Yes, you read the title to this post correctly.
No, it’s not a denunciation of the importance of values. However, it is a denunciation of value-based decision-making the way it is currently practiced today: as an alternative to responsible, pragmatic action at best, and as an excuse to ignore practical considerations at worst.
This struck me the other night as I watched the election returns from this year’s primaries. I heard several news snippets from victory parties where one candidate or another was talking about their victory represented a victory of a particular set of values.
Let me be clear: I cannot think of a more dangerous or slippery claim.
Of course, we hear about values everywhere: in politics, certainly, but also in business and even in our own lives. But look around and then ask yourself, how’s that “values” thing working for us? Wait, lemme guess: your values are working just fine for you, the problem is all those other people who haven’t yet gotten onto the—your—program.
Am I close?
There’s a philosophical fallacy to such thinking (based in its ethnocentric bias) as well as a logical fallacy (it’s self-reinforcing). Let’s not get into a philosophical debate here, though: I’m not in college, I’m not stoned, I don’t have the patience. Let’s instead look at the impact in three specific, representative cases, to show how quickly and completely values can become unmoored from the actions they are supposed to drive:
- Macro-level (political). The drifting, malleable nature of “values-based decision-making” was center stage in 2005 during the Terri Schiavo debacle: whereas prior to the case, conservatives lined up with “states rights” and liberals with “federal superiority” based on each side’s values with regard to Roe v. Wade, values-based decision-making relative to Ms. Schiavo had the liberals and conservatives switching seats on that issue, with conservatives intervening in a state matter from the federal level and with the liberals urging restraint. Values-based decision-making here led to an inconsistent, hypocritical, and uncertain interpretation of law—hardly the stuff of responsible governance.
- Micro-level (organization/team). BP’s core values, from it’s website: “BP is progressive, responsible, innovative and performance driven.” “Responsible,” I’m sure, translated into some specific actions taken by real people who were proud that they were working based on clear values… but the state of the Gulf of Mexico today pretty much proves the disconnect between those value-based decisions and their real-world impact.
- Individual-level. I had an participant in a program not too long ago tell me that she favored “values-based hiring” at her organization. Which got me thinking, how does she hire for things like courage? What’s her success rate? And how does she weigh two candidates against one another whose only difference is the priority they give to the values they hold (e.g., Candidate #1 puts loyalty above teamwork, while Candidate #2 has those reversed?) In this case, isn’t values-based hiring taking us away from objective and quantifiable criteria and moving us back to a day of “I-like-you” based hiring?
There is a real allure to basing decisions on values: Values seem so solid, and their conceptual nature makes them seem comfortingly steady even while the world around you changes. Unfortunately, the dark side of values is that, like buoys floating on the ocean current, their positions are relative. Which makes their value limited as decision-making tools.
Fail at your own risk.
Jason Seiden is Co-founder and CEO of Ajax Social Media, a training company that shows professionals how use social media to work more effectively.
I'm the CEO of Ajax Social Media. We're helping 1 million people shine by making their online stories better. 
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Very provacative Jason. But it begs the question about what CAN happen if you don’t make some decisions based on values. If I accept a big-dollar gig on even though my values of integrity and honesty are telling me it’s the wrong thing to do (knowing that making big bucks isn’t one of my values; but it is certainly alluring), where does that get me?
Are there times when there is no alternative in making a decision other than to make it on the basis of your values?
@Mary Jo—I’m wouldn’t suggest people abandon their moral compasses… just recognize those occasions when values compete, lose their meaning in a given context, or prove functionally inactionable, as the situations above illustrate.
Interesting perspective and some good examples of where you believe values based decisions left us fairly well hosed, but I am curious about what tools you would suggest be used, in those examples, that would have led to different outcomes. The main question you’ve stirred for me is this – As tools to make decisions, how are the more pragmatic tools any less like the buoys you describe?
Jason
I really like the fact that you raise this; I think there are some hidden presuppositions that suggests that:
1. we are conscious of our values – occasionally true but most of the time they are out of conscious awareness
2. that we can make decisions not based on our values – not sure this is the case
To my mind I think the examples you highlighted make a number of different points and do not necessarily reflect the issue with value based decisions. For example:
– I think you indicate an issue with the rules by which people meet their values, particularly so in organisations where one person’s way of meeting a value is different to another’s (I would agree with that).
– The sometimes, unintended consequences of our actions (I would agree with that also regardless of on what basis the decision is made). I would also suggest that there are no such things as perfect decisions.
– You also highlight that values can be in conflict (also agree). I think that if we make what appears to be a non-value based decision, what we are actually doing is fulfilling a higher priority value without it being in our conscious awareness. One can’t operate in an unregulated manner – one just values deregulation!
Stuart
@Jerry—Great point… those other tools often aren’t any better. Pragmatism often results in small mindedness, and though it’s often more predictable, it can lead to results equally as painful.
The only decision making tool that people should be using regularly is the one they run away from every chance they get:
Thoughtfulness.
@Stuart—I believe very few people actually know what their values are, actually. To many of us, “values” are things we use as justifications for doing what they want.
I also believe that not knowing your moral compass can cause people to act in conflict with their values, which they do frequently. Anyone who has known the right thing to do and not done it has acted outside their values. Might we have a philosophical debate about whether such actions actually demonstrate a hidden value around “safety,” or “consistency,” or “laziness” or whatever “virtue” the person used to excuse his or her own behavior? Sure, but at the end of the day it comes down to this: values take courage, and courage is in too short supply.
When you act out of fear, you have not yet risen to the level of the values you think you stand for.
Jason
I take your point and I suspect our difference in the definition of ‘values’ results in the perception of whether someone acts according to them or not. My personal view is that values are what motivates us either way – they are what is important to us and are therefore justification, if you will, for an action. What is your definition/understanding of a value?
Anyway I’m now a little confused as to the point you are making; are you saying people don’t have the courage, discipline or mindfulness to do what’s right?
Stuart
@Stuart—Ah, decided-upon values vs. de facto values, perhaps? My point is that I don’t believe in a de facto, or “default” set of values. That’s darkness. That’s fear. That’s the night before the day, so to speak. It takes courage to decide to have a value and to stick to it. I think people are quite mindful, and know what they’d like to do, but lack the courage to stand up for that something when pressed.
And just so I’m clear: I include me in that grouping, too… I’m no saint.
Jason,
Really thought-provoking read. It’s like mind-candy-reading.
I could go on and on, but am also neither in college, stoned, or having a lot of time. I think what your article highlights is how the use of the term “values-based” decision making generally – politically, business, etc – has clouded the water around decision-making in general. If anything, saying a decision was “value-based” today really does seem like code for something else. There seems to be an assumption that if one proclaims the utilization of “values” to drive decisions, then they are not using facts or reason or objectivity to make decisions.
I would argue, we are all guided by “values” when we’re making decisions and taking actions. I think that what is happening, is that people are using “values-based” as code for, and an excuse for, judging individuals from a lens of “right-wing bias values” or “left-wing bias values,” as an example. It’s as though the notion that someone could be using other values outside of a religious or political bias and also call that a “value-guided” decision making is outside of the coded meaning of “values-based.”
For me, I value competence. I value independence and productivity in people I work with. I value a strong work ethic, and value experience that indicates all of these things and more. If I hire someone based on those above values, am I not, then also using “values-based” decision making? Rationally, the answer would be “yes.” Call it thoughtfulness, call it rational, call it “values not aligned with political and social leanings and based on fact” decision-making.
So thanks for starting the dialogue. . .and the gears in the brain working!
Jason — I think the title and discussion represent a straw-man argument. I don’t think you’ll find anyone that advocates making decisions soley on values. However, we have many examples financially-driven, highly-quantitative decisions have undermined companies, communities and countries. The general argument is, companies need to balance the quantitative and qualitative measures of the company. KPI’s may yield some actual facts and informed analysis, but rarely reveal causation and remedies.
There’s an underlying, secondary straw-man argument that says that values (often expressed as corporate mission statements) don’t work when they’re based on hypocrisy, PR and marketing. No one is arguing that they do.
As part of an organization that does interview for adherence to our core values in addition to experience, work product and talent, I can tell you that it does work. There’s no mystery about the core values we stand for what we live into daily. If someone is talented, but can’t live through our core values, it will become readily apparent and they’ll leave the company. It’s the long view: Without core values, we risk becoming a sweat shop, flushing careers and undermining the organization.
@Virginia—Mind candy. Totally. Plus, I think you nailed it. It’s actually not a “values” thing per se as much as it’s judgments and excuses masking as values that are the problem. Thanks!
John—I think if you look at the way in which values are implemented during a decision making process, this issue becomes quite real. You describe values-based hiring at it’s best, as it’s intended to be. I work with clients to achieve what you describe. I interview executives to determine their fit factor for a given opportunity. Critically important.
But that’s only true for those who have thought through their values and calibrated their moral compass… which is not as many people as I’d hope.
Too often, people wrap the word “values” around their prejudices, their desire to take the easy way out, their affinities, or their need for structure. That’s when things get dicey. And it’s not that they base their values on prejudice, etc., it’s that they lack the self-awareness to know the difference.
My hope with this piece is to spur people to think—not necessary to invent (and then solve) a non-problem.
Thanks for the comment and driving the conversation forward.
All rational decisions should be based on value, which is defined as the sum of all the benefits and losses to infinity in time. The only solution to value is real estate appraisal demonstrated at:
http://www.infinitespreadsheet.com
Please contact hughching@gmail.com for further questions.
Also, please feel free to counter this view with an counterexample. Thanks.
@Hugh—I let your post in depsite the fact that you are clearly shilling here, because I wanted to address a few things in your statement:
1. Your premise is f*cked. The measure of those benefits and losses is only as useful as the assumptions that underpin the analysis, and those assumptions are rooted in values more often than not.
2. Your math is unnecessarily complex. Pretty much everything after year 20 (and I’m being generous here) washes out when you discount it back to its NPV.
3. Be careful with words like “all,” “only,” and (especially) “should.” They make you sound intense, inflexible, and naive all at the same time.
4. When asking for an counterexample, be sure first to provide an example.
5. I have no further questions.
Dear Jason,
I appreciate your generosity and your openness. We have almost exactly the opposite views. I suggest that we have an open debate in your blog for the benefit of your viewers and post-science students.
My background is posted at: http://www.jumpulse.com/ching.pdf
Please introduce yourself for this debate.
The web version of the Infinite Spreadsheet is free for the public during the current financial crisis, so that its introduction should also be considered a public service.
Answer to 1: You seem to agree that all decisions are based on value, which is defined mathematically in the Infinite Spreadsheet following the formulation of the problem of value described in the book Theory of Value mathematically by Kenneth Arrow and Gerard Debreu, both of whom are my friends.
Answer to 2: The Infinite Spreadsheet is mathematically rigorous, regardless how complex is the problem of value (50 variables or inputs). It relates rigorously all the factors affecting the value, in the form of the price or the rate of return, in a semi-infinite time space. If the inputs are reliable, the output should be reliable. Thus far, it has publicly predicted both the S&L Crisis and the Subprime Woe. During the S&L Crisis, it was the solution to the Crisis endorsed by nearly all the authorities in real estate appraisal, but Alan Greenspan backed by Milton Friedman, who was a friend turned adversary due to the our debate on whether the market is free, preferred the Free Market.
NPV generally should use a different discount rate for each year, making comparison difficult and the result somewhat arbitrary. The half-life of nuclear waste is around 2,000 years. There are many garage leases up to 99 years. In China, land lots are leased out usually for 75 years. 20 years would be way too short. However, the infinite consideration is a mathematical necessity to make the calculation deterministic (number of unknowns = number of equations).
Answer to 3: I prefer to speak as exactly as possible, not to please the listeners. In the solution of value, the solution is quantitative (in the form of the price or the rate of return). Post-science (http://www.postscience.com) believes that in science, the method is empirical verification and the inputs are precise, and in social science, the method is mathematics, more rigorous than empirical verification, which is not possible because infinity never arrives, and the accuracy of the inputs can be relaxed (fuzzy inputs are allowed).
Answer to 4: You can get an example easily by just clicking the “Calculate” Button at any of the four programs. Value is determined as either the price of the rate of return (when the price is inputted). The calculation, at least, serves as an investment yardstick, needed not to be precise.
Answer to 5: I hope that you can defend and answer the post-science accusation that you are one of the products and of the contributors to our irrational society, which is evidenced by the continual financial crises since the collapse of the central planning economy and the global dominance of the Free Market.
As in science, where material objects are governed by non-violable laws of nature in physical science, such as gravitation, our economy and human behavior are governed by non-violable laws of nature in social science, such as the Infinite Spreadsheet. However, due to the reliability of inputs, the Infinite Spreadsheet up to now can only make infallible predictions of the real estate market.
Our communication is very helpful to me and post-science because it enhances my understanding of the state of the art of social science, of which you are a good representative. Thank you for your valuable contribution to the progress of knowledge.
With best regards,
Hugh
@Hugh, here’s a true story.
At Kellogg, in one of my upper level fin classes, we had a case study. The numbers were fairly straightforward, and pointed to a clear cut answer. In reality, the analysts had come to the same clear cut answer and acted upon their rational, quantitative analysis. And all hell broke loose. The characters in real life who were supposed to execute simply could not do the “rational” thing.
Turns out, real life is more like a game of chess or poker than an algebraic formula. Though is a lot that can be determined objectively, there is also a “random walk” that’s going to take way more than 50 variables and a spreadsheet to account for. (Just ask the guys behind Deep Blue.)
I continue to think your premise is f*cked. You predicted the subprime debacle? Good for you. So did lots of people. Your perfect analysis still couldn’t help you stave it off. All you get is a badge you can wave in peoples’ faces that reads, “I told you so!” The fact that you predicted the S&L collapse just makes it worse: you were right once before and you still couldn’t get people to listen to you the 2nd time around. Know why? Because facts alone will never carry the day.
Facts need to be presented in a way that cuts through peoples’ filters and helps people get beyond their resistence to change. And that resistence is emotional, not rational. Facts can’t solve emotional resistance anymore than gasoline can put out a fire. Your model, even if it spits out perfect information (which I doubt it will), still leaves you at the mercy of peoples’ whims.
From reading your piece, I’m not clear if you’re accusing me or asking me to defend my accusation of you. I’m also not clear on WTH “post-science” means. So I have no intention of defending anything to you.
But I will say this: I’m a big fan of facts. Love ‘em. The more empirically generated, the better. The blog you’re reading is based on a study of over 50 years worth of organizational and social behavior. On the other hand, until you show me a model that quantifies the impact of a person’s emotions on decision making and action—which currently you cannot, because we cannot even adequately define an emotion to quantify it, let alone quantify changes in it or its impact on decision making—I will continue to tell you that your premise is f*cked. You’re making the fact side of the equation far more complicated than it needs to be and leaving the other half of the question—how to get people to accept your numbers and act on them—entirely unsolved.
To truly quantify value, you need a language and system that have not yet been invented. Value is not fully captured by dollars and cents. (Are you married? Would you like me to quantify your marriage for you based on a financial analysis? How about I do that, and then find you alternative service providers who, for the same money, could provide all those benefits more cost effectively, right down to a consort? It’s about $143k for the domestic services, btw. It’s been calculated. Now we just need to quantify the sex and friendship and I can get you all taken care of. Except for the part that the logic of this substitution is just as f*cked as your premise.) But keep at it, because one day, we will have that scale, and we will be able to measure today’s intangibles, and when that happens, you’ll be able to complete your model and we’ll be best friends.
Dear Jason,
Thank you for your prompt and long reply, which reflects the general view of the establishment, which is the cause of our current dire economic plight. In particular, I would replace your word “emotion” with “punishment,” because pain and suffering are the way society learns and operates; emotion is just a distraction. Also, the Infinite Spreadsheet, being purely mathematics and a law of nature, is applicable to even investing machines without any emotion.
The Infinite Spreadsheet concludes that the stock market is run more by psychology than analyses; for example, to win, temporarily, is to predict how Fidelity trade. However, the real big gorilla is the house of stocks is not big mutual funds, but the government, namely, the Fed. The overall order of authority, as I implied in my previous comment, is from low to high (1) individual investor, (2) money managers, (3) government, and (4) nature with its non-violable laws of nature.
As a formally trained scientist, I have been brainwashed by science, which accepts truths only after empirical verification. As the founder of post-science, which deals with the reality, I realize that problems involving infinity in time cannot be empirically verified, simply because infinity never arrives. David Hilbert, my grand, grand (Richard Courant) teacher (Harold Grad) of mathematics, credited Kant as the first to address infinity technically. Kenneth Arrow and Gerard Debreu, the leaders of mathematical economists, consider the economy as infinite in time and space. Arrow hardly speaks to business majors, when I brought them to see him.
Without the possibility of empirical verification, the solution of value must be based on the rigor of derivation, in the case of the Infinite Spreadsheet, mathematics. As I told my friend Niall Ferguson, a honest, dynamic, and creative financial historian, historical facts should be classified into two parts: (1) time invariant, such as inputs to the Infinite Spreadsheet, which are subject to market comparison, and (2) time-variant, such as decisions, values, plans, and prices, which continually change with time as future expectation changes. If he promotes this idea, he would be the starter of post-science history.
Your talk of quantifying emotion is trivial in the solution of value. Roughly, the total rate of return, which is the sum of the monetary and the non-monetary rates of return, is an approximate time-invariant quantity. The Infinite Spreadsheet calculates the monetary rate of return, which reflects the non-monetary return, such as pride of ownership, management headaches, risks, and emotion, by the difference between the total and the monetary rate of return. In my recent discussion with our collaborative group, which includes Lotfi Zadeh, from who I am learning fuzzy logic, I would consider uncertainty simply as a non-monetary return, rather than having to go through a tedious special analysis of its own. The rate of return is an approximate time-invariant quantity.
One of the Reviewers of National Science Foundation summarizes the post-science economy as:
“Summary Statement
The proposal imagines a world in which there is total disclosure in finance and accounting, objective valuation of economic resources, and man-made regulations are replaced by newly discovered laws of nature in social science. In this world, erroneous market prices have been corrected by the use of mathematics, utility functions and subjective valuation decisions made by investors are unnecessary, man-made regulations are unnecessary, and financial crises are no longer caused by the ignorance of regulators.”
But, like you, he does not believe this conclusion himself. Unlike you, he is anonymous. Therefore, I truly appreciate this discussion, which I shall send to NSF. Enclosed please also find the communication with the Fed on the Subprime Woe, starting in June 2006. The Subprime Woe is difficult to predict because it can only be predicted within a window about a year from June 2005 to June of 2006, the later the prediction, the better is the prediction; less than a month after June 2006, the Subprime Woe first flared up. Now Bernanke and I are friendly.
With best regards,
Hugh
[NOTE: The fed rejected my email of June 2006, predicting the Subprime Woe, but reversed its attitude toward my view in 2008 after the Subprime Woe started in 2007. Below are the actual email exchanges.]
Subject: Response to your email concerning: Board Members
From: FRB.Mail@frb.gov
Date: Thu, July 20, 2006 6:50 am
Dear Mr. Ching:
This will acknowledge your most recent letter. While we appreciate your continued willingness to share your views, I regret that we will be unable to continue the dialog.
Sincerely,
APM
Public Affairs Office
IF YOU NEED TO REPLY TO THIS EMAIL, YOU MUST DO SO FROM OUR PUBLIC WEB SITE AT:
http://www.federalreserve.gov .
————————————————————————
First Name: Hugh Last Name: Ching Profession: Mathematical Scientist
Organization: Post-Science Institute
StreetAddress1: PO Box 461
City: Berkeley State: CA Country: US Postal Code: 94701
Email Content:
June 2006
Dear Dr. Ben S. Bernanke, Chairman of Federal Reserve Board,
We would like to introduce you to our deterministic valuation system which related the interest, inflation, and return rate in a system where the number of equation equals the number of unknowns (deterministic). The system is known coomercially as the Infinite Spreadsheet and has predicted the US Savings and Loan Crisis by detecting over-valuation of the real estate market in the early 1980s.
The current real estate interest rate, if continue to rise, might put the real estate market out of the logic order of the economic factors. the logic order is that the interest rate should be greater than the inflation rate and the rate of return should be greater than the interest rate. As the interest rate rises, the rate of return calculated by the Infinite Spreadsheet will decrease. Now they are very close already.
The Infinite Spreadsheet is the exact solution to valuation, as the P/E ratio or the capitalization rate is the zeroth order solution. You can use the Infinite Spreadsheet for free. The Infinite Spreadsheet Stock Valuation System is at: http://www.123iss.com which has proven to be as reliable as the Infinite Spreadsheet Real Estate Valuation System: http://www.123is.com and http://www.123istv.com which allows 100 years time-varying inputs. Thank you for your consideration.
With best regards,
Hugh Ching
http://www.post-science.com/ching.htm
[Editor’s Note: Two weeks after the above communication the real estate subprime woe starts. “dialog” means the communications with former Fed Chairman Greenspan. The following communication ensues when Fed Chairman Bernanke declared an open communication policy.]
Subject: Response to your email concerning: Board Members
From: FRB.Mail@frb.gov
Date: Fri, February 1, 2008 12:32 pm
Dear Mr. Ching:
Thank you for your most recent correspondence to the Federal Reserve Board and for your suggestions concerning the subprime mortgage issue. We appreciate your taking the time to share your thoughts with us and want to assure you that the concerns you have expressed are not simply ignored.
The Federal Reserve shares your concern and continues to work to find and implement the best and most sustainable solutions to the current challenges with regard to subprime mortgage lending. Along with the other federal banking regulators, the Federal Reserve significantly expanded subprime lending guidance in 2001, issued guidance on non-traditional mortgage products (such as payment-option and interest-only loans) in 2006, and issued guidance on adjustable-rate subprime mortgages last year. Again, thank you for your suggestions.
Sincerely,
JPD
Board Staff
IF YOU NEED TO REPLY TO THIS EMAIL, YOU MUST DO SO FROM OUR PUBLIC WEB SITE AT:
http://www.federalreserve.gov .
————————————————————————
Dear Mr. Ching:
This will acknowledge your most recent comment. While we appreciate your continued willingness to share your views, I regret that we will be unable to continue the dialog.
Sincerely,
Jason
Just remember, nature has the last say… Dow down 300 points.