![Systems are reactive
World Economic regulations, contracts, laws and “Order
enhancers” have inadequate pro-active mechanisms to
prevent financial crises
[bureaucratic /boards]
Bottom line is: Groups tend to be reactive
Someone fell off the Empire state building….](https://image.slidesharecdn.com/peaceseminarpresentationpartone2r-140319124836-phpapp01/85/Peace-Workshop-Part-1-25-320.jpg)
Peace Workshop Part 1
- 2. Island Economics Cultures and how to see the world accurately Envy and victims = economic and personal vitality destroyers Forecasting and scenario planning Experts & Dummies Ethics, sustainability and virtue Business Values Discussion Outline
- 7. Island Economics Philosopher, Poet, Artist Sage
- 9. We all live in a Yellow Submarine Spiral Dynamics
- 10. A theory of human development Human nature is not fixed People will adapt to their environment when forced by life conditions by constructing a new model of the world. Cultural DNA Spiral Dynamics Memes & DNA • Systems of values • Apply to individuals and cultures • Negative and positive • Each new system modifies or builds on the previous
- 11. Stage/Wave Color Code Popular Name Thinking Cultural manifestations and personal displays 8 Turquoise Wholeview Holistic collective individualism; cosmic spirituality; earth changes 7 Yellow FlexFlow Ecological natural systems; self-principle; multiple realities; knowledge 6 Green Human Bond Consensus egalitarian; feelings; authentic; sharing; caring ;community 5 Orange StriveDrive Strategic materialistic; consumerism; success; image; status; growth 4 Blue TruthForce Authority meaning; discipline; traditions morality; rules; lives for later 3 Red PowerGods Egocentric gratification; glitz; conquest; action; impulsive; lives for now 2 Purple KinSpirits Animistic rites; rituals; taboos; superstitions; tribes; folk ways & lore 1 Beige Survival Sense Instinctive food; water; procreation; warmth; protection; stays alive Source: Don Beck Ph.D
- 12. Spiral Dynamics’ Takeaways • We make mistakes as people, companies and groups when we think people are like us. • We need to meet people at their level – not ours. • Zen training = we can see what is real when we quit judging and saying “this is GOOD - this is Bad - this is NEUTRAL & this is… fill in the blank. • Most consensus, democratic or group systems are reactive systems not proactive. • Bottom line is everything connects & economics is about people in action not money in action.
- 13. Forecasting and Scenarios Stand in the Future 3 Same Subject Experts
- 14. Forecasting and Scenarios Stand in the Future 3 Experts and a Dummy
- 15. Forecasting and Scenarios Stand in the Future 3 Experts and an Artist
- 16. Simplicity & Complexity • Complex problems require complex solutions • We make mistakes when we over- simplify complex problems
- 17. Simplicity & Complexity • Complex problems require complex solutions Problem; Need sustainable economy that provides Jobs Problem; War Problem; Starvation Problem; Ignorance (root) “Just be ethical” & “Just Love More”
- 18. What causes a Financial Crisis? What Causes a Financial Opportunity/Crisis?
- 19. People will rationally “binge” “Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one!” – Charles Mackay “Irrational Exuberance” –Alan Greenspan
- 20. Cycles Happen • Financial meltdowns are a systematic and normal dysfunction of government influence, greed, fear, and are normal in our world. Tulip mania – 1620 Mississippi Company France 1719/1720 & John Law South Sea Company London 1711/1720 Wall Street 1929 Junk bonds 1980s Dot.coms/telecom 1990s Sub-prime mortgages/CDOs
- 21. People Make Mistakes What Causes a Financial Crisis? Mis-pricing of risk MPT (Modern portfolio theory) Increases in real risk are not captured in nominal market prices Asset prices become irrational
- 22. Finance 101 • Present value should reflect the risk of actually receiving future income • Capital value is a function of present and future income! • Misjudgments about future income distort present capital values (Manias/Emotion, squinter problem)
- 23. Finance 1001 We want to Believe! • A person will not wish to know something, if knowing that something will cost him or her. Coal and Global Warming Meat eating and Environmentalism/Global Warming Driving “Hummers” Not walking/riding bike Eating Junk food – other stuff…
- 24. Free money=distortions • In financial bubbles, mis-pricing is sustained by infusions of debt • Higher and higher asset values are supported by borrowed funds • Excess liquidity – based on future promises to pay – transforms investment into speculation; prudence loses out to greed; illusion trumps reality (beliefs VS truth)– for a time
- 25. Systems are reactive World Economic regulations, contracts, laws and “Order enhancers” have inadequate pro-active mechanisms to prevent financial crises [bureaucratic /boards] Bottom line is: Groups tend to be reactive Someone fell off the Empire state building….
- 26. What is the fair value of an investment in business? Quality Income Stream High future income Priced right Good Corporate Value (Warren Buffet would buy it)
- 27. Today where does most corporate value come from? Intangible Assets!
- 28. Intangible value 3-4-14 Microsoft: Market value: $318 billion Balance sheet assets: ~45%% Goodwill/intangibles: 55% Starbucks: Market value: $54 billion Balance sheet assets: 20% Goodwill/intangibles: 80% Facebook Market value: $173 billion Balance sheet assets: ~10%% Goodwill/intangibles: 90%
- 29. Growing Importance of Intangible Wealth Change in U.S. Employment: Tangible sector (manufacturing, construction, natural resources, real estate, wholesale and retail, transportation and warehousing) = job losses Intangible sector (education, health care, computer system design, finance and insurance, scientific research, etc.) = job gains
- 30. Valuation & Sustainability Intangible Assets = Stakeholder Relationships (are the relationships sustainably nurtured and part of culture) Create value thru growing relationships with… Customers Employees Owners/Investors Suppliers Competition (Strategic relationship) Community
- 31. How Do Companies Create (Intangible) Value? • The Good • The Bad • The Ugly
- 32. The Good (Virtue Capitalism) Manage Risk Be Opportunity seeking Constantly reassess business practices Through 1)systems and culture 2)Best practice adoption Optimize Stakeholder Benefits as goal A culture where Virtue matters Transparency (I am what I am-no hiding anymore)
- 33. The Bad Brute Capitalism, Crony Capitalism Feed Shareholders,& Abuse Stakeholders Feed Mangers & Abuse shareholders and everyone else Hire slaves, compete only on pricing/low costs abusing market power Take the money and run: short term-ism Always with a smile of course Unsustainable values & practices= Eventual Failure
- 34. The Ugly (Punting on the trading floor) No net wealth creation (Rob Peter to pay Paul) Exploiting the emotion & Irrational Exuberance (Market traders/short term-ism) Exploiting emotions = False Valuations (Enron: Ponzi Scheme; sub prime mortgages, CDOs, CDSs, 50,000 dogs) Encourage unsustainable pricing of securities (CDOs, CDSs, government bonds, currencies) INEVITABLE FINANCIAL MELTDOWN
- 35. The Ugly
- 36. Reality=life goes on Unsustainable trends are unsustainable… Herbert Stein
- 37. Reality=life goes on Net wealth creation will happen Wealth transfer will happen Irrational Exuberance will happen False Valuations will happen So what do you do about it? Use your head and heart & Think! Has your brain ever hurt from thinking?
- 38. Summary Island Economics= everything connects Cultures = meet people at their culture Scenarios =Experts, dummies and Artists Ethics, sustainability and virtue matter
- 39. Summary Complex problems require complex solutions People won’t learn the truth if it could hurt them (Duh!) Beliefs are more powerful than truth. Emotions Manias happen markets are cyclical. Emotions Life goes on, Relax and enjoy! Zen Master gets sick (story)
- 40. suffering exists We suffer because we grasp and obsess; We can do something about suffering; We can live a spiritual life. Neither shall they say, Lo here! or, lo there! for, behold, the kingdom of God is within you. Luke 17:21 “Peace comes from Within; DO not seek it without.” Buddha
- 42. If you look at the Peacemakers that we know from history and today; Joan of Arc, David, Gandhi, Dalai lama, Mother Theresa, M. L. King Jr., Nelson Mandela, Desmond Tutu, St. Francis, Fethullah Gulen, Malala Yousafzai, they were willing to risk their lives, their social comforts and acceptance to pursuit virtue-infused ideals.
- 43. 7 Social Sins Wealth without Work Pleasure without Conscience Knowledge without Character Commerce without Morality Science without Humanity Worship without Sacrifice Politics without Principle – Mahatma Gandhi 8th sin added by Arun Gandhi, his grandson: Rights without Responsibilities
- 44. I grew up among the Sages. All my life I listened to their words. Yet I have found nothing better than silence. Study is not the goal, doing is. Do not mistake “talk” for “action.” Pity fills no stomach. Compassion builds no house. Understanding is not yet justice. Whoever multiplies words causes confusion. The truth that can be spoken Is not the Ultimate Truth. Ultimate Truth is wordless, the silence within the silence. More than the absence of speech, More than the absence of words, Ultimate Truth is the seamless being-in-place that comes with attending to Reality. —Shimon ben Gamliel
- 45. Questions & Thank You