3rd September 2006 | Draft
Human Values "Stock Market"
Investing in "shares" in a "value market" of
fundamental principles
- / -
Introduction
Virtuality of value: the challenge of intangibility
Equivalence of value-related intangibles?
Key human value "stocks" or "shares"
"Portfolios" of human values -- and "mutual funds"?
Psychic income?
Insights from terminology: stocks, shares, bonds and securities
From stock exchanges to "value markets" and "value exchanges"?
Value transactions: "buying" and "selling"
Value promotion -- and the role of the media
Value brokers
Learnings from financial market strategies: investment styles and preferences?
Learnings from financial analysis and modelling?
Comprehension of stock exchange operation through metaphor
Benefits vs Losses: dividends from investment in values
Fluctuation in values
Performance indicators in the values market
Assessing the value of shares
Abuse in the value exchange system
Conclusion: ambiguities with regard to human values
References
Introduction
There is a strong possibility that human values may tend to be thought about
by many in capitalist societies with the same logic and mindset as company
stocks and shares. There is therefore a case for exploring those values as
though they were "stocks" that could be "traded" --, bought
and sold -- on a "value
market".
The two kinds of value -- "human" and "economic" -- may
be more intimately related than is readily assumed. Economic values may be
confused, deliberately or inadvertently, with other values that may be as essential,
or more fundamental, to community viability -- as argued by Dee Hock (Birth
of the Chaordic Age, 1999; One from Many: VISA and
the rise of chaordic organization,
2005).
Part of the challenge lies in the overlap in terminology between "values"
as economic values and those considered to be of psychosocial, even spiritual,
importance. For example governments issue "bonds", a term fundamental
to social and other bonds considered vital to a sense of relationship and
community. There is a sense in which the terminology applicable to "intangible"
fundamental human principles, such as "equity", has been appropriated to
facilitate descriptions of the specific needs of investment and trading in
economic values treated as significantly more "tangible".
This overlap is more consciously explored with respect to local
exchange trading systems (LETS) and complementary
currencies where there
is a recognition that economic transactions can underpin community relationships
more effectively than monetarized transactions. LETS could be understood
more generally as systems for the exchange of community values -- as is the case of such web-based variants as Friendly Favors and GiveGet Nation. The arguments
for use of such systems are not however the immediate concern of the exploration
here -- although their specific concerns with the poorly understood operations
of the monetary system may well point to insights of more generic significance
with respect to human values (cf Margrit Kennedy, Why
Do We Need Monetary Monetary Innovation? 1995; Richard Douthwaite,
The Ecology of Money, 1999; Bernard
Lietaer,
The Future
of Money,
2001; Thomas H Greco, Money:
understanding and creating alternatives to legal tender, 2001; Peter Koenig, 30
Lies About Money, 2003).
In part the following exploration is an effort to determine whether there
are insights from the process of trading in values in the financial market
arena -- notably in the light of the terminology used -- which are of relevance
to understanding the dynamics of society in relation to human principles. It
is however also possible that the disciplined thinking devoted worldwide, and
so intensively, to the financial markets and their operation might offer insights
into forms of thinking that would give greater discipline to thinking about
human values and principles -- perhaps with more fruitful implications for
the challenges of humanity.
The pattern of thinking with regard to financial
values is therefore used here as a form of cognitive template offering a means
of tentatively ordering understandings and possibilities with regard to human
values. However this is NOT an exploration of possibilities
of placing monetary value on human values, as studied in other contexts. Nor
is the intent to explore the morality of the marketplace as studied by Daniel
Finn (1998, 2003, 2006) [more more]
More generally this exploration is an effort to address the collective "split
personality" that is seemingly so determinative of the dynamics
of society -- between preoccupations, on the one hand, with economic values
and, on the other hand, with values extolled as exemplifying the best of humanity.
The fact that "trillions of dollars" are exchanged daily through various
financial markets -- whose benefit to humanity continues to be
debated -- suggests a need to explore ways of understanding how human values
are (or might be) "traded" or "exchanged" to the greater benefit of humanity.
In clarifying the intent of this exploration, two further potential misunderstandings need to be addressed:
- There is a concern expressed by some that the term "human values" should be understood as referring to the uniquely "positive" and "good" in contrast with other non-monetary "values" which are the reverse, do not meet such standards, or are unfortunately misunderstood by those mistakenly holding them. Although there is no universal consensus in practice, such qualities are held to be non-valuable to society and therefore should not be misrepresented as "values". The purpose here however is to treat any quality that some humans would label as valuable to themselves as "human values", including greed and other qualities (even those held by some to be hindrances to spiritual development). The intention in doing so is to recognize the challenge of a "market" in which people might indeed "trade up" or "trade down" -- reflecting the reality of the psycho-social system rather than a particular human understanding of how it ought to be (with which, in the light of human colonial intervention, extraterrestials might well disagree!).
- There is a concern expressed that the very nature of the "market" process is incompatible with the emergence of a better society. This argument has been well-expressed by John Raven (The New Wealth of Nations: a new enquiry into the nature and origins of the wealth of nations and the societal learning arrangements needed for a sustainable society, 1995) in presenting evidence that: "undermines any lingering faith one might have in the effectiveness of the so-called market process as a means of orchestrating communal action for the common good". Here the confusion lies primarily in the assumed indissoluble relationship between "market" and monetary values. In what follows the whole focus is on the possibility of a non-monetary approach to "trading", as widely experienced in many aspects of human relationship. Raven however recommends: "to develop ways of ensuring that [public servants] seek out, and act on, information in an innovative way in the long term public interest, recognising that, in order to do this, they need to develop and release the know-how, creativity, and initiative of all members of the population in a pervasive climate of innovation". The issue in what follows is how to make such an ideal approach less dependent on "public servants" but to provide processes which could benefit from insights from consideration of the market approach, whether or not the parallel is only of limited relevance.
Virtuality of value: the challenge of intangibility
Concepts such as stocks, shares, companies, property/ownership, and debts
are primarily intangibles whose "existence" derives from the social
construction of conventional reality. There are various forms of agreement
that such phenomena are "real" and this reality is acknowledged in
a variety of documents that confer a legal existence to the phenomena through
that convention.
Part of the challenge is evident when attempting to view a corporation and
its assets. The challenge has been exemplified in endeavouring to explain
concepts of "property" to many indigenous peoples -- especially when "ownership"
of that property has been acquired from them under treaty. The modern consequences
of these difficulties continue to feature in complex legal proceedings on
behalf of indigenous peoples in former colonies, notably Canada, New Zealand,
Australia, USA (cf Conclusions
and Recommendations of the U.N. Experts Seminar on Indigenous Land Rights and
Claims, 1996; Charlene Yates, Conceptualising
Indigenous Land Rights in the Commonwealth, Commonwealth Policy Studies
Unit, 2004) [more]
The intangibility of human values -- including virtues and principles --
is move obvious. In terms of modern understanding of chaos, such values may
even be described as phenomena of higher dimensionality (cf Human
Values as Strange Attractors: Coevolution of classes of governance principles, 1993).
There is a case for recognizing the commonality between understandings of
"interest" in the economic sphere and the more generic role of any form of
"interest" as an attractor. The former is understood as problematic by some
religions (as noted above) and by studies promoting complementary
currency systems (cf Margrit Kennedy, Interest
and Inflation Free Money, 1995),
whereas other religions may view any form of interest as a problematic symptom
of mundane "attachment" from a mystical perspective. But, irrespective of this
spiritual reservation, the issue remains of the relation between "values" and
the "interest" they variously evoke, attract because of a subtle reward that
they offer -- and how any "market" in such values is to be managed.
Curiously, there is a degree of overlap between the domain of economic values
and that of human values. This is exemplified in several cases:
- "Goodwill" in accounting practice: Considerable
importance attached in the financial market to intangible notions of "confidence" and "trust",
especially as they affect "credibility". More curious still is
the recognition of "goodwill" in
accounting terms -- as one of the assets of a corporation that may figure
in the balance sheet of a business.
- "Selling indulgences" by religions: Priesthoods
throughout history have tended to be open to intercession with divinity in
exchange for temporal goods. Historically considerable
controversy was created by what became known as the "sale
of indulgences" -- leading to the Protestant separation from the Roman
Catholic Church [more].
By an indulgence (indulgentia) is understood "the extra-sacramental remission
of the temporal punishment of sin remaining after the forgiveness of the
guilt of sin." Penance
was initially to be achieved through the performance of certain good works
such as fasting, the recitation of certain prayers, pilgrimages, or alms.
From the 14th century, partial substitution of money gifts for works of mercy
and charity was accepted. In 1517, Pope Leo X offered indulgences for those
who gave alms to rebuild St. Peter's Basilica in Rome, a situation that took
on the appearance of "selling indulgences." The aggressive marketing
practices of Johann Tetzel in promoting this cause provoked Martin Luther
to protest what he saw as the purchase and sale of
salvation.
Concern has been expressed at the revival by Pope John Paul II of
the practice of earning indulgences (cf Arthur Noble. The
Resurrection of Indulgences or Is Tetzel really dead? European Institute
of Protestant Studies, 1999)
- Purchasing status:
- Purchasing titles of nobility: Nobility may be considered
an intangible value. The acquisition of aristocratic titles by purchase has
always been a possibility under certain conditions, dependent on jurisdiction
[more more more].
The sale of such titles is also recognized as subject to hoaxes and scams.
- Honours-for cash: In the process of fund raising for political parties, one strategy, used notably in the UK, has been to provide honours (in that case peerages) in exchange for donations or loans [more | more]
- Purchasing academic degrees: The quality recognized
by academic accreditation may be purchased under certain conditions.
There is an extensive market in academic degrees (notably online), much
of it (through so-called "diploma mills") considered to be
fraudulent [more more]
- Subversion of democratic values
- Votes for cash: The purchase of electoral votes, whether in parliamzntary bodies or in international organizations, has long been a widespread practice [more | more | more]
- Cash-for-questions: This is the procedure whereby lobbyists pay parliamentary representatives to ask questions that will advance their special cause [more]
The nature of intangibility has even been provocatively highlighted in relation
to the "existence" of a "person" by Kenneth Boulding (Ecodynamics;
a new theory of societal evolution. London, Sage, 1978)
Our consciousness of the unity of the self in the middle of a vast complexity
of images or material structures is at least a suitable metaphor for the
unity of a group, organization, department, discipline, or science. If personification
is only a metaphor, let us not despise metaphors -- we might be one ourselves.
Equivalence of value-related intangibles?
In what follows below some possible implications of equivalence
are explored between intangibles in the financial world and in the world of
human values and principles. An overview is provided by some of the parallels
highlighted in the following table.
| Financial securities |
Human values |
| Company: asset / liability |
Value (liability) |
| Stocks |
Values, principles |
| Stockholders |
Subscription
- signatories
- memberships
- journal
|
| Stockholders Association |
Association
|
| Broker |
Mediator
|
| Financial analyst |
|
Share issue
|
Promotional campaign
|
| Credit, credibility (Standard and Poors) |
Credibility |
| Transaction (buying, selling) |
Subscribing (lapsing, resigning) |
| Value fluctuation |
Value fluctuation (shifting priorities) |
Key human value "stocks" or "shares"
Some human values that might be considered obvious key "stocks" include:
- Love
- Peace
- Democracy
- Justice
- Freedom
- Courage
- Equality
As an example, a more limited set of "chief human values" (identified with
associated sub-values) is given in a clarifying discussion by Robert Priddy
(In
What May Human Values Consist?, 1993/2003) as: Truth, Care, Peace,
Duty, Justice. A number of efforts have been made to present key values (eg Copthorne Macdonald, Values That Various People Have Associated With Wisdom).
The distinction between such fundamental values and others is
helpfully made by C H Cooley (Valuation
as a Social Process. The Psychological Bulletin, 9, 12, December
1912).
The objects possessing... values differ greatly from age to age, but
the tests which are applied to them are fundamentally much the same, because
the organism from which they spring is much the same.... Such values are
as various as human nature itself and may be differentiated and classified
in a hundred ways. There are some in which particular senses are the conspicuous
factors, as auditory and gustatory values. Others spring from the social
sentiments, like the values of social self-feeling which underlie conformity,
and the values of love, fear, ambition, honor and loyalty. Closely related
to these are the more universal religious and moral values, which, however,
are usually entangled with institutional values of a more transient and special
character. The same may be said of scientific, philosophical and ethical
values, and great achievement in any of these fields depends mainly on the
creation of values which are such for human nature, and not merely for some
transient institutional point of view.
The "key stocks" -- as "global
values" -- may be understood
as analogous to "blue
chip" stocks.
That term is used to describe large, well-known companies
that offer stable earnings and a consistent dividend record. Blue-chip companies
are reputed to be reliable investments. There would be little question that
the above values are typically recognized as reliable "investments" --
as extolled in much traditional wisdom as well as in stories for children.
Recent political initiatives by social or religious conservatives in some
countries have stressed a particular set of core values termed "family
values"
which might also be considered as "blue chip" stocks. As a political
and social concept, the term is used to describe a set of moral beliefs
in society specifically in response to the perception
of declining morality. The term is vague in its
precise definition because of the overlapping and distinct understandings
of those proposing such a set of values.
However, just what "dividend" and "investment" mean in this context needs
to be clarified further -- as with "stocks" and "shares".
"Portfolios" of human values -- and "mutual
funds"?
A portfolio is collection
of investments held by an institution or by a private individual, typically in
the form of stocks and shares.
It could be argued that many social groups, especially political parties,
hold "portfolios" of human values as "stocks" -- occasionally "trading" in
them. In the case of groups, the formality of holding "stocks" in
this way is evident in the manner in which they are embodied into the statutes
and constitutions of such bodies -- or additionally into the manifestos and
declarations to which they subscribe. There it is typically declared what principles
the group "holds" to
be true or intends to cultivate in some way. Those "truths" tend
to be values, namely "stocks" in the sense explored here. This may
usefully apply to the values of a nation as embodied in its constitution.
Intergovernmental "value portfolios": Declarations,
manifestations, and especially a constitution, may therefore be understood
as a kind of "portfolio" of
stocks -- a set of values to which nations that are members of an intergovernmental
group subscribe. "Portfolios" of
values of major international importance are those embodied in universal
declarations such as the following:
There are of course numerous other intergovernmental declarations, some of
whose principles are embodied into treaties, for example:
- United
Nations Convention on the Rights of the Child -- effectively
"managed" by UNICEF
- ILO Conventions (of which 8 are identified as fundamental)
-- effectively
"managed" by the International Labour Organization
Mutual funds: Portfolios of stocks in companies, as managed by a mutual
fund,
suggest some interesting similarities to the above "management" of human values.
In the case of stocks:
- Mutual fund: This is a collective investment scheme, operated
by an investment company, that typically pools money
from shareholders (investors) to be invested in stocks, bonds, options, commodities
or money market securities. The fund may group
investments held across asset classes (stocks, bonds, real estate, gold)
or within the same asset class (such as stocks across companies
and industries).
- Family of funds: This is a group of mutual funds managed by the
same investment management company. Each fund typically has a different objective
(eg growth-oriented stock fund, a bond
fund, or money market fund). Shareholders in one of the funds may be able
to reallocate their money into any of the family's other
funds, possibly at no cost. A family of funds with no
charges are called no-load families in contrast with
so-called load families.
Religions as value fund managers: Of particular interest is the role of religions
-- as special kinds of value-holding groups -- in relation to any such "portfolios"
or "mutual funds". In the search, through inter-faith dialogue, for a global
ethic (cf Towards
a Global Ethic: An Initial Declaration, 1993), religions have named
many values that they claim to share.
Religions are however assiduous in identifying in their scriptures
where their sets of values are explicated (Joel Beversluis (Ed.) A
Sourcebook for the Earth's Community of Religions, 1993/1995).
Nevertheless each religion could be understood as similar to a mutual fund,
managing sets of values, whether or not they are shared by other religions.
Indeed there is a sense in which religions manage their particular portfolios "competitively" --
in a manner somewhat similar to managers of mutual funds. As with mutual funds,
religions strive to demonstrate to their "investors" better "performance"
than may be achieved with their competitors. This is also evident in their
attitude towards members of the religion "investing" in
the values of another religion, which typically is the subject of strong disapproval,
possibly undertaken at some some considerable cost in terms of social penalization
(cf "load families" in the case of mutual funds).
In relation to operations of the financial market, such shifts in the pattern
of religious values to which individuals (or groups) subscribe is of
particular interest to the degree to which such financial transactions are
considered:
- compatible, notably with respect to religious views on
"interest", defined prejudicially by some religions as usury (cf the concerns
of Islamic banking). Of far greater concern,
as noted above, is the "investment" in the values of another religion (framed
contemptuously as "shopping around") or, considered even more problematic,
termination of "investment" in any religious values
- comparable, namely the existence of any meaningful parallel
between management of economic values and the management of religious values,
especially such challenging notions as "trading", the "fluctuation" of
values over time, or "dividends" to be derived from appropriate "investment".
The latter notion is of course to be found in the long-term perspective of
the rewards in the "after life" for leading a "good life",
holding to religious values, Buddhists are notably sensitive to the accumulation
of "merit" in
this life, to be rewarded through the processes of karma in subsequent lives.
Of particular historical interest to any parallel between a "market" of
financial operations and one of religious values is the implication of the
much-cited biblical account of Jesus
ejecting the "money changers" from the Temple in Jerusalem (Matthew
21:12)
-- because of the exploitation by such money-brokers of pilgrims required to
exchange coins bearing a foreign image for Temple coinage in order to purchase
animals for sacrifice there [more].
This account has been cited in protesting the "sale of indulgences" (as
discussed above). Ironically this exchange of funds for remission of sins (understood
as negative values) originated in the same period as (but prior to) the
issue of shares by the Dutch East India
Company in 1602 -- the first company to do so.
Secular management of value funds: In contrast to value funds
"managed" by religions or by intergovernmental bodies, there are numerous sets
of values managed by other bodies. In direct competition with the religious
management of values, for example, are the initiatives of humanistic bodies,
such as the
International Humanist and Ethical Union, which
have produced the Fundamental
Values of Humanism [more].
An interesting initiative was taken on the occasion of the Rio de Janeiro
Earth Summit in 1992 to assemble a set of NGO
Alternative Treaties covering values relating to education, communication,
cooperation, economics, consumption, poverty, food, subsistence, climate, energy,
waste, land, natural resources, marine issues, biodiversity and biotechnology,
as well as cross-sectoral issues.
More generally it might be understood that many of the 30,000 or more international
nongovernmental organizations, or their regional counterparts, effectively
act as managers for "mutual funds" of values corresponding to their particular
field of interest (cf Yearbook of International Organizations). As
"mutual funds" these may be considered as competing on value "performance"
with those of intergovernmental bodies and religions.
The regular meetings of many of these bodies, such as "annual general
meetings",
could then also be understood as analogous to meetings of shareholders in a
company -- at which the value performance of the managers of the particular
mutual fund is assessed (cf the 8,000 future international meetings held
annually as identified in the International
Congress Calendar).
Of particular interest is the extent to which academic and other disciplines,
as represented through their professional bodies, may be understood as managing
-- effectively as "guardians" -- a "fund of values" and
principles understood to be associated with that discipline. An important distinction
is however to be made between:
- values intrinsic to the discipline, however this is understood (scientific
values, artistic values, engineering values, sporting values, ecological
values, etc)
- values arising from a sense of wider social responsibility of the discipline,
namely completely undefinable within that discipline or profession, as with:
- ethical guidelines
- social responsibility
Ethical funds: Recent years have seen the emergence in relation
to the financial market of "ethical investment" or "socially
responsible investing"
(SRI), namely investing by both financial and social criteria. This should
not however be confused with "value
investing", a term applied to a technique of financial investing in
shares (articulated by Warren Buffet) that appear underpriced by some forms
of fundamental analysis (cf Geoff Gannon, What
Is Value Investing? Investnewz,
May 2006). There are many bodies with a focus on ethical investment. Terms
such as "social
fund" and "social investing" have
also emerged [more].
A global ethical dimension to business has been promoted through the United
Nations Global Compact as an initiative to encourage businesses worldwide,
notably multinational corporations, to adopt sustainable and socially responsible
policies, and to report on them in the light of ten
principles. Again this initiative could be understood as a "mutual
fund"
seeking to manage value performance in relation to a portfolio of principles.
It should however be stressed that the concern in what
follows is not with investments on the financial stock market that are evaluated
according to ethical criteria but rather with the extent to which human (ethical)
values may be understood as constituting a form of "stock market" in their
own right -- independent of any relation to financial values.
Psychic income?
One useful conventional lead is offered by
understandings from the business world of "psychic income" -- the
subjective value of nonmonetary satisfaction gained from an activity, possibly
an "implicit revenue" associated with an economic transaction. This
is income in a non-monetary form, gratifying psychological and emotional needs.
In the business world, power, prestige, recognition, and fame are all considered
to be forms of psychic income. From a marketing perspective, it relates to
the intangible benefits above and beyond the utilitarian value derived from
a conventional purchase -- including the improvement in a consumer's self image
as a result of purchasing certain highly desirable products.
Psychic income" refers to what motivates people other than money, such
as respect, recognition, challenge, love of the work itself, opportunity for
autonomy, location in a particular community, name of the prestigious institution
for a resume, technologies that make work less drudgery, flexible hours, etc.
therefore, the full income is the combination of wages and psychic income of
the working conditions.
Colin F. Camerer and
Ulrike Malmendier (Behavioral
Organizational Economics, 2004) analyze how behavioral economics can
be applied to organizations, and how it can be enriched by thinking about the
economic questions associated with economic organization. For the authors, behavioral
economics modifies the standard economic model to account for psychophysical
properties of preference and judgment, which create limits on rational calculation,
willpower and greed. Their modified economics theory aims at providing parsimonious
and psychologically sound explanations for empirical findings that the standard
model has a tough time explaining. They stress, for example, that "psychic
income matters", and may be tied to psychological factors like perceived appreciation:
The basic risk-incentive model divides the worker’s world into efforts
they dislike, and rewards they like. It is convenient to talk about wages
as rewards because they are easily measured, and don’t satiate. But
people are motivated by many other types of non-pecuniary “psychic
income” as
well.... Psychologists’ synonym for psychic income is “intrinsic
motivation” -- the satisfaction a worker gets from work for
its own sake. An interesting phenomenon documented in psychology is the possibility
that extrinsic incentives like money can “crowd out” or extinguish
intrinsic motivation.
Christopher J Coyne and Peter T Leeson (How
do Rulers Choose? Dual domains of discretion in political decision making)
offer an extensive discussion, with evidence, of the role of psychic income
in political decision-making (points also echoed in another paper by Benjamin
Powell and Christopher J Coyne, Do
Pessimistic Assumptions About Human Behavior Justify Government?
Global Prosperity Initiative, Working Paper 19). They argue:
The nature of psychic income is such that the outside observer is unable
to assign, a priori, specific characteristics that constitute psychic income
for the ruler. The psychic component of income is solely in the mind of the
actor and hence cannot be measured. Some rulers may place value on being
altruistic and truly attempt to serve the interests of their constituents...
Others may value their reputation and legacy and act in manner to promote
and accomplish these goals. It is most likely due the difficulty in quantifying
psychic income that the notion has largely been excluded from analyses of
the actions of rulers. Despite difficulties in quantification, we see a plethora
of examples of actions taken by rulers that cannot be explained by the standard
rent-seeking models.
Milan Zafirovski (Human
Rational Behavior and Economic Rationality, Electronic
Journal of Sociology, 2003) argues that the rational
behavior of human agents is far from being invariably utility- and profit-optimizing,
and thus cannot be automatically reduced to economic rationality. His main
argument is that behavior can be rational not only on economic grounds but
also on non-economic ones. Hence human behavior can be non-rational in economic
and yet rational in extra-economic terms, i.e. economically irrational and
non-economically rational. He points out:
One can argue... that while measuring psychic-income
concepts like happiness is not as clear as the measurement of purely economic
utility, they also can be measured. Arguably, though happiness or psychic
income is relative and cannot be as precisely quantified as money income,
it might be to a degree and in the same way concepts like social prestige
can be numerically measured. Researchers in sociology and social psychology
have been measuring prestige for some time thus making this concept at least
an ordinal-level variable, though it is a subjective measure based on group
judgments.... For psychic income simply does not add up to money income --
and often vice versa -- and to that extent to utility in any sensible sense....
As egoist’s utility or money income seems of a qualitative different
kind to that of the altruist or psychic income, it is highly questionable
to subsume under the same category, i.e., utility optimization, even satisficing,
what are essentially different types of behavior, such as egoism and altruism,
status and wealth, political power and profit, and the like. In addition,
these types of income are quantitatively incomparable and incommensurable...
Zafirovski is however careful in pointing out the fallacy of treating psychic
income (especially in the light of its acknowledged importance in behaviour)
merely as an extension of economic thinking:
...for psychological, ideal and other cultural phenomena are
simply not what economists term income, profit, capital, and the like. In
this sense, the term psychic income appears as an oxymoron reflecting the
above fallacy, or at best an easy analogy and mere metaphor; this mutatis
mutandis applies to similar pseudo-economic terms, including political
profit, income, capital, exchange, or markets, etc.
Insights from terminology: stocks, shares, bonds and securities
In economic practice, stocks, shares and bonds are formalizations of notions
of mutual confidence in the social
construction of reality. With respect to
human values, they are as fundamental as the process of "sharing" and
the resultant pattern of "shares" --
recognized even by small children faced with the challenge of subdivision of
resources (whether equitably or with "preferential" allocation of
resources to older siblings or more respected "gang" members).
In this context, the analogue to the "stocks" typical
of the economic market (especially the commodities
market) is that of "setting
stock by",
namely by a valued standard of reference. With respect to "commodities",
these might be understood in the sense of the set of things which are commodious
or appropriate -- an old sense of "commodities". Again "bonds" outside
the economic market reflect an understanding of a strong relationship, typical
of kinship, team and tribal bonds -- and of elective affinities. A similar
point could clearly be made with respect to "securities" (physical,
affective, or otherwise) .
What is it then possible to learn about "investing" in human values,
and from the process of sharing, given the understandings and distinctions
made with regard to "financial instruments" and their distribution?
How do people "share" an investment in a value? Comments with respect
to human values are given in italics.
- Shares (Stocks): These are units of account, or equity
ownership, with respect to various financial instruments
including stocks, mutual funds, or limited partnerships. In the case of a
company, a share is one of a
finite number of equal portions in the capital of a company. The word stock
may refer specifically to a bond (eg in the UK). It can also be used more
widely to refer to all kinds of marketable securities. As noted above,
people and groups may subscribe to human values but the only quantitative measure
of their share would then be in terms of amounts of money allocated or number
of petitioners.
- Share issue: More generally, for a corporation, the stock
is the capital raised by a corporation, through the issuance and distribution
of shares. Group articulation and promotion of a declaration or manifesto,
or even the formation of an organization or the publication of a periodical,
may be considered to correspond to a "value issue" analogous to
a "share
issue". These are effectively all invitations to subscribe to the associated
values.
- Dividends: Shares entitle the
owner to a proportion of distributed, non-reinvested profits, known as dividends,
and to a portion of the value of the company in case of liquidation. As
noted earlier, dividends are an indication of the sense of reward derived
from subscribing to the values, whether in the short, medium or longer-term. It
could possibly be understood as a form of "psychic interest" in the light
of understandings of psychic income.
A shareholder is then any person or organization which holds shares,
or fractions of shares, of a corporation's stock.
Those subscribing to a value, or set of values, may be described as value
shareholders.
There are several types of share:
- Ordinary shares (Common stock): This is the
most common form of share. Shares
can be voting or non-voting, meaning they either do or do not carry the
right to vote on the board of directors and corporate policy. Whether
this right exists often affects the value of the share. Holders
may receive dividends in line with the company's profitability and
recommendation of its directors. In the case of human values, these
could be considered as the ordinary subscribers to a value. As such they
clearly have some right to speak to the value and in its name. They may
receive some notional reward for doing so -- if only in the form of
self-satisfaction. They may be rewarded to a greater degree if duly recognized
by those claiming to manage relevant value funds. Examples include the
recognition accorded by the Right Livelihood Foundation, and other such
awards, notably those for outstanding performance or courage (as medals,
for example).
- Preference shares (Preferred stock): Although normally
fixed-income shares, compared with common stock, these stocks enjoy
a number of preferences, such as a higher dividend and preferential payment
of dividends (before ordinary shareholders). In return, however, preferred
stocks generally do not have voting rights at the Annual Shareholders'
Meeting. They may have enhanced voting rights such as the ability
to veto mergers or acquisitions or the right of first refusal when new
shares are issued (i.e. the holder of the preferred stock can buy as
much as they want before the stock is offered to others). In the
case of human values, these may be associated with the exemplars
of such a value. There is a process whereby those ordinary value
shareholders who are widely recognized are then treated preferentially,
if not deferentially, in relation to the values for which they are exemplars.
Laureates of the Nobel Peace Prize are an example of those who effectively
become the equivalent of preference shareholders.
- Treasury stock: These are shares
that have been bought back from the public. Such stock is
considered issued but not outstanding. This suggests the existence
of an interesting process in relation to values.
- Multiple class: In this case there are several classes
of shares (for
example Class A, Class B, and Class C) each with its own advantages and
disadvantages. This suggests the existence of an interesting equivalent
in relation to values.
The number
of issued and outstanding shares for the specified security may be used in
the calculation of index values.
An equivalent is to be seen in the
methods used in various value surveys.
- Bonds (Bills or Notes): These are any interest bearing
or discounted government or corporate securities that obligate the issuer
to pay the bondholder a specified sum of money, usually at specific intervals,
and to repay the principal amount of the loan at maturity. A bond is therefore
a debt security, in which the issuer owes the holders a debt and is obliged
to repay the principal and interest (the coupon). A bond is just a loan,
but in the form of a security, although terminology used is rather different.
Bonds enable the issuer to finance long-term investments with external
funds. From a human values perspective, given the special relation
to government, the equivalent to a bond would seem to be intimately related
to the values embodied in any social contract through which the integrity
of the collectivity is defined.
- Bond issue: They are
issued by governments and companies as a means of raising capital.
The issuer is equivalent to the borrower, the bond holder to the lender
and the coupon to the interest. Governments can be understood to
promulgate new values in seeking support and commitment from their
populations. People may then respond by effectively lending such commitment
for a period typically specified in the promise made by government
at the time. This is most obvious in the case of the values associated
with plans promoted by government for 5 or 10 years or more.
- Interest: This
generally entitles the holder to a fixed-rate of interest during the
life of the bond and to repayment of the amount of the bond at maturity.
In the value case, the bond holder may be said to benefit in a continuous
manner throughout the life of the bond -- in the expectation of eventually
recovering the investment. As noted above, criticism of "interest"
by some religions and in the promotiojn of complementarty currencies
may suggest richer and more sustainable possibilities.
- Price: The market price of
a bond depends on the coupon rate, the market interest rate and the number
of years to maturity. Bond prices are inversely related to interest rates.
The price of a value bond can be explored in the light of understandings
of examples such as the price of friendship, the price of peace, the price
of freedom, etc
- Conditions: Other stipulations may also be attached
to the bond issue, such as the obligation for the issuer to provide certain
information to the bond holder, or limitations on the behaviour of the
issuer. In the case of values, both parties may indeed impose conditions
on any value bond.
In some cultures, saving a life may create a special binding obligation
on the person saved. The obligations associated with the Japanese concept
of giri offers an interesting example.
- Maturity period (or date): This is the life of a
bond or security, namely the date on which the principal amount of
a bond is to be paid in full. Bonds are generally issued for a fixed
term (the maturity) longer than one year (whereas stocks may be outstanding
indefinitely). A bond usually ranges from
5 to 15 years but a few government bonds may even have a lifespan of
25 to 50 years. Debt securities
with a maturity shorter than one year are typically bills. Perpetual bonds (Perpetuities) have
no maturity date, some are still traded having been issued in the 19th
century. Some ultra long-term bonds will only mature in the 24th century
with a principal currently valued near zero. The period of a value bond
is most evident in interpersonal relationships, notably friendships or those
partnerships with even greater commitment -- notably those involving membership
in groups whose role takes precedence over that of government (eg secret societies).
The commitment at marriage, for example, may be "until death do us part" (notably
the commitment made by nuns in their "marriage" with Christ). Some bonds may
even be understood to be "eternal". In some cultures, certain bonds may be understood
to have been undertaken in previous incarnations -- or as having existed "forever". For
the religious, the maturity of a bond with any form of deity may be associated
with processes of reward associated with notions of heaven (eg "sitting on the
right hand of God"). In a secular context, the maturity of value bonds associated
with government commitment may be presented as closely related to notions of
benefits for a person's "grandchildren", or "the next generation"
There are many kinds of bond:
- Fixed rate
bonds: These have
a coupon that guarantees a fixed interest throughout
the life of the bond.
In the value case, this may perhaps best be understood in terms
of the constancy of friendship or of the support offered by a community.
In Japan, this is even clearer in the constant support offered by a
corporate environment. A degree of equivalence in the West may be
found in the possibly life-long support offered by an institutionalized
environment (eg a government bureaucracy, academic tenure systems,
or the military)
-
High yield bonds:
These are bonds that are rated below investment-grade securities by the credit rating agencies.
As these bonds are relatively risky, investors expect to earn a higher
yield. They are considered to be
"speculative" because the issuing company’s ability
to meet the debt obligations is less certain. These bonds are popularly
known as junk bonds.
Equivalents in the value case are to be found in relation to the bond
created with those issuing any form of prediction or prophecy. This may
range from the "high yield" offered by marginal or alternative political
parties to the "end-times" scenarios offered by religious fundamentalists. They
may include predictions offered by doom-mongers (peak oil, asteroids, etc),
conspiracy theorists, or channellers. Although such bonds offer a
higher "yield" in psychological benefit, the fact that the commitment to
them may prove unfounded also leads to them being rated by the mainstream
analysts as "speculative" and "junk".
- Floating rate notes (FRN's):
These bonds have a coupon that is linked to a money
market index, such as LIBOR or EURIBOR.
The coupon is then reset periodically, normally every three months.
The money market, in the value case, may be understood as a
measure of general confidence. Clearly there is a case for exploring
the manner in which the psychic yield on certain types of bond
may be periodically adjusted in relation to general levels of confidence
rather than being independent of it.
- Zero coupon bonds:
These bonds do not pay any interest. They trade at a substantial discount
from par value.
The bond holder receives the full principal amount as well as
value that has accrued on the redemption date. Such bonds may
be created from fixed rate bonds by financial institutions by "stripping
off"
the coupons. In other words, the coupons are separated from the final
principal payment of the bond and traded independently.
In the value case many bonds may be of this form, postponing any reward
in the light of a promise of a final recompense commensurate with
the original value commitment, plus that for the intervening period. Parents
may promote such value bonds. Notable examples are however those bonds
promoted on the basis of spiritual values explicitly based on non-expectation
of "earthly" rewards -- recompense being associated with the afterlife.
- Inflation linked
bonds: With these bonds, the principal amount
is indexed to inflation. The interest rate is lower than for
fixed rate bonds with a comparable maturity. However, as the
principal amount grows, the payments increase with inflation.
The UK was
the first to issue inflation linked Gilts in the 1980s. Treasury
Inflation-Protected Securities (TIPS) and I-bonds are
examples of inflation linked bonds issued by the USA.
In the value case, the bonds would bear some resemblance
to the points made above with respect to floating rate
notes.
- Subordinated bonds:
These bonds have a lower priority than other bonds of the issuer in case
of liquidation. In case of
bankruptcy, there is a hierarchy of creditors. First the liquidator is paid,
then government taxes, etc. The first bond holders in line
to be paid are those holding what is called senior bonds.
After they have been paid, the subordinated bond holders
are paid. As a result, the risk is higher. Therefore, subordinated
bonds usually have a lower credit rating then senior bonds.
The main examples of subordinated bonds can be found in
bonds issued by banks, and asset-backed securities. The
latter are often issued in tranches. The
senior tranches get paid back first, the subordinated tranches
later.
This form of bond is particularly worth exploring
in the value case in the event of any form of default in
the light of any sense in which value bonds may have
been prioritized -- or may need to be prioritized. Especially
agonizing examples are provided in emergency situations
in which a parent may have to choose which of two children
to save -- some religions may prioritize an unborn child
over the mother where only one can survive a problematic
birth process. More generally this is related to the value
challenges of any process of triage. Examples at a planetary
level may be seen in choices effectively made between developing
and industrialized countries, or between humans and other
species.
- Bearer bond: This is
an official certificate issued without a named holder. In other
words, the person who has the paper certificate can claim the value of
the bond. Often they are registered by a number to prevent counterfeiting,
but may be traded like cash. Bearer bonds are very risky because they can
be lost or stolen.
A value equivalent is an obligation to an unidentified party, perhaps most
simply illustrated by a blind date.
- Securities: A general term signifying an instrument
of ownership position in a company (a share), a creditor relationship
with a company or government body (a bond), or rights to ownership such as
those represented by an option, subscription right or subscription warrant.
Bonds and stocks are both securities, but the difference is that stock holders
own a part of the issuing company (have an equity stake), whereas bond holders
are in essence lenders to the issuer.
Understood in this general sense, value securities essentially describe
the pattern of value relationships
in which a person or a group is embedded -- relationships which are effectively
a source of security. Security in this sense may range from physical, through
affective, mental, or spiritual forms. As such it may include cultural, philosophical
and epistemological variants.
- Gilt-edged
securities (Gilts): Debt securities issued
on behalf of a government. In a value sense, it is in these forms
of security that the highest level of confidence are placed. They
are values promulgated and sustained by a system of governance, whether
this is associated with a country, a local authority, a religion,
or some other authoritative body. It could be argued that the
Universal Declaration of Human Rights (as managed by the UN) offers
a selection of such core values (although omitting many that are promoted
from a more transcendental governance perspective by religions, as presented
in the Global Ethic). Interesting cases are provided by ideological movements
and schools of thought (eg communism, capitalism, the military) especially
when confidence in them is lost.
- Asset-backed securities:
These are bonds whose interest and principal payments are backed by underlying
cash flows from other assets. Examples of asset-backed securities are mortgage-backed
securities (MBS), collateralized
mortgage obligations (CMO) and collateralized
debt obligations (CDO).
From stock exchanges to "value markets" and "value exchanges"?
(As above, the possible equivalent with respect to human values is
indicated in italics)
The so-called capital
market is the market for securities (thus also known
as the securities market), where companies and government can raise long-term
funds. The stock market and
the bond
market are parts of the capital market.
A distinction is made within the capital market between the primary
market where new issues are distributed to investors, and the secondary
market, where
existing securities are traded. Note that an Alternative
Investments Market (AIM) has been created as a sub-market of the London Stock Exchange,
to allow smaller companies to float shares with a more flexible regulatory
system.
In the case of human values, the notion of "capital" is perhaps best
understood through terms such as "moral capital", "ethical capital", "spiritual
capital", "emotional capital", or "intellectual capital". Fundamentally,
as in the financial case, it is a question of the credibility on which
confidence is built to enable the establishment of sustainable relationships
(for whatever period viable transactions are required). The challenge of
"raising capital" is thus one of raising confidence through various forms
of presentation and promotion that provide a sense of security. The process
of "talking it up" is as meaningful in the financial markets as it is with
respect to the promotion of other forms of credibility -- for example in
the motivation of soldiers going into battle. The distinction in the
values case between stocks and bonds has been made earlier. But clearly
a distinction can also be made between a "primary market" through which
new values are offered and a "secondary market" through which existing
values are appreciated or depreciated.
The capital market can be contrasted with other financial markets through
which various forms of economic value are exchanged::
- the money market which
deals in short term liquid assets. It is the financial market
for short-term borrowing and lending, typically up to thirteen months. This
contrasts with the capital market for longer-term funds. The points to
a possible contrast in the values case between short-term values and longer-term
values -- especially how they are called upon in practice. A distinction
can indeed be made between short-term value-based thinking and that based
on more en during values.
- the foreign exchange
(currency or forex or FX) market exists wherever
one currency is traded for another. It is by far the largest market. The
human value equivalent is especially interesting since it points to the daily
need for transactions across the interface between the different sets of values
typical of different "cultures" (exemplified by languages, ethnic groups, age
and gender, disciplines, etc). In particular it highlights the challenge of
"convertible" and "non-convertible" value currencies -- which are the bane
of many communication processes. But also of great interest is the manner
transactions can be handled where a much appreciated value within
one culture has little (or no) value in another culture (or vice versa).
- the commodity market for
which trading facilities are provided through so-called commodity exchanges
specializing in future contracts on commodities
- the derivatives
market deals in derivative
contracts typically traded on a futures
exchange (also termed a futures and options
exchange, rather than a derivatives exchange) which is managed by a corporation
or mutual organization (see checklist).
This form of exchange developed from commodity exchanges through the addition
of other products such as short term interest rates or bonds. In addition
to futures contracts, they now include trading on options,
options on futures, and other varieties. The method of trading is called
exchange trading, as opposed to over-the-counter (OTC) trading. The term
derivatives may lead to confusion, as most derivatives are traded OTC, and
most derivatives, such as swaps are rarely exchange traded. This points
to an interesting way of framing reflection on future value-based "contracts" --
especially future relationships (where emphasis may be placed on "options")
between groups, and notably between individuals. In
the case of religious values, there is of course a case for examining the
performance of a portfolio of values, such as "heaven" or "hell", as an ultimate
understanding of "futures" .
- the insurance market. In
the case of values, this facility raises the question of how to insure against
value-related risks
Stock exchanges (see checklist)
tend to have the following characteristics:
- Access to capital: An exchange provides access to capital
and facilitates securities dealing through speedy and innovative trading
platforms and services. As framed in the case of human values, the credibility
of a value is achieved through various contexts that can be understood as
analogous to a stock exchange. Groups, especially international organizations
(cf Yearbook of International
Organizations), can be understood as performing
exactly this function of collectively determining the worth of values in
relation to each other. Some organizations of this kind are actually set
up as exchanges (or federations of exchanges), as for example:
- International Petroleum Exchange
- World Federation of Exchanges
- Union of Arab Stock Exchanges
- Asian and Oceanian Stock Exchanges Federation
- Asian Regional Exchange for New Alternatives
- European Commodities Exchange
- Global Exchange for Social Investment
Ironically the trading room of stock exchanges is
not too different architecturally from the plenary conference room of such
bodies -- where values are debated and prioritized through a voting process
(possibly even an electronic one). Of course, as with electronic stock market
trading, increasingly values may be said to be traded virtually through electronic
fora and the like. More generally it may be said that, in the case of values,
the role of a stock exchange is performed in part by the role of the media
in changing appreciation of a value -- but possibly only to the same degree
as it constitutes an extension of the financial stock exchange, namely without
obviating the need for contexts in which values can effectively be traded.
It is possible however that electronic fora and blogs may dramatically modify
this in the case of human value trading.
- Market stabilization : As an organization, an exchange
ensures an orderly marketplace (whether physical or virtual) for trading
shares, where investors (represented by stock brokers) may buy and sell shares
in a wide range of companies. In the case of human values, many international
bodies would argue that an important reason for their creation is to be
stabilize the set of values that are the core of their membership. Their
regular meetings offer an orderly environment for this process although increasingly
aspects of that process are handled through virtual conferences hosted by
the organizations.
- Listing requirements: A given company will usually list
its shares in only one exchange by meeting and maintaining the listing requirements
of that particular stock exchange. An analogous situation may exist in
the relationship between an international organization and its members. Many
organizations have (often stringent) criteria for membership. Some organizations
may even oppose adherence of a member to another body and may limit the number
of members from a single country
- Inter-market quotation: Through an inter-market quotation
system, stocks listed on one exchange may also be bought or sold on several
other exchanges, including relatively new internet-only exchanges. This is
done to broaden their investor base. It is typical of many values that
they are the subject of debate in many different national, regional and international
fora. Whilst particular values may be differently appreciated in each, the
valuation made may well be communicated between such contexts -- effectively
an "inter-market" system of quotation which may indeed be accelerated
through electronic fora.
- Pricing discrepancies between exchanges: Although it makes
sense for some companies to raise capital by offering stock on more than
one exchange, with electronic trading, there is little opportunity for private
investors to make profit on pricing discrepancies between one stock exchange
and another. As such, arbitrage opportunities disappear almost immediately
due to the efficient nature of the market. Clearly in the case of human
values, where there is no unique value currency (or equivalent to the dollar),
values will be differently appreciated in different contexts. These discrepancies
may well be exploited.
In the human values case, it would appear that there is a strong argument
for exploring how the many nonprofit organizations and their conferences effectively
function as "value exchanges" -- whether at the local, national, regional or
international level, and whether they are (inter)governmental or nongovernmental.
As with stock markets, such bodies are the contexts in which:
- new values are "issued" with an associated promotional process,
amplified by media involvement
- values are appreciated or depreciated (to the point of rejection) relative
to each other, through a trading process by which they are prioritized
- value brokers are recognized, accredited or discredited
Assemblies of religious bodies may also be understood in this light, and
especially when convened for inter-faith dialogue. In this respect there is
considerable irony to the fact that the centennial of the Parliament
of the World's Religions (Chicago, 1993), with its core Assembly of Religious
and Spiritual Leaders, was held in the former Chicago Stock Exchange (cf Learnings
for the Future of Inter-Faith Dialogue: Questions arising from the Parliament
of the World's Religions, 1993)
Concern has frequently been expressed by the principal religions that
individuals are increasingly faced with what amounts to a "religious supermarket"
amongst which people are effectively encouraged to feel free to choose --
selecting aspects of one religion and matching them with features of
another. What is selected in this way might however be considered to include
"values" -- as respectively promoted by each religion. Further
exploration is required to determine whether this "supermarket" could be
better understood as the religious segment of a "values market" from
which individuals build up a "portfolio" of values according to their investment
strategy and preferences. This framing could offer a way of looking at the
traditional long-term religious strategies of acquiring "merit" in anticipation
of a desired "afterlife".
It is appropriate to note that the expression "psychological stock exchange"
has been used by Jean Baudrillard (The
Melodrama of Difference, 2006) as a feature of modernity.
Value transactions: "buying" and "selling"
The question is whether the nature of trading transactions in a stock market
can offer any insights into the kinds of "trading" transactions that
are (or might be) associated with analogues to a stock market, namely plenary
conference sessions (or their electronic variants). The main transactions are
of course buying and selling,primarily undertaken by brokers, and supported
by a flow of communications in which the media play an important role.
- "Buying": There are various methods
of buying stocks and financing their purchase. This effectively means taking
a financial risk.
In the case of human values, the process of buying may be best understood
in terms of such phrases as "buying into", "subscribing to", "committing
to" or "conversion" (notably in relation to religious values).
Through this process, the buyer effectively "holds the value", "owns
to the value", or
"possesses the value" (and may consequently be appreciated for
doing so). The acquirer may be perceived as embodying the value or imbued
with the value -- or even, possibly more problematically, as being "possessed
by" the value.
Buying into a value may be appropriately perceived as
taking a risk -- as the discourse around any form of "commitment" or "conversion"
recognizes.
- Via broker: Typically this is done through
a stock broker, listed with the stock exchange, who arranges
the transfer of stock from a seller to a buyer. In the case of human values, the role of broker is discussed in detail
below.
- Full service brokers: These usually charge more per
trade, but give investment advice or more personal service;
- Discount
brokers: These offer little or no investment advice but charge less
for trades.
- Banks or credit unions: These
may serve as another kind of broker by setting up a deal with
either a full service or discount broker.
- From company:
Most companies will, under certain conditions, allow
the purchase of shares directly from the company through their investor's
relations departments.
- Direct:
Usually possible, if at least one share is already owned, However,
the initial share of stock in the company will have to be obtained
through a regular stock broker.
- Direct Public Offerings: A direct public offering is an initial
public offering, typically sold by the company itself, in which the
stock is purchased directly from the company, usually without the
aid of brokers.
- Financing purchase of stock:
- With funds: The purchase of stock is made with money
currently possessed by the buyer
- On margin: Buying stock with money borrowed against the stocks
in the same account. As collateral, these stocks
guarantee that the buyer can repay the loan; otherwise, the stockbroker
has the right to sell the collateral to repay the borrowed
money. He can sell if the share price drops below the margin requirement,
at least 50 percent of the value of the stocks in the account. Buying
on margin works the same way as borrowing money to buy a car or a
house using the car or house as collateral. Moreover, borrowing is
not free; the broker usually charges 8-10 percent interest.
- "Selling" Selling stock is procedurally similar
to buying stock, notably with the aid of a broker. This may be understood
as taking a financial risk -- or avoiding one. It is important to distinguish
with promotion of the stock to potential purchasers and the act of selling
itself. In
the human values case, it is also important to distinguish between:
(a) promoting the value, understood as marketing it; (b) achieving
"buy in", "commitment
to", "subscription
to", or "conversion" (notably in the case of religious values)
on the part of another; and (c) any implication that, by "selling" the
value, the "seller" is effectively "selling out". In
this last case the seller ceases to "hold
the value", "own
to the value", or
"possess the value" (and may consequently be judged pejoratively
for doing so). The seller is then perceived as no longer embodying the
value or being imbued with the value -- possibly to be stigmatized as "backsliding"
with respect to religious and ideological values. In some cases, as with
ideological "re-education" and deprogramming those associated with
sects, ensuring that the "seller" is no longer "possessed
by" the value may be perceived
very positively. Dispossessing oneself of a value may
well be appropriately perceived as taking a risk -- as the discourse (possibly
accompanied by threats) around any form of "commitment" or "conversion"
recognizes.
- Strategies: Generally,
the investor wants to buy low and sell high, if not in that order (short
selling); although a number of reasons may induce an investor to sell
at a loss.
- Transaction fees: As with buying a stock, there is a transaction fee
for the broker's efforts in arranging the transfer of stock from a seller
to a buyer. This fee can be high or low depending on which type of brokerage,
discount or full service, handles the transaction. After the transaction
has been made, the seller is then entitled to all of the money.
- Taxation on earnings: An important
part of selling is keeping track of the earnings. Importantly, on selling
the stock, in jurisdictions that have them, capital gains taxes will
have to be paid on the additional proceeds, if any, that are in excess
of the cost basis.
Value promotion -- and the role of the media
In the economic case, any purchase or sale is heavily
influenced by the promotion through the media of the stocks, bonds, or other
financial securities. This promotion is undertaken by the company seeking
to raise capital, to justify the confidence of investors, or to promise future
performance. Extensive commentary in the media may be made by financial analysts
influencing some to buy and others to sell. Rumour-mongering may perform a
significant role in interpreting available information. The securities may
be "talked up" by interested parties.
Promotion is especially important
when issuing a new stock. Private companies may seek public participation,
becoming a public company, by floatation of their shares on a stock exchange
primarily in order to raise funds to grow their business. A secondary objective
is to achieve extra exposure and credibility with existing and potential investors.
Both objectives may be associated with plans for acquisition of other companies
through use of the shares. Floatation may also be used as a means of extending
participation to directors and staff..
In the values case, the media also perform
a significant role in carrying and interpreting information from press releases
provided by the group promoting the value. Examples are evident in the case
of values such as peace, justice, health, and the like. Many organizations
conduct their own media campaigns in support of positive values and against
negative values. Such organizations may range from (inter)governmental agencies
to (international) nongovernmental bodies of every kind.
Values may be promoted widely or to relatively specialized or closed groups. Promotion
may be associated with efforts to seek wider adherence to the values through
converting an essentially private set of values into a set to which the public
is invited to adhere. This exposure and increased credibility may be envisaged
as a strategy to subsume other sets of values held by other groups.
Value brokers: buying and selling
In the financial case, a broker is an agent, or middle man, who facilitates
the buying and selling of securities on behalf of investors on the stock exchange.
The broker may be a company and is recompensed through a commission
on each transaction. Ironically, important in the selection of a broker may
be non-financial value criteria, notably "honesty", reinforced by industry
standards for "ethical" behaviour (often formulated by individual stock exchanges).
A variety of individuals and groups can usefully be considered as acting
as value brokers:
- religions and their priesthoods have an especially important role in promoting
"positive" values and adherence to them by their believers and condemning
"negative" values and ensuring that their believers disassociate themselves
from them.
- song writers and singers play a major role in promoting particular values,
notably in relation to the social revolution of the 1960s (Joan Baez, Beatles,
etc). This role was exemplified in history by wandering minstrels and troubadours.
- media programmers (exemplified by disc jockeys) now play a central role
in the promotion of values through the selection of particular songs for
radio; similar arguments apply to other media, notably films.
- artists, literature -- promotional literature for a value
- story tellers have long performed the role of articulating and maintaining the values of a culture
- politicians and political parties may seek to articulate and promote sets
of values important to their (desired) constituencies, notably "traditional
values" and, most recently, "family values"
Value brokers, aided and abetted by the promotional activities of the
groups concerned, help to define what values "are in" and which
ones "are out" or "outdated".
Learnings from financial market strategies: investment styles and preferences?
As indicated in the following table, investment strategies in financial securities
distinguish between short-, medium- and long-term periods over which risk will
be accepted in order to derive benefit. With respect to risk, a distinction
is made between low, medium and high risk. In addition to such conventional
distinctions, a distinction is now increasingly made by some between "ethical"
and "unethical" investments, notably in relation to corporate social responsibility
and social investment. With human values, there is a case for distinguishing
between adherence to a value for the short-, medium-, or long-term. Such adherence
may indeed be understood as low, medium or high risk. As in the financial
case, short-term, high-risk investment in a value may be associated with a
high degree of opportunism to enable a "quick killing" -- which in the values
case could be held to be cynical adoption of values purely as a matter of
(selfish) convenience.
| Investment strategies
and preferences |
| |
Short-term |
Medium-term |
Long-term |
| |
Neg. |
Pos. |
Neg. |
Pos. |
Neg. |
Pos. |
| High-risk |
. |
. |
. |
. |
. |
. |
| Medium-risk |
. |
. |
. |
. |
. |
. |
| Low-risk |
. |
. |
. |
. |
. |
. |
The distinction between "ethical" or "unethical" investment
may be fruitfully generalized in terms of "positive" ("constructive")
or "negative" ("destructive") values -- complexifying
the table (as shown above). This extension makes it possible to encompass
situations where people or groups invest in "negative" values
rather than in "positive" values. Obvious examples include:
the glorification of "war" in preference to "peace"; "wealth" in
preference to "poverty",
"intolerance" in preference to "tolerance"; "selfishness" in
preference to "altruism"; "materialism" in preference
to "spirituality".
Such
examples point to the ambiguity of any positive-negative connotations.
This issue has been extensively explored elsewhere with respect to
a very comprehensive range of values in the Human
Values Project (as part of the Encyclopedia
of World Problems and Human Potential) -- 4148 "constructive" [list
of key values]
and 7246 "destructive" values [list
of key values]. These
were in turn clustered in terms of 220 value polarities [checklist]
specifically in order to respond to ambiguity in value-charged word
connotations.
The
resultant value database has been used experimentally to associate
thousands of international organizations with both the "positive" values
to which they claim to aspire (in their constitutions) and with the "negative" values
that may be their operational preoccupations in alleviating problems
that inhibit the dominance of the "positive" value. This
highlights the fact that organizations may be more focused on alleviating "problems"
than in embodying or celebrating "positive" values. It
is in this sense that value investment may be in problem alleviation
rather than in what might be more conventionally recognized as "positive"
values. It was in fact concluded that no such problem (as a "negative"
value) could be meaningfully recognized without recognizing that it
effectively concealed an implicit "positive" value. Just
as the financial market may be understood as split into ethical and
unethical investment opportunities, so the values market might be understood
as split into "positive" and "negative" investment
opportunities.
In the case of religious values, there is of course a case for
recognizing their polarization into portfolios of "sins" and "virtues"
-- with the ultimate value (or value portfolio) of "heaven" or, alternatively,
"hell".
The distinct strategies of mutual fund managers offer useful insights:
- Active management:
In this case fund managers strive to outperform the market by identifying
stocks that could produce better returns and beat the overall market
(or target index).
- Passive management: In this case, fund managers
do not attempt to beat the market. Instead, they try to mirror the
performance of a selected market index (such as the FTSE 100).
In the values case a similar distinction could be made in the case
of value brokers offering advice to value investors:
- Active management: In this case an effort
is made to "outperform" the values market by identifying values
that could produce better returns and beat the overall market (or
target index). This might best be understood in terms of efforts
to achieve a "strong position" or occupy the "moral highground".
More aggressively it might be understood as an effort by a particular
group (notably a religion) to "corner the market" on a
set of values
- Passive management: In this case, fund managers
do not attempt to beat the market. Instead, they try to mirror the
performance of a selected market index (such as the FTSE 100).
Comprehension of stock exchange operation through
metaphor
A number of studies and comentaries have focused on the metaphors
through which understanding of stock trading has been been articulated.
The studies include:
- C. J. Lofting. Market
Games: the "what" and the "where" in
the stock market. 1999
- Michael W. Morris, Oliver J. Sheldon, Daniel R. Ames and Maia J.
Young. Metaphors
and the Market: consequences and preconditions of agent and object
metaphors in stock market commentary
- Judy Steininger. The
bond market as metaphor for American society. The
Business Journal of Milwaukee, 25 July 1997 [text]
- Tom Walker. Metaphors
affect investors, researcher says. Statesman.com
/ Cox News Service, 9 October 2005
- Stefan Marti, Deva Seetharam and Hiroshi Ishii, WeatherTank:
A Tangible Interface using Weather Metaphors
- Fabio Cifariello Ciardi, sMAX:
a multimodal toolkit for stock market data sonification Proceedings
of ICAD 04:Tenth Meeting of the International Conference on Auditory
Display, Sydney, Australia, July 6-9, 2004
- J.M. Seymour, Stock
Market Pie: Grandma Helps Emily Make A Million
- Tim Dwyer and Peter Eades, Visualising
a Fund Manager Flow Graph with Columns andWorms
- Andrew Salway and Khurshid Ahmad, The
Role of Metaphors in Financial Texts, 1997
- Geoff P. Smith, How
High Can a Dead Cat Bounce?: metaphor and the Hong Kong stock
market. Hong Kong Papers in Linguistics
and Lanuage Teaching, 1995
- A Hübler. On Metaphors Related to the
Stock Market: who lives by them? Duisburg, L.A.U.D., 1989
- M. Hundt. Modellbildung in der Wirtschaftssprache.
Zur Geschichte der Institutionen- und Theoriefachsprachen der Wirtschaft.
Tübingen, Max Niemeyer, 1995
- Christopher M. Schmidt. Metaphor and Cognition:
a cross-cultural study of indigenous and universal constructs in
stock exchange reports.
Language Center at the Åbo
Akademi University, Finland
- Donald N. McCloskey, Metaphors
Economists Live By, Social
Research,
1995, Summer
Such studies offer insights into how a values stock exchange might
be understood to operate -- and how it might
already be experienced, whether by individual or institutional "investors"
in human values. They
point to the possibility of providing greater comprehension of the "feel"
and context of the exchange trading process.
Learnings from financial analysis and modelling
There is a very considerable interest, on the part of those extensively
involved in investment in financial securities, in the insights offered by
financial modelling (cf
Simon Beninnga, Financial
Modeling, 2000; Sergio M. Focardi and Frank J. Fabozzi, The
Mathematics of Financial Modeling and Investment Management, 2004).
The central aim of such modelling is valuation under uncertainty, namely how
to estimate the value of a security when its future trajectory, or the trajectory
of the other securities or economic variables it depends on, is unknown. They
make extensive use of mathematics. Of particular interest is the management
of portfolios according to investment preferences for risk and return (cf Björn
Palmgren, The
Need for Financial Models, 1999). There are many such models. Some
of these are highly confidential and proprietary, notably those used in automated
trading (or alogarithmic trading) on the stock exchange. Algorithmic
trading is the use of very complex computer programs to trade financial
instruments (e.g., stocks, bonds, etc.) in electronic markets.
Other analytical approaches include:
- Game theory: Many studies have been made of the relevance
of game theory to understanding stock market operations (cf Ronald B. Shelton,
Gaming
the Market: applying game theory to create winning trading strategies,
1997; Benoit S. Montin, A
Stock Market Agent-Based Model
Using Evolutionary Game Theory, 2004)
- Complexity theory: Following the work of Benoit
Mandelbrot,
considerable
interest has been aroused about the application of complexity theory to price
movements in financial markets.(Benoît
Mandelbrot and Richard L. Hudson, The
(Mis)Behavior of Markets: a fractal view of risk, ruin, and reward,
2004; Blake LeBaron. Building
the Santa Fe Artificial Stock Market, 2002; Edgar
E. Peters, Fractal
Market Analysis: applying chaos theory to investment and cconomics, 1994)
In distinguishing the basis for the two forms of analysis in the stock market,
technical and fundamental, C. J. Lofting (Market
Games: the "what" and
the "where" in
the stock market, 1999) focuses on a dichotomy that is equally relevant
in the case of human values:
From this brief analysis we can see the fundamental
neurological processes, manipulation of the what/where dichotomy, at work in
one of the most dynamic and at times abstract disciplines used in society and
across all cultures within the species, the discipline concerned with financial
markets.
What is of interest is that behind all of the words used in these various
disciplines there is an invarient pattern of meaning used by ALL disciplines
that use dichotomies as fundamentals. It is this template that
acts to encode all words with a sense of meaning, something we 'feel', and
as such even enables us to make analogies across disciplines since it is the
invarient patterns of emotion that resonate with meaning rather than any words.
Furthermore, since the market forces emphasise the use of profit/loss, long/short,
put/call, bear/bull dichotomies etc etc so patterns we see in the market
are in fact patterns found in the template; For example, wave
patterns observed in market processes [C. J. Lofting, Patterns
in Markets : the imposition of thinking patterns and the establishment
of ‘meaning’ in
trading systems, 1998] can be traced back
to (a) recursive dichotomisations combined with (b) indeterminant states
and (c) different degrees of feedback considerations. Thus all possible
expressions are 'known' and we need to find the current 'flavour of the
month'.
In the values case, the main area in which value analyses are done is
in relation to value-related opinion surveys, notably with respect
to customer values (for marketing purposes) or environmental values -- typically
in order to place an economic value on human values (Rajaram Krishnan, Jonathan
M. Harris, Neva R. Goodwin (Eds), Survey
of Ecological Economics, 1995).
This is not the concern of this exploration. The possibility of the kinds
of complex modelling and analyses performed in the economic case is not apparently
considered in the development of policy options or in the management of value
portfolios. Any such portfolio management tends to be framed as an art, unassisted
by mathematical modelling -- as in reflection on lifestyle design (cf Mary
Catherine Bateson, Composing
a Life, 1990; Organization
and Lifestyle Design: characteristics of a nonverbal structural language,
1978).
Value surveys typical endeavour to identity with what values people identity
(World Values Survey, European
Values Study, [more].
These may endeavour to focus on the manner in which such values relate to social
change in terms of the "blue chip" values of "democracy", "freedom" etc
(cf Ronald Inglehart and Christian Welzel, Modernization,
Cultural Change and Democracy: The Human Development Sequence, 2005;
Mansoor Moadell, Religion,
Democracy and Gender: Findings from Value Surveys in Islamic Countries,
2003). Analyses tend to focus on how the adherence to (specific) values has
changed between successive surveys, possibly of annual or greater periodicity
(cf World Database of Happiness,
Average
happiness in 90 nations 1990-2000,
2004; Edwin J. Feulner and Doug Wilson, Getting
America Right: The
True Conservative Values Our Nation Needs Today,
2006). The Global
Values Monitor (developed by the Global
Values Network) is,
for example, an instrument to survey and measure the "values mix" present
in either an organisation, a region or a country.
Of particular interest is the value-survey analysis that has identified
a group of people who have invested in a particular portfolio of values.
As a result of this work, the group has been recognized as a "sub-culture",
labelled the "cultural creatives" (Paul
H. Ray and Sherry Ruth Anderson, The
Cultural Creatives: how 50 million people are changing the world, 2000). Whilst that sub-culture is acknowledged to have low self-recognition, it might be asked whether sub-cultures within that group had a higher sense of identity.
Such analyses are primarily concerned with identifying the sets of values
with which people identity. Any similarity to the economic preoccupation
with "portfolio management" is limited to political agendas
encouraging people to shift to a different value portfolio ("in their
best interests" as defined by the promoter of the values in the promoted
portfolio). This may indeed be expressed in terms of social change, paradigm
change, patterns of consumption, or the promotion of democracy.
Two forms of analysis mentioned in connection with stock market values have
also been explored in relation to non-=economic values:
- Game theory: This has been used to explore the natuire
of the social contract, that could be interpreted in terms of a pattern
of value relationships (cf Kenneth
M Binmore. Game Theory and the Social Contract, 1994; ) Of particular interest
is the adaptation to business ethics (Christopher W. Morris and Peter Vanderschraaf
(Eds). Game Theory and Business Ethics, Business Ethics Quarterly,
9, 1999, 1). An associated approach is via social contract theory because
of its clear correspondence to the exchange relationships central to marketing
thought and practice as explored by Thomas W. Dunfee1, et al Social
Contracts and Marketing Ethics, Journal of
Marketing, 63, 1999).
The use of game theory has also been related to the development of a global
ethic (cf D Loye. Can
science help construct a new global ethic? The development and implications
of moral transformation theory. Zygon,
1999)
- Complexity theory: Pointers to the possibility
of the application of complexity theory to dynamic systems of ethics have
been offered by a number of authors (Chris Lucas, Contextual
Ethics, 2006; Chris Lucas, Complexity
Theory: actions for a better world,
2002; Vladimir D. Dimitrov, Complexity,
Spirituality and Ethics; Psycho-social
Significance of the Mandelbrot Set: a sustainable boundary between chaos
and order, 2005; Heesoon Bai, On
the Edge of Chaos: Complexity and Ethics, 2003).
Benefits vs Losses: dividends from investment in values
The benefits from investment are typically associated with the following notions:
- Dividend: With respect to financial securities, this is
understood as the distribution of earnings to shareholders, prorated by
the class of security. It may be paid in the form of money, stock,
scrip, or, rarely, company products or property. The amount is dependent
on the general business condition and is therefore
subject to fluctuations. It is decided by
the board of directors and is usually paid quarterly. As noted above, in
the values case, dividends are an indication of the
sense of reward derived from subscribing to the values, whether in the short,
medium or longer-term. It could possibly be understood as a form of "psychic
interest" in the light of understandings of psychic income.
- Stock dividend payment: This is a a corporate dividend
paid in the form of stock rather than cash. It may be additional
shares in the company, or it may be shares in a subsidiary being spun off
to shareholders. Such dividends are often used to conserve cash needed to
operate the business. Unlike a cash dividend, stock dividend are not taxed
until sold.
- Yield: In general, a return on an investor's capital investment.
For bonds, the coupon rate of interest divided by the purchase price, called
current yield. Also, the rate of return on a bond, taking into account the
total of annual interest payments, the purchase price, the redemption value,
and the amount of time remaining until maturity. The yield measures return
on invested capital in percent. There are two main types:
- Dividend yield:
ratio between dividend + tax credit and the share price.
- Investment yield:
ratio between dividend + tax credit + share price changes + subscription
rights and the share price.
- Long term gain: A gain on the sale of a capital asset
where the holding period was twelve months or more and the profit was subject
to the long term capital gains tax.
Fluctuation in values
The price of a stock in the market fluctuates due to the law of supply and
demand like all commodities. However, there are
many factors on basis of which the demand for a particular stock may increase
or decrease. These factors are studied using methods of analysis
to predict such changes in the stock price. In the human values case, the appreciation
or depreciation of values is typically recognized in opinion surveys and the
subject of media comment and research. A useful example is the increasing concern
with environmental and health values in comparison with earlier periods.
Significant situations include:
- Capital appreciation: This occurs when the market value
of the shares exceeds the purchase price. This situation might be compared
in the human values case with the importance attached to a value in, say,
a political manifesto, and its importance several years after the political
party had gained power on the strength of that manifesto.
- Rising (Bull) market: A bull market is a rising market
in which bulls would prosper. A bull is then understood to be an investor
who buys a security in the hope of selling it at a higher price, as he thinks
the market will go up. This situation might be compared with an individual
or organization positioning themselves as subscribers to a value in anticipation
of increasing interest in that value. This is evident in the case of "early
adopters" of a value (cf . Everett Rogers,
Diffusion
of Innovations, 1962). Many consultancies seeking opportunities for development
project funding adopt strategies of this kind in response to new policy "flavours" as
they start to emerge (eg "sustainability").
- Falling (Bear) market: A bear market is a falling market
in which bears would prosper. A bear is then understood to be an investor
who sells a security in the hope of buying it back at a lower price, as he
thinks the market will go down. This situation might be compared with
an individual or organization positioning themselves to disassociate themselves
from a value in anticipation of decreasing interest in that value.
- Volatility: This is the degree of variation in a share's
price. It is the price fluctuation for a given asset, rate, or index (usually
expressed as a variance or standard deviation). Stocks which react
strongly to market trends are highly volatile. For the investor, this means
the possibility of making fast and attractive gains, but also the risk of
making equally fast and dramatic losses.
- Beta: A measure of the volatility of a stock relative
to the overall market. A beta of less than one indicates lower risk than
the market; a beta of more than one indicates higher risk than the market.
- Alpha: This is a measure of how much
a stock has risen or fallen over a one-year period. The
weighted alpha is a measure of one year growth with an emphasis on the
most recent price activity:
- Positive: A stock whose price has risen over the
period will have a positive Weighted Alpha.
- Unchanged: A stock whose price
has not changed in the period will have a small Weighted Alpha
- Negative: A
stock whose price has dropped over the period will have a negative
Weighted Alpha.
- Collapse: A stock
market crash is a catastrophic situation in which the
market value of many stocks, across a significant cross-section
of a market, suddenly declines very rapidly. Crashes are driven by panic
as much as by underlying economic factors. They often follow speculative
stock market bubbles. In the human values case it is worth envisaging
the possibility of a similar global or regionalized loss of confidence in
a wide set of values -- which might effectively trigger a loss of confidence
in economic values, or be triggered by it. It could be argued that the consequence
of the actions of the US-led Coalition of the Willing in response to "global
terrorism" has resulted in such a catastrophic collapse of confidence
in institutional
leadership and in the military, scientific and legal opinion on which it
draws to justify what have subsequently proven to be an extremely questionable
initiative -- possibly analogous to a stock market "bubble". Just
as concerns have been expressed regarding the future economic implications
of "peak
oil", it could be argued that a values market
collapse would be associated with a "collapse of meaning" of unforeseeable
consequences.
Performance indicators in the values market
Share indices: These are used to track the price and value
development of a group of company shares. The shares included in the index
are given a specific weighting according to the criteria of the particular
index. A distinction is made between:
- Share price indices (such as the FAZ index) consider only the development
of share prices,
- Performance indices (such as the DAX) also consider dividends and subscription
rights, i.e. the overall development of shares included in the index.
Indexes may be either price-weighted or market
value-weighted (cf List of
stock market indices):
- FTSE 100 Index: This
is a share index of the 100 largest companies listed on the London Stock
Exchange
- S&P 500 Composite
Stock Price Index (S&P500):
This is a European-style, capitalization-weighted index (shares outstanding
multiplied by stock price) of 500 stocks that are traded on the New York
Stock Exchange, American Stock Exchange and NASDAQ Global Select Market or
NASDAQ Global Market. The advantage of "cap-weighting" is
that each company's influence on index performance is directly proportional
to its relative market value.
- NASDAQ Composite
Index: This measures all NASDAQ
domestic and non-U.S. based common stocks listed on the NASDAQ Stock Market
(over 5,000 companies). It is market-value weighted to ensure that each company's
security affects the Index in proportion to it's market value. The market
value, the last sale price multiplied by total shares outstanding, is calculated
throughout the trading day, and is related to the total value of the Index.
- Dow
Jones Industrial Average (DJIA): This measures the relative
value of the market. It is a price-weighted average
of 30 actively traded blue chip stocks, representing
between 15% and 20%
of the market value of NYSE stocks. The DJIA is calculated by adding the
closing prices of the component stocks and adjusting
for splits and stock dividends equal to 10% or more of the market value
of an issue as well as substitutions and mergers.
- etc
Bond indices: A number of bond indices exist for the purposes
of managing portfolios and measuring performance, similar to the S&P 500 or Russell
Indices for stocks. The most common American
benchmarks are the Lehman Aggregate, Citigroup BIG and Merrill Lynch
Domestic Master. Most indices are parts of families of broader indices
that can be used to measure global bond portfolios, or may be further subdivided
by maturity and/or sector for managing specialized portfolios. The
Treasury Bond index (TYX) is based on 10 times the yield-to-maturity on the
most recently auctioned 30-year Treasury bond.
In the case of human values, the main approach to value performance is
through the tools identified earlier, notably value-related
surveys of different types:
- Value surveys (as noted above), including:
- Value-related international reports, including:
- Value-related national reports, including:
In proposing a Human Value Index (HVI), Peter Block (Hard
Measures for Human Values. News
for a Change,
April 2000) makes the point:
We have now made the stock market our primary measure of well-being....
So why do I know more about the well-being of these market indexes than I
do about most of my friends? The stock market has become much more important
than an index of economic value, it has become a thermometer of our morale
and the justification of a culture. As the stock market has become essential
to my sense of well-being, the importance of relationships and the value
of the person and their social and emotional well-being has been in decline.
A significant reframing of the challenge of human value has been made from a business perspective by W. Chan Kim and Renée Mauborgne (Blue Ocean Strategy: how to create uncontested market space and make the competition irrelevant, 2005) who notably focus on the art of drawing value innovation charts, namely trying to transform truly qualitative indicators into comparative form. They have found that the most profitable companies -- over a sustaibale period -- seem to "value" the intangibles, not technology, but relations: with clients, staff etc. Based on a study of 150 strategic moves spanning more than a hundred years and thirty industries, Kim and Mauborgne argue that tomorrow’s leading companies will succeed not by battling competitors, but by creating “blue oceans” of uncontested market space ripe for growth . Such strategic moves -- termed “value innovation” -- create powerful leaps in value for both the firm and its buyers, rendering rivals obsolete and unleashing new demand. It would be interesting to determine whether a "blue ocean" approach could be successfully applied in ways that would reframe the significance of "competitors" and the insecurity associated with any need to render them "irrelevant".
Of relevance to any such reframing is recognition of the extent to which the
largest corporations in the "East" (the Korean chaebol, the Japanese
keiretzu in Japan, and similar Chinese groups) decide with their "hearts" (see
related arguments on metaphor by Susantha Goonatilake, Toward a Global
Science: Mining Civilizational Knowledge, 1999). By this is meant
that their financing of future start-ups has little to do with "economic
values" as
understood in the "West" (cf P K Ip, The
Weizhi Group of Xian: a Chinese virtuous corporation, Journal of Business Ethics, 35(1),
2002, pp 15 - 26).
The above points were highlighted by Ernst
Max Nielsen (in a personal communication) following his experience as chief
of bureau of the Market and Democracy office in the transition economy of Leningrad.
He recognized that "business people" transact in the absence of "monetary" value
systems through fundamental reliance on trust -- of which money may become
a token. This value is also recognized in the "western" "old
boys clubs" like Rotary -- possibly adapted by the knights of yore with
their emphasis on "valour".
Jeremy Rifkin (The
Third Sector — and the rebirth of civil society,
1999) argues
that modern business practice relies on the practice of value relationships
-- notably associated with trust -- built over generations by the third sector
(civil society). Also the corollary: to the degree that such trust relationships
are dismantled, then modern business collapses:
The first thing to understand about the Third Sector -- the cultural sphere
-- is that it is the primordial sector. Throughout history, human beings
have always established social communities first. They develop rules of social
exchange, embed their members in complex reciprocal relationships, and build
up social trust. Only when these relationships, and the trust that is built
from them, are firm can communities enter into commercial trade and set up
markets for exchange. That's because markets, by there very nature, deplete
trust.
Assessing the value of shares
There are various ways in which the value of financial securities can be assessed,
notably to determine those which are undervalued or overvalued. In the
case of human values, such assessment is based primarily on opinion surveys
through which non-financial values are rated (as with the
Consensus Rating described below). A distinction should however be made between
the assessment of human values on their own terms and efforts to assess the financial performance
of the nonprofit bodies that typically promote such values, as discussed by
Elizabeth K. Keating and Peter Frumkin (How
to Assess Nonprofit Financial Performance, 2001) or as suggested
for international associations (Management
and Assessment of Financial Resources of international nonprofit associations,
1971):
- Share price: This is the price of a share quoted on a
stock exchange in monetary units.
The price is determined by supply and demand, but is influenced by the share's
par value and other key factors, such as company earnings and future prospects. As
noted above in the human values case, this can be thought of in terms of
the "price" of friendship, of peace, of freedom, of democracy, or of a
human life, etc
- Market value (or market capitalization):
This is
calculated by multiplying the number of issued shares for that security
by the current share price.
The aggregate value of a corporation's
issued shares is its market capitalization. A high market capitalization
is one of the primary aims of value-oriented management.
Clearly in the human values case, a measure of this kind would provide some
sense of aggregate value
within society (or within a subgroup)
- Net asset value (NAV) The market value of a fund
share is synonymous with a bid price.
- External liabilities: These are assessed
by dividing them according to their maturity dates (i.e. short-term bank
overdrafts and long-term bonds and loans).
- Equity:
- Face value: The value of a bond, shares, or other
security as given on the certificate or instrument. The face value is
the amount on which interest payments or dividend are calculated, and
is also referred to as par value or nominal value. This raises the
question in the human values case of the "face value" of may
values such as peace, democracy, etc -- perhaps as claimed in formal
documents such as the Universal Declaration of Human Rights.
- Shareholders' equity (net worth): The amount by which
assets exceeds liabilities; also known as shareholders' equity or net
assets. This raises the question in the human values case of the "positive"
connotations of a value in practice as compared with the "negative" connotations.
This distinction is dramatically evident in the presence of threat
when a pacifist stance may be perceived as exposing a group to unnecessary
levels of danger.
- Equity valuation: Valuation of holdings in associated
companies in proportion to their equity capital. The proportional net
income of the associated company is included in the consolidated financial
statements of the parent company. This raises the question in the
human values case of the relation between sets of values, when one
set may subsume another.
- Intangible assets (or debts):
- Goodwill: Difference between the price paid for a
company and its net assets (assets minus debts). It appears in consolidated
accounts as an intangible asset. As noted earlier, this provides
one of the few examples of a human value being recognized within an economic
(financial accounting) context.
- Human resources: These include the quality of management
of the company and the professional skills at its disposal. Of particular
interest in the human values case is the recognition of the presence
of "good people", possibly described as "good vibrations" or "high energy".
- Future prospects: These include expansion plans (or
vulnerability to acquisition). This points to the expectation, or
hopes, attached to the future importance of a value, such as peace, freedom,
democracy or justice.
- Liquidity: A term used to indicate
how readily a security can be traded. The more market participants there
are, willing to quote prices for a certain security, the greater
the liquidity, namely the greater the chance of finding a buyer and/or seller.
In the case of a specific company, the term may also be used to describes
the ability of a company to meet due payments on time in its daily business.
In the case of human values, some may have so little "currency" that
the number of people prepared to buy into them may be very limited.
- Consensus rating: The (standardized) average of financial analysts'
recommendations for a single security. This arises from the many rating systems
used by different broker's systems. One consensus
standard distinguishes: 1. Strong buy, 2. Buy, 3. Hold, 4. Underperform,
5. Sell
- Surprise (Earnings Surprise): A company earnings report
that differs (either positively or negatively) from what analysts were expecting
(forecast consensus rating). This often causes movement in the stock's
price. The nature of any surprise is indicated by symbols such as: N+ : Negative
actual earnings with positive surprise; N- : Negative actual earnings with
negative surprise; -+ : Negative consensus earnings with positive actual
earnings; -0 : Negative consensus earnings with zero actual earnings; -VL:
Very large negative percent surprise; +VL: Very large positive percent surprise;
NA : Not available (data necessary for calculation are not available). It
could be argued in the values case, that prime examples of surprise have
been demonstrated by the (fanatical) courage unexpectedly demonstrated in
various forms of asymmetric
warfare in recent decades.
- Performance over time: In addition to the above positive
or negative values in the financial accounts (assets or debts), a range of
analytical measures are applied to provide insight into the performance of
a share value over time. They merit exploration in the human values case:
- Debt to Equity Ratio: Long-term debt divided by shareholders'
equity, showing relationship between long-term funds provided by
creditors and funds provided by shareholders; high ratio may indicate
high risk, low ratio may indicate low risk.
- Return of Capital: A distribution of cash resulting
from depreciation tax savings, the sale of a capital asset or of securities
in a portfolio, or any other transaction unrelated to retained earnings.
- Return on Equity (ROE): This is the net income divided
by shareholders' equity. It is the company's
total earnings divided by the total shareholders' equity and is a measure
of the net income that a firm is able to earn as a percent of stockholders'
investment. It indicates to common shareholders how effectively their
money is being employed.
- Return on Total Assets: This is the net income divided
by total net assets and is a measure of the net income that a firm's
management is able to earn with the firm's total assets.
- Price/Earnings ratio (P/E ratio): Calculated by dividing
the current share price by the reported (or forecast) annual earnings
per share. A high P/E ratio means the company is highly-rated by the
stock market, suggesting that investors think its prospects for earnings
growth are good. It gives investors an idea of how much they are paying
for a company's earning power. A forward P/E refers to the value for
the next full year.
- Price/Book Ratio (P/B Ratio): The price of a stock
is divided by the reported book value (as of the date specified) of the
issuing company
- Price/Cash Flow Ratio (P/C Ratio): Comparison of
stock price with cash flow from operations per outstanding shares.
- Price/Sales Ratio (P/S Ratio): Comparison of stock
price with sales per share (or market value with total revenue).
In the case of human values, there are few, if any, indicators
of the type mentioned above for economic values -- which may be
made available with high periodicity (even hourly). Various
approaches to assessment of value performance are howver worth considering:
- Value-related surveys: As noted with respect to
the tools identified in the previous section, this is a widely favoured
approach to value performance. Typically they are conducted annually or even more infreaquently.
- Public opinion surveys: These may constitute a variant of values survey
and may indeed be conducted irregularly but with higher frequency
- Media ratings: These are usefully recognized as a distant variant of
values surveys, but do indeed seek to assess the non-monetary
value of TV and music (at relative high frequency)
- Horoscopes: Although seemingly irrelevant to the topic of this exploration,
in practice these devices are recognized by the media as much in demand by
audiences. Whilst the reports they give daily may be considered to be based
on a totally questionab analytical model, functionally the confidence
placed in such models may be seen as analogous to that placed in many stock
market analyses. It is of course the case that horoscopes are used by many
as a guide to financial investment [more more more].
Abuse in the value exchange system
Financial regulators, such as the U.S. Securities and Exchange Commission
and the Financial Services Authority in the UK, oversee the markets, to ensure
that investors are protected against misselling of various kinds. Individual
exchanges may deploy a vast array of sophisticated automated systems to review
each trade and price quotation on an on-line, real-time basis. Off-line computer-based
analyses may be conducted to evaluate trading patterns on a monthly,
weekly and daily basis -- notably unusual price or volume
variations in a stock. Abuses include:
- Insider trading : The purchase or sale of securities by someone
who possesses 'inside' information affecting securities which has not yet
been made available to the market and which, if made available, would significantly
affect the share price. Utilizing this knowledge
to make gains in stock trading is forbidden.
- Misuse of information: The abuse of dealing in securities
based on information that is not publicly available. This abuse is similar
to the offence of insider dealing.
- Market abuse: A conduct that adversely affects a financial
market and falls below the standards expected by the regular user of that
market.
- Creating a false impression: Deliberately
creating false or misleading impressions regarding the supply, demand, price
or value of an investment.
- Distorting the market: Manipulating
market prices by interfering with the normal supply and demand process.
- Market offence: An illegal/criminal conduct that adversely
affects the market.
- Money laundering: The process of disguising money obtained
from criminal activity.
- Churning: This is the unethical practice of buying
and selling shares simply in order to earn more commission.
There are as yet no analogous controls with respect to abuses in the human
values market, notably those relating to misrepresentation. The need
for these is increasingly obvious -- in the light of the degree of "spin"
with which values are now presented to public opinion.
Conclusion: ambiguities with regard to human values
The intangible nature of values has been stressed. In effect the discussion
is an exploration of value "trading" in a generic sense -- of which
trading in economic market values is the most obvious and best articulated
form.
Although any conflation of the two forms of value may be disputed, there is an interesting way of reviewing and relating the two extremes:
- the focus on monetary interest and dividend, across a judiciously chosen (multi-sectoral) "spread" of shares in the economic case, may indeed be understood as seeking to optimize a single monetary variable according to a preferred investment strategy
- but the assumption regarding the single monetary focus ("the bottom line") can however be reframed to the extent that each sectoral share investment is distinguished in that the expected monetary interest (or dividend) in each case is effectively qualified by an assessment of risk-opportunity -- each investment is then qualitatively different
- the focus on a set of distinct human values may be understood as having been judiciously chosen to optimize a preferred life strategy and sense of identity
- but the assumption regarding the disparate nature of the set of values, seemingly without any common element, may be usefully seen as corresponding to the sectoral spread of qualitatively different shares
- in both cases the challenge is to optimize a qualitative set, whether the "bottom line" is monetary or some sense of merit or satisfaction
In the discussion above
various suggestions were made as to how a value is held or traded. At this
early stage -- prior to further clarification -- an organization may already be
ambiguously understood as:
- A stock: In this case a particular organization, for
example Democracy International or
World Peace Council, is understood to
constitute a prospectus for a particular value, whether or not it in fact
embodies the intangible qualities of that value.
- A share portfolio: In this case a particular organization,
for example Amnesty International, Human
Rights Watch or UNICEF, are each understood to
represent a distinct portfolio of values
- A mutual fund: In this case a particular organization,
for example Amnesty International or Human
Rights Watch might be understood to constitute a fund managing
a distinct portfolio of values
- A meeting of shareholders: In this case a particular
individual membership organization, for example Amnesty
International, is
understood to represent those subscribing to the value -- but effectively
only the major shareholders
- A broker: In this
case a particular organization, for example European
Science Foundation or Migrants
Rights International, are in each case understood
to act as a broker -- promoting particular values for acquisition by others.
It might even act to assist an investor to relinquish a value (as
in re-education or deprogramming) or give priority to another
- A value exchange: In this case a particular organization,
for example UNESCO or ILO, is each understood to constitute a value exchange
in which a range of values is traded and prioritized in the plenary conference.
Many of these roles are already variously performed by international organizations
identified in the Yearbook
of International Organizations -- whether "official" intergovernmental
organizations or nongovernmental bodies. The value exchange role is in particular
performed within the international (plenary) meetings of such bodies -- as
identified in the International
Congress Calendar.
Of particular interest is the manner in which these many distinct "stock
exchanges"
for non-monetary human values are interlinked and variously "quote" and
prioritize (namely "trade") the same values (or value sets) -- perhaps
at a regional level. Where such contexts bring together their equivalents at
the regional or national level, or those which have a more specific sectoral
focus, a distinction may be seen between broader and more specialized exchanges
analogous to that in the economic case. The broader contexts may be understood
as seeking to bring order to a wider segment of the values market.
Of particular interest is that the intimate relationship of organizational
forms with a value that they purport to represent in some way result in practice
in either the organization or the value losing its credibility in relation
to that which it previously held. Of course it is also possible that the appreciation
of the value and/or the organization may increase in a manner subsequently
held to be excessive or inappropriate.
The fact that, for a given value or set of values, many different bodies
may be considered as performing such roles stresses further the non-exclusive
quality of intangible values. Whilst some bodies may strive, or claim, to "corner
the market" with respect to one or more such values, other bodies may emerge
that claim or act otherwise. Classically this situation has been highlighted
with respect to "peace" as a value. The inability of any of the many bodies
focused exclusively on "peace" to represent that value unambiguously, and without
contestation by others making some such claim, is an indication of how
the value transcends any of the above roles to "capture" it within the values
market. In contrast with the exclusive nature of possession
or ownership of property, as represented by stock in the financial market,
human values clearly have a non-exclusive dimension -- despite
any efforts to "corner the market".
This framework also suggests the merit of reflecting on the nature of national
parliaments as contexts in which human values are effectively
traded. The use there of the term "horse-trading" points to an existing
recognition of this process -- as a dematerialization of the trading in stock
by farmers. The dynamics of regional parliaments, such as the European Parliament,
are then of particular interest as regional value exchanges -- especially with
respect to the efficiency, speed and transparency with which they perform
this function in relation to the value "shareholders" in whose values
they are effectively trading.
Recently there has been a focus on selected (but typically unidentified)
core "blue
chip" values at the global level. This has notably been in service
of particular (and potentially questionable) political and religious agendas (cf Tony Blair, Global
Alliance for Global Values, Speech on Foreign Policy to the Parliament
of Australia, 27 March 2006; Honor Mahony, Merkel favours God reference in EU constitution, EU Observer, 26 May 2006). It is especially unfortunate that such intiatives should be promoted by world leaders so recently associated with public deception -- Blair in the case of WMD, Merkel as inheritor of the mantle of presidency of the Christian Democratic Union (completely discredited by Helmut Kohl's party financing scandal), or George Bush (Lie by Lie: Chronicle of a War Foretold: August 1990 to March 2003, MotherJones, September/October 2006).
Any value initiatives are particularly problematic when deliberate efforts are to be made to impose "Christian values" on a continent under the auspices of a particular religion -- as indicated by Angela Merkel's commitment, as future president of the EU, following her encounter with the Pope (cf Nicholas Watt, Merkel backs more Christian EU constitution, The Guardian, 29 August 2006). The commitment on behalf of Germany is particularly unfortunate given its highly controversial association with the Vatican on the occasion of a previous attempt to impose a set of values on Europe (cf Bill Stone, The Vatican and World War II, 1999). Such initiatives
should be explored in the light of the necessary clarification of roles suggested
here. Such clarification is especially important to
the extent that these political agendas represent a reframing of the discredited
strategic initiative of the Coalition
of the Willing and its leadership (cf Blair: Western values must triumph over radical Islam. Islam Review, 1 August 2006) -- perhaps well analyzed by Scott Peck (People of the Lie, 1983).
Also of interest is the possibility for any individual to reframe the sense
of personal identity in terms of the value stock market metaphor. An individual
is thus constantly juggling with a set of value priorities -- a personal (existential)
portfolio requiring "management" and calling for analysis of "performance".
It is perhaps through enhancing the skills required for such management, through
the many insights from the stock market, that new approaches to well-being
can be realized.
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