The deadly genius of drug cartels | Rodrigo Canales

682,511 views ・ 2013-11-04

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In December of 2010,
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the city of Apatzingán
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in the coastal state of Michoacán, in Mexico,
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awoke to gunfire.
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For two straight days,
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the city became an open battlefield
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between the federal forces
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and a well-organized group,
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presumably from the local criminal organization,
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La Familia Michoacana, or the Michoacán family.
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The citizens didn't only experience incessant gunfire
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but also explosions
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and burning trucks used as barricades across the city,
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so truly like a battlefield.
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After these two days,
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and during a particularly intense encounter,
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it was presumed that the leader of La Familia Michoacana,
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Nazario Moreno, was killed.
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In response to this terrifying violence,
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the mayor of Apatzingán
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decided to call the citizens to a march for peace.
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The idea was to ask for a softer approach
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to criminal activity in the state.
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And so, the day of the scheduled procession,
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thousands of people showed up.
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As the mayor was preparing to deliver
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the speech starting the march,
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his team noticed
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that, while half of the participants
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were appropriately dressed in white,
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and bearing banners asking for peace,
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the other half was actually marching
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in support of the criminal organization
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and its now-presumed-defunct leader.
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Shocked, the mayor decided to step aside
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rather than participate or lead a procession
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that was ostensibly in support of organized crime.
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And so his team stepped aside.
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The two marches joined together,
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and they continued their path
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towards the state capital.
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This story of horrific violence
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followed by a fumbled approach
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by federal and local authorities as they tried
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to engage civil society,
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who has been very well engaged by a criminal organization,
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is a perfect metaphor for what's happening in Mexico today,
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where we see that our current understanding
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of drug violence and what leads to it
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is probably at the very least incomplete.
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If you decided to spend 30 minutes trying
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to figure out what's going on with drug violence in Mexico
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by, say, just researching online,
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the first thing you would find out is that
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while the laws state that all Mexican citizens are equal,
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there are some that are more
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and there are some that are much less equal than others,
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because you will quickly find out
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that in the past six years
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anywhere between 60 and 100,000 people
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have lost their lives in drug-related violence.
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To put these numbers in perspective,
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this is eight times larger than the number of casualties
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in the Iraq and Afghanistan wars combined.
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It's also shockingly close to the number of people
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who have died in the Syrian civil war,
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which is an active civil war.
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This is happening just south of the border.
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Now as you're reading, however,
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you will be maybe surprised that you will quickly
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become numb to the numbers of deaths,
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because you will see that these are sort of abstract numbers
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of faceless, nameless dead people.
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Implicitly or explicitly, there is a narrative
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that all the people who are dying
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were somehow involved in the drug trade,
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and we infer this because they were either tortured
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or executed in a professional manner,
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or, most likely, both.
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And so clearly they were criminals
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because of the way they died.
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And so the narrative is that somehow these people
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got what they were deserved.
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They were part of the bad guys.
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And that creates some form of comfort
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for a lot of people.
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However, while it's easier to think
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of us, the citizens, the police, the army,
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as the good guys, and them, the narcos,
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the carteles, as the bad guys,
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if you think about it,
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the latter are only providing a service to the former.
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Whether we like it or not,
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the U.S. is the largest market
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for illegal substances in the world,
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accounting for more than half of global demand.
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It shares thousands of miles of border with Mexico
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that is its only route of access from the South,
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and so, as the former dictator of Mexico, Porfirio Diaz,
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used to say, "Poor Mexico,
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so far from God and so close to the United States."
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The U.N. estimates that there are 55 million users
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of illegal drugs in the United States.
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Using very, very conservative assumptions,
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this yields a yearly drug market on the retail side
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of anywhere between 30 and 150 billion dollars.
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If we assume that the narcos only have access
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to the wholesale part, which we know is false,
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that still leaves you with yearly revenues
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of anywhere between 15 billion and 60 billion dollars.
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To put these numbers in perspective,
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Microsoft has yearly revenues of 60 billion dollars.
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And it so happens that this is a product that,
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because of its nature, a business model
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to address this market requires you
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to guarantee to your producers
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that their product will be reliably placed
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in the markets where it is consumed.
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And the only way to do this, because it's illegal,
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is to have absolute control of the geographic corridors
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that are used to transport drugs.
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Hence the violence.
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If you look at a map of cartel influence and violence,
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you will see that it almost perfectly aligns
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with the most efficient routes of transportation
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from the south to the north.
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The only thing that the cartels are doing
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is that they're trying to protect their business.
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It's not only a multi-billion dollar market,
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but it's also a complex one.
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For example, the coca plant is a fragile plant
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that can only grow in certain latitudes,
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and so it means that a business model
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to address this market requires you to have
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decentralized, international production,
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that by the way needs to have good quality control,
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because people need a good high
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that is not going to kill them
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and that is going to be delivered to them when they need it.
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And so that means they need to secure
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production and quality control in the south,
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and you need to ensure that you have
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efficient and effective distribution channels
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in the markets where these drugs are consumed.
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I urge you, but only a little bit,
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because I don't want to get you in trouble,
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to just ask around and see how difficult it would be
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to get whatever drug you want, wherever you want it,
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whenever you want it, anywhere in the U.S.,
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and some of you may be surprised to know
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that there are many dealers that offer a service
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where if you send them a text message,
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they guarantee delivery of the drug
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in 30 minutes or less.
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Think about this for a second.
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Think about the complexity
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of the distribution network that I just described.
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It's very difficult to reconcile this
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with the image of faceless, ignorant goons
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that are just shooting each other,
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very difficult to reconcile.
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Now, as a business professor, and as any business professor would tell you,
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an effective organization requires
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an integrated strategy that includes
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a good organizational structure, good incentives,
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a solid identity and good brand management.
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This leads me to the second thing that you would learn
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in your 30-minute exploration of drug violence in Mexico.
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Because you would quickly realize,
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and maybe be confused by the fact,
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that there are three organizations
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that are constantly named in the articles.
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You will hear about Los Zetas,
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the Knights Templar, which is the new brand
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for the Familia Michoacana that I spoke about at the beginning,
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and the Sinaloa Federation.
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You will read that Los Zetas is this assortment
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of sociopaths that terrify the cities that they enter
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and they silence the press,
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and this is somewhat true, or mostly true.
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But this is the result of a very careful branding
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and business strategy.
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You see, Los Zetas is not just
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this random assortment of individuals,
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but was actually created by another criminal organization, the Gulf Cartel,
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that used to control the eastern corridor of Mexico.
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When that corridor became contested, they decided
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that they wanted to recruit
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a professional enforcement arm.
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So they recruited Los Zetas:
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an entire unit of elite paratroopers
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from the Mexican Army.
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They were incredibly effective as enforcers for the Gulf Cartel,
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so much so that at some point, they decided
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to just take over the operations,
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which is why I ask you to never keep tigers as pets,
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because they grow up.
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Because the Zetas organization was founded in treason,
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they lost some of the linkages to the production and distribution
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in the most profitable markets like cocaine,
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but what they did have,
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and this is again based on their military origin,
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was a perfectly structured chain of command
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with a very clear hierarchy
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and a very clear promotion path that allowed them
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to supervise and operate across many, many markets
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very effectively,
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which is the essence of what a chain of command seeks to do.
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And so because they didn't have access
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to the more profitable drug markets,
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this pushed them and gave them the opportunity
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to diversify into other forms of crime.
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That includes kidnapping, prostitution,
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local drug dealing and human trafficking,
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including of migrants that go from the south to the U.S.
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So what they currently run is truly
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and quite literally a franchise business.
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They focus most of their recruiting on the army,
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and they very openly advertise for better salaries,
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better benefits, better promotion paths,
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not to mention much better food,
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than what the army can deliver.
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The way they operate is that
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when they arrive in a locality,
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they let people know that they are there,
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and they go to the most powerful local gang
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and they say, "I offer you
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to be the local representative of the Zeta brand."
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If they agree -- and you don't want to know
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what happens if they don't --
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they train them and they supervise them
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on how to run the most efficient criminal operation
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for that town, in exchange for royalties.
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This kind of business model obviously depends
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entirely on having a very effective brand of fear,
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and so Los Zetas
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carefully stage acts of violence
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that are spectacular in nature,
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especially when they arrive first in a city,
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but again, that's just a brand strategy.
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I'm not saying they're not violent,
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but what I am saying is that even though you will read
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that they are the most violent of all,
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when you count, when you do the body count,
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they're actually all the same.
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In contrast to them, the Knights Templar
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that arose in Michoacán
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emerged in reaction to the incursion
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of the Zetas into the state of Michoacán.
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Michoacán is a geographically strategic state
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because it has one of the largest ports in Mexico,
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and it has very direct routes to the center of Mexico,
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which then gives you direct access to the U.S.
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The Knights Templar realized very quickly
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that they couldn't face the Zetas on violence alone,
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and so they developed a strategy
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as a social enterprise.
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They brand themselves as representative of
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and protecting of the citizens of Michoacán
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against organized crime.
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Their brand of social enterprise means
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that they require a lot of civic engagement,
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so they invest heavily in providing local services,
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like dealing with home violence,
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going after petty criminals, treating addicts,
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and keeping drugs out of the local markets
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where they are,
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and, of course, protecting people
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from other criminal organizations.
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Now, they kill a lot of people too,
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but when they kill them,
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they provide very careful narratives and descriptions
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for why they did them,
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through newspaper insertions, YouTube videos,
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and billboards that explain that the people who were killed
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were killed because they represented a threat
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not to us, as an organization, of course,
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but to you, as citizens.
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And so we're actually here to protect you.
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They, as social enterprises do,
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have created a moral and ethical code
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that they advertise around,
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and they have very strict recruiting practices.
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And here you have the types of explanations
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that they provide for some of their actions.
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They have actually retained access
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to the profitable drug trade,
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but the way they do it is, because they control all of Michoacán,
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and they control the Port of Lázaro Cárdenas,
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they leverage that to, for example,
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trade copper from Michoacán that is legally created
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and legally extracted
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with illegal ephedrine from China
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which is a critical precursor for methamphetamines
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that they produce, and then they have partnerships
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with larger organizations like the Sinaloa Federation
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that place their products in the U.S.
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Finally, the Sinaloa Federation.
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When you read about them, you will often read about them
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with an undertone of reverence and admiration,
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because they are the most integrated
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and the largest of all the Mexican organizations,
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and, many people argue, the world.
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They started as just sort of a transport organization
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that specialized in smuggling between the U.S.
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and the Mexican borders,
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but now they have grown
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into a truly integrated multinational
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that has partnerships in production in the south
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and partnerships in global distribution
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across the planet.
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They have cultivated a brand of professionalism,
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business acumen and innovation.
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They have designed new drug products
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and new drug processes.
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They have designed narco-tunnels
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that go across the border,
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and you can see that these are not
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"The Shawshank Redemption" types.
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They have invented narco-submarines and boats
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that are not detected by radar.
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They have invented drones to transport drugs,
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catapults, you name it.
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One of the leaders of the Sinaloa Federation
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actually made it to the Forbes list.
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[#701 Joaquin Guzman Loera]
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Like any multinational would, they have specialized
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and focused only in the most profitable part of the business,
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which is high-margin drugs like cocaine,
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heroine, methamphetamines.
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14:28
Like any traditional Latin American multinational would,
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the way they control their operations
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is through family ties.
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When they're entering a new market, they send
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14:36
a family member to supervise it,
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or, if they're partnering with a new organization,
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they create a family tie,
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either through marriages or other types of ties.
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Like any other multinational would,
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they protect their brand by outsourcing
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the more questionable parts of the business model,
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like for example, when they have to engage
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in violence against other criminal organizations,
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14:58
they recruit gangs and other smaller players
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15:02
to do the dirty work for them,
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and they try to separate their operations
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15:05
and their violence and be very discrete about this.
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To further strengthen their brand,
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they actually have professional P.R. firms
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that shape how the press talks about them.
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They have professional videographers on staff.
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15:20
They have incredibly productive ties
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15:23
with the security organizations
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on both sides of the border.
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15:28
And so, differences aside,
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what these three organizations share
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is on the one hand, a very clear understanding
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15:38
that institutions cannot be imposed from the top,
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15:41
but rather they are built from the bottom up
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one interaction at a time.
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15:47
They have created extremely coherent structures
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15:49
that they use to show the inconsistencies
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15:52
in government policies.
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15:56
And so what I want you to remember from this talk
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are three things.
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16:00
The first one is that drug violence
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16:03
is actually the result
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16:05
of a huge market demand
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16:08
and an institutional setup that forces
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16:12
the servicing of this market to necessitate violence
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16:15
to guarantee delivery routes.
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16:19
The second thing I want you to remember
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16:21
is that these are sophisticated,
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16:23
coherent organizations
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16:26
that are business organizations,
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16:28
and analyzing them and treating them as such
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16:30
is probably a much more useful approach.
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16:33
The third thing I want you to remember
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is that even though we're more comfortable
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with this idea of "them,"
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a set of bad guys separated from us,
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16:42
we are actually accomplices to them,
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16:45
either through our direct consumption
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16:47
or through our acceptance of the inconsistency
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16:52
between our policies of prohibition
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16:54
and our actual behavior of tolerance
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16:57
or even encouragement of consumption.
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17:01
These organizations service, recruit from,
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17:05
and operate within our communities,
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17:07
so necessarily, they are much more integrated
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within them than we are comfortable acknowledging.
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17:14
And so to me the question is not whether
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17:17
these dynamics will continue the way they have.
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We see that the nature of this phenomenon
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17:23
guarantees that they will.
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17:26
The question is whether we are willing to continue
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17:29
our support of a failed strategy
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17:33
based on our stubborn, blissful, voluntary ignorance
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17:39
at the cost of the deaths of thousands of our young.
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Thank you.
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(Applause)
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