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Meaningful Metrics for a Smart Society
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Date: 2019-09-17 Page is: DBtxt001.php list0300-Why-is-TVM-needed-1

Definitions for TrueValueMetrics
Why? ... Why is TVM needed?

The prevailing system of metrics ... financial accountancy, market indexes, economic indicators, etc. ... has become deeply flawed at the the organizational level, the capital market level and the macroeconomic level. The flaws have compounded over time with disastrous consequences, and by 2008 the capital markets became paralyzed and the economic system froze like an automobile engine without oil. TVM is needed because there has been a complete breakdown in the system used for analysis of organizational performance and the economic performance of society.

For example ... GNP. The measurement of economic growth is one important metric for the capital markets ... but the metric has become quite meaningless. GNP is Gross National Product ... and product would normally be an outcome. In modern GNP speak, however, anything and everything goes into the product ... including profits with no value and costs with no product. It is little wonder that economic incentives encourage unsustainable behavior!

Capital market performance and money wealth have been used as a proxy for socio-economic performance. Profit and stock price growth has been the primary goal of private and corporate enterprise with little attention paid to the impact on society as a whole. Excessive reliance on computer models, simulation and statistics with too little validation is a formula for catastrophe. A good part of economic data is based on small surveys and a lot of statistics. This system gives good results at low cost in a stable environment, but falls apart whenever there are changes, and especially disruptive changes. Modern financial accounting has failed to get money capital allocated efficiently to solve the world's critical issues ... endemic poverty ... poor health ... lack of education ... basic services ... etc.

What gets measured gets done

The system must measure what is needed so that good decisions get made and resources are allocated in the best possible manner. Socio-economic performance can be improved as soon as bad practices are stopped. TVM helps to stop scams, rip-offs, shoddy goods and services, thievery, corruption and other bad practices. Socio-economic performance will improve when good, reliable on time data are available for decision makers and socio-economic productivity can increase an order of magnitude ... with with the planet more sustainable ... and everyone a beneficiary.

A paradigm shift to TVM puts the socio-economic performance of everyone on the same playing field and using the same system of keeping score. The progress of 3 billion people who are poor can have the same visibility as the 3 billion who are economically middle class or the economic elite. Under the TVM paradigm, information is used not only to do score-keeping ... but also to guide decisions and the deployment of scarce resources. TVM embraces the idea that what gets measured gets done as well as the idea that management information is the least amount of information that gets the best possible decisions made reliably.

Information that makes it possible for 3 billion people to improve their productivity by $300 a year ... about $1 a day ... is an improvement in the 33% to 100% range. This is huge. A similar absolute improvement at the top of the economic pyramid would be hardly noticed. But with unemployment in this demographic increasing exponentially ... it is now time to address the critical metrics of society so that wealth is not accumulated in one segment of the population merely by scamming the other segments of society.

TrueValueMetrics (TVM) has been created because something much better than the prevailing system of metrics used by business, not for profit organizations, governments, capital market and macro-economics is needed. National, government, corporate and social metrics are all compromised.

The metrics are no longer adequate for effective understanding of the dynamics of society. Something is needed that goes beyond the money metrics that are prevalent today. Many initiatives are ongoing to improve metrics, but none (as far as I can tell) are based on the underlying framework of double entry accountancy that has been so valuable for money profit accounting and reporting.

Because the metrics are wrong ... decision making is wrong ... and unfavorable outcomes result.



The text being discussed is available at

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TrueValueMetrics (TVM) is an Open Source / Open Knowledge initiative. It has been funded by family and friends plus donations from well wishers who understand the importance of accountability and getting the management metrics right. TVM is a 'big idea' that has the potential to be a game changer leveling the playing field so the wealth and power is shared on a more reasonable basis between people who work for a living and those that own the economy and the levers of power. In order to be effective, it cannot be funded in the conventional way with a for profit business plan, but absolutely must remain an open access initiative.
WE WANT TO MAINTAIN AN OPEN KNOWLEDGE MODEL
A MODEST DONATION WILL HELP MAKE THAT HAPPEN


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