4 ms·

> They knew it was illegal but put all the incentives for companies not to follow the rules. Offtopic but i cant help it. You get what you measure. Which is wh

> They knew it was illegal but put all the incentives for companies not to follow the rules. Offtopic but i cant help it. You get what you measure. Which is why economies that only measure profit optimize for nothing but profit. When a nationstate says "It's illegal to do X" but has mandatory accounting practices that do not measure X but only measure profit, we should not be surprised that companies like Facebook do awful things. the GAAP has all but ensured that this happens. You want companies to have values? Then measure values! (alongside profit, not inspite of) https://en.wikipedia.org/wiki/Generally_Accepted_Accounting_Principles_(United_States) https://en.wikipedia.org/wiki/Generally_Accepted_Accounting_...

JumpCrisscross 9y ago
> When a nationstate says "It's illegal to do X" but has mandatory accounting practices that do not measure X but only measure profit We don't need accountants to measure legality. That's what we have law enforcement and courts for. Investors care about profits; behaving illegally should hurt profits. Deputising a multi-billion dollar company's thousands of shareholders as its moral police is an absurd proposal.
- adamc 9y ago
  Law enforcement and courts aren't funded in a way that makes that effective.
  - JumpCrisscross 9y ago
    > Law enforcement and courts aren't funded in a way that makes that effective In the 1930s, the Congress realized that financial crimes were (a) prevalent, (b) serious and (c) difficult to investigate and prosecute. So it created the SEC [1]. Its specialists, with the budget, focus and mandate to pursue securities-related violations, have been effective (relative to pre-1930s finance). Regulators make rules. They also enforce them. We have no top cop for technology. The costs of that gap are becoming apparent.
    - gt_ 9y ago
      Average US citizens have no comprehension of 1930s America, FDR, etc. but the same people will instinctually glorify the 1950s as a time when traditional values led to economic prosperity.
greenmana 9y ago
Slightly offtopic too, but I would love to hear suggestions for good books on economics and/or philosophy that would discuss non-monetary profit and values. https://www.theguardian.com/sustainable-business/2014/oct/01/for-profit-capitalism-selfish-unsustainable-behaviour-inequality https://www.theguardian.com/sustainable-business/2014/oct/01...
- hype7 9y ago
  An alternative approach I’ve long been fond of is to lengthen time horizons. In the long run, bad behavior is much more likely to come back and bite you. If you can get incentive structures on a longer term time horizon, you’re much less likely to engage in risky behavior that might have short term payoffs but sinks you in the long run.
- jpao79 9y ago
  Here's an interesting paper by some Columbia grad students that I've been meaning to read: http://sustainability.ei.columbia.edu/files/2014/07/Navigating-ESG-Data-for-Foundations_FINAL.pdf http://sustainability.ei.columbia.edu/files/2014/07/Navigati... Also check out the MSCI links in my other comments to this thread if you have a chance.
deleted 9y ago
[deleted]
shripadk 9y ago
> the GAAP has all but ensured that this happens. You want companies to have values? Then measure values! (alongside profit, not inspite of) How do you record company/moral values into Books of Accounts? How does one audit those morals? What category do you assign it under: Asset, Liability or Owners Equity? And moreover, what would happen if morals change and some are deemed obsolete? Also, if you start to measure company values then it becomes obvious that other things that have been kept out of purview of the Books would want to have an equal footing too; like: legal contracts with clients, employee agreements, court cases, so on and so forth. There is a very good reason why accounting standards (like GAAP or IFRS) decided to only record transactions into the Books and not be concerned with legalities or moralities. It's impossible to assign an amount to a company/moral value as what is valuable to me as a shareholder may not be considered valuable to say the local tax authority or an would be investor and vice versa.
- dustingetz 9y ago
  Yes we all know that. To even start thinking about how to quantify values — and if you follow macro like i do, you know a modern economist can probably quantify anything — first we must inject values into the conversation. Right now, the world doesn't have any values. Except profit, competition, winning, domination and control. It's not even efficient — it's a prisoner's dilemma stuck at backstab/backstab. How do you solve a prisoners dilemma? ... shared values! (“thou shalt not kill”)
  - shripadk 9y ago
    Yes you are right that from an economic standpoint you will be able to quantify anything. However, GAAP/IFRS was specifically created to handle only a subset of that whole gamut viz. recordation into Books of Accounts and generation of Balance Sheet, Income Statements and Cash Flow statements. There are commissions in place to handle fraud and deceptive practices for things that cannot be codified into the Books of Accounts. For instance, the Anti-Monopoly Acts enacted in various countries have safeguards that prevent a single entity from monopolising the market. However, if you try to codify this into the Books you are going to have a tough time when the law changes. You can't go back in time and retrospectively change your ledger transactions (which is static) to reflect changes in law (which is dynamic) or values/morals (which is also dynamic). Please note that I am only replying in the context of GAAP (which you mentioned). If not, I agree with all the ideas you presented and only disagree on the one aspect of it being added to the GAAP/IFRS standards as the purpose of it's creation was to precisely steer away from unknowns and only record the knowns.
deleted 9y ago
[deleted]
jpao79 9y ago
Here is a one attempt at using environmental, social and governance (ESG) integration factors to create an index of companies that are measured beyond just the basic plain vanilla profitability/market cap metrics: https://www.msci.com/esg-ratings https://www.msci.com/esg-ratings https://www.msci.com/research/esg-research https://www.msci.com/research/esg-research Recommended watching the following TED video to introduce the topic: https://www.ted.com/watch/ted-institute/ted-state-street/audrey-choi-why-we-need-to-prioritize-investing-for-social-change-oldredirected https://www.ted.com/watch/ted-institute/ted-state-street/aud...

JumpCrisscross 9y ago

> When a nationstate says "It's illegal to do X" but has mandatory accounting practices that do not measure X but only measure profit We don't need accountants to measure legality. That's what we have law enforcement and courts for. Investors care about profits; behaving illegally should hurt profits. Deputising a multi-billion dollar company's thousands of shareholders as its moral police is an absurd proposal.

adamc 9y ago
Law enforcement and courts aren't funded in a way that makes that effective.
- JumpCrisscross 9y ago
  > Law enforcement and courts aren't funded in a way that makes that effective In the 1930s, the Congress realized that financial crimes were (a) prevalent, (b) serious and (c) difficult to investigate and prosecute. So it created the SEC [1]. Its specialists, with the budget, focus and mandate to pursue securities-related violations, have been effective (relative to pre-1930s finance). Regulators make rules. They also enforce them. We have no top cop for technology. The costs of that gap are becoming apparent.
  - gt_ 9y ago
    Average US citizens have no comprehension of 1930s America, FDR, etc. but the same people will instinctually glorify the 1950s as a time when traditional values led to economic prosperity.

greenmana 9y ago

Slightly offtopic too, but I would love to hear suggestions for good books on economics and/or philosophy that would discuss non-monetary profit and values. https://www.theguardian.com/sustainable-business/2014/oct/01/for-profit-capitalism-selfish-unsustainable-behaviour-inequality https://www.theguardian.com/sustainable-business/2014/oct/01...

hype7 9y ago
An alternative approach I’ve long been fond of is to lengthen time horizons. In the long run, bad behavior is much more likely to come back and bite you. If you can get incentive structures on a longer term time horizon, you’re much less likely to engage in risky behavior that might have short term payoffs but sinks you in the long run.
jpao79 9y ago
Here's an interesting paper by some Columbia grad students that I've been meaning to read: http://sustainability.ei.columbia.edu/files/2014/07/Navigating-ESG-Data-for-Foundations_FINAL.pdf http://sustainability.ei.columbia.edu/files/2014/07/Navigati... Also check out the MSCI links in my other comments to this thread if you have a chance.

deleted 9y ago

[deleted]

shripadk 9y ago

> the GAAP has all but ensured that this happens. You want companies to have values? Then measure values! (alongside profit, not inspite of) How do you record company/moral values into Books of Accounts? How does one audit those morals? What category do you assign it under: Asset, Liability or Owners Equity? And moreover, what would happen if morals change and some are deemed obsolete? Also, if you start to measure company values then it becomes obvious that other things that have been kept out of purview of the Books would want to have an equal footing too; like: legal contracts with clients, employee agreements, court cases, so on and so forth. There is a very good reason why accounting standards (like GAAP or IFRS) decided to only record transactions into the Books and not be concerned with legalities or moralities. It's impossible to assign an amount to a company/moral value as what is valuable to me as a shareholder may not be considered valuable to say the local tax authority or an would be investor and vice versa.

dustingetz 9y ago
Yes we all know that. To even start thinking about how to quantify values — and if you follow macro like i do, you know a modern economist can probably quantify anything — first we must inject values into the conversation. Right now, the world doesn't have any values. Except profit, competition, winning, domination and control. It's not even efficient — it's a prisoner's dilemma stuck at backstab/backstab. How do you solve a prisoners dilemma? ... shared values! (“thou shalt not kill”)
- shripadk 9y ago
  Yes you are right that from an economic standpoint you will be able to quantify anything. However, GAAP/IFRS was specifically created to handle only a subset of that whole gamut viz. recordation into Books of Accounts and generation of Balance Sheet, Income Statements and Cash Flow statements. There are commissions in place to handle fraud and deceptive practices for things that cannot be codified into the Books of Accounts. For instance, the Anti-Monopoly Acts enacted in various countries have safeguards that prevent a single entity from monopolising the market. However, if you try to codify this into the Books you are going to have a tough time when the law changes. You can't go back in time and retrospectively change your ledger transactions (which is static) to reflect changes in law (which is dynamic) or values/morals (which is also dynamic). Please note that I am only replying in the context of GAAP (which you mentioned). If not, I agree with all the ideas you presented and only disagree on the one aspect of it being added to the GAAP/IFRS standards as the purpose of it's creation was to precisely steer away from unknowns and only record the knowns.

deleted 9y ago

[deleted]

jpao79 9y ago

Here is a one attempt at using environmental, social and governance (ESG) integration factors to create an index of companies that are measured beyond just the basic plain vanilla profitability/market cap metrics: https://www.msci.com/esg-ratings https://www.msci.com/esg-ratings https://www.msci.com/research/esg-research https://www.msci.com/research/esg-research Recommended watching the following TED video to introduce the topic: https://www.ted.com/watch/ted-institute/ted-state-street/audrey-choi-why-we-need-to-prioritize-investing-for-social-change-oldredirected https://www.ted.com/watch/ted-institute/ted-state-street/aud...