Saniel Bonder

A Formula of Correlation that's Destroyed Much More than Wall Street and Is Way More Threatening than Terrorism and Global Warming - Part One

It’s been several months since I’ve posted here on Good-B. Frankly, I’ve had to take care of business on the home front. My wife/partner Linda’s and my business of “democratizing” spiritual enlightenment and transformation has taken its share of hits from the financial-economic meltdown. We’re super-successful at the intangible aspects of our work, on a small, intimate scale. But lately we’ve had to focus on “jumpin’ dem ole icy cash floes” while restructuring much of our business model to adjust, survive, and hopefully grow and thrive.

Meantime, I continue to see a Rorschach of humanity’s deeper psycho-spiritual condition that shows up in the daily financial news. I’m going to catalog some sound-and-image bites of that news here, ones that have struck a chord with me, from a few days this late winter and spring.

I’ll come back to them later to help explain the mysterious axiom of correlation I refer to in the title of this post. We’re going to need raw, real, recent human examples to be able to make good sense of that formula, and these stories provide particularly ripe illustrations. This model, by the way, wasn’t created by “quants,” quantitative financial wizards in giant global institutions, unlike the specific “Gaussian copula function” for risk correlation that has now become notorious as “The Secret Formula That Destroyed Wall Street.”

Of course, no formula itself has destroyed anything. What we human beings have done with that abstruse mathematical equation, like what we did with E=mc2 to create the atomic bomb and to generate nuclear-based electric energy, is what creates, sustains, or destroys things in our world.

As you’ll see, the formula of correlation I propose here also hasn’t, itself, really destroyed anything. But it suggests a possible truth in how we humans operate that, once you learn how to see its tracks, is quite sobering. You may recognize behind it an immense wake of destruction and species-wide self-sabotage over the last, well, five thousand years and more — at least since the creation of money. Not because we’ve abused it, but because we’ve been ignorant of it and thus unable to take it into account.

I’m a “qual,” I guess you could say; a kind of backroom spiritual-emotional, quality of living voice for Good-B. I once wrote an essay comparing my role in life to that of Rafiki, the blue-butted baboon shaman in Disney’s “Lion King.” Rafiki lived at the edge of the savannah, far from the waterholes and the real action of the “Circle of Life.” He discerned things about the whole Circle in odd, magical ways, such as by seeing the way windblown leaves landed in his lair. That’s something like the way I proceed. Apparently, I see things others don’t and interpret them in ways others wouldn’t think to. Hopefully, it all adds to our capacity to make sense of our world and ourselves and proceed with wisdom and sanity.

The logic I’ll present here is not prove-able by statistics. This model of correlation is made of words, not numbers and mathematical symbols. And it’s so apparently simplistic as a statement that when you read it, you might well yawn. But it reckons, like no other such formulaic statement I know of, with reality factors that our now-notorious quants and their greedy financier employers could not possibly have reduced to Greek symbols. These reality factors made for what actually wreaked the havoc on Wall Street and around the world to produce our current financial/economic crisis.

Hint: read the old news I present here for the human emotional and spiritual components or lack of them that thread through each incident and event. Some are stated; read for the implicit ones too. Ask yourself questions like, “What’s going on in people behind the facts of what happened in that situation? What were they feeling? What did they want? What weren’t they feeling? What difference did it make?”

That catalog occupies most of Part One, along with an initial presentation of the formula itself. Part Two, to be posted as soon as possible — can’t make guarantees when, hopefully within a month — then will come back to these illustrations, adding a few newer ones, to show how this formula encapsulates what may be the single most globally perilous threat to our very survival in the 21st century and beyond.

Hint: that threat is not “out there,” like the truth Mulder and Scully were always seeking in the TV hit “X-Files.”

For its location, start by looking in the mirror.

The relatively recent but now old news:

On March 13th, a Friday the 13th as it happened, high on the front page of “Financial Times,” my British-to-global Spirit/Money Rorschach-ometer, we were treated to current stories of Bernie and Jack.

Bernie Madoff sighed in court that he couldn’t “adequately express how deeply sorry” he was for what he had done.

And Jack Welch, legendary former head of GE and generally regarded to be on the bright, principled side of super-success, appeared there in a story just next to Madoff’s. Jack righteously “denounc[ed] corporate obsession” with creating shareholder value at all costs — that is, costs to all other human beings except the shareholders, and to the entire environment in which a company functions.

Curious how tinny they both sounded.

Whichever part of Madoff’s bizarre identity was talking, it was not the ghoulish backroom monster whose greed and duplicity singlehandedly destroyed more wealth and caused more woe and heartbreak than that of any other supposedly lone con man, ever. (His longtime secretary, all those years clueless about what was happening on the top-secret “17th floor” of the Madoff operation, reported more recently in Vanity Fair that many of his Jewish former clients now regard him to be as evil as Hitler.)

And here in 2009, two-plus decades after becoming famous as the poster-boss for that very corporate obsession with shareholder value — not for nothing did he earn the nickname “Neutron Jack,” adept at leaving buildings and corporate structures intact while mass-eliminating employees — Welch sounded shocked, simply shocked, that anyone could have interpreted his contribution to big-biz culture so narrowly. As if he were Mr. Corporate Social Responsibility after all and always had been.

Sure, guys. Whatever you say.

On and on the news of this greatest financial-economic meltdown of our time has sloshed, on computer and TV screens, in hard copy and real audio. If this global event is indeed an economic tsunami, then all the water drowning the world economy is shockingly cold. Plus it’s still full of immense glacial masses of frozen credit, and frigid chunks of uninvested capital and unspent revenue the size of broken-off Antarctic continental ice fields. Ours is a financial-economic crisis perfect for the era of global warming. It’s as if giant chunks of every ice mass on the planet have plunged into the seas all at once. Suddenly, everywhere, rushing freezing water is at our necks.

By May 1st, if not long before, what not so long ago would have shocked us had become expectable, even banal. On the FT front page we were treated to “Chrysler files for Chapter 11 protection.” And, anticipating the Berkshire-Hathaway annual shareholders meeting, we learned that “Tough questions await [Warren] Buffett on worst-ever year.” Ho-hum. Was either story real news to anyone? (As I write now, of course, it’s GM’s turn. No surprise either. Are we numb?)

That same day, still early in the now also ho-hum swine flu scare, a commentator held that “Fears over pandemics and economic crises have similar roots” — emotional ones, roots in the trust/confidence/faith departments of how we relate to our fellow humans.

In that day’s Companies & Markets section, we found a strange morality tale from British press Journalist of the Year Gillian Tett, an FT editor. A full page ad in that same section trumpeted the paper’s exclusive serialization of her new book, “Fool’s Gold: How Unrestrained Greed Corrupted a Dream, Shattered Global Markets, and Unleashed a Catastrophe.” The ad also claimed that Tett was “one of the few people to have predicted the economic catastrophe.”

But her column that day was about what most of us would consider a sideshow to the main event. It was a strange, true yet not fully documentable report on how Kazakhstan, till recently an up-and-coming Eastern European darling of big Western institutional investment, is now reeling on the economic ropes.

That’s right, the Kazakhstan of Borat ridicule. But there was nothing entertaining in this story, nothing funny. Tett reported that a crushing financial wallop to that tiny little national economy, just the week before, may have resulted from one of its key banks being secretly shorted by Morgan Stanley. The global American-based bank had openly held huge amounts of that little local Eastern European bank’s paper until — time’s up, Kazakhs! — demanding payment in late April.

No comment from Morgan, of course. Naturally. No accountability, either. Besides, who on Earth can track all those fractal realms of counterparties to hidden, unregulated instruments that the great Buffett warned could become “financial weapons of mass destruction”? So they have. And even an award-winning reporter can’t document what can’t be found.

Toward the end of May, Linda and I helped lead a week-long spiritual retreat in Missouri, where I took a break from the daily financial-economic reports. The break strengthened my resolve to try to present the ideas I offer in this two-part post, a vision I’ve shared with a very few people and have never before really tried to communicate. The week away from the news cycles got my attention off enough of the trees at the outer edges of the crisis to see its deeper forest that much more starkly.

With my dummy’s mind for finance, monetary policy, and economic trends, some time earlier I had gathered from all the stories that there was a special mathematical formula that had been the atom-smashing E=mc2 of the subprime mortgage crisis and ensuing meltdowns. I wondered what that formula could have been. …

Part Two, coming next week, explores the now-infamous Gaussian copula function and its then-hidden, now-obvious flaws (with the benefit of hindsight of course) and the slippery slope, gray zone pressures that may have tragically influenced its Wall Street exploiters.

© Saniel Bonder 2009. All rights reserved.  

For previous articles please click archives.

About Saniel: Harvard educated “destiny-empowerment” expert, Saniel is author of the forthcoming audio series, "Wealth Without Guilt," the provocative "White-Hot Yoga of the Heart," and many other books and programs. He hails from Sonoma, California where his unique blend of intellectual curiosity and spiritual wisdom is honed and nurtured. Saniel co-writes and co-teaches with his wife, Linda. Together they travel and teach “materiality and spirit” workshops throughout the US and internationally. His website is http://heartgazing.com/spiritmoney.