March 2014

The Leyendecker View

Government Transparency vs. Secrecy: Where to Draw the Line?

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"Publicity is justly commended as a remedy for social and industrial diseases. 

Sunlight is said to be the best of disinfectants; electric light the most efficient policeman."

- Supreme Court Justice Louis Brandeis

Publisher: Douglas Leyendecker
Managing Editor: Kelly Griego

Welcome to the Leyendecker View
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"There is strong shadow where there is much light."

- Johann Wolfgang von Goethe


Right now, as you read this newsletter on your computer, tablet or smart phone, the government could activate your device's camera, watch and listen to you and steal data and documents from your device - and you'd never know it. Nothing about your computer or phone would indicate it was monitoring you. Odds are high your device isn't currently being hacked, but the software to do this does exist.


Surveillance software is a $5 billion industry. Many governments lack the means - resources or expertise - to build software in-house, so companies that manufacture hacking software and sell exclusively to governments are cropping up all over the world to meet demand. Hacking Team, one of such companies, has been openly courting the U.S. law enforcement market. 


Aware that the FBI does have the budget to build its own surveillance software, Christopher Soghoian, a government surveillance and hacking technology researcher and activist, did some digging to determine whether or not our government currently has the capability to hack into the computers of surveillance targets. Interestingly, as he reveals in his TED talk, LinkedIn profiles of former U.S. government intelligence contractors provided the key clue that eventually lead to the revelation that, yes, the FBI does have that technology and has a team dedicated exclusively to this kind of hacking.  


Of course, the FBI and any of these software surveillance companies would say that their purpose is to capture terrorists and criminals. But the uncomfortable fact is: Criminals and regular people use the same kinds of computing devices. For governments to embrace this kind of hacking of a terrorist's computer is to acknowledge that they have the capacity to hack your computer, too. 


Up until now, there hasn't been any public debate about how the government can and cannot use this technology, and if it needs warrants to do so. Nor have there been any sort of congressional hearings or attempts to devise laws to meet the capabilities of these new technologies.


Cue Edward Snowden. 


It might be easy to dismiss Mr. Snowden as a traitor, a reckless intelligence contractor who violated his oath, showed disregard for the law by going outside of it to leak classified information, which in turn, some claim, has jeopardized our national security. This may all be true. But was his whistleblowing necessary?


Surveillance technology is relatively new, and clearly incredibly powerful. It begs the question: Just because the technology is there, does it give the government carte blanche to use it as it sees fit? Which includes, as we've learned courtesy of Snowden, collecting metadata of every American's phone and electronic conversations without warrants. Don't we have a say here?


Last month, in a debate series from Intelligence Squared in New York, a panel discussed the following statement: "Edward Snowden was justified in leaking NSA documents." Arguing against this statement were former federal prosecutor Andrew C. McCarthy (who successfully prosecuted the Blind Sheik) and James Woolsey (former CIA Director). Arguing for the statement were Daniel Ellsberg (the Pentagon Papers whistleblower) and Ben Wizner (Snowden's legal advisor). (If you have the time, the 1.5-hour debate linked below is well worth it, or you can click here to see which side won the debate.)


A particular point of contention in the debate was that Snowden chose to go outside the system to report his concerns. Where Woolsey repeatedly said that there is a legal process to bring intelligence concerns to the fore, Ellsberg and Wizner repeatedly responded with examples of people who'd attempted to work within the system and were threatened, delegitimized and got nowhere. It's also revealed in the debate that the due process for raising intelligence concerns occurs almost entirely in secret courts, as law enforcement and intelligence bodies have a vested interest in keeping their goings on concealed.


The common go-to argument of those who object to Snowden's actions is that he threatened our country's safety by making terrorist surveillance programs known to terrorists. While many view this argument as just rhetoric, most Americans agree that some degree of spying on our enemies and some degree of security programs that lack transparency are necessary and welcome in the terrorist age.


What of transparency? It isn't just in the realm of surveillance that our government can benefit from more transparency. But is it possible to have too much transparency? Transparency has become a sacred cow these days, making many hesitant to argue against it because the knee-jerk assumption is that they are then, by default, pro-corruption. But if you read arguments against transparency in government, there are some valid points out there, namely about how excessive transparency leads to waste in the legislative process and can also enable deceit and intimidation. 


Too much transparency creates opportunities for the government to disclose loads of information that is confusing to the average American. The government, or companies acting in accordance with disclosure laws (think sub-prime mortgage disclosures), dumps dense legalese on Americans that most can't parse, but the government or agency gets to appear honest and prudent.


In a TED talk about the role of trust in a democracy, political scientist Ivan Krastev tells a true story about an unnamed country where the government decided that all discussions among their council of ministers would be made public online 24 hours after meetings. Krastev got the opportunity to ask the prime minster why he made this decision. The prime minster responded that it was the best way to keep his minsters' mouths closed.


The scope and scale of our government's spying capabilities, and their use on average citizens, is chilling and could make a cynic of many. In a cynical frame of mind, it's easy to see why Snowden saw no point in trying to raise concerns within a clandestine system that has an interest in muting such concerns. From this perspective, if Snowden's aim was to try NSA actions in the court of public opinion, as he claims it was, his only choice was to leak the information to media. Regardless of how he might have harmed our security, we are now having an important conversation. Citing a threat to democracy, key figures in technology, like Google's Larry Page and Facebook's Mark Zuckerburg, have repeatedly appealed to President Obama for laws that protect private citizens. President Obama has begun calling for an end to NSA's bulk data collection, and Justice Scalia has hinted that the matter will be brought to the Supreme Court.


The question still remains: How much surveillance is the right amount? It seems like an impossible question to answer. But someone, Richard Stallman, a high profile, American software freedom activist, has done so with quite an interesting response. According to Stallmanthe right amount of surveillance leaves enough room for whistleblowers to be able to remain anonymous. There will always be a necessary and creative tension between transparency and secrecy in a healthy and functioning democracy. The key to maintaining balance is first to safeguard a system that is hospitable to whistleblowers. In this line of thought, whistleblowers are the last line of defense against programs and policies that infringe egregiously on civil liberties or operate outside the Constitution. In order for whistleblowers - and a democracy - to remain safe, the government must stop at monitoring the conversations of journalists (which it presently does).


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Last month's TLV was about how globalization and technology are diminishing the power of national leaders and, thus, the importance of power in general. We mentioned in that issue that such a shift would make for strange bedfellows. The question of surveillance is doing the same, uniting civil liberties-minded people on the left with limited government-minded people on the right. How will this conversation change the public opinion about transparency as we navigate uncharted technological waters? Time will tell.


In the meantime, check out the section below, which features arguments on either side of the debate.



"As loath as I am to give any credit to what's happened here [the Snowden leaks], I think it's clear that some of the conversations this has generated, some of the debate, actually needed to happen."

- James Clapper, Director of National Intelligence

General Economic Perspectives
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The Federal Reserve seems committed to continuing to taper down its quantitative easing program. They are doing so because the economy is supposedly looking better. The daily, weekly and monthly economic perspectives of the mainstream media don't exactly suggest we're headed back to a let-the-good-times-roll period. So what does the Fed see in their crystal ball that we may not see in the regular news?


One thing we may not see, or may not even know, is that the Fed has been carrying out an unspoken agenda: recapitalizing our banking system. After Lehman's bankruptcy, no one was going to say that our banks were broke. Doing so would have created widespread panic, making matters even worse, perhaps to the point of making it impossible to rescue the entire global financial system. Therefore, at the time, we could not have expected the Fed or Washington to say anything that would cause a panic.


But look at recent headlines. The Fed has cleared all but Citibank to increase their shareholder dividends. In essence, the Fed is saying that it now deems the banks "in the clear," that their balance sheets have been repaired enough to allow them to increase returns to shareholders. 


We've been viewing the Fed's actions within the context of their stated objectives relative to inflation and employment. But what we've likely not considered is the subtext; the Fed drove interest rates down significantly, allowing the banks to purchase government securities that paid more than their cost of capital. This allowed banks to rebuild their balance sheets.  


Of course, this was done on the backs of fixed-income savers, who for the last few years have been getting paltry returns on their investments. But if things are as they appear, our banking system has been restored to worthwhile health. Now some folks believe interest rates will start to rise. Except, the Fed is clearly suggesting it will keep interest rates low for some time to come. It should be obvious why; sovereign debt is so high that increasing rates would add a new drag on and risk to the economy.


The buck must now stop with the federal government, which must in turn create policy to unlock economy. Luckily, Washington has a probable savior, the growing energy boom. If energy and industrial policy can turn from restrictive to accommodative, then our economy may grow enough to increase tax receipts, lower needed social welfare, and thus lower budget deficits. Should this happen, then we would likely see the Fed loosen its grip on interest rates. Until then, expect the Fed to keep rates low.

The Hiring Market
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A recent joint report from McKinsey and Vinson & Elkins suggested that private sector investment in the growing domestic energy infrastructure market could total as much as $2.1 trillion dollars by 2020. Yes, you read that right: $2.1 trillion of private sector capital investment. By contrast, the government recently proposed a $600 billion, multi-year budget for road infrastructure investment. Well, do we have to guess where the great job opportunities exist in today's economy? It should be no surprise that Houston growth is exploding.


Blue collar drilling rig workers, pipe fitters and welders can make as much $100,000 a year. Demand and compensation for all sorts of engineers and technical specialists are sharply increasing. These energy infrastructure workers are spending their money all throughout the economy, in turn boosting economic returns and employment across industries and geographies. 


Increased natural resource production creates waterfall growth throughout the entire economy, from increased demand for technology, to all kinds of basic raw materials, infrastructure construction, and on and on. It all trickles down to more demand for all manner of consumables. Grow natural resource production, and we will grow employment in virtually every sector of the economy.

For documentation of how expanded natural resource production trickles down to overall economic growth, read the Dallas Federal Reserve's most recent quarterly report. It outlines how Texas leads the nation in not just job growth, but also job growth in every income sector. The middle class is not dying in Texas.

Managing the Modern Day
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We have all heard that being happy has nothing to do with money. But why?


Money is primarily used to buy stuff.  When we consume, we get a quick bliss fix. We bought something we thought we wanted or that we think others will admire.


Marsha Richins of the University of Missouri conducted a study on consumer behavior and found that it is the anticipation of making a purchase that produces the greatest positive emotions. The emotional high lasts through just right after the purchase, but then subsides quite quickly. Having stuff doesn't make us happy. Instead, it is the idea of having something new and the empowerment we feel in executing a purchase that produces positive emotions. 


Richins' findings make it easy to understand how consumption itself can be a bit addictive. But the more things we buy, the more difficult it is to be happy because all those things require maintenance. Who likes spending their time on maintenance?


Happiness comes from healthy self-esteem, and self-esteem comes from our effort to create value, from accomplishing a personal objective, whether that's building a company or even just cleaning out the garage.


Creating value is no easy feat. It takes work. It often includes periods of significant challenge. No matter the economic takeaway of our efforts, it is the effort to create value and accomplish objectives that provides self-esteem. No effort, and there is little self-esteem. Little self-esteem, and there is really very little happiness. Get to work, give yourself some worthwhile goals and then you create more happiness.

BLS Corner
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The Bureau of Labor Statistics just released a longitudinal study called "America's Young Adults at 27: Labor Market Activity, Education and Household Composition." The survey, which commenced in 1997 and ended in 2012, involved 9,000 men and women born between 1980 and 1984. Over the course of the st

How the government uses and collects your data


The team at the Verge put together a great chart that shows from which online sources the government collects data and to which programs - publicly authorized or not - it directs your data. The accompanying article provides a high-level, but comprehensive overview of what we've come to know about the NSA's surveillance programs, primarily due to Edward Snowden's leaks.


udy, participants answered questions about work and nonwork experiences, training, schooling, income, assets and other characteristics.


Follow this link for the full survey, but highlights of findings include: 

  • By 27 years of age, 32% of women had received a bachelor's degree, compared with 24% of men. 9% of men were high school dropouts compared to 8% of women.
  • Individuals born from 1980 to 1984 held an average of 6.2 jobs from ages 18 to 26. The number of jobs held varies by education for women but not for men.
  • 34% of young adults were married at age 27, while 20% were cohabiting and 47% were single. On average, young adults with more education were more likely to be married and less likely to be cohabiting.
  • Nearly 41% of young adults had their own or their partner's child in the household at age 27. 65% of married individuals had at least one child in the home, compared with 21% of single individuals and 48% of those who were cohabiting.
Chart of the Month: How the Government Collects and Uses Your Data
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How the government uses and collects your data


The team at the Verge put together a great chart that shows from which online sources the government collects data and to which programs - publicly authorized or not - it directs your data. The accompanying article provides a high-level, but comprehensive overview of what we've come to know about the NSA's surveillance programs, primarily due to Edward Snowden's leaks.

Source: The Verge

Government Transparency vs. Secrecy: Where to Draw the Line?
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"Over the last two decades, the web has become an integral part of our lives. A trace of our use of it can reveal very intimate personal things. A store of this information about each person is a huge liability: whom would you trust to decide when to access it, or even to keep it secure?"

- Tim Berners-Lee, inventor of the world wide web


The case for more transparency 


Edward Snowden at TED2014: How to take back the Internet

At last week's TED2014 conference in Vancouver, 30-year-old Edward Snowden appeared from Russia, where he remains in asylum, via "telepresence robot," to tell his story. Because he witnessed surveillance programs that even Congress didn't know about, Snowden believes he acted in defense, not betrayal, of his country. He details the range of unauthorized data collection he saw as an NSA contractor, how data could be misinterpreted by a government agent, and offers solutions digital companies can implement to protect private citizens. The moderator asks an important question: For the average citizen who is doing nothing wrong, why does it matter if their data is collected? Snowden's response: "Your rights matter because you never know when you're going to need them."


Why representative democracies cannot write off transparency

As a representative democracy, individual American citizens do not have the ability to act on disclosed information in a way that can affect policy. But intermediaries and interest groups do. Thus, transparency plays a critical role in maintaining a motivated voter base. The argument for transparency here is that it can trigger the "action cycle": individuals learn information, which impels them to take concerns to third parties (e.g. the NRA or the ACLU) that can in turn impact policy. Disclosure of roll-call votes also gives special interests groups the ability to keep scorecards on legislators, which informs voters, political ads and advocacy campaigns. 


Your smartphone works for the surveillance state

The way our government is tracking and storing data from every last digital activity we engage in is the stuff East German spies could have only dreamed of. This is at least one interpretation of the Snowden leaks that included information about the NSA's controversial PRISM program, which is court approved, but doesn't require warrants. The following slide - created confidentially by the NSA, leaked by Snowden and annotated by the Washington Post - shows the scale and scope of your data collected under PRISM.


There are data collection centers in the middle of nowhere Utah capable of storing "yottabytes" of information. A former NSA employee said that the point of this spy center is to capture anything and everything - "financial transactions or travel or anything... [and] the ability to eavesdrop on phone calls directly and in real time." Read on for a portrait of how a post-9/11 secret government is getting ever more secret and more effective at shunting challengers to it.


Stallman: How much surveillance can democracy withstand?

In this article, where software freedom activist Richard Stallman puts forth a multi-step plan to design digital systems built to maximize privacy protection, he also reveals how an unnamed US government agent informed journalists that the government would not subpoena reporters because it "already knows who [they're] talking to." Stallman believes that a democracy can withstand surveillance to the point where whistleblowers can avoid being identified. Importantly, this also means the system has to encourage, to a degree, whistleblowing. Worth noting, then, is that President Obama has prosecuted more whistleblowers than all other presidents combined under the Espionage Act of 1917. In other words, someone who leaks information about government waste could get charged under the same statute used to try Aldrich Ames, the CIA officer who sold intelligence to the KGB. 


For more on journalism in the surveillance age, watch the video below. Pulitzer Prizing winning journalist Barton Gellman, who broke the PRISM story in the Washington Post, discusses the challenges of government accountability reporting when journalists now have a very real concern that the government is monitoring their communications. (He also discusses how technology companies have collaborated with the government to hand over bulk user data.)


The case against too much transparency


The NSA responds to Edward Snowden at TED2014

Richard Ledgett, Deputy Director of the NSA, appeared via satellite to respond to Edward Snowden's appearance at TED2014. He concedes that the NSA has failed at being transparent about certain things - what the NSA is, its authority, processes and oversight. But he maintains that to be able to secure our country and help other nations secure their countries too, their intelligence needs to remain secret. He says that the NSA cares about the privacy of average citizens, and employs "minimization procedures" that protect the rights of innocent citizens whose communications turn up in the course of monitoring surveillance targets. Ultimately, Ledgett believes that Snowden's revelations didn't warrant whistleblowing, and have thus hurt legitimate whistleblowers while jeopardizing national security programs.


The case for honest corruption

Historically, the process of passing a budget was called "regular order." Negotiations would go on behind closed doors, earmarks would be issued as needed and consensus would be reached. George Washington Plunkitt, a New York politician in the late 1800s and early 1900s, called this practice "honest graft," when a politician made decisions with the interests of himself, an organization and his city all in mind. Honest graft was, according to Plunkitt, critical to pragmatic and effective governing. The opposite is dishonest graft, policy-making where the politician is in it entirely for himself. Transparency and hyper-partisan rhetoric have greatly diminished honest graft, with the squeeze on earmarks being the final blow to one of the last tools of honest graft. The result is regular chaos - where legislators fear grass roots groups more than their own leadership and highly transparent debate slows down governing at a high cost (literally - to the point of an expensive government shutdown last fall). Read on for the upside of patronage and honest graft in politics.


Can democracy exist without trust?

Political scientist, Ivan Krastev, explains many ways transparency is a double edge sword. As an example, when almost everything legislators and leaders say is on the record - thanks to ever present cameras, whether news cameras or cell phone cameras - consistency and party rhetoric becomes more important than pragmatism. Krastev argues this is a critical point because "democracy is about people changing their views based on rational arguments and discussions." The demand for transparency, he says, eventually hinders free discourse. In bending to pressures to appear transparent, governments get calculated about what they disclose and how they disclose it. In the end, transparency devolves to being merely the management of mistrust.


The virtues of government secrecy

Law professor and author, Eric Posner, addresses the tendency to dismiss the claim that Snowden threatened national security by making surveillance tactics known to terrorists. Produce bodies, and we'll believe you, the line of thought goes. But the government can't prove that Snowden harmed security without further harming national security. Courts have long seen this catch-22 and developed the "states secret privilege" to allow governments to refuse disclosures at their discretion. Posner believes that this promotes democracy by empowering people to direct its government to engage in secret programs in their defense. The fact is, according to Posner, many reasonable programs can function only under secrecy (like voting), and to undermine them is to undermine democracy.


Transparency is overrated

Many view transparency as the panacea to issues that plague our government. This article's author argues that this notion is fundamentally flawed on the grounds that we function as a representative, not direct, democracy. The idea behind transparency is that voters can learn about government programs and policies and then decide which they like and which they don't. But voters have no actual power to act on this; we can only vote in elections every couple of years. Thus, we can, at best, judge how we like politicians in general. Ultimately, what is disclosed by mandate gets ignored because people are busy living their lives, or serves to confuse the public, intentionally or not, and, therefore does not enable productive channels for voters to affect policy.


"First, this great and glorious country was built up by political parties; 

second, parties can't hold together if their workers don't get the offices when they win; 

third, if the parties go to pieces, the government they built up must go to pieces, too; 

fourth, then there'll be hell to pay."

- George Washington Plunkitt, on how besmirching honest graft courts anarchy

News You Can Use
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The Economy


Six cities dominate America's economy

In this fascinating map, each color area represents about 25% of U.S. GDP, or $4.05 trillion in annual output. Just six cities - New York, Los Angeles, Chicago, Washington DC, Dallas and Houston - together account for about 25% of the American economy. The top 23 metro areas account for half of it.

Houston leads US metro areas in job creation index

According to Gallup, based on hiring and layoff data, Houston is presently the best major metropolitan area for job creation, versus San Diego, which ranked lowest out of the 50 most populous metropolitan areas tracked in the study. While hiring rates varied amongst these 50 metros, each was net positive (more jobs created than lost) for the 2012 - 2013 survey period.


Leadership & Management 


25 charts of negotiation styles around the world

Using the framework of moving from "word base" to "clarity," the following chart (click the link or image to see the full version) depicts how people from different countries move through negotiations. It's a handy tool if you often negotiate internationally, and a fun read because it tends to keep in line with stereotypes. Americans favor a more confrontational approach mixed with humor, where Canadians conduct negotiations honestly and cordially. Germans take a highly analytical approach, and Italians, well, just talk a lot.

Successful companies need leaders at all levels

Deloitte recently published a report on their 2014 Human Capital Trends Survey. Data revealed that leadership remains the number one talent issue facing organizations, with just 13% of respondents saying their companies sufficiently develop leaders. Deloitte's proposed solution is grooming leaders at all levels, not just the top. From the report: "Today's market environment places a premium on speed, flexibility and the ability to lead in uncertain situations. At the same time, the flattening of organizations has created an explosion in demand for leadership skills at every level." Read on for more about this shift away from management to leadership training.


The New America


The best and worst countries for press freedom

According to data from Reporters Without Borders' annual index of freedom of information, the U.S. became less hospitable to free press in 2013. Following the sentencing of Bradley Manning, the revelation that the government monitored the Associated Press' phone records, and speculation that journalists could be criminally charged for publishing leaks from Edward Snowden, Reporters Without Borders demoted the U.S. by 13 spots. Click here for the full report.

Millenials in adulthood: Detached from institutions, networked with friends

A new Pew Research Center study about millenials revealed that they, currently aged 18 to 33, are less likely to identify with a religion or political party than other generations. They are less likely to be married than prior generations were at the same age. Only one in five believe most people are trustful, and very few expect to receive Social Security benefits. Interestingly, millennials are far more likely than older generations to believe that America's best days are still ahead and to feel optimistic about their financial futures. Follow the link for more interesting data about a paradoxical generation.

Thanks for reading The Leyendecker View. We hope you find these perspectives unique, insightful and valuable.

We at Leyendecker & Associates are committed to the highest standards of value creation. 
Doug Leyendecker Jim Ford David Prodoehl Kelly Griego