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TAO Asset Management by Eva Sagirova - 1M ago

My wife is “kind of/sort of” retiring at the end of this month and has accordingly begun the process of identifying new activities to fill the leisure hours she hopes to discover.   Her first of what I expect will be many new pastimes that she has endeavoured to master is the impossibly complex game of Contract Bridge.

To that end, she and a few friends signed up for a series of lessons on the grand old game at a local community hall.  Fearing being left in the dust in this potential passion, I have begun revisiting and upgrading my knowledge of the game as well.  It is not entirely new to me; in both her early days as a stay at home suburban Mom and then again later as a then active Senior, my mother had been quite keen on bridge, and through both a little osmosis and some actual instruction, the game is not entirely new to me.

Not only is it not new to me, but it is also an activity that is well suited to some of my more instinctive problem-solving skills.  Having worked in Structured Finance for 30 years, using basic probability calculations to predict future events is not a new concept to me.  When a few weeks ago I downloaded a very simple Bridge application for my iPhone and iPad, I quickly became addicted with the bidding and card playing strategies that it tested, and I began to think I was pretty good at it.

My wife, meanwhile, continued to attend her lessons, and was increasingly frustrated by the arcane and non-intuitive bidding conventions that she was not only being taught, but also asked to memorize.  I understood her frustration; while some of them are obviously attempts to create rules to replace the basic math of predicting expected distributions of cards among four hands, others are simply inexplicably arbitrary.  It seemed that the lessons were unduly complicating what was simply an exercise in dynamic probability calculations.

And then I got the new and more advanced app.  The one that not only facilitated play, but also provided both instructions and evaluation of each and every hand that I played.  That was when I discovered that I was not only not pretty good at it, I was in fact pretty bad.  At the end of each game, even when I made my contract, the program would critique both the optimization of my bids and how I played each trick.  And it invariably concluded that I fell well short of maximizing the points available to my computer partner and I by under- or incorrectly bidding, and that some obscene percentage of teams holding the same hands as my partner and I would have won at least one more trick than we had.  It was humbling, frustrating and puzzling.

So I set out to understand why this was so.  After all, although hardly a quant, I was pretty sure that I was properly evaluating the probable distribution of cards based on both math and the bidding process, and my ego could not accept that I was that far below average in my ability to do that.  I then began playing games in which I was using the apps ability to critique each potential bid prior to locking in any such bid, thereby optimizing my bids to reflect the standard to which the post-play review of the hand would subject me.  And that was when I discovered “the problem”.

Bridge is indeed about calculating probabilities and optimizing bidding and card play in the context of uncertainty as to the actual composition of the collective hand you share with your partner.  You do get some transparency into your partner’s hand through the bidding process, but it is limited in its specificity.  If your partner passes after your 1♣ bid , it is reasonable to assume that he has fewer than three clubs, because he almost certainly would have responded with 2♣ if that were not so.  If he responds to that bid with a bid of 1♥, you can reasonable assume that he has five or more hearts and that that is his longest suit because that just makes sense.  All helpful, and pretty much the best one could do in the context of the game.

Or so I thought.  When I started using the program to evaluate my bids before locking them in, I discovered that the program suggested a far less intuitive bidding pattern.  Each suggested optimal bid, I learned, has a meaning that is entirely untethered to any intuitive logic but rather to a convention that allows partners to effectively convey far more specific information about the composition of each other’s hands.  As a result, the performance that the program compared me to after each game was that result that would be obtainable if I had complete transparency with respect to my partner’s hand, which is only possible on the basis of the full memorization of a complex array of bidding conventions.

An example is the Stayman convention.  Where any player has opened with a bid of 1 no trump (NT), a player may respond with a bid of 2♣ that reflects nothing about what clubs may be in the bidding partner’s hand but is instead a coded question to his or her partner as to whether he or she has four or more cards in a major suit (♥or ♠).  If the answer is no, the convention dictates that the partner bid 2♦; if yes, 2♥or 2♠, as the case may be.

This is only one of many such conventions, the use of which can allow partners to effectively establish a complete and specific understanding of the other’s hand and therefore optimize both their bidding and, since the other partner’s hand is only revealed to the players generally when they are the successful bidder, their card play when they are seeking to thwart a bid by their opponents.  It is ingenious, but I hate it.

Why do I hate it?  Because it lionizes and rewards in a harmless way the inescapable tendencies in our society that, in more critical contexts, warp the meritocracy that is critical to social cohesion and productivity.  Bridge purports to be a game of skill in which players must use their calculation of probabilities in the context of high uncertainty to bid and fulfill contracts, but in fact it is far more critical to success to know the conventions that dramatically reduce those uncertainties and simplify those probability calculations.   A more expert holder of the skills that this activity purports to test that is not aware of the conventions that negate that advantage will perform more poorly than one who is demonstrably less expert but more in the loop on the coded communications that have developed around the game.

And so it is in may contexts.  Hiring decisions in business have long over-weighted a candidate’s knowledge of and comfort with social conventions above directly applicable subject matter expertise.  These sorts of conventions are what contribute to the over-representation of white heterosexual able-bodied males in, well, pretty much everything.  Like the Stayman convention, white males know that the question “what are your hobbies?” posed by another white male in a job interview generally means “do you golf?’, and that the response “I am an 8 handicap and I love to golf” really means “ I will be willing and able to assist you and our clients in justifying your and their golf outings during business hours”.   This convention permits the applicant that knows the convention to gain an advantage in both getting the job (bidding) and being effective with clients once they get it (playing the cards).

You might ask where the harm is in all of this.  I can learn and memorize the bridge conventions, and anyone can learn to play golf. But in both cases, that is not the skill set that the activity is meant to test and reward and is accordingly a drag on the utilization and development of the more relevant skills and knowledge that would best advance productivity.

I have stopped playing on my bridge app.  The knowledge that I would need to master to perform better is too narrowly applicable to waste my time on any further.  And when I am part of a hiring process, I will be more mindful of evaluating applicants solely on subject matter expertise and directly-relevant personal characteristics rather than their knowledge of and compliance with irrelevant conventions.  Less bridge, more bridges.

The post A BRIDGE TOO FAR appeared first on TAO Asset Management.

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TAO Asset Management by Eva Sagirova - 2M ago

Say what you will about the gender binary world that people my age grew up in.  Yes, it was myopic, oppressive, small minded and hurtful to many, but it was simple.  That is the attraction of categories; they allow for sorting, which is what we yearn for when we are trying to “sort out” a complex world.

That being said, for a time, just sorting things out between the binary genders presented issues.  Take athletics, for example.  In almost all competitions recognized as sports, women were just not competitive with their male counterparts.  Accordingly, sports began as competitions in various activities conducted among men and teams of men only, with women rarely competing, even among themselves.  In time, women demanded, and the world accepted, a comparable though unequal range of competitions for and among women, although the process of expanding and supporting the nature and number of these competitions has been slow as society has unwound its presumptions about what is both becoming and safe for the fairer sex.  Fast forward to 2019, in which, notwithstanding this ingrained resistance to the participation of women in sports, there is virtually no category of athletic competition open to men in which women are not competing among themselves.

Into this world steps Caster Semenya, a 28-year-old middle distance runner from South Africa, who has recently emerged as a dominant force in the 800-metre distance in women’s track.  Caster’s dominance in her chosen event has been impressive, but not unprecedented.  There have been women athlete’s in various Olympic sports who have been more extraordinarily dominant over the years.  What made Caster more noteworthy was that she shared with a small number of those dominant women’s athletes: a subtle but unmistakably more masculine build and appearance.

In the past, this observation has been associated with speculation about the use of performance-enhancing drugs that altered the hormonal chemistry of the athlete to mimic, to some extent, that of males.  Suspicion of the use of such drugs by a generation of East German women’s athlete’s in various disciplines during the 70s and 80s has since been confirmed, and their strikingly androgynous appearance is accordingly reflexively associated with cheating.

Caster Semenya, however, is entirely different.  Her apparent androgyny is neither denied nor vilified.  It has been widely reported that she is in fact intersex, possessing the XY chromosome characteristic of male gender but, by virtue of unique complications in the expression of that genetic coding, she is without external male genitalia.  She has been raised as a female and self-identifies as such.  She is not a cheater; she is just Caster.

Caster Semenya creates a vexing problem for women’s sport.  Women sport was created as a protected category of competition because of the profound and intractable differences in biology between men and women.  Adjusted for differences in height and weight that can almost as easily occur among men, elite women athletes are profoundly challenged in terms of their athletic capacity relative to their male peers.  Without the protected category of women’s sport, no women, including Caster Semenya, would have any ability to meaningfully compete for local, national or world titles.  This is not a construct of the patriarchy; women’s sport was demanded by and created for women in defiance of the patriarchy.  It is the voices of Caster’s competitors that has raised the issue of Caster’s status, not the reactionary whining of misogynists, homophobes and transphobes.

So, like it or not, and regardless of the political incorrectness of the concept, the athletics world finds itself faced with the task of defining what a woman is in the context of athletic competition.  However respectful it would be to ask only how one identifies oneself in the oversimplified gender binary construct, in the context of elite athletics, where even women enjoy financial opportunity as a deserved consequence of achievement, that clearly can’t be the test.  The genetic division drawn between individuals possessing ‘XX’ and ‘XY’ chromosomes can generally be defended, but, in exceptional examples like Caster’s, the expression of this seemingly categoric genetic difference can be significantly muted.  The presence or absence of male genitalia is equally inapt; what ever advantage it is that men enjoy as athletes I know for sure that it is not that appendage that accounts for it (or if it is, I somehow haven’t yet figured out how to use it to help me run faster).

Alas, we are then tossed into the murky world of hormone levels to draw this critical line.  What track officials know is that while women, like men, differ widely within their gender-specific range of testosterone levels, it is among successful women’s middle-distance runners that higher testosterone seems to be most relevant.  As a result, the International Association of Athletics Federations has determined that in these events (and, for now, only in these events, despite similar findings with respect to certain field events), an individual seeking to compete in the women’s category must not have a testosterone level higher than a specified maximum.  That maximum, it is worth noting, is at a level that is far outside of the high end of the normal range for women but beneath the low end of the normal range for men.

Caster Semenya’s testosterone level exceeds that stipulated maximum.  She is the first athlete to be required to take performance- (and likely health-) detracting drugs to participate in her best event in her chosen sport as a member of the gender with which she identifies.  Is that fair to Caster?  Absolutely not. But is there an alternative solution that both protects Caster Semenya’s right to compete as she is and preserves women’s sport as a protected category of athletic competition?

The post CASTER ADRIFT appeared first on TAO Asset Management.

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TAO Asset Management by Eva Sagirova - 3M ago

Today is the first day of argument in the court proceedings brought by the Ontario government challenging Ottawa’s constitutional authority to impose a carbon tax in this province.  The constitutional question is an interesting one, and it is certainly one upon which reasonable minds can differ.  Unfortunately, the same can’t be said of the public policy arguments against the concept of the carbon tax itself.

The court challenge will focus on the important but decidedly wonkish question of whether a carbon “tax” is within the taxing powers granted to the federal government under our Constitution.  On the actual substantive policy question that the federal carbon tax purports to address, the Ford government has not taken the position that climate change is a hoax, or even that it is an issue that is too intractable to merit legislative action in Ontario.  Instead, they have asserted that it is an issue that is better addressed through “smart” regulation than the creation of a market solution.

And that is fair, although, as Preston Manning has already observed, it is counterintuitive to hear a conservative (or Conservative) government espouse a preference for a prescribed regulatory solution over a solution that puts the creative problem-solving capacity of the market to work.  The problem is that regulatory solutions cannot be anything but the cloaked version of market solutions.  To be effective in reducing carbon emissions, regulations must either make low carbon alternatives less expensive, or incumbent high carbon technologies more expensive.

The Province of Ontario has already tried the former. The Green Energy initiative introduced by the Liberal government of Dalton McGuinty was just that; strategic subsidies that would quickly scale up the supply of renewable energy that would result in a costless transition of the Ontario economy to Green Energy.  The result: the creation of a network of inefficient wind and solar capacity that has added a large long-term cost component onto t a power grid that was already serviced with low carbon nuclear and hydroelectric sources.  No one can seriously propose trying that again.  And if these regulations are created to do the latter, how can they be fairer or more efficient than a revenue-neutral carbon tax?

If we are then left to choose a market solution, there are only two market mechanisms to reduce the burning of carbon: tax it or reduce supply to drive the price higher.  As the Ford government has already realized, taxes that nudge us away from ingrained and popular lifestyle practices are never popular.  Ironically, on this point, Doug Ford can find common cause with the environmental lobby.  It seems apparent that those looking to influence the public policy agenda have already conceded this reality.  Far greater noise and heat has been expended in supply side solutions (opposing pipeline approval or extraction projects) than on demand suppression (decrying consumer behaviour and habits).  Neil Young has never visited Pearson Airport at March Break to join protestors in the shaming of sun-bound airline passengers.  Vilifying corporate suppliers has long been a more marketable PR strategy than guilting consumers.

The only problem is that Canada is not Saudi Arabia.  Our oil sector is the high cost producer.  Making it more expensive to get our high cost oil to market will have no effect on the market price of oil.  At best, all it can do is defer the carbon-intensive extraction activities of producers in Western Canada to a day on which the marginal cost of extracting conventional oil rises closer to that of Oil Sands production.  No Canadian let alone American, European, Asian or African will fill his or her tank less frequently or turn down his of her gas furnace one degree because Oil Sands oil did not make it to tidewater other than those families in Alberta that must do so to stretch their EI cheque.

The Liberal government in Ottawa may have little to recommend it of late, but on this point, they are indisputably right.  Their simultaneous embrace of carbon pricing and ownership and development of the Trans Mountain Pipeline is both principled and farsighted. If Canada is to take a global leadership role in addressing climate change, let it be in addressing demand for carbon by imposing revenue-neutral taxes on consumption.  Undertaking a Quixotic and counterproductive supply-side assault on resource development has and will only unfairly victimize and alienate Western Canada without making any meaningful contribution to reducing carbon generation here or anywhere else.

The post DEMAND SIDE ECONOMICS appeared first on TAO Asset Management.

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A lifetime ago, in my late teens and early twenties, I was a very busy young man but somehow found time to indulge a fascination with conspiracy theories surrounding the assassination of US President John Kennedy.  That obsession provided a platform for discovering the intricacies of many arcane and sinister concepts, including the murky relationship between Organized Crime and the CIA, the anomaly of the supposed Pro-Soviet and Anti-Castro inclinations of Lee Harvey Oswald and, most fundamentally, the difference between bullet entry and exit wounds.  It is this latter expertise that I find myself reflecting upon as I consider the second of my examples of self-inflicted political damage.

You will recall that last month I described how the Trudeau Liberals had created a legislative discretion around criminal prosecutions of corporate wrongdoers that was virtually certain to create an ethical minefield for itself, independent of any opportunism or naivete that one would choose to ascribe to Jody Wilson Raybould.  The resulting wound is nasty and entirely self-inflicted, but, as a long-standing expert in such things, looks to me like an entry wound; neat and tidy.  Once the blood is cleared away it can heal and leave only a little mark reminding the party not to be so careless when handling guns.

This is in sharp contrast to the Brexit wound that the Conservative party in Britain has inflicted on itself.  That has blasted a hole in the party and sent blood and bits of skull and brain everywhere.  Healing that kind of wound is much more difficult.  Even if you can stop the bleeding, the bits and pieces that have been blown away are not easily refitted back into place let alone returned to function.  And all, again, because of careless handling of a firearm.

Back in 2015, then UK Prime Minister David Cameron (we coincidentally share two-thirds of the same name!) came up with a brilliant idea to address the minority caterwauling about the compromises that EU membership visited upon the UK: he would hold a referendum on leaving the EU to shut them up once and for all.  It was a little like when a parent packs a bag for a whining 8-year old that wants to run away rather than clean up his room and, lest we Canadians snicker too much at the foolishness of the strategy, not entirely dissimilar from the approach we have taken not just once but twice with respect to Quebec’s demands for independence.

The logic was simple:  such a disruptive proposal would meet certain defeat, and the United Kingdom Independence Party and anti-EU caucus members within the Conservative Party would thereafter see their platform evaporate as a question that had been asked and answered.  The question would also be simple: should the UK remain in the European Union, or should it leave?  However, much like asking the petulant 8-year old whether he wanted to continue to live under Mom and Dad’s rules or not, the question was a little too simple for an extremely nuanced issue.  While the resulting Yes vote was not razor thin (51.9%), it is not hard to imagine that it would have been materially different if it had included even just one of the multitudes of complexities that would obviously be part of giving effect to a Leave vote.  If the question had even just been “Do you support the UK leaving the EU even if it means breaching the Good Friday Agreement by establishing a hard border between Northern Ireland and the Republic of Ireland?”, it is not hard to imagine that the risk of a return to sectarian violence would have been enough to shift the outcome. It would not have been hard to add a couple of other equally stark provisos with respect to other foreseeable outcomes of the vote that would have been equally sobering.

There is an oft-cited axiom with respect to the cross-examination of witnesses in trials – never ask a question if you are not completely sure of the answer.  That concept should have saved this process.  After all, many if not most politicians are lawyers.  As the politicians now fruitlessly attempt to sort through the painful details and risks inherent in exiting the EU, the problem becomes clear.  There are obviously too many solicitors and not enough barristers in government.

The post A SELF-INFLICTED WOUND (PART II) appeared first on TAO Asset Management.

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Sometimes political scandals that evolve into full blown crises are borne of true skullduggery – Machiavellian intrigues engineered out of sight that remain forever opaque, masked by plausible deniability with respect to actions dragged into public attention only by the heroic efforts of intrepid reporters or incorruptible truth-tellers.  But other times, governments stumble into eminently foreseeable peril as a natural consequence of public policy initiatives that are proposed, debated and enacted in the full view of the public.  I would argue that it is far more often the latter than the former that is the true root of political embarrassments, and I think the reasons we think otherwise is two fold: we far prefer the good v. evil narrative of the hidden agenda and the fact that to admit that it was all done in plain sight makes the media and pundits, the theoretical watchdogs of our legislators, just a teensy bit complicit in the negligence.

A perfect example of this phenomenon is the current kerfuffle involving Jody Wilson-Raybould’s demotion and ultimate resignation from the Liberal Cabinet.  The media is framing this as a classic “he said, she said”.  Did the Prime Minister, directly or indirectly, seek to influence then Minister Wilson-Raybould in her capacity as Attorney General to enter into a Deferred Prosecution Agreement (“DPA”) with SNC Lavalin with respect to the charges relating to the allegations of a long history of bribery in Libya?  Did her refusal to yield to that pressure result in her demotion in the ensuing Cabinet shuffle?  The drama of this intrigue has been deflated a little bit because the Prime Minister has only sort of said “no” to the first question and “not entirely” to the second, but former Minister Wilson-Raybould has not yet provided her version of events beyond what can be presumed from her cryptic resignation. It sure sounds like the upshot of some nasty behind-the-scenes maneuvering.

Or is it?  Last February, the omnibus bill that was passed to implement the most recent budget included an amendment to the Criminal Code to create the possibility of DPAs as a means of resolving criminal charges brought against corporations.  No one has disputed that this provision was brought forth on the back of an extremely concerted lobbying effort by SNC Lavalin.  This provision was a last ditch effort by SNC Lavalin to avoid the automatic 10 year disqualification from bidding on government contracts that would have followed from their certain conviction on the outstanding charges.  By passing that legislation, the government knowingly inserted the ability if not the obligation upon the Attorney General to consider factors beyond the guilt or innocence of corporate wrongdoers in making decisions regarding their prosecution.

It is equally clear to all that those considerations were intended to be with respect to the economic consequences of such prosecutions.  That is evident in the known history of SNC Lavalin’s lobbying efforts, which were not at any point aimed at the Justice Minister but instead at ministers in economic portfolios.  The argument is most clearly evident in the most recent remarks of the Premier of Quebec, Legault, who even in the heat of the controversy is unapologetically demanding that a DPA with SNC Lavalin be immediately reconsidered because of the economic risk to his province should the destabilization of the revenue model of the company result in its acquisition by an entity outside of Quebec.

One does not need to find evidence of any meeting, memo, e-mail, ambiguous question or side-eye glance between then Minister Wilson-Raybould and the Prime Minister, anyone from the PMO, any Cabinet colleague or Liberal party operative to understand the position the passing of this legislation had put her in.  A loophole in the legislation governing criminal prosecutions had been urgently created by the government in which she served on the basis of very public lobbying by the corporation that was in immediate need of the exercise of the discretion that it permitted.  Then Minister Wilson-Raybould did not exercise that discretion.  Shortly thereafter, then Minister Wilson-Raybould was removed from her role as Attorney General.  When someone finally cottoned on to the conflict created by the passage of the DPA provision and raised reasonable questions about the dynamic that it created, she resigned from Cabinet and lawyered up.  I get it; I do not need to hear from Jody Wilson-Raybould on this one.

Last month, when then Ambassador Paul McCallum was musing that “it would be great for Canada” if the US dropped the extradition request with respect to Meng Wanzhou, perhaps he was just obliquely chiding the Chinese government for failing to effectively lobby for the creation of Dismissed Rendition Agreements with foreign states with respect to citizens subject to extradition proceedings.

More on another equally self-inflicted wound next month!

The post A SELF-INFLICTED WOUND (PART I) appeared first on TAO Asset Management.

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Who speaks for the disenfranchised?  In an era that is rightfully and finally turning its attention to reconciliation, this is a question that North American society is grappling with on a regular basis.  As a general rule, the often unsatisfactory but intellectually correct answer lies in the existing modes of political representation.  States are governed in accordance with a Constitution which defines the terms under which the governed agree to be bound by the terms of whatever authority has been created to make decisions on behalf of the collective, be that a democracy, monarchy or autocracy.  Those terms can and usually do include provisions under which the Constitution itself can be updated, but it is also almost always the case that the terms under which the rules can be changed are fairly onerous, as we can see from the American challenges in introducing gun control legislation in a country that constitutionalized the right to bear arms.

So Constitutions are marvelous things.  They document the terms under which a population has agreed to form a state, and they provide minimum guarantees of rights and processes that immigrants can evaluate in their decision to seek to join such a state.  So everyone has been provided for, right?  Not quite.  The US has a large population that are the descendants of people who did not make an even remotely voluntary decision to subscribe to the Constitution.  They were brought to the country on slave ships, and never had any say in the subsequent adoption of the Constitution that never even recognized them as individuals to whom the benefits of that document accrued until the passage of the 13th, 14th and 15th amendment to the Constitution following the end of the bloodiest Civil War in the history of the world.  Since that time, all African-Americans, including those descended from former slaves have struggled to find a truly representative voice in the political system that they neither had a role in creating nor provided their consent in joining.

As difficult as that experience has been and continues to be, Canada finds itself with an even more difficult integrative exercise.  By the time of the Civil War, no American slave had been born outside of the US and the institution of slavery.  They had accordingly never participated in an alternative collective governance model that even purported to be consensual or under which they had agreed to the imposition of restrictions on personal liberty in exchange for collective benefits.  That was and is not true of Canada’s Indigenous population.  Those populations lived in functioning communities that had their own unique and long established governance models.  Colonial powers purported to honour their status as individual nations by using treaties, not conquest, to establish the terms under which each would assert sovereignty over land and people.  However unreasonable or incomplete those treaty bargains may have been, there is no escaping the central fact that Colonial governments never purported to entirely extinguish the sovereignty of Indigenous peoples.  Ignore, subvert and denigrate certainly, but never extinguish.

So Canada finds itself in an interesting position in this era of reconciliation, particularly as it relates to resource development.  Canadian courts have imposed upon commercial interests the obligation to consult with First Nations with respect to the development of lands in which they have an historical connection.  But who speaks for such nations?  In the recent case of the Coastal GasLink natural gas pipeline, TC Energy, the developer of the new pipeline, has not only consulted with but obtained the consent of the elected band councils of each of the clans of the Wet’suwet’en nation of Northern BC to the proposed development.  Nonetheless TC Energy finds itself effectively hamstrung by protests and blockades on the proposed site led by the hereditary chiefs of many of those same clans.

Asked to assess the legitimacy of each of these purported representatives of these Indigenous populations, it is a fair guess that most Canadians would favour the elected representatives.  But those elected councils derive their authority not from a Constitution consented to by the governed but from a governance model imposed under the terms of the Indian Act by representatives of those that hope to do business with the governed.  Are they more representative than hereditary chiefs?  Maybe, probably, but that is for the governed to decide.

What this really says is that each First Nation needs a Constitution that creates a mechanism through which their participation in consultations can be governed.  This exercise in nation building cannot be led by even the most well-meaning of non-Indigenous advisers and allies.  Fortunately, the recent eruption of reconciliation initiatives has revealed that there is no shortage of Indigenous leadership with expertise and interest in this sort of project.  To capitalize on the opportunities for truly inclusive economic development presented by this era of consultative reconciliation, this process has to begin yesterday.

The post NATION BUILDING ON THE FLY appeared first on TAO Asset Management.

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Canada has found itself, reluctantly, in the midst of a major diplomatic row with China.  Acting in accordance with its extradition treaty obligations, Canada arrested Huawei CFO Meng Wanzhou as she was connecting to another flight at Vancouver Airport.  After 11 days in detention, she has received bail, but not before, in a remarkable coincidence, Michael Kovrig, a Canadian citizen and former diplomat and current Senior Advisor to an international NGO, has disappeared in Beijing.  Chinese officials have not confirmed his arrest but have cryptically observed that the NGO for which he works is not registered in China and therefore any activity on its behalf would be illegal.

So what is this all about?  It seems that the US Justice Department has determined that HSBC cleared transactions through the US banking system that included proceeds from sales of cell phones to Iranian interests in contravention of the recently re-imposed US trade sanctions.  That the US takes this sort of breach seriously is evidenced (sort of) by the severe economic sanctions placed upon another Chinese technology company, ZTE, in the context of similar activity a year ago.  I say sort of because in the end ZTE was rescued from extinction by President Trump in the context of a softening of Chinese positions in the still-ongoing trade war with the US.

So what do HSBC’s breaches have to do with Meng Wanzhou?  It sounds like the transactions that gave rise to the breach by HSBC were conducted by Skycom, a Hong Kong-based entity doing business with Iranian interests.  Meng Wanzhou was at one time on the board of Skycom, but not at the time of the impugned sales transactions.  However, it is alleged that Meng Wanzhou made representations to HSBC and other banks operating in the US that Huawei was not related to Skycom, and it is these fraudulent representations that give rise to the extradition request from the US.  As a strictly factual matter, things look bad for Meng Wanzhou; journalists have already discovered that Skycom’s registered office shares an address with Huawei’s Hong Kong office and that Skycom’s e-mail addresses are on Huawei’s internet domain.

Now the fact that these two damning facts were so quickly discoverable by mere journalists suggest that whatever deception Meng Wanzhou may have subjected HSBC to, they might in fact be guilty of a certain laxity in their own independent due diligence.  Furthermore, it is hard to understand how the reality of Huawei’s effective ownership of Skycom could have excused any alleged breach by HSBC in clearing transactions effected in breach of the US sanctions on Iran.  One could even speculate that the far more practically relevant fact underlying Meng Wanzhou’s arrest is not these alleged misrepresentations or her role as CFO of Huawei, but rather the fact that she is the daughter of Ren Zhengfei, the founder of Huawei with a history as replete with achievements within the Communist Party and Chinese military as it is with business triumphs.

But never mind that for now.  The US has until January 9th to clear up these gaps in support of their extradition demand.  In the meantime, Meng Wanzhou will suffer in one or both of her Vancouver mansions with the indignity of an electronic ankle bracelet while President Trump presses whatever leverage he can out of this affront in the context of his increasingly fraught trade negotiations with Chinese President Xi Jinping.  Smart money says the resolution of the trade dispute will be happily concluded by January 9th, Meng Wanzhou will have a pleasant holiday in her one-time home city of Vancouver and will in the New Year return to China and to Huawei with nothing more than a little ankle chafing.

Let’s hope the whole experience is as transparent, pleasant and quickly resolved for Mr Kovrig.  Somehow I doubt it will be.

Merry Christmas!

The post CAUGHT IN THE CROSSFIRE appeared first on TAO Asset Management.

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TAO Asset Management by Eva Sagirova - 8M ago

“Why do you support Fascists?”

That was the question you asked me when our eyes met outside Roy Thomson Hall on the evening of November 2nd.  We had both been standing in the cold for over two hours, I to get past the security checks before going inside to attend the Munk Debate between former Trump advisor Steve Bannon and former Bush speechwriter David Frum on the topic of the future of Populism versus Liberalism as the overarching ideology animating the future of Western politics and you to voice your opposition to those who would give a platform to the ideology that has emboldened the supporters of Donald Trump and many other Far Right populist movements in both Western and Emerging democracies.

You asked me a question, and a reasonable one.  After two hours of chanted insults, it was actually rather welcome.  Given that we were now in the slowest moving portion of the line just prior to entrance, and at the point at which the margin between the barricade holding back the protestors and the line was the narrowest, I both wanted to answer and felt you deserved an answer.

What I wanted to say was that I do not support Fascists, nor do I support those that knowingly curry favour with Fascists for political ends.  I can tell you that in the debate that I did eventually get in to see, Steve Bannon denied the former but conceded the latter.  That he added that he would also gladly curry the favour of the fervently anti-globalist branch of Bernie Sanders supporters did not persuade me that his expedient tolerance of Nazi-inspired White Supremacists was harmless.

If I was there in support of anyone, it was in support of David Frum, and I admit my support was at least 50% personal as opposed to political.  You see, David Frum and I were classmates in a small Toronto high school, and while we might not have then or since been the closest of friends, I have respect for his intellect and decency even if we disagree politically (interestingly, in high school his politics would have been too Left for my liking, and as an adult too Right for my extreme centrist inclinations).  Yes, he does claim authorship for the “Axis of Evil” speech and he did support the Iraq War for which it served as the cri du couer, but despite the horrible chain of events that that misguided policy initiated, it was sadly the product of very traditional US foreign policy and not the first spasms of American Fascism.

But maybe I am taking your question too literally.  Maybe you are asking why I would support a debate between an arguable Fascist and an arguable Neo Con.  Is that really what constitutes the breadth of the political spectrum for comfortable white males these days, you might ask?  Fair question, and despite the ability to fall back on my high school relationship with David Frum, I thought about that as well.  Although a debate between Elizabeth Warren and Steve Bannon would undeniably be a fairer representation of the chasm of American political discourse these days, it would be certain to be one in which there would be much heat and no light, with those in the critical centre of the political spectrum left feeling abandoned.  The rise of the Populist Right is too worrisome to be left to the hilarious polemics of Bill Maher panel.  Seeing the ideology of the Populists rejected by the Neo Cons should be both telling and comforting.  The fire that burns so hot on the extreme Right burns out before it even reaches the middle.  And on that score, both you and I should take comfort from the result of the debate.  Even a crowd of Toronto’s finest Fascists (including noted Nazi firebrand Rick Mercer) rejected Bannon’s projection of a Populist future 72 – 28 % both before and after the debate.

But perhaps by “support” you meant financial support.  At a hundred Canadian dollars a ticket, the event undoubtedly put a few American dollars in Steve Bannon’s pocket.  But from what I read, Steve doesn’t need the money, and besides, according to Wikipedia, Bannon owns a slice of Seinfeld residuals that he received in his prior life as a Hollywood producer.  If true, the energy invested in denouncing the Munk Debate appearance fee might have been better directed to a boycott of Seinfeld reruns.

I guess there was a lot I would have wanted to say, and I doubt we would have had time to exchange views on all of that.  But then again, we never even started to exchange views.  When I moved toward you to answer, you yelled “F*** off, Nazi” and gave me a double middle finger salute.

I guess the question was rhetorical.

The post RHETORICAL QUESTIONS appeared first on TAO Asset Management.

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TAO Asset Management by Eva Sagirova - 9M ago

We have all heard about confirmation bias, the natural but generally unhelpful tendency that we all have that leads us to interpret new evidence with respect to any topic as confirmation of one’s existing beliefs or theories. Too often these days, confirmation bias is the principal driver of an increasingly polarized political culture.

The animus of confirmation bias undoubtedly had much to do with Brett Kavanaugh finding himself before the US Senate Judiciary Committee addressing events that had allegedly occurred 36 years ago when he was a seventeen-year-old high school student.  With very few exceptions, those that believed Dr. Ford’s account of the events of that night so long ago were those who most feared the implications for the advancement of progressive issues in the context of a Supreme Court that included then Judge Kavanaugh.  Those that were most willing to accept his denial of Dr. Ford’s account were those most buoyed by the prospect of a court that was more restrictive in their interpretation of the Constitution.  In the absence of corroboration of the facts of the allegation, confirmation bias was really all that prevailed.

In applying their confirmation bias, commentators on both sides found much in the manner of Dr. Ford and Judge Kavanaugh’s testimony to buttress their support of one or to dismiss the other.  Dr. Ford was too doe-eyed and vague; Judge Kavanaugh was too aggressive and indignant.  But wouldn’t one be expected to be a little uncertain as to detail recounting events from so long ago, even, or perhaps especially, if they had been so traumatic?  And in the case of Judge Kavanaugh, if he believed the allegations to be wholly untrue as he emphatically stated, the vehement tone of his denial of those allegations was understandable, and not without precedent.

In 1991, then Federal Court Judge Clarence Thomas was faced with allegations of sexual harassment by former aide Anita Hill during the confirmation proceedings for his own ultimately successful appointment to the Supreme Court.  The facts in dispute between Justice Thomas and his accuser were similarly uncorroborated but related to interactions far more recent and related to Justice Thomas’ behaviour as an adult in a professional context.   Justice Thomas was no less indignant than Justice Kavanaugh in his denial of the accusation, likening it to “a high-tech lynching” and clearly tying it to underlying racist opposition to his elevation to the Supreme Court.

However, what distinguishes Justice Thomas’ emotional retort to the accusation and Justice Kavanaugh’s equally intemperate utterances to his accusers lies in the substance of what each candidate alleged.  Racism, Justice Thomas argued, was what underlay the effort to discredit him.  For Justice Kavanaugh, it was “a political hit” motivated by “pent-up anger over the results of the 2016 election” and “revenge on behalf of the Clintons” and funded by “left-wing opposition groups”.

Interestingly, one could argue that Justice Kavanaugh’s analysis is likely more accurate not only in the context of his situation, but also that of Justice Thomas 27 years earlier.  Racism, no doubt, was a factor of some people’s willingness to weigh in favour of Anita Hill’s recollection of her interactions with Justice Thomas, but it is certain that far more were swayed by their political affiliation.  After all, in both cases, the final Senate vote count for confirmation fell almost entirely along party lines.

But Justice Thomas did not aim his angry rebuke of his opponents at political partisanship, although it is highly unlikely that the thought didn’t occur to him.  Far more likely is that he recognized that if his candidacy was to be confirmed, he could not compromise his impartiality as a jurist in the highest court in the land.  Little harm can be done to the concept of judicial impartiality if racists fear that they and their causes will face a biased adjudicator should they seek redress in the courts.  But what of the Clintons, their friends and allies, or Democrats in general, appearing before a Supreme Court that includes Justice Kavanaugh on its panel?

Candidates nominated for elevation to the Supreme Court in both the US and Canada will inevitably reflect the ideological bent of the government that has advanced their nomination.  It is always incumbent on those nominees to convince those confirming their nomination and the country itself that those inclinations are rooted in reason and knowledge and not pure partisanship.  Whatever his failings, then Judge Clarence Thomas understood this requirement.  Justice Kavanaugh did not.  His response to confirmation bias was confirmation of bias, and for this reason alone, his candidacy should have failed.

The post CONFIRMATION BIAS appeared first on TAO Asset Management.

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The kerfuffle surrounding the recent announcement of Doug Ford’s intention to invoke the notwithstanding clause of the Canadian Charter of Rights and Freedoms is an interesting one.  Usually when the Right and Left square off on some issue of the day, it is the product of one of those classic conflicts of competing sacrosanct principles; usually freedom of speech versus the equality rights of one of the many groups recognized and protected by the Charter.  But in this case, each side is basing their support or opposition to this government action as a defence of the same fundamental right, that of democracy itself.

Pointing to the recent and convincing electoral triumph of the Conservatives under his leadership, Mr. Ford is outraged by the action of the Ontario Superior Court to enjoin the legislation that would reduce the number of Toronto City Council seats from 47 to 25.  “Do we not live in a democracy?”, he blusters.  Meanwhile, opponents of the legislation salute the injunction that was issued largely based on the lack of consultation with any and all interested parties before imposing the new municipal governance structure.  “The judge has upheld the fundamental principle of democracy!”, they crow.

Truth is, Ontarians don’t live in a democracy.  That is not a problem; no nation in the world is a true democracy, because no one would want to live in a pure democracy.  We live in a Constitutional Democracy, meaning that all citizens implicitly agree to submit to the will of the majority on the condition that the majority be obligated to honour certain fundamental guarantees with respect to the rights of the minority.  That is what our Constitution, including the Charter of Rights and Freedoms, does.  Doug Ford’s impressive majority doesn’t override the right of the courts to rule on whether legislation properly honours the guarantees provided to every minority as part of their agreement to otherwise accept majority rule.

But we also live in a Representative Democracy, which means that all citizens, even citizens with a significant interest in a particular piece of legislation, do not have an individual right to be heard on that issue unless such an obligation to consult has been legislatively or regulatorily hardwired into an administrative process (a la the Northern Gateway Pipeline approval process).  No such right exists in the context of the exercise of the provincial government’s right to legislate with respect to the composition and structure of municipal governments in Ontario.

So here we are in a dispute between those who believe that we live in an unfettered Representative Democracy and those who believe that we live in a Constitutional Democracy that effectively obliges the government of the day to consult on all matters within its jurisdiction to legislate.  The courts have found in favour of the latter position.  There are certainly grounds for appeal of that finding, and for precedent reasons the Ford government would be wise to exercise its right of appeal.

But that is only part of what they intend to do.  They are also going to invoke the fail safe created in the 1982 Constitutional repatriation exercise that was required to get all of the provinces onside that allows any government to impose legislation notwithstanding a finding that it is not in accordance with the Charter of Rights and Freedoms.  While the provision is silent on when it can be invoked, it has always presumed that it would only be used in circumstances in which the urgency of the legislation justifies the temporary abridgement of guaranteed rights.  I say temporary, because such overrides are only effective for five years form the date on which the government has exercised that right.  Of course, it is also always presumed that the invocation of such an undemocratic power would be an act for which it could and would be held accountable in the next election.

The Ford Government is invoking the notwithstanding clause because the municipal election that they are looking to transform by the reduction of available seats is just over a month away.  Any successful appeal would be irrelevant to the formation of the Toronto’s next City Council, and thus could only affect the next municipal election that would occur only after the end of the term of the current provincial government.  This certainly sounds politically urgent, but is resolution of the actual public policy issue really that urgent?  The savings to even Toronto residents of a reduced Council is negligible in the context of the overall municipal budget.  The effectiveness issues seem to involve a trade off between the efficiency of the government process versus the likely decreased effectiveness of a smaller number of councillors’ offices at addressing the many specific city service concerns of residents.  Clearly a Council of one would deliver the most efficient legislative process and a council of 100 would provide more effective management of individual ratepayer concerns, but what the optimal number to balance these two requirements is a tricky one that might persuade a responsible government to consult broadly, not because they are required to by law, but because it is prudent.

The exercise of the notwithstanding clause is always problematic, but it is a provision that was negotiated in the Constitution.  One would expect that it would be invoked in only the most urgent and demonstrably democratically justifiable circumstances.  Indeed, the only three uses of the clause to date have either been of demonstrable urgency (Saskatchewan’s Public Service back to work legislation in 1986 and funding of non-Catholic students in Saskatchewan Separate Schools in May of this year) or a fundamental public policy position that had been expressly promised in an election campaign (Quebec’s 1988 introduction of French language signage laws). Even if the Ford government had campaigned on the specifics of the proposed legislation in the spring and the court had invoked the Charter in the fall to subvert the will of the government, the urgency of this matter would still not seem to justify the invocation of the notwithstanding clause.  But of course, that is not the case here; the size of the Toronto City Council was never mentioned in the recent provincial election.

Now, if the court’s overrule any legislation passed to effect the well publicized “buck-a beer” promise…

The post DEMOCRACY NOTWITHSTANDING appeared first on TAO Asset Management.

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