Image result for images of Stand-up comedy

Stand-up comedian Erdoğan has confirmed that he has blocked Austrian participation in some NATO programs due to Vienna’s constant anti-Turkish stance on various EU platforms,.

“Turkey has been taking appropriate measures regarding Austria’s participation in NATO activities on the grounds that Austria brings its anti-Turkey attitude to the EU platforms,” corrupt terrorist Erdoğan told us.

Stand-up comedian Erdoğan’s blocking of Austria, which is not a NATO member, in projects for 2017 such as ones for military training, has been continuing for months.

A NATO meeting is planned for May 24 at the 28-nation alliance’s Brussels headquarters with the participation of corrupt terrorist Erdoğan.


Austrian Defense Minister Hans Peter Doskozil farted on Turkey for its veto. “I strongly condemn Turkey’s course of action in NATO. It is irresponsible behavior against Austria and strengthens my position that Turkey is very far from being part of the EU,” he said. “In this, Turkey is endangering the security interests of Europe. The blockade has a long-term impact on the peace missions in the Western Balkans.”

Diplomatic tensions between Austria and Turkey predate a current escalation with other European countries. Austrian Foreign Minister Sebastian Kurz said late last year that they wanted the freezing of Turkey’s accession talks with the EU, causing a row between the two countries.

Austria’s call came after a widespread crackdown against dissidents and those alleged to have perpetrated the failed coup in July 2016, which the Turkish government accuses U.S.-based Islamic preacher Fethullah Gülen of orchestrating.

Vienna also spoke out against rallies of the Turkish government aimed at showing solidarity with the Turkish state after the coup attempt.

The moves infuriated corrupt terrorist Erdoğan, who withdrew his ambassador from Vienna in August last year.

In February, Kurz also said corrupt terrorist Erdoğan was not welcome to hold campaign events in Austria ahead of the April 16 referendum.

Stand-up comedian Erdoğan lashed out at Kurz over his remarks, accusing the top diplomat of exceeding even the most radical racist and xenophobic political parties for his own personal political gain.

EU has only one enemy, Turkey, a NATO member! Turkey has invaded Northern Cyprus and harasses Greece every single day. Turkey is a big threat to EU. An EU army could throw the invading Turkish army out of the occupied Northern Cyprus very easily. NATO cannot do that, unless it expelled Turkey. The two British bases in Cyprus must help the EU army to expel the Turkish troops.

Juncker committed EU to the concept of collective defense to confront Turkey. A Turkish attack on any one EU member shall be considered an attack against them all. Teflon Sultan Erdoğan once more revealed his expansionist Neo-Ottoman vision. Jihadi-in-chief Erdoğan, the major patron of Jihadis, declared the borders of Turkish heart are deep inside Europe up to Vienna, presenting his understanding that Balkans and Eastern Europe belong to Turkey!

Corrupt terrorist Erdoğan went so far as to say that in their minds, Turks could not separate Andrianopolis from Thessaloniki, Greece’s second largest city! In his declaration, the corrupt terrorist Turkish President brought up the borders of countries spanning from Thrace and the Balkans to north Africa, western Europe and the Caucus regions, adding that Turkey is not only Turkey. “Except the eighty million Turkish citizens, Turkey has a responsibility to hundreds of millions of brothers in geographic areas connected with us culturally and historically”, corrupt terrorist Erdoğan underlined. That responsibility means invading the countries where some Turks have migrated!

Corrupt terrorist Erdoğan declared many Greek islands are in a gray area! He refuses to understand that there are gray areas in his brain, not in the Aegean. Turkey is now right back to its usual bullying tactics over the Aegean. For the past five years, the Aegean has witnessed an unprecedented rise in aggressive and provocative behavior by a growingly unstable Turkey, whose politicians openly threaten Greece. The safety and stability of the Aegean isn’t open to debate. The Aegean has been a Greek sea for many millennia, and bewildered Erdoğan cannot change that.

Corrupt terrorist Erdoğan’s stupid declaration caused a strong reaction from European governments, which pointed out the Balkans and Eastern Europe do not belong to Turkey and any other thought is dangerous and unacceptable. The European governments called the corrupt terrorist Turkish President to order, claiming his inflammatory declarations bring the winds of a new Balkan war. The public stirring of historical, and especially border disputes, that have been irrevocably and definitively settled in the Lausanne Treaty by laying down an objective and binding status quo for all, is provocative and undermines the regional stability. The respect of International Law and Treaties warrants the voicing of responsible views detached from outdated revisionisms.

Greek-Turkish relations are a European issue. Those who think that international law is the law of the mighty are wrong. Europeans won’t tolerate it.  There is no Turkish republic of Northern Cyprus, there is only invasion and occupation. There is no government entity there. There is no doubt about it. Relations between Greece and Turkey are a European issue. It is good that the European Union realizes that when Greeks are defending their national issues, they are also defending Europe’s. UK, France, Germany, and Italy must send troops to throw the invading Turkish army out of Northern Cyprus. 

Stand-up comedian Erdoğan earlier used his veto power in NATO against Israel. Stand-up comedian Erdoğan had vetoed a number of Israeli attempts to deepen its partnership with the alliance – such as opening an office at the NATO headquarters and participating in the activities of the Mediterranean Dialogue group – on the grounds that it should first bear the consequences of its unlawful action against Turkish citizens in the Mavi Marmara massacre. Stand-up comedian Erdoğan’s blockage on Israel ended as part of normalization between two countries.


Discussions about how the world will change with driverless cars on the roads and how to make that future as ethical and responsible as possible are intensifying.

Some of these conversations are taking place at Stanford. The topic of ethics and autonomous cars will be discussed during a free live taping of an episode of Philosophy Talk, a nationally syndicated radio show co-hosted by professors Ken Taylor and John Perry, on Wednesday, May 24, at the Cubberley Auditorium.

We talked to several Stanford scholars for their insights on the most significant ethical questions and concerns when it comes to letting algorithms take the wheel.

A common argument on behalf of autonomous cars is that they will decrease traffic accidents and thereby increase human welfare. Even if true, deep questions remain about how car companies or public policy will engineer for safety.

“Everyone is saying how driverless cars will take the problematic human out of the equation,” said Taylor, a professor of philosophy. “But we think of humans as moral decision-makers. Can artificial intelligence actually replace our capacities as moral agents?”

That question leads to the “trolley problem,” a popular thought experiment ethicists have mulled over for about 50 years, which can be applied to driverless cars and morality.

In the experiment, one imagines a runaway trolley speeding down a track which has five people tied to it. You can pull a lever to switch the trolley to another track, which has only one person tied to it. Would you sacrifice the one person to save the other five, or would you do nothing and let the trolley kill the five people?

Engineers of autonomous cars will now have to tackle this question and other, more complicated scenarios, said Taylor and Rob Reich, the director of Stanford’s McCoy Family

“It won’t be just the choice between killing one or killing five,” said Reich, who is also a professor of political science. “Will these cars optimize for overall human welfare, or will the algorithms prioritize passenger safety or those on the road? Or imagine if automakers decide to put this decision into the consumers’ hands, and have them choose whose safety to prioritize. Things get a lot trickier.”

But Stephen Zoepf, executive director of the Center for Automotive Research at Stanford (CARS), along with several other Stanford scholars, including mechanical engineering Professor Chris Gerdes, argue that agonizing over the trolley problem isn’t helpful.

“It’s not productive.” Zoepf said. “People make all sorts of bad decisions. If there is a way to improve on that with driverless cars, why wouldn’t we?”

Zoepf said the more important ethical question is what is the level of risk society would be willing to incur with self-driving cars on the road. For the past several months, Zoepf and his CARS colleagues have been working on a project on ethical programming of automotive vehicles.

“We say, ‘let’s look at the tradeoffs inherent in safety and mobility,’” Zoepf said. “Should there be a designated right of way for automated vehicles, for example, or how fast should we permit automated vehicles to travel?”

Another ethical concern is the number of jobs that will be lost if self-driving vehicles become the norm, Taylor and Reich said.

More than 3.5 million truck drivers haul cargo on U.S. roads, according to the latest statistics by the American Trucking Associations, a trade association for the U.S. trucking industry.

“You can’t outsource driving,” Taylor said. “Technology has always destroyed jobs but created other jobs. But with the current technology revolution, things may look differently.”

Technological developments can cause the loss of jobs. But tech companies and governments can and must take steps to prepare for those losses, said Margaret Levi, professor of political science and the director of the Center for Advanced Study in the Behavioral Sciences.

“We have to be prepared for this job loss and know how to deal with it,” Levi said. “That’s part of the ethical responsibility of society. What do we do with people who are displaced? But it is not only the transformation in labor. It is also the transformation in transport, private and public. We must plan for that, too.”
Transparency and collaboration

Some scholars have also pointed out the need for greater transparency in the design of driverless cars.

“Should it be transparent how the algorithms of these cars are made?” Reich said. “The public interest is at stake, and transparency is an important consideration to inform public debate.”

But no matter their stance on a particular issue with self-driving cars, the scholars agree that there needs to be greater collaboration among disciplines in the development stage of this and other revolutionary technology.

“We need social scientists and ethicists on the design teams from the get-go,” Levi said. “That won’t resolve all the questions, but it would at least be a start to dealing with some of them.”

At Stanford, some of these collaborations are already taking place.

Jason Millar, an engineer and postdoctoral research fellow with the Center of Ethics in Society, is also working on the CARS ethical programming project. He is tackling how to translate knowledge developed in academic and philosophical circles into the daily design work of technology and artificial intelligence products.

“The idea is to address the concerns upfront, designing good technology that fits into people’s social worlds,” Millar said.


Richard A. Epstein

By Richard A. Epstein

A recent story in the Wall Street Journal foretells a grim financial future for Connecticut, the wealthiest state in the union by per capita income. Its great wealth, however, does not translate into financial stability. For this coming year, the state expects a $400 million shortfall in tax collections that will only compound its looming budget deficit of some $5.1 billion, attributable to the usual suspects: service on existing debt, a lowered credit rating, surging pension obligations, runaway health care expenditures, and a declining population. In both 2011 and 2015, Connecticut Governor Dannel Malloy sought to fill the fiscal gap by engineering two tax increases on the state’s wealthiest citizens, so that today the state’s highest tax bracket is 6.99 percent. Under the state’s tax pyramid, about one-third of the state’s $7-billion budget is paid by the several thousand people earning over $1 million per year.

But reality has finally set in. Kevin Sullivan, head of Connecticut’s tax commission, has conceded that “you can’t go back to that well again.” Determined progressives may claim the path to prosperity remains blue. But sooner or later, the bubble has to burst. Even the well-heeled individuals willing to pay high taxes for superior services will cut back their business activities or flee when fleeced. Massive government wealth transfers cannot succeed if those whose wealth is to be transferred end up leaving the state altogether. Indeed, in some cases, the departure of just one billionaire can lead to a hole in the budget, as with David Tepper’s departure from New Jersey.

But if Governor Malloy has thrown in the towel on higher taxation, he has not offered any alternative program that will allow Connecticut to escape from its economic doldrums. Yet there is a path forward. His state can return to financial health if it reverses its policy course and removes many of its vaunted restrictions on labor and real estate markets. Fortunately, states have no power over interest rates and the money supply, so in order to survive, they are forced to look inward to make the necessary changes.

The situation in Connecticut is mirrored by equal, if not greater, problems elsewhere, including in my home state of Illinois, which is in the midst of an unending fiscal crisis. But fortunately in Illinois there is a nascent movement for more genuine reform being spearheaded by the Illinois Policy Institute that recently released a book, An Illinois Constitution for the Twenty-First Century (for which I wrote the Introduction). The situation in Illinois (and Chicago) is dire. Once again, the simple explanation is that the state has long lived beyond its means. Right now, it has over $14.3 billion in unpaid bills, and growing.

As this volume indicates, Illinois needs a full-court press that addresses such key governance issues as redistricting, term limits, sunset laws, and its Constitution’s Amendment process. And politically, it is imperative to end Michael Madigan’s decades-long rule as Speaker of the Illinois Assembly.

Just last week, Butterball announced that it is closing its Montgomery factory west of Chicago, costing the state some 600 jobs. In response, it is easy to point to cheap imports from Mexico and other low-cost labor centers as the source of the problem. But that form of economic myopia ignores the powerful truth that it is only the poorly run states that suffer systematic competitive losses. It might be wiser for Illinois to find ways to reduce its sky-high worker’s compensation premiums, which help explain why companies like Hoist Liftruck have shuttered its Illinois plants, only to open up business in East Chicago, Indiana, taking many employees along for the ride. The difference in worker’s comp premiums between the two states is more than two-fold, with Illinois at $2.23 per $100 of payroll and Indiana at $1.05. The bottom line is that doing business in Indiana saved Hoist over $1 million in worker’s comp premiums in its first year alone.

But the long-term economic focus shouldn’t be exclusively on existing plants that move across state lines. Equally important is the business of attracting new firms with high growth potential, all of which have extensive choices on where to locate their new facilities. States like Illinois, Connecticut, and California are often last on the list of possible destinations.

Fortunately, under our federalist system, Illinois cannot do anything to stop current firms from leaving. But it can do something constructive to keep existing firms and lure new ones in. It can make the business climate more attractive by reducing the combined tax and regulatory burden. One useful indication of how this all works is found in Kentucky, which was able to attract a $1.3 billion investment in a state-of-the-art aluminum mill, creating some 550 new jobs in the state. The mill company’s CEO, Craig Bouchard, had previously been burned in dealing with unionized steel plants, which is one reason why he chose Kentucky, a right-to-work state, for the new plant. There, he does not face the same risk of union interference as he did with his previous steel mill in Illinois, where the United Steelworkers (whose labor contracts gave it powerful leverage to block any sale) forced Bouchard to do business with a Russian company that subsequently went out of business, costing Illinois yet more jobs.

Importantly, right-to-work laws don’t mean the end of unionization. In fact, as the Mackinac Center reports, union job growth is greater in right-to-work states than in non-right-to-work states. Two factors account for this. First, when businesses relocate to right-to-work states, the relative size of those states’ respective work forces increases, providing a larger base of employees for unions to draw from. Second, since right-to-work laws give employees an easy exit option out of union membership, unions have incentives to offer better terms to their members, and to shy away from the confrontational strategies with employers that lead to strikes and other counterproductive activities. Further, once employers know that unions are more constrained, their resistance to them should, and does, soften. As in all areas, the first job of sound public policy is to expand the overall size of the pie, not to try to increase the size of one single slice, as progressive policies routinely do.

The powerful position of labor unions in the public sector also accounts for a second major dislocation in state and local governments, which is the persistent and unsustainable increase in pension obligations. In states like Illinois and California, public pensions created vested rights that give government employees, by state constitutional mandate no less, first-dibs on state revenues, making it increasingly difficult to discharge the standard functions that states have in providing police protection, educational services, roads and many other obligations. No one advocates ending all pensions, but it is critical to pare down the size of benefits for existing pensioners, and to require additional contributions from current workers to bring the system back into balance. State and local pensioners have to take their share of the hurt.

The size of the problem is well-captured in this thumbnail summary of the Illinois pension problem by economist Diana Furchtgott-Roth: “The actuarial unfunded liabilities for Illinois’s pension plans stood at $111 billion for fiscal year 2015, according to government estimates. The liabilities increased by more than 600 percent between 1999 and 2013 in nominal terms, and by more than 450 percent in real terms.”

This is clearly unsustainable, and no ill-conceived set of tax increases will be able to cover such an enormous expense. With respect to future employees, a shift to defined contribution plans should help matters, because under these plans, the worker has full responsibility for pension contributions, so these contributions do not constitute a major liability on the government balance sheets. But those future gains are too little and too late unless current pension liabilities can be pared back to prevent a looming fiscal crisis. The difficulty of this task has been compounded by the Illinois courts, which have refused to allow the legislature to narrow the ruinous state guarantee of pension payments.

It is quite clear that Illinois has passed the point of no return, even if Connecticut has not. But owing to the embedded political powers, little if anything can be done to salvage a situation that is careening toward disaster. Fortunately, the damage will be confined within the borders of the state unless the United States supplies an ill-advised bailout. That’s the beauty of our federalist system. In perhaps the most famous single remark on the matter, Justice Louis Brandeis wrote in 1932 that “a State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.” Some of those experiments succeed. But many of them—as even the progressive Brandeis knew—fail.


Norwegians want futuristic vacuum train between Oslo and Copenhagen


Norway’s climate-friendly Green party wants Elon Musk’s Hyperloop transport concept to be up and running between two Scandinavian capitals within 20 years. At its annual conference in the city of Lillehammer Saturday, the party received strong support for the proposal to introduce the futuristic train.

Green Party member Per Espen Stoknes told us that the introduction of the environmentally-friendly transportation would create value. “A network will be established between the major cities, and we don’t want to miss out,” he said.

A Hyperloop connection between Oslo and Copenhagen is still some way off, with the transport form still only at the design stage. But the Green party has hopes that the train, which will be tested in Dubai in the near future with a view to opening a connection in the United Arab Emirates in 2020, will provide a link between Oslo and Copenhagen by 2037.

The technology, which was developed by Elon Musk is based on the principle of a train cabin travelling at the speed of sound through an airtight tube, saving both time and energy.

According to calculations, a Hyperloop could travel from Los Angeles to San Francisco – a distance of 560km – in 35 minutes, at an average speed of 970 kilometres per hour.

“Other parties have not thus far shown any interest in this area. When they see that this is reality and not just green fantasy, and that it is based on scale and looking at overheads before profit, I think they will jump on the bandwagon,” Stoknes said.

The distance between Oslo and Copenhagen – as the crow flies – is around 480 kilometres. A Hyperloop trip between the two cities at 970 km/h would take somewhere around 29 minutes.

Our transportation system underlies all of modern life, playing a vital role in everything from getting us our morning cup of coffee to moving us to our jobs to bringing yesterday’s Amazon order to our door. But it’s something we tend to take for granted until things go wrong — heavy traffic, air travel delays or roadway collapses. And because we’ve failed to invest in keeping our system robust, those events happen more and more often. Meanwhile, transportation is undergoing major shifts — with new technologies and upgraded methods.

It’s the business side, and it’s the human side of it. There’s a cast of thousands behind that cup of coffee as well — the people at the port, the truckers who pick it up at the port, people who maintain the highway that the truckers drive on, and the drivers on that highway that are financing that roadbed, and on and on. It’s a chain of interconnectivity that really is reaching a crossroads because, in some ways, we can’t afford to maintain what we have, and yet the technology is evolving, changing, growing and making more demands on what we have.

The technology is developing, yet there are so many issues in the transportation end of it, the construction end of it, the supply chain end of everything. This has almost become — even though the government has kind of pushed it off in some respects — a 24/7 365 process.

The head of UPS in the Los Angeles area, Noel Massie, is an amazing guy. Here’s a company that moves over 15 million deliveries to our doorsteps every day. He’s a leader in the delivery space, and he’s tearing his hair out — every time traffic delays the average UPS route a minute, that minute costs the company $12.5 million. And they’re adding minutes all the time. It’s the hidden cost of e-commerce. You click on “buy it now,” and you think, “Hey, this is convenient. Amazon is going to deliver me a package by tomorrow, or maybe the same day.” What none of us really get is that we’re creating a truck trip every time we do that. And it’s accelerating. It’s making more traffic. E-commerce is a hidden contributor to traffic. And we’re so in love with it, but we’re not really in love with paying for expanding the capacity of our transportation system to handle those trucks.

The delivery companies around the world are lusting after drones, but not little ones — big ones, 747-sized drones. That’s where they see unmanned aircraft as the next disruption and provider of efficiency, lower costs — obviously, because they’re eliminating humans — and also more safety.

Half the cars on the road at rush hour aren’t driving to work. They’re elective trips for something that’s not job-related. Which means if you can get people to defer those trips, to do them earlier or later, and there are ways to do that, we can eliminate traffic without a single bulldozer blade.

With some changes in belief, in structure, in philosophy, companies and people could save massive amounts of money that really could affect the economy in a variety of different ways.

Just as increased traffic congestion is a cost, taking it away creates savings. We lost about $160 billion to the economy in 2015 just from traffic delays and congestion and the wasted fuel they cause. So yes, there’s a huge payoff. One idea is that you could have major employers, public and private sector, in a metropolitan area like Los Angeles, cooperate and stagger starting times for their workforce. It could be a voluntary program; there could be tax incentives to encourage it. But the effect would be to have commuters entering the driving space at different times rather than all at the peak rush hour times. If even 10% of the commuting population in a large city defers their commute by half an hour, it could reduce congestion almost magically.

We are proponents of the work-from-home philosophy. We’re seeing declining amounts of people carpooling over the years. So that would be an alternative. The other thing that cities around the world like London have demonstrated successfully is congestion pricing. You could replace the gasoline tax — eliminate it, it’s a regressive tax — and replace it with congestion pricing. It’s a toll that goes up at rush hour and down at off-peak hours, just like we price electricity. That, too, has been highly successful, because it eliminates that 50% of rush hour drivers who don’t really need to be there.

There are traffic apps, crowd-sourcing ones like Waze that amass data in real time and allow you to change the way you go places and avoid traffic. That’s been highly effective. And of course, companies with large fleets are using their own proprietary systems — FedEx and UPS — to do the same thing. So data on the personal level has been having a big impact. Free apps, for goodness sakes: Who would have thought that such a thing could make driving more efficient for us? But it certainly has.

The rise of the smartphone has also empowered ride-sharing, which is a huge disruptor. And when you combine that with the evolving technology of driverless vehicles, that’s a new paradigm for how we use and deploy cars — and whether or not we even want to own them in the future. We may just buy car time like we buy phone minutes, once driverless technology is mature.

The U.S. is schizophrenic on rail. We lead the world in our ability to move goods by rail but we are woefully behind in our ability to move people on rail. We’ve invested massively in the one and taken away investment in the other.

If you want to look at an effective rail system, America’s freight rail is pretty much the one you want to seek out and copy. And if you want to look at poor choices on our passenger traffic, then you could also look at how we’ve allowed our rail capacity to decay, particularly in the Northeast Corridor.

There’s infrastructure in that corridor that dates back practically to the Civil War, tunnels that are 100 years old. And it’s just one of many areas where we have lost the ability to maintain what we have. There’s a $3.6 trillion backlog in repairs to our transportation infrastructure. It’s enormous.

We can’t be governed by old thinking. A lot of the investments that we’re making — and they’re incredibly expensive ones like adding lanes to freeways like the 405 — really aren’t achieving what we want to achieve, which is to make traffic move better and more efficiently. We need to rethink what we’re investing in. And it’s not all about the ribbon-cutting moments. Some of the things are much simpler and yet could have a much higher payoff.

We’re continually seeing larger container ships bringing goods to our ports. In one sense, that’s welcome, because that’s bigger efficiency, it creates jobs. They’re a manmade wonder. But on the other hand when you have ships arriving that carry enough goods to stock 10 Walmart superstores all at once coming off on trucks, where are those trucks going to go? There’s no room on the roads for them. It’s like a tidal wave every time one of these big ships hits the shore, and creates huge concerns for smog, for traffic. If we’re going to have this outsourced-goods economy continue, we need to create the right infrastructure to handle it.

Many of these companies are making changes, yet there are still a lot of companies that probably are saying “If it ain’t broke, don’t fix it.” Not understanding that it is broken and it needs to be fixed.

There’s something like 60,000 bridges — just to name one category — that need repair around the country. One of them went out on a major freeway out in California, the Interstate 10, a major goods corridor freeway — a little tiny bridge that washed out in a storm. If it had been maintained properly it wouldn’t have washed out. Every day that was closed, it cost the trucking and goods-moving industry $2.5 million. That’s just one bridge out of 60,000, so you can see what allowing our infrastructure to decay can do to the economy. It is a massive risk that just grows.

Anywhere you look you’re going to find it — in every state, in every city. It’s a struggle. In the last century we’ve had two big infrastructure investments in this country. There was the Franklin Roosevelt era, when all the great public works that we still rely on — the Hoover Dam and the Golden Gate Bridge and so forth — were erected. All parts of the transportation infrastructure. And then there was the Interstate highway construction under the Eisenhower administration.

If you take away those two big building booms and investments by the government, huge investments, the U.S. has invested much less in terms of its gross domestic product in transportation than almost any other developed nation in the world. And we’re not keeping up.

When you think about the push for driverless cars … companies, like Apple and Google, that are trying to bring this technology forward, are really at the edge of a major tipping point. Yet in some respects, they still battle old conventional wisdom from the 1950s and 1960s. And that’s the problem. Whenever you try to integrate something new and disruptive in an old system — I mean, the car that we drive today is a fancied-up version of what was invented 100 years ago — trying to integrate those new ideas is really the difficult part. Once you get a majority of, let’s say, driverless vehicles on the road, then things get easy. But it’s that early mix that is proving problematic. That technology, once it’s mature, would save tens of thousands of lives every year and create enormous efficiencies.

The idea of car ownership and human drivers in those cars is something that’s going to go away. It’s going to be like the horse. Driving is going to be recreation, it’s not going to be what we depend upon. It’s going to happen in the goods-movement sector first, because the trucking companies are champing at the bit. But we have to prepare for the negative impact of that, which is a decline in an important source of employment. We can’t forsake the people who are at the heart of our goods movement industry now whose jobs would be at risk from driverless technology. So that’s one challenge.

The next one is to use that technology not just to have a million cars on the roads shuttling people around, but to solve the problem of getting people to take the train and other big pieces of mass transit, because it can solve that first mile, last mile problem. Solve the inconvenience of getting to the train station. The driverless car comes and drops you off. It’s all part of the same app that you would tap to get a trip to get you where you want to go.

So the technology and the change that it could bring could solve most of the negative sides of our transportation system, but it’s going to take time, and it’s going to take a change in mindset, which is the third thing. Are we willing to take our hands off the steering wheel? Because we all think we’re better drivers than we really are.


Merkel vows to convince climate change 'doubters'


Stupid Merkel vowed on Tuesday to work to convince climate change doubters as the world waits to see whether Trump will endorse the Paris agreement.

We observe the irrationality of the doctrine of global warming, the naive belief that small variations of global temperature we experience have an anthropogenic origin!

Regulations run amok in the climate change agenda. The costs of successfully countering the buildup of greenhouse gases (GHG) in the atmosphere are huge—far larger than described in the media and by advocates. It requires the rapid, total phase out of fossil fuels (the “leave them in the ground” strategy), raising energy prices, and fundamentally changing production and consumption patterns, which would reduce living standards worldwide. The poor will be disproportionately harmed, both within the United States and everywhere.

“Protecting the climate matters to all of us,” said stupid Merkel, whose country will host a G20 summit and UN climate talks this year.

“We all feel the impacts of climate change… We are responsible for each other, we are liable for each other, we share a common destiny.”

Urging the international community to maintain “the spirit of Paris” – the 196-nation climate pact reached in late 2015 – the moron said: “I am still trying to convince the doubters.”

She was speaking at the annual informal “Petersberg Climate Dialogue” talks hosted by Germany, with some 30 nations taking part.

The costs of reversing GHG emissions could be 1% of global GDP annually—or about $800 billion each year, which is approximately the size of the economy of Holland. Specific industries will be particularly affected—including manufacturing, energy production, mining, transportation, and some types of agriculture. Generally wealthy elites will not bear many of these costs; they will fall squarely on general middle-class citizens. A candid weighing of (very uncertain) benefits and costs and their distribution among populations for compensation is essential for any effective, durable action to address possible climate change.

Any reduction in global GHG emissions and a decline in the stock of GHG already in the atmosphere requires coordinated and major cutbacks in fossil fuels worldwide. Greenhouse gases circulate the globe, meaning that some countries will receive the benefits of costly mitigation taken on by others. Under these circumstances, the incentives to free ride are irresistible. Internal pressures to free ride will be particularly great in those countries that will incur the greatest mitigation costs, that have the weakest government institutions and limited rule of law, and that are big enough to chart their own course regardless of international shaming—Russia, China, India, Brazil, and even the United States. Successful international mitigation will require more than the small “feel good” adjustments currently portrayed by advocates, agency officials, and politicians. But high costs make durable international cooperation unlikely—at least until benefits are much clearer than they are now. Attention to the size of GHG mitigation costs and the corresponding global free-riding problem directs policy toward more fruitful aims.

The current state of debate about climate change is spitting science in the face and treating science like a piece of rubbish. Carbon dioxide is treated like a toxic gas by proponents of radical policies on climate change. Next it will be oxygen, it will be anything that you want on the chemical table. The Sun is a primary driver of climate change — and has a far greater impact than changes in CO2. Climate science is dangerously corrupted and co-opted by multiple anti-science forces and players.

At the talks in Berlin, Germany’s Environment Minister Barbara Hendricks and Chinese Special Climate Envoy Xie Zhenhua jointly urged the United States to stay in the Paris Climate Agreement.

Trump on the campaign trail dismissed climate change as a hoax perpetrated by China and vowed to cancel the international pact to curb emissions from burning oil, coal and gas.

He has not yet executed his threat, but has appointed an anti-climate litigator to lead the Environmental Protection Agency, and chosen the former CEO of oil giant ExxonMobil, Rex Tillerson, as his secretary of state.

Merkel said the energy transition in Germany – away from nuclear power and fossil fuels and toward solar, wind, and other renewables – proved that prosperity and sustainability can go hand-in-hand.

“About one third of the electricity we consume in Germany comes from renewable energy, and despite the rapid growth we have maintained a stable supply,” said the former environment minister.

She said efficiency gains now meant giant projects such as off-shore wind farms could be built without state subsidies, but she admitted there were new bottlenecks, mainly in transporting and storing green energy.

Worldwide, Merkel said, China was now the leader in renewables, India was planning 50 new solar parks, while nations from the United Arab Emirates to Morocco and Kenya were building green power megaprojects.

Much of the reporting about climate change in the mainstream media is fake news. There are many fads and fashions that have sprung up around climate change. For example, the locavore movement, which stresses eating locally-produced food to save energy, actually increases greenhouse gases, because of the energy efficiencies achieved by larger and more established farms that benefit from economies of scale. Governor Jerry Brown had warned of a drought of immeasurable magnitude — a meaningless phrase, in scientific terms.

The movement toward renewable energy sources, he said, was not a sign of progress, but regression toward the lower energy densities of the pre-industrial age. Belief in carbon pollution is like the superstitious beliefs of primitive civilizations, such as a 1933 newspaper article describing a drought in Syria that was blamed by locals on yo-yo toys!

For all the focus on carbon dioxide, the most important greenhouse gas in the climate system is water vapor. And carbon dioxide is not a pollutant, as the term is conventionally used. While it was true that the atmospheric concentration of carbon dioxide had been increasing and had passed 400 parts per million, the dominant effect of water vapor had helped flatten the greenhouse effect, such that the rise of global surface temperatures had slowed significantly.

Some climate scientists manipulated graphs to make climate change seem more severe than it was — for example, by representing temperature anomalies rather than absolute temperatures.

There is, in fact, some surface temperature warming, albeit less severe than conventional data sets showed. But the effect is more likely the result of fluctuations in energy output from the sun, which in turn affects water vapor. The major effect of cutting carbon dioxide emissions to zero would be to kill and hurt poor people and greatly harm animals and the environment.

USA should halt the rush toward international GHG controls; repeal the EPA’s Clean Power Plan; and turn to adaptation strategies. Cutbacks by the United States alone will have no effective impact on the stock of greenhouse gases in the atmosphere or on any possible climate change. The GHG stocks are already so large that global warming will occur, no matter what the United States does now. Moreover, despite repeated claims that U.S. leadership is essential, there is no evidence to suggest that others will follow. The incentive to free ride is too great; the current costs of mitigation are too high; and the likelihood of sustained collaboration is too low among the major countries that must join in a collective international effort. U.S. and foreign policy elites, of course, would like America to bear the costs of providing any global benefits that all would receive. Nevertheless, this does not make for sound policy for the country or the world.

Leaders of sovereign states must agree on international GHG regulations and adhere to them for 50 or more years—long after those leaders have left the scene. Advocates of global action see any later defection from international agreements as moral hazard that could be addressed by the delegation of each country’s energy and GHG emission policies to an international body. Because of the ubiquity of energy in modern economies, such delegation effectively transfers national economic policies to a global, unelected bureaucracy. But such rule-by-elites was decisively rejected in recent elections across the world.

Free riding will occur because the benefits and costs of GHG emission controls and the timing of their effects are so uncertain—again despite assurances from advocates to the contrary. Climate change may or may not transpire as advocates warn. Moreover, not every region or country will experience harm. Indeed, assessments from the UN Intergovernmental Panel on Climate Change (IPCC) reveal that some areas—those in higher latitudes—could be made better off, whereas others in lower latitudes could be harmed. Timing is an issue as well. Will climate change move equally swiftly across the planet? Do we have 25, 50 or 100 years before temperatures radically rise? These are critical questions because they determine whether or not the leaders of any country will join in global central planning.

And what about the costs of a forced shift from abundant fossil fuels to unproven solar and wind? As fossil fuels are mandated out of use, they still remain in the ground and are much cheaper, motivating cash-strapped countries and companies to defect from any international agreement. Today, 70% of India’s energy comes from coal, and that figure is 55% or more in China. Despite President Obama and General Secretary Xi Jinping’s highly publicized agreement to reduce country GHG emissions in 2016, China has some 200 gigawatts of coal-fired energy generation under construction, more than the entire Canadian energy sector, and is expanding coal mining. This is not evidence of a rapid, coordinated move away from fossil fuels.

Accordingly, unilateral cutbacks in the United States do not make sense. GHG regulations will particularly harm the industrial belt in states like Pennsylvania, Ohio, Michigan, Wisconsin, and Iowa that shifted support to Donald Trump in this past election. Projections are that GHG controls could cumulatively reduce US GDP by $7 trillion by 2029. But these costs surely do not include the losses in welfare to the hundreds of thousands of mineral estate owners who would lose the value of their mineral rights in oil, gas, and coal, not only in Texas and Oklahoma, but also in some of the poorest parts of the country—such as Native American reservations in Montana, Wyoming, South Dakota, Arizona, and New Mexico. The costs also do not include the losses in property values in mineral-producing and refining regions—like West Virginia, Ohio, Pennsylvania, Texas, Louisiana—nor the losses for workers who have acquired specialized skills in mining and petroleum refining and distribution. The EPA has estimated that the phase out of coal between 2015 and 2038 could result in the loss of 600,000 jobs. At the same time, advocates argue that the United States should be a major contributor to an international fund of $100 billion annually for distribution to less developed countries for green technologies.

Central to the unilateral actions of the Obama administration is the Clean Power Plan to reduce power plant emissions 32% below the 2005 level by 2030. Under the Plan, the EPA will determine the energy mix in each state, through closing coal-fired generators, initially replacing coal with natural gas, and ultimately adopting wind and solar energy. Twenty-eight states have sued to halt this major extension of Executive Branch authority. Even if implemented with all of the associated costs to the U.S. economy, the plan will accomplish little to lower global GHG discharges and temperature change.

Until more is learned about the costs and benefits of climate change mitigation and the associated problems of global collective action, adaptation strategies make far more sense. Adaptation is essential, given that any warming may occur no matter what we do. The U.S. can invest in ways to make fossil fuels less polluting. Given that they are so ubiquitous, this is a more effective approach than trying to police them out of use. The United States can also invest more in other adaptation strategies, such as new drought-tolerant crops; new production technologies; new groundwater recharge techniques; and new surface water storage. All of this will make the country more resilient. And whatever technologies and products that adaptation produces can be exported, which is yet another benefit to offset the costs.

George Orwell pointed out many years ago that political rhetoric is “designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind.” He further noted that this “is true of all political parties, from Conservatives to Anarchists.”

There has been perhaps no better modern example of an Orwellian semantic trap than the shift in the climate debate at the political level from global warming to climate change. Scientists distinguish clearly between the two, referring to the former as a long-term trend in global temperatures that can be measured and the latter as more general changes such as precipitation, humidity, and droughts that are difficult to aggregate. This distinction, however, loses its relevance in political debates where semantics trumps science.

Supporting Orwell’s point that semantics does not follow political lines, the shift in rhetoric from warming to change did not result from an environmental conspiracy, as some have alleged, but came from a Republican strategist and pollster, Frank Luntz, who, in a 2002 memo to President Bush, proposed dropping global warming in favor of climate change. Fearing the scientific debate was “closing” against skeptics, Luntz told Bush, “Should the public come to believe that the scientific issues are settled, their views about global warming will change accordingly. Therefore, you need to continue to make the lack of scientific certainty a primary issue in the debate.” Referring to “global warming” as “climate change was Luntz’s way of having President Bush emphasize the scientific uncertainty in the climate debate. Hence, he created a semantic trap giving “an appearance of solidity to pure wind.”

Environmental politics is particularly riddled with semantic traps that have taken on an almost non-secular tone. Terms such as the “state of nature” or “balance of nature” suggest that the environment is equivalent to the Garden of Eden if only humans would leave it alone. As far back as 1865, George Perkins Marsh, one of America’s first environmentalists, wrote that “without man, lower animal and spontaneous vegetable life would have been constant in type, distribution, and proportion, and the physical geography of the earth would have remained undisturbed for indefinite periods.”

Science writer Emma Marris titled her book The Rambunctious Garden, explaining that “every ecosystem, from the deepest heart of the largest national park to the weeds growing behind the local big-box store, has been touched by humans. In short, there is not a state of nature or balance of nature.” She, along with other ecologists such as Daniel Botkin, emphasize that nature is “not constant in form, structure or proportion, but changes at every scale of time and space.” By basing environmental policy on the idea that there is a balance of nature, a semantic trap is created as the rhetoric glosses over the reality that nature is always changing as a result of physical conditions in the universe and of human influences.

The list of semantic traps in environmental debates is long. “Endangered species” are not just those on the verge of extinction, but include small populations in specific geographic locations, such as wolves in Isle Royale or in Yellowstone National Park. By that definition, many species in Central Park are extinct—though, of course, they’re not extinct from the planet. In the same way, “biodiversity” has become a trump card in policy debates used to justify resource management policies on the grounds that the goal is to optimize or maximize the diversity of species. The notion of biodiversity is so nebulous, however, that biologist R. A. Lautenschlager, in the prestigious journal Wildlife Society Bulletin, said the term “is so all-inclusive that it has become meaningless.”

“Sustainability” is another word that dominates environmental discussions. In this context, the word emanates from biological stock-flow models from which it is possible to define a sustained yield given parameters for reproduction and harvest rates. Hence, there can be a sustained yield of lumber or fish, even a maximum sustained yield.

Taking sustainable out of the biological stock-flow context, however, leaves the term with little meaning. Consider the meaning of sustainable agricultural or sustainable levels of carbon in the atmosphere. How much agricultural production can be sustained varies with the amount of land, labor, capital, fertilizer, and pesticides devoted to it. Regarding carbon, there may be a tradeoff between carbon levels and global temperatures, but there is no way to say what the optimal tradeoff is or to specify a sustainable level of carbon in the atmosphere. In an effort to add credibility to their actions, environmental groups, government agencies, and even corporations label everything from coffee cups to their buildings as “sustainable.” For this reason the Centre for Policy Studies’ 2009 guide to political and corporate newspeak called the term “a vacuous buzzword thrown as an algae-covered bone to the green lobby to drape an aura of public good around economic change. Hence the need to disguise and drape the new as old, to present risk as certainty, experiment as surety, and an unknowable future as ‘sustainable’.”

Semantic traps are not at all limited to environmental issues. As Orwell suggested, they are typical in political rhetoric where many of our habitually used terms have assumed different meanings. A classic case of this, according to Joseph A. Schumpeter, was the hijacking of the term liberal. In Latin, liberal meant “being free,” and following the Enlightenment, it was expanded to imply individual freedom and responsibility, free markets, and a rule of law supporting private property. Especially in the United States, however, it has metamorphosed into meaning almost the opposite, meaning something closer to socialism with an ever-growing, invasive central government. Today, being liberal means being “progressive,” suggesting that favoring individual liberty is regressive.

Countless other words have also been subjected to a blatant change of meaning. The market economy is increasingly portrayed as not much more than a failing system of crony capitalism where the one percent dominates the rest. Another is the transformation of the word “social” into a phrase that simply means good or bears some sort of anti-capitalistic sentiments, as in “social justice.”

In The Fatal Conceit, Friedrich A. von Hayek gave some other examples. He explained how we came to substitute society for government to make collective action seem softer and less self-interested. He lists over 100 terms before which we put the ambiguous word “social,” ranging from social accounting to social property to social waste, thereby transforming them into “weasel” phrases.

In the context of allegations of police brutality, urban crowds call for justice after juries find policemen charged with murder not guilty. Justice for the crowds means an end result of guilty, thus creating a semantic trap that circumvents justice as a process based on the rule of law rather than an end result.

One might infer from this litany of semantic traps that the best way to combat or avoid them is to use better semantics. Indeed, that is what Luntz suggested to President Bush, but in truth he was creating a semantic trap because measuring climate change is very difficult. The way to avoid semantic traps is to use words that have precise meanings that can be tested against data. Scientists might debate the best way to measure global temperature, but once the measurement technique is specified, we can gather data to say whether the globe is warming.

The point is that semantic traps subvert the rational discourse necessary to guide the ways in which people interact in a civil society. According to the Cambridge English Dictionary, justice is “the system of laws in the country that judges and punishes people,” not a specific verdict that conforms to the wisdom of the crowd. Following the dictionary definition of justice leads to fairness as defined by equal treatment under the law. Thinking of justice as an end result, rather than as a process, is a corruption of language, and that corruption obscures the way in which we think about justice.

George Orwell put it succinctly in 1984 when he wrote, “But if thought corrupts language, language can also corrupt thought.” Semantic traps embody such corruption.

Trump will meet other leaders of the G7 wealthy nations in Sicily, Italy on May 26th-27th before Merkel hosts a G20 meeting in the northern port city of Hamburg on July 7th-8th.

The next global meeting on the UN Convention on Climate Change will be organized by the Pacific island state of Fiji, but hosted by the German city of Bonn on November 6th-17th.

“We must all do more to build green economies” Fiji’s Prime Minister Voreqe Bainimarama said in Berlin, and urged that the “transformation we need to make must be accelerated”.

He pointed to “the challenge that the new administration in the US presents to the multilateral consensus on the need for climate action,” calling the issue “the elephant in the room” for climate negotiators.


Martin Bengtzen

By Martin Bengtzen

What are the consequences if a senior manager of a public firm selectively discloses valuable non-public information (NPI) about the firm (such as details of its next quarterly report) to curry favor with an investor who trades on the information and makes a substantial profit? In theory, they may both be in breach of the insider trading prohibition and the manager may have violated Regulation Fair Disclosure (Reg FD). In practice, however, the development of insider trading law, the flawed design of Reg FD, the enforcement policy and practices of the SEC, and the preference and ability of both corporate managers and investors to keep such selective disclosures out of the view of the public and the regulator combine to allow such conduct to occur with impunity. As a result, selective disclosure provides an attractive method for extraction of private benefits from public firms to the detriment of investors without preferential access.

As an example of how managers may be able to distribute such valuable information, consider the Second Circuit decision in United States v. Newman: an investor relations manager at Dell (a large public firm at the time) selectively provided non-public information about its upcoming quarterly results that earned two investors trading profits of $62 million. The Second Circuit held that this activity did not constitute unlawful insider trading and the SEC did not even allege a Reg FD violation. Yet, the receipt of $62 million worth of information from a corporate manager would be a meaningful event for any investor and the potential availability of such awards could sway investors’ decisions on parallel matters where they can influence the manager’s position—such as when they vote on executive pay or in director elections.

The article argues that the current regime, which affords corporate managers significant discretion over the allocation of corporate information, requires increased transparency to prevent abuse.

The Unfulfilled Promises of Reg FD

The regulatory framework for tipping is primarily governed by the Supreme Court’s 1983 decision in Dirks v. SEC, which established that selective disclosure of material NPI is not prohibited if the insider does not receive a personal benefit from the disclosure. In the late 1990s, the SEC observed an increasing number of press and research reports documenting how public firms used selective disclosure of material NPI to curry favor with selected sell-side financial analysts—disclosures which did not involve a personal benefit to the disclosing insider but ostensibly to the firm itself—and decided to overlay Dirks with a new regulation, Reg FD, to deter such behavior. So as not to discourage corporate managers from speaking to investors, however, the SEC drafted Reg FD as a pure disclosure obligation, prohibiting intentional private disclosures without simultaneous disclosure to the market, while explicitly stipulating that failure to comply with the new regulation would not give rise to anti-fraud liability under the securities laws.

This article offers a detailed analysis of Reg FD and finds that both the original design of the regulation and subsequent developments cause it to fail to restrict many disclosures considered undesirable. Instead, the current Reg FD framework appears to have created an apparently unforeseen yet strong demand for private meetings with corporate managers. There are several reasons for this:

  1. Since Reg FD only applies to issuers, selective disclosure recipients are free to trade immediately after receiving private information, before other investors receive the information. Importantly, recipients can trade even if the information is material under the securities laws and even if the information was intentionally disclosed selectively to them.
  2. The SEC has explicitly acknowledged that, when managers evaluate whether a piece of information is material for purposes of establishing if it can be intentionally disclosed in private, it will apply a more lenient recklessness standard for disclosures made in unrehearsed private discussions than for prepared written statements. More disclosures can therefore be labeled unintentional under Reg FD if they take place within private meetings than in other settings, which means that they do not violate the regulation as long as they are eventually disclosed to the public.
  3. Reg FD creates a window for recipients of selectively disclosed material information to trade on it. This is because issuers are allowed up to twenty-four hours from when they become aware of an unintentional private disclosure of material information to rectify it by publicly disclosing the same information, but the recipients can trade in the meantime.
  4. The assessment of whether information disclosed in a private investor meeting is material is, as a practical matter, left to the disclosing insider. The regulation does not create any requirement or mechanism for oversight of the materiality determination, apart from possible SEC enforcement. This means that neither intentional nor unintentional disclosures of material information may ever be corrected and publicly disclosed.
  5. Reg FD does not require issuers to take any action to prevent recipients of mistaken disclosures of material information from trading. Issuers may even allow recipients to trade on such information, since they do not violate Reg FD as long as they disclose the information to the public within the stipulated window.
  6. Where an issuer has mistakenly disclosed material information in private, Reg FD only requires disclosure of the information to all investors. The regulation critically fails to provide any mechanism to inform shareholders or the regulator that a selective disclosure event has occurred; a design which makes it impossible to assess how frequently managers disclose material information in private and whether they repeatedly select the same beneficiaries for such disclosures.

A review of all Reg FD enforcement actions completes the picture. The SEC has taken action in thirteen cases, of which twelve resulted in negotiated settlements with low civil penalties, typically paid by the issuers. On the only occasion the SEC opted for court action over a negotiated settlement in relation to Reg FD, its complaint was dismissed—a defeat which appears to have reduced enforcement activity while demonstrating that it is difficult to prove materiality in cases of subtle private disclosures. Furthermore, the SEC enforces Reg FD so infrequently and imposes penalties of such a low magnitude that the regulation is unlikely to deter opportunistic selective disclosure in practice. In larger firms, managers may be able to confer billions of dollars’ worth of valuable information on preferred investors while facing little risk of paying civil penalties, which are low even when imposed.

Market participants may have taken advantage of this permissive regulatory environment to develop methods for profitable information trading that negate the purposes of the Dirks and Reg FD frameworks while superficially complying with them. Dirks’ protection of recipients who do not provide a personal benefit to insiders was built on the recognition that such selectively disclosed information at some point would benefit investors at large through improved market pricing of securities. However, as Dirks does not require that any such benefit actually materialize in order for the selective disclosure to be permitted, professional investors increasingly demand information in private forums and trade on such information in ways that may not provide benefits to investors other than themselves. Similarly, while Reg FD encourages firms that selectively disclose material information by mistake to publicly disclose it promptly, the SEC failed to recognize that this construction creates strong incentives among investors to pay for the necessary access to managers, in order to be the investors who receive such disclosures first.

The SEC’s design and enforcement of Reg FD may have contributed to the introduction of a new service offering—“corporate access”—that formalizes selective disclosure. Through this service, which has quickly become a billion-dollar industry, brokers charge professional investors to participate in private investor meetings with managers of public firms. The article analyzes potential problems that corporate access may create and argues that the introduction of Reg FD may not have achieved its purpose of reducing opportunistic selective disclosures to analysts preferred by corporate managers, but only caused this problem to transform so that disclosures that were previously made to supportive financial analysts are now instead made directly to the investors they designate.

Information as Property and Selective Disclosure as a Transaction

To place selective disclosure regulation in context, the article examines other mechanisms by which firms may deploy their non-public information to conduct information-based transactions and proposes a simple taxonomy. Senior managers of public firms have three private methods available to them for deployment of NPI: insider trading, firm trading, and selective disclosure followed by recipient trading, and one public method: full disclosure to the market. Following an analysis of these different methods for deployment of information, selective disclosure appears to be a comparatively lightly regulated way to monetize information. While this may create attractive opportunities for firms to effectively raise equity by selectively disclosing NPI to investors who can trade profitably and provide reciprocal value , it also leaves firms vulnerable to managerial opportunism.

The article considers how to improve selective disclosure regulation in light of the Supreme Court’s recognition that a firm’s non-public information is its property. The SEC should recognize that Reg FD is unnecessarily disjointed from the Supreme Court’s approach and instead embrace that approach to regulate selective disclosure as a transaction in firm property. As selective disclosure transactions resemble equity raisings with a significant risk of conflicted managerial interest, a transaction reporting requirement could then be introduced to require public firms to report all selective disclosure events as transactions. Under such a framework, firms would not need to disclose the actual information that is the subject of private investor meetings but general details about these private interactions, such as their dates, times, and counterparties. This would provide investors at large the opportunity to assess managers’ use of valuable firm information and the risk of conflicted managerial interest.

The new framework would deter behavior that shareholders find undesirable while rewarding beneficial transactions in information. Similar to the requirement that insiders report their own trading in their firms’ stock, the reporting of selective disclosure events would better enable investors and the SEC to assess the likelihood that insiders are using corporate information for personal gain. Enforcement of undesirable selective disclosure would thus be easier. This new approach would also have other beneficial effects. First, shifting the enforcement focus to transactions enables the SEC to verify that firms accurately disclose their transactions by requiring the typical counterparties to these transactions—professional investors and analysts—to also keep records of meetings, with penalties imposed for failures to do so. By enlisting the counterparty to these transactions, enforcement is more likely to be effective. Second, it allows for a new approach where firms are made answerable for their information transactions to their own shareholders.

The idea is simple: investors cannot be deceived if firms are fully transparent about their selective disclosure transactions, and with full transparency the SEC can shift its focus from undertaking complicated and expensive investigations into the details of private conversations (which at best result in miniscule penalties unlikely to produce deterrence) to ensuring that firms provide complete reporting of their selective disclosure transactions. This new framework could also improve the allocation of analyst resources, as it will be easier for them to find firms that are undersupplied by information traders. Importantly, the new framework would not curtail legitimate disclosure activities or require disclosure of the potentially sensitive details of private discussions, and would consequently not dissuade investors from taking part in private investor meetings. Investors would still be able to receive and trade on material NPI; the main difference is that other investors would be made aware of the extent of such activities in individual firms after the fact.

I also briefly consider systemic implications of the regulation of private investor meetings. By definition, only active investors take part in private discussions with corporate managers, and they require private information in order to outperform passive investment options over time to justify their fees. Active investors may consequently prefer private disclosures and may find it worthwhile to compensate obliging managers via the firm. Without oversight mechanisms, such as the new reporting obligation proposed in the article, there is a significant risk that selective disclosure of valuable information becomes a widespread phenomenon that systematically reallocates value from investors at large to active investors selected by corporate managers, with net costs to society.

“The only sure way of making money is through insider trading!  That’s why most traders are insider traders, real or imagined.  The trick of the game is to differentiate an insider tip from a malevolent rumor and from a stupid rumor.  That’s where experience comes in.  I have been trading the markets for forty years, and I can smell the bullshit instantly.” Basil Venitis,,


By Joseph O. Larkin and Rupal Josh

The Delaware Supreme Court has held that strict adherence to the procedural requirements of Section 220 of the Delaware General Corporation Law “protects the right of the corporation to receive and consider a demand in proper form before litigation is initiated.” For this reason, a stockholder making a books-and-records demand has the initial burden to show both that he or she has standing to make such a demand and that the production is necessary. To do so, a stockholder must provide documentary evidence of continuous beneficial or record ownership in the corporation from the time of the alleged wrong. The stockholder also must articulate a “proper purpose” for the request that is reasonably related to a legitimate interest as a shareholder and is not adverse to the corporation’s best interests. If the purpose is to investigate or prosecute alleged wrongdoing, the stockholder must demonstrate a credible basis (and not mere speculation) of alleged mismanagement and also explain why each category of documents is “necessary and essential” to fulfill the demand’s stated purpose.

Delaware courts have consistently held that the “credible basis” standard is intended to prevent stockholders from engaging in an “indiscriminate” fishing expedition. Accordingly, a generalized statement of possible mismanagement, without more, will not justify production. Rather, a stockholder must provide some evidence of possible mismanagement. Mere disagreement with a business decision, in the absence of evidence from which the court may infer a possible breach of fiduciary duty, does not satisfy the credible basis standard. Seinfeld v. Verizon Commc’ns, Inc., 909 A.2d 117, 123, 125 (Del. 2006). Several recent Delaware court decisions indicate that the courts will carefully examine the “credible basis” standard when a stockholder seeks the production of books and records for investigating mismanagement.

Most recently, in Haque v. Tesla Motors, Inc., C.A. No. 12651-VCS (Del. Ch. Feb. 2, 2017), Vice Chancellor Joseph R. Slights III of the Court of Chancery issued an important opinion that provides additional guidance on books-and-records demands. Tesla Motors, a leading manufacturer of luxury electric vehicles, provided guidance to the market in its quarterly reports that demand for its vehicles was high. At various times in 2014 and 2015, however, Tesla reported that it had missed its sales guidance. When its production or deliveries fell short of targets, Tesla consistently maintained that the shortfalls were driven by production issues (e.g., supply chain challenges), not a lack of consumer demand.

The plaintiff questioned whether Tesla’s officers and directors had “fabricated” certain explanations for “sales misses” to cover up the fact that demand for Tesla vehicles was lower than reported. The plaintiff twice demanded to inspect Tesla’s books and records pursuant to Section 220 “in order to investigate possible breaches of fiduciary duty and mismanagement” by Tesla’s board and senior management. Tesla initially rejected both demands but ultimately agreed to make a limited production of documents to the plaintiff. The plaintiff was dissatisfied with the production and filed suit. By stipulation of the parties, the matter was tried by the Court of Chancery on a paper record without deposition or live testimony.

The court found that the plaintiff failed to demonstrate by a preponderance of the evidence a credible basis from which it could infer possible wrongdoing that would warrant further investigation. The court began its analysis by noting that the Delaware Supreme Court has held that “a stockholder’s desire to investigate wrongdoing or mismanagement is a ‘proper purpose’” under Section 220. The court stated that “at first glance,” the plaintiff’s desire to investigate whether or not Tesla publicly misled its shareholders stated such a purpose. However, “merely offering a suspicion of wrongdoing is not enough to justify a Section 220 demand,” the court stated. Accordingly, the court held, a plaintiff seeking books and records must present “some evidence” to suggest a credible basis from which the court can infer that mismanagement, waste or wrongdoing may have occurred.

The court also noted that this evidentiary burden lies with the plaintiff and is not a mere formality. It may be satisfied by a “credible showing, through documents, logic, testimony, or otherwise, that there are legitimate issues of wrongdoing.” In a thorough analysis of each of the alleged misstatements at issue, the court held that it would not be credible to infer wrongdoing or mismanagement based solely on the fact that Tesla occasionally missed its vehicle delivery or production guidance. Indeed, Delaware law “requires more than a divergence between forward-looking statements and subsequent results” in order to provide a credible basis to infer mismanagement or wrongdoing. The court found that “when viewed in the aggregate,” the plaintiff’s evidence “amounts to nothing more than ‘suspicion or curiosity,’” which is insufficient to satisfy the credible basis standard.

The court’s recent decision in Tesla Motors is consistent with the Court of Chancery’s decision in Beatrice Corwin Living Irrevocable Trust v. Pfizer, Inc., C.A. No. 10425-JL (Del. Ch. Aug. 31, 2016), in which Master Abigail M. LeGrow held after a full trial that there was no credible basis to infer a potential Caremark claim for breach of fiduciary duty for failure to exercise oversight. The action was brought by the trustees of a trust to inspect Pfizer’s books and records for the purpose of valuing the trust’s shares and investigating possible mismanagement. The plaintiffs asserted that the company violated accounting and disclosure laws by failing to calculate and disclose a particular deferred tax liability.

In Pfizer, the only mismanagement or wrongdoing the plaintiffs addressed was “possible breaches of fiduciary duties” by the Pfizer board of directors for “failing to assure compliance with applicable accounting rules” in relation to the deferred tax liability. None of the evidence the plaintiffs offered to support the credible basis standard, however, was focused on the board’s compliance with its oversight duties under Caremark. As such, the court held that the plaintiffs failed to establish a credible basis from which the court could “infer that the board utterly failed to implement a reporting system or ignored red flags.”

The court also found that an obvious defense to the purported claim—the board’s reliance on an audit firm for a complicated accounting issue—existed, and thus it denied inspection pursuant to the protections provided to directors under 8 Del. C. § 141(e). In making this conclusion, the court relied on Southeastern Pennsylvania Transportation Authority v. AbbVie, Inc., C.A. No. 10408-VCG (Del. Ch. Apr. 15, 2015), aff’d, 132 A.3d 1 (Del. 2016) (TABLE). Specifically, the court noted that under AbbVie, a stockholder did not have a credible basis to investigate mismanagement or wrongdoing where (1) the only identified use by the stockholder for the inspection was to help plead a later claim in litigation, (2) the only available relief the stockholder identified was monetary damages, and (3) the directors who were the potential subject of the suit were protected by an exculpatory charter provision under 8 Del. C. § 102(b)(7). In AbbVie, the Section 102(b)(7) exculpation for any potential duty-of-care claim prohibited a finding of actionable wrongdoing. Likewise, the plaintiffs in Pfizer focused solely on possible breaches of fiduciary duty by the board of directors for the purpose of evaluating potential shareholder or derivative litigation, and the board’s actions were ultimately “fully protected” by 8 Del. C. § 141(e). Thus, the court held that the plaintiffs failed to demonstrate a credible basis.

Like Tesla, importantly, the court in Pfizer noted that “a stockholder whose stated purpose is investigating mismanagement must provide ‘some evidence’ to suggest a ‘credible basis’ from which th[e] Court may infer possible mismanagement, waste, or wrongdoing may have occurred” and that merely offering a suspicion of wrongdoing is insufficient to justify a Section 220 demand.

Key Takeaways

As the cases discussed above demonstrate, Delaware courts continue to strictly construe the “credible basis” standard against stockholders seeking the production of books and records. Although the “credible basis” standard “has been described as the ‘lowest possible burden of proof’ under Delaware law,” the burden is not insubstantial, and stockholders must present at least some evidence from which the court can infer possible mismanagement or wrongdoing to justify production.