behavioral economics

| Profit with Purpose, Capital with Conscience | P2C2

Profit with Purpose, Capital with Conscience (P2C2) is going to be the DNA of behaviour that becomes the sustainable ecosystem advantage for every individual and firm. There is no doubt that Behaviour is the “Visible hand in economics”, Mores ex parte visibilis.

Whether it is SARS CoV2 or the unfortunate death of George Floyd or the vast disappearing wildlife and forests in Africa and South America or massive plantations that overtaken natural flora and fauna in SE Asia, it is greed of people and only human behavior, that is the single causal variable of what is value extraction at its peak!

Are you aware that in a study titled Business Model Warfare, The Strategy of Business Breakthroughs By Langdon Morris Senior Practice Scholar Ackoff Center for the Advancement of Systems Approaches (A-CASA) The University of Pennsylvania An InnovationLabs White Paper, prepared & published jointly with A-CASA, 2003, https://www.innovationlabs.com/BusModelWarfare.pdf

The following was the conclusion as highlights of sheer velocity of mortality of companies;

Fortune 500:
A study by planners at Shell found that by 1983, ..That’s an average mortality rate of 12 companies per year, or one per month.

Forbes 100
In 1917, from the largest 100 US companies. By 1987, 61 of those companies no longer existed. Over the seventy year span, in other words, an average of about one company per year disappeared.

S&P 500
The S&P 500 list provides a third reference point. In 1957, the S&P listing of 90 top companies was expanded to 500. By 1997, only 74 of the original 500 companies remained, an average mortality rate of more than 10 per year.

We are in 2020 and these numbers I am sure are further being accelerated by the deficit or “maximizing” behaviour of people who manage these companies.

If one looks at the basics of all underperforming companies or governments it is behaviour that has the greatest LTL and STL of the balance sheet. It is what extracts value from every walk of life, Social, Environmental and Economic.

Let us look at what is the greatest destruction of the value of a firm, stock buybacks. Instead of investing FCF and Retained Earnings in hiring people to create greater products and services or investing in long term research or technologies that will create a competitive advantage and thus create more jobs and greater return for all stakeholders including SEE in the medium to long term, company executives and boards have continued to destroy more value than ever seen.

Between 2013 to 2019 over $4.6Trillion has gone into share buybacks alone (greater EPS greater bonuses are the Causality). This represents over 50% of the market capitalisation of the Dow Jones and the $10Trillion in corporate debt is over 220% of the Dow Jones and 50% of the US GDP!

 

Screenshot 2020-06-13 at 19.37.28Screenshot 2020-06-13 at 19.40.32

https://seekingalpha.com/article/4336564-sailed-doldrums-implications-of-demise-of-financial-engineering

It’s like watching the secret blowfish auction trading for Fugu in Japan. At least the secret handshakes are what make the market.

Screenshot 2020-06-13 at 19.37.04

The secret blowfish auction — trading for deadly but tasty fugu 【Video】

Some examples:

Banks have been fined a staggering $243 billion since the financial crisis, according to a tally released Tuesday. The US and EU fines on banks’ misconduct to top $400 billion by 2020 – report. Hong Kong-based financial services consultancy estimated bad behaviour had erased $850 billion in profits for the top 50 global banks since the 2008 financial crisis. And yet companies continue to do business like nothing has changed.

 

Screenshot 2020-06-13 at 19.55.11

https://www.marketwatch.com/story/banks-have-been-fined-a-staggering-243-billion-since-the-financial-crisis-2018-02-20 https://in.reuters.com/article/banks-regulator-fines/u-s-eu-fines-on-banks-misconduct-to-top-400-billion-by-2020-report-idINKCN1C210D 

Screenshot 2020-06-13 at 19.54.28Screenshot 2020-06-13 at 19.53.37

Two words taught at business schools are the foundation and causality of where we are as a society today, “Profit Maximization”.

It is this maximizing thinking and culture that has become the very DNA of every business, manager, investor and employee alike. This is where the disconnect it.

In this world of Volatility, Uncertainty, Complexity and Ambiguity ( VUCA) it is clear that unless companies stop the PR and slogans and really adapt to understanding that Profit must have a Purpose and the Capital that is deployed and returned have a Conscience we are witnessing what is possibly the greatest rest in trade since the Rennaissance, this time at the speed of technology networks, bandwidth, storage and computing.

Time to understand whether you and your company will exist when we have the new normal 2.0 and understand the laws of the telecom. We are witnessing and about to see an implosion on a scale of what we have never witnessed before.

The Twenty Laws of the Telecosm

February 21, 2001 by George Gilder

This excerpt from Telecosm (Free Press/Simon & Shuster) encapsulates futurist George Gilder’s grand vision of the age of the telecosm–in which infinite bandwidth will revolutionize the world.

https://www.kurzweilai.net/the-twenty-laws-of-the-telecosm

 

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.”, Charles Mackay, 1841

https://en.wikipedia.org/wiki/Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds

Screenshot 2020-06-14 at 12.09.04

And its time to add behavioural and decision sciences to every curriculum from K-12 to Ph.D. programs.

 

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https://qz.com/work/1385050/behavioral-science-will-be-more-important-than-ever-in-the-fourth-industrial-revolution/

 

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