Private Equity and Corporate Governance. Thought of the Day 109.0

The two historical models of corporate ownership are (1) dispersed public ownership across many shareholders and (2) family-owned or closely held. Private equity ownership is a hybrid between these two models.

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The main advantages of public ownership include giving a company the widest possible access to capital and, for start-up companies, more credibility with suppliers and customers. The key disadvantages are that a public listing of stock brings constant scrutiny by regulators and the media, incurs significant costs (listing, legal and other regulatory compliance costs), and creates a significant focus on short-term financial results from a dispersed base of shareholders (many of whom are not well informed). Most investors in public companies have limited ability to influence a company’s decision making because ownership is so dispersed. As a result, if a company performs poorly, these investors are inclined to sell shares instead of attempting to engage with management through the infrequent opportunities to vote on important corporate decisions. This unengaged oversight opens the possibility of managers potentially acting in ways that are contrary to the interests of shareholders.

Family-owned or closely held companies avoid regulatory and public scrutiny. The owners also have a direct say in the governance of the company, minimizing potential conflicts of interest between owners and managers. However, the funding options for these private companies are mainly limited to bank loans and other private debt financing. Raising equity capital through the private placement market is a cumbersome process that often results in a poor outcome.

Private equity firms offer a hybrid model that is sometimes more advantageous for companies that are uncomfortable with both the family-owned/closely held and public ownership models. Changes in corporate governance are generally a key driver of success for private equity investments. Private equity firms usually bring a fresh culture into corporate boards and often incentivize executives in a way that would usually not be possible in a public company. A private equity fund has a vital self-interest to improve management quality and firm performance because its investment track record is the key to raising new funds in the future. In large public companies there is often the possibility of “cross-subsidization” of less successful parts of a corporation, but this suboptimal behavior is usually not found in companies owned by private equity firms. As a result, private equity-owned companies are more likely to expose and reconfigure or sell suboptimal business segments, compared to large public companies. Companies owned by private equity firms avoid public scrutiny and quarterly earnings pressures. Because private equity funds typically have an investment horizon that is longer than the typical mutual fund or other public investor, portfolio companies can focus on longer-term restructuring and investments.

Private equity owners are fully enfranchised in all key management decisions because they appoint their partners as nonexecutive directors to the company’s board, and some- times bring in their own managers to run the company. As a result, they have strong financial incentives to maximize shareholder value. Since the managers of the company are also required to invest in the company’s equity alongside the private equity firm, they have similarly strong incentives to create long-term shareholder value. However, the significant leverage that is brought into a private equity portfolio company’s capital structure puts pressure on management to operate virtually error free. As a result, if major, unanticipated dislocations occur in the market, there is a higher probability of bankruptcy compared to either the family-owned/closely held or public company model, which includes less leverage. The high level of leverage that is often connected with private equity acquisition is not free from controversy. While it is generally agreed that debt has a disciplining effect on management and keeps them from “empire building,” it does not improve the competitive position of a firm and is often not sustainable. Limited partners demand more from private equity managers than merely buying companies based on the use of leverage. In particular, investors expect private equity managers to take an active role in corporate governance to create incremental value.

Private equity funds create competitive pressures on companies that want to avoid being acquired. CEOs and boards of public companies have been forced to review their performance and take steps to improve. In addition, they have focused more on antitakeover strategies. Many companies have initiated large share repurchase programs as a vehicle for increasing earnings per share (sometimes using new debt to finance repurchases). This effort is designed, in part, to make a potential takeover more expensive and therefore less likely. Companies consider adding debt to their balance sheet in order to reduce the overall cost of capital and achieve higher returns on equity. This strategy is sometimes pursued as a direct response to the potential for a private equity takeover. However, increasing leverage runs the risk of lower credit ratings on debt, which increases the cost of debt capital and reduces the margin for error. Although some managers are able to manage a more leveraged balance sheet, others are ill equipped, which can result in a reduction in shareholder value through mismanagement.

Gothic: Once Again Atheistic Materialism and Hedonistic Flirtations. Drunken Risibility.

 

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The machinery of the Gothic, traditionally relegated to both a formulaic and a sensational aesthetic, gradually evolved into a recyclable set of images, motifs and narrative devices that surpass temporal, spatial and generic categories. From the moment of its appearance the Gothic has been obsessed with presenting itself as an imitation.

Recent literary theory has extensively probed into the power of the Gothic to evade temporal and generic limits and into the aesthetic, narratological and ideological implications this involves. Officially granting the Gothic the elasticity it has always entailed has resulted in a reconfiguration of its spectrum both synchronically – by acknowledging its influence on numerous postmodern fictions – and diachronically – by rescripting, in hindsight, the history of its canon so as to allow space for ambiguous presences.

Both transgressive and hybrid in form and content, the Gothic has been accepted as a malleable genre, flexible enough to create more freely, in Borgesian fashion, its own precursors. The genre flouted what are considered the basic principles of good prose writing: adherence to verisimilitude and avoidance of both narrative diversions and moralising – all of which are, of course, made to be deliberately upset. Many merely cite the epigrammatic power of the essay’s most renowned phrase, that the rise of the Gothic “was the inevitable result of the revolutionary shocks which all of Europe has suffered”.

The eighteenth-century French materialist philosophy purported the displacement of metaphysical investigations into the meaning of life by materialist explorations. Julien Offray de La Mettrie, a French physician and philosopher, the earliest of materialist writers of the Enlightenment, published the materialist manifesto L’ Homme machine (Man a Machine), that did away with the transcendentalism of the soul, banished all supernatural agencies by claiming that mind is as mechanical as matter and equated humans with machines. In his words: “The human body is a machine that winds up its own springs: it is a living image of the perpetual motion”. French materialist thought resulted in the publication of the great 28-volume Encyclopédie, ou Dictionnaire raisonné des sciences, des arts et des méttrie par une société de gens de lettres by Denis Diderot and Jean Le Rond d’ Alembert, and which was grounded on purely materialist principles, against all kinds of metaphysical thinking. Diderot’s atheist materialism set the tone of the Encyclopédie, which, for both editors, was the ideal vehicle […] for reshaping French high culture and attitudes, as well as the perfect instrument with which to insinuate their radical Weltanschauung surreptitiously, using devious procedures, into the main arteries of French Society, embedding their revolutionary philosophic manifesto in a vast compilation ostensibly designed to provide plain information and basic orientation but in fact subtly challenging and transforming attitudes in every respect. While materialist thinkers ultimately disowned La Mettrie because he ran counter to their systematic moral, political and social naturalism, someone like Sade remained deeply influenced and inspired for his indebtedness to La Mettrie’s atheism and hedonism, particularly to the perception of virtue and vice as relative notions − the result of socialisation and at odds with nature.

 

OnionBots: Subverting Privacy Infrastructure for Cyber Attacks

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Currently, bots are monitored and controlled by a botmaster, who issues commands. The transmission of theses commands, which are known as C&C messages, can be centralized, peer-to-peer or hybrid. In the centralized architecture the bots contact the C&C servers to receive instructions from the botmaster. In this construction the message propagation speed and convergence is faster, compared to the other architectures. It is easy to implement, maintain and monitor. However, it is limited by a single point of failure. Such botnets can be disrupted by taking down or blocking access to the C&C server. Many centralized botnets use IRC or HTTP as their communication channel. GT- Bots, Agobot/Phatbot, and clickbot.a are examples of such botnets. To evade detection and mitigation, attackers developed more sophisticated techniques to dynamically change the C&C servers, such as: Domain Generation Algorithm (DGA) and fast-fluxing (single flux, double flux).

Single-fluxing is a special case of fast-flux method. It maps multiple (hundreds or even thousands) IP addresses to a domain name. These IP addresses are registered and de-registered at rapid speed, therefore the name fast-flux. These IPs are mapped to particular domain names (e.g., DNS A records) with very short TTL values in a round robin fashion. Double-fluxing is an evolution of single-flux technique, it fluxes both IP addresses of the associated fully qualified domain names (FQDN) and the IP address of the responsible DNS servers (NS records). These DNS servers are then used to translate the FQDNs to their corresponding IP addresses. This technique provides an additional level of protection and redundancy. Domain Generation Algorithms (DGA), are the algorithms used to generate a list of domains for botnets to contact their C&C. The large number of possible domain names makes it difficult for law enforcements to shut them down. Torpig and Conficker are famous examples of these botnets.

A significant amount of research focuses on the detection of malicious activities from the network perspective, since the traffic is not anonymized. BotFinder uses the high-level properties of the bot’s network traffic and employs machine learning to identify the key features of C&C communications. DISCLOSURE uses features from NetFlow data (e.g., flow sizes, client access patterns, and temporal behavior) to distinguish C&C channels.

The next step in the arms race between attackers and defenders was moving from a centralized scheme to a peer-to-peer C&C. Some of these botnets use an already existing peer-to-peer protocol, while others use customized protocols. For example earlier versions of Storm used Overnet, and the new versions use a customized version of Overnet, called Stormnet. Meanwhile other botnets such as Walowdac and Gameover Zeus organize their communication channels in different layers….(onionbots Subverting Privacy Infrastructure for Cyber Attacks)

Deleuzo-Foucauldian Ontological Overview From the Machine to the Archive. Thought of the Day 26.0

In his book on Foucault first published in 1986, Deleuze drew a diagram in the last chapter, Foldings, that depicts in overview the Outside as abstract machine, defined by the line of the outside (1), which separates the unformed interplay of forces and resistance from the strategies and strata that filter the affects of power relations to become “the world of knowledge”.

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The central Fold of subjectification, of ‘Life’ is “hollowed out” and ignored by the forces of the outside as they are realized in the strata fulfilling the obligation of the diagram to “come to fruition in the archive.” This is dual process of integration and differentiation. The residual dust of the affective relations produced by force upon force, integrate into the strata even as they differentiate to forms of realization – visible or articulable. The ‘empty’ fissure/fold attracts and repels these moving curvilinear strategies as they differentiate and ”hop over” it. Ostensibly, the Fold of subjectification effectuates change as both continuously topological, and as discontinuously catastrophic (as in leaping over). So, the process of crystallization from informal to formal paradoxically integrates as it differentiates. Deleuze’s somewhat paradoxical description follows:

The informal relations between forces differentiate from one another by creating heterogeneous curves which pass through the neighborhood of particular features (statements) and that of the scenes which distribute them into figures of light (visibilities). And at the same time the relations between forces became integrated, precisely in the formal relations between the two, from one side to the other of differentiation. This is because the relations between forces ignored the fissure within the strata, which begins only below them. They are apt to hollow out the fissure by being actualized in the strata, but also to hop over it in both senses of the term by becoming differentiated even as they become integrated. Gilles Deleuze, Sean Hand-Foucault

So this “pineal gland” figure of the Fold is the “center of the cyclone”, where life is lived “par excellence” as a “slow Being”.

As clarifying as Deleuze’s diagram is in summarizing the layered dimensionality of the Foucauldian/Deleuzian hybrid, some modifications will be drawn off to alternatively express the realizations of the play of informal forces as this diagram takes on the particular features of a Research Creation praxis. True to the originating wax tablet diagramma, the relations are drawn and redrawn, in recognition, after Bergson’s notion of recognition as the intensive point where memory meets action of the contemporary social field that situates it. The shifts from the 19C to 20C disciplinary diagram of Foucault’s focus modulates with the late 20C society of control diagram formulated by Deleuze. The shorthand for the force field relevant to the research creation diagram of practice-led arts research today is a transdisciplinary diagram, the gamespace of just-in-time capitalism, which necessarily elicits mutations in the Foucault/Deleuze model. Generating the power-resistance relations in this outside qua gamespace are, among others, the revitalized forces of the military-academic-entertainment complex that fuel economic models such as the Creative Industries that pervade the conditions of play in artistic research. McKenzie Wark concludes his book GAMER THEORY, with prescient comments on the black hole quality of a topology of the outside qua contemporary “gamespace” from Deleuze and Guattari (ATP) and Guy Debord. “Only by going further and further into gamespace might one come out the other side of it, to realize a topology beyond the limiting forms of the game. Deleuze and Guattari: “… one can never go far enough in the direction of [topology]: you haven’t seen anything yet — an irreversible process. And when we consider what there is of a profoundly artificial nature […] we cry out, ‘More perversion! More artifice!’ — to a point where the earth becomes so artificial that the movement of [topology] creates of necessity and by itself a new earth.”

Astrobiological Traces Within the Secret Doctrine.

पूर्णस्य पूर्णमादाय पूर्णमेवाशिष्यते

pūrṇasya pūrṇamādāya pūrṇamevāśiṣyate

‘From the Fullness of Brahman has come the fullness of the universe, leaving alone Fullness as the remainder.’

पूर्णमदः पूर्णमादाय पूर्णात् पूर्णमुदच्यते
पूर्णस्य पूर्णमादाय पूर्णमेवाशिष्यते
ॐ शान्तिः शान्तिः शान्तिः ।

pūrṇamadaḥ pūrṇamādāya pūrṇāt pūrṇamudacyate
pūrṇasya pūrṇamādāya pūrṇamevāśiṣyate
oṃ śāntiḥ śāntiḥ śāntiḥ |

‘The invisible (Brahman) is the Full; the visible (the world) too is the Full. From the Full (Brahman), the Full (the visible) universe has come. The Full (Brahman) remains the same, even after the Full (the visible universe) has come out of the Full (Brahman).’

नित्योऽनित्यानां चेतनश्चेतनानाम्
एको बहूनां यो विदधाति कामान् ।
तमात्मस्थं योऽनुपश्यन्ति धीराः
तेषां शान्तिः शाश्वतं नेतरेषाम् ॥

nityo’nityānāṃ cetanaścetanānām
eko bahūnāṃ yo vidadhāti kāmān |
tamātmasthaṃ yo’nupaśyanti dhīrāḥ
teṣāṃ śāntiḥ śāśvataṃ netareṣām ||

‘He is the eternal in the midst of non-eternals, the principle of intelligence in all that are intelligent. He is One, yet fulfils the desires of many. Those wise men who perceive Him as existing within their own self, to them eternal peace, and non else.’

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The Secret Doctrine of the Ages teaches that the universe came into existence through creative and evolutionary processes; and it demonstrates why both are necessary to explain our origins. It harmonizes the truths of science and religion, while showing that major assumptions of both Darwinism and Fundamentalist Creationism do not bear up to careful examination. By drawing our attention to the questions of why we live and die, of what is mind and substance, the Secret Doctrine helps us realize that wisdom begins with understanding how very little we really know. Yet it also affirms that the most perplexing problems can be solved; that of the progeny of one cosmos.

Evolution means unfolding and progressive development, derived from the Latin evolutio: “unrolling,” specifically of a scroll or volume — suggestively connoting the serial expression of previously hidden ideas. A climb from the bottom of the Grand Canyon reveals an unmistakable evolutionary story: of the appearance of progressively more complex species over a lengthy period of time. But how actually did this happen? The compelling evidence of nature contradicts the week-long special creation postulated by Bible literalists. Darwinian theory is also proving unsatisfactory, as a growing number of scientists are relegating its major claims to the category of “mythology. “Though not assenting to any metaphysical implications, Harvard paleontologist Stephen Jay Gould declared in 1980 that the modern synthetic theory of evolution, “as a general proposition, is effectively dead, despite its persistence as textbook orthodoxy.” Pierre-P. Grassé, former president of the French Academy of Sciences and editor of the 35-volume Traité de Zoologie, was more forceful:

Their success among certain biologists, philosophers, and sociologists notwithstanding, the explanatory doctrines of biological evolution do not stand up to an objective, in-depth criticism. They prove to be either in conflict with reality or else incapable of solving the major problems involved. Through the use and abuse of hidden postulates, of bold, often ill-founded extrapolations, a pseudoscience has been created. It is taking root in the very heart of biology and is leading astray many biochemists and biologists, who sincerely believe that the accuracy of fundamental concepts has been demonstrated, which is not the case.

While most critics readily acknowledge that natural selection and gene changes partially explain variation in species or microevolution, they point out that Darwinism has failed spectacularly to describe the origin of life and the mechanism of macroevolution: the manner in which higher types emerge.

Textbook theory asserts that life on earth began with the formation of DNA and RNA, the first self-replicating molecules, in a prebiotic soup rich in organic compounds, amino acids, and nucleotides. Robert Shapiro, professor of chemistry at New York University, wrote:

many scientists now believe that neither the atmosphere described nor the soup had ever existed. Laboratory efforts had also been made to prepare the magic molecule from a simulation of the soup, and thus far had failed.

Even if the purported soup existed elsewhere in the universe, and DNA were brought to earth by meteorite, comet, or some other means, there remains the enigma of how it was originally synthesized. Astrobiology.

In the first place, several mathematicians have shown the astronomical improbability of chance mutations “evolving” any organized system — neither complex DNA molecules nor higher organisms. The 10-20 billion year time frame presently assigned to our universe is far too short a period, given known mutation rates. Moreover, nothing in empirical experience suggests that unguided trial and error — i.e., random mutation — will produce anything but the most trivial ends. Research biologist Michael Denton writes that to “get a cell by chance would require at least one hundred functional proteins to appear simultaneously in one place” — the probability of which has been calculated at the negative figure 1 followed by 2,000 zeros — a staggeringly remote possibility, to say nothing of the lipids, polysaccharides, and nucleic acids also needed to form a viable, reproducing cell.

The same reasoning applies to the extraordinary number of coordinated, immediately useful mutations required to produce “organs of extreme perfection,” such as the mammalian brain, the human eye, and the sophisticated survival mechanisms (including inter-species symbiotic systems) of the plant and animal kingdoms. There is simply no justification, according to Denton, for assuming that blind physical forces will self-organize “in the finite time available the sorts of complex systems which are so ubiquitous in nature.” In observing the sheer elegance and ingenuity of nature’s purposeful designs, scientists like Denton can hardly resist the logic of analogy. The conclusion may have religious implications, he says, but the inference is clear: nature’s systems are the result of intelligent activity.

Another enigmatic problem is the absence in fossil strata of finely-graded transitional forms between major groups of species, i.e., between reptiles and birds, land mammals and whales, and so forth. Darwin himself recognized this as one of the “gravest” impediments to his theory and tried to defend it by asserting “imperfection of the geologic record.” Yet over a century of intensive search has failed to disclose the hypothetical missing links. Thus far only conjecture, or imagination, has been able to fill in how gills became lungs, scales became feathers, and legs became wings — for the record of nature on this point is still a secret.

Darwin also worried over one of nature’s most formidable barriers to macroevolutionary change: hybrid limits. Artificial breeding shows that extreme variations are usually sterile or weak. Left to themselves these hybrid varieties — if they are able to reproduce at all — revert to ancestral norms or eventually die out. In this sense, natural selection, environmental pressures, and genetic coding tend as much to weed out unusual novelties, as to ensure the survival of the fittest of each typea fact which is confirmed by the fossil record. Unquestionably, species adapt and change within natural limits; refinement occurs, too, as in flowering plants. But no one has yet artificially bred, genetically engineered, or observed in nature a series of chromosomal changes, micro or macro, resulting in a species of a higher genus. There are no “hopeful monsters,” except, perhaps, in a poetic sense. Trees remain trees, birds birds, and the problem of how higher types originate has not been solved by Darwin or his successors.

We do not give up our dogmas easily, scientific or religious. Obviously, ideas should be examined for their intrinsic value, not blindly accepted because somebody tells us “Science has proven” or the “Bible says so,” or again, because the Secret Doctrine teaches it. But with science’s recognized ignorance of first causes and macroevolutionary mechanisms, as well as the failure of scriptural literalism to provide satisfactory explanations, there remain the questions about our origins, purpose, and destiny. The answers to these questions are, in a sense, nature’s secret doctrines. Her evolutionary pattern suggests, however, that they are not hopelessly beyond knowing. Just as from the conception of a human embryo to a fully-developed adult, so from the first burst outward of the primordial cosmic atom, the progressive unfolding of intelligence is a natural and observable process. The whole universe seems bent on discovering itself and its reason for being.

The concept of the universe evolving for purposes of self-discovery and creative expression is found not only in modern European philosophy, such as Hegel’s, but also in ancient myths the world over, some of which sound surprisingly up-to-date. The Hindu Puranas, for example, speak of our universe as Brahma, and of alternating periods of cosmic activity and rest as the Days and Nights of Brahma, each of which spans over four billion years — an oscillating universe reminiscent of modern cosmological theory. In each “creation” Brahma attempts to fashion an ever-more perfected mankind, in the process of which he serially evolves from his own consciousness and root substance all of nature’s kingdoms: atoms, minerals, plants, animals, and so forth. Conversely, the stories allude also to the striving of mankind and, for that matter, of all sentient beings, to become Brahma-like in quality — i.e., to express more and more of the hidden mind pattern of the cosmos.

We often look down on ancient traditions as moldy superstitions. While this judgment may well apply to the rind of literalism and later accretions, concealed within and giving life to every religion are core ideas which bear the hallmark of insight. Biblical Genesis also, when read allegorically as is done in gnostic and kabbalistic schools, yields a picture of evolutionary growth and perfectibility, both testaments clearly implying that we are sibling gods of wondrous potential. But are the secret doctrines spoken of in these older traditions expressions of truth or simply romantic wish-fulfilling fantasy? Can they teach us anything relevant about our heritage and our future? It is to such questions that the modern book entitled The Secret Doctrine addresses itself. Impulsed by divinity and guided by karma (cause and effect), each of us has been periodically manifesting since eternity through all the kingdoms, from sub-mineral through human, earning our way to the next realm and beyond. Although seeded with godlike potential, we are not irrevocably fated to an unsought destiny. Karma is a philosophy of merit, and within our power is the capacity to choose — to evolve and create — our own future. We give life and active existence to our thoughts and, to a very large extent, we become what we think we are, or would like to be. This affects ourselves for good or evil, and it affects all others — profoundly so.