Global Metal

York University anthropologist Sam Dunn has found a communication strategy to reach a broader audience than many academics and scholars.  Metal: A Headbanger’s Journey (2005) combined Dunn’s fandom of heavy metal music, a taxonomy of subgenres, interviews with influential musicians and a field trip to the Wacken Open Air festival in Germany.  Dunn’s follow-up documentary Global Metal (2008) travels from Wacken to three BRIC members (Brazil, India and China), China, Israel, Indonesia, and the United Arab Emirates.  Global Metal has rich insights on the coevolution of nation-states in the world system, the challenges of market design, indigenous and hybrid responses to globalisation, and new voices on old debates in heavy metal subcultures.

Anthropologists need an entry point into a new culture.  Dunn achieves this by interviewing Max Cavalera the cofounder of Brazil’s Sepultura and frontman for Soulfly and Cavalera Conspiracy.  Cavalera explains that Sepultura emerged in the mid-1980s as Brazil evolved from a military dictatorship to a neoliberal market society.  For many heavy metal fans Sepultura’s album Roots (1996) was their first encounter with an indigenous worldview as the band included field recordings with the Xavante Indians and Brazilian percussion.  Dunn’s interview with Cavalera uses Roots to tacitly bring the anthropological models and theories of Clifford Geertz, David Horowitz, Stanley Tambiah and others to fans who are unfamiliar with these influential scholars.  In contrast to this immersive approach Global Metal ends with a more familiar event: Iron Maiden‘s concert on 1st February 2008 the first time that a major Western heavy metal band has played Mumbia, India.

A second entry point for fans is when Dunn revisits past controversies and debates in heavy metal media to include new voices and perspectives.  Does Slayer‘s song ‘Angel of Death’ about the Nazi doctor Josef Mengele promote Holocaust denial and racism?  Dunn turns to the Israeli band Orphaned Land who note that although the song was written for shock value it has been used by politicians to inform Israeli youth about the Holocaust.  Orphaned Land then talk about Jerusalem as a global city and the past religious conflicts between Judaism, Christianity and Islam.  Far scarier than Middle Ages imagery and occult demons is Orphaned Land’s reality of having to live daily with potential suicide bombers in crowded urban areas.

Dunn returns to this debate throughout Global Metal to show how different individuals and groups reinterpret a meme or symbol and how this can have unforseeable outcomes.  Orphaned Land recount how after playing ‘Angel of Death’ live for Israeli audiences they were sent a mail bomb by Varg Vikernes a notorious Norwegian black metal musician and Holocaust denier.  Iranian fans who are photographed next to Slayer graffiti face possible arrest and torture by religious police – which provokes Slayer’s frontman Tom Araya to comment that the fans seek a death sentence.

More disturbingly, Dunn interviews the Indonesian band Tengkorak whose song ‘Jihad Soldiers’ embraces a militant Islamist worldview.  When Tengorak’s lead singer quotes conspiracy theories from The Protocols of the Elders of Zion, Dunn observes his jacket has a crossed out Nazi swastika.  “We’re not against Jews,” the singer explains, “just the Jewish system.”  Dunn then visits a Muslim mosque with another Indonesian musician.  Tengorak’s context is the 1997 Asian currency crisis which sparked a wave of conspiracy theories within Indonesia due to macroeconomic destabilisation.

Many of the interviewees give examples of how heavy metal music is reinterpreted differently to Western narratives.  Japanese fans reject Western alienation as an existential motivation and instead create a more emotional and direct identity that is an alternative to their conformist work identity.  KISS had an immediate impact in Japan as the band’s makeup is comparable to Kabuki theatre.  The live improvisation which closed Deep Purple‘s first concert at Tokyo’s Nippon Budokan in 1972 has sparked a subculture of ageing salarymen who reform their teenage bands to play ‘Highway Star’.  Former Megadeth guitarist Marty Friedman explains how X-Japan and Death Panda have fused heavy metal with Japanese game shows like Rock Fujiyama and pop music to create rifts within and between subcultures.  In China heavy metal music is used as part of a Confucian state policy to give youth an outlet for aggression, even though the music is officially frowned upon.  Whilst visiting Mumbai, Dunn intercuts scenes of Indian bands playing a local bar with the Hindu wedding playing Bollywood music next door: two alternative cultures coexist.

The heavy metal subcultures that Dunn visits serve as barometers for nation-state development; freedom for religious and political views; and in a nod to Ulrich Beck, P.R. Sarkar and Amy Chua, the relationship of subcultural groups to mainstream society and sociopolitical power.  Japan has a Janus-faced subculture which has Western and indigenous elements.  India and the United Arab Emirates’ subcultures are at an infancy stage which Dunn links explicitly to democratic political institutions and modernisation: UAE hosts a festival with bands and fans who cannot perform in their home countries due to restrictions.  China, Iran and Turkey have subcultures that are underground due to religious authorities who perceive them as antinomian youth subcultures.  Beck’s concept of subpolitics from below and Sarkar’s Law of the Social Cycle provide theoretical insights here: if the fans are shudra (workers) they have coopted insights from vaeshya (entrepreneurs, merchants) and vipra (intellectuals) to create soft power which counteracts the influence of ksatriya (military).

Brazil and Indonesia are two test cases of this hypothesis.  Cavalera’s narrative of Brazil’s transition to democracy st
ands in contrast to Samuel P. Huntington’s Political Order in Changing Societies (1968) which warned of the gap between rapid sociopolitical change and lagging political institutions.  Instead, Cavalera argues that Sepultura’s music signified a subpolitics response by the shudra underclass to poverty and the lack of macroeconomic and sociopolitical reforms by social elites.  The flashpoint is Metallica’s concert on 11th April 1993 at Lebak Bulus Stadiam in Jakarta, Indonesia.  Metallica’s drummer Lars Ulrich explains that in order to protect a middle class area Indonesian police prevent fans from entering the stadium.  Fans retaliate by setting fire to the surrounding buildings; the smoke is visible on a bootleg concert tape.  Indonesian authorites then banned all heavy metal bands and live tours until the Suharto regime ended in 1998.  Indonesia’s heavy metal subculture have since gained greater visibility although Tengorak gives voice to subcultural fears of Western geoeconomic, cultural and religious domination.

The consensus of most fans in Global Metal is that heavy metal’s ‘identity politics’ is evolving into a transnational network with a cosmopolitan worldview.  Almost everyone in the documentary wars an Iron Maiden t-shirt – the power of Chinese sweatshops, marketing and passionbrands.  The major facilitator is the heavy metal entrepreneur, such as the cofounder of China’s Tang Dynasty who imported Western heavy metal in the late 1980s and then evolved into an indigenous worldview.  The major barrier to this cosmopolitan ideal and diffusion process is when subcultural identities are caught in Muzafer Sherif‘s assimilation-contrast effect of social judgment: Japanese purist fans who decry the fusion of pop-metal or Indian fans who are caught in a power struggle with authority figures and family traditions.

Failures in market design are one source of these infra-subcultural battles.  In order to change their financial account reporting Western conglomerates dumped their excess back catalogue such as Extreme‘s 1989 debut album as cheap CDs into India and other countries.  Third World countries were the beneficiaries of bootlegs, MP3s and illegal downloads.  Dunn coaxs an admission from Ulrich that this is a positive trend, a reversal of Metallica’s lawsuit against Napster in 2000.  Black markets emerge where demand exists yet there are no official agents and major price differentials exist.  Ironically,  Global Metal is a victim of this trend: the documentary and a soundtrack of featured bands now circulates on illegal BitTorrent networks.  Turn up the distortion to 11.

The Debt

Assaf Bernstein’s The Debt (2007) portrays the breakdown of accountability during a fictional operation by Israel’s Mossad agency to capture a Nazi war criminal.

The film opens with the Mossad team of Rachel Brenner (Gila Almagor, Neta Garty), Zvi and Ehud arriving home triumphantly in April 1965: a scene reminiscent of Beatles mania.  Flashforward 30 years later and Rachel explains to Israeli intelligence trainees what it was like to kill the Nazi war criminal Maximilian Rainer (Edgar Selge) in a safehouse shootout: ‘I didn’t think of anything, I just closed my eyes, thought of my mother and what she had been through.’  The trainees joke about the Surgeon of Burkenau as a symbol of evil.

At a launch party for her memoir My Mission we hear an account of Rachel’s bravery and see her signing books like a celebrity.  As the party ends Zvi arrives with a newspaper story that will shatter the bubble: an old man in a nursing home 40 minutes outside of the Ukrainian industrial city Kiev now claims to be Rainer.  Rachel, Zvi and Ehud all know the truth that has been hidden for 30 years: Rainer escaped from the safehouse and they created the cover-story to hide the truth about the Surgeon of Burkenau’s fate that would have shocked Israel. 

The team is being reactived before Mossad and the Israeli public find out the truth.  Ehud is already in Kiev whilst Zvi cannot go due to wounds from an Israeli embassy bombing 10 years earlier.  Zvi convinces Rachel to go to Kiev armed with poison to confirm Rainer’s identity and to kill him.  She is unsure about the newspaper photograph.  ‘People change a lot in 30 years’, Zvi tells her.  ‘We were different then, weren’t we?’, Rachel wonders.

The Debt‘s narrative cuts back and forth between the 1964 Berlin operation and Rachel’s 1994 visit to Kiev.  Bernstein thus creates a cause-effect relationship between the team’s initial decisions and their consequences.

Mossad tracks Rainer to Berlin in 1964 after a 15-year search.  The night before the team’s operation begins Rachel examines photographs of Rainer’s atrocities in Auschwitz-Birkenau.  Rainer now works as a gynecologist so Rachel poses as Mrs. Roget and gets several appointments for an infertility examination.  These scenes have a starkness similar to David Cronenberg’s Dead Ringers (1988) as Rainer attempts to discover Rachel’s true identity.  Eventually the team resorts to an extraction operation: Rachel injects Rainer with a serum whilst Zvi and Ehud arrive with a fake ambulance.

Holed up in a safehouse with Rainer imprisoned the team begins to fall apart.  The cover operation to use an embassy party is delayed several times.  The team starts infighting over their motives: Rachel has unrequited love for Zvi, Ehud’s tough personal masks his fears and Zvi is hauned by the deaths of his entire family at Auschwitz.

Rainer emotionally manipulates Rachel and Ehud when they break Zvi’s rule not to speak to their prisoner.  He offers several rationalisations: his work was done for ‘scientific progress’, ‘hundreds of deaths’ were necessary to save millions, and that ‘we could do anything we wanted with the Jews’.  Rachel taunts Rainer that he will endure a public trial similar to Adolf Eichmann
in Jerusalem in 1961.  Rainer explains to Rachel and Ehud that only four guards were needed to send entire families to their deaths: Jewish ‘egoists’ meant that individuals only thought for themselves.  ‘Jews only knew how to die, they didn’t know how to kill,’ Rainer concludes.  The exchanges are a misdirection ploy: with Ehud and Zvi now out of the room Rainer attacks the sleeping Rachel with a razor that she has dropped and escapes.  ‘It took 15 years to find him, we aren’t going to find him in 10 minutes,’ Ehud and Zvi argue.  The truth that happened in Berlin is not the truth that Israel must know.

30 years later Zvi, Ehud and Rachel are each haunted by their lie.  When Rachel arrives in Kiev she meets Ehud who is now an arms dealer to both sides in Sierra Leone: ‘rebel against them’ he explains over a double malt whiskey.  Ehud and Rachel are unable to get into the Kiev nursing home which is a high security facility for former Soviet military.  The next morning Rachel discovers that Ehud has committed suicide because he is a coward.  Zvi asks her to return but Rachel wants to finish what should have been done in Berlin.

After several cat-and-mouse attempts Rachel disguises herself as a nurse to infiltrate the nursing home.  She sees the old man on a balcony.  A Berliner Zeitung reporter also wants to interview the old man and phones his editor in advance to claim a double-spread cover story.  In these scenes Rachel seems cautious to conduct a field operation, unsure of the old man’s true identity and out-of-place in a life after espionage.  Both she and the reporter discover the truth: the old man has Alzheimers and started the story a month ago to the concern of his son.  The reporter leaves in disgust.

Only then does Rachel discover the deeper truth underneath the surface truth and by accident:  she follows the old man’s grandson and his remote controlled car to discover an elderly Rainer playing cards in the dining room.  ‘I should never have confessed to him,’ he tells Rachel, ‘I should have taken this secret to my grave.’  Rachel and Rainer’s bathroom knife fight leave both fatall wounded, and Rachel dies on a train platform, remembering the team’s triumphant return to Israel, the black and white news footage now in colour.

The Debt explores the ethical challenges of intelligence fieldwork, coming face to face with ontological evil, and the cost of living with a lie.  However two other dimensions are only hinted at.  The team’s lie is necessary to maintain Mossad’s invincibility and as a counter-myth against the Nazi postwar survival myths of Adolf Hitler, Martin Bormann and the Odessa in South America.  More cryptic is Rainer’s explanation to Rachel about World War II’s intergenerational trauma: ‘The war changed a lot of people.’

Anvil! The Story of Anvil & Prospect Theory

Music lasts forever . . . and sometimes the debt does too!
– Steve ‘Lips’ Kudlow, Anvil

Sacha Gervasi‘s Anvil! The Story of Anvil (2008) is more than a documentary on the Canadian heavy metal band Anvil: it’s one of the most poignant films yet on how our beliefs and emotions affect our decision-making abilities.

Gervasi’s film begins with Anvil’s triumph: a support set at Super Rock ’84 Japan where lead guitarist/vocalist Steve ‘Lips’ Kudlow wears bondage gear and plays a guitar solo with a dildo whilst drummer Robb Reiner unleashes fast blast beats.  Anvil’s albums Metal on Metal (1982) and Forged in Fire (1983) combine two different strands of heavy metal music: the New Wave of British Heavy Metal movement of the early 1980s that Def Leppard and Iron Maiden popularised, and outrageous tactics that Motley Crue and other Los Angeles bands would adopt in the mid-1980s.  The other bands at Super Rock ’84 sold millions of albums: Scorpions, MSG (Michael Schenker Group), Whitesnake, and Bon Jovi.

But Anvil didn’t and Gervasi explores why.

Anvil’s peers offer several explanations.  Metallica‘s Lars Ulrich suggests Anvil’s Toronto home disadvantaged them compared to the US heavy metal subcultures in Los Angeles and New York.  Motorhead‘s Lemmy Kilmister believes Anvil’s original lineup had talented musicians who never received their due recognition.  Slash the iconic guitarist from Guns ‘n’ Roses and Velvet Revolver contends that other bands took what Anvil did well and just ripped them off.  Anthrax guitarist Scott Ian just wonders where did Anvil go in the past 25 years?

Gervasi tracks down Kudlow and Reiner who are Anvil’s sole original members to Toronto.  Kudlow’s day job is a driver for Choice Children’s Catering whilst Reiner is a sandblaster.  Bassist Glen Five and guitarist Ivan Hurd struggle to survive.  Anvil’s only gigs are at a local sports bar.  They have no management, no producer, no record label contract and will rely on luck and perseverence to get to the ‘next level’ of their careers.

Anvil! documents Kudlow and Reiner’s attempts to achieve the heights of their Super Rock ’84 Japan success: a disastrous European tour and the recording sessions for This is Thirteen (2007).  Gervasi captures Kudlow and Reiner’s decisions during this process, their rationalisations when things go wrong, and the reactions of other band members, friends and collaborators.  Anvil! is thus less a mockumentary like Bad News (1983) and Spinal Tap (1984) and closer to a great case study in Amos Tversky and Daniel Kahneman‘s Prospect Theory: decision-making about risk where there are differences, known outcomes and unconscious biases.  Despite the improbability of achieving the rockstar dream after 30 years Kudlow and Reiner continue to strive because of their ‘Loser Take All’ passion and self-image, their early success at Super Rock ’84 Japan and the path dependence of their past decisions.

The European tour becomes a series of bad decisions: the tour manager doesn’t book train tickets for transport, Kudlow and Reiner fight with a club owner to pay a gig when only seven people turn up (‘We aren’t getting paid!’), and only 174 people turn up to a Transylvanian heavy metal festival in a 10,000-capacity venue (‘How much love could one person put into something?’).  The tour manager expresses remorse due to hindsight bias, falls in love with and then marries guitarist Ivan Hurd who leaves Anvil in 2007.  Kudlow and Reiner also have to fend against adverse selection when lawyers and others cluster around to take Anvil’s money.  Kudlow takes five weeks off work for the tour in which Anvil makes no money: ‘When we’re on tour we’re on vacation’ he tells Gervasi.

In the tour’s aftermath Kudlow admits to Gervasi why Anvil have not succeeded: they made bad decisions early on in their career, have no management to promote them, the past few albums have poor material and no production, and the band was ripped off by ‘indie’ record labels who never payed their artists (‘99.9% of bands never get paid’).

Kudlow’s solution is to approach producer Chris Tsangarides who worked with Anvil to record a new album.  Kudlow struggles to raise the $13,000 that Tsangarides requests: he lasts eight hours at a telemarketing job run by Anvil’s fan club president before turning to his sister who is a successful businesswoman and gives him the money.  The band decamps to Tsangarides’ studio in Dover, England, to write, record and mix This Is Thirteen
(2007).  The studio appears to consist of a band gear room, a vocalist room, and an audio engineering room with Protools software and a small mixing desk.  (Although Gervasi doesn’t explore it further the studio shots suggest that Tsangarides is also down on his luck and that his surface altruism hides the more pragmatic motive of generating income from any source to survive and trading on his past with Black Sabbath and Judas Priest).  Reiner argues with Kudlow over the lyrics and poor takes, and storms out.  Kudlow apologises and tries to bring Reiner back with a reminder about their teenage pact whilst Tsangarides tries to de-escalate the conflict and deal with the inevitable group tensions during the recording process.  Kudlow and Reiner reconcile during a Stonehenge visit.

Afterwards, Kudlow uses guerrilla marketing tactics to visit the offices of US record companies, and receives no interest after two weeks.  Kudlow then visits EMI Canada’s officer where an A&R manager turns off This is Thirteen after hearing Kudlow’s over-the-top vocals.  Gervasi ends Anvil! with an unlikely triumph when a Japanese promoter who saw Anvil on their European tour books the band to play a Tokyo festival.  Kudlow and Reiner worry backstage about if anyone will turn up and emerge to find the room full of thousands of fans who remember their Super Rock ’84 Japan performance.

Tversky and Kahneman’s work on Prospect Theory is central to Anvil!‘s narrative about Anvil’s tours and album recording sessions.  Kudlow’s nostalgia about Super Rock ’84 Japan highlights why he has an emotional overinvestment in Anvil’s self-image and appears stuck in a time-warp.  Others share this: bassist Glen Five is an Anvil fan whose belongings are in a garage because he can’t afford a house, the European tour manager has plenty of love and passion but fails in strategic execution, and Kudlow’s wife admits near the film’s end that because of her interest in 1980s heavy metal music and lifestyles she had wanted Anvil to succeed commercially in a moment that has passed.  Kudlow is overconfident about Anvil’s chances, he manages risks through the affect heuristic of immediate problems rather than consequences, and illustrates the knowing-doing problem of knowing what the barriers are and yet not developing mitigative strategies to bypass them.  Gervasi hints that Anvil might have pursued other options, from doing children’s parties at Kudlow’s catering firm to Reiner’s private collection of landscape paintings.  Luckily, Anvil!’s success has opened up new possibilities for Anvil including a MySpace page and street team.

Anvil frequently make comparisons between themselves and the successful bands at Super Rock ’84 Japan.  This is a self-narrative that illustrates Tversky and Kahneman’s anchoring a  cognitive bias which focuses on specific information in decision-making.  Anvil! would be even more interesting if it contrasted Anvil’s underdog failure with the comparison bands who have all run into major problems yet survived due to business savvy managers and major label support: albums recorded for tax purposes (Anthrax), management problems and hostile fans (Metallica and its managers QPrime), lineup, recording and tour problems (Anthrax, Black Sabbath, Guns ‘n’ Roses, Iron Maiden, Judas Priest, Motorhead, Velvet Revolver), and peaks and troughs in their careers (Anthrax, Black Sabbath, Bon Jovi, Iron Maiden, Metallica, Motorhead, Scorpions).  Nor are the costs of these ‘sucesses’ explored: on the first date of Anvil’s European tour Kudlow reunites with Twisted Sister guitarist Eddie Ojeda who looks to be a drugged, emaciated mess.

If that’s heavy metal ‘success’ then Anvil’s hometown longevity, label independence, lifelong friends and supportive family may have been a better long-term choice.

Predicting The Unthinkable In Financial Markets

The nuclear strategist Herman Kahn coined the phrase ‘thinking about the unthinkable’ in a series of black comic Air Force briefings that became On Thermonuclear War (Princeton University Press, 1960).  Faced with a year-long crisis in US credit markets analysts have embraced similar imagery in their forecasts of catastrophic risk.

Several different players in the financial ecosystem rely on the forecasts for multiple payoffs, one for their target audience and the other for themselves:

  • Research Analysts: (1) Provide clients with guidance and metrics to the market turbulence; (2) stand out in the pecking order of research firms and competing industry/sectoral analysts to remain relevant.
  • Investment Media: (1) Catastrophes as the source of drama and headlines to keep consumers engaged; (2) Financial and operational synergies of convergent media production.
  • Fund Managers: (1) An external input to valuation models for visiting potential firms to invest in; (2) A parameter for deciding on the asset classes, diversification and hedging for investment portfolios.

Some questions to ask in evaluating any catastrophic forecasts that predict the unthinkable:

  • What is the source, type and timeframe of the evidence presented?  The source may be company interviews, earnings calls, investment calls and trade seminars.  The type may be firsthand observation, market rumour, financial model, computer simulation or analyst conjecture.  The timeframe may be historical simulation of past data, quarterly forecasts or a longer time horizon for capital financing, global market entry, innovation pipelines or sustainability projects.  The source enables you to filter any possible agendas, the type refers to the information structure, whilst the timeframe often has embedded assumptions about cause-effect relationships, impacts, and the actions of others.
  • Why is the analyst making this forecast and could there be other agendas? Analysts have biases and personal theories that an attention economy might amplify.  At a group level this becomes self-reinforcing collective wisdom that may turn out to be flawed.  In embracing a current meme in a true believer stance analysts create a cognitive frame prevents them from considering alternative outcomes, options and possibilities.  At its most cynical this question is a reminder that forecasts are not objective or value-neutral, especially if the analyst is under pressure to generate earnings revenue or has a different private opinion to their public view.
  • What is the analyst’s track record in accurate forecasting?  This focuses on the analyst’s patterns of thinking and rhetoric in forecasts; how their performance compares to an industry, market or sectoral baseline; and the margin of error in their past forecasts.  This can be used to construct a brains syndicate, to filter out media reports and noise, to surface hidden assumptions and how they affect performance, and as a quality assurance check.
  • How might the catastrophic forecast be hedged? This shifts the focus from optimistic versus pessimistic views to the risk management focus on mitigative strategies and action planning.  To be effective, this requires an understanding of your risk profile and risk-return needs (risk averse, neutral or seeking), your time horizon, and the nature of the financial instruments, investment portfolio and markets to be used.

The Devolution Is Here

Devo‘s first Melbourne performance in 25 years was ‘a dream come true’ cofounder Mark Mothersbaugh told the audience – in falsetto – as Booji Boy during the finale ‘Beautiful World’. Most of the audience were ‘less beautiful than their parents’ who had attended Devo‘s last show in 1983.  Australia was ‘relatively untouched then’ compared to the post-industrial decay in Devo’s hometown of Akron, Ohio.
 
The 90-minute setlist centered on Devo’s first three albums from 1978-82.  After opening with clips from Chuck Statler’s film In the Beginning Was the End: The Truth About De-Evolution (1975) the band played the MTV hits ‘Whip It’ and ‘Girl U Want’ early in the set.  Devo’s heavy rock arrangements became even more intense when they dispensed with the Korg keyboard at the front-of-stage and their trademark yellow radiation suits to reveal black t-shirts and shorts.  Session drummer Josh Freese kept a fast drum tempo, Bob Casale switched deftly between keyboards and rhythm guitar, Bob Mothersbaugh added lead guitar histrionics to ‘Uncontrollable Urge’, ‘Gut Feeling’ and the Rolling Stones cover ‘I Can’t Get No (Satisfaction)’, whilst Gerald Casale’s vocals on ‘Secret Agent Man’ highlighted the band’s humour.  The first encore ‘Freedom of Choice’ became a satire on Pax America: ‘If you want proof of devolution just look at the current White House’, Mark Mothersbraugh told fans.  For me, ‘Jocko Homo’ was the standout track with MIDI keyboard samples, jerky robotic stage moves, a wall of sound, and the audience singing the anthematic chorus.

I took away three lessons about innovation from Devo’s 2008 tour.

Devo’s expertise in art direction differentiates their live show from others: a Pop Art aesthetic now fused with New Wave nostalgia.  This sensibility may be why Brian Eno, Iggy Pop and David Bowie engaged in a bidding war to produce Devo’s first album Q: Are We Not Men? A: We Are Devo (1978).  It’s also why Virgin’s Richard Branson invited Devo to Jamaica in a ploy to sign John Lydon as their frontman, which Simon Reynolds recounts in Rip It Up And Start Again (Faber & Faber, London, 2005).  Branson perceived Devo as the New Wave heirs to the Sex Pistols‘ Situationist critique (p. 80-81).  This New Wave branding ensures Devo has a core fanbase and branding that resonates enough to sell plenty of red flowerpot hats 25 years later.  It’s also evident in the Australian support band Regurgitator‘s aesthetics and Band in a Bubble experiment, and the Primus theme for South Park.

Devo mania was however a New Wave subculture that did not go mainstream.  Despite MTV’s heavy rotation of ‘Whip It’ and ‘Girl U Want’ the network became the ‘Home
Shopping Network for record labels’ claims Mark Mothersbaugh, rather than maintain its avantgarde and experimental credentials (p. 349).  A mainstream audience would not understand Devo’s satirical parodies of Christian fundamentalist and 19th century eugenicist doctrines on human and cultural evolution nor its embrace of the Church of the Subgenius.  Devo by the mid-1980s was consigned to mid-level status on Enigma Records: what happens after a fad or mania fades away can be just as much a lesson as the subcultural tipping point.

The production company Mutato Muzika offers a synthesis of how to escape the half-lives of subcultural fads and the limits of mid-level success.  Mark & Bob Mothersbaugh and Bob Casale have refocused on composing advertising jingles, film and television scores.  Mutato provides a small team environment which composer John Enroth describes as a focus on pragmatic ‘craft’ with timeboxes for project delivery that are differentiated from the ‘art’ projects that members pursue elsewhere.  Mutato developed business models including corporate sponsors for songs and Apple iTunes release and distribution that are now ‘indie’ common practices.

As the next stage in devolution Mutato looks to be a sustainable business that can collaborate with the mainstream media yet is also centred on a personal aesthetic experience and philosophical outlook.

Ebook Textbooks & The Market for Lemons

The software consultant Ed Yourdon once warned US programmers in his book Decline and Fall of the American Programmer (1992) that they faced global hypercompetition.  This was a fashionable message in the turbulent early 1990s of industry deregulation, export tariffs, mega-mergers, downsizing and reengineering.  Spenglerian pessimism made Decline and Fall an IT bestseller as Eastern European and Russian computer programmers emerged as low cost competition with their US counterparts.  Now in Thomas Friedman‘s vision of a flatter world the Eastern European and Russian computer programmers have help from an unlikely source: electronic copies of IT textbooks.

Several barriers mean that US textbook publishers are cautious about embracing ebook versions.  Publishers fear the Napsterisation of ebooks on peer-to-peer networks.  There’s no standard ebook device although Amazon’s Kindle is the latest candidate.  There’s no standard ebook format: most use Adobe PDF, however when Acrobat 8 was released Adobe shifted its ebook functionality to a new Digital Reader that did not necessarily read a user’s existing ebook collection.  Potential customers do not have a utility function to necessarily favour ebooks over printed copies: publishers charge high prices for ebook versions that may contribute a higher contribution margin to profits but that give the customer little price differential compared with print counterparts.

The implementation of digital rights management (DRM) also leaves much to be desired: McGraw-Hill’s Primis uses a digital fingerprint on a hard-drive that voids an ebook even if reinstalled on a reformatted drive due to a virus, whilst Thomson’s Cengage Learning uses a time-sensitive model which gives the user access for one semester to an ebook with the full price of its exact print version.  Publishers are also slow to adjust cross-currency rates: Australian textbooks still cost $A120-$200 despite near parity between the Australian and US dollars.

Thus, it’s no surprise that ebook divisions remain small in multinational publishing conglomerates.  One exception is Harvard Business School Press which appears to have ditched Sealed Media’s DRM plugin for Adobe Acrobat after Oracle acquired SM in August 2006 and then had integration problems with information rights management.

These barriers suggest a failure in market design with analogies to George Akerlof‘s study of the used car market in his influential paper The Market for Lemons (1970).  Publishers counter that although there is a lack of ebook standards similar to Akerlof’s paper the economics of publishing provide a disincentive to lower prices.  They claim high fixed costs in printing, photography rights and licensing fees for the case studies taken from Businessweek, Fortune and The Wall Street Journal.  Author fees and promotional budgets to professional associations add variable costs –  however, Australian academics have a disincentive to publish textbooks compared with their US colleagues, as Australia’s Department of Education, Employment & Workplace Relations does not provide recognition points.

To survive US textbook publishers have turned to global market models with regional editions of popular texts (such as Asia-Pacific editions with local coauthors), and adopted the music industry’s business model of electronic and online content (similar to how record labels have released Dualdisc, DVD and collectors editions of albums).  However as Yourdon warned US programmers this may not be a business model with longterm sustainability.  MIT’s OpenCourseWare, Apple’s iTunesU and Scribd all provide free content that mirrors the generic content in most textbooks, although some differentiate via a problem-based approach.

Yourdon’s ‘challenger’ computer programmers now also have illegal BitTorrent sites such as The Pirate Bay, filehosting networks such as Rapidshare, and ebook sites including Avaxsphere.com and PDFCHM to choose from.  The last two provide solutions to Akerlof’s challenge in market design: they have an easier user interface, a broader (illegal) catalogue of ebook titles, and DRM-free files compared to Cengage Learning or McGraw-Hill.  Even business strategists are getting in on the act, as Clayton Christensen, Curtis Johnson & Michael Horn explore in Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns (McGraw-Hill, New York, 2008).

There’s one textbook coauthor who came up with a unique solution to Akerlof’s dilemma in market design.  His Macroeconomics book coauthors Andrew Abel and Dean Croushore opted for the mod-cons from publisher Addison-Wesley: an online site and a one-semester ebook version as a bundle deal.  The textbook coauthor?

Federal Reserve Chairman Ben Bernanke.

Dealmaker With The Dead

Randy Nails‘ documentary Dead On: The Life and Cinema of George A. Romero (2008) screened as a ‘work in progress’ at the 2008 Melbourne International Film Festival.  The documentary charts Romero‘s evolution as a director and how his films are responsible for a 40-year-old ‘zombie economy’ worth over US$2 billion.

Three themes are central to Nails’ documentary: how psychopolitics such as Cold War nuclear fears and Vietnam War social activism influenced Romero’s personal vision, why Romero has fought to retain his independence against Hollywood studios, and how the zombie meme has in turn influenced contemporary ‘indie’ directors, subcultures, and musucians such as Glen Danzig and Rob Zombie.

The documentary begins with a nuclear fear montage: stark black-and-white footage of the Trinity nuclear test on 16th July 1945, ‘duck and cover’ safety drills and simulations of the impact on targeted cities.  From this dystopian beginning Nails explores Romero’s early work for the Pittsburgh-based company Latent Image which tapped the market for advertising and industrial films in the ‘go go’ 1960s.  Latent Image would be the nucleus for the team that produced the influential zombie film Night of the Living Dead (1968): Romero used handheld cameras to capture the feeling of newsreels on Vietnam War combat and civil rights protests.  Latent Image cofounders liken their production approach to jamming in jazz and small teams.  However after the follow-up There’s Always Vanilla (1971) the Latent Image team fell apart and Romero continued as an auteur to create films where the Cold War’s Mutually Assured Destruction is the backdrop to dark and apocalyptic forces which threaten to overwhelm individuals.

Latent Image’s DIY ethic was a formative experience for Romero.  He cites Martin (1977) as the film that captures best Romero’s work ethic and small team approach, with Diary of the Dead (2007) as a return to this independence.  Its cast believe Knightriders (1981) was his most personal film, which Romero explains is about the extremes and limits of personal ideologies, and that he was able to maintain a strong team despite the production difficulties due to his respectful way of dealing with the cast and crew (which Ed Harris and Dennis Hopper also attest to in Romero’s later films for major studios).  Romero and special effects wizard Ted Savini worked quickly on the location shoot in a shopping mall for Dawn of the Dead (1978) due to a 3-4 hour time limit: a precursor to the ‘sprints’ in agile software development.  Romero’s DIY approach and his ability to combine multiple roles (scriptwriter, cinematographer, director, producer, editor) appeals to John Landis, John Carpenter, John Waters, Kevin Smith, Robert Rodriguez and Danny Boyle, who Nails interviews.

Pigeonholed as a horror director Romero points out why many of his films have a satirical dimension that the Hollywood major studios often choose to ignore or minimise.  Jack’s Wife (1972) explored a neo-feminist vision of personal empowerment through Wicca symbolism, although the US distributor retitled the film as Hungry Wives to appeal to the softcore porn market.  The Crazies (1973) satirised military contingency planning to prevent a chemical warfare disaster.  Martin (1977) uses vampirism as a metaphor for industrial decline of Pittsburgh’s steel industry: Romero surmises people need vampires as a modern mythology to combat the ‘death of magic’ caused by downsizing and hypercompetitive globalisation.  Spurred on by giallo director Dario Argento, Romero overcomes his desire not to revisit zombie films by turning Dawn of the Dead (1978) into a satire on consumer lifestyles.  Day of the Dead (1985) and Land of the Dead (2005) respectively target the Reagan Administration’s revival of Cold War brinkmanship and nuclear fears, and the second Bush Administration’s widening social gap between the haves and have-nots.  Romero’s personal vision emerges collectively in this body of work as a concern with personal autonomy and class politics.

Why Romero despises Hollywood studios is illustrated through the many anecdotes about his production battles and mistakes.  Night of the Living Dead relied initially on 10 personal investors who lost their money when the film was released with the copyright symbol on its title credits rather than in the correct position, which immediately made NoTLD public domain.  Despite a successful lawsuit Latent Image lost money and the followup There’s Always Vanilla broke up several friendships.  Knightriders, Land of the Dead and Creepshow all had studio distribution problems.  During the preview screenings of Monkey Shines (1988) and The Dark Half (1993) the test audiences demanded the downbeat endings be changed, a Hollywood practice that reviewer Roger Ebert condemns.  The film studio Orion was almost bankrupt during The Dark Half and was unable to finance a score for the film’s third act, which led to director-producer tensions.  Bruiser (2000) was a straight to video release which Romero was relieved to complete.  In a lesson on ‘decision rights’ Romero worked on 8 redrafts over a two-year period for Resident Evil (2002) to ensure the film reflected the first two videogames, before he discovered that the studio executive did not have the decision-making power as he had claimed.  Whilst Romero admits to not being very good at business his criticisms of Hollywood are supported by illusionist Penn Jillette and writer Stephen King.

Despite the wealth of archival footage and interviews Nails’ ‘work in progress’ suffers from a nonlinear narrative.  I had just as much fun sitting just behind Romero and his daughter Tina in the cinema, watching him deal with zombie fans and autograph hunters.  Romero might not have the financial rewards of the ‘zombie economy’ he inadvertently created but Dead On has plenty of lessons on cultivating a personal vision and the mindlessness of the Hollywood zombies known as mid-level studio executives.

Investors’ Regret: Société Générale v Jérôme Kerviel

On 4th July 2008, The Banking Commission of France (BCF) fined Société Générale €403 million euros for the bank’s lack of internal controls in a €4.9 billion trading loss in January 2008.  SocGen blames ‘rogue trader’ Jérôme Kerviel for the loss after it discovered his trading positions on 18th January.  SocGen’s chairman Daniel Bouton also blamed Kerviel for the stockmarket’s 6% fall on 21st January 2008.

Kerviel counter-blames SocGen for its loss, fired his lawyers, and adopted an aggressive stance with a new legal team during a court hearing in France on 23rd July. SocGen had already suffered fallout from the revelations about Kerviel’s losses: Bouton made changes to senior management, and the French bank had to raise €5.5 billion euros to recapitalise, and prevent SocGen from becoming an M&A takeover target.SocGen’s ‘rogue trader’ claim against Kerviel recalls the fate of trader Nick Leeson whose speculation on derivatives and options markets led to the collapse of Baring’s Bank in 1995.  Leeson attempted to trade himself out of bad decisions through his knowledge of exotic options, his control of the settlements role, and his tactical deception using spreadsheet models and accounts with whited-out text that was invisible to others.  SocGen claims Kerviel used complex program trades with exchange traded funds and swaps for a similar tactical deception.  Leeson’s losses made Baring’s illiquid and in 1995 the English merchant bank was sold to ING for £1.

On the surface Leeson and Kerviel share enough similarities as a pair to warrant the ‘rogue trader’ label.  Both had knowledge of sophisticated financial instruments and markets.  Both used this knowledge to make substantial profits for their respective firms.  Both were in teams which faced rapid revenue growth but also with a lack of internal controls: Singapore for Leeson and Delta One for Kerviel.  Both used tactical deception in attempts to escape from adverse trade situations, caused by the misuse of financial instruments, dynamic disequilibriua in the markets, and cascade events.  In Leeson’s case, Japan’s Kobe earthquake on 17th January 1992 was also a Black Swan event.  Both Leeson and Kerviel have made counter-accusations that the banks’ senior management were scapegoating them for larger institutional losses.

One central difference between Leeson and Kerviel is that all game-players are now more aware of ‘rogue trader’ as a media narrative and symbol of financial villains.  Bloggers posted Kerviel’s resume online and registered his name as a website address.  Bouton quickly singled Kerviel out for blame before French authorities also charged Kerviel’s manager. Kerviel countered this with claims that SocGen’s senior management was happy with his trading and that the bank had broader problems with its risk management system.  Independent sites such as ReTheAuditors.com also discussed Kerviel’s case.

SocGen appointed a Special Committee to investigate Kerviel’s trades and to evaluate its corporate governance and risk management systems.  The Special Committee and General Inspection reports found problems with Kerviel which echo post-mortems on Leeson: no supervisor, an inexperienced new manager, problems with intraday positions and high-correlative markets, ignored red flags, and a lack of transparency between middle office and back office functions.  The bank also derisked its internal review by hiring PricewaterhouseCoopers to evaluate SocGen’s risk management systems.  The audit firm then derisked itself by de-scoping its report which PwC claims was based on SocGen’s internal documents and industry best practices.

Was this an exercise in ‘plausible deniability’?  Perhaps.  Did it interest book publishers? Yes, the entrepreneurial small press turned Kerviel’s case into several ‘quick books’ for micro audiences.  Did Kerviel create a new market?  Definately: at a university career fair in May 2008 a Gen Y consultant pitched to me that her Big 4 accounting firm could prevent future Leesons and Kerviels through the automatic control of access rights to critical IT systems.  I countered that whilst this solution would provide audit trails, it might not deal with the ‘human factors’ that allow failures such as Leeson and Kerviel to (re)occur.

CF’s fine signals some deeper problems in SocGen’s corporate governance and risk management systems.  Traders can use knowledge of complex derivatives, options and trading systems for tactical deception.  They may also perceive risk management as a separate function rather than an integral process, although this is changing after the 2007 subprime crisis.  Senior managers who keep changing their stories in a crisis may be stonewalling.  The pressure to make profits can mean that outcomes-based systems are manipulatable according to the outcomes demanded.  In Kerviel’s case managers ignored ‘red flags’ from the Eurex derivatives exchange.  Could Eurex have the independent power to bar traders who reach a high level of ‘red alerts’ in a given period?  What if Eurex took a solution from nuclear detente and have a ‘red phone’ line direct to SocGen’s internal auditors and external regulatory agencies?

Leeson and Kerviel are proof that traders always face the possibility of large losses from consistent market trades.  Fans of Oliver Stone’s film Wall Street (1987) and Michael Lewis’s memoir Liar’s Poker (W.W. Norton & Co., New York, 1989), which is mandatory reading in many MBA corporate finance classes, can overlook this market reality.

But equally overlooked is a more troubling problem: the differences in promotion pathways and work culture between compliance/legal/risk staff and traders who must live by their next deal regardless if the client blows up.  Gordon Gekko (Michael Douglas) recruits Bud Fox (Charlie Sheen) in Wall Street because Fox is ambitious, risk aware, and his working class roots give him a gritty edge.  Lewis suggests in Liar’s Poker that Salomon Brothers traders share a similar outlook.  SocGen’s managers promoted Kerviel to junior trader from a compliance role and SocGen’s lawyers now believes this risk management knowledge aided Kerviel’s tactical deception.  Described by friends as ‘honest, working class’ Kerviel might be Bud Fox without the ‘remorse of conscience’.

Are Financialistas Over Hedge Fund Chic?

You can blame George Soros for making hedge funds the dark horse of the irrationally exuberant 1990s.

As the public face of the Quantum Group of Funds, Soros gained notoriety for short selling the English pound in September 1992 and allegedly making $1 billion in profits.  Adam Curtis observes in his riveting documentary The Mayfair Set (BBC, 1999) that Soros’ victory signalled the first time that market speculators had beaten a country’s central bank.  In the aftermath Soros cultivated a master trader persona based on his personal ‘theory of reflexivity’ or how ‘participant’s bias’ can shape our actions in and perceptions of market events.  Hedge fund chic arose in Wall Street as investment banks rushed to found hedge funds, which use leverage and pooled capital to manage assets, derivatives and securities for an investor group.

Financialistas however are showing signs of buyers’ remorse as subprime turbulence brings an end to Soros-inspired hedge fund chic.  The high-profile collapse of Bear Stearns‘ two hedge funds in mid 2007 was only a precursor, Hedge Fund Research notes, of 170 liquidated in early 2008.  The survivors have adopted Soros’ global macro strategy which relies on computational finance and dynamical models of currencies, interest rates and other macroeconomic factors to achieve returns.

Global macro is a risky strategy for several reasons: it requires forecasting models of complex interactions, computing power and fund mangers with impeccable judgment for asset allocation.  In fact global macro deals with a specific risk class known as systemic risk that results from business cycles and macroeconomic movements, thus it cannot be diversified away.  Add funds’ massive leverage of pooled securities, industry secrecy, little government regulation and hypercompetition between different funds and managers, and an accurate calculation of risk-return is difficult.  These challenges overshadow the potential of applied research solutions, such as Fritz Zwicky‘s morphological analysis, a problem-solving method which deals with ‘multi-dimensional, non-quantifiable problems’ – relevant to the macroeconomic factors and systemic risk in global macro strategies.

Hedge fund chic faces several other problems.  As an investment category hedge funds have matured and their combination of high leverage and high management fees are unsuitable for many non-institutional investors.  Subprime fallout is triggering change in US financial and regulatory institutions which will inevitably lead to more rules and regulatory oversight of edge funds and managers.  Internally, hedge funds also need to separate managerial processes (principal management, portfolio execution) from financial reporting (mark to market book) and governance (board, corporate and policies & procedures).

Which means despite Soros’ alchemical touch hedge fund chic may now be a fad.