Tag Archives: finance

How Mark Zuckerberg Should Give Away $45 Billion – The Huffington Post

It’s complicated.

Source: How Mark Zuckerberg Should Give Away $45 Billion – The Huffington Post

For a long time, the way philanthropy worked was simple: Rich people gave their money to museums and churches and opera houses and Harvard. Their names went up on buildings, charities gave them made-up awards, their grandkids went to rehab, the Earth went around the sun.

But philanthropy is changing. Today’s billionaires are less interested in legacy institutions, less obsessed with prestige and perpetuity. Part of this is a function of their age: In 2012, 4 percent of America’s biggest charitable donations were made by people under 50 years old. In 2014, a quarter of them were.

The other factor driving the new philanthropists is how they earned their money in the first place. Last year, six of the 10 largest charitable donations in the United States came from the tech sector, solidifying Silicon Valley’s place as the epicenter of the newer, bigger, disrupty-er philanthropy. There, tech billionaires form “giving circles” to share leads on promising charities, and they hire the same consultants to vet them. They use terms like “hacker philanthropy” and “effective altruism.” These guys—they are mostly guys—believe that they became successful businessmen by upending existing institutions, by scaling simple ideas, by “breaking shit.” And, with few exceptions, that is how they plan to become successful philanthropists, too.

All of this became much more relevant in December, when Mark Zuckerberg and his wife, Priscilla Chan, announced that they were giving 99 percent of their wealth to charity. The total amount they pledged, around $45 billion in Facebook shares at current valuation, exceeds the endowments of the Rockefeller, Ford and Carnegie foundations combined. If Zuckerberg gives away the upper limit of what he announced in December, $1 billion per year for the next three years, he will likely become the world’s second-largest charitable donor after Bill Gates. He is 31 years old.

Zuckerberg’s ability to remake the world in his own image, in his own lifetime, is unprecedented. Andrew Carnegie opened his first library when he was 68, and only managed to get around $5 billion in today’s dollars out the door before he died. John D. Rockefeller, generally considered the most generous industrialist in history, launched his foundation when he was 76, and only gave away around half his fortune. If he wanted to, Zuckerberg could eradicate polio, or de-neglect half a dozen tropical diseases, or fix all the water pipes in Flint, or give $9,000 to every single one of the world’s refugees.

But $45 billion, as a former Bill & Melinda Gates Foundation grantee put it, is “a 1,000-pound gorilla.” You don’t give away that much money without changing the places and institutions and people you give it to, sometimes for the worse.

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the hard part about social change “is that it doesn’t scale like a social network.”

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Nearly every social advance in history has technology somewhere near the center of it—the aqueduct, the steam train, the birth control pill. And whenever you start asking people about the life-altering potential of Mark Elliot Zuckerberg and the tech-based philanthropy he represents, the first words you’re likely to hear are “The Green Revolution.”

In 1975, nearly three out of five people in Asia lived on less than $1 a day. Rains at the wrong time of year meant the difference between starvation and survival. Then, researchers funded by the Ford and Rockefeller foundations created new crops—varieties that grew taller, needed less water and could be planted year-round. Over the next 30 years, this innovation radically improved the lives of hundreds of millions of people. Rice yields spiked by 1,000 percent. Wheat got cheaper, healthier and more abundant. Norman Borlaug, the scientist who developed the new wheat varieties, won the Nobel Prize.

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“Technology,” Toyama says, “is the easiest part of any solution.” The hard part is everything that comes afterward. Take car crashes, which kill more people every year than tuberculosis or pulmonary disease. The technology to prevent these deaths—seat belts, motorcycle helmets—is not rocket science. It’s just that no one has figured out how to make it appeal to the people who need it, especially in the developing world, where 90 percent of these deaths occur.

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he should acknowledge that the silver-bullet promise of technology only works at changing the world when it’s combined with political will and popular demand. Until he finds a way to engineer those (please don’t), he should focus on the small ways, at the margins, where technology can improve people’s lives, 8 percent at a time.

In 2001, the Gates Foundation gave PATH and the World Health Organization $70 million, 10 years and a simple objective: Develop a vaccine for meningitis A and make it affordable for every single person who needs it.

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Marc LaForce headed the team in charge of bringing the vaccine to market. He says it wasn’t just the scale of the Gates donation that mattered, but its duration. In those days, most grants were capped at two or three years, with check-ins every six months. Years of work could be wiped away if a donor decided progress was moving too slowly and pulled out.
“If you want to do something major,” LaForce says, “you need the ability to go two steps forward, then one step back.”

Plus, the Gates team left LaForce alone. Back then, the foundation only employed about a dozen people who worked out of a small office in a residential neighborhood of Seattle. Staffers spent their time making lists of diseases, ranking them by annual fatalities, then calling around to find out which ones were closest to being cured.

“We didn’t need to be specialists,” says Gordon Perkin, the foundation’s first director of global health. “We just needed to know which organizations had the judgment and the infrastructure, and we gave them money.”

This story doesn’t just illustrate the potential of philanthropy. It also demonstrates that how Zuckerberg gives away his money will be just as important as what he gives it to. Because one way to look at his $45 billion is that it’s a lot of money. Another way to look at it is that it’s about what the United States spends on prisons every six months. Or education every four weeks. Or health care every five days. Even at a scale that large, efficiency matters.

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The Gates Foundation, as it’s expanded to more than 1,300 employees, has become prone to the same bloat, the same “expert-itis,” as a former grantee calls it. “They hired Ph.D.s in biotech and all they wanted to do was the science that the grantees were doing.”

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It’s hard to overstate just how un-Silicon Valley all of this is. “Money is sitting there to make the world a better place, and to dole it out cautiously is antithetical to why it’s there,” says Freada Kapor Klein, a partner at the Kapor Center for Social Impact, a foundation set up by Mitch Kapor, an early investor in Uber and other unicorns.

[…]

Zuckerberg shouldn’t be afraid to fail; he should approach philanthropy like a venture capitalist, testing out ideas to scale up later on. Bypassing legacy institutions is what Silicon Valley CEOs are good at, right? All those consultants must strike them as the charity equivalent of taxi medallions.

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What Zuckerberg actually announced last December wasn’t a big fat donation to charity. All he did was establish a limited liability company (LLC) and issue a promise that he would use it for good. Much of the reaction at the time was suspicious, speculating that an LLC was a scheme for Zuckerberg to avoid taxes (which isn’t true) or that it would allow him to spend mountains of money without disclosing how he was doing so (which is).

But the corporate approach actually makes a lot of sense. Under the standard philanthropic model, billionaires set up a foundation and give it a huge endowment. Every year, the foundation has to give away at least 5 percent of its total value. Meanwhile, the other 95 percent gets invested in blue chip stocks, hedge funds, foreign currencies, whatever will keep the total endowment the same size. That’s how foundations like Rockefeller and Ford exist in perpetuity: Do-gooders work on one side of the building finding things to donate to, while bankers work on the other side, making sure there’s more to donate next year.

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“This idea that philanthropy is only about nonprofits is an outdated model,” says Paula Goldman, a vice president at the Omidyar Network. Pierre Omidyar, the founder of eBay, was one of the most prominent tech billionaires to merge his investing and grant-making. The foundation still gives donations, but the LLC provides loans and seed capital and invests in things like solar-powered lighting startups, Brazilian test-prep companies and funds that discover Indian entrepreneurs.

Zuckerberg is going even further, giving up on a foundation entirely and putting all of his charity money in a corporate form with no limits on how to spend it. He’s not interested in making his money back. He just wants the flexibility to fund charities or companies or both. Which explains why one of Zuckerberg’s most recent donations wasn’t a donation at all. It was $10 million in seed capital for an education startup called Bridge International Academies, a chain of private elementary schools that wants to deliver education to the world’s poorest students.

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The primary appeal of Bridge, especially to investors like Zuckerberg, is the $6 per month it says it charges its students. Operating as a business rather than a charity gives each school an incentive to deliver a decent education and ensures that it’s not going to wither away when development agencies or donors move on to the next idea.

[…]

It’s tempting to stop there, to say capitalism perverts philanthropy, full stop, and advise Zuckerberg to just go back and form a foundation. But that’s not right either. One of the most successful private-sector development projects of the last 10 years is M-PESA, the mobile-money system that allows people in Kenya to transfer money via their cell phones. Before the system launched, Kenyans sent money to each other by mail, or by giving envelopes full of cash to bus drivers. Replacing an inefficient, expensive system with a regularized one made everybody better off. That’s not as easy to argue, in the long run, about education.
So, when Zuckerberg hears pitches from companies seeking to solve the world’s problems, he shouldn’t ask them if they have a plan to grow, or an ambition to exist in perpetuity. He should ask himself whether he really wants them to replace the systems that already exist, or simply make them better. Because successful companies don’t just disrupt other companies—they disrupt economies, governments and the people who depend on them. That’s not something that Zuckerberg ever had to worry about, but he has to start.

In 2009, four grad students came up with an audacious idea: Instead of giving poor people the things we think they need—bags of food, stacks of clothing, a pair of goats—what if we gave them enough money to decide for themselves?
They called their charity GiveDirectly, and in 2011 they started doing exactly that. They went to villages in Kenya, found the poorest people living there and transferred $1,000 straight to their cell phones. Later, they came back to ask the villagers what they did with the money. Mostly, it turns out, the villagers spent it on better roofs, better food, paying off debts, starting up businesses. All the stuff the development system used to buy for them—but without any overhead.

[…]

In the end, though, Zuckerberg’s greatest impact might be in the model he sets for other philanthropists. The Giving Pledge, which encourages billionaires to donate the majority of their wealth to charity, has attracted more than 142 commitments totaling more than $400 billion. The Founders Pledge has convinced 151 startup executives—most of them look about 19—to devote a portion of their exits to philanthropy. Charitable giving in the United States has nearly quintupled since 1994, and shows no signs of reverting back to opera houses and Harvard.

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Aggregate – Risk Design

Aggregate – Risk Design.

Back the Bid. Leap for London. Make Britain Proud. Emblazoned across photomontages of oversized athletes jumping over, diving off, and shooting for architectural landmarks old and new, these slogans appeared in 2004 on posters encouraging Londoners to support the city’s bid to host the 2012 Olympic Games. Featured twice in the series of six posters—along with Buckingham Palace, Nelson’s Column, the Tower Bridge, the London Eye, and the Thames Barrier—was 30 St Mary Axe, the office tower known colloquially as the Gherkin for its resemblance to a pickle, or as the Swiss Re building, after the Zurich-based reinsurance company that commissioned the building and remains its major tenant.

One poster shows the upper half of the Gherkin standing alone against a clear sky. A gymnast vaults above the building, using its smoothly rounded apex as a pommel. The contrasting blues of his uniform echo those of the building’s glazing, while the higher of his legs aligns with one of the spirals that animate the otherwise crisp and symmetrical tower. Constructing affinities between body and building even as it captured attention through a dramatic juxtaposition of scales, the poster associated British athleticism and architecture as complementary manifestations of daring and skill. In representing Games-hosting as a leap akin to vaulting over the Gherkin, it also imagined public investment as the running of a risk. By figuring the building’s dynamic equipoise as support for the gymnast’s virtuosity, it enlisted the Gherkin as evidence that London possessed the expertise and daring to handle that risk—to manage the complex investments and construction projects in infrastructure, architecture, and landscape needed to host an Olympic games.

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the Gherkin has been compared to many objects of similar shape, including a pine cone, a bullet, a stubby cigar, a pickle, and a penis.

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Upon its completion in 2004, this unusual yet centrally symmetrical form created a distinctive and consistent silhouette widely visible across London. Reproduced in countless advertisements, drawings, photographs, and postcards as well as in films, television shows, video games, and other media, the Gherkin has become one of the world’s newest urban icons, a junior partner to the Eiffel Tower, the Empire State Building, and the World Trade Center. The building has served as a powerful branding instrument for Swiss Re; for British design expertise, in particular that of the building’s architects, Foster + Partners; and for the London of Tony Blair’s New Labour, Ken Livingstone’s mayoralty, and the 2012 Olympics.1

[…]

Like any icon, the building carries many meanings. As the Back the Bid poster suggests, prominent among these are risk and its management. Most generally, “risk” denotes the effect of uncertainty on objectives. More commonly, the term describes the quantification of uncertainty through the probabilistic calculation of likelihood for any kind of negative outcome. Risk was once a technical concept specific to maritime insurance. In the coffee houses and early exchanges of London’s nascent financial district it described the commodity that insurers sold and shippers bought to manage the economic danger posed by the uncertain conditions of travel by sea. As capitalism, with its dynamic of continual change, introduced ever more uncertainty into daily life ashore, over the course of the 19th century risk became part of broader Anglo-American economy and culture. Once located exclusively in nature, risk came to be recognized as a dimension of human conduct and society. Assuming risks became part of the freedom and self-mastery that characterizes modern liberal subjectivity.3

The expanding corporate economy rationalized contingency by generating new financial instruments of risk management: savings accounts; markets in bonds, futures, and stocks; insurance policies. In the 20th century, advanced industrial nations socialized certain kinds of risk through regulation, state health coverage, and social insurance. In constituting the nation as a risk community, these measures diminished the prevalence of risk as a framework for individual action. Since the 1970s, however, these large-scale risk communities have weakened and responsibility for risk management has increasingly returned to individuals and corporations. Sociologists and political theorists have identified risk as a major currency of governance and self-governance in neoliberal society.4

Since it entails imagining uncertainties and projecting potential futures, risk is always in some sense imaginary. It is “a construction of an observer,” in the words of sociologist Niklas Luhmann.5 The unique design of 30 St Mary Axe addresses the ways we imagine the risks associated with climate change, terrorism, and financial globalization. Spiraling atriums with windows that open to allow natural ventilation suggest that innovative design can help highly technological societies use less energy and slow down potentially catastrophic human-induced climate change. Protective barriers, security cameras, and a diagrid structure enclosing shops along a public arcade and plaza suggest that resilient design can secure the open society by making even a prominent terrorism target accessible and welcoming. A handsome new skyscraper in the City of London, the quasi-autonomous financial district at the heart of the British capital, suggests that quality design can enlarge the supply of prestige office space for global businesses without jeopardizing the visual appeal of London’s townscape for residents and tourists.

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By reshaping salient risk imaginaries, the building mediated significant changes in the City of London’s spatial form, economy, and governance. The Gherkin’s development established a new cluster of branded high-rise office towers that expanded economic activity in London’s financial district by changing its physical and urban character. Its planning and design provided a framework for revisions to planning regulations that favored the interests of landowners, developers, and multinational financial services firms over those of heritage conservationists—changes linked to a restructuring of governance that diminished the autonomy of the City Corporation, the City’s distinctive and traditionally insular government. The design and construction of 30 St Mary Axe are a smaller-scale instance of what Arindam Dutta calls “metaengineering”: the design of entire economies through intertwined architectural, urban, and policy intervention.6

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Climate change

The Gherkin may have supported gymnast Ben Brown well in his Olympic bid vault, but it affords only precarious footing to the giant polar bear featured in a poster created three years later by activists from the Camp for Climate Action to publicize a mass protest at Heathrow Airport against the environmental degradation caused by air travel. Teeth bared, the bear stands atop the tower swatting at jets. Seeking purchase on the smoothly rounded tower, its claws grasp at the slight relief offered by spiraling mullions and fins.

Conflating the story of King Kong, a jungle monarch captured and killed by the metropolis, with the climate change icon of the solitary polar bear stranded on a melting ice floe, the poster associates the Gherkin with the rest of London’s corporate office towers through its sooty brown coloring yet sets the building apart by foregrounding its unique form and patterning. Like the Empire State Building for the famous gorilla, the Gherkin is at once the epitome of destructive capitalism and a redoubt that evokes aspects of the bear’s native environment while offering a dubious last chance for survival. Echoes of September 11 tinge the image with menace, suggesting that the Gherkin epitomizes the hubris of global finance. For artist Rachel Bull, the building is an ambivalent climate change icon courting risks beyond its capacity to manage.

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Articles about the design emphasized the mixed-mode ventilation that would cool the building much of the time. Many writers repeated the claim by Foster + Partners that the building management system would exploit these features to reduce the building’s energy consumption by as much as fifty percent relative to other prestige office towers. “Nature takes care of the temperature of the building,” explained Norman Foster in one interview. “It is only in extreme heat and cold that the windows close and the temperature is regulated by the automated air conditioning system.”7 The Gherkin was “London’s first ecological tall building,” in the phrase used by Foster + Partners and circulated widely in the press, and it soon became a case study in books and courses on building technology and sustainable design.8 The building emblematized the potential for architectural innovation to reduce resource consumption and so to reduce the likelihood of catastrophic climate change.

Managing climate risk was deeply inscribed in the design of 30 St Mary Axe because it was integral to the market mission and brand identity of the client. Swiss Re is a reinsurance firm, the world’s second-largest insurer of insurance companies. It manages the risks taken on by risk managers. Reinsurance emerged in the 1820s as a local and regional risk-spreading measure among fire insurers in Germany and Switzerland, becoming an integral part of the financial risk management sector as the insurance industry internationalized during the latter part of the 19th century. Created in 1863 by two primary insurers and a bank following a fire in Glarus, Switzerland, the Swiss Reinsurance Company by the turn of the 20th century was a leading firm in a globalized reinsurance market. While the San Francisco earthquake of 1906 tested its capacity to meet its obligations, the firm remained solvent to benefit from Swiss neutrality during World War I and from the weakness of Germany’s economy after the war, when the Swiss firm bought one of its competitors, Bavaria Re. The company expanded after World War II as social insurance became widespread among industrialized nations, and it has remained among the largest reinsurers alongside rival Munich Re.9

In 1995 the company created a new corporate identity, taking “Swiss Re” as its global brand name and adopting a new logo and minimalist graphic language. Shortly afterward, the firm constructed headquarters buildings for its operations in the United States and the United Kingdom, making architecture “a crucial communications tool and an intrinsic part of the Swiss Re brand,” according to Richard Hall, author of Built Identity, a company-sponsored volume on the firm’s architecture.10

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Natural catastrophes are the primary cause of insured losses, so Swiss Re attentively monitors and predicts the impact of weather and climate on economic activity. The firm emphasized sustainability in its corporate literature and policies before many others did; lighting designer Mark Major recalled receiving a “massive” sustainability manual from the firm, the first such document he had encountered.11 “For us, sustainability makes excellent business sense,” explained Sara Fox, the project director hired by Swiss Re to direct construction and occupation of 30 St Mary Axe, “because we pay claims on behalf of clients for floods, heat waves, droughts. To the extent that these claims are related to global climate warming, it is only prudent of us to contribute as little to it as possible.”12 At the same time, the company would seem to benefit from perception that climate change poses insurable business risks, so calling attention to climate risk could stoke demand for the company’s products.

[…]

By thematizing its environmental control systems and energy consumption features, Swiss Re’s new UK headquarters at once highlighted climate risk and demonstrated the company’s commitment to managing that risk through practices of sustainability

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The building’s ostentatiously streamlined form, tinted glass spirals, and visibly operable windows called attention to its capacity for supplementing or substituting mechanical ventilation with natural ventilation. Intentionally understated lighting at the building’s crown emphasized restraint in energy consumption. The smoothness of that crown, where the doubly curving curtain wall resolves into a glass dome, eliminates the roof that so often supports chillers and fans—visible elements of industrial environmental control. By tucking this equipment into plant rooms near the top of the tower—as well as into the basement and a six-story annex building across the plaza—the building obscures the extent of its reliance on energy-intensive mechanical ventilation and temperature control. Instead of supporting mechanical equipment, the apex contains a private dining room with a 360-degree view that spectacularizes London. Seen from outside, as an element in the skyline or a distinctively patterned whorl in satellite images of the city, the summit of this distinctively roofless building stands out from neighboring buildings.

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The Foster + Partners brand is associated with highly controlled, self-contained buildings that employ modern industrial materials to celebrate technology and tectonic articulation.

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In presentations to clients and planning officers, project architect Robin Partington likened an intermediate scheme to an egg, while Foster compared later versions to a pinecone. The firm constructed a lineage for the Gherkin that stretched back to the work of Buckminster Fuller, the onetime mentor of Foster’s who is a primary reference point for some concepts of sustainable design.14 The building’s architects saw the Gherkin’s interior atriums as successors to planted “sky gardens” in the Commerzbank headquarters. The plaza and shopping arcade at the building’s base were modest vestiges of earlier schemes that featured extensively tiered leisure and commerce zones. To the architects they evoked precursor projects that reimagined the work environment as a planted landscape of open-plan trays within a glass enclosure, including the landmark building the firm had completed in 1975 for the insurance firm Willis Faber & Dumas and the Climatroffice, a 1971 concept for a multilevel escalatored office environment enclosed by an oval triangulated spaceframe.

The section and plan of the Climatroffice project (1971) show how the Foster firm reconceptualized the platforms, escalators, and enclosure of the U.S. Pavilion as elements in a freestanding climate-controlled office building. Courtesy of Foster + Partners.

The U.S. Pavilion at Expo 67 in Montreal, in which the United States Information Agency set floor decks linked by elevator and escalator within a five-eighths geodesic sphere, provided a model for the Climatroffice and successor projects from Foster + Partners, including 30 St Mary Axe.

In the late 1960s and early 1970s, Fuller and Foster collaborated on a few unbuilt projects, and the Climatroffice was a direct adaptation of the U.S. Pavilion from Expo 67,

An early attempt to regulate building climate performance by automating environmental control systems. Intermediate schemes for Swiss Re, known colloquially as “the haystack” and “the bishop’s mitre” or “breadloaf” adapted the platforms and escalators of the Climatroffice and the U.S. Pavilion to the St Mary Axe site by partially submerging a stack of staggered floorplates below ground and encasing the stack in a glass-and-steel diagrid enclosure recalling Fuller’s spaceframes.15

This schematic design from spring 1998 envisions 30 St Mary Axe as an adaptation of the Climatroffice, with staggered floorplates set within a curving steel-and-glass enclosure.

Photographed in March 1998, these study models show the massing already permitted by the Planning Department alongside some of the alternative building configurations considered by Foster + Partners early in the design process.

With its diagrid structure, double-curving glazed skin, and automated building management system (along with a rotating sunshade intended for installation inside the apex but not completed), the Gherkin evoked the U.S. Pavilion’s five-eighths geodesic sphere stretched vertically to improve its aerodynamics and accommodate office floors to a height capable of realizing the value of its constrained but expensive site. With his collaborators Shoji Sadao and John McHale, Fuller intended the U.S. Pavilion to function as a Geoscope (a global hypermap) and a facility for exposition visitors to play the World Game, a scenario simulator through which they would test strategies for redistributing resources in order to maximize human well-being. The platforms and escalators that filled the Expo dome were added by another firm at the client’s insistence. At 30 St Mary Axe, as in the Climatroffice, Foster + Partners adapted the pavilion as built rather than as initially conceived, setting aside Fuller’s technocratic utopianism while adapting its forms, aesthetics, and technical solutions. Despite these differences, the building claimed the mantle of Fuller’s reflexive modernism, his attempt through technocratic design to automate processes of progressive optimization in resource use and so to steer humanity toward a more sustainable resource use trajectory.16

Like the U.S. Pavilion, the Gherkin suggested that the ecological risks of modernization could be managed through technological innovation and that sustainable design could promote rather than inhibit economic growth. In another parallel to the U.S. Pavilion, the automated environmental control features at 30 St Mary Axe failed to achieve declared objectives. In practice, the Gherkin has not achieved the economies heralded during its construction and first occupancy. Its vaunted energy performance is imaginary.

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On Tuesday, April 26, 2005, though, that regulating geometry failed in a small but significant way when one of the building’s operable windows broke off and fell some twenty-eight floors to the ground. Building managers concluded that one of the mechanical arms controlling the window had failed.17 Following this episode, Swiss Re and its management company disabled the mixed-mode building control system as they tested and replaced the chain-drive motors controlling window operation. The system has been used on only a limited basis since. Many tenants have walled off the atriums, and some have insisted on lease provisions guaranteeing that mixed-mode ventilation will not be employed in their zones. Since 2005, as far as I can determine, the windows have opened only occasionally, and only on the lower floors, which are occupied by Swiss Re. This means that mixed-mode ventilation is available in only one of the four sets of six-story atriums. For all but its first year of operation, then, the building has run primarily on mechanical ventilation.18

One of the environmental consultants who modeled the building’s anticipated performance compares its owners and facility managers to overly cautious sports-car owners who never take the Ferrari out of second gear. But it’s not clear that the building could have lived up to the promised energy savings even if its mixed ventilation mode were fully activated. The enclosure and ventilation system combine building components taken from climate-control strategies that are usually deployed independently and that may not work together from the point of view of building physics.

The double-skin façade zones encased by clear glazing presume that air between curtain wall layers will absorb solar heat, rise due to the stack effect, and vent to the exterior through narrow slits at the top of each two-story structural bay. But these cavities are open at their sides to the two- and six-story atria that are intended to draw fresh air through the building by exploiting external pressure differentials.

These atria in turn are—or were—open to the adjoining office floors. Rather than operating as discrete systems, then, the cavities, atria, and floors are integrated into continuous air masses. So if the triangular operable windows were opened as intended for natural or mixed-mode ventilation, the stack effect venting of the double-skin facade zones, the pressure-differential venting of the spiral atriums, and straightforward cross-ventilation within a single floor could all be operating simultaneously—and at cross purposes.19

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the performance of the mixed-mode ventilation has never been rigorously tested or empirically confirmed.

Nor has this hybrid of ventilation systems been employed in another tower, by Foster + Partners or another firm, in more than a decade since the design was completed. The combination of double-skinned facade, atriums, and open floors connotes improved environmental performance and aligns the building with symbolically powerful precursors. But what it yields functionally is an internally incoherent environmental control system of undetermined performance capability.

The Gherkin makes extensive use of industrial materials whose manufacture consumes a great deal of energy, and the atriums give it an unusually low ratio of usable square footage to total square footage. If its provisions for natural ventilation aren’t used, 30 St Mary Axe is not a green tower, it’s an energy hog. So it’s striking that the building has been a critical and financial success despite its failure to realize one of the headline claims made about its design.

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Even if it has not reduced the energy consumption of its occupants, 30 St Mary Axe has changed that risk imaginary by persuading people that design can manage the climate risk of postindustrial production. For this, the building needed to change perceptions, and this task was achieved by design features that highlight the building’s capacity for natural ventilation, combined with simulations that imagined how the building would perform.21 In legitimizing the building as an exemplar of sustainable design, the simulations created space for the design risks that this innovative and cynical building runs. Addressing the imagination rather than the climate, they bought its designers freedom.

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Terrorism

By pulling away from its irregular property lines, the tower achieves almost perfect formal autonomy from its context. The gap between the circular tower base and trapezoidal site boundaries forms a privately owned public space (see also the third image, “Site plan showing the plaza and context of 30 St Mary Axe.”), a civic and commercial amenity in this densely built part of the City.

The plaza is much reduced in activity compared to what Foster + Partners envisioned during the schematic design and permitting phases of the project

This perspective sketch from fall 1998 shows how the base of the building might function as an airy retail zone extending below plaza level

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This residual urban space allows visitors and passersby to see the building’s curving sweep and to appreciate visually its formal coherence. It also creates a security perimeter, a glacis or open zone permitting video surveillance of all approaches by some of the roughly 115 CCTV cameras located on the premises. Within the building, access to the office floors is controlled by lobby turnstiles that admit staff by card-swipe. Visitors must pass through airport-style security screening at an x-ray and metal detector station to the right of the turnstiles behind the reception desk. Card-swipes also control access from the elevator banks to the office floors above.

These techniques for monitoring and controlling access are standard for high-quality office space in the City. Financial services firms have constructed protected enclaves for their workers since the early 1990s, when the City responded to a series of Provisional IRA bombings by instituting new territorial strategies as a way to “design out terrorism.”22 30 St Mary Axe sits within the security perimeter known as the “Ring of Steel”: the array of access controls, barricades, automobile checkpoints, license-plate tracking, security cameras, traffic monitoring, parking restrictions, and stepped-up policing that encircles the financial services core of the City. By creating a nested series of security perimeters, the building reinscribes the Ring of Steel at multiple scales.

[…]

The plaza is one such device. Shielded by its low walls and planters as well as by bollards capable of stopping a car or truck, the plaza provides “standoff,” the protective distance that mitigates the impact of a bomb blast. Another security perimeter is provided by the building’s structural system. The lateral stability of the perimeter diagrid provides superior blast resistance as well as structural redundancy in case part of the steel cage is knocked out by a bomb or vehicle. The curtain-wall that clads the diagrid enhances the protection it affords: consultants who worked on the project noted that the building’s double-curving form—key to its deflection of wind—would significantly reduce the impact of blast forces in the event of another bombing adjacent to the site. Toughened and laminated glass sheets designed to flex and then break into harmless pebbles are set into deep, cushioned rabbets capable of absorbing additional blast energy. The decentralized and zoned HVAC system, which draws air in through narrow vents between window courses at the edge of every floor and heats or cools it locally using circulating water pipes, eliminates the risk that a chemical or biological attack will travel through centralized air handling systems from a mailroom or main intake.23

By integrating an array of security measures into its design, 30 St Mary Axe exemplifies the cultivation of resilience as a response to the threat of terrorism. (Following the World Trade Center attack in September 2001, with the Gherkin’s pilings already sunk, the steel purchased, and stairs and elevators locked into place, the architects, consultants, and developers performed a resilience check on the building. After concluding that the diagrid structure was likely to survive an airplane impact without collapsing, they strengthened bollards, added a guard station on the truck ramp, eliminated vendor carts from the plaza, and retrofitted what was to have been a property management office behind the lobby with airport-style x-ray and metal detector screening for visitors.24) This building secures itself against anticipated forms of terrorist assault as well as can be imagined given its tight siting and provision for businesses and public uses in its base and plaza. In security jargon, its features provide target hardening designed to discourage attacks and direct them elsewhere through a carefully modulated combination of overt and implicit strategies. Bollards, visible cameras, and security checks encourage target substitution by generating security theater. But because many of the truck barriers are built into the landscaping, blast resistance is integrated into the overall building form, and air intakes are sublimated into curtain-wall joints, the building masks many more of its security measures from daily perception.25

[…]

The property developer was able to purchase the St Mary Axe property and secure planning permission for a tall new building in the midst of a tightly regulated historic preservation zone only because the site had been partially cleared in April 1992 when the Provisional IRA detonated a bomb consisting of one hundred pounds of Semtex and a ton of fertilizer inside a van parked at 28 St Mary Axe. The blast severely damaged the listed neoclassical building housing the Baltic Exchange, the international shipping exchange that since the mid-18th century has been part of the City’s financial sector and the global mercantile economy. The bomb also precipitated planning and policing studies that led to creation of the Ring of Steel following a second bombing one year later in Bishopgate, just a block away from St Mary Axe.

[…]

in choosing to consolidate its London workforce into a single tall building sited on the Baltic Exchange property, Swiss Re significantly increased its terrorism risk exposure.27 Since the company’s business is reinsurance against risks, including those of terrorism, the exposure it purchased at 30 St Mary Axe was not only a liability—it was also an asset. By highlighting the company’s commitment to managing terrorism risks through prudential planning, design, and policy, a distinctive new building on a symbolically charged site like this created value for the reinsurer as it expanded its activity in the UK market.

[…]

By soliciting risks and handling them ostentatiously yet seemingly effortlessly, 30 St Mary Axe accrued capital for the clients and the City of London, for the architects and their consultants—and also for design as a risk management practice. With each solicitation, gain, and management of risk, the design acquired agency by becoming a stronger branding instrument.

[…]

Created in 1993, Pool Re spreads insurance liability for terrorist attacks and other catastrophes across all the insurers active in the UK market. Because extreme losses beyond predefined commitments made by the private insurers are guaranteed by the British state, Pool Re spreads ultimate liability across the entire UK taxpayer base, socializing some of the most extreme risks borne by private insurers and reinsurers.29 This collaboration between the state and a globalized insurance market in creating a new risk management regime is one of the neoliberal mechanisms for “governing at a distance” that have displaced the insular “club government” that prevailed in Britain, and particularly in the City of London, from the late 19th century to the late 20th century: a tradition of self-regulation by private institutions and their socially vetted leaders operating via informality, tacit knowledge, and autonomy from public scrutiny and accountability.30 As both the UK headquarters of a major reinsurer and a valuable asset within the terrorism risk zone covered by Pool Re, 30 St Mary Axe emblematizes the new arrangements whereby risk mediates British governance.

Globalisation

Unlike New York and other cities in which zoning codes entitle landowners to some kinds of development “as of right,” the City of London regulates property development through case-by-case review by planning officers, who judge how well proposed construction conforms to City-wide plans and guidelines regarding factors such as building height, development density, access to transit, impact on views and the visual character of the area. In order to develop the Gherkin, the property owners and Swiss Re had to secure planning consent from the City Corporation, the governing body of the City of London, through its chief planning officer, Peter Wynne Rees. The review and permitting process that culminated in the granting of planning consent in August 2000 spanned not only the planning office but also the market, the courts, and the press. Rees brokered a multilateral negotiation so intensive that we could almost say the building was designed by bureaucracy. Part of that negotiation entailed imagining and staging risk: climate risk and terrorism risk, but especially the financial risks associated with globalization.

As the Olympic bid poster reminds us, the Foster + Partners design for 30 St Mary Axe helped the City of London to rebrand itself as a center of innovation and investment, and so to secure the City’s position within a neoliberal economic geography construed as a competition among cities for global capital and its management.31 These triumphalist associations mask a more complex history, though. It would be more accurate to say that the building brokered a renegotiation of authority, decision-making, and spatial control through which the City Corporation traded a measure of the autonomy it historically possessed in order to retain meaningful sovereignty in a changing world.

A block west of the St Mary Axe site was the 47-story Tower 42, designed in the late 1960s by Richard Seifert and at 183 meters then the tallest building in the UK. Since the building’s completion in 1981 the City had enforced an unwritten prohibition on further skyscraper construction, steering developers and architects toward the design and construction of “groundscrapers,” low-rise but horizontally extensive buildings that evoked neoclassical business palaces of the Edwardian era while providing minimally obstructed floorplates along with the communications cabling and air conditioning required for computing-intensive trading.32 These large buildings, which emulated North American precursors in providing the large floorplates and open workspaces preferred by multinational corporations and large financial firms, reflected a concession on the part of planners to a transnational range of clients and developers increasingly prevalent in the City office space market after the “Big Bang” banking deregulation of 1986.33 Construction of the Canary Wharf development in the Docklands had created a second business district a few miles to the east, its American-style skyscrapers drawing some large banks and financial services firms from the City, which was also conscious of competing with Paris and especially Frankfurt for the footloose capital of Europe’s financial services business.

[…]

For English Heritage, SAVE Britain’s Heritage, and other preservation advocates who opposed the initial Foster designs, the prospect of a skyscraper on the Baltic Exchange site risked jeopardizing the visual management framework that regulated development based on a network of protected views toward the dome of St Paul’s Cathedral.34 Negotiating among the various parties to the development process challenged the City Corporation to balance the risk of breaking the conservation-oriented spatial regime it had maintained since the early 1980s against the risk of losing its primacy as a location for financial services to competing locations. The team that developed the Gherkin for Kvaerner and Swiss Re had worked together previously in developing Canary Wharf. By suggesting that they would build in the Docklands rather than occupy the consented GMW groundscraper, Swiss Re and Kvaerner pressured City planners—but also empowered them—to lift the prohibition on tall buildings. This stance was a bluff, but it established one component in the rhetorical framework within which the City ultimately changed the regime regulating its architectural and urban form.

The other component of that framework was design. Kvaerner hired Foster + Partners in 1996 to draw up an office tower for the Baltic Exchange site. From the start, the task of this design was to realign risk imaginaries so that for Rees and his City Corporation constituency the risk of denying permission for a tall building would seem to exceed the risk of granting it. The Foster firm responded with the Millennium Tower project, an implausible proposal imagining a skyscraper with 1,700,000 square feet of floor space that, at 385 meters tall, would have dwarfed every other building in Europe.

Included among the documents submitted toward the end of the planning review was this chart showing some of the variant designs considered for 30 St Mary Axe between 1996 and 2000

This design was a provocative bargaining posture signaling to the heritage lobby and the City Corporation that the new owner expected to be able to build a tower on the Baltic Exchange site. Shortly afterward the Foster firm prepared a more realistic 170 meter version for Kvaerner to show to prospective occupiers.

[…]

Rees allowed Swiss Re to develop a large volume of office space in a tower just three meters shorter than the NatWest Tower. In return, he extracted concessions: the building would provide a public plaza, it would accommodate retail uses, and it would achieve a high standard of “design quality.”35

The granting of planning consent for 30 St Mary Axe did not only reflect a shift in policy regarding this particular site. It also initiated a new regime of spatial regulation governing development in the City. Codified two years later in a new Unitary Development Plan, this regime welcomed high-rise towers within “clusters” that deferred in some degree to the view corridors around St Paul’s Cathedral, so long as the new buildings provided public amenities and exemplified quality design.

Towers permitted under this new regime include Heron Tower, the Leadenhall Building (The Cheesegrater), Broadgate Tower, the Pinnacle, and 20 Fenchurch Street (The Walkie-Talkie).36

Displayed in fall 2011 at the marketing office for 20 Fenchurch Street, this visualization imagined how the new cluster of skyscrapers around the Gherkin would appear from across the Thames

Branded like 30 St Mary Axe with signature profiles and nicknames, these skyscrapers maximize the value of City land while using design to raise rents and profits. This regulatory shift allowed local and multinational landowners, developers, and investors to capitalize on the increased value of City properties, and it reasserted the primacy of the City of London among the world’s centers of banking, insurance, and finance. Led by the Swiss Re project, these towers have transformed London’s skyline, urban character, and real estate market. A study conducted a couple of years after completion of 30 St Mary Axe found that the Gherkin had displaced the dome of St Paul’s as the most prominent City landmark in the perception of City workers.37

[…]

as geographer Maria Kaika points out, construction of the Gherkin should also be understood as a defeat for the City Corporation, since achieving these economic gains entailed the loss of a measure of control over the city’s form and appearance.

[…]

Pressure from transnational corporations and capital since the Big Bang, she argues, “forced the City to reinvent its spatial identity” in a way that favors skyscrapers over conservation considerations as it generated a form of architectural patronage identified not with City’s traditional institutions but with transnational capital elites. The towers built since 2002, she concludes, are not the “commitments in stone” of a prior era but rather “functional objects of capital accumulation” that “operate more as branding objects for multinational corporations or as speculative objects for real-estate developers.”40

Risk design

Survey Foster’s London from the private club at the top of the Gherkin. At your feet is the Square Mile, dotted with and fringed by Foster + Partners office buildings: Moor House, the Wallbrook, offices at 10 Gresham Place, and headquarter buildings for Bloomberg, Allen & Overy, and Willis. To the south are buildings at Tower Place and, just across the Thames, the new development of More London, including several more office buildings and the striking City Hall—leased by its private developer to the Greater London Authority. Downriver to the east in Canary Wharf you’ll see the Citibank tower and the HSBC UK headquarters. With a little imagination you can picture the Canary Wharf Underground station, too. Upriver to the west are several more projects, including the Millennium Bridge across the Thames, a redeveloped Trafalgar Square, the National Police Memorial, the roof over the British Museum’s Great Court, buildings at the Imperial College, and Wembley Stadium.

Your view of some of these buildings will be blocked by the even taller skyscrapers that have gone up nearby since 2004 as the cluster has grown. You’ll still see the river, though, where you might spot one of the YachtPlus 40 powerboats that Foster designed cruising upriver toward the Albion Riverside offices and the Riverside Apartments and Studio in Battersea. This is where the firm is headquartered. It is also where Foster kept his primary residence until 2008, when he transnationalized himself and became a tax exile—footloose rather than place-loyal, a Swiss citizen rather than a British Lord. The previous year, Foster had restructured the firm (valued at about 300 million pounds or $593 million) to prepare for eventual succession and cashed out by selling a forty-percent stake in the company to a London-based multinational private equity and venture capital firm.42

By building so many prominent commissions associated with millennial London, Foster + Partners has strongly shaped the cast of the contemporary city.43 Modernist but classically so, favoring self-contained and symmetrical geometries along with a high standard of craft and the deep detailing of high-quality materials, the architecture of Foster + Partners connotes progressive innovation. The firm’s impact on the city has become so extensive that it must be considered in urban and economic terms, as a practice of metaengineering. Like Arup, and often—as in the case of 30 St Mary Axe—in partnership with Arup, Foster + Partners designs not only buildings but also economies and governance practices.

Foster and the firm he founded have been central to remaking London over the past two decades because their architecture fits the vision of New Britain put forward by New Labour from the mid-1990s through the 2000s, including neoliberal methods for governing at a distance through risk.44 Noting that the firm’s buildings more often provide the appearance of rationality than they deliver rational functionality, some critics have concluded, as one puts it, that the firm “supplies the look of innovation without the pain of actually changing anything” for a British establishment seeking to maintain its authority by appearing to change.45 Studying the Gherkin suggests a different conclusion. Addressing the ways we imagine risk and opportunity in climate change, terrorism, and financial globalization, the firm’s buildings sometimes use design to transform economies and governance.

From the Gherkin to Krakow’s Skeletor: famous skyscrapers that flopped | Art and design | The Guardian

From the Gherkin to Krakow’s Skeletor: famous skyscrapers that flopped | Art and design | The Guardian.

Norman Foster's 30 St Mary Axe – AKA the Gherkin.

Skyscrapers are usually considered signs of success, steel-framed declarations of triumph. But they’re equally associated with corporate hubris, architectural ego and recession – the latter tallied via the Skyscraper Index, which plots the striking correlation between the completion of a new “world’s tallest building” and the arrival of a global economic downturn.

The failure of Norman Foster‘s Gherkin is just the latest example. Made unprofitable by changes in currency exchange rates, it was recently put into receivership and is now up for sale at an estimated price of £640m. It may yet recover, of course, but for now it joins the already long list of skyscraping architecture’s most conspicuous flops.

The Empire State Building
The architects of the longest-serving “world’s tallest” – which reigned from the early 30s until the mid-70s – were given a staggeringly idiotic brief. In a possibly apocryphal story, the boss of General Motors picked up a pencil, balanced it on the desk and asked, “How tall can you make it without it falling over?” One hundred and three storeys was the answer, but it became the first of the recession-predicting skyscrapers on the Index, known as the “Empty State Building” through the Great Depression, and presaging other Index members such as the World Trade Centre (mid-70s recession), the Petronas Towers (the Asian financial crash) and the Burj Khalifa (the current recession).

[…]

Skeletor
There are several skyscrapers that faced sudden obsolescence when their countries’ respective economies collapsed, leaving them perpetually unfinished – such as “Skeletor”, the tallest building in Krakow, an office block begun in 1975 and abandoned in 1981 as an empty steel frame. Designed for the Polish Federation of Engineering Associations, it is now used as a giant frame for billboards.

The Ryugyong Hotel
The tallest building in Pyongyang, begun in 1987, is the most notorious example of this genre. Now an insanely overambitious remnant from when North Korea was as rich as South Korea, it was left unfinished as the Soviet collapse plunged the country into famine. It is now finally being completed, 27 years on.

Torre David
This unfinished, partly mirror-glass-clad Caracas office block has been a cause celebre for those few architects more interested in social than architectural change: years after being abandoned, it was squatted by a tightly organised group of citizens, creating a “vertical slum”. After years with the tacit support of the Chávez and Maduro governments, it is now being sold to Chinese developers and its inhabitants rehoused elsewhere. It remains an exceptional example of a skyscraper being claimed by the masses, rather than by big business.

Why New York Real Estate Is the New Swiss Bank Account — New York Magazine

Why New York Real Estate Is the New Swiss Bank Account — New York Magazine.

“The global elite,” says developer Michael Stern, “is basically looking for a safe-deposit box.”

[…]

The influx of global wealth is most visible on the ultrahigh end, as Stern and other builders are erecting spiraling condo towers and sales records are regularly shattered by foreign billionaires, like the Russian fertilizer oligarch Dmitry Rybolovlev, purchaser of the most expensive condo in Manhattan’s history ($88 million), and Egyptian construction magnate Nassef Sawiris, who recently set the record for a co-op ($70 million). But much of the foreign money is coming in at lower price points, closer to the median for a Manhattan condo ($1.3 million and rising). In fact, if you’ve recently been outdone by an outrageous all-cash bid for an apartment, there’s a decent chance that, behind a generic corporate name, there’s a foreign buyer and an offshore bank account.

[…]

The Census Bureau estimates that 30 percent of all apartments in the quadrant from 49th to 70th Streets between Fifth and Park are vacant at least ten months a year.

To cater to the tastes of their transient residents, developers are designing their projects with features like hotel-style services. And the new economy has spawned new service businesses, like XL Real Property Management, which takes care of all the niggling details—repairs, insurance, condo fees—for absentee buyers.

[…]

Even those with less reflexively hostile reactions to foreign buying competition might still wonder: Who are these people? An entire industry of brokers, lawyers, and tight-lipped advisers exists largely to keep anyone from discovering the answer. This is because, while New York real estate has significant drawbacks as an asset—it’s illiquid and costly to manage—it has a major selling point in its relative opacity. With a little creative corporate structuring, the ownership of a New York property can be made as untraceable as a numbered bank account. And that makes the city an island haven for those who want to stash cash in an increasingly monitored global financial system. “With everything that is going on in Switzerland in terms of transparency, people are being forced to pay taxes on their capital that they used to hold there,” says Rodrigo Nino, the president of the Prodigy Network. “Real estate is a great alternative.”

[…]

“Real estate is a wonderful way to cleanse money. Once you buy real estate, the derivation of that cash is forgotten.”

[…]

Every year, the British real-estate brokerage Knight Frank publishes a document called “The Wealth Report.” The latest edition produces the curiously precise estimate that there are 167,669 individuals in the world who are “ultrahigh net worth,” with assets exceeding $30 million. “Of course, the big question is: are the rich getting richer?” the report asks. It answers gleefully in the affirmative, forecasting that over the next decade, the ranks of the ultrarich will increase by 30 percent, with much of the growth coming in Asia and Africa.

This new global wealth is being lavished on the usual status items—planes, yachts, contemporary art—but Knight Frank is pleased to report that the rich favor real estate most of all. Real estate can serve as a convenient pied-à-terre, an investment hedge against a wobbly home currency, or an insurance policy—a literal refuge if things go bad. Other financial centers boast a similar mix of glamour and apparent security—Knight Frank’s list of the top-ten “global cities” includes London, Paris, Geneva, and Dubai—but New York is forecast to add more ultrahigh-net-worth individuals than any city outside Asia over the next decade.

[…]

As expensive as New York’s luxury real estate might seem, it’s a bargain compared to other global capitals; a million dollars will buy twice as much space here as it does in Monaco or Hong Kong. New York is perceived to be more stable than Miami, Shanghai, and Beijing. It is much cheaper than London, where tabloid-fanned outrage over property prices has created an uncomfortable political climate and various new or proposed taxes are aimed at foreign investors and offshore entities. In New York, by contrast, buyers of new construction often qualify for a tax abatement.

[…]

The first rule of selling property to the ultrarich is that you can’t try to sell them property—you offer them status, or a lifestyle, or a unique place in the sky. A marketing video for 432 Park Avenue, scored to “Dream a Little Dream,” features a private jet, Modigliani statuary, and Harry Macklowe himself costumed as King Kong. One recent morning, at the development’s sales office in the GM Building, Wallgren led me down a hallway lined with vintage New York photographs, through a ten-by-ten-foot frame meant to illustrate the building’s enormous window size, to a scale model of Manhattan.

“If you bend down like this,” Wallgren said, stooping to street level, “you can really appreciate the height of it.”

[…]

“Rich people come to the U.S., and these people are busy,” he said. “What is, for these people, very important? I am asking you! To save the time.” Perepada doesn’t drag his clients to a bunch of open houses. He takes them to Jean Georges, gets them hockey or Broadway tickets, rents helicopters or horse carriages, sets them up with plastic surgeons. He says that by building a rapport, he is able to sell 80 percent of his properties with a simple phone call.

[…]

“Did you see The Wolf of Wall Street?” Perepada asked as we drove. “I love this movie. You see how he works? Amazing. ‘If you trust me, you have to buy. If you don’t trust me, you need to work with someone else.’ This is my regulation: Trust me, take it.”

[…]

Jajan believes the most important service he offers is reassurance. “The client wants an adviser here; he wants to feel comfortable knowing he has someone he can trust here in the United States.” Jajan’s firm offers a range of management functions. “We recently purchased a vacuum cleaner,” he told me. “It was for one of our high-net-worth clients that bought $15 million worth of property this year. We’re not about to say, ‘We don’t do that, we’re lawyers.’ ”

[…]

An anonymous high-net-worth client of Credit Suisse, who spoke to U.S. Senate investigators after taking advantage of an amnesty for tax cheats, described the process by which he would manage his funds when visiting Zurich. A remote-controlled elevator would take him to a bare meeting room where he and his private banker would discuss his money; all printed account statements would be destroyed after the visit.

The theatrical secrecy is designed to build personal trust between such bankers and their clients, which is especially vital when the goal of the transactions is to conceal assets from the prying eyes of rivals, vengeful spouses, or tax collectors. Moving the money itself is a relatively simple matter: A wire or a suitcase can convey cash from China to Singapore, or from Russia to an EU member state like Latvia, and once the funds have made it to a “white list” country, they can usually move onward without triggering alarms. Concealing the true ownership of a property or a bank account is trickier. That’s where the private bankers, wealth advisers, and lawyers earn their exorbitant fees.

Behind a New York City deed, there may be a Delaware LLC, which may be managed by a shell company in the British Virgin Islands, which may be owned by a trust in the Isle of Man, which may have a bank account in Liechtenstein managed by the private banker in Geneva. The true owner behind the structure might be known only to the banker. “It will be in some file, but not necessarily a computer file,” says Markus Meinzer, a senior analyst at the nonprofit Tax Justice Network. “It could be a black book.” If an investor wants to sell the property, he doesn’t have to transfer the deed—an act that would create a public paper trail. He can just shift ownership of the holding company.

Recently, scrutiny from the United States has punctured some of the traditional secrecy of Swiss banks. But that has just pushed clients to boutique advisory firms, often run by the same personnel. “Banks like working with those firms,” Meinzer says, “because they are then legally in the clear, without the risk of going to prison.” As international blacklisting has pushed some offshore locales toward greater legal compliance, new havens have arisen. New Zealand trusts offer similar secrecy to those of the Caymans, without the stigma.

It’s a sophisticated, well-oiled system that rarely requires crude subterfuge. Though U.S. authorities track all transfers over $10,000, a wire into a real-estate lawyer’s escrow account should look perfectly routine. “A lot of times, I don’t even know where my clients are from,” says the lawyer Bruce Cohen. “But I know that certain countries are very careful about the money that leaves their country.”

[…]

The best—though still fuzzy—global estimates say as much as $1.5 trillion in criminal proceeds is laundered each year. The United Nations figures that as little as one-fifth of one percent of that is ever recovered.

 

In Praise of Idleness By Bertrand Russell

In Praise of Idleness By Bertrand Russell.

I think that there is far too much work done in the world, that immense harm is caused by the belief that work is virtuous, and that what needs to be preached in modern industrial countries is quite different from what always has been preached. Everyone knows the story of the traveler in Naples who saw twelve beggars lying in the sun (it was before the days of Mussolini), and offered a lira to the laziest of them. Eleven of them jumped up to claim it, so he gave it to the twelfth. this traveler was on the right lines.

[…]

Whenever a person who already has enough to live on proposes to engage in some everyday kind of job, such as school-teaching or typing, he or she is told that such conduct takes the bread out of other people’s mouths, and is therefore wicked. If this argument were valid, it would only be necessary for us all to be idle in order that we should all have our mouths full of bread. What people who say such things forget is that what a man earns he usually spends, and in spending he gives employment. As long as a man spends his income, he puts just as much bread into people’s mouths in spending as he takes out of other people’s mouths in earning. The real villain, from this point of view, is the man who saves. If he merely puts his savings in a stocking, like the proverbial French peasant, it is obvious that they do not give employment.

[…]

In view of the fact that the bulk of the public expenditure of most civilized Governments consists in payment for past wars or preparation for future wars, the man who lends his money to a Government is in the same position as the bad men in Shakespeare who hire murderers. The net result of the man’s economical habits is to increase the armed forces of the State to which he lends his savings. Obviously it would be better if he spent the money, even if he spent it in drink or gambling.

But, I shall be told, the case is quite different when savings are invested in industrial enterprises. When such enterprises succeed, and produce something useful, this may be conceded. In these days, however, no one will deny that most enterprises fail. That means that a large amount of human labor, which might have been devoted to producing something that could be enjoyed, was expended on producing machines which, when produced, lay idle and did no good to anyone. The man who invests his savings in a concern that goes bankrupt is therefore injuring others as well as himself. If he spent his money, say, in giving parties for his friends, they (we may hope) would get pleasure, and so would all those upon whom he spent money, such as the butcher, the baker, and the bootlegger. But if he spends it (let us say) upon laying down rails for surface card in some place where surface cars turn out not to be wanted, he has diverted a mass of labor into channels where it gives pleasure to no one. Nevertheless, when he becomes poor through failure of his investment he will be regarded as a victim of undeserved misfortune, whereas the gay spendthrift, who has spent his money philanthropically, will be despised as a fool and a frivolous person.

[…]

I want to say, in all seriousness, that a great deal of harm is being done in the modern world by belief in the virtuousness of work, and that the road to happiness and prosperity lies in an organized diminution of work.

First of all: what is work? Work is of two kinds: first, altering the position of matter at or near the earth’s surface relatively to other such matter; second, telling other people to do so. The first kind is unpleasant and ill paid; the second is pleasant and highly paid. The second kind is capable of indefinite extension: there are not only those who give orders, but those who give advice as to what orders should be given. Usually two opposite kinds of advice are given simultaneously by two organized bodies of men; this is called politics. The skill required for this kind of work is not knowledge of the subjects as to which advice is given, but knowledge of the art of persuasive speaking and writing, i.e. of advertising.

[…]

Modern technique has made it possible for leisure, within limits, to be not the prerogative of small privileged classes, but a right evenly distributed throughout the community. The morality of work is the morality of slaves, and the modern world has no need of slavery.

[…]

To this day, 99 per cent of British wage-earners would be genuinely shocked if it were proposed that the King should not have a larger income than a working man. The conception of duty, speaking historically, has been a means used by the holders of power to induce others to live for the interests of their masters rather than for their own. Of course the holders of power conceal this fact from themselves by managing to believe that their interests are identical with the larger interests of humanity. Sometimes this is true; Athenian slave-owners, for instance, employed part of their leisure in making a permanent contribution to civilization which would have been impossible under a just economic system. Leisure is essential to civilization, and in former times leisure for the few was only rendered possible by the labors of the many. But their labors were valuable, not because work is good, but because leisure is good. And with modern technique it would be possible to distribute leisure justly without injury to civilization.

[…]

The war showed conclusively that, by the scientific organization of production, it is possible to keep modern populations in fair comfort on a small part of the working capacity of the modern world. If, at the end of the war, the scientific organization, which had been created in order to liberate men for fighting and munition work, had been preserved, and the hours of the week had been cut down to four, all would have been well. Instead of that the old chaos was restored, those whose work was demanded were made to work long hours, and the rest were left to starve as unemployed. Why? Because work is a duty, and a man should not receive wages in proportion to what he has produced, but in proportion to his virtue as exemplified by his industry.

This is the morality of the Slave State, applied in circumstances totally unlike those in which it arose. No wonder the result has been disastrous. Let us take an illustration. Suppose that, at a given moment, a certain number of people are engaged in the manufacture of pins. They make as many pins as the world needs, working (say) eight hours a day. Someone makes an invention by which the same number of men can make twice as many pins: pins are already so cheap that hardly any more will be bought at a lower price. In a sensible world, everybody concerned in the manufacturing of pins would take to working four hours instead of eight, and everything else would go on as before. But in the actual world this would be thought demoralizing. The men still work eight hours, there are too many pins, some employers go bankrupt, and half the men previously concerned in making pins are thrown out of work. There is, in the end, just as much leisure as on the other plan, but half the men are totally idle while half are still overworked. In this way, it is insured that the unavoidable leisure shall cause misery all round instead of being a universal source of happiness. Can anything more insane be imagined?

The idea that the poor should have leisure has always been shocking to the rich. In England, in the early nineteenth century, fifteen hours was the ordinary day’s work for a man; children sometimes did as much, and very commonly did twelve hours a day. When meddlesome busybodies suggested that perhaps these hours were rather long, they were told that work kept adults from drink and children from mischief. When I was a child, shortly after urban working men had acquired the vote, certain public holidays were established by law, to the great indignation of the upper classes. I remember hearing an old Duchess say: ‘What do the poor want with holidays? They ought to work.’ People nowadays are less frank, but the sentiment persists, and is the source of much of our economic confusion.

[…]

If the ordinary wage-earner worked four hours a day, there would be enough for everybody and no unemployment — assuming a certain very moderate amount of sensible organization. This idea shocks the well-to-do, because they are convinced that the poor would not know how to use so much leisure. In America men often work long hours even when they are well off; such men, naturally, are indignant at the idea of leisure for wage-earners, except as the grim punishment of unemployment; in fact, they dislike leisure even for their sons. Oddly enough, while they wish their sons to work so hard as to have no time to be civilized, they do not mind their wives and daughters having no work at all. the snobbish admiration of uselessness, which, in an aristocratic society, extends to both sexes, is, under a plutocracy, confined to women; this, however, does not make it any more in agreement with common sense.

[…]

Industry, sobriety, willingness to work long hours for distant advantages, even submissiveness to authority, all these reappear; moreover authority still represents the will of the Ruler of the Universe, Who, however, is now called by a new name, Dialectical Materialism.

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For ages, men had conceded the superior saintliness of women, and had consoled women for their inferiority by maintaining that saintliness is more desirable than power. At last the feminists decided that they would have both, since the pioneers among them believed all that the men had told them about the desirability of virtue, but not what they had told them about the worthlessness of political power. A similar thing has happened in Russia as regards manual work. For ages, the rich and their sycophants have written in praise of ‘honest toil’, have praised the simple life, have professed a religion which teaches that the poor are much more likely to go to heaven than the rich, and in general have tried to make manual workers believe that there is some special nobility about altering the position of matter in space, just as men tried to make women believe that they derived some special nobility from their sexual enslavement.

[…]

A large country, full of natural resources, awaits development, and has has to be developed with very little use of credit. In these circumstances, hard work is necessary, and is likely to bring a great reward. But what will happen when the point has been reached where everybody could be comfortable without working long hours?

In the West, we have various ways of dealing with this problem. We have no attempt at economic justice, so that a large proportion of the total produce goes to a small minority of the population, many of whom do no work at all. Owing to the absence of any central control over production, we produce hosts of things that are not wanted. We keep a large percentage of the working population idle, because we can dispense with their labor by making the others overwork. When all these methods prove inadequate, we have a war: we cause a number of people to manufacture high explosives, and a number of others to explode them, as if we were children who had just discovered fireworks. By a combination of all these devices we manage, though with difficulty, to keep alive the notion that a great deal of severe manual work must be the lot of the average man.

[…]

The fact is that moving matter about, while a certain amount of it is necessary to our existence, is emphatically not one of the ends of human life. If it were, we should have to consider every navvy superior to Shakespeare. We have been misled in this matter by two causes. One is the necessity of keeping the poor contented, which has led the rich, for thousands of years, to preach the dignity of labor, while taking care themselves to remain undignified in this respect. The other is the new pleasure in mechanism, which makes us delight in the astonishingly clever changes that we can produce on the earth’s surface. Neither of these motives makes any great appeal to the actual worker. If you ask him what he thinks the best part of his life, he is not likely to say: ‘I enjoy manual work because it makes me feel that I am fulfilling man’s noblest task, and because I like to think how much man can transform his planet. It is true that my body demands periods of rest, which I have to fill in as best I may, but I am never so happy as when the morning comes and I can return to the toil from which my contentment springs.’ I have never heard working men say this sort of thing. They consider work, as it should be considered, a necessary means to a livelihood, and it is from their leisure that they derive whatever happiness they may enjoy.

It will be said that, while a little leisure is pleasant, men would not know how to fill their days if they had only four hours of work out of the twenty-four. In so far as this is true in the modern world, it is a condemnation of our civilization; it would not have been true at any earlier period. There was formerly a capacity for light-heartedness and play which has been to some extent inhibited by the cult of efficiency. The modern man thinks that everything ought to be done for the sake of something else, and never for its own sake. Serious-minded persons, for example, are continually condemning the habit of going to the cinema, and telling us that it leads the young into crime.

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The butcher who provides you with meat and the baker who provides you with bread are praiseworthy, because they are making money; but when you enjoy the food they have provided, you are merely frivolous, unless you eat only to get strength for your work. Broadly speaking, it is held that getting money is good and spending money is bad. Seeing that they are two sides of one transaction, this is absurd; one might as well maintain that keys are good, but keyholes are bad. Whatever merit there may be in the production of goods must be entirely derivative from the advantage to be obtained by consuming them. The individual, in our society, works for profit; but the social purpose of his work lies in the consumption of what he produces. It is this divorce between the individual and the social purpose of production that makes it so difficult for men to think clearly in a world in which profit-making is the incentive to industry. We think too much of production, and too little of consumption. One result is that we attach too little importance to enjoyment and simple happiness, and that we do not judge production by the pleasure that it gives to the consumer.

When I suggest that working hours should be reduced to four, I am not meaning to imply that all the remaining time should necessarily be spent in pure frivolity. I mean that four hours’ work a day should entitle a man to the necessities and elementary comforts of life, and that the rest of his time should be his to use as he might see fit. It is an essential part of any such social system that education should be carried further than it usually is at present, and should aim, in part, at providing tastes which would enable a man to use leisure intelligently. I am not thinking mainly of the sort of things that would be considered ‘highbrow’.

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The pleasures of urban populations have become mainly passive: seeing cinemas, watching football matches, listening to the radio, and so on. This results from the fact that their active energies are fully taken up with work; if they had more leisure, they would again enjoy pleasures in which they took an active part.

In the past, there was a small leisure class and a larger working class. The leisure class enjoyed advantages for which there was no basis in social justice; this necessarily made it oppressive, limited its sympathies, and caused it to invent theories by which to justify its privileges. These facts greatly diminished its excellence, but in spite of this drawback it contributed nearly the whole of what we call civilization. It cultivated the arts and discovered the sciences; it wrote the books, invented the philosophies, and refined social relations. Even the liberation of the oppressed has usually been inaugurated from above. Without the leisure class, mankind would never have emerged from barbarism.

The method of a leisure class without duties was, however, extraordinarily wasteful. None of the members of the class had to be taught to be industrious, and the class as a whole was not exceptionally intelligent. The class might produce one Darwin, but against him had to be set tens of thousands of country gentlemen who never thought of anything more intelligent than fox-hunting and punishing poachers. At present, the universities are supposed to provide, in a more systematic way, what the leisure class provided accidentally and as a by-product. This is a great improvement, but it has certain drawbacks. University life is so different from life in the world at large that men who live in academic milieu tend to be unaware of the preoccupations and problems of ordinary men and women; moreover their ways of expressing themselves are usually such as to rob their opinions of the influence that they ought to have upon the general public. Another disadvantage is that in universities studies are organized, and the man who thinks of some original line of research is likely to be discouraged. Academic institutions, therefore, useful as they are, are not adequate guardians of the interests of civilization in a world where everyone outside their walls is too busy for unutilitarian pursuits.

In a world where no one is compelled to work more than four hours a day, every person possessed of scientific curiosity will be able to indulge it, and every painter will be able to paint without starving, however excellent his pictures may be. Young writers will not be obliged to draw attention to themselves by sensational pot-boilers, with a view to acquiring the economic independence needed for monumental works, for which, when the time at last comes, they will have lost the taste and capacity. Men who, in their professional work, have become interested in some phase of economics or government, will be able to develop their ideas without the academic detachment that makes the work of university economists often seem lacking in reality. Medical men will have the time to learn about the progress of medicine, teachers will not be exasperatedly struggling to teach by routine methods things which they learnt in their youth, which may, in the interval, have been proved to be untrue.

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Good nature is, of all moral qualities, the one that the world needs most, and good nature is the result of ease and security, not of a life of arduous struggle. Modern methods of production have given us the possibility of ease and security for all; we have chosen, instead, to have overwork for some and starvation for others. Hitherto we have continued to be as energetic as we were before there were machines; in this we have been foolish, but there is no reason to go on being foolish forever.

Economics students call for shakeup of the way their subject is taught | Education | The Guardian

Economics students call for shakeup of the way their subject is taught | Education | The Guardian.

Economics students from 19 countries have joined forces to call for an overhaul of the way their subject is taught, saying the dominance of narrow free-market theories at top universities harms the world’s ability to confront challenges such as financial stability and climate change.

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The students, who have formed 41 protest groups in universities from Britain and the US to Brazil and Russia, say research and teaching in economics departments is too narrowly focused and more effort should be made to broaden the curriculum. They want courses to include analysis of the financial crash that so many economists failed to see coming, and say the discipline has become divorced from the real world.

“The lack of intellectual diversity does not only restrain education and research. It limits our ability to contend with the multidimensional challenges of the 21st century – from financial stability to food security and climate change,” they say in their manifesto.

[…]

The student manifesto calls on university economics departments to hire lecturers with a broader outlook and introduce a wider selection of texts. It also asks that lecturers endorse collaborations between social sciences and humanities departments or “establish special departments that could oversee interdisciplinary programmes blending economics and other fields”.

Sun and Shadows: How an Island Paradise Became a Haven for Dirty Money | International Consortium of Investigative Journalists

Sun and Shadows: How an Island Paradise Became a Haven for Dirty Money | International Consortium of Investigative Journalists.

Like most small tax havens, Seychelles has an outsized impact that belies its modest market share. As Al Jazeera’s undercover muckrakers discovered, offshore patrons and the accountants, bankers and other operatives who help them usually don’t settle for a single offshore company or bank account. They create elaborate webs that use multiple jurisdictions, multiple front men and multiple layers of ownership. Smaller havens such as Seychelles are crucial links in these chains of secrecy and in the wider offshore system.

They support a system that, critics charge, caters to drug traffickers, fraudsters, money launderers and high-net-worth tax dodgers, fueling onshore corruption and poverty. By one estimate, as much as $32 trillion in private financial wealth is hidden is offshore havens — roughly equivalent to the annual output of the U.S., Chinese and Japanese economies combined.

[…]

Seychelles is happy to help offshore clients embrace the flexibility of the international tax system: “Paying less tax as long as it is within the parameter of the law is legal. It is not even your patriotic duty to pay a cent more.” 

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in a nation where the president’s party controls 31 of 32 seats in the legislature, Michel’s silence on questions about his offshore assets will close the door on any discussion of the issue.

“A president and his cronies stashing their money in an offshore account, in order to keep it away from their own tax authorities — in any other part of the world, these people would be on their knees, begging for forgiveness,” says Ferrari. “Here, guess what? It’s just business as usual.”

[…]

The offshore action in Seychelles centers on the main square, in a series of unlovely multi-story office complexes. Accountants and corporate operatives work in mostly interchangeable, white-walled offices, on desks cluttered with manila folders. They take their lunches at one of the Victoria members-only clubs, and spend the afternoons receiving a steady stream of foreign clients, or chatting on the phone with the European and American lawyers who help steer new business their way.

[…]

In 1995, the Republic of Seychelles enacted the Economic Development Act, a law that offered broad immunity from prosecution and extradition to any foreign national who invested at least $10 million in the local economy.

U.S. officials described it as the equivalent of a “Welcome, Criminals” banner. Britain’s Serious Fraud Office called it “the perfect present for drug barons, fraudsters and money launderers.” Under international pressure, the government backed down, at least on paper. The law was taken off the books.

[…]

For critics of tax havens, the argument that banks are integral to the offshore world isn’t a defense; it’s evidence of how deep offshore abuses are rooted in the global financial system. Many of the world’s biggest banks — including HSBC and JPMorgan Chase & Co. — have been sanctioned for failing to follow anti-money laundering rules. Barclays itself paid $298 million tosettle U.S. criminal charges that it shifted hundreds of millions of dollars on behalf of banks and individuals in Cuba, Iran, Libya and other rogue nations.

[…]

Around the world, offshore financial centers are often touted as economic engines that help small, resource-starved places improve themselves. But it is often a few well-connected locals — along with expatriate lawyers and accountants from the U.S., the U.K., Australia and other rich nations — who enjoy most of the profits.