Who's creating these days?

7:35 am, express train to Grand Central Terminal. Leading luminaries of Wall Street and the New York City bar populate most every seat as far as one can see. All monthly commuters. All headed in to their high-flying, high-paying positions in the world's leading financial center. The financial center that has spread its ways and wares to all corners of the globe, in the form of debt and equity securities, syndicated bank loans, project finance and other structured financings, commodity and currency derivatives, and complex credit and equity derivatives, to name just a few high-lights. These structures have worked pretty well in the US market and legal system, but they have fared quite poorly in some other parts of the world.

With all the power and influence riding the train right next to me, what strikes me most is what these folks are reading. Almost to a person, they are all reading the Wall Street Journal, and a few are reading the New York Times business section. That's it - I can see scores of the papers, often open to the same page and read at roughly the same pace. Like lemmings. These people are all informing themselves, but only with the same data as their colleagues and competitors.

I have to imagine that such market behavior helps put a kind of frame around what these people create. All the time spent catching up on what your competitors are reading cannot be spent preparing to enter markets and build ideas and products that the competitors are not. Although my evidence is purely anecdotal, my clear sense is that most of these folks do not read other news sources that would inform them better about developments in other fields and from other countries' perspectives. OK, they all have Bloomberg terminals, so they can follow throughout the day whatever Bloomberg thinks is important - but that seems to be much of the same stuff as appears in their morning papers, only more hastily written.

Is it any wonder that this closed information loop leads to Wall Street products that so often merely replicate - culturally - what has been done in the past, even when those products have badly failed investors in parts of the world far away from New York. I have been there when many fixed income products failed investors in the wake of currency and political crises, so I am awed that the international finance products Wall Street and their lawyers still trot out today are complete replicas of the failed deals.

I am sure that institutional compensation structures drive this dynamic as much as anything - it is expensive and risky to adapt deal structures to other cultures, especially when the existing deals continue to sell so well - to a buy-side with complementary compensation structures, and informed by the same news sources. I expect there is opportunity out there for creative people to build new, more culturally-sensitive approaches to investments, approaches that will be more lucrative, even to the deal designers, in the longer term. But somebody will have break out of the "Wall Street Journal on Metro North" model of self-education first.

Sovereign Resurgence?

This post is only to re-direct you to a piece in last week's Economist (sorry for my delay) on the subject of my favorite "bone" - global liquidity. In this piece, Buttonwood helpfully introduces what has been going on in the credit markets of late. The author's final words are resonant in my mind.

Perhaps my bone is tastier than I knew. All gnawers are welcome.

Join me in Hell

In most human activity, hidden opportunities are plentiful. The world's most capable and effective people know how to seek out and capitalize on those chances. So it must also go in the game of international relations, US politics, and the war on terror. On the basis of that premise, leap with me into the abyss. Osama bin Laden is the most widely-recognized terrorist, and perhaps the most inhumanely savage murderer, in recent memory. There is no case for supporting anything that he does or supports, he must be stopped, and there can be no credible argument against that view. At the same time, however, responsible and thinking warriors on terror MUST consider carefully what Osama has to say. His chosen subjects and his choice of words almost certainly loom large in the minds of the terrorist enemy. So, if we are to prevail in the war on terror, we must understand his means and his meaning. We must learn from his tireless efforts to corrupt Islam and to coopt the world's Muslims, and we must deploy what we learn as an important weapon in the war. It cannot be that the war on terror is the sole form of human activity in which there are no hidden opportunities.

If you are still with me down here (is it hot enough yet?), let's have a quick look at important parts of Osama's latest. First, I think noteworthy the broad span of world and religious history that he recites in his speech. The fellow speaks to the world once every couple years, and he chooses to describe the details of centuries of relations among Islam, Judaism, and Christianity. He must know that the US population has little understanding of the subject, and perhaps even less patience for it, so he cannot seriously believe his words will persuade. Instead, he must know that these words will be described as "strange", if not outright offensive, and they will be perceived that way. In the western coverage I have seen, the point that is most frequently identified is his invitation for the US to convert to Islam. How odd, and what hubris!

Second, Osama goes to great lengths to inform the US population that their ways and means have led them astray from monotheism - the belief in one god. According to Osama, corporate wealth, consumerism, and democratic power have each risen to the level of a god in the western mind and in western pursuit. So today's Jews and Christians (those in power at the least) cannot rightfully claim to be monotheists. Instead, they have reverted to pre-Abraham paganism and idol worshiping (the idols being the latest country invaded, the latest pool of oil reserves controlled, the latest collection of corporate profits expanded). That such barbarians so completely rule the world today is seemingly Osama's greatest complaint.

Finally, Osama explains important similarities among Islam, Judaism, and Christianity. As many people know, all of these religions emanated from the same Abrahamic tradition in the middle east. Judaism was the first religion/tradition to form, based on what was revealed to Moses at Sinai. Christianity was a branch of Judaism whose rabbis were persuaded that Jesus Christ was the messiah who had been promised in Judaism's Torah. Islam came along five centuries or so after the birth of Christianity, and it came in the form of the Koran as revealed to the Jew Mohamed. Osama well understands this common history, and, it seems to me, he seeks a sympathetic ear by referring to it. Though his call is clearly for US conversion to Islam (the purest form of monotheism in his opinion), one could read his speech as stating that he would be satisfied were the world made up of pure and true monotheists (in his judgment) of any stripe. He even states that submission to the one and only god is the most important truth in human activity, even if the laws people use in that pursuit differ among themselves.

Hmmmmmm. So what do we make of all this? (Bear with me as I seek out the hidden opportunities and, for the moment, I ignore the truly offensive parts of his speech - particularly where he refers to his responsibility for 9/11 and where he reveals obvious antisemitism and disdain for Christians, etc., etc., etc., etc.) How do we think the Islamic world perceives his words (I imagine they are fairly well-received)? What opportunities exist for the warriors on terror to design countervailing messages that would be credible in the minds of those Muslims who are disposed to be sympathetic to Osama's words? I am no expert, though I certainly hope that the US Government is carefully wrestling with these questions and any related opportunities, from the White House on down.

Were I in the White House, I would consult my best Islam (and Islamic) experts to learn just how powerful Osama's words are among Muslims in various places and various traditions. I would ask if there are important sections of Islam that are receptive to a co-existence of Islamic tenets and human culture (business, society, democracy), and if so, what could be done to speak to the people in those traditions. I would ask if there are concrete investments that the US could make to become credible in that universe - whether re-constructing destroyed mosques in Iraq, promoting Islamic awareness within the US, strengthening the position of peaceful Islamic leadership in critical locations, etc. I would ask those and other experts whether an education campaign in the US about the deep commonalities among monotheistic traditions would be useful, whether a substantial education and re-direction of the western media on these subjects would be helpful in focusing the US on the opportunities for peace, and also the specific hot-spots where military engagement is completely unavoidable.

I contend that using Osama's speech against him, educating the warriors on terror so they can be smarter and more appealing and effective in the world's hot spots, must be the right thing to do. I am constrained by my limited knowledge of Islam and the details of the war on terror. But the way the western media presents the whole subject, I am left with the impression that the US Government is falling short and missing opportunities that may be in the best interests of the United States and international security.