Subtlety #1: Prioritize What You Care About •Indifference is impossible. Being indifferent is a choice. •Therefore, you should decide what you give a @#$! about.
Subtlety #2: Accept Adversity As Empowering •To not accept adversity and use it to your advantage, means you must care about something more important than that annoying adversity: “not having enough” (i.e adversity is character/purpose building) •
Subtlety #3: You Are Always Making a Choice •Whether you realize it or not, you are always choosing what to give a @#$! about.
Law 1: Prioritize What You Should Give a #@$! About §Figure out what goals should you have and what goals you should actively not give a #@$! about.
Law 2: The Backwards Law §The pursuit of positive experience is itself a negative experience; §The acceptance of negative experience is itself a positive experience. §“Nothing good is easy, otherwise it is not good.” §“You can’t enjoy the highest mountain without knowing the lowest valley” §“Negativity is the path to positivity: tolerance of negative experience leads to positive experiences.” §“No pain, no gain.” §“Suffering is good, character building, valuable.” §“Failure and problem solving grows your brain cells.” §“Poverty propelled many boomers to wealth and success.” § “Challenges makes you stronger, more purposeful.” §“Easy/Pleasant/Convenient are bad aspirations.”
Law 3: Dukkha: Life Is Suffering •Suffering is helpful since it motivates you to find purpose. •Negative emotions have an inherent purpose: to help us. •Avoiding suffering is bad; that’s what heroine addicts do. •Beware of the Hedonic Treadmill: get a house, now I want a Y, get a Y, now I want a X, get an X, now I want a B etc. The carrot is always a few feet in front of you.
Law 4: Happiness Should Be From Solving Problems •Everyone enjoys what feels good, be carefree, have amazing sex, look perfect, be well-respected, admired…. •The question is ‘what pain do you want in your life?’ •“Find out what the price of success is an pay it.”
Law 5: You Are Not Special •You have to work hard to become special, but you are not special by default. •Beware of entitlement: feeling as though you deserve to be happy without sacrificing to achieve it. •“Everyone can be extraordinary and achieve greatness” is flawed thinking. You can achieve greatness if you like but there will be many sacrifices and your passion will be formed through that sacrifice. •“Your actions don’t matter in the grand scheme of things for the most part. Most of your life is boring (thankfully) & that’s okay!”
Law 6: Forms of Entitlement
Grandiose Narcissism •I’m awesome and the rest of you all suck, so I deserve special treatment;
Victim Narcissism •I suck and the rest of you are all awesome, so I deserve special treatment.
The world should not be altered to serve you!
Law 7: Choose Good Values •If you have the wrong goal then you are @#$!ed. •Good Values: Reality based, Socially Constructive, Controllable •Bad Values: Superstitious, Socially Destructive, Not Controllable
Honesty is a good value.
Law 8: Choose Your Suffering •If you choose a goal then your suffering will be a positive experience. •If someone chooses a goal for you then your suffering will be bad. •Responsibility does not equal your fault. Own your suffering. •Choose to be interested or indifferent to something you think sucks.
Law 9: Reality today will be hilarious looking back on §Reality is getting better, not in a straight line because suffering is good, but improvements over time happen. §People who stand on principal are dangerous, they can’t be wrong because of socially and logically constructed system. §
Law 10: Benefits of Uncertainty §Opens up space to learn and improve §Guards against extremist ideology §Opens up room for dialogue with people §
Law 11: The more something threatens your identity, the more you will avoid it. §Cultural intolerance is a fear of losing your identity §Therefore, the less defined we define ourselves the better. §
Law 12: Become Less Certain of Yourself §Would it be wrong to create a better or a worse problem than my current problem for both myself and others? §
Law 13: Be comfortable saying “No” §Be open with your spouse §Be willing to say “No” to trust someone. §
Law 14: Death Focuses the Mind §You are going to die so make sure you pick the right goals, purpose and think about how to get there. §
Law 15: Births Focus the Mind §If you have a kid, then make sure you pick the right goals, purpose and think about how to get there. §
Law 16: The truth can be very frightening •Tragedies that don’t kill you, make you stronger. •While we don’t hope for the worst, we can truly unlock our potential in the ashes of failure, disappointment and sorrow. §
“What’s your favourite movie, ice cream, meal?” Instead, use stream of consciousness, free associations, connections based on particular nouns/topics discussed.
Tool 2: Canned Invitations Questions
Q: How are you? A: “I’m swinging in an hammock!” Q: How was your weekend? A: “[describe something funny]” Q: Where’d you go to school? A: “[partying 80% studying 20%]” Q: Where are you from? A: “[the prairie skies…minus 40.]” Q: Do you have siblings? A: “[one sis, two bros..lot-a-sharing]” Q: What do you do? A: “[I help financial traders click better]” Q: What did you study? A: “[people, places and beers]”
Tool 3: Double Answers
Step 1 – provide a layman’s answer that is short, unique and fun. “I pack and send wallets for a living!” “This weekend I sailed my parents sailboat chanting limericks and avoiding siblings.” Step 2 – provide the expert answer. “I’m the CEO of a men’s apparel company.” “Sailing since I was 12, like riding a bike.”
Don’t want to appear too knowledgeable or elitist in Step 2
The Basics Part II
Tool 4: Always Stay Positive
Lead with: “Yes!”, “Agreed!”, “Totally!”, “Awesome!” Avoid: “Nope!”, “Yeah But!”, “Wrong!”, “The opposite!” Compliment things that the person can control: clothing, hairstyle, accessories, world view, their ideas, how they solve/tackle a problem, weight loss….. Do not compliment eyes, ears, face, body as the person cannot really control those things, (also inappropriate). Flattery can quickly become ham fisted and lame, avoid it.
Tool 5: Pay Attention to how they want to be perceived
Call out when some one has put in a lot of effort. “You kept working on that project, we love it!”
SUMMARY OF THE BASICS
Don’t use absolutes, use generalizations…no right answers.
Reactions are important, mirror the emotions that the other person is expressing, this brings them onside.
Use free associations in the conversation; keywords!
Double answer: layman answer and expert answer.
Give people complements on the things they control.
Witty Banter Part I
Tool 1: Don’t Be Too Literal
So the idea here is to be more playful in your conversation, less literal and less serious. Use conversation as a way to have fun with people rather than share information or facts.
Something that is noteworthy and gets their attention is more valuable than a straightforward answer, in most circumstances.
Make sure you actually answer the question so that you’re humorous and informative.
Tool 2: Witty Comeback
When you come back should be done with an indifferent tone, in the way that perhaps James Bond might use, after just defeating a villain. “Positively shocking!”
Focus on specific words that the person uses. And exploit those words. Re-interpret them in a new way. Intentionally mis-interpret their statements.
For example, Statement: you’re as slow as a glacier….could be interpreted as. Comeback: you mean I’m strong and cool under pressure?
Tool 3: Amplify the Statement to a ridiculous degree
“You look like a girl” Can be responded with “Am I a charming girl?”
Witty Banter Part II
Tool 3: Banter Chain
The key is to stop taking things at face value and start intentionally misinterpreting the statement for goofy results.
The best way to break the mold in small talk is to play dumb and misconstrue what the other person’s point was.
You can achieve quite a lot in your banter by agreeing and then going beyond and amplifying what they had said to create a banter chain. For example, Statement: I love the colour of that cat. Reply: “so you think that cat is sexy huh?” Answer: “Yeah, I think that cat sexy I can go on a date with that cat.” Question: “where would you take the cat?” Answer: “I’d take that cat dancing all night, cats are nocturnal after all.”
Tool 4: Exaggeration Is an Effective Technique
For example if you say I’m really hungry I could eat this whole meal myself, the other person could reply oh I could eat a horse;
Make sure the exaggeration is extreme: “I’ll call you when you get home.” A: “Well, I don’t know how I don’t know if they have phones on the moon….”
Play In Conversation Part I
Tool 1: Break the Fourth Wall
Commenting on the conversation itself.
Acknowledge something about the conversation. Full meta!
“This conversation just took a fun turn…”
“I apologize for talking so much about this topic…”
Be positive: “Franky, I don’t know where this conversation is going but I like it!”
Us against the World: “Have you noticed something…?”
Tool 2: Fall Back Stories
Fall back stories should be universal. Never use absolutes…..
Four distinct parts
The bridging sentence “You know what I heard yesterday…”
The story “One of my friends proposed to her boyfriend, didn’t want to wait…”
Your opinion of the story “I thought, well, it’s 2021…”
What their opinion of the story “Would you accept a proposal like that?”
Just transition from a dead convo: “Want to know something interesting that happened yesterday?” or “You won’t believe what happened?”
Story points out some basic emotions, story telling. It’s not even about the story…what is the primary emotion and point!!!
My opinion: “You want to have a positive interpretation.” It’s key to be positive…
Opinion: “Would I do that?” You need multiple questions to prime the conversation.
Play In Conversation Part II
Tool 3: Role Play
Get the creative mind flowing, how would you proceed with this story?
Make a judgement about someone, that contrasts with you. “You are great at navigating”
Give them a label in a statement made. “Chris Columbus of Round Lake.”
Start playing the role: the modern Chris Columbus. Then you play out the role conversationally.
Then continue with the fake set of questions…Chris Columbus would you travel to the moon?
SUMMARY OF PLAY IN CONVERSATIONS:
Breaking the fourth wall;
Use against the world technique;
Short fall back stories to test how they would react;
Role playing….take on generic roles and then follow up the role play.
Funny on Command
Tool 1: The Comic Triple
List two things that are positive (negative) and then one negative (positive).
Audiences expect the third to align with the other. This surprise causes laughter
[good things], [good thing] and [bad things].
Greeks gave us science, democracy and little cubes of charred meat that taste like sweat. – Big Bang Theory
Tool 2: Misdirection
Stating something in the first part and then the true sentiment in the second part. I love dogs except seeing, hearing or touching them.
Tool 3: Sarcasm
Usually to exaggerate the situation to the absurd…
Make sure you do this dead pan…
Oh that would be the end of the world…
Tool 4: Irony
The opposite of what was intended. Observing contrasts.
Ironic Simile: “As a sad as a dog with a bone.”
“As flexible as a brick.”
Tool 1: The Power of Three
We have an innate desire to hear things in threes the human brain is drawn to patterns of three, the three little pigs, the three bears, the holy Trinity and the three branches of government. Etc etc.
Tool 2: MiniStory
You have to recognize them in our daily stories. Storytelling is telling someone what happened. We must draw and tell stories from our daily lives.
Tool 3: The Story Spine – 8 Elements
“Once upon a time there was _.” You lay out the characters…
“Every day, _.” You lay out their world…
“One day _.” dilemma one….
“Because of that, _.” dilemma two….
Because of that, _. (and so on) dilemma three…
“So….” dilemma four….
“Until finally _.” Climax
And every day after that _. You provide the moral of the story at the end which signals you’re done telling the story The High Point of a conversation could be referenced at a future point in the conversation which creates an inside angle between you and the person you’re talking with Asking the right questions in a conversation is critical by asking the right questions you’re able to elicit storytelling so frame your question as though it requires a story and you’ll get more out of your partner. One ask for a story to be brought as to what you were asking give them multiple prompts Ask them for an emotional angle.
The following is a quick summary of Words That Work by Luntz published in 2007.This summary is not an endorsement of Luntz or his partisanship. Professor Nerdster is intellectually free to explore ideas regardless of source. Being intellectually free is a precursor to problem solving, join the club.
Narrow the Gap Between What You Say and What Your Listener Hears
The fact is that people will misinterpret what you were saying and intentionally or accidentally project what they understand into your words. Just as in 1984, when Winston Smith is exposed to the one thing he fears the most….rats, listeners will shape whatever they are perceiving in their own unique way. So through a career of listening to what people say and focus groups Dr. Frank Luntz has come up with some overarching principles around what words work and which ones do not in the US. So in effect this book is actually about persuasion. However, it’s also to narrow the gap between what you say and what your readers or listeners interpret. Because it’s truly not what you say, it’s what people here.
Note there is partisanship in Frank Luntz’ thinking. Dr. Frank ‘s published a new article called American lexicon which laid out a pro-business right wing agenda in terminology that would be appealing to centrist voters. Luntz-Speak. And then Luntzy Award. Harsh and ideological people have railed against Luntz for years.
Luntz is always trying to get the support of centrists. He also seeks to listen then find language that works.
Manipulation is neither good or bad. It’s all manipulation. Artists know this well. Any parent, we know it.
Luntz’ 10 Rules
Listen to the public, emotional and rational and day to day interaction. It is what people say:
Simplicity: Use simple words: average American doesn’t know the difference between deficit and debt: MI3 is better than Mission Impossible 3
Brevity: Never say 4 words when you can say it in three. Simple beats complex.
Credibility: is as important as philosophy. Set expectations lower and the best expectations. So, expectations can sink a campaign.
Consistency: Do not have a bunch of different talking points and new campaign ideas during your campaign season. Repeat yourself, repeat your message, focus on the same lines over and over again to get your message through because people don’t really remember. You will get confused if you have a bunch of different tag lines.
Novelty: We like truly new and different things. Brand new ideas that take on an old idea, have mass appeal.
Sound and Texture of Language: Think Different. i’m lovin it. Are effective because of how they sound.
Go for the inspirational.
Visualize: don’t tell, show! Draw pictures in people’s minds. Ask people to imagine.
Ask a Question: Ask the participant a rhetorical question.
Context: You have to provide context: you need to have relevance.
The target, everyone can immediately remember, you never leave home without it: American Express.
Visual impact is the most important and striking power; speaking in front of your national flag, for example.
Language Is Often Used to Obscure
Beltway or insiders language is not appropriate for the general public: inside baseball is a big communication mistake.
For example, using terms like cloture. There is a reason that few senators make it to the presidency? They speak the language of the insider. How can you even talk about filibusters? The general public doesn’t care.
It’s about getting things done it’s not about the procedural rules of the subcommittee in which cloture and filibusters are used. All the technical deadlock components that impact the legislative process don’t interest people, it frustrates the people’s will which is sometimes in conflict. People really just want you to get things done.
Language is frequently used as a tool to obscure rather than to enlighten… to control and it has illustrates the influence of closed off group in mind: the inside-baseball crowd.
The Sequence of Information Matters
The order of presentation really matters if you have a background presentation and then some theory and then have the actual presenter talk can actually be more effective than having the presenter talk turkey and then provide the background this is what Luntz found out during the Ross Perot campaign in 1992.
Using analogies like sports or war is a very male centric way of describing politics it is genuinely harmful.
Women appreciate being listened to more than having the right questions asked. Luntz says women typically respond better to storytelling, anecdotes and metaphors whereas men respond better to economics rational engineering: I’m pretty sure this is already out of date….
If you talk about a government program then the hostility is significant but if you describe welfare as assistance to the poor you’re going to get a very positive reaction. Lee Atwater called them Welfare Queens. Assistance to the poor was supportive.
Focus on results not the means for example crime reduction is way more popular than law-enforcement. Also note that crime reduction could have many variable inputs in achieving the outcome beyond the law-enforcement interventions and as such it’s more catchall and more popular as a term.
Be The Message
If you are known by your first name that’s a very strong compelling case that you have a brand. No kidding. Building your own brand is very challenging. Living by your values is very compelling.
John Kerry talked about his work in the Vietnam War. The key is you have to show, don’t tell. George W. Bush never fought in any war but he used tough language that suggested he was tough on the topic. So it’s better to act, use wording that resonates with the general public.
Giuliani was someone who campaigned on his working class background, his work ethic and the ‘why’ behind all of his positions. He always provided that context.
And this is the case too with John McCain who was a maverick but basically was right wing however journalists got great news stories from him and he was entertaining.
When John McCain and George Bush were appearing on competing talk shows Jay Leno and David Letterman. George Bush just sat there and took all the criticism and giggled where as John McCain made a strong effort to try to be funny. Journalist thought John McCain had done a better job but in the truth of it, George W. Bush was more compelling by being folky and more authentic.
Words that work language alignment, product and derive, you should try to establish personalization. We buy the product that we have a brand association with. Language of Cheerios is compelling.
How our language is said, really matters.
The Words That We Remember
Memorable movie lines. Fiction is more Powerful for revealing truth than truth.
“Bring it on” as if Bush was inviting violence when he was describing the threat of terrorism and the implied US response. That was a mistake.
Contract with America
Most effective campaigning is about being sensitive to word choice, using focus groups to tease out what works and what does not. For example, the Contract with America. The ‘contract’ was more effective than the ‘covenant’ or the ‘new deal’.
So the Contract with America was put into the TV guide, The first of the 10 items were important and the last of the 10 items was important because they figured that’s what people would read if they had to skim the list quickly. And it was contractual in the sense that it had the word contract in it but it didn’t obligate the legislators to not seek reelection if they fail to achieve that goal.
The 10 point list was easy and eye-catching. The Democrats felt that it was a mistake to provide concrete guarantees that they could then easily break down and attack. But folks were really cynical and tired of triangulation.
There’s a big difference between not giving and denying when it comes to healthcare. Newt Gingrich felt that the Republican Party should have define itself as the compassionate party. The other aspect of this that was interesting was that Franklin’s claims using the word promise as a politician is an absolutely horrendous mistake never promise anything. Never use the word promise.
There was a debate as to whether decreasing future spending on Medicare was considered a cut the public felt that it was not considered a cut.
Eisenhower came up with the sound bites, the ’30 second’ spot.
Retirement security is way more effective than Social Security. Everyone wants to be secure in their retirement.
It was successful politically liters find ways to get you to imagine. Sympathy, passion. You need to appeal to something far greater.
Federal civil servants are viewed as having no accountability. Is there an enforcement clause in the Contract with America?
Customers are actually looking for simple answers to complex problems they wanna lose weight they want a solution for that. They want to have a ruthlessness if they are spending their money around what they’re going to get. They love to see the things are going to be specifically delivered.
More Words That Work
US culture is driven by three major things: I can do attitude, self-reliance and optimism.
Rekindle renew revise reinstate refresh these are all calls to return to a prior default. Redesign rebuild restore revitalize reform and renew.
Efficiency and being efficient are also great however they might be closet words for cuts.
Having the right to choose is also a powerful communication approach.
Patient-centred resonates because it draws an unspoken conscious link with dollar centred or insurance centred medicine. The last thing you want to be concerned about when you’re dealing with one’s loved ones care is dollars and cents. All you care about at that point is your loved one.
Independent! Independent candidates. You need to declare independence.
Peace of mind!
Balanced Approach! For the people, no need to a new civil war.
A culture of!!!!
Straight talk express with John McCain!
Never say entrepreneur say small business owner;
Never say tax reform say tax simplification;
Never say foreign companies say international companies;
Never say undocumented when you mean illegal immigrants;
Never say drilling for oil say exploring for energy;
Never never deny something just do not give;
Never say global economy globalization or capitalism talk about free market economy;
Never say vouchers say school choice;
Never say outsourcing talk about taxation regulation litigation innovation education and legislation;
Never say inheritance tax or estate tax call it a death tax;
Never say crime or criminals talk about public safety;
Never say interpretation when you mean analysis;
Never say capital markets what you you mean investor public interest;
Your schools, your hospitals, your taxes. our schools, our hospitals, our taxes.
Optimism sells, pessimism dwells.
Don’t say peace of mind being rewarded compassion commitment listen to employees find common ground comprehensive contract balance instead say security being valued fairness respect responsibility keeping promises respecting employees negotiating in good faith long-term contracts fairness and common ground
Don’t say the union is biased objective union leader should not hold local employees hostage over national issues when are union strikes against a company it isn’t just hurting the company if the union chooses to strike have a legitimate right to stay open it is the unions fault not ours if that workers have to walk a picket line instead say full disclosure you have a right to hear all sides accurate local problems require local solutions no one wins in a strike we won’t do whatever we can to avoid a stroke if there is a stroke will do whatever we can refill our responsibility to a customers.
Never say corporate accountability say corporate responsibility.
Scum literally means a used condom I did not know that.
Important truths about politics; voters do not pick their candidate based on the issues or the policy. Definitely not the case in fact voters look at the attributes the personality, image and th vibe of the candidate more so. The candidate’s brand.
Nostalgia doesn’t really sell in the political arena, you should be looking forward not to a bygone era that feels remembered.
People read books? No people don’t read, people don’t read newspapers, people watch Netflix. If you want to get your ideas disseminated then you should try to get your content converted into a format that people consume. YouTube visual storytelling.
People are educated? No most people actually aren’t educated so you better simplify your messaging otherwise you’re not gonna get it and then you’ll have the educated people as gatekeepers to try to explain your policies or ideas through them.
Want a promotion? Use Imagine in sentences. Also, mirror your boss.
Carney starts out with the history of companies as a concept and asks what is the purpose of companies? It is not simply to make a profit, but rather to create value which is only partly quantified in the form of profit. For Carney, purpose requires balancing dynamism, fairness(?), solidarity (with employees and community), sustainability (across generations) and responsibility.
As John Kay put it…“Profit is no more the purpose of business than breathing is the purpose of living.” And while you need to make a profit to operate just as you need to breath, it is not the purpose of business.
Who owns the company? Shareholders do not own the companies to which they hold stock, Carney argues.
Wedgwood as the Model of a Modern Major Capitalist:
What is the company for? Carney suggests it’s more than profits. Josiah Wedgwood is the example of a capitalist that made life better for customers by democratizing.
He was born as the industrial revolution was taking off.
He tracked 5,000 changes in experimentation to understand how to make the perfect pottery.
He was an abolitionist icon (ie. against slavery).
He built a town with amenities to support his growing factory.
He was an ardent economic nationalist, admits Ricardian Carney.
Five things that change us in a crisis;
1) Triggers a revaluation of what we value…
2) Triggers a shift in what we value…
3) Triggers an improvement in reporting…
4) Triggers cause resilience…
5) Triggers embed responsibility…
1st for Carney, a crisis triggers a reevaluation of what we value. In prior chapters, Carney showed that the crisis was caused partly by:
· the underpricing in risk and the lack of supervising and off-loading responsibility to the wisdom of the market in Chapter 7’s breakdown of the Financial Crisis;
· the years of undervaluing resilience, with states failing to protect citizens despite ample warnings in Chapter 9’s breakdown during Covid;
· the tragedy of the commons where we aren’t pricing pollution as the producers problem (externality)
2nd for Carney, a crisis changes our appraisal of value and values. Who benefits from these shifts? Shareholder, stakeholders are disrupted through change….
The Covid crisis caused:
· a reappraisal of value and values
· a reset by companies
· a social reset by countries
· accelerated move to e-commerce,
· accelerated shift to e-learning
· accelerated shift to e-health
· a reorientation of supply chains from ‘just-in-time’ to ‘just-in-case’
· greater consumer caution
· widespread financial restructuring (sees a stretched)
3rd for Carney, crises are a catalyst for new reporting of systematic risk.
· 1929 Wall Street Crash (crazy speculation by everyday people using loan money) + Roosevelt’s New Deal = creation of the Securities and Exchange Commission to protect the investors and efficient markets. The SEC then also triggered the creation in 1936 of GAAP (generally accepted accounting principles) which became the global standard to ensure financial data could be reliably counted on.
· 2008 Financial Crisis = reporting for OTC derivatives, reduce the influence of shadow banking, new rules for securitization, accounting standards such as IFRS 9 was developed. IRFS includes what the expected losses are which provides more clarity.
· The Climate Crisis, Carney is (hoping?) to bring about TCFD for consistent, standardized disclosures on climate-related financial risk.
4th for Carney, crises increased resilience, they make us tougher. Global banks have a buffer 10x the size prior. Trading has been reduced 1/2, interbank leading is declined 1/3rd and cloistering of divisions within banks, with deep separation aims to prevent a systematic collapse.
Again, Carney argues the Climate Crisis has a valid target of net-zero. ¾ of the world’s coal reserves…
5th for Carney, embedding responsibility. Having purpose, Carney suggests might have prevented the financial crisis. In the aftermath, regulations, rules and compensation provide the teeth for a better future.
The Firm As A Series of Contracts versus A Purpose-Driven Entity at the Heart of an Ecosystem:
Carney goes through the history of company formation. The coordination of employees, investors, suppliers, buyers. He notes that corporations are indeed people both legally and in reality. For Carney, the company is not the sum of a bunch of contracts, however.
Shareholder & Purpose:
East India Company (the 1st publicly traded company in the UK) was incorporated with the purpose of protecting a monopoly in Asia. The concept of the shareholder was buy shares of a company with the agreement that that capital would be used to advance the purpose of the firm, a larger goal. But during the industrial revolution, in 1844, the UK government passed a law that allowed firms to be incorporated without an express purpose and it made registration much easier. By the 19th century, the focus on public purpose shifted to private purpose.
Ford Motor Company challenged the idea further when in 1916, there was a $112 million surplus on their balance sheet. Shareholders wanted a dividend but Henry Ford wanted to direct those profits into creating more innovation and to democratize cars for more people. The Michigan Supreme Court sided with shareholders but the amount doled out was much smaller through managerial discretion. This case Dodge v. Ford is central to the idea that shareholders own the company to which they hold shares. The UK Companies Act in 2006 and the Delaware Supreme Court in 2015 re-asserted that the purpose of ‘directors must make stockholder welfare their sole end.’ So, in the UK and the US, it is to maximize shareholder value. But there is disagreement, Wachtell, Lipton, Rosen & Katz LLP (WLRK) says shareholder primacy is not exactly what is going on….
Carney shows through legal examples in Canada and France that shareholder aren’t even owners of the company and thus the maxim of maximizing shareholder value is flawed. It is true that shareholders do get paid after everyone else: creditors, bond holders, employees, suppliers and governments via taxation both in the UK and the US. But employees cannot diversify their risk to a company as Martin Wolf has argued so shareholders may not really be taking the most risk, aren’t really owners and certainly a poor shareholder who put their life-savings in it is taking more risk than Warren Buffett in the owning of a given share of any company. Shareholders do not have much downside risk either. So, for Carney shareholder primacy is flawed.
The Agency Problem:
The separation of ownership of shareholders and control via the management which have their own self-interest (perks, pet projects, empire building) mixed in with meeting shareholder interests, triggered the Milton Friedman doctrine that:
a) an executive is an employee of the owners of the business;
b) the executive is responsible for maximizing shareholder value;
c) shareholders (probably want) profits therefore that is the value in question;
d) as long as the firm conforms to rules of society in terms of customs and law, they are good.
Carney sees Friedman’s ideas as useful but deeply flawed. Shareholder primacy is problematic and the proof is that Friedman gives himself an out in two ways:
1) saying that money making should conform to customers and laws of their day. As Carney has shown, values are subject to their time therefore, Friedman has an out when there is disembodiment between the market and shareholder. Friedman claims any charity to employees is merely window-dressing. But Carney has shown in this book that there are times where there is deep corrosion in financial markets.
2) saying that shareholders have primacy is flawed because shareholders merely have a ownership of the shares in a limited legal way. There is strain in how the wealthy treat the poor for example.
Companies have Command and Control Dynamics so Models from an Economist is a Matter of Degrees:
For Coase in The Nature of the Firm, the firm is defined by costs difference of providing goods and services through the market. Transactions in the market hold the costs of gathering information, bargaining and enforcement. These transactions bear costs that the firm saves but the expense is the span of control, complexity and diseconomies of scale. The activities performed more efficiently in a Command and Control system within the firm with the rest completed through the market.
Carney argues that instead of Shareholder Value there ought to be Stakeholder Value, which also happens to be the latest trend in business school literature. Profit is essential but it is not the only thing. Many CEOs reject the notion that there is a single purpose to a firm. For Carney, a successful firm must deliver a balance of competing interests amongst stakeholders (which Carney neglects to define), but this is analogue to the individual who pursues the good life. Competitive advantage, for Carney includes, having an attractive purpose as Chapter 15 will show.
Other Thoughts from Chapter 14:
· For a better tomorrow, we need companies that are motivated by profit and empowered through purpose;
· Profit and purpose are both necessary and re-enforce each other;
· Firms should embed purpose in what they do;
· Corporate purpose reduces risks, inspires employees, provides guidance in uncertainty and attracts and drives innovation;
· Non-financial metrics should matter even if they are notoriously hard to measure;
· The challenge falls with turning a purpose into practice (actions, outputs);
· Maximizing shareholder value (short-term) is not the sole aim of corporations, full stop;
· Environmental, Social and Governance (ESG) can contribute to profits and also purpose;
· The make-up of boards and their focus on purpose is critical;
· Board-level reforms need to include purpose-oriented reform;
· Patagonia, Unilever have institutionalized purpose;
· B Corp certification reward companies that meet social and environmental metrics;
· Danone is a company that embraces a enterprise a mission designation;
· Executive level compensation needs to be connected to ESG factors and needs to be re-configured to align incentives that are longer term;
· Companies need to consider future generations;
· Companies should be engaged in improving communities;
· Reporting is Key: two-way flow of information between stakeholders, shareholders and companies;
· Good and bad ideas need to be tested and then good ideas scaled, and bad thrown away;
· There is more and more evidence that suggest that companies that perform well on ESG also tend to have better financial performance, 63% report a positive co-variation, increased ESG leads to increased financial performance, Chapter 15 will address the counter-arguments.
· Employees who know their employers purpose also have better financial performance;
· Patagonia give 1% of its revenue and they get 9000 applicants per post as a result….;
Ø Chapter’s message in a nutshell: You get more with honey then you do with vinegar, be nice and have better outcomes in good and bad times.
Ø The Covid crisis has accelerated a shift, but for how long? What is the reasonable band-width for which human’s recalibrate? Carney seems to be have a view that change is more permanent than might be believed by myself or others.
Ø “During the [Covid] crisis, we have acted as interdependent communities not independent individuals, with the values of economic dynamism and efficiency, joined by those of solidarity, fairness, responsibility and compassion.” (386, Value(s). This is not quite what is happening or happened or has it? Hard to measure? Are media stories representative of reality? How does Carney know from publications, statistical research or the people he hangs out with? People aren’t, pre-determined. There is speculation and sales in his statement; persuasive as it is.
Ø If Carney is so certain of the benefits of a crisis, then logically should triggering a crisis not be an aim of effecting change? From 9/11 to detonating a nuclear weapon in the Antarctic, causing a crisis is perhaps a logically implication of his breakdown of how the financial crisis has progressed financial technology forward. Carney seems to imply that all the Dodd-Frank legislation was a major success, whatever has been implemented deserves a thumbs up, however the process of providing new safe-guards was very contentious and as Obama points out in my blog post, it wasn’t always that great.
Ø An inverted view might be that the financial crisis brought on regulations that are a mixed bag of efficacy and punishment. Instead of weeding out the incompetent, regulations have caused a retrenchment of those most passionate about finance.
Ø Perhaps this will be addressed in Chapter 15, but how do you really objectively measure ESG performance? If the measures are game-able, they will be gamed, just a fun fact of human nature. Humans are cunning. Get used to it.
Ø Carney took the Patagonia “9,000” applications example in two funny ways. 1) that Patagonia didn’t plant this story as a PR stunt, 2) that Patagonia has those high number of applicants because of their purpose (single causation is flawed thinking or perhaps Carney is simply trying to persuade).
Ø Senator Elizabeth Warren’s 2018 proposed Accountable Capitalism Act requires directors in firms making more than $1 billion to ‘consider’ stakeholders, not simply shareholders, when making choices.
Citations Worth Noting for Part 3: Chapter 14:
v Andrea Sella, ‘Wedgwood’s Pyrometer’ Chemistry World, 19 December 2012.
v Derek Lidow, ‘How Steve Jobs Scores on Wedgwood Innovation Scale’, Forbes, 3 June 2019.
v US Securities and Exchange Commission, ‘What We Do’, 10 June 2013.
v John Kay, ‘Shareholders Think They Own the Company – They Are Wrong’, Financial Times, 11 November 2015.
v Martin Wolf, ‘Shareholders Alone Should Not Decide on AstraZeneca’, Financial Times, 9 May 2014.
v Lynn A Stout, ‘The Shareholder Value Myth’, Cornell Law Faculty Publications, Paper 771 (2013).
v John Kay, The Truth About markets: Their Genius, their Limits, their Follies (London: Penguin, 2003).
This chapter discusses the discovering of COVID and all the other asks of this pandemic that we are all very familiar with. Carney was the governor of the Bank of England until February 2020. Economic and family priorities.
The Covid crisis emphasized:
Solidarity: companies, bank, society
Responsibility: for each other, employees, supplies, customers.
Sustainability: where the health consequences skew towards seniors while the economics consequences skew towards millennials and Gen Z.
Fairness: sharing the burden, providing access to care.
Dynamism: restoring the economy with massive government intervention and private sector resurgences…..
Duty of the State:
Carney goes through a review of political philosophy from Thomas Hobbes (1588 – 1679) to John Locke (1632 – 1704) to Rousseau (1712 – 1778) to suggest that in exchange for giving up certain freedoms, the state promises to deliver protection to its citizens. Much the same with central banks; that the public gives up the detailed nuanced control of the money supply in exchange the financial system delivers prosperity.
Capacity of the State must have:
1) legal capacity: ability to create regulations, enforce contracts and protect property rights: these include social distancing regulations that aimed to reduce transmission of COVID 19;
2) collective capacity delivering services;
3) fiscal capacity: power to tax and spend: state capacity has moved from 10% of GDP to 25% to 50% of GDP with corresponding services to protect citizens from COVID 19.
Poor compliance in democratic societies;
Stock piles were not restocked;
Bill Gates Ted Talk from 2015 was not actioned by any one actor;
Many countries didn’t have PPE and depended on China’s production initially;
No country is really prepared for this particular kind of pandemic;
South Korea had a pandemic in 2015 and Carney repeats the often mentioned success of South Korea through contact tracing and geo-targeting of users;
Governments need to be better at coordinating: there were departmental territoriality;
In simulations for pandemics this was very evident.
Cost-Benefit Analysis for Hard Choices:
There was a weighting of variables to decide whether to lockdown or otherwise.
The effects of lockdown: domestic abuse were hard to do that.
Calculating the value of a human life: is hard to do. But there is actuaries to put the intrinsic versus investment value of a life or the net present value of all future cashflows that person is predicted to generate. Life is priceless. Sometimes the calculation is about the productivity of the person in life…..
Schelling’s “The Life You Save May Be Your Own” points out that the value of a life principally the concern of the person living it. Value of a Statistical Life (VSL) became the industry standard. The example Carney provides is the a risk of death in a high-risk job might be 1 in 10,000 and employees receive $300 of danger pay, therefore the VSL is $3,000,000. There are several other methods: 1) stated-preference, 2)hedonic-wage, 3) contingent etc. And different countries use different metrics in similar circumstances. In Canada, the estimated range of a human life is $3.4M to $9.9M CAD meanwhile in the US, the estimated range of a human life is $1M to $10M USD. Healthcare looks at quality-adjusted life year (QALY) and cost-utility versus cost-benefit analysis. Schelling’s assumption about how a person can evaluate the value of their life. VSL usage is a moral choice. Wealthcare many not be measured properly according to Carney. Another model is the VSLY Value of a Statistical Life Year. The question remains: do all lives have an equal value or is it the number of life years should be treated as equal?
While it is complicated, I would have liked Carney to have explained the system of money creation in simple terms as it pertains to the pandemic. The level of government issuance of support has been massive. It is imperative folks understand how stimulus money is created.
The perception that money is created out of thin air, subject to political pressures is not true. Zeitgeist and other explanations of the money system are warped thinking. There friends and family going around saying that central banks ‘just print money’ whenever it suits them…
Here is a good explanation of how the central bank enables money creation: To support small businesses and citizens out of work: Is the government increasing tax or are they printing money during the pandemic? The stimulus money was not coming from new taxes so here the government raises through borrowing. The government issues treasury bills to three groups of savers:
(1) public sector (other parts of the government,
(2) the private sector (people and companies),
(3) foreign entities.
The government agrees to pay those savers back with interest at a future date. In the short-term the government uses that cash sucked out of the economy in exchange for the treasury bills to issue stimulus cheques back into the economy. Keynesian economics says that the more stimulus there is, the more economic activity which enables more private savings which then fuels more transactions for bonds. The government can borrow, unlike an individual, through this system as long as the economy is growing at the same or greater rate then that of the debt. The economy is growing at the same rate as debt then the debt to GDP ratio will be stable. If the debt to GDP ratio is stable, then the government can argue for continued investment in its debt securities (ie. bonds).
An additional layer of complexity is that: (4) the source which is the Mint in Canada and the Federal Reserve in the US does not print actual paper money much any more but does indeed ‘print out of thin air’: electronic money, that is credited in the treasury department’s account. In exchange, the Fed then holds treasury bills. The key consequence of issuing too much money with this source (4) is inflation whereby more money in circulation is chasing the same limited number of goods available thus driving the price upward of the individual goods. The 10 year Treasury Note then starts to go up and inflation creeps in. In this case, the Fed needs to increase interest rates to counteract/dampen the purchasing of the demand side…..
The fines for violating COVID rules have an earned media dynamic: we know that the virus is spread through gatherings where one ore more participants has the virus. When someone gets an ‘arbitrary fine’ it effectively markets better than other forms of advertising such as digital. The injustice of the fine is earned media.
There are Canadians under the false impression that government at the federal, provincial and municipal level are not allowed to make rules that ‘violate’ the Charter of Rights and Freedoms. Well, a constitution has to be enforced, my friend…
This time will be different which was Carney’s number one lie in finance seems to be fillable here to say, why would you think that in a future pandemic in say 2055, that our children will be able to respond better then this time?
Just are Carney fails to explain how the central bank manages the money supply, he too here fails to give a basic description of the “obvious’ nature of the COVID 19 virus. Its unique gestation period in which it sheds without the host having any symptoms for T+7 days is very novel unlike other viruses that are initially extremely aggressive, for example, ebola or SARS.
The threat of future pandemics is very real until it isn’t at all. If COVID had the immune effects of HIV then the response would have been more severe in North America. However COVID can be contracted and the likelihood of death is 1 – 5% based on comorbidities. We’ve literally spent the last year talking about this virus. The next virus if it were HIV but airborne, the human race would be in full black plaque mode. Freedom loving + scientific illiteracy are a potent weapon.
Lack of understanding the characteristics of the virus.
In ability to connect barriers that create friction such as laws, walls and masks have the underlying same logic; they do not prevent all the negatives from happening but laws, walls and masks make the unwanted thing from happening, obviously.
Citations Worth Noting for Part 1: Chapter 9:
John Locke, A Third Concerning Toleration, in Ian Shapiro (ed.), Two Treaties of Government and A Letter Concerning Toleration, 1689.
Jean-Jacques Rousseau, The Social Contract.
Thomas Piketty, Capital in the Twenty-First Century (Cambridge, Mass.: Harvard University Press, 2014).
Derek Thompson, ‘What’s Behind South Korea’s COVID-19 Exceptionalism?’, Atlantic, 6 May 2020.
A.E. Hofflander, ‘The Human Life Value: An Historical Perspective’, Journal of Risk and Insurance 33(1) (1966).
Cass Sunstein, The Cost-Benefit Revolution (Cambridge, Mass.: MIT Press, 2018): OECD (2012).
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