Elon Musk has an internal theme for his managers. “If following a ‘company rule’ is obviously ridiculous in a particular situation, such that it would make for a great Dilbert cartoon, then the rule should change.” Scott Adams’ cartoon strip Dilbert has become the inept management detector and a way to describe it to the world.
It is not so much that the management ideas addressed are wrong, but more that the ideas are applied where they don’t belong. As Musk has pointed out. Frequently they are carried to irrational extremes. Another of the cartoon’s themes is the idea that what we say we are and what we say we do is enough, but it never is. Failings in delivery or quality can be dealt with by impersonal “customer service” which is neither a service nor customer-centric. It’s more about redirection and obfuscation.
If your idea or methods make it into a Dilbert cartoon, it is time to pause and think again.
ESG is management with attention to the Environment, Social issues, and Governance. While I think all of us are in favour of a clean, productive environment, social fairness if not equality, and sound governance of our businesses and social institutions, no one I know believes that these values should be a cudgel to address how others are behaving. Their situation may be different or at a time point on the time scale. Values are situational and situational is what Dilbert is frequently about. There is humour in seeing people mismatch worthy goals with their particular reality.
Beginning on 12 September 2022 there have been Dilbert cartoons showing how responses to the ESG narrative have been playing out in our world. The first of them makes a point of claiming moral superiority.
Wednesday’s cartoon makes the point about subjectivity.
By Friday, ESG rating has become a sardonic laughing stock.
That sounds like the ratings methodology for subprime mortgages fifteen years ago.
If your idea makes it into Dilbert, it is time to rethink what you are doing. There are investment managers who are taking it seriously for marketing purposes. Whether they believe it is an investment metric or not is another story, but it serves a useful purpose at the marketing level. It only makes sense for an investor if they are trying to make their investments serve more than one master and history shows that doesn’t work.
The Wall Street Journal recently expended some ink to make the point that ESG tends to produce lower returns. Blackrock, the largest money manager is noted for using its financial clout to direct companies to manage towards ESG. Some state attorney generals and pension fund managers are investigating whether there is a course of action to force them to act in concert with investment return only. That will be interesting.
While it is ideal to want social factors to be addressed in a timely and efficient way it is not clever to buy into an unmeasurable indicator. My view is to invest to make as much money as you ethically can, so you can invest some into social things in your own community or with agencies addressing specific and narrow goals. Compared to fashionable approaches, conscious segregation of purpose and methods usually provides optimal results. Efficiency first.
It is likely too simplistic to say it is nothing more than a badge you wear to signal your allegiance to the current social leadership, but that idea is directionally accurate. It is becoming a cult, where belief triumphs over reason.
I expect if we look back at it from 2027, our first question will be, “What were people thinking?”
Even if people like the ideas behind it, I doubt they will accept lower returns forever.
Business management is more complex than people believe. Not everyone who can barbecue a hamburger can run a successful restaurant. Being a plumbing contractor is about more than buying a used panel van. If you create many goals and some of them conflict, you have a problem. Simple businesses organize themselves to do one thing very well, and use objective measurements as their guide.
If left alone solutions to ESG problems would evolve when different methods of management come available. Businesses never try to suppress risk, social goals, or ways to operate if those ways would improve their performance over a long time. To assume a responsible business is avoiding something like climate change risk is irrational. More likely their labs are and have been looking for solutions and opportunities.
ESG is a way to signal virtue, it has little to do with reality. Ethics and consistently applied standards have value If you think virtue signally has value you will appear in Dilbert eventually. To be mocked.
You can see Scott Adams each day with commentary on social and political issues. Real Coffee With Scott Adams each day at 10AM eastern time. He is a little full of himself but thoughtful and interesting. As my golf buddy, Tom used to say, “It’s not bragging if you can do it.” Take a look
I build strategic, fact-based estate and income plans. The plans identify alternate ways to achieve spending and estate distribution goals. In the past, I have been a planner with a large insurance, employee benefits, and investment agency, a partner in a large international public accounting firm, CEO of a software startup, a partner in an energy management system importer, and briefly in the restaurant business. I have appeared on more than 100 television shows on financial planning. I have presented to organizations as varied as the Canadian Bar Association, The Ontario Institute of Chartered Accountants, The Ontario Ministry of Agriculture and Food, and Banks – from CIBC to the Federal Business Development Bank.
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