Yves here. I’m putting up this piece precisely because I find it to be frustratingly superficial and hope readers will come up with additional observations and ideas. Specifically, it skips over the various reasons why CEOs are so blinkered in their view of risks that they don’t put climate change at the top of the list. Blaming that result on “economics” comes close to obscuring the problem.
For instance, CEO thinking isn’t driven by economics as practiced by either neoclassical or finance economists. It is unduly influenced by net present value analysis, which is at the core of most companies’ capital budgeting processes as well as Wall Street financial modeling. Companies and often the Street assign unduly high risk premia, which results in cash flows more than five or ten years out having close to nada impact on cash flow analyses.
It isn’t just the rise of neoliberalism and the promotion of the ideology of shareholder capitalism that led to the fetishization of cash flow models (which are just storytelling that too many take too seriously because spreadsheets). It is also that the rise of the personal computer suddenly made it vastly easier to prepare financial forecasts, greatly increasing their use as a managerial tool. And I’ve seen again and again how users come to treat those models as more real than the conditions they represent. For instance, anyone who has prepared financial models has either on their own or under pressure tweaked model assumptions to achieve a preferred outcome by moving at least one of the assumptions into “not terribly realistic” territory.
And that’s before getting to other social factors like CEOs identifying less with their communities as corporations that were important to mid-sized cities were acquired by larger concerns covering much larger geographical areas.
By Christopher Michaelson, Professor of Ethics and Business Law, University of St. Thomas. Originally published at The Conversation
We live in a world threatened by numerous existential risks that no country or organization can resolve alone, such as climate change, extreme weather and the coronavirus.
But in order to adequately address them, we need agreement on which are priorities – and which aren’t.
As it happens, the policymakers and business leaders who largely determine which risks become global priorities spent a week in January mingling in the mountainous resort of Davos for an annual meeting of the world’s elite.
I participated in a global risk assessment survey that informed those at the Davos summit on what they should be paying the most attention to. The results, drawn from experts in a broad range of disciplines including business, happen to be very different from what company CEOs specifically see as the biggest threats they face.
As a philosopher, I found the differences curious. They highlight two contrasting ways of seeing the world – with significant consequences for our ability to address societal risks.
Two Perspectives on the Biggest Risks
The World Economic Forum’s Global Risk Report consolidates the perceptions of about 800 experts in business, government and civil society to rank “the world’s most pressing challenges” for the coming year by likelihood and impact.
In 2020, extreme weather, a failure to act on climate change and natural disasters topped the list of risks in terms of likelihood of occurrence. In terms of impact, the top three were climate action failure, weapons of mass destruction and a loss of biodiversity.
The specific perspective of corporate leaders, however, is captured in another survey that highlights what they perceive as the biggest risks to their own businesses’ growth prospects. Conducted by consultancy PwC since 1998, it also holds sway in Davos. I’ve been involved in that report as well when I used to work for the organization.
In sharp contrast to the World Economic Forum’s risk report, the CEO survey found that the top three risks to business this year are overregulation, trade conflicts and uncertain economic growth.
Economic or Ethical
What explains such a big difference in how these groups see the greatest threats?
I wanted to look at this question more deeply, beyond one year’s assessment, so I did a simple analysis of 14 years of data generated by the two reports. My findings are only inferences from publicly available data, and it should be noted that the two surveys have different methodologies and ask different questions that may shape respondents’ answers.
A key difference I observed is that business leaders tend to think in economic terms first and ethical terms second. That is, businesses, as you’d expect, tend to focus on their short-term economic situation, while civil society and other experts in the Global Risk Report focus on longer-term social and environmental consequences.
For example, year after year, CEOs have named a comparatively stable set of narrow concerns. Overregulation is among the main three threats in all but one of the years – and is frequently at the top of the list. Availability of talent, government fiscal concerns and the economy were also frequently mentioned over the past 14 years.
In contrast, the Global Risk Report tends to reflect a greater evolution in the types of risks the world faces, with concerns about the environment and existential threats growing increasingly prominent over the past five years, while economic and geopolitical risks have faded after dominating in the late 2000s.
A Philosophical Perspective
Risk surveys are useful tools for understanding what matters to CEOs and civil society. Philosophy is useful for considering why their priorities differ, and whose are likelier to be right.
Fundamentally, risks are about interests. Businesses want a minimum of regulations so they can make more money today. Experts representing constituencies beyond just business place a greater emphasis on the common good, now and in the future.
them. And while I’m sympathetic to CEOs’ desire to run their businesses without regulatory interference, I’m concerned that these short-term economic considerations often impede long-term ethical goals, such as looking after the well-being of the environment.
An Uncertain World
Experts agree on at least one thing: The world faces dire risks.
This year’s Global Risk Report, titled, “An Unsettled World,” depicts on its cover a vulnerable earth in the shadow of a gigantic whirlpool.
The cover photograph of the Global CEO Survey, which reported the lowest CEO confidence in economic growth since the Great Recession, shows an incoming tide beneath looming dark clouds, with the words: “Navigating the Rising Tide of Uncertainty.”
Between the covers, however, the reports demonstrate a wide gap between two influential groups that need to be on the same page if we hope to resolve the world’s biggest threats.
Last century, in the same year that World War II drew to a close, Bertrand Russell proclaimed that the purpose of philosophy was to teach us “how to live without certainty, and yet without being paralyzed by hesitation.”
In the 21st century, philosophy can remind us of our unfortunate tendency to let economic priorities paralyze action on more pressing concerns.
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Isn’t it obvious that “businesses” cannot, and do not “focus” on anything, individuals can, and do focus, and what CEOs focus on is avoiding responsibility for the damage done as a result of their decisions, the damage that regulations are intended to prevent.
It seems the author is more than willing to excuse nasty, short-sighted attitudes toward ethical considerations because it’s only ‘natural’, and “as you’d expect“, no it’s not what we expect from ‘business‘, what we expect is behavior that complies with the regulations we enact, collectively through the political process because individually we cannot hope to stop ‘business‘ from doing what it will, which includes destroying the environment, and turning the population into wage slaves.
The author paints a picture of a sort of balance between business interests, and the interests of We the People, that ideally is a story of thoughtful compromise, but in reality, his description is massively faulty in that what is meant by compromise, on the part of the CEOs, is STFU, and get out of our way, or else.
Not being able to get We the People to STFU, those CEOs purchase our government, in order to allow them to stifle all collective resistance to their greedy impulses.
There is no “wide gap between two influential groups” because those on the ‘philosophical‘ side of the conversation have no influence.
The flipside to your very well stated comment is that this is BS, or at least should be:
>Overregulation is among the main three threats
CEOs are weird people and like other comments below say, have well defined blind spots in areas that paralyze the rest of us. So they can say things like “regulation bad!” but so many regulations actually enforce the hold of the rich over the rest of us, and it’s just comical that they don’t register that fact at all.
Well, for some fatalistic definition of “comical”, I admit.
They use regulations, and statutes, that they can get put in place from their lobbying to crush competition. http://hispanicpundit.com/2005/11/09/how-corporations-use-the-government-to-reduce-competition/
Another way of saying this could be:
A key difference I observed is that business leaders tend to think in economic terms first, economic terms second, and third, fourth,…., only under extreme pressure would they consider ethical terms but with a different prism. Like a different chris says these are weird types (like anyone on the top of something, let’s say a company, a government, a foundation…).
They tend to think in financial terms, not economic terms. Gaming the books to improve finances, or taking large risks (e.g. global financial crisis) in order to swing for the fences is perfectly fine. That is not economic thinking. Economic thinking is thinking through the micro or macro economics with the long view for successors etc. in mind. Henry Ford was thinking about the economics when he paid his workers more so he wouldn’t have the staff turnover, which in turn meant they could afford to buy the cars they were building. That is not a thought going through most CEO’s heads these days.
That is such a nice story about Ford. Just a skeleton of the real story, of course. That $5 (more than twice the base wage of $2.25) was half paycheck and half bonus. You did not get the bonus unless you were a perfect acolyte of Our Ford, in all your everyday behaviors that had to meet strict standards Ford set. https://www.forbes.com/sites/timworstall/2012/03/04/the-story-of-henry-fords-5-a-day-wages-its-not-what-you-think/#22ca4f09766d And Ford had lots of ways of enforcing that behavior.
Bezos knows his history, and how to apply it.
The Forbes story is interesting, ascribing Ford’s generous wages to the desire/need to increase employee retention. But the Forbes story also leaves out a major piece of the story: the extensive collusion between Ford (family and company) and the Third Reich. This provided plenty of money to enable Ford to pay those generous salaries!
A couple links based on extensive documentation:
Ford and the Fuehrer
The Rise of the Fourth Reich
Regarding the latter link, John O’Loughlin has been doing amazing reading from the richly documented Jim Mars book. His YouTube channel which includes these ongoing readings is HERE. It is jaw-dropping stuff.
I had no idea of the extent to which numerous corporate cutouts were put in place to prepare for the post-war continuation and growth by Martin Bormann and colleagues. These include approximately 750 companies around the world–all carefully using bearer bonds or other strategies to conceal ultimate ownership or control. That’s in addition to the over 700 new companies related to IG Farben in non-transparent ways.
I had heard about Ford being a good buddy of Hitler, and knew that US and European banks and manufacturers supported the German side of the war–that is, they supported both sides of the war. But I had NO IDEA how extensive the Nazi preparations for the post-war recovery went, how early it started (after the Stalingrad and Kursk losses), and how successful their penetration was into US intelligence agencies, military, political establishment and global corporations. The well-known Paperclip project was only a tiny part of the infiltration strategy.
It’s called “piercing the corporate veil”. You know, corporate officers only have limited liability, and often larger corporations take out liability insurance against their own actions. Hence Romney stating that corporations are people too.”The company did it, not me!” and legally that’s how it goes.
Legally it may be necessary, but effectively it has given cover to all kinds of sociopathy.
Median tenure of an S&P 500 CEO is 5 years, down from 6 years earlier in the decade. Average tenure is 7.2 years, down from 7.5. Only 64 of the S&P 500 CEOS have been on the job longer than 15 years. https://corpgov.law.harvard.edu/2018/02/12/ceo-tenure-rates/
Most of the CEOs are not thinking big thoughts. They are figuring out how to survive at their company to Year 6. Saving the planet is generally not high on the list of things that will help get them to Year 6.
I started reading this with my own notions of risk – i.e. uncertainty – i.e. situations ( present or future) involving imperfect information. From that my mind goes to measurement of this ( probability, and probability of probability ) and expected values ( risk / reward:loss) and decisions under uncertainty. I saw none of this in the short article so I went to the reports themselves:
the WEF talks about risk as loss ( and loss only, nothing about situations involving gains ) and likelihood of this ( Figure I and Figure II) – items as diverse of cyberattacks, water shortage, unemployment, financial failure to climate change.
the PwC survey has specific questions e.g. “Do you believe global economic growth will improve, stay the same or decline over the next 12 month? ” and as another example – specific statements about regulation.
Climate change is there but at first sight only as this question : “How strongly do you agree or disagree that: ‘climate change initiatives will lead to significant new product and service opportunities for my organisation’”
Its not surprising to me the two reports diverge then. For such a short article I was surprised at how increasingly irritating it was ! For me, I’d prefer conversations about risk to be about decisions under uncertainty with the firm perspective of Expected Value ( risk/reward:loss) . Of course Expected Value to whom comes in for sure !
We live in a world threatened by numerous existential risks that no country or organization can resolve alone, such as climate change, extreme weather and the coronavirus.
There are some risks that can’t be dealt with by human effort alone; e.g. what are we going to do to stop the Yellowstone Super Volcano from erupting and essentially destroying the US?
So we’d better, for our own sake, assume the existence of a God who can prevent such catastrophes and not trust in mere pragmatism at the expense of moral principles and ethics.
I don’t understand? Why do I need God?
If I’m driving recklessly and I wreck* and die then that’s my fault and I should have exerted control over my desire to go fast. If I’m driving safely and I get hit by a meteorite well, OK couldn’t do anything about that.
I have seen no evidence of a God that takes comprehensible actions to protect anybody from a meteorite, so why even bother bringing Her up?
*on a lighter note, WTF is up with the English language? “Recklessly” seems to imply not wrecking, but it actually means the odds are just the opposite.
There’s a strategy in card playing that if the only way one can win the hand is for the cards to be distributed a certain way, then one should ASSUME the cards are distributed that way and play accordingly.
Mankind, despite enormous increases in knowledge and power, is faced with existential threats we can’t deal with alone so it is wisest to ASSUME the existence of Someone who might help us and to act accordingly.
It’s just logic and woe to us if we fail that course too …
Your logic seems a bit sketchy. If I assume that there’s only one path for me to take to slowly walk across a crowded 8 lane freeway without getting hit and killed when no auto drivers will try to slow down and avoid hitting me, then I should assume that path is the only one I can take and therefore I should step out into traffic with the expectation of remaining unscathed? I don’t think I want to make that assumption.
In the face of existential threats for the inhabitants of this planet that we can’t deal with on our own it is wisest to assume that Cthulhu is setting us up for annihilation and so we should act to help the dread Lord to implement the plan as he is much wiser and greater than we are. It is only logical. But it would be as logical to presume that the Invisible Pink Unicorn (hallowed be Her Holy Hooves) will swoop in and banish Cthulhu back to the outer realms, so there’s no need for human action at all.
Remember the old chesnut, “assume makes an ass of u and me” and try not get too carried away with assumptions of things for which there is no evidence.
Lars Syll’s blog (mostly very, very technical) pushes for a technical difference between the terms “risk” and “uncertainty”.
“Risk” is quantifiable, and might be applicable to a hand in a card game — where you could calculate the game’s outcomes, and deduce that any path save one would lead to a loss.
“Uncertainty” is not quantifiable, is incalculable, looks to me like it would apply to the example of stepping out into traffic. Doesn’t lend itself to simple, easily objectifiable, strategies.
I don’t think he’s saying exactly that.. Its a case of TINA ( there is no alternative) – its about choosing amongst alternatives – loss or a win.
so in the freeway walking example… – actually a better one is from Butch Cassidy and the Sundance Kid – get killed by Lord Baltimore’s lot who’ve been chasing and catching up with since you are at a dead end or jumping down the ravine into the stream below – even if you can’t swim and even if the fall will probably kill you. The assumption explicitly argued over in the movie is that – Lord Baltimore isn’t gonna jump down the ravine as well – “if you didn’t have to, would you ?” where Butch and Sundance HAVE TO.
It was a more trying to point out that assuming a one out of a very large number happening MUST happen seems a bit of a step too far. It seems better to realize the unlikely is actually unlikely and plan accordionly.
I saw nothing there about having perfect knowledge of how all the cards are dealt (or even knowledge beyond the cards dealt to notabanktoadie) to justify the assumption of success being assured. Nothing was said about only one hand being a possible winner AND that being the hand that one holds, therefore assume you are the winner.
Let’s say there’s a very small chance that I can “win” at diving into a cesspool and therefore come up not only smelling like a rose but clutching a gold coin. Should I then make a habit of diving into every cesspool around because I assume that the unlikely must happen? That would seem to be the action I should take based on how I interpreted notabanktoadie’s statement.
I’d only be repeating myself so I’ll stop discussing the substantive point.. but..as a matter of humour – on the cesspool issue :
That’s exactly what the kid does in “Slumdog Millionaire” – he’s locked in the wooden stall of the outdoor public toilet, yet he hears Amitabh Bacchan, the movie superstar, is passing by – his only way to get out and get Bacchan’s autograph is to dive right into the feces.. So what did he do ? I’ll leave it to your imagination. A priceless movie sequence.
This is the philosophy behind the Rapture – we can’t beat it, but if we believe in God hard enough we personally will escape the consequences of our own actions. Ditto the sale of ‘indulgences’ in the Middle Ages.
My own assumption is that it is ‘wisest’ to assume the worst case scenario and work to mitigate it as far as possible while preparing for the potential consequences. Unhappily this approach is undermined by the God-botherers who say “Bring it on, and the Devil take the hindmost.”
From Webster’s Revised Unabridged Dictionary (1913):
Reck
1. To make account of; to care for; to heed; to regard.
[Archaic]
This son of mine not recking danger. –Sir P. Sidney.
And may you better reck the rede Than ever did the adviser. –Burns.
2. To concern; — used impersonally. [Poetic]
What recks it them? –Milton.
Oh man only on the NC blog! Thanks that is so cool. I now see the connection with “reckless” and “reckon”, where reckoning implies thinking about it and reckless is not to.
Sorry. But I can not agree. Even with your own example, the super volcano under Yellow Stone. True, there is little we can do to stop it from erupting. But there is a great deal we can do to prepare for the eventuality. We can stockpile food, run preparation drills, research its past to be better informed about what such an eruption might look like and the challenges it would produce, set up evacuation plans, modify building codes, public education & preparedness. The list of things we can do to prepare is endless.
Forgive me, but “trusting in God” strikes me as nothing more than hiding one’s head in the sand. Merely to pretend that these threats are not real, or that divinity will some how spare us should they come to pass. It’s learned helplessness, rooted in superstition.
it’s also how practically everyone within at least 100 miles of me gets through the day.
there’s likely quite a few wherever you are, too.
I’m agnostic(the mystical kind), and have learned to tolerate such superstitious, goat-like* behaviour…because they generally mean well.
I put a mental red letter “A” on the foreheads of the most virulent ones, to better avoid them.
*I’m often torn as to which is a better mascot…i mostly land on geese. gossipy, so conservative they won’t go through a newly opened gate until they talk about it for 2 hours, always muttering when you come around, then freaking the hell out when you bother them.
A paraphrased quote (as the original is in French which I neither read nor speak, being a barbarian ‘n all):
True love is the creation of a religion whose God is false. – Paul Valéry
>the biggest risks to their own businesses’ growth prospects
Growth itself is the problem. But they are looking at just the opposite, “how do we continue growth” when the question really is “how do we continue without growth”.
I mean back to the milk example – how does Turner’s continue with the base consumption being constant? I die, somebody else takes my place and loves the milk just as much. Period. Why isn’t that a sustainable business model?… and it isn’t, nowadays. We have to fix it.
Usury based finance REQUIRES growth – to pay the interest.
Why then do we have government privileges for private credit creation?
There is a huge literature on ingrained bias within groups – I recall a well distributed piece of research in the 1980’s that found that Economics graduates scored much higher on decision-making processes that matched psychopathic profiles, and the longer they studied, the stronger this tendency became. It wouldn’t surprise me if this result was replicated with business students.
As someone who has long worked in an area where humanities, scientists and engineers intersect, I’ve been fascinated by how people from these perspectives often come to widely different conclusions based on the exact same evidence. As an obvious and crude example, engineers almost invariably see a problem as ‘something to be solved’, while those from the humanities see problems as ‘something to be avoided’. Contrary to a reputation for hard rationality, I’ve frequently seen scientists tie themselves into intellectual knots over largely irrelevant aspects of a problem while seemingly being incapable of grasping the bigger picture.
There is also the obvious issue that, as Upton Sinclair put it, its very hard to make a man understand something when his job depends on not understanding it. My sad experience of organisational high fliers is that they’ve succeeded precisely because they possess strategic blind spots. Its middle management’s job to wrestle with genuinely tough issues. Its the CEO’s job to have ‘vision’ and to ‘only see opportunities, not problems’. People like that are never going to agonise over something that won’t appear on balance sheets within the next year or two.
“I’ve frequently seen scientists tie themselves into intellectual knots over largely irrelevant aspects of a problem while seemingly being incapable of grasping the bigger picture.”
Well said. As a non-PhD – I see this all the time. It’s like the very act of completing such a degree renders you entirely useless at seeing the bigger picture.
It’s publish or perish after all. Gotta publish something “novel” and seeing the bigger picture doesn’t matter for that line of grant-acquisition-logic.
As a PhD, I resemble that remark! ;-)
Whereas I disagree that a PhD makes you useless at “big picture”thinking, you are absolutely correct that the grant-acquisition process sucks up too much time that could be used doing productive research. Moreover, the types and direction of research become skewed as well.
I am glad I got out of academia (altho’ I miss the teaching). I do really enjoy designing and building stuff and being paid for it!
Today’s mega corporations have been really good at maximizing their products, trade, and profits. It must be hard for them to come to the end of the ride. But it is the end because they are in conflict with life itself. It’s not that they couldn’t see it coming, we all could and we all preferred to be in denial for the last 50 years. I think this will almost resolve itself now because profits. How will the Bigs pay for all of their externalized sins? They won’t because to do so means they won’t make any money. So it just might come about, even through the foggy nonsense at the yearly Davos World Ponzi Forum, that reality will intervene to save us. The economy of the future will be a de-consolidated one. Back to local boundaries and controls; answerable to local environments and the world. Right now it looks like they can see the writing on the wall very clearly and they are all scrambling to get the state, i.e. the taxpayer, to float a generous future for them while they stick to the same old business plan. That won’t happen because the world is too fed up and very angry. It is more probable that the Bigs will divest themselves naturally, break up into many smaller local businesses. So if this adaptation is a concept beginning to make all their medulas buzz, then the bone we need to throw at them is the opportunity to do this – to get small. At the local level where all the contradictions of bigness, growth, profit and environmental devastation can be controlled and regulated. But this isn’t to say we no longer need their expertise. We will need all the good thinking we can conjure up.
Look how a simple little virus has shown up and family blogged Apple and weirdly (TLDR) Starbucks.
Six (or 8) words: I’ll be gone, you’ll be gone.
Unless the CEO founded the company (and often not even then, if they can sell it), they don’t care.
By the time the CO2 reading or slashed customer service or whatever hits the fan,
they will have long since retired, or possibly died, leaving their heirs a multi-generational fortune.
The CEO of Exxon-Mobil from 1993-2005 (“one of the most outspoken executives in the United States
against regulation to curtail global warming.[4]”) according to wiki) departed with a $400 million package.
The CEO who sold Aetna to CVS walked away with $500 million.
Incentives matter, and as long as they can leave their progeny with so much material comfort
that they (think they) can buy their way out of any inconveniences like rising sea levels or crappy health care,
nothing will change.
hard agree with all of this
It seems that the question at the core of the article will just obviously lead to the results given.
I mean, you compare “the world’s most pressing challenges” with “biggest risks to their own businesses’ growth prospects”.
It’s not even the same question. At all. I have a small IT business (approx 10 employees). Ask me what the biggest risks to my own business’ growth prospects are, and I will very likely answer in economics terms with lack of available talent, unstable economy, and maybe even geo-political conflicts (we do some business in Dubai, and the situation over there with Iran among other things is terrible for tourism and has a direct impact). Overregulation isn’t an issue in what I do, so doesn’t really apply.
But ask me what the world’s most pressing challenges are, and I will totally go on about climate change at the very top. And we do all we can to help with the issue and I will welcome any government decision, even if it increased taxes or whatever else, that would be a real step towards resolving it. I’m far on the left on the political spectrum, really hope Sanders can get elected and be a turning point in a movement to create real change in the way our society work, hope for health care for all in the US, access to college, etc.
But ask me what’s the biggest risks for my business growth? The answer will obviously be short-term focused and based on economics. It doesn’t mean that I’m thinking any differently than “the philosophers” as an individual and that my personal and even business choices won’t be influenced by my ethics and the global challenges I see. But that’s just not the question you asked.
I believe you have identified a key insight in understanding the differences in “ways of seeing the world” between CEOs and Philosophers. A CEO is not a person. CEO is a role that a person plays. Similarly Philosopher is a role that a person plays. Each role must conform to different expectations. I believe the nature of this difference between person and role is one aspect of being Satre explores in “Being and Nothingness”, particularly his description of the nature of being a waiter.
I suspect it is much easier to be selected for a role if your nature as a person better fits the expectations of that role. Some of our very wealthy and some CEOs appear to have so become their role or their nature already fit their role so well that they would answer “what the world’s most pressing challenges” are in the same way in terms related to their wealth and prospect for increased wealth, and for many of them, the increased power and control wealth can purchase. I believe those sorts of people nicely fit the labels of psychopath or sociopath.
I think a more meaningful question for the Philosopher to ask is how it is that our Corporations and many of our large organizations select psychopaths or sociopaths for their leadership. How did our Corporations and many of our large organizations acquire their psychopathic and sociopathic viewpoints on the world? How has Humankind been compelled to accept these sorts of business and organization as ‘acceptable’ or to be tolerated because there is no alternative?
throughout, i was thinking about “Both/And”…however, i find that i’m not capable of thinking like the picture painted of the ceo’s…bottom line uber alles, etc…so i am a priori biased towards the humanities/humanist side of things…so how can i understand?
their outlook does seem rather shallow and narrow, to me….and is nothing like…say …my grandad, who was the owner operator of a then successful sheetmetal/pipefitting shop in houston back in the day.
he wasn’t cut-throat at all…and as long as he ran it, it went pretty well. after he retired, then died(so really retired this time,lol)…the world had changed. reagan’s second term,etc.
i often think how he probably couldn’t build that company starting from right now.
since the system now selects for psychopathy…and i refuse, like him, to be a psychopath…i am at a strategic and tactical disadvantage.
so, good job, whomever’s idea all that was.
A friend was about to get a promotion and I started kidding him about how he’d become like the pointy-haired boss in Scott Adams’ Dilbert comic. (Adams declared that boss had a pointy hairdo because he was too stupid to grow a beard.)
My friend replied that the trouble with management was that, of necessity, they became more ignorant the higher up the corporate ladder they ascended…they would have to trust their staff to know the details they couldn’t manage. “Managing ignorance is the boss’ biggest job,” said my friend.
So PK’s description of CEOs as people who pursue opportunism over ethics is accurate, but needs a dash of ignorance to be completely accurate. Example: Ken “Kenny Boy” Lay.
To Adam Eran- if the Managers become more ignorant the higher up the ladder they go, and they have to trust their staff to keep them informed, I’d say that it is not so much managing ignorance as feigning knowledge when necessary that is what occupies most of their time.
And I have just retired from a place where very few administrators were very good at feigning knowledge. Ye gods, am very glad to be out of it while still being supremely worried about living in a world full of so much BS
Your friend was right, in a sense. There are some jobs that aren’t just that complex and rely on other factors for excellence, such as execution – restaurant cooking being one example. In those cases, it’s feasible for the boss to be the one that does all the jobs the best, and derive authority from that.
In most cases, though (IT being a prime example) it’s simply not possible for the boss to know everything about what goes in in the part of the organization that they manage. It’s just too big and complex for them and their experience (in some cases it might be too big and complex for any single person to understand). So one of the things that distinguishes good managers from bad ones, in those roles, is their ability to recruit and work with trusted and knowledgeable delegates and advisors. This includes synthesizing the information they provide, allowing for any possible biases/uncertainties/risks/inaccuracies, and then charting a path that takes all of that into account as well as possible. And when you get to upper management, you probably have one or more layers of managers below you that are dealing with the same problem themselves, so information very often undergoes several stages of filtering and summarizing before it reaches you. I’m guessing this is what your friend meant by ‘managing ignorance.’
IMHO the difference is ideological – corporate business hews to an ideology hiding in plain sight – unlimited growth, constant rising profits, markets, and government is bad. This is why “excessive regulation” is their top problem – regulation is a challenge to their ideology.
It’s a psychopathic ideology to be sure. But any ideology makes people view the world through the frame of their ideology – making them incapable of deeper or more realistic analysis. The thing that makes the ideology of corporatism so effective is it mirrors the fundamental imperative of all living things. That it hijacks this natural tendency to run a machine that is the enemy of all living things is sick and terrible.
Thank, Yves, for your introduction to the article. Well said!
What’s missing, surely, is the time dimension. Long-term risks are not the same as short-term risks, and it’s a question of type, not of degree. If you have five years at the top of a major company before moving on, the question of how, say, global warming may affect the long-term future of your company simply doesn’t arise. If you are going to spend your working life with the same company (the old Japanese model, for example) then your perception of risk will be quite different.
What about shorter term risks like running out of cash flow to leverage or worse seeing cash flows decline triggering default?
“Citigroup CEO Chuck Prince told the Financial Times in July 2007: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” Prince didn’t “dance” for much longer—in November 2007, he retired from Citigroup.”
“Après nous, le déluge”
Of course, what risk is a golden parachute?
Unless ‘climate change’ is so bad that life is literally wiped out (possible I suppose but that seems unlikely) the people at the top are not at any kind of risk at all: indeed, they stand to profit greatly and to cement their political and social advantages. They’re not crazy, just amoral.
Remember, the Malthusian catastrophe is NOT global collapse or widespread famine. The Malthusian catastrophe is populations pushing up against the limits, and population growth is restrained primarily by chronic malnutrition and women not being able to conceive or bring a pregnancy to bear etc. It’s what is happening right now in places like Pakistan and Bangladesh and India etc. Slow grinding constant misery, not apocalypse.
It is impossible that a population not have enough food to feed everyone – at least, just barely. If ‘climate change’ really is a risk, and things go badly, then perhaps the global population will be winnowed down to 5 billion or 3 billion or even lower – but the average person won’t be any worse off than they are today in the third world. And the super rich will continue to prosper, just as the super rich proper today in India and Mexico etc., because resources will be tight and labor cheap.
So why should the super rich care? It’s not their problem!
There are two things that the super-rich should care about, though:
1. Social unrest and revolution due to widespread poverty. The ghosts of several Chinese emperors have much to say on this topic.
2. The vast profits to be currently had in the overpopulated third world can only be realized by contact with first-world societies that still have significant free resources and spending power. When the entire world become third-world, this easy profit will go away. I mean, in a third-world country with no external contact, the rich can still get the vast majority of the profit from the economy – but the vast majority of very little is still pretty small.
The degree of amorality you’ve so accurately described would be sufficient for an ordinary person to be assigned a place in a prison cell or a psychiatric hospital. How is it that wealth is sufficient in our society to insulate a person from the consequences of their amorality? We appear to live in an amoral society.
One major wrinkle to consider is that the actual leaders of the WEF are very interested in climate reform on their terms. Founder Klaus Schwab praises the “Greta Thunberg effect” and calls for Keynesian “Stake holder Capitalism” Greenpeace’s Jennifer Morgan is bought in and is a co-director at WEF.
https://www.weforum.org/agenda/2019/12/why-we-need-the-davos-manifesto-for-better-kind-of-capitalism/
Yves,
Thanks for your comments about the malign influence of computing and spreadsheets on executive behavior. However, I am inclined to argue that the fetishization of math, numbers, computers, data, computation, automation, robotics, etc. throughout high society is actually a fundamental aspect of (our modern realization of) neoliberalism, which I regard to involve simultaneous intellectual and moral failures. To a substantial extent, I believe the intellectual failures have facilitated the moral ones. For example, I might describe neoliberalism and its associated fascination with number games to be a kind of *secular prosperity gospel*, a ready enabler of sociopathic tendencies, just like the more familiar religiously charged *prosperity gospel*.
The intellectual failure may have originated with “physics envy” in the social sciences which contributed to a lot of garbage “science” coming out of economics, sociology, and psychology before invading management and finance culture. These computational abuse practices eventually came back around to corrupt the technology sector. A big part of this is corruption takes the form of software tech chauvinism, which is the arrogant notion that computers and software are essentially a “super-technology” from which other branches of technology may be understood and wielded via some kind of programmatic abstraction, like a program calling into an API. Software tech chauvinism and other factors have led in turn to championing of computers and computer-based techniques in the other physical sciences and a frightening loss of critical capacity for quantitative reasoning in those fields.
I speak from my broken heart. I’ve been writing code for 30 years and also spent ~8-10 years of my life pursuing higher education that led to Ph.D. candidacy in chemical engineering with specialization in modeling and simulation. I finished my undergrad and started grad school right in the shadow of the financial crisis, in 2009, and quickly became disenchanted with the lack of intellectual rigor and willful ignorance of major methodological problems in service of neoliberal ideals. A lot of good science and engineering has been rapidly displaced by sciency and techy marketing, and computational abuse (not always intentional) has played a major role in that.
I think this deserves a lot more elaboration and appreciate that the NC site touches on these issues from time-to-time. I think this is my second comment ever, even though I’ve been an off-and-on lurker for almost 10 years now. I’d probably comment more often, but I find that by the time I get to reading an article and digesting its content, the commenting is largely done and over with. I feel so slow and don’t know how you peeps keep up!
I disagree with the basic notion I believe underlies much of your comment — that Neoliberalism is a numbers fetishism. I would attribute the numbers fetish to the Managerial Demiurge to which Neoliberalism gives free rein. Neoliberalism views Science as a tool. Science holds authority and commands a certain reverance in our Society. Neoliberalism introduces the Marketplace of ideas helping Science offer the best answers money can buy. Numbers, spreadsheets, statistics, models are become tools for creating and promoting ‘Truth’ in ways made difficult to refute. Many areas of Science were complex and difficult before Neoliberalism assumed control. This made some problems and their solutions the province of experts. Neoliberalism bought some of its own experts.
I am responding to your second comment in 10 years to make you aware that your comment was read and appreciated. I too studied systems theory [basic stuff] — although I dropped out after getting my Bachelors degree and started doing work for DoD I suspect was far less noble than the work you did in service of neoliberal ideals.
Please do not regard my comment as an attack on you or your comment. I am engaging with your ideas and it is my nature to disagree. In most cases I find it more enlightening to me — my goal — than agreement. Please comment more.
Several things jump out at me.
One: The notion of “priority” is flawed. The issue should be which “threats” have priority over others, as if we can place global warming over say the coronavirus or sea level rise. The fact is that all threats must be addressed – regardless of any priority. So, setting “priority” is entirely academic. The real issue is the allegation of resources to meet each threat. “Priority” is only relevant when allocating limited resources. (If both need X, which get’s X first and which can wait until X can be redeployed?) But when dealing with global issues, resource availability is largely irrelevant.
Two: Jurisdiction. So why should corporate CEO’s even worry about global warming? Before you protest, consider the fact that we do not expect fire fighters to handle policing issues, or police officers to manage hospital emergency rooms. Indeed, many professions have contradictory, even adversarial concerns, such as the differences between defense attorneys and prosecutors.
A case in point would be in the wake of school shootings, ‘second amendment advocates would argue for the need of arming teachers. Critics point out this is unworkable because teachers should be advocates for the welfare of the students, which is incompatible for the needs of security which demands suspicion of the students. If this task is necessary, it should be given to security personal who can specialize in the security and safety of the school.
Global warming should be the purview of the climatologist. The corporate CEO’s responsibility should thus be bringing activity into compliance with the recommendations made by the climatologist. Just as the CEO needs to only execute the findings of the Fire Marshal when it comes to fire safety of the plant and other buildings.
Third: Relevance. Those who have “escaped” the executive life note that top corporate boards don’t meet all that often. They might convene a few hours a week, if that. When they do meet, the ‘minutes” are usually filled with boasting or prior successes, or the pitching of “new initiatives”. Most of there time is spend in “networking”, such as playing gulf, going to ball games, and having parties. This all begs the question of just how much “governance” goes on in the typical corporate board room.
Nevertheless, the narrative is that these boardrooms are the nerve centers of our economy, commanded by men of innovation, intelligence, and other positive descriptors. They take the risks, so us mere presents don’t have to.
This essay falls into that narrative. That CEO’s are the ones that can and must deal with issues like global warming – and then wondering why this doesn’t seem to be happening.
Fourth: Conflicting Interests
CEOs fretting over “overregulation”? This is akin to a bank robber being concerned about over-policing or intrusive bank surveillance.
It again begs the question of why we would want CEO’s any where near issues such as global warming. Especially given that their personal interests never align with global interests.
To paint another analogy.
Four people are looking at an old run-down house. The plumber lists off all the issues he found with the plumbing. The electrician notes all the problems with the wiring. The carpenter notes the house has termites and rotting support beams. The landscapist notes that the trees are all dying and could fall onto the house with the next storm.
So why are we concerned that the plumber didn’t note the electrical issues, or the structural concerns, or the dead trees? Let along put the plumber in charge of these issues.
So why would we even expect CEOs to worry about global warming? Their only concern is to abide by the regulations put in place to combat these issues.
And this is the main problem. CEO’s are at the top of the ladder. They are the masters of the world, superior to even elected legislatures and scientific commissions. They are not just held unaccountable for their actions – but all forms of governance are subordinate to their whims. Even those unrelated to their perfusion & expertise.
This is the main thrust of the essay. Why are CEO’s unconcerned about global warming – so that they can conceive and execute policies to deal with it. Why doesn’t the King have any clothing on.
With respect, we often in these kinds of circumstances confuse “causation” and, I suppose “symptom” or “consequence”. So, for example, climate change and its impact is merely a consequence of other behavior largely on our part interacting with natural systems. We humans also often overlook that we are a part of the natural system.
So, we need to respond to the immediate consequence such as more robust medical systems and more robust infrastructure but we need to change and reverse the inputs. We need evolution, not revolution.
I liked the reference to philosophy. To me, we humans are charged with the stewardship of this great home of ours known as Earth. Stewardship starts in our homes and then in our businesses.
Yes, this requires change and sometimes enforcement. But we are always better off when we can also help others truly understand.
We need to stop talking and start doing. Doing our job of stewardship.
Thank you for listening.
Your statements: “The corporate CEO’s responsibility should thus be bringing activity into compliance with the recommendations made by the climatologist”
“If this task is necessary, it should be given to security personal who can specialize in the security and safety of the school”
and the general drift of your comment suggest you believe there is or should be some authority to assign proper jobs to those whose role fits the needed capabilities to fit solving a problem. Who or what in our society has this authority or should have this authority?
How does your notion of directing the proper person to do their proper job deal with matters like the large scale aggressive agnotology where CEOs and their Corporate concerns spend so much effort and money? How does it fit the efforts to suborn the creation of laws and their enforcement through Corporate procurement of government? What morality explains these actions promoted by — or at best allowed to their organization through inaction — by CEOs?
Imagine asking Harry Lime about his priorities and what risks most concern him about collecting the value from each of the little dots he looks upon from the highest point of the Ferris wheel in the Third Man. How similar might his answer be to the risks and concerns CEOs identify? [Of course one big difference was that Harry Lime could be held personally culpable and personally responsible for his actions.]
“I’ll be gone” [see comment above]. Yup. Considering tenure and the arrow of time, a typical leader, probably realizes: “Sooner rather than later.” Ideas that are most evolutionary useful to remember, Freud thought, were warnings, things to avoid: representations of death. The subconscious ruminates, heavily weighted toward these symbols. Consider, symphorophilia, a paraphilia surrounding the staging and watching of tragedies, like car wrecks, according to the American Journal of Psychotherapy. Attempting to experience the elusive causation, rather than passively witness science’s correlation, lights up all sorts of doo-hickies in the ol’ bing-bong, including a CEO’s. But in the board room, it’s spoken, “Avoiding change at all costs.” Suppress thoughts of being noshed alive by this hive-building full of wasps coming for the royal jelly in the c-suite. Then solidify social supremacy with an encouraging comment: “the excel numbers in this table are in the right direction.” Death is postponed past end of business today.
The defining difference between predatory finance and human perceptions of risk (known unknowns, like a roll of the dice) and uncertainty (unknown unknowns, like what happens if Greenland melts) is whether the future matters or not. People tend to care about the future. Predatory financial markets do not.
Predatory finance has two fundamental conceptual flaws. First, it assumes that risk is the same as uncertainty, and tends to be willfully lazy about the cascading consequences of being wrong. That, in a nutshell, is what caused the Great Unpleasantness of 2008. That will be the underlying cause of the next crash, in a global financial system that has learned nothing over the last decade.
The second problem goes to the heart of why global civilization will fail, if predatory finance is doing the driving: when you demand high returns on investment, you are effectively saying that the future doesn’t matter nearly as much as the present. You are extracting wealth from the future.
You don’t have to push very hard to see the implications of predatory financial norms. For example: every parent that helps their kid through college is saying that their kid’s future matters more than their personal present. In conventional financial terms, they are willfully losing money in order to make a better future possible. From a predatory financial perspective this is a terrible idea, precisely because it prioritizes the future.
By contrast, consider a corporation or investor demanding a 10% annual threshold return on investment. Logically, collectively, they are saying that they are fine with the idea of a world seven years from now that is worth half of everything that we have today. In global sustainability terms, they are saying that a 75% collapse in global population within twenty years is the financial equivalent of 8 billion people today.
When we leave investments in the future in the hands of people who heavily discount the value of there being a future at all, there is no future.
For instance, CEO thinking isn’t driven by economics as practiced by either neoclassical or finance economists. It is unduly influenced by net present value analysis, which is at the core of most companies’ capital budgeting processes as well as Wall Street financial modeling.
Which is extraordinarily like AI, where each new input affects and shifts the total output without regard to time or duration of preceding 'inputs', imo. No wonder the CEOs and B-schools love AI: it mimics their very short term thinking processes.
adding:
And I’ve seen again and again how users come to treat those models as more real than the conditions they represent.
Indeed.
I think Nate Hagens does a good job of explaining the actions of a lot of us in this summary of his course Reality 101. http://www.energyandourfuture.org/index.html?bookmark=Education
For those of you who are not familiar with Nate Hagens here is a bio:
Nate is a well-known speaker on the big picture issues facing human society and currently teaches a systems synthesis Honors seminar at the University of Minnesota ‘Reality 101 – A Survey of the Human Predicament’ Nate is on the Boards of Post Carbon Institute, Bottleneck Foundation, IIER and Institute for the Study of Energy and the Future. Previously, he was lead editor of The Oil Drum, one of the most popular and respected websites for analysis and discussion of global energy supplies and the future implications of the upcoming energy transition. Nate’s presentations address the opportunities and constraints we face after the coming peak of global economic growth. On the supply side, Nate focuses on the interrelationship between debt-based financial markets and natural resources, particularly energy with and the unique (and so far unplanned for) risks from the coming ‘Great Simplification’. On the demand side, Nate addresses the evolutionarily-derived underpinnings to status, addiction, and our aversion to acting about the future and offers suggestions on how individuals and society might better adapt to the coming decades. Ultimately, Nate’s talks attempt to provide a framework for people who would like to participate in shaping the future. Nate has appeared on PBS, BBC, ABC and NPR, and has lectured around the world. He holds a Masters Degree in Finance with Honors from the University of Chicago and a PhD in Natural Resources from the University of Vermont. Previously Nate was President of Sanctuary Asset Management and a Vice President at the investment firms Salomon Brothers and Lehman Brothers.
As has been made abundantly clear, CEOs and Wall Street will “talk their book” and act on what they perceive to be their financial self interest (stock options income, stock buybacks funded with debt, meeting their near-term E.P.S. profit bogeys, etc.), not the interest of society nor frequently even the long-term interests of the corporations they head.
Graham Steele argues in a newly published paper that financial regulation is one critical tool that is available without further action from Congress to require financial institutions to internalize the financial risks associated with lending and investments that drive climate change. In fact, …”By not adopting effective macroprudential climate policies, financial regulators are providing a nontransparent, indirect subsidy to climate change-causing industries.”
https://greatdemocracyinitiative.org/document/dodd-frank-and-the-climate-crisis/
Being an effective leader of a company, with morals and global stewardship principles intact, should not require falling in line with the climate change story we’re being told, Some might be concerned about regulation because the regulations (e.g. reducing CO2 emissions) that are being proposed to deal with climate change 1) reveal a lack of understanding about the mechanisms governing the climate; 2) will hurt populations while transferring wealth to a small few at the top; 3) will have zero effect on climate.
Some CEOs (and I am a founder and director) take the time to read scientific literature widely and come to their own conclusions. Some have come to recognize the extent of data tampering and rewriting of history being done before our eyes.
The tragedy is that the real environmental breakdowns are not being addressed, and our systems are not being adapted to respond well to the natural swings in weather and climate that have occurred on this planet in both recent, medium-recent and distant past.
“Some CEOs take the time to read scientific literature widely and come to their own conclusions.”
OK — so what do you conclude from your reading? You suggest the climate and weather changes have occurred before — implicitly suggesting Humankind is not the cause of these changes. What are the mechanisms governing the climate that you allude to? How will reducing CO2 emissions transfer wealth to a small few at the top? I am especially curious how that transfer will take place.
If you have indeed read the scientific literature widely, I am not sure what you have been reading that leads you to your “own conclusions” which you allude to but do not state. I have read some of the climate related scientific literature and I do not recall ever reading anything that would remotely support what I believe you seem to believe.
I suppose I could agree that “our systems are not adapted to respond well” to change. I do agree that “the extent of data tampering and rewriting of history being done before our eyes” is quite remarkable — climate change denial agnotology on a remarkable scale.