I will be traveling in Europe for the next two weeks. West and East for business. Perhaps I will have a better prospective on the Ukrainian Crisis when I get back.
In the meantime, I wanted to talk about my right of spring.
I was outside yesterday in Chicago. It was April 12th. And it was the first time I had been outside my house in Chicago for almost six months. A pessimist would ask, why don't you move stupid? An optimist would say, you can't appreciate nice weather without such a stark contrast. Me? Somewhere in the middle. And I have been since childhood.
But like someone doing a year stretch in prison, I do have dates marked off the calender to remind me it wont last forever.
Groundhog Day tells me the worst of winter is behind me. The end of February brings the Oscars. Then comes March Madness and the Final Four. Then, except for the Kentucky Derby, my television watching ends, with my final right of spring: the Masters.
People may think the Masters is a golf tournament. I see it as fast-forward visual to spring in Chicago. Why do people think that Augusta National spends so much time on the flowers (they treat them behind the scenes like a premature child in an incubator)? It's for people of the north to bask in a visual of what they can look forward to in June and July.
I always say that you are either selling dreams or lifeboats. The Masters is selling both.
The other thing that golf does well, better than any other sport, is selling a reality television show. It isn't a team game. It's an individual contest. A person, their family and the dream of winning it.
Which bring me back to my generational right of spring. I have watched the Masters all my life for the reasons explained above. But I never got more of a thrill, than when someone my age won it.
My generation, before there was a Tiger of a Phil, rooted for Freddy Couples. He was born the same year I was born. He swang the golf club like it was effortless. We all wanted to be like Freddy. It was a dream. A dream no one could ever replicate. Hit it long and so smoothly? Good luck.
Now Freddy Couples is 54. Ever since he won the Masters in 1992, somehow Couples has always been in contention at the Masters. He is within reach of winning again. He again is trying to become the oldest person to win the Masters (the oldest was Jack Nicklaus at 46). He will most likely not win it again. And the odds are that he will break down quickly and be out of the pages of the leaderboard on CBS with an hour or two.
William Faulker, in Intruder In The Dust, wrote "For every Southern boy fourteen years old, not once but whenever he wants it, there is the instant when it's still not yet two o'clock on that July afternoon in 1863, the brigades are in position behind the rail fence, the guns are laid and ready in the woods and the furled flags are already loosened to break out and Pickett himself with his long oiled ringlets and his hat in one hand probably and his sword in the other looking up the hill waiting for Longstreet to give the word and it's all in the balance, it hasn't happened yet, it hasn't even begun yet"
I will watch as always Sunday at the Masters. I will again watch Freddy Couples as me. And I will again try to relive our Gettysburg's Pickett's Charge. The fourteen years old boy will turn on the television. He expects the charge to end in disaster. But there is the dream. A dream of us winning. A dream of us being in Chicago in July. It hasn't started yet. And even though it is most certainly a fools-folly, it will be two o'clock.
I will be able to imagine July. I will be able to imagine I am Freddy Couples. I will be able to imagine Freddy winning.
Either way, I will be able to finish my generational right of spring. And I will say goodbye to the shackles of my incarceration of my home, hit the golf course and trick myself into believing, without effort, I will become an effortless golfer that will be able to hit the ball longer than I ever have.
A most glorious Chicago July charge.
April 13, 2014
When the Rickett's family decided to buy the Chicago Cubs, they made two critical business acquisition errors. They didn't do their due diligence. And they let a son, with no business operating experience, run the team.
I started my business operating career doing due diligence for an acquisitive public corporation. I learned from the best. Anyone can do the financial, legal and tax due diligence. What I focused on was culture, SWOT (strengths, weaknesses, opportunities and threats) and building a comprehensive business model for the future.
I am sure the Rickett's family did the financial, legal and tax due diligence. But they either skipped the others; or were tone-deaf. Where my experience was to not fall in love with acquisition targets and be choosy (only pulling the trigger 10% of the time); the Rickett's family made their decision based on their emotions.
The business due diligence mistakes were numerous. Let's start out with Wrigley Field. The culture of Wrigley Field is unique. People go to the games, not like going to a plush venue, but more like Woodstock. The restrooms are deplorable. Nobody eats the food (they simply walk out after the game to one of a hundred great restaurants). So what was Tom Rickett's first decision? Upgrade the restrooms and the food. Money not only wasted; but anathema to Wrigley Field's culture.
The second Wrigley Field mistake was an assumption how to add more seats (revenue). Chicago is not Boston. Chicago is diabolically political and its politics lean to the left. The Rickett's family are staunch conservatives. And they have not been able to navigate Chicago's political maize. Compare that to DePaul University. With a basketball program that has long been shattered; the city pushed through a new basketball stadium. In a word, DePaul had connections; and the Rickett's simply didn't have any.
The next due diligence issue was the fan's culture. On top of trying to turn Wrigley Field into non-Woodstock; they missed the essential "asset" of the fans. Cub fans take pride in "withstanding" 105 years of not winning the World Series. But they like to be teased. People will come to Wrigley Field's Woodstock if the team is competitive; if only to be disappointed so they can say "let's get them next year". I don't have any certainty, that Wrigley Field would be attractive after winning a World Series; but I have 100% certainty that people will not come to the park if it fields a team that's not competitive.
The Rickett's family pulled off the impossible. In their myopic and flawed plan to add more seating revenue; they actually did the opposite. They stopped many decades of filling their existing seating. Like Woodstock, Wrigley Field is a place to commune with fellow self-loathing Cub fans; shoulder to shoulder and generation to generation. When the ball park is half empty? It defeats that very purpose.
Then there was the issue of television revenue. The ball club was locked into ten more years of an existing contract when the Rickett's family bought the team. Meaning that addition television revenue - with Tom Rickett's admitting as much - might not occur until 2020. Forget about "get them next year". Try selling Ernie Banks saying "let's play two in three years times two". Good luck.
Finally there is the matter of financing. The Rickett's family leveraged (credit) up the deal. They put up very little of their capital and financed most of the team's purchase price. I have used leverage successfully; but I knew it only worked when I knew I could grow the business (example: if you put up a $1 of capital and $7 of debt and you double the business, the resulting $14 dollars of cash return, makes 7 times your capital after paying off the debt). The first thing you have to do when you use leverage is to make you interest payments. Not a problem if you are growing; but a big problem if you are not.
The whole idea that the team will be built by rebuilding the minor league system is nothing more than lipstick-on-a-pig because you don't have the cash flow - after interest - to acquire veteran free agents to put out a competitive team. And it just compounds itself. The less competitive the team is, the less people show up at the ball park and the greater the debt load becomes. A vicious cycle.
The lesson here is as ingrained in me as it always has been. There are four dimensions. Three are flexible and one is not. The "great arrow of time" can't move backwards. Meaning if you screw up due diligence; you can't undo the mistakes.
As of this writing, the Ricketts's family is reportedly looking for more capital. But they don't want any new shareholders to have any decision-making power. There is plenty of capital floating around. But capital without decision-making power votes by their comfort with the person running the organization. Forgive me, but I don't think anyone is going to give the Rickett's family capital based on their track record. They are going to have to split up some of their decision-making authority to attract capital.
Again, I sincerely believe that the Rickett's family went into buying the Cubs because they loved the team, the fans and wanted to be the family that ended the Cub's curse. Unfortunately, their only fall back position is to share in any future glory. And adding a partner, with not only money and decision-making power, but who can navigate the labyrinth of a left-leaning political machine is the only solution left on the board.
April 10, 2014
Someone asked me last week why countries revere religion? I asked the person, were they talking about their own faith? No they replied. They were asking why nations mixed religion with politics.
Nations do find religious practice consistent with their goals. Throughout history they always have. For two reasons. The first reason is that religion, with its rules of behavior, help maintain social order. The second reason, is that if a particular religion is different, it can unite its people against their enemies.
Which brings me to Russia and the Ukraine crisis.
It is clear that Putin sees himself as the restorer, of not the Soviet Union, but of tsarist Russia. He understands that the flaw in the Soviet Union was atheism. So like the Russian tsars, he is restoring Russian pride and restoring the bonding of Russia with the Russian Orthodox religion. Vladimir the Great.
Looking back, all his moves, have been made for this to become the outcome. First the destruction of popular voting for representatives in parliament. Next the elimination of a free press. The ascension of the Church, to the highest levels of power, from being underground a couple of decades ago. The sham of a constitution, where voting for President, is rigged. All to build Vladimir the Great.
Vladimir the Great maybe evil, but he is not a big risk taker. Crimea was his lab. How would the world act? Not very hard. Even less so with Europe and Germany. Crimea was his Hitler's Czechoslovakia move. The West sought appeasement. That only makes the aggressor more aggressive.
With either real or fake Russian sympathy in East Ukraine; Vladimir the Great is ready to come to the aid of people of Russian descent and who pray in the Russian Orthodox Church. That gives him great pretext to seize opportunities with nations that border Russia to the west.
Again, someone has to draw a line. There is no Berlin Wall this time. I can only hope that Europe, the US and Nato understand what Putin's goals are. And I can only hope they have drawn him a line.
April 8, 2014
Yes another post. Yes it involves the Ukraine crisis.
Throughout most of my life until the breakup of the Soviet Union - I was too young to remember the Cuban Missile Crisis - I was programmed to fear nuclear war. A lot of my generation was. The only time I could get it out of my mind was when an American and/or Soviet leader was in their opponent's territory
During the Reagan-Gorbachev time, using this logic, I never felt so safe. There were so many meetings and between the leaders; it was unprecedented. By this time Gorbachev had visited the West (getting out of his car and shaking people's hands), and introduced social, political and economic reforms in his country. At the same time both sides had the means to annihilate one another at any moment.
My first renewed pang of insecurity came after the coup of Gorbachev. It didn't get any better after Yeltsin "saved" Russia.
Where I used to see a certain stable calculus - nuclear missiles on ready-alert, the Berlin Wall, East vs West, dialog - I thought the risk of breaking down "DEFCON 2" and replacing it with "DEFCON 5" was more scary.
I had lived my entire life-time, even with detente and Reagan-Gorbachev, and seen that both sides had very little room to maneuver. DEFCON 2 becoming DEFCON 1 was so inconceivable that both sides had very limited options. And when they moved, they moved glacially.
I was happy of course to see the Berlin Wall fall. I was happy of course for the people of Eastern Europe. But the corruption of Yeltsin and the rise of a KGB officer to replace him gave me pause.
Since the Putin years, we have seen the end of democracy in Russia. We have seen the end of a free press system. A return to nobody in the West understanding what is going on in a despot's mind. Back to the need for Kremlinologists. All - including this writer - only trying to guess.
What I do know is this.
There is a lot of levels of maneuverability between DEFCON 5 and DEFCON 1. First sanctions. Then getting kicked out out of the G8. Then NATO symbolic moves. Then Russia recalls its NATO Ambassador. Then NASA says it doesn't want to work with the Russians on space planning.
In the good old days, the rubber band was wound tight around the two pencils. Now the rubber band has been stretched out. Stretched out so far, that moves that would have seemed "normal" during the Cold War, could snap the rubber band back so hard and so fast, that the end is unpredictable.
During the cold war the Soviet Union made incursions into Hungary and Czechoslovakia in 1968. It didn't lead to nuclear war. What happens today if Ukraine is invaded and followed up by another Eastern country? All we know is one unpredictable response after another.
Then where will be the line?
The line was at the Berlin Wall. Terrible human tragedy. But a terrible line is better than an unknown line.
During the Cold War the options for escalation and provocation were severely limited. Enemies became talk-able enemies. But what happens when talk-able enemies become untrustworthy friends?
A talk-able enemy is easier to understand. "You don't like me and I don't like you". "So let's agree to find ways to not see each other".
An untrustworthy friend is not easy to understand. "We kind of like each other but you only want to see me when?"
The breakup with a friend is unplanned, explosive and unpredictable.
A talk-able enemy that doesn't want to talk to you today? If they don't want to talk today, it maybe unplanned; but its not explosive and the results are predictable.
I fear two things.
I fear the rubber band snapping back into place too quickly.
And I fear the inexorable logic, that there are thousands of levels of a twenty-year old relationship between the West and the East, each of these thousand of levels can be rolled back each day, and what happens the day when each side decides to weigh the scale?
Too much trust twenty years ago. Too little today. Too much gray area between untrustworthy friends and talk-able enemies. Too many new Republics. Too many questions between new Republics and their land's strategic importance. Too many ways to maneuver. Too many ways to to unwind a complicated relationship without the first bullet being fired.
In short: too much risk with too little forethought.
April 4, 2014
I have been busy traveling. But I do google "Ukraine" once a day. I know most people want to track the missing Malaysia Airlines Flight 370. And that is where most of the press coverage has been.
But I track the Ukrainian crisis because I believe a) that eastern Europe is as fragile as western Europe was in the early and mid- 20th century, b) eastern Europe represents a critical component of an ever shrinking world-wide economic growth engine and c) while I wouldn't call the Ukraine a Cuban Missile Crisis; I do believe it has all the aspects of the 1961 Berlin Crisis.
I have never bought into the "Putin is crazy" theory. I think his morals and ethics are foreign to us. But his aims have a certain rationality. A few months ago he thought he had "bribed" his way to creating a Ukrainian buffer state. Once the revolution removed Ukraine's president; Putin was forced to figure out Plan B. Russia's most immediate and most important problem was lacking a Black Sea port. So he secured it. And is probing how far he can or should go. He knows the more of the Ukraine he invades, the more the West will make his economy suffer. He also knows the more of the Ukraine he doesn't invade; the bigger the problem becomes to the West to bail it out.
The 1961 Berlin Crisis has the most similarities with the Ukrainian crisis. During 1961, the brain drain of people migrating from East Germany to West Germany threatened to bring down Russia's buffer of East Germany. JFK signaled to Khrushchev that West Berlin was off-limits. He didn't say anything about East Berlin. History remembers JFK making a great speech at the Berlin Wall. But history forgets that JFK went on vacation while the Berlin Wall was built. JFK wanted the wall. A bad line of demarcation is better than no line of demarcation.
So it seems to me that Obama has signaled Putin that Russia gets Crimea - and its access to the Black Sea - if it stops there. And the reasons for the troop build-up of this last week was a bargaining chip for Putin to use to consolidate its gains.
Or I am wrong.
Either way, who ever owns Ukraine, has to fix it.
March 29, 2014
In 2010, Viktor Yanukovych, the ousted Ukrainian president, won Crimea by nearly a million votes, which is why he won the election. Without Crimea, only 15 percent of the population will be ethnic Russian.
This has implications that have been underplayed by the media:
1. If Ukraine wants to maintain a democratic form of government; Putin has effectively made Ukraine a pro-west country.
2. Ukraine is both broke and corrupt.
3. The EU has not been able to agree on any punitive actions against Russia.
4. The EU has a strict set of requirements to enter their economic union.
5. Even if the EU were to be satisfied that Ukraine met the requirements of being in their economic union; the cost of bailing out a member country (see PIGS) is austerity.
So with Putin taking over Crimea, the Ukraine is on their own. No more cheap subsidized fuel. No money. And somewhere between $25 to $35 billion in debt.
The EU this week should spend less of its time on organizing a set of slap-on-the-wrist sanctions punishing Russia; and decide if they are willing to bail out the Ukraine. Having said that, I wouldn't hold my breath.
So where will that leave the Ukrainians? Still broke. Still deeply in debt. Unable to buy fuel at market prices. Still corrupt. And no EU life-line.
When the people stop celebrating their political victory; they will begin to protest their economic defeat.
And there will be only one life line: Russia. With its military and tanks, Russia wil not be invading, but welcomed as economic liberators that also restore civil order.
March 25, 2014
In the mid-2000s, I outsourced programmers from the Ukrainian capital of Kiev. They were smart, talented and cheap. Win/win right? Wrong.
The lines of separating Ukrainian civil service from Ukrainian organized crime is at best blurry. I ended up having to pay my Ukrainian programmers twice. Organized crime was tipped off that someone from the West was paying - what we would call low wages - abnormally high wages. Organized crime took their cut. We ended up paying them twice as much, so that after organized crime took their cut, we left them with what they expected in take-home wages.
The same blurry lines between Ukrainian civil service and organized crime are ubiquitous in Crimea and the entire Ukraine. The unmarked pro-Russian rabble rousing in Crimea and now East Ukraine work for Ukrainian organized crime.
Organized crime has always run Ukraine. They keep the order and disorder for a price. Russia knows that it doesn't have to invade Ukraine without pretext. Russia knows that if they pay off Ukrainian organized crime, Russian speaking people will "ask" to be protected and Russia can invade under pretext.
Sort of like Kurds wanting protection in Iran, and the US being compelled to enforce a no fly zone. Except the US did it for humanitarian reasons; while Russia uses it as en excuse for annexation.
Under the best of circumstances, Ukraine is a corrupt sovereign country. Why we should defend it is not clear. Might as well let Russia deal with its corruption. They have more experience with corruption than we do.
March 23, 2014
Putin is like Hitler?
More like Mussolini.
Hitler attacked all the great powers of his day: France, Britain, and Russia. He declared war on the United States.
Mussolini? He only attacked attacked Albania, Libya and Ethiopia.
Lost in the hyperbole, is NATO spends 11 times more than Russia, on its military.
Mussolini strutted around like George Patton; only with a losing hand. Eventually Putin will be hung by a lampost - like Mussolini and not taking a cyanide pill like Hitler.
March 21, 2014
From a 20th century geopolitical standpoint, Russian President Vladimir Putin, is winning in the short-term.
He wants an independent Crimea, that will join the Russian Federation, after a "vote" supervised by 18,000 Russian troops.
Western Europe has been big on rhetoric; but short on an organized response before Sunday's Crimea referendum.
So now Putin is amassing 10,000 troops on Ukraine's eastern border. That's less likely an immediate military threat; and more likely a bargaining/consolidating-his-gains chip.
Putin seems to be saying "give me Crimea and I will pull back the Ukrainian eastern border threat".
The West's "off-ramp" strategy is likely to be a failure - replaced by a Russia's "off-ramp" strategy of not invading the Ukraine.
The West has focused on giving Putin a face-saving way to back out of Crimea. But Russia, is now the one that is presenting the West with a face-saving way to save Ukraine in the short-term.
The Russian stock market is down 17%. Its capital/borrowing costs have exploded. And economic growth has stopped. All this with an economy that heavily depends on fossil fuel energy exports and should be benefiting from rising prices.
From a 21st century perspective, Putin is losing the support of Russian oligarchs, after he has already lost the social and economic support of the average Russian citizen (he will get a short-term nationalistic bump and it will fade quickly).
If he gets Crimea and withdraws the Ukrainian threat; big Russian money will rebound.
The problem is, Putin is stuck in a mind-set of 20th century geopolitics and will not be able to help himself from future land grabs.
And the more Putin acts after Crimea; the more likely big Russian money is at risk.
All of this is dependent on an assumption that Western Europe, stops its rhetoric, and organizes a comprehensive set of economic sanctions, freezes big Russian assets in highly liquid European banks and clamps down of the visas of Russian oligarchs and/or politicians.
So it's now up to Western Europe and the US to act. If and when they do; Putin will have won the battle and lost the war. If Western Europe and the US don't act; Putin will have won the battle and the world will become a more dangerous place.
It's as simple as that. And it's as important as that.
March 14, 2014
Most of what you read about the Ukrainian Crisis is based on 20th century geopolitics.
You see the antagonists and protagonists as politicians. Putin, Obama, G8, David Cameron, Angel Merkel, John Kerry, Sergei Lavrov, Ukraine's ex-President and Ukraine's interim president.
What you don't see is how financial globalization and Russian and Ukrainian oligarchs have and will continue to have their own power that reigns in politicians and militaries.
The ex-President of Ukraine, didn't leave Kiev because of the protesters. He left because Ukrainian oligarchs turned on him. Ukrainian oligarchs, like all concentrations of capital, depend on order. An order that the ex-President of Ukraine couldn't deliver.
Putin would like nothing better than to unleash his military. I am not smart enough to know if Putin has a plan for a further conquest of Ukraine. But I do know that if his actions result in a further depressing of his economy, ultimately Russian oligarchs won't stand for it. It's bad for business.
Most of the funding of Russia industry comes from the West. In turn, the Russian oligarchs hold their money and live in the West. London real estate is ludicrously high due to the Russian oligarchs that own property and live there. 10 Downing Street is no longer the seat of some Churchill-like power; rather it has to balance its national goals with Russian oligarchs goals.
Russian imperialism was lost due to greed. Putin's Soviet Union 2.0 takes a back seat when its stock market is collapsing. Europe is not united on a Ukrainian solution. Far from it. American sanctions are bad for business. European capital has bet on Russia. European energy has bet on Russia.
If 20th century geopolitics was fought by geography; 21st century geopolitics finds its solution through the "imaginary hand" of financial markets.
Later in the 21st century, historians will note, the idea that Western and Eastern European politicians represented the well-being of people was quaint and antiquated. Rather they represent the wishes of ever-concentrating capital. They, not polling, determine whether someone like Putin or a Ukrainian president stays or is forced out.
Currency with politicians, kings and queens is ironic. When in reality capital is a face-less number in a computer that only works when capital has unfettered movement around the globe. This 'unfettered movement" is most endangered in its weakest lanes. And the weakest lane of the movement of capital is a heterogeneous Europe that is subject to change. It's exactly the mirror opposite of the US.
That's why the Ukrainian Crisis prognostications are out-of-step. Its genesis was not political but financial. And its re-balancing will not be political but financial.
21st Century European nationalism's importance, is simply a a way to coalesce and maintain order among the masses. Order and stability ultimately wins out - because only in such an environment - can financial globalization prosper.
The world shouldn't measure the Ukrainian Crisis by the movement of troops, tanks and political rhetoric as its box score. Instead its box score should be the financial markets and its "imaginary hand" getting ever closer to restoring a new equilibrium.
March 10, 2014