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SOCIO-ENVIRO-ECONOMIC SYSTEM
COMPLETE SYSTEM
HUGE ... COMPLEX ... AND AMAZING
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HUGE SYSTEM ... VERY COMPLEX
The system is very complex with many competing agendas!
Top down management of this system for best results is impossible
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Conventional thinking about performance analysis simply does not work
Profits, financial wealth and quality of life is up ... for some
Improvement in quality of life for most is weak
Degradation of the environment is out of control
BETTER MANAGEMENT METRICS ARE ESSENTIAL
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MANAGE FOR PROGRESS NOT FOR PERFORMANCE
PROGRESS is the increase in VALUE (of the STATE) from beginning to end of the period
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PERFORMANCE is very complicated, and depends on the PERSPECTIVE of the analysis
PROGRESS is less complicated and very much easier to measure ... and manage!
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By thinking in terms of three segments that embrace ALL of the system, the complexity of the system may be organized in a somewhat coherent manner thus:
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PEOPLE
Social Capital
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ENVIRONMENT
Natural Capital
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ECONOMY
Economic Capital
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Each of these have multiple sub-segments:
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SOCIAL CAPITAL
- Human Capital
- Relationship Capital
- Locational Capital
- Spiritual Capital
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NATURAL CAPITAL
- Sun
- Land
- Water
- Air
- Resources
- Biodiversity
- Ecosystems
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ECONOMIC CAPITAL
Physical Capital
- Buildings
- Infrastructure
- Machinery, Equipment
- Vehicles
- Working Capital
Intangible Capital
- Knowledge
- Institutions
- Enabling Environment
- Culture
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The dynamic change in all of these may be described using some core concepts of accountancy:
- Beginning Balance Sheet (BOP STATE)
- Value add | Contribution
- Value destruction | Cost
- Ending Balance Sheet (EOP STATE)
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HUMAN CAPITAL
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PEOPLE are the most important part of the socio-enviro-economic system.
The most important goal is simply that quality of life for everyone on planet earth should be getting better.
In order to live life there is a cost of living. Products ... a variety of goods and services ... are consumed to support quality of life.
People are also contributors in very many different ways. Some are 'unpaid' in a conventional sense, like parenting, which is very valuable for the child. Much is pay for work done within an organization that produces goods and services.
People are also decision makers ... and it is these decisions that are going to determine more than anything else the performance of the socio-enviro-economic system. Since around 1980 the dominant goal of decision making has been to improve the profit performance of companies primarily for the benefit of the owners. Decision making in the household has been constrained by available income. Household consumption growth was facilitated by financial innovation and easing credit, but hardly at all by increased income.
While scientists have understood for several decades that serious climate change will happen, most decision makers in the general socio-enviro-economic system have ignored the matter ... to everyones detriment.
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RELATIONSHIP CAPITAL
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People are social. They are better in a family setting and better with friends and a community.
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LOCATIONAL CAPITAL
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PLACE has a major impact on quality of life ... perhaps more than anything else. Places need to be liveable with decent housing and access to all the goods and services needed for a good quality of life.
Too much of the world's people are living in squalid conditions. This is not because the world does not have the capacity to do better, it is because the decision makers in the system do not have the objective to do better.
There are many attractive communities in the world ... but too many places that are dysfunctional in a variety of ways ... places where the economics do't work, where the environment is unhealthy and society broken. The places need programs to help that address ALL the systemic problems. Single issue initiatives are not enough. Programs have to addess all the issues in a comrpehensive way.
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SPIRITUAL CAPITAL
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Bhuddism
Christianity
Islam
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Religion ... spirituality ... has played an important part in human society for thousands of years. Arguably the level of spiritual awareness is a measure of something important in society.
There are many different manifestations of spirituality.
Over the centuries they have had a huge role in how society has developed.
In recent decades religion has played a low profile role in Western democracies but not so much in less developed countries. In far too many cases religion has been used as a basis for hate rather than for love and empathy.
Religion has an important role in quality of life, perhaps appreciated the most in times of stress and intense deprivation and crisis. This is important.
Religion also has a role in helping to define 'right' and 'wrong' in ways that are not simply materialistic.
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ENVIRONMENT / NATURAL CAPITAL
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SUN
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UPON WHICH NATURE DEPENDS, AND PEOPLE, AND MANY ECONOMIC RESOURCES
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LAND
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UPON WHICH NATURE DEPENDS, AND PEOPLE, AND MANY ECONOMIC RESOURCES
LAND ... critical for nature, people and the economy
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WATER
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WATER, WATER EVERYWHERE ... BUT VERY LITTLE GOOD ENOUGH TO DRINK
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AIR
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AIR CONTAINS OXYGEN, ESSENTIAL FOR LIVING
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RESOURCES
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MINERALS AND ENERGY ARE ESSENTIAL FOR THE MODERN ECONOMY AND SOCIETY
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BIODIVERSITY
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A LOT IS KNOWN ... BUT EVEN MORE REMAINS UNKNOWN
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ECOSYSTEM SERVICES
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VERY COMPLEX / VERY IMPORTANT ... AND VITAL THAT IT IS NOT IGNORED
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ECONOMY / ECONOMIC CAPITAL
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FINANCIAL CAPITAL
MONEY MAKES THE WORLD GO ROUND
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Financial engineering has become a big part of performance optimization. Without money the economy stops ... and life is miserable. However, finance is only a lubricant, not the engine!
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MONEY / STORE OF VALUE
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There was a time when money as a store of money because it had intrinsic value. Gold was a very suitable metal for making money.
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PHYSICAL CAPITAL
THE ENGINEERING THAT ENABLES THE MODERN MATERIAL WORLD
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THEY HAVE LONG LIFE AND BIG IMPACTS
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CRITICAL DRIVER / CONSTRAINT ON PROGRESS
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ECONOMICALLY EFFICIENT ... Impressive improvement in economic productivity, but less so for social and environmental impact
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THE LINKS THAT ENABLE THE SUPPLY CHAIN
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ESSENTIAL FOR THE FUNCTIONING OF THE MODERN WORLD
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INTANGIBLE CAPITALS
MANY OF THE THINGS THAT MAKE LIFE WORTH LIVING
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THE UNDERLYING DRIVER OF PROGRESS
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ESSENTIAL FOR AN ENABLING ENVIRONMENT
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MUCH OF WHAT MAKES LIFE WORTH LIVING
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| | The text being discussed is available at
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