Philip Whiteley's Blog

November 1, 2010

Pace of change is just too slow

Filed under: Uncategorized — felipewh @ 7:50 pm

Some people complain about the rapid pace of change in management and business. I’ve always found it frustratingly slow, and averse to innovation. Just over ten years ago I decided to specialise in human capital and related matters, noting how, in a high-skill economy, this was where the value lies. Surely, it won’t be long before businesses ditch their addiction to accountancy and invest in proper analysis of the real company. I thought.

Since then there have been some positive developments – but the sort of progress in ten years that I had expected in five. And the other surprise is the source of the new thinking. It hasn’t come from executives and the business schools, but from the investment community.

Discussion in executive circles seems to be locked in a depressing pattern of swallowing camels and spitting out gnats. The problem is defined as waiting for the HR community to come up with business measures that can convince the hard-nosed executives to take them seriously. There is no critique of said hard-nosed community, whether they are asking the right questions or defining value in a meaningful way.

Accompanying this, however, are three fascinating developments from the investment community:

  • The rise of management due diligence in private equity. See David Cooper’s book Leadership Risk: A Guide for Private Equity and Strategic Investors.
  • Behavioural finance, influenced among others by Nassim Nicholas Taleb, who has comprehensively demolished the theories that propped up mathematical modelling of the economy.
  • Successful human capital funds, set up for example by Laurie Bassi in the US and by AXA in Europe. Bassi Investments Inc, since 2001; and the AXA Human Capital Fund, since 2007, have consistently beaten the market.

What these developments add up to is an overdue recognition that financial and company data are nothing other than a reflection of human behaviour.

In ten years time, we may find that …. No, I shouldn’t be too optimistic; I’m sure some stupid trend will come along to provide competition with the intelligent one.

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