Reviving Keynes Animal Spirits for your business: Recently (July 2012) Dr. Manmohan Singh, Prime Minister of India declared "Reverse the climate of pessimism... revive the animal spirits in the country's economy," It is indeed surprising the catch-phrase was not made use of all these years and Dr. Manmohan Singh a renowned economist himself had stressed on bringing optimism to his second wave of reforms for revival of Indian economy. Can Animal Spirits be implanted to Indian Economy? What about for Corporate Sector? The note prepared by IBCM© Research is published here with regard to Animal Spirits that John Maynard Keynes stated in the year 1930 and what it means to corporate? 'Reviving Keynes Animal Spirits for your business - Measuring by Return on Intangible' is one that can bring in measurable vibrancy within an organisation. IBCM© Research Consulting shall be the agent of change. Keynes Animal Spirits: Quote: "Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than expectations, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits – a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits – a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities." Unquote Jayaraman Rajah Iyer

1. Reviving Keynes Animal Spirits for your business -
Measuring by Return on Intangible
An IBCM© Research - Management Consulting Services

2. IBCM© Research Management Consulting - Management Rating - by Return on Intangible
Table of Contents
IBCM© Research Management Consulting - Return on Intangible..................................3
1. The Principle:.............................................................................................................3
2. Balance Sheet........................................................................................................... 3
3. Return on Intangible.................................................................................................. 5
4. Rationale for adopting Return on Intangible..............................................................5
5. Plan of Action.............................................................................................................6
6. Executive Summary ..................................................................................................7
7. Recommendation...................................................................................................... 9
8. Services - IBCM© Research Management Consulting:..........................................11
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3. IBCM© Research Management Consulting - Management Rating - by Return on Intangible
IBCM© Research Management Consulting - Return on Intangible
1. The Principle:
1. Convert a n-dimensional problem into n problems of one dimension,
optimising company's capability, facilitating decision making.
2. Balance Sheet
2. Companies are stuck up, for too long with Balance Sheet, a convoluted
process of exhibiting self-deception. Book-keeping is essential, so is a daily
calendar.
3. Companies continue to search for beneficial ways in which to disclose
information about themselves with or without formal sanction. In fact, it is not
clear that the so-called GAAP standard is even particularly meaningful
anymore: They are letting the markets inform them about what constitutes
value.i
4. Corporates do jump from one jargon to the other, corporate planning to
business ethics to corporate governance to corporate social responsibility to
sustainability, and with equal speed dump them to seek a fresh one.
5. The reason why companies are stuck up with Balance Sheet because of it
being the only instrument they can construct with an abacus, an instrument of
structured chaos that everyone can read but no one can decipher, for it
conceals more than it reveals.
6. Companies need to measure jargons.
• Corporate Social Responsibility : In a survey of 558 global companies
on Corporate Social Responsibility by KPMG International in co-
operation with Economist Intelligence Unit on Corporate Sustainability -
KPMG – EIU a Progress reportii – there is a stunning statement –
Many firms are grappling with the problem of deciding exactly what and
how to measure - page 16; Deciding how to measure is more difficult
than deciding what to measure. - (EIU report findings).
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4. IBCM© Research Management Consulting - Management Rating - by Return on Intangible
• Sustainability : Aman Das in Vault.com reports: "At a recent breakfast
hosted by the Global Reporting Initiative (GRI) and NYSE Euronext, the
Conference Board’s David Vidal asked an insightful question: What are
the top three reasons for your company’s reluctance to embrace
sustainability—and to adopt sustainability reporting? The responses
that came from an audience representing the glitterati of the corporate
social responsibility world might surprise. What these responses point
to, however, is the continued sense of reluctance across senior
leadership toward combining the social and environmental with
corporate. The 11 challenges indicated were:
i. Doubt
ii. Liabilities
iii. Denial
iv. Resources
v. Causality
vi. Lack of Global Standards
vii. Benchmarking
viii. Lack of comparative credibility
ix. Uncertainty
x. Fear of the unknown
xi. Fear of the known
• KPMG report on survey of 558 global companies stating Deciding how
to measure is more difficult than deciding what to measure, is the crux
of the matter that IBCM© Research criticises Balance Sheet as an
instrument of self-deception while offering a solution of how to measure
the jargons in use.
7. What is crucial is to bring the abstractions into reality, acknowledge value
where value is due, and deconstruct what is valueless. Balance Sheet fails
the test, so are a number of management jargons. Ethics is subtler than the
subtle.
• Intangible is the resultant empirical study of Nature that IBCM©
Research applies as evidence for bringing abstractions into reality by
measuring terms such as Business Ethics that are used loosely.
8. Measure what is measurable and make measurable what is not so. If you
are one of the Companies that continue to search for beneficial ways in which
to disclose information about themselves with or without formal sanction, then
take the first step towards measuring qualitative elements of management.
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5. IBCM© Research Management Consulting - Management Rating - by Return on Intangible
3. Return on Intangible
9. Return on Investment vs. Return on Intangible
• Return on Investment one is accustomed to is between two inanimate
objects that IBCM© Research classifies as non-pulsating energies,
whereas Return on Intangible is the result of effort exerted by the
people within an organisation, classified as Intangible i.e. pulsating
energy.
• Every matter possesses non-pulsating energy whereas management
capability is never brought into limelight that Return on Intangible brings
to the fore.
• Inanimate objects do not by themselves release the energy without
Intangible colliding with the matter, called as material event.
• Return on Intangible for Balance Sheet and Profitability items (i.EPS)
would be insufficient without the same is calculated for:
◦ ii. Management Quality,
◦ iii. Corporate Governance,
◦ iv. Accounting Quality,
◦ v. Risk Management - the five criteria set by SEBI for mandatory
grading for IPOs.
• IBCM© Research Management Consulting for Return on Intangible
shall address the issues that 558 global companies could not fathom,
that glitterati of Corporates found perplexed as well as resolve internally
the self-deceiving Balance Sheet that one tends to hold on ad infinitum
for decision making.
4. Rationale for adopting Return on Intangible
10. For an investment decision for People-Soft 8 in the year 2005 by Return
on Intangible <note: Return on Investment was 0) it surprised the then CEO
John Hugh of MBT on under utilisation of a truly great package.
• Return on Intangible looks at the capability and the optimal usage.
• Application of the principle Return on Intangible for Balance Sheet and
Profitability would bring out the inactive elements that could be
energised and made best use of for productivity.
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6. IBCM© Research Management Consulting - Management Rating - by Return on Intangible
11.Double entry book-keeping creates a Balance Sheet differentiating an
asset and a liability. It is not the case for Return on Intangible calculation. All
such elements that occupy a Balance Sheet are considered non-pulsating
energy and assessed how they are made use of by a single entry observation
of binary value 0 or 1, the absence or presence of pulsating energy.
• This is a major advantage for companies, converting a n-dimensional
problem into n problems of one dimension, optimising company's
capability, facilitating decision making.
• A substance yoked with another perform independently each uniquely
defined by its quality.
12. Return on Intangible analyses creative process and action process, the
sub-atomic levels of management in a structured manner, that several risk
measurement tools have a specific slot in the process area. Strategies,
policies, practices, Projects, Budgets are monitored by one and the only
resource area - Intangible i.e pulsating energy (as against non-pulsating
energy within each inanimate object) - by dBudget/dT where dBudget are a
series of KPIs accomplishing the tasks in dT - in respective Time.
• Non-pulsating energy varies between one inanimate object to another
whereas pulsating energy is constant between a potter or a nuclear
scientist.
• Creative process that ends up as a substance has quality embedded.
Creative process is identical to every object be it a policy statement or a
diamond or a child.
• Action process is unique to the respective quality of the substance.
5. Plan of Action
13. Let IBCM© Research Management Consulting shall assist you in
developing an internal rating system.
14. A comprehensive Return on Intangible for Profits, Policies and People
<main stay of Intangible - pulsating energy> shall consolidate all process
areas of your company and consolidate group companies arriving at a single
digit - Return on Intangible.
15. IBCM© Research Management Consulting shall assist you with
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7. IBCM© Research Management Consulting - Management Rating - by Return on Intangible
calculation of Return on Intangible, corporate training and development of
Intangible as the energy force of your organisation.
6. Executive Summary
16. Make it easy running an organisation for yourself first, converting n-
dimensional problem to problems of one dimension.
17. Balance Sheet/ Profitability is the outcome of reactive release of non-
pulsating energy. Make it proactive, monitoring real-time release of effort put
in, measuring by Return on Intangible.
• To be proactive consolidate policies and value system, foundation for
sustainability of profits.
18. Of all the jargons in use none played as much economic havoc as
'intangible assets'. It gained entry into a Balance Sheet surreptitiously by IAS
38 without even defining the term Intangible. Besides toxic assets and
impaired assets Balance Sheets are heavily loaded with Intangible Asses
estimated in 2007 of USD4.1 Trillion in US alone. In effect qualitative
elements of an asset are altogether ignored for a company which are
presented in a Balance Sheet that IBCM© Research refers as exhibiting self-
deception. In order to confirm quality, measuring policies and value system of
a company is a must.
19. CSR and sustainable living plan are used by MNCs loosely as another
marketing gimmick. IBCM© Research has given the primary place for CSR
as the main mover of energy force - Intangible for an organisation, by
incorporating CSR in every set of 5 KPIs.
20. Fiscal and Ethical Responsibility: IBCM© Research classifies, a team of
four: Group 1: i. Managerial Force, ii. Operating Force, iii. Technology, and iv.
Finance representing Fiscal Responsibility. Added to the fiscal group is
People (society) representing Ethical Responsibility that make a single team
seen in every block of corporate structure irrespective of a traditional
nomenclature of departments - be it R&D, Marketing or Production.
• Fiscal and Ethical Responsibility groups have the same goal - create an
Intellectual platform such as IPR, Policies, Value System - Human
Rights, Anti-corruption etc. and use the platform to collide with the
inanimate objects in a Balance Sheet to release the non-pulsating
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8. IBCM© Research Management Consulting - Management Rating - by Return on Intangible
energy.
21. Pension funds allocation to public equities declined significantly compared
to past years.iii OECD-area pension funds experienced negative rates of
return in more than half of the OECD countries in 2011. Rates of return
averaged -1.7% on investment of USD20.1 trillion and in US it was -3%.
• Investment by Pension Funds managers and investment into selected
market equities is a war of Balance Sheet vs. Balance Sheet
compounded by self-deception.
• With nation after nation competing with each other to get into a junk
grade status the options for a fund manager is narrowing day-by-day.
22. People constitute the biggest chunk of the real assets, by way of
shareholdings, by way of lifetime contribution to pension funds, by way of life
insurance, by way of savings etc. IBCM© Research Corporate Critical
Density identifies 3 Ps - Policies, Practices and People as the protons,
electrons and neutrons of an organisational atom respectively.
• People do not influence the identity of a company but they add mass to
it. Policies and People form a nucleus while practices spin around the
nucleus.
• The three criteria set for corporate critical density identified as 'just right'
are profits, policies and value system.
• With no knowledge on the policies and value system of a company any
quantitative prediction models would result in a rate of return of
negative -1.7% if not more in 2012 for such huge funds of USD20.1
trillion.
23. CSR Manager within a company, one of the five members team heading
ethical responsibility group, will act as a modem - modulator ~ demodulator
between management, who needs understanding of the 11 challenges and
'how to measure' conceptualisation, and the people who need confidence
measures needed for market revival.
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9. IBCM© Research Management Consulting - Management Rating - by Return on Intangible
7. Recommendation
24. Decision making Process:
• Currently decision making process, heavily dependant on Balance
Sheet, is like the legendary Dutch boy plugging holes in a dike with his
fingers.
• Contrarily Return on Intangible is the other way, like the boy
St.Augustine found emptying the sea into a hole, emptying n-
dimensional inanimate objects to a one-dimensional hole of
Intangible.
• Whereas Balance Sheet displays static non-pulsating energy of
an inanimate object, Return on Intangible observes and records
establishing causality of material events.
• Material energy is responsible for cause and effect. Balance
Sheet displays the effect whereas Return on Intangible highlights
the cause.
• By a series of material events from a state of non-existence to
conceptualisation to communication to formation to formulation an idea
becomes a substance that is tangible. In every state of creative process
material energy is the only triggering device.
• Based on the platform created i.e. IBCM© Research Intellectual
Value Capital, series of material events take place in infinite
succession of finite purposes towards task accomplishments - i.e.
Action Process, IBCM© Research Emotional Value Capital - to
derive - Return on Intangible - i.e. IBCM© Research Intangible
Value Capital.
• In every state of action process too, material energy is the only
triggering device. Pulsating energy is the only material energy
triggering creation and action, which is Intangible.
• Decision making is based on identifying the material energy whether
present or absent in every material event.
25. Animal Spirits: John Maynard Keynes: Quote: "Even apart from the
instability due to speculation, there is the instability due to the characteristic of
human nature that a large proportion of our positive activities depend on
spontaneous optimism rather than mathematical expectations, whether moral
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10. IBCM© Research Management Consulting - Management Rating - by Return on Intangible
or hedonistic or economic. Most, probably, of our decisions to do something
positive, the full consequences of which will be drawn out over many days to
come, can only be taken as the result of animal spirits – a spontaneous urge
to action rather than inaction, and not as the outcome of a weighted average
of quantitative benefits multiplied by quantitative probabilities."Unquoteiv
• In the Subject - Object distinction of Corporate Management, ERP -
Enterprise Resource Planning, Budgets, Balance Sheets are the
outcome of a weighted average of quantitative benefits multiplied by
quantitative probabilities, representing the object characteristics.
• Return on Intangible is the outcome of spontaneous urge to action
rather than inaction, measured by IBCM© Research assigning a binary
value of 1 or 0 for the presence or absence of the spontaneous urge.
• Absence is what one should watch out and make it happen - an
activity has a cost incidence whereas inactivity a cost
consequence. Acronym IBCM stands for Inactivity Based Cost
Management where inactive elements are measured and then
material energy is triggered for optimal rating of Return on
Intangible.
• Material energy rests with men and women adding mass to the
corporate building block.
• Corporate Building blocks move linearly upwards from 0 to 5 of
Return on Intangible.
• The process of change from 0 to 1, 1 to 2, 2 to 3, 3 to 4, 4 to 5
when reflected in everyone's monitor is a cause for celebration by
all, like holding a world cup aloft.
• Currently it is compartmentalised to inanimate objects that team
spirit is muted. Return on Intangible brings the human spirits of
achievement a common platform of 5 KPIs by one and the only
resource available to the corporate - Intangible.
• Four fiscal and one ethical responsibility group are present in
every department that the matrix status of process areas bring the
team together towards goal congruence.
• Material energy of each person within the organisation that Keynes
calls as Animal Spirits is visible, evident energising the organisation that
is vibrant with pulsating energy.
• the instability due to speculation that Keynes observed continues and is responsible
for declining pension funds allocation to public equities. Speculation is on account
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11. IBCM© Research Management Consulting - Management Rating - by Return on Intangible
of non-availability of qualitative granular data of the companies that Return on
Intangible is set to correct.
26. Return on Investment is passé, Return on Intangible is for Market
Revival:
• IBCM© Research Management Consulting assist companies, Investors
and fund managers bringing company's capability in sustainable profits,
sustainable policies and sustainable value system to the fore.
• Pension Funds of USD20.1 trillion with a negative return averaging
-1.7% warrants quantitative analysis supplanted by Return on
Intangible as the primary criteria measuring qualitative elements of an
organisation.
• Companies with higher Intangible Value Capital are bound to attract
investment from Pension Funds, Private Equity, Hedge Funds sans
insider trading and the public for mutual benefits of win-win situation.
8. Services - IBCM© Research Management Consulting:
27. Animal Spirits: John Maynard Keynes was spot on to say, i. the instability
due to the characteristic of human nature that a large proportion of our
positive activities depend on spontaneous optimism rather than mathematical
expectations, ii. a spontaneous urge to action rather than inaction, iii. not as
the outcome of a weighted average of quantitative benefits multiplied by
quantitative probabilities.
• i. spontaneous optimism:
• IBCM© Research Management Consulting addresses the issue
by integrating in each block CSR function as the primary source of
energising your organisation. People as the most influential group
for your products as well as for Investments.
• ii. action and inaction:
• IBCM© Research by assigning binary value of 1 or 0 for action or
inaction respectively, the granular data by each block rates the
spontaneous urge providing your company the status of energy
force within.
• iii. quantitative vs. qualitative:
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12. IBCM© Research Management Consulting - Management Rating - by Return on Intangible
• Your company will be stable when qualitative elements of your
company are measured. IBCM© Research is the only
organisation globally that systematically measures and rates
qualitative elements of management. Return on Intangible based
on empirical study of Nature will remain unchallenged.
• iv. Human spirits: Keynes dismisses the quantitative benefits multiplied
by quantitative probabilities as
secondary to human nature that a
company is dependant on
spontaneous optimism, within as well
as outside its own four walls.
Inanimate objects have made
companies lacking vibration,
compartmentalised in an insentient
cocoon. IBCM© Research has brought the concept of pulsating energy
in every block of the corporate structure that achievements are shared
by all and the human spirits vibrant.
• v. Fund management: IBCM© Research Rating of a company
encompasses three dimensions - Profits, Value System and Policies
that fund managers are looking towards for Investment. The traditional
Balance Sheet Return on Investment will be replaced by Return on
Intangible. IBCM© Research shall collaborate with outside funding,
based on the rating.
• vi. n-dimensional problems: IBCM© Research brings in all problems to
a single dimension. Coupled with the integrated rating system on real-
time, delegation of authority works towards management excellence.
• vii. Creating Policies: Innovation, CSR, Management Quality, Corporate
Governance, Accounting Quality, Risk management, Risk Appetite, Risk
Culture, Human Rights, Labour Rights, Anti-Corruption, Environmental,
Business Ethics are all part of the Intellectual Value Capital of your
company. IBCM© Research will assist you in developing, practicing and
measuring the Policies created.
• Indian companies are expanding globally that they could use
Intangible Value Capital as a launching pad for Government,
World Bank contracts worldwide, besides attracting Investment
through Private Equity.
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13. IBCM© Research Management Consulting - Management Rating - by Return on Intangible
• viii. Training: Corporate Training imparted on Planning and Budget,
creating policies, practices, CSR development, real-time monitoring,
rating , fiscal and ethical responsibility, accountability etc.
• Software: IBCM© Research will undertake to provide for an integrated
rating system.
For further understanding on the subject of Intangible Value Capital:
1. Planning And Budget Measuring By Return On Intangiblev
2. Investment Decisions For Pension Funds by Intangible Value Capitalvi
3. DIY Corporate Rating (Banking and Finance inclusive)vii
and Author profile, Book Preview, Research Papersviii.
Jayaraman Rajah Iyer
IBCM© Research
Kodaikanal - 624101
+919487390439
jayar.ibcm@gmail. com
Copyright
IBCM - Inactivity Based Cost Management - Copyright © REGN. NO. L-27490/2006
DATED December 1, 2006 Govt. of India, Copyrights Office, by the Author, Jayaraman
Rajah Iyer
ALL RIGHTS RESERVED. No part of this Publication may be reproduced, stored in a retrieval systems,
transmitted, in any form or by any means – electronic, mechanical, photocopying, or otherwise without the
prior permission in writing from the Author.
Picture Courtesy: India World Cup:ix
IBCM© Research 2012 Page 13 of 14

14. i 4. Cost Containment and Value Chain Management: New Building Blocks for Jobs and Economic Growth:
Background paper for the conference session: “Global Competition and Collaboration”
ii EIU report_v2_A4_Apr14. dated 15th April 2011, KPMG International in co-operation with EIU on
Corporate Sustainability - A Progress Report - (page29)
iii © OECD 2012 – Pension Markets in Focus – September 2012 – Issue 9
iv http://en.wikipedia.org/wiki/Animal_spirits_(Keynes)
v http://www.slideshare.net/jayaraman.18/planning-and-budget-measuring-by-return-on-intangible
vi http://www.slideshare.net/jayaraman.18/investment-decisions-for-pension-funds-by-intangible-value-
capital
vii http://www.slideshare.net/jayaraman.18/diy-corporaterating
viii http://jayaribcm.wordpress.com/
ix http://www.sify.com/sports/India-beat-Sri-Lanka-to-win-cricket-World-Cup-imagegallery-cricket-
lecxTXiaaaj.html?html=5