You are what you measure – so what do you measure?

TED Nicola Sturgeon what do you measure

“..the objective of economic policy should be collective well-being: how happy and healthy a population is, not just how wealthy a population is.” 

~ Nicola Sturgeon, First Minister of Scotland, TED Summit, Edinburgh, July 2019

As UK government and politics, in general, continue to flail along with no clear sense of direction or what success would look like, earlier this week, on the day that the new Prime Minister chose to visit Scotland, a TED Talk that was given last week by the First Minister of Scotland was released. What a stark contrast in leadership it offered and in what two countries (the UK overall and Scotland separately) seek to measure.

Long-time readers will note that in amongst the shorter and often more eclectic daily posts I intersperse longer and deeper reads, often around Economics and, more specifically the future of both Economics and Capitalism in service of the broader society.

So, today share the video and transcript of Ms Sturgeon’s powerful talk, then connect that to some earlier posts and thoughts of my own on what we measure.

You are what you measure

First, though, something for you to reflect on. What do you measure? In your business, in your life? We do focus on what we measure, so if, for example, we focus on maximising how much money we make, do we do that at the expense of time we spend elsewhere, say with our families and friends? Does this also cost us in health (conditions such as stress, mental health, obesity have greatly worsened as households have become “better off” in the last several decades).

Are we, are you focussing on the right things?

What does a country measure?

In the First Minister’s TED Talk, (full transcript at the base of this post), I note the following excerpts:

Just over a mile away from here, in Edinburgh’s Old Town, is Panmure House. Panmure House was the home of the world-renowned Scottish economist Adam Smith. In his important work “The Wealth of Nations,” Adam Smith argued, amongst many other things, that the measurement of a country’s wealth was not just its gold and silver reserves. It was the totality of the country’s production and commerce. I guess it was one of the earliest descriptions of what we now know today as gross domestic product, GDP.

Now, in the years since, of course, that measurement of production and commerce, GDP, has become ever more important, to the point that today — and I don’t believe this is what Adam Smith would have intended — that it is often seen as the most important measurement of a country’s overall success. And my argument today is that it is time for that to change.

and:

growth in GDP should not be pursued at any or all cost. In fact, the argument of that group is that the goal, the objective of economic policy should be collective well-being: how happy and healthy a population is, not just how wealthy a population is.

and she closes with:

I started with Adam Smith and “The Wealth of Nations.” In Adam Smith’s earlier work, “The Theory of Moral Sentiments,” which I think is just as important, he made the observation that the value of any government is judged in proportion to the extent that it makes its people happy. I think that is a good founding principle for any group of countries focused on promoting well-being. None of us have all of the answers, not even Scotland, the birthplace of Adam Smith. But in the world we live in today, with growing divides and inequalities, with disaffection and alienation, it is more important than ever that we ask and find the answers to those questions and promote a vision of society that has well-being, not just wealth, at its very heart.

None of us is perfect, and Scotland and the elected government there have done and will continue to make mistakes. However, a government that is so clearly focussed on measuring what (in my opinion) matters more than raw GDP growth is almost certain to, over time, come closer to delivering on all that matters.

Now for my thoughts and links to earlier posts, then the video and finally the full transcript. I hope this provokes thought in you and if so, I’d love to connect and talk about it.

Business as a force for good

In “Beautiful Leadership – Purpose and the Corporation“, I also linked to Adam Smith, noting:

In 1970, Milton Friedman famously said:

“There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits.”

Whilst I can understand any Economist working as an academic taking polarising views such as this, my opinion is that this is ugly leadership in our modern world.

Friedman’s views have broadly been at the centre of capitalist thinking for approaching five decades, and, I argue, has fostered a growing lack of connection to society and planet that has led to symptoms such as radically growing income inequality as well as loss of faith in capitalism as a model and so the rise of ugly populism across the world.

Now, Friedman is thought in this statement to reference the views of the founder of modern Economics, Adam Smith, yet as I outlined in “CEO Pay and Ugly Leadership“, Adam Smith’s work on such concepts as self-interest in “The Wealth of Nations” must always be taken alongside his other great work, “The Theory of Moral Sentiments”.

I consider the absolutist Friedman to be someone who clearly largely apes Smith’s economic thinking while ignoring his moral and societal thinking.

Now, in 2018, Jesse Norman wrote: “Adam Smith: What He Thought, and Why it Matters“, attempting to create a broader sense of how all of Smith’s written works integrate.

In “How Adam Smith would fix capitalism” in the FT in June 2018, Norman wrote of Smith’s philosophies :

“markets constitute a socially constructed and evolving order that exists and must exist not by divine right but because it serves the public good.”

We have reduced business to a form of simplistic capitalism that ignores the broader society and focussed only on profits. This then links to central goverment fiscal policy which holds out GDP growth as the holy grail, the primary and almost sole measure of “success” of a country, a government, yet does not factor in anywhere near all that matters to society.

Business can and indeed should be a force for good.

Rethinking the Purpose of the Corporation

So, if business can be a force for good, what does that mean?

In “Beautiful Leadership – Purpose and the Corporation“, one in a number of articles out of which evolved my “Scale for Impact – the new triple bottom line” model, I noted:

Martin Wolff, chief economics commentator for the FT, wrote an article in the FT, Dec 11, 2018 : “We must rethink the purpose of the corporation”. This piece quotes several recent books. Here I give you only two thoughts from Martin from his article:

“Profit is not itself a business purpose. Profit is a condition for — and result of — achieving a purpose.”

“These books suggest that capitalism is substantially broken. Reluctantly, I have come to a similar conclusion. This is not to argue for the abandonment of the market economy, but for better companies and more competition.”

Purpose and the Corporation

…the now oft considered “triple bottom line” is People, Profit, Planet

What sits more powerful than all of these, as Martin notes in his article, is that Purpose is the reason for a corporation to exist, not Profit.

I spent the first two decades of my career in corporations with a profit motive, during which time I found, empirically, that those businesses that had a clear Purpose, and those that also focussed on their People, were those that made the most sustainable profits.

Now, in recent decades, humanity has become, belatedly, more and more aware of the impact of our economic activity on the Planet we live on, and any business looking to be more beautiful must always consider their impact on the Planet.

I, therefore, ask businesses I work with to consider a different type of triple bottom line: Purpose, People, Planet

Yes, I always ask them to focus on the Profit they will make, yet Profit, to me, is the outcome of a corporation, a business focussing first and always on their Purpose, their People and our Planet.

We are what we measure. In this age where we are rapidly driving towards authoritarian rule of a type that divides us rather than unites us more and more, surely it is time to radically rethink what we measure.

For this, I applaud the leaders (all women, I note) of Scotland, Iceland and New Zealand for bravely taking a new path.

Now, over to Ms Sturgeon:

Full transcript:

Just over a mile away from here, in Edinburgh’s Old Town, is Panmure House. Panmure House was the home of the world-renowned Scottish economist Adam Smith. In his important work “The Wealth of Nations,” Adam Smith argued, amongst many other things, that the measurement of a country’s wealth was not just its gold and silver reserves. It was the totality of the country’s production and commerce. I guess it was one of the earliest descriptions of what we now know today as gross domestic product, GDP.

Now, in the years since, of course, that measurement of production and commerce, GDP, has become ever more important, to the point that today — and I don’t believe this is what Adam Smith would have intended — that it is often seen as the most important measurement of a country’s overall success. And my argument today is that it is time for that to change.

You know, what we choose to measure as a country matters. It really matters, because it drives political focus, it drives public activity. And against that context, I think the limitations of GDP as a measurement of a country’s success are all too obvious. You know, GDP measures the output of all of our work, but it says nothing about the nature of that work, about whether that work is worthwhile or fulfilling. It puts a value, for example, on illegal drug consumption, but not on unpaid care. It values activity in the short term that boosts the economy, even if that activity is hugely damaging to the sustainability of our planet in the longer term.

And we reflect on the past decade of political and economic upheaval, of growing inequalities, and when we look ahead to the challenges of the climate emergency, increasing automation, an aging population, then I think the argument for the case for a much broader definition of what it means to be successful as a country, as a society, is compelling, and increasingly so.

And that is why Scotland, in 2018, took the lead, took the initiative in establishing a new network called the Wellbeing Economy Governments group, bringing together as founding members the countries of Scotland, Iceland and New Zealand, for obvious reasons. We’re sometimes called the SIN countries, although our focus is very much on the common good. And the purpose of this group is to challenge that focus on the narrow measurement of GDP. To say that, yes, economic growth matters — it is important — but it is not all that is important. And growth in GDP should not be pursued at any or all cost. In fact, the argument of that group is that the goal, the objective of economic policy should be collective well-being: how happy and healthy a population is, not just how wealthy a population is.

And I’ll touch on the policy implications of that in a moment. But I think, particularly in the world we live in today, it has a deeper resonance. You know, when we focus on well-being, we start a conversation that provokes profound and fundamental questions. What really matters to us in our lives? What do we value in the communities we live in? What kind of country, what kind of society, do we really want to be? And when we engage people in those questions, in finding the answers to those questions, then I believe that we have a much better chance of addressing the alienation and disaffection from politics that is so prevalent in so many countries across the developed world today.

In policy terms, this journey for Scotland started back in 2007, when we published what we call our National Performance Framework, looking at the range of indicators that we measure ourselves against. And those indicators are as varied as income inequality, the happiness of children, access to green spaces, access to housing. None of these are captured in GDP statistics, but they are all fundamental to a healthy and a happy society.

And that broader approach is at the heart of our economic strategy, where we give equal importance to tackling inequality as we do to economic competitiveness. It drives our commitment to fair work, making sure that work is fulfilling and well-paid. It’s behind our decision to establish a Just Transition Commission to guide our path to a carbon zero economy. We know from economic transformations of the past that if we’re not careful, there are more losers than winners. And as we face up to the challenges of climate change and automation, we must not make those mistakes again.

The work we’re doing here in Scotland is, I think, significant, but we have much, much to learn from other countries. I mentioned, a moment ago, our partner nations in the Wellbeing network: Iceland and New Zealand. It’s worth noting, and I’ll leave it to you to decide whether this is relevant or not, that all three of these countries are currently led by women.

They, too, are doing great work. New Zealand, in 2019, publishing its first Wellbeing Budget, with mental health at its heart; Iceland leading the way on equal pay, childcare and paternity rights — not policies that we immediately think of when we talk about creating a wealthy economy, but policies that are fundamental to a healthy economy and a happy society.

I started with Adam Smith and “The Wealth of Nations.” In Adam Smith’s earlier work, “The Theory of Moral Sentiments,” which I think is just as important, he made the observation that the value of any government is judged in proportion to the extent that it makes its people happy. I think that is a good founding principle for any group of countries focused on promoting well-being. None of us have all of the answers, not even Scotland, the birthplace of Adam Smith. But in the world we live in today, with growing divides and inequalities, with disaffection and alienation, it is more important than ever that we ask and find the answers to those questions and promote a vision of society that has well-being, not just wealth, at its very heart.

You are right now in the beautiful, sunny capital city..(Laughter) of the country that led the world in the Enlightenment, the country that helped lead the world into the industrial age, the country that right now is helping to lead the world into the low carbon age. I want, and I’m determined, that Scotland will also be the country that helps change the focus of countries and governments across the world to put well-being at the heart of everything that we do. I think we owe that to this generation. I certainly believe we owe that to the next generation and all those that come after us. And if we do that, led here from the country of the Enlightenment, then I think we create a better, healthier, fairer and happier society here at home. And we play our part in Scotland in building a fairer, happier world as well.


Also published on Medium.

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