Day 152 MIT Sloan Fellows Class 2023, AI for business 4 "Framework for AI business"

AI Framework

New AI business idea with framework

Presentation design is pretty personal and cultural. It depends on your preference about design, complexity of messages and organizational culture. 

Even with completely same message, the best slide design to deliver is different.  

Problem Statement

If from people's feedback about presentation designs, we could know the best presentation format for specific messages, audience, and context, then many young presentors could derive a benefit by reducing time to modify presentation design and focusing on messaging/contents. 

So many business person recreate the similar deck with similar message from scratch. The organizations such as my company, an agency, should store the pitch data in the standardized way and then we can analyze and optimize presentation design in the data-driven way.

Inputs(x)

• Audience attributes, recency, contexts/situation, messages and design of presentation(Image data)
• Recorded video of presentation might be future training data.
• Contexts and messages are difficult to be standardized.
• This would cause some misinterpretation of contexts. 

Outputs(Y)

• Pitch feedback and people's feedback (score or Y/N) / budget from pitch
• The past result would affect the future result. (The same message with same design presentation would give a negative image for clients even if it recorded positive score before)
• Scarce patterns of presentations would be a noise for majority of cases. 
• Major concern is too many patterns of designs and contexts. 

Training data

• Actual recording video from presentations
• Pitch results and presentations
• We don't have enough data so far. Data storing project need to be initiated. 
• The presentation data is basically owned by agencies, but it may contain some confidential data for clients. 

Errors

• It may cause wrong suggestions to future presentation.
• Also, it would cause the bias in the future training data. 

Day 151 in MIT Sloan Fellows Class 2023, Choice point 10 "A Man of All Seasons"

A Man For All Seasons (Modern Classics) (English Edition)

Story

"A Man for All Seasons" is a play written by Robert Bolt in 1960. The play is set in the 16th century and is based on the true story of Sir Thomas More, the Chancellor of England under King Henry VIII. The story provides a historical account of More's life, as well as his moral and ethical struggles in the face of political pressure and personal ambition.

The central conflict of the play revolves around King Henry VIII's desire to divorce his wife, Catherine of Aragon, in order to marry Anne Boleyn. This decision sets the stage for a series of events that ultimately lead to the English Reformation and the establishment of the Church of England, separate from the Roman Catholic Church. Sir Thomas More, a devout Catholic and a man of strong principles, opposes the king's decision and faces a series of challenges as a result.

Throughout the play, More grapples with his personal convictions and loyalty to the king, striving to maintain his integrity in the face of political machinations and corruption. The story also touches on themes such as the abuse of power, the importance of conscience, and the role of individual integrity in a world full of moral ambiguity.

"A Man for All Seasons" received critical acclaim and was adapted into an Academy Award-winning film in 1966, directed by Fred Zinnemann and starring Paul Scofield as Sir Thomas More. The play remains a popular work in modern theater and serves as a powerful exploration of the conflict between personal principles and the demands of political expediency.

More's multiple roles and responsibilities

Sir Thomas More held several significant roles in his professional and personal life, each with its own set of responsibilities. Here are his primary roles:

1. Lord Chancellor of England: As the highest-ranking non-royal in England, More's responsibilities included serving as the King's chief advisor, overseeing the court system, and acting as a key decision-maker in government affairs. His role required him to balance loyalty to the King with the responsibility of upholding the law.
2. Lawyer: Trained in law, More's responsibility was to uphold the law and ensure justice. This role's principles likely influenced his decision-making process, making it difficult for him to compromise his beliefs and the law in favor of the King's desires.
3. Scholar: More was a respected intellectual and writer, known particularly for his work "Utopia". His responsibilities in this role involved contributing to intellectual discourse, exploring philosophical ideas, and promoting education.
4. Devout Catholic: As a devout Catholic, More had a responsibility to his faith and its teachings. This deeply personal role affected his actions and decisions, especially in matters relating to the Church, such as the King's desire for a divorce and the subsequent break from the Catholic Church.
5. Family Man: As a husband and father, More had responsibilities to his family. His role involved providing for them, protecting them, and ensuring their well-being. This responsibility, in particular, influenced his decision to initially remain silent about his views on the King's divorce and the establishment of the Church of England.
6. Friend and Mentor: More was a friend and mentor to many, including Richard Rich in the play. In this role, More had a responsibility to provide guidance and support, a duty he fulfilled by advising Rich to seek a career away from the court to avoid corruption.

At the beginning of the play, he prioritizes his role as Lord Chancellor and a lawyer, attempting to navigate the legal and political landscape in a way that aligns with his principles. When King Henry VIII wants to divorce Catherine of Aragon, More tries to find a legal solution that will satisfy the King without violating Church law.

However, as the story progresses and the King's actions increasingly conflict with the teachings of the Catholic Church, More prioritizes his role as a devout Catholic. Despite the potential consequences, he refuses to support the King's decision to break from the Catholic Church, placing his religious principles above his political obligations.

Toward the end of the play, More prioritizes his role as a family man, choosing to remain silent about his views on the King's actions in an attempt to protect his family from the potential fallout of his dissent. However, when he is pushed to make a public declaration, he again chooses his religious principles over his family's safety, demonstrating his unwavering commitment to his conscience.

More's concept of conscience is central to his character and decisions throughout the play. He views conscience as an individual's moral compass, a guide to right and wrong that must be followed even when it conflicts with personal desires or external pressures. For More, conscience is deeply tied to his religious faith, but it also transcends it, representing an innate understanding of morality and justice. In his view, violating one's conscience is the highest form of betrayal, worse than any external consequence.

His strategy

In "A Man for All Seasons," Sir Thomas More does indeed employ a strategy of careful communication, often choosing silence over explicit disagreement, in an effort to protect himself and his family from the potential consequences of his dissent. He foresaw that openly disagreeing with King Henry VIII's break from the Catholic Church could lead to charges of treason, a crime punishable by death.

However, there are several factors that led to his strategy not being successful and ultimately ending in his execution:

• The Oath of Supremacy: More's strategy was undermined by the introduction of the Oath of Supremacy, which required all of the King's subjects to acknowledge Henry as the Supreme Head of the Church of England. More's refusal to take the oath was interpreted as an act of treason, even though he tried to avoid explicitly stating his reasons for doing so.
• The persistence of his opponents: Thomas Cromwell, Richard Rich, and others who saw More as an obstacle to their plans were determined to remove him. Despite More's careful avoidance of explicit dissent, they used his silence against him and manipulated the situation to their advantage.
• The perjury of Richard Rich: In the trial against More, Richard Rich lies under oath, stating that More had explicitly denied the King's supremacy over the Church. This false testimony was the decisive evidence used to convict More of treason.
• The volatile political climate: The period during which More lived was marked by significant religious and political upheaval. This volatility meant that even careful and considered strategies could easily fail under intense pressure and rapidly changing circumstances.

However, compared to other characters in our "ChoicePoints" journey, he was one of the most intelligent and greatest strategists. 

The last tips in the class

Professor left me a life-long discipline. 

• Step back
• Observe and think about the situation
• Don't jump into a solution/decision immediately
• Rather ask a right question. 

Day 150 in MIT Sloan Fellows Class 2023, Choice point 9 "Frankenstein"

Frankenstein (Penguin Classics)

Story

Frankenstein, or The Modern Prometheus, is a novel written by Mary Shelley, first published in 1818. It tells the story of Victor Frankenstein, a young scientist who becomes obsessed with the idea of creating life from inanimate matter. Through his experiments, he successfully creates a living creature, but the result is a grotesque and monstrous being. Horrified by his creation, Victor abandons the creature, setting off a chain of events that leads to tragedy and despair for both the creator and his creation.

The creature, abandoned and alone, struggles to find his place in the world and understand his own existence. He eventually learns to read and speak, and he tries to approach humans for companionship but is rejected due to his monstrous appearance. This rejection drives the creature to seek revenge against his creator for bringing him into a cruel and unloving world.

Throughout the novel, themes of ambition, responsibility, the pursuit of knowledge, and the dangers of playing God are explored. The story is told through a series of letters and narratives, primarily from the perspectives of Victor Frankenstein and the creature. The novel is often considered one of the first examples of science fiction and has had a significant influence on the genre. It is also seen as a cautionary tale about the limits of human knowledge and the potential consequences of unchecked scientific ambition.

How to deal with technology disruption and ethical dilemma?

1. Consider ethical implications: When developing new technologies, it is crucial to reflect on the potential ethical implications and consequences of their deployment. Researchers and innovators should be aware of the possible impacts on society, the environment, and individuals, and strive to minimize harm.
2. Collaboration and diverse perspectives: Technological development should involve collaboration among stakeholders with diverse perspectives and expertise. By including a wide range of voices, it is more likely that potential risks and ethical issues will be identified and addressed effectively.
3. Responsibility and accountability: Researchers, developers, and organizations should take responsibility for the technologies they create and their potential consequences. This includes implementing measures to ensure the responsible use of these technologies and being accountable for any unintended negative outcomes.
4. Balance ambition and caution: While ambition drives innovation, it is essential to balance it with caution and a thorough evaluation of potential risks. Pursuing knowledge and innovation without considering the possible consequences can lead to disastrous outcomes, as exemplified by Victor Frankenstein's actions.
5. Public engagement and education: To promote responsible technological development and use, it is essential to engage the public and educate them about the potential benefits, risks, and ethical dilemmas associated with new technologies. This fosters a more informed and inclusive dialogue, which can help guide ethical decision-making and policy development.
6. Adaptability and ongoing evaluation: As technology evolves and its impacts become more apparent, it is crucial to continually reassess and adapt policies, regulations, and practices to address emerging ethical concerns and ensure responsible development and use.

Technology itself is neutral. The issue is how to use it and control it. 

Technology itself is neutral, and its impact on society largely depends on how it is used and managed by human beings. Indeed, technological advancements like nuclear technology and AI have the potential to bring about significant benefits, such as improved medical treatments, more efficient energy sources, and enhanced decision-making capabilities.

Involving individuals with diverse expertise and perspectives in the development and management of technology is crucial. By fostering a collaborative and multidisciplinary approach, researchers and technology developers can ensure that potential risks and ethical concerns are addressed proactively, while maximizing the positive impacts of their innovations.

Open source is a prime example of how collaboration and transparency can lead to better, more responsible technology development. By making the source code and underlying processes accessible to a wide range of individuals and organizations, open source projects can benefit from diverse perspectives, expertise, and ideas, resulting in more robust and ethically sound technologies.

That's why I feel some potential in LLMs by Facebook.

ai.facebook.com

On the other hand,the way researchers and society react to emergency situations caused by technology is crucially important. Victor Frankenstein's immediate response to flee after seeing his creation highlights the potential consequences of failing to manage such situations responsibly.

Two contemporary examples further illustrate the significance of proper reactions in emergency situations:

1. Fukushima nuclear power plant disaster: In 2011, a massive earthquake and tsunami led to a nuclear meltdown at the Fukushima Daiichi power plant in Japan. The emergency response was critical in mitigating the disaster's effects. Teams of workers risked their lives to stabilize the reactors, and the government took decisive action to evacuate residents from the surrounding areas. While mistakes were made during the response, the overall effort to manage the emergency showcased the importance of swift, coordinated, and responsible action in the face of a technological crisis.
2. AI emergency stop button: The concept of an AI emergency stop button is designed to provide a means of controlling AI systems in case they become dangerous or exhibit unintended behaviors. This safety mechanism underscores the importance of having contingency plans and the ability to intervene when technological emergencies arise. By being prepared to act decisively and responsibly, researchers and society can prevent or minimize the harmful consequences of technological failures or unexpected behaviors. This concept was proposed by a researcher in DeepMind.

Everyone can be the lonely creature

The creature's crucial failure is its inability to control its emotions and the resulting destructive actions driven by its feelings of rejection, loneliness, and despair. While it's essential to acknowledge that the creature's suffering and isolation were primarily caused by Victor Frankenstein's abandonment and society's rejection, the creature's response ultimately exacerbates its own plight. After killing a child accidentally, the creature becomes a true monster not only with appearance but also with mindset.

The responsibility is partially in Mr Frankestein and society as well.Society also bears some responsibility for the events that unfold in Frankenstein. The creature's monstrous appearance leads to its rejection, isolation, and eventual descent into violence. While the creature demonstrates intelligence, empathy, and a desire to connect with others, society's unwillingness to look beyond its external appearance exacerbates its suffering. A more compassionate and inclusive approach could have potentially prevented the tragic chain of events that took place. 

Key takeaways

Shelley’s novel holds profound lessons for us as a society and as individuals concerning (a) our responsibilities as "creators" (of new technologies, new enterprises, new human beings...), and (b) the importance of human connection and empathy as a foundation for any moral consciousness.

Victor, the Creature, and the people the Creature met along his travels all displayed very natural, human responses, and yet at one point or another they each failed to think about the consequences their actions would have for others—and that was when they gave into the worst of their human instincts and became "monsters" toward one another. Simply put, it is our choice whether we want to live up to the best of our human instincts or give in to the worst, and our responsibility to strive always for the former.

It teaches that the way to stay connected with the most beautiful aspects of our humanity is to stay connected, period—that is, we should never forget the value of human connection; never forget how important it is that we acknowledge our shared humanity and the responsibilities we have to one another, no matter our differences. There are the risks of isolation and rejection of others again and again in this novel (e.g., in Victor’s cutting himself off from others during his R&D process; in his refusal to tell others about the Creature and seek their advice on what to do; in his and society’s rejection of the Creature).

1. Responsibility and ethics: The novel emphasizes the importance of considering the ethical implications of one's work and the responsibility that comes with creating something new. For researchers and business leaders, this means being aware of the potential consequences of their innovations and taking necessary steps to minimize harm.

2. Unintended consequences: The story of Frankenstein serves as a reminder that even well-intentioned pursuits can have unintended and potentially disastrous consequences. This underscores the importance of thorough risk assessment, and being prepared to address potential issues as they arise.

3. The human factor: The novel highlights the importance of empathy and understanding when dealing with the consequences of one's work. For founders and business leaders, this can translate into prioritizing the well-being of employees, customers, and society at large, and fostering a culture of compassion and collaboration within their organizations.

4. The limits of ambition: Frankenstein serves as a cautionary tale about the dangers of unchecked ambition and the pursuit of knowledge without considering the potential consequences. Business leaders and researchers should maintain a balance between their ambitions and the possible ramifications of their actions.

5. The importance of reflection: The novel encourages introspection and reflection, urging individuals to question the potential impact of their decisions and actions. For researchers, founders, and business leaders, this means regularly re-evaluating their goals, methods, and progress, and being open to change when necessary.

Day 149 in MIT Sloan Fellows Class 2023, M&A 13 "SPAC"

A Special Purpose Acquisition Company (SPAC) is a type of investment vehicle that allows public market investors to participate in the initial public offering (IPO) and merger and acquisition (M&A) processes. SPACs are essentially shell companies with no commercial operations, created solely for the purpose of raising capital through an IPO and using those funds to acquire an existing private company. 

Players

SPAC process involves many players and high number of stakeholders makes this process complex. 

• Sponsors: Sponsors are the individuals or entities that create the SPAC. They are typically experienced investors or management teams with a strong background in a particular industry or sector. For example, Apollo Global Management, a leading global alternative investment manager, could act as a sponsor by creating a SPAC to acquire a private company in the financial services sector. Sponsors contribute the initial capital, guide the SPAC through the IPO process, and identify potential acquisition targets.
• Sellers: Sellers are the existing shareholders of the target company, which is the private company that the SPAC aims to acquire. They may include founders, early investors, venture capital firms, or other stakeholders who own equity in the target company.
• Target Company: The target company is the private company that the SPAC intends to acquire. It is typically a company operating in the industry or sector specified by the SPAC sponsors. The acquisition of the target company allows it to become a publicly-traded entity without going through the traditional IPO process. An electric vehicle manufacturer like Rivian, which went public via a SPAC merger with Churchill Capital Corp IV, acted as a target company in a SPAC transaction.
• PIPE (Private Investment in Public Equity): PIPE investors are institutional investors who provide additional capital to the SPAC through private investments. This capital is typically used to fund the acquisition of the target company or support its growth after the transaction is completed. PIPE investments are made at a pre-determined price per share, and these investors receive shares in the combined public company after the merger. Fidelity Investments and BlackRock might participate as PIPE investors, providing additional capital to a SPAC targeting a renewable energy company.
• Trust: The trust is an interest-bearing account where the funds raised during the SPAC's IPO are held. These funds can only be used to complete an acquisition or returned to the IPO buyers if the SPAC fails to complete a business combination within the specified timeframe.Citigroup, as a trustee, could hold the funds raised in a SPAC's IPO in an interest-bearing trust account until a business combination is completed or the SPAC is liquidated.
• IPO Buyers: IPO buyers are the public investors who purchase shares in the SPAC during its initial public offering. They provide the capital that the SPAC uses to acquire the target company. After the merger, these investors become shareholders in the combined public company. If the SPAC fails to complete a business combination within the specified timeframe, IPO buyers receive a pro-rata share of the funds held in the trust account. Many investors are hedge fund.
• Long-term investors: Long-term investors are those who buy and hold shares in the combined public company resulting from the SPAC merger. They believe in the potential growth and value of the acquired company and expect to benefit from its long-term performance. Long-term investors may include institutional investors, mutual funds, pension funds, or individual investors. T. Rowe Price or Vanguard, as long-term investors, might hold shares in the combined public company resulting from a SPAC merger, expecting growth and long-term value creation.

Process

SPAC setup process: 

1. Formation: The SPAC sponsors (typically experienced investors or management teams) form a shell company, and outline a target industry or sector for acquisitions.
2. Fundraising: The sponsors contribute the initial capital to the SPAC, usually in exchange for founder shares, which represent a significant portion of the SPAC's equity.
3. IPO: The SPAC goes through the IPO process, selling shares (usually at $10 per share) and raising capital from public investors. The funds raised are placed in an interest-bearing trust account.

De-SPAC Process:

1. Acquisition target search: After the IPO, the SPAC has a limited time frame (typically 18-24 months) to identify and complete an acquisition of a private company. This is known as the "business combination."
2. Due diligence and merger agreement: Once a target company is identified, the SPAC conducts due diligence and negotiates a merger agreement with the target company's shareholders.
3. PIPE financing (optional): To provide additional capital for the acquisition or support the target company's growth, the SPAC may seek private investment in public equity (PIPE) financing. PIPE investors agree to invest at a pre-determined price per share and receive shares in the combined public company after the merger.
4. Shareholder approval and closing: The SPAC's shareholders vote to approve or reject the proposed business combination. If approved, the merger is completed, and the target company becomes a public entity, with the SPAC's shareholders now owning shares in the combined company.
5. De-listing and ticker change: After the merger is completed, the SPAC is de-listed, and the combined company begins trading under a new ticker symbol on the stock exchange.

If the SPAC fails to complete a business combination within the specified timeframe, the SPAC is liquidated, and the funds held in the trust account are returned to the IPO investors.

Pros/Cons

Advantages

• Speed and simplicity: SPACs can provide a faster and more streamlined process for private companies to go public compared to the traditional IPO process, which can involve extensive regulatory hurdles, disclosures, and roadshows.
• Price certainty: The SPAC structure allows for pre-determined valuations and deal terms, providing price certainty for both the target company and the investors.
• Access to capital: SPACs provide private companies with access to public market capital, which can help fuel their growth and expansion plans.
• Expertise: SPAC sponsors typically have extensive experience in the target industry and can provide valuable strategic guidance to the acquired company.

Disadvantages

• Speed and simplicity: SPACs can provide a faster and more streamlined process for private companies to go public compared to the traditional IPO process, which can involve extensive regulatory hurdles, disclosures, and roadshows.
• Price certainty: The SPAC structure allows for pre-determined valuations and deal terms, providing price certainty for both the target company and the investors.
• Access to capital: SPACs provide private companies with access to public market capital, which can help fuel their growth and expansion plans.
• Expertise: SPAC sponsors typically have extensive experience in the target industry and can provide valuable strategic guidance to the acquired company.

Day 148 MIT Sloan Fellows Class 2023, The art of leading 5 "Collective creativity and how to communicate with people"

Improvisational Model

An Improvisational Model of Change Management

The challenges and misconceptions surrounding technology-based change in organizations. According to the authors, traditional models of managing technological change, which treat change as a sequential series of pre-planned steps, are becoming less effective. This is due to the complex and unpredictable nature of modern environments, making it difficult to stick to a rigid plan.

The authors propose an "improvisational change model" as a new way of managing the introduction and ongoing use of information technologies. Contrary to traditional models, this model views change as an ongoing process filled with unpredictable opportunities and challenges. It defines a process that revolves around three types of changes - anticipated, emergent, and opportunity-based. This approach allows organizations to experiment, learn, and adapt as they use technology over time.

Adopting the improvisational change model implies a departure from the "command and control" paradigm. Instead, it encourages management to create an environment that facilitates improvisation. The article uses the analogy of a jazz band to illustrate this point: while each member is free to improvise, the overall performance remains harmonious because it operates within a shared framework of expectations, norms, and resources.

The article emphasizes that effectively implementing an improvisational change model requires aligning the technology with the organization's context and change model. This alignment doesn't happen automatically and requires ongoing adjustments. Additionally, the authors note that not every organization or situation may be suited to an improvisational model of change - especially if the culture doesn't support experimentation and learning.

In conclusion, as organizations continue to adapt to new technological changes, the improvisational model offers a flexible and responsive approach to managing these changes, particularly in unpredictable and complex environments. However, its effective implementation demands a significant shift from traditional practices and might not be suitable for all organizations or situations.

Anticipated, Emergent, and opportunistic change

The article discusses three types of changes within an organization: anticipated, emergent, and opportunistic change.

Anticipated Change: This type of change is pre-planned and mapped out with a detailed timeline, including expectations, milestones, and contingencies. It is the standard approach for most organizational projects, where outcomes and transformations are anticipated and planned for.

Emergent Change: This type of change arises spontaneously from the ground level and veers away from the anticipated plan. These are unplanned adaptations made by different stakeholders such as managers, employees, customers, or partners in response to evolving circumstances. The article provides an example of emergent change when MIT's Sloan School of Management moved to web-based student applications, which unexpectedly led to the creation of a vibrant online community by admitted students.

Opportunistic Change: This type of change is not initially anticipated but is officially incorporated into the change process at a later stage. It is often a result of recognizing and institutionalizing emergent, grassroots practices. Opportunistic change can also occur when organizations identify unforeseen capabilities or opportunities and adapt to leverage them. The article cites an example of a software company that discovered its customer support system could be adapted into a training tool for new hires.

There are situations where emergent or opportunistic changes may be less likely, such as when an organization attempts to precisely replicate a proven model without any local adaptations. Despite this, uncertainties abound in every domain due to evolving technologies, market changes, emerging competitors, and shifting economic and political landscapes, suggesting a constant need for adaptability and improvisation.

Some tips from sessions

• Time budgeting
• Full transparency is the driver of creativity and productivity
• Don't change who you are
• Asking "tell me more?" not "why?"

Day 147 in MIT Sloan Fellows Class 2023, Financial Market Dynamics and Human Behavior 7 - "Impact investing"

Impact investing 101

Impact investing, particularly in the Environmental, Social, and Governance (ESG) field, refers to the practice of investing in companies and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return. It's an investment approach that goes beyond traditional financial considerations by factoring in the broader impacts of business activities.

The fundamental question - fiduciary duty

The concept of fiduciary duty generally involves an obligation to act in the best financial interests of clients or beneficiaries. Historically, this has been interpreted to mean that fiduciaries should seek the highest risk-adjusted returns, irrespective of other considerations.

In the context of impact investing, the question arises whether considering Environmental, Social, and Governance (ESG) factors, or making investment decisions based on these considerations, may violate that fiduciary duty. This is particularly pertinent if such considerations could potentially lead to lower financial returns.

Many argue that ESG factors do have a direct impact on financial performance and risk, and thus should be a part of fiduciary duty. They point to evidence that companies with strong ESG practices often have better long-term financial performance and lower risk profiles. Furthermore, issues like climate change, social inequality, and corporate governance are increasingly seen as financially material over the long term.

Typical problems ( Greenwashing and Divergence )

Greenwashing: This term is a blend of "green" (referring to environmentally friendly practices) and "whitewashing" (the practice of covering up or glossing over wrongdoing). Greenwashing is when a company or organization gives a false impression of its environmental responsibility. For example, a company might spend more time and money on marketing themselves as environmentally friendly, through advertising or packaging, than they do actually implementing practices that reduce their environmental harm. It's like someone talking a lot about how much they recycle, but they're still wasting a lot of energy and resources in other parts of their life.

Divergence: In the context of ESG (Environmental, Social, and Governance) scores, divergence refers to the lack of consistency or agreement between different ESG rating systems. Different organizations or rating agencies might use different criteria or place different emphasis on certain factors when they calculate ESG scores. This can lead to a company receiving a high ESG score from one agency but a low score from another, even though both scores are supposed to measure the same thing. It's like different teachers grading an essay: one teacher might focus more on grammar, while another focuses on creativity, leading to different grades for the same essay.

I think those problems come from some fundamental issues around ESG.

• Difficult to measure consistently and universally
• Difficult to forecast the impact and what would happen next
• We have no data and formula so far(except for non-academic ones)
• Uncertainty about other risks such as pandemic. Then ESG strategy itself gets affected.

Basic framework

Prof Andrew Lo said there is a potential criteria to filter out assets to invest in.

Here is examples.

• ESG→？
• Industry consortia→？
• Divesting "sin" stocks such as tabacco→×
• Venture philanthrophy→？
• Meme stocks(e.g. Gamestop)→？

Also, there are some factors to consider the investment strategy in this field. 

1. Regulatory changes
2. Investor sentiment
3. Market dynamics
4. New metrics
5. Energy transition funds
6. Carbon offsets market

Existing metrics and problems

• Carbon Footprint: This is the total greenhouse gas (GHG) emissions caused directly and indirectly by an individual, organization, event, or product. It's usually measured in equivalent tons of carbon dioxide (CO2).
  • Pros: It's a straightforward and easily understood measure that can be used to compare the environmental impact of different companies, products, or activities.
  • Cons: It only measures one aspect of environmental impact, and it can be challenging to accurately measure indirect emissions. It also doesn't take into account other important environmental factors like water usage, waste production, and biodiversity impact.
• Life-Cycle Assessment (LCA): This is a methodology for assessing environmental impacts associated with all the stages of the life-cycle of a commercial product, process, or service. It includes raw material extraction, materials processing, manufacture, distribution, use, repair and maintenance, and disposal or recycling.
  • Pros: It provides a comprehensive view of environmental impact throughout a product's life-cycle. It can help to identify opportunities to improve environmental performance.
  • Cons: It's a complex and time-consuming process that requires a lot of data. It can also be difficult to compare LCAs between different products or companies due to differences in methodology and assumptions.
• Science-Based Targets (SBTs): Companies set SBTs to reduce their emissions in line with the level of decarbonization required to keep global temperature increase below 2 degrees Celsius, the central aim of the Paris Agreement.
  • Pros: SBTs align corporate goals with global efforts to mitigate climate change. They provide a clear pathway for companies to reduce their emissions over time.
  • Cons: Setting and achieving SBTs can be challenging for companies, particularly those in carbon-intensive industries. There's also currently no standardized approach to setting SBTs.
• Carbon Offsetting: Companies or individuals invest in environmental projects to balance out their own carbon footprints.
  • Pros: Offsetting allows companies to claim carbon neutrality and provides funding for environmental projects.
  • Cons: It's often seen as a "quick fix" that doesn't encourage companies to reduce their own emissions. There's also a risk of investing in ineffective projects or those that would have happened anyway.

If you are interested in this field, I strongly recommend reading this book. 

Climate Future: Averting and Adapting to Climate Change (English Edition)

Day 146 in MIT Sloan Fellows Class 2023, Choice point 8 "In a Penal Colony"

In the Penal Colony

In the Penal Colony (English Edition)

Story

"In the Penal Colony," a short story by Franz Kafka, is set on an island where a severe penal system has been established. The story primarily revolves around four characters: the Officer, the Explorer, the Condemned Man, and the Soldier.

The Officer is a devotee of the old penal system established by the previous Commander, who has since died. This system employs an elaborate execution device that etches the nature of the offender's crime into their skin over a period of twelve hours, leading to death. The Officer is deeply devoted to this brutal form of justice and views the machine as a manifestation of the old Commander's enlightened philosophy.

The Explorer is a foreign visitor invited to witness the operation of the execution device. While intrigued by the Officer's passionate explanations, he is also deeply disturbed by the brutality of the system. The Explorer maintains a neutral stance, possibly due to his unfamiliarity with the place and his unwillingness to interfere in foreign affairs.

The Condemned Man is a prisoner sentenced to death under the penal system. He is not informed of his crime nor the nature of his punishment until it begins. The Soldier, tasked with guarding him, doesn't fully understand the changes happening in the penal colony.

The story unfolds as the Officer attempts to justify the use of the machine to the Explorer, who remains critical of the system. In a desperate attempt to gain the Explorer's support, the Officer decides to subject himself to the machine. However, the Explorer remains unconvinced and leaves the island, disturbed by what he's witnessed.

The role of the Officer

The Officer is a character who is deeply committed to the penal colony's old regime and its methods of punishment. He represents the upholding of tradition and a resistance to change, even when those traditions are cruel and inhumane.

In my opinion, he simply does not know outside his traditional system. There was a charismatic but dictatorial tyrant and created the obsessed society with auto-pilot citizens like holocaust camp. He was born there, was educated by this regime, and has a priviledge. 

Also, his ignorance of outside his world makes him to persuade traveler to support him and leverage traveler to influence new commandant to recover the traditional authority. 

The symbol of extremeness of this culture was described in a stupid and disgusting punishment machine.

HORROR MONTH #22: In the Penal Colony, by Franz Kafka (1919) — SEVENCUT

We can learn about "change" from this story.

Learning about change management

1. Resistance to Change: The Officer's resistance to the new regime demonstrates that change can be challenging for those accustomed to existing systems. This resistance can be fueled by fear of the unknown, loss of control, or a deeply held belief in the existing system. Understanding and addressing these concerns can help manage resistance.
2. Communication is Key: The lack of clear communication about the change from old to new systems causes confusion and conflict in the story. Effective communication about the reasons for change, and how it will impact individuals and the organization, is crucial in managing change.
3. Show Respect for the Past: The Officer's reverence for the old Commander shows the importance of respecting what came before. Even when implementing change, acknowledging the positive aspects of previous systems can help to ease the transition and reduce resistance.
4. Involve Neutral Parties: The Explorer serves as a neutral observer in the story, offering an unbiased perspective on the change. Involving third parties or external consultants can provide fresh insights and aid in the change process.
5. Change Can Be Disruptive: The story shows that change can lead to upheaval and conflict. Managing change effectively requires planning and preparedness to mitigate the disruptive effects.

However, I just want to point out. In such a situation, as a traveler, the best thing to do is to ask a good question to encourage both a traveler and officer to reflect themselves and change their behaviour internally. 

We can apply this story somewhat to a new leader. A new leader is always minority at initial period and needs to understand the context of existing organization. He or she probably needs to show some respect to existing members and what they have done. Also, it is extremely important to know each other deeply.  After mutual understanding of each other is achieved, they need to explain where they want to change and why throughly. Sometimes they need to face conflict and kick out opponents. 

Kafka actually rewrote the ending of this story three times. 

There is no right answer for leadership.