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SIZE MATTERS-1

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SIZE MATTERS 1 ... OVERVIEW
A workshop at MIT to link mathematics with the realities of a very complex global integrated socio-enviro-economic system that has been very badly served by money as a metric and a dangerously simplified financial system.

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SIZE MATTERS-1

  1. 1. SIZE MATTERS 1- OVERVIEW File: TVA-p3-01-SIZE-MATTERS-1-160220.odp Peter Burgess (c) All rights reserved TRUE VALUE ACCOUNTING
  2. 2. CONTEXT This slideset is a Work-in-Progress and will be updated from time to time. It is part of a series that aims to enable better metrics for the complex socio-enviro-economic system that we all live in. Metrics are powerful, but they must be the right metrics. TRUE VALUE ACCOUNTING
  3. 3. The system is complex … TRUE VALUE ACCOUNTING
  4. 4. Complex system … competing agendas TRUE VALUE ACCOUNTING
  5. 5. I don't know who drew that image … and have not figured out all its content … but we must figure out the best way to get the best of possible outcomes! TRUE VALUE ACCOUNTING
  6. 6. HISTORY … HOW THE THREE SEGMENTS HAVE CHANGED OVER TIME TRUE VALUE ACCOUNTING
  7. 7. YELLOW: The PEOPLE piece … Human Capital (NC) DIRTY BROWN: The ECONOMIC piece … Man Built Capital (MBC) GREEN: NATURE, ENVIRONMENT … Natural Capital (NC) COLOR KEY TRUE VALUE ACCOUNTING
  8. 8. AT THE START THERE WERE FEW PEOPLE, LITTLE MAN BUILT CAPITAL AND PLENTY OF NATURAL CAPITAL THAT WAS AVAILABLE FOR EXPLOITATION. TRUE VALUE ACCOUNTING
  9. 9. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  10. 10. OVER TIME MORE PEOPLE, MORE MAN BUILT CAPITAL AND EVENTUALLY TOO MUCH PRESSURE ON NATURAL CAPITAL TRUE VALUE ACCOUNTING
  11. 11. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  12. 12. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  13. 13. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  14. 14. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  15. 15. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  16. 16. Trajectory to disaster! Over time it looks something like this. Period 1-8 past and present Period 9-12, a future scenario TRUE VALUE ACCOUNTING
  17. 17. Period 1 2 3 4 5 6 7 8 9 10 11 12 HC MBC NC TRUE VALUE ACCOUNTING HC MBC NC HC MBC NC HC MBC NC HC MBC NC HC MBC NC HC MBC NC HC MBC NC HC MBC NC HC MBC NC HC MBC NC HC MBC NC
  18. 18. What we need … TRUE VALUE ACCOUNTING
  19. 19. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  20. 20. PEOPLE progressing MBC* efficient PLANET healthy * Man Built Capital … Man Built Structures and Systems TRUE VALUE ACCOUNTING
  21. 21. Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  22. 22. Fundamentals of the Socio-Enviro-Economic System Human Capital Man Built Capital Natural Capital Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  23. 23. Fundamentals of the Socio-Enviro-Economic System Human Capital Man Built Capital Natural Capital Hum an Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  24. 24. Fundamentals of the Socio-Enviro-Economic System Human Capital Man Built Capital Natural Capital TRUE VALUE ACCOUNTING
  25. 25. Fundamentals of the Socio-Enviro-Economic System Financial Capital Human Capital Man Built Capital Natural Capital Man Built Capital Natural Capital Human Capital Split out Financial Capital from other components of Man Built Capital TRUE VALUE ACCOUNTING
  26. 26. Fundamentals of the Socio-Enviro-Economic System Financial Capital Human Capital Man Built Capital Natural Capital SunSun Man Built Capital Natural Capital Sun Human Capital Add Sun … the source of all energy Split out Financial Capital from other components of Man Built Capital TRUE VALUE ACCOUNTING
  27. 27. Fundamentals of the Socio-Enviro-Economic System Financial Capital Human Capital Man Built Capital Natural Capital SunSun Financial Capital Human Capital Man Built Capital Natural Capital SunSunSun Man Built Capital Natural Capital Sun Human Capital Add Sun … the source of all energy Split out Financial Capital from other components of Man Built Capital Reorder because Financial Capital metrics exist TRUE VALUE ACCOUNTING
  28. 28. Sun Fundamentals of the Socio-Enviro-Economic SystemBOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOP BOP = Beginning of Period STATE EOP = End of Period STATE PROGRESS is Change in STATE during the period. ALL the elements of the BOP and EOP STATES need to be quantified TRUE VALUE ACCOUNTING
  29. 29. Sun Fundamentals of the Socio-Enviro-Economic SystemBOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOP Any number of activities may take place during a period. They may be extremely complex and interconnected, but PROGRESS is still measured by CHANGE in STATE. TRUE VALUE ACCOUNTING
  30. 30. Sun Fundamentals of the Socio-Enviro-Economic SystemBOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOP PERFORMANCE is measured by relating PROGRESS achieved with the RESOURCES Consumed. How much is Human Capital increased and how much are Financial, Man Built and Natural Capital diminished TRUE VALUE ACCOUNTING
  31. 31. Sun Fundamentals of the Socio-Enviro-Economic SystemBOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun Financial Capital … virtual masquerading as reality. Human Capital … PEOPLE … are complex, because we originated through nature, but our inventions are simple. Man Built Capital is so simplistic compared to Natural Capital. While in some part amazing, it is very crude compared to what is the norm in Natural Capital. In the end it is Natural Capital that is going to determine everything. NC is infinitely complex and resilient and will outlast everything Man Built … and People are unlikely to survive in a future mass extinction that is quite certain. The source of ALL energy to drive the system EOP TRUE VALUE ACCOUNTING
  32. 32. TVA builds on double entry and the concept of state and flow … TRUE VALUE ACCOUNTING
  33. 33. These 3 slides explain the concept of STATE and FLOW … or in accounting terms, the BALANCE SHEET / PROFIT AND LOSS relationship … TRUE VALUE ACCOUNTING
  34. 34. STEADY STATE TRUE VALUE ACCOUNTING
  35. 35. POSITIVE PROGRESS TRUE VALUE ACCOUNTING
  36. 36. DETERIORATION OF STATE TRUE VALUE ACCOUNTING
  37. 37. No information about activities is needed in order to measure PROGRESS … only measures about changes in STATE TRUE VALUE ACCOUNTING
  38. 38. State, Progress and Performance ● State is the Balance Sheet of the entity at a moment in time; ● Progress is measured by comparing Balance Sheet changes between the beginning and the end of the period; ● Performance is a measurement that relates Progress to the resources consumed. TRUE VALUE ACCOUNTING
  39. 39. EFFICIENCY AND EFFECTIVENESS TRUE VALUE ACCOUNTING
  40. 40. A fundamental reality … All FINANCIAL WEALTH has been created by human energy together with man built knowledge, structures and systems and exploiting NATURAL CAPITAL in an unsustainable way. TRUE VALUE ACCOUNTING
  41. 41. ELEMENTS OF THE SYSTEM by SEGMENT Financial Capital Human Capital Man Built Capital Natural Capital Sun Financial Capital Human Capital Man Built Structures & Systems Natural Capital Money Food Government Nature (life) Sun Nature (life) Capital Market Value Water Laws. Rules Nature (life)Land Shelter Infrastructure WaterClothes Industry Nature (life)Air Health Mining Ecoservices Education EnergySkills Waste Recreation Retail Culture LogisticsReligion Knowledge Technology Security Energy Mobility Profit TRUE VALUE ACCOUNTING
  42. 42. Financial Capital Human Capital Man Built Capital Natural Capital Sun TRUE VALUE ACCOUNTING FINANCIAL CAPITAL … virtual masquerading as reality. As a measure, money is fatally flawed. The problem is compounded with GDP which ignores almost everything that makes life worth living. Corporations are high performance in making profit, but issues like social impact and environmental impact are not measured in a meaningful way and therefore Ignored.
  43. 43. Financial Capital Human Capital Man Built Capital Natural Capital Sun TRUE VALUE ACCOUNTING Human Capital … PEOPLE … are complex, because we originated through nature, but our inventions are simple. Food Water Shelter Clothes Energy Health Education Mobility Recreation Culture Religion Recreation Security Skills
  44. 44. TRUE VALUE ACCOUNTING Man Built Capital … Structures and Systems Man Built Capital is simple compared to Natural Capital. It has become very powerful over the past 300 years but at the expense of natural capital and social capital Government Laws Infrastructure Industry Mining Energy Waste Mobility Logistics Retail Knowledge Technology Financial Capital Human Capital Man Built Capital Natural Capital Sun
  45. 45. Financial Capital Human Capital Man Built Capital Natural Capital Sun TRUE VALUE ACCOUNTING NATURAL CAPITAL In the end it is Natural Capital that is going to determine everything. NC is infinitely complex and resilient and will outlast everything Man Built … and People are unlikely to survive in a future mass extinction that is quite certain. Nature (life) Millions and millions of miracles, and we only know a small part of it all. Land The place where natural systems function, but also where man built processes and structures Water Essential to life, man built processes and the natural cycles that sustain nature Bio-diversity That has made nature the miracle it is, and fundamental to the functioning of the complex system Air pollution Has impact directly on human health and the functioning of many of the systems of nature Eco-system services The myriad of natural recycling mechanisms that serve to keep everything in nature in balance. Air GHG Atmospheric processes that regulate climate and the cycles of many critical compounds
  46. 46. Financial Capital Human Capital Man Built Capital Natural Capital Sun TRUE VALUE ACCOUNTING SUN The source of ALL the energy that drives the system ELEMENTS OF THE SYSTEM
  47. 47. Managing in a complex system is a challenge … The best practice it to drive decision making with the best / quickest data about progress and performance and at the most granular level … this is the essence of the TVA data architecture. TRUE VALUE ACCOUNTING
  48. 48. To manage change there have to be METRICS for ALL the components of the system. ● The next slide is a simplified representation of the State – Flow – State idea for ALL elements of the Socio-Enviro-Economic System ● The second slide shows what the conventional money metrics measure … just a tiny part of everything that matters. TRUE VALUE ACCOUNTING
  49. 49. MULTI DIMENSION IMPACT ACCOUNTING STATE - BOP STATE - EOPPERIOD ACTIVITES
  50. 50. MULTI DIMENSION IMPACT ACCOUNTING STATE - BOP STATE - EOPPERIOD ACTIVITES
  51. 51. Effective metrics will track impact on ALL* the components of the system … * Not just the money based financial metrics TRUE VALUE ACCOUNTING
  52. 52. THE BALANCE OF THE SLIDESET IS A RECAP USING IMAGES … This slideset is A WORK-IN-PROGRESS. It will be upgraded periodically. It is part of a series of more than 100 slidesets. Navigation to these is available here: http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=N1-Slidesets-p3 More about the True Value Metrics initiative is at: http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=list0100-MainNav FEEDBACK is welcome. Please email to Peter Burgess … peterbnyc@gmail.com … with a catchy phrase in the subject line so that it gets attention, and please identify the specific slideset(s) or webpage involved. TRUE VALUE ACCOUNTING
  53. 53. THIS SLIDESET IS 1 OF 5 SIZE MATTERS 1 … OVERVIEW SIZE MATTERS 2 … KEY CONCEPTS http://www.slideshare.net/PeterBurgess2/size-matters2 SIZE MATTERS 3 … SYSTEM CYCLES http://www.slideshare.net/PeterBurgess2/size-matters3 SIZE MATTERS 4 … PERSPECTIVES http://www.slideshare.net/PeterBurgess2/size-matters4 SIZE MATTERS 5 … IMPACTS http://www.slideshare.net/PeterBurgess2/size-matters5 TRUE VALUE ACCOUNTING
  54. 54. Sun BOP Sun Financial Capital Human Capital Man Built Capital Natural Capital Sun SunSun Financial Capital Human Capital Man Built Capital Natural Capital Sun EOPSocio-Enviro-Economic System Hum an Capital Man Built Capital TRUE VALUE ACCOUNTING
  55. 55. The next slide shows: PEOPLE MORE THAN 7 BILLION NOW AND GROWING TRUE VALUE ACCOUNTING
  56. 56. TRUE VALUE ACCOUNTING
  57. 57. The next slides shows: MAN-BUILT CAPITAL GOVERNMENT, LAW, CITIES, INDUSTRY AND A LOT MORE TRUE VALUE ACCOUNTING
  58. 58. TRUE VALUE ACCOUNTING
  59. 59. TRUE VALUE ACCOUNTING
  60. 60. TRUE VALUE ACCOUNTING
  61. 61. TRUE VALUE ACCOUNTING
  62. 62. TRUE VALUE ACCOUNTING
  63. 63. TRUE VALUE ACCOUNTING
  64. 64. The next slide shows: ENVIRONMENT PLANET EARTH, FAUNA and FLORA TRUE VALUE ACCOUNTING
  65. 65. TRUE VALUE ACCOUNTING
  66. 66. The final slide shows: SUN SOURCE OF ALL ENERGY TRUE VALUE ACCOUNTING
  67. 67. TRUE VALUE ACCOUNTING
  68. 68. REMINDER This slideset is A WORK-IN-PROGRESS. It will be upgraded periodically. It is part of a series of more than 100 slidesets. Navigation to these is available here: http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=N1-Slidesets-p3 More about the True Value Metrics initiative is at: http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=list0100-MainNav FEEDBACK is welcome. Please email to Peter Burgess … peterbnyc@gmail.com … with a catchy phrase in the subject line so that it gets attention, and please identify the specific slideset(s) or webpage involved. TRUE VALUE ACCOUNTING
  69. 69. THANK YOU Some links and contact information: Email Peter Burgess … peterbnyc@gmail.com Peter Burgess LinkedIn profile https://www.linkedin.com/in/peterburgess1 Link to TrueValueMetrics.org website http://www.truevaluemetrics.org/ Link to navigation to other resources: http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=list0100-MainNav#1 TRUE VALUE ACCOUNTING

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