http://hbr.org/2011/07/the-hbr-interview-technology-tradition-and-the-mouse/ar/pr

Excerpt from this interview with Disney CEO Bob Iger:

“Along those lines, suppose a shareholder got up at your annual meeting and said, “Are you really worth the $28 million you earned this year in salary, bonus, and stock?” What would you say?

Fortunately, we have a chairman and a compensation committee that can answer those questions. I don’t address the public when it comes to how I’m compensated, and I’d prefer not to now.”

The interview question struck me as both a strange and completely fair question.  For a shareholder, executive salary is analogous to a capital investment – you make payments in the near term for the expectation of long-term future returns.  You want to know whether your investment will yield returns.

But it is a very strange question to receive – because while a CEO has a market price, his expected value will vary depending on the firm and its situation.  You can’t say that because another firm is willing to pay $X, your firm should pay $X.  The future returns vary widely and are highly uncertain.  Furthermore, you generally can’t (or don’t) sell a CEO’s time (or his decisions over that period) into the market.  Once you fire him, you stop investing but you don’t usually recoup your prior investment. 

What the shareholder is asking is not “Are we paying him market price?” but rather “If we perform the thought experiment of the firm with this CEO versus the firm without this CEO, do his decisions in aggregate generate an incremental fully discounted future value that is commensurate with the salary we are paying today?”

It seems to me that the right answer should always start with, “I don’t know.”  Anything else would be rank arrogance.

But – suppose we were looking not to give just the answer to the precise literal interpretation of the question but rather to offer what the shareholder is really looking for, that is, some measure of assurance.  Then the answer might sound be something like this:

“I don’t know.  I can’t predict the future, and the decisions that I make today will have long-run ramifications.  They impact a large firm with thousands of employees and take time to percolate into the organization.  My competitors will respond and their reactions are not wholly predictable either.  

However, I will let you make your own assessment as to whether I’m worth it.  Here are all the major decisions I made during my tenure to date.  Of these, here are the major decisions that were non-intuitive, that is, they could and likely would have gone in the other direction.  Of the non-intuitive decisions, here is the financial impact to date, and here is the projected financial impact of these decisions for the foreseeable probable future.  Beyond that, you will have to make your own assessment but let me share with you my strategic logic for why I think these moves will play out advantageously.”

Sigh.  Where can I find a CEO after my own heart.  I would give him my portfolio in a moment (subject to diversification and contingent on market conditions….of course).

There are two kinds of people:  those who think the world can be divided in two groups, and those who despise those who do.  Sometimes I find myself in the first bucket, other times in the second.

Today, I’m in the first.  So here you go – some people are Google fans, others are Apple acolytes, either current or potential. 

I like Google.  I like their ethos, their principles, their rigor, and independence.  I’m clear-eyed about their faults but this is not the post for that.  Suffice to say, I generally subscribe to the Google fan club.

Historically, I’ve been neutral on Apple.  My assessment of their products for a long time was that they seemed expensive for the value they offered me as an individual.  I’m a functionalist – my gauge for value is generally usefulness, not aesthetics or identity.  Apple asked me to invest a dollar premium in their products and my time in their learning curve, and until recently, I declined their kind invitation.

The iPad, in particular, seemed like a nonstarter for me.  I carry a notebook computer with me – everywhere I go – that does everything the iPad does and a whole bunch of things it doesn’t.  I didn’t get it.

Which is where the learning about emotional imagination came into the picture.  Jonathan Haidt in his research outlined in the Happiness Hypothesis (and others as well) has found that we are terrible at empathizing with our future selves.  We find it hard to gauge how happy we will be in future scenarios – which is a shocking finding when you think of how many decisions we make based on our assessment of our future happiness. 

It is a finding that is interesting on paper but very hard to apply to your current decision-making.  It feels like a finding that applies to other people but not yourself.  So how do you improve your decision-making and have greater empathy with your future self?

I had to get an iPad for work.  It sat for a month on my desk, shiny, sad and lonely.  One day, I picked it up to install a custom app my team had developed.  I gradually started using it.  After awhile, I began carrying it around with me.  Now I love it.

But the reasons why I love it are so specific to my life that I’m amazed that the business case was ever made at Apple to develop it in the first place:

1)      I’m rushing to my gate at the airport.  As I’m walking, I pull out my iPad, flip open the cover, instant on and I’m typing an email: “Can we push this call by half an hour?” with an explanation for the request.  My fingers aren’t too big for the keyboard.  They get my note, I make my flight and settle into my seat to read.

2)      I’m on the plane and have downloaded some documents onto my iPad, as well as some articles from longreads.com.  The experience of the iPad makes it much easier to absorb longform content.  I am happy.

3)      I’m in Edinburgh at a conference.  Jetlagged in the evenings, I curl up in bed in the hotel room and catch up with folks back home on Facetime (videoconference).  At times, it seems like they’re in the room with me.  I can also Skype for a similar experience if a wireless connection isn’t available.

4)      I’m at the conference and a bit late for a session.  I sneak in and quietly take a seat.  I like to take notes so I pull out my iPad.  No rustling paper, no searching for pen.  In-between taking notes, I review on Twitter and the blogosphere the updates for the part of the session I missed. I’m caught up.

5)      I’m in transit to the airport to go home.  I want to catch up on the news since I’ve been gone.  I open Zite and Flipboard and flip through the headlines, opening a few articles that look interesting.  We hit traffic and I have a moment of concern about making my flight so open Flightboard to see what other options I have for getting home.

Here’s the thing:  I never thought about any of these scenarios when I was assessing how much value I would find in an iPad.  I didn’t have the emotional imagination – or more accurately, I never pushed the limits of my emotional imagination.  If I had thought of these scenarios, the usefulness of an iPad would have made perfect sense to me. 

We need concretes, we need the story to viscerally understand what will make us happy.  The problem is that the story we tell ourselves is often wrong – it’s a high-level sketch that leaves out the good stuff.  We get lazy because using our emotional imagination is hard work. 

So what’s the answer?  Like most good answers, it’s boring and what we already knew.  Don’t be lazy.  Demand the stories from yourself.  Tell better stories to other people.  Stories with richess and texture and color, that take risks and maybe show some vulnerability.  Learn from other people.  Demand better stories from them.  Be a human being.  Feel like other people are like you. 

There’s a lot here – being empathetic towards yourself is the first step to feeling empathy for others, and that’s a whole treasure trove.  This is just the tip of the iceberg.

Problems solved vis a vis Facebook:
1.  Circles:   Slick grouping capabilities to allow your digital life to mirror the way you behave in meatspace
2.  Fast search:  To allow this to be a real archive of digital interactions
3.  Solid functionality: Facebook has lately been very rocky from a technical standpoint

Features that are value-add:
1.  Hangouts:   I'm hanging out - join me...or not.  Its very passivity is what makes this work from a social-psychological standpoint
2.  Integrated email / chat:  Less sites to visit for this stuff

Enabling factors:
1.  Massive access to users:  Through brand and existing applications
2.  Import networks:  Streamlined mechanisms to set your network up fast
3.  Relative trust:  A vast number of people still like Google and want to use its products....whereas Facebook is at best considered a utility and at worst truly evil

What it could do better:
1.  Formatting, layout and navigation:  Not as useful and readable as Facebook's today
2.  Direct messaging:  Seems to have only email available (when it is available for a contact at all)
3.  Events:  Nonexistent on Google+ today
4.  Content curation:  In truth, no one does this really well today but it has the potential to be a killer app, and if anyone can do it, it's Google

Summary:  
18 million users to date.  A serious contender... if they can evolve the platform - very fast.

Very not evil.

Session 2:  Everyday Rebellions

Hasan Elahi, privacy artist
• Detained in Detroit and asked about where he was on 9/11
• His name was mistakenly put on a government watchlist
• Luckily he had an enormous amount of information / documentation on what he was doing that day
• Since then, he has been watched by the US government
• Took 9 consecutive lie detector tests
• He has since chosen to inform the FBI every time he takes a trip or gets on a plane – phone calls, emails, pictures
• All the artifacts of his life cross-validate each other – receipts, bank statements, pictures
• Eventually became an art project
• From his server logs, the FBI, NSA and White House are still visiting his website

Maajid Nawaz, anti-extremism activist
• Globalization of hate
• Terrorists have been using the Internet to propagate their messages and create a global phenomenon
• For 13 years, he was involved in an extremist Islamist organization
• British-born, he was recruited as a teenager into a global Islamist organization
• He rose to leadership, and at the age of 24, he found himself in jail in Egypt for 4 years
• He learned in that extremist Islamist organization how to communicate across borders
• Localized parochialisms have become interconnected and are becoming mainstream and transnational
• Domestic politics are being affected by transnational issues
• Difference between ideas and narratives – idea is the cause, narratives are the ways to sell that cause
• There is no equivalent democratic social movement – because of complacency, political correctness, political & economic failure, and the ideology of resistance
• Neoconservatives have been supply-led (democracy) rather than demand-led
• We need a grassroots, youth-led movement to spread democratic culture – democracy, to date, has just been one of many choices
• As a choice, when democracy is seen to fail, people say, well we tried that and it didn’t work
• Social movements are loose networks with ideas and narratives to bind them together

Justin Hall-Tipping, nanotech venture capitalist
• Describing a nanomaterial made of carbon a thousand times more conductive than copper
• Transparent and flexible at the nanoscale
• Combined with polymer and affixed to window, state can be changed with a millisecond pulse to allow light and heat through (or not)
• Working with University of Florida
• Imagine if we didn’t have to rely on synthetic light at night
• Two nanomaterials combined, a detector and imager – width 600 times smaller than a decimal place – transparent and flexible film that lets you see in the dark, the power plant of tomorrow
• Today the best energy storage is the lead acid battery
• Working with University of Texas–Dallas to build a box made of nanomaterials that can park an electron and then release it – even beam it where you want it to go
• Power of grid of tomorrow is no grid
• Clean efficient energy will one day be free
• The answer to clean water is to gain control over the building block of life – the electron

Yves Rossy, jetman
• (Video of human flight using rigid powered wing over Swiss Alps, Straits of Gibraltar, English Channel, etc)
• His body is used in tests since his body is an integral part of the structure, used to steer wing
• Gains altitude when he arches back
• Pushing shoulders forward goes into dive
• “It’s fun” (to laughter)… “I feel like a bird”
• He discovered freefalling at 23 – the dream, to fly free with no machine
• He flies at 190 miles per hour with 55 kilos on his back (on 55 kilo body)
• Uses 2 parachutes
• Instruments are altimeter and fuel
• Landed at the bottom of Grand Canyon – much safer as top is rocky, has cactus, and has funny wind dynamics
• (Bruno:  When are you developing a two-seater?”)  “Have you ever seen a tandem bird?”
• He would like to share it, do formation flights

Session 1:  Beginnings

Lee Cronin, chemist
• Studies “inorganic biology” and self-organizing matter
• Inorganic crystal mimics life
• The physics of life may be encoded in the universe just like the physics of the stars
• What is life – life divides, competes, survives; life = energy and disorder
• (*Perhaps the line between organic and inorganic isn’t so well defined)
• Biology may just be chemical complexity
• Recipe for inorganic life – energy + information + container = evolution
• Molecular Darwinism – molecular shapes are in competition, they “want” to persist
• It is time for a General Theory of Evolution (vis a vis the Special Theory that applies only to biology)
• “Selfish matter” rather than “selfish gene”
• “Design by evolution” for all matter
• (*Does the term fitness even make sense in this context?)
• This new approach is happening now (in the next 2 years)
• In his mind, there is a 100% chance of other forms of life (non-carbon-based) out there on other plans

Annie Murphy Paul, science writer
• Explores how life in the womb shapes how we behave (fetal development)
• Fetuses learn the sounds of their mother’s voice, and in an experiment based on the patterns of infant sucking (vigor and speed), will prefers their mother’s voice over all others
• Other people’s voices may sound like adults in Charlie Brown cartoons from the womb
• Babies recognize theme songs of soap operas watched by their mothers (i.e. infant sucking will slow when they hear these theme songs again)
• Babies cry in the accent of their mother’s language (e.g. end in high note in French) – probably to endear themselves to the mother as well as give them a headstart in language acquisition
• Babies can smell and taste in womb
• They prefer familiar tastes (e.g. carrot juice and anise experiments where mothers will ingest the food during the last trimester and babies will show preference after birth)
• They learn about the outside world through their mother’s diet, stress levels and exercise – will the child face tribulations or will it be protected
• The siege of Holland in WWII that caused mass hunger over one freezing winter – people whose mothers were pregnant during the siege had more obesity, heart disease and diabetes, higher blood pressure, decreased glucose tolerance
• Fetuses prepare themselves for the environment they will face
• Fetuses in women who were pregnant and exposed to World Trade Center on 9/11 had biological markers for post-traumatic stress – i.e. prenatal transmission of PTSD

Rebecca MacKinnon, media activist
• Apple censored Dalai Lama app in China, Mark Fiore app (until he won Pulitzer), German magazine app, Palestinian protest app – all apps that go beyond the freedom of speech laws of the Constitution and often the local government itself (i.e. in the case of the German magazine)
• Private sovereignty in cyberspace – “Facebookistan”
• Upon storming of Egyptian State Security HQ, activists found transcripts of their emails, Skype messages, and documentation that American companies facilitated this
• Amazon webhosting dropped Julian Assange as a customer even though Assange had not been charged or convicted of a crime
• China presents awards to top 20 companies best at “self-discipline” (or censorship) – Baidu, China’s top search engine, was one of the recipients
• Relationship between citizens and government is mediated by Internet, which is predominantly operated by private firms
• How should private firms be held accountable?

Richard Wilkinson, social epidemiologist
• Inequality is socially divisive
• Life expectancy in rich countries is no longer related to national income per capita
• Life expectancy is strongly related to income within rich countries – i.e. relative social position
• Japan and Scandinavian countries have the least inequality, USA and Singapore the most
• Health and social problems are worse in more unequal countries – but neither health or social problems is related to national income per head
• Child well-being is better in more equal countries…but not related to national income per head (in developed world)
• People in more unequal countries trust each other less
• People in more unequal states in the USA trust each other less
• Mental illness is more common in more unequal societies
• Homicide rates are higher in more unequal US states and Canadian provinces
• Imprisonment rates are higher in more unequal countries – mostly related to punitive lengths and greater likelihood of applying the death penalty
• Children are less likely to graduate from high school in more unequal countries
• Social mobility is lower in more unequal countries
• Benefits of greater equality extend to all social classes – infant mortality rates are lower in more equal countries even in the highest income brackets
• The most stressful tasks are those with “social evaluative threat” (*e.g. public speaking)

Philip Blond, political thinker
• Facing the loss of the group delivery mechanism for services
• Western societies are not producing good groups – and therefore having trouble producing good individuals
• Collectivism and individualism converge – Russia is one of the most individualistic society he has encountered, while in the US, individualistic society demands a big government to pick up the pieces and offer protection for rights and borders
• The left has not saved us from poverty and the right has not delivered us prosperity
• Relationships are the key
• Groups are the primary human category – civilization began as a group.
• The crucial format for groups is agreement.
• Unless we can agree, we can’t even disagree – we’re just at war.
• The Church as a cultural movement in the 10th century used soft power to disarm Europe – by creating taboos and thereby suppressing violence (and chaos) in Europe
• Then, monarchs desiring absolute power asserted their authority over religion and created European racism – i.e. new groupings; we continue to live with the implications of this today
• Asset inequality is much more dramatic than income inequality (100X vs. 4-8X)
• 1% of Americans have more wealth than the bottom 90%
• “Big Society” is a bottom-up economy and society – self-defining neighborhoods, lcal power to take over budgets
• (Chris Anderson:  Is “Big Society” the right name?  It evokes almost the opposite impression from that intended)

http://www.chicagobooth.edu/capideas/mar11/5.aspx

Excerpts:

"Liberalizing capital markets, however, does not always mean that foreigners are willing to supply capital or that local companies are eager to receive it."

"Poor corporate governance is one reason foreigners may be reluctant to invest in certain companies abroad...In particular, foreigners are wary of investing in a firm controlled by shareholders who are also its managers"

"...if domestic investors have more information than foreigners about the local business environment, then the price of the firm's stock will reflect what the locals know but not the cost that foreigners would have to incur in figuring out whether to invest in a company"

"This probably explains why previous papers that have looked at the impact of corporate governance on investing in U.S. firms show very little effect, because shareholders in the United States are well protected through effective disclosure regulations and measures that safeguard outsiders' investments. This is not the case in many other countries where the information advantage that locals have could create a significant wedge between the ability of a local and a foreigner to assess firms."

"The study finds strong evidence that U.S. investors hold significantly fewer shares in firms with high levels of managerial and family control, but only when these firms are located in countries with weaker disclosure requirements, securities regulations, and outside shareholder rights. In contrast, firms with substantial insider control that are located in countries with strong investor protection and require more transparency do not experience less foreign investment."

"...findings do not simply depend on a country's economic development but appear to be directly related to its legal institutions and rules on disclosure and investor protection. Previous papers have noted that in Italy, which is considered a developed market, favoring connected insiders at the expense of minority shareholders may be tolerated at times within the country's institutional and political frameworks. An emerging market like Hong Kong, in contrast, has comprehensive and well-enforced disclosure requirements."

"Regulators and governments aiming to substantially attract more foreign investment also can change the set of rules and laws that encourage insider control and opaqueness in the first place, such as weak investor rights."

"...it is unclear whether all firms would be willing to make changes especially if they have other sources of capital that do not require more transparency....In a another study by Leuz and Felix Oberholzer-Gee of Harvard University that looks at the role of political connections in firms' financing strategies in Indonesia, the authors find that political connections and global financing are actually substitutes...well-connected firms favored low-cost loans from state-owned banks and disliked the accountability and scrutiny that comes with publicly traded securities."

"Institutional reform and political reform go hand in hand," says Leuz."