Showing posts with label Hayak. Show all posts
Showing posts with label Hayak. Show all posts

Monday, March 02, 2009

Berkshire Shareholder Letter

We've all heard of the "Oracle of Omaha" Warren Buffett and understand his perspective on business. Lately he has taken some solid hits to his reputation with the high profile and large investments he made in Citibank and General Electric. Both being questionable in terms of judgement.

Nonetheless he has the clarity of thinking that provides a solid grounding of where we are and what may be happening to us economically.
“The economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond,” said Buffett. “Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so.”
The annual report of Berkshire Hathaway is available and down-loadable from here. The Wall Street Journal also has a review of the letter to shareholders here .

Is this recession really a depression? Have we seen a time when a recession has put so many homeowners underwater? Or watched the Japanese economies exports decline 45% year over year? A recession in which we have seen banks and auto manufacturers, media and almost every industry in such a decline that the poor performing companies are looking straight down the barrel of their demise?

Well actually yes we have. There have been many other periods of time in which the economy has been hit by a depression. The 1930's being the most recent. These are long wave economic theories that have been systemically analysed by Professor Carlota Perez. And I have applied them to the oil and gas industry in a variety of blog posts under the label Perez. The key takeaway from her theories is that there is economic stress, or shambles as Buffet calls it. This a necessary and productive time of renewal. The organizations that will come out of this decline will be more able to satisfy the needs of society and people. Something that the old economy styled companies where unable to do.

Professor Ludwig von Mises is famous for educating Professor Friedrich von Hayek in Economics. He also stated an important point pertaining to some of these long term economic cycles. And that is they are generally solutions to the problems of the day. Specifically he states that the "industrial revolution was the solution to the problem of mass hunger".
 
This puts in context the role of today's Information and Communication Technologies (IT). IT has for the past 40 years provided us with some of the solutions to the problems of the day. And we live in remarkable times as a result of these technologies. But there is so much more that is expected of them, and in many cases they have been systemically disappointing in terms of building specific value for organizations. With organizations unwilling to change or to adopt the new technologies to their fullest of potential, IT's impact has been limited. As a result we have barely experienced the value they could provide. I marvel at the stupidity of driving to the office in the morning. This activity consuming up to three hours of each individuals day, When in reality they were prepared and ready to work within 5 minutes of waking up.

We need these economic depressions to eliminate the weaker and less adaptive firms from the economy. In oil and gas I have written about the piggies and specifically about Canadian Natural Resources Ltd (CNRL). I have accused them of aggressively fudging their financial statements in the third quarter. They have lost Fidelity investments and this is the only news we have heard from them? They were to have their Horizon tar sands operational now, yet we only know that their is litigation with the contractor. With $26 billion in debt and greater then $3 billion working capital deficiency, these delays in reporting are evidence of the last moments of that organizations life. Say good bye to this pig.

The time in which people will be faced with the question "what do I do now" is answered with their involvement in this software development project. For a variety of reasons we need to begin the development of the People, Ideas & Objects software application. We have advanced as a society where the role of software in organizing is at a very high level. We have alternatives that make this choice very critical. We either build this software or regress to manual systems. A future that unfolds in a very bad way. We need to get moving with these developments, the time is brief, and we are not moving forward at this point in time. So please, join me here and lets build this software .

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Thursday, January 03, 2008

A test of Hayek's theory of spontaneous order.

I have referenced Professor Russell Roberts on this blog before. He is an economics Professor at George Mason University, and a Fellow at Stanford's Hoover Institute. His best work is available freely through his blog Cafe Hayek, and podcast EconTalk. I highly recommend subscribing to both feeds.

One of the concepts that Hayek developed was "Spontaneous Order". In the last month this blog has morphed from somewhat of an academic exercise of extending the thinking of my thesis, to a project that is actively searching for funds, Users and Developers. Over the past year the number of people who subscribed to this blog grew slowly into a handsome audience.

Since I published the call for action in December, it is clear this community was waiting for me to exercise this change. That I may have been limiting the response is obvious to me now. The numbers of people who share an interest in these writings continues to increase. And I can now see that Hayek's concept of spontaneous order is possible. Professor Roberts provides clarity on the interaction of "spontaneous order."
When we talk about spontaneous order, the adjective is trying to capture the fact that no one is in charge, controlling the economic system - the order we see around us is spontaneous, organic, emergent, rather than controlled, directed or managed.
and
But I've been thinking lately about a different sense of the word spontaneous. It's the ability of the modern economy to deal with our spontaneity as economic actors, or, it's how order re-emerges in the face of our spontaneity as economic actors.
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What happens when there's an unanticipated, essentially spontaneous change of behavior?
What should spontaneous order mean to Users and Developers? Action! Action not only in proceeding with the development of this software, but also learning what could be done. Action on behalf of the producers to sponsor this development, action on behalf of the Developers to get involved and action for the User groups to form and move forward.

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