Preparation Precedes Performance

The rule of strategy is to be flexible within an uncertain setting, while becoming efficient under a predictable setting. During a pre-opportunity time, one prepares for a positive opportunity by staging proper logistics and procedures from a top-down view.

The challenge is that most people preferred to plan and prepare at the wrong stage of the cycle. They find the act of operating from the seat of their pants to be emotionally enjoyable.

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Cautionary saga of a failed San Francisco bank
Kathleen Pender
Sunday, November 29, 2009
United Commercial Bank of San Francisco liked to boast that it was the first U.S. bank to buy a bank in China. Instead it will go down in history as the first U.S. depository institution to fail after its parent company took money from the Treasury's Troubled Asset Relief Program.

As investigators seek to uncover the exact causes of the bank's death, some big questions remain: -- Should the government have done more due diligence before investing $300 million worth of taxpayer money in parent company UCBH Holdings? -- Would it have made any difference if the Federal Reserve had allowed China Minsheng Bank to acquire a controlling interest in UCBH? -- What role did fraud play? When regulators shut down United Commercial Bank on Nov. 6 , "it was like deja vu," says Richard Newsom, a retired West Coast bank and thrift regulator.

United Commercial Bank grew from the ashes of United Bank, a San Francisco thrift that failed in the mid-1980s as a result of "reckless construction lending," Newsom says. Likewise, the FDIC cited commercial real estate and construction loans as a cause of United Commercial Bank's failure, along with "alleged fraud." That may have surprised people who still saw it as a conservative bank catering to Chinese Americans in San Francisco, Los Angeles and a few other cities with large Asian communities. "It was a great franchise for a while," says James Ellman, president of hedge fund Seacliff Capital.

"It took in deposits from primarily Chinese Americans and made very conservative loans to the same ethnic group." But the bank "had a mismatch: its original depositor base was growing rapidly, but its ability to make loans to that depositor base was difficult. Heavy savers tend not to be big borrowers."

Like other smaller banks, it also faced growing competition from Fannie Mae and Freddie Mac in home mortgages, from the large credit card companies in consumer loans and from the automakers' finance arms for car loans. That left United Commercial increasingly dependent on riskier commercial real estate and construction loans.

/// In chaotic times, some companies have a tendency to take risk without the understanding the  secular effect within the Big Tangible Picture (BTP). Chief Decision Makers have a tendency of not knowing whether their project operation team project have the logistics to operate efficiently.


"This bank, more than others, had its life or death tied to the health of the commercial real estate market, particularly in California," says Ellman. "As the health of commercial real estate weakened, so did this bank."

The China focus Julianna Balicka, an analyst with Keefe, Bruyette & Woods who followed UCBH until last week, says "the real problem started" when the company wanted to buy a bank in China but needed $10 billion in assets to do so. "Management got greedy about growth," she says.

Between the third and fourth quarters of 2006, its assets surged from $8.3 billion to $10.3 billion. "It was one of the worst times to push growth given what happened in the housing and credit cycles," Balicka says.

In March 2007, United Commercial announced it was buying the Business Development Bank of Shanghai, becoming the first U.S. bank to wholly own a bank in China. By the end of 2008, the company had $13.5 billion in assets. "They got aggressive on lending," Balicka says. They "priced loans too low" for their risk and "got sloppy on underwriting." Senior management "was so focused on solidifying the China opportunity," they didn't pay enough attention to lending. Although United Commercial was hardly the only bank to make risky loans at the peak of the market, it was slow to recognize losses, which contributed to its undoing.

# The operational planners should have prepared themselves for this situation. The ideal plan would have contained strategic guidelines that enable the implementers to understand the risks and benefits for each circumstances.

Compass Rule: The quantity of quality strategic guidelines usually creates a cycle of efficiency.
TARP investment
In November 2008, UCBH got a $300 million investment from the TARP-funded Capital Purchase Program. Then-Treasury Secretary Henry Paulson stressed that this was a program only for "healthy" banks, but UCBH had already posted a small loss for the third quarter that ended in September 2008. Although companies had to be recommended for the program by their primary regulators, ultimately it was up to the Treasury to approve or disapprove TARP investments. "I would say the Treasury did not do enough due diligence," Balicka says. "They will say, for every 100 banks you're going to have 99 winners and one failure." At the time of the TARP injection,

UCBH "was already exhibiting levels of stress that were higher than the banking industry averages. They hadn't fallen off the table, but they were heading in that direction," says Christopher Whalen of Institutional Risk Analysts. By the end of the fourth quarter, stress levels had skyrocketed and so had its losses - to $83 million after preferred dividends. It lost an additional $94 million in the first quarter of 2009. When it filed its 10-K for 2008 in March 2009, UCBH disclosed that "the company's internal control over financial reporting was ineffective," and there was a "material weakness" in assessing credit in the loan portfolio. "That's a pretty good indicator that there may have been fraud involved or negligence," says Whalen.

In May, the company reported that it would have to restate its 2008 financials, in part because loan losses recognized in the first quarter of 2009 should have been taken in the previous quarter. The company estimated that its 2008 pretax profit could shrink by $55 million, but it never reissued the corrected financials.

On Sept. 8, the company announced it had agreed to a cease-and-desist order with regulators and would take steps to enhance its strength and stability. It also announced the resignation of Thomas Wu, its chairman, president and chief executive officer, and Ebrahim Shabudi, its chief operating officer. Wu did not return phone calls. Finally, it disclosed that an investigation by the board's audit subcommittee had found "deliberate and improper actions and omissions by certain bank officers" including "inappropriate modification of loan terms" driven "by an apparent desire to downplay deteriorating financial conditions."

The officers responsible were never identified. Within days, class-action lawyers started filing lawsuits alleging that the company had hidden losses from UCBH shareholders.

The Minsheng factor
In early October, Bloomberg reported that China Minsheng Bank wanted to increase its stake in UCBH above 50 percent. No details were revealed, and the deal never happened. The Federal Reserve has never allowed a Chinese bank to take a controlling interest in a U.S. bank. Most Chinese banks are government owned. Although Minsheng is not, allowing it to take control of UCBH would have set a precedent.

A Federal Reserve spokeswoman would say only that "Chinese authorities are working hard to meet the standards that would permit them to buy banks in the United States, but these things can take time. We've been working with them as they seek to implement standards for consolidated supervision, and they're making real progress."

Other troubled banks that received TARP money survived because they were able to raise new capital, says analyst Joe Morford of RBC Capital. UCBH's inability to produce new, audited financial statements prevented it from raising capital, and this, more than anything, caused its failure, he says. It's not clear how much capital, if any, Minsheng would have put into UCBH, but Morford says it could not have been enough, by itself, to save the company. "It might have helped them buy more time to do a public offering, but that's a lot of speculation," Morford says. "Allowing Minsheng to take their ownership up to 50 percent would not have necessarily prevented what happened."

The end

On Nov. 6, the FDIC and the California Department of Financial Institutions shut down United Commercial and sold its assets, loans and 63 branches to East West Bank of Pasadena. The FDIC will bear the majority of losses on United Commercial's loans. It estimates that the losses to the FDIC insurance fund will be $1.4 billion. UCBH stock is now trading around 40 cents per share. Taxpayers will probably get nothing from their $300 million TARP investment.

When I asked the FDIC why it didn't spot United Commercial's problems before it got TARP money, spokesman David Barr pointed me to the FDIC's Nov. 6 statement, which said, "Earlier identification of problem loans may have been impeded through alleged fraud exercised by former senior management, currently under investigation by the relevant authorities."

The deal will give East West, which also targets Asian communities, about $19 billion in combined assets, making it the second largest independent bank based in California after Wells Fargo. East West has also had problems with its loan portfolio, but has been much quicker to recognize losses. "If we smell a loan is going bad, we write it down right away," says Emily Wang, marketing director for East West. East West's parent company also received about $300 million in TARP money, but it was able to raise $500 million in new capital when it took over United Commercial's operations. East West will have "no problem" repaying its TARP money, Balicka predicts.


United Commercial Bank

1986: Established as United Savings Bank. Acquired United Bank, a failed San Francisco thrift, in a government-assisted transaction.

1990-92: Acquired Global Savings Bank and Golden Coin Savings and Loan of San Francisco.

1998: Management team led by Thomas Wu and large investors acquired United Savings from its owners, converted it into a bank, changed its name to United Commercial Bank, and took it public.

2002-06: Acquired San Francisco's Bank of Canton of California and banks in Rosemead (Los Angeles County), Boston, Atlanta and Bellevue, Wash. 2007: Acquired a bank in New York and Business Development Bank of Shanghai. Separately, China Minsheng Banking Corp. of Shanghai bought 9.9 percent of parent company UCBH.

November 2008: U.S. Treasury invested $300 million in UCBH. March 2009: UCBH disclosed that financial-reporting controls were "ineffective."

May: UCBH said 2008 financial statements must be restated; loan losses reported in first quarter 2009 should have been in fourth quarter 2008. September: UCBH entered cease-and-desist agreement with regulators.
Two top officers including Wu resign. Audit subcommittee finds "deliberate and improper actions and omissions" by certain unnamed bank officers. Class-action suits begin. October: Bloomberg reports that Minsheng Banking might increase its UCBH stake to more than 50 percent.

The deal fails to get regulatory approval.

Nov. 6: Closed by regulators. East West Bank of Pasadena takes over deposits, loans and branches and the bank in China and enters loss-sharing agreement with the FDIC.

Net Worth runs Tuesdays, Thursdays and Sundays.
E-mail Kathleen Pender at kpender@sfchronicle.com.
http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/11/29/BUHI1AQ1Q7.DTL
This article appeared on page D - 1 of the San Francisco Chronicle
Some people might know the general objectives and the approach for achieving a grand goal. It is quite rare that proper planning and preparation processes are ever implemented promptly. When a major negative circumstance forces them to do so, it is usually too late to execute that grand process.

Our experience reveals to us that most organizations do not have a process that enables their Chief Decision Makers to read and recognize the circumstances that lead to the various predictable and unpredictable settings.

Click here for more posts on the subject of Preparation Precedes Performance.

Assessing the Experts

The over-hyped experts are usually amateurs who usually focus on a limited objectives and its generalities. They use "marketing words" to amaze the naive that they are "in the know" and that they have the secret insight to understanding the current situation. . . . They efficiently utilize their primitive templates, checklists and their vast network of expediters to display their level of effectiveness.

History tells us that these charlatans have a great tendency of saying one thing and do another.

When the outcome does not match their prediction, they retreat to their local bar and drink themselves to a state of forgetfulness and self-forgiveness. After a few days or weeks, they start again.

How can one ever consider these amateurs to be an expert? Some might presume that they are the experts in the art and the science of the deception.

We will discuss more on this topic in the future.

Assessing the Unfocused Strategist

The Compass View
One cannot build or implement any strategy if he or she is not capable of staying focused on the target and/or unable to think geometrically. 

The elevation of one's goal usually creates a higher level of competition with greater resources.

The Origin of the Problem
We believed that this level of dysfunctionality begins at the elementary schools where the kids are assumed that they are technology literate. Playing games and pushing buttons do not necessarily make these kids expert-thinkers. Learning how to stay focused is the first step of learning and thinking.

Technology is a good tool when one is focused.

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As Classrooms Go Digital, Textbooks Are History
By TAMAR LEWIN

At Empire High School in Vail, Ariz., students use computers provided by the school to get their lessons, do their homework and hear podcasts of their teachers’ science lectures. Down the road, at Cienega High School, students who own laptops can register for “digital sections” of several English, history and science classes.

And throughout the district, a Beyond Textbooks initiative encourages teachers to create — and share — lessons that incorporate their own PowerPoint presentations, along with videos and research materials they find by sifting through reliable Internet sites.

Textbooks have not gone the way of the scroll yet, but many educators say that it will not be long before they are replaced by digital versions — or supplanted altogether by lessons assembled from the wealth of free courseware, educational games, videos and projects on the Web.

“Kids are wired differently these days,” said Sheryl R. Abshire, chief technology officer for the Calcasieu Parish school system in Lake Charles, La. “They’re digitally nimble. They multitask, transpose and extrapolate. And they think of knowledge as infinite.

The Problem of Multitasking 
Technology simplifies the process of completing tasks. Whenever some of these kids are performing non-technology based tasks, they become ADD driven. They lived for the moment and cannot stay focused on target that takes a long timeline. Amateurs multi-task. Professionals multi-process (or multi-thread).

The Process of Transposing 
The practice of reversing data back and forth while minding the grand picture is not difficult. It just take some understanding of the process and some degree of internal preparation. The real challenge is performing regression analysis.

The Process of Extrapolating 
Drawing significant data from specific cases for more general cases is the key to building an understanding toward a Big Tangible Picture. Due to laziness,  most people (including adults) cannot even perform this task well.

“They don’t engage with textbooks that are finite, linear and rote,” Dr. Abshire continued. “Teachers need digital resources to find those documents, those blogs, those wikis that get them beyond the plain vanilla curriculum in the textbooks.”

Copyright 2009 The New York Times Company
http://www.nytimes.com/2009/08/09/education/09textbook.html?_r=1&hp

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We understand what are some of the possible problems that the new generation of strategists are facing. A strategist who consistently executes or adjusts their strategy without a focus or a reason, could be a person who operates without a plan. A person without a plan is one who has no goal.

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Side note: 
The work cycle for transforming two-dimensional information to a three dimensional format can be lengthy and laborious. Some professionals are not willing to perform this task because of the constant change of data.
One increases their opportunity of succeeding by observing the data from a multi-dimensional view.  This is how one connects the dots and reap the rewards. 

Best Practices for The Pragmatic Strategists

Many of our associates are believers of the Asian strategy classics and are avid players of the Chinese and Japanese martial arts. During our chats and emails, we talked about our various internal martial arts training experience and enjoy quoting from the strategy classics and various martial art essays.

At our annual dinner party, we discussed the topic of the best practices that we have found helpful in our many years of strategic practice. After dinner, we compiled a list of the best practices that might be helpful to the next generation of strategists.

Here are the most relevant of the practices outlined below for the strategists.

Side note: Much of the content in this article is common sense. The article's goal is to ensure that our readers have a foundation for improving their training and their performance.

Strategy and Competition

• Always read The Art Of War and other strategy classics many hours before entering any serious competition. Sometimes it puts the mind in a proper "competitor" perspective. We also recommend The Art of War [CD-ROM] from Denma's translation and Ralph D. Sawyer, as a very good substitute. Note: Ronnie Lott, former San Francisco Niners cornerback and a member of the Professional Football Hall of Fame, is noted for reading Sunzi's, the Art of War before a critical game. Pat Riley, Phil Jackson, and Bill Belichek are famous for quoting excerpts from Sunzi's, the Art of War to the news media.
• Whenever one encounters overwhelming odds, some recommend the reading of Tao Te Ching, the Yi-Jing book (Oracle of Change) or the Spirit Tokens of the Ling Qi Jing. The reading might present the reader a different view of life.
• Always show respect to your teammates and your future opposition
• Always assess your competition and your grand settings before anything else
• Be aware of the various faces of deception
• Strategy professionals prefer to communicate in terms of mixing their metaphors between Weiqi (Go game), Daoism, The Art of War, The Seven Military Classics of Ancient China (History and Warfare)
• While amateurs strategize from a two-dimensional view, the professionals strategize from a multi-dimensional perspective
• By practicing the principles of The Seven Military Classics of Ancient China (History and Warfare)The Seven Military Classics of Ancient China and the Tao Te Ching, you will learn the meta-connection between the two subjects
• The process of the strategy is always greater than the features of the technology
• Display a state of calmness; never show a sense of stress and anxiety
• During the winter season, you should take a "chaotic climate" weekend to re-read the various classics in a quiet setting. We also recommend the reading of the various translations of The Art of War and different strategic classics for the purpose of getting a different viewpoint. "Now if the estimates made in the temple before hostilities indicate a victory, it is because calculations show one's strength to be superior to that of his enemy; if they indicate defeat, it is because calculations show that one is inferior. With many calculations, one can win; with few one cannot. How much less chance of victory has one who makes none at all! By this means I examine the situation and the outcome will be clearly apparent." - The Art of War 1 (Seven Military Classics)
• Reading the right strategy books once or twice a year is usually helpful for those who have gone through the proper training, practice and experience. It also allows the experienced strategists to compare and contrast whether their strategic actions are similar to the traditions of that of the ancient strategists.
• Understand the importance of having a clean and quiet temple of the mind before beginning the process of assessing and planning.

Some of the grand tangible secrets in the strategy game are:

• Practicing the best strategic practices; and
• Having the conscious will to perform those practices consistently well.

A Presentation on Strategic Assessment

Many thanks to Dr. Fellman of Southern New Hampshire University for the opportunity to do a presentation on "Applying Sun Tzu's (Sunzi's) principles to the Global Economy" for his Multinational Business Strategy class.

Beside covering the basic principles of Sunzi, we also focused on the importance of strategic assessment and competitive positioning.

Our presentation also demonstrated the approach of finding the critical path of least resistance. Some parts of this presentation will be displayed on-line, in the near future.

We at Compass360 Consulting would like to thank Dr Fellman for the opportunity to share our knowledge of Chinese strategies with his class.

The Dao of Strategic Decision-Making

Making political decisions at the level of a state official is always difficult.

The following story was sent by an associate.

ACORN puts Jerry Brown in a political pickle

Joe Garofoli, Chronicle Staff Writer

Monday, November 16, 2009

Attorney General Jerry Brown, a likely Democratic candidate for governor next year, faces political blowback no matter how he rules on the undercover videotaping by conservative filmmakers at offices of the community group ACORN in Southern California.

Brown is investigating the filmmakers, who posed as a prostitute and a pimp, for possible violations of state privacy laws. He is also investigating the group for what is shown in the video: an employee of ACORN apparently advising the filmmakers how to smuggle Mexican girls across the border to work as prostitutes.

After the tapes were released, House Republicans used a series of similar videos to pass a resolution to cut all federal funding for ACORN, or the Association of Community Organizations for Reform Now. The group sued the federal government Friday to restore funding, claiming Congress punitively targeted an individual organization.

Political quicksand

Brown, the state's top law enforcement official, is stepping into that political quicksand in California.

If he charges the filmmakers, he'll be accused of hypocrisy because he chose not to bring charges against his own spokesman, who has admitted secretly recording journalists. If he doesn't bring charges against the filmmakers, he faces criticism from grassroots liberals and supporters of ACORN, which Republicans have also accused of voter fraud.

Brown's spokesman Scott Gerber admitted recording six interviews with five journalists, including a reporter for The Chronicle, without their consent. Officials in Brown's office said they had told him not to record the conversations without the reporters' consent, as required by state law.

Gerber resigned last week, and the attorney general's office said it had completed its investigation.

But the attorney general faces political problems in addition to legal questions surrounding the secret recordings by the filmmakers and his spokesman.

Last week, his Republican rivals for governor, as well as consumer advocates and newspaper editorial boards, blasted him for not ordering an independent investigation of Gerber's recordings.

"Jerry Brown has to know that without an independent probe, there will be a cloud over his office - and his pending run for governor," editorialized the San Diego Union-Tribune.

Troubling signs

While analysts say the story may seem minor to Brown's gubernatorial candidacy - with the June primary months away and without a Democratic rival - it raises troubling signs for Brown's exploratory campaign.

"It's giving a lot of Democrats reason to worry that he's not ready for prime time," said Democratic consultant Steve Maviglio, a top aide to former Gov. Gray Davis and other politicians.

The secret taping scandal should have been a one-day story, Maviglio said. Now, Republicans are tying it to his investigation of the ACORN filmmakers, raising questions about Brown's trust.

"Apparently, California's attorney general thinks that he and his cohorts can sidestep the very laws that they are using as justification for their investigations of ACORN filmmakers James O'Keefe and Hannah Giles," blogged California Republican Party chair Ron Nehring.

An online ad produced by the state GOP asked: "Really, Jerry? An unbiased investigation of yourself? What do you have to hide? We just can't trust you on this one."

Attempting to show Brown's bias in his investigation of ACORN, conservatives circulated audio clips of Dan Lagstein, ACORN's lead San Diego organizer, speaking at a Democratic Club meeting in El Cajon last month.

"The attorney general is a political animal as well," Lagstein said. "Every bit of communication we've had with (Brown's office) has suggested that fault will be found with the people that did the video and not with ACORN."

Lagstein, in an interview with The Chronicle, declined to discuss details of his contact with Brown's office but said he believes ACORN has done nothing illegal.

Christine Gasparac, a spokeswoman for the attorney general's office, said the ACORN probe has not been prejudged.

"There is absolutely no truth to the assertion that this office has come to any conclusions in the ACORN matter, in a preliminary way or at all," she said.

'Wake-up call'

Maviglio said Brown's handling of the two cases "should be a wake-up call that he can't continue to run his campaign out of his basement."

Because Brown has not officially declared his candidacy, he is working with a skeletal staff. "When you let things like that linger in this age of the Internet, they fester," Maviglio added.

Tony Quinn, a press official in the attorney general's office three decades ago who is an editor with the nonpartisan California Target Book, which tracks statewide races, said Brown's actions in the cases "are raising some serious questions about how he's running the office."

E-mail Joe Garofoli at jgarofoli@sfchronicle.com.

http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/11/16/MNAC1AK9NC.DTL

This article appeared on page A - 1 of the San Francisco Chronicle

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Jerry Brown is currently involved in an unique double-edged situation where he can get hit by either side of the political spectrum. The lack of relevant data prevents us from properly assessing this situation.

However, we can play armchair quarterback and surmise what are Mr. Brown's strategic possibilities.

One of our associates suggested the following:
"I would authorize an independent probe so that the Republicans can't use the issue against him. I would say that my friendship with Scott Gerber and the fact that he resigned should have been enough to satisfy anyone upset with the secret taping, but if an independent probe is necessary, I will authorize it. ... I would also delegate the investigation of the filmmakers to an independent panel, committee, etc. so that I won't be the one recommending whether charges will be filed. I would just follow the recommendation of the panel. ... Mr. Jerry should show the public that he is not playing favorites, create a side deal with Mr. Gerber and that continue with the investigation of the filmmakers. ... Have the Republicans go after the independent panel instead of you. Be prepared to go negative if the Republicans go negative first in the governor's race. ... "
...

In summary, the best solution usually begins with the understanding of one's goal and the current circumstances regarding to the grand situation. The next step is defining the general priorities and the approach.

Mr. Brown understands that the significance of reaching the 2010 California governor's November election politically unblemished is.

His current priorities is to confront and resolve this issue with the least amount of political damage.

Following is the possible approach that could be utilized:

• Display an unquestionable image of non-partiality to the public by creating an investigative panel
  
• Use the panel as a composite of a moving target and a pseudo stalking horse to misdirect the opposition.
• Create a contingency strategy to go negative against the opposition.

At this level of game playing, perception is reality.


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Some food for thought
"The time to take counsel of your fears is before you make an important battle decision. That's the time to listen to every fear you can imagine. When you have collected all the facts and fears and made your decision, turn off all your fears and go ahead." Gen. George S. Patton

"The ruling quality of leaders adaptive capacity, is what allows true leaders to make the nimble decisions that bring success. Adaptive capacity is also what allows some people to transcend the setbacks and losses that come with age and to reinvent themselves again and again." Warren G. Bennis

"A pessimist is one who makes difficulties of his opportunities, and an optimist is one who makes opportunities of his difficulties." Harry S. Truman

Assessing the Mindset of the Targeted Audience

When marketing any item toward the masses, one must understand the decision-making process of their targeted audience. Focus on what gains their attention. Observe their attention span and the entire process of their external actions.

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Attention loss feared as high-tech rewires brain

Benny Evangelista, Chronicle Staff Writer

Sunday, November 15, 2009

In today's fast-paced, multitasking world, it's easy to get hooked on technology that's always online, delivering a steady stream of texts and tweets.

But some mental health experts fear that a growing technology addiction, perhaps accelerated by the popularity of smart phones and social networks, will lead to a breakdown of interpersonal relationships and an increase in attention deficit disorder.

"If our attention span constricts to the point where we can only take information in 140-character sentences, then that doesn't bode too well for our future," said Dr. Elias Aboujaoude, director of Stanford University's Impulse Control Disorders Clinic at Stanford University.

"The more we become used to just sound bites and tweets," Aboujaoude said, "the less patient we will be with more complex, more meaningful information. And I do think we might lose the ability to analyze things with any depth and nuance. Like any skill, if you don't use it, you lose it."

Dr. John Ratey, an associate clinical professor of psychiatry at Harvard Medical School, uses the term "acquired attention deficit disorder" to describe the way technology is rewiring the modern brain.

He noted that reliance on even the simplest programs - such as a spell-checker in a word-processing program or a contact list that memorizes all your phone numbers for you - are short-circuiting the brain's ability to process details.

"My favorite example is when I type the word 'tomorrow,' " Ratey said. "I know spell-check will get it right. It would take 30 milliseconds for me to make sure in my mind. But we depend on that (spell-check). Even when we take the time to write, we don't have the patience to give that a consideration."

To be sure, the digital revolution has increased productivity and opened vast new worlds of information and discourse. Some mental health experts say there's still not enough research to determine whether heavy use of computers, the Internet or video games is an unhealthy condition by itself or merely a symptom of recognized problems such as depression.

['This little appendage' ]

But experts such as Ratey and Aboujaoude say they are already seeing cases that go beyond addiction to the Internet, especially with the growing popularity of portable devices that make it harder to walk away from technology.

The signs are everywhere - college students texting as their professors lecture, pedestrians crossing the street with their heads down checking messages on a BlackBerry, and BART riders reaching furtively into their pockets thinking their iPhone has vibrated - even if it hasn't.

One of the firms generating the biggest buzz in technology, Twitter, caters to short attention spans with its text messages of 140 characters or less. Another new San Francisco company called Particle recently started Robo.to, which offers video updates no longer than four seconds. Pop star Justin Timberlake is the lead investor.

"We are definitely an addicted society," said Dr. Kimberly Young, the founder and director of the Center for Internet Addiction Recovery of Bradford, Pa., and author of a series of books on Web addiction. "EBay goes down for a day, and everybody has a fit. It's like this little appendage that people have."

It even reaches into the bedroom. In a September survey, 36 percent of the people ages 35 and younger said they often used Facebook or Twitter after having sex. Men were twice as likely to tweet or post status updates after sex.

"It's the new cigarette," said Manish Rathi, co-founder of Retrevo.com, a Sunnyvale consumer electronics shopping site that commissioned the survey.

[Separation anxiety]

Software engineer Jeanine Swatton of Dublin said that when she goes to lunch or dinner with someone, she eats "fairly quickly" to get back to her computer and tends "to check my e-mail messages on my iPhone throughout the meal. Luckily, my friends understand."

Swatton, 37, believes her attention span has shortened.

"If I do not have access to a computer, I will check my iPhone or will have a glass of wine to reduce the anxiety of being away from a computer," she said.

Indeed, technology has elevated the ability to multitask to a higher level. But a study published in August by researchers at Stanford University's Communication Between Humans and Interactive Media Lab found multitaskers were more distracted by irrelevant details and didn't do as well as people who completed one job at a time.

Harvard's Ratey, author of the new book "Spark: The Revolutionary New Science of Exercise and the Brain," said he fears today's tech-savvy generation is evolving away from the "genetic roots" of humankind, which used to have time for deep contemplation about complex problems without "being bombarded from stimuli from the outside."

"It's a challenge for many kids just to sit silently for a few minutes without moving around, looking for some kind of stimulation," he said. "We need that ability to center ourselves."

"A bigger portion are not learning to be more resilient, and we're going to have a lot of kids who are just not used to the challenges of defeat," he said. "It's just part of society that we're multitasking all the time. We can't stop to think, and if we have to stop and consider something, we get frustrated."

[ Writing habits change ]

Aboujaoude, assistant director of the Stanford School of Medicine's Obsessive-Compulsive Disorder Clinic, said a few studies indicate a link between excessive Internet use and attention-deficit-hyperactivity disorder in children and some adults, which could impair academic performance and social development.

The Internet, though, is only part of "one big virtual addiction," he said.

"One reason that ADD is on the rise is that our attention span is similar to our attention span on Facebook," Aboujaoude said. "Look at language. People are writing the way that they text. Anything complex that takes several paragraphs to develop is information overload at this point.

"I think of it as regressive. I don't think of it as progressive. It's becoming so normalized in our culture, it becomes hard to catch while it's happening."

E-mail Benny Evangelista at bevangelista@sfchronicle.com.

http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/11/15/BUNI1AB1G2.DTL

This article appeared on page D - 1 of the San Francisco Chronicle

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In an ultra competitive level, the successful and experienced strategists usually stay focused on the target while avoiding distractions.

Using the Strategic Assessment Process in the Boxing World

There are many ways to assess the opponent's strategic advantage.

• Understanding the history and the rules of the competition
  
• Pinpointing the opponent's arsenal and their history.
• Comparing it with others
  
• Identifying their strengths.
• Determining their weaknesses through a process of elimination
  

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Pacquiao, Cotto camps apply Art of War lessons
By Francis Ochoa
Philippine Daily Inquirer
First Posted 23:12:00 11/07/2009

HOLLYWOOD—Sun Tzu’s philosophy is getting a ringside twist with each passing day leading to the Manny Pacquiao-Miguel Cotto showdown for the WBO welterweight belt on Nov. 14 at the MGM Grand in Las Vegas.

The legendary Chinese military commander, largely credited as the author of the iconic “The Art of War,” has cast—however inadvertently—his influence in the training camp of both marquee fighters.

And where Sun Tzu preaches that if you know the enemy and you know yourself, you can win a thousand battles, Buboy Fernandez, a key member of Pacquiao’s corner and the fighter’s close friend, believes that knowing what the enemy knows and using it against him guarantees victory just as well.

“They said that they’ve studied Manny’s fight against (Juan Manuel) Marquez and they’ve spotted a weakness,” Fernandez said in Filipino. “Well, we’ve watched the tape and we know what weakness they’re talking about and we have a counter for that.”

“It’s still a secret now,” said Fernandez, smiling impishly.

Taking a page from Taoist strategizing that calls on gathering knowledge of the enemy, Team Cotto revealed that it is using flaws it discovered by watching videos of Pacquiao’s last fight against nemesis Marquez to derail the Filipino ring icon, who is eyeing an unprecedented seventh world crown.

Fernandez feels that advantage was just blown away.

During mitts training Friday, Fernandez, chief trainer Freddie Roach and Pacquiao repeatedly went through different strategies to hold the hook-throwing Cotto off his element.

Pacquiao himself had earlier said “knowledge is power,” and that what they’ve learned so far is exactly what they’re preparing for.

/// Knowledge is power. However, know-how is power squared. ... Having the awareness of the composition and its grand settings and the skills to take advantage of the opponent is the key to success. ... Assess the target and its settings. Position yourself quietly with a precision-focused plan and fundamental-based preparation. Influence the opposition with a deceptive blend of direct and indirect methods. This is the way of strategically staging the opposition. ///

“I can say right now that I am 100 percent prepared for this fight,” Pacquiao said.

The fighter from Gen. Santos City was upbeat during training Saturday, unleashing rapid combinations with ferocious tenacity that had Roach asking Pacquiao to “slow down” several times.

During one particular series during mitts training, Roach got tagged in his armor-cushioned body and drew a deep breath.

“I said slow,” said Roach.

“That was slow,” quipped Pacquiao.

When Pacquiao put an end to eight hard rounds of mitts exercises by knocking off Roach’s right mitt, observers milling around the ring couldn’t help but murmur about how Cotto could end up on his back on fight night.

The only guy who wasn’t buying it was Pacquiao.

“I’m not even thinking of knocking him out,” he said during a post-training interview with a television crew and a handful of reporters. “I’m just going to give my best and if a knockout comes, it will be a bonus.”

http://sports.inquirer.net/professional/professional/view/20091107-234876/Pacquiao-Cotto-camps-apply-Art-of-War-lessons

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In Punishing Fashion, Pacquiao Wins 7th Title
Manny Pacquiao, won a highly anticipated fight by technical knockout Saturday, after the bout was stopped in the 12th round at the MGM Grand Garden Arena

http://www.nytimes.com/2009/11/15/sports/15fight.html?_r=1&hp


The strategist who knows why and how, will always dominate the strategist who knows what and how.

Developing a Tangible Strategic Model (The Tangible Vision)

To build a tangible strategic model, one must understand the following:

• the definitive goal;
• the competitive position;
• the seasonal cycle of that position;
• the risk that comes with it; and
• the connections that comes from the impact

In our case, we usually transform those listed points into our strategic model that gives the reader a comprehensive overview.

Our strategic overview is consisted of some of the following attributes:

• the current state of the targeted terrain;
• the objective;
• the various risk/benefit scenarios;
• the ranking of value points;
• a tangible representation of the venture; and
• a tangible delineation of its connections to the bigger picture.

The next step is developing an operational plan that supports the strategic model. It is a specific project milestone-based chart that includes the contingencies for capitalizing on certain opportunities and mitigating strategic risks.

Our planning process criteria is based on the complete understanding of the weaknesses and the strengths of the client's operational team while minding the capability of the targeted opposition.

More Quality Intelligence. Less Risks

Most projects accrue more changes in the timeline and costs due to the lack of information transparency. ... Most people possessed the tendency to assume the best circumstance without ever probing for a worst case scenario. ... 

While the quantity of information transparency determines the severity of risk, the quality of specific intelligence determines the effectiveness of the decision-making.

The Bottom Line
In an economy of limited resources, the successful strategy professional must focus on lowering costs and maximizing the profits. The first step is to assess the grand picture of tangibility. 
Ask the following questions:

• How do you assess the grand picture? 
• Does it have general points or specific points? ... 
• Do the specific points contain both technical measures and a cyclical state of tangibility? 

If your grand picture does not have it, your assessment is flawed. .. .

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If you are interested in learning more about our strategic consulting services, please contact us at service [aattt] compass360consulting [ddoott]com

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September 13, 2009
Unboxed
Wall Street’s Math Wizards Forgot a Few Variables
By STEVE LOHR

IN the aftermath of the great meltdown of 2008, Wall Street’s quants have been cast as the financial engineers of profit-driven innovation run amok. They, after all, invented the exotic securities that proved so troublesome.

But the real failure, according to finance experts and economists, was in the quants’ mathematical models of risk that suggested the arcane stuff was safe.

The risk models proved myopic, they say, because they were too simple-minded. They focused mainly on figures like the expected returns and the default risk of financial instruments. What they didn’t sufficiently take into account was human behavior, specifically the potential for widespread panic. When lots of investors got too scared to buy or sell, markets seized up and the models failed.

That failure suggests new frontiers for financial engineering and risk management, including trying to model the mechanics of panic and the patterns of human behavior.

“What wasn’t recognized was the importance of a different species of risk — liquidity risk,” said Stephen Figlewski, a professor of finance at the Leonard N. Stern School of Business at New York University. “When trust in counterparties is lost, and markets freeze up so there are no prices,” he said, it “really showed how different the real world was from our models.”

In the future, experts say, models need to be opened up to accommodate more variables and more dimensions of uncertainty.

The drive to measure, model and perhaps even predict waves of group behavior is an emerging field of research that can be applied in fields well beyond finance.

Much of the early work has been done tracking online behavior. The Web provides researchers with vast data sets for tracking the spread of all manner of things — news stories, ideas, videos, music, slang and popular fads — through social networks. That research has potential applications in politics, public health, online advertising and Internet commerce. And it is being done by academics and researchers at Google, Microsoft, Yahoo and Facebook.

Financial markets, like online communities, are social networks. Researchers are looking at whether the mechanisms and models being developed to explore collective behavior on the Web can be applied to financial markets. A team of six economists, finance experts and computer scientists at Cornell was recently awarded a grant from the National Science Foundation to pursue that goal.

“The hope is to take this understanding of contagion and use it as a perspective on how rapid changes of behavior can spread through complex networks at work in financial markets,” explained Jon M. Kleinberg, a computer scientist and social network researcher at Cornell.

At the Massachusetts Institute of Technology, Andrew W. Lo, director of the Laboratory for Financial Engineering, is taking a different approach to incorporating human behavior into finance. His research focuses on applying insights from disciplines, including evolutionary biology and cognitive neuroscience, to create a new perspective on how financial markets work, which Mr. Lo calls “the adaptive-markets hypothesis.” It is a departure from the “efficient-market” theory, which asserts that financial markets always get asset prices right given the available information and that people always behave rationally.

Efficient-market theory, of course, has dominated finance and econometric modeling for decades, though it is being sharply questioned in the wake of the financial crisis. “It is not that efficient market theory is wrong, but it’s a very incomplete model,” Mr. Lo said.

Mr. Lo is confident that his adaptive-markets approach can help model and quantify liquidity crises in a way traditional models, with their narrow focus on expected returns and volatility, cannot. “We’re going to see three-dimensional financial modeling and eventually N-dimensional modeling,” he said.

J. Doyne Farmer, a former physicist at Los Alamos National Laboratory and a founder of a quantitative trading firm, finds the behavioral research intriguing but awfully ambitious, especially to build into usable models. Instead, Mr. Farmer, a professor at the interdisciplinary Sante Fe Institute, is doing research on models of markets, institutions and their complex interactions, applying a hybrid discipline called econophysics.

To explain, Mr. Farmer points to the huge buildup of the credit-default-swap market, to a peak of $60 trillion. And in 2006, the average leverage on mortgage securities increased to 16 to 1 (it is now 1.5 to 1). Put the two together, he said, and you have a serious problem.

“You don’t need a model of human psychology to see that there was a danger of impending disaster,” Mr. Farmer observed. “But economists have failed to make models that accurately model such phenomena and adequately address their couplings.”

When a bridge over a river collapses, the engineers who built the bridge have to take responsibility. But typically, critics call for improvement and smarter, better-trained engineers — not fewer of them. The same pattern seems to apply to financial engineers. At M.I.T., the Sloan School of Management is starting a one-year master’s in finance this fall because the field has become too complex to be adequately covered as part of a traditional M.B.A. program, and because of student demand. The new finance program, Mr. Lo noted, had 179 applicants for 25 places.

In the aftermath of the economic crisis, financial engineers, experts say, will probably shift more to risk management and econometric analysis and concentrate less on devising exotic new instruments. Still, the recent efforts by investment banks to create a trading market for “life settlements,” life insurance policies that the ill or elderly sell for cash, suggest that inventive sales people are browsing for new asset classes to securitize, bundle and trade.

“Good or bad, moral or immoral, people are going to make markets and trade via computers, and this is a natural area of financial engineers,” says Emanuel Derman, a professor at Columbia University and a former Wall Street quant.

Copyright 2009 The New York Times Company
http://www.nytimes.com/2009/09/13/business/13unboxed.html

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The Way of Strategic Assessment:

"In the beginner's mind there are many possibilities. In the expert's mind there are few. ..." - Shunryu Suzuki

Everyone's strategic experience is different. Those who have the proper strategic experience, usually assessed the possibilities in a few moments. They know what are the active factors and what are the static factors.  ... 

What does it take to become an ultra-class expert (UCE)?

Following are some of those guidelines that a UCE have always followed:

• Recognizing all of the active variables at play;
• Having the capability to connect one's current objective to the greater picture; and
• Staying focused on the target while being mindfully aware at the grand settings.

Step 1: Understanding The Grand Basics of Strategy

To succeed in life, you must follow the steps of "ready, aim and fire . . . ," not "fire, ready aim . . . "

In competition as in life, one can only be ready, when he or she knows their target. The successful strategist does it by assessing the grand objective and the grand settings that is connected to it. Then he or she positions him or her selves with proper planning and preparation. The final stage is influencing their opposition through the use of directness and indirectness.

Compass Rule: The complete understanding of one's target through the process of assessing, positioning and influencing enables one to "subjugate the predominant paradigm" of the competition.

In future posts, we will talk about the process of assessing, positioning and influencing and the art and science of subjugating the predominant paradigm.

Our Current Project: Strategic Assessment

We are currently working on a book on that focuses on how to apply the Sunzi strategic principles in competing situations. The emphasis of this book is on the process of of strategic assessment.

More details later.