encountering a knot of riot
police, lounging on a street corner with their plastic shields and body armor.
During the week of Stratigaki’s job interview, the trash collectors were on strike,
leaving garbage piled around the bins. The local police, facing possible job cuts,
were demonstrating, crisscrossing the city center in convoy s of cars and
motorcy cles, sirens blaring.
Stratigaki’s struggle to find stable employ ment has lasted more than half a decade.
In high school she was the top student in her class. She studied social work at the
Democritus University of Thrace in Northern Greece, finishing her studies in
2007. While there, she held down three jobs, waitressing, bartending, and tutoring
to supplement what her parents were able to give her.
Stratigaki’s first job after university was as a bank debt collector in Athens, calling
people who owed money on loans or credit cards and haranguing them. She spent
eight hours a day being cursed at and insulted; some of her co-workers turned to
pills to fight depression. “It was the worst job I have ever done,” she say s. Even
so, Stratigaki excelled, bringing in pay ments with a calm and soothing sales pitch.
In March 2009 she was finally offered a job in her field, and she leapt at the
chance.
Stratigaki was hired by the municipal government of an Athens suburb to help
people find jobs and arrange appointments with counselors and psy chologists for
individuals and couples. The position was perfect except for one thing: She wasn’t
getting paid. When she asked, her bosses would tell her that the funds for her
position, which were to come from both the local government and the EU, were
tied up in red tape.
Desperate for the work experience, she stuck it out. She’d moved back in with her
parents and worked nights tutoring students in ancient Greek and philosophy. After
13 months on the job she arrived at the office one day to find a letter telling her
she was being fired. She hadn’t received pay ment for a single hour of work. “The
crisis had begun,” she say s. This time she was unemploy ed for more than a y ear.
In June 2011 she was hired to answer phones at a travel agency, using her French
and English to handle calls from abroad. She worked there for six months before
finding another job in social work—this time in a government center, working with
women and children who were homeless, unemploy ed, or victims of trafficking.
That job, like many in Greece these day s, was given to her on a one-y ear
contract. When it expired at the beginning of 2013, it wasn’t renewed.
Since then, Stratigaki has been out of work. She’s living on help from her parents,
on her unemploy ment insurance, and on a partial pay ment of the money she
say s the municipality owes her, which she obtained after hiring a lawy er. Her
mother has been unemploy ed since 2011, when she lost her government job. Her
father is a clerk at a shipping company. Her brother, 25, studied nursing but works
as a handy man, fixing air conditioners and installing car alarms and radios,
pulling in about €200 a month.
Shortly after her government contract expired, Stratigaki tried to go back to her
job at the travel agency, but there were no positions available. “I feel horrible,”
she say s. “I sit with my computer, searching, searching, searching.”
Studies of joblessness in the U.S. and Japan have shown that extended periods of
unemploy ment in the early y ears of a worker’s career can depress earnings for
decades. Nikos Kotsalos, 33, has been unemploy ed since November 2011, when
he lost his back-office job at the national postal service. Until then he had never
been without a job for more than a few months. In September he expects to finish
an undergraduate degree in phy sics from the National University of Athens—a
credential that’s barely sufficient to get an entry -level job. (To cite one example,
the government recently announced it will be lay ing off all university security
guards, except those with a master’s degree or a Ph.D.) “Sometimes we are
angry. Sometimes we are sad,” say s Kotsalos. “I’m 33. It’s not normal that I live
with my parents. My father, when he was 33, he already had two children.”
Photograph by Finn Tay lorOut of work since late 2011, Kotsalos will soon finish a
degree in phy sics—which may not help land a job
For y oung Greek adults, the sense that their lives have been put on hold is
palpable. Rare is the conversation that ends on a happy note. “It’s not only a
financial crisis,” say s Marianina Patsa, a 34-y ear-old Athens resident. “It also has
a severe psy chological impact. People feel like they ’re losers.” Patsa, a
successful freelance journalist before the crisis, watched her work slip away in
the months following the crash. She now works in a media startup her sister cofounded called Doc TV, earning about €350 a month. “All the rest of the bills go
to my dad,” say s Patsa. “If my dad wasn’t around, I wouldn’t be around.”
Many are already gone. A study by the Aristotle University of Thessaloniki last
spring found that 120,000 professionals with advanced degrees had left the
country since 2010. When y oung Greeks talk about another country, they might
mention its weather, its culture, or its language. Almost certainly, they ’ll note its
rate of unemploy ment. In February, Elena Vourvou, 29, lost her job in the
marketing department of a major pharmaceutical company. In June her
boy friend, Nikos Bogdos, 34, was let go from his position in the supply department
of a marine electronics company. The two are moving to London, where they ’ve
been accepted in master’s programs. “We deserve a better future,” say s
Vourvou. Adds Bogdos: “My country is going to be where there is work.
Wherever there is employ ment, that’s where I’m going to live.”
Greek society and the education sy stem have done a dismal job preparing citizens
to compete in a globalized, technology -driven economy. Up until the crisis, it was
the dream of every parent to have their child become a doctor or a lawy er. Now
the country has an excess of both. Meanwhile, with the public sector sweeping up
many recent graduates, there was little incentive for universities to offer the
technical skills companies now demand. The Greek government, prompted and
assisted by the EU, has started to roll out measures intended to reduce y outh
unemploy ment, including training programs, grants for small businesses, and
subsidies for companies that hire y oung people. But those policies are unlikely to
do much as long as the economy continues to sink. “I admit there are structural
problems in Greece,” say s Theodoros Ampatzoglou, governor of the Greek
Manpower Employ ment Organization, the government agency in charge of
tackling unemploy ment. “But the basic problem isn’t matching labor supply and
labor demand. The problem is that there’s very little demand.”
Photograph by Finn Tay lorSix y ears into Greece’s recession, abandoned
storefronts like this one are an all-too-common sight in downtown Athens
There are signs that the economy is beginning, if not to turn around, at least to
plummet at a less alarming rate. After y ears of bleeding budgets followed by the
shock therapy of austerity, the government say s it expects to take in more
revenue than it spends this y ear, not counting pay ments on its loans. “The
progress is significant, but it has been achieved with blood,” say s Aggelos
Tsakanikas, research director at the Athens-based Foundation for Economic &
Industrial Research (IOBE). The Greek central bank forecasts the economy to
start growing again in 2014.
Some Greek analy sts say 2012 marked the peak of the crisis, a y ear in which a
Greek exit from the euro appeared plausible and roughly 30 percent of the
country ’s top companies slashed salaries or cut working hours, according to a
survey by the ICAP Group, a Greek business services firm. In 2012 the average
take-home pay for a company director dropped from €105,000 to €63,000,
managers’ earnings plummeted from €55,000 to €29,000, and manual laborers’
from €16,000 to €7,000.
According to Alexandros Fourlis, managing director of Kariera.gr, a jobs site
owned by Careerbuilder.com, firings still outpace hirings. But the gap is starting to
close. In October 2012, after four y ears of decline, the number of job listings
began to increase. At the height of the crisis, in January 2012, there were on
average more than 330 applicants for every job posting on his site, compared
with a little more than 80 in 2009. For popular jobs not requiring specific skills,
such as a bank teller, the number could reach as high as 11,000. Today the
average number of résumés a job listing receives is back down to about 160. “The
picture is still negative,” say s Fourlis. “But it’s vastly improving.”
For her interview, Stratigaki has put on a white blouse and black pants. Goldrimmed sunglasses hold back her red hair. Open sandals reveal pink toenails. On
her left wrist she wears a chain with a tiny glass evil ey e, a charm to ward off
bad luck. The summer heat has penetrated the interior of the high school. Three
y oung women sit near her outside the green metal door.
Another applicant in white slacks and a white linen shirt paces back and forth,
from the hallway into the stairwell. He say s his name is George but declines to
give his last name. He’s 29 y ears old, holds a master’s degree in economics, and
has been unemploy ed for a y ear and a half, not counting the five months he
worked as a street cleaner.
“It’s more difficult for the highly qualified,” he say s. “The market thinks we will
cost too much.” He’s apply ing for a position as a secretary, a job that requires a
high school degree. For a couple of minutes, he and Stratigaki discuss whether his
education will be an asset or a liability , and then their names are called.
The position Stratigaki is apply ing for, a social worker in an office distributing
discounted groceries and medicine to the city ’s rising numbers of disadvantaged,
would be a coup. For one thing, it’s a two-y ear contract. The salary of €700 a
month would be low by the standards of a few y ears ago but is considered
generous in the current economy .
Stratigaki estimates she spends two hours a day looking for jobs, an effort that’s
netted her nine interviews in six months. One was for a position as a secretary at
an economics newspaper in Athens’s richer southern suburbs. It quickly went off
the rails when the interviewer began mocking the working-class neighborhood
where Stratigaki grew up.
In addition to three jobs sites, including Kariera.gr, Stratigaki regularly checks the
home page of her university ’s career office. She set e-mail alerts for positions in
her field but has received only two notices. Another alert, for secretarial work,
generates mostly spam from companies looking to staff call centers with y oung
people working on commission. Increasingly, many postings are for unpaid
internships. Two or three times a week she makes the rounds of the websites of
nearby municipalities, checking in the evening, when she’s learned that they
usually refresh. Sometimes, to break the monotony, she meets for coffee at the
home of close friends to go through the listings together. “It’s expensive for us, as
unemploy ed people, to go to a cafe,” she say s.
Photograph by Finn Tay lorSiderakis returned from London to be closer to his
ailing father. He found work as a chef, but his pay checks have shrunk
With the rest of her time, she helps take care of her parents’ house and that of her
boy friend, Stelios Siderakis, 32, who moved back from London in 2010 to be
closer to Stratigaki and to his father, who died of cancer last y ear. She recently
began study ing photography, shooting mostly landscapes but brainstorming with
her classmates about earning some money shooting weddings and baptisms. The
one thing she and her boy friend don’t want to do is leave Athens, unless it’s to
move to the island of Chios, where Siderakis has family . “I don’t know why ,” say s
Stratigaki. “May be I’m afraid. Or may be it’s the fact that I’ve alway s found
something sooner or later.” Siderakis, a chef, has had relatively little trouble
finding work, though his pay check has shrunk with every new job. “I’d feel like I
was betray ing my country ” by leaving, he say s. “I have friends who have left,
but they didn’t have any other options. The jobs they were doing were gone. I
know that I can make it somehow or another.”
When Stratigaki, George, and two other women emerge from their interviews, all
four say they ’re happy with how things went. They compare notes on the way
down the stairs. Greece shuts down in August, even in this time of crisis, so
Stratigaki didn’t expect to hear back about the interview until September, but the
interviewers tell her they plan to make their decision by the end of July. “Now it’s
time to wait,” she say s. “This is the hardest part.”
In the meantime, the job hunt goes on. Two day s after the interview, Stratigaki
drops by her old travel agency to book a couple of ferry tickets to Chios. She takes
the opportunity to ask once more about getting rehired. The answer, again, is no.
Original: https://www.readability.com/articles/wvgluywd
Title: Facebook, One Year Later: What Really Happened in the Biggest
IPO…
Author: theatlantic.com
Summary: Uma Swaminathan tuned the television set in the living room of her
ranch style home in the suburbs of East Brunswick, N.J. to CNBC. It was 9:00
a.m. on May 18, 2012, a day the retired schoolteacher…
Facebook, One Year Later: What Really Happened in the Biggest IPO Flop
Ever - www.theatlantic.com - Readability
Uma Swaminathan tuned the television set in the living room of her ranch sty le
home in the suburbs of East Brunswick, N.J. to CNBC. It was 9:00 a.m. on May
18, 2012, a day the retired schoolteacher thought might make her rich. She logged
onto her Vanguard brokerage account on her computer and placed an order for
5,000 shares of Facebook at $42 a share.
On TV, wearing his trademark hoodie, 28-y ear-old Mark Zuckerberg, creator of
the world's largest social networking site, stood in the courty ard of Facebook
headquarters in Menlo Park, California. A crowd of eager Facebook employ ees
held up company license plates and posters for the cameras. They 'd stay ed up all
night at an employ ee "hack-a-thon" to celebrate the big day when Facebook was
finally going public, in what might have been the most anticipated initial public
offering in history. The boy ish, blue-ey ed Zuckerberg grinned, standing next to
Bob Greifeld, chief executive of Nasdaq-OMX Stock Market, Inc., the largest
electronic stock exchange in the United States.
With short hair, brown skin, and few wrinkles, Swaminathan looks much y ounger
than her 68 y ears. She spent most of adult life as a suburban mom, making tofu
for her daughter's friends at theater rehearsals, taking her three sons to soccer
practice and Boy Scouts, and volunteering in the local community. She served a
term as president of the Indian American Association of New Jersey .
Her interest in the stock market didn't develop until her husband died about 13
y ears ago. Her four children had already moved out to attend college or to pursue
their careers. Swaminathan was left with her late husband's 401(k) retirement
account, when she started dabbling in the market, investing in stable companies
like Microsoft. Not long after, she began to follow the news coverage of initial
public offerings (IPOs) -- when private companies enter the public market -- and
came to know of the phenomenon known as the first day "pop." On the day that
companies would debut on the stock market, the price would tend to shoot up
before stabilizing. A y ear earlier, she watched as social networking site LinkedIn's
stock price closed up 109 percent on its opening day .
She'd never placed such a big bet on just one stock, but she felt a personal
connection to Facebook. She had been using the site to connect with family and
friends since 2009, and almost every one she knew had an account.
Now, as she watched the TV in eager anticipation, millions of shares were going
to leave the hands of private investors and start trading, giving any one with
enough money a chance to own a slice of the social network giant. Silence
descended as Zuckerberg came forward to deliver his speech: "I just want to say
a few things, and then we'll ring this bell and we'll get back to work. Right now this
all seems like a big deal. Going public is an important milestone in our history. But
here's the thing: our mission isn't to be a public company. Our mission is to make
the world more open and connected..."
Finally he reached the moment so many were waiting for: "So let's do this!" And
the opening bell sounded as he signed the digital screen on the podium before him:
"To a more open and connected world," he wrote. His handwritten message
instantaneously appeared in Times Square just above the giant illuminated
NASDAQ exchange ticker.
Facebook shares hit the market at an opening price of $38. Minutes later,
Swaminathan's online order was executed, and the retired schoolteacher had just
spent approximately half her life savings.
I: THE OFFERING
For Mark Zuckerberg, selling Facebook shares on the public market had a clear
downside. Besides the headache of releasing a company 's financial details to the
public, he worried that increased scrutiny and push for profits would compromise
Facebook's mission.
But like any growth-stage company, Facebook needed money, and private
companies face restrictions on how much stock they can issue for cash. In early
2011, Goldman Sachs helped Facebook conjure IPO-ty pe money without an
actual IPO by creating a special investment product to sell its private shares to
Goldman's wealthiest clients. But when the New York Times exposed the plan, the
SEC began to investigate the transaction. Soon after, Zuckerberg decided to take
the company public. In late 2011, the Wall Street Journal reported that Facebook
was anticipating an IPO valuation of $100 billion -- nearly four times more than
Google's market cap when it went public in 2004.
On February 1, 2012, Facebook filed its Form S-1 -- effectively a birth certificate
for publicly traded companies -- containing every thing an investor needs to know
before buy ing shares at an IPO, including basic financial information and the
business model. Facebook's S-1 showed that the company was primarily in the
display -advertising business, with a net profit of $1 billion in 2011 from total
revenue of $3.7 billion.
The S-1 is especially meaningful to investment banks. Facebook listed its
underwriters -- the banks picked to buy and sell shares on the IPO -- near the front
of the document, from left to right, in order of responsibility , with Morgan Stanley
in the coveted "left lead" position.
This put Facebook's IPO in the hands of one of Silicon Valley 's most celebrated
bankers: Michael Grimes, co-head of global technology banking at Morgan
Stanley 's Menlo Park office, located just a few miles north of Facebook's
headquarters.
II: THE BANK
Michael Grimes, the son of a mapmaker, is a lifelong Californian with a
bachelor's in computer engineering from UC Berkeley. A titan in the world of
tech IPOs, his status grew not only from expertise in taking small and large digital
companies public, but also from his my th-making showmanship. To win
Ancestry.com's IPO, he created his own family tree and wore a green Hermes
tie with leaves to signify the company logo. To get a Hewlett Packard acquisition,
he waited outside an executive's office for hours just to make a pitch.
With Grimes and the investment bank prepping the offering and building demand
for shares, it fell to another Morgan Stanley employ ee, Scott Devitt, to tell outside
money managers whether they should buy Facebook stock. As the head of
Morgan Stanley 's Internet equity research team, Devitt makes a 12-month target
price for stocks and provides a rating -- buy, hold, or sell -- for hedge funds like
Citadel and large, storied institutional investors like Fidelity. Devitt's agreement
with his clients guarantees an independent analy sis of company performance -even if Morgan Stanley is leading the IPO. (Devitt advised clients on whether to
buy companies like LinkedIn, Zy nga and Pandora while Grimes orchestrated
their IPOs.)
The stark division between these two functions of a bank is known as a "Chinese
Wall." It forbids investment bankers, like Grimes, from influencing research
analy sts, like Devitt. Morgan Stanley and other brokerage firms were slammed
with fines for repeatedly breaching the "Wall" during the dot-com boom. In the
aftermath of the Facebook IPO, the bank would find itself under the spotlight y et
again for allegedly sharing key , private information with wealthy clients.
In Facebook's case, the trouble began with a simple revision.
III: THE REVISION
A roadshow -- a city -by -city promotional tour where executives drum up support
for their IPO before large investors -- is ty pically a lackluster affair. Facebook's
was more like a Holly wood party .
On May 7, 11 day s before the IPO, Facebook management -- CEO Mark
Zuckerberg, COO Shery l Sandberg, and CFO David Ebersman -- stepped out of a
black SUV in front of the Sheraton Hotel in midtown Manhattan for their first
meeting with investors. A crowd of paparazzi greeted them, and a long line of
onlookers wound around the hotel building. Inside the meeting, Facebook play ed a
video introducing the business model to special clients of its underwriting banks.
Eleven day s before the historic IPO, Morgan Stanley found out Facebook had cut
revenue projections -- a nearly unprecedented last-minute correction.
Although an IPO roadshow is supposed to be an untarnished hy pe-machine for a
company 's prospects, back in California, those prospects were hurting. Facebook's
new internal forecasts showed revenue growing slower than expected. The
reason: Users were flocking to smartphones faster than the company could serve
mobile ads.
On the first day of what may have been the most watched IPO roadshow in
memory, Ebersman confessed to Morgan Stanley that Facebook had cut revenue
projections -- a nearly unprecedented last-minute correction in an IPO of its
scale. Even if the changes were small, statistically, in IPO showbiz statistics run
second to momentum, and nothing kills momentum like a poorly timed downward
revision.
Facebook and Morgan Stanley knew they had to make a public disclosure. But
what to disclose? The law requires companies to share all information that would
likely influence an investor's decision to buy stock. Plus, Morgan Stanley 's
research team was still advising clients based on figures that Facebook now
considered wrong. With less than a week before the IPO, they came up with a
solution that they thought would spare Facebook a modicum of embarrassment -but would have fateful consequences for Morgan Stanley and investors:
• First, Facebook would file an amendment to its public birth certificate, the S-1, to
include information about mobile usage cutting into revenue.
• Second, the company would call research analy sts with much more specific
information about the company 's weakening projections.
IV: THE AMENDMENT
When a company makes an amendment to its S-1, the entire document can be
filed again, without track-changes or highlights to specify the changes. When
Facebook filed its "Amendment No. 6 to Form S-1" to disclose its ongoing
challenge to serve ads to mobile users, changes were embedded on three pages of
the 170-page document.
On page 14 and 17, the company said that its users were growing faster than ads
due to the increased use of mobile phones and product decisions that allowed
fewer ads per page. On page 57, Facebook said the mobile trend discussed
elsewhere in the document had continued in the second quarter, due to users
shifting from computers to phones. None of the changes suggested any major
revision to Facebook's financial outlook.
Facebook's lowered revenue estimates did not appear in the S-1, nor was there
any precedent requiring these numbers to be included. Even the most
sophisticated retail investors, armed with a software bot that could comb the new
S-1 for updates, could not have read what research analy sts at Morgan Stanley,
JP Morgan, Goldman Sachs, Citigroup, and many other investment banks would
learn later that evening: That Facebook, already projected to trade at high
multiples given its earnings figures, was slashing its annual projections.
V: THE CALL
Before an IPO of Facebook's size, research analy sts and large investors play a
massive multi-billion-dollar game of "Telephone," because analy sts at
underwriting firms are banned from publishing or emailing research about a new
public company until 40 day s after the IPO. The rule is designed to protect retail
investors from taking analy sts' notoriously bullish research too seriously . But it has
an unintended side effect: Research analy sts can pass on exclusive, last-minute
information to institutional clients without a paper trail.
And Facebook's last-minute revelation was about to launch a historic game of
"Telephone."
After the company 's surprising eleventh-hour amendment, the unenviable job of
explaining Facebook's revisions to the research analy sts fell to Cipora Herman,
Facebook's vice president of finance. On May 9, Herman and Michael Grimes
huddled in a Philadelphia hotel for a rehearsal session. He play ed the part of an
analy st, while she play ed herself. They practiced until the amended S-1 was
officially made public on the SEC website, at exactly 5:03pm.
In its revised S-1, Facebook told the public that mobile ads presented an ongoing
challenge. In calls that night to research analy sts, the company said much more.
Before her first call to Scott Devitt at Morgan Stanley, Grimes left the room to
avoid the appearance of breaking the law that bans investment bankers from
influencing analy sts. "I was far down the hall so I wouldn't hear any thing," he
testified in a Massachusetts suit brought against Morgan Stanley. "I took extra
precaution to do that, and sat on the floor."
But Herman had a script in Grimes' handwriting detailing Facebook's new secondquarter revenue estimates:
"I wanted to make sure y ou saw the disclosure we made in our amended
filing. The upshot of this is that we believe we are going to come in the lower
end of our $1.1 to $1.2 bn range for Q2 based upon the trends we described
in the disclosure."
The script also showed that Herman had added Facebook's y ear-end estimates:
"Trend/headwinds over the next six to nine months as this run through the rest
of the y ear, this could be 3 to 3 and a half percent off the 2012 $5 billion
target."
Herman's first three calls were to the research desks of Morgan Stanley,
JPMorgan, and Goldman Sachs, and after their conversations, all three banks cut
their estimates of Facebook's annual revenue by between 3.01% and 3.33% -perfectly aligned with Herman's notes, as the following charts from court
documents show:
The news spread -- from research analy sts to their preferred clients -- that
Facebook was slashing revenue estimates in the middle of the roadshow. Morgan
Stanley, JP Morgan, and Goldman Sachs had effectively sounded alarm bells on
Wall Street. Even analy sts who hadn't y et made a single call about Facebook's
new figures were being inundated with questions. "Our clients were asking us to
confirm what they had heard, so we had to tell them what we knew," said a
research analy st at one of the other underwriting firms.
Many large investors sensed a rare opportunity : With its revenue projections
falling at such a peculiar time, the conditions could be perfect to place a massive
bet against Facebook stock.
VI: THE BET
A week before the IPO, confusion reigned in the financial press.
On May 11, Bloomberg reported that demand for Facebook's stock among
institutional investors was much lower than expected. But on the same day,
Reuters had a conflicting report: Facebook was already oversubscribed, and one
large unnamed institutional investor was calling around sy ndicate desks try ing to
get more shares.
While retail investors clamored for Facebook shares, some large investors were
planning a massive short -- essentially betting against the stock's buy ers. Scott
Sweet, senior managing partner of Tampa-based research firm IPO Boutique,
received calls from hedge fund clients say ing they heard from research analy sts
at underwriting banks that Facebook's mobile trend was behind its lowered
earnings estimates. One multi-billion dollar hedge fund client told Sweet that he
planned to short the stock as a result. (Sweet didn't name the investor due to a
confidentiality agreement he has with clients.)
"The consensus among hedge funds on the West Coast was to short the stock on
day one."
"The consensus among hedge funds on the West Coast was to short the stock on
day one," said one institutional investor at a medium-sized hedge fund specializing
in technology stocks. "The call we received from JP Morgan about earnings being
lighter than expected gave us even more conviction in our short." Hedge fund
analy sts at his firm were receiving calls from their personal brokers day s before
the IPO, hawking an allegedly rare chance to get shares of Facebook stock. "That
never happens," the hedge fund investor said. "Supply was definitely exceeding
demand."
But despite the growing consensus among some large investors that Facebook was
overpriced, on May 15, three day s before Facebook's market debut, the
underwriting banks increased the IPO range from $28-$35 to $35-$38, citing
heavy demand. A day later, they increased supply to more than 420 million
shares.
The new share and price allocation placed Facebook's valuation at the iconic $100
billion mark.
VII: THE GLITCH
Back in her home, Swaminathan didn't know about the reduced revenue estimates
or about the vast number of hedge funds that were planning to short Facebook.
After the opening bell ceremony neared its end at 9:30 a.m., she was still
watching CNBC waiting for the stock to begin its scheduled trading at 11:00 a.m.
"We are witnessing a lot of American wealth getting generated as we speak," said
a CNBC reporter. "After y ears of people taking risks, dealing with uncertainty,
unknowns, rivals, this is the pay -off."
"Awaiting Facebook's opening trade" showed in a breaking news box on the
bottom of the screen, while an unchanged $38 opening price appeared on a split
screen in anticipation of 11:00 a.m. Minutes later, Swaminathan, eager for the
stock to open, called her son, who lives in New York City, to inform him about the
5,000 shares she had ordered. She had placed a buy limit order, a conditional
transaction to purchase shares at a specified price -- $42 in her case -- or lower.
Her son, who studied finance at UC Berkeley, was livid. "Cancel the order
immediately," he told his mother. "Cancel it! Cancel it!" Around 9:45 a.m., she hit
the icon on her trading screen to cancel the order and then resumed watching TV.
At 11:00 a.m., CNBC announced that Facebook's opening was delay ed until 11:05
a.m. In all the times she had seen IPOs on television, Swaminathan had never
witnessed a market delay on the opening day . Something is wrong, she thought.
She turned her attention to her computer screen only to realize that there was no
sign of her having voided the order. She kept refreshing the page in hopes of
seeing the notification. When no cancellation report appeared, she called her
stockbroker at Vanguard. "What's going on?" she asked.
If the cancel order was placed, then it's probably cancelled, the broker told her.
She got off the phone and went back to her computer screen. There was no sign of
cancellation. She called Vanguard again. This time, she say s, she waited on the
line for a long time, but no one came to take her call.
Meanwhile, Facebook stock opened at 11:30 a.m. The my sterious delay was due
to technical glitches. NASDAQ's electronic trading platform couldn't handle the
high volume of trades. In the first 30 seconds, around 82 million shares were
exchanged.
Facebook did not experience the anticipated pop. The stock reached a high of
around $45 per share. At 4:00 p.m., when the market closed, the stock was priced
at $38.23, only 23 cents more than its opening price.
Later that day, the Wall Street Journal reported that Morgan Stanley had stepped
in to stabilize the stock, using what is referred to in finance as a "greenshoe option"
-- a common stipulation in the IPO agreement that lets underwriting banks sell
more shares to investors than they are allotted. The mechanism lets banks buy
back the shares at the offering price, in case the company 's stock price needs a
little help on the first day . The buy ing action puts upward pressure on the stock.
Her son came to New Jersey to stay with her over the weekend. For two day s,
they quarreled. He wanted to know why she put so much money into one stock,
and she couldn't give him a satisfy ing answer. "He kept asking me what was going
through my head when I bought the shares," she recounts.
On Monday morning, she called Vanguard. "Was my purchase cancelled?" she
asked. The answer finally came: No, the broker told her, Vanguard had purchased
5,000 shares on her behalf at a price of $41.25, meaning about $206,000 from her
retirement account was spent to acquire her stake.
On that second day of trading, Facebook closed at $34.03. Swaminathan had lost,
on paper, about $36,000. Her son advised her to hold onto her shares until she
either resolved the matter with Vanguard or the price bounced back.
VIII: THE AFTERMATH
The next couple day s were a blur. Swaminathan approached Vanguard again,
asking why the cancel order wasn't processed. She could have sold the shares
before the price plummeted, she said to the broker, asking to speak with a
supervisor. The supervisor blamed NASDAQ and said they would notify the
exchange about the incident. When she called a day later, Vanguard declared it a
legitimate purchase. There was nothing that could be done for her.
In the meantime, she tuned into CNBC to watch coverage of the IPO's aftermath.
When news started rolling in about class action lawsuits filed against Morgan
Stanley and Facebook for selective disclosure, she was stunned. Institutional
investors received warnings about lower revenue estimates before the opening
day , CNBC reported. (Some of these class-action lawsuits are still ongoing.)
Swaminathan wasn't keen on using the court sy stem. She had already lost money
and was wary about losing more to legal expenses. But in June, one lawy er told
her about the Financial Industry Regulation Authority (FINRA) -- a private
corporation that acts as a self-regulatory body among securities firms, such as
banks. She believed the agency had a way for her to seek restitution without the
complexities of a formal lawsuit. FINRA offered a way for her to air her
grievances without a hefty legal fee, and the organization's stated goal is to protect
investors -- investors like her, she thought.
She quickly wrote a ty po-riddled complaint, lay ing out her misgivings against
Facebook, Morgan Stanley, NASDAQ and her brokerage firm Vanguard, to
FINRA. It was a two-page explanation of what happened on the day of the IPO.
"I was caught up in the Facebook IPO hy pe and thought that this would be a good
investment and practically put all my retirement money in this stock purchase,"
she wrote in the complaint. She said Vanguard failed to inform her of the status of
her trade, blamed NASDAQ, and then retracted responsibility to say her trade
was a proper execution. She complained that "only certain customers, mostly big
institutions and hedge funds" could file claims with NASDAQ about the trading
glitches.
She also jotted down the expected reparation: $105,000 for compensatory
damages, $500,000 for punitive damages, $1 million for "pain and suffering" and
$315,000 in damages related to fraud. "I feel jilted and my confidence is now
permanently stricken," she said in the complaint. FINRA will be on my side, she
thought, as she told her story to the regulatory body .
IX: THE HEADLINES
On July 16, FINRA sent Swaminathan a letter: Neither Facebook nor NASDAQ
was a member of their organization, and it lacked the authority to call them in.
Still, she was willing to arbitrate with Morgan Stanley and Vanguard.
But in November, a response came from Morgan Stanley in the form of a
lawsuit: Morgan Stanley & Co. LLC v. Swaminathan. The bank had essentially filed
an injunction to stop the arbitration from happening, requesting that Swaminathan
pay legal fees incurred if it is required to participate in arbitration. When
Swaminathan read the court documents, she panicked. "They wanted to take what
I had left," she cried.
Then she saw the headlines.
Reuters based a story on Morgan Stanley 's complaint, entitled, "Morgan Stanley
seeks to halt Facebook arbitration case." Gizmodo.com wrote, "A Sad Woman
Lost Her Entire Life Savings in the Facebook IPO and Now Wants Her Money
Back." Business Insider had "There Actually Is A Widow Who Say s She Lost Her
Life Savings In The Facebook IPO."
She was mortified. "Whatever happened to confidentiality ?" she exclaimed.
"FINRA had promised that my documents would stay private." Indeed, her
complaint might have stay ed private if it went unsettled (FINRA makes awards
and judgments public on its website). But Morgan Stanley made her papers
available to the press when it attached them to a countersuit filed through New
York's public court sy stem.
She eventually withdrew her claims against both the bank and Vanguard. "I just
couldn't deal with the stress any more," she said. "I guess the big guy alway s
wins."
X: THE LOSS
An American flag hangs in front of the JPMorgan Chase tower in midtown
Manhattan. In early May, rivaling its height was another banner with a Facebook
IPO logo. Business journalist Heidi Moore shared a photograph of the building's
façade with her Twitter followers on May 4. Radio reporter Ben Bergman
retweeted it with a comment: "In Facebook We Trust."
By Aug. 18, Facebook lost about $50 billion in value. But many big investors made
huge profits betting against the company .
By Aug. 18, Facebook lost about $50 billion in value. But many big investors made
huge profits betting against the company, and others avoided major losses by
backing out of the IPO just in time. During the roadshow, Capital Group, a large
mutual fund and one of Morgan Stanley 's preferred clients, pulled out of the deal
after initially showing interest, and many other funds followed suit, according to a
research analy st who was in correspondence with investors. SAC Capital
Advisors, Steven Cohen's $14 billion dollar hedge fund and another one of Morgan
Stanley 's prominent clients, took a sizeable short position in the stock, said a
research analy st. Scott Sweet's multi-billion dollar hedge fund client flipped the
stock at $42. His subsequent short made his firm its "largest profit of the y ear,"
Sweet said. There's "no way " a retail investor could have known about the
lowered projections, unless he or she "had a friend at a multi-billion dollar
institution," he added.
A few day s after Facebook debuted, Massachusetts's regulator William Galvin
issued a subpoena to Morgan Stanley as part of an investigation into research
analy sts communicating Facebook's revenue prospects to certain institutional
investors. Seven months later, Galvin's office settled with Morgan Stanley for $5
million after charging its investment banking division with inappropriately
influencing research analy sts during Facebook's IPO roadshow -- essentially
breaching the "Chinese Wall." When asked about the script he wrote for
Facebook's vice president of finance, Grimes testified, "I don't remember if she
had a script or not."
Facebook, Vanguard, and Morgan Stanley declined to comment on all the claims
in this story .
Swaminathan held onto her shares and went to her birth city of Chennai, India.
She's writing two books -- one about herbs and spices and another about New
Jersey 's public school sy stem. She hasn't traded stocks in a while, but she checks
Facebook's stock price every few day s hoping that someday it will bounce back.
Saturday, May 18, marked the one-y ear anniversary of the IPO. Facebook's
shares closed Friday at $26.25 -- exactly $15 below her purchase price.
Original: https://www.readability.com/articles/9d2w3ym4
Title: Jeffrey Levitt Stole $15 Million
Author: washingtonpost.com
Summary: Jeffrey Levitt Stole $15 Million Sometimes $ 15 million isn't enough
By Tony Kornheiser Sunday, October 26, 1986 THEY BROUGHT JEFFREY
LEVITT to the sentencing in leg irons, which are more…
Jeffrey Levitt Stole $15 Million - www.washingtonpost.com - Readability
Jeffrey Levitt Stole $15 Million
Sometimes $ 15 million isn't enough
By Tony Kornheiser
Sunday , October 26, 1986
THEY BROUGHT JEFFREY LEVITT to the sentencing in leg irons, which are
more dehumanizing than handcuffs. A pair of handcuffs can make y ou seem
more powerful and frightening than y ou actually are because shackling the arms
and upper body is seen as a concession to great strength. Leg irons, however,
minimize y ou because they restrict the piece of body language that illustrates the
spirit of freedom -- y our natural stride.
Early on the morning of July 2, 1986, gray gloom pressed on Baltimore like a
steam iron, promising terrible heat and humidity. At 9:30, the appointed time for
Jeffrey to appear, there were only 15 people in the public viewing stands in the
back of Judge Edward J. Angeletti's small, dingy courtroom. To no one's surprise
Jeffrey 's wife, Karol, was not one of them. She hadn't gone to the pleading either.
It's one thing to stand by y our man when he's wrongly accused, or when y ou look
like Maureen Dean. It's another when the locals hoot at y ou as if y ou were a
sideshow freak.
Gradually the courtroom filled, like a theater does before a performance of a hit
show, until every seat was taken and all that remained was the appearance of the
star onstage. The people who came, who were they ? How many of them lost
money ? How many came to gloat? How many to judge the quality of justice
itself? How many to see the last act and get on with their lives? Whatever, they
were a quiet, patient group, not unlike librarians, who know that if y our answer's
not in one book, it's in another. When Jeffrey finally did come in, at 10:07, hardly
a word was said. Nor were there cheers or boos when he was sentenced. In a
strange way it seemed to satisfy them just to see him led in and out like a
chimpanzee.
It wasn't a good setting for Jeffrey -- leg irons on his feet and not a drop of cry stal
any where. He stood at the defendant's table flanked by his criminal attorney,
William Hundley, on the left, and his civil attorney, Paul Mark Sandler -- a dead
ringer for Pee-wee Herman -- on the right. Jeffrey had already been in jail for
six months, serving the contempt sentence Judge Joseph H.H. Kaplan threw at
him for overspending his $ 1,000-a-week allowance, and the time showed.
Although he was no longer fat -- indeed he had shrunk to no more than 200 pounds
-- the new weight did not fit him well. Loose flesh hung about him like taffy.
Jeffrey 's gaudy spirit was gone. He looked dusty and slow. His ey es were as
vacant as Miami in August. How shall we describe him? "Doofus" comes to mind.
Forgive me, but he just didn't seem smart enough to cause all this. His high school
classmates say the same thing. His Baltimore City College High School class of
1960 had its 25th reunion in the summer of 1985. They had deposited the reunion
money in Old Court before it fell -- though they 'd somehow gotten it out -- so
Jeffrey was very much on their minds. They had kibitzed about him all night long.
"It seemed every body had the same opinion about Jeffrey," said a class member
who'd known Jeffrey well. "The surprise wasn't that he tumbled, but that he got so
high to begin with."
The prosecution asked for 35 y ears. The defense, undoubtedly, wanted time
already served, thank y ou very much, but suggested 12-to-20. Angeletti would
later say Jeffrey greatly helped himself by signing over, at the last possible
moment, irrevocable power of attorney to Mary land, transferring all his equity
(but not Karol's or the children's funds) other than his house. If he hadn't made
that restitution, who knows how high the number would have gone?
All the major play ers got a chance to speak. Attorney General Stephen Sachs,
running for governor at the time, called Jeffrey "a white-collar outlaw." Defender
Hundley, arguing for leniency, pointed out Jeffrey was "a first offender,"
whereupon Angeletti interrupted and righteously declared him "the biggest first
offender the state has ever seen." Your Honor should bear in mind, Hundley said,
try ing to shave any thing at all -- a y ear, a month, a minute -- off the time, that
Jeffrey "saved the state the expense of a long trial." Defender Sandler, who said
he'd only just thought of this on his way to the courtroom, gave a speech about the
nature of justice that seemed so well rehearsed he might have written it with a
quill pen.
Then came Jeffrey 's turn. He took the stand to speak in his own behalf and answer
Angeletti's questions. Essentially what he said was: It's not my fault. He said he
didn't know what he was doing was wrong at the time he was doing it. "I was
surrounded by attorney s and regulators. Nobody questioned it."
Now he accepted responsibility. Now he saw it was wrong. "I got carried away,"
he concluded. He talked about his obsessive gambling. He said he caused a lot of
people grief, ruined a lot of lives, particularly his family 's and his own. He may
have said he was sorry . I don't think so, but I could be wrong.
Angeletti called Jeffrey a lot of things; "disgrace" was as representative as any.
Then he sentenced him to 30 y ears on 12 counts of grand theft and 13 counts of
breach of fiduciary trust.
Jeffrey sat there thickly , his arms folded, like a sack of dirty laundry .
JEFFREY LEVITT STOLE AND MISAPPROPRIATED A GRAND total of
fourteen million, six hundred ninety -nine thousand, nine hundred forty -seven
dollars and fifty -eight cents. He stole all that. It was the largest single white-collar
crime in Mary land history, almost bringing down the state's entire savings and
loan industry. About 35,000 depositors in Levitt's own Old Court Savings and Loan
had their accounts frozen. And the cost to Mary land taxpay ers to clean up the
mess would run into millions of dollars.
During the period when they were ordered to spend no more than $ 1,000 per
week, Jeffrey and Karol continually overspent their limit. Indeed, they casually
wrote checks to cover their country club dues, to feed their racehorses, to buy
jewelry ($ 7,857) and bathroom fixtures ($ 4,781). Once, before the troubles
began and after a full dinner, in front of witnesses at the Belvedere Hotel in
Baltimore, they each ate six desserts.
The Couple That Ate Baltimore.
The Levitt jokes have been base and cruel, but part of the social price for such
massive theft and gluttonous indulgence. What do y ou call their waterbed? Bay of
Pigs. How did they get her into her jail cell? Greased the bars and threw in a
Twinkie. What do they sing when she walks down the street? There she is, North
America.
If ever a couple made themselves into a cartoon, the Levitts did. They were fat
cats, sy mbolically and literally. The richer they got, the fatter they got. At this
rate, by Thanksgiving 1995 they 'd have been floats in the parade. Perhaps had
they been more sy mpathetic, people might not have fixated on their size. But
what is it that defines them if not their size? Their size, their appetite, their
apparent insatiable piggishness: 17 cars, not counting the ones they actually drove.
The Rolls-Roy ce golf cart with the TV and the stereo tape deck in the dashboard.
From the Lutherville, Md., house alone, the IRS confiscated silverware including
15 sterling creamers and 33 sterling tray s. Who did they think would come over
for dinner, the Sixth Fleet? Theirs was a nearly incomprehensible gluttony,
hy perphagic shoppers poised to devour us all. Isn't that why we hate them so
much? Isn't that why we made up those jokes? The thievery was regrettable, but
y ou can shake a high-rise office building and 100 embezzlers will fall out. Wasn't
it the Levitts' vulgarity that really got to us? My God, they didn't even have taste.
Consider the cars. "He bought for the name, not the condition," say s car fancier
Bob McMahan. "Half his cars were butchered in some way. He didn't appreciate
cars -- he just collected them." They bought in such mass quantities that they not
only trivialized the pieces, they couldn't even find room for them. A reporter for
the Baltimore Jewish Times recalled going into their house and getting the grand
tour from Karol, and then when Karol opened a dining room cabinet, fine sterling
silver samovars and tray s and candelabras tumbled out and clanged to the floor
like hubcaps at a swap shop. Too much was never enough for these people. Isn't
that why we tied the cans to their tails, because they were so nouveau?
They are a classic example of the unconscious run wild. They stuffed themselves
with food, their closets with clothes and their garages with cars and still they
craved more. (In Jeffrey 's new offices the rugs alone cost $ 50,000.) May be
every thing they bought pleased them, but obviously nothing satisfied them.
Heaped atop one another, their purchases came to represent what winnings are to
a gambler -- simply a way to keep score.
According to Bob Coursey , a clinical psy chologist, "There's an excess after which
people think decadence, and they don't like it. These people were totally
undisciplined. It struck the public like Imelda Marcos and the shoes. It's fine to buy
a beautiful, expensive car. But 17? The image the middle class runs away from is
the Fall of Rome. The Levitts misread the culture and violated the standards.
Consumerism speaks to American society, eloquently to the y uppies. But not this
kind of unbridled, bloated consumerism."
But what if the Levitts didn't misread the culture? What if they were just a step or
so in front of it? Historically, when societies crumble, y ou see hedonism emerge.
People who are pessimistic about their futures do not save for them. Tomorrow
being too horrible to contemplate, they live solely and wholly for today. The
question isn't whether the Levitts' behavior was repulsive. It was. The question is
whether they were on to a trend.
Our post-World War II society has been characterized by economic democracy
and a general disapprobation of great selfishness. Consider Medicare, Vista and
the Peace Corps. Here was America at its egalitarian best, reaching out to the
underclass and helping it up the ladder toward a great society. America
concerned itself with inequality, and committed itself to erasing it, to making the
American Dream -- the belief that hard work and long hours guaranteed
inevitable success -- a reality for every one. (Jeffrey must have been
uncomfortable with this sharing attitude since his hero was "Honolulu" Harry
Weinberg, a Baltimore financial octopus who made zillions, mostly by scarfing
up transit properties. Jeffrey once told a high school classmate he wanted to be
just like Weinberg, whom he admiringly called "a guy who screwed every body
and got away with it.")
Now we seem unwilling to wait, unwilling to work long and hard, unwilling to see
our success come gradually . People want to make it big, make it y oung, and make
it quick. I, me, mine. Social work is out. Entrepreneurs are in. What's the big
growth profession? Investment banking. What's the favored course of study ? The
MBA. People do not get MBAs and go into investment banking because they are
motivated to help their fellow man. The only way they can keep in touch with
what's happening with the working class is to ask their gardeners. We have
invented the phrase "situational ethics" to absolve all sorts of social and financial
sins. We accept cheating through all levels of the culture, from adultery to
income taxes to bank fraud. One hero in "The Big Chill" saw insider trading as
proof of friendship. Is there any thing more oxy moronic in the language than
"business ethics"? Today 's businessmen seem to have hung a sign that say s: We
Will Lie, Cheat and Steal Unless You Stop Us. They renounce their responsibility
to behave ethically , and dare the government regulators to seal off the border.
The sin isn't cheating, but getting caught. If Jeffrey hadn't been caught, he and
Karol might still be the toasts of Baltimore. They wouldn't be seen as gluttons, but
as eccentrics and damned entitled to be so.
A few y ears ago Jeffrey hired a public relations firm to retool his image. The
trick, and Jeffrey understood it, was philanthropy. Rockefeller, Ford, du Pont,
Morgan -- they all gave some away. That's how they bought respectability. Now
their great-grandsons are running for president. Instead of being known as a
slumlord, which he was before he got into banking, Jeffrey would be known as a
philanthropist. Through Jeffrey 's and Karol's good charitable deeds, the Levitt
name would stand for kindness and compassion. What Jeffrey neglected to tell the
public relations firm was that it wasn't his own money he was giving away .
WHY WOULD HE DO THIS? WHY WOULD HE STEAL ALMOST $ 15
million?
There are many who think he's insane. A former high school classmate of
Jeffrey 's remembers running into Jeffrey at a property auction a couple of y ears
ago. Jeffrey was regularly overbidding on properties, buy ing them for
unrealistically inflated prices. "I bid $ 250,000 on a building that was barely worth
that, and Jeffrey bought it for $ 450,000," the classmate recalled. "He owned the
bank, so he'd give himself a mortgage for money well in excess of the $ 450,000.
He'd bought the property and he'd made a pile of money for himself on the side.
Every body knew what he was doing. I went over to him and said, 'You're bidding
this stuff up much higher than it's worth, and y ou're hurting every one.' "
Jeffrey giggled and said, "I'm good for the economy ."
Some think it's a prima facie thing: Any one who'd steal that much money has to
be insane. No sane person could steal like that, steal so much from so many, and
live with the guilt. Others believe Jeffrey demonstrated his insanity by steadfastly
insisting -- even in the face of irrefutable proof -- that he'd done nothing wrong.
"He actually believes that," a former employ ee say s. "He's crazy ."
Had that been so, Jeffrey 's criminal attorney , William Hundley , would have been
a happy man. "We were interested in legal insanity. We sent him to a top
psy chiatrist. Had there been any issue, we'd have definitely raised it," said
Hundley , his shrug indicating there wasn't.
Some people think Jeffrey did it to prove to the world -- and to his wife -- that he
wasn't a kept man. They say he resented the common gossip that he'd married
Karol for her money, and this was his way of showing he could make money on
his own. Money was the critical mass in his life. In one of his offices he hung a
poster of a downtown sky line full of high-rises. From atop the tallest building a
man is shouting: "I'm gonna own this town someday." Jeffrey worshipped
money. After he married into it, he began to learn about the class distinctions in
money : how old money connoted stability and taste, while new money was
viewed as garish. "He wanted his offices to look like old money," said a former
employ ee. "He thought the 'old money ' look would make people respect him."
(Jeffrey and Karol made no such decorating statement in their clunky home.
There, artwork by Picasso and de Kooning shared space with a mirror-covered
play er piano. Then there were the gargantuan candelabra, the Steuben glass
collection and things that the IRS confiscators labeled simply "five naked-women
wineglasses." The house must have looked like the stockroom of an upscale K
mart.)
Some think he did it to please his mother Nettie. Nettie, it is said, wanted more for
Jeffrey than what her husband Al would accomplish. Baltimore Magazine flirted
with this theory. It gets tricky, though, because of our old friend Oedipus. Let's
say Nettie saw Al as a failure and somehow communicated this to Jeffrey. That
sets Jeffrey up as Al's rival for Nettie's approval. As we remember from the
play , this doesn't end well.
I personally like Charles Monk's theory. Monk was one of the prosecutors in the
Levitt case. He told me y ou can learn more by looking at a man's checkbook than
by talking to 50 of his friends. "Pure greed" is the centerpiece of Monk's theory.
"Jeffrey was motivated by pure greed."
It has to be greed. Any body 's Mom would be satisfied with $ 2 million.
How did he steal so much money ?
This one is easier. "He stole in every way possible," Monk say s. (Former
employ ees talk of Jeffrey simply writing checks to himself for huge sums like $
50,000. If they asked, for what? Jeffrey said, "Call it consulting.")
Of course, Jeffrey did not do this alone. Deals are not made by ones, but by twos
and threes and fours and mores. Jeffrey didn't hold the patent on greed.
When Judge Kaplan first became involved with the Levitt case the phones in his
office rang incessantly. His staff spent three hours a day answering calls from
Old Court depositors. John Hathaway, Kaplan's clerk, was intrigued by the fact
that "initially people felt guilty for banking at Old Court and going for the higher
points." (Of course, they soon got over this. As Judge Kaplan later put it: "If I did
what the public wanted, the Levitts would be hanging from the rafters in front of
the courthouse.")
People went to Jeffrey to make deals because he was renowned as a guy who
would cut a high-numbered deal on the spur of the moment. He was an action
guy. Old Court was an action place. According to the books, Jeffrey was getting
rich quick. That's why he had customers.
Nonetheless, "he was no fun doing business with," say s someone who did. "He'd
show up at the settlement table with a whole new set of rules, different from what
y ou had agreed to. Ty pically he'd want a higher percentage on the loan; if y ou'd
agreed on 12, he'd demand 14. He'd act as the settlement lawy er, charge an
outrageous fee and put it in his pocket. Or he'd try to buy in as a partner. People
went along with him because they had other deals in the pipeline that they liked in
spite of Jeffrey 's behavior . . . You'd look at a deal and see that 10 percent was a
mess. But y ou let the 10 percent go because the other 90 percent was good, and
y ou figured that down the line Jeffrey would catch up to himself -- or someone
would catch up to Jeffrey. The 10 percent was more than offset by the 90
percent. It's an economic decision."
Now people say they suspected all along that Jeffrey was skimming and
scamming. One former employ ee marveled, "He stole $ 15 million and they all
sat there and watched."
THIS ALL DIDN'T HAPPEN OVERNIGHT. Jeffrey Levitt has a history. You
could look it up.
Two high school classmates remember his being thrown off the high school golf
team for cheating. He still loves golf -- besides that outrageous golf cart, he had
an $ 18,000 putting green at his Florida house -- and he still loves cheating. People
who play ed with him said he moved the ball. Appropriately enough, this is called
improving y our "lie." You're not supposed to do that.
He was an audacious slumlord. He was regularly hauled into housing court by
tenants complaining of housing code violations. So regularly that Friday s in
Baltimore housing court were known as "Levitt Day s." Baltimore Magazine
reported that on one Levitt day in 1975 he was found guilty of 172 violations ($
12,895 in fines were suspended). He disdained the court. He paid his fines; he
figured that was the cost of doing business. But he showed his clear contempt for
the law by not fixing properties. "He appeared before me for failing to correct
problems in a number of his houses," said a former Baltimore housing official. "I
gave him a schedule of accomplishment. His demeanor was that of an abashed
individual, a schoolboy caught with his fingers in the cash register. He gave all
sorts of protestations of good faith and what have y ou. I must say he copped a
pretty good plea. But he never corrected the problems."
Here are some highlights from Jeffrey 's career as a slumlord: A tenant once shot
at him. And the Mary land Court of Appeals once suspended him from practicing
law, because he'd lied about his knowledge of an injury to a y oung girl in one of
his buildings. The vote on the suspension was 5 to 2. The two dissenters wanted
him disbarred.
He came from some money, but not enough. Karol came from real money.
Jeffrey liked that. With enough money he could invent himself on the fly and get
away with it, because if money buy s nothing else it alway s buy s people who will
agree with y ou. He could tell people that he'd been a child prodigy at the piano,
even though his wife had never heard him play. He could tell people that his
father had owned the dress company on Eutaw Street, even though he actually
worked there as a designer. He could submit a list of extracurricular activities to
his high school y earbook that was twice as long as any one else's in the class, even
though classmates don't remember his doing all of those things. He could tell those
same classmates he was accepted at Dartmouth, even though he was enrolling in
night classes locally at Loy ola. He was inventing himself before he had much
money .
Al Levitt was a dress designer, a dreamy man who liked to paint. His ambitious
wife Nettie, who divides her time between Mary land and Florida, was in her day
a buy er for Bonwit Teller. They did not concern themselves with what y ou put in
y our body -- that was y our business. Their business was what y ou put on y our
body. The outside. The front. The facade. Al Levitt, now deceased, created
costumes for people to wear. Nettie Levitt bought them, stocked them, then
pushed like crazy to sell them off the floor. Costumes: the public mirror of our
private dreams.
Jeffrey Levitt preoccupied himself with the outsides of things, which would
explain why he had a Rolls Roy ce that couldn't move because its engine had been
disconnected and loaded into the trunk. Someone who worked for him said Jeffrey
didn't have bad taste or good taste -- Jeffrey had no taste whatsoever. "If it had an
expensive price tag, that was good enough for him." Jeffrey confused reputation
and character, as he confused taste and affectation. He is a man of appearance,
not depth. Inside he's hollow.
We like to live our lives believing we are artichokes, and if people would simply
be patient and pull away our leaves, eventually they 'd find a heart. But the truth is
that some of us are Swiss cheese, and all y ou have to do is poke slightly to reach a
hole. IN OCTOBER OF 1984, WHEN THEY were up so high even the birds
couldn't reach them, Jeffrey and Karol gave a Halloween costume bash, inviting
hundreds of friends and business associates to come sip champagne and eat raw
oy sters in Baltimore's Westminster Hall. Almost two y ears later, on July 2, 1986,
after the fall, Jeffrey went before a sentencing judge to hear how many y ears
he'd drawn, what the magic number was for crimes of unprecedented fraud and
thievery , at least by Mary land standards.
These were the bookends of Jeffrey 's professional life as a fiduciary comet. A
man grounded as he was in the lore of costumes wouldn't toss these off like just
another day at the office. On Halloween, the one night of the y ear when
every one is permitted to literalize his fantasy, Jeffrey wore tights and carried a
sceptre and presented himself as the living King of Old Court -- the bank he
himself named. On that much less fanciful day, the day of his sentencing, when,
as a lawy er himself he knew that even a minor gesture of disrespect or contrition
might result in y ears being added to or taken off his jail term, Jeffrey chose to
wear a ratty madras shirt, pale y ellow garage-sale pants, no socks and
Docksiders. Like he was going to a barbecue, which, as it turned out, he was.
After the run on the bank, when the sand forts Jeffrey built had dissolved down to
small mounds a man couldn't hide behind, Judge Kaplan ruled that the Levitts had
to limit their personal spending to $ 1,000 a week, rather generous considering that
the depositors had no access to their money at all. Moreover there was the
question in the judge's mind, not to mention the minds of the depositors, whether
any of this money the Levitts were spending was theirs to begin with, or whether,
as the prosecutors claimed, it had all been stolen. Jeffrey 's response to this
sedition was to stand on the corner of Redwood and Calvert, bellowing like the east
wind, "They can't tell me what to do with my money . Nobody tells me what to do
with my [bleeping] money ."
As an only son, Jeffrey was born and raised a prince, so it may have seemed
natural to him to grow into a king. A king stands above and bey ond the reach of
the law. He is not bound by it, or subject to it. It is his privilege to respond with
contempt to any popular notion of justice. Certainly in his business dealings,
Jeffrey was imperious and capricious. Certainly he held himself above the law.
Someone who worked for him said he had delusions of infallibility .
"Jeffrey felt Jeffrey was special, that he had a sixth sense about people and
deals," the employ ee said. "He'd buy property sight unseen. He wouldn't go look
at it. If y ou showed him pretty pictures, he'd do the deal. He'd sit at his desk and
call for the pictures: 'Show me the pictures!' The grander, the better."
He didn't screen the applicants? "No."
He didn't do any homework? "No."
He did it on a whim? "It sure seemed so."
What did he base this on? "Right time, right place."
How did he define right time, right place? "In his head. He'd bang his right hand
down on the table, open palm, and say, 'Trust me. I know what I'm doing. That's
it.' "
His staff once gave Jeffrey a T-shirt with his favorite say ings printed on it. On the
front: "No Problem." On the back: "I'll Take Care of It." But the truth was that
Jeffrey didn't take care of it. "Details weren't his concern," a former employ ee
said. "His job was to do deals. The clean-up was someone else's problem."
There was a sloppiness to the way Jeffrey did business, a sloppiness not unlike
Jeffrey himself. He had a perpetually rumpled look. "You could alway s tell when
he'd just finished shaving; he'd have some blood on his shirt collar," one
employ ee said. "He was never shiny, if y ou know what I mean." The sloppiness
may have scared some respectable people off because, according to the
prosecutors, towards the end the only kinds of people who were doing deals with
Jeffrey were people who couldn't do deals any where else and didn't mind waiting
in Jeffrey 's outer office for hours at his whim. They suffered Jeffrey 's bizarre
behavior because they , like his employ ees, had to.
Jeffrey was more like a buy er than a banker, more like Nettie than suited his
occupation. Buy ers work on intuition. If y our intuition is bad, y ou lose the season.
Having a buy er's mentality in banking can be devastating. If y our intuition is bad,
y ou can lose much more than a season: You're dealing with 30-y ear notes. But
Jeffrey didn't see things that way . He saw himself as a cross between Henry VIII
and Monty Hall. He thought he couldn't make a bad deal.
Even after they caught him.
The Mary land people offered him 12-to-20. He turned them down. The Feds
offered him better than that. He turned them down. "We had a lot of deals I
wanted him to make," sighed attorney Hundley . "He wouldn't."
The prosecutors think Jeffrey got tangled in his delusions. Who dares put a king in
jail? They theorize that he looked back at housing court and all the judges he'd
bamboozled and all the times he'd skated, and convinced himself he wouldn't go to
jail for an extended period no matter what the sentence was. "In Jeffrey 's mind,
the deal is only going to get better the longer he waits," said prosecutor Monk.
"Don't feel bad, Bill, because I turned this deal down," Jeffrey would tell
Hundley . "Something will come up. We'll do better."
But in the middle of negotiations he broke down. To Hundley 's consternation and
amazement, Jeffrey pleaded guilty to the whole schmear. No bargain. No
nothing. And now there was no need for the prosecutors to make any deal.
"Jeffrey," an exasperated Hundley told him, "y ou're absolutely naked. This is
insanity ."
The reason Jeffrey turned down all the deals was money. All the deals that were
offered insisted that Jeffrey give back all the money , including money -- as much
as $ 2 or $ 3 million -- that the state claimed was an ill-gotten gain and which
Jeffrey claimed belonged to his wife and children and was independent of any
money he'd stolen from Old Court. Jeffrey refused to make a deal with that
money. To give him the benefit of the doubt, y ou could say he was selfless
because he chose go to jail to ensure financial security for his family. To cast a
cy nic's ey e, y ou could say he was determined to Honolulu them, to screw the
public and get away with it by salting away a pile of the booty until his return.
Either way the bottom line is that Jeffrey Levitt chose money over freedom -- 30
y ears instead of 12-to-20.
Jeffrey , y our money or y our life.
Take my life. Please. JEFFREY IS IN JAIL IN JESSUP WHERE, according to
attorney Hundley, "he is doing considerably better than most white-collar guy s
do." He is said to be teaching math to the other inmates. The new math,
undoubtedly .
Karol has her freedom, but does she enjoy it? She has been hounded by the press
and public. When Judge Kaplan found her in contempt of court for joining
Jeffrey in "flagrant, intentional and willful" overspending of their $ 1,000-a-week
allowance and sentenced her to 15 weekends in jail, she was taunted by the other
prisoners who chanted, "We Want Karol! We Want Karol!" as she entered the
jail. Hundley 's description is acutely depressing: "She would walk in that cell, sit
on a chair and shut her ey es for the whole weekend." She is described as a
devoted wife and mother (even Jeffrey 's detractors concede he is a devoted
husband and father). From all accounts, she is a kind, generous woman who was
sincere about doing good and charitable works. But her notoriety has driven her to
resign her offices. "I think it's so unfair what's happened to her," Hundley say s.
"The time in jail, the tasteless jokes, the public ridicule. She's a very nice woman.
I feel very strongly she got screwed." How much, if any , Karol knew of Jeffrey 's
dealings, and when she knew it are questions only she can answer. People who
have known her for a long time say she came from sufficient money to suit her
and didn't covet more. "He wanted all that stuff," Hundley say s. "Not her."
Karol was charged with no crime. Like so many others, she appears to be an
innocent victim of Jeffrey 's crime.
Who say s y ou can't have it all? But what if the Levitts are what happens when
y ou do? YOU CAN'T SEE THE HOUSE FROM the street. You could drive by
and never know y ou missed it. It stands back in the woods, in the deep shade. You
walk down the driveway, a lazy ribbon of black asphalt, to the mouth of the house
and the huge, ornately carved, wooden double doors, as wide and as tall as
Gulliver's closet. In the brickwork to y our left a hand-painted ceramic sign bids
y ou: Welcome To The Levitts. But the size of the doors is forbidding, and any way
they 're locked.
You knock. The stern sound quickly rumbles through the humid late-afternoon r.
The y ounger of his two college-age sons reluctantly opens the doors, stares at the
ground and weakly whispers, "No comment," then continues to stand there,
immobile, like a toy -store inflatable punching bag. You turn to go when y ou see
her driving toward y ou in a dirty blue sedan, some sort of lesser Buick, an
unexpectedly minor car. There are two bags on the front seat; she has been
shopping. Climbing out of the car, she clutches the small one in her right hand like
a torch.
From behind her sunglasses Karol Levitt ey es y ou warily. She is a splash, a
decidedly big splash, of color: coral skirt and tomato-red short-sleeve sweater top.
Such blindingly bright colors screech for attention, something fat people normally
seek to avoid. Curiously she is neither so large nor so severe looking as she
appeared in the newspaper photos. Here, in her exile, she seems softer, y ounger,
not unlike somebody 's mother. They 're never the same as in the pictures. It's
never as simple after y ou meet in real life.
You tell her y our name and why y ou've come: to talk, of course, to give her the
chance to tell her side of the story , a sincere but self-serving offer. You both know
there's nothing in it for her. There is enough pity in her smile that two can share.
"I'd like to help y ou," she say s, "but I can save y ou some time. I'm under
instructions from my lawy ers not to comment."
We all have our sentences to serve. Jeffrey Levitt's is 30 y ears in prison. Karol
Levitt's is to have strangers come to her home and ask to draw her blood. She
never gives y ou her number, she only gives y ou her situation: "There isn't
any thing new here. People have been writing about us for a long time now. It's an
old story." She moves toward the only sanctuary she has, those huge wooden
doors where her y ounger son still stands, numbly watching.
She is already on the steps when y ou ask her to please wait just a second. You say
y ou're not like all the others, y ou're not from Baltimore, y ou're not predisposed
against her and her husband. You might even be sy mpathetic. If she wants a
sy mpathetic ear to talk to, y ou've got one.
She shakes her head from side to side. Where do these people come from? Her
laugh is as bitter as last week's coffee. "Sy mpathetic? If I only had a nickel for
every time I've heard that one . . . ." She turns away without another word,
closing the great doors behind her.
© 1986 The Washington Post Company
Original: https://www.readability.com/articles/o1witcdh
Title: Why We Keep Playing the Lottery
Author: nautil.us
Summary: To grasp how unlikely it was for Gloria C. MacKenzie, an 84-yearold Florida widow, to have won the $590 million Powerball lottery in May,
Robert Williams, a professor of health sciences at the…
Why We Keep Playing the Lottery - nautil.us - Readability
To grasp how unlikely it was for Gloria C. MacKenzie, an 84-y ear-old Florida
widow, to have won the $590 million Powerball lottery in May, Robert Williams,
a professor of health sciences at the University of Lethbridge in Alberta, offers
this scenario: head down to y our local convenience store, slap $2 on the counter,
and fill out a six-numbered Powerball ticket. It will take y ou about 10 seconds. To
get y our chance of winning down to a coin toss, or 50 percent, y ou will need to
spend 12 hours a day , every day , filling out tickets for the next 55 y ears. It’s going
be expensive. You will have to plunk down y our $2 at least 86 million times.
Williams, who studies lotteries, could have simply said the odds of winning the
$590 million jackpot were 1 in 175 million. But that wouldn’t register. “People just
aren’t able to grasp 1 in 175 million,” Williams say s. “It’s just bey ond our
experience—we have nothing in our evolutionary history that prepares us or
primes us, no intellectual architecture, to try and grasp the remoteness of those
odds.” And so we continue to play. And play. People in 43 states bought a total of
232 million Powerball tickets for the lottery won by MacKenzie. In fact, the
lottery in the United States is so exceedingly popular that it was one of the few
consumer products where spending held steady and, in some states, increased,
during the recent recession. That’s still the case. About 57 percent of Americans
reported buy ing tickets in the last 12 months, according to a recent Gallup study.
And for the 2012 fiscal y ear, U.S. lottery sales totaled about $78 billion, according
to the North American Association of State and Provincial Lotteries.
It may seem easy to understand why we keep play ing. As one trademarked
lottery slogan goes, “Hey, y ou never know.” Somebody has to win. But to really
understand why hundreds of millions of people play a game they will never win,
a game with serious social consequences, y ou have to suspend logic and consider
it through an alternate set of rules—rules written by neuroscientists, social
psy chologists, and economists. When the odds are so small that they are difficult
to conceptualize, the risk we perceive has less to do with outcomes than with how
much fear or hope we are feeling when we make a decision, how we “frame”
and organize sets of logical facts, and even how we perceive ourselves in relation
to others. Once y ou know the alternate set of rules, plumb the literature, and speak
to the experts, the popularity of the lottery suddenly makes a lot more sense. It’s a
game where reason and logic are rendered obsolete, and hope and dreams are on
sale. And nobody knows how to sell hope and dreams better than Rebecca Paul
Hargrove.
On most day s in a nondescript office park on the outskirts of Nashville, Tennessee,
y ou will find Hargrove reclining in a purple executive chair behind a massive
desk. She occupies a corner office in the Tennessee Education State Lottery
Corporation, where she serves as president.
Hargrove is a lottery legend. In the 1980s and ‘90s she built the state lotteries in
Georgia and Florida from scratch, constructing multibillion-dollar empires that
soon surpassed many lotteries that had been around far longer. After two y ears of
Hargrove’s leadership, Florida was outselling every other lottery in the nation,
including California, which had a population twice Florida’s size. When Hargrove
left Georgia for Tennessee in 2003, Georgia Lt. Gov. Mark Tay lor commented,
“Now I know how the Boston Red Sox fans felt. Babe Ruth has been traded to the
Yankees.” Hargrove, he said, was “the premier lottery executive in the country .”
On a sweltering morning in June, I was ushered into Hargrove’s second floor
corner office. She greeted me warmly, dressed in a pink T-shirt, khaki pants, and
a button-down sweater. With a mass of snowy white hair swept back in a loose
bun, and a pair of glasses perched precariously on the bridge of her nose,
Hargrove came across as a folksy Fairy Godmother, with a gift for schmooze.
Within minutes of my arrival, she was spinning out anecdotes about her
hairdresser’s predilection for cat-themed instant game tickets and the little old
lady who lives down the block from her mother and won $56 million.
It’s a game where reason and logic are rendered obsolete, and hope and
dreams are on sale.
Hargrove has an intuitive understanding of what drives her customers to play the
game. She has a preternatural sense of where their psy chological buttons are
located and how to push them. She responded in a flash to my comment about the
logical futility of play ing the lottery. “If y ou made a logical investment choice,
y ou’d play a different game,” she said, leaning forward for emphasis. “It’s not an
investment. It’s entertainment. For a very small amount of money y ou might
change your life. For $2 y ou can spend the day dreaming about what y ou would
do with half a billion dollars—half a billion dollars!”
In 1985, when Illinois Governor James Thompson tapped Hargrove to head the
state lottery, she didn’t know much about the business. But the former beauty
queen (Miss Indiana 1972, Miss America finalist 1973) did know a thing or two
about selling a product. After winning a TV job doing the weekend weather at an
ABC affiliate in her hometown of Indianapolis, she moved to Springfield, Illinois,
to work for a NBC affiliate. In Springfield, she recruited her own TV advertisers
and produced her own commercials, demonstrating a natural talent for marketing.
She got involved in politics and rose to Illinois Republican State Party
Chairwoman, before taking over the Illinois lottery .
In her new job, Hargrove did what any savvy marketer would do: She sat down
and thought about her own motivations. “I play ed the lotto when I was caught up
in the frenzy of a $40 million jackpot,” she said. “And I thought, ‘What made me
play ?’ What made me play was the thought of what I would do with $40 million.
You pay $1 and then for three day s y ou can think about that question. Would I
share with my brother-in-law? No! I don’t like that brother-in-law. But I would
share with my neighbor’s nephew.”
With that simple insight, Hargrove struck marketing gold. More than 200 ads went
up on billboards across the state. “How to Get from Washington Boulevard to
Easy Street,” read one in a poor Chicago neighborhood, display ing a picture of a
tantalizing pile of lotto money . Hargrove also pushed for larger, attention grabbing
jackpots. In 1987, she play ed a key role in creating a multistate lottery, consisting
of nine states and the District of Columbia, so that jackpots could balloon to as
much as $80 million. The excitement generated by the ey e-popping jackpots, she
figured, would generate more excitement than any one state could create on its
own. “The more the jackpot is, the more tickets y ou sell,” she said. “It feeds the
dreaming.”
From her first day s in the lottery business, Hargrove learned to make the lottery
fantasy tangible by making sure that winning, on a smaller scale, is something
people experience. “If y ou play a lot and y ou play for three y ears and y ou never
win, y ou’re not going to keep play ing,” Hargrove said.
In Illinois, Hargrove experimented with smaller prizes, which had better odds of
winning than the big state Lottos. When she introduced a second weekly Lotto
drawing, she saw an immediate 5 percent spike in sales. To prevent play er
burnout, Hargrove pioneered games with different prices, designs, and themes.
She might trot a game where y ou scratch off cute cats for cat lovers, and a game
with footballs for Bears fans. She might sell four leaf clovers on St. Patrick’s Day,
and reindeer-themed tickets around Christmas. The odds of winning may remain
remote, but keeping it “fresh” and “exciting” added a sense of possibility and
made it more fun, she said. Hargrove knew that game cards were impulse buy s,
so she emphasized point-of-purchase advertising. She pushed to make the cards as
ubiquitous as “bubble gum.”
Sitting in her Tennessee office, her energy never flagging, Hargrove stressed the
lottery raised millions to fund educational programs for the state’s children, and
that was something that should alway s be apparent. The direct link to education
“affects every thing—it affects how the legislators feel, it affects how the play ing
public feels about it, it affects how the press feels about y ou,” she said. “All those
things add up to a positive experience buy ing a lottery ticket.”
While Hargrove’s feel-good marketing goes a long way toward explaining why
we keep play ing the lottery, scientists are increasingly making it clear how lottery
marketing taps into our brains and impacts our communities.
Selling the lottery dream is possible because, paradoxically, the probabilities of
winning are so infinitesimal they become irrelevant. Our brains didn’t evolve to
calculate complex odds. In our evolutionary past, the ability to distinguish
between a region with a 1 percent or 10 percent chance of being attacked by a
predator wouldn’t have offered much of an advantage. An intuitive and coarse
method of categorization, such as “doesn’t happen,” “happen sometimes,”
“happens most of time,” “alway s happens,” would have sufficed, explains Jane
L. Risen, an associate professor of Behavioral Science at the University of
Chicago, Booth School of Business, who studies decision-making. Despite our
advances in reason and mathematics, she say s, we still often rely on crude
calculations to make decisions, especially quick decisions like buy ing a lottery
ticket.
In the conceptual vacuum created by incomprehensible odds, people are likely to
experience magical thinking or superstition, play a hunch, or simply throw reason
out the window all together, say s George Loewenstein, a professor of economics
and psy chology at Carnegie Mellon. “Most of the weird stuff that y ou see with
decision-making and risk happens with small probabilities,” he say s.
Selling the lottery dream is possible because, paradoxically, the probabilities
of winning are so infinitesimal they become irrelevant.
One reason may be that uncertainty activates a network of brain areas that push
us reflexively to find a resolution. Uncertainty for the brain is a negative state,
and so it screams, “‘I don’t know what to do, I don’t know how to act, my
organism is at risk,’” say s Giorgio Coricelli, an associate professor of economics
and psy chology at University of Southern California. “To make the choice, y our
brain automatically looks for suggestions, searches for more information, and if
there is little information, we can make strange associations, assume something is
realistic, even if it is superstitious.”
There is plenty of historical research to correlate the rise of religion and
superstition with uncertainty, Coricelli say s. In the same way, he adds, when
there is little we can do to raise a probability, we are just as likely to play the
lucky number 7 or insist on buy ing our lottery ticket at a certain time of day to
raise our chance of winning.
Our proclivity for fantasy makes us an easy target for advertising. Lottery
commercials depict winners in stretch limousines, counting stacks of money,
dressed in evening gowns and tuxedos, sipping champagne.
The commercials hit home because fantasizing about winning the lottery activates
the same parts of our brains that would be activated if we actually won, notes
Daniel Levine, professor of psy chology at the University of Texas at Arlington,
and an expert on decision theory and neural networks. Picturing ourselves in a
limo activates visual areas of the brain, while imagining the clink of champagne
glasses lights up the auditory cortex. These areas have links to the brain regions
involved in emotion, decision-making, and motivation. “The motivational areas of
the brain can be heavily influenced by vivid day dreaming,” Levine say s. “Just
like seeing something can activate the emotional sy stem, so can envisioning it.”
But even fantasy will drop its hold on us if we alway s lose—a point Hargrove
grasped from the start. Research has shown that positive reinforcement is a key in
virtually all of the successful lotteries, notes the University of Lethbridge’s
Williams. Lotteries that allow play ers to choose combinations of four or five
numbers from a total of 60 numbers are popular, he say s, because many play ers
experience “the near miss,” which creates the illusion that they came close to
winning the multi-million dollar jackpot. Most play ers don’t realize, however, that
“near-miss” is an illusion. The odds of winning get worse with each successive
match. (The odds of having 2 out of 5 numbers is 1/119, while the odds of having
5 out of 5 is 1/299.)
Another important factor comes into play as we step up to the cash register at the
convenience store: self-image. Lottery sales, it turns out, are heavily influenced
by the way we are thinking about the purchase, and the way we perceive
ourselves in relation to others when we do.
Carnegie Mellon’s Loewenstein and colleagues demonstrated it’s possible to
change how many lottery tickets people will buy by making them think—or not
think—about their purchase in a larger context. The researchers gave one group
of study participants $1 at a time, five times, and asked them if they wanted to
buy a lottery ticket. They gave a second group $5 and asked how many tickets
they wanted, while a third group received $5 and was told they had only two
choices: they could spend it all on tickets or not buy any tickets at all. The people
in the first group purchased twice as many tickets as those asked explicitly what
percentage of the $5 they wanted to spend on tickets. Members of the all or
nothing group opted for no tickets 87 percent of the time.
One of the things the experiment shows is that lottery play ers are often “thinking
my opically,” say s Romel Mostafa, who co-authored the 2008 study with
Loewenstein, and is now an Assistant Professor of Business, Economics, and
Public Policy at Ivey Business School, Western University. “We think about these
purchases in one or two at a time. But when the decisions aggregate over time, it
adds up. And if I were to bracket the spending over a longer period of time, I
would not have bought it in the first place.”
This same “framing” phenomenon also helps explain our misperception of the
risk. Most people “frame” the lottery as “Boy, I could win $100 million,” rather
than considering what they might lose, say s Princeton Economist Hank Farber.
“To them a dollar seems inconsequential,” he say s.
It’s not just the way we frame the odds in the lottery that can affect how likely we
are to play the game. It turns out that the way we frame our own economic status
can also play a role in our decision to play the lottery .
Mostafa, Loewenstein, and colleagues designed a study to examine the influence
that “feeling poor” has on the decision to play the lottery. They approached
people at the Pittsburg Grey hound Bus Depot (who had an average income of
$29,228) and asked them to fill out a questionnaire about “community issues.”
Much of the survey was just window dressing. The only thing researchers cared
about were two different versions of multiple choice answers offered for a single
question, “How much money do y ou make.” Half received questionnaires with
the categories: “less than $10,000, less than $20,000, less than $30,000.” The other
half were presented with choices designed to make them feel poor. The
categories included “less than $100,000,” “less than $200,000,” and “less than
$300,000.”
After completing the questionnaires, the participants were paid $5 and asked if
they wanted to use any of the money to buy lottery tickets. Those who had been
made to feel poor bought twice as many lottery tickets as those in the control
group, the authors wrote in a 2008 study published in the Journal of Behavioral
Decision Making.
The commercials hit home because fantasizing about winning the lottery
activates the same parts of our brains that would be activated if we actually
won.
“The lottery is a way to raise the ceiling on what can happen to y ou,” say s
Loewenstein. “So if y ou are reminded of y our poverty , it makes the idea of lifting
the poverty a more salient motive. Lottery tickets become that much more
attractive at that moment.”
For many poor people, he adds, there is “no scenario they can come up with in
which they are suddenly going to get very rich.” To them, the lottery may be a
low probability event—but so is getting a job that pay s six figures.
That point is driven home by a 2006 Consumer Federation of American study,
which survey ed 1,000 adult Americans about their personal views on wealth. The
survey found that 21 percent of Americans—38 percent of whom had incomes
below $25,000—thought that winning the lottery represented the “most practical”
way for them to accumulate several hundred thousand dollars.
“A lot of people say that the lottery is a regressive tax, which is true,”
Loewenstein say s, referring to taxes that aren’t pegged to income, and take a
larger proportion of income from those who can least afford it. (A person who
makes $15,000 a y ear and buy s $1,500 worth of lottery tickets has spent 10
percent of his income, while a person who makes $150,000 and buy s $1,500 has
spent only 1 percent.) “It is true that poor people spend a substantially higher
fraction of their income on lottery tickets” than the affluent, he notes. “But I don’t
think it is necessarily irrational. Buy ing lottery tickets is a fairly inexpensive way
of raising the ceiling on what can happen to y ou economically.” In other words,
when y our economic prospects are dim, buy ing hope makes sense.
How we perceive ourselves in relation to others also shapes our decision to play
the lottery —a lever the industry consistently pulls. A salient example is the
“Postcode Lottery ” in the Netherlands. Weekly it awards a “Street Prize” to one
postal code, the Dutch equivalent of a zip code, chosen at random. When a postal
code (usually about 25 houses on a street) is drawn, every body who has play ed
the lottery in that code wins about $12,500 or more. Those living there who
neglected to buy a ticket prior to the drawing win nothing—except the chance to
watch their neighbors celebrate. In secondary drawings, many of those who
purchased tickets in the winning postcode win BMWs, and are eligible to win as
much as $14 million—$7 million for one lucky winner picked from within the
winning postcode, and $7 million for their immediate neighbors who bought
tickets.
“There is no scenario that poor people can come up with in which they are
suddenly going to get very rich.”
In a 2003 study, researchers in the Departments of Economic and Social
Psy chology , and Marketing at Tilbrug University in the Netherlands, noted fear of
regret play ed a significantly larger role in the Postcode Lottery than in a regular
lottery. It was not the chance of winning that drove the play ers to buy tickets, the
researchers found, it was the idea that they might be forced to sit on the sidelines
contemplating missed opportunity. The promoters of the postcode lottery seemed
well aware of that. One mailer read: “Sour, that is how it feels when y ou miss an
amount of at least 2 million by just an inch. Because seeing a multimillion prize
fall on y our own address, but winning nothing since y ou did not buy a ticket, that is
something that y ou do not want to experience.”
“The brain is very sensitive to loss—even low probability losses,” explains USC’s
Coricelli. “So if y ou frame something as a loss, biologically there is a compulsion
to avoid it. We have an aversion to it.”
In fact, say s Levine of the University of Texas, we are hardwired to evaluate
gains or losses based not on their own terms, but in comparison with other people.
“If y ou don’t see any body in a limo, y ou can be perfectly happy with y our
Honda Civic,” Levine say s. “But if y ou do, y ou might feel less happy with what
y ou have. It is a comparison. You can manipulate people into potentially feeling
regret when they see other people getting more than they have.”
In the end, fear and regret are the flipsides of hope and dreams—all are powerful
emotions that when tapped can cause us to relinquish rationality, to act on instinct,
even to make decisions that might not be in our best interest. As I left Hargrove’s
office and drove along the Tennessee Interstate toward the airport, I scanned the
highway for the giant Powerball billboards that she had touted as the best
marketing tool in her arsenal. She didn’t need many words to get her message
across, as the billboard that week trumpeted, in 10-foot-high digital numbers, a
$100 million jackpot. I couldn’t help but think, as I drove along, “What would I do
with that much money ?”
Adam Piore is a freelance writer based in New York.
Original: https://www.readability.com/articles/gw901fwc
Title: Sleeping Together
Author: harpers.org
Summary: She bowed and introduced herself as Yukiko and I knew it was her
real name. I’d heard about the games played by the women in Tokyo’s hostess
bars, that they introduced themselves first…
Sleeping Together - harpers.org - Readability
She bowed and introduced herself as Yukiko and I knew it was her real name. I’d
heard about the games play ed by the women in Toky o’s hostess bars, that they
introduced themselves first with a fake name, then, after a few minutes,
reintroduced themselves to their “special” customers with their real name, i.e., a
different fake name. But I was and remain sure that the name she gave me,
which was not Yukiko, was her real name. She was from Saitama prefecture, the
New Jersey of Toky o. I told her I was from New Jersey, the Saitama of New
York. She was twenty and this was only her second time. She wore her own
pajamas: a gray top with y ellow flowers and puffy gray shorts with a ruffled
hem.
For ¥3,000, or about thirty dollars, I had gotten a membership card at Toky o’s first
co-sleeping café, and then I paid another ¥3,000 for forty minutes of sleeping; it’s
ordinarily ¥5,000, but as a first-timer I was eligible for a promotional rate. (A tenhour package costs ¥50,000, a 20 percent discount off the hourly rate.) The café
had a video explaining that all sexual overtures, regardless of financial
incentivization, would be refused. But there were add-ons available: I chose
staring into each other’s ey es (1 min, ¥1,000) and being patted on the head (1 min,
¥1,000). Other options included having the woman change her pajamas once,
spooning, or sleeping with y our head in her lap. As appealing as they were, those
had all struck me as crossing some sort of line.
Yukiko and I lay down on our foam pallet and she covered us with a flimsy
blanket. It had the overwashed nap of a child’s transitional object. She leaned
toward the cubicle wall to set one of two pink egg timers she’d withdrawn, along
with her phone, from a pink pencil case, then flopped onto her back. I followed
her lead. We looked at the ceiling. Our bodies did not touch. There wasn’t even a
pretense that we were actually going to sleep.
First of all, we were too nervous. Second, it was seven p.m. Third, she was going
to be switched out for a second-round sleeper after twenty minutes. Furthermore,
there was too much to talk about. Her English was surprisingly not bad — when
she was fifteen she took a vacation to Australia, the only time she ever enjoy ed to
leave Japan — but she kept her phone nearby for assistance. It was a white
iPhone 5. This was, she said again, only her second shift at the co-sleeping café.
“Did y ou sleep the first time?”
“No. I don’t think many people sleep here. I think only may be real otaku sleep
here. I only heard of some sleeping.” Otaku is, roughly, obsessive nerd culture —
manga, cards, collectibles, schoolgirls.
“I thought so, y es, before I came — it is in Akihabara, electronics place, for
otaku. But it is more celery men. My first time, was celery man.”
“Wait, what?”
“Ce-le-ry -man. Ce-re-ry -man.” I shook my head. “Se-ra-ry -man.”
“Salary man!”
“Salary man!”
“And, with this salary man, y ou didn’t sleep?”
“Didn’t sleep, no.”
“Did y ou talk?” Yukiko nodded. “What did y ou talk about?”
“We talked about his work. He talked about his work at a company .”
“Do y ou mind if I write this stuff down?”
“Yes, okay to write down.” Yukiko smiled, seemed to loosen a little bit. Her teeth
were small and even and spaced far apart. I reached for my notebook, which I’d
hidden on the windowsill behind the heart lamp in the hope that, if I failed to fall
asleep, I might record what it felt like to be here, not sleeping.
“What was his work?”
“It was . . . hokken.” She felt around beside her for her phone, decided she could
just explain it. “Like, when I get sick, when I hurt my self, I get money.” She
waved her arms in rapid swoons toward her chest, as though she were in one of
those game-show fly ing-money wind chambers.
“Insurance?”
“Yes, insurance!
celery man.”
Insurance.
That’s right.
He
was insurance-salesman
“Did he get any of the options?”
“He wanted five-second hug option.”
“How much does that cost?”
“Sen y en.” A thousand y en.
“What was it like?”
She mimed wrapping her arms around a thorn tree. She wincingly patted the
thorny emptiness.
“Why do y ou think he came here, to the sleeping café?”
“He wanted five-second hug may be because he had no one to hug. Japan is haji
culture. Shame. Is shame culture. Or may be also is shy ness. I don’t know why.
Toky o people . . . very alone. And he does not have . . . ” She thought for a
second, shrugged, reached for her phone. “Please hold moment.”
She held it close to her face, multitouched the screen not with thumb and
forefinger but with tiny forefinger and middle finger. I could hear another
customer whispering in Japanese in the silk-walled cubicle at our feet. His cosleeper laughed loudly, then laughed softly. Yukiko tapped a button and shone the
phone at my face. The screen said courage.
“You also got option.” She looked up at a laminated card posted over the bed.
“Two option. First option, we watch.” She pointed to her ey es, which were small
and black and wide-open. It looked as though she was wearing those contacts that
make y our pupils seem larger. She smoothed her hair, tucked it behind her ears,
smoothed it again. She started the second pink plastic timer and we turned toward
each other. A Pikachu looking like a blandly benevolent sack of flour peered down
at me over her shoulder. We laughed and she covered her open mouth. She
smoothed down her hair again. The timer beeped that our minute was up, but we
didn’t look away right away .
“You’re pretty good at this, for only y our second time.”
She laughed. “No.”
“Why do the customers come here, instead of a maid café, or a kyabakura?”
These are all venues for what the Japanese call the mizu-shobai, the “water
trade”; the origin of the term is debated, but it evokes flotation, impermanence,
chance. Mizu-shobai is a finely graded thing: there’s a big difference between a
hostess, who’s paid to entertain and flatter and drink with her clients — often
wealthy businessmen — and who sees her work as being within the tradition of the
geisha, and, on the other end of the spectrum, an actual prostitute. The kyabakura
(a derivative of “cabaret”) are a step down from the hostess bars but a step up
from the “soaplands,” which are barely more than brothels. At the kyabakura the
women are garishly made up. They cater to the working classes.
Yukiko smoothed her hair, put her hand to her chin. “Customers think this is
different from kyabakura. The options here aren’t . . . deep. No deep option.
There’s just pat the back and watch the watch.” She pointed to her ey es, then
mine. Watch the watch. “It’s very . . . soft . . . here. They cannot do the deep
thing because they don’t have the courage. Don’t have the courage to cabaret
club.” In other words, it’s easy here. Even a hostess club, or a cabaret club, has a
ritual to it, a social component; the man is expected to play his part. Here the lone
expectation is that he be present horizontally .
“ I n kyabakura y ou do not sleep. You cannot sleep. You cannot sleep with me.
Here y ou do pure things.” I think she meant pure as in simple. Simple but also
intimate. We were, after all, ly ing in bed, shabby as the bed may have been.
“What about the maid cafés?”
“Not like in maid café, where maids have to do lovely actions. I don’t want to do.”
“You mean sexual actions?”
“No, not sexy actions. Lovely. Loving.” She made a brittle heart in the air with
her hands and grimaced. She quickly shook it off. In the maid cafés, the whole
point is the performance of servile adorability .
“But here y ou just have to sleep.”
“Just have to sleep, y es. Pure thing.”
“But then y ou don’t actually sleep, y ou just end up talking most of the time.”
“This my only second time.”
“Sorry , y ou just ended up talking once.”
“Yes, once. He talk to me about work, and I have . . . Please hold moment.” She
looked to her phone, which she’d been holding in her left hand. Before she could
tap I ventured a guess.
“Sy mpathy ?”
“Yes, sy mpathy. I have sy mpathy for their work. For any work. I am at work
now. In Japan y ou have no . . . Please hold moment.” She blushed, whited out her
face with her screen, tapped lightly. She held the phone out. It said paid vacation.
“In France I hear y ou get one months. But Japan is no. Men come here want
time, relax time. It’s like being in their room at their house. Bed is best relax
item.”
“Bed is best relax item.”
“Bed is best relax item.”
“But here they are with y ou.”
“Here they are with me.” She turned to the ceiling for a few seconds, turned back
to watch the watch again, this time off-clock.
“But y ou, y ou and I are same, not like men to relax.”
Invited to be same, I could feel the heat in my face. But every body must be
invited to be same, right?
“How are y ou and I the same?”
“We both at working.” One of the timers beeped. “Someone else come now to
sleep. But we forget second option!”
She set the second timer, the option timer, put her little fist just above my ear,
extended her fingers, and thumped my head with her palm, hard enough to say
You’re better than this. Each one contained the pleasure and shame of a Facebook
like.
After my one minute the timer went off.
“Do I seem relaxed now?”
“No.”
She rose to her knees, smoothed her pajama shorts, pulled at their ruffled hem,
smoothed her hair, put her two pink timers and her white iPhone 5 into her pencil
case, and bowed and said goodby e it was nice to meet y ou and bowed again. She
withdrew behind the flutter of cheap silk.
I lay back next to a Pikachu.
On my way to the café, I’d stopped for a drink. Since the Japanese recession
began, in the 1990s, there’s been a resurgence in enjoy ment of a drink called
Hoppy. Hoppy was first marketed after the war, when most people couldn’t
afford to drink beer; beer was something y ou kept in y our home for very special
occasions. Hoppy is a nonalcoholic beer drink that comes in a clear bottle with a
retro design. A Hoppy cocktail is a bottle of Hoppy served with a tall glass half
full of cheap, tasteless shochu, Japanese grain alcohol, on the rocks. You pour the
watery nonalcoholic beer drink over the cheap iced grain alcohol and come away
with a counterfeit beer. But because it’s half grain alcohol, it’s extremely strong.
You get drunk very fast. It’s fake, but powerful.
Three minutes passed. You couldn’t really sleep in here if y ou tried. Timers in
cubicles kept beeping. I lay by the Pikachu in the orange light, watched the
ceiling, and listened for sounds in the alley outside.
Yukiko parted the pink silk.
“I’m back again. Not someone else.” She tried to explain but I waved it off.
“I figured y ou’d come back again.” She pulled the thin cover over us and we
returned to our backs and resumed neither sleeping nor touching.
“Does any one ever sleep? You said the otakus sometimes slept.”
“May be sometimes. My friend, who worked here first, she is how I found out this
place, she had a man sleep for eight hours. It costed forty thousand y en. May be
he is rich.”
“Did y our friend sleep, too, when the man was sleeping?”
“May be a little bit. I think she was bored.”
“What did they do? Options, I mean. Did the man have options?”
“They did only this.” She motioned for me to lift my head. She put her arm
around my head in a tense, shallow spoon. I settled against it.
She y anked away her arm. “No, this is option!”
She laughed to cover the y anking and our embarrassment. I felt ashamed. I’d
tried to get an option for nothing, even after she’d said I was like her. I was unlike
her.
“Do any of the girls have boy friends?” I asked.
“Some have.”
“Do they tell their boy friends what they do?”
“Some of them tell and some of them lie. Very normal girls come here, they lie
to their boy friend and family.” We looked away from each other, toward the
ceiling and then toward the little sliding window, and she pulled the transitional
object up higher over us, to our necks. Our knees touched and, still hot from the
shame of having tried for a free option, I was the first to move my body away. I
wanted to ask the obvious question but didn’t want to overstep.
She blurted out the answer any way . “I cannot tell my family .”
We turned to each other and watched the watch.
“If they knew they would be angry and sad.”
“What do y ou tell them?”
“I am student, at Japan Women’s University .”
“What do y ou study ?”
“Culture. And society. But I want to be cosmetics and work skin care. I am
student, so I have time but no money . I have other job too. I tell my parents am at
other job. When I am here I tell my parents I am at tapioca-and-crêpe shop.”
I’d seen the places she was talking about; it was a chain. Or may be there was
more than one chain. They sold tapioca drinks and crêpes.
“I work here to save money for a trip. At maid café y ou make eight hundred fifty
y en one hour. Here work is . . . Please hold moment.” paid commission. “I make
more money with option.”
“Where do y ou want to go?”
“Belgium.”
“Belgium?”
“Belgium.”
“Why ?”
“My friend, friend who also work here, friend who brought me to work here, has
boy friend from Belgium. He is very nice. He say s nice things about Belgium. I
want to go there, to Belgium. Have y ou been to Belgium?”
“Yeah, once, briefly . I’m actually going there next week.”
“Next week y ou go to Belgium?”
“Yes.”
“Next week y ou go to Belgium.” She paused, lay still. “I don’t think I go on with
this job.”
We were quiet.
“It makes y ou feel bad.”
She pointed to herself, to her chest, to her heart. “Makes me feel bad. It
doesn’t . . . suits. Please hold moment.” it doesn’t look good on me.
“It doesn’t suit y ou.”
“Yes! It doesn’t suit me.”
“Who’s in that picture on y our phone?” Her wallpaper was a uniformed
schoolgirl, a Westerner. She laughed.
“Here is Blair. Blair from Gossip Girls.”
“You watch a lot of American TV?”
“Some. Gossip Girls. You are writer. Do y ou read Japanese books?”
“In English, y eah.”
“What Japanese books y ou like?”
“Do y ou know Tanizaki Junichiro?”
“I heard him.”
“He has this book I love. Can I have y our phone?”
I called up the Wikipedia page for The Makioka Sisters. Serialized in Japan in the
Forties, it takes place in the last few y ears before the Second World War. It is the
story of the four daughters of an Osaka merchant family ; the family ’s declining
fortunes have made it increasingly difficult to marry off the reticent, thwarted
third daughter, and the bad behavior and Western inclinations of the y oungest
have brought them shame. They try to take comfort in the Japanese rituals
celebrating impermanence, such as the annual viewing of the cherry blossoms.
The apparently untranslatable Japanese title evokes both snow and blossoms.
I flicked my finger to the bottom of the Wikipedia entry, selected the tab for other
languages, and brought up the Japanese version. I passed Yukiko the phone. Her
timer began to beep. Our second twenty minutes were up.
She began to read, then turned the beeping timer off. “Please hold moment.”
She held the phone up to her face. I watched her, pale in the white phone light.
She slowly drew the screen down through the entry. We lay there for four more
minutes. She read down to the bottom.
“I think I really like this book.”
Original: https://www.readability.com/articles/81eiun55
Title: A Solution From Hell
Author: nplusonemag.com
Summary: Humanitarian intervention in somethingclose to its modern form
first appeared as a concept in the early 16th century, the invention of Spanish
jurists who, as their countrymen conquered the New…
A Solution From Hell - nplusonemag.com - Readability
Humanitarian intervention in somethingclose to its modern form first appeared as
a concept in the early 16th century, the invention of Spanish jurists who, as their
country men conquered the New World, needed to explain why it might be
necessary to depose recalcitrant native rulers. In this way the legal men
exculpated the conquistadors who would wipe out entire populations: the chiefs
were cruel to their subjects. The hint was picked up by the European princes of
the next century, after the Reformation split the continent into two armed camps,
each invoking the right to invade other countries on behalf of oppressed coreligionists. After the religious wars, European states began intervening to protect
fellow Christians in the Ottoman Empire; when the slave trade was shut down,
European colonialists fought “barbarism” in Africa on behalf of civilization and
the natives. The editors of a very useful volume, Humanitarian Intervention: A
History, just out from Cambridge University Press, present this information and
then argue against drawing the obvious conclusion. “The fact that opposition to
ty ranny or abusive government was not applied uniformly ,” they write, “does not
mean that it was insincere.”
For all this history, there’s no question that our current age is especially
preoccupied with human rights. The story of how we got here can be traced from
various points, whether from the Enlightenment and its great American
spokesman Thomas Jefferson (as in Ly nn Hunt’s Inventing Human Rights), or
from the interventions and non-interventions following the European upheavals of
1848 (the subject of John Stuart Mill’s “A Few Words on Non-Intervention”), or
from the founding of the United Nations after World War II and the Holocaust (as
in most of the literature), or from 1977, the y ear when post-’60s dismay, Jimmy
Carter, and the cold war intersected to place a commitment to “human rights” at
the center of Western consciousness (as in Samuel Moy n’s recent revisionist
history, The Last Utopia). Whichever way, for whatever reason, or for half a
dozen reasons, human rights have at least rhetorically come to the fore of
American and European foreign policy, with the result that it is now possible for
the US to wage war for humanitarian purposes in campaigns that seem otherwise
irrelevant to the national interest. In this telling of the story of the “rights
revolution,” as the philosopher and Iraq war proponent Michael Ignatieff has
called it, the end of the cold war has opened up new vistas for the enforcement of
human rights across the globe.
There is another way to tell the story, however. In this telling, the march of rights
took a wrong turn as early as 1948, when the UN adopted its Universal
Declaration of Human Rights. The UN Charter had established state sovereignty
as the basis for international law. This meant that weaker states would be
protected against stronger states by the international community —and for all its
flaws, the UN was instrumental in helping postwar, postcolonial states get on their
feet. At the same time, the Universal Declaration promoted the principle of
human rights in general, independent of sovereignty. Writing in the wake of
World War II and the founding of the UN, Hannah Arendt in The Origins of
Totalitarianism echoed Edmund Burke’s famous critique of the French
revolutionaries’ Declaration of the Rights of Man. “The calamity of the rightless,”
wrote Arendt, “is not that they are deprived of life, liberty, and the pursuit of
happiness, or of equality before the law and freedom of opinion—formulas which
were designed to solve problems within given communities—but that they no
longer belong to any community whatsoever. Their plight is not that they are not
equal before the law, but that no law exists for them.” Survey ing the history of
refugees and other stateless people over the prior thirty y ears, Arendt found that
“not only did the loss of national rights in all instances entail the loss of human
rights; the restoration of human rights, as the recent example of the State of Israel
proves, has been achieved so far only through the restoration of national rights.”
There could be no rights without belonging to a sovereign jurisdiction; the UN, by
paradoxically enshrining sovereignty on the one hand and “universal rights” on
the other, had done nothing to solve the problems revealed in the interwar period.
The contradiction in the UN founding documents between inviolable human rights
and inviolable state sovereignty remained essentially obscured throughout the
cold war, when neither the Americans nor the Soviets could seriously claim to
believe in either. Even when the US championed human rights under Carter, it
retained its priorities: forced to choose between socialists (or just serious land
reformers) and human rights abusers, the US alway s sided with the abusers.
Suddenly in 1991 the choice became unnecessary. You no longer had to decide
between leftists and rightists, since every where y ou looked there were only
capitalists. And by the end of the cold war, aerial weapons sy stems had advanced
to the point where the military could conduct basically gratuitous wars, with little
risk to soldiers’ lives, at comparatively low cost—and without raining explosives
indiscriminately on foreign populations. (“Humanitarian” carpet-bombing would
have been too oxy moronic even for policy intellectuals.) The new precision-
guided weaponry offered the hope of truly distinguishing the good guy s from the
bad guy s, as long as they stay ed far enough apart.
In the ’90s, the language of human rights came into its own. The people of
Kuwait, when a US-led, UN-approved coalition drove Iraq out of their country,
were the citizens of a sovereign state invaded by Saddam Hussein—but not so the
Iraqi Kurds, who were Saddam’s own citizens when he invaded their lands.
Nevertheless the US, Britain, and France established a no-fly zone to protect the
Iraqi Kurds from their internationally recognized head of state. Likewise, the
Tutsis of Rwanda and the Albanians in Yugoslav Kosovo were victims of the state
in which they lived, and their rights, insofar as they had any, could only be
defended by an international community . In one case those rights were defended,
in the other they were not. What were the US’s principles, and what was its
practice, when it came to human rights? Neither seemed clear, and the debate
about them was equally confusing and confused.
The only people who seemed consistent about intervention were too far right or
left to get much of a hearing. Throughout the 1990s, conservatives opposed
intervention from a “realist” perspective, arguing that it was not in the national
interest to go on humanitarian missions abroad (or within the US, for that matter).
The left, which was in the process of forming a powerful movement against the
“structural adjustment” policies of the giant international financial institutions, and
also promoting a humane globalization (carelessly labeled “antiglobalization” by
the mainstream press), opposed the interventions on anti-imperialist grounds. In
the end, neither view had much effect, as a strong hawkish core emerged: Bob
Dole, the Republican leader in the Senate and 1996 presidential candidate, was a
strong proponent of intervention in Bosnia; so too, eventually, was Bill Clinton.
Among respectable pundits, the right-leaning hawks were neoconservative, the
left-leaning hawks neoliberal. If there was a real distinction it was in their attitudes
toward international institutions like the UN. Neoconservatives loathed the UN;
neoliberals liked it. But it was the Kosovo intervention, which most egregiously
circumvented international institutions (in the name of a good cause), that was the
final Clinton intervention. Thus at the end of the ’90s neoconservatives and
neoliberals had reached the same place, disdainful of seeking “multilateral”
permission for their wars.
Perhaps the liberals would soon have returned to their more traditional interest in
international institutions; perhaps the conservatives would have gotten out of the
human rights business altogether; perhaps not. In any case the terrorist attacks of
September 11 altered—or scrambled—people’s thinking. The next American war
was an unusual operation: a mission to overthrow a government (the Taliban) that
almost nobody recognized as legitimate, in order to deprive a belligerent non-state
actor (al Qaeda) of a staging ground. Realists on the left—few remained on the
right—argued for a narrowly defined police action to root out al Qaeda.
Supporters of all-out war, soon the only respectable position, invoked the liberation
of Afghan women as a bonus legitimation. And a y ear and a half later came Iraq.
The war was sold to the public under many pretexts, but for liberal hawks the
dominant reason to invade was Saddam Hussein’s former crimes (and potential
future crimes) against his people. There was no question that from a humanitarian
perspective a world without Saddam would be a better world. And we were going
to take him out.
+++
In retrospect it’s easy to see that the argument over humanitarian intervention that
should have taken place in the y ears after Kosovo was replaced and muddled by
an argument over the Bush doctrine of preemptive war. In 2000–01, a highpowered international commission convened to discuss what the international
community should do in the event of a human rights crisis in a failing state; one of
their recommendations was that the concept of “humanitarian intervention” be
scrapped, as being needlessly prejudicial (like “pro-life”), and replaced with the
more capacious, less necessarily violent “responsibility to protect.” The group’s
report was humane and intelligent, though not without problems; it was also
presented before the UN Security Council in December 2001, at which point it
had been “O.B.E.,” as they say in Washington—overtaken by events. The same
happened with Samantha Power’s “A Problem from Hell”: America and the Age
of Genocide, the summa theologica of liberal interventionist historiography, which
was published in 2002. The book immediately became part of the debate over
Iraq, with George W. Bush famously scribbling NOMW (“not on my watch”) in
a memo outlining its arguments. Not long after, he invaded Iraq.
The argument over preemptive war was decided, resoundingly, against, though
not because Stephen Holmes wrote essay s in the London Review of Books or
Jacques Rancière contributed an elegant elaboration of Hannah Arendt’s
argument about rights in the South Atlantic Quarterly. The argument was decided
by the 126,000 or so Iraqis killed during the US invasion and in the civil war that
followed. No one will be invading a terrible but stable regime to hang its leader
any time soon; at least we won’t. Now, in 2011, we are bringing the troops
gradually home from Afghanistan and Iraq, the results mixed. Neither war was
waged for human rights, and it seems clear that humanitarianism shouldn’t have
been part of the discussion, not in the way it was. How humanitarian is it to
unleash one civil war and reignite another?
In Liby a, we find ourselves faced with a more classic, ’90s-sty le intervention.
The background could not be more stark: a courageous rebellion against a brutal
and unbalanced forty -y ear dictatorship was inspired by the nearby uprisings in
Egy pt and Tunisia. Unlike the dictators of those countries, Muammar Qaddafi
gave no thought to stepping down. The rebels armed themselves and began to
march toward Tripoli, capturing several towns on the way. They carried
Kalashnikovs and RPGs. Qaddafi’s day s were numbered! But his army had jets,
and tanks, and heavy artillery. Once it began a counteroffensive, the rebels
proved powerless. They retreated and retreated, until Qaddafi’s forces reached
the outskirts of Benghazi, the largest city in the Liby an east and the heart of the
rebellion. Qaddafi took to the radio. “It’s over,” he told the rebels. “We are
coming tonight. Prepare y ourselves. We will find y ou in y our closets. We will
show no mercy and no pity.” People on the ground began to predict the massacre
of Benghazi. They even used the word “genocide,” if only to disclaim it: “Not a
slaughter amounting to genocide,” clarified the New York Review of Books , “but
almost certainly a bloodbath.” (And what was the exact word these exquisite
splitters of hairs had in mind for the killing resulting from NATO bombardment?)
The New Yorker ’s understated Jon Lee Anderson was in Benghazi as Qaddafi’s
army approached. He had been watching the hapless rebels for weeks, growing
increasingly alarmed at their inadequate arms and training. Now artillery could
be heard on the edge of town; in the city ’s lone functioning internet cafe the
y oung people updated their Facebook profiles. Social media weren’t going to help
them now. “The war was finally coming to Benghazi,” Anderson wrote.
And then it didn’t. NATO jets swooped in, forcing Qaddafi’s army back. Benghazi
was saved. Nor was it a unilateral mission. The Arab League had sought the
intervention; none other than Lebanon, home of Hezbollah (still furious at Qaddafi
for the “disappearing” of a Lebanese Shi’ite chief in the late ’70s), sponsored the
resolution in the UN Security Council. The White House had the finesse to “lead
from behind,” as they put it. And the rebels, having taken several cities in the first
weeks of the uprising, had established what international law calls “belligerent
rights”—they were a force that could claim some legitimacy both inside and
outside the country. Many of the arguments that should have given pause to
American policy makers before the Iraq war, and to some extent during the
Kosovo bombing, were moot here. This intervention was UN-approved, and
seemed to emerge from a genuine concern for the casualties that would have
ensued had Qaddafi’s forces been allowed to proceed into Benghazi. (A more
realpolitik consideration was to place the US, belatedly, on the side of the Arab
Spring; we would be less resented as the old enabler of Mubarak if we were also
the foe of Qaddafi.) Ry an Lizza’s New Yorker article describing the day s leading
up to Obama’s decision for war singled out Samantha Power, Senior Director for
Multilateral Affairs on Obama’s National Security Council, as one of the motors
for the intervention. America was finally choosing values over money .
And y et somehow it gave one a toothache—like the toothache Vronsky had at the
end of Anna Karenina, when he went off to Belgrade to humanitarianly aid the
Orthodox Christians in their uprising against the Turks. Wars waged by the US are
inevitably imperialist; that is part of the toothache. But are they also irredeemably
so? Can the local good—the protection of these people or that city —never
outweigh the global problem that human rights are, at best, invoked inconsistently
and hy pocritically, and at worst to excuse any and every war? Humanitarian
warfare, clearly bad in principle, often looks good from the standpoint of a
particular people at a particular moment, when they are threatened with death.
And so the temperamental opponent of intervention can come to feel that while in
general he opposes this kind of thing, well, in this case he guesses he supports it—
and in that case too, and the next one. He can come to feel like somebody who
has principles only for the sake of suspending them. This was the real cause of the
toothache—it was déjà vu all over again. In general, y ou reject humanitarian war
—but have y ou ever met one y ou didn’t initially like? For liberals or leftists who
neither automatically support nor automatically oppose all interventions, the
Liby a war has prompted something paradoxical: mixed feelings in especially
pure form. Here the humanitarian motive for intervening has seemed more
genuine and decisive than in any prior case. And the chances of doing real good
looked favorable. Yet we’ve got to stop doing these things!
What has been the result? NATO almost immediately expanded the concept of
“civilian protection” to include regime change—what safety could there be for
the rebels if Qaddafi stay ed in power? Again, it was hard to argue: Qaddafi was a
maniac and a murderer. But Qaddafi held on. One of his residences was bombed,
killing a son and several grandchildren, and still he held on. The rebels, while
increasing in number and confidence, did not suddenly transform themselves into
a well-armed, well-trained fighting force, and militarily a stalemate ensued. Here
we were again: an idea that on the face of it was reasonable, and in a certain way
“humane,” was leading to further deaths, further damage to a country ’s
infrastructure, and a political situation in which the rebels, emboldened by the
NATO jets (and, eventually , attack helicopters), refused to negotiate until Qaddafi
was gone. Meanwhile the International Criminal Court, the pride and joy of the
liberal interventionists, filed suit against Qaddafi for crimes against humanity,
thereby putting him bey ond the pale. How could y ou negotiate with someone with
nothing to lose? So a nonmilitary solution to a conflict that, Obama said, would be
a matter of “day s, not weeks,” is, as of this writing, further away than ever, even
after four months of bombing.
All this could simply be regretted as a well-intentioned plan not working well
enough. But that issue of abrogated sovereignty cuts both way s—the American
people are supposed to be sovereign, too. The Obama White House’s attitude in
this has been telling. Not only has Obama failed to seek Congressional approval;
his lawy ers filed a laughable legal brief that argued that America was not even at
war. As Congressional Republicans correctly pointed out, the administration could
not be serious! What could explain this fealty to the letter of international law, and
utter contempt for the President’s duty to get his wars through Congress?
The answer, it seems to us, can be found in the work of the humanitarian hawks;
they have turned the world into a morality play, a ceaseless battle of good versus
evil. In Power and the Idealists, his ambivalent farewell to the moralism of the
generation of 1968, Paul Berman traced this worldview to the 1960s student left.
Born too late to fight Nazis the way their parents did, idealistic y oung leftists in the
prosperous countries of the West looked for Nazis where they could: in university
administrations, in American carpet bombers, in the colonialist Israeli state. Even
as they grew older and wiser, the hunt for Nazis continued, and continued; in
1999, it led them into Kosovo, and in 2003 it led some of them into the
catastrophic invasion of Iraq. Berman was the most perceptive analy st of the
humanitarian hawk mindset; Samantha Power was its most compelling exemplar.
There are only three kinds of people in her “A Problem from Hell”: evildoers
(Hitler, Pol Pot, Milosevic); saints (Raphael Lemkin, Jan Karski, George
McGovern, Peter Galbraith); and cowards (every one else). You’re either with
Power or with Pol Pot. The word “evil” is sprinkled liberally throughout the text
(thirty -five appearances), as are “slaughter” (sixty -five), “mass murder”
(twenty -five), “bloodbath” (thirteen), and “massacre” (ninety -nine). The
function of these words—as well as the word “genocide,” to whose propagation
the book is partly devoted—is to place the evil people bey ond the pale of politics,
of negotiation, of human intercourse. Would y ou shake hands with a mass
murderer? With the invocation of the word “genocide,” we move into some other
sphere of human relations. Thought, strategy, negotiation shut down; there is only
right and wrong, only fight or flight. Which is precisely , in fact, the point.
A politics this morally coercive may explain why a President who is a former
law professor, and who came to power with the mandate to restore the rule of
law, would so brazenly ignore the Constitution. But a politics this morally coercive
is not a politics at all.
What has happened to human rights in the last twenty y ears is a hijacking, of the
sort Napoleon managed with the Declaration of the Rights of Man when he turned
Europe into a “bloodbath,” as Power would put it, under its banner. The search
around the globe for genocides to eradicate is the ultimate rights perversion, for it
reduces human rights to the right not to be brutally murdered in a particular way
that fits the definition of genocide given in the Genocide Convention. This cannot
be any one’s idea of a robust human rights. If human rights are to be reclaimed
they need first of all to be restored to the realm of politics. Not the realm of
morality, which is alway s and ever a discussion of good versus evil, but politics, a
discussion and argument over competing legitimate aims—e.g., the aim of
honoring sovereignty and not waging war, versus the aim of protecting the
defenseless and ensuring their rights. Morally, it would clearly be better to be a
democracy liberated by George Bush than a ty ranny under Saddam Hussein.
Politically, it may be better to bide y our time under Saddam than be plunged into
a civil war that will kill 100,000 or twice that many. A political rather than moral
discussion of human rights might even lead us to acknowledge that a mass
murderer like Muammar Qaddafi or George W. Bush has a legitimate
constituency whose rights must also be kept in mind.
Meantime the historical record grows long enough for us to ask: Has there ever
been a truly successful, truly humanitarian humanitarian intervention? Not of the
Vietnamese in Cambodia, who deposed the Khmer Rouge for their own reasons
(the Khmer kept crossing the border, and also murdered their entire Vietnamese
population), and then replaced them with Hun Sen, who has been ruling Cambodia
with an iron fist for more than thirty y ears. Not the Indian intervention in
Bangladesh, under whose cover the Indian government arrested all student
protesters in India. And not NATO in Kosovo, which, while it stopped Milosevic
and ensured the safety of Kosovo, could not make it a viable state (it is now a
failing state likely to be swallowed by Albania), and also led to the ethnic
cleansing of the Serb population. Too bad for the Serbs, to be sure; but the creation
of a safe space for the expulsion of a civilian population cannot be what any one
had in mind when they launched the planes. That there has never been a
successful humanitarian intervention does not mean that there cannot be one in
the future. But the evidence is piling up.
Original: https://www.readability.com/articles/sfaosmcc
Title: The Killing Machines
Author: theatlantic.com
Summary: Tribesmen stand on the rubble of a building destroyed by a U.S.
drone strike that targeted suspected al-Q aeda militants in the southeastern
Yemeni provence of Shabwa on February 3, 2013. (Khaled…
The Killing Machines - www.theatlantic.com - Readability
Tribesmen stand on the rubble of a building destroy ed by a U.S. drone strike that
targeted suspected al-Qaeda militants in the southeastern Yemeni provence of
Shabwa on February 3, 2013. (Khaled Abdullah/Reuters/Corbis)
I. Unfairness
Consider David. The shepherd lad steps up to face in single combat the Philistine
giant Goliath. Armed with only a slender staff and a slingshot, he confronts a
fearsome warrior clad in a brass helmet and chain mail, wielding a spear with a
head as heavy as a sledge and a staff “like a weaver’s beam.” Goliath scorns the
approaching y outh: “Am I a dog, that thou comest to me with staves?” (1
Samuel 17)
David then famously slay s the boastful giant with a single smooth stone from his
slingshot.
A story to gladden the hearts of underdogs every where, its biblical moral is: Best
to have God on your side. But subtract the theological context and what y ou have
is a parable about technology. The slingshot, a small, lightweight weapon that
employ s simple phy sics to launch a missile with lethal force from a distance, was
an innovation that rendered all the giant’s advantages moot. It ignored the spirit of
the contest. David’s weapon was, like all significant advances in warfare,
essentially unfair.
As any one who has ever been in combat will tell y ou, the last thing y ou want is a
fair fight. Technology has been tilting the balance of battles since Goliath fell. I
was born into the age of push-button warfare. Ivy Mike, the first thermonuclear
bomb, capable of vaporizing an entire modern metropolis, of killing millions of
people at once, was detonated over the Pacific before my second birthday.
Growing up, the concept of global annihilation wasn’t just science fiction. We held
civil-defense drills to practice for it.
Within my lifetime, that evolution has taken a surprising turn. Today we find
ourselves tangled in legal and moral knots over the drone, a weapon that can find
and strike a single target, often a single individual, via remote control.
Unlike nuclear weapons, the drone did not emerge from some multibillion-dollar
program on the cutting edge of science. It isn’t even completely new. The first
Predator drone consisted of a snowmobile engine mounted on a radio-controlled
glider. When linked via satellite to a distant control center, drones exploit
telecommunications methods perfected y ears ago by TV networks—in fact, the
Air Force has gone to ESPN for advice. But when y ou pull together this disparate
technology, what y ou have is a weapon capable of finding and killing someone
just about any where in the world.
Drone strikes are a far cry from the atomic vaporizing of whole cities, but the
horror of war doesn’t seem to diminish when it is reduced in scale. If any thing,
the act of willfully pinpointing a human being and summarily executing him from
afar distills war to a single ghastly act.
One day this past January, a small patrol of marines in southern Afghanistan was
working its way at dusk down a dirt road not far from Kandahar, stay ing to either
side to avoid planted bombs, when it unexpectedly came under fire. The men
scattered for cover. A battered pickup truck was closing in on them and popping
off rounds from what sounded like a big gun.
Continents away, in a different time zone, a slender 19-y ear-old American
soldier sat at a desk before a large color monitor, watching this action unfold in
startlingly high definition. He had never been near a battlefield. He had graduated
from basic training straight out of high school, and was one of a select few invited
to fly Predators. This was his first time at the controls, essentially a joy stick and
the monitor. The drone he was fly ing was roughly 15,000 feet above the besieged
patrol, each member marked clearly in monochrome on his monitor by an
infrared uniform patch. He had been instructed to watch over the patrol, and to
“stay frosty,” meaning: Whatever happens, don’t panic . No one had expected
any thing to happen. Now something was happening.
The y oung pilot zoomed in tight on the approaching truck. He saw in its bed a .50caliber machine gun, a weapon that could do more damage to an army than a
platoon of Goliaths.
A colonel, watching over his shoulder, said, “They ’re pinned down pretty good.
They ’re gonna be screwed if y ou don’t do something.”
The colonel told the pilot to fix on the truck. A button on the joy stick pulled up a
computer-generated reticle, a grid display ing exact ground coordinates, distance,
direction, range, etc. Once the computer locked on the pickup, it stay ed zeroed in
on the moving target.
“Are y ou ready to help?” the colonel asked.
An overlay on the grid showed the anticipated blast radius of an AGM-114
Hellfire missile—the drone carried two. Communicating via a digital audio link,
the colonel instructed the men on the ground to back away, then gave them a few
seconds to do so.
The pilot scrutinized the vehicle. Those who have seen unclassified clips of aerial
attacks have only a dim appreciation of the optics available to the military and the
CIA.
“I could see exactly what kind of gun it was in back,” the pilot told me later. “I
could see two men in the front; their faces were covered. One was in the
passenger seat and one was in the driver’s seat, and then one was on the gun, and I
think there was another sitting in the bed of the truck, but he was kind of obscured
from my angle.”
On the radio, they could hear the marines on the ground shouting for help.
“Fire one,” said the colonel.
The Hellfire is a 100-pound antitank missile, designed to destroy an armored
vehicle. When the blast of smoke cleared, there was only a smoking crater on the
dirt road.
“I was kind of freaked out,” the pilot said. “My whole body was shaking. It was
something that was completely different. The first time doing it, it feels bad
almost. It’s not easy to take another person’s life. It’s tough to think about. A lot of
guy s were congratulating me, telling me, ‘You protected them; y ou did y our job.
That’s what y ou are trained to do, supposed to do,’ so that was good
reinforcement. But it’s still tough.”
One of the things that nagged at him, and that was still bugging him months later,
was that he had delivered this deathblow without having been in any danger
himself. The men he killed, and the marines on the ground, were at war. They
were risking their hides. Whereas he was working his scheduled shift in a
comfortable office building, on a sprawling base, in a peaceful country. It
seemed unfair. He had been inspired to enlist by his grandfather’s manly stories
of battle in the Korean War. He had wanted to prove something to himself and to
his family , to make them as proud of him as they had been of his Pop-Pop.
“But this was a weird feeling,” he said. “You feel bad. You don’t feel worthy. I’m
sitting there safe and sound, and those guy s down there are in the thick of it, and I
can have more impact than they can. It’s almost like I don’t feel like I deserve to
be safe.”
After slay ing Goliath, David was made commander of the Israelite armies and
given the hand of King Saul’s daughter. When the Pentagon announced earlier this
y ear that it would award a new medal to drone pilots and cy ber warriors, it
provoked such outrage from veterans that production of the new decoration was
halted and the secretary of defense sentenced the medal to a review and then
killed it. Members of Congress introduced legislation to ensure that any such
award would be ranked beneath the Purple Heart, the medal given to every
wounded soldier. How can someone who has never phy sically been in combat
receive a combat decoration?
The question hints at something more important than war medals, getting at the
core of our uneasiness about the drone. Like the slingshot, the drone
fundamentally alters the nature of combat. While the y oung Predator pilot has
overcome his unease—his was a clearly justifiable kill shot fired in conventional
combat, and the marines on the ground convey ed their sincere gratitude—the
sense of unfairness lingers.
If the soldier who pulls the trigger in safety feels this, consider the emotions of
those on the receiving end, left to pick up the body parts of their husbands, fathers,
brothers, friends. Where do they direct their anger? When the wrong person is
targeted, or an innocent by stander is killed, imagine the sense of impotence and
rage. How do those who remain strike back? No army is array ed against them, no
airfield is nearby to be attacked. If they manage to shoot down a drone, what
have they done but disable a small machine? No matter how justified a strike
seems to us, no matter how carefully weighed and skillfully applied, to those on
the receiving end it is profoundly arrogant, the act of an enemy so distant and
superior that he is untouchable.
“The political message [of drone strikes] emphasizes the disparity in power
between the parties and reinforces popular support for the terrorists, who are seen
as David fighting Goliath,” Gabriella Blum and Philip B. Hey mann, both law
professors at Harvard, wrote in their 2010 book, Laws, Outlaws, and Terrorists:
Lessons From the War on Terror. “Moreover, by resorting to military force rather
than to law enforcement, targeted killings might strengthen the sense of
legitimacy of terrorist operations, which are sometimes viewed as the only viable
option for the weak to fight against a powerful empire.”
Is it any wonder that the enemy seizes upon targets of opportunity —a crowded
café, a passenger jet, the finish line of a marathon? There is no moral justification
for deliberately targeting civilians, but one can understand why it is done.
Arguably the strongest force driving lone-wolf terror attacks in recent months
throughout the Western world has been anger over drone strikes.
The drone is effective. Its extraordinary precision makes it an advance in
humanitarian warfare. In theory, when used with principled restraint, it is the
perfect counterterrorism weapon. It targets indiscriminate killers with exquisite
discrimination. But because its aim can never be perfect, can only be as good as
the intelligence that guides it, sometimes it kills the wrong people—and even when
it doesn’t, its cold efficiency is literally inhuman.
So how should we feel about drones?
II. Gorgon Stare
The Defense Department has a secret state-of-the-art control center in Dubai
with an IMAX-size screen at the front of the main room that can project video
feed from dozens of drones at once. The Air Force has been directed to maintain
capability for 65 simultaneous Combat Air Patrols. Each of these involves
multiple drones, and maintains a persistent ey e over a potential target. The Dubai
center, according to someone who has seen it, resembles a control center at
NASA, with hundreds of pilots and analy sts array ed in rows before monitors.
This is a long way from the first known drone strike, on November 4, 2002, when
a Hellfire missile launched from a Predator over Yemen blew up a car carry ing
Abu Ali al-Harithi, one of the al-Qaeda leaders responsible for the 2000 bombing
of the USS Cole. Killed along with him in the car were five others, including an
American citizen, Kamal Derwish, who was suspected of leading a terrorist cell
based near Buffalo, New York. The drone used that day had only recently been
reconfigured as a weapon. During testing, its designers had worried that the
missile’s backblast would shatter the lightweight craft. It didn’t. Since that day,
drones have killed thousands of people.
John Yoo, the law professor who got caught up in tremendous controversy as a
legal counselor to President George W. Bush over harsh interrogation practices,
was surprised that drone strikes have provoked so little hand-wringing.
“I would think if y ou are a civil libertarian, y ou ought to be much more upset
about the drone than Guantánamo and interrogations,” he told me when I
interviewed him recently. “Because I think the ultimate deprivation of liberty
would be the government taking away someone’s life. But with drone killings, y ou
do not see any thing, not as a member of the public. You read reports perhaps of
people who are killed by drones, but it happens 3,000 miles away and there are no
pictures, there are no remains, there is no debris that any one in the United States
ever sees. It’s kind of antiseptic. So it is like a video game; it’s like Call of Duty .”
The least remarkable thing about the sy stem is the drone itself. The Air Force
bristles at the very word—drones conjures autonomous fly ing robots, reinforcing
the notion that human beings are not piloting them. The Air Force prefers that
they be called Remotely Piloted Aircraft. But this linguistic battle has already
been lost: my New Oxford American Dictionary now defines drone as—in addition
to a male bee and monotonous speech—“a remote-controlled pilotless aircraft or
missile.” Even though drones now range in size from a handheld Raven, thrown
into the air by infantry units so they can see over the next hill, to the Global Hawk,
which is about the same size as a Boeing 737, the craft itself is just an airplane.
Most drones are propeller-driven and slow-moving—early -20th-century
technology .
In December 2012, when Iran cobbled together a rehabilitated version of a
ScanEagle that had crashed there, the catapult-launched weaponless Navy drone
was presented on Iranian national television as a major intelligence coup.
“They could have gone to RadioShack and captured the same ‘secret’
technology,” Vice Admiral Mark I. Fox, the Navy ’s deputy chief for operations,
plans, and strategy, told The New York Times . The vehicle had less computing
power than a smartphone.
Even when, the y ear before, Iran managed to recover a downed RQ-170
Sentinel, a stealthy, weaponless, unmanned vehicle flown primarily by the CIA,
one of the most sophisticated drones in the fleet, it had little more than a nifty
fly ing model. Any thing sensitive inside had been remotely destroy ed before the
Sentinel was seized.
James Poss, a retired Air Force major general who helped oversee the Predator’s
development, say s he has grown so weary of fascination with the vehicle itself
that he’s adopted the slogan “It’s about the datalink, stupid.” The craft is essentially
a conduit, an ey e in the sky. Cut off from its back end, from its satellite links and
its data processors, its intelligence analy sts and its controller, the drone is as
useless as an ey eball disconnected from the brain. What makes the sy stem
remarkable is every thing downrange—what the Air Force, in its defiantly tineared way, calls PED (Processing, Exploitation, and Dissemination). Despite all
the focus on missiles, what gives a drone its singular value is its ability to provide
perpetual, relatively low-cost surveillance, watching a target continuously for
hours, day s, weeks, even months. Missiles were mounted on Predators only
because too much time was lost when a fire mission had to be handed off to
more-conventional weapons platforms—a manned aircraft or ground- or shipbased missile launcher. That delay reduced or erased the key advantage now
afforded by the drone. With steady, real-time surveillance, a controller can strike
with the target in his sights. He can, for instance, choose a moment when his
victim is isolated, or traveling in a car, reducing the chance of harming any one
else.
I recently spoke with an Air Force pilot who asked to be identified only as Major
Dan. He has logged 600 combat hours in the B-1 bomber and, in the past six
y ears, well over 2,000 hours fly ing Reapers—larger, more heavily armed
versions of the Predator. He describes the Reaper as a significantly better warfighting tool for this mission than the B-1 in every measure. The only thing y ou
lose when y ou go from a B-1 to a Reaper, he say s, is the thrill of “lighting four
afterburners” on a runway .
From a pilot’s perspective, drones have several key advantages. First, mission
duration can be vastly extended, with rotating crews. No more try ing to stay
awake for long missions, nor enduring the phy sical and mental stresses of fly ing.
(“After y ou’ve been sitting in an ejection seat for 20 hours, y ou are very tired
and sore,” Dan say s.)
In addition, drones provide far greater awareness of what’s happening on the
ground. They routinely watch targets for prolonged periods—sometimes for
months—before a decision is made to launch a missile. Once a B-1 is in flight, the
capacity for ground observation is more limited than what is available to a drone
pilot at a ground station. From his control station at the Pentagon, Dan is not only
watching the target in real time; he has immediate access to every source of
information about it, including a chat line with soldiers on the ground.
Dan was so enthusiastic about these and other advantages of drones that, until I
prodded him, he didn’t say any thing about the benefit of getting to be home with
his family and sleep in his own bed. Dan is 38 y ears old, married, with two small
children. In the y ears since he graduated from the Air Force Academy, he has
deploy ed several times to far-off bases for months-long stretches. Now he is
regularly home for dinner.
The dazzling clarity of the drone’s optics does have a downside. As a B-1 pilot,
Dan wouldn’t learn details about the effects of his weapons until a post-mission
briefing. But fly ing a drone, he sees the carnage close-up, in real time—the blood
and severed body parts, the arrival of emergency responders, the anguish of
friends and family. Often he’s been watching the people he kills for a long time
before pulling the trigger. Drone pilots become familiar with their victims. They
see them in the ordinary rhy thms of their lives—with their wives and friends, with
their children. War by remote control turns out to be intimate and disturbing.
Pilots are sometimes shaken.
“There is a very visceral connection to operations on the ground,” Dan say s.
“When y ou see combat, when y ou hear the guy y ou are supporting who is under
fire, y ou hear the stress in his voice, y ou hear the emotions being passed over the
radio, y ou see the tracers and rounds being fired, and when y ou are called upon
to either fire a missile or drop a bomb, y ou witness the effects of that firepower.”
He witnesses it in a far more immediate way than in the past, and he disdains the
notion that he and his fellow drone pilots are like video gamers, detached from the
reality of their actions. If any thing, they are far more attached. At the same time,
he dismisses the notion that the carnage he now sees up close is emotionally
crippling.
“In my mind, the understanding of what I did, I wouldn’t say that one was
significantly different from the other,” he say s.
Drones collect three primary packages of data: straight visual; infrared (via a
heat-sensing camera that can see through darkness and clouds); and what is called
SIGINT (Signals Intelligence), gathered via electronic eavesdropping devices and
other sensors. One such device is known as LIDAR (a combination of the words
light and radar), which can map large areas in 3-D. The optical sensors are so
good, and the pixel array so dense, that the device can zoom in clearly on objects
only inches wide from well over 15,000 feet above. With computer enhancement
to eliminate distortion and counteract motion, facial-recognition software is very
close to being able to pick individuals out of crowds. Operators do not even have to
know exactly where to look.
“We put in the theatre [in 2011] a sy stem called Gorgon Stare,” Lieutenant
General Larry James, the Air Force’s deputy chief of staff for intelligence,
surveillance, and reconnaissance, told me. “Instead of one soda-straw-size view
of the world with the camera, we put essentially 10 cameras ganged together, and
it gives y ou a very wide area of view of about four kilometers by four kilometers
—about the size of the city of Fairfax, [Virginia]—that y ou can watch
continuously. Not as much fidelity in terms of what the camera can see, but I can
see movement of cars and people—those sorts of things. Now, instead of staring
at a small space, which may be, like, a villa or compound, I can look at a whole
city continuously for as long as I am fly ing that particular sy stem.”
Surveillance technology allows for more than just looking: computers store these
moving images so that analy sts can dial back to a particular time and place and
zero in, or mark certain individuals and vehicles and instruct the machines to track
them over time. A suspected terrorist-cell leader or bomb maker, say, can be
watched for months. The computer can then instantly draw maps showing
patterns of movement: where the target went, when there were visitors or
deliveries to his home. If y ou were watched in this way over a period of time, the
data could not just draw a portrait of y our daily routine, but identify every one
with whom y ou associate. Add to this cellphone, text, and e-mail intercepts, and
y ou begin to see how special-ops units in Iraq and Afghanistan can, after a single
nighttime arrest, round up entire networks before dawn.
All of this requires the collection and manipulation of huge amounts of data,
which, James say s, is the most difficult technical challenge involved.
“Take video, for example,” he say s. “ESPN has all kinds of tools where they can
go back and find Eli Manning in every video that was shot over the last y ear, and
they can probably do it in 20 minutes. So how do we bring those ty pes of tools [to
intelligence work]? Okay, I want to find this red 1976 Chevy pickup truck in every
piece of video that I have shot in this area for the last three months. We have a
pretty hard push to really work with the Air Force Research Lab, and the
commercial community, to understand what tools I can bring in to help make
sense of all this data.”
To be used effectively, a drone must be able to hover over a potential target for
long periods. A ty pical Predator can stay aloft for about 20 hours; the drones are
flown in relay s to maintain a continuous Combat Air Patrol. Surveillance satellites
pass over a given spot only once during each orbit of the Earth. The longest the U2, the most successful spy plane in history, can stay in the air is about 10 hours,
because of the need to spell its pilot and refuel. The Predator gives military and
intelligence agencies a surveillance option that is both significantly less expensive
and more useful, because it flies unmanned, low, and slow.
Precisely because drones fly so low and so slow, and have such a “noisy ”
electronic signature, operating them any where but in a controlled airspace is
impractical. The U.S. Air Force completely controls the sky over active war
zones like Afghanistan and Iraq—and has little to fear over countries like Yemen,
Somalia, and Mali. Over the rugged regions of northwestern Pakistan, where most
drone strikes have taken place, the U.S. operates with the tacit approval of the
Pakistani government. Without such permission, or without a robust protection
capability, the drone presents an easy target. Its datalink can be disrupted,
jammed, or hijacked. It’s only slightly harder to shoot down than a hot-air
balloon. This means there’s little danger of enemy drone attacks in America
any time soon.
Drone technology has applications that go way bey ond military uses, of course—
every thing from domestic law enforcement to archeological survey s to
environmental studies. As they become smaller and cheaper, they will become
commonplace. Does this mean the government might someday begin hurling
thunderbolts at undesirables on city sidewalks? Unlikely. Our entire legal sy stem
would have to collapse first. If the police just wanted to shoot people on the street
from a distance, they already can—they ’ve had that capability going back to the
invention of the Kentucky long rifle and, before that, the crossbow. I helped cover
the one known instance of a local government dropping a bomb on its own city, in
1985, when a stubborn back-to-nature cult called Move was in an armed standoff
with the Philadelphia police. Then-May or Wilson Goode authorized dropping a
satchel packed with explosives from a hovering helicopter onto a rooftop bunker in
West Philadelphia. The bomb caused a conflagration that consumed an entire city
block. The incident will live long in the annals of municipal stupidity. The
capability to do the same with a drone will not make choosing to do so any
smarter, or any more likely. And as for Big Brother’s ey e in the sky, authorities
have been monitoring public spaces from overhead cameras, helicopters, and
planes for decades. Many people think it’s a good idea.
The drone is new only in that it combines known technology in an original way —
aircraft, global telecommunications links, optics, digital sensors, supercomputers,
etc. It greatly lowers the cost of persistent surveillance. When armed, it becomes
a remarkable, highly specialized tool: a weapon that employ s simple phy sics to
launch a missile with lethal force from a distance, a first step into a world where
going to war does not mean fielding an army , or putting any of y our own soldiers,
sailors, or pilots at risk.
III. The Kill List
It is the most exclusive list in the world, and y ou would not want to be on it.
The procedure may have changed, but several y ears back, at the height of the
drone war, President Obama held weekly counterterror meetings at which he was
presented with a list of potential targets—mostly al-Qaeda or Taliban figures—
complete with photos and brief bios laid out like “a high school y earbook,”
according to a report in The New York Times.
John Brennan instituted weekly conclaves—in effect, death-penalty deliberations
—where targets were selected for summary execution.
The list is the product of a rigorous vetting process that the administration has kept
secret. Campaigning for the White House in 2008, Obama made it clear (although
few of his supporters were listening closely ) that he would embrace drones to go
after what he considered the appropriate post-9/11 military target—“core alQaeda.” When he took office, he inherited a drone war that was already
expanding. There were 53 known strikes inside Pakistan in 2009 (according to
numbers assembled from press reports by The Long War Journal), up from 35 in
2008, and just five the y ear before that. In 2010, the annual total more than
doubled, to 117. The onslaught was effective, at least by some measures: letters
seized in the 2011 raid that killed Osama bin Laden show his consternation over
the rain of death by drone.
As U.S. intelligence analy sis improved, the number of targets proliferated. Even
some of the program’s supporters feared it was growing out of control. The
definition of a legitimate target and the methods employ ed to track such a target
were increasingly suspect. Rely ing on other countries’ intelligence agencies for
help, the U.S. was sometimes manipulated into striking people who it believed
were terrorist leaders but who may not have been, or implicated in practices that
violate American values.
Reporters and academics at work in zones where Predator strikes had become
common warned of a large backlash. Gregory Johnsen, a scholar of Near East
studies at Princeton University, documented the phenomenon in a 2012 book
about Yemen titled The Last Refuge. He showed that drone attacks in Yemen
tended to have the opposite of their intended effect, particularly when people
other than extremists were killed or hurt. Drones hadn’t whittled al-Qaeda down,
Johnsen argued; the organization had grown threefold there. “US strikes and
particularly those that kill civilians—be they men or women—are sowing the
seeds of future generations of terrorists,” he wrote on his blog late last y ear. (See
Johnsen’s accompany ing article in this issue.)
Michael Morrell, who was the deputy director of the CIA until June, was among
those in the U.S. government who argued for more restraint. During meetings
with John Brennan, who was Obama’s counterterrorism adviser until taking over
as the CIA director last spring, Morrell said he worried that the prevailing goal
seemed to be using drones as artillery , striking any one who could be squeezed into
the definition of a terrorist—an approach derisively called “Whack-A-Mole.”
Morrell insisted that if the purpose of the drone program was to diminish al-Qaeda
and protect the United States from terror attacks, then indiscriminate strikes were
counterproductive.
Brennan launched an effort to select targets more carefully. Formalizing a series
of ad hoc meetings that began in the fall of 2009, Brennan in 2010 instituted
weekly conclaves—in effect, death-penalty deliberations—where would-be
successors to bin Laden and Khalid Sheik Mohammed were selected for
execution before being presented to Obama for his approval. Brennan demanded
clear definitions. There were “high-value targets,” which consisted of important
al-Qaeda and Taliban figures; “imminent threats,” such as a load of roadside
bombs bound for the Afghan border; and, most controversial, “signature strikes,”
which were aimed at characters engaged in suspicious activity in known enemy
zones. In these principals’ meetings, which Brennan chaired from the Situation
Room, in the basement of White House, deliberations were divided into two parts
—law and policy. The usual participants included representatives from the
Pentagon, CIA, State Department, National Counterterrorism Center, and,
initially, the Justice Department—although after a while the lawy ers stopped
coming. In the first part of the meetings, questions of legality were considered:
Was the prospect a lawful target? Was he high-level? Could he rightly be
considered to pose an “imminent” threat? Was arrest a viable alternative? Only
when these criteria were deemed met did the discussion shift toward policy. Was
it smart to kill this person? What sort of impact might the killing have on local
authorities, or on relations with the governments of Pakistan or Yemen? What
effect would killing him have on his own organization? Would it make things better
or worse?
Brennan himself was often the toughest questioner. Two regular meeting
participants described him to me as thoughtful and concerned; one said his
demeanor was “almost priestly.” Another routinely skeptical and cautious
participant was James Steinberg, the deputy secretary of state for the first two
and a half y ears of Obama’s first term, who adhered to a strict list of acceptable
legal criteria drawn up by the State Department’s counsel, Harold Koh. This
criteria stipulated that any drone target would have to be a “senior member” of
al-Qaeda who was “externally focused”—that is, actively plotting attacks on
America or on American citizens or armed forces. Koh was confident that even
if his criteria did not meet all the broader concerns of human-rights activists, they
would support an international-law claim of self-defense—and for that reason he
thought the administration ought to make the criteria public. Throughout Obama’s
first term, members of the administration argued about how much of the
deliberation process to reveal. During these debates, Koh’s position on complete
disclosure was dismissively termed “the Full Harold.” He was its only advocate.
Many of the sessions were contentious. The military and the CIA pushed back
hard against Koh’s strict criteria. Special Forces commanders, in particular,
abhorred what they saw as excessive efforts to “litigate” their war. The price of
every target the White House rejected, military commanders said, was paid in
American lives. Their arguments, coming from the war’s front line, carried
significant weight.
Cameron Munter, a veteran diplomat who was the U.S. ambassador to Pakistan
from 2010 to 2012, felt that weight firsthand when he tried to push back. Munter
saw American influence declining with nearly every strike. While some factions
in the Pakistani military and Inter-Services Intelligence believed in the value of
strikes, the Pakistani public grew increasingly outraged, and elected officials
increasingly hostile. Munter’s job was to contain the crisis, a task complicated by
the drone program’s secrecy, which prevented him from explaining and
defending America’s actions.
Matters came to a head in the summer of 2011 during a meeting to which Munter
was linked digitally. The dy namics of such meetings—where officials turned to
policy discussions after the legal determination had been made—placed a
premium on unified support for policy goals. Most participants wanted to focus on
the success of the battle against America’s enemies, not on the corrosive foreignpolicy side effects of the drone program.
At the decision meetings, it was hard for someone like Munter to say no. He
would appear digitally on the screen in the Situation Room, gazing out at the vice
president, the secretary of defense, and other principals, and they would present
him with the targeting decision they were prepared to make. It was hard to object
when so many people who titularly outranked him already seemed set.
By June of 2011, however, two events in Pakistan—first the arrest and subsequent
release of the CIA contractor Ray mond Davis, who had been charged with
murdering two Pakistanis who accosted him on the street in Lahore, and then the
Abbottabad raid that killed bin Laden—had brought the U.S.-Pakistan partnership
to a new low. Concerned about balancing the short-term benefits of strikes
(removing potential enemies from the battlefield) and their long-term costs
(creating a lasting mistrust and resentment that undercut the policy goal of
stability and peace in the region), Munter decided to test what he believed was his
authority to halt a strike. As he recalled it later, the move play ed out as follows:
Asked whether he was on board with a particular strike, he said no.
Leon Panetta, the CIA director, said the ambassador had no veto power; these
were intelligence decisions.
Munter proceeded to explain that under Title 22 of the U.S. Code of Federal
Regulations, the president gives the authority to carry out U.S. policy in a foreign
country to his ambassador, delegated through the secretary of state. That means
no American policy should be carried out in any country without the
ambassador’s approval.
Taken aback, Panetta replied, “Well, I do not work for y ou, buddy .”
“I don’t work for y ou,” Munter told him.
Then Secretary of State Hillary Clinton stepped in: “Leon, y ou are wrong.”
Panetta said, flatly , “Hillary , you’re wrong.”
At that point, the discussion moved on. When the secretary of state and the CIA
director clash, the decision gets made upstairs.
Panetta won. A week later, James Steinberg called Munter to inform him that he
did not have the authority to veto a drone strike. Steinberg explained that the
ambassador would be allowed to express an objection to a strike, and that a
mechanism would be put in place to make sure his objection was registered—but
the decision to clear or reject a strike would be made higher up the chain. It was a
clear victory for the CIA.
Later that summer, General David Petraeus was named to take over the
intelligence agency from Panetta. Before assuming the job, Petraeus flew from
Kabul, where he was still the military commander, to Islamabad, to meet with the
ambassador. At dinner that night, Petraeus poked his finger into Munter’s chest.
“You know what happened in that meeting?” the general asked. (Petraeus had
observed the clash via a secure link from his command post in Afghanistan.)
“That’s never going to happen again.”
Munter’s heart sank. He thought the new CIA director, whom he liked and
admired, was about to threaten him. Instead, Petraeus said: “I’m never going to
put y ou in the position where y ou feel compelled to veto a strike. If y ou have a
long-term concern, if y ou have a contextual problem, a timing problem, an
ethical problem, I want to know about it earlier. We can work together to avoid
these kinds of conflicts far in advance.”
Petraeus kept his word. Munter never had to challenge a drone strike in a
principals’ meeting again during his tenure as ambassador. He left Islamabad in
the summer of 2012.
By then, Brennan’s efforts to make the process more judicious had begun to show
results. The number of drone strikes in Pakistan and Yemen fell to 88 last y ear,
and they have dropped off even more dramatically since.
The decline partly reflects the toll that the drone war has taken on al-Qaeda.
“There are fewer al-Qaeda leadership targets to hit,” a senior White House
official who is working on the administration’s evolving approach to drone strikes
told me. The reduction in strikes is “something that the president directed. We
don’t need a top-20 list. We don’t need to find 20 if there are only 10. We’ve
gotten out of the business of maintaining a number as an end in itself, so therefore
that number has gone down.”
Any history of how the United States destroy ed Osama bin Laden’s organization
will feature the drone. Whatever questions it has raised, however uncomfortable it
has made us feel, the drone has been an extraordinarily effective weapon for the
job. The U.S. faced a stateless, well-funded, highly organized terrorist operation
that was sophisticated enough to carry out unprecedented acts of mass murder.
Today, while local al-Qaeda franchises remain a threat throughout the Middle
East, the organization that planned and carried out 9/11 has been crushed. When
bin Laden himself was killed, Americans danced in the streets.
“Our actions are effective,” President Obama said in a speech on
counterterrorism at the National Defense University in May .
Don’t take my word for it. In the intelligence gathered at bin Laden’s
compound, we found that he wrote, ‘We could lose the reserves to enemy ’s
air strikes. We cannot fight air strikes with explosives.’ Other communications
from al-Qaeda operatives confirm this as well. Dozens of highly skilled alQaeda commanders, trainers, bomb makers, and operatives have been taken
off the battlefield. Plots have been disrupted that would have targeted
international aviation, U.S. transit sy stems, European cities, and our troops in
Afghanistan. Simply put, these strikes have saved lives.
So why the steady drumbeat of complaint?
IV. Drones Don't Kill People. People Kill People.
The most ardent case against drone strikes is that they kill innocents. John Brennan
has argued that claims of collateral carnage are exaggerated. In June 2011, he
famously declared that there had not been “a single collateral death” due to a
drone strike in the previous 12 months.
Almost no one believes this. Brennan himself later amended his statement, say ing
that in the previous 12 months, the United States had found no “credible evidence”
that any civilians had been killed in drone strikes outside Afghanistan and Iraq. (I
am using the word civilians here to mean “noncombatants.”) A fair interpretation
is that drones unfailingly hit their targets, and so long as the U.S. government
believes its targets are all legitimate, the collateral damage is zero. But drones are
only as accurate as the intelligence that guides them. Even if the machine is
perfect, it’s a stretch to assume perfection in those who aim it.
For one thing, our military and intelligence agencies generously define combatant
to include any military -age male in the strike zone. And local press accounts from
many of the blast sites have reported dead women and children. Some of that
may be propaganda, but not all of it is. No matter how precisely placed, when a
500-pound bomb or a Hellfire missile explodes, there are sometimes going to be
unintended victims in the vicinity .
Ground combat almost alway s kills more civilians than drone strikes do. When
y ou consider the alternatives, y ou are led, as Obama was, to the logic of the
drone.
How many ? Estimates of body counts range so widely and are so politicized that
none of them is completely credible. At one extreme, anti-American
propagandists regularly publish estimates that make the drone war sound
borderline genocidal. These high numbers help drive the anti-drone narrative,
which equates actions of the U.S. government with acts of terror. In two of the
most recent Islamist terror attacks as of this writing—the Boston Marathon
bombing and the beheading of a soldier in London—the perpetrators justified their
killings as pay back for the deaths of innocent Muslims. At the other extreme, there
is Brennan’s claim of zero civilian casualties. The true numbers are unknowable.
Secrecy is a big part of the problem. The government doesn’t even acknowledge
most attacks, much less release details of their aftermath. The Bureau of
Investigative Journalism, a left-wing organization based in London, has made a
strenuous effort, using news sources, to count bodies after CIA drone strikes. It
estimates that from 2004 through the first half of 2013, 371 drone strikes in
Pakistan killed between 2,564 and 3,567 people (the range covers the minimum to
the maximum credible reported deaths). Of those killed, the group say s,
somewhere between 411 and 890—somewhere between 12 percent and 35
percent of the total—were civilians. The disparity in these figures is telling. But if
we assume the worst case, and take the largest estimates of soldier and civilian
fatalities, then one-quarter of those killed in drone strikes in Pakistan have been
civilians.
Every one agrees that the amount of collateral damage has dropped steeply over
the past two y ears. The Bureau of Investigative Journalism estimates that civilian
deaths from drone strikes in Pakistan fell to 12 percent of total deaths in 2011 and
to less than 3 percent in 2012.
No civilian death is acceptable, of course. Each one is tragic. But any assessment
of civilian deaths from drone strikes needs to be compared with the potential
damage from alternative tactics. Unless we are to forgo the pursuit of al-Qaeda
terrorists entirely, U.S. forces must confront them either from the air or on the
ground, in some of the remotest places on Earth. As aerial attacks go, drones are
far more precise than manned bombers or missiles. That narrows the choice to
drone strikes or ground assaults.
Sometimes ground assaults go smoothly. Take the one that killed Osama bin
Laden. It was executed by the best-trained, most-experienced soldiers in the
world. Killed were bin Laden; his adult son Khalid; his primary protectors, the
brothers Abu Ahmed al-Kuwaiti and Abrar al-Kuwaiti; and Abrar’s wife Bushra.
Assuming Bushra qualifies as a civilian, even though she was helping to shelter the
world’s most notorious terrorist, civilian deaths in the raid amounted to 20 percent
of the casualties. In other words, even a near-perfect special-ops raid produced
only a slight improvement over the worst estimates of those counting drone
casualties. Many assaults are not that clean.
In fact, ground combat almost alway s kills more civilians than drone strikes do.
Avery Plaw, a political scientist at the University of Massachusetts, estimates that
in Pakistani ground offensives against extremists in that country ’s tribal areas,
46 percent of those killed are civilians. Plaw say s that ratios of civilian deaths
from conventional military conflicts over the past 20 y ears range from
33 percent to more than 80 percent. “A fair-minded evaluation of the best data
we have available suggests that the drone program compares favorably with
similar operations and contemporary armed conflict more generally,” he told
The New York Times.
When y ou consider the alternatives—even, and perhaps especially, if y ou are
deeply concerned with sparing civilians—y ou are led, as Obama was, to the logic
of the drone.
But don’t drone strikes violate the prohibition on assassination, Executive
Order 12333? That order, signed by Ronald Reagan in 1981, grew out of
revelations that the CIA had tried to kill Fidel Castro and other leftist-leaning
political figures in the 1960s and ’70s. It was clearly aimed at halting political
assassinations; in fact, the original order, signed in 1976 by Gerald Ford, refers
specifically to such acts. Attempting to prevent acts of mass murder by a
dangerous international organization may stretch the legal definition of armed
conflict, but it is not the same as political assassination. Besides, executive orders
are not statutes; they can be superseded by subsequent presidents. In the case of
President Bush, after the attacks of September 11, Congress specifically
authorized the use of lethal operations against al-Qaeda.
When Bush branded our effort against al-Qaeda “war,” he effectively established
legal protection for targeted killing. Targeted killing is a long-established practice
in the context of war. According to international treaties, soldiers can be killed
simply for belonging to an enemy army —whether they are actively engaged in
an attack or only preparing for one, whether they are commanders or office
clerks. During World War II, the United States discovered and shot down the
plane carry ing Admiral Isoruku Yamamoto, the commander in chief of the
Japanese navy, who had been the architect of the attack on Pearl Harbor. The
order to attack the plane was given by President Franklin Roosevelt.
But bey ond what international treaties call “armed conflict” is “law
enforcement,” and here, there are problems. The 1990 United Nations Congress
on the Prevention of Crime and the Treatment of Offenders laid out basic
principles for the use of force in law-enforcement operations. (The rules,
although nonbinding, elaborate on what is meant by Article 6 of the International
Covenant on Civil and Political Rights, to which the United States has agreed.) The
pertinent passage—written more than a decade before weaponized drones—reads
as follows:
Law enforcement officials shall not use firearms against persons except in
self-defense or defense of others against the imminent threat of death or
serious injury, to prevent the perpetration of a particularly serious crime
involving grave threat to life, to arrest a person presenting such a danger and
resisting their authority, or to prevent his or her escape, and only when less
extreme means are insufficient to achieve these objectives. In any event,
intentional lethal use of firearms may only be made when strictly
unavoidable to protect life.
Once the “war” on al-Qaeda ends, the justification for targeted killing will
become tenuous. Some experts on international law say it will become simply
illegal. Indeed, one basis for condemning the drone war has been that the pursuit
of al-Qaeda was never a real war in the first place.
Sir Christopher Greenwood, the British judge on the International Court of Justice,
has written: “In the language of international law there is no basis for speaking of
a war on al-Qaeda or any other terrorist group, for such a group cannot be a
belligerent, it is merely a band of criminals, and to treat it as any thing else risks
distorting the law while giving that group a status which to some implies a degree
of legitimacy.” Greenwood rightly observes that America’s declaration of war
against al-Qaeda bolstered the group’s status worldwide. But history will not
quarrel with Bush’s decision, which was unavoidable, given the national mood.
Democracy reflects the will of the people. Two American presidents from
different parties and with vastly different ideological outlooks have, with strong
congressional support, fully embraced the notion that America is at war. In his
speech at the National Defense University in May, Obama reaffirmed this
approach. “America’s actions are legal,” he said. “Under domestic law and
international law, the United States is at war with al-Qaeda, the Taliban, and their
associated forces.” He noted that during his presidency, he has briefed
congressional overseers about every drone strike. “Every strike,” he said.
Bin Laden himself certainly wasn’t confused about the matter; he held a press
conference in Afghanistan in 1998 to declare jihad on the United States. Certainly
the scale of al-Qaeda’s attacks went well bey ond any thing previously defined as
criminal.But what are the boundaries of that war? Different critics draw the lines
in different places. Mary Ellen O’Connell, a law professor at the University of
Notre Dame, is a determined and eloquent critic of drone strikes. She believes that
while strikes in well-defined battle spaces like Iraq and Afghanistan are justified,
and can limit civilian deaths, strikes in Pakistan, Yemen, Somalia, and other places
amount to “extrajudicial killing,” no matter who the targets are. Such killings are
outside the boundary of armed conflict, she say s, and hence violate international
law.
Philip Alston, a former United Nations special rapporteur on extrajudicial,
summary, or arbitrary executions, concedes that al-Qaeda’s scope and menace
transcend criminality, but nevertheless faults the U.S. drone program for lacking
due process and transparency . He told Harper’s magazine:
[International] laws do not prohibit an intelligence agency like the CIA from
carry ing out targeted killings, provided it complies with the relevant
international rules. Those rules require, not surprisingly when it’s a matter of
being able to kill someone in a foreign country , that all such killings be legally
justified, that we know the justification, and that there are effective
mechanisms for investigation, prosecution, and punishment if laws are
violated. The CIA’s response to these obligations has been very revealing. On
the one hand, its spokespersons have confirmed the total secrecy and thus
unaccountability of the program by insisting that they can neither confirm
nor deny that it even exists. On the other hand, they have gone to great
lengths to issue unattributable assurances, widely quoted in the media, both
that there is extensive domestic accountability and that civilian casualties
have been minimal. In essence, it’s a ‘y ou can trust us’ response, from an
agency with a less than stellar track record in such matters.
President Obama has taken steps in recent months to address Alston’s concerns.
He has begun transferring authority for drone strikes from the CIA to the
Pentagon, which will open them up to greater congressional and public scrutiny.
He has sharply limited “signature strikes,” those based on patterns of behavior
rather than strict knowledge of who is being targeted. (Because most signature
strikes have been used to protect American troops in Afghanistan, this category of
drone attack is likely to further diminish once those forces are withdrawn.) In his
May speech, he came close to embracing “the full Harold,” publicly outlining in
general terms the targeting constraints drafted by Koh. He also made clear that
the war on al-Qaeda will eventually end—though he stopped short of say ing
when. American combat troops will be gone from Afghanistan by the end of next
y ear, but the war effort against “core al-Qaeda” will almost certainly continue at
least until Ahman al Zawahiri, the fugitive Egy ptian doctor who now presides
over the remnants of the organization, is captured or killed.
Then what?
“Outside of the context of armed conflict, the use of drones for targeted killing is
almost never likely to be legal,” Alston wrote in 2010. Mary Ellen O’Connell
agrees. “Outside of a combat zone or a battlefield, the use of military force is not
lawful,” she told me.
Yet this is where we seem to be headed. Obama has run his last presidential
campaign, and one senses that he might cherish a legacy of ending three wars on
his watch.
“Our commitment to constitutional principles has weathered every war, and
every war has come to an end,” he said in his May speech. “We must define the
nature and scope of this struggle, or else it will define us. We have to be mindful
of James Madison’s warning that ‘no nation could preserve its freedom in the
midst of continual warfare.’
The changes outlined by the president do not mean we will suddenly stop going
after al-Qaeda. If the war on terror is declared over, and the 2001 Authorization
for Use of Military Force (AUMF) is withdrawn, then some other legal
justification for targeting al-Qaeda terrorists with drones would be necessary, and
would likely be sought.
“We believe we have a domestic and international legal basis for our current
efforts,” Ben Rhodes, who is Obama’s deputy national-security adviser for
strategic communications, told me. “If y ou project into the future, there are
different scenarios, y ou know, so they are kind of hy pothetical, but one is that y ou
might have a narrower AUMF that is a more targeted piece of legislation. A
hy pothetical: the Taliban is part of the AUMF now, but we could find ourselves
not in hostilities with the Taliban after 2014.” In that case, the military authority to
attack Taliban targets, which account for many drone strikes and most signature
strikes, would be gone. Another scenario Rhodes sketched out was one in which a
local terrorist group “rose to the level where we thought we needed to take direct
action. You might have to go back to Congress to get a separate authorization. If
we need to get authority against a new terrorist group that is emerging
somewhere else in the world, we should go back to Congress and get that
authorization.”
You can’t know in advance “the circumstances of taking direct action,” Rhodes
said. “You may be acting to prevent an imminent attack on the United States or
y ou may be acting in response to an attack, each of which carries its own legal
basis. But y ou have to be accountable for whatever direct action y ou are taking,”
rather than rely ing on some blanket authority to strike whomever and whenever
the president chooses. “You would have to specifically define, domestically and
internationally, what the basis for y our action is in each instance—and by each
instance, I don’t mean every strike, per se, but rather the terrorist group or the
country where y ou are acting.”
Seeking such authorization would help draw the debate over continued drone
strikes out of the shadows. Paradoxically, as the war on terror winds down, and as
the number of drone strikes falls, the controversy over them may rise.
V. Come Out With Your Hands Up!
Once the pursuit of al-Qaeda is defined as “law enforcement,” ground assaults
may be the only acceptable tactic under international law. A criminal must be
given the opportunity to surrender, and if he refuses, efforts must be made to
arrest him. Mary Ellen O’Connell believes the Abbottabad raid was an example
of how things should work.
“It came as close to what we are permitted to do under international law as y ou
can get,” she said. “John Brennan came out right after the killing and said the seals
were under orders to attempt to capture bin Laden, and if he resisted or if their
own lives were endangered, then they could use the force that was necessary.
They did not use a drone. They did not drop a bomb. They did not fire a missile.”
Force in such operations is justified only if the suspect resists arrest—and even
then, his escape is preferable to harming innocent by standers. These are the rules
that govern police, as opposed to warriors. Yet the enemies we face will not
change if the war on terror ends. The worst of them—the ones we most need to
stop—are determined suicidal killers and hardened fighters. Since there is no such
thing as global police, any force employ ed would likely still come from, in most
cases, American special-ops units. They are very good at what they do—but
under law-enforcement rules, a lot more people, both soldiers and civilians, are
likely to be killed.
It would be wise to consider how bloody such operations can be. When Obama
chose the riskiest available option for getting bin Laden in Abbottabad—a specialops raid—he did so not out of a desire to conform to international law but because
that option allowed the possibility of taking bin Laden alive and, probably more
important, because if bin Laden was killed in a ground assault, his death could be
proved. The raid went well. But what if the seal raiding party had tripped
Pakistan’s air defenses, or if it had been confronted by police or army units on the
ground? American troops and planes stood ready in Afghanistan to respond if that
happened. Such a clash would likely have killed many Pakistanis and Americans,
and left the countries at loggerheads, if not literally at war.
There’s another example of a law-enforcement-sty le raid that conforms to the
model that O’Connell and other drone critics prefer: the October 1993 Delta Force
raid in Mogadishu, which I wrote about in the book Black Hawk Down. The
objective, which was achieved, was to swoop in and arrest Omar Salad and
Mohamed Hassan Awale, two top lieutenants of the outlaw clan leader
Mohammed Farrah Aidid. As the arrests were being made, the raiding party of
Delta Force operators and U.S. Army rangers came under heavy fire from local
supporters of the clan leader. Two Black Hawk helicopters were shot down and
crashed into the city. We were not officially at war with Somalia, but the ensuing
firefight left 18 Americans dead and killed an estimated 500 to 1,000 Somalis—a
number comparable to the total civilian deaths from all drone strikes in Pakistan
from 2004 through the first half of 2013, according to the Bureau of Investigative
Journalists’ estimates.
The Somalia example is an extreme one. But the battle that erupted in Mogadishu
strikes me as a fair reminder of what can happen to even a very skillful raiding
party. Few of the terrorists we target will go quietly. Knowing they are targets,
they will surely seek out terrain hostile to an American or UN force. Choosing
police action over drone strikes may feel like taking the moral high ground. But if
a raid is likely to provoke a firefight, then choosing a drone shot not only might
pass legal muster (UN rules allow lethal force “when strictly unavoidable in order
to protect life”) but also might be the more moral choice.
The White House knows this, but it is unlikely to announce a formal end to the war
against al-Qaeda any time soon. Obama’s evolving model for counterterrorism
will surely include both raids and drone strikes—and the legality of using such
strikes outside the context of war remains murky .
Ben Rhodes and others on Obama’s national-security team have been thinking
hard about these questions. Rhodes told me that “the threat picture” the
administration is mainly concerned with has increasingly shifted from global
terrorism, with al-Qaeda at its center, to “more traditional terrorism, which is
localized groups with their own agendas.” Such groups “may be Islamic
extremists, but they are not necessarily signing on to global jihad. A local agenda
may raise the threat to embassies and diplomatic facilities and things like [the BP
facility that was attacked in Algeria early this y ear], but it diminishes the
likelihood of a complex 9/11-sty le attack on the homeland.”
If terrorism becomes more localized, Rhodes continued, “we have to have a legal
basis and a counterterrorism policy that fits that model, rather than this massive
post-9/11 edifice that we built.” This means, he said, that post-2014
counterterrorism will “take a more traditional form, with a law-enforcement lead.
But this will be amplified by a U.S. capability to take direct action as necessary in
a very narrowly defined set of circumstances.” What U.S. policy will be aiming
for, Rhodes said, is “traditional [law-enforcement-sty le] counterterrorism plus a
limited deploy ment of our drone and special-forces capabilities when it is
absolutely necessary .”
To accommodate the long-term need for drone strikes, Obama is weighing a
formal process for external review of the target list. This might mean appointing a
military -justice panel, or a civilian review court modeled on the Foreign
Intelligence Surveillance Court, which oversees requests to monitor suspected
foreign spies and terrorists in the United States. But this raises thorny constitutional
questions about the separation of powers—and presidents are reluctant to concede
their authority to make the final call.
How should we feel about drones? Like any wartime innovation, going back to the
slingshot, drones can be used badly or well. They are remarkable tools, an
exceedingly clever combination of existing technologies that has vastly improved
our ability to observe and to fight. They represent how America has responded to
the challenge of organized, high-level, stateless terrorism—not timidly, as
bin Laden famously predicted, but with courage, tenacity, and ruthless ingenuity.
Improving technologies are making drones capable not just of broader and more
persistent surveillance, but of greater strike precision. Mary Ellen O’Connell say s,
half jokingly, that there is a “sunset” on her objection to them, because drones
may eventually offer more options. She said she can imagine one capable of
delivering a warning—“Come out with y our hands up!”—and then landing to
make an arrest using handcuffs.
Obama’s efforts to mitigate the use of drones have already made a big difference
in reducing the number of strikes—though critics like O’Connell say the reduction
has come only grudgingly, in response to “a rising level of worldwide
condemnation.” Still, Obama certainly deserves credit: it is good that drones are
being used more judiciously. I told Ben Rhodes that if the president succeeds in
establishing clear and careful guidelines for their use, he will make a lot of people
happy , but a lot of other people mad.
“Well, no,” Rhodes said. “It’s worse than that. We will make a lot of people mad
and we will not quite make people happy .”
No American president will ever pay a political price for choosing national
security over world opinion, but the only right way to proceed is to make targeting
decisions and strike outcomes fully public, even if after the fact. In the long run,
careful adherence to the law matters more than eliminating another bad actor.
Greater prudence and transparency are not just morally and legally essential,
they are in our long-term interest, because the strikes themselves feed the antidrone narrative, and inspire the kind of random, small-scale terror attacks that are
bin Laden’s despicable legacy .
In our struggle against terrorist networks like al-Qaeda, the distinction between
armed conflict and law enforcement matters a great deal. Terrorism embraces
lawlessness. It seeks to disrupt. It targets civilians deliberately . So why restrain our
response? Why subject ourselves to the rule of law? Because abiding by the law is
the point—especially with a weapon like the drone. No act is more final than
killing. Drones distill war to its essence. Abiding carefully by the law—man’s law,
not God’s—making judgments carefully, making them transparent and subject to
review, is the only way to invest them with moral authority, and the only way to
clearly define the terrorist as an enemy of civilization.
Mark Bowden is a national correspondent for The Atlantic.
Original: https://www.readability.com/articles/dvcuw5vh
Title: Yes, Healthful Fast Food Is Possible. But Edible?
Author: nytimes.com
Summary:
A tofu taco from Lyfe Kitchen, Buffalo “wings” with ranch
dressing from Veggie Grill and Veggie Grill's “cheeseburger” on kale.
Yes, Healthful Fast Food Is Possible. But Edible? - www.nytimes.com Readability
I was thinking of those Taco Bell stops during a recent week of travel. I had
determined, as a way of avoiding the pitfalls of airport food, to be vegan for the
length of the trip. This isn’t easy. By the time I got to Terminal C at Dallas/Fort
Worth, I couldn’t bear another Veggie Delite from Subway, a bad chopped salad
on lousy bread. So I wandered up to the Taco Bell Express opposite Gate 14 and
optimistically asked the cashier if I could get a bean burrito without cheese or sour
cream. He pointed out a corner on the overhead display where the “fresco”
menu offered pico de gallo in place of dairy, then upsold me on a multilay ered
“fresco” bean burrito for about 3 bucks. As he was talking, the customers to my
right and left, both fit, suit-wearing people bearing expressions of hunger and
resignation, perked up. They weren’t aware of the fresco menu, either. One was
try ing to “eat healthy on the road”; the other copped to “having vegan kids.” Like
me, they were intrigued by a fast-food burrito with about 350 calories, or less
than half as many as a Fiesta Taco Salad bowl. It wasn’t bad, either.
Twelve y ears after the publication of “Fast Food Nation” and nearly as long since
Morgan Spurlock almost ate himself to death, our relationship with fast food has
changed. We’ve gone from the whistle-blowing stage to the higher-expectations
stage, and some of those expectations are being met. Various states have passed
measures to limit the confinement of farm animals. In-N-Out Burger has
demonstrated that y ou don’t have to underpay y our employ ees to be profitable.
There are dozens of plant-based alternatives to meat, with more on the way ;
increasingly , they ’re pretty good.
The fulfillment of these expectations has led to higher ones. My experience at the
airport only confirmed what I’d been hearing for y ears from analy sts in the fastfood industry. After the success of companies like Whole Foods, and healthful (or
theoretically healthful) brands like Annie’s and Kashi, there’s now a market for a
fast-food chain that’s not only healthful itself, but vegetarian-friendly, sustainable
and even humane. And, this being fast food: cheap. “It is significant, and I do
believe it is coming from consumer desire to have choices and more balance,”
say s Andy Barish, a restaurant analy st at Jefferies LLC, the investment bank.
“And it’s not just the coasts any more.”
I’m not talking about token gestures, like McDonald’s fruit-and-y ogurt parfait,
whose calories are more than 50 percent sugar. And I don’t expect the prices to
match those of Taco Bell or McDonald’s, where economies of scale and
inexpensive ingredients make meals dirt cheap. What I’d like is a place that serves
only good options, where y ou don’t have to resist the junk food to order well, and
where the food is real — by which I mean dishes that generally contain few
ingredients and are recognizable to every one, not just food technologists. It’s a
place where something like a black-bean burger piled with vegetables and baked
sweet potato fries — and, hell, may be even a vegan shake — is less than 10 bucks
and 800 calories (and way fewer without the shake). If I could order and eat that
in 15 minutes, I’d be happy, and I think a lot of others would be, too. You can try
my recipes for a fast, low-calorie burger, fries and shake.
In recent y ears, the fast-food industry has started to heed these new demands.
Billions of dollars have been invested in more healthful fast-food options, and the
financial incentives justify these expenditures. About half of all the money spent
on food in the United States is for meals eaten outside the home. And last y ear
McDonald’s earned $5.5 billion in profits on $88 billion in sales. If a competitor
offered a more healthful option that was able to capture just a single percent of
that market share, it would make $55 million. Chipotle, the best newcomer of the
last generation, has beaten that 1 percent handily. Last y ear, sales approached $3
billion. In the fourth quarter, they grew by 17 percent over the same period in the
previous y ear.
Numbers are tricky to pin down for more healthful options because the fast food
industry doesn’t y et have a category for “healthful.” The industry refers to
McDonald’s and Burger King as “quick-serve restaurants”; Chipotle is “fast
casual”; and restaurants where y ou order at the counter and the food is brought to
y ou are sometimes called “premium fast casual.” Restaurants from these various
sectors often deny these distinctions, but QSR, an industry trade magazine —
“Limited-Service, Unlimited Possibilities” — spends a good deal of space
dissecting them.
However, after decades of eating the stuff, I have my own. First, there are those
places that serve junk, no matter what kind of veneer they present. Subway, Taco
Bell (I may be partial to them, but really. . .), McDonald’s and their ilk make up
the Junk Food sector. One step up are places with better ambience and perhaps
better ingredients — Shake Shack, Five Guy s, Starbucks, Pret a Manger — that
also peddle unhealthful food but succeed in making diners feel better about eating
it, either because it tastes better, is surrounded by some healthful options, the
setting is groovier or they use some organic or sustainable ingredients. This is the
Nouveau Junk sector.
Chipotle combines the best aspects of Nouveau Junk to create a new category that
we might call Improved Fast Food. At Chipotle, the food is fresher and tastes
much better than traditional fast food. The sourcing, production and cooking is
generally of a higher level; and the overall experience is more pleasant. The
guacamole really is made on premises, and the chicken (however tasteless) is
cooked before y our ey es. It’s fairly easy to eat vegan there, but those burritos can
pack on the calories. As a competitor told me, “Several brands had a head start on
[the Chipotle founder Steve] Ells, but he kicked their [expletive] with culture and
quality. It’s not shabby for assembly -line steam-table Mexican food. It might be
worth $10 billion right now.” (It is.)
Chipotle no longer stands alone in the Improved Fast Food world: Chop’t, Maoz,
Freshii, Zoës Kitchen and several others all have their strong points. And — like
Chipotle — they all have their limitations, starting with calories and fat. By
offering fried chicken and fried onions in addition to organic tofu, Chop’t, a salad
chain in New York and Washington, tempts customers to turn what might have
been a healthful meal into a calorie bomb (to say nothing of the tasteless
dressing), and often raises the price to $12 or more. The Netherlands-based Maoz
isn’t bad, but it’s not as good as the mom-and-pop falafel trucks and shops that are
all over Manhattan. There are barely any choices, nothing is cooked to order, the
pita is a sponge and there is a messy serve-y ourself setup that makes a $10 meal
seem like a bit of a rip-off.
Despite its flaws, Improved Fast Food is the transitional step to a new category of
fast-food restaurant whose practices should be even closer to sustainable and
whose meals should be reasonably healthful and good-tasting and inexpensive.
(May be not McDonald’s-inexpensive, but under $10.) This new category is, or
will be, Good Fast Food, and there are already a few emerging contenders.
Veggie Grill is a six-y ear-old Los Angeles–based chain with 18 locations.
Technically, it falls into the “premium fast casual” category. The restaurants are
pleasantly designed and nicely lighted and offer limited service. The food is
strictly vegan, though y ou might not know it at first.
Kevin Boy lan and T. K. Pillan, the chain’s founders, are vegans themselves. They
frequently refer to their food as “familiar” and “American,” but that’s debatable.
The “chickin” in the “Santa Fe Crispy Chickin” sandwich is Gardein, a soy -based
product that has become the default for fast-food operators looking for meat
substitutes. Although there are better products in the pipeline, Gardein, especially
when fried, tastes more or less like a McNugget (which isn’t entirely “real”
chicken itself). The “cheese” is Daiy a, which is tapioca-based and similar in taste
to a pasteurized processed American cheese. The “steak,” “carne asada,” “crab
cake” (my favorite) and “burger” are also soy, in combination with wheat and
pea protein. In terms of animal welfare, environmental damage and resource
usage, these products are huge steps in the right direction. They save animals,
water, energy and land.
Boy lan wanted to make clear to me that his chain isn’t about haute cuisine.
“We’re not doing sautéed tempeh with a peach reduction da-da-da,” he said.
“That may be a great menu item, but most people don’t know what it is. When we
say ‘cheeseburger’ — or ‘fried chickin’ with mashed potatoes with gravy and
steamed kale — every one knows what we’re talking about.” He’s probably right,
and the vegetables are pretty good, too. The mashed potatoes are cut with 40
percent cauliflower; the gravy is made from porcini mushrooms and y ou can get
y our entree on a bed of kale instead of a bun.
When I first entered a Veggie Grill, I expected a room full of skinny vegans
talking about their vegan-ness. Instead, at locations in Holly wood, El Segundo and
Westwood, the lines could have been any where, even an airport Taco Bell. The
diners appeared mixed by class and weight, and sure looked like omnivores,
which they mostly are. The company ’s research shows that about 70 percent of
its customers eat meat or fish, a fact that seems both reflected in its menu and its
instant success. Veggie Grill won best American restaurant in the 2012 Los
Angeles Times readers’ poll, and sales are up 16 percent in existing stores
compared with last y ear. The plan is to double those 18 locations every 18 months
for the foreseeable future — “fast enough to stay ahead of competitors, but not so
fast as to lose our cultural DNA,” Boy lan said. In 2011, the founders brought in a
new C.E.O., Greg Dollarhy de, who helped Baja Fresh become a national chain
before its sale to Wendy ’s for nearly $300 million.
Veggie Grill is being underwritten partly by Brentwood Associates, a small
private-equity firm that’s invested in various consumer businesses, including Zoës
Kitchen, a chain that offers kebabs, braised beans and roasted vegetables. “For a
firm like us to get involved with a concept like Veggie Grill, we have to believe it’s
a profitable business model, and we do,” Brentwood’s managing director, Rahul
Aggarwal, told me. “Ten y ears ago I would’ve said no vegan restaurant would be
successful, but people are looking for different way s to eat and this is a great
concept.”
I admire Veggie Grill, but while making “chickin” from soy is no crime, it’s still
far from real food. I have a long-running argument with committed vegan
friends, who say that Americans aren’t ready for rice and beans, or chickpeaand-spinach stew, and that places like Veggie Grill offer a transition to animaland-environment-friendlier food. On one level, I agree. Why feed the grain to
tortured animals to produce lousy meat when y ou can process the grain and
produce it into “meat”? On another level, the goal should be fast food that’s real
food, too.
Much of what I ate at Veggie Grill was fried and dense, and even when I didn’t
overeat, I felt as heavy afterward as I do after eating at a Junk Food chain. And
while that Santa Fe Crispy Chickin sandwich with lettuce, tomato, red onion,
avocado and vegan may o comes in at 550 calories, 200 fewer than Burger King’s
Tendercrisp chicken sandwich, the “chickin” sandwich costs $9. The Tendercrisp
costs $5, and that’s in Midtown Manhattan.
Future growth should allow Veggie Grill to lower prices, but it may never be
possible to spend less than 10 dollars on a meal there. Part of that cost is service:
at Veggie Grill, y ou order, get a number to put on y our table and wait for a
server. It’s a luxury compared with most chains, and a pleasant one, but the
combination of the food’s being not quite real and the price’s being still too high
means Veggie Grill hasn’t made the leap to Good Fast Food.
During my time in Los Angeles, I also ate at Native Foods Café, a vegan chain
similar to Veggie Grill, where y ou can get a pretty good “meatball” sub (made of
seitan, a form of wheat gluten), and at Tender Greens, which, though it is
cafeteria-sty le (think Chipotle with a large Euro-Californian menu), flirts with the
$20 mark for a meal. It can’t really be considered fast food, but it’s quite terrific
and I’d love to see it put Applebee’s and Olive Garden out of business.
In Culver City, I visited Ly fe Kitchen (that’s “Love Your Food Every day ”; I
know, but please keep reading). Ly fe has the pedigree, menu, financing, plan and
ambition to take on the major chains. The company is try ing to build 250 locations
in the next five y ears, and QSR has already wondered whether it will become the
“Whole Foods of fast food.”
At Ly fe, the cookies are dairy -free; the beef comes from grass-fed, humanely
raised cows; nothing weighs in at more than 600 calories; and there’s no butter,
cream, white sugar, white flour, high-fructose corn sy rup or trans fats. The
concept was the brainchild of the former Gardein executive and investment
banker Stephen Sidwell, who quickly enlisted Mike Roberts, the former global
president of McDonald’s, and Mike Donahue, McDonald’s U.S.A.’s chief of
corporate communications. These three teamed up with Art Smith, Oprah’s
former chef, and Tal Ronnen, who I believe to be among the most ambitious and
talented vegan chefs in the country .
According to Roberts, Ly fe currently has more than 250 angel investors who
“represent a group of people that are say ing, ‘We’ve been waiting for something
like this.’ ” The Culver City operation opened earlier this y ear, and two more
California locations are scheduled to open before the y ear is out. New York
locations are being actively scouted, and a Chicago franchise is in the works.
When I visited the Culver City operation, shortly before its official opening, I
sampled across the menu and came away impressed. There are four small,
creative flatbread pizzas under $10; one is vegan, two are vegetarian and one was
done with chicken. I tasted terrific salads, like a beet-and-farro one ($9) that could
easily pass for a starter at a good restaurant, and breakfast selections, like steel-cut
oatmeal with y ogurt and real maple sy rup ($5) and a tofu wrap ($6.50), were
actually delicious.
Ly fe, not unlike life, isn’t cheap. The owners claim that an average check is
“around $15” but one entree (roast salmon, bok choy, shiitake mushrooms, miso,
etc.) costs exactly $15. An “ancient grain” bowl with Gardein “beef tips” costs
$12, which seems too much. Still, the salmon is good and the bowl is delicious, as
is a squash risotto made with farro that costs $9 — or the price of a “chickin”
sandwich at Veggie Grill or a couple of Tendercrisp sandwiches at Burger King.
How in the world, I asked Roberts and Donahue, can they expect to run 250
franchises serving that salmon dish or the risotto or their signature roasted brussels
sprouts, which they hope to make into the French fries of the 21st century ?
Donahue acknowledged that it was going to be a challenge, but nothing that
technology couldn’t solve. Ly fe will rely on digital order-taking, G.P.S. customer
location — a coaster will tell y our server where y ou’re sitting — online ordering
and mobile apps. Programmable, state-of-the-art combination ovens store
recipes, cook with moist or dry heat and really do take the guesswork out of
cooking. An order-tracking sy stem tells cooks when to start preparing various parts
of dishes and requires their input only at the end of each order. Almost all activity
is tracked in real time, which helps the managers run things smoothly .
Ly fe isn’t vegan, so much as protein-agnostic. You can get a Gardein burger or a
grass-fed beef burger, “unfried” chicken or Gardein “chickin.” You can also get
wine (biody namic), beer (organic) or a better-than-it-sounds banana-kale
smoothie. However, I fear that Ly fe’s ambition, and its diverse menu, will drive
up equipment and labor costs, and that those costs are going to keep the chain
from appealing to less-affluent Americans. You can get a lot done in a franchise
sy stem, but its main virtues are locating the most popular dishes, focusing on their
preparation and streamlining the process. My hope is that Ly fe will evolve, as all
businesses do, by a process of trial and error, and be successful enough that they
have a real impact on the way we think of fast food.
Veggie Grill, Lyfe Kitchen, Tender Greens and others have solved the challenge
of bringing formerly upscale, plant-based foods to more of a mass audience. But
the industry seems to be focused on a niche group that y ou might call the healthaware sector of the population. (If y ou’re reading this article, y ou’re probably in
it.) Whole Foods has proved that y ou can build a publicly traded business, with
$16 billion in market capitalization, by appealing to this niche. But fast food is, at
its core, a class issue. Many people rely on that Tendercrisp because they need
to, and our country ’s fast-food problem won’t be solved — no matter how much
innovation in vegan options or high-tech ovens — until the prices come down and
this niche sector is no longer niche.
It was this idea that led me, a few y ears ago, to try to start a fast-food chain of
my own, modeled after Chipotle. I wanted to focus on Mediterranean food,
largely on plant-based options like falafel, hummus, chopped salad, grilled
vegetables and may be a tagine or ratatouille. I wanted to prioritize sustainability,
minimize meat and eliminate soda, and I’d treat and pay workers fairly. But after
chatting with a few fast-food veterans, I soon recognized just how quixotic my
ideas seemed. Any one with industry experience would want to add more meat,
sell Coke and take advantage of both workers and customers to maximize profits. I
lost my stomach for the project before I even really began, but recent trends
suggest that there may have been hope had I stuck to my guns. Soda consumption
is down; meat consumption is down; sales of organic foods are up; more people
are expressing concern about G.M.O.s, additives, pesticides and animal welfare.
The lines out the door — first at Chipotle and now at Maoz, Chop’t, Tender Greens
and Veggie Grill — don’t lie. According to a report in Advertising Age,
McDonald’s no longer ranks in the top 10 favorite restaurants of Millennials, a
group that comprises as many as 80 million people. Vegans looking for a quick fix
after the orthodontist have plenty of choices.
Good Fast Food doesn’t need to be vegan or even vegetarian; it just ought to be
real, whole food. The best word to describe a wise contemporary diet is
flexitarian, which is nothing more than intelligent omnivorism. There are
probably millions of people who now eat this way, including me. My own sty le,
which has worked for me for six y ears, is to eat a vegan diet before 6 p.m. and
then allow my self pretty much whatever I want for dinner. This flexibility avoids
junk and emphasizes plants, and Ly fe Kitchen, which offers both “chickin” and
chicken — plus beans, vegetables and grains in their whole forms (all for under
600 calories per dish) — comes closest to this ideal. But the menu offers too
much, the service raises prices too high and speed is going to be an issue. My
advice would be to skip the service and the wine, make a limited menu with big
flavors and a few treats and keep it as cheap as y ou can. Of course, there are
huge play ers who could do this almost instantaneously. But the best thing they
seem able to come up with is the McWrap or the fresco menu.
In the meantime, I’m throwing out a few recipes to the entire fast-food world to
help build a case that it’s possible use real ingredients to create relatively
inexpensive, low-calorie, meat-free, protein-dense, inexpensive fast food. If
any one with the desire can produce this stuff in a home kitchen, then industry
veterans financed by private equity firms should be able to produce it at scale in a
fraction of the time and at a fraction of the price. You think people won’t eat it?
There’s a lot of evidence that suggests otherwise.
Original: https://www.readability.com/articles/iggeeakr
Title: The Long Con
Author: indianapolismonthly.com
Summary: The day Phil Ferguson killed Vern Cox, late spring was turning to
summer in “The Big Empty,” an expanse of high desert in Eastern Oregon
where the earth stretched lonesome and wide. By…
The Long Con - www.indianapolismonthly.com - Readability
The day Phil Ferguson killed Vern Cox, late spring was turning to summer in “The
Big Empty,” an expanse of high desert in Eastern Oregon where the earth
stretched lonesome and wide. By midmorning, temperatures near the remote
outpost of Burns, the Harney County seat, were in the 70s, even as the Steens
Mountains clung to their snowcaps off in the distance. Center-pivot irrigation
sy stems watered fields of alfalfa. Sagebrush filled the unworked land. Here, a
man could see things coming for miles: people, possibilities, trouble.
Work, too, was heating up on Vern Cox’s 320-acre ranch. It was May 30, 2012,
the Wednesday after Memorial Day weekend. Cox, 62, and Kenney Bush, his
y oung friend and ranch hand, were collecting stray lumber left over from the
construction of a new corral. That coming Saturday, the men, along with a small
group of neighbors and friends, aimed to brand 30 head of cattle. Afterward, they
planned to celebrate with barbecue, beer, and, once the stars grew big and the
night long, may be some of Cox’s homemade coffee liqueur.
It was a simple existence, but the idea of making any thing other than an honest
living tickled them. Can you imagine wearing a suit and tie to work, sitting at a
desk? They ’d laugh. Suckers.
For Bush, 24, working with the older Cox never seemed like working at all. Cox
had a talent for disguising the drudgery with stories, humor, and teasing—“flicking
the shit,” they called it.
Almost a decade had passed since Bush and his mother first met Cox, a tall, thin
man with a bearded face often hidden by sunglasses and a ball cap—because of
his glaucoma, he would say. Bush rarely saw his father, and Cox stepped in. He
taught the boy how to handle a baseball bat, and, later, when Bush ran into trouble
with the law, Cox gave him a wad of money to help out, no questions asked.
More recently, Bush and his fiancee, Shawn, had moved into a small camper on
Cox’s property, replacing one of his ex-girlfriends. While Bush worked on the
ranch, Shawn earned her keep by running errands and buy ing groceries for Cox,
who also set her to the task of removing evidence of the ex-girlfriend from his
single-wide trailer.
The y oung couple paid little mind to Cox’s recent strange behavior. In previous
weeks, he had moved his stash of hay money from inside the never-used
dishwasher to the air filter of an old tractor to a pistol case. And just last night,
Shawn had found the door to Cox’s trailer locked and barred with a two-by -four.
He said he was writing a journal entry on his laptop and didn’t want to be
disturbed.
Cox was due some privacy, they thought. After all, life had taken the widower
from Arkansas by surprise. He had a hard-luck story of losing a wife to leukemia,
a company to bankruptcy, and his driver’s license to DUIs. Over the last decade,
he had worked to leave that man behind. He had befriended Bush’s mother,
play ed father to Bush, and turned acres of sagebrush into a profitable ranch. In
the void of Oregon, Cox had found a life.
But just before noon on that Wednesday morning, as Bush and his fiancee went
about their chores, Cox noticed two vehicles coming down the dirt road that ran
the length of his alfalfa field. And he must have sensed that Phil Ferguson—a man
from his past he had hoped never to face again—was about to steal it all away .
“Take the tractor,” Cox said, instructing Bush to drive around to the rear of the
trailer. “I’ll be right back.”
As Bush disappeared, Cox climbed into his white flatbed Ford, where he kept a
rifle on the passenger’s seat. Then he sped away, past the property ’s outbuildings,
to meet the visitors.
About a quarter-mile from the trailer, Cox stopped the truck and got out, leaving
the rifle on the seat. He walked toward a chest-high barbed-wire fence that ran
the length of the ranch and separated it from the dirt road. On the other side of the
fence, a familiar man approached, carry ing a gun.
For the last time, Vern Cox began to run.
Phil Ferguson made quite a name for himself in northeastern Indiana. As a boy,
Ferguson had worked on his family ’s farm near Alexandria, helping his father,
mother, and sister tend to corn, beans, and a few spotted Appaloosa horses. At
Alexandria High School, he was active in the AV club and Future Farmers of
America. “Above-average student, worked hard, well-liked, good parents,” say s
Orvis Burdsall, Ferguson’s high-school principal. “He was the kind of kid y ou
never had to worry about.”
Ferguson was also a versatile athlete, lettering in track, football, and—like any
good Hoosier schoolboy —basketball. A photo caption in his senior y earbook
depicts him as the kind of lunch-pail play er who took opponents by surprise: “The
Hustler” Phil Ferguson speeds past an opponent who didn’t even see him go by.
After graduating in 1968, Ferguson married his high-school sweetheart, Vicki, and
the couple had two children, Brian and Angie. For the next few y ears, he applied
the same hard-working approach that made him a memorable basketball play er
to his job as a financial consultant with K.J. Brown Brokers in nearby Marion. In
1985, he took his portfolio and clients downtown to a red-brick storefront with a
large picture window on 3rd Street. At Ferguson Financial, he developed a
following among modest, good-earning folks like teachers, farmers, and factory
workers.
Harry Craw, now 92, was a retired World War II veteran who had worked 40
y ears at the Delta Electric Company in Marion when Ferguson approached him
with a financial opportunity in 1988. Craw liked that the advisor was plainspoken
and that, when he paid a visit to Craw’s home, he talked about the local highschool baseball team nearly as much as he did certificates of deposit. “Seemed
like a nice guy,” say s Craw, “a regular guy.” Craw invested that day, and over
the y ears entrusted $56,000 to Ferguson.
Not only did Ferguson have the common touch, but he also projected a command
of the complicated financial world. He ran a satellite office in Cincinnati and
another at the nexus of the commodity markets in Chicago, within walking
distance of the Mercantile Exchange and the Chicago Board of Trade. To his
unsophisticated clients, “The Hustler” Phil Ferguson seemed to know how to speed
past the big-city investors, who didn’t even see him go by .
Individual buy -ins ranged from $2,500 to more than $1 million. For the riskaverse, Ferguson provided a humdrum collection of investments in the securities
market, including bonds, mutual funds, and variable annuities. With CDs, he sold
clients on a reasonable rate of return—usually just a quarter- or half-percentage
point better than the local banks. Ferguson never missed a pay ment.
But for those with an appetite for something juicier, Ferguson offered
membership in the First Investors Group, which dealt in commodities—
investments tied to the prices of raw materials and agricultural goods such as pork
bellies, corn, and soy beans. In FIG, investors would pool their money and trade
commodities as a single entity under Ferguson’s direction. Thanks to his Chicago
connections and a down-home grasp of human nature, he was able to anticipate
the swings of the high-risk commodities market to make millions for himself and
his clients.
While Ferguson experienced professional success, his personal life fell into
disarray. In 1993, he divorced Vicki, his high-school sweetheart; later that y ear,
he married a woman named Elizabeth. Through it all, though, Ferguson’s business
thrived, and returns sky rocketed. In 1997, Ferguson and his commodities pool of
about 500 investors made a respectable $798,000; a y ear later, the gains jumped
to $7.4 million. Then, in 1999, Ferguson sent out a letter to clients indicating he had
scored a partnership with commodities firm Archer Daniels Midland, the agrigiant that billed itself as “supermarket to the world.” FIG’s clients, sold on the
ADM letter, collectively made $61 million that y ear alone.
Based on Ferguson’s boffo performance, many clients rolled traditional
investments like IRAs into the FIG kitty. Few of them ever cashed out, even when
it came time to buy cars, make down pay ments on new homes, or pony up for
college tuition. Given Ferguson’s claim of creating two to three millionaires per
month, it made sense to let the Ferguson-invested money ride.
The gamble seemed to pay off. For a 13-month period starting in February 1999,
Ferguson’s fund made $91 million.
"We were instant buddies,” Lillian Ramge say s of Vern Cox, who had moved
onto a neighboring ranch in Oregon. “He had the studs to my mares."
But Ferguson’s personal life was in tumult again. Though he never flaunted his
money —he usually wore a simple shirt and dress slacks to work and drove
understated vehicles—he went on a spending spree shortly before filing for
divorce from his second wife, Elizabeth, in April 1999. During the contentious
divorce proceedings, she alleged that her estranged husband had been wasting and
hiding marital assets—and making numerous out-of-state trips. He owned a farm
close to Marion and another in nearby Summitville, and began sinking cash into
expensive farm equipment, a big “dually ” pickup, and high-dollar livestock. That
February, he had spent $42,000 on a new Chevy truck and a Harley -Davidson
motorcy cle in the span of a few day s.
And why not? By May 2000, FIG was on the way to y et another record showing,
with a y ear-to-date profit of $31 million.
Neighbors shared earning statements. Co-workers bragged at break-room tables.
Phil Ferguson had made them rich.
On paper.Kenney Bush’s mother, Lillian Ramge, has hundreds of photos of Vern
Cox on her desktop computer but doesn’t seem happy with any of them.
“Here’s one,” say s Ramge, 55, a warm and chatty mother of six. Her face is
ruddy after spending a nippy March morning on her 160-acre farm outside of
Burns, Oregon, checking on cows and watering her horse, with at least eight dogs
running underfoot. “Nah, that one’s no good.” She wiggles the chair in her home
office and clicks on another image.
Ramge is a full-time corrections officer, and this is her day off. On mornings like
this, when her husband is at work and there’s no one to help with a broken machine
or a stubborn animal, or to chat with over a cup of coffee, her thoughts turn to
Vern Cox. He was her cover bull.
“Cover bull” is farm-speak for a male that a rancher pairs with a female without
a herdmate—a companion for one that has none. When Ramge met Cox 12 y ears
ago, she was coming off a 20-y ear marriage to a man in Utah who woke up one
day and decided he no longer loved her. Aside from her children, Ramge was all
alone, but she decided to pack up, move to Oregon, and give ranching a try. “Me
and Vern were related by horses,” she say s. “That’s how we first met—he had
the studs to my mares. Vern got them when he bought the property .”
Cox first came to Oregon in 2002. In Wagontire, a tiny oasis at the crest of a hill
an hour southwest of Burns, he walked into a rickety motel across the highway
from a bent mile-marker and talked up the elderly woman who owned it. As it
happened, she also had land near Burns, and he plunked down cash for a scrubcovered plot he planned to reshape with alfalfa and cattle.
Lillian Ramge’s land, anchored by a modest home that was once a barn, lies
catercorner to the ranch Cox bought. If he wasn’t visiting to help her put out one
fire or another, the two friends were gossiping on the phone. “We were instant
buddies,” she say s. “Girlfriends, really —we talked for an hour almost every day.
I loved him. Every one did. Men, women—it didn’t matter. Every one wanted to
be around him. He was a force. He was fun.”
In 2003, the y ear after Cox arrived in Burns, Ramge was laid off from her job,
and she spent the entire summer with the widower from Arkansas, learning how
to hay , drive a tractor, move irrigation lines, and shoot rabbits. She recalls working
in 104-degree heat that summer, tossing hundred-pound bales onto a trailer by
hand. “I damn near had heatstroke and had to go into the truck and turn on the
AC,” she recalls. “Vern just laughed and laughed, even when I dumped 14 bales
on him.”
Ramge’s kids liked Cox, too, especially Kenney Bush. Ramge and Bush’s father
had divorced when the boy was only 8, and Cox filled the void for the then-14y ear-old. “When I went back to work, my kids were over there every day,
shooting or setting gopher traps or whatever,” Ramge say s. “I really think Vern
was here just kind of collecting a family .”
Cox shared stories of his dead wife and past troubles. To return his generosity and
ease his pain, Ramge helped him establish a new life. Since he had lost his driver’s
license, she put her name on titles to new vehicles for his ranch. And because his
credit was shot—he had made poor business deals in the past, he said—she
opened and operated a checking account for Cox in her name. She felt that
intertwining their financial affairs was the least she could do; that way he could
move bey ond making cash deals or working in trade.
She also didn’t mind running his errands in town or picking up his groceries,
because Cox hardly ever left his ranch. Plus, Cox paid her in alfalfa for her
efforts (and their shared cellphone plan). The arrangement simply made sense.
While their relationship never rose to a romance, Cox remained the constant in
Ramge’s life, even after she remarried; he and her husband worked together on
an addition to Ramge’s home.
Cox rarely left the ranch. He avoided banks. The women ran his errands and did
the shopping. He wore a hat and dark sunglasses whenever he was outside.
Now, more than a y ear after the last time she saw Cox, the project remains
unfinished, with nails and sawdust on the floor, and empty rooms framed with
bare wood studs. Sheetrock covers some of the walls, but not others. Ramge’s
husband stopped working on the job in Cox’s absence. “It’s very quiet here now,”
she say s.
She partially blames Cox—and his weakness for women—for his own downfall.
“He liked ’em y oung—any thing that walked, talked, and breathed,” she say s. “To
tell the truth, Vern was a whore. He could seduce just about any one.”In June
2000, during a routine audit, a National Futures Association field agent named
Heather Rankin-Sendera began pulling on the string that would unravel one of
Indiana’s largest-ever frauds.
As the agent inspected checks from an NFA-member broker in Chicago, she
found that one investor had deposited $15,000 by endorsing a third-party check
from First Investors Group of Marion, Indiana. Curious, the agent called the
customer, who explained that the check represented a withdrawal from an
account operated by Marion-based Ferguson Financial.
The names didn’t match any in the NFA database, and the agent discovered that
neither FIG nor Ferguson Financial was registered with the U.S. Commodity
Futures Trading Commission.
On June 21, the NFA paid a surprise visit to Ferguson Financial. Phil Ferguson was
out of the office, so the auditors interviewed him by phone. They found his story
dubious and alerted the CFTC. When the NFA called Ferguson again, he declined
comment.
A few day s after that, Ferguson stopped showing up at work.
Eventually, a host of other organizations—the Indiana Secretary of State’s office,
the U.S. Securities and Exchange Commission,the National Association of
Securities Dealers, and the FBI—began making inquiries into Ferguson. What they
discovered was a massive, y et simple, Ponzi scheme.
Starting in the mid-1980s, Ferguson had taken money from clients and sold them
nonexistent financial products—like “Indiana Toll Road Revenue Tax Free Bond,”
“Coca-Cola Rev Bond,” “Australian Dollar Note,” and a host of others.
Investigator Rick Neff, a 21-y ear veteran of the Indiana Secretary of State’s
securities division, was amazed at the scope, organization, and patience of the
scam. Similar schemes that Neff encountered had lasted only a few y ears, but he
found Ferguson had bled investors for longer than a decade by never missing a
dividend pay ment, never raising a red flag. “I think he would have done this until
the day he died,” say s Neff. Though there was never a full forensic accounting of
the money, Neff estimates that, on the securities-fraud end, Ferguson took in $22
million and never invested a dime. After selling the phony securities to clients, he
supplied them with fictitious earning statements. He dipped into the money to pay
fake dividends or reimburse those who cashed out, but otherwise kept the money
for himself. Even so, his lifesty le wasn’t out of line for a successful financial
consultant: He lived in a nice house outside of town but refrained from flashing
the kind of extravagances that draw suspicion.
Investigators found that at the same time Ferguson was selling bogus securities, he
was also running an illegal—and largely fraudulent—commodities pool. He either
pocketed money from investors, lost it with lousy trades, or used it to reimburse
those lucky enough to pull out their stake before his scheme collapsed.
Gil Hirschy, a now-retired special agent from the FBI’s Fort Way ne office who
worked the case, say s the staggering gains posted by FIG, Ferguson’s
commodities pool, turned out to be losses—$579,000 in 1997, $1.1 million in 1998,
$328,000 in 1999, and $122,000 in 2000. What’s more, in the 13-month period
Ferguson told investors he’d raked in $91 million, from 1999 to 2000, he hadn’t
made a single trade. The only one who actually got rich was Ferguson; Hirschy
believes FIG netted Ferguson about $14 million. Its investors, like Ferguson’s
securities clients, received fabricated earnings statements.
As investigators looked deeper, they found that Ferguson’s offices in Chicago and
Cincinnati were simply mail drops. They also uncovered evidence of multiple
bank accounts in a variety of names, along with a cache of forged documents and
counterfeit identification.
In September 2000, the prosecutor in Grant County, Indiana, charged Ferguson
with an almost unprecedented 90 counts of securities violations, and federal
authorities later brought mail- and wire-fraud charges. “This guy was Bernie
Madoff before Bernie Madoff,” say s Neff.
The charges didn’t come as a complete surprise to Ferguson’s son, Brian. The
bravado, the bluster, the lies—those had alway s been at the core of his father’s
identity. And they had helped endear him to others. “People loved him,” Brian
say s. “He was a showman. I mean, y ou’re not going to give y our money to
someone y ou don’t like, right?”
“But,” he continues, “I knew that things weren’t on the up-and-up.” He
remembered a period when his father was trading under the name of another
man, whom he claimed lived in Saudi Arabia and therefore didn’t have to pay
taxes. As a high-school student in the late 1980s, Brian joined his father at a
meeting with an elderly woman who spread plastic baggies filled with pre-1964
coins—minted with 90 percent pure silver—across her kitchen table. At her feet,
six five-gallon buckets brimmed with old “wheat” pennies. Neither she nor her
now-deceased husband had ever trusted banks, but Ferguson assured her the
money would be safe in his vault at Ferguson Financial. When father and son
returned to the office with the woman’s treasure, Ferguson instructed his son to put
the silver currency safely in the company vault, just as he had promised. But he
had other plans for the vintage copper coins. “Take those to the pawn shop,” he
said. “We can get two cents for every penny .”
Later, when Brian Ferguson was in college in Indianapolis, he spent his summers
working for Ferguson Financial, observing the blueprint for his father’s house of
cards. “Dad’s trades would lose tons and tons of money,” he say s, but his father
would never admit defeat. Instead, Phil Ferguson would scapegoat an older
employ ee, blaming the man for making poor trades. Then he would make
a big show of disappearing to the computers in the back office and returning,
triumphant, after having magically outperformed his colleague. “Dad was
basically a chronic liar, and he wanted every one to think he was a big, highrolling investor,” say s Brian. “He liked that air of my stery around him.” In his
free time, the elder Ferguson would hang out in dive bars and, over White
Russians, slap backs and fabricate colorful tales about being involved with the
Mafia and drug dealers.Sometime after his father’s first divorce, Brian noticed
that business at Ferguson Financial seemed to be slowing down. The office was
often empty, save for Ferguson making trades on the computers in the back room.
At home, he had three separate phone lines installed in his bedroom, each
connected to an answering machine. No one was allowed to touch the phones.
Brian did hear one of the messages, though; the caller was asking for a man he’d
never heard of.
By the time the Grant County prosecutor got around to filing charges in 2000,
Ferguson had gone missing, without so much as a goodby e to Brian or his sister.
For a few weeks that summer, Neff, the securities investigator, paid occasional
visits to the Marion area. He intercepted Ferguson’s mail and staked out the con
man’s home, but he realized catching Ferguson was a longshot. On one of his first
visits to Ferguson Financial, Neff interviewed a secretary who, shortly after the
NFA phone call, had seen her boss doing research on his office computer. She
caught a glimpse of a few words on the screen: HOW TO DISAPPEAR.
In Colorado, Roy Vernon Cox often went by his middle name—the widower was
just “Vern,” a guy who knew a fair bit about horses and cattle and, if the situation
warranted it, could handle a gun.
Cox owned a concierge service called “About Time” in Broomfield, a suburb of
Denver, where he ran a variety of errands for clients in the area. Sometime in
2000, he got a call from a man named Al Russell.
Russell explained that he had recently broken his ankle, was wearing a
cumbersome cast, and needed someone to help him with a few odd jobs and shop
for groceries. He lived 30 miles away in Morrison, but offered to pay Cox
handsomely for mileage and his time.
Cox jumped at the job, ran the errands, did the shopping (his new client wanted
plenty of alcohol and chocolate), and returned to Russell’s mountain estate—a
vast spread with domesticated animals as well as wild game prowling the
property. Russell paid in cash and gave Cox a $50 tip, and then offered his new
friend an opportunity to make even more money. Was he interested? Well, hell
yeah.
Russell explained that he had been injured in a construction accident in Florida
while he and his father were repairing bridges between Miami and Key West. He
told Cox he was receiving under-the-table compensation for the accident—a huge
cash pay out to keep an insurance company in the dark. Money wasn’t a problem,
but Russell admitted he was ly ing low. He had recently split from his wife and
made off with her little sports car, just to piss her off.
For the next six months or so, Cox made monthly shopping runs for Russell,
pocketing $1,200 every two weeks for the service. The pay ments alway s came in
cash.
Soon, Cox took on bigger tasks. He picked up corral fencing in Oklahoma and
acquired Russell’s Dodge van for $1,000 and trade. And not long after that, Russell
gave Cox and another man $10,000 in cash and one-way tickets to Minneapolis to
buy two vehicles from a discount lot and deliver them to Denver.
Cox attempted to call Russell. The line was dead. Fearing his friend was in danger
—the gun?—Cox raced to Russell’s home. Inside, he saw that the place had been
picked clean.
Russell and Cox became trusting associates, so much so that when Russell needed
to buy an unregistered weapon, he turned to Cox. “I know a guy who can get y ou
a .22,” Cox offered. Russell, though, wanted something bigger. “You want
something bigger? Get a Colt .45,” advised Cox. “They ’ll go down—I don’t give a
shit if they ’re wearing armor.” The conversation weighed on Cox for a while, but
Russell dropped the request, and Cox eventually forgot about it.
Russell turned his attention to buy ing real estate and livestock, and he offered Cox
an opportunity to form a partnership. The men started the Morrison Livestock
Company and ordered business cards for their wallets and magnetic signage for
the doors of their trucks. One of Russell’s first purchases was a trailer and a $5,000
cutting horse. Cox completed the paperwork for a new company bank account
bearing his name. But before opening it, Cox attempted to call Russell. The line
was dead. Fearing his friend was in danger—the gun?—Cox raced to Russell’s
home. Inside, he saw that the place had been picked clean, and a handful of
Russell’s other associates were gathered in the kitchen.
“He’s gone,” said one of the men, as the others dug through stray papers and
receipts Russell had left behind. Cox was play ing catch-up. He looked around the
room and noticed a Xerox machine and other office equipment. Just like that, he
was missing his business partner—and he wondered if he would ever see him
again.By the end of 2011, distrust between Lillian Ramge and Vern Cox’s new
girlfriend was complicating life on the ranch.
Cox had been living with a 44-y ear-old woman from town, Honey Schatz, and
she had taken on some of the domestic duties that once belonged to Ramge. When
Schatz’s daughter became pregnant, she moved into Cox’s trailer as well.
Ramge couldn’t understand the connection. As far as she was concerned, Schatz
was a thief and a drug addict—at least, that was her reputation. But Ramge’s
disapproval didn’t resonate with Cox, who responded by limiting contact with
Ramge to the handling of his business affairs.
The relationship between Cox and Schatz was romantic—at first. But she
eventually settled for a more platonic partnership, partly because she was
annoy ed by Cox’s lies concerning their financial situation. Once, when he handed
her a shopping list, she turned it over to find the other side was a bank statement—
one of the accounts Ramge operated for him.
“Eight thousand dollars?” she asked, miffed that she’d had to scrape together
money for her granddaughter’s birthday gift. “I thought we were penniless.”
“I’ll do what I damned well want with my money,” he said. “I’ve got five more
accounts just like that one.”
Schatz found Cox’s secrecy extended to late-night computer usage as well, and
often spied him banging away on his laptop key board in private. Curious, she
thought, for someone who often claimed not to know how to use a computer.
Ramge, too, was growing puzzled by Cox. He had begun showing up at her home
again, bemoaning Schatz’s drug use and ly ing. “Kick her out,” Ramge advised.
But he didn’t. Instead, he had Ramge write checks to Schatz—one for thousands of
dollars—and bought her a vehicle.
Ramge’s misgivings about Schatz were confirmed when Schatz and a group of
friends were rounded up by the Harney County sheriff’s department for a string
of burglaries. When the authorities returned Schatz to the ranch, Cox was waiting.
“Who was that?” he asked.
“The cops,” she said.
“Are they going to be back?”
“Probably .”
In 2002, two y ears after authorities uncovered his Ponzi scheme, Phil Ferguson’s
whereabouts remained unknown. But tips were trickling into the FBI office in Fort
Way ne thanks to a segment on America’s Most Wanted.
The FBI knew Ferguson had money. They knew he had been in Colorado, where
he landed for a time after fleeing Indiana and did business with a man named
Roy Vernon Cox while using the name “Al Russell.” They narrowly missed
apprehending him. Later, they received a tip that Ferguson had brazenly returned
to Marion, from someone who claimed to have seen him in a drugstore.
The rest was just guesswork. How much did Ferguson have? Thousands?
Hundreds of thousands? Millions?
A decade passed, and Ferguson’s trail had gone cold. Then, in early May 2012, a
tip originating from an America’s Most Wanted rerun crossed the desk of special
agent Gil Hirschy, the FBI agent who had unsnarled Ferguson’s commodities
fraud. He normally dismissed those kinds of leads on principle, believing some
people had way too much time on their hands. But this one was different.
The details were intimate.
Dave Glerup, the Sheriff of Harney County, Oregon, was going to have to drive
back out to the Cox ranch. And he wasn’t sure what to expect.
By now, the characters at the isolated compound were a familiar lot.
First, it was Kenney Bush. A few y ears back, Bush’s vehicle had been towed to an
impound lot in Burns after a drunk-driving arrest. Several months later, he broke
into the lot and soaked the office and numerous vehicles with fuel, running a fuse
from one to the other. Before igniting a stove and leaving the scene, he broke into
an apartment above the impound office and stole several firearms. The plot
failed; Bush was apprehended and charged with multiple felonies.
And then there was Honey Schatz, whom the sheriff had dropped off at the Cox
ranch after her recent burglary arrest.
This time, however, on May 30, 2012, Glerup needed to see Vern Cox.
Glerup turned onto the dirt lane that ran alongside Cox’s ranch and approached a
barbed-wire fence about a quarter-mile from Cox’s trailer. He saw Cox driving
out to meet him in a white Ford truck.
“What do y ou want now?” Cox asked.
“I just want to talk, Vern,” said Glerup.
A tall thicket of sagebrush stood at Cox’s rear flank, and his irrigation pivot loomed
in the distance.
A deputy pulled up and joined Glerup. Fifteen feet and a fence separated them
from Cox. Glerup spoke again.
“We know y our name’s not Vern.”Sheriff Glerup stood facing Vern Cox across
the fence, and the two stared each other down.
Earlier in the month, the FBI had contacted Glerup with a request. An anony mous
tip—the one the FBI had received from America’s Most Wanted —alleged that
Phillip Ferguson, an Indiana financial consultant accused of stealing millions from
his clients, had been living in Glerup’s county for almost a decade, posing as a
poor rancher named Vern Cox. The FBI sent the sheriff a photo of Ferguson and
asked him to see if he could make a positive identification.
Glerup’s department then made two visits to Cox’s trailer under the guise of
looking for stolen property from Honey Schatz’s burglary case. Even though Cox
was thinner than in the old pictures of Ferguson, and wearing a beard, Glerup was
certain he had the FBI’s fugitive.
Now, Glerup, accompanied by a deputy and a field agent from the FBI, was back
to pick up Cox before he could escape again. In 30-plus y ears of law enforcement
—25 as sheriff—Glerup had never fired his weapon. But as he stood across the
barbed-wire fence from Cox, a peaceful resolution seemed unlikely .
“Look, we know who y ou are,” said Glerup. “We know y ou’re Phil Ferguson.”
“No, I’m not, and I can prove it,” Cox said. “I have my ID in the truck.” He
whirled around and broke into a run.
Glerup and his deputy ordered Cox to stop. Cox ignored the warning, hopped into
the truck, and began driving away .
The lawmen fired at the truck’s tires but missed. Cox sped toward the sagebrush.
Glerup jumped into his SUV and gave chase. But by then, Cox’s truck had rolled
to a stop.
From back on the ranch, Kenney Bush had seen the sheriff’s SUV and a white
unmarked vehicle parked on the dirt lane, and Cox driving out to meet them. He
called into the trailer to Shawn—“I think they ’re arresting Vern”—then mounted a
dirt bike and sped toward them.
When Bush arrived, the deputy intercepted him. Bush y elled for the man who’d
been like a father to him—“Vern!”
“He’s not Vern,” said the deputy .
A few feet away, Glerup, gun drawn, approached the still truck. It appeared
empty. He scanned the sagebrush to see if Cox had escaped, but when the sheriff
looked
at the truck again, he saw Cox’s leg dangling from the open cab door.
Glerup called out, but there was no reply . He crept closer to gain a better view.
Slumped over in the driver’s seat, Vern Cox gurgled his last breath. Phil Ferguson,
the man Cox wanted to avoid facing at all costs, had put a bullet in his head with a
.22-caliber rifle.
He left every one—girlfriend, ex-wives, his children—behind and never looked
back,” say s an investigator who tracked Ferguson. “What kind of guy does that?”
That night, as they mourned the death of the man they knew as Vern Cox,
Kenney Bush and Shawn began untangling Phil Ferguson’s deceptions on Lillian
Ramge’s computer.
A quick search revealed an FBI wanted poster. It featured his photo, a list of his
crimes (millions of dollars? they marveled), and a register of aliases he had used,
including Roy “Vern” Cox, which he had stolen from his business partner in
Colorado while posing as Al Russell. The fugitive was from Indiana, not Arkansas,
as he had told them. Then they watched an online video about the man they
thought they knew on the website of America’s Most Wanted.
In retrospect, it wasn’t difficult to believe that Cox had been on the lam. He rarely
left the ranch. He avoided banks. The women ran his errands and did the
shopping. He wore a hat and dark sunglasses whenever he was outside. Bush once
saw Cox accidentally break his jaw pulling an infected tooth so he wouldn’t have
to go to the dentist. They wondered what happened to all that money. He couldn’t
have spent it, they reasoned. He lived like a Carhartt-clad pauper.
Ramge and Bush cleaned the blood out of Cox’s white Ford and kept the ranch
running for a few day s, until the woman from the motel in Wagontire, who’d sold
Cox the property, claimed it for her own. In his haste to get rid of Honey Schatz
and hide the scope of his wealth, Cox had manufactured a phony set of papers
that indicated the woman from Wagontire still owned the land. Since Cox dealt in
cash or by trade—and legally speaking, didn’t exist—no one could prove
otherwise. Neighbors and friends who had used Cox’s outbuildings for storage
were out of luck, as were those to whom Cox owed money or hay .
The prospect of missing money, along with tales of the violent standoff, have
made Cox’s ranch the subject of local legend. “There’s been a million conspiracy
theories,” say s the sheriff. “He’s got his money here. No, he’s got his money
there. You know, he may have, I don’t know, but he was alway s late making his
pay ments.”
Bush and Shawn collected their belongings from the ranch and stuck around Burns
for a few months. Eventually, figuring there was nothing left for them in Burns
without Vern Cox, they moved to Portland.
Even a y ear after Phil Ferguson’s run from Indiana to Colorado to Oregon came
to an end, the truth of what happened remains hard to grasp.
Lillian Ramge believes Honey Schatz, Cox’s ex-girlfriend, discovered his true
identity and used the information to extort him (which may explain why he had
given her cash and bought her a car). Or may be when Cox’s money ran out,
Schatz called America’s Most Wanted looking for a reward. (Schatz was
interviewed by the Oregon State Police but did not return phone calls seeking
comment for this story .)
Long before the FBI tracked Ferguson to Oregon, at least $3 million was
recovered from the sale of his Indiana property and the liquidation of his bank
accounts and paid out to victims of his scams. It’s possible that the rest of
Ferguson’s ill-gotten millions were spent to perpetuate the Ponzi scheme, fund his
lifesty le, and cover his bad investments. Still, when Ferguson was pretending to be
Al Russell in Colorado, say s the real Roy Vernon Cox, it appeared he had plenty
of money. “He didn’t spend it like crazy, but he didn’t seem worried about it,
either,” Cox say s. About a month before Ferguson left Colorado, Cox adds, the
man offered to take him on an all-expenses-paid trip to Las Vegas: “He wanted
me to gamble with his money. He said he was just going to stay in the hotel room
and drink the whole time. I think he wanted to stay away from all those cameras
[on the casino floor].” Shortly after the offer, Ferguson stole a copy of Cox’s birth
certificate and disappeared.
When the FBI was on Ferguson’s trail in Colorado, they found he had escaped in a
hurry, leaving behind driver’s licenses, birth certificates, and various forms of
false identification. “He was probably a master of identity theft before it became
a term,” say s Hirschy, the FBI agent. Initially, that ability helped Ferguson elude
capture and perhaps instilled a false sense of security that he could stay on the run
indefinitely. But after 9/11, which occurred about 14 months after Ferguson fled
Indiana, proof of identification received closer scrutiny from authorities. Hirschy
speculates that tighter security at airports and border crossings hamstrung any
plans Ferguson might have had to leave the country. If any of Ferguson’s loot is
still floating around, it appears the authorities have stopped looking for it.
Whatever the case, the manner of Ferguson’s disappearance—and the eccentric
lifesty le he adopted in remote Oregon—still puzzles investigators. “One of the
things that struck me the most was the way he left,” say s Neff of Indiana’s
securities division. “Told his girlfriend he was going away for the weekend, and
then he left every one—girlfriend, ex-wives, his children—and never looked back.
Completely cut all ties. That’s cold. What kind of guy does that?”
But Harry Craw, the 92-y ear-old World War II vet from Marion, couldn’t stay
angry at the affable con man who bilked him out of $56,000 and skipped town.
“Did the people in Oregon say he was a nice guy ?” Craw wonders. “I liked him. I
bet they did, too.”
For Ramge, try ing to separate fact from fiction has only led to more questions—
some without easy answers. She began her quest last y ear, finding Ferguson’s first
wife, Vicki, and his son, Brian, in Indiana. Long phone calls helped Ramge
establish Cox’s true backstory, and last June, Brian spent a few day s in Burns for a
quiet memorial service at Ramge’s house, where they shared beers in the addition
Cox’s death left unfinished; Brian sat on a barstool his father had marked as his
own.
Like just about every one else who knew Phil Ferguson, Brian Ferguson has
unanswered questions. Did his father ever wake up in the morning and have
something remind him of his real family ? How could y ou completely forget
about y our past? “I wish he would have been a man and not killed himself—not
taken the easy way out—and told his story,” he say s. “But then again, I don’t
know if I’d even believe him.” Brian say s the trip to Oregon helped him fill in
some of the gaps of his father’s time on the run, but really , he had already figured
his father for dead, any way .
Ramge is having a more difficult time making peace with the deceased man.
“You do something for someone—y ou love someone—and it blows up in y our
face,” she say s. She’s worried she could be audited for helping Phil Ferguson—
lose her house, her farm. She’s already lost so much: hay , equipment, a friend.
“Right now, it would be calving season, and me and Vern would go walking
through his herd and talking about the calves he was going to have,” she say s. “It’s
such a loss, and it’s just so stupid. One part of y ou hates him because y ou invested
in a friendship, and y ou loved the person—he was like family. And y ou invest
those hours and day s and months and y ears—and it’s just all a lie, betray al. And
then y ou have to answer questions from the fucking sheriff’s office.”
Does she feel like she was conned?
“Well, y eah,” she say s. “I think the whole 12 y ears was a con.”
Her sweet “cover bull” relationship with Vern Cox turned out to be bullshit.
Kenney Bush sits on a queen-size bed watching the television, looking for a man in
a home movie. It’s a series of patched-together scenes from a small gathering on
a ranch in the middle of nowhere—nothingness as far as the ey e can see. One
scene ends. Another begins. Gusts of wind rustle the camera mic.
There he is. The man on the screen steps from the shadows, wearing a beard, a
baseball cap, and sunglasses. He stay s in the camera’s ey e long enough to crack a
joke and then disappears, teasing.
“Vern loved to flick the shit,” Bush say s.
A laborer with a copper-colored goatee and thick arms, Bush is in a cramped
bedroom in Portland, Oregon, surrounded by a few meager belongings—
coffeemaker, mini-fridge, microwave—and memories.
Stale cigarettes and wet dog foul the air. Shawn, now Bush’s wife, sits at the head
of the bed and brushes ringlets of hair from her face to get a better glimpse of the
fray ed cardboard box and rumpled manila envelope her husband is arranging on
the bedroom floor.
“This is pretty much what’s left of Vern’s,” Bush say s.
Shawn scoots forward, and Bush opens the box for inspection.
About a dozen sweat-stained ball caps fill the interior, along with a film of dust
from the alfalfa fields of southeastern Oregon.
A pair of dogs paces outside the bedroom door, their nails clicking and clacking
against the tattered hardwood of the home the Bushes share with about a halfdozen other people.
“Don’t know what all’s in here,” Bush say s as he empties the envelope.
It’s stuffed with 70-odd pages of a book manuscript with color-coded charts, some
abbreviations scrawled on scrap paper, and handwritten shopping lists. Shawn
loves the way Cox used to write his A’s: “They ’re backwards, see?” She plans to
get a tattoo replica of the character as a tribute.
“The best man I ever knew,” she say s.
Bush nods. “I feel lost without him.”
They vow to keep Vern Cox’s story alive. The two recently told the Portland
Oregonian that they thought the sheriff and his men killed Cox, intimating that
they ’d executed him for money. The pair followed that up by sounding out on a
Portland-area radio show, telling listeners that they had heard Ferguson returned
millions to his financial victims. (Although he never did.)
The 70-page manuscript at their feet presents a less valiant version of Cox.
Bizarrely, he was writing a book about commodities trading, of all things, with
short, cry ptic passages about his flight from justice, which he accurately predicts
will end in suicide. “I wish to God that I could be available to y ou through the
Internet and help y ou along with y our journey,” he wrote. “May be I will not kill
my self and turn my self in and help all of y ou with The Count and answer all of
y our questions from a jail cell.” In explaining “The Count,” the name Ferguson
gave to his trading philosophy, he likens investors to bugs drawn to the glow of an
electric bug light. “My dad didn’t really like people,” say s Brian Ferguson.
Yet, even in death, he inspires fierce loy alty . “Shit, he’s still my hero,” say s Bush.
“Taught me how to work. Taught me how to do every thing.” If they had known
the truth, both Bushes say , they would not have turned Cox in.
“We’re alway s going to think of him one way —to us, he was Vern Cox,” say s
Bush. “And with the people in Indiana, y ou’re going to have the same thing—to
them, he’s alway s going to be Phillip Ferguson. They ’re not going to change and
we’re not going to change, because the experiences we had with the man? Fucking
awesome.”
“He was someone I could alway s talk to, no matter what,” say s Shawn.
They hope to carry on his legacy and pass it along to the two-week-old baby
sleeping in Shawn’s arms. She had a doctor induce labor in February so the
newborn and Cox would share a birthday . The boy ’s name? Vernon Phillip.
They say they will make sure the boy knows that his namesake was a great man.
Others will alway s remember Phil Ferguson as a guy who stole money, ruined
lives, and broke hearts.
Some won’t admit it, but Vern Cox was, too.
Photo of Cox and Ramge courtesy Lillian Ramge; trailer photo by Michael Rubino.
This article appeared in the June 2013 issue.
Original: https://www.readability.com/articles/31nlhxfb
Title: Politics & Policy
Author: businessweek.com
Summary:
http://www.businessweek.com/articles/2013-06-20/booz-allen-theworlds-most-profitable-spy-organization How this week's cover got madeIn
1940, a year before the attack on Pearl Harbor, the U.S. Navy…
Politics & Policy - www.businessweek.com - Readability
How this week's cover got madeIn 1940, a y ear before the attack on Pearl
Harbor, the U.S. Navy began to think about what a war with Germany would look
like. The admirals worried in particular about the Kriegsmarine’s fleet of U-boats,
which were prey ing on Allied shipping and proving impossible to find, much less
sink. Sty mied, Secretary of the Navy Frank Knox turned to Booz, Fry, Allen &
Hamilton, a consulting firm in Chicago whose best-known clients were Goody ear
Tire & Rubber (GT) and Montgomery Ward. The firm had effectively invented
management consulting, deploy ing whiz kids from top schools as analy sts and
acumen-for-hire to corporate clients. Working with the Navy ’s own planners,
Booz consultants developed a special sensor sy stem that could track the U-boats’
brief-burst radio communications and helped design an attack strategy around it.
With its aid, the Allies by war’s end had sunk or crippled most of the German
submarine fleet.
That project was the start of a long collaboration. As the Cold War set in,
intensified, thawed, and was supplanted by global terrorism in the minds of
national security strategists, the firm, now called Booz Allen Hamilton (BAH),
focused more and more on government work. In 2008 it split off its less lucrative
commercial consulting arm—under the name Booz & Co.—and became a pure
government contractor, publicly traded and majority -owned by private equity
firm Carly le Group (CG). In the fiscal y ear ended in March 2013, Booz Allen
Hamilton reported $5.76 billion in revenue, 99 percent of which came from
government contracts, and $219 million in net income. Almost a quarter of its
revenue—$1.3 billion—was from major U.S. intelligence agencies. Along with
competitors such as Science Applications International Corp. (SAIC), CACI, and
BAE Sy stems (BAESY), the McLean (Va.)-based firm is a prime beneficiary of
an explosion in government spending on intelligence contractors over the past
decade. About 70 percent of the 2013 U.S. intelligence budget is contracted out,
according to a Bloomberg Industries analy sis; the Office of the Director of
National Intelligence (ODNI) say s almost a fifth of intelligence personnel work in
the private sector.
It’s safe to say that most Americans, if they ’d heard of Booz Allen at all, had no
idea how huge a role it play s in the U.S. intelligence infrastructure. They do now.
On June 9, a 29-y ear-old Booz Allen computer technician, Edward Snowden,
revealed himself to be the source of news stories showing the extent of phone and
Internet eavesdropping by the National Security Agency. Snowden leaked
classified documents he loaded onto a thumb drive while working for Booz Allen
at an NSA listening post in Hawaii, and he’s promised to leak many more. After
fleeing to Hong Kong, he’s been in hiding. (He didn’t respond to a request for
comment relay ed by an intermediary .)
The attention has been bad for Booz Allen’s stock, which fell more than 4 percent
the morning after Snowden went public and still hasn’t recovered. Senator Dianne
Feinstein (D-Calif.), who chairs the Select Committee on Intelligence, has called
for a reexamination of the role of private contractors in intelligence work and
announced she’ll seek to restrict their access to classified information. Booz Allen
declined to comment on Snowden bey ond its initial public statement announcing
his termination.
The firm has long kept a low profile—with the federal government as practically
its sole client, there’s no need for publicity. It does little, if any, lobby ing. Its
ability to win contracts is ensured by the roster of intelligence community
heavy weights who work there. The director of national intelligence, James
Clapper—President Obama’s top intelligence adviser—is a former Booz Allen
executive. The firm’s vice chairman, Mike McConnell, was President George W.
Bush’s director of national intelligence and, before that, director of the NSA. Of
Booz Allen’s 25,000 employ ees, 76 percent have classified clearances, and
almost half have top-secret clearances. In a 2003 speech, Joan Dempsey, a
former CIA deputy director, referred to Booz Allen as the “shadow IC” (for
intelligence community ) because of the profusion of “former secretaries of this
and directors of that,” according to a 2008 book, Spies for Hire: The Secret World
of Intelligence Outsourcing. Today Dempsey works for Booz Allen.
It’s possible that fallout from the Snowden revelations will lead to significant
changes in intelligence contracting. The Senate intelligence committee has been
pressuring spy agencies for y ears to reduce their reliance on contractors. And in
the age of the sequester, even once untouchable line items such as defense and
intelligence spending are vulnerable to cuts.
Yet conversations with current and former employ ees of Booz Allen and U.S.
intelligence officials suggest that these contractors aren’t going any where soon.
Even if Snowden ends up costing his former employ er business, the work will
probably just go to its rivals. Although Booz Allen and the rest of the shadow
intelligence community arose as stopgap solutions—meant to buy time as
shrunken, post-Cold War agencies tried to rebuild after Sept. 11—they ’ve become
the vine that supports the wall. As much as contractors such as Booz Allen have
come to rely on the federal government, the government relies on them even
more.
Edward Snowden was not hired as a spy. He’s a mostly self-taught computer
technician who never completed high school, and his first intelligence job was as
a security guard at an NSA facility. In an interview in the Guardian, he say s he
was hired by the Central Intelligence Agency for his computer skills to work on
network security. In 2009 he left for the private sector, eventually ending up at
Booz Allen. The job he did as a contractor for the NSA appears to have been
basic tech support and troubleshooting. He was the IT guy .
People in intelligence tend to divide contract work into three tiers. In the first tier
are the least sensitive and most menial jobs: cutting the grass at intelligence
facilities, empty ing the trash, sorting the mail. In classified facilities even the
janitors need security clearances—the wastebaskets they ’re empty ing might
contain national secrets. That makes these jobs particularly hard to fill, since most
people with security clearances are almost by definition overqualified for
janitorial work.
Snowden, with his computer expertise, fit in the middle tier: people with
specialized skills. When the U.S. military first began ramping up its use of
contractors during the Vietnam War, these jobs made up much of the hiring—the
Pentagon was desperate for repairmen for its increasingly complex weapons and
transport sy stems. Also in this tier are translators, interrogators, and investigators
who handle background checks for government security clearances. Firms such
as CSC (CSC) and L-3 Communications (LLL) specialize in this tier. Booz Allen
competes for some of that work, but it tends to focus on the highest tier: big
contracts that can involve every thing from developing strategies to defeat alQaeda in the Islamic Maghreb to designing software sy stems to writing speeches
for senior officials. Tier three contractors often are, for all intents and purposes,
spies—and sometimes spy masters.
William Golden heads a recruiting and job placement company for intelligence
professionals. In mid-June, he’s try ing to fill three slots for contractors at the
Defense Intelligence Agency. As it happens, Booz Allen isn’t involved, but these
are the sort of jobs the firm has filled in thousands of other instances, Golden
say s. Two postings are for senior counter-intelligence analy st openings in Fort
Devens, Mass., one focusing on the threat to federal installations in Massachusetts,
the other on Southwest Asia. The contractors would be trawling through streams
of intelligence, from digital intercepts and human sources alike, writing reports
and briefings just like the DIA analy sts they would be sitting next to. Both postings
require top-secret clearances, and one would require extensive travel. The third
job is for a senior linguist fluent in Malay alam, spoken mostly in the Indian state
of Kerala, where there’s a growing Maoist insurgency. That the Pentagon is
looking for someone who speaks the language suggests American intelligence
assets are there. The listing specifies “austere conditions.”
Golden say s he constantly sees openings at Booz Allen and other contractors for
“collection managers” in posts around the world. “A collection manager is
someone at the highest level of intelligence who decides what assets get used, how
they get used, what goes where,” he say s. “They provide thought, direction, and
management. They basically have full status, as if they were a government
employ ee. The only thing they can’t do is spend and approve money or hire and
fire government workers.”
The pay fluctuates widely, depending on the candidates’ skills and experience.
“This money comes from the intelligence budget, so there isn’t much oversight,”
Golden say s. He estimates that the Malay alam translator job, for example, will
pay between $180,000 and $225,000 a y ear. That’s partly to compensate for the
austere conditions as well as insurgents’ tendency, unmentioned in the posting, to
target translators first. The pay is also a reflection that the past 10 y ears have
been boom times for private spies.
The large-scale hiring of intelligence contractors can be traced directly to
Sept. 11. The al-Qaeda attacks triggered a bipartisan chorus on Capitol Hill for
more and better intelligence—and correspondingly massive increases in the
federal budget to pay for it. There’s plenty of evidence that the effort has
disrupted terrorist plots. It has also created a lot more contractor work. The
intelligence community had been shrinking throughout the 1990s; with the Soviet
Union gone, intelligence didn’t seem as important to politicians, and there were
budget cuts and a wave of retirements at the CIA, NSA, and DIA. In late 2001 the
only way to get enough experienced people to meet demand was with
contractors, many of them the same experts the government had trained decades
before and then let go. “We were able to expand very, very quickly by using
contract personnel,” said Ronald Sanders, then ODNI’s associate director for
human capital, in a 2008 call with reporters. “They were able to come in quickly
and perform the mission even as we were busy recovering the IC’s military and
civilian workforce.”
Contractors such as Booz Allen were seen as a temporary measure—surge
capacity —to give the government time to hire and train its own employ ees.
Michael Brown, a retired rear admiral, tells about try ing to develop the Navy ’s
cy berwarfare programs in 2001. None of his personnel were cy bersecurity
experts, so he trained Navy linguists—traditionally considered some of the
brainier sailors—for the job. “The Navy was able to use contractors to augment
those trainees while it developed a permanent program,” Brown say s. He himself
now works for RSA Security (EMC), a Bedford (Mass.) cy bersecurity company
that does a lot of business with the government.
As the government intelligence workforce has grown, however, contractor head
count hasn’t returned to pre-Sept. 11 levels. In the 2008 interview, Sanders said
only 5 percent of contractors working for various intelligence agencies were for
“surge requirements.” In a report published this March, the Senate intelligence
committee complained that “some elements of the IC have been hiring additional
contractors after they have converted or otherwise removed other contractors,
resulting in an overall workforce that continues to grow.” The ODNI’s public
affairs office disputes this, say ing “core contractor personnel” has been cut by
36 percent since 2007.
Proponents of intelligence contracting say there are good reasons private firms
have become a permanent part of the landscape. Not every task requires a fulltime federal employ ee. Building a classified facility or a new database is a shortterm project that’s ideal for contract labor—the job takes a few months or a
couple y ears, and it doesn’t make sense to hire and train new employ ees just for
that. In theory, contract labor is cheaper, since the government isn’t on the hook
for the worker’s salary after the job is over, much less his health care or pension.
For the military, it’s often the only way to get additional work done without
violating the caps on manpower written into legislation. And it’s abetted by the
dy sfunctional funding environment in Washington, where money even for longterm projects is increasingly appropriated in y ear-to-y ear emergency
supplemental spending bills, creating a sense of uncertainty that makes it harder to
hire permanent employ ees.
Senior intelligence officials also say contractors are a pipeline to innovation in the
private sector. The contemporary version of Q’s laboratory —that storied
incubator for James Bond’s spy toy s—is Silicon Valley, where startups are
developing technology that can discern patterns and connections in oceans of raw
data, among other feats of computer science. In an interview with Bloomberg
Businessweek, Vice Chairman McConnell points out that while Booz Allen is wellknown for hiring former spies like himself, the company also recruits heavily
from tech. A 2008 study by the ODNI reported that 56 percent of intelligence
contractors provided unique expertise not found among government intelligence
officers.
“As DNI, I absolutely wanted the lift and creativity and the power of the private
sector,” say s McConnell, using the initials for his old job. “Because I’d become
irrelevant if I didn’t stay in tune with technology and its evolution. The most
innovative, creative, dominant country in the world is the United States, and it’s
mostly because of the efficiency of the free market.” Some intelligence
contractors, such as Palo Alto (Calif.)-based Palantir Technologies, have gone so
far as to locate in commercial tech hubs rather than the traditional intelligence
corridor that stretches 50 miles from Reston, Va., to the Fort Meade (Md.)
headquarters of the NSA.
Even so, spending can spin way out of control. According to the ODNI, a ty pical
contractor employ ee costs $207,000 a y ear, while a government counterpart
costs $125,000, including benefits and pension. One of the most notorious projects
was the NSA’s Trailblazer. Intended as an advanced program to sort and analy ze
the vast volume of phone and Web traffic that the NSA collects hourly,
Trailblazer was originally set to cost $280 million and take 26 months. Booz Allen
was part of a five-company consortium working on the project. (SAIC was the
lead contractor.) “In Trailblazer, NSA is capturing the best of industry technology
and experience to further their mission,” Booz Allen Vice President Marty Hill
said in a 2002 press release. In 2006, when the program shut down, it had failed to
meet any of its goals, and its cost had run into the billions of dollars. An NSA
inspector general report found “excessive labor rates for contractor personnel,”
without naming the contractors. Several NSA employ ees who denounced the
waste were fired; one, a senior executive named Thomas Andrews Drake, was
charged under the Espionage Act after he spoke to a reporter. (The charges were
eventually dropped.)
A U.S. Department of Homeland Security computer sy stems contract awarded to
Booz Allen around the same time had similar issues. Over the course of three
y ears, costs exploded from the original $2 million to $124 million, in large part,
auditors at the Government Accountability Office would later report, because of
poor planning and oversight. But even when the problems came to light, as the
Washington Post reported, DHS continued to renew the contract and even give
Booz Allen new ones, because the agency determined it couldn’t build, or even
run, the sy stem on its own.
Booz Allen spokesman James Fisher and NSA spokeswoman Vaneé Vines both
declined to comment on Trailblazer. (Former NSA Director Michael Hay den has
since said publicly that the project failed because the spy agency ’s plan for it was
unrealistic.) Fisher also declined to comment on the DHS contract; Peter
Boogaard, a spokesman for that agency, did not immediately return a call for
comment.
Booz Allen and its competitors are able to keep landing contracts and keep
growing, critics charge, not because their expertise is irreplaceable but because
their Rolodexes are. Name a retired senior official from the NSA or the CIA or
the various military intelligence branches, and there’s a good chance he works for
a contractor—most likely Booz Allen. Name a senior intelligence official serving
in the government, and there’s a good chance he used to work for Booz Allen.
(ODNI’s Sanders, who made the case for contractors, is now a vice president at
the firm, which declined to make him available for an interview.) McConnell and
others at Booz Allen are quick to point out that the contracting process has
safeguards and oversight built in and that it has matured since the frenzied y ears
just after Sept. 11. At the same time, the firm’s tendency to scoop up—and
lavishly pay —high-ranking intelligence officers once they retire suggests the
value it places on their address books and in having their successors inside
government consider Booz Allen as part of their own retirement plans.
Rich contractor salaries create a classic public-private revolving door. They pull
people from government intelligence, deplete the ranks, and put more experience
and knowledge in the private sector, which makes contractors even more vital to
the government. “Now y ou go into government for two or three y ears, get a
clearance, and migrate to one of the high-pay ing contractors,” say s Steven
Aftergood, who heads the Project on Government Secrecy at the Federation of
American Scientists. That’s what Snowden did. “You have to have a welldeveloped sense of patriotism to turn that money down,” Aftergood say s.
As a result, say s Golden, the headhunter, a common complaint in spy agencies is
that “the damn contractors know more than we do.” That could have been a
factor in the Snowden leak—his computer proficiency may have allowed him to
access information he shouldn’t have been allowed to see. Snowden is an
anomaly, though. What he did with that information—copy ing it, getting it to the
press, and publicly identify ing himself as the leaker—cost him his job and
potentially his freedom, all for what appear so far to be idealistic motives. The
more common temptation would be to use knowledge, legally and perhaps not
even consciously , to generate more business.
In the wake of the Snowden leak, Congress is pay ing more attention to contractors
like Booz Allen and the role they play in intelligence gathering. Lawmakers on
both sides of the aisle say that the ease with which Snowden was able to gain
access to and divulge classified information highlights the need for greater
oversight of contractors’ activities. “I’m just stunned that an individual who did not
even have a high school diploma, who did not successfully complete his military
service, and who is only age 29 had access to some of the most highly classified
information in our government,” Senator Susan Collins (R-Me.) told reporters on
Capitol Hill on June 11. “That’s astonishing to me, and it suggests real problems
with the vetting process. The rules are not being applied well or they need to be
more strict.”
Changing them, however, may be easier said than done. “At the very highest
level, whether at the White House or the Pentagon, there will alway s be a
contractor in the room,” say s Golden. “And the powers that be will turn around
and say, ‘That’s a brilliant plan, how do we make that work?’ And a contractor will
say , ‘I can do that.’ ”
Original: https://www.readability.com/articles/xnthvu5i
Title: DAVID FOSTER WALLACE, IN HIS OWN WORDS
Author: moreintelligentlife.com
Summary: IN MEMORIAM | September 19th 2008 The world of letters has
lost a giant. We have felt nourished by the mournful graspings of sites dedicated
to his memory ("He was my favourite" ~ Zadie Smith), and…
DAVID FOSTER WALLACE, IN HIS OWN WORDS - moreintelligentlife.com
- Readability
IN MEMORIAM | September 19th 2008
The world of letters has lost a giant. We have felt nourished by the mournful
graspings of sites dedicated to his memory ("He was my favourite" ~ Zadie
Smith), and we grieve for the books we will never see. But perhaps the best tribute
is one he wrote himself ...
Special to MORE INTELLIGENT LIFE
This is the comencement address he gave to the graduates of Kenyon College in
2005. It captures his electric mind, and also his humility--the way he elevated and
made meaningful, beautiful, many of the lonely thoughts that rattle around in our
heads. The way he put better thoughts in our heads, too. (Many thanks to
Marginalia.org for making this available.)
(If any body feels like perspiring [cough], I'd advise y ou to go ahead, because I'm
sure going to. In fact I'm gonna [mumbles while pulling up his gown and taking
out a handkerchief from his pocket].) Greetings ["parents"?] and congratulations to
Keny on's graduating class of 2005. There are these two y oung fish swimming
along and they happen to meet an older fish swimming the other way, who nods
at them and say s "Morning, boy s. How's the water?" And the two y oung fish
swim on for a bit, and then eventually one of them looks over at the other and
goes "What the hell is water?"
This is a standard requirement of US commencement speeches, the deploy ment
of didactic little parable-ish stories. The story ["thing"] turns out to be one of the
better, less bullshitty conventions of the genre, but if y ou're worried that I plan to
present my self here as the wise, older fish explaining what water is to y ou
y ounger fish, please don't be. I am not the wise old fish. The point of the fish story
is merely that the most obvious, important realities are often the ones that are
hardest to see and talk about. Stated as an English sentence, of course, this is just a
banal platitude, but the fact is that in the day to day trenches of adult existence,
banal platitudes can have a life or death importance, or so I wish to suggest to y ou
on this dry and lovely morning.
Of course the main requirement of speeches like this is that I'm supposed to talk
about y our liberal arts education's meaning, to try to explain why the degree y ou
are about to receive has actual human value instead of just a material pay off. So
let's talk about the single most pervasive cliché in the commencement speech
genre, which is that a liberal arts education is not so much about filling y ou up
with knowledge as it is about "teaching y ou how to think". If y ou're like me as a
student, y ou've never liked hearing this, and y ou tend to feel a bit insulted by the
claim that y ou needed any body to teach y ou how to think, since the fact that y ou
even got admitted to a college this good seems like proof that y ou already know
how to think. But I'm going to posit to y ou that the liberal arts cliché turns out not to
be insulting at all, because the really significant education in thinking that we're
supposed to get in a place like this isn't really about the capacity to think, but rather
about the choice of what to think about. If y our total freedom of choice regarding
what to think about seems too obvious to waste time discussing, I'd ask y ou to think
about fish and water, and to bracket for just a few minutes y our scepticism about
the value of the totally obvious.
Here's another didactic little story. There are these two guy s sitting together in a
bar in the remote Alaskan wilderness. One of the guy s is religious, the other is an
atheist, and the two are arguing about the existence of God with that special
intensity that comes after about the fourth beer. And the atheist say s: "Look, it's
not like I don't have actual reasons for not believing in God. It's not like I haven't
ever experimented with the whole God and pray er thing. Just last month I got
caught away from the camp in that terrible blizzard, and I was totally lost and I
couldn't see a thing, and it was 50 below, and so I tried it: I fell to my knees in the
snow and cried out 'Oh, God, if there is a God, I'm lost in this blizzard, and I'm
gonna die if y ou don't help me.'" And now, in the bar, the religious guy looks at
the atheist all puzzled. "Well then y ou must believe now," he say s, "After all, here
y ou are, alive." The atheist just rolls his ey es. "No, man, all that was was a couple
Eskimos happened to come wandering by and showed me the way back to
camp."
It's easy to run this story through kind of a standard liberal arts analy sis: the exact
same experience can mean two totally different things to two different people,
given those people's two different belief templates and two different way s of
constructing meaning from experience. Because we prize tolerance and diversity
of belief, nowhere in our liberal arts analy sis do we want to claim that one guy 's
interpretation is true and the other guy 's is false or bad. Which is fine, except we
also never end up talking about just where these individual templates and beliefs
come from. Meaning, where they come from INSIDE the two guy s. As if a
person's most basic orientation toward the world, and the meaning of his
experience were somehow just hard-wired, like height or shoe-size; or
automatically absorbed from the culture, like language. As if how we construct
meaning were not actually a matter of personal, intentional choice. Plus, there's
the whole matter of arrogance. The nonreligious guy is so totally certain in his
dismissal of the possibility that the passing Eskimos had any thing to do with his
pray er for help. True, there are plenty of religious people who seem arrogant and
certain of their own interpretations, too. They 're probably even more repulsive
than atheists, at least to most of us. But religious dogmatists' problem is exactly the
same as the story 's unbeliever: blind certainty, a close-mindedness that amounts
to an imprisonment so total that the prisoner doesn't even know he's locked up.
The point here is that I think this is one part of what teaching me how to think is
really supposed to mean. To be just a little less arrogant. To have just a little
critical awareness about my self and my certainties. Because a huge percentage
of the stuff that I tend to be automatically certain of is, it turns out, totally wrong
and deluded. I have learned this the hard way , as I predict y ou graduates will, too.
Here is just one example of the total wrongness of something I tend to be
automatically sure of: every thing in my own immediate experience supports my
deep belief that I am the absolute centre of the universe; the realest, most vivid
and important person in existence. We rarely think about this sort of natural, basic
self-centredness because it's so socially repulsive. But it's pretty much the same
for all of us. It is our default setting, hard-wired into our boards at birth. Think
about it: there is no experience y ou have had that y ou are not the absolute centre
of. The world as y ou experience it is there in front of YOU or behind YOU, to the
left or right of YOU, on YOUR TV or YOUR monitor. And so on. Other people's
thoughts and feelings have to be communicated to y ou somehow, but y our own
are so immediate, urgent, real.
Please don't worry that I'm getting ready to lecture y ou about compassion or
other-directedness or all the so-called virtues. This is not a matter of virtue. It's a
matter of my choosing to do the work of somehow altering or getting free of my
natural, hard-wired default setting which is to be deeply and literally selfcentered and to see and interpret every thing through this lens of self. People who
can adjust their natural default setting this way are often described as being "welladjusted", which I suggest to y ou is not an accidental term.
Given the triumphant academic setting here, an obvious question is how much of
this work of adjusting our default setting involves actual knowledge or intellect.
This question gets very tricky. Probably the most dangerous thing about an
academic education--least in my own case--is that it enables my tendency to
over-intellectualise stuff, to get lost in abstract argument inside my head, instead
of simply pay ing attention to what is going on right in front of me, pay ing
attention to what is going on inside me.
As
I'm sure y ou guy s know by now, it is extremely difficult to stay alert and
attentive, instead of getting hy pnotised by the constant monologue inside y our
own head (may be happening right now). Twenty y ears after my own
graduation, I have come gradually to understand that the liberal arts cliché about
teaching y ou how to think is actually shorthand for a much deeper, more serious
idea: learning how to think really means learning how to exercise some control
over how and what y ou think. It means being conscious and aware enough to
choose what y ou pay attention to and to choose how y ou construct meaning from
experience. Because if y ou cannot exercise this kind of choice in adult life, y ou
will be totally hosed. Think of the old cliché about "the mind being an excellent
servant but a terrible master".
This, like many clichés, so lame and unexciting on the surface, actually expresses
a great and terrible truth. It is not the least bit coincidental that adults who commit
suicide with firearms almost alway s shoot themselves in: the head. They shoot the
terrible master. And the truth is that most of these suicides are actually dead long
before they pull the trigger.
And I submit that this is what the real, no bullshit value of y our liberal arts
education is supposed to be about: how to keep from going through y our
comfortable, prosperous, respectable adult life dead, unconscious, a slave to y our
head and to y our natural default setting of being uniquely, completely, imperially
alone day in and day out. That may sound like hy perbole, or abstract nonsense.
Let's get concrete. The plain fact is that y ou graduating seniors do not y et have
any clue what "day in day out" really means. There happen to be whole, large
parts of adult American life that nobody talks about in commencement speeches.
One such part involves boredom, routine and petty frustration. The parents and
older folks here will know all too well what I'm talking about.
By way of example, let's say it's an average adult day, and y ou get up in the
morning, go to y our challenging, white-collar, college-graduate job, and y ou
work hard for eight or ten hours, and at the end of the day y ou're tired and
somewhat stressed and all y ou want is to go home and have a good supper and
may be unwind for an hour, and then hit the sack early because, of course, y ou
have to get up the next day and do it all again. But then y ou remember there's no
food at home. You haven't had time to shop this week because of y our
challenging job, and so now after work y ou have to get in y our car and drive to
the supermarket. It's the end of the work day and the traffic is apt to be: very bad.
So getting to the store takes way longer than it should, and when y ou finally get
there, the supermarket is very crowded, because of course it's the time of day
when all the other people with jobs also try to squeeze in some grocery shopping.
And the store is hideously lit and infused with soul-killing muzak or corporate pop
and it's pretty much the last place y ou want to be but y ou can't just get in and
quickly out; y ou have to wander all over the huge, over-lit store's confusing aisles
to find the stuff y ou want and y ou have to manoeuvre y our junky cart through all
these other tired, hurried people with carts (et cetera, et cetera, cutting stuff out
because this is a long ceremony ) and eventually y ou get all y our supper supplies,
except now it turns out there aren't enough check-out lanes open even though it's
the end-of-the-day rush. So the checkout line is incredibly long, which is stupid
and infuriating. But y ou can't take y our frustration out on the frantic lady working
the register, who is overworked at a job whose daily tedium and meaninglessness
surpasses the imagination of any of us here at a prestigious college.
But any way, y ou finally get to the checkout line's front, and y ou pay for y our
food, and y ou get told to "Have a nice day " in a voice that is the absolute voice of
death. Then y ou have to take y our creepy, flimsy, plastic bags of groceries in
y our cart with the one crazy wheel that pulls maddeningly to the left, all the way
out through the crowded, bumpy, littery parking lot, and then y ou have to drive all
the way home through slow, heavy, SUV-intensive, rush-hour traffic, et cetera et
cetera.
Every one here has done this, of course. But it hasn't y et been part of y ou
graduates' actual life routine, day after week after month after y ear.
But it will be. And many more dreary , annoy ing, seemingly meaningless routines
besides. But that is not the point. The point is that petty, frustrating crap like this is
exactly where the work of choosing is gonna come in. Because the traffic jams
and crowded aisles and long checkout lines give me time to think, and if I don't
make a conscious decision about how to think and what to pay attention to, I'm
gonna be pissed and miserable every time I have to shop. Because my natural
default setting is the certainty that situations like this are really all about me. About
MY hungriness and MY fatigue and MY desire to just get home, and it's going to
seem for all the world like every body else is just in my way. And who are all
these people in my way ? And look at how repulsive most of them are, and how
stupid and cow-like and dead-ey ed and nonhuman they seem in the checkout line,
or at how annoy ing and rude it is that people are talking loudly on cell phones in
the middle of the line. And look at how deeply and personally unfair this is.
Or, of course, if I'm in a more socially conscious liberal arts form of my default
setting, I can spend time in the end-of-the-day traffic being disgusted about all the
huge, stupid, lane-blocking SUV's and Hummers and V-12 pickup trucks, burning
their wasteful, selfish, 40-gallon tanks of gas, and I can dwell on the fact that the
patriotic or religious bumper-stickers alway s seem to be on the biggest, most
disgustingly selfish vehicles, driven by the ugliest [responding here to loud
applause] (this is an example of how NOT to think, though) most disgustingly
selfish vehicles, driven by the ugliest, most inconsiderate and aggressive drivers.
And I can think about how our children's children will despise us for wasting all
the future's fuel, and probably screwing up the climate, and how spoiled and
stupid and selfish and disgusting we all are, and how modern consumer society
just sucks, and so forth and so on.
You get the idea.
If I choose to think this way in a store and on the freeway, fine. Lots of us do.
Except thinking this way tends to be so easy and automatic that it doesn't have to
be a choice. It is my natural default setting. It's the automatic way that I
experience the boring, frustrating, crowded parts of adult life when I'm operating
on the automatic, unconscious belief that I am the centre of the world, and that
my immediate needs and feelings are what should determine the world's
priorities.
The thing is that, of course, there are totally different way s to think about these
kinds of situations. In this traffic, all these vehicles stopped and idling in my way,
it's not impossible that some of these people in SUV's have been in horrible auto
accidents in the past, and now find driving so terrify ing that their therapist has all
but ordered them to get a huge, heavy SUV so they can feel safe enough to drive.
Or that the Hummer that just cut me off is may be being driven by a father whose
little child is hurt or sick in the seat next to him, and he's try ing to get this kid to the
hospital, and he's in a bigger, more legitimate hurry than I am: it is actually I who
am in HIS way .
Or I can choose to force my self to consider the likelihood that every one else in
the supermarket's checkout line is just as bored and frustrated as I am, and that
some of these people probably have harder, more tedious and painful lives than I
do.
Again, please don't think that I'm giving y ou moral advice, or that I'm say ing y ou
are supposed to think this way, or that any one expects y ou to just automatically
do it. Because it's hard. It takes will and effort, and if y ou are like me, some day s
y ou won't be able to do it, or y ou just flat out won't want to.
But most day s, if y ou're aware enough to give y ourself a choice, y ou can choose
to look differently at this fat, dead-ey ed, over-made-up lady who just screamed
at her kid in the checkout line. May be she's not usually like this. May be she's been
up three straight nights holding the hand of a husband who is dy ing of bone
cancer. Or may be this very lady is the low-wage clerk at the motor vehicle
department, who just y esterday helped y our spouse resolve a horrific, infuriating,
red-tape problem through some small act of bureaucratic kindness. Of course,
none of this is likely, but it's also not impossible. It just depends what y ou want to
consider. If y ou're automatically sure that y ou know what reality is, and y ou are
operating on y our default setting, then y ou, like me, probably won't consider
possibilities that aren't annoy ing and miserable. But if y ou really learn how to pay
attention, then y ou will know there are other options. It will actually be within
y our power to experience a crowded, hot, slow, consumer-hell ty pe situation as
not only meaningful, but sacred, on fire with the same force that made the stars:
love, fellowship, the my stical oneness of all things deep down.
Not that that my stical stuff is necessarily true. The only thing that's capital-T True
is that y ou get to decide how y ou're gonna try to see it.
This, I submit, is the freedom of a real education, of learning how to be welladjusted. You get to consciously decide what has meaning and what doesn't. You
get to decide what to worship.
Because here's something else that's weird but true: in the day -to-day trenches of
adult life, there is actually no such thing as atheism. There is no such thing as not
worshipping. Every body worships. The only choice we get is what to worship.
And the compelling reason for may be choosing some sort of god or spiritual-ty pe
thing to worship--be it JC or Allah, be it YHWH or the Wiccan Mother Goddess,
or the Four Noble Truths, or some inviolable set of ethical principles--is that pretty
much any thing else y ou worship will eat y ou alive. If y ou worship money and
things, if they are where y ou tap real meaning in life, then y ou will never have
enough, never feel y ou have enough. It's the truth. Worship y our body and
beauty and sexual allure and y ou will alway s feel ugly. And when time and age
start showing, y ou will die a million deaths before they finally grieve y ou. On one
level, we all know this stuff already. It's been codified as my ths, proverbs,
clichés, epigrams, parables; the skeleton of every great story. The whole trick is
keeping the truth up front in daily consciousness.
Worship power, y ou will end up feeling weak and afraid, and y ou will need ever
more power over others to numb y ou to y our own fear. Worship y our intellect,
being seen as smart, y ou will end up feeling stupid, a fraud, alway s on the verge
of being found out. But the insidious thing about these forms of worship is not that
they 're evil or sinful, it's that they 're unconscious. They are default settings.
They 're the kind of worship y ou just gradually slip into, day after day, getting
more and more selective about what y ou see and how y ou measure value without
ever being fully aware that that's what y ou're doing.
And the so-called real world will not discourage y ou from operating on y our
default settings, because the so-called real world of men and money and power
hums merrily along in a pool of fear and anger and frustration and craving and
worship of self. Our own present culture has harnessed these forces in way s that
have y ielded extraordinary wealth and comfort and personal freedom. The
freedom all to be lords of our tiny skull-sized kingdoms, alone at the centre of all
creation. This kind of freedom has much to recommend it. But of course there are
all different kinds of freedom, and the kind that is most precious y ou will not hear
much talk about much in the great outside world of wanting and achieving.... The
really important kind of freedom involves attention and awareness and discipline,
and being able truly to care about other people and to sacrifice for them over and
over in my riad petty , unsexy way s every day .
That is real freedom. That is being educated, and understanding how to think. The
alternative is unconsciousness, the default setting, the rat race, the constant
gnawing sense of having had, and lost, some infinite thing.
I know that this stuff probably doesn't sound fun and breezy or grandly
inspirational the way a commencement speech is supposed to sound. What it is, as
far as I can see, is the capital-T Truth, with a whole lot of rhetorical niceties
stripped away. You are, of course, free to think of it whatever y ou wish. But
please don't just dismiss it as just some finger-wagging Dr Laura sermon. None
of this stuff is really about morality or religion or dogma or big fancy questions of
life after death.
The capital-T Truth is about life BEFORE death.
It is about the real value of a real education, which has almost nothing to do with
knowledge, and every thing to do with simple awareness; awareness of what is so
real and essential, so hidden in plain sight all around us, all the time, that we have
to keep reminding ourselves over and over:
"This is water."
"This is water."
It is unimaginably hard to do this, to stay conscious and alive in the adult world
day in and day out. Which means y et another grand cliché turns out to be true:
y our education really IS the job of a lifetime. And it commences: now.
I wish y ou way more than luck.
Picture credit: Steve Rhodes/flickr
See our Notes on a Voice on David Foster Wallace
Arts books
Original: https://www.readability.com/articles/j9osagtl
Title: How Much Is a Life Worth?
Author: nationaljournal.com
Summary: To Ken Feinberg, if you lose both your legs, you’re as good as dead.
Here, in the world of the living, inspirational media stories after the Boston
Marathon bombings featured survivors who…
To Ken Feinberg, if y ou lose both y our legs, y ou’re as good as dead.
Here, in the world of the living, inspirational media stories after the Boston
Marathon bombings featured survivors who persevered, grittily relearning to walk
atop state-of-the-art prosthetic limbs, fighting for normalcy with each new step.
But in Feinberg’s world, it made no difference whether a person could still live a
rewarding life or never left the race’s finish line. That didn’t enter the equation
—his equation. His choice. His rules. Whether y ou died at the scene or y ou lost
both y our legs, y ou received the same amount of money —$2.2 million—from
the victim fund established in the wake of the attack. If y ou lost one limb, y ou
received considerably less. If y ou were hospitalized but kept y our limbs, then still
less.
Feinberg is the nearly ubiquitous expert who has been called in to divvy up funds
for the fallen and the injured in a stomach-churning sequence of tragedies, from
the Sept. 11 attacks to the Gulf of Mexico oil spill, from the Virginia Tech
shootings to the Boston bombings. He’s Death’s accountant. When the stands
collapsed at the Indiana State Fair in 2011, killing seven, they called Ken Feinberg.
When a gunman murdered 27 children at Sandy Hook Elementary in
Connecticut, they called Ken Feinberg. His is the grimmest of specialties.
“You’ll never make these people whole,” Feinberg say s, sitting in his Washington
law office as the city below baked in the summer’s heat. Befitting a career lived
under klieg lights, one wall is dedicated to press clippings. But here, dread and
devastation run though the framed articles, a sorrowful wall of fame. On the
coffee table are we-couldn’t-have-done-it-without-y ou letters from Presidents
Bush and Obama, along with a picture of Feinberg and family in the Oval Office.
Opera, Feinberg’s passion, is piped into the room continuously .
And characteristic of a man who has waded repeatedly into tragedy ’s wake, who
has been praised and flay ed, who has sent millions of dollars to some victims and
told thousands of others they ’ll see nothing, and who is viewed as the unparalleled
expert in his field, Feinberg is alternately boastful and defensive, contemplative
and bombastic. He’s done this so long now, he knows the questions before they
come, addresses the criticisms before they ’re raised, and stands by his record to
the end. With this vocation, it seems, comes a nearly bottomless capacity for selfexamination. Feinberg has written books and delivered commencement speeches
on the principles of victim compensation, on the value of a life. He has a singular
perspective on how our society chooses—or declines—to take care of its own.
And it has left him troubled. “Bad things happen to good people each day in this
country ,” he say s.
That is to say, not every one gets a million dollars when tragedy calls. And by
“not every one,” that is to say just about no one. Feinberg’s entire public career is
about the outliers—the handful of moments when the government, or a
corporation, or a bevy of private citizens determines that a tragic event somehow
merited a pecuniary response. Until 9/11, the government was not in the business
of remunerating victims of terrorism; the closest it came to compensating on a
mass scale was natural-disaster relief. But families of those murdered on that
September day ended up with more than $2 million each, tax free. Feinberg say s
such an effort, funded by taxpay er dollars, will never happen again. “It’s against
our heritage and character as a nation, frankly, to be establishing government
funds to compensate for loss,” he say s.
Indeed, victims of the first World Trade Center bombings in 1993 never saw any
money, nor did the 168 killed and 680 injured in the 1995 Oklahoma City
bombing. Nor did the 13 troops killed and 30 wounded by a gunman at Fort Hood,
Texas, in 2009. The Boston Marathon bombing, which killed three and injured
more than 260 others, can be viewed as a test of whether Congress still wants to
redress personal injuries caused by a terrorist attack. It doesn’t.
But if the government is out, every day donors aren’t. The $60 million that
Feinberg administered in Boston was all private money, which gave him license
to disperse it any way he saw fit. Funds sprung up to assist victims of the shootings
at Virginia Tech, Aurora, Colo., and Newtown, Conn. Obama persuaded BP to set
aside $20 billion for businesses and communities harmed by the oil spill after its
Deepwater Horizon rig exploded in 2010. Feinberg was involved in each of those
efforts.
All of this raises fundamental questions of fairness, he say s. On one hand, the 9/11
pay out was an expression of political sentiment; few Americans objected. And as
far as private money goes, well, that’s the marketplace in action. Donors are free
to send checks in one case and not another, just like they ’re free to choose
between the Jerry Lewis telethon and the March of Dimes. On the other hand is
the unsettling feeling that human life ends up being valued in all manner of
disparate way s, based on publicity, geography, the nature of the crime, and the
identities of the victims. “It’s horrible,” Feinberg say s. A woman who lost a
spouse in the Boston bombings will receive more than $2 million. A family who
lost a child at Sandy Hook Elementary will see less than $300,000. Meanwhile, the
families of African-American children killed by stray bullets on the streets of
Chicago, Washington, New Orleans, and elsewhere may not be able to cover the
cost of the funeral.
SOME, NOT OTHERS
There are many reasons why the private victim fund has become the favored
means to compensate victims of mass tragedy. Certainly, the 9/11 fund created a
model in the public consciousness; it reemphasized the principle of a society
collectively responding to disaster—and, more than that, it showed, largely thanks
to Feinberg’s work, that compensation could be paid in a humane, effective, and
efficient way. Other factors also play in: Technology has made donating easier
than ever, while cable networks’ thirst for narrative can drive donations. Victims
in some cases are elevated to the status of marty rs or even angels. Tragedies are
lingered over for day s at a time. In some way s, it can feel like a telethon. “You’re
totally at the mercy of what people have an emotional reaction to, what gets the
most visibility, what play s out well as a story,” say s Edward Lascher, a socialsciences professor at California State University (Sacramento) who has written
about victim funds. “The potential for arbitrariness is pretty high.”
By and large, however, Americans have never made compensating victims of
crime or tragedy a societal priority. It was, rather, a matter for criminal law,
which provides for restitution in most cases. A perpetrator in an assault case, for
example, is ordered to pay the victim’s medical expenses and lost wages as part
of his punishment. The aim is to stave off another lawsuit to recover damages.
“You don’t want the victim to have to navigate the civil sy stem,” say s Meg
Garvin, executive director of the National Crime Victim Law Institute in Portland,
Ore.—a goal that Feinberg has long shared. Except that, often, the perp pay s
nothing; and when he does, it only trickles out. Convicted swindler Bernie Madoff
was ordered to pay $17 billion to his victims, but he was bankrupted by the same
crash that evaporated his clients’ money. Some are just beginning to see partial
pay ments.
A victims-rights movement that sprung out of the progressive criminal-justice
reforms of the 1960s and ’70s led to state and federal programs intended to assist
crime victims in the same manner as restitution, with basic pay ments to cover
economic losses. But they are chronically underfunded (they draw money from
fees and fines rather than from tax dollars) and often underused. They pay
nothing on the order of the Boston fund or even the Newtown fund, because most
states cap victim awards at $25,000. According to the National Association of
Crime Victim Compensation Boards, less than $500 million is paid out annually to
about 200,000 crime victims nationwide, an average of close to $2,500—almost
100 times less than the average Boston Marathon award.
In 2004, after Feinberg wrapped up the 9/11 fund, Julie Goldscheid, a professor at
the City University of New York School of Law, compared the compensation
given to three groups—terrorism victims, the more than 1,000 women killed that
y ear as a result of domestic violence, and the 40,000 to 60,000 women who were
sexually assaulted. The average 9/11 fund award, she noted, was $2 million, with
pay ments ranging from $500 to $8.6 million. In 2001, the average award to crime
victims through state victim-compensation programs was $2,400. “The contrast
was just stark,” Goldscheid say s, calling it part of an “unfortunate history of a
narrative about deserving and undeserving victims.”
Private fundraising for certain classes of victims, she say s, “opens the door to
long-standing biases.” Nowhere might this be more true than in Chicago. At the
time of the Newtown tragedy last December, 270 children under 18 had been
gunned down on Chicago’s streets during the previous three y ears. One was 7y ear-old Heaven Sutton, who was hit by a stray bullet while selling candy
outdoors a few months before Newtown. Her family asked for donations to cover
the cost of the burial and even setting up a table at her memorial service. “If y ou
think about a victim of gang violence, they do tend to be kids of color,” Goldscheid
say s. “Is there a sensibility that they are somehow at fault?” According to the
Illinois attorney general’s office, the maximum a murder victim or the family
can receive from the state compensation fund is $27,000. (Litigating en masse
against the gun industry is no longer a realistic option since Congress passed a law
in 2005 granting broad immunity to firearms manufacturers.)
Lascher say s a valid argument can be made for treating terrorism victims
differently than every one else because of the “psy chic damage.” “The
community really does suffer from some instances more than others,” he say s.
He adds, however, that it’s tough to draw a line between the Boston bombings and
the Sandy Hook shooting. “If y ou are ever going to make a case for third-party
trauma, it’s probably Newtown.”
But Newtown is also an example of the problematic nature of private victim
funds, which can become politicized. Connecticut Gov. Dannel Malloy last month
criticized the administrator of the fund, a foundation, for dispersing only $7.7
million of the $11.4 million to the families. It will use the rest to assist the
Newtown community in unspecified way s. That means each family who lost a
child will receive only $281,000 from the fund. “I was amazed,” say s Feinberg,
shaking his head. He was a consultant to the fund but not its administrator.
LESSONS FROM MISERY
I first met Ken Feinberg 11 y ears ago at a claims hearings for the 9/11 fund. It
was for Juan Cruz-Santiago, a Pentagon accountant who had somehow survived
when American Airlines Flight 77 smashed into the building’s outer ring, where he
was working. The inferno burned over 70 percent of Cruz-Santiago’s body and
seared off his ey elids. He endured 30 surgeries and spent 12 weeks in the hospital,
where doctors amputated his fingers.
Cruz-Santiago came with an attorney to ask Feinberg for an award akin to or
greater than that given to a victim who had died in the attacks. Even then, Feinberg
exhibited the mix of warmth and implacability that defines him, on one hand
sy mpathizing with the victim’s suffering and on the other rejecting outright his
lawy er’s efforts to inflate the award toward $3 million. Feinberg has written that
he takes inspiration from the seated pose of Abraham Lincoln at the memorial on
the National Mall. One hand is relaxed, showing his compassion toward the
disloy al South; the other hand is clinched with determination to keep the Union
together.
Feinberg works hard not to be sway ed by emotional appeals—and he tries as best
he can to keep some distance. “You sob in private,” he say s. “Never in front of a
victim.” As a rule, he does not visit the sites of the tragedies to which he has been
connected. He avoided the marathon finish line and the Sandy Hook campus. He
didn’t inspect Ground Zero in Manhattan until after the claims process was
finished, and he never returned. Nor does he make a habit of visiting claimants in
the hospital; he makes them come to an office, to keep himself from becoming
entangled in their despair.
He broke his rule in Boston when he visited two victims at a rehabilitation facility
—and he regrets it now. The first man, he say s, greeted Feinberg with bitterness:
“You’re going to give me a million dollars or more,” he said. “I’ve got a better
idea. Give me my leg back.” The second victim’s legs were stippled by shrapnel
and gangrene, but he still had them. He had been ly ing in bed doing the math, and
he had a simple question for Feinberg. Should he have his legs amputated before
the July 1 deadline for determining his award? The difference in his pay out would
have been more than $1 million, tax free. Feinberg didn’t know what to say. The
man decided to keep his legs—and received $948,300. The first man, who lost one
leg, received $1,195,000. Feinberg walked out of the facility that day and vowed:
Never again. “There have to be limits,” he say s.
The Bush administration tapped Feinberg for the 9/11 assignment largely because
of his work assessing claims that arose from the 1984 Agent Orange settlement,
which was then the largest mass tort deal in U.S. history. Brokered by legendary
federal Judge Jack Weinstein, a mentor of Feinberg’s, the settlement fund paid
$197 million to about 52,000 veterans exposed to the toxin during the Vietnam
War, and to their families. The top pay ment was $12,800.
But the 9/11 fund was unlike any previous settlement. Passed by Congress almost
as an afterthought in the rush to ensure that the domestic airline industry didn’t
collapse in the wake of the attacks, the statute handed Feinberg a blank check and a
fair amount of discretion—although nothing like he enjoy s when he administers
private money. “Congress didn’t know what a life was worth,” Feinberg say s. “So
it said, ‘Well, Ken will take care of it.’ ” After Feinberg accepted the job, another
mentor, Sen. Edward Kennedy, for whom he had served as chief of staff, gave
him some advice. “You make sure that 10 percent of the people don’t get 90
percent of the taxpay ers’ money ,” Kennedy said. “Be careful.”
Out of his 9/11 experience, which had its share of rocky moments, Feinberg
developed a set of principles he’s used ever since: Be fair. Be up-front about the
process. Give victims and their families a chance to vent. Try to evaluate
applications with a minimum of paperwork. Don’t get bogged down assessing
each claim like an insurance company or a court would. Don’t try to figure out
someone’s future earnings. Or how long they ’re going to live. Or the extent that
one victim is more injured than another. “If I took time to examine every body ’s
medical records, how can I get money out the door?” he say s of his Boston work.
“I’d be swamped. It would be New Year’s before the money would get out.”
To Feinberg, who takes jobs like the Boston fund pro bono, that’s the most basic
tenet of all: Victims, he say s, don’t believe a compensation process will work until
the checks move. “Nothing is more important than getting money out the door,”
he say s. The Boston attack took place on April 15. In May, Feinberg stood before
a crowd at the Boston Public Library and explained the uncomplicated criteria he
would use for distributing money : Death and double amputation, single
amputation, hospital stay, outpatient care. That was it, and that was the hierarchy.
A month later, he held claims hearings. The first checks went out within 60 day s
of the bombing.
There were a few hiccups: One man sought $2 million for an aunt who had been
dead for a decade. Another woman faked the documentation of a traumatic brain
injury, won a $484,000 award, and was then caught and arrested. But only one
victim, Feinberg say s, wrote him to complain about his award, a man who lost an
arm. He said that $1 million simply wasn’t going to cut it. Feinberg had long ago
decided not to distinguish between a lost arm and a lost leg. And not to give a
wealthy victim any less than the one who makes $68,000 per y ear and has to
support five kids. “Most tort lawy ers would say, ‘Ken, don’t y ou dare give both of
those victims the same amount.’ I disagree,” he say s. “I’m not prepared to say to
someone they don’t need a million dollars.”
Plenty of people didn’t see a dime. Feinberg immediately ruled out compensation
for mental distress—nothing for those who witnessed the explosions or who were
showered with the blood of victims; nothing for the first responders who had to
treat the shattered bodies. “Start pay ing every one who has mental trauma?” he
asks. “I got trauma watching on CNN.” Property damage, no. Economic losses,
no. Forget that Boy lston Street was shut down for the investigation and cleanup.
Forget about the city being on lockdown while the Tsarnaevs were pursued.
Boston was as simple as any thing like this was going to be. Money was plentiful,
and Feinberg had grown up in nearby Brockton. (His accent makes it sound like he
never left.) Still, the carnage, the amputated arms and legs, will linger with him.
“This was the worst experience I’ve had,” he say s. “In 9/11, y ou either got out of
the buildings or y ou didn’t.”
EXCEPTIONS, NOT RULES
I tell Feinberg that I can’t help but think of the waves of y oung soldiers who’ve
returned from Iraq and Afghanistan with missing limbs. He nods. “They didn’t get
a million dollars.” And they can’t. (Disability benefits for military amputees top
out at around $7,800 per month.) We place soldiers in a different category than
innocent victims, because they signed up to put their lives on the line. They
undertook—and are paid for—the risk.
But what if the risk they assumed doesn’t cover being gunned down away from
the battlefield, within the confines of their own military base? On Nov. 5, 2009,
Maj. Nidal Hasan, an Army psy chiatrist, opened fire with a semiautomatic pistol
at Ford Hood, killing 13 and wounding 32 more before he was subdued. He now
faces court-martial on murder charges.
Since the attack, the Obama administration has been locked in a debate with the
victims over whether Hasan, a Muslim radicalized by a Qaida cleric while
America was at war, committed an act of terrorism. The White House and the
Defense Department call it “workplace violence,” since Hasan is not technically
considered an enemy, despite arguments to the contrary from members of the
Texas congressional delegation and other politicians. In a statement to Fox News
last week, Hasan said the U.S. is “at war” with Islam.
The victims’ families and the survivors of the attack have taken the unusual step of
suing the federal government for damages, alleging that the administration’s
failure to label the attack as terrorism has resulted in reduced levels of financial
and medical benefits because their injuries have been deemed unrelated to
combat; they also charge that the FBI and the Pentagon failed to identify Hasan
as a threat. The government has asked the court to delay the suit until after
Hasan’s trial.
Kimberly Munley, a civilian police sergeant who was wounded when she tried to
stop Hasan and who was seated next to Michelle Obama at the 2010 State of the
Union, told ABC earlier this y ear that the president had broken his promise to help
the shooting victims. “We got tired of being neglected,” she said of the lawsuit.
Munley ’s lawy er, Reed Rubinstein, wonders why the government was so quick to
compensate the Pentagon victims of the 9/11 attacks and hasn’t showed the same
generosity with the Fort Hood victims. “From a public standpoint,” he say s,
“people assumed the government was going to take care of its own.” Rubinstein,
who practices in Washington, say s his plaintiffs have noticed the millions, too, that
poured into the Boston Marathon fund. What, after all, is the difference between
that terrorist attack and this one?
The lawsuit faces serious and perhaps insurmountable obstacles in court; the
government is likely immune. But Rubinstein could find encouragement in a June
ruling by the British Supreme Court, which held that families of British soldiers
killed in Iraq could sue the U.K. government for negligence if the soldiers
received improper equipment and training. The ruling has no applicability to U.S.
troops, but it could represent a trend toward holding the military accountable for
negligence in way s courts haven’t before.
In the meantime, Rubinstein, mindful of the long road ahead, has been
considering other way s to help his clients. “I’ve been thinking about starting up a
nonprofit fund,” he say s.
BUILDING A MODEL
Feinberg has alway s worried that the 9/11 fund set a bad precedent. “If Congress
had thought about it a couple of more weeks, they probably wouldn’t have passed
it,” he say s. He frets about creating a culture of victim entitlement, which is why
he thinks nothing like the fund will ever exist again.
Others aren’t so sure. Lascher, the Cal State professor, say s government may
have to step in if there’s another large-scale terrorist attack. “We really do
recognize that people suffer disproportionately, and we have an obligation to take
care of them,” he say s.
But another part of Feinberg’s legacy, his work on the BP oil spill, may last the
longest. In a sense, what the company did was more radical than Congress’s
creation of the 9/11 fund—deciding to set aside $20 billion to avoid protracted
litigation. Nothing, not even 9/11, created more headaches for Feinberg than the
spill. Claimants all along the Gulf Coast grumbled that he was moving too slowly.
Local politicians griped about his methodology. Trial lawy ers felt aced out of the
action after victims waived their right to sue. And it didn’t entirely work: BP
remains locked in a lawsuit against other claimants in New Orleans.
The BP fund put Feinberg in an odd position. He has maintained throughout his
career (and in his private work settling claims for corporations) that there are
better alternatives to a trial. He rankled some in the plaintiffs’ bar when he
explained to claimants why they should waive their right to sue: They got their
money from the fund quickly, and no lawy er would take a cut. But he also
resisted attempts by pro-business forces such as the U.S. Chamber of Commerce
to hold up his efforts as an example of a reshaped American legal sy stem. “I’m a
lawy er,” Feinberg said in a speech to the chamber three y ears ago. “I happen to
believe, in the run-of-the-mill, every day life in America, the legal sy stem works
pretty well.”
At the same time, he recognizes that the environment for litigation—and
particularly mass class-action suits—has worsened dramatically since his Agent
Orange day s, because of hostility from the courts, Congress, and state
legislatures. Cases must more often be heard individually (if at all), which can
clog court dockets. As an alternative, in situations where liability seems clear,
“one has to look toward some sort of an informal process” other than litigation,
say s Robert Rabin, a professor at Stanford Law School. “The tort sy stem was
never superefficient. The question is whether the tort sy stem is still the way to go”
when 90 percent of all cases end up settling. It’s something that airlines—which
can be quick to settle claims after a crash—have known for y ears. Hospitals, too,
are realizing that admitting to medical error, engaging the patient quickly, and
disbursing money results in far fewer malpractice suits. That’s the Feinberg Way .
Feinberg has seen it himself, bey ond BP, which he calls a tremendous success
story, because the vast majority of claimants avoided the courts. The Virginia
Tech shootings served as another model. Because that fund was private, the 200plus applicants didn’t have to surrender the right to sue the university. Still, only
two did. Feinberg credits the lessons he learned from the 9/11 fund: Treat people
well, give them some money, and they don’t sue. To that end, Penn State
University brought him in last y ear to quickly (and quietly ) settle claims relating
to the Jerry Sandusky sexual-abuse scandal, where, again, liability isn’t the issue.
Even the 9/11 fund has been revived in an effort to ward off litigation from first
responders who say they suffered health problems from exposure at Ground
Zero. Now they can apply to the fund for compensation, though the job will be
tougher because the amount of money that can be awarded is capped. Feinberg
had unlimited government funds the first time around. (He isn’t involved this
time.)
But there’s the legacy, and there’s the man himself. And the need for his special
expertise shows no signs of abating. After my second interview with Feinberg, he
went to Capitol Hill to give advice about how to distribute money collected after
19 firefighters were killed battling Arizona wildfires. (What would he tell
lawmakers? “Take the money. Divide it by 19. And get it out.”) Life, Feinberg
say s, guarantees misfortune. The wolf is alway s at the door.
The work has taken a toll. When it gets bad, Feinberg retreats to a soundproof
room in his home and cranks up Wagner or Verdi. It’s been his curative since he
was a child. “Shut that door, and y ou escape.” Opera, he say s, is the height of
civilization, but “civilization is no guarantee against these horrors that we go
through. Just because we live in a civilized society doesn’t mean we aren’t going
to have these tragedies.”
You can stop whenever y ou want, I tell him. The next time a president, or a
governor, or a may or calls, y ou can turn it down. “No one would blame y ou if
y ou said, ‘I’ve had enough tragedy for 20 lifetimes,’ ” I say .
“I’m not going to say no,” Feinberg replies. “I’m not going to say no.” And, to be
sure, that call will come. It alway s does.
This article appears in the Aug. 3, 2013, edition of National Journal as Death’s
Accountant.
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Original: https://www.readability.com/articles/oypxqxoz
Title: Cocaine Incorporated
Author: nytimes.com
Summary: One afternoon last August, at a hospital on the outskirts of Los
Angeles, a former beauty queen named Emma Coronel gave birth to a pair of
heiresses. The twins, who were delivered at 3:50 and 3:51,…
Cocaine Incorporated - www.nytimes.com - Readability
Known as El Chapo for his short, stocky frame, Guzmán is 55, which in narcoy ears is about 150. He is a quasi-my thical figure in Mexico, the subject of
countless ballads, who has outlived enemies and accomplices alike, defy ing the
implicit bargain of a life in the drug trade: that careers are glittering but brief and
alway s terminate in prison or the grave. When Pablo Escobar was Chapo’s age,
he had been dead for more than a decade. In fact, according to the Drug
Enforcement Administration, Chapo sells more drugs today than Escobar did at
the height of his career. To some extent, this success is easily explained: as
Hillary Clinton acknowledged several y ears ago, America’s “insatiable demand
for illegal drugs” is what drives the clandestine industry. It’s no accident that the
world’s biggest supplier of narcotics and the world’s biggest consumer of narcotics
just happen to be neighbors. “Poor Mexico,” its former president Porfirio Díaz is
said to have remarked. “So far from God and so close to the United States.”
The Sinaloa cartel can buy a kilo of cocaine in the highlands of Colombia or Peru
for around $2,000, then watch it accrue value as it makes its way to market. In
Mexico, that kilo fetches more than $10,000. Jump the border to the United States,
and it could sell wholesale for $30,000. Break it down into grams to distribute
retail, and that same kilo sells for upward of $100,000 — more than its weight in
gold. And that’s just cocaine. Alone among the Mexican cartels, Sinaloa is both
diversified and vertically integrated, producing and exporting marijuana, heroin
and methamphetamine as well.
Estimating the precise scale of Chapo’s empire is tricky, however. Statistics on
underground economies are inherently speculative: cartels don’t make annual
disclosures, and no auditor examines their books. Instead, we’re left with back-ofthe-envelope extrapolations based on conjectural data, much of it supplied by
government agencies that may have bureaucratic incentives to overplay the
problem.
So in a spirit of empirical humility, we shouldn’t accept as gospel the estimate,
from the Justice Department, that Colombian and Mexican cartels reap $18 billion
to $39 billion from drug sales in the United States each y ear. (That range alone
should give y ou pause.) Still, even if y ou take the lowest available numbers,
Sinaloa emerges as a titanic play er in the global black market. In the sober
reckoning of the RAND Corporation, for instance, the gross revenue that all
Mexican cartels derive from exporting drugs to the United States amounts to only
$6.6 billion. By most estimates, though, Sinaloa has achieved a market share of at
least 40 percent and perhaps as much as 60 percent, which means that Chapo
Guzmán’s organization would appear to enjoy annual revenues of some $3 billion
— comparable in terms of earnings to Netflix or, for that matter, to Facebook.
The drug war in Mexico has claimed more than 50,000 lives since 2006. But what
tends to get lost amid coverage of this epic bloodletting is just how effective the
drug business has become. A close study of the Sinaloa cartel, based on thousands
of pages of trial records and dozens of interviews with convicted drug traffickers
and current and former officials in Mexico and the United States, reveals an
operation that is global (it is active in more than a dozen countries) y et also very
nimble and, above all, staggeringly complex. Sinaloa didn’t merely survive the
recession — it has thrived in recent y ears. And after prevailing in some recent
mass-casualty clashes, it now controls more territory along the border than ever.
“Chapo alway s talks about the drug business, wherever he is,” one erstwhile
confidant told a jury several y ears ago, describing a driven, even obsessive
entrepreneur with a proclivity for micromanagement. From the remote mountain
redoubt where he is believed to be hiding, surrounded at all times by a battery of
gunmen, Chapo oversees a logistical network that is as sophisticated, in some
way s, as that of Amazon or U.P.S. — doubly sophisticated, when y ou think about
it, because traffickers must move both their product and their profits in secret, and
constantly maneuver to avoid death or arrest. As a mirror image of a legal
commodities business, the Sinaloa cartel brings to mind that old line about Ginger
Rogers doing all the same moves as Fred Astaire, only backward and in heels. In
its longevity, profitability and scope, it might be the most successful criminal
enterprise in history .
The state of Sinaloa, from which the cartel derives its name, lies wedged
between the Sierra Madre Occidental and Mexico’s west coast. Sun-blasted and
remote, Sinaloa is the Sicily of Mexico, both cradle and refuge of violent men,
and the ancestral land of many of the country ’s most notorious traffickers. Chapo
was born in a village called La Tuna, in the foothills of the Sierra, in 1957. His
formal education ended in third grade, and as an adult, he has reportedly
struggled to read and write, prevailing upon a ghostwriter, at one point, to
compose letters to his mistress. Little is known about Chapo’s early y ears, but by
the 1980s, he joined the Guadalajara cartel, which was run by a former
policeman known as El Padrino — the Godfather.
For decades, Mexican smugglers had exported homegrown marijuana and heroin
to the United States. But as the Colombian cocaine boom gathered momentum in
the 1980s and U.S. law enforcement began patrolling the Caribbean, the
Colombians went in search of an alternate route to the United States and
discovered one in Mexico. Initially, Mexican traffickers, like a pudgy 25-y ear-old
airplane pilot named Miguel Angel Martínez, acted as independent contractors
who were paid a fee by the Colombians to move their cargo. In 1986, the
Guadalajara cartel dispatched Martínez to the Colombian port of Barranquilla, in
the hope that someone might commission him to fly drugs up to Mexico. But
Martínez couldn’t find any takers and ended up languishing in Colombia for
months, worry ing that he had blown his big opportunity with the cartel.
Eventually, he caught a commercial flight back to Mexico, and shortly thereafter,
he was summoned to a meeting with Chapo, who was by then an underboss in the
cartel. “You were very well behaved in Colombia,” Chapo told him, according to
subsequent testimony. He seemed impressed by Martínez’s patience in waiting
for an assignment.
Having passed this test, Martínez started working for Chapo as a kind of air traffic
controller, negotiating directly with the Cali and Medellín cartels, then guiding
their cocaine flights from South America to secret runway s in barren stretches of
Mexico. Martínez knew U.S. agents were monitoring his radio communications, so
rather than say a word, he would whistle — a signal to the pilots that they were
cleared for takeoff.
With the decline of the Caribbean route, the Colombians started pay ing Mexican
smugglers not in cash but in cocaine. More than any other factor, it was this
transition that realigned the power dy namics along the narcotics supply chain in
the Americas, because it allowed the Mexicans to stop serving as logistical
middlemen and invest in their own drugs instead. In 1986, Martínez couldn’t land a
gig as a lowly courier in Barranquilla. Not five y ears later, he was marshaling
hundreds of flights laden with cocaine for Chapo. “Sometimes we would get five
planes a night,” he remembered. “Sometimes 16.” Now it was the Colombians
who went hat in hand to Chapo, looking not to hire him to move their product but to
sell it to him outright. They would tip Martínez $25,000 just to get an audience
with the man.
The y oung pilot became a gatekeeper to the ascendant kingpin, fielding his phone
calls and accompany ing him on foreign trips. There’s a vaudevillian goofiness to
nicknames in Mexico, and the stout Martínez was known in the cartel as El Gordo.
He and Chapo — Fatty and Shorty — made quite a pair. “Japan, Hong Kong,
India, all of Europe,” Martínez recalled in testimony. Chapo owned a fleet of
Learjets, and together, they saw “the whole world.” They both used cocaine as
well, a habit that Chapo would eventually give up. When a lawy er inquired, y ears
later, whether he had been Chapo’s right-hand man, Martínez replied that he
might have been, but that Guzmán had five left hands and five right hands. “He’s
an octopus, Chapo Guzmán,” he said. For his efforts, Martínez was paid a million
dollars a y ear, in a single annual installment: “In cash, in a suitcase, each
December.” When Martínez’s son was born, Chapo asked to serve as godfather.
In 1989, Chapo’s mentor, El Padrino, was captured by Mexican authorities, and
the remaining members of the Guadalajara cartel assembled in Acapulco to
determine which smuggling route each capo would inherit. According to Ioan
Grillo’s book, “El Narco,” the meeting was ostensibly a gathering of friends. But
the shards of El Padrino’s organization would become the basis for the Tijuana,
Juárez and Sinaloa cartels, and these onetime colleagues would soon become
antagonists in a cy cle of bloody turf wars that continues to this day .
“Drug cartel,” it turns out, is a whopper of a misnomer; neither the Mexicans nor
the Colombians ever colluded to fix prices or supply. “I wish they were cartels,”
Arturo Sarukhán, Mexico’s ambassador in Washington, told me. “If they were,
they wouldn’t be fighting and driving up the violence.”
At first, Chapo’s organization controlled a single smuggling route, through western
Mexico into Arizona. But by 1990, it was moving three tons of cocaine each
month over the border, and from there, to Los Angeles. The Sinaloa has alway s
distinguished itself by the eclectic means it uses to transport drugs. Working with
Colombian suppliers, cartel operatives moved cocaine into Mexico in small
private aircraft and in baggage smuggled on commercial flights and eventually
on their own 747s, which they could load with as much as 13 tons of cocaine.
They used container ships and fishing vessels and go-fast boats and submarines —
crude semi-submersibles at first, then fully submersible subs, conceived by
engineers and constructed under the canopy of the Amazon, then floated
downriver in pieces and assembled at the coastline. These vessels can cost more
than a million dollars, but to the smugglers, they are effectively disposable. In the
event of an interception by the Coast Guard, someone onboard pulls a lever that
floods the interior so that the evidence sinks; only the crew is left bobbing in the
water, waiting to be picked up by the authorities.
Moving cocaine is a capital-intensive business, but the cartel subsidizes these
investments with a ready source of easy income: marijuana. Cannabis is often
described as the “cash crop” of Mexican cartels because it grows abundantly in
the Sierras and requires no processing. But it’s bulkier than cocaine, and smellier,
which makes it difficult to conceal. So marijuana tends to cross the border far
from official ports of entry. The cartel makes sandbag bridges to ford the
Colorado River and sends buggies loaded with weed bouncing over the Imperial
Sand Dunes into California. Michael Braun, the former chief of operations for the
D.E.A., told me a story about the construction of a high-tech fence along a stretch
of border in Arizona. “They erect this fence,” he said, “only to go out there a few
day s later and discover that these guy s have a catapult, and they ’re flinging
hundred-pound bales of marijuana over to the other side.” He paused and looked
at me for a second. “A catapult,” he repeated. “We’ve got the best fence money
can buy , and they counter us with a 2,500-y ear-old technology .”
Improvisation is a trafficker’s greatest asset, and in recent y ears, Sinaloa has
devised an even more efficient solution to the perennial challenge of getting
marijuana across the border. Grow it here. Several y ears ago, a hunter was
trekking through the remote North Woods of Wisconsin when he stumbled upon a
vast irrigated grow site, tended by a dozen Mexican farmers armed with AK-47’s.
According to the D.E.A., it was a Sinaloa pot farm, established on U.S. National
Forest land to supply the market in Chicago.
Heroin is easier to smuggle but difficult to produce, and as detailed in court
documents, Chapo is particularly proud of his organization’s work with the drug.
He personally negotiates shipments to the United States and stands by its quality,
which is normally 94 percent pure. “The value-to-weight ratio of heroin is better
than any other drug,” say s Alejandro Hope, who until recently was a senior
officer at Cisen, Mexico’s equivalent to the C.I.A.
But the future of the business may be methamphetamine. During the 1990s, when
the market for meth exploded in the United States, new regulations made it more
difficult to manufacture large quantities of the drug in this country. This presented
an opportunity that the Sinaloa quickly exploited. According to Anabel Hernández,
author of “Los Señores del Narco,” a book about the cartel, it was one of Chapo’s
deputies, a trafficker named Ignacio (Nacho) Coronel, who first spotted the
massive potential of methamphetamine. “Nacho was like Steve Jobs,” Hernández
told me. “He saw the future.”
Here was a drug that was ragingly addictive and could be produced cheaply and
smuggled with relative ease. When they first started manufacturing meth, the
Sinaloa would provide free samples to their existing wholesale clients in the
Midwest. “They ’d send five hundred pounds of marijuana, and secreted in that
would be two kilos of meth,” Jack Riley, the D.E.A.’s special agent in charge of
the Chicago office, told me. “They ’d give it away for free. They wanted the
market.” As demand grew, the cartel constructed superlabs, capable of churning
out industrial volumes of meth. Container ships from India and China unloaded
precursor chemicals — largely ephedrine — in the Pacific ports Lázaro Cárdenas
and Manzanillo. To grasp the scale of production, consider the volume of some
recent precursor seizures at these ports: 22 tons in October 2009; 88 tons in May
2010; 252 tons last December. When Mexico banned the importation of
ephedrine, the cartel adapted, tweaking its recipe to use unregulated precursors.
Recently they have started outsourcing production to new labs in Guatemala.
But Chapo’s greatest contribution to the evolving tradecraft of drug trafficking was
one of those innovations that seem so logical in hindsight it’s a wonder nobody
thought of it before: a tunnel. In the late 1980s, Chapo hired an architect to design
an underground passageway from Mexico to the United States. What appeared to
be a water faucet outside the home of a cartel attorney in the border town of
Agua Prieta was in fact a secret lever that, when twisted, activated a hy draulic
sy stem that opened a hidden trapdoor underneath a pool table inside the house.
The passage ran more than 200 feet, directly beneath the fortifications along the
border, and emerged inside a warehouse the cartel owned in Douglas, Ariz.
Chapo pronounced it “cool.”
When this new route was complete, Chapo instructed Martínez to call the
Colombians. “Tell them to send all the drugs they can,” he said. As the deliveries
multiplied, Sinaloa acquired a reputation for the miraculous speed with which it
could push inventory across the border. “Before the planes were arriving back in
Colombia on the return, the cocaine was already in Los Angeles,” Martínez
marveled.
Eventually the tunnel was discovered, so Chapo shifted tactics once again, this
time by going into the chili-pepper business. He opened a cannery in Guadalajara
and began producing thousands of cans stamped “Comadre Jalapeños,” stuffing
them with cocaine, then vacuum-sealing them and shipping them to Mexicanowned grocery stores in California. He sent drugs in the refrigeration units of
tractor-trailers, in custom-made cavities in the bodies of cars and in truckloads of
fish (which inspectors at a sweltering checkpoint might not want to detain for
long). He sent drugs across the border on freight trains, to cartel warehouses in
Los Angeles and Chicago, where rail spurs let the cars roll directly inside to
unload. He sent drugs via FedEx.
But that tunnel into Douglas remains Chapo’s masterpiece, an emblem of his
creative ingenuity. Twenty y ears on, the cartels are still burrowing under the
border — more than a hundred tunnels have been discovered in the y ears since
Chapo’s first. They are often ventilated and air-conditioned, and some feature
trolley lines stretching up to a half-mile to accommodate the tonnage in transit.
You might suppose that a certain recklessness would be a prerequisite for any one
contemplating a career in the drug trade. But in reality, blue-chip traffickers tend
to fixate, with neurotic intensity, on the concept of risk. “The goal of these folks is
not to sell drugs,” Tony Placido, who was the top intelligence official at the
D.E.A. until he retired last y ear, told me. “It’s to earn a spendable profit and live
to enjoy it.” So the smart narcos are preoccupied with what Peter Reuter and
Mark Kleiman once referred to, in a classic essay on the drug business, as “the
marginal imprisonment risk.” In 2010, Chapo’s old friend Ismael (El May o)
Zambada, the No. 2 man in the Sinaloa cartel, granted an interview to the
Mexican magazine Proceso. Now in his 60s and a grandfather, El May o has been
in the drug business for nearly half a century and has amassed a fortune. But y ou
can’t buy peace of mind. “I’m terrified they ’ll incarcerate me,” he
acknowledged. “I’m full of fear. Alway s.”
There’s a reason coke and heroin cost so much more on the street than at the farm
gate: y ou’re not pay ing for the drugs; y ou’re compensating every one along the
distribution chain for the risks they assumed in getting them to y ou. Smugglers
often negotiate, in actuarial detail, about who will be held liable in the event of lost
inventory. After a bust, arrested traffickers have been known to demand a receipt
from authorities, so that they can prove the loss was not because of their own
negligence (which would mean they might have to pay for it) or their own
thievery (which would mean they might have to die). Some Colombian cartels
have actually offered insurance policies on narcotics, as a safeguard against loss
or seizure.
To prevent catastrophic losses, cartels tend to distribute their risk as much as
possible. Before sending a 100-kilo shipment across the border, traffickers might
disaggregate it into five carloads of 20 kilos each. Chapo and his associates further
reduce their personal exposure by going in together on shipments, so each of
those smaller carloads might hold 10 kilos belonging to Chapo and 10 belonging to
May o Zambada. The Sinaloa is occasionally called the Federation because senior
figures and their subsidiaries operate semiautonomously while still employ ing a
common smuggling apparatus.
The organizational structure of the cartel also seems fashioned to protect the
leadership. No one knows how many people work for Sinaloa, and the range of
estimates is comically broad. Malcolm Beith, the author of a recent book about
Chapo, posits that at any given moment, the drug lord may have 150,000 people
working for him. John Bailey, a Georgetown professor who has studied the cartel,
say s that the number of actual employ ees could be as low as 150. The way to
account for this disparity is to distinguish between salaried employ ees and
subcontractors. A labor force of thousands may be required to plow all that
contraband up the continent, but a lot of the work can be delegated to independent
contractors, people the Mexican political scientist and security consultant Eduardo
Guerrero describes as working “for the cartel but outside it.”
Even those who do work directly for the cartel are limited to carefully
compartmentalized roles. At a recent trial, a regional cartel lieutenant, José
Esparza, testified about his experience working for the Sinaloa along the border.
On one occasion, he attended a meeting outside Culiacán with many of the
cartel’s top leaders. But there was no sign of Chapo. Once the discussion
concluded, an emissary left the group and approached a Hummer that was
parked in the distance and surrounded by men with bulletproof vests and machine
guns, to report on the proceedings. Chapo never stepped out of the vehicle.
It’s not just the federales that the narcos fear; it’s also one another. The brutal
opportunism of the underworld economy means that most partnerships are
temporary, and treachery abounds. For decades, Chapo worked closely with his
childhood friend Arturo Beltrán Ley va, a fearsome trafficker who ran a
profitable subsidiary of Sinaloa. But in 2008, the two men split, then went to war,
and Beltrán Ley va’s assassins were later blamed for murdering one of Chapo’s
sons. To reduce the likelihood of clashes like these, the cartel has revived an
unlikely custom: the ancient art of dy nastic marriage. Chapo’s organization is
occasionally referred to as an alianza de sangre (“alliance of blood”), because so
many of its prominent members are cousins by marriage or brothers-in-law.
Emma Coronel, who gave birth to Chapo’s twins, is the niece of Nacho Coronel,
the Steve Jobs of meth (who died in a shootout with the Mexican Army in 2010).
All of this intermarriage, one U.S. official in Mexico suggested to me, functions as
“a hedge against distrust.” An associate may be less likely to cheat y ou, or to
murder y ou, if there’ll be hell to pay with his wife. It’s a cy nical strategy,
certainly, but in a vocation where one of Chapo’s rivals went by the nickname
Mata Amigos, or “Friend Killer,” it may also be quite sound.
The surest way to stay out of trouble in the drug business is to dole out bribes, and
promiscuously. Drug cartels don’t pay corporate taxes, but a colossus like Sinaloa
makes regular pay ments to the federal, state and municipal authorities that may
well rival the effective tax rate in Mexico. When the D.E.A. conducted an internal
survey of its top 50 operatives and informants several y ears ago and asked them
to name the most important factor for running a drug business, they replied,
overwhelmingly, corruption. At a trial in 2010, a former police official from
Juárez, Jesús Fierro Méndez, acknowledged that he had worked for Sinaloa. “Did
the drug cartels have the police on the pay roll?” an attorney asked.
“All of it,” Fierro Méndez replied.
The cartel bribes may ors and prosecutors and governors, state police and federal
police, the army , the navy and a host of senior officials at the national level. After
an arrest for drug trafficking in the 1990s, Chapo was sentenced to 20 y ears and
shipped to Puente Grande, a fortified prison in Jalisco that was Mexico’s answer to
a supermax. But during the five y ears he spent there, Chapo enjoy ed prerogatives
that make the prison sequence in “Goodfellas” look positively austere. With most
of the facility on his pay roll, he is said to have ordered his meals from a menu,
conducted business by cellphone and orchestrated periodic visits by prostitutes,
who would arrive aboard a prison truck driven by a guard. I spoke with one drug
producer who negotiated a joint venture deal with Chapo while he was behind
bars. Eventually, as the story goes, Chapo was smuggled out in a laundry cart.
According to Martínez’s testimony, he paid more than $3 million to secure his
release. Today, Chapo is a free man, Puente Grande’s warden only recently
completed a jail sentence for letting him go and Mexicans call the prison Puerta
Grande — the Big Door.
The tacit but unwavering tolerance that Mexican authorities have shown for the
drug trade over the y ears has muddled the boundaries between outlaws and
officials. When Miguel Angel Martínez was working for Chapo, he say s,
“every one” in the organization had military and police identification. Day light
killings are sometimes carried out by men dressed in police uniforms, and it is not
alway s clear, after the fact, whether the perpetrators were thugs masquerading as
policemen or actual policemen providing paid assistance to the thugs. On those
occasions when the government scores a big arrest, meanwhile, police and
military officials pose for photos at the valedictory news conference brandishing
assault weapons, their faces shrouded in ski masks, to shield their identities. In the
trippy semiotics of the drug war, the cops dress like bandits, and the bandits dress
like cops.
When y ou tally it all up, bribery may be the single largest line item on a cartel’s
balance sheet. In 2008, President Felipe Calderón’s own drug czar, Noe Ramirez,
was charged with accepting $450,000 each month. Presumably, such gargantuan
bribes to senior officials cascade down, securing the allegiance of their
subordinates. “You have to recruit the high commands, so they can issue the
information to lower ranks and order whatever they want,” the corrupt cop, Fierro
Méndez, testified. But in key jurisdictions, the cartel most likely makes pay ments
up and down the chain of command. In a 2010 speech, Genaro García Luna,
Mexico’s secretary of public security, speculated that together, the cartels spend
more than a billion dollars each y ear just to bribe the municipal police.
It’s not only officials who must be bribed, either. There are also the “falcons,” an
army of civilian lookouts who might receive $100 a month just to keep their ey es
open and make a phone call if they notice an uptick in border inspections or a
convoy of police. “There are cities in Mexico where virtually every cabdriver is
on the pay roll,” Michael Braun, formerly of the D.E.A., said. “They have ey es
and ears every where.”
And then there are the Americans. Guards at the U.S. border have been known to
wave a car through their checkpoints for a few thousand dollars, and since 2004,
there have been 138 convictions or indictments in corruption investigations
involving members of the United States Customs and Border Protection.
Paradoxically, one explanation for this state of affairs is the rapid expansion of
border forces following the creation of the Department of Homeland Security. In
their hurry to fortify the U.S.-Mexico boundary with uniformed personnel, it
seems, officials may have made allowances on background checks and
screenings. In some instances, job offers have been extended to the immediate
relatives of known traffickers.
When corruption fails, there is alway s violence. During the 12 y ears that he
worked for the cartel, Martínez claims that he did not carry a gun. But Sinaloa has
risen to pre-eminence as much through savagery as through savvy. “In illegal
markets, the natural tendency is toward monopoly, so they fight each other,”
Antonio Mazzitelli, an official with the United Nations Office on Drugs and Crime
in Mexico City , told me. “How do they fight: Go to court? Offer better prices? No.
They use violence.” The primal horror of Mexico’s murder epidemic makes it
difficult, perhaps even distasteful, to construe the cartel’s butchery as a rational
advancement of coherent business aims. But the reality is that in a multibilliondollar industry in which there is no recourse to legally enforceable contracts,
some degree of violence may be inevitable.
“It’s like geopolitics,” Tony Placido said. “You need to use violence frequently
enough that the threat is believable. But overuse it, and it’s bad for business.”
The most gratuitous practitioners of violence right now would be the Zetas, a
rampaging league of sociopaths with a notable devotion to phy sical cruelty. The
Zetas are a new kind of cartel, in that they came somewhat late to the actual
business of smuggling drugs. They started out as body guards for the Gulf Cartel
before going into business for themselves, and they specialize in messaging
through bloodshed. It’s the Zetas who are charged with dumping 49 mutilated
bodies by the side of a highway near Monterrey last month. Sinaloa is responsible
for a great deal of carnage as well, but its approach to killing has traditionally
been more discreet. Whereas a Sinaloa subsidiary allied with a Tijuana farmer
known as the Stewmaker, who dissolved hundreds of bodies in barrels of ly e, the
Zetas have pioneered a multimedia approach to violence, touting their killings on
YouTube. One strategic choice facing any cartel is deciding when to intimidate
the civilian population and when to cultivate it. Sinaloa can be exceedingly brutal,
but the cartel is more pragmatic than the Zetas in its deploy ment of violence. It
may simply be, as one Obama administration official suggested, that the Sinaloa
leadership is “more conscious of their brand.”
It’s a curious rivalry between these two organizations, because their business
models are really very different. The Zetas have diversified bey ond drugs to
extortion, kidnapping and human trafficking, blossoming into what officials call a
“poly criminal organization.” Sinaloa, by contrast, has mostly tended to stick to its
core competence of trafficking. According to one captured cartel member,
Chapo specifically instructed his subordinates not to dabble in protection rackets
and insisted that Sinaloa territory remain “calm” and “controlled.”
“Sinaloa does not do extortion directly ,” Eduardo Guerrero said. “It’s so risky , and
the profits are so small. They want the big business — and the big business is in
the United States.”
Just how active the cartel is north of the border is a divisive question. According
to the Department of Justice, by 2009, Mexican-based criminal organizations
were operating in “more than a thousand U.S. cities.” When y ou consider the
huge jump in the price of narcotics between bulk importation and retail sales, it
might seem that Chapo would want to expand into street-level distribution. In
2005, the D.E.A. began intercepting large shipments of cocaine in which each kilo
brick was heat-sealed in a distinctive My lar foil. They spotted the foil in Los
Angeles first, then in Oklahoma, Chicago, Atlanta and New Jersey. “This was
Sinaloa coke,” Michael Wardrop, who led two of the agency ’s most ambitious
operations against the domestic networks of the cartel, told me. As the telltale
wrapping popped up across the country, Wardrop and his colleagues marveled at
the sheer expanse of Sinaloa’s market. “It was like watching a virus in a Petri
dish,” he said. “It was constantly growing.”
Wardrop’s investigations netted more than a thousand arrests. But some observers
question the extent to which the perpetrators in these cases were actually working
for the cartel. “If y ou’re telling me there’s a straight chain of command back to El
Chapo in Sinaloa — come on, that’s absurd,” the Mexican ambassador, Arturo
Sarukhán, protested. Often, the gatekeepers and logistics men that the D.E.A.
arrested were indeed connected to handlers in Mexico. But this was more true of
high-level importers dealing in kilos than run-of-the-mill retailers pushing grams.
When The Associated Press tracked down Otis Rich, a Baltimore dealer who was
ensnared in one of the operations, he answered the obvious question with a telling
reply : “Sina-who?”
“The fully integrated model would indeed maximize profits,” John Bailey
observes in a coming book about the cartels, but “it also maximizes risk of
exposure.” A big reason for the markup at the retail level is that the sales force is
so exposed — out on the corner, a magnet for undercover cops, obliged to
negotiate with a needy, unpredictable clientele. When y ou adjust for all that
added risk, the windfall starts to seem less alluring. Like a liquor wholesaler who
opts not to open a bar, Chapo appears to have decided that the profits associated
with retail sales just aren’t worth the hassle.
What Sinaloa does do inside this country is ferry drugs along highway s to regional
distribution hubs, where they are turned over to trusted wholesalers, like the Flores
twins of Chicago. Pedro and Margarito Flores grew up in a Mexican-American
enclave of the city during the 1990s. Their father and an older brother had moved
drugs for Sinaloa, and by the time the twins were in their 20s, they had gone into
business as distributors, purchasing cocaine and heroin directly from Mexican
cartels, then selling to dealers throughout the United States. Chicago, home of the
Mercantile Exchange, has alway s been a hub from which legitimate goods fan
out across the country, and it’s no different for black-market commodities. Chapo
has used the city as a clearinghouse since the early 1990s; he once described it as
his “home port.”
In 2005, the Flores twins were flown to a mountaintop compound in Sinaloa to
meet with Chapo Guzmán. The kingpin is an intimidating interlocutor; one
criminal who has negotiated with him face to face told me that Chapo tends to
dominate a conversation, asking a lot of questions and compensating for his short
stature by bouncing on the balls of his feet. But the meeting went well, and before
long, the brothers were distributing around two tons of Sinaloa product each
month. As preferred customers, they often took Chapo’s drugs without putting any
money down, then paid the cartel only after they sold the product. This might
seem unlikely, given the pervasive distrust in the underworld, but the narcotics
trade is based on a robust and surprisingly reliable sy stem of credit. In a sense, a
cartel like Sinaloa has no choice but to offer a financing option, because few
wholesale buy ers have the liquidity to pay cash upfront for a ton of cocaine.
“They have to offer lines of credit,” Wardrop told me, “no different from
Walmart or Sears.”
This credit sy stem, known as “fronting,” rests on an ironclad assumption that in
the American marketplace, even an idiot salesman should have no trouble selling
drugs. One convicted Sinaloa trafficker told me that it often took him more time to
count the money he collected from his customers than it did to actually move the
product. It may also help that the penalty for defaulting could involve
dismemberment.
As wholesale buy ers, the Flores brothers occupied a crucial bottleneck between
the cartel and its consumers. They grew so indispensable, in fact, that after taking
delivery of a shipment of drugs, they could retroactively bargain down the price.
One day in 2008, Pedro Flores telephoned Guzmán in Mexico to ask for a discount
on heroin.
“What did we agree on?” Chapo asked him, according to a government transcript
of the call.
They had negotiated a price of $55,000 per kilo, Flores explained. But if Chapo
would consider lowering that to $50,000, the twins could pay immediately .
“That price is fine,” Chapo agreed, without argument. Then he added something
significant: “Do y ou have a way to bring that money over here?”
For the Sinaloa cartel, pushing product north into the United States is only half the
logistical equation. The drug trade is a cash business — y ou can’t buy kilos with
y our credit card. So while politicians tend to focus on cartels primarily as
importers of drugs, the narcos also devote an enormous amount of energy to the
export of money . Cash is collected in small denominations from individual buy ers
and then bundled in great stacks of broken-in bills that are used to pay wholesalers,
like the Flores brothers. These bills are counted, hidden in the same vehicle
compartments that were used to smuggle drugs in the opposite direction and then
sent to stash houses in Los Angeles, San Diego and Phoenix. From there, they
move across the border into Mexico.
What happens to the money when it gets there? The cartel employ s professional
money launderers who specialize in drug proceeds, and according to Robert
Mazur, a former D.E.A. agent who infiltrated the Colombian cartels, the fee for
fully scrubbing and banking illicit proceeds may run Sinaloa more than 15 cents
on the dollar. But a great deal of the cartel’s money remains in cash. In the early
1990s, a Sinaloa accountant sent planeloads of U.S. currency to Mexico City in
suitcases holding $1 million each. When Miguel Angel Martínez worked for
Chapo, the kingpin would test his loy alty, adding an extra $200,000 to one of the
suitcases to see if Martínez would pocket it. “Eight suitcases, compadre, so that is
$8 million,” he would say. (Martínez never fell for the trick.) A sizable share of
the cash is devoted to pay ing bribes, and some is sent to Colombia to purchase
more product, because drugs offer a strong return on investment. “Where would
y ou put your money ?” the former Cisen officer Alejandro Hope asked me with a
chuckle. “T-bills? Real estate? I would put a large portion of my portfolio in
cocaine.”
Even so, the business generates such volumes of currency that there is only so
much y ou can launder or reinvest, which means that money can start to pile up
around the house. The most that Martínez ever saw at one time was $30 million,
which just sat there, having accumulated in his living room. In 2007, Mexican
authorities raided the home of Zhenli Ye Gon, a Chinese-Mexican businessman
who is believed to have supplied meth-precursor chemicals to the cartel, and
discovered $206 million, the largest cash seizure in history. And that was the
money Zhenli held onto — he was an inveterate gambler, who once blew so
much cash in Las Vegas that one of the casinos presented him, in consolation,
with a Rolls-Roy ce. “How much money do y ou have to lose in the casino for
them to give y ou a Rolls-Royce?” Tony Placido, the D.E.A. intelligence official,
asked. (The astonishing answer, in Zhenli’s case, is $72 million at a single casino in
a single y ear.) Placido also pointed out that, as a precursor guy, Zhenli was on the
low end of the value chain for meth. It makes y ou wonder about the net worth of
the guy who runs the whole show.
In 2008, the Flores twins were indicted in Chicago and began secretly cooperating
with law enforcement. The following y ear, one of their Sinaloa contacts — a
debonair y oung trafficker named Jesús Vicente Zambada Niebla, or Vicentillo —
was arrested in Mexico and later extradited to Chicago. He will be the highestranking member of the cartel ever to face trial in the United States, and his
favorite wholesale customers will be the star witnesses against him. In a surprise
twist, Vicentillo (who is the son of Chapo’s partner, May o Zambada) has argued
that he can’t be prosecuted — because even as he worked for Sinaloa, he was also
a secret informant for the D.E.A.
There has been speculation in Mexico that the Calderón regime favors Sinaloa
over the unhinged Zetas and has made a devil’s pact to lay off the cartel. It might
be impossible to eradicate all the cartels in Mexico, this theory goes, so the
government has picked a favorite in the conflict in the hope that when the smoke
clears, a Sinaloa monopoly might usher in a sort of pax narcotica. A 2010
National Public Radio investigation of Mexican arrest statistics found that Sinaloa
had suffered conspicuously fewer arrests than had its peers, though this could
simply be evidence of triage on the government’s part rather than proof of a
conspiracy. Calderón vehemently denies any charges of favoritism, and his
administration has arrested or killed several of Chapo’s key deputies in the last few
y ears. (My repeated requests for interviews with relevant officials in Mexico
were denied.)
The suggestion that the D.E.A. might have made a deal with a high-ranking
Sinaloa figure is new, however. In the past, Chapo has occasionally authorized
employ ees to provide information to American law enforcement. Fierro Méndez,
the Juárez cop, described a sy stem in which junior traffickers would walk into
U.S. Immigration and Customs Enforcement and announce their willingness to
become informers — then feed the Americans intelligence about rival cartels,
thereby using law enforcement to eliminate their competitors. U.S. officials allow
that there were discussions between the D.E.A. and Vicentillo, but they deny that
any quid pro quo was in place.
The trial, which is scheduled for October, should shed significant light on Sinaloa’s
logistical apparatus — provided the witnesses can stay alive until then. Recently , a
career criminal named Saul Rodriguez testified that Vicentillo solicited his help at
the Metropolitan Correctional Center in downtown Chicago, where they were both
being held, in an effort to have the Flores twins assassinated. Authorities have
expressed concern that the cartel might undertake a daring jailbreak to get
Vicentillo out. They have also voiced the opposite worry — that Vicentillo will
himself be killed. A request by the trafficker’s attorney s that he be permitted to
exercise outdoors raised concerns from prison officials, because the only open
space at the prison is a fenced-in recreation area on top of the building, where
Vicentillo could be picked off by a sniper. (He has since been moved to a more
secure facility .)
It might seem far-fetched that the cartel would try to assassinate one of its own,
the son of May o Zambada, no less. But Sinaloa guards its secrets ruthlessly. After
Chapo’s friend Miguel Angel Martínez was arrested in 1998, four men came to kill
him in prison, stabbing him repeatedly. In that assault, and another that followed,
he sustained more than a dozen stab wounds, which punctured his lungs, pancreas
and intestines. After the second attack, he was moved to another facility and kept
in a segregated unit. This time, an assassin managed to get as far as the gate
outside Martínez’s cell and chucked two grenades at the bars. Locked in with
nowhere to run, Martínez could only cower by the toilet to shield himself from the
blast. The roof caved in, and he barely survived. Asked later who it was that tried
to have him killed, Martínez said that it was his compadre, Chapo Guzmán.
“Because of what I knew,” he explained. (Today he is living in witness protection
in the United States.)
Between the coming trial and the increased political drumbeat on both sides of the
border for his capture, Chapo may be more embattled today than at any time in
his career. In February, he escaped a raid by Mexican authorities in the resort
area of Los Cabos. President Calderón’s party is trailing in the polls, and some
have theorized that the only way it might manage to retain power after next
month’s presidential election would be if Chapo is killed or captured. U.S.
authorities, meanwhile, are uncertain about who might succeed Calderón — Vice
President Joe Biden met with all of the leading candidates on a visit to Mexico in
March — and whether that successor will have any appetite to continue battling
the cartels. With so many dead and so little progress, the Mexican populace has
grown war-weary. Several U.S. officials told me that the critical window for
capturing Chapo is between now and when Calderón leaves office.
In addition to the threat of capture, there is the threat of competition. By some
estimates, the Zetas now control more Mexican territory than Chapo does, even if
they don’t move nearly as many drugs. Zeta gunmen have made bloody
incursions on Chapo’s turf, going so far as to penetrate the previously inviolable
stronghold of his own home state, Sinaloa. In 2008, Chapo’s lover, Zulema
Hernández, was discovered dead in the trunk of a car, her body carved with the
letter “Z.” “It’s like the evolution of the dinosaurs, and the coming of the T. Rex,”
Antonio Mazzitelli told me. “The T. Rex is the Zetas.”
Chapo and his colleagues were never peaceful ty pes; in the last few y ears, they
have waged vicious wars of acquisition to seize the lucrative smuggling routes
through Juárez and Tijuana. But to fend off the Zetas, Sinaloa is resorting to new
levels of barbarism. In March, the cartel dumped a collection of dismembered
bodies in Zeta territory and posted a series of open letters on the walls around
them, deriding the Zetas as “a bunch of drunks and car-washers.” Each message
was signed, “Sincerely , El Chapo.”
One thing Chapo has alway s done is innovate. Even as he engages in violent
brinkmanship along the border, the cartel is expanding to new markets in Europe,
where a kilo of cocaine can sell for three times what it does in the U.S., and in
Australia, where authorities believe that Chapo is now a major cocaine supplier.
There are also indications that the cartel is exploring opportunities in Southeast
Asia, China and Japan — places Chapo and Martínez first visited as y ounger men.
And Chapo’s great comparative advantage still lies along that fraught boundary
between Mexico and the United States. Even if the kingpin is killed or captured,
one of his associates will quite likely take his place, and the smuggling
infrastructure that Chapo created will endure, channeling the product, reaping the
profits and feeding, with barely a blip in service, the enduring demand on this side
of the border — what the historian Héctor Aguilar Camín once referred to as “the
insatiable North American nose.”
Original: https://www.readability.com/articles/3grr2lrf
Title: The Chase Is the Thing and the Thing Is the Chase: Learning to Love…
Author: splitsider.com
Summary: The following was posted to the Chris Gethard Show Tumblr as a
response to an anonymously asked question, which follows. It's reprinted here
with permission. For Chris: I’ve always really…
The Chase Is the Thing and the Thing Is the Chase: Learning to Love Failure splitsider.com - Readability
The following was posted to the Chris Gethard Show Tumblr as a response to an
anonymously asked question, which follows. It's reprinted here with permission.
For Chris: I’ve alway s really wanted to get into acting and/or comedy but
I’m terrified of failing at it. How do y ou get the courage to perform?
First off – the terror y ou’re feeling will never go away if y ou choose to go into
this field. That’s just something I want to say very bluntly right at the top. There is
no sugar coating that. I know it’s horrible to hear, but the terror ain’t going
nowhere. That fear will manifest itself many times over and in many way s and if
y ou really can’t handle it, y ou should follow y our gut instinct to not pursue acting
and/or comedy. It’s a cliche thing to say in the acting world, but if there’s
any thing else y ou could envision y ourself doing, do that thing. Not every thing will
be easier per se, but I imagine 90% of other professions fuck with y our head less.
There are so few things where y ou are judged on talent, personal appearance,
drive, and where y ou have to live like shit for y ears to make it, where “overnight
successes” are sometimes people who have worked for ten y ears plus, where
even if every factor of motivation, ability, and talent line up perfectly, y our
success is still also determined at least partially (and in many cases, mostly ) by
luck. It’s a bad trip. It is not for every one.
I often wish that I had a resume with any thing on it besides comedy, but I started
doing this when I was 20. The only other job I’ve ever had was at a magazine,
where I wrote, delivered boxes, handled the mailing list, and answered emails.
That magazine was about weird stuff in New Jersey. A very cool thing and the
best job I’ll ever have, but also not the resume padding that I desire when I want
to give up and go get a corporate job. On a very frequent basis, I find my self
wishing I got that job when I was 27 instead of 20. I would have done it for the
rest of my life, and I would have been very happy to do so. Things didn’t break
that way . I am backed into this corner where I do comedy .
You might be thinking to y ourself, “How do y ou know the fear never goes
away ?” It could just be me. It could just be pessimism, or cy nicism. The
realization hit me like a ton of bricks a few y ears back after witnessing an ey e
opening conversation in the green room of the UCB Theater. I saw two very
accomplished comedians talking in one of the side rooms. One of these people
was a cast member on SNL. The other was a correspondent for The Daily Show.
(Luckily being at UCB there are multiple people who have passed through that
have gone on to those illustrious jobs and I can use those specific examples
without outing any one. Please don’t ask who they were. It’s not important.) Person
one said something along the lines of “I’m just not sure what I’m going to do.”
Person two said, “Yeah, things have been so fucking dry lately. I’m really, really
worried.” The conversation proceeded from there and sounded like the exact ty pe
of conversation I was having with my own friends who were in the trenches
performing all around NYC with me. (To give y ou the context of where I was at,
this was around 2008 or 2009, before the Comedy Central show, before my book,
when I really was just a guy who was known on stages throughout NYC but could
not catch a break for the life of me and was kind of becoming sadly infamous for
it.)
These were two people who both had careers I would kill for. Being on SNL!
Being on The Daily Show! I think for any of us whose dream it is to do comedy,
those would be two crown jewel jobs. Those would be two jobs that most of us
would think feel like a life-altering accomplishment. Getting those gigs would feel
like grabbing on to the brass ring we’ve been chasing. Those are the ty pes of gigs
that y ou imagine lead to the validation, wealth, and fame that we chase so hard.
You have to imagine that’s true, right? Those jobs? You will feel like y ou did it.
You made it. Your life can have a movie ending where the sun rises and the
credits roll and the hard times are over, y ou’ve done it. You’ve won.
But I eavesdropped on those two individuals, and realized – the fear is inside us.
It’s part of why we do what we do.
The chase is the thing, and the thing is the chase.
There are no external circumstances that can erase the anxiety and fear of
people like y ou and I – people who have this dream but also have a ton of terror
regarding it. Getting that gig, getting that approval, getting that whatever y our
version of that dream job is – doesn’t erase the anxiety. The anxiety is internal.
It’s part of us. I have never accomplished any thing that made it diminish even
slightly. We all wind up wondering “What’s next? How am I going to make my
health insurance next y ear?” And even if we can get over that, the anxiety rears
its head in some other form. It is part of us.
Now that might seem dismal, but I found witnessing that conversation to be one of
the most incredibly liberating experiences of my entire life. If people in THAT
position were still feeling that way, there was zero chance I would ever escape
the constant self-doubt and self-questioning I tortured my self with every day .
So that being the case, I might as well operate with more freedom, I might as well
take the chances I want to take, because apparently, I learned, even success
doesn’t erase those negative, nervous, gnawing feelings – so what is the big deal if
I don’t ever get it?
I mean, to be honest – even look at the circumstances of y ou leaving this question
for me. You’re asking me for professional advice on how to be courageous in the
worlds of acting and comedy. And y et, I consider my self very much a failure. I
say that not to garner sy mpathy or so people can leave comments of
encouragement; I say that because I consider it to be the truth. In y our mind, I
am someone who has both reached a certain level of achievement that y ou want
to ask me this question, as well as someone who makes himself accessible enough
to be asked this question. I am very flattered that y ou view me as someone
qualified to give y ou this advice. It means a lot, and it’s an honor I don’t take
lightly .
But at the same time, it might be ey e opening for y ou to realize that my
perspective on my own career is that largely what I’ve accomplished is booking a
lead part in a sitcom called Big Lake that flamed out publicly and where, being
that I was both the lead of it and the only unknown member of the cast, my face
and name are associated with its failure most heavily. 99% of the people who
have ever heard my name or seen my face in the entire world know me as “That
guy who was really bad in that sitcom Will Ferrell produced.” Who do y ou think
people are gonna blame when they watch episodes of that show? Proven comedy
god Chris Parnell? Unquestionably hilarious force of nature Horatio Sanz? The
production team of Will Ferrell (one of the top three comedic powerhouses of the
past two decades) and Adam McKay (the writer and producer of many of the
classic comedies of recent memory, regarded as one of the most brilliant
comedic minds on earth, proven through his work not just in movies, but as head
writer of SNL, legendary Second City veteran, and member of The Family,
among may be two or three improv groups regarded as being able to lay claim to
the title of “best improv group of all time”)? Probably not. Probably, they ’re
going to say “This show is weird and isn’t working. I wish it didn’t have a laugh
track. Also, that main guy fucking sucks.” It was not easy to have a ton of press
come out before the show say ing things like I had “the pressure of an unlikely
sitcom star” on my shoulders, or that “the success of the vehicle largely depends
on his ability to drive it.” Or to have a reporter ask me “So many people have
come out of the UCB and gone on to great success. How will y ou react if y ou’re
the first one to drop the ball?”, and to then have it turn out the way it did, where
that is indeed what happened.
Again, I’m not say ing all of that to lay out my personal sob story . But y ou told me
y ou’re terrified of failing and asking me how to have the courage to overcome it,
and I want to make clear that I have failed at a level that made my head spin and
that I would imagine might sound like y our personal nightmare.
But here’s the secret about that failure – like I said, it wasn’t easy by any means,
but it really didn’t crush me like I thought something like that would have. Why ?
Because just like I learned to suspect when I glimpsed that conversation a few
y ears earlier, what I had some inkling of while watching my more accomplished
peers stress out, the success didn’t really make me feel as good as I thought it
would either. Not even close.
Getting the show was an amazing experience. On the conference call where all of
my agents and managers and lawy ers called me to tell me I booked it, they also
told me that if it eventually got its back end pick up of 99 episodes, I would make
2.2 million dollars on the day those contracts were signed. The press blew up over
the story of this guy who came out of nowhere (this guy, of course, being
someone who had been performing on the most competitive stage in New York
City at that point for ten y ears of his life). The New York Times wrote a profile on
me. Every one of my peers rallied around the story. A student of the UCB school
wrote a blog post someone sent to me say ing something like “When Gethard was
a guy who wasn’t making it, it made me feel like ‘If a guy that talented can’t do it,
how can I?’ This gives me hope.” On top of that, I had been single about six
months before the show came along, and I tell y a, when y ou have a TV show,
girls seem to find y ou more phy sically attractive. They were less about y our
giant forehead and deformed hands and elbows and seem to find y ou “hot” all of
a sudden. I won’t lie. Initially , in the short term, all of that stuff felt AMAZING.
But really, all of that stuff was totally gilded. It was hollow, empty, it didn’t
actually change any thing about me or my life. I was still going home to an
apartment in Woodside, Queens where I didn’t have a closet and my shower
didn’t work. I was still taking the 7 train. I was still waking up a lot of the time and
dealing with my depression and anxiety. When I was feeling down, I would still
call my mom in New Jersey, and she would still talk to me like I was the same
idiot whose diapers she used to change. (Don’t get me wrong – she was definitely
proud of me. But I was still me. She was still her. We just shot the shit like alway s.
I’d drive out to see her and she’d tell me I looked too skinny and try to force me to
eat six lunches in the same afternoon. Business as usual.)
I can tell y ou very honestly – when I first got to my dressing room at Big Lake,
the thing I was most happy about, my first initial instinctive gut reaction was
“Amazing! My dressing room has a shower. I can take a shower in a shower that
works.” And then I realized how depressing and funny it was that this is what hit
me in the face of this monumental upgrade in success I’d been waiting so long
for.
I remember a camera man and I shooting the shit between takes and he asked me
where I lived in the city. I said I didn’t live in the city. He asked me what
neighborhood in Brookly n I called home. I told him I lived in Queens. He asked
me where. I said Woodside. He looked confused and said “But that’s a shittier part
of Queens then we’re in right now.” (We shot at Silvercup Studios in Long Island
City .)
The one that makes me laugh the hardest – I remember going on a press junket. A
limo was sent to my house. When I went to leave my apartment, my door knob
literally fell off my door. It was in my hand. I was wearing these expensive
clothes I bought for shit like this press junket, clothes someone else instructed me
to buy so I would look decent, clothes I felt completely uncomfortable and fake
in. I was about to head outside to a limo, so I could go give canned answers that
were coached to me for a bunch of press outlets that couldn’t have cared less.
And I was holding my door knob in my hand, and I couldn’t figure out how to
reattach it. The door would not open. So I had to climb out my bedroom window,
past my unframed Morrissey poster, and down my fire escape. I thought I was
going to slip and break my neck and get more press for dy ing after getting my big
break but before it actually debuted. I somehow didn’t kill my self – which is a
miracle considering that I trip and fall just from walking almost every day – and
dropped down into the area behind my house where we threw all the trash. I
picked my self up, made sure none of my trash or the trash of any of the dozens
of Hispanic families who lived in my building was stuck to my shitty fancy fake
clothes, and I got into the limo. And I laughed about it the whole way there – I
wasn’t really the guy in the nice clothes. I was about to give hundreds of
interviews, and not one of the people who ever saw or read any thing in any of
those interviews would know that less than an hour earlier I was legit rolling
around in a giant pile of garbage. I wasn’t a sitcom star – I was still the sad sack
with the ridiculous life who had to leap into his own garbage pile to get into the
limo some assholes had rented for him.
Point being – I chased success for ten y ears. And I got it, and nothing about ME
changed. I had a little more money. I had a little more attention. But I still got sad,
I still got grumpy when I was tired, I still had immense trouble talking to people in
social situations, I was still the same old weird shy nerdy kid from New Jersey
who had a chip on his shoulder and felt like he shouldn’t be doing this in the first
place. There was no real alteration to who I was, to my self-confidence, to how I
thought and how I lived.
So – the reason I wrote that novel up above is because it gives me credibility
when I got to answer y our actual question of “How do y ou get the courage to
perform?”
Well, the success y ou’re chasing isn’t going to be as good as y ou think it is. And I
can tell y ou very much, with all honesty – the failure never hurts as much as y ou
think it will, either.
When the show didn’t pan out, I definitely had some feelings of embarrassment.
And man did it suck to know I wasn’t going to get that 2.2 million dollars. I knew
that I would be judged based on the show, probably more than any other person
associated with it. I had some bitterness over how some of the decisions were
made. I loved the director of the show immensely, he is one of the best people
I’ve ever met in my life. The producers took care of me to no end. There were a
few people in charge bey ond those guy s who I realized didn’t have my best
interests in mind, who didn’t really trust me and probably didn’t want me to get
the job in the first place. Some of the choices made about the show in general,
and those ones relating to me in particular via those specific people did leave me
with a bad taste in my mouth.
BUT – I never felt bad. Honestly . I analy zed those things, shook my head at them,
had some internal “I told y ou so” moments. But sincerely I can say, I didn’t ever
feel bad about the public flame out of my high profile first big break. I never felt
talentless. My opinions related only to how things were handled: how the press put
too much of the weight of the show’s success on my shoulders, when I didn’t write
a word of it and got the job on literally two day s’ notice. The cinderella story was
a great story, but it wasn’t necessarily true with how it was being written up. And
y eah, the decisions made by some of the powers that be were baffling and last
minute and made it feel like the ship didn’t necessarily have a rudder. It made me
grit my teeth to think about it.
But again, all of that is purely external. In the same way that the money and
attention didn’t give me the validation I craved, the negative inverse of that – my
opinions on the external circumstances of the show bey ond me – did not hurt me
when it failed. I felt strong. I did not feel hurt. I had some wounds to lick, but I
have had many deeper wounds in my life. I was honestly barely phased.
I feel like that is may be complicated, so I will say it simply – the good parts of
getting the show didn’t solve any of my problems. The failure didn’t create more.
Not at any given point during the process did it ever feel like those things had the
effects I alway s expected they would have.
If I can fail that big, y ou can take an acting class.
If I can fall on my face that profoundly after the New York Fucking Times writes
a profile on the pressures I have as the star of that sitcom, y ou can do an open
mic or two.
If it doesn’t work out, trust me, y ou will be ok. If it does work out, the great parts
will come from what y ou discover about y ourself and the joy of doing the work.
Success and failure are real things, but the effects we assume they will have are
constructs we make up.
Go. Fail.
I will tell y ou this, and again, it comes from a place of pure honesty : Every thing
I’ve ever done that I’m proud of is something that someone else told me was a
bad idea, and something that came in the face of a failure. This goes back to the
very beginning of my career in comedy, and any thing I’ve done that is even
slightly respected or notable.
“Who wants to watch a show where y ou pretend to be Darry l Strawberry ? Write
something that showcases y ou, something that can get y ou an agent.” Well, I
wrote that show – it didn’t get me an agent. I took it to LA and literally zero agents
came to see it. But word of that show spread over time and when my current
manager signed me y ears later, he told me the first thing he saw of mine was a
two minute fuckaround video I made as that character y ears later, that was not lit
properly, that had bad sound, but that he thought was funny. He has been my
greatest defender, and the biggest proponent of me doing the crazy shit I like to do
now. He is an ally who encourages me. By following my voice – by making a
one man show out of a dumb bit my brother used to do to make me laugh – I
found someone who has been in my corner for y ears, someone whose opinion I
can alway s trust.
“Chris, no one is interested in reading y our dumb stories about y our life.” This
was said to me by a manager I worked with very early on in my career. I
wanted to focus on my story telling on stage and he wanted me to focus on making
more videos with my friend Zach Woods where Zach would like never speak and
turn down alley s where bizarre stuff would happen to him. Zach and I loved those
videos, but we both wanted to expand and move bey ond them. The manager
wanted us to keep making him money, we wanted to do stuff that reflected our
voices more, and in my heart, I knew that meant writing a book of my stories of
growing up. My manager told me that above quote and I fired him the next day.
Six y ears later, A Bad Idea I’m About to Do was published. It is a book of my
personal stories. It exceeded expectations. I was able to promote it on Jimmy
Fallon and Conan. I read a version of a story from it on This American Life. Guess
what? For the first five y ears of that process, my old manager was right: no one
wanted to read any of it. It was a failing prospect. All I had to do was work
harder, make it better, stay stubborn, believe in my self, and trust that even if no
one else ever read the stories, the process of writing them down was completely
fulfilling to me and worth it on its own.
And now let’s get back to Big Lake. You know when I was offered the contract
for A Bad Idea I’m About to Do? The day the show premiered. I don’t think I’ve
ever said that publicly, but doesn’t that feel like karma or God or whatever y ou
think it is that guides life say ing “You know in y our heart y ou should have been
doing y our own thing this whole time any way , right?”
I took that message and ran with it. The Chris Gethard Show had existed on stage at
UCB for two y ears before Big Lake happened. It could not have been a weirder,
less industry -friendly show, but I loved it more than any thing I’d ever done,
easily, hands down, no question. Now when Big Lake failed, some of my agents
thought the next steps were very clear – move to LA, get more sitcom work, be a
character actor, look for staff writing jobs on sitcoms. I was now in the sitcom
world. That’s something they can work with. Even with Big Lake failing, I had
opened a door that they could walk me further through.
Instead, I stay ed in New York and decided to bring TCGS to public access. I had
failed SO HARD. There is no way to describe how big it felt to me that Big Lake
failed – people were SO excited by the cast, the producers, all of it. And it
flopped.
But again, the experience didn’t crush me. Instead, it gave me an insane sense of
liberation and freedom. As I tried to make clear above – the jig was up. The
story book version of what my life could be was no longer tricking me. It was
fiction. Head west, wear sunglasses all the time, make millions, be a star – fake,
fake, fake, not as easy as y ou think it is any way, doesn’t solve y our problems
even if it does happen, fake. Why leave the east coast – my family, my home
base at UCB, my beloved motherfucking New Jersey, and the endless source of
insanity, experience, and creative inspiration that is New York City – to go chase
more jobs that weren’t going to necessarily make me feel good any way ? I wasn’t
fooled any more. That romantic notion that Holly wood is going to be salvation
wasn’t convincing to me any more. In my gut, I felt like if I went out there and
crushed it completely, if I nailed it as hard as every one wanted me to, I’d
probably wind up more like that lonely, insane starlet from Sunset Boulevard
any way. Validation wasn’t coming down the pike from chasing those high profile
jobs.
So I took TCGS to public access and felt immense freedom in doing so. The book
was something where may be no one would ever read it, but at least it would be
my words and I would stand by them. No one else would put words in my mouth
and force me to do it their way. My picture is on the cover. If y ou like it, y ou like
what I vouch for. And if y ou hate it, at least I’m not taking it on the chin for
decisions I really had very little say in, if any at all.
TCGS is the same mentality – public access doesn’t have the reach of cable, but
y ou know what it is? Ours. That show represents a world that I am the architect of
and that I believe in. And when Murf calls out Gimghoul, when Shannon starts
digging into the dark sides of callers, when Haskel puts on the banana suit and talks
about the environment, when Bethany gets all nervous about the crazy bits, when
Bluvband gets weird as the Human Fish, when Malone dances, when JD does a
fucking insanely good live cut of a musical performance, when the LLC make
every one in the room break with their intro songs, when Noah and Dru run around
the floor like the point guards of the show, like fucking conductors at an orchestra,
THAT IS OURS. Those are OUR voices. There’s pride there, in what we’ve built.
I lose money on it. Almost no one watches it. But – It. Is. Us.
Keep in mind though, for as much as we love making it and for as much as those
of y ou who watch the show seem to enjoy it, the show IS A FAILURE. It’s the
thing I’ve done that’s loved the most by the people who love it, but y ou know
who’s not convinced? Development executives, production companies, and
decision makers. They all respect it, but no one has decided to pick it up. I’ve been
reached out to by people who can make those decisions to tell me that they love
what we do, but that it’s not for them. That they respect it, but they ’re not in a
place to let us do it our way, and that they don’t want to ruin it. That’s really nice.
I mean that sincerely. Respect goes a very, very long way. And all of us making
the show are happy to continue to fail, on our terms, in our way, with something
that makes us and other random people who find it happy .
I get emails from people all the time telling me the show actually means
something to them. Got one today from a guy today who said his social anxiety
built to a point where his friends abandoned him and the show was the fun high
point of his week when it was at its roughest. Got one a few day s ago from a guy
who almost flunked out of college due to some people fucking him over, and who
said the show kept him sane in the midst of it. Got one from a kid overseas a while
back that said he was forced to upsell funeral suits to grieving families by his
insane boss, and that it was so grim and fucked up that he’d watch the show to
watch people being nice to each other. I get consistent emails from people who
say things like this – it boggles my mind, it feels like real responsibility, but it also
makes me feel like the thing I built in the scorched earth aftermath of my biggest
failure as a man actually means something to people.
All this relating to a show that IS A FAILURE. Monetarily, failure. Ability to
move to a traditional network, failure. Ability to get a huge audience, failure.
But nobody was writing letters like that about Big Lake. That show had the
potential to reach millions of people, and if it went one hundred percent
swimmingly, it would have been regarded as a funny show. Big Lake would have
gotten me 2.2 million dollars. TCGS will get me about negative 80 dollars a week,
but it will also get me letters from kids who remind me of my self, letting me know
that I’ve built something for them that I wish I had when I felt like them. Is that
worth 2.2 million dollars? I guess every one has to decide that for themselves, but I
know in my heart how I answer that question.
All the stuff I’m doing now is consumed by only a few thousand people. The
book, the show – I am a niche comedian even in the alternative world. A
development guy once told me I am “the alternative to alternative comedy.” But
the stuff I’m doing now is stuff that the people who DO find it care about. Which
option do y ou think does more for me? The one that got me success and money ?
Or the one that connects me with people and keeps me poor? In case y ou’re not
clear, the answer is the second one.
Of course, every one who watches the show knows that we are in over our heads.
I may get a job someday and have to go to LA and act in a sitcom. When that
day comes, I will be grateful for the opportunity. I will be a professional. I will
not bite the hand that feeds me. I will do my absolute best. (I will earn my health
insurance that y ear!) I will pray that it’s a show I find funny and that I will be
proud to be a part of. But y ou guy s – the ones who follow me right now at this era
in my life – will know that if I could have made my living doing this I would have,
and that I will be taking those jobs to hopefully pay for more stuff exactly like this
in the future. And if I don’t ever get the chance again, y ou’ll all know that I really
regret that more than almost any one besides us will ever know.
So back to y ou, Anony mous. If y ou want my real advice, focus hard on this part
– For me, I don’t even think of the missed chances at mainstream success as
failures. I think of those as odd, educational, and unexpected blips of life.
The book is a failure. The show is a failure. The fact that I still get on stage in
NYC every Friday and Sunday when literally almost every one I started with has
moved to LA, that is a failure.
The failures are the fun ones. The failures are the ones where we take chances.
The failures are the ones that y ou get to own, they ’re the experiences that are
y ours. No one else’s.
For many people, they look back on the time they were allowed to fail as the era
of their career they miss most – I have so many friends on TV now, and they kill
it, and I couldn’t be more proud to call them friends and compatriots and mentors
and people I look up to – but almost universally, they say that the headaches and
stresses of success make them miss the day s when they were poor and figuring it
out and failing on stage over and over and over again. Enjoy it. Enjoy not
knowing how it works, enjoy figuring it out, being scared of it, and tripping on the
ice during the newborn phase of y our artistic endeavors.
Failure isn’t something to be terrified of. You should only be terrified when
y ou’re not scared. Because it means y ou’ve stopped learning, that y ou’ve gotten
complacent. Here’s a secret at the heart of y our question – I don’t have the
courage to perform. I still get scared all the time. And when I’m not scared – like
when I’m on stage improvising at my second home, the UCB, I purposely do
something where I don’t know how it’s going to turn out, to make sure it gets scary
again.
The trick isn’t to eliminate those feelings of fear, the trick is to understand that they
are the feelings that come about when y ou’re taking risks that might lead to
creative growth. They ’re the feelings that spring up when y ou’re broadening y our
horizons and getting to a level y ou haven’t known before. Fear is like the
bloodhound that sniffs out all the cool shit that y ou should be learning how to do,
that y ou should desperately and zealously be pushing y ourself to do. But every
time y ou find one of those new horizons, new risks, new cool shit, it’s not going to
go well the first time. Or the first 50 times. With any thing worth doing, y ou’re
going to be bad at it before y ou’re good at it. And comedians, they can only learn
in public. They can only test how things work by doing them. You will have to get
up on stage with material y ou aren’t sure about and do it on purpose knowing that
it will be a miracle if it is met with any thing except silence, dissatisfaction, and
judgement. That will be doubly scary. It is one of the scariest feelings. Enjoy it.
Know that the complete terror y ou feel getting zero laughs in front of a crowd that
expected more is like a shower washing off all the complacency and selfsatisfaction that comes about when y ou just keep doing the things y ou know will
work.
The point is never to figure out how to NOT LOSE. The point is to figure out how
to LOSE WELL. Be good at losing. Be graceful at losing. Learn how to lose with
class. Learn how to lose often enough and severely enough that y ou want to quit,
and know that y our only job at that point is to not quit. You have failed enough that
y ou have achieved the goal of wanting to give up. And know that if y ou do quit,
that’s okay – it’s okay to admit this is not for y ou.
But know even moreso that if y ou don’t quit, y ou will run into the same situation
where y ou want to quit, over and over again – endlessly – for as long as y ou do
this.
But don’t avoid it. If y ou avoid failing and fear, y ou will at best become someone
who play s it safe.
And know that the fear y ou’re feeling right now is what will get y ou to that failure.
So when y ou ask me how to get the courage to perform – how to get to a place
where y ou’re not terrified – y ou are asking me to do y ou a disservice. Any time I
get to a point where I’m not terrified, I do something like write a book and send it
out into the world with my ugly fucking face on the front, or sign up to do my
show on an outdated, dy ing, and generally mocked broadcast medium. Those
things are shit y our pants level scary actions when y ou were supposed to be the
next big TV star, when y ou were supposed to be the next proud representative of
a legendary comedic institution. They don’t even feel like risks, they feel like
suicide.
So pardon my rejection of y our question, but I refuse to tell y ou how to find
courage that overcomes being terrified. It will give y ou a false impression of the
difficulties of this profession and lifesty le. Furthermore, it will be advice that
guides y ou to – at best – a stale, boring place as an artist and creative mind.
That being said – I wish y ou nothing but the best and I hope y ou get into comedy,
become a sensation, break out into undreamed of mainstream success, and then
remember this advice and how inspired y ou were by it and give me a job.
Sorry for all the depressing parts. Sorry if this reads as discouraging. I guess it
kind of is, but I hope under the surface it reads as I hope it does – as the most
optimistic thing in the world. I am rooting for y ou.
And sorry for the parts where I made it about me. I hope if y ou do decide that
this is for y ou, y ou go out there and make it about y ou. Enjoy the process. Enjoy
the failure. Learn to love the fear. Like a rollercoaster or a horror movie or like
driving around New Jersey breaking into abandoned mental hospitals to look for
ghosts in underground tunnels, learn to love the fear.
Chris Gethard is the host of The Chris Gethard Show and the author of A Bad Idea
I'm About to Do: True Tales of Seriously Poor Judgment and Stunningly
Awkward Adventure.
Original: https://www.readability.com/articles/aonezeep
Title: The Extraordinary Science of Addictive Junk Food
Author: nytimes.com
Summary: On the evening of April 8, 1999, a long line of Town Cars and taxis
pulled up to the Minneapolis headquarters of Pillsbury and discharged 11 men
who controlled America’s largest food…
The Extraordinary Science of Addictive Junk Food - www.nytimes.com Readability
James Behnke, a 55-y ear-old executive at Pillsbury, greeted the men as they
arrived. He was anxious but also hopeful about the plan that he and a few other
food-company executives had devised to engage the C.E.O.’s on America’s
growing weight problem. “We were very concerned, and rightfully so, that
obesity was becoming a major issue,” Behnke recalled. “People were starting to
talk about sugar taxes, and there was a lot of pressure on food companies.”
Getting the company chiefs in the same room to talk about any thing, much less a
sensitive issue like this, was a tricky business, so Behnke and his fellow organizers
had scripted the meeting carefully, honing the message to its barest essentials.
“C.E.O.’s in the food industry are ty pically not technical guy s, and they ’re
uncomfortable going to meetings where technical people talk in technical terms
about technical things,” Behnke said. “They don’t want to be embarrassed. They
don’t want to make commitments. They want to maintain their aloofness and
autonomy .”
A chemist by training with a doctoral degree in food science, Behnke became
Pillsbury ’s chief technical officer in 1979 and was instrumental in creating a long
line of hit products, including microwaveable popcorn. He deeply admired
Pillsbury but in recent y ears had grown troubled by pictures of obese children
suffering from diabetes and the earliest signs of hy pertension and heart disease.
In the months leading up to the C.E.O. meeting, he was engaged in conversation
with a group of food-science experts who were painting an increasingly grim
picture of the public’s ability to cope with the industry ’s formulations — from the
body ’s fragile controls on overeating to the hidden power of some processed
foods to make people feel hungrier still. It was time, he and a handful of others
felt, to warn the C.E.O.’s that their companies may have gone too far in creating
and marketing products that posed the greatest health concerns.
The discussion took place in Pillsbury ’s auditorium. The first speaker was a vice
president of Kraft named Michael Mudd. “I very much appreciate this
opportunity to talk to y ou about childhood obesity and the growing challenge it
presents for us all,” Mudd began. “Let me say right at the start, this is not an easy
subject. There are no easy answers — for what the public health community
must do to bring this problem under control or for what the industry should do as
others seek to hold it accountable for what has happened. But this much is clear:
For those of us who’ve looked hard at this issue, whether they ’re public health
professionals or staff specialists in y our own companies, we feel sure that the one
thing we shouldn’t do is nothing.”
As he spoke, Mudd clicked through a deck of slides — 114 in all — projected on a
large screen behind him. The figures were staggering. More than half of
American adults were now considered overweight, with nearly one-quarter of the
adult population — 40 million people — clinically defined as obese. Among
children, the rates had more than doubled since 1980, and the number of kids
considered obese had shot past 12 million. (This was still only 1999; the nation’s
obesity rates would climb much higher.) Food manufacturers were now being
blamed for the problem from all sides — academia, the Centers for Disease
Control and Prevention, the American Heart Association and the American
Cancer Society. The secretary of agriculture, over whom the industry had long
held sway , had recently called obesity a “national epidemic.”
Mudd then did the unthinkable. He drew a connection to the last thing in the world
the C.E.O.’s wanted linked to their products: cigarettes. First came a quote from a
Yale University professor of psy chology and public health, Kelly Brownell, who
was an especially vocal proponent of the view that the processed-food industry
should be seen as a public health menace: “As a culture, we’ve become upset by
the tobacco companies advertising to children, but we sit idly by while the food
companies do the very same thing. And we could make a claim that the toll taken
on the public health by a poor diet rivals that taken by tobacco.”
“If any one in the food industry ever doubted there was a slippery slope out
there,” Mudd said, “I imagine they are beginning to experience a distinct sliding
sensation right about now.”
Mudd then presented the plan he and others had devised to address the obesity
problem. Merely getting the executives to acknowledge some culpability was an
important first step, he knew, so his plan would start off with a small but crucial
move: the industry should use the expertise of scientists — its own and others — to
gain a deeper understanding of what was driving Americans to overeat. Once this
was achieved, the effort could unfold on several fronts. To be sure, there would
be no getting around the role that packaged foods and drinks play in
overconsumption. They would have to pull back on their use of salt, sugar and fat,
perhaps by imposing industry wide limits. But it wasn’t just a matter of these three
ingredients; the schemes they used to advertise and market their products were
critical, too. Mudd proposed creating a “code to guide the nutritional aspects of
food marketing, especially to children.”
“We are say ing that the industry should make a sincere effort to be part of the
solution,” Mudd concluded. “And that by doing so, we can help to defuse the
criticism that’s building against us.”
What happened next was not written down. But according to three participants,
when Mudd stopped talking, the one C.E.O. whose recent exploits in the grocery
store had awed the rest of the industry stood up to speak. His name was Stephen
Sanger, and he was also the person — as head of General Mills — who had the
most to lose when it came to dealing with obesity. Under his leadership, General
Mills had overtaken not just the cereal aisle but other sections of the grocery store.
The company ’s Yoplait brand had transformed traditional unsweetened breakfast
y ogurt into a veritable dessert. It now had twice as much sugar per serving as
General Mills’ marshmallow cereal Lucky Charms. And y et, because of y ogurt’s
well-tended image as a wholesome snack, sales of Yoplait were soaring, with
annual revenue topping $500 million. Emboldened by the success, the company ’s
development wing pushed even harder, inventing a Yoplait variation that came in
a squeezable tube — perfect for kids. They called it Go-Gurt and rolled it out
nationally in the weeks before the C.E.O. meeting. (By y ear’s end, it would hit
$100 million in sales.)
According to the sources I spoke with, Sanger began by reminding the group that
consumers were “fickle.” (Sanger declined to be interviewed.) Sometimes they
worried about sugar, other times fat. General Mills, he said, acted responsibly to
both the public and shareholders by offering products to satisfy dieters and other
concerned shoppers, from low sugar to added whole grains. But most often, he
said, people bought what they liked, and they liked what tasted good. “Don’t talk to
me about nutrition,” he reportedly said, taking on the voice of the ty pical
consumer. “Talk to me about taste, and if this stuff tastes better, don’t run around
try ing to sell stuff that doesn’t taste good.”
To react to the critics, Sanger said, would jeopardize the sanctity of the recipes
that had made his products so successful. General Mills would not pull back. He
would push his people onward, and he urged his peers to do the same. Sanger’s
response effectively ended the meeting.
“What can I say ?” James Behnke told me y ears later. “It didn’t work. These guy s
weren’t as receptive as we thought they would be.” Behnke chose his words
deliberately. He wanted to be fair. “Sanger was try ing to say, ‘Look, we’re not
going to screw around with the company jewels here and change the
formulations because a bunch of guy s in white coats are worried about obesity.’ ”
The meeting was remarkable, first, for the insider admissions of guilt. But I was
also struck by how prescient the organizers of the sit-down had been. Today, one
in three adults is considered clinically obese, along with one in five kids, and 24
million Americans are afflicted by ty pe 2 diabetes, often caused by poor diet,
with another 79 million people having pre-diabetes. Even gout, a painful form of
arthritis once known as “the rich man’s disease” for its associations with gluttony,
now afflicts eight million Americans.
The public and the food companies have known for decades now — or at the very
least since this meeting — that sugary, salty, fatty foods are not good for us in the
quantities that we consume them. So why are the diabetes and obesity and
hy pertension numbers still spiraling out of control? It’s not just a matter of poor
willpower on the part of the consumer and a give-the-people-what-they -want
attitude on the part of the food manufacturers. What I found, over four y ears of
research and reporting, was a conscious effort — taking place in labs and
marketing meetings and grocery -store aisles — to get people hooked on foods that
are convenient and inexpensive. I talked to more than 300 people in or formerly
employ ed by the processed-food industry, from scientists to marketers to
C.E.O.’s. Some were willing whistle-blowers, while others spoke reluctantly when
presented with some of the thousands of pages of secret memos that I obtained
from inside the food industry ’s operations. What follows is a series of small case
studies of a handful of characters whose work then, and perspective now, sheds
light on how the foods are created and sold to people who, while not powerless,
are extremely vulnerable to the intensity of these companies’ industrial
formulations and selling campaigns.
I. ‘In This Field, I’m a Game Changer.’
John Lennon couldn’t find it in England, so he had cases of it shipped from New
York to fuel the “Imagine” sessions. The Beach Boy s, ZZ Top and Cher all
stipulated in their contract riders that it be put in their dressing rooms when they
toured. Hillary Clinton asked for it when she traveled as first lady, and ever after
her hotel suites were dutifully stocked.
What they all wanted was Dr Pepper, which until 2001 occupied a comfortable
third-place spot in the soda aisle behind Coca-Cola and Pepsi. But then a flood of
spinoffs from the two soda giants showed up on the shelves — lemons and limes,
vanillas and coffees, raspberries and oranges, whites and blues and clears — what
in food-industry lingo are known as “line extensions,” and Dr Pepper started to
lose its market share.
Responding to this pressure, Cadbury Schweppes created its first spinoff, other
than a diet version, in the soda’s 115-y ear history, a bright red soda with a very
un-Dr Pepper name: Red Fusion. “If we are to re-establish Dr Pepper back to its
historic growth rates, we have to add more excitement,” the company ’s president,
Jack Kilduff, said. One particularly promising market, Kilduff pointed out, was the
“rapidly growing Hispanic and African-American communities.”
But consumers hated Red Fusion. “Dr Pepper is my all-time favorite drink, so I
was curious about the Red Fusion,” a California mother of three wrote on a blog to
warn other Peppers away . “It’s disgusting. Gagging. Never again.”
Stung by the rejection, Cadbury Schweppes in 2004 turned to a food-industry
legend named Howard Moskowitz. Moskowitz, who studied mathematics and holds
a Ph.D. in experimental psy chology from Harvard, runs a consulting firm in
White Plains, where for more than three decades he has “optimized” a variety of
products for Campbell Soup, General Foods, Kraft and PepsiCo. “I’ve optimized
soups,” Moskowitz told me. “I’ve optimized pizzas. I’ve optimized salad dressings
and pickles. In this field, I’m a game changer.”
In the process of product optimization, food engineers alter a litany of variables
with the sole intent of finding the most perfect version (or versions) of a product.
Ordinary consumers are paid to spend hours sitting in rooms where they touch,
feel, sip, smell, swirl and taste whatever product is in question. Their opinions are
dumped into a computer, and the data are sifted and sorted through a statistical
method called conjoint analy sis, which determines what features will be most
attractive to consumers. Moskowitz likes to imagine that his computer is divided
into silos, in which each of the attributes is stacked. But it’s not simply a matter of
comparing Color 23 with Color 24. In the most complicated projects, Color 23
must be combined with Sy rup 11 and Packaging 6, and on and on, in seemingly
infinite combinations. Even for jobs in which the only concern is taste and the
variables are limited to the ingredients, endless charts and graphs will come
spewing out of Moskowitz’s computer. “The mathematical model maps out the
ingredients to the sensory perceptions these ingredients create,” he told me, “so I
can just dial a new product. This is the engineering approach.”
Moskowitz’s work on Prego spaghetti sauce was memorialized in a 2004
presentation by the author Malcolm Gladwell at the TED conference in
Monterey, Calif.: “After . . . months and months, he had a mountain of data about
how the American people feel about spaghetti sauce. . . . And sure enough, if y ou
sit down and y ou analy ze all this data on spaghetti sauce, y ou realize that all
Americans fall into one of three groups. There are people who like their spaghetti
sauce plain. There are people who like their spaghetti sauce spicy. And there are
people who like it extra-chunky. And of those three facts, the third one was the
most significant, because at the time, in the early 1980s, if y ou went to a
supermarket, y ou would not find extra-chunky spaghetti sauce. And Prego turned
to Howard, and they said, ‘Are y ou telling me that one-third of Americans crave
extra-chunky spaghetti sauce, and y et no one is servicing their needs?’ And he
said, ‘Yes.’ And Prego then went back and completely reformulated their
spaghetti sauce and came out with a line of extra-chunky that immediately and
completely took over the spaghetti-sauce business in this country. . . . That is
Howard’s gift to the American people. . . . He fundamentally changed the way
the food industry thinks about making y ou happy .”
Well, y es and no. One thing Gladwell didn’t mention is that the food industry
already knew some things about making people happy — and it started with sugar.
Many of the Prego sauces — whether cheesy, chunky or light — have one
feature in common: The largest ingredient, after tomatoes, is sugar. A mere halfcup of Prego Traditional, for instance, has the equivalent of more than two
teaspoons of sugar, as much as two-plus Oreo cookies. It also delivers one-third of
the sodium recommended for a majority of American adults for an entire day.
In making these sauces, Campbell supplied the ingredients, including the salt,
sugar and, for some versions, fat, while Moskowitz supplied the optimization.
“More is not necessarily better,” Moskowitz wrote in his own account of the Prego
project. “As the sensory intensity (say, of sweetness) increases, consumers first
say that they like the product more, but eventually, with a middle level of
sweetness, consumers like the product the most (this is their optimum, or ‘bliss,’
point).”
I first met Moskowitz on a crisp day in the spring of 2010 at the Harvard Club in
Midtown Manhattan. As we talked, he made clear that while he has worked on
numerous projects aimed at creating more healthful foods and insists the industry
could be doing far more to curb obesity, he had no qualms about his own
pioneering work on discovering what industry insiders now regularly refer to as
“the bliss point” or any of the other sy stems that helped food companies create
the greatest amount of crave. “There’s no moral issue for me,” he said. “I did the
best science I could. I was struggling to survive and didn’t have the luxury of
being a moral creature. As a researcher, I was ahead of my time.”
Moskowitz’s path to mastering the bliss point began in earnest not at Harvard but a
few months after graduation, 16 miles from Cambridge, in the town of Natick,
where the U.S. Army hired him to work in its research labs. The military has long
been in a peculiar bind when it comes to food: how to get soldiers to eat more
rations when they are in the field. They know that over time, soldiers would
gradually find their meals-ready -to-eat so boring that they would toss them
away, half-eaten, and not get all the calories they needed. But what was causing
this M.R.E.-fatigue was a my stery. “So I started asking soldiers how frequently
they would like to eat this or that, try ing to figure out which products they would
find boring,” Moskowitz said. The answers he got were inconsistent. “They liked
flavorful foods like turkey tetrazzini, but only at first; they quickly grew tired of
them. On the other hand, mundane foods like white bread would never get them
too excited, but they could eat lots and lots of it without feeling they ’d had
enough.”
This contradiction is known as “sensory -specific satiety.” In lay terms, it is the
tendency for big, distinct flavors to overwhelm the brain, which responds by
depressing y our desire to have more. Sensory -specific satiety also became a
guiding principle for the processed-food industry. The biggest hits — be they
Coca-Cola or Doritos — owe their success to complex formulas that pique the
taste buds enough to be alluring but don’t have a distinct, overriding single flavor
that tells the brain to stop eating.
Thirty -two y ears after he began experimenting with the bliss point, Moskowitz got
the call from Cadbury Schweppes asking him to create a good line extension for
Dr Pepper. I spent an afternoon in his White Plains offices as he and his vice
president for research, Michele Reisner, walked me through the Dr Pepper
campaign. Cadbury wanted its new flavor to have cherry and vanilla on top of the
basic Dr Pepper taste. Thus, there were three main components to play with. A
sweet cherry flavoring, a sweet vanilla flavoring and a sweet sy rup known as “Dr
Pepper flavoring.”
Finding the bliss point required the preparation of 61 subtly distinct formulas — 31
for the regular version and 30 for diet. The formulas were then subjected to 3,904
tastings organized in Los Angeles, Dallas, Chicago and Philadelphia. The Dr
Pepper tasters began working through their samples, resting five minutes between
each sip to restore their taste buds. After each sample, they gave numerically
ranked answers to a set of questions: How much did they like it overall? How
strong is the taste? How do they feel about the taste? How would they describe the
quality of this product? How likely would they be to purchase this product?
Moskowitz’s data — compiled in a 135-page report for the soda maker — is
tremendously fine-grained, showing how different people and groups of people
feel about a strong vanilla taste versus weak, various aspects of aroma and the
powerful sensory force that food scientists call “mouth feel.” This is the way a
product interacts with the mouth, as defined more specifically by a host of related
sensations, from dry ness to gumminess to moisture release. These are terms
more familiar to sommeliers, but the mouth feel of soda and many other food
items, especially those high in fat, is second only to the bliss point in its ability to
predict how much craving a product will induce.
In addition to taste, the consumers were also tested on their response to color,
which proved to be highly sensitive. “When we increased the level of the Dr
Pepper flavoring, it gets darker and liking goes off,” Reisner said. These
preferences can also be cross-referenced by age, sex and race.
On Page 83 of the report, a thin blue line represents the amount of Dr Pepper
flavoring needed to generate maximum appeal. The line is shaped like an upside-
down U, just like the bliss-point curve that Moskowitz studied 30 y ears earlier in
his Army lab. And at the top of the arc, there is not a single sweet spot but instead
a sweet range, within which “bliss” was achievable. This meant that Cadbury
could edge back on its key ingredient, the sugary Dr Pepper sy rup, without falling
out of the range and losing the bliss. Instead of using 2 milliliters of the flavoring,
for instance, they could use 1.69 milliliters and achieve the same effect. The
potential savings is merely a few percentage points, and it won’t mean much to
individual consumers who are counting calories or grams of sugar. But for Dr
Pepper, it adds up to colossal savings. “That looks like nothing,” Reisner said. “But
it’s a lot of money . A lot of money . Millions.”
The soda that emerged from all of Moskowitz’s variations became known as
Cherry Vanilla Dr Pepper, and it proved successful bey ond any thing Cadbury
imagined. In 2008, Cadbury split off its soft-drinks business, which included
Snapple and 7-Up. The Dr Pepper Snapple Group has since been valued in excess
of $11 billion.
II. ‘Lunchtime Is All Yours’
Sometimes innovations within the food industry happen in the lab, with scientists
dialing in specific ingredients to achieve the greatest allure. And sometimes, as in
the case of Oscar May er’s bologna crisis, the innovation involves putting old
products in new packages.
The 1980s were tough times for Oscar May er. Red-meat consumption fell more
than 10 percent as fat became sy nony mous with cholesterol, clogged arteries,
heart attacks and strokes. Anxiety set in at the company ’s headquarters in
Madison, Wis., where executives worried about their future and the pressure they
faced from their new bosses at Philip Morris.
Bob Drane was the company ’s vice president for new business strategy and
development when Oscar May er tapped him to try to find some way to reposition
bologna and other troubled meats that were declining in popularity and sales. I
met Drane at his home in Madison and went through the records he had kept on
the birth of what would become much more than his solution to the company ’s
meat problem. In 1985, when Drane began working on the project, his orders
were to “figure out how to contemporize what we’ve got.”
Drane’s first move was to try to zero in not on what Americans felt about
processed meat but on what Americans felt about lunch. He organized focusgroup sessions with the people most responsible for buy ing bologna — mothers —
and as they talked, he realized the most pressing issue for them was time. Working
moms strove to provide healthful food, of course, but they spoke with real passion
and at length about the morning crush, that nightmarish dash to get breakfast on
the table and lunch packed and kids out the door. He summed up their remarks for
me like this: “It’s awful. I am scrambling around. My kids are asking me for stuff.
I’m try ing to get my self ready to go to the office. I go to pack these lunches, and I
don’t know what I’ve got.” What the moms revealed to him, Drane said, was “a
gold mine of disappointments and problems.”
He assembled a team of about 15 people with varied skills, from design to food
science to advertising, to create something completely new — a convenient
prepackaged lunch that would have as its main building block the company ’s
sliced bologna and ham. They wanted to add bread, naturally, because who ate
bologna without it? But this presented a problem: There was no way bread could
stay fresh for the two months their product needed to sit in warehouses or in
grocery coolers. Crackers, however, could — so they added a handful of cracker
rounds to the package. Using cheese was the next obvious move, given its
increased presence in processed foods. But what kind of cheese would work?
Natural Cheddar, which they started off with, crumbled and didn’t slice very well,
so they moved on to processed varieties, which could bend and be sliced and
would last forever, or they could knock another two cents off per unit by using an
even lesser product called “cheese food,” which had lower scores than processed
cheese in taste tests. The cost dilemma was solved when Oscar May er merged
with Kraft in 1989 and the company didn’t have to shop for cheese any more; it
got all the processed cheese it wanted from its new sister company , and at cost.
Drane’s team moved into a nearby hotel, where they set out to find the right mix
of components and container. They gathered around tables where bagfuls of
meat, cheese, crackers and all sorts of wrapping material had been dumped, and
they let their imaginations run. After snipping and taping their way through a host
of failures, the model they fell back on was the American TV dinner — and after
some brainstorming about names (Lunch Kits? Go-Packs? Fun Mealz?),
Lunchables were born.
The tray s flew off the grocery -store shelves. Sales hit a phenomenal $218 million
in the first 12 months, more than any one was prepared for. This only brought
Drane his next crisis. The production costs were so high that they were losing
money with each tray they produced. So Drane flew to New York, where he met
with Philip Morris officials who promised to give him the money he needed to
keep it going. “The hard thing is to figure out something that will sell,” he was told.
“You’ll figure out how to get the cost right.” Projected to lose $6 million in 1991,
the tray s instead broke even; the next y ear, they earned $8 million.
With production costs trimmed and profits coming in, the next question was how
to expand the franchise, which they did by turning to one of the cardinal rules in
processed food: When in doubt, add sugar. “Lunchables With Dessert is a logical
extension,” an Oscar May er official reported to Philip Morris executives in early
1991. The “target” remained the same as it was for regular Lunchables — “busy
mothers” and “working women,” ages 25 to 49 — and the “enhanced taste”
would attract shoppers who had grown bored with the current tray s. A y ear later,
the dessert Lunchable morphed into the Fun Pack, which would come with a
Snickers bar, a package of M&M’s or a Reese’s Peanut Butter Cup, as well as a
sugary drink. The Lunchables team started by using Kool-Aid and cola and then
Capri Sun after Philip Morris added that drink to its stable of brands.
Eventually, a line of the tray s, appropriately called Maxed Out, was released that
had as many as nine grams of saturated fat, or nearly an entire day ’s
recommended maximum for kids, with up to two-thirds of the max for sodium
and 13 teaspoons of sugar.
When I asked Geoffrey Bible, former C.E.O. of Philip Morris, about this shift
toward more salt, sugar and fat in meals for kids, he smiled and noted that even in
its earliest incarnation, Lunchables was held up for criticism. “One article said
something like, ‘If y ou take Lunchables apart, the most healthy item in it is the
napkin.’ ”
Well, they did have a good bit of fat, I offered. “You bet,” he said. “Plus
cookies.”
The prevailing attitude among the company ’s food managers — through the
1990s, at least, before obesity became a more pressing concern — was one of
supply and demand. “People could point to these things and say, ‘They ’ve got too
much sugar, they ’ve got too much salt,’ ” Bible said. “Well, that’s what the
consumer wants, and we’re not putting a gun to their head to eat it. That’s what
they want. If we give them less, they ’ll buy less, and the competitor will get our
market. So y ou’re sort of trapped.” (Bible would later press Kraft to reconsider its
reliance on salt, sugar and fat.)
When it came to Lunchables, they did try to add more healthful ingredients. Back
at the start, Drane experimented with fresh carrots but quickly gave up on that,
since fresh components didn’t work within the constraints of the processed-food
sy stem, which ty pically required weeks or months of transport and storage before
the food arrived at the grocery store. Later, a low-fat version of the tray s was
developed, using meats and cheese and crackers that were formulated with less
fat, but it tasted inferior, sold poorly and was quickly scrapped.
When I met with Kraft officials in 2011 to discuss their products and policies on
nutrition, they had dropped the Maxed Out line and were try ing to improve the
nutritional profile of Lunchables through smaller, incremental changes that were
less noticeable to consumers. Across the Lunchables line, they said they had
reduced the salt, sugar and fat by about 10 percent, and new versions, featuring
mandarin-orange and pineapple slices, were in development. These would be
promoted as more healthful versions, with “fresh fruit,” but their list of ingredients
— containing upward of 70 items, with sucrose, corn sy rup, high-fructose corn
sy rup and fruit concentrate all in the same tray — have been met with intense
criticism from outside the industry .
One of the company ’s responses to criticism is that kids don’t eat the Lunchables
every day — on top of which, when it came to try ing to feed them more
healthful foods, kids themselves were unreliable. When their parents packed fresh
carrots, apples and water, they couldn’t be trusted to eat them. Once in school,
they often trashed the healthful stuff in their brown bags to get right to the sweets.
This idea — that kids are in control — would become a key concept in the
evolving marketing campaigns for the tray s. In what would prove to be their
greatest achievement of all, the Lunchables team would delve into adolescent
psy chology to discover that it wasn’t the food in the tray s that excited the kids; it
was the feeling of power it brought to their lives. As Bob Eckert, then the C.E.O. of
Kraft, put it in 1999: “Lunchables aren’t about lunch. It’s about kids being able to
put together what they want to eat, any time, any where.”
Kraft’s early Lunchables campaign targeted mothers. They might be too
distracted by work to make a lunch, but they loved their kids enough to offer them
this prepackaged gift. But as the focus swung toward kids, Saturday -morning
cartoons started carry ing an ad that offered a different message: “All day, y ou
gotta do what they say ,” the ads said. “But lunchtime is all y ours.”
With this marketing strategy in place and pizza Lunchables — the crust in one
compartment, the cheese, pepperoni and sauce in others — proving to be a
runaway success, the entire world of fast food suddenly opened up for Kraft to
pursue. They came out with a Mexican-themed Lunchables called Beef Taco
Wraps; a Mini Burgers Lunchables; a Mini Hot Dog Lunchable, which also
happened to provide a way for Oscar May er to sell its wieners. By 1999,
pancakes — which included sy rup, icing, Lifesavers candy and Tang, for a
whopping 76 grams of sugar — and waffles were, for a time, part of the
Lunchables franchise as well.
Annual sales kept climbing, past $500 million, past $800 million; at last count,
including sales in Britain, they were approaching the $1 billion mark. Lunchables
was more than a hit; it was now its own category. Eventually, more than 60
varieties of Lunchables and other brands of tray s would show up in the grocery
stores. In 2007, Kraft even tried a Lunchables Jr. for 3- to 5-y ear-olds.
In the trove of records that document the rise of the Lunchables and the sweeping
change it brought to lunchtime habits, I came across a photograph of Bob Drane’s
daughter, which he had slipped into the Lunchables presentation he showed to
food developers. The picture was taken on Monica Drane’s wedding day in 1989,
and she was standing outside the family ’s home in Madison, a beautiful bride in a
white wedding dress, holding one of the brand-new y ellow tray s.
During the course of reporting, I finally had a chance to ask her about it. Was she
really that much of a fan? “There must have been some in the fridge,” she told
me. “I probably just took one out before we went to the church. My mom had
joked that it was really like their fourth child, my dad invested so much time and
energy on it.”
Monica Drane had three of her own children by the time we spoke, ages 10, 14
and 17. “I don’t think my kids have ever eaten a Lunchable,” she told me. “They
know they exist and that Grandpa Bob invented them. But we eat very
healthfully .”
Drane himself paused only briefly when I asked him if, looking back, he was
proud of creating the tray s. “Lots of things are trade-offs,” he said. “And I do
believe it’s easy to rationalize any thing. In the end, I wish that the nutritional
profile of the thing could have been better, but I don’t view the entire project as
any thing but a positive contribution to people’s lives.”
Today Bob Drane is still talking to kids about what they like to eat, but his approach
has changed. He volunteers with a nonprofit organization that seeks to build better
communications between school kids and their parents, and right in the mix of
their problems, alongside the academic struggles, is childhood obesity. Drane has
also prepared a précis on the food industry that he used with medical students at
the University of Wisconsin. And while he does not name his Lunchables in this
document, and cites numerous causes for the obesity epidemic, he holds the
entire industry accountable. “What do University of Wisconsin M.B.A.’s learn
about how to succeed in marketing?” his presentation to the med students asks.
“Discover what consumers want to buy and give it to them with both barrels. Sell
more, keep y our job! How do marketers often translate these ‘rules’ into action on
food? Our limbic brains love sugar, fat, salt. . . . So formulate products to deliver
these. Perhaps add low-cost ingredients to boost profit margins. Then ‘supersize’ to
sell more. . . . And advertise/promote to lock in ‘heavy users.’ Plenty of guilt to go
around here!”
III. ‘It’s Called Vanishing Caloric Density.’
At a sy mposium for nutrition scientists in Los Angeles on Feb. 15, 1985, a
professor of pharmacology from Helsinki named Heikki Karppanen told the
remarkable story of Finland’s effort to address its salt habit. In the late 1970s, the
Finns were consuming huge amounts of sodium, eating on average more than two
teaspoons of salt a day. As a result, the country had developed significant issues
with high blood pressure, and men in the eastern part of Finland had the highest
rate of fatal cardiovascular disease in the world. Research showed that this plague
was not just a quirk of genetics or a result of a sedentary lifesty le — it was also
owing to processed foods. So when Finnish authorities moved to address the
problem, they went right after the manufacturers. (The Finnish response worked.
Every grocery item that was heavy in salt would come to be marked prominently
with the warning “High Salt Content.” By 2007, Finland’s per capita consumption
of salt had dropped by a third, and this shift — along with improved medical care
— was accompanied by a 75 percent to 80 percent decline in the number of
deaths from strokes and heart disease.)
Karppanen’s presentation was met with applause, but one man in the crowd
seemed particularly intrigued by the presentation, and as Karppanen left the
stage, the man intercepted him and asked if they could talk more over dinner.
Their conversation later that night was not at all what Karppanen was expecting.
His host did indeed have an interest in salt, but from quite a different vantage
point: the man’s name was Robert I-San Lin, and from 1974 to 1982, he worked as
the chief scientist for Frito-Lay, the nearly $3-billion-a-y ear manufacturer of
Lay ’s, Doritos, Cheetos and Fritos.
Lin’s time at Frito-Lay coincided with the first attacks by nutrition advocates on
salty foods and the first calls for federal regulators to reclassify salt as a “risky ”
food additive, which could have subjected it to severe controls. No company took
this threat more seriously — or more personally — than Frito-Lay, Lin explained
to Karppanen over their dinner. Three y ears after he left Frito-Lay, he was still
anguished over his inability to effectively change the company ’s recipes and
practices.
By chance, I ran across a letter that Lin sent to Karppanen three weeks after that
dinner, buried in some files to which I had gained access. Attached to the letter
was a memo written when Lin was at Frito-Lay, which detailed some of the
company ’s efforts in defending salt. I tracked Lin down in Irvine, Calif., where
we spent several day s going through the internal company memos, strategy
papers and handwritten notes he had kept. The documents were evidence of the
concern that Lin had for consumers and of the company ’s intent on using science
not to address the health concerns but to thwart them. While at Frito-Lay, Lin and
other company scientists spoke openly about the country ’s excessive consumption
of sodium and the fact that, as Lin said to me on more than one occasion, “people
get addicted to salt.”
Not much had changed by 1986, except Frito-Lay found itself on a rare cold
streak. The company had introduced a series of high-profile products that failed
miserably. Toppels, a cracker with cheese topping; Stuffers, a shell with a variety
of fillings; Rumbles, a bite-size granola snack — they all came and went in a blink,
and the company took a $52 million hit. Around that time, the marketing team was
joined by Dwight Riskey, an expert on cravings who had been a fellow at the
Monell Chemical Senses Center in Philadelphia, where he was part of a team of
scientists that found that people could beat their salt habits simply by refraining
from salty foods long enough for their taste buds to return to a normal level of
sensitivity. He had also done work on the bliss point, showing how a product’s
allure is contextual, shaped partly by the other foods a person is eating, and that it
changes as people age. This seemed to help explain why Frito-Lay was having so
much trouble selling new snacks. The largest single block of customers, the baby
boomers, had begun hitting middle age. According to the research, this suggested
that their liking for salty snacks — both in the concentration of salt and how much
they ate — would be tapering off. Along with the rest of the snack-food industry,
Frito-Lay anticipated lower sales because of an aging population, and marketing
plans were adjusted to focus even more intently on y ounger consumers.
Except that snack sales didn’t decline as every one had projected, Frito-Lay ’s
doomed product launches notwithstanding. Poring over data one day in his home
office, try ing to understand just who was consuming all the snack food, Riskey
realized that he and his colleagues had been misreading things all along. They had
been measuring the snacking habits of different age groups and were seeing what
they expected to see, that older consumers ate less than those in their 20s. But
what they weren’t measuring, Riskey realized, is how those snacking habits of the
boomers compared to themselves when they were in their 20s. When he called up
a new set of sales data and performed what’s called a cohort study, following a
single group over time, a far more encouraging picture — for Frito-Lay, any way
— emerged. The baby boomers were not eating fewer salty snacks as they aged.
“In fact, as those people aged, their consumption of all those segments — the
cookies, the crackers, the candy, the chips — was going up,” Riskey said. “They
were not only eating what they ate when they were y ounger, they were eating
more of it.” In fact, every one in the country, on average, was eating more salty
snacks than they used to. The rate of consumption was edging up about one-third
of a pound every y ear, with the average intake of snacks like chips and cheese
crackers pushing past 12 pounds a y ear.
Riskey had a theory about what caused this surge: Eating real meals had become
a thing of the past. Baby boomers, especially, seemed to have greatly cut down
on regular meals. They were skipping breakfast when they had early -morning
meetings. They skipped lunch when they then needed to catch up on work
because of those meetings. They skipped dinner when their kids stay ed out late or
grew up and moved out of the house. And when they skipped these meals, they
replaced them with snacks. “We looked at this behavior, and said, ‘Oh, my gosh,
people were skipping meals right and left,’ ” Riskey told me. “It was amazing.”
This led to the next realization, that baby boomers did not represent “a category
that is mature, with no growth. This is a category that has huge growth potential.”
The food technicians stopped worry ing about inventing new products and instead
embraced the industry ’s most reliable method for getting consumers to buy more:
the line extension. The classic Lay ’s potato chips were joined by Salt & Vinegar,
Salt & Pepper and Cheddar & Sour Cream. They put out Chili-Cheese-flavored
Fritos, and Cheetos were transformed into 21 varieties. Frito-Lay had a
formidable research complex near Dallas, where nearly 500 chemists,
psy chologists and technicians conducted research that cost up to $30 million a
y ear, and the science corps focused intense amounts of resources on questions of
crunch, mouth feel and aroma for each of these items. Their tools included a
$40,000 device that simulated a chewing mouth to test and perfect the chips,
discovering things like the perfect break point: people like a chip that snaps with
about four pounds of pressure per square inch.
To get a better feel for their work, I called on Steven Witherly, a food scientist
who wrote a fascinating guide for industry insiders titled, “Why Humans Like
Junk Food.” I brought him two shopping bags filled with a variety of chips to taste.
He zeroed right in on the Cheetos. “This,” Witherly said, “is one of the most
marvelously constructed foods on the planet, in terms of pure pleasure.” He
ticked off a dozen attributes of the Cheetos that make the brain say more. But the
one he focused on most was the puff’s uncanny ability to melt in the mouth. “It’s
called vanishing caloric density,” Witherly said. “If something melts down
quickly, y our brain thinks that there’s no calories in it . . . y ou can just keep eating
it forever.”
As for their marketing troubles, in a March 2010 meeting, Frito-Lay executives
hastened to tell their Wall Street investors that the 1.4 billion boomers worldwide
weren’t being neglected; they were redoubling their efforts to understand exactly
what it was that boomers most wanted in a snack chip. Which was basically
every thing: great taste, maximum bliss but minimal guilt about health and more
maturity than puffs. “They snack a lot,” Frito-Lay ’s chief marketing officer, Ann
Mukherjee, told the investors. “But what they ’re looking for is very different.
They ’re looking for new experiences, real food experiences.” Frito-Lay acquired
Stacy ’s Pita Chip Company, which was started by a Massachusetts couple who
made food-cart sandwiches and started serving pita chips to their customers in the
mid-1990s. In Frito-Lay ’s hands, the pita chips averaged 270 milligrams of
sodium — nearly one-fifth a whole day ’s recommended maximum for most
American adults — and were a huge hit among boomers.
The Frito-Lay executives also spoke of the company ’s ongoing pursuit of a
“designer sodium,” which they hoped, in the near future, would take their sodium
loads down by 40 percent. No need to worry about lost sales there, the company ’s
C.E.O., Al Carey, assured their investors. The boomers would see less salt as the
green light to snack like never before.
There’s a paradox at work here. On the one hand, reduction of sodium in snack
foods is commendable. On the other, these changes may well result in consumers
eating more. “The big thing that will happen here is removing the barriers for
boomers and giving them permission to snack,” Carey said. The prospects for
lower-salt snacks were so amazing, he added, that the company had set its sights
on using the designer salt to conquer the toughest market of all for snacks: schools.
He cited, for example, the school-food initiative championed by Bill Clinton and
the American Heart Association, which is seeking to improve the nutrition of
school food by limiting its load of salt, sugar and fat. “Imagine this,” Carey said.
“A potato chip that tastes great and qualifies for the Clinton-A.H.A. alliance for
schools . . . . We think we have way s to do all of this on a potato chip, and imagine
getting that product into schools, where children can have this product and grow
up with it and feel good about eating it.”
Carey ’s quote reminded me of something I read in the early stages of my
reporting, a 24-page report prepared for Frito-Lay in 1957 by a psy chologist
named Ernest Dichter. The company ’s chips, he wrote, were not selling as well as
they could for one simple reason: “While people like and enjoy potato chips, they
feel guilty about liking them. . . . Unconsciously, people expect to be punished for
‘letting themselves go’ and enjoy ing them.” Dichter listed seven “fears and
resistances” to the chips: “You can’t stop eating them; they ’re fattening; they ’re
not good for y ou; they ’re greasy and messy to eat; they ’re too expensive; it’s hard
to store the leftovers; and they ’re bad for children.” He spent the rest of his memo
lay ing out his prescriptions, which in time would become widely used not just by
Frito-Lay but also by the entire industry. Dichter suggested that Frito-Lay avoid
using the word “fried” in referring to its chips and adopt instead the more
healthful-sounding term “toasted.” To counteract the “fear of letting oneself go,”
he suggested repacking the chips into smaller bags. “The more-anxious
consumers, the ones who have the deepest fears about their capacity to control
their appetite, will tend to sense the function of the new pack and select it,” he
said.
Dichter advised Frito-Lay to move its chips out of the realm of between-meals
snacking and turn them into an ever-present item in the American diet. “The
increased use of potato chips and other Lay ’s products as a part of the regular
fare served by restaurants and sandwich bars should be encouraged in a
concentrated way,” Dichter said, citing a string of examples: “potato chips with
soup, with fruit or vegetable juice appetizers; potato chips served as a vegetable
on the main dish; potato chips with salad; potato chips with egg dishes for
breakfast; potato chips with sandwich orders.”
In 2011, The New England Journal of Medicine published a study that shed new
light on America’s weight gain. The subjects — 120,877 women and men —
were all professionals in the health field, and were likely to be more conscious
about nutrition, so the findings might well understate the overall trend. Using data
back to 1986, the researchers monitored every thing the participants ate, as well as
their phy sical activity and smoking. They found that every four y ears, the
participants exercised less, watched TV more and gained an average of 3.35
pounds. The researchers parsed the data by the caloric content of the foods being
eaten, and found the top contributors to weight gain included red meat and
processed meats, sugar-sweetened beverages and potatoes, including mashed and
French fries. But the largest weight-inducing food was the potato chip. The coating
of salt, the fat content that rewards the brain with instant feelings of pleasure, the
sugar that exists not as an additive but in the starch of the potato itself — all of this
combines to make it the perfect addictive food. “The starch is readily absorbed,”
Eric Rimm, an associate professor of epidemiology and nutrition at the Harvard
School of Public Health and one of the study ’s authors, told me. “More quickly
even than a similar amount of sugar. The starch, in turn, causes the glucose levels
in the blood to spike” — which can result in a craving for more.
If Americans snacked only occasionally, and in small amounts, this would not
present the enormous problem that it does. But because so much money and
effort has been invested over decades in engineering and then relentlessly selling
these products, the effects are seemingly impossible to unwind. More than 30
y ears have passed since Robert Lin first tangled with Frito-Lay on the imperative
of the company to deal with the formulation of its snacks, but as we sat at his
dining-room table, sifting through his records, the feelings of regret still play ed on
his face. In his view, three decades had been lost, time that he and a lot of other
smart scientists could have spent searching for way s to ease the addiction to salt,
sugar and fat. “I couldn’t do much about it,” he told me. “I feel so sorry for the
public.”
IV. ‘These People Need a Lot of Things, but They Don’t Need a Coke.’
The growing attention Americans are pay ing to what they put into their mouths
has touched off a new scramble by the processed-food companies to address
health concerns. Pressed by the Obama administration and consumers, Kraft,
Nestlé, Pepsi, Campbell and General Mills, among others, have begun to trim the
loads of salt, sugar and fat in many products. And with consumer advocates
pushing for more government intervention, Coca-Cola made headlines in January
by releasing ads that promoted its bottled water and low-calorie drinks as a way to
counter obesity . Predictably , the ads drew a new volley of scorn from critics who
pointed to the company ’s continuing drive to sell sugary Coke.
One of the other executives I spoke with at length was Jeffrey Dunn, who, in
2001, at age 44, was directing more than half of Coca-Cola’s $20 billion in annual
sales as president and chief operating officer in both North and South America. In
an effort to control as much market share as possible, Coke extended its
aggressive marketing to especially poor or vulnerable areas of the U.S., like New
Orleans — where people were drinking twice as much Coke as the national
average — or Rome, Ga., where the per capita intake was nearly three Cokes a
day. In Coke’s headquarters in Atlanta, the biggest consumers were referred to as
“heavy users.” “The other model we use was called ‘drinks and drinkers,’ ” Dunn
said. “How many drinkers do I have? And how many drinks do they drink? If y ou
lost one of those heavy users, if somebody just decided to stop drinking Coke, how
many drinkers would y ou have to get, at low velocity, to make up for that heavy
user? The answer is a lot. It’s more efficient to get my existing users to drink
more.”
One of Dunn’s lieutenants, Todd Putman, who worked at Coca-Cola from 1997 to
2001, said the goal became much larger than merely beating the rival brands;
Coca-Cola strove to outsell every other thing people drank, including milk and
water. The marketing division’s efforts boiled down to one question, Putman said:
“How can we drive more ounces into more bodies more often?” (In response to
Putman’s remarks, Coke said its goals have changed and that it now focuses on
providing consumers with more low- or no-calorie products.)
In his capacity, Dunn was making frequent trips to Brazil, where the company
had recently begun a push to increase consumption of Coke among the many
Brazilians living in favelas. The company ’s strategy was to repackage Coke into
smaller, more affordable 6.7-ounce bottles, just 20 cents each. Coke was not
alone in seeing Brazil as a potential boon; Nestlé began deploy ing battalions of
women to travel poor neighborhoods, hawking American-sty le processed foods
door to door. But Coke was Dunn’s concern, and on one trip, as he walked through
one of the impoverished areas, he had an epiphany. “A voice in my head say s,
‘These people need a lot of things, but they don’t need a Coke.’ I almost threw up.”
Dunn returned to Atlanta, determined to make some changes. He didn’t want to
abandon the soda business, but he did want to try to steer the company into a
more healthful mode, and one of the things he pushed for was to stop marketing
Coke in public schools. The independent companies that bottled Coke viewed his
plans as reactionary. A director of one bottler wrote a letter to Coke’s chief
executive and board asking for Dunn’s head. “He said what I had done was the
worst thing he had seen in 50 y ears in the business,” Dunn said. “Just to placate
these crazy leftist school districts who were try ing to keep people from having
their Coke. He said I was an embarrassment to the company, and I should be
fired.” In February 2004, he was.
Dunn told me that talking about Coke’s business today was by no means easy and,
because he continues to work in the food business, not without risk. “You really
don’t want them mad at y ou,” he said. “And I don’t mean that, like, I’m going to
end up at the bottom of the bay. But they don’t have a sense of humor when it
comes to this stuff. They ’re a very , very aggressive company .”
When I met with Dunn, he told me not just about his y ears at Coke but also about
his new marketing venture. In April 2010, he met with three executives from
Madison Dearborn Partners, a private-equity firm based in Chicago with a wideranging portfolio of investments. They recently hired Dunn to run one of their
newest acquisitions — a food producer in the San Joaquin Valley. As they sat in
the hotel’s meeting room, the men listened to Dunn’s marketing pitch. He talked
about giving the product a personality that was bold and irreverent, convey ing the
idea that this was the ultimate snack food. He went into detail on how he would
target a special segment of the 146 million Americans who are regular snackers
— mothers, children, y oung professionals — people, he said, who “keep their
snacking ritual fresh by try ing a new food product when it catches their attention.”
He explained how he would deploy strategic story telling in the ad campaign for
this snack, using a key phrase that had been developed with much calculation:
“Eat ’Em Like Junk Food.”
After 45 minutes, Dunn clicked off the last slide and thanked the men for coming.
Madison’s portfolio contained the largest Burger King franchise in the world, the
Ruth’s Chris Steak House chain and a processed-food maker called
AdvancePierre whose lineup includes the Jamwich, a peanut-butter-and-jelly
contrivance that comes frozen, crustless and embedded with four kinds of sugars.
The snack that Dunn was proposing to sell: carrots. Plain, fresh carrots. No added
sugar. No creamy sauce or dips. No salt. Just baby carrots, washed, bagged, then
sold into the deadly dull produce aisle.
“We act like a snack, not a vegetable,” he told the investors. “We exploit the rules
of junk food to fuel the baby -carrot conversation. We are pro-junk-food behavior
but anti-junk-food establishment.”
The investors were thinking only about sales. They had already bought one of the
two biggest farm producers of baby carrots in the country, and they ’d hired Dunn
to run the whole operation. Now, after his pitch, they were relieved. Dunn had
figured out that using the industry ’s own marketing ploy s would work better than
any thing else. He drew from the bag of tricks that he mastered in his 20 y ears at
Coca-Cola, where he learned one of the most critical rules in processed food: The
selling of food matters as much as the food itself.
Later, describing his new line of work, Dunn told me he was doing penance for his
Coca-Cola y ears. “I’m pay ing my karmic debt,” he said.
Original: https://www.readability.com/articles/g1gfqerl
Title: The New Geopolitics of Food
Author: foreignpolicy.com
Summary: In the United States, when world wheat prices rise by 75 percent,
as they have over the last year, it means the difference between a $2 loaf of
bread and a loaf costing maybe $2.10. If, however, you…
The New Geopolitics of Food - www.foreignpolicy.com - Readability
In the United States, when world wheat prices rise by 75 percent, as they have
over the last y ear, it means the difference between a $2 loaf of bread and a loaf
costing may be $2.10. If, however, y ou live in New Delhi, those sky rocketing costs
really matter: A doubling in the world price of wheat actually means that the
wheat y ou carry home from the market to hand-grind into flour for chapatis costs
twice as much. And the same is true with rice. If the world price of rice doubles,
so does the price of rice in y our neighborhood market in Jakarta. And so does the
cost of the bowl of boiled rice on an Indonesian family 's dinner table.
Welcome to the new food economics of 2011: Prices are climbing, but the impact
is not at all being felt equally. For Americans, who spend less than one-tenth of
their income in the supermarket, the soaring food prices we've seen so far this
y ear are an annoy ance, not a calamity. But for the planet's poorest 2 billion
people, who spend 50 to 70 percent of their income on food, these soaring prices
may mean going from two meals a day to one. Those who are barely hanging on
to the lower rungs of the global economic ladder risk losing their grip entirely.
This can contribute -- and it has -- to revolutions and upheaval.
Already in 2011, the U.N. Food Price Index has eclipsed its previous all-time
global high; as of March it had climbed for eight consecutive months. With this
y ear's harvest predicted to fall short, with governments in the Middle East and
Africa teetering as a result of the price spikes, and with anxious markets sustaining
one shock after another, food has quickly become the hidden driver of world
politics. And crises like these are going to become increasingly common. The
new geopolitics of food looks a whole lot more volatile -- and a whole lot more
contentious -- than it used to. Scarcity is the new norm.
Until recently, sudden price surges just didn't matter as much, as they were
quickly followed by a return to the relatively low food prices that helped shape
the political stability of the late 20th century across much of the globe. But now
both the causes and consequences are ominously different.
In many way s, this is a resumption of the 2007-2008 food crisis, which subsided
not because the world somehow came together to solve its grain crunch once and
for all, but because the Great Recession tempered growth in demand even as
favorable weather helped farmers produce the largest grain harvest on record.
Historically, price spikes tended to be almost exclusively driven by unusual
weather -- a monsoon failure in India, a drought in the former Soviet Union, a
heat wave in the U.S. Midwest. Such events were alway s disruptive, but thankfully
infrequent. Unfortunately, today 's price hikes are driven by trends that are both
elevating demand and making it more difficult to increase production: among
them, a rapidly expanding population, crop-withering temperature increases, and
irrigation wells running dry. Each night, there are 219,000 additional people to
feed at the global dinner table.
More alarming still, the world is losing its ability to soften the effect of shortages.
In response to previous price surges, the United States, the world's largest grain
producer, was effectively able to steer the world away from potential
catastrophe. From the mid-20th century until 1995, the United States had either
grain surpluses or idle cropland that could be planted to rescue countries in
trouble. When the Indian monsoon failed in 1965, for example, President Ly ndon
Johnson's administration shipped one-fifth of the U.S. wheat crop to India,
successfully staving off famine. We can't do that any more; the safety cushion is
gone.
That's why the food crisis of 2011 is for real, and why it may bring with it y et
more bread riots cum political revolutions. What if the upheavals that greeted
dictators Zine el-Abidine Ben Ali in Tunisia, Hosni Mubarak in Egy pt, and
Muammar al-Qaddafi in Liby a (a country that imports 90 percent of its grain)
are not the end of the story, but the beginning of it? Get ready, farmers and
foreign ministers alike, for a new era in which world food scarcity increasingly
shapes global politics.
THE DOUBLING OF WORLD grain prices since early 2007 has been driven
primarily by two factors: accelerating growth in demand and the increasing
difficulty of rapidly expanding production. The result is a world that looks
strikingly different from the bountiful global grain economy of the last century.
What will the geopolitics of food look like in a new era dominated by scarcity ?
Even at this early stage, we can see at least the broad outlines of the emerging
food economy .
On the demand side, farmers now face clear sources of increasing pressure. The
first is population growth. Each y ear the world's farmers must feed 80 million
additional people, nearly all of them in developing countries. The world's
population has nearly doubled since 1970 and is headed toward 9 billion by
midcentury. Some 3 billion people, meanwhile, are also try ing to move up the
food chain, consuming more meat, milk, and eggs. As more families in China and
elsewhere enter the middle class, they expect to eat better. But as global
consumption of grain-intensive livestock products climbs, so does the demand for
the extra corn and soy beans needed to feed all that livestock. (Grain consumption
per person in the United States, for example, is four times that in India, where
little grain is converted into animal protein. For now.)
At the same time, the United States, which once was able to act as a global buffer
of sorts against poor harvests elsewhere, is now converting massive quantities of
grain into fuel for cars, even as world grain consumption, which is already up to
roughly 2.2 billion metric tons per y ear, is growing at an accelerating rate. A
decade ago, the growth in consumption was 20 million tons per y ear. More
recently it has risen by 40 million tons every y ear. But the rate at which the
United States is converting grain into ethanol has grown even faster. In 2010, the
United States harvested nearly 400 million tons of grain, of which 126 million tons
went to ethanol fuel distilleries (up from 16 million tons in 2000). This massive
capacity to convert grain into fuel means that the price of grain is now tied to the
price of oil. So if oil goes to $150 per barrel or more, the price of grain will follow
it upward as it becomes ever more profitable to convert grain into oil substitutes.
And it's not just a U.S. phenomenon: Brazil, which distills ethanol from sugar
cane, ranks second in production after the United States, while the European
Union's goal of getting 10 percent of its transport energy from renewables,
mostly biofuels, by 2020 is also diverting land from food crops.
This is not merely a story about the booming demand for food. Every thing from
falling water tables to eroding soils and the consequences of global warming
means that the world's food supply is unlikely to keep up with our collectively
growing appetites. Take climate change: The rule of thumb among crop ecologists
is that for every 1 degree Celsius rise in temperature above the growing season
optimum, farmers can expect a 10 percent decline in grain y ields. This
relationship was borne out all too dramatically during the 2010 heat wave in
Russia, which reduced the country 's grain harvest by nearly 40 percent.
While temperatures are rising, water tables are falling as farmers overpump for
irrigation. This artificially inflates food production in the short run, creating a food
bubble that bursts when aquifers are depleted and pumping is necessarily reduced
to the rate of recharge. In arid Saudi Arabia, irrigation had surprisingly enabled
the country to be self-sufficient in wheat for more than 20 y ears; now, wheat
production is collapsing because the non-replenishable aquifer the country uses
for irrigation is largely depleted. The Saudis soon will be importing all their grain.
Saudi Arabia is only one of some 18 countries with water-based food bubbles. All
together, more than half the world's people live in countries where water tables
are falling. The politically troubled Arab Middle East is the first geographic region
where grain production has peaked and begun to decline because of water
shortages, even as populations continue to grow. Grain production is already going
down in Sy ria and Iraq and may soon decline in Yemen. But the largest food
bubbles are in India and China. In India, where farmers have drilled some 20
million irrigation wells, water tables are falling and the wells are starting to go
dry. The World Bank reports that 175 million Indians are being fed with grain
produced by overpumping. In China, overpumping is concentrated in the North
China Plain, which produces half of China's wheat and a third of its corn. An
estimated 130 million Chinese are currently fed by overpumping. How will these
countries make up for the inevitable shortfalls when the aquifers are depleted?
Even as we are running our wells dry, we are also mismanaging our soils,
creating new deserts. Soil erosion as a result of overplowing and land
mismanagement is undermining the productivity of one-third of the world's
cropland. How severe is it? Look at satellite images showing two huge new dust
bowls: one stretching across northern and western China and western Mongolia;
the other across central Africa. Wang Tao, a leading Chinese desert scholar,
reports that each y ear some 1,400 square miles of land in northern China turn to
desert. In Mongolia and Lesotho, grain harvests have shrunk by half or more over
the last few decades. North Korea and Haiti are also suffering from heavy soil
losses; both countries face famine if they lose international food aid. Civilization
can survive the loss of its oil reserves, but it cannot survive the loss of its soil
reserves.
Bey ond the changes in the environment that make it ever harder to meet human
demand, there's an important intangible factor to consider: Over the last halfcentury or so, we have come to take agricultural progress for granted. Decade
after decade, advancing technology underpinned steady gains in raising land
productivity. Indeed, world grain y ield per acre has tripled since 1950. But now
that era is coming to an end in some of the more agriculturally advanced
countries, where farmers are already using all available technologies to raise
y ields. In effect, the farmers have caught up with the scientists. After climbing
for a century, rice y ield per acre in Japan has not risen at all for 16 y ears. In
China, y ields may level off soon. Just those two countries alone account for onethird of the world's rice harvest. Meanwhile, wheat y ields have plateaued in
Britain, France, and Germany -- Western Europe's three largest wheat producers.
IN THIS ERA OF TIGHTENING world food supplies, the ability to grow food is
fast becoming a new form of geopolitical leverage, and countries are scrambling
to secure their own parochial interests at the expense of the common good.
The first signs of trouble came in 2007, when farmers began having difficulty
keeping up with the growth in global demand for grain. Grain and soy bean prices
started to climb, tripling by mid-2008. In response, many exporting countries tried
to control the rise of domestic food prices by restricting exports. Among them
were Russia and Argentina, two leading wheat exporters. Vietnam, the No. 2 rice
exporter, banned exports entirely for several months in early 2008. So did several
other smaller exporters of grain.
With exporting countries restricting exports in 2007 and 2008, importing countries
panicked. No longer able to rely on the market to supply the grain they needed,
several countries took the novel step of try ing to negotiate long-term grain-supply
agreements with exporting countries. The Philippines, for instance, negotiated a
three-y ear agreement with Vietnam for 1.5 million tons of rice per y ear. A
delegation of Yemenis traveled to Australia with a similar goal in mind, but had
no luck. In a seller's market, exporters were reluctant to make long-term
commitments.
Fearing they might not be able to buy needed grain from the market, some of the
more affluent countries, led by Saudi Arabia, South Korea, and China, took the
unusual step in 2008 of buy ing or leasing land in other countries on which to grow
grain for themselves. Most of these land acquisitions are in Africa, where some
governments lease cropland for less than $1 per acre per y ear. Among the
principal destinations were Ethiopia and Sudan, countries where millions of people
are being sustained with food from the U.N. World Food Program. That the
governments of these two countries are willing to sell land to foreign interests
when their own people are hungry is a sad commentary on their leadership.
By the end of 2009, hundreds of land acquisition deals had been negotiated, some
of them exceeding a million acres. A 2010 World Bank analy sis of these "land
grabs" reported that a total of nearly 140 million acres were involved -- an area
that exceeds the cropland devoted to corn and wheat combined in the United
States. Such acquisitions also ty pically involve water rights, meaning that land
grabs potentially affect all downstream countries as well. Any water extracted
from the upper Nile River basin to irrigate crops in Ethiopia or Sudan, for
instance, will now not reach Egy pt, upending the delicate water politics of the Nile
by adding new countries with which Egy pt must negotiate.
The potential for conflict -- and not just over water -- is high. Many of the land
deals have been made in secret, and in most cases, the land involved was already
in use by villagers when it was sold or leased. Often those already farming the
land were neither consulted about nor even informed of the new arrangements.
And because there ty pically are no formal land titles in many developingcountry villages, the farmers who lost their land have had little backing to bring
their cases to court. Reporter John Vidal, writing in Britain's Observer, quotes
Ny ikaw Ochalla from Ethiopia's Gambella region: "The foreign companies are
arriving in large numbers, depriving people of land they have used for centuries.
There is no consultation with the indigenous population. The deals are done
secretly. The only thing the local people see is people coming with lots of tractors
to invade their lands."
Local hostility toward such land grabs is the rule, not the exception. In 2007, as
food prices were starting to rise, China signed an agreement with the Philippines
to lease 2.5 million acres of land slated for food crops that would be shipped
home. Once word leaked, the public outcry -- much of it from Filipino farmers -forced Manila to suspend the agreement. A similar uproar rocked Madagascar,
where a South Korean firm, Daewoo Logistics, had pursued rights to more than 3
million acres of land. Word of the deal helped stoke a political furor that toppled
the government and forced cancellation of the agreement. Indeed, few things are
more likely to fuel insurgencies than taking land from people. Agricultural
equipment is easily sabotaged. If ripe fields of grain are torched, they burn
quickly .
Not only are these deals risky, but foreign investors producing food in a country
full of hungry people face another political question of how to get the grain out.
Will villagers permit trucks laden with grain headed for port cities to proceed
when they themselves may be on the verge of starvation? The potential for
political instability in countries where villagers have lost their land and their
livelihoods is high. Conflicts could easily develop between investor and host
countries.
These acquisitions represent a potential investment in agriculture in developing
countries of an estimated $50 billion. But it could take many y ears to realize any
substantial production gains. The public infrastructure for modern market-oriented
agriculture does not y et exist in most of Africa. In some countries it will take
y ears just to build the roads and ports needed to bring in agricultural inputs such as
fertilizer and to export farm products. Bey ond that, modern agriculture requires
its own infrastructure: machine sheds, grain-dry ing equipment, silos, fertilizer
storage sheds, fuel storage facilities, equipment repair and maintenance services,
well-drilling equipment, irrigation pumps, and energy to power the pumps.
Overall, development of the land acquired to date appears to be moving very
slowly .
So how much will all this expand world food output? We don't know, but the World
Bank analy sis indicates that only 37 percent of the projects will be devoted to food
crops. Most of the land bought up so far will be used to produce biofuels and other
industrial crops.
Even if some of these projects do eventually boost land productivity, who will
benefit? If virtually all the inputs -- the farm equipment, the fertilizer, the
pesticides, the seeds -- are brought in from abroad and if all the output is shipped
out of the country, it will contribute little to the host country 's economy. At best,
locals may find work as farm laborers, but in highly mechanized operations, the
jobs will be few. At worst, impoverished countries like Mozambique and Sudan
will be left with less land and water with which to feed their already hungry
populations. Thus far the land grabs have contributed more to stirring unrest than
to expanding food production.
And this rich country -poor country divide could grow even more pronounced -and soon. This January , a new stage in the scramble among importing countries to
secure food began to unfold when South Korea, which imports 70 percent of its
grain, announced that it was creating a new public-private entity that will be
responsible for acquiring part of this grain. With an initial office in Chicago, the
plan is to by pass the large international trading firms by buy ing grain directly
from U.S. farmers. As the Koreans acquire their own grain elevators, they may
well sign multiy ear delivery contracts with farmers, agreeing to buy specified
quantities of wheat, corn, or soy beans at a fixed price.
Other importers will not stand idly by as South Korea tries to tie up a portion of
the U.S. grain harvest even before it gets to market. The enterprising Koreans
may soon be joined by China, Japan, Saudi Arabia, and other leading importers.
Although South Korea's initial focus is the United States, far and away the world's
largest grain exporter, it may later consider brokering deals with Canada,
Australia, Argentina, and other major exporters. This is happening just as China
may be on the verge of entering the U.S. market as a potentially massive
importer of grain. With China's 1.4 billion increasingly affluent consumers
starting to compete with U.S. consumers for the U.S. grain harvest, cheap food,
seen by many as an American birthright, may be coming to an end.
No one knows where this intensify ing competition for food supplies will go, but the
world seems to be moving away from the international cooperation that evolved
over several decades following World War II to an every -country -for-itself
philosophy. Food nationalism may help secure food supplies for individual
affluent countries, but it does little to enhance world food security. Indeed, the
low-income countries that host land grabs or import grain will likely see their food
situation deteriorate.
AFTER THE CARNAGE of two world wars and the economic missteps that led
to the Great Depression, countries joined together in 1945 to create the United
Nations, finally realizing that in the modern world we cannot live in isolation,
tempting though that might be. The International Monetary Fund was created to
help manage the monetary sy stem and promote economic stability and progress.
Within the U.N. sy stem, specialized agencies from the World Health Organization
to the Food and Agriculture Organization (FAO) play major roles in the world
today . All this has fostered international cooperation.
But while the FAO collects and analy zes global agricultural data and provides
technical assistance, there is no organized effort to ensure the adequacy of world
food supplies. Indeed, most international negotiations on agricultural trade until
recently focused on access to markets, with the United States, Canada, Australia,
and Argentina persistently pressing Europe and Japan to open their highly
protected agricultural markets. But in the first decade of this century, access to
supplies has emerged as the overriding issue as the world transitions from an era
of food surpluses to a new politics of food scarcity. At the same time, the U.S.
food aid program that once worked to fend off famine wherever it threatened has
largely been replaced by the U.N. World Food Program (WFP), where the
United States is the leading donor. The WFP now has food-assistance operations in
some 70 countries and an annual budget of $4 billion. There is little international
coordination otherwise. French President Nicolas Sarkozy -- the reigning president
of the G-20 -- is proposing to deal with rising food prices by curbing speculation in
commodity markets. Useful though this may be, it treats the sy mptoms of
growing food insecurity, not the causes, such as population growth and climate
change. The world now needs to focus not only on agricultural policy, but on a
structure that integrates it with energy, population, and water policies, each of
which directly affects food security .
But that is not happening. Instead, as land and water become scarcer, as the
Earth's temperature rises, and as world food security deteriorates, a dangerous
geopolitics of food scarcity is emerging. Land grabbing, water grabbing, and
buy ing grain directly from farmers in exporting countries are now integral parts
of a global power struggle for food security .
With grain stocks low and climate volatility increasing, the risks are also
increasing. We are now so close to the edge that a breakdown in the food sy stem
could come at any time. Consider, for example, what would have happened if the
2010 heat wave that was centered in Moscow had instead been centered in
Chicago. In round numbers, the 40 percent drop in Russia's hoped-for harvest of
roughly 100 million tons cost the world 40 million tons of grain, but a 40 percent
drop in the far larger U.S. grain harvest of 400 million tons would have cost 160
million tons. The world's carry over stocks of grain (the amount in the bin when
the new harvest begins) would have dropped to just 52 day s of consumption. This
level would have been not only the lowest on record, but also well below the 62day carry over that set the stage for the 2007-2008 tripling of world grain prices.
Then what? There would have been chaos in world grain markets. Grain prices
would have climbed off the charts. Some grain-exporting countries, try ing to hold
down domestic food prices, would have restricted or even banned exports, as they
did in 2007 and 2008. The TV news would have been dominated not by the
hundreds of fires in the Russian country side, but by footage of food riots in lowincome grain-importing countries and reports of governments falling as hunger
spread out of control. Oil-exporting countries that import grain would have been
try ing to barter oil for grain, and low-income grain importers would have lost out.
With governments toppling and confidence in the world grain market shattered,
the global economy could have started to unravel.
We may not alway s be so lucky. At issue now is whether the world can go
bey ond focusing on the sy mptoms of the deteriorating food situation and instead
attack the underly ing causes. If we cannot produce higher crop y ields with less
water and conserve fertile soils, many agricultural areas will cease to be viable.
And this goes far bey ond farmers. If we cannot move at wartime speed to
stabilize the climate, we may not be able to avoid runaway food prices. If we
cannot accelerate the shift to smaller families and stabilize the world population
sooner rather than later, the ranks of the hungry will almost certainly continue to
expand. The time to act is now -- before the food crisis of 2011 becomes the new
normal.
Table of Contents
Readability
All articles
Meet The Dread Pirate Roberts, The Man Behind Booming Black
Market…
Microsoft’s Lost Decade
Lottery Winner Jack Whittaker's Losing Ticket
The Bitcoin Bubble and the Future of Currency
Global Economics
Facebook, One Year Later: What Really Happened in the Biggest
IPO…
Jeffrey Levitt Stole $15 Million
Why We Keep Play ing the Lottery
Sleeping Together
A Solution From Hell
The Killing Machines
Yes, Healthful Fast Food Is Possible. But Edible?
The Long Con
Politics & Policy
DAVID FOSTER WALLACE, IN HIS OWN WORDS
How Much Is a Life Worth?
Cocaine Incorporated
The Chase Is the Thing and the Thing Is the Chase: Learning to
Love…
The Extraordinary Science of Addictive Junk Food
The New Geopolitics of Food
Table of Contents
Readability
4
All articles
4
Meet The Dread Pirate Roberts, The Man Behind Booming Black
Market…
Microsoft’s Lost Decade
4
9
Lottery Winner Jack Whittaker's Losing Ticket
13
The Bitcoin Bubble and the Future of Currency
26
Global Economics
39
Facebook, One Year Later: What Really Happened in the Biggest
IPO…
54
Jeffrey Levitt Stole $15 Million
77
Why We Keep Play ing the Lottery
90
Sleeping Together
100
A Solution From Hell
109
The Killing Machines
117
Yes, Healthful Fast Food Is Possible. But Edible?
142
The Long Con
150
Politics & Policy
172
DAVID FOSTER WALLACE, IN HIS OWN WORDS
181
How Much Is a Life Worth?
191
Cocaine Incorporated
202
The Chase Is the Thing and the Thing Is the Chase: Learning to
Love…
218
The Extraordinary Science of Addictive Junk Food
230
The New Geopolitics of Food
249