The Art of Deception: How Spy Agencies Use Behavioral Sciences in Covert Operations

Found this insightful presentation via The Intercept. The presentation reviews concepts used by spy agencies for online covert operations. If you are a fan of Robert Cialdini’s work on influence and persuasion this is a presentation to review.

Some of my favorite slides via The Intercept: 

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Click Here To View The Full Presentation @ The Intercept 

24. June 2014 by Miguel Barbosa
Categories: Curated Readings, Current Affairs | Leave a comment

Snowden, the NSA, and the U.S. Surveillance State

I just finished Glenn Grenwald’s book,”No Place To Hide – Edward Snowden, The NSA, & The US Surveillance State.” Having read 15 books on the CIA, NSA, & FBI. Glenn’s book stands out as a thriller, I have a feeling it’s going to end up as a film. Below are some excerpts from the book.

A history of mass surveillance.

“By the early decades of the twentieth century, the US Bureau of Investigation—the precursor of today’s FBI—was using wiretaps, along with mail monitoring and informants, to clamp down on those opposed to American government policies.”

“No matter the specific techniques involved, historically mass surveillance has had several constant attributes. Initially, it is always the country’s dissidents and marginalized who bear the brunt of the surveillance, leading those who support the government or are merely apathetic to mistakenly believe they are immune. And history shows that the mere existence of a mass surveillance apparatus, regardless of how it is used, is in itself sufficient to stifle dissent. A citizenry that is aware of always being watched quickly becomes a compliant and fearful one.”

“Frank Church’s mid-1970s investigation into the FBI’s spying shockingly found that the agency had labeled half a million US citizens as potential “subversives,” routinely spying on people based purely on their political beliefs. (The FBI’s list of targets ranged from Martin Luther King to John Lennon, from the women’s liberation movement to the anti-Communist John Birch Society.)”

“On the contrary, mass surveillance is a universal temptation for any unscrupulous power. And in every instance, the motive is the same: suppressing dissent and mandating compliance.”

“At the turn of the twentieth century, the British and French empires both created specialized monitoring departments to deal with the threat of anticolonialist movements.”

“The ability to eavesdrop on people’s communications vests immense power in those who do it. And unless such power is held in check by rigorous oversight and accountability, it is almost certain to be abused. Expecting the US government to operate a massive surveillance machine in complete secrecy without falling prey to its temptations runs counter to every historical example and all available evidence about human nature.”

The universal fear shared by whistleblowers. 

“I knew from my years of writing about NSA abuses that it can be hard to generate serious concern about secret state surveillance: invasion of privacy and abuse of power can be viewed as abstractions, ones that are difficult to get people to care about viscerally.”

How do governments silence whistleblowers? 

“The two most favored lines of whistle-blower demonization—“he’s unstable” and “he’s naive” ” Demonizing the personality of anyone who challenges political power has been a long-standing tactic used by Washington, including by the media. One of the first and perhaps most glaring examples of that tactic was the Nixon administration’s treatment of Pentagon Papers whistle-blower Daniel Ellsberg, which included breaking into the office of Ellsberg’s psychoanalyst to steal Ellsberg’s files and pry into his sexual history.”

“The same tactic was used to damage Julian Assange’s reputation well before he was accused of sex crimes by two women in Sweden. Notably, the attacks on Assange were carried out by the same newspapers that had worked with him and had benefited from Chelsea Manning’s disclosures, which Assange and WikiLeaks had enabled.”

Casting Assange as crazy and delusional became a staple of US political discourse generally and the New York Times’s tactics specifically.

“The Times also led the way on the Manning coverage, insisting that what drove Manning to become a massive whistle-blower was not conviction or conscience but personality disorders and psychological instability.”

“Attributing dissent to personality disorders is hardly an American invention. Soviet dissidents were routinely institutionalized in psychological hospitals, and Chinese dissidents are still often forcibly treated for mental illness.”

“There are obvious reasons for launching personal attacks on critics of the status quo. As noted, one is to render the critic less effective: few people want to align themselves with someone crazy or weird. Another is deterrence: when dissidents are cast out of society and demeaned as emotionally imbalanced, others are given a strong incentive not to become one.”

Examples of U.S. Government illegally surveilling Americans. 

“The ruling I read on the plane to Hong Kong was amazing for several reasons. It ordered Verizon Business to turn over to the NSA “all call detail records” for “communications (i) between the United States and abroad; and (ii) wholly within the United States, including local telephone calls.” That meant the NSA was secretly and indiscriminately collecting the telephone records of tens of millions of Americans, at least. Virtually nobody had any idea that the Obama administration was doing any such thing. would be “stunned to learn” of the “secret interpretations of law” the Obama administration was using to vest itself with vast, unknown spying powers.”

“Even more significant, the files—along with the Verizon document—proved that the Obama administration’s senior national security official, Director of National Intelligence James Clapper, lied to Congress when, on March 12, 2013, he was asked by Senator Ron Wyden: “Does the NSA collect any type of data at all on millions or hundreds of millions of Americans”

The Obama Administration’s stance on journalists, activists, & whistleblowers

“The Obama administration had waged what people across the political spectrum were calling an unprecedented war on whistle-blowers. The president, who had campaigned on a vow to have the “most transparent administration in history,” specifically pledging to protect whistleblowers, whom he hailed as “noble” and “courageous,” had done exactly the opposite.”

“Obama’s administration has prosecuted more government leakers under the Espionage Act of 1917—a total of seven—than all previous administrations in US history combined: in fact, more than double that total. The Espionage Act was adopted during World War I to enable Woodrow Wilson to criminalize dissent against the war, and its sanctions are severe: they include life in prison and even the death penalty.”

“Just weeks before my arrival in Hong Kong, it was revealed that the Obama Justice Department had obtained a court order to read through the emails and telephone records of reporters and editors from the Associated Press to find their source for a story.”

“Almost immediately after that, a new report revealed an even more extreme attack on the news-gathering process: the Department of Justice had filed a court affidavit accusing Fox News Washington bureau chief James Rosen of being a “co-conspirator” in his source’s alleged crimes, on the grounds that the journalist had “aided and abetted” the source’s disclosure of classified information by working with him closely to receive the materials.”

“Journalists had noted for several years that the Obama administration was waging unprecedented attacks on journalism.”

“In 2011, the New York Times revealed that the DOJ, attempting to find the source for a book written by James Risen, had “obtained extensive records about his phone calls, finances and travel history,” including “his ‘credit card and bank records and certain records of his airline travel’ and three credit reports listing his financial accounts.”

“Many in the press responded with alarm. One typical article, from USA Today, noted that “President Obama finds himself battling charges that his administration has effectively launched a war on journalists,” and quoted former Los Angeles Times national security reporter Josh Meyer saying: “There’s a red line that no other administration has crossed before that the Obama administration has blown right past.” Jane Mayer, the widely admired investigative reporter for the New Yorker, warned in the New Republic that the Obama DOJ’s targeting of whistle-blowers was operating as an attack on journalism itself: “It’s a huge impediment to reporting, and so chilling isn’t quite strong enough, it’s more like freezing the whole process into a standstill.”

“On his own CNBC show, New York Times financial columnist Andrew Ross Sorkin said: I feel like, A, we’ve screwed this up, even letting [Snowden] get to Russia. B, clearly the Chinese hate us to even let him out of the country.… I would arrest him, and now I would almost arrest Glenn Greenwald, who’s the journalist who seems to want to help him get to Ecuador. That a reporter for the Times, which had fought all the way to the US Supreme Court in order to publish the Pentagon Papers, would advocate my arrest was a potent sign of the devotion of many establishment journalists to the US government: after all, criminalizing investigative journalism would have a grave impact on that paper and its employees. Sorkin did later apologize to me, but his remarks demonstrated the speed and ease with which such assertions gain traction.”

“In the United States, Director of National Intelligence James Clapper started using the criminal term “accomplices” to refer to journalists covering the NSA.”

“That lawyers and a congressman considered the risk real was itself extraordinary, a powerful measure of the erosion of press freedom. And that journalists had joined the call to treat my reporting as a felony was a remarkable triumph of propaganda for the powers of government, which could rely on trained professionals to do their work for them and equate adversarial investigative journalism with a crime.

The U.S. intelligence community.

“He explained that the entire intelligence community was desperate for tech-savvy employees. It had transformed itself into such a large and sprawling system that finding enough people capable of operating it was hard. Thus the national security agencies had to turn to nontraditional talent pools to recruit. People with sufficiently advanced computer skills tended to be young and sometimes alienated, and had often failed to shine in mainstream education.”

Companies like Booz Allen Hamilton and AT&T employ hordes of former top government officials, while hordes of current top defense officials are past (and likely future) employees of those same corporations. “

Why Snowden became a whistleblower.

“They would say this isn’t your job, or you’d be told you don’t have enough information to make those kinds of judgments. You’d basically be instructed not to worry about it,” he said. He developed a reputation among colleagues as someone who raised too many concerns, a trait that did not endear him to superiors.”

“But then it became clear that Obama was not just continuing, but in many cases expanding these abuses,” he said. “I realized then that I couldn’t wait for a leader to fix these things. Leadership is about acting first and serving as an example for others, not waiting for others to act.”

“The stuff I saw really began to disturb me,” Snowden said. “I could watch drones in real time as they surveilled the people they might kill. You could watch entire villages and see what everyone was doing. I watched NSA tracking people’s Internet activities as they typed. I became aware of just how invasive US surveillance capabilities had become. I realized the true breadth of this system. And almost nobody knew it was happening.”

“The true measurement of a person’s worth isn’t what they say they believe in, but what they do in defense of those beliefs,” he said. “If you’re not acting on your beliefs, then they probably aren’t real.”

“What keeps a person passive and compliant,” he explained, “is fear of repercussions, but once you let go of your attachment to things that don’t ultimately matter—money, career, physical safety—you can overcome that fear.

The Washington Post & the relationship between the U.S. government  & major media companies.

“I respected Gellman but not the Washington Post, which, to me, is the belly of the Beltway media beast, embodying all the worst attributes of US political media: excessive closeness to the government, reverence for the institutions of the national security state, routine exclusion of dissenting voices. The paper’s own media critic, Howard Kurtz, had documented in 2004 how the paper had systematically amplified pro-war voices in the run-up to the invasion of Iraq while downplaying or excluding opposition. The Post’s news coverage, concluded Kurtz, had been “strikingly one-sided” in favor of the invasion. The Post editorial page remained one of the most vociferous and mindless cheerleaders for US militarism, secrecy, and surveillance.”

“One of my few criticisms of WikiLeaks over the years had been that they, too, had at times similarly handed major scoops to the very establishment media organizations that do the most to protect the government, thereby enhancing their stature and importance.”

“Worse, I knew that the Post would dutifully abide by the unwritten protective rules that govern how the establishment media report on official secrets. According to these rules, which allow the government to control disclosures and minimize, even neuter, their impact, editors first go to officials and advise them what they intend to publish. National security officials then tell the editors all the ways in which national security will supposedly be damaged by the disclosures. A protracted negotiation takes place over what will and will not be published. At best, substantial delay results. Often, patently newsworthy information is suppressed. This is what led the Post, when reporting the existence of CIA black sites in 2005, to conceal the identities of those countries in which prisons were based, thus allowing the lawless CIA torture sites to continue.”

“Then there’s the tone that establishment media outlets use to discuss government wrongdoing. The culture of US journalism mandates that reporters avoid any clear or declarative statements and incorporate government assertions into their reporting, treating them with respect no matter how frivolous they are. They use what the Post’s own media columnist, Erik Wemple, derides as middle-of-the-road-ese: never saying anything definitive but instead vesting with equal credence the government’s defenses and the actual facts, all of which has the effect of diluting revelations to a muddled, incoherent, often inconsequential mess. Above all else, they invariably give great weight to official claims, even when those claims are patently false or deceitful.”

“It was that fear-driven, obsequious journalism that led the Times, the Post, and many other outlets to refuse to use the word “torture” in their reporting on Bush interrogation techniques, even though they freely used that word to describe the exact same tactics when used by other governments around the world.”

“American public on a war built of false pretenses that the US media amplified rather than investigated.”

“Yet another unwritten rule designed to protect the government is that media outlets publish only a few such secret documents, and then stop. They would report on an archive like Snowden’s so as to limit its impact—publish a handful of stories, revel in the accolades of a “big scoop,” collect prizes, and then walk away, ensuring that nothing had really changed.”

“Aside from my contempt for the process—the government should not be a collaborative editorial partner with newspapers in deciding what gets published—I knew there was no plausible national security argument against our specific Verizon report, which involved a simple court order showing the systematic collection of Americans’ telephone records. The idea that “terrorists” would benefit from exposing the order was laughable: any terrorists capable of tying their own shoes would already know that the government was trying to monitor their telephone communications. The people who would learn something from our article weren’t the “terrorists” but the American people.”

“When WikiLeaks began publishing classified documents related to the Iraq and Afghanistan wars and especially diplomatic cables, calls for the prosecution of WikiLeaks were led by American journalists themselves, which was in itself astounding behavior. The very institution ostensibly devoted to bringing transparency to the actions of the powerful not only denounced but attempted to criminalize one of the most significant acts of transparency in many years.”

This reflexive demonization of whistle-blowers is one way that the establishment media in the United States protects the interests of those who wield power.”

“Take, for instance, the notion that leaking classified information is some sort of malicious or criminal act. In fact, the Washington journalists who applied that view to Snowden or to me do not deplore all disclosures of secret information, only those disclosures that displease or undermine the government.”

“The reality is that Washington is always drowning in leaks. The most celebrated and revered DC reporters, such as Bob Woodward, have secured their position by routinely receiving classified information from high-level sources and then publishing it.”

“Obama officials have repeatedly gone to the New York Times to dish out classified information about topics like drone killings and Osama bin Laden’s assassination. Former secretary of defense Leon Panetta and CIA officials fed secret information to the director of Zero Dark Thirty, hoping the film would trumpet Obama’s greatest political triumph.”

“No establishment journalist would propose prosecution for any of the officials responsible for those leaks or for the reporters who received and then wrote about them. They would laugh at the suggestion that Bob Woodward, who has been spilling top secrets for years, and his high-level government sources are criminals. That is because those leaks are sanctioned by Washington and serve the interests of the US government, and are thus considered appropriate and acceptable. The only leaks that the Washington media condemns are those that contain information officials would prefer to hide.”

“This, of course, is precisely the opposite of what press freedoms were supposed to achieve. The idea of a “fourth estate” is that those who exercise the greatest power need to be challenged by adversarial pushback and an insistence on transparency; the job of the press is to disprove the falsehoods that power invariably disseminates to protect itself.”

“As we are told endlessly, journalists do not express opinions; they simply report the facts. This is an obvious pretense, a conceit of the profession. The perceptions and pronouncements of human beings are inherently subjective. Every news article is the product of all sorts of highly subjective cultural, nationalistic, and political assumptions. And all journalism serves one faction’s interest or another”

“The relevant distinction is not between journalists who have opinions and those who have none, a category that does not exist. It is between journalists who candidly reveal their opinions and those who conceal them, pretending they have none.”

“The very idea that reporters should be free of opinions is far from some time-honored requirement of the profession; in fact, it is a relatively new concoction that has the effect, if not the intent, to neuter journalism.”

“Just like the supposed rule against leaking, the “rule” of objectivity is no rule at all but rather a means of promoting the interests of the dominant political class. Hence, “NSA surveillance is legal and necessary” or “the Iraq War is right” or “the United States should invade that country” are acceptable opinions for journalists to express, and they do so all the time. “Objectivity” means nothing more than reflecting the biases and serving the interests of entrenched Washington. Opinions are problematic only when they deviate from the acceptable range of Washington orthodoxy.”

“The iconic reporter of the past was the definitive outsider. Many who entered the profession were inclined to oppose rather than serve power, not just by ideology but by personality and disposition. Choosing a career in journalism virtually ensured outsider status: reporters made little money, had little institutional prestige, and were typically obscure.”

“That has now changed. With the acquisition of media companies by the world’s largest corporations, most media stars are highly paid employees of conglomerates, no different than other such employees. Instead of selling banking services or financial instruments, they peddle media products to the public on behalf of that corporation.”

“Keller proudly trumpeted his paper’s relationship with Washington on other occasions, too. During a 2010 appearance on the BBC discussing telegrams obtained by WikiLeaks, Keller explained that the Times takes direction from the US government about what it should and shouldn’t publish. The BBC host asked incredulously, “Are you saying that you sort of go to the government in advance and say: ‘What about this, that and the other, is it all right to do this and all right to do that,’ and you get clearance, then?” The other guest, former British diplomat Carne Ross, said that Keller’s comments made him think one shouldn’t go to the New York Times for these telegrams. It’s extraordinary that the New York Times is clearing what it says about this with the U.S. Government.”

“But there’s nothing extraordinary about this kind of media collaboration with Washington. It is routine, for example, for reporters to adopt the official US position in disputes with foreign adversaries and to make editorial decisions based on what best promotes “US interests” as defined by the government. Bush DOJ lawyer Jack Goldsmith hailed what he called “an underappreciated phenomenon: the patriotism of the American press,” meaning that the domestic media tend to show loyalty to their government’s agenda.”

This identification of the establishment media with the government is cemented by various factors, one of them being socioeconomic. Many of the influential journalists in the United States are now multimillionaires. They live in the same neighborhoods as the political figures and financial elites over which they ostensibly serve as watchdogs. They attend the same functions, they have the same circles of friends and associates, their children go to the same elite private schools. This is one reason why journalists and government officials can switch jobs so seamlessly. The revolving door moves the media figures into high-level Washington jobs, just as government officials often leave office to the reward of a lucrative media contract. Rich, famous, insider journalists do not want to subvert the status quo that so lavishly rewards them.”

“It is but a short step to full identification with the needs of political officials. Hence, transparency is bad; adversarial journalism is malignant, possibly even criminal. Political leaders must be permitted to exercise power in the dark.”

“Seymour Hersh, the Pulitzer Prize–winning reporter who uncovered both the My Lai massacre and the Abu Ghraib scandal. In an interview with the Guardian, Hersh railed against what he called “the timidity of journalists in America, their failure to challenge the White House and be an unpopular messenger of truth.”

“The troublemakers don’t get promoted,” he said. Instead, “chickenshit editors” and journalists are ruining the profession because the overarching mentality is not to dare to be an outsider.”

“Once reporters are branded as activists, once their work is tainted by the accusation of criminal activity and they are cast out of the circle of protections for journalists, they are vulnerable to criminal treatment. This was made clear to me very quickly after the NSA story broke.”

What’s the NSA up to?

“The 2008 FISA Amendments Act is the current governing law for NSA surveillance.”

“The documents left no doubt that the NSA was equally involved in economic espionage, diplomatic spying, and suspicionless surveillance aimed at entire populations.”

“The US government had built a system that has as its goal the complete elimination of electronic privacy worldwide. Far from hyperbole, that is the literal, explicitly stated aim of the surveillance state: to collect, store, monitor, and analyze all electronic communication by all people around the globe.”

“Internet companies to provide access to all the communications of any non-American, including those with US persons—Facebook chats, Yahoo! emails, Google searches.”

“According to Tim Shorrock, who has long chronicled the NSA-corporate relationship, “70 percent of our national intelligence budget is being spent on the private sector.”

“These corporate partnerships, which provide the systems and the access on which the NSA depends, are managed by the NSA’s highly secret Special Sources Operations unit, the division that oversees corporate partnerships.”

“The companies listed on the PRISM slide denied allowing the NSA unlimited access to their servers. Facebook and Google, for instance, claimed that they only give the NSA information for which the agency has a warrant, and tried to depict PRISM as little more than a trivial technical detail: a slightly upgraded delivery system whereby the NSA receives data in a “lockbox” that the companies are legally compelled to provide.”

“From their workstations anywhere in the world, government employees cleared for PRISM access may ‘task’ the system”—that is, run a search—“and receive results from an Internet company without further interaction with the company’s staff.
These negotiations, the New York Times said, “illustrate how intricately the government and tech companies work together, and the depth of their behind-the-scenes transactions.”

“Another document describes further collaboration between Microsoft and the FBI, as that agency also sought to ensure that new Outlook features did not interfere with its surveillance habits: “The FBI Data Intercept Technology Unit (DITU) team is working with Microsoft to understand an additional feature in which allows users to create email aliases, which may affect our tasking process.… There are compartmented and other activities underway to mitigate these problems.”

“Finding this mention of FBI surveillance in Snowden’s archive of internal NSA documents was not an isolated occurrence. The entire intelligence community is able to access the information that the NSA collects: it routinely shares its vast trove of data with other agencies, including the FBI and the CIA.”

“In addition to such sweeping surveillance, though, the NSA also carries out what it calls Computer Network Exploitation (CNE), placing malware in individual computers to surveil their users. When the agency succeeds in inserting such malware, it is able, in NSA terminology, to “own” the computer: to view every keystroke entered and every screen viewed.”

“The NSA has increasingly made use of a secret technology that enables it to enter and alter data in computers even if they are not connected to the Internet.”

“The key program used by the NSA to collect, curate, and search such data, introduced in 2007, is X-KEYSCORE, and it affords a radical leap in the scope of the agency’s surveillance powers. The NSA calls X-KEYSCORE its “widest-reaching” system for collecting electronic data, and with good reason. A training document prepared for analysts claims the program captures “nearly everything a typical user does on the internet,” including the text of emails, Google searches, and the names of websites visited. monitoring of a person’s online activities, enabling the NSA to observe emails and browsing activities as they happen. The searches enabled by the program are so specific that any NSA analyst is able not only to find out which websites a person has visited but also to assemble a comprehensive list of all visits to a particular website from specified computers”

“One of X-KEYSCORE’s most valuable functions to the NSA is its ability to surveil the activities on online social networks (OSNs), such as Facebook and Twitter, which the agency believes provide a wealth of information and “insight into the personal lives of targets”

Aren’t there checks & balances? What/who keeps the NSA in check?

“In fact, contrary to the repeated denials of President Obama and his top officials, the NSA continuously intercepts the communications of American citizens, without any individual “probable cause” warrants to justify such surveillance.”

“Further discrediting Obama’s assurances is the subservient posture of the FISA court, which grants almost every surveillance request that the NSA submits.”

“Defenders of the NSA frequently tout the FISA court process as evidence that the agency is under effective oversight. However, the court was set up not as a genuine check on the government’s power but as a cosmetic measure, providing just the appearance of reform to placate public anger over surveillance abuses revealed in the 1970s.”

“It meets in complete secrecy; only one party—the government—is permitted to attend the hearings and make its case; and the court’s rulings are automatically designated “Top Secret.” Tellingly, for years the FISA court was housed in the Department of Justice, making clear its role as a part of the executive branch rather than as an independent judiciary exercising real oversight.”

“The results have been exactly what one would expect: the court almost never rejects specific NSA applications to target Americans with surveillance.”

“Another layer of oversight for the NSA is ostensibly provided by the congressional intelligence committees, also created in the aftermath of the surveillance scandals of the 1970s, but they are even more supine than the FISA court. While they are supposed to conduct “vigilant legislative oversight” over the intelligence community, those committees are in fact currently headed by the most devoted NSA loyalists in Washington: Democrat Dianne Feinstein in the Senate and Republican Mike Rogers in the House. Rather than offer any sort of adversarial check on the NSA’s operations, the Feinstein and Rogers committees exist primarily to defend and justify anything the agency does.”

“We will be up against a ‘business-as-usual brigade’—made up of influential members of the government’s intelligence leadership, their allies in thinktanks [sic] and academia, retired government officials, and sympathetic legislators. 

“Feinstein has long been a devoted loyalist of the US national security industry, from her vehement support for the war on Iraq to her steadfast backing of Bush-era NSA programs. (Her husband, meanwhile, has major stakes in various military contracts.)”

But doesn’t the NSA only collect meta-data? That isn’t as intrusive right?

“The US government has insisted that much of the surveillance revealed in the Snowden archive involves the collection of “metadata, not content,” trying to imply that this kind of spying is not intrusive—or at least not to the same degree as intercepting content.”

“These disingenuous arguments obscure the fact that metadata surveillance can be at least as intrusive as content interception, and often even more so.”

“Princeton computer science and public affairs professor Edward Felten says, “Even for a single phone call, the metadata can be more informative than the call’s content. The metadata would show far more than that: it would reveal the identity of those who were called. The same is true of calls to a dating service, a gay and lesbian center, a drug addiction clinic, an HIV specialist, or a suicide hotline. Metadata would likewise unmask a conversation between a human rights activist and an informant in a repressive regime, or a confidential source calling a journalist to reveal high-level wrongdoing.”

“…eavesdropping on calls can be quite difficult due to language differences, meandering conversations, the use of slang or deliberate codes, and other attributes that either by design or accident obfuscate the meaning. “The content of calls are far more difficult to analyze in an automated fashion due to their unstructured nature,” he argued. By contrast, metadata is mathematical: clean, precise, and thus easily analyzed.”

Besides terrorists who is the NSA targeting?

“For years, President Obama and his top officials vehemently denounced China for using its surveillance capabilities for economic advantage while insisting that the United States and its allies never do any such thing.”

“That the NSA spies for precisely the economic motive it has denied is proven by its own documents. The agency acts for the benefit of what it calls its “customers,” a list that includes not only the White House, the State Department, and the CIA, but also primarily economic agencies, such as the US Trade Representative and the Departments of Agriculture, Treasury, and Commerce:”

“One 2006 memorandum from the global capabilities manager of the agency’s International Security Issues (ISI) mission spells out the NSA’s economic and trade espionage—against countries as diverse as Belgium, Japan, Brazil, and Germany—in stark terms:”

“The New York Times noted that its surveillance targets often included financial institutions and “heads of international aid organizations, foreign energy companies and a European Union official involved in antitrust battles with American technology businesses.”

“The reasons for economic espionage are clear enough. When the United States uses the NSA to eavesdrop on the planning strategies of other countries during trade and economic talks, it can gain enormous advantage for American industry.”

“If anything, the revelations about NSA spying on foreign leaders are less significant than the agency’s warrantless mass surveillance of whole populations.”

“More remarkable is the fact that in country after country, revelations that the NSA was spying on hundreds of millions of their citizens produced little more than muted objections from their political leadership. True indignation came gushing forward only once those leaders understood that they, and not just their citizens, had been targeted as well.”

“Numerous other documents detail how Susan Rice, then ambassador to the UN and now President Obama’s national security adviser, repeatedly requested that the NSA spy on the internal discussions of key member states to learn their negotiation strategies.”

“But an equally important motive seems to have been preventing Chinese devices from supplanting American-made ones, which would have limited the NSA’s own reach. In other words, Chinese routers and servers represent not only economic competition but also surveillance competition: when someone buys a Chinese device instead of an American one, the NSA loses a crucial means of spying on a great many communication activities.”

Privacy as seen by Silicon Valley Technologists,  “Don’t use the internet if you have something to hide”. 

“Governments around the world have made vigorous attempts to train citizens to disdain their own privacy. A litany of now-familiar platitudes has convinced people to tolerate severe encroachments into their private realm; so successful are these justifications that many people applaud as the authorities collect vast amounts of data about what they say, read, buy, and do—and with whom.”

““If you have something that you don’t want anyone to know, maybe you shouldn’t be doing it in the first place.” With equal dismissiveness, Facebook founder and CEO Mark Zuckerberg said in a 2010 interview that “people have really gotten comfortable not only sharing more information and different kinds, but more openly and with more people.” Privacy in the digital age is no longer a “social norm,” he claimed, a notion that handily serves the interests of a tech company trading on personal information.”

“But the importance of privacy is evident in the fact that even those who devalue it, who have declared it dead or dispensable, do not believe the things they say. Anti-privacy advocates have often gone to great lengths to maintain control over the visibility of their own behavior and information. The US government itself has used extreme measures to shield its actions from public view, erecting an ever-higher wall of secrecy behind which it operates.”

“Similarly, those Internet tycoons who are so willing to devalue our privacy are vehemently protective of their own. Google insisted on a policy of not talking to reporters from CNET, the technology news site, after CNET published Eric Schmidt’s personal details—including his salary, campaign donations, and address, all public information obtained via Google—in order to highlight the invasive dangers of his company.”

“Meanwhile, Mark Zuckerberg purchased the four homes adjacent to his own in Palo Alto, at a cost of $30 million, to ensure his privacy. As CNET put it, “Your personal life is now known as Facebook’s data. Its CEO’s personal life is now known as mind your own business.”

“The many pro-surveillance advocates I have debated since Snowden blew the whistle have been quick to echo Eric Schmidt’s view that privacy is for people who have something to hide. But none of them would willingly give me the passwords to their email accounts, or allow video cameras in their homes.”

“The point is not the hypocrisy of those who disparage the value of privacy while intensely safeguarding their own, although that is striking. It is that the desire for privacy is shared by us all as an essential, not ancillary, part of what it means to be human. We all instinctively understand that the private realm is where we can act, think, speak, write, experiment, and choose how to be, away from the judgmental eyes of others. Privacy is a core condition of being a free person.’

“The rabbi’s point was clear: if you can never evade the watchful eyes of a supreme authority, there is no choice but to follow the dictates that authority imposes. You cannot even consider forging your own path beyond those rules: if you believe you are always being watched and judged, you are not really a free individual.”

“All oppressive authorities—political, religious, societal, parental—rely on this vital truth, using it as a principal tool to enforce orthodoxies, compel adherence, and quash dissent.”

“What made the Internet so appealing was precisely that it afforded the ability to speak and act anonymously, which is so vital to individual exploration. For that reason, it is in the realm of privacy where creativity, dissent, and challenges to orthodoxy germinate.”

“What makes a surveillance system effective in controlling human behavior is the knowledge that one’s words and actions are susceptible to monitoring.”

“Since the institution—any institution—was not capable of observing all of the people all of the time, Bentham’s solution was to create “the apparent omnipresence of the inspector” in the minds of the inhabitants. “The persons to be inspected should always feel themselves as if under inspection, at least as standing a great chance of being so.”

“In Discipline and Punish, Foucault further explained that ubiquitous surveillance not only empowers authorities and compels compliance but also induces individuals to internalize their watchers. Those who believe they are watched will instinctively choose to do that which is wanted of them without even realizing that they are being controlled.”

“Additionally, this model of control has the great advantage of simultaneously creating the illusion of freedom. The compulsion to obedience exists in the individual’s mind. Individuals choose on their own to comply, out of fear that they are being watched. That eliminates the need for all the visible hallmarks of compulsion, and thus enables control over people who falsely believe themselves to be free.”

“Authorities faced with unrest generally have two options: to placate the population with symbolic concessions or fortify their control to minimize the harm it can do their interests. Elites in the West seem to view the second option—fortifying their power—as their better, perhaps only viable course of action to protect their position. The response to the Occupy movement was to crush it with force, through tear gas, pepper spray, and prosecution. The para-militarization of domestic police forces was on full display in American cities, as police officers brought out weapons seen on the streets of Baghdad to quell legally assembled and largely peaceful protesters.”

“The strategy was to put people in fear of attending marches and protests, and it generally worked.”

“All of the evidence highlights the implicit bargain that is offered to citizens: pose no challenge and you have nothing to worry about. Mind your own business, and support or at least tolerate what we do, and you’ll be fine.”

“Of course, dutiful, loyal supporters of the president and his policies, good citizens who do nothing to attract negative attention from the powerful, have no reason to fear the surveillance state. This is the case in every society: those who pose no challenge are rarely targeted by oppressive measures, and from their perspective, they can then convince themselves that oppression does not really exist.”

“But the true measure of a society’s freedom is how it treats its dissidents and other marginalized groups, not how it treats good loyalists.

“We shouldn’t want a society where the message is conveyed that you will be left alone only if you mimic the accommodating behavior and conventional wisdom of an establishment columnist.

“People are willing to dismiss fear of government overreach when they believe that those who happen to be in control are benevolent and trustworthy. They consider surveillance dangerous or worth caring about only when they perceive that they themselves are threatened by it.”

“Radical expansions of power are often introduced in this way, by persuading people that they affect just a specific, discrete group.”

“Governments have long convinced populations to turn a blind eye to oppressive conduct by leading citizens to believe, rightly or wrongly, that only certain marginalized people are targeted, and everyone else can acquiesce to or even support that oppression without fear that it will be applied to them. Leaving aside the obvious moral shortcomings of this position—we do not dismiss racism because it is directed at a minority, or shrug off hunger on the grounds that we enjoy a plentiful supply of food—it is almost always misguided on pragmatic grounds.

“But once the citizenry acquiesces to a new power, believing that it does not affect them, it becomes institutionalized and legitimized and objection becomes impossible. Indeed, the central lesson learned by Frank Church in 1975 was the extent of the danger posed by mass surveillance. In an interview on Meet the Press, Hendrik Hertzberg, who downplayed concerns about the NSA programs, nonetheless acknowledged that “harm has been done. The harm is civic. The harm is collective. The harm is to the architecture of trust and accountability that supports an open society and a democratic polity.

Psychological effects of mass surveillance.

“But mass surveillance kills dissent in a deeper and more important place as well: in the mind, where the individual trains him- or herself to think only in line with what is expected and demanded.”

“History leaves no doubt that collective coercion and control is both the intent and effect of state surveillance.”

“White and Zimbardo noted in their conclusion that the “threat or actuality of government surveillance may psychologically inhibit freedom of speech.” They added that while their “research design did not allow for the possibility of ‘avoiding assembly,’” they expected that “the anxiety generated by the threat of surveillance would cause many people to totally avoid situations.”

“But overwhelmingly, the effect of being watched is to severely constrain individual choice. Even in the most intimate of settings, within the family, for example, surveillance turns insignificant actions into a source of self-judgment and anxiety, just by virtue of being observed.”

“Subjects initially described the surveillance as annoying; however, they soon “got used to it.” What began as deeply invasive became normalized, transformed into the usual state of affairs and no longer noticed.”

“As the experiments showed, there are all sorts of things people do that they are eager to keep private, even though these sorts of things do not constitute doing “something wrong.”

If the FBI were permitted to listen to our conversations and seize our communications, a wide array of crime could conceivably be prevented and solved. But the Constitution was written to prevent such suspicionless invasions by the state. By drawing the line at such actions, we knowingly allow for the probability of greater criminality. Yet we draw that line anyway, exposing ourselves to a higher degree of danger, because pursuing absolute physical safety has never been our single overarching societal priority. Above even our physical well-being, a central value is keeping the state out of the private realm—our “persons, houses, papers, and effects,” as the Fourth Amendment puts it. We do so precisely because that realm is the crucible of so many of the attributes typically associated with the quality of life—creativity, exploration, intimacy. Forgoing privacy in a quest for absolute safety is as harmful to a healthy psyche and life of an individual as it is to a healthy political culture. For the individual, safety first means a life of paralysis and fear, never entering a car or airplane, never engaging in an activity that entails risk, never weighing quality of life over quantity, and paying any price to avoid danger.”

More thoughts on privacy.

“In sum, everyone has something to hide.

“Privacy is relational. It depends on your audience. You don’t want your employer to know you’re job hunting. You don’t spill all about your love life to your mom, or your kids. You don’t tell trade secrets to your rivals. We don’t expose ourselves indiscriminately and we care enough about exposure to lie as a matter of course. Among upstanding citizens, researchers have consistently found that lying is “an everyday social interaction” (twice a day among college students, once a day in the Real World).… Comprehensive transparency is a nightmare.… Everyone has something to hide.”

“A prime justification for surveillance—that it’s for the benefit of the population—relies on projecting a view of the world that divides citizens into categories of good people and bad people. In that view, the authorities use their surveillance powers only against bad people, those who are “doing something wrong,” and only they have anything to fear from the invasion of their privacy. This is an old tactic.”

“But that view radically misunderstands what goals drive all institutions of authority. “Doing something wrong,” in the eyes of such institutions, encompasses far more than illegal acts, violent behavior, and terrorist plots. It typically extends to meaningful dissent and any genuine challenge. It is the nature of authority to equate dissent with wrongdoing, or at least with a threat.”

“Nobody understood better than Hoover the power of surveillance to crush political dissent, confronted as he was with the challenge of how to prevent the exercise of First Amendment rights of speech and association when the state is barred from arresting people for expressing unpopular views.”

“The Court said that the First Amendment guarantees of free speech and free press are so strong that they “do not permit a State to forbid or proscribe advocacy of the use of force.” Given those guarantees, Hoover instituted a system to prevent dissent from developing in the first place.”

“COINTELPRO, was first exposed by a group of antiwar activists who had become convinced that the antiwar movement had been infiltrated, placed under surveillance, and targeted with all sorts of dirty tricks. Lacking documentary evidence to prove it and unsuccessful in convincing journalists to write about their suspicions, they broke into an FBI branch office in Pennsylvania in 1971 and carted off thousands of documents.”

“The National Association for the Advancement of Colored People, black nationalist movements, socialist and Communist organizations, antiwar protesters, and various right-wing groups. The bureau had infiltrated them with agents who, among other things, attempted to manipulate members into agreeing to commit criminal acts so that the FBI could arrest and prosecute them. The FBI succeeded in convincing the New York Times to suppress the documents and even return them, but the Washington Post published a series of articles based on them.

“Unsurprisingly, the tactic worked. In a 2013 documentary entitled 1971, several of the activists described how Hoover’s FBI was “all over” the civil rights movement with infiltrators and surveillance, people who came to meetings and reported back. The monitoring impeded the movement’s ability to organize and grow.

“COINTELPRO was far from the only surveillance abuse found by the Church Committee. Its final report declared that “millions of private telegrams sent from, to, or through the United States were obtained by the National Security Agency from 1947 to 1975 under a secret arrangement with three United States telegraph companies.” Moreover, “some 300,000 individuals were indexed in a CIA computer system and separate files were created on approximately 7,200 Americans and over 100 domestic groups” during one CIA operation, CHAOS (1967–1973).

“The bureau also used wiretapping to discover vulnerabilities, such as sexual activity, which were then deployed to “neutralize” their targets.

“During the Bush years, for example, documents obtained by the ACLU revealed, as the group put it in 2006, “new details of Pentagon surveillance of Americans opposed to the Iraq war, including Quakers and student groups.” The Pentagon was “keeping tabs on non-violent protestors by collecting information and storing it in a military anti-terrorism database.” The ACLU noted that one document, “labeled ‘potential terrorist activity,’ lists events such as a ‘Stop the War NOW!’ rally in Akron, Ohio.”

“The opportunity those in power have to characterize political opponents as “national security threats” or even “terrorists” has repeatedly proven irresistible.”

“In the last decade, the government, in an echo of Hoover’s FBI, has formally so designated environmental activists, broad swaths of antigovernment right-wing groups, antiwar activists, and associations organized around Palestinian rights. Some individuals within those broad categories may deserve the designation, but undoubtedly most do not, guilty only of holding opposing political views. Yet such groups are routinely targeted for surveillance by the NSA and its partners.”

“The NSA explicitly states that none of the targeted individuals is a member of a terrorist organization or involved in any terror plots. Instead, their crime is the views they express, which are deemed “radical,” a term that warrants pervasive surveillance and destructive campaigns to “exploit vulnerabilities.”

“Among the information collected about the individuals, at least one of whom is a “U.S. person,” are details of their online sex activities and “online promiscuity”—the porn sites they visit and surreptitious sex chats with women who are not their wives. The agency discusses ways to exploit this information to destroy their reputations and credibility.”

“As Jaffer pointed out, the NSA has historically, at a president’s request, “used the fruits of surveillance to discredit a political opponent, journalist, or human rights activist.” It would be “naive,” he said, to think the agency couldn’t still “use its power that way.”

How do spy agencies use the internet to attack “adversaries”?

“One PowerPoint slide presented by GCHQ surveillance officials at the 2012 SigDev conference describes two forms of attack: “information ops (influence or disruption)” and “technical disruption.” GCHQ refers to these measures as “Online Covert Action,” which is intended to achieve what the document calls “The 4 D’s: Deny/Disrupt/Degrade/Deceive.”

“In accompanying notes, the GCHQ explains that the “honey trap”—an old Cold War tactic involving using attractive women to lure male targets into compromising, discrediting situations—has been updated for the digital age: now a target is lured to a compromising site or online encounter.”

“Such government plans to monitor and influence Internet communications and disseminate false information online have long been a source of speculation. Harvard law professor Cass Sunstein, a close Obama adviser, the White House’s former head of the Office of Information and Regulatory Affairs, and an appointee to the White House panel to review NSA activities, wrote a controversial paper in 2008 proposing that the US government employ teams of covert agents and pseudo-“independent” advocates for “cognitive infiltration” of online groups, chat rooms, social networks, and websites, as well as off-line activist groups.”

Does mass surveillance help us catch bad people? 

“Surveillance cheerleaders essentially offer only one argument in defense of mass surveillance: it is only carried out to stop terrorism and keep people safe. Indeed, invoking an external threat is a historical tactic of choice to keep the population submissive to government powers.”

“That same month, Obama’s hand-picked advisory panel (composed of, among others, a former CIA deputy director and a former White House aide, and convened to study the NSA program through access to classified information) concluded that the metadata program “was not essential to preventing attacks and could readily have been obtained in a timely manner using conventional [court] orders.”

“The record is indeed quite poor. The collect-it-all system did nothing to detect, let alone disrupt, the 2012 Boston Marathon bombing. It did not detect the attempted Christmas-day bombing of a jetliner over Detroit, or the plan to blow up Times Square, or the plot to attack the New York City subway system—all of which were stopped by alert bystanders or traditional police powers. It certainly did nothing to stop the string of mass shootings from Aurora to Newtown. Major international attacks from London to Mumbai to Madrid proceeded without detection, despite involving at least dozens of operatives.”

“In fact, mass surveillance has had quite the opposite effect: it makes detecting and stopping terror more difficult. Democratic Congressman Rush Holt, a physicist and one of the few scientists in Congress, has made the point that collecting everything about everyone’s communications only obscures actual plots being discussed by actual terrorists. Directed rather than indiscriminate surveillance would yield more specific and useful information.”

“American dying in a terrorist attack is infinitesimal, considerably less than the chance of being struck by lightning. John Mueller, an Ohio State University professor who has written extensively about the balance between threat and expenditures in fighting terrorism, explained in 2011: “The number of people worldwide who are killed by Muslim-type terrorists, Al Qaeda wannabes, is maybe a few hundred outside of war zones. It’s basically the same number of people who die drowning in the bathtub each year.” More American citizens have “undoubtedly” died “overseas from traffic accidents or intestinal illnesses,” the news agency McClatchy reported, “than from terrorism.”

“After the trouble-free Olympics, Stephen Walt noted in Foreign Policy that the outcry was driven, as usual, by severe exaggeration of the threat. He cited an essay by John Mueller and Mark G. Stewart in International Security for which the authors had analyzed fifty cases of purported “Islamic terrorist plots” against the United States, only to conclude that “virtually all of the perpetrators were ‘incompetent, ineffective, unintelligent, idiotic, ignorant, unorganized, misguided, muddled, amateurish, dopey, unrealistic, moronic, irrational, and foolish.’” Mueller and Stewart quoted from Glenn Carle, former deputy national intelligence officer for transnational threats, who said, “We must see jihadists for the small, lethal, disjointed and miserable opponents that they are,” and they noted that al-Qaeda’s “capabilities are far inferior to its desires.”

Democracy & privacy.

“A population, a country that venerates physical safety above all other values will ultimately give up its liberty and sanction any power seized by authority in exchange for the promise, no matter how illusory, of total security. However, absolute safety is itself chimeric, pursued but never obtained. The pursuit degrades those who engage in it as well as any nation that comes to be defined by it.”

“While the government, via surveillance, knows more and more about what its citizens are doing, its citizens know less and less about what their government is doing, shielded as it is by a wall of secrecy.”

“In a healthy democracy, the opposite is true. Democracy requires accountability and consent of the governed, which is only possible if citizens know what is being done in their name. The presumption is that, with rare exception, they will know everything their political officials are doing, which is why they are called public servants, working in the public sector, in public service, for public agencies. Conversely, the presumption is that the government, with rare exception, will not know anything that law-abiding citizens are doing. That is why we are called private individuals, functioning in our private capacity. Transparency is for those who carry out public duties and exercise public power. Privacy is for everyone else.”

Closing quotes:

For guardians of the status quo, there is nothing genuinely or fundamentally wrong with the prevailing order and its dominant institutions, which are viewed as just. Therefore, anyone claiming otherwise—especially someone sufficiently motivated by that belief to take radical action—must, by definition, be emotionally unstable and psychologically disabled.

“At the heart of this formulation is an essential deceit: that dissent from institutional authority involves a moral or ideological choice, while obedience does not. With that false premise in place, society pays great attention to the motives of dissenters, but none to those who submit to our institutions, either by ensuring that their actions remain concealed or by using any other means. Obedience to authority is implicitly deemed the natural state.”

“In fact, both observing and breaking the rules involve moral choices, and both courses of action reveal something important about the individual involved. Contrary to the accepted premise—that radical dissent demonstrates a personality disorder—the opposite could be true: in the face of severe injustice, a refusal to dissent is the sign of a character flaw or moral failure.”

“The media’s desire to psychoanalyze members of generation W is natural enough. They want to know why these people are acting in a way that they, members of the corporate media, would not. But sauce for the goose is sauce for the gander; if there are psychological motivations for whistleblowing, leaking and hacktivism, there are likewise psychological motivations for closing ranks with the power structure within a system—in this case a system in which corporate media plays an important role. Similarly it is possible that the system itself is sick, even though the actors within the organization are behaving in accord with organizational etiquette and respecting the internal bonds of trust.

Pick Up A Copy of The Book Here

20. June 2014 by Miguel Barbosa
Categories: Curated Readings, Current Affairs | Leave a comment

Atlas of Public Stocks v 2.0

Hi Readers,

I recently updated the Atlas of Public Stocks. New features include:

  • Live filtering of companies by sector/industry/subindustry.
  • List view button which allows you to view results as a list (with company name and details).
  • Market-Caps in the descriptions for each public company. Market caps are in local currencies. Eventually, I would like to create a slider for selecting various market caps but first I need to standardize all currencies.

Let me know what you think. I’m sure there is much to improve.

Best Regards,

Miguel Barbosa

P.S. I’m finally settling in the Bay Area. New posts coming soon. Thanks for your patience.

17. June 2014 by Miguel Barbosa
Categories: SimoleonSense News | Leave a comment

SimoleonSense relocates to San Francisco Bay Area

Hi Readers,

I’m excited to announce that I have moved from Chicago to the San Francisco Bay Area. I am now living in Berekely, California. As always, I love getting to know readers on a personal basis. If you are in the area and interested in meeting up for a coffee/drinks please let me know.

Best Regards

-Miguel Barbosa

Editor of SimoleonSense

P.S. Moving from Chicago to Berkeley has taken up quite a bit of time and I apologize for the slow posts.


09. June 2014 by Miguel Barbosa
Categories: SimoleonSense News | Leave a comment

Lessons From Cable Cowboy John Malone

Many investors regard John Malone as having one of the best track records of capital allocation in the 20th century. Below are my curated excerpts from the book, “Cable Cowboy: John Malone And The Rise of The Modern Cable Business” by Mark Robichaux.

Mental Math:

“Guess at the answers,” he said. John gave him a perplexed look. “Guess before you figure the problems out,” Dan repeated. Uncertain at first, Malone quickly developed an intuition for engineering questions that called for empirical data. Malone was amazed at how quickly he could derive a number, how he could guess what waveforms would look like at the end of a circuit even before doing the underlying mathematics. This ability to make split-second calculations served him well throughout his school days, and it became the one weapon in his arsenal-to see the answers before others did-that gave him an edge over future rivals.”

Lessons From Consulting:

“Over time, Malone found that if he interviewed 30 people or so and listened intently, themes would emerge. The best ideas were sometimes hidden, or they were lost on senior executives.”

It was not rocket science, Malone quickly realized. You simply take the best ideas from anyone who has them, polish them, and serve them up to the chairperson.”

Always ask the question, `If not?'”

Crafting A Cable Strategy:

“Despite the explosion of new content, most operators of cable systems paid little attention to programming; it was merely a commodity that brought in new viewers, not a value chain all its own. But John Malone quickly saw a more important role for all the new channels popping up-they had a dual-revenue stream: from advertising and from payments made by cable systems based on how many subscribers each system had.”

“Turning it over in his mind, he suddenly realized the answer: Rather than just owning the cable that delivered the new programming fare, TCI needed to own a piece of the cable channels themselves, thereby sharing in a whole extra upside. A big operator like TO could give a new network a big head start, and as valuable as its laid wires were, if the cable industry kept growing, the new networks now launching could be even more valuable. By buying into networks, Malone thought, TCI could own both the pipe and the water flowing through it. The cable wire and the cable programming, if owned under one roof, could be leveraged off of each other to create innumerable efficiencies. Vertical integration of companies would become an awesomely powerful and controversial tool for Malone to use in building TCI. Malone arrived at a simple conclusion: He wanted to own as much of the programming as he did of the wire. TCI, which would eventually reach 20 percent of the households, would seek to own 20 percent of every programmer that came calling. “I want to be hedged all the way,” Malone told himself.”

Malone envisioned owning an entire portfolio of networks to supply his growing cable TV empire. And this was just the beginning.”

TCI launched Encore, a pay-movie channel, with a marketing gimmick that put a new spin on “The Godfather” and the offer that couldn’t be refused. To attract as wide an audience as possible, TCI gave away the service free to its subscribers for the first month. If subscribers did not want to receive the service, the burden was on them to inform TCI; otherwise, they would be billed for it from then on. The tactic, pioneered by book and record clubs, came to be known as negative-option billing.”

Telephone companies weren’t the only reason cable operators had for alarm. Another technology that had the danger of growing quickly was satellite-dish TV. Malone took precautions like any good monopolist “

Capital Allocation:

“media titans in the East tried frantically to outbid each other to wire the big urban markets, John Malone avoided the fray and waited for them to tire themselves out. TCI steadily expanded by buying suburban and rural systems at cheap prices, waiting until the mid-1980s to venture into urban areas.”

Malone was simply reaping the remains of a system someone else had already paid for and could not operate profitably. ”

Malone’s strategy was simple: Get bigger. After more than a decade at TCI, Malone could tally a cable system’s budget with precision and predict costs and returns with uncanny accuracy. Because of that insight and because of the company’s sheer size, TCI could now buy a cable company and begin to improve the performance dramatically within a few months. TCI could buy programming and equipment on the cheap, and it could get cheaper financing rates. Malone focused on long-term growth, eschewed dividends, and handsomely rewarded management. He enjoyed an extensive network of industry contacts, but when trolling for information with investment bankers and colleagues, he often found that he knew more than they did. ”

All the while, TCI had consistently failed to report any earnings. As the stock continued to climb, Malone pointed out that it was the accumulation of valuable assets over time, not the flow of reported after-tax earnings, that was making TCI shareholders so wealthy. “Forget about earnings. That’s a priesthood of the accounting profession,” he would preach, unrelentingly. “What you’re really after is appreciating assets. You want to own as much of that asset as you can; then you want to finance it as efficiently as possible.”

Bigger scale, higher risk. But risk was a function of skill and knowledge. If you know you can exert control on the outcome, Malone reasoned, the risk is far less than those who jump into a deal with no expertise or facts.”

Malone viewed himself as an investor and shareholder in each of these enterprises. It was not unusual for TCI to make straight financial investments in operators he deemed shrewd. ”

Despite the company’s healthy stock price, Malone didn’t put much faith in it. He always believed that disaster and ruin hung over his head, dangling by a single hair like the sword of Damocles. ”

It was classic Malone: Take a tiny, near worthless stock, fill it with small stakes in several companies, watch them grow, then trade them for stakes in even bigger, more secure companies. “

Management Style:

Malone did not believe in memos. No paper passed from his desk to underlings. No executive sought to curry favor or engage in the sort of Kremlinesque politics that causes ulcers in so many midlevel executives. Communication was direct, effective, and efficient. Every Monday morning, Malone sat with his closest executives at a broad round table, much as Magness had done, to figure a way to squeeze more out of TCI’s growing cable kingdom.”

It was, of course, much more complicated than that; what drove John Malone, always, was getting the best deal, and part of his motivation in these disputes was power-which side had it, and how it was used. ”

Malone seemed to relish the fight; he found comfort in a world of efficacy. He would never sacrifice his convictions to the whims of others, no matter what the price.”

Malone had known something about himself all along, that he was a deal maker, a strategist, a fund manager-anything but an operator. He loathed simply running a company, and now TCI was under what he saw as occupation of the federal government, shackled by an inordinate amount of federal regulation. He could not handle the duress of running a regulated monopoly for years to come.”

Malone accomplished this consolidation of power largely by doing what he always did: picking up the phone and reaching out to the other side to look for the common ground where he could put together a mutually agreeable deal. ”

“A guy who rises to the top of a big corporation and owns none of it is much more interested in control than he is in economics. It is just the nature of humanity. A guy who owns his business is used to control. He never has to fight for control. What he has to fight for is economics. But a bunch of entrepreneurs find it much easier to collaborate and create economic value.

Bob Magness, Malone’s Partner & Mentor:

“Magness learned to listen instead of talk, and within a short time he could read a customer like a poker player, anticipating what that person wanted from the deal moments into negotiation.”

“a quiet determination, free of the need for praise or encouragement, that seemed to give him the advantage over others.”

23. May 2014 by Miguel Barbosa
Categories: Curated Readings, Finance & Investing | Leave a comment

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