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GP 17 January 2007: The Translator's Alchemy

Lord, how can man preach thy eternall word?
                  He is a brittle crazie glasse:
Yet in thy temple thou dost him afford
                  This glorious and transcendent place,
                  To be a window, through thy grace.

But when thou dost anneal in glasse thy storie,
                  Making thy life to shine within
The holy Preachers; then the light and glorie
                  More rev’rend grows, & more doth win:
                  Which else shows watrish, bleak, & thin.

Doctrine and life, colours and light, in one
                  When they combine and mingle, bring
A strong regard and aw: but speech alone
                  Doth vanish like a flaring thing,
                  And in the eare, not conscience ring.

                                        - "Windows" from George Herbert’s Temple, 1633 

George Herbert.  “Windows” accompanied a truly beautiful Christmas card this year that bore a print of St. Paul’s Baptistry window in Bellingham, Washington.  It came in from a celebrant at that Church, whose career as an English professor was bound up with meaning of every kind, including intimations from the gods.  Herbert was an early 17th-century metaphysical poet and divine whose family were patrons of the better-known John Donne. 

Here, Herbert likens the preacher to church windows, suggesting that in the temple, through God’s grace, the mere words of a parson’s sermon get imbued with meaning, conveying the beauty and perfection of God. 

In this digital age that spews words at us in streams that we cannot withstand, much less understand, Herbert strikes home with us.  We, too, are faced with the enigma of how words, millions of words, become more than words and achieve meaning. 

Open Secrets.  In “Open Secrets: Enron, Intelligence, and the Perils of Too Much Information, “ New Yorker, January 8, 2007, pp. 44-53, Malcolm Gladwell, author of The Tipping Point, Blink, and a few other trendy hits, gives us his most profound insight in a very few pages.  Harking briefly back to Pearl Harbor, he notes that there was ample information around in the 1940s to equip intelligence analysts to know that Pearl Harbor was coming, but that the world was generally busy not paying attention to the facts at hand.  More recently he points out that Enron’s disclosure in widely available documents rather fully revealed that the company’s accounting policies booked into revenues and earnings money that was not in the till and also set out the convoluted nature of financings that had it skating pretty close to the edge all along. 

By implication, at least for us, his article casts a cloud over the conviction of Jeffrey Skilling and others, since the investment risks were set forth in spades for those who cared to work through them.  And a few bearish ‘short’ investors, as well as some decent journalists, had done just that.  Nonetheless, the judge has locked Skilling up and thrown the key away.  While we may feel both Skilling and Ken Lay of Enron were scoundrels, we may still ask whether the pols and the Feds and, most of all, the courts, were not a bit inquisitorial since prudent investors could have found information that would give anyone pause about the company. 

LTCM.  Ironically, as far as we know, nobody went to jail for something far more serious.  The Long-Term Capital Management hijinks worried the Feds and everybody else.  It was even thought that it came within a hair of sinking the international banking system in 1998, but for the intervention of the Fed, the money center banks, etc.  It lost 4.5 billion dollars in a third of a year.  Compared to this earthquake, Enron was just a little Houston tremor. You can get a whiff of this in When Genius Failed: The Rise and Fall of Long-Term Capital Management

As far as we know, John Meriwether, the whiz who had already paid a $50,000 penalty in a Treasury trading scandal while at Salomon Brothers, never got his fanny spanked for the LTCM disgrace.  Today he heads JWM Partners, a hedge fund in Greenwich, Connecticut with $2.5 billion or so of assets.  The Feds and the judges lack a sense of proportion in meting out justice, but they can read the headlines: Enron was more of a political hot potato, so Skilling has been put away for 24 years.  The powers-that-be could not allow Meriwether to fail, and he’s back out on the Street like several other recidivists. 

Disclosure Is Not Communication.  The greater lesson here, for us and for Gladwell, is that data, information, facticity, disclosure is not communication.  The Enron data was available, but it was like the falling tree in the forest that made no sound—because nobody heard it.  This is the central error of an endless raft of Federal and state legislation: it cannot distinguish between disclosure and communication.  A horribly expensive example of this terrible mistake is SOX, or the Sarbanes-Oxley Act.  This legislation—hatched up by a Democratic Senator and a Republican Congressmen, both on the verge of retirement—codified all sorts of disclosures for companies that were meant to protect us from thieving businesspeople.  In fact, we have all the disclosure we need; we just need intelligent interpretation of what is in the public domain—and good business judgment by both officials and investors.  We need interpretation, communication, intellectual vigor, instruction infused with the honest spirit that pours in through stained glass windows.  Then we will hear the warning bells. 

Sarbanes has enriched the lawyers and accountants who were handmaidens of the deceits practiced by some businessmen.  For sure they were amply mixed up with Enron. It has created hundreds of millions of dollars of excess disclosure expenses, particularly for smaller business enterprises, without much gain for the small investor.  It has drive some enterprises out of the public market and caused others to go public in European, rather than U.S., markets.  It has turned corporate annual reports into meaningless pieces of paper.  Companies no longer treat them as serious documents but instead tack a small rather meaningless president’s letter on the voluminous required regulatory disclosures. 

Here, and elsewhere, as Gladwell realizes, we have become overwhelmed by outpourings of data which we cannot digest or choose not to.  What’s changed is that the providers—companies, for instance—are no longer providing much interpretation for us.  The great poet Edmund Spenser pictured something like this in The Faerie Queen when he told of the spew pouring forth from the Dragon Error: 

Her vomit full of bookes and papers was,
With loathly frogs and toades, which eyes did lacke,
And creeping sought way in the weedy gras:
Her filthy parbreake all the place defiled has. 

Investment Conferences.  In the last few years, every investment house that wants to do serious business puts on investment conferences that are more like computer dating than conferences.  In olden times, there was more emphasis on general sessions where a multitude of people would hear companies hawk their wares and dozens would ask questions.  Now, in a typical day, company CEOs will have one-on-one sessions with perhaps 8 to 10 fund managers or analysts.  Forums have given way to trysts in hotel rooms. 

We and our colleagues attend a goodly number of these affairs, which have gotten rather boring.  The fund managers arrive unprepared and sometimes are not schooled in politeness.  Out of one business school or another, they ask all sorts of penetrating questions that have the ‘gotcha’ tone prevalent in talk radio and the cable TV interview shows.  Invariably, these bright young-ums never ask the million-dollar question that would shed real light on company affairs. They draw out the wrong facts.  They have not been hit by the light that shone through Herbert’s stained glass windows.  Years ago the SEC thought that analysts, not average investors, would make sense of the information that it requires of companies.  But keen analysis really does not happen, and communication really does not occur. 

Intelligence Squared U.S.  Last week’s “For the Love of Learning” argued that our educational system is crumbling at all levels, but that, fortunately, new informal agencies of learning are emerging.  Another example is Intelligence Squared, a debate society backed by Robert Rosenkrantz, the chairman of Delphi Financial Group.  See “Oxford on the Hudson,” New Yorker, January 8, 2007, p.25.  A knockoff of a British group that is modeled on debates at the Oxford Union, it is meant to pit knowledgeable advocates for both sides of issues of our time against each other in a civilized way.  While populated by too narrow a New York crowd, it shows promise in getting people to get beyond data and think about the meaning of things.  We would hope that Rosenkrantz would also get into trenchant debates about our financial community and our international financial system, both of which are out of control and posing dangers, particularly to developed countries.  In some respects, we think such debating societies bear a relation to Chautaquas, the late-19th- and early 20th-century societies that brought lecturers to towns and villages throughout the country to educate and entertain the populace.  Surely there is a need for independent forums where original people lay bare their thoughts about leading edge topics.  Here we can try to get a handle on the facts that trouble and overwhelm us. 

The Concord Review.  In the same spirit, we would bring to your attention The Concord Review, a journal for serious history papers by high school students.  Both in college and in school students aplenty never are taught how to write, which means never learning how to think—which, in turn, results in adults who cannot grapple with the digital outpouring of facts and knowledge our civilization now has to offer.  If you’re of a mind, you should bring TCR into your local high schools and figure out ways to back it.  It’s about the only thing around that challenges our youngsters to celebrate well-ordered research and mildly stylish writing about thoughtful matters.  Those who can put meaning into their discourse have captured the translator’s alchemy, turning dross into gleaming gold. 

P.S.  It was a Dallas reporter at the Wall Street Journal, one Jonathan Weil, who did the impressive heavy lifting on Enron.  As well, there’s a firm in Dallas called David W. Tice & Associates, Inc. that has done a host of good analysis for hedge funds on companies such as Coca Cola and IBM, pointing out that not all is as it seems.  Tice, as we remember, was first out with the horrid news about Tyco, much to the chagrin of many money managers who had overbought the stock and saw no way to dump their positions once his insights had hit the stock.  We wonder what it is about Dallas that gives some astute fellows such a nose for scams.  One sharp money manager there named Shad Rowe is also trying to hit back at runaway executive compensation. 

P.P.S.  One step at a time, Gladwell is turning out to be everyman’s epistemologist, trying to understand how we come to know or not to know things.  It’s a decent question, since the world is currently defying our attempts to keep track of it. We first talked about Gladwell under “Making Ideas Big.”

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