The Banana Republic of Goldman Sachs

Props to Peking Duck @ Twitter for linking to this article:

The Quiet Coup – The Atlantic (May 2009)
In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.

But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.

Obama’s needs to assert operational independence from his Wall Street backers. A great way to start is nationalizing the welfare zombie queen financial institutions and placing a 90% tax on TARP-funded income (salary, bonuses, and capital gains).

Review of “Bell Labs: Life in the Crown Jewel,’ by Narain Gehani

At one point, listening to this book while running on an eliptical, I wanted to throw the remote control at the television.

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Bell Labs: Life in the Crown Jewel is a first-person history of the Bell Labs – Research, as told from the perspective of a Computer Science Ph.D. who began n development, transferred to research, and eventually became head of Bells Labs Silicon Valley. The book suffers from numerous flaws, and I finished it merely so I could give it a negative review.

In a way, comparing Bell Lab: Life in the Crown Jewel with other stories of innovation engines (such as Where Wizards Stay Up Late and Dealers of Lightning) leads to the same comparison of The Man Who Stayed Behind and I Chose China. Both of these latter two books concern American Jews who went to China in the early post-War years, aligned themselves with the Communist Party, and witnessed Maoism first-hand over a period of decades. However, while The Man Who Stayed Behind is carefully organized, I Choose China is a collection of reminiscences that go nowhere in particular. Bell Labs: Life in the Crown Jewel is a collection of reminiscences that go nowhere in particular. The tenacity with which Narain repeats that there is a conflict between basic and applied research is impressive, but ultimately pointless.

Bell Labs: Life in the Crown Jewel appears to want to be a popular business book. I say this because technical and research skills are regularly mocked, but little is learned from a research perspective, either. For instance, in one anectdoe, Gehani disputes whether a colleague actually saved a Business Unit a large amount of money through some new technique. The colleague, the colleague’s manager, and the Business Unit all assert that he did. Gehani’s “test” — to see whether the Business Unit would grant a bonus of a large amount of money, because that employee might again be so productive the next year, ends the anecdote as an example of Gehani’s cleverness. The technical details of what this innovation might have been are not discussed. But neither is any business thinking exhibited. Questions of headcount, corporate fiefdoms, and the such aren’t even raised. Instead, in this anecdote and others, the reader is intended to exist with a sense of Gehani’s unique cleverness.

The book is a nauseating example of how corporate lawfare retards actual innovation. For instance, in a sickening passage, Narain discusses how he “invented” and patented co-browsing, and urged Bell Labs’ general counsel to sue others who use this “invention.” The patent(s) Gehani refers to appear to be:

These ridiculous patents exist only because corporate corporations attempt to use the law to club possible competitors. None of these “inventions” are any more impressive than, say, “A Method to Repair Shoe Laces with Scotch Tape in the Event they Break Instead of Buying New Shoelaces.” However, large companies that hire lawyers are able to cause enough problems litigating these pattens (that they get by flooding the underfunded USPTO with applications) that they are able to carve out de facto monopolies contrary to the intent of U.S. law. A search on the Patent Office’s website indicate that Gehani’s first patent was granted in 1995, considerably after he joined Bell Labs. My obvious conclusion is that Bell Labs, ever closer to its decapitation by Lucent, began generating patents in order to force competitors to “license” obvious methods, or else face hundreds of thousands in legal bills. This is not discuss.

The tragedy of Bell Labs: Life in the Crown Jewel is that it might have been one of the best case-studies of an innovation engine written. Perhaps Narain Gehani will still write that book. He is no longer with Bell Labs, and currently serves as the Chairman of the Computer Science Department at the New Jersey Institute of Technology. His publication list is impressive, and Google Book Search brings up numerous other works written or co-written by Dr. Gehani. I hope that I will have a chance to read a more complete first-person perspective, perhaps titled Bell Labs: Decline and Fall, sometime soon. Narain could structure such as book as follows.

Introduction: What Went Wrong
Chapter One: My Early Life
Chapter Two: From a Professor to a Researcher
Chapter Three: (Mis)Adventures with the Unix Team
Chapter Four: Concurrent C/C++
Chapter Five: The Object Database Environment
Chapter Six: Years of Transition
Chapter Seven: The Columbus GPS System
Chapter Eight: Maps On Us
Chapter Nine: Cell Center Capers
Chapter Ten: Commuting from Jersey to the Valley (by Jet)
Chapter Eleven: From a Researcher to a Professor:
Epilogue: What Went Right

Such a book would be a wonderful read, a great “technical autobiography” of a man, and a first-person history of Bell Labs. It would explain obviously important parts of Narain’s career which are discussed but never described, such as his database and C/C++ systems. Additionally, it would provide a coherent chronology and frames of reference, that do not exist in the current book.

Welfare Queens

President Obama and Secretary of the Treasury Geithner have given Goldman Sachs a $13 billion no-strings-attached, no-interest, non-repayable grant

This was operationalized through the AIG Bailout. Goldman Sachs, which has taken billions in TARP funds and other government welfare, and had previously stated it had no material interest in AIG, nonetheless received $13 billion in payments from AIG after the government gave even more money to AIG. Goldman Sachs is not only a fraudster of a company, it is a welfare queen, dependent on the federal government to pay for its reckless, antisocial behaviors.

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Other large institutions have benefited as well.

In an inexplicably good move (he, after all, liedjust today on ABC’s This Week by saying he spent his entire career in public service) , Secretary of the Treasury Timothy Geithner has asked for the authority to nationalize large financial institutions. I hope he gets it, and uses it. Zombies such as Citi, and welfare queens such as Goldman Sachs, should be seized, their shareholders wiped out, their officers civially prosecuted for mismanagement and criminally prosecuted for fraud, and their assets transferred to the treasury.

Just as I support a 90% tax on TARP-funded bonuses, salaries, and capital gains, I support the nationalization of zombie banks and welfare queen financiers. Their raids on the Treasury must stop.

Update: Obama has forced the CEO of GM to resign. The head of the UAW, and the CEO of Goldman Sachs, have not similarly angered our President, and still have work.