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Date: 2024-05-19 Page is: DBtxt003.php txt00004716

Peter Burgess Dialog

A discussion about system thinking that results in need for more meaningful metrics

Tim et al ... I like to think that the metrics that I am talking about are a product of system thinking ... and it is memories of measuring in the engineering lab at Cambridge that has been an important part of my thinking ever since I graduated. For a time I was a fairly successful corporate CFO because I used to work on fixing the factory rather than fiddling the books.

With regard to the 'banking system', there is a lot of blogging about the way 'fractional reserve' money creation works ... or does not! The way money is created by the Central Banks and Commercial Banks seems like the ultimate Ponsi scheme, and runs completely unconnected from the real economy. The Chairman of BA/Iberia recently said in an interview that BA was doing just fine because London was prospering while the UK as a whole was not! Someone needs to write a book ... the Tale of Two Economies, rather than the Tale of Two Cities.

Money is a big part of the economic problem that has infected the planet. Modern money is both a medium of exchange and a flexible measure of performance. This cannot work.

For medium of exchange it will be better when there are multiple complementary or community currencies. These will facilitate trade within a local area, and encourage localization instead of globalization. Globalization has its place ... but should not be used for everything and indiscriminately. There are already a surprisingly large number of complementary currencies in play, and modern IT can make them even easier to implement. There are questions about how these should be 'backed' and I think there is a good answer for this.

The measurement of performance, the money based metrics need to be quietly retired. I refer to the terrible trio of: (1) money profit performance for business; (2) stock prices in capital markets for investors; and. (3) GDP growth for policy makers, pundits and politicians. These measures worked reasonably well in a low productivity labor shortage economy, but cannot function for the benefit of society in a high productivity labor surplus economy that has been the norm since the 1970s. An economist friend in South Korea has suggested to me that the marginal price of labor is trending to zero, so capital can 'have it all' ... and he is not far off being right.

With the terrible trio of money metrics in control, how can the economy work to reduce big issues of the planet? It can't! Investors cannot make money solving the problem of hunger in drought prone areas of the world, cannot make money handling the issue of climate change, cannot make money delivering health and education to those with no money to pay.

However, all of these things have value. I want to see value quantified so that there are ways to compare different ways of delivering value and choosing the best. I want to see potential and opportunity become the backing for community currency so that everything that needs doing can be funded and get done.

Money profit accounting is everywhere in organizations ... but there is nothing in 'community' that does anything like the equivalent. Progress and performance in the organization is measured. Progress and performance in the community is not. I want to see metrics around every economic activity ... with consolidation (aggregation) upwards into organization and upwards into place or community. Same data flowing that gives performance relating to both money and value.

People say that value cannot be quantified ... I say it may not be easy, but it can be done. Just as in corporate cost accounting there are 'standard costs', in my world of metrics there are 'standard values'.

All of this becomes quite feasible on top of smart phones and in the 'cloud'. This is, after all 2013 and not 1813.

Peter Burgess

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