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THE SOCIO-ENVIRO-ECONOMIC SYSTEM
ECONOMIC CAPITAL / MONEY
VALUES: PHYSICAL / FINANCIAL / KNOWLEDGE / INSTITUTIONAL / CULTURAL / LOCATIONAL
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THREE MAIN SEGMENTS OF ECONOMIC CAPITAL
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FINANCIAL
Adding to wealth is dominant goal ...
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PHYSICAL
Tangible physical structures ...
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INTANGIBLE
Important elements for quality of life ...
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FINANCIAL CAPITAL
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THE FINANCIAL ECONOMY
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CORPORATE PROFITS
Profits up
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CAPITAL MARKETS
Stock Prices Up
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OWNERS UP
Inequality Up
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In modern times, the dominant economic metrics have been GDP growth, corporate profit growth and stock market wealth. Management metrics have been aligned to these same goals, and have been very effective.
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MOST WORKING MIDDLE CLASS OUTCOMES NOT GOOD
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WAGES FLAT
Productivity grows but wages flat.
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GDP growing / GPI flat
While GDP is up, progress (GPI) is flat
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WORKERS DOWN
Record level of inequality
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The outcome for wage earners had not been as good and there has been a massive increase in inequality. TrueValueMetrics seeks to enhance accountancy to include the quantification of Social Impact.
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MOST ENVIRONMENTAL OUTCOMES CATASTROPHIC
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RESOURCE
DEPLETION
Mining for natural resources
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ENVIRONMENTAL
DEGRADATION
Deforestation for agriculture
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SYSTEM
DESTABILIZATION
Extreme weather events
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The impact of modern financialization and a materialistic consumer economy has had catastrophic consequences for nature and the environment. TrueValueMetrics seeks to enhance accountancy to include the quantification of Environmental Impact.
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PHYSICAL CAPITAL
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THE PHYSICAL (REAL) ECONOMY
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LAND & BUILDINGS
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INFRASTRUCTURE
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PROCESSES
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EQUIPMENT
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WORKING CAPITAL
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- Modern engineering and technology is deployed and exploited to improve profit performance.
- Rather little technology is deployed to make society and the world a better place.
- The modern 'real' economy is pretty amazing, but not so much in the news (Western news, that is).
- Many of the more amazing things are going on in the Middle East (e.g. Dubai) and Far East (China).
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LAND AND BUILDINGS
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COMMERCIAL
FARMLAND
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HOTEL
APARTMENTS
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ROW HOUSES
SUBURBAN
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Buildings represent a big part of the physical economy, and are a big part of life. They have a long life and require a substantial amount of materials to build. They are where people live their lives. Buildings have impact on the environment during construction and again during their life because of operational energy use.
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INFRASTRUCTURE
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BRIDGES
ROAD
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RAIL
PORTS
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WATER
TELECOM
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Infrastructure makes a big difference to a place. The lack of infrastructure is one of the root causes of poverty in a place. Infrastructure has substantial cost to build, but long life means that infrastructure benefits accrue over a long time. The question of pubic or private ownership of infrastructure is an important ongoing debate.
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MINING AND MANUFACTURING PROCESSES
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MINING I
MINING II
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IRON & STEEL
CONCRETE
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PETROCHEMICALS
PULP & PAPER
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Processes make products which are needed to satisfy the needs of people ... but the social and environmental efficiency of processes is not accounted for effectively. Business understands the profit performance of processes, but without better metrics, social and environmental improvement get ignored.
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MACHINERY, EQUIPMENT & VEHICLES
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SHIPS
AIRCRAFT
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BUSES
AUTOMATION
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MINING
OIL & GAS
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The performance of machinery, equipment and vehicles has progressed enormously over the last century. Human brawn is no longer an important part of the production process, rather it is the machine that gets the work done. In the future is is not only going to be the brawn of the machine but also the brain of the machine. The challenge is to make this a benefit to society, the environment and the economy.
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PRODUCTS / WORKING CAPITAL
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SHIPPING
TRUCKING
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FULFILLMENT
WAREHOUSE
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RETAIL
E-COMMERCE
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Working capital is a vital component in the economy enabling the efficient function of essential organizations. Technology has enabled substantial improvement in the operation of the supply chain and indeed has made possible global logistics that have become a key part of the modern economy.
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INTANGIBLE CAPITAL
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THE INTANGIBLE ECONOMY
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Some of the things that make life worth living
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KNOWLEDGE CAPITAL
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INSTITUTIONAL CAPITAL
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ORGANIZATIONAL CAPITAL
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CAMBRIDGE UNIVERSITY
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GOVERNMENT / LAW
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ORGANIZATIONS
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KNOWLEDGE CAPITAL
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EDUCATION / RESEARCH / TECHNOLOGY
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KNOWLEDGE
Albert Einstein
EDUCATION
Cambridge
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BIO-TECH
Genetic code / DNA
AUTOMATION
Auto Assembly
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DIGITAL TECH
Quantum Computing
AEROSPACE
Space Shuttle
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It is human imagination that makes knowledge possible. Humankind now has more easy access to knowledge than at any time in history in all sorts of fields. This knowledge has the potential for both good and bad ... nuclear power or nuclear bombs ... digital distribution of news or dangerous misinformation ... cures for disease or biological warfare ... and so on. There are huge possibilities if well used.
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INSTITUTIONAL CAPITAL
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GOVERNANCE / RULE OF LAW / ORGANIZATIONS
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Legislation
Cooperation
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Police
Courts
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Military
Prisons
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The challenge of ordering society in an effective way has been in play for a very long time, and getting this right continues to be a subject of great debate. What is clear is that when the enabling environment of governance, rule of law and justice becomes dysfunctional, society and quality of life rapidly degenerates and the system doesn't work.
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ORGANIZATIONAL CAPITAL
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BIG COMPANIES / SMALL COMPANIES / NOT FOR PROFITS
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Big Oil
Computers
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Technology
Small Bsiness
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Engineering
Informal Economy
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Organizations are important, and especially big for-profit corporate organizations which account for as much as 90% of all profit and financial value-add. They have enabled much of modern progress, while not being held to account for environmental and social degradation. Small business and not-for-profits struggle to survive! Investors thrive, workers struggle!
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Navigation to -->
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InPage
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NewPage
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ECONOMY / CREATED CAPITAL
Everything that people have created
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Physical Capital (PC)
Buildings, Infrastructure, Equipment, Vehicles, etc.
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InPage PC
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Open L0700-CS-PC-PHYSICAL-CAPITAL
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Financial Capital (FC)
Corporate Net Present Value, Capital Market Value , Financial Wealth
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InPage FC
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Open L0700-CS-FC-FINANCIAL-CAPITAL
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Knowledge Capital (KC)
Scientific Knowledge
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InPage KC
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Open L0700-CS-KC-KNOWLEDGE-CAPITAL
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Institutional Capital (IC)
Scientific Knowledge, Governance, Justice, Rule of Law, Organization and Management
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InPage IC
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Open L0700-CS-IC-INSTITUTIONAL-CAPITAL
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Cultural Capital (CC)
Scientific Knowledge, Governance, Justice, Rule of Law, Organization and Management
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InPage CC
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Open L0700-CS-CC-CULTURAL-CAPITAL
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Locational Capital (CC)
Place ... where everything comes together into a coherent whole ... or not
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InPage LC
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Open L0700-CS-LC-LOCATIONAL-CAPITAL
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PHYSICAL CAPITAL
BUILDINGS, INFRASTRUCTURE, TECHNOLOGY, MACHINERY, EQUIPMENT, PRODUCTS, PROCESSES, VEHICLES,
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GO TOP
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Buildings / Infrastructure / Bridges / Rail / Water / Equipment / Ports
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Navigation
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PHYSICAL CAPITAL
TECHNOLOGY, MACHINERY, PRODUCTS, PROCESSES, VEHICLES, INFRASTRUCTURE
Physical capital is the product, factories, plant and equipment associated with business operations, as well as the infrastructure used for transport, communications, energy and so forth owned in both the public and private sector. Physical capital has costs to operate, needs maintenance and depreciates over time. The efficient performance of this physical capital determines how much quality of life there can be relative to the consumption of non-renewable resources.
Physical capital is man made. Some of the physical capital is owned by people, some is owned by companies and some is owned in the commons by the state. There are factories, machinery and equipment, jigs and dyes, vehicles, furniture fixtures and fittings that are assets of companies and on their balance sheets. There are roads and bridges, airports, seaports and water systems and sewer systems that have been built by government and are maintained by government or others. There is working capital, and specifically inventory of product, that is mainly owned by private sector organizations. There are products that are consumed by people to satisfy their needs and their wants. There are houses owned or occupied by people. There are commercial buildings. There are city transit systems. There are parks, theaters for cultural events and stadiums for sports events. Money is in part a piece of physical capital in the sense that physical money (or its virtual equivalent) is needed to make transactions efficiently. Everything in the physical capital has been built using resources and impacting the environment.
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Open L0700-CS-PC-PHYSICAL-CAPITAL
GO SlideNav-for-TVA #PC
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Infrastructure ... Flood Control
Global crisis ... There have been major floods in all sorts of place ... Why?
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Open file 0882
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Infrastructure ... Flood Control ... Global crisis
There have been major floods in all sorts of place ... Why?
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Open file 982
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Country ... USA ... Infrastructure -v- Politics -v- Big Business
The Koch brothers just kicked mass transit in the face
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Open file 9154
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USC-Phelps-Dunbar-Third-Coast-Reshoring
Development of the US Gulf Coast ports and industry ... 2015
'http://truevaluemetrics.org/DBpdfs/Transport/USC-Phelps-Dunbar-Third-Coast-Reshoring.pdf'
| Open PDF ...
USC-Phelps-Dunbar-Third-Coast-Reshoring
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Christopher-Swan-Commons-Sense-2014.pdf
How technology can change the performance of infrastructure
'http://truevaluemetrics.org/DBpdfs/Ideas/ChristopherSwan/Christopher-Swan-Commons-Sense-2014.pdf'
| Open PDF ...
Christopher-Swan-Commons-Sense-2014
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FINANCIAL CAPITAL
FINANCIAL WEALTH IS THE DOMINANT MEASURE OF CORPORATE AND PERSONAL SUCCESS
BUT WITH QUESTIONABLE OUTCOMES
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GO TOP
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GDP / Corporate Profits / Stock Markets are insufficient
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Navigation
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FINANCIAL CAPITAL
Financial capital is man made. Financial capital is also the only capital that really does not exist per se, but is a function of the ownership and deployment of the other capitals. This is clear from a company balance sheet where the 'capital' of the company is represented by the (physical) assets of the company less the liabilities. Similarly an individual's wealth (financial capital) may be represented by ownership interest in various assets … house, car, personal property, stocks and bonds, insurance policies, etc … less liabilities. Financial capital presently is the dominant component of the perception of success.
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Open L0700-CS-FC-FINANCIAL-CAPITAL
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FINANCE - Capital Markets / Investment
CAPITAL MARKETS mobilize the MONEY that is needed to run anything ... from personal life to the business of a large corporation, or a city or a country.
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Open L0700-CS-FC-Finance-Investment
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MONEY
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Open L0700-MX-MONEY
Open L0700-CS-FC-Money
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CURRENCY
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Open L0700-MX-CURRENCIES
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USING MONEY AS A MEASURE
MONEY ... an inadequate metric ... it changes in size over time.
GDP ... A MACRO MEASURE FOR THE PERFORMANCE OF THE NATIONAL ECONOMY
GDP measures consumption more than anything else. There is a weak correlation between quality of life and GDP ... better measures are possible.
PROFIT ... MEASURING THE PERFORMANCE OF A CORPORATE ORGANIZATION
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Open L0700-CS-FC-Finance-Investment
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The disfunctional GDP metric
The disfunction of the GDP metric has been known for more than 50 years
It is a measure that sends all the wrong signals about economic performance in any mature economy ... though there is a strong correlation between GDP and quality of life in poor developing economies. After the 1970s GDP has proved to be a bad proxy for quality of life in rich mature economies like the United States and Canada, many countries in Europe and Japan.
The following is a quotation from Robert Kennedy in 1968 speaking about GDP!
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Open L0700-MT-GDP
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Sustainable Signals
Morgan-Stanley ... Institute-Sustainable-Investment ... Sustainable-Signals-2016
| Open pdf ...
Morgan-Stanley-Institute-Sustainable-Investment-Sustainable-Signals-2016
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S-Network-Global-Benchmarking-System
“A Systematic Mechanism for Direct Investment, Global Benchmarking and Smart Beta Index Development.”
| Open pdf ...
S-Network-Global-Benchmarking-System
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MONEY ... UNIT OF MEASURE ... UNIT OF ACCOUNT
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MEDIUM OF EXCHANGE ... MONEY
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MEDIUM OF EXCHANGE ... MONEY
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PERSONAL WEALTH
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CORPORATE VALUE
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FINANCIAL TRANSACTIONS
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CAPITAL MARKETS
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BANKING AND FINANCIAL SECTOR SYSTEMS
Commercial Banks
Investment Banks
Central Banks
Development Banks
SWIFT
Banking regulation
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FINANCIAL GOODWILL
A component of intangible value on the balance sheet of an enterprise
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GO TOP
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FINANCIAL GOODWILL
Financial goodwill is a construct used in financial engineering to maintain the integrity of a financial balance sheet. Goodwill arises when a company purchases the equity of another company at a price that is more than the net assets on the puchased company's balance sheet.
Goodwill in accounting is an intangible asset that arises when a buyer acquires an existing business. The goodwill amounts to the excess of the 'purchase consideration' (the money paid to purchase the asset or business) over the total accounting value of the assets and liabilities per the books of account.
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Open L0700-CS-FC-Financial-Goodwill
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FINANCIAL GOODWILL
The graph shows how the proportion of goodwill for the companies in the S&P500 has increased over the period 2003 to 3013 which was already up considerably over the previous three decades. This makes portfolio investment for 'real' development progress more and more difficult ... one of many systemic constraints on better socio-enviro-economic performance.
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BOOK VALUE -v- MARKET VALUE
Between the 1970s and 2005 the stock market value of companies increased at a far more rapid rate that the book value of the company balance sheets. The dot.com bubble leading up to 2000 was followed by a bust, but there was relatively rapid recovery to 2005 .. and then later there was the banking crisis which peaked in 2008.
There is clear evidence of what might best be described as a profit bubble that has been growing for several decades enabled in large part by emergence of very powerful technologies in sev eral fields including materials, computer science and biotechnology.
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FINANCIAL BALANCE SHEET -v- STOCK MARKET VALUATIONS
The graph shows how the relationship has changed over the years from 1973 to 2005.
The underlying reason for this change is that real corporate investment has become much more profitable so the net present value of the the profit flow is very much higher now than it has been in the past.
In large part this has come about because of an increase in productivity, another way of say more product production for less labor ... so while profits have enriched owners, they have not done the same for workers.
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KNOWLEDGE CAPITAL
FINANCIAL GOODWILL, ENABLING ENVIRONMENT, KNOW-HOW, IP, GOODWILL, REPUTATION, RULE-OF-LAW, SECURITY, ETC. |
GO TOP
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Knowledge / Government / Rule of Law / Ethics / Culture / Security
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KNOWLEDGE / INNOVATION / INTELLECTUAL PROPERTY
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CREATED INTANGIBLE CAPITAL ... OVERVIEW
The monetization of intangible capital explains how so much financial wealth is now recorded in the numbering of world performance.
One of the benefits of True Value Impact Accounting is bringing some clarity to the role that INTANGIBLE CAPITAL is playing in the progress and performance of the socio-enviro-economic system. It is increasingly apparent that the growth of intangible capital has enabled inequity in important ways.
In its essence, intangible capital is created by the gap that arises when the discounted thinking about the future of things is bigger than the current state of things.
Because conventional numbering about the economy is based mainly on financial analysis, things like financial goodwill in the balance sheet of companies is very visible and very large, and at the same time, all the existential risks for the future of society and the planet, like massive social disruption, large scale war, climate change, etc are being ignored because they are not being numbered.
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Navigation to -->
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MainNav
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SlideNav
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KNOWLEDGE / INNOVATION
KNOWLEDGE ENABLES BETTER MAN BUILT SYSTEMS AND STRUCTURES
MODERN KNOWLEDGE IS AMAZING - BUT COULD BE USED BETTER
Knowledge is the result of study, research and learning. Knowledge is a critical enabling factor for the efficient functioning of the modern enviro-socio-economic system. Knowledge has increased very rapidly in the past century, and there are massive amounts of new knowledge every day. The challenge is to use this knowledge in the most valuable and positive way for the benefit of society, This has not been the experience over the past fifty years, and has to change. There is a huge amount of knowledge now compared to the past, and it is growing exponentially. The question is whether or not knowledge will be used for good or ill.
USING KNOWLEDGE ... Knowledge can be used for GOD or BAD ... this is determined by the decision making processes that are in place. Recent history is that knowledge has been deployed mainly in order to maximize profit performance and rather little for value performance.
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Open L0700-CIC-Knowledge-Capital
Open L0700-CIC-Technology
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GO SlideNav-for-TVA #KNOWLEDGE
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INSTITUTIONAL CAPITAL
ENABLING ENVIRONMENT, RULE-OF-LAW, SECURITY, ETC.
GOVERNMENT / TAXATION / LAWS / REGULATION / INSTITUTIONS / SECURITY
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GO TOP
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Knowledge / Government / Rule of Law / Ethics / Culture / Security
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Navigation
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INSTITUTIONAL CAPITAL
Police, courts and prisons are part of local security ... but culture and attitude on the part of everyone are even more important.
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Open L0700-CS-IC-INSTITUTIONAL-CAPITAL
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ENABLING ENVIRONMENT
GOVERNANCE / LAWS, RULES AND REGULATIONS / TAX REGIME / GOVERNMENT INCENTIVES / SECURITY / COMPANIES / INSTITUTIONS / ETC
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GO TOP
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GOVERNMENT
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GOVERNANCE - FRAMEWORK OF LAWS, RULES AND REGULATIONS
Society has had laws, rules and regulations for thousands of years. These are needed, but they should be efficient and fair and not gamed for the benefit of powerful special interests.
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Open L0700-CIC-Government
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SAFETY / SECURITY
SAFE ENVIRONMENT / SAFE PRODUCTS / SAFE STREETS / NATIONAL SECURITY
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POLICE / LOCAL SECURITY
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LOCAL SECURITY
Police, courts and prisons are part of local security ... but culture and attitude on the part of everyone are even more important.
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Open L0700-SI-POLICE
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MILITARY / INTERNATIONAL PEACEKEEPING AND SECURITY
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MILITARY / INTERNATIONAL PEACEKEEPING AND SECURITY
Police, courts and prisons are part of local security ... but culture and attitude on the part of everyone are even more important.
A competent and strong military is important ... but competent, strong dimplomacy is even more important.
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Open L0700-SI-MILITARY-INDUSTRY-COMPLEX
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JUSTICE
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JUSTICE
The US Supreme Court building / The Justices
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PLACE
Commercial buildings
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PROCESS
Hot strip mills producing coils of sheet steel
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LOGISTICS
Grain elevators at a Canadian port
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LOGISTICS
Container ship of the Maersk Line
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REPUTATIONAL VALUE
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Report: Global-RepTrak-2017
• About Reputation Institute
• The 2017 Global RepTrak® 100
• Common Characteristics of the Most Reputable Global Companies
• Key Reputation Drivers for 2017
'http://truevaluemetrics.org/DBpdfs/Reputation/Global-RepTrak-2017.pdf'
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Open PDF ... Global-RepTrak-2017
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CULTURAL CAPITAL
MUSIC / DANCE / ART / HISTORY / TRADITIONS
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GO TOP
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Knowledge / Government / Rule of Law / Ethics / Culture / Security
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