Author: CRT Admin

As our Global Dialogue at Mountain House in Caux, Switzerland, gets ever closer, I hope you might decide to attend and so register.

Our colleagues at Mountain House tell me that participants for other meetings are registering so that it is quite important for you to register as soon as possible if you are thinking of joining the discussions and help draft the statement on a civilizational ethic.

Michael Wright, one of our fellows, cannot come, but has written a special comment on how we could approach not only thinking about a complex present and its implications for the future, but structure systemic responses.  I would like to share his valuable thinking with you.  You may read his recommendations here:

Dear Steve:

Today, we are caught in a dilemma regarding the application of ethics to AI and rapid technology adoption in general.  I would argue that the use of Catholic, Sunni, Shi’a, Judeo and Thai ethical norms is based on transactional and observational behaviors and is useful only when future outcomes are known, foreseeable or have historical precedent.  Today, we are unleashing technologies whose ramifications in the future are not known, may in some instances be unknowable, thereby severely reducing the context for ethical decision-making (no instance will be observed, no time constraint applied, no participants in the same space/time).  Is it possible that we need entirely new ethics to guide the adoption of technologies which are shaping, impacting, pre-dispositioning and radically altering the planet-people-purpose relationship to the point of possible self-anhelation?

The ethical norms we’ve inherited from a variety of cultural and philosophical traditions, including Catholicism, Sunni and Shi’a Islam, Judaism and Thai Buddhism (to name a few you’ve mentioned), have evolved over centuries based on human-to-human and human-to-nature interactions.  The introduction of advanced technologies, like AI, presents new, unprecedented scenarios that these traditions did not foresee.  Human-to-technologies, as yet, are not understood (as opposed to technologies, e.g., fire, that we do understand).  Yet, it is a new ‘basis’ of interaction.

As such, there is a growing consensus that we do indeed need to evolve our ethical norms to address these new realities.  The question is the usefulness of the past constructs versus a blank page as a starting point.  For me, it feels like we are refining the art of making telephone poles and ignoring the promise of satellite global coverage.

The application of ethics to AI poses many novel challenges.  For example, how should we approach the bias inherent in AI systems?  How do we ensure that AI is used in a way that respects human dignity and rights?  What responsibilities do AI developers have in ensuring that their creations and economic engines are used ethically?  These are questions that traditional ethical norms might not have ready-made answers for and for which no incentives exist in the current business models wherein engineers are amorally engaged in extracting five more seconds of your time that they will then capture on their employer’s site.  Which seems harmless until you multiply you, the captive, by 2 billion.  That is 10 billion seconds of exposure to advertising or 320 years’ worth if directed at one person.

Any ethical framework will always be a work in progress.  It will need to be continuously updated and refined as our understanding of AI and its impacts on society evolve.  This is a daunting task, but it is one somebody with respect and authority must undertake if we are to harness the power of AI responsibly. However, currently, there is no entity or network of networks with universal respect or authority.  That means it is unlikely, given the rapid acceleration of technology adoption, that the world can develop an ethical construct in a useful period of time.  Unless there is a compelling reason….i.e., incentive in the new religion of finance.

The idea of incentivizing ethical behavior within financial institutions is an interesting one and there are mechanisms that could be used to accomplish this.  These could include regulatory measures, tax incentives and the use of ESG (environmental, social and governance) criteria in evaluating investments.

Regulatory measures could require financial institutions to consider long-term societal impacts in their decision-making processes.  This could mean implementing stricter laws around issues like lending practices, investment criteria and corporate governance, with penalties for non-compliance.

Tax incentives could be used to reward financial institutions that make decisions based on sustainable, socially responsible principles.  For instance, a bank might receive a tax break for investing in renewable energy, affordable housing or other projects that contribute to societal well-being.

ESG criteria are already used by many investors to assess the sustainability and ethical impact of an investment in a company or business.  But it is nearly always a look in the rearview mirror. Banks, lending institutions and capital markets could be encouraged (or required) to use ESG criteria in their decision-making processes, rewarding companies that operate sustainably and ethically.  In my experience with cost modeling for the semiconductor and solar industries (among others), when one expands the time horizon, environmental, social and governance costs become more anchored in reality and are often counter intuitive.  In nearly all cases, a ‘green’ strategy wins out over ‘status quo’ or ‘cheap, but dirty’ when looked at across generational time versus the next quarter or year.

There are many challenges to this approach.  One is the difficulty of defining and measuring “ethical” behavior.  What one person or culture considers ethical, another may not.  This is particularly relevant when considering global financial markets, which involve actors from many different cultures and ethical traditions.  Traditions which play extremely important roles, as Steve Young pointed out in his book on Kissinger’s Betrayal…thank you!

Another challenge is enforcement.  Given the complexity and global nature of modern financial markets, enforcing ethical standards can be difficult without monetary incentive.  It requires cooperation between governments, regulatory bodies and financial institutions worldwide.  With the emerging battle over reserve currencies, especially when digitized, this type of cooperation seems less plausible every day.

Lastly, there’s the issue of short-term versus long-term incentives.  Many financial institutions are driven by short-term profits, while ethical considerations, as we are learning too late, must involve long-term impacts that can only be imagined, but which must be agreed upon or we all lose.  Aligning these incentives requires a significant shift in the way that financial institutions operate.  So, I ask …what events must occur to motivate them?  More natural catastrophes at larger scale?  Nation state economic failures at scale?  Insurance companies are abandoning entire regions as this is written.

Despite these challenges, the idea of incentivizing ethical behavior in the financial industry is, I think, a compelling one.  It aligns with broader societal trends towards greater corporate responsibility and sustainable business practices and could potentially lead to significant societal benefits.  However, it would require careful thought, planning and cooperation between various stakeholders to implement effectively.  I’m becoming less and less convinced we can get the stakeholders in a room without an overwhelming existential threat and that may not occur in a timely or forgiving fashion.

Part 2

A technology solution to a technological ethics dilemma?

The idea of considering the long-term impact of technological decisions is, in my opinion, a strong ethical guideline for the investment and financial community and thinking about implications for future generations specifically could be a powerful motivator for careful, responsible decision-making.

For instance, the concept of “seven generation sustainability,” which is derived from the Great Law of the Iroquois, asserts that decisions should be made with consideration of their effects seven generations into the future.  With today’s computing power, we should be able to look beyond 7 and think in terms of centuries, which not many people will or can do.

Applying this type of framework to technological adoption could help to anticipate and mitigate potential negative effects, promote longer term horizon practices and guide the development and deployment of technologies in a way that is beneficial (or the least harmful) for both current and future generations.

While I’ve always believed the concept is ethically appealing and indeed necessary, its practical implementation presents several challenges.  Just a few:

1. Predictability: It’s often difficult to accurately predict the long-term impacts of new technologies.  Consider, for example, the advent of the internet or smartphones.  These technologies have had far-reaching and unanticipated effects on society, both positive and negative.  Or our ignorant (not implying stupid, but lacking the discipline to examine the consequences) adoption of plastics and fossil fuels.

2. Accountability: Holding entities accountable for the potential impacts of their decisions on future generations can be an open-ended issue.  If negative consequences do emerge, it may be difficult to trace these back to specific decisions or entities (e.g. pfas).  Moreover, unless they are modeled and reviewed carefully, these impacts may not become apparent until long after the decision-makers are gone.  E.g., fossil fuel-based energy; plastic proliferation; monocrop agriculture….

3. Measurement: How do you measure the impact of privacy concerns or job displacement due to automation on future generations?  In Steve Young’s book on Kissinger, the issue of transition time becomes central to the outcome.  It becomes even more so when technology adoption can be nearly instantaneous across the globe.

4. Balancing present and future needs: Striking a balance between short and long can be complex, but complexity, fortunately, is nothing more than architecture.

An argument for creating a mechanism to fund a novel capability in the context of developing new ethics alongside new technologies suggests there is an opportunity for a new approach that features the specifics of time-enriched data and the constructal law of physics to create a new modeling methodology capable of at least exploring, at scale, the likely path and timing of technology adoption and identifying possible outcomes and outliers.

Dr. Stuart Albert’s work on time-enriched data has shown that time can be used to enrich data in ways that can improve the accuracy and reliability of models.  Dr. Adrian Bejan’s work on the constructal law of physics has shown that systems evolve to increase their access to available energy and minimize their dissipation of energy.  By combining these two approaches, along with studies done on complex interactive systems and systems integration, it is possible to create a new modeling methodology that can improve the accuracy and reliability of models by considering the temporal evolution of systems.

Temporal evolution, in this context, refers to the changes and development in a system over time. When applied to models, this concept focuses on how the factors or variables in a model change as time progresses.

For instance, if we’re talking about the spread of diseases, the temporal evolution of an outbreak would look at how the number of cases, the rate of spread and other important factors changes day by day, month by month or year by year.  It could involve tracking how the disease spreads through a population over time, how its virulence might change, how quickly interventions can slow the spread and more.

Similarly, in the context of technology, the temporal evolution could consider how a particular technology or technological system evolves over time.  This might involve looking at advancements and changes in the technology, its adoption rate, its impacts on society and other factors.  By incorporating temporal evolution into models, we can gain a dynamic understanding of systems that better reflects their real-world behavior.  This is particularly important in complex systems, where the interactions between different factors can change over time (see EPRI-DARPA CIN/SI).

The integration of Dr. Stuart Albert’s work on time-enriched data and Dr. Adrian Bejan’s constructal law can enable models to consider the full complexity of these temporal evolutions. This new modeling methodology has the potential to revolutionize our understanding of a wide range of systems.  By considering the temporal evolution of systems, this methodology can improve the accuracy and reliability of models, leading to a better understanding of how systems work and how they change over time.  This knowledge can be used to improve our decision-making and to create new opportunities.

Considering the far-reaching implications and potential benefits of an innovative modeling methodology based on time-enriched data, work done on complex interactive systems and the constructal law, it becomes clear that establishing a funding mechanism to support its development and application is not just desirable, but essential.

This methodology promises a revolution in our understanding of various systems, from climate change and disease spread, to the evolution of technology.  By incorporating temporal evolution and principles of energy flow, this approach could improve the accuracy and reliability of our models, offering profound insights into how systems change over time.

More to the point of this discussion, the modeling methodology I have been proposing since 2019 could also play a crucial role in ethical considerations, particularly concerning the development and adoption of new technologies.  By providing more accurate models of potential future outcomes, this methodology could enable us to foresee and consider the ethical implications of our technological decisions more effectively.  This could help us uphold the ethical requirements to consider the potential impact of these decisions on future generations.

Just as the development of new technologies necessitates the evolution of ethical frameworks, the development of these advanced modeling methodologies calls for financial support and incentive structures to guide their growth.  The funding mechanism should not only support the research and development of the methodology, but also its application and integration into decision-making processes.

Such an initiative would provide economic and moral incentives for ethical behavior in our technological decisions.  It aligns with the broader societal trend towards corporate responsibility and sustainable practices.  And most importantly, it provides us with a tool to ensure that our decisions today consider and protect the interests of future generations and possibly humanity itself.

In the end, the creation of a funding mechanism to support this innovative modeling methodology is a vital step towards understanding and managing the ethical implications of our rapidly evolving technological landscape.  This is an investment not just in technology, but in the future of our society.  Do you know any takers?  People with absurd hordes of dead money and no real legacy could actually fund a project that will aid in assuring their children’s grandchildren have a better planet, a healthier population to share it with and useful and meaningful purpose as humans.

I thought it at least worth the time and effort to throw this into the mix for your consideration and give some voice to the problem with a potential solution (I used to have a rule to never let someone leave the ‘monkey’ in my office; if you come up with a problem, come in with a possible solution).

Respectfully yours,

Michael Wright
CEO/Founder
Intercepting Horizons, LLC

To learn more or to register, please click here.

Recently in the U.S., we have been bystanders to a conundrum at the heart of a “moral” capitalism – whose morals are to be elevated above other alternatives?

Sexual lifestyles have recently tripped up two major consumer companies – one the maker and seller of beer, Anheuser-Busch and the other the shopping mall retail giant, Target.  Anheuser-Busch recently ran an ad for its Bud Light brand of beer featuring a trans woman.  That public presentation of the company’s values triggered a customer boycott of the beer.  Then, Target put on sale a line of clothing designed for trans women in association with a celebration of LBGT values and lifestyles.  There were protests in stores and the company lost $15 billion in market capitalization.

Faced with rejection from some in its customer base, the company took down the pride displays. The Target CEO issued this statement:

Team –

I want to end the day … on a note of care.  This has been a very hard day for Target and it follows many difficult days of deliberation and decision-making.

To our team in stores: thank you for steadfastly representing our values.  No one is better at working through uncomfortable situations in service to an inclusive guest experience.

What you’ve seen in recent days went well beyond discomfort and it has been gut-wrenching to see what you’ve confronted in our aisles.

To our team in the service centers, thank you for your patience and professionalism through high volumes of angry, abusive and threatening calls.  I recognize how difficult and even frightening those interactions can be and thank you for the composure with which you’ve fielded those comments.

To the teams who have been working so hard on our plans for pride – and now are showing incredible agility as we adjust – thank you.  Your efforts will ensure we can still show up and celebrate pride in meaningful ways.

To the LGBTQIA+ community, one of the hardest parts in all of this was trying to contemplate how the adjustments we’re making to alleviate these threats to our team’s physical and psychological safety would impact you and your wellbeing and psychological safety.  We stand with you now and will continue to do so – not just during pride month, but each and every day.

Those were the two guiding principles when it came time for us to act: do all we can to keep our team safe and do all we can to honor our commitment and connection to the LGBTQIA+ community.

You just can’t please everyone all of the time.  Some people all of the time, yes; all of the people some of the time, yes; but all of the people all of the time, no!

A third recent case in the U.S. is that of CNN’s firing of its new CEO.  He tried to expand the audience for CNN by appealing to Trump supporters.  CNN hosted a town meeting with former President Trump.  Providing that cultural “product” antagonized CNN’s regular audience, who mostly hate Trump.  CNN was caught between a rock and a hard place.  The CEO took the fall for his marketing shortsightedness.  The company’s salable product was a certain “taste” in politics and culture.  Those who tuned in wanted to experience that “taste” and only that “taste,” not any other.

In retrospect, one of the wisest comments I’ve ever heard is the Latin quip: De gustibus non disputandum est – “You can’t argue about taste.”

Another truism is: “One person’s trash is another person’s treasure.”

In capitalism, companies are in the business of satisfying tastes.  They are not tastemakers, though many try through advertising to link their product or service to some strongly felt preference, value, taste or emotional need.  Firm reputation management is also about coming out ahead in the “taste” wars or at least avoiding customer alienation.

But the task for managers in successfully navigating community civil wars over tastes and values is like squaring a circle – sometimes it just can’t be done.  To please one taste/value constituency, you inevitably alienate another.

This is especially true when the values at stake are emotionally profound, triggering identity anxieties and are even existentially important for some customers or other influencers.

Reflecting on the cases of Bud Light and Target, the Wall Street Journal ran a frontpage story with the caption “Companies Rethink Embrace of Social Issues.”  The story continued on page 10, filling the entire page.

Actually, two years ago, I forewarned our Caux Round Table network about the dangers which would arise for firms when CEOs took public positions on controversial differences of opinion.  On April 19, 2021, I wrote to our network:

In the current cultural turmoil in the U.S., Big Tech companies such as Facebook, Twitter, Amazon and Google take political positions by censoring opinion and speakers they don’t like. Many advocates of good causes press companies to sway public opinion or adopt new norms with respect to remediation of global warming or compensation for past discrimination based on race.

The issue of when corporate social responsibility would encourage political engagement by companies is most relevant to democracies where rights of free speech, the rule of law and free markets are the reality.  In one party or other, authoritarian states, where control of private lives by the government is the norm, companies do as they are told, not as they might like.  In such states, what can’t be helped must be endured, as the recent experience of Alibaba and Ant Financial in China has demonstrated.

The Caux Round Table, many years ago now, made a distinction between corporate social responsibility, on the one hand and the responsibilities of governments and civil society, on the other.  The ethics of competency and “sphere sovereignty” constrain the power of companies to dictate politics, as they see fit to do.

But there currently is little discussion of what the ethics of companies, especially publicly held corporations, should be when the responsibility of companies, as citizens, is under discussion and open to critique.

As James Madison reminded us: “If we were angels, there would be no need for government.” Corporate social responsibility, likewise, cannot presume that companies are always on the side of the angels.  Some degree of circumspection is therefore wise.

In a related essay, ascribed to either Madison or Alexander Hamilton, the point was made that “as there is a degree of depravity in humanity, which requires a certain degree of circumspection and distrust, so there are other qualities in human nature which justify a certain portion of esteem and confidence.”  When companies and their executives presume to lecture and admonish citizens as to what is right and what is wrong, should their recommendations be received with mistrust or with esteem and confidence?

You can read my April 2021 argument for wise use of corporate discourse in the public domain here.

A problem always arises when companies take sides in a conflict of “tastes” – be they commercial, social or political.  To borrow a mental construct from the economists, the good or service offered by the company to the public or the brand associated with that good or service is not exclusively a “private” good, but one which has externalities that make it more of a “public” good than one only privately consumed.

Is a beer advertisement communicated to a mass audience really only a “private” matter without any entanglement with the feelings of others?  Is a display of clothing in a mass retailer only for “private” consumption of a few or does it speak to all who happen to pass by?

Generally speaking, we don’t care all that much about who consumes what private goods.  My taste is not yours.  I buy what I like and want and don’t spend much time worrying about getting your approval for my purchases.  What I buy for myself is, mostly, none of your business.  I, too, have my safe space in which to be myself.

But there is a line which can be crossed: what I buy may threaten you physically – a gun or drugs for example or upset you emotionally – a prejudice which you can’t stand, something vulgar or sexual, a cultural appropriation.

Fathers and mothers do not approve of every purchase made by their children, but then they are parents with a role responsibility for taking due care of those in their charge.

When some such socializing line between “private” and “public” is crossed, the good or service purchased loses its completely “private” character and acquires “public” impact.  The more a good or service acquires a “public” quality, the more it becomes subject to public comment and perhaps, disdain.  Such a product or service is then less a matter of free private choice and more a matter for social disparagement and even regulation – like pornography or “disinformation.” Other people then care who buys what and who sells what.  The business transaction is no longer just a socially insignificant matter between a private seller and a private buyer, as Adam Smith famously put it in the cases of the butcher and the baker.

In these circumstances, the company is forced to choose among stakeholder constituencies.  Who does it want to serve?  What if one constituency likes the “taste” that the company brings to the market and another one despises it?  Then what does management do?

Thus, the conundrum just reported on by the Wall Street Journal.

Tim Knavish, CEO of PPG Industries, was quoted as saying: “There’s no pure algorithm to put all this stuff in a spreadsheet to tell you what to do.”

Knavish asked his staff to review their processes for engaging on polarizing topics.  So, PPG now uses an internal scoring system to determine if and when it makes sense for the company to comment on matters that may offend some of its customers and employees or affect its brands.

Knavish said further: “We run a business.  We don’t run a political organization.  We don’t run a religious organization and we don’t run a social organization.  However, we recognize that we operate in a society.  We hire employees with opinions and views.  We work with customers that have opinions and views, so we have to take all that into account.”

Now, Knavish here stands right in the vortex of stakeholder management.  Not all stakeholders are of the same mind and never will be.  And there is no AI algorithm to make the choices among stakeholders easy and without risk.

Human judgment is all a CEO and board have by which to navigate their way between this Scylla and that Charybdis, as Odysseus might say.  Providing some guidance for CEOs and boards when they find themselves mired in such a quandary was my intent two years ago in writing about CEOs speaking out in public on “public” issues.

Now, I would add to my recommendations the mindset of seeking equilibrium, of cultivating a sense of balance which triggers awareness of when a course of action will shift the equilibrium among stakeholders off balance too far in one direction.

For six decades, Warren Buffett, now 92, has sent investors in his Berkshire Hathaway fund an annual letter containing his thoughts and observations about the business and its ecosystem.

I have just read his 2023 letter.  It is shorter and more spare than many of his prior ones.  This year, he focuses on data – fiscal results of investments and company business models.  He does so by looking back at the history of his investment decisions and their varying results.  He admits that some decisions were excellent, others mediocre and some just bad.

On balance, however, and that is a metric he uses – balance out the good, the bad and the ugly; track the trendlines instead of obsessing on the volatility highs and lows; separate sheep from goats, apples from oranges.

For his philosophical approach, he just mentions the obligation to do well for the people who trust him with their money and the reality that “the disposition of money unmasks humans”; that he is a business-picker, not a stock-picker.

He credits the secret sauce of success in investing as cash flow.  He struck gold when he invested in Coca Cola in August 1994 and with American Express in 1995.  Those two companies have  paid higher and higher dividends annually, as the earth has rotated around the sun ever since. Other companies did not pay good dividends, so their capital value to Berkshire dropped and dropped.  Conclusion: the weeds wither away as the flowers bloom.

Pick flowers, not weeds.

He notes that of the S&P 500 companies, in 2021, only 128 earned $3 billion or more, while 23 lost money.  Berkshire was the largest owner of 8 of these profitable giants.

Here, Buffett’s focus on data leads him to a theory, a theory of capitalism.  He understands that narratives do not drive facts.  Rather, facts drive conclusions about reality.  He writes: “Capitalism has two sides: the system creates an ever-growing pile of losers, while concurrently delivering a gusher of improved goods and services.”  It’s a mixed bag – some win and some lose.  On balance, however, capitalism delivers for everyone in gross, if not at the margin for some.

Buffett’s mindset is congruent with reality.  That should be a lesson for us.  Ideals and good intentions, the precise social engineering of equality and fairness, only intrude on a natural process and may not be integral to its system dynamics.  Our thinking and our wishing must partner with reality if well-being is to be experienced.  “If wishes were horses, beggars would ride,” was the old truth.  In a way, Buffett believes that the truth shall make you better off.

In line with this theory of real economic growth, Buffett admits that his profits have come from the working of a system that he does not control.  Rather, he knows his returns are only part of a giant stream of commerce, finance and industry, culture and governance flowing through history, driven by the decisions, preferences, fears and ambitions of millions of individuals.

He calls this stream the “American Tailwind,” as if he were only the pilot of a small plane being pushed forward (or backwards, as the case might be from time to time) by the force of a human system called the sovereign nation of the United States of America.  Buffet is proud of owning companies that are broadly aligned with America’s economic future.  He writes: “We count on the American Tailwind and though it has been becalmed from time to time, its propelling force has always returned.”

You can read the letter here.

May you invest as wisely as Warren Buffet has done.

I recently wrote a short comment on the morality of using words.  I just received a comment from Jim Lukaszewski on how we can get to “decency” in our relationships with others.  I thought his ideal of decency is pretty close to a common, cross-cultural understanding of morality, very much like the ideal of “virtue” proposed by Mencius and the behaviors advocated by the Buddha in his noble eightfold way to take in our lives.

In using words, Lukaszewski recommends:

The true test of civility is a commitment to verbal and written communication that are predominantly positive and declarative and behaviors that are simple, sensitive, sensible, constructive, positive, helpful, humble, empathetic and always benefit the recipient more than the giver.  Any other pathways lead only to trouble, prolong problems and delay mitigation and resolution.  Empathy means positive deeds that speak louder and more constructively than words.

The true test of civility is a commitment to verbal, written communication, deeds and actions that benefit a recipient more than the sender.  Here are 39 possible paths that can get you to civility, decency, integrity and trust.  Always pick as many as you can, as frequently as you can.

1. Accountability
2. Apology
3. Calmness
4. Candor
5. Character
6. Charitability
7. Chivalry
8. Civility
9. Compassion
10. Constructiveness
11. Courtesy
12. Decency
13. Dignity
14. Empathy: positive deeds that always speak louder than words
15. Engagement
16. Forgiveness
17. Gratitude
18. Helpfulness
19. Honesty
20. Honor
21. Humility
22. Integrity
23. Listening: the greatest decency
24. Openness
25. Peacefulness
26. Pleasantness
27. Politeness
28. Positivity
29. Principle
30. Respect
31. Responsiveness
32. Sensibility
33. Sensitivity
34. Simplicity
35. Softness
36. Tact
37. Thoughtfulness
38. Transparency
39. Truthfulness

Remember, the reverse of any of these words, ideas or behaviors only lead to trouble, problems and delayed mitigation and resolution; plus, revictimizing those who have been injured.