Posted by: Dr Churchill | April 1, 2015

Ethics of Angels & Economic Growth vs Kleptorenumeration

Fittingly for the beginning of the month of April, we share this write-up from my friend George Monbiot on the issue of employment returns, and renumeration for the work we do and contribute to Society and to our Community, as we traverse our very own lives….

“”Kleptorenumeration
–George Monbiot

Kleptorenumeration means theft through excessive rewards.

And sadly this seems to be the dominant business model in our Banking and Corporate World…””

“”There is an inverse relationship between utility and reward. The most lucrative, prestigious jobs tend to cause the greatest harm. The most useful workers tend to be paid least and treated worst.

I was reminded of this while listening last week to a care worker describing her job. Carole’s company gives her a rota of, er, three-half hour visits per hour. It takes no account of the time required to travel between jobs, and doesn’t pay her for it either, which means she makes less than the minimum wage. During the few minutes she spends with a client, she might have to get them out of bed, help them on the toilet, wash them, dress them, make breakfast and give them their medicines. If she ever gets a break, she told the radio programme “You and Yours” she spends it with her clients. For some, she is the only person they see all day.

Is there more difficult or worthwhile employment? Yet she is paid in criticism and insults as well as pennies. She is shouted at by family members for being late and not spending enough time with each client, then upbraided by the company because of the complaints it receives. Her profession is assailed in the media, as the problems created by the corporate model are blamed on the workers. “I love going to people; I love helping them, but the constant criticism is depressing,” she says. “It’s like always being in the wrong”.

Her experience is unexceptional. A report by the Resolution Foundation reveals that two-thirds of frontline care workers receive less than the living wage. Ten percent, like Carole, are illegally paid less than the minimum wage. This abuse is not confined to the UK: in the US, 27% of care workers who make home visits are paid less than the legal minimum.

Let’s imagine the lives of those who own or run the company. We have to imagine it, as, for good reasons, neither the care worker’s real name nor the company she works for were revealed. The more costs and corners they cut, the more profitable their business will be. In other words, the less they care, the better they will do. The perfect chief executive, from the point of view of the shareholders, is a fully fledged sociopath.

Such people will soon become very rich. They will be praised by the government as wealth creators. If they donate enough money to party funds, they have a high chance of becoming peers of the realm. Gushing profiles in the press will commend their entrepreneurial chutzpah and flair.

They’ll acquire a wide investment portfolio, perhaps including a few properties, so that – even if they cease to do anything resembling work – they can continue living off the labour of people like Carole, as she struggles to pay extortionate rents. Their descendants, perhaps for many generations, will need never take a job of the kind she does.

Care workers function as a human loom, shuttling from one home to another, stitching the social fabric back together, while many of their employers, shareholders and government ministers slash blindly at the cloth, downsizing, outsourcing and deregulating in the cause of profit.

It doesn’t matter how many times the myth of meritocracy is debunked. It keeps re-emerging, as you can see in the current election campaign. How else, after all, can the government justify stupendous inequality?

One of the most painful lessons a young adult learns is that the wrong traits are rewarded. We celebrate originality and courage, but those who rise to the top are often conformists and sycophants. We are taught that cheats never prosper, yet the country is run by spivs. A study testing British senior managers and chief executives found that, on certain indicators of psychopathy, their scores exceeded those of patients diagnosed with psychopathic personality disorders in the Broadmoor special hospital.

If you possess the one indispensable skill – battering and blustering your way to the top – incompetence in other areas is no impediment. The former chief executive of Hewlett-Packard, Carly Fiorina, features prominently on lists of the USA’s worst bosses: quite an achievement when you consider the competition. She fired 30,000 workers in the name of efficiency, yet oversaw a halving of the company’s stock price. Morale and communication became so bad that she was booed at company meetings. She was forced out, with a $42m severance package. Where is she now? About to launch her campaign as presidential candidate for the Republican party, where, apparently, she’s considered a serious contender. It’s the Mitt Romney story all over again.

At university, I watched in horror as the grand plans of my ambitious friends dissolved. It took them about a minute, on walking into the corporate recruitment fair, to see that the careers they had pictured – working for Oxfam, becoming a photographer, defending the living world – paid about one fiftieth of what they might earn in the City. They all swore that they would leave to follow their dreams after two or three years of making money. Need I remark that none did? They soon adjusted their morality to their circumstances. One, a firebrand who wanted to nationalise the banks and overthrow capitalism, plunged first into banking, then into politics. Claire Perry now sits on the front bench of the Conservative Party.

Flinch once, at the beginning of your career, and they will have you for life. The world is wrecked by clever young people making apparently sensible choices.

The inverse relationship doesn’t always hold. There are plenty of useless, badly-paid jobs, and a few useful, well-paid jobs. But surgeons and film directors are greatly outnumbered by corporate lawyers, lobbyists, advertisers, management consultants, financiers and parasitic bosses consuming the utility their workers provide. As the pay gap widens – chief executives in the UK took 60 times as much as the average worker in the 1990s and 180 times as much today – the uselessness ratio is going through the roof. I propose a name for this phenomenon: kleptorenumeration.

There is no end to this theft except robust government intervention: a redistribution of wages through maximum ratios and enhanced taxation. But this won’t happen until we challenge the infrastructure of justification, built so carefully by politicians and the press. Our lives are damaged not by the undeserving poor but by the undeserving rich.””

===========

And from George’s depressing perspective there appears no end in sight for a betterment of this situation.

But I beg to differ. We have to use simple Arithmetic to measure and change things. Yes n old England there appears no hope unless we collectively realize that the 1% is actually far less than that, and far less powerful than it appears to be — and we change the dynamics of wealth creation and sharing.

And we can do this by borrowing a page for the playbook of the old Colonies of the UnitAnd by seeing that the same way that AMerica liberated itself from old King George — we can liberate ourselves from all the old norms of wealth sharing and creation today.

Because what we really have to counter this klepto-renumeration movement is the Ethical and Moral compass as described by Adam Smith in his book “The Theory of Moral Sentiments” The Theory of Moral Sentiments is the pivotal 1759 book by Adam Smith. It provided the ethical, philosophical, psychological, and methodological underpinnings to Smith’s later works, including The Wealth of Nations and all his other works. But most people never read that Great Book and instead jump straight to Ayn Rand’s hellhole.

Today this strong standard of Ethics holds only in the Angel Capital community amongst the classes of Investment Bankers, Venture Capitalists and various Private Equity and Hedge Funds or high risk economic endeavours…
And this ethic spreads outwards like ripples in a pond, because today the movement to democratize corporate equity in the young Startup companies is the good first step, we’ve taken through our own ANgel Network riding the wave of Innovation in that industry via the dramatic Policy changes enacted through the JOBS Act for America.

That is why the leadership of America in StartUp Innovation and Culture of Company Creation is such a powerful driver of change in job and wealth creation, coursing through all the segments of this economy and society alike.

We have to democratize upriver, the relationship of the distributed ownership of the means of production to the society as a whole. This is the significance of Impact Capitalism. And having literally millions of New Early Stage Investors in the market supporting StartUps is a great way to move forward in that plan.

Once the equity of a young company is shared by many more individuals, who can act like Angels and Early stage Investors in the new Science & Technology companies we are creating out there — the rewards of the upside will be spread far more easily in the general community and throughout society as a whole.

This in turn increases the tolerance of the Social Fabric because the wealth of the winning companies is more evenly distributed and this in the United States at least has started to happen through the JOBS Act that was signed into law by President Obama and in the last two years has been driven by additional clarity through the SEC rules and regulations.

This whole company & society beneficial policy movement has helped usher in a new Era of early stage corporate investment that now might find almost 10% of Americans qualified to invest in the high risk – high rewards, game of Angel investing, whereas in the past it was a tiny portion of the 1% that were considered Accredited Investors.

The more society integrates with the new super-Novas of the commercial and corporate world, the better it is for all of us, because Good Governance and Good Ethics of Renumeration will be applied since the experience of Leadership will be shared more Democratically and in an Egalitarian fashion throughout the different segments of Society…

For Technology Startups this is the path to successful investment that doesn’t rob the investors and the customers, as our friend George Monbiot posits.

Because the Investors themselves run the risks and also reap the rewards of this very interesting and profitable game. Just in the past three decades alone, very significant fortunes have been made through startup investments. With early successes coming from startups from Silicon Valley, Seattle, and Boston – we now have developed StartUp scenes in New York, London, and Tel-Aviv.

But the most interesting new StartUps and things are coming out of Beijing, Shanghai, Hong Kong, Taipei, and Seoul. It is the Pacific century after all…

And there are many other newer tech hubs in America developing fast, like Los Angeles, Austin, and Portland. And in the old “stuck in the past” Europe — you still have Barcelona, Berlin, and Riga, developing fast StartUps with potential to grow into world class players, but not quite getting there…

China is where this whole thing along with Angel investing is rally taking off. And well beyond the obvious places like Beijing, Shanghai and Tianjin. We have our sights in the StartUp scene of Chengdu, Guangzhou

In places like Shenzhen, China’s City of Innovation and Entrepreneurship and admittedly, the World’s capital of Makers, there are more StartUps per square mile and number of residents than in any other place on tis earth. Whole lots of engineering going on there today.

In another really interesting place, Sujhou, there are a plethora of exciting companies out there, many of them seeking funding to help them change the world.

And China is vast and regulatory heavy, but really eager to unleash these new Baby-Dragons to the World.

Israel in particular has seen some impressive numbers in the last few years with more Israeli companies listed on the NASDAQ than any other country outside the US.

Some recent noteworthy acquisitions, away from the stratospheric numbers for Instagram’s billions or WhatsApp twentyone billions [all said and done], or so many other Unicorns [= above a Billion dollar in acquisition value], include Google’s acquisition of Waze for $1 billion, IBM’s acquisition of Trusteer for $1 billion, and Rakuten’s acquisition of Viber for $900 million. Investing in a technology startup that you believe in, i risky but the rewards are not only money but also the exciting ride as you watch the company grow and achieve milestones, or as it crashes and burns.

There are a lot of gamblers who make tough investments that can vary dramatically in size, but the wise investor does the StartUps differently.

A wise investor practices the Tao of practical method for StartUp Angel investments. ANd this s a technique that can be easily learned if you read my book, The Tao of the Successful StartUp. Read the book as a Funder or as a Founder, because a diversified portfolio of startups can help you manage the risks wisely and augment the rewards. Measure twice – cut once.

Still today with the current regulatory system, there are two main ways that this Angel Investment is done. The default method for private investors to get involved with startups is with old school Angel investing, which typically involves time & money as well as a deeply personal business relationship with the Founders and the other stakeholders of the , you choose to take a stake into.

A big pool of startups to choose from, and a large Angel network to syndicate deals through and to guide you by removing the regulatory and compliance complexity — is an absolute must here. This Angel system is traditionally reserved for Accredited Investors and limits investing to only those with strong ties to startup communities.

Then, there is the new crowdfunding model for investing, whereby one platform provides its members with access to a diverse portfolio of startup investments. As an example, Kickstarter or Indiegogo’s equity-based crowdfunding platform enables pretty much everybody to jump in the game…

But our Angel Investment platform is for all those accredited investors that qualify now nder the JOBS Act to participate in investments in the most promising startups in China, America, and Europeis reaching returns that are beyond the pale…

Our Angel Investor Network has enabled thousands of people to aggregate their moves, and invest over the space of twenty years and hundreds of millions of dollars, in thousands of exciting new StartUp companies in Science and Technology.

As more investors begin to take charge of their portfolios by actively seeking out the best opportunities, which also serve as engaging forms of participation, these types of investments are likely to gain popularity.

All that through the little JOBS Act in America and through similar policy initiatives in countries as diverse as Brazil and Thailand, or Turkey and Russia, that are making a real effort to get on the fast moving bandwagon of Economic Innovation and Growth, through Early Stage company creation and Angel equity investment for the masses…

We certainly need a similar Act to that in Old Blightey and only then the UK will redevelop it’s old Corporate Ethic and support of Society and Community that the old Founders of the Great Banks had as their motto: ” Honesty, integrity, & plain dealing. ”

In Business what you measure — you manage. And measuring the returns with multiple bottomlines to include Social Impact and Ethics, we are getting way smarter and far better Citizen Investors.

That is why our network is so popular as are our Angel Capital Investment Network members who are sought after a great Mentors and not only as a source of easy money. Today our network is far greater in both numbers of individual Angels and in the amounts of educated investments made — and all of our Angels are similarly guided by our Ethical and Long term value investment philosophy.

This is our way to combat the erosion of values that we see in the banking culture that our friend George Monbiot summarizes in his essay: Kleptorenumeration.

In other words as Investors and as Angels if we are all aspiring to ” Being good with Money, Customer led, and ethically guided ” all the while practicing and plying our Trade through ” Honesty, Integrity, and Plain Dealing ” we shall all come out ahead as a Society and as an Economy.

And that’s a pretty good outcome to have.

Yours,
Dr Kroko

PS:
Happy Spring


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