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On Dec 10, 2015, at 8:41 PM, Peter Burgess wrote:
Dear Jose, Dean Rolle. Chris and others
Good to see ideas emerging, cooperation and collaboration ... congratulations.
And also congratulations in respect of the Michael Moore film event where the audience seemed to be incredibly engaged, with not enough time to Tweet!
There are enough good people on the planet, and enough amazing technology for the world to be in a much better place. Why are things so dysfunctional. Why does our modern socio-enviro-economic system produce so many bad outcomes ... both social and environmental. I argue that we are maintaining a system where the main and strong metric is money profit and money wealth, while we have very weak metrics about people and social issues that matter and weak metrics about the environment and everything that is done for us by natural systems. Double entry accounting goes back to 1211 and has not changed much since then. The main ideas of economics were formulated when horses were the source of most power. Science and technology has progressed enormously but harnessed almost exclusively in the interest of progress as measured by the money metric. The idea that if it does not make money profit, it is not worth doing must be complemented by the idea that if it is going to do (measurable) good it is worth doing ... and for doing there must first be financing!
Every sports team has metrics about everything that matters for winning the game ... why not our socio-enviro-economic system?
Peter
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Peter Burgess
12/11/15
to Jo-ann, christopher, Jose, John, bcc: Miko, bcc: Philippa
Dear Jo-ann ... I mean Dean Rolle
Establishing a system of better metrics is a process rather than an event.
Conventional metrics are very powerful ... metrics like money profit and financial wealth are key drivers of personal and corporate decision making, and at a macro level policy makers have a fixation with GDP growth. We measure these things, and every decision pushes towards these metrics.
One thing I learned a long time ago as a young corporate CFO was that I could effect change in the corporate organization by measuring the right things, and making these measures available to the right people. Change was rapid but it was critical that the measures were the right ones. When we used the wrong measures, we got the change, but we did not get the results we were looking for.
Until about 50 years ago, GDP had a strong correlation with quality of life and standard of living. This changed in the 1970s when technology enabled increased productivity and offshoring so that less labor could produce all the products needed for a good life. Payroll down, profits up and corporate capitalism was on a roll. Individuals and society were more and more put at risk. Economists are talking about this state of affairs, but it is just talk with no meaningful metrics and no policy traction.
So how can we use the power of double entry accountancy that is ubiquitous in the corporate space as the foundation for metrics that will be as rigorous for people / society and environment / planet as it is for corporate performance. How can we measure everything that matters, and not simply the money profit dimension of an activity. How can we use the concepts of double entry accounting to measure progress and performance for everything in society and no just the corporate business and capital markets.
Business schools typically teach students how to optimize for business profit. We need to be able to teach a more complete optimization that addresses the triple bottom line for the organization ... that is, profit, people and planet.
But we need to address the issue of perspective as well. From the corporate view, payroll down means profit up. From the employee perspective, payroll down means lower pay or unemployment. A big car is more comfortable, but a big car also has a bigger environmental impact. This idea applies to everything ... every product ... life cycle analysis.
And then there is risk ... we don't handle risk in a sensible way. It may be reasonable to discount future profit flows to a net present value, but doing the same for risk is just plain WRONG.
We need to look have better metrics about cost, price and value ... not only the money dimension of these things, but also what is going on with people / society and environment / planet as well.
We need to think in terms of the progress and performance of place. Organizations like the World Bank, the United Nations do their management at a project level, but a project disappears after a time. On the other hand a place goes on for ever. When we start managing resources so that places get better, then everything can get better. Managing for better cities, communities, neighborhoods is going to be more effective than managing at a national level.
We need to think of people as assets and not as liabilities ... more as potential contributors rather than simply as potential customers.
We need to have a way to measure 'good' as rigorously as we are able to measure 'profit'. Getting funding for an initiative that is going to make profit is relatively easy compared to getting funding for something that is going to merely do good!
Human life has value. All sorts of things that are essential to a strong family have value ... but no price. Without price and a money transaction there the activity does not exist in the prevailing system of metrics.
In the end we need to have metrics that give incentive to a world where an individual makes better decisions, a family makes better decisions, a place makes better decisions, a business makes better decisions, nations make better decisions and in the end we have a better world and each of these entities is better off as well. Metrics can make a difference.
A lot of work is going on to improve corporate reporting so that it includes social and environmental issues as well ... the Global Reporting Initiative, the Integrated Reporting initiative, SASB (Sustainable Accounting Standards Board), IRIS and others. It is good that they are emerging, but they are costly and don't integrate well with a system of accounting. They also focus uniquely on the corporation without looking at progress and performance from any other perspective. Initiatives like Shared Value (Michael Porter) sound good until you realize that in the end the main beneficiary is that the corporation is even more dominant in the system.
Part of the True Value Accounting system will be 'standard values' ... something like standards costs in conventional cost accounting, but about value and impact.
This is probably enough ... indeed too much ... to introduce the challenge. I have written a lot about how this might come together in a single coherent system, but none of this writing is complete ... but it is progressing. And ... in the end, at this time in history all of this has to be accessible on mobile devices ....
I think I have got to the stage where the material can be used for a series of workshops or discussion groups ... open space groups if you will. The concepts can be discussed from the perspective of a student as an individual ... or as a potential corporate accountant CFO ... or as a community organizer looking to make Brooklyn a better place ... or really any initiative that aims to do good ... or indeed for a business that aims to make money, but could also optimize for doing good.
I am very much aware that the purpose of education is to help prepare a person for a successful life ... many, if not most students, need to focus on what it is they need to learn to get a job and earn a living. Some students will benefit from having the opportunity to engage in some 'out of the box' thinking. We need innovation, but it is not for everyone!
Too long ... sorry
Peter
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Peter Burgess
12/12/15
to Jo-ann, christopher, Jose, John, bcc: Claudia, bcc: Miko
Dear Jo-ann
It is so much easier to write a lot than to write a little! Thanks, anyway for your encouragement. I will try to keep this short!
The only thing that will work and be sustainable is something that delivers true value to Medgar Evers College (MEC) in some way ... that is, to the faculty, the students, the college reputation and the local community (Brooklyn). Perhaps more important, any initiative or collaboration must not get in the way of students getting the education they need for their own careers. These are some possible areas of help and collaboration:
1. The idea of True Value Accounting (TVA) could be a subject within the broader areas of Business, Economics or Accounting. Students need to learn the mainstream versions of these disciplines, but they also should be aware of the limitations of the conventional teaching and the possibilities of a better way to handle the metrics. It would be enormously helpful to work with MEC faculty to make something like this happen.
2. Some of the initiatives MEC is initiating for the good of the community (Brooklyn) could be subject to True Value analysis to complement financial feasibility studies. Conventional accounting is powerful for the business perspective, but less so for measuring progress of place and the progress of people.
3. The technology initiatives of MEC and MEC students could help bring TrueValueMetrics into the 21st century ... the basic architecture of TVA is fairly well defined, but turning this architecture into modules that work on top of systems now generally used by everyone is still work to be done.
4. The process of numbering (quantifying) important things needs to be an iterative process involving a database and method for crowdsourcing values. This could be a student / tech project.
5. Using the Michael Moore film as a starting point ... dialog about what the examples mean for the United States ... and integrating the dialog with the sort of numbering that emerges from TVA. This could have an Open Space format.
I will get value from some form of collaboration simply because many heads are better than one. There are many ways to proceed. I always observe that I am constrained by a limited budget of energy, time and cash ... but less constrained by my thinking about what is possible. Younger people might be able to take what I have already done to a new level, and as Peter Drucker famously said 'You manage what you measure'. I argue that in order to have a better world, we had better start to measure the right things!
I am sure others may be able to see other ways that new metrics can be introduced into modern education. CEOs are talking about Corporate Social Responsibililty (CSR) and Sustainability and investors are starting to talk about Responsible Investing and Impact Investing, but CFOs are stuck with conventional money profit accounting that is powerful but completely inadequate for the modern world. Many initiatives are in play to improve corporate reporting, but none of them seem to have an architecture that is comprehensive and coherent. The TVA data architecture has the potential to be a game changer.
Too long again ... surprise surprise
Peter
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