moneyFYI
Financial Freedom Is Merely Organized Common Sense
You Can’t Fool Mother Nature
After paying attention to how the world has worked for over 50 years, I find I am somehow outside the bubble people claim to live within. It’s uncomfortable. My understanding of the world included several dimensions. Not all were accepted by everyone, but not many argued they were unreasonable.
Most deal with the efficient achievement of goals that help us all. That seems lost.
How do you measure achievement?
There are two basic approaches.
- How does the outcome relate to the original purpose?. It got what was wanted, within budget, on time, easily maintained and things like that, or it got some of the purposes, or even sometimes none. Success was rarely complete and often over budget. The mistakes could be analyzed and carried to future iterations or other projects.
- Was it completed the way that was described in the planning outline? In this method, outcomes don’t matter, only procedure. Few businesses adopt this method because it is immensely more expensive than trying to achieve a particular result within time and budget constraints. Governments, universities, and NGOs frequently use this method because it is basically unmeasurable.
When following a method prescribed before beginning is the choice, outcomes become secondary. Adherence to doing what you are told becomes dominant, even when you know it doesn’t work.
As anyone who has tried to achieve an outcome and failed knows, the method you think will work rarely does. Changing conditions, previously unknown variables, and outright errors in first perception force adjustments. Good results evolve, and careful managers admit the possibility that the method is secondary to the idea of achieving a particular purpose.
When you pay attention only to how you are doing something, you lose track of the idea of achievement.
We are now dominated by how we do things.
Here are two easy examples.
DEI – Diversity, Equity, Inclusion. These are all about how you carry out the tasks. While each is a well-constructed talking point, none are closely attached to achievement. That’s because achievement is usually connected to meritorious effort and skill. The HR department can measure each of these, all the while paying zero attention to whether or not they improve the organization’s ability to deliver on their reason for being.
If an organization values achievement, it will unquestionably make more money and have more to distribute to its shareholders or apply to its services. Should they wish to allocate their excess to DEI projects, they may. Can DEI goals be compatible with the organization’s claimed purpose? DEI ideas don’t coincide with outcomes.
ESG – Environment, Social, Governance. There is a whole rating system where corporations are evaluated about how they stack up against others in the three areas of concern. Some businesses have decided to follow the expectations of others and spend to improve their look under this metric. If the activity improves their ESG score, and all other effects are benign or positive, then no harm. That is usually not what happens. ESG costs.
In my world, things that distract from the overall purpose reduce the likelihood of success or increase its cost.
What balances this problem?
One thing we have seen so far is the creation of investment funds that are working to acquire stocks in companies that have, in their industry, relatively low ESG scores. It will take a year or more for the comparison to become apparent. Would anyone like to bet that these funds will lose to ESG-strong companies?
Until there is evidence that the cost to provide service using DEI or ESG as useful metrics is so great that people reject it, we should expect no government, governmental agency, university, or NGO will change. The revolt will eventually come to pass, but not soon. Organizations like hospitals are in the middle. Their outcomes are both measurable and vital.
The other side
As a consumer, do you realize that efficient agencies and businesses charge because they must? When some group boycotts a company because they are not paying attention to ESG, there is a new cost. Are you willing to pay more because others think ESG matters urgently? Maybe the boycotters are right, but we should expect them to provide objective evidence over rhetoric. Protesting against businesses trying to be efficient is part of the get something for nothing ethos.
Think about it
The world seldom, if ever, delivers something of value for nothing. Demanding DEI or ESG is about compliance with ideas proposed by people with power and minimal experience. To dismiss merit to give a place to these ideas is counter to reality.
Reality always wins.
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 and business matters. 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.
Be in touch at 705-927-4770 or by email at don.shaughnessy@gmail.com.
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