Losing Sight of Value


There’s no doubt the capitalist world got ahead of itself over the last decade or so and a few recent conversations on BTalk helped to explain why.

It’s all to do with the notion of value. Economist Steve Keen argued that investment was only ever intended to allow for the growth of a business, not to contribute to the pay packet of a detached speculator. So businesses all become subject to the same speculative ponzi scheme we saw hammer the US sub-prime market. To fix the problem you need to ensure that the value of a business is more tightly coupled to the assets and it’s growth potential, without investors talking it up.

The same disease seems to relate to how many big businesses operate. We become so obsessed with the money, looking for financial measurements for everything, and in so doing, we forget the ultimate objective of the company. Companies want to make a profit but it has to relate to what we make or do. Problems happen when the company becomes so focused on the money, they detach earnings from the real business that sits behind those earnings.

John Seddon says that’s why many public sector organisations become inefficient. They make supposed cuts and efficiency measures — such as Lean processes — while forgetting what it was they are there for in the first place, which is to service customers.

Perhaps the only people who create a true sense of value are individuals working for themselves. As Matthew Franceschini and Tui McKeown explain, there are more of them, and they are generally the most satisfied people in the workplace.

But how much are they worth? Well, more than they imagine. Julia Bickerstaff suggests they are perhaps one element of the workforce that underestimates its true value, at least at the onset.

So there’s no doubt that the world economy — Australia included — has some adjusting to do. The question is, how much has business efficiency been hammered by too many people focusing on the wrong things — becoming too obsessed with the money and not focused enough on producing things.

Barack Obama spoke of reinvigorating production and creating jobs in his speech last month, but as Tom Switzer suggested at the time, his approach is largely so he can be seen as doing something, anything really.

It doesn’t really get to the heart of the issue — how do we tie value to money?

First published on CBS News

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