It is the time of year when we try to clear out the piles of sclerotic stuff that the previous 12 months have almost unwittingly gathered. So, what next?
There is a real problem here. We live in a world where it is increasingly hard to be sensible. On a whole variety of urgent issues, from corporate governance to climate change, sensible courses of action are in place but are being steadily undermined by, frankly, bizarre notions. And that is before similarly barking theories about the coming effects of AI stumble frenetically into play.
Some of the problem in all this is that change takes time, and as it gradually takes shape over, invariably, years, that gives breathing space for opponents of change to gather their opposition together.
Charlie Munger once told shareholders: ‘If people weren’t so often wrong, we wouldn’t be so rich’
The old guard doesn’t like change, but it knows that it will have time to fight back. If only they would take note of one of the wise sayings of Charlie Munger who, at the age of 99, died last November. He was one-half of the Warren Buffett team that built Berkshire Hathaway into one of the world’s most phenomenally successful investment firms.
The long view necessary for that success came from being thoughtful. ‘It’s much better to think you are ignorant,’ he once told the shareholders. ‘If people weren’t so often wrong, we wouldn’t be so rich’.
Think about AI
It is a very similar philosophy to that of IBM founder Thomas Watson, who insisted the word ‘Think’ should be displayed on the walls of every office in the corporation. Thinking seems to be lacking when addressing the likely effects of AI. All manner of wild surmise surrounds the topic. Yet think about it and it will be a boon to the world of accounting and business, and tax as well (see also ‘Horizon scanning for 2024’)
Thought processes can be elevated to brighter things as AI looks after the mundane and the far-from-mundane as well. It is like the great millennium scare when the notion of Y2K stalked the land. Consultants, journalists and many others made a very good living out of pondering aloud, and for fees, the possible disaster that might occur as all those systems clicked over from 1999 to 1 January 2000.
We stood gazing across a Scottish valley as the actor Robbie Coltrane’s fireworks on the opposite hill kept us entertained at – important for we Scots – no expense to ourselves. And computer systems clicked and whirred on, unaffected by the changing of the year.
The ESG elements of guarding the corporate world from the downside of climate change have come under fire
Once the unhinged prognostications are discarded from people’s minds, the thoughtful, sensible stuff will kick in. And you would hope the same would be true of the risk management at the heart of climate change measures.
ESG backlash
Common sense has again gone out the window. The environmental, social and governance (ESG) elements of guarding the corporate world from the downside of climate change, once seen as straightforward common sense in risk management, are under fire; bizarre notions have taken root.
In the US, 18 states have invoked some sort of anti-ESG legislation in an effort to bar state pension money from being invested in any company that mentions the acronym ESG. The Treasurer of South Carolina even called for the chief executive of BlackRock to be fired, though he decided eventually not to take the state’s money out of the scheme. It seemed that the reality of low fees trumped political correctness. Common sense was allowed, eventually, but only if no one mentioned it.
Governance out
Or you could take the UK government’s attitude to corporate governance. We were once a global leader in the field, but it has been encouraged to fall out of fashion (see the AB article ‘Corporate governance reform rolls back’).
Long-term reputations falling to bits does not encourage competition
Again, the government has said that transforming the Financial Reporting Council into an Audit, Reporting and Governance Authority with much sharper teeth is no longer a government priority. It is a priority for everyone else in the business world, but the government prefers, while urging auditors to be more effective, to allow companies to be run on a much longer and looser leash. If anything, it wants the regulations for companies and their directors to be much more lax. This would, they say, encourage competition.
Anybody applying common sense to the proposition knows that it will do the opposite. Long-term reputations falling to bits does not encourage competition. So, we need to sharpen up our thinking as we look to the months ahead. As we slip painlessly through the first few weeks of 2024 we should sit back and really take time to ponder whatever we see as pressing problems. It is not hard; it is simple. Take the memory of Munger to your heart and think: ‘Does that really make sense?’
