Profit is one thing ... value is another

Dear Colleagues

One of the fundamental flaws in modern society is that all the metrics are about profit. Profit is required for sustainability ... but profit is not the only way to wealth and quality of life.

The missing piece is value. A bank does nothing to increase value per se ... though its service may result in increase in value. In the main, a bank charges so that others can achieve a value increase.

But a bank can make profit by doing things that have nothing to do with value. Most of the trading operations of banks are nothing more than a variant of what goes on in the casino world of Macau or Las Vegas. The training profit earned by one side of the transaction is offset by something going on on the other side of the transaction. Net net there is no value arising from the activity.

Listen to Bloomberg News and one very quickly gets to understand why society is in deep trouble. They talk 24/7 about profit, stock market levels and GDP growth and everything that might impact these metrics ... but the issue of value is never talked about.

The fact of achieving a high profit US corporate community while essentially gutting the quality of life for a large part of the US population is not addressed. Nobody at Bloomberg News talks about the value destruction that happens in society when a person becomes unemployed ... or when a house is repossessed ... or a car, for that matter. The value destruction associated with a high unemployment far exceeds the profit increase that gets translated into good news by the commentators at Bloomberg News.

I am not "against" profit ... but I want both profit and value to be treated in the same way. The destruction of value ... or creation of value in a community should be as much on the record as the corporate profit.

What gets measured gets done ... when we start measuring value change, then there is a good chance that there will be better management of value, just as there is high energy management of profit.

If we change the way the game is scored ... we will change the way the game is played. We absolutely must put value into the metrics.

Peter Burgess