Skin in the Game: Why Your "Fund Manager" is a Fraud

 

Skin in the Game: Why Your "Fund Manager" is a Fraud

Let me tell you something, and pay attention, because it’s about your money, your future, and the sheer intellectual dishonesty that infects the very core of what they call "finance." They, the suits, the "experts" in their shiny offices,managing your hard-earned cash, are not just incompetent; they are operating under a system that incentivizes fraud. And I don't mean fraud in the legal sense, necessarily, but in the deeper, more ancient, more dangerous sense of operating without Skin in the Game.

You're told to invest, to trust the "professionals." They offer you a "fund," promising superior returns. How do they do this? By playing a rigged game, designed to extract wealth from you, the productive member of society, and transfer it to them, the parasitical "advisors."

First, the Management Fee. Two percent, they say. Or one, or even half a percent. Sounds small, right? Wrong. This is pure rent-seeking. They take this regardless of performance. Whether they make you money or lose you money, their yacht payments are secure. This incentivizes asset gathering, not risk management. A fool can gather assets; it takes wisdom to manage risk. But wisdom doesn't guarantee a steady stream of passive income. So they gather. They market.They talk. And they take. Where is their Skin in the Game? If they lose your money, do they give back their fees? Do they suffer alongside you? No. Their downside is capped; yours is not. This is pure asymmetry.

Then, the pièce de résistance: the Incentive Fee. "Twenty percent of the profits," they beam. "We only get paid if we perform!" Sounds fair, doesn't it? It’s a trick, an optical illusion for the unsuspecting. It’s an option on your portfolio, and you, the investor, are selling it to them for free.

Think about it:

• If the fund makes money, they take their 20% cut. They profit.

• If the fund loses money, they don't give you 20% of the loss back. They simply make nothing on top of their management fee.

This is the very definition of asymmetry of consequences. They participate in the upside; you own all the downside.Your pain is theirs, but their gain is also theirs. They can take wild, foolish risks with your money, knowing that if it pays off, they win big. If it doesn't, they just don't get the bonus this year. But don't worry, the management fee keeps coming.

And what about this "High-Water Mark"? "We won't charge an incentive fee until we've recovered previous losses," they promise. More deception. When a fund goes deep underwater, when the losses are too great to reasonably recover, what do these "managers" do? They simply shut down the old fund and open a new one. The high-water mark vanishes. Your losses are cemented, and they're back to collecting fees on a fresh slate. It's like a bad chef burning a meal, then simply getting a new kitchen and expecting you to pay for the next attempt. This is not how humans with Skin in the Gameoperate. A builder whose bridge collapses doesn't just get to build a new one and expect full payment. No, he faces the consequences.

Finally, the Benchmark. Oh, the benchmark! They pick an index, often one that has lower volatility or is simply differentfrom their own high-risk strategies. Then, when the market is booming, their inherently riskier portfolio easily "outperforms" this mismatched benchmark. And boom, incentive fees activated! It's like claiming to be a faster runner than a turtle simply because you're a cheetah. It's a dishonest comparison, designed solely to trigger their bonus. They exploit the relative volatility between their chosen strategy and the irrelevant yardstick. They are paid for luck, for general market beta, or for simply taking more risk than their benchmark, not for true skill.

How to Remedy This (Simple, Obvious, Ancient Wisdom)

My remedy is brutally simple, and it comes from millennia of human wisdom: Skin in the Game.

1. Mandatory Co-Investment: If a manager wants to manage your money, a substantial portion of their own personal wealth must be invested in that very same fund, and on the exact same terms as yours. Not just a token amount, but enough to hurt if the fund fails. This aligns interests. If they lose your money, they lose their own.

2. No Asymmetric Fees: Abolish the "2 and 20" model. If there's an incentive fee, it must be paired with an incentive penalty. If they outperform, they get a bonus. If they underperform, they pay you a penalty out of their personal co-investment. This creates symmetry. Or, even better, simply stick to a very low, transparent, performance-linked feethat actually decreases if they fail to meet specific, long-term, absolute targets (not relative to some arbitrary benchmark).

3. No Fund Closures to Reset High-Water Marks: If a fund goes underwater, the manager is chained to that fund until the high-water mark is genuinely surpassed, or they lose their co-investment. No reboots. No convenient disappearances.

4. Meaningful Benchmarks (or None at All): If a benchmark is used, it must truly reflect the risk and investment universe of the fund. Or, even better, focus on absolute returns net of inflation and a risk-free rate. You're trying to grow your wealth, not beat some arbitrary index that has no bearing on your life.

These simple rules would purge the system of charlatans. It would ensure that those who manage your money are true fiduciaries, with their fates truly intertwined with yours. It's not complicated. It's not academic. It's just common sense,applied with the wisdom of the ancients. If they don't have Skin in the Game, they are not to be trusted. Period.

Crisis Response Checklist: Democracy vs. Totalitarianism

 

Crisis Response Checklist: Democracy vs. Totalitarianism

This 12-question checklist allows observers to rate a government's crisis management approach based on its actions, moving from the accountable responses of a liberal democracy toward the repressive tactics of an authoritarian state.

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The Totalitarianism Risk Score (TRS)

For each question, assign a score from 1 (Most Democratic/Open) to 5 (Most Totalitarian/Closed). Sum the scores to get the final Totalitarianism Risk Score (TRS).

Score	Rating Description
1	Democratic/Transparent: Favors accountability and fact-based repair. (Corresponds to Levels 1-3 of the initial taxonomy).
3	Minimizing/Stonewalling: Uses legal ambiguity and media manipulation to control the narrative. (Corresponds to Levels 4-7 of the initial taxonomy).
5	Totalitarian/Repressive: Uses state power and fear to eradicate the truth and punish perceived enemies. (Corresponds to Levels 1-6 of the totalitarian taxonomy).

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The 12-Question Crisis Response Checklist

#	Question	Score (1, 3, or 5)
Q1	Acknowledgement: Did the leader offer a public, unreserved apology for the core misconduct or harm? (If yes, 1; If admitted only as a "technical error" or "oversight," 3; If denied absolutely or blamed on foreign enemies, 5)
Q2	Accountability: Was the responsible high-level official or leader immediately removed from power due to the evidence? (If yes, 1; If a low-level scapegoat was purged, 3; If no one was removed, or the accused was promoted, 5)
Q3	Truth & Evidence: Was the government's full internal evidence (e.g., meeting minutes, emails) made public to an independent inquiry? (If yes, 1; If stonewalled with "ongoing legal process," 3; If evidence was declared "un-personed" or destroyed, 5)
Q4	Whistleblowers: Were the initial accusers or journalists protected and praised, or were they silenced/pressured? (If protected, 1; If ignored or attacked (Level 5), 3; If legally intimidated, imprisoned, or tortured (Level 10), 5)
Q5	Media Coverage: Did state-affiliated media provide thorough, critical coverage of the scandal? (If yes, 1; If minimized or balanced with unrelated positive news (Level 7), 3; If coverage was dominated by propaganda overload/a "new truth" (Level 5T), 5)
Q6	Scope of Blame: Was the scandal confined to the specific act, or was it framed as an ideological plot against the state? (If confined, 1; If the accuser's motive was attacked, 3; If framed as "sabotage" or "revisionism" (Level 3T), 5)
Q7	Resolution: Did the government offer visible, measurable policy/systemic reform to prevent recurrence? (If yes, 1; If offered an internal review with no change, 3; If response involved increased internal security/control, 5)
Q8	Legal Interpretation: Did the government respond to the spirit of the law, or did it rely solely on technical, legalistic denials to mislead? (If spirit, 1; If used limited, technical denials (Level 6), 3; If an investigation was used to fabricate evidence against the victim (Level 6T), 5)
Q9	Dissent: Were dissenters, critics, or protestors treated with respect, or were their families also targeted for retribution? (If respected, 1; If ignored/marginalized, 3; If collective punishment was used against families/associates (Level 4T), 5)
Q10	Leader's Status: Did the leader appear capable of making errors, or was the leader’s infallibility a major defense against the charges? (If capable of error, 1; If relied on minimizing/normalizing (Level 3), 3; If defense relied on the Cult of Personality (Level 9T), 5)
Q11	Historical Record: Is the scandal documented accurately in public records, or has it been scrubbed from official history? (If documented, 1; If information is confusing/incomplete, 3; If the event has been "un-personed" from all records (Level 1T), 5)
Q12	Ultimate Consequence: What was the highest penalty for those involved in the scandal? (If demotion/re-education (Level 11T), 1; If firing/loss of public office (Level 1-2), 3; If forced public confession, imprisonment, or execution (Level 2T-4T), 5)

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Final Score and Rating Scale

Sum your 12 scores to get the final Totalitarianism Risk Score (TRS). The minimum score is 12; the maximum is 60.

Total Score (TRS)	Rating (1-5 Scale)	Interpretation (The Spectrum of Governance)
12–20	1 (Strong Democracy)	Crisis managed through accountability, apology, and visible reform. The cost of the scandal is primarily paid by the leader, not the system.
21–30	2 (Flawed Democracy)	Crisis managed through legalism, delay, and strategic deflection. Tactics like stonewallingand blaming the opposition are primary.
31–40	3 (Hybrid Regime)	Crisis managed through scapegoating, intimidation, and selective media suppression. The government is willing to sacrifice lower-level officials to save the elite.
41–50	4 (Authoritarian State)	Crisis managed through propaganda, weaponized investigations, and fear. The rule of law is used to punish critics, and the public is overwhelmed with "new truths."
51–60	5 (Totalitarian State)	Crisis managed through eradication, terror, and systematic violence. The truth is destroyed, the perpetrator is "un-personed," and the system is infallible.

Decentralized Convergence: Market, Data, and Citizen Injections to Break the Darwin Trap

Decentralized Convergence: Market, Data, and Citizen Injections to Break the Darwin Trap

The alternative approach, rooted in the Theory of Constraints (TOC) logic, is to focus on decentralized, self-reinforcing mechanisms that change the cost/benefit calculation for nations without requiring them to surrender fundamental sovereignty.

Here are three alternative, workable "Injections" designed to overcome the Darwin Trap by leveraging technology, market forces, and internal political dynamics.

Overcoming the Darwin Trap: Three Decentralized Injections

The goal remains to align Individual Rationality with the Global Optimum by making destructive behavior more expensive and cooperative behavior more beneficial, all without a single coercive super-body.

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Injection 1: The "Digital Earth" Accountability Protocol (DEAP)

This injection addresses the problem of transparency and trust by using decentralized, unassailable data to make non-cooperation globally visible and costly.

• Mechanism: Establish a global, open-source data infrastructure (using technologies like satellite imagery, remote sensing, and potentially distributed ledger technology/blockchain) to autonomously, continuously, and objectively monitor all high-impact global behaviors (e.g., carbon emissions, illegal fishing, deforestation, nuclear material production).

• Logic: Information is Power/Constraint. Currently, powerful nations can hide or dispute their destructive actions. DEAP removes the ability to hide or lie. By making environmental and security data immutable, universally accessible, and independently verifiable, the system forces the cost of non-cooperation to be borne via global reputation, financial risk, and domestic political pressure, rather than by an external enforcement body. A country doesn't "sign up" or "surrender power"; its activities are simply measured and reported as a fact of the physical world.

• How it Works: Any nation, NGO, or commercial entity could use this data to inform their own actions—be it an investor divesting from a polluting nation or citizens organizing against a government whose destructive behavior is now undeniable.

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Injection 2: The "Trade-Linked" Carbon/Sustainability Tariff (TL-CST)

This injection addresses the problem of economic incentives by turning trade policy into a self-adjusting mechanism that favors global optimization.

• Mechanism: Introduce a standardized, transparent Trade-Linked Carbon/Sustainability Tariff (TL-CST)applied at the border of participating nations. The tariff level is directly tied to the importing nation's established domestic standards and the exporting nation's verified performance (measured by DEAP) on environmental impact and human rights. It's effectively a border adjustment tax that internalizes global externalities.

• Logic: Market Forces Drive Compliance. Instead of an international body enforcing penalties, individual nations (or trade blocs like the EU) use their existing trade sovereignty to create economic pressure. If Nation A fails to meet global standards (high emissions, illegal fishing), its exports to Nation B face a higher tariff. This cost is borne by the exporting nation's producers, who will then pressure their own government for policy change to maintain competitiveness. The system is decentralized and leverages the most powerful constraint: access to global markets.

• How it Works: Nations compete not only on price but also on sustainability performance. The tariff is a financial incentive to clean up or cooperate, making "sacrificing" short-term, destructive growth (Individual Rationality) less profitable than pursuing sustainable growth (Global Optimum).

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Injection 3: The "Citizen-Sovereignty" Electoral Mechanism (CS-EM)

This injection addresses the problem of political will by introducing a dynamic that allows domestic populations to directly exert pressure on global issues.

• Mechanism: Focus on standardizing and promoting a global electoral practice where elected officials are legally bound to report annually on their government's compliance with self-declared international commitments (e.g., Paris Agreement goals, non-proliferation treaties). Furthermore, promote the inclusion of "Global Commons" referenda or ballot initiatives in national elections, allowing citizens to vote directly on specific, high-stakes global issues.

• Logic: Aligning Domestic Interests. In a democracy, political leaders are constrained by the will of their voters. By formally linking a leader's domestic mandate to their global accountability, this system allows the "global citizen" to exert political pressure through the domestic electoral process. Even in non-democratic nations, making international commitments a formalized report subject to public scrutiny increases the internal political cost for leaders who break promises, as it undermines their domestic legitimacy.

• How it Works: This bypasses the need for super-national coercion by empowering national electoratesto hold their own governments accountable for global commitments, making the "Individual Rationality" of the politician (getting re-elected/staying in power) align with Global Optimum.

A Universal Standard for Care: Applying Jess's Rule to All Service Sectors

 

A Universal Standard for Care: Applying Jess's Rule to All Service Sectors

Jess's Rule, a new patient safety initiative in England, establishes a clear, proactive approach for healthcare professionals. Named in memory of Jessica Brady, who tragically passed away from cancer, it mandates a "three strikes and rethink" protocol for General Practitioners (GPs). This rule formalizes the critical practice of reconsidering a patient's case after three appointments for the same or similar unresolved symptoms. While it's designed for clinical settings, the core principle behind Jess's Rule—a commitment to re-evaluation and persistent problem-solving—is a powerful model that can and should be applied across every service industry.

The fundamental goal of this rule is to prevent avoidable harm by encouraging a pause, a re-assessment, and a push for a deeper solution when initial efforts fall short. This isn't just a clinical imperative; it's a universal principle of quality assurance and customer care. Whether you're a financial advisor, a software developer, a mechanic, or a customer service agent, you are responsible for delivering a service that meets a client's needs. When those needs aren't met on the first, second, or even third attempt, a new approach is essential. Adopting this framework can build trust, improve outcomes, and enhance service standards across the board.

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The Three-Step Rule to Rethink Service

To universalize this powerful concept, we can distill Jess's Rule into a simple, three-step framework that any service professional can follow.

1. Acknowledge and Track: When a client returns with the same or a similar issue for the third time, it's a signal. Do not treat it as a new, unrelated problem. Acknowledge the history and track the previous attempts to solve it. This shows the client that you're listening and that their issue's persistence is a priority.

2. Pause and Re-evaluate: Stop the standard process. Acknowledge that the initial approach is not working. This is the "rethink" stage of Jess's Rule. Instead of simply repeating the same troubleshooting steps, take a moment to re-evaluate the situation from a fresh perspective. What have we missed? Could there be an underlying problem we haven't considered? Consider bringing in a colleague for a fresh pair of eyes. This collaborative approach can often uncover solutions that were previously overlooked.

3. Escalate and Act: Once you have re-evaluated the situation, it's time to take decisive action. This might mean escalating the issue to a senior specialist, recommending a more comprehensive diagnostic check (like a full system audit instead of a quick fix), or pursuing a different solution altogether. The goal is to move beyond the superficial and address the root cause, ensuring the problem is resolved for good.

This three-step process is not about assigning blame; it's about building a culture of relentless problem-solving and accountability. It transforms a frustrating, repetitive cycle into a structured, proactive effort to deliver genuine value and prevent avoidable failures. Just as Jess's Rule seeks to save lives, a universal service rule can save time, money, and customer relationships, ultimately elevating standards for all.

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Unmasking the Doublespeak: A Guide for Executive Clarity

 Unmasking the Doublespeak: A Guide for Executive Clarity

Good morning, leaders. In today's complex business environment, clarity is not just a virtue; it's a strategic imperative. As executives, your decisions rely on accurate information and transparent communication. Yet, lurking in many organizations is a subtle saboteur of truth: doublespeak.

William Lutz, the authority on this linguistic phenomenon, defines doublespeak as "language designed to evade responsibility, make the unpleasant appear pleasant, the unattractive appear attractive, basically its language designed to mislead while pretending not to." It's not always an outright lie, but a deliberate obfuscation that, if left unchecked, can corrode trust, paralyze decision-making, and foster a culture of dishonesty. As a management trainer, I urge you to sharpen your senses. Spotting doublespeak is a critical leadership skill.

Let's break down the four common types you'll encounter in the corporate jungle and how to recognize them:

1. Euphemisms: The Art of Softening Harsh Realities

This is perhaps the most common form of doublespeak, where unpleasant truths are dressed up in palatable words. It's designed to avoid direct confrontation with an unpalatable reality.

How to Spot It: Listen for phrases that sound overly polite or vague when a direct, simple word would suffice, especially around negative events or difficult topics.

Corporate Examples:

• Instead of: "We're laying off 20% of the workforce."

  • You hear: "We are undergoing a strategic headcount reduction to achieve optimal organizational right-sizing."

• Instead of: "Our profits dropped."

  • You hear: "We experienced a period of accelerated negative growth in the last quarter."

• Instead of: "We made a mistake that cost us millions."

  • You hear: "There was a sub-optimal resource allocation event that necessitated a re-evaluation of our fiscal trajectory."

• Instead of: "We're raising prices."

  • You hear: "We are introducing enhanced revenue generation opportunities for our premium offerings."

2. Jargon: The Overly Technical Smokescreen

Jargon is specialized language necessary for internal communication within a specific field. However, it becomes doublespeak when used unnecessarily to impress, exclude, or confuse those who don't share the same technical background. It makes simple concepts seem complex.

How to Spot It: When a simple idea is explained with a flurry of complex, industry-specific terms that don't add clarity but obscure it. If you feel like you need a dictionary for a routine update, it might be jargon-as-doublespeak.

Corporate Examples:

• Instead of: "Our team needs to work better together."

  • You hear: "We need to focus on synergistic optimization of cross-functional workflows to leverage our collective core competencies."

• Instead of: "We're looking at detailed customer reports."

  • You hear: "We are conducting a granular data analytics initiative to derive actionable insights from our consumer engagement matrix."

• Instead of: "This is a very important goal for the company."

  • You hear: "This is a mission-critical strategic imperative that will drive value-added propositions for all stakeholders."

3. Gobbledygook / Bureaucratese: The Word Avalanche

This type of doublespeak involves piling on words, using excessively long sentences, and making vague or circuitous statements to avoid directness, commitment, or responsibility. It's often seen when someone is forced to comment on something they'd rather not.

How to Spot It: If a sentence stretches on endlessly, is grammatically convoluted, and uses passive voice to avoid naming an agent, or when you finish listening and realize no concrete information was conveyed despite many words.

Corporate Examples:

• Instead of: "The project is delayed because we ran out of money."

  • You hear: "In the context of the evolving fiscal parameters and our commitment to holistic project lifecycle management, certain adaptive rescheduling initiatives were deemed necessary to ensure optimal resource utilization in light of unanticipated budgetary realignments."

• Instead of: "I can't answer that question."

  • You hear: "My current remit precludes me from offering a definitive articulation on that specific query, as the relevant data points are still undergoing robust validation protocols within a multi-tiered analytical framework."

4. Inflated Language: The Puffery Principle

Inflated language is used to make something simple sound grand, or to give an exaggerated sense of importance to individuals, roles, or situations. It's often about self-aggrandizement or rebranding.

How to Spot It: When job titles sound ridiculously grand for a basic function, or when mundane tasks are described with overly impressive verbs and nouns.

Corporate Examples:

• Instead of: "Sales clerk"

  • You hear: "Retail Client Engagement Associate."

• Instead of: "Brainstorming meeting"

  • You hear: "Proactive Ideation and Innovation Synthesis Session."

• Instead of: "Customer service representative"

  • You hear: "Client Relationship Optimization Specialist."

• Instead of: "I have some ideas."

  • You hear: "I'd like to present a strategic thought leadership framework for our consideration."

Why Executives Must Be Vigilant

Allowing doublespeak to fester in your organization has severe consequences:

• Impaired Decision-Making: You cannot make sound decisions on obscured information.

• Erosion of Trust: Employees and external partners lose faith in leadership that speaks in riddles.

• Reduced Accountability: Failures are masked, preventing valuable learning and growth.

• Cultural Decay: It fosters a culture where avoiding blame is prioritized over honesty and direct problem-solving.

How to Counter Doublespeak

As leaders, you have the power to change the linguistic landscape of your company:

• Demand Clarity: Make it known that you expect direct, simple answers. When you hear doublespeak, ask: "What exactly does that mean?" "Can you say that in plain English?" "Who is responsible for that action?"

• Model Simplicity: Communicate clearly and concisely yourself. Reward conciseness and discourage verbosity.

• Foster Accountability: Tie language directly to outcomes and responsibilities. Ensure that reports are factual and unambiguous.

• Listen Actively: Pay attention not just to the content of what's being said, but to how it's being said. Evasion, overly complex sentences, and excessive politeness can be red flags.

Your role as an executive demands an unwavering commitment to truth and clarity. By actively identifying and dismantling doublespeak within your ranks, you will cultivate a more transparent, accountable, and ultimately, more effective organization.