Thank you to all the speakers and participants of the “Value, Worth and Valuation” workshop held last Friday, 05 March 2010 at CRASSH, University of Cambridge, UK, for the fascinating talks and discussions we had, and, of course, to my co-organisers Vito Laterza (Cambridge) and André Spicer (Warwick) for putting this really enjoyable and vibrant event together.

Let me attempt to capture a guiding theme of the workshop with a quote taken from one of my favourite texts, Nietzsche’s Genealogy of Morals

—   Is there anyone who would like to take a little look down on and under that secret how man fabricates ideals on earth? Who has the courage for that? …Come on, now! Here’s an open glimpse into this dark workshop. Just wait a moment, my dear Mr. Nosy and Presumptuous: your eye must first get used to this artificial flickering light… (1st essay/#14)

In a way all the talks were attempts to shed some light into the ‘workshop’ of the fundamental question of the creation of value and valuations– and how this is bound up with systems of meanings in the capitalist economy. What creates value? How is value created? What represents it? And how are its representations entangled with value creation itself? A recurring theme was the idea that in order to address the conundrum of value creation we might need to understand that a part of value creation is the act of determining what the values will be. The capitalist appropriation of value comes then to a large part from managing a symbol – or the social relationships from which the symbol derives its meaning. Moreover, what was formerly rendered external to the economic sphere (ethics, sustainability…) is increasingly becoming internalized. As a consequence, there is an open-ended market for values itself, where ‘value entrepreneurs’ compete for authority to decide what values count and how they can be appropriated.

(A rather free) summary of talks and discussions

Have management scholars been ‘middle class morons’?

The first session in the morning looked at brands and brand valuation. Inspired by Italian design, Davide Ravasi (Management, Università Bocconi) asked the question why people were willing to pay excessive money for everyday appliances. Are they paying for functional properties? Or because their possessions are essentially showing something about their extended selves (Belk, 1988)? Kitchen tools by Alessi become pieces of art and consumers become art collectors. Apple’s iMac makes a computer a fashion and lifestyle statement. The most interesting example was how, by virtue of a change of design, the Danish firm Oticon turned the hearing aid, a medical device for the handicapped and a sign of stigma, into a fashionable accessory. The symbolic dimension of consumption might appear as nothing fundamentally new to cultural anthropologists. But regarding mainstream strategy literature, some scholars from business schools in the audience arrived at a confessional conclusion: management scholars have been moronic about the question of how something that is so powerful as symbolic value can be managed. George Tsogas pointed comment on class and symbolic value sharpened the recognition that managers were not only moronic, but even “middle class morons”. An example of how class relates to symbolic consumption: once Burberry became popularized by working class people it gained a ‘negative’ symbolic value that devalued the brand. Conversely, much of the street fashion of 70s punk or hip hop ‘underclass’ culture became appropriated by catwalk fashion. It is a two-way process – it works from up and down.

Entrepreneurial valuation Who’s the pastor?

Celia Lury’s talk (Sociology, Goldsmiths), based on a paper written with her colleague Liz Moor, observed substantial shifts over the past 30 years of brand valuation techniques. In the early 1980s, accountants encountered a puzzle regarding M&A transactions. They involved necessary, but quite undesirable write-downs on the balance sheet afterwards. This was because conventional accounting techniques ignored the general role of ‘intangibles’ in value creation. As a result, the monetary value paid for an acquisition could not be accounted for– the access value paid included the intangible value of the brand acquired.

As the IASB recognised a need to translate brand reputation into financial value, a new, ‘economic use’ approach was introduced that was based on future earnings and included prospective future earnings from intangibles. The purchase of brands should be capitalized separately from ‘good will’ at market value. The firm Interbrand proposed a brand valuation tool that could capitalize prospective projected brand earnings and put them on the balance sheet. Initially, this was met with controversial reactions. Notably, the London Business School questioned the validity of the tool. Nevertheless, the methodology has become established. Brands have hence become a locus of financial valorization.

The new logic of brand valuation was not confined to commercial organizations and business. There are other real attempts to engage in what the value of a brand is. For example, attempts to measure city brand strength use questions like: “How interesting it would be to say at a cocktail party ‘I’ve just come from ‘Bradford’’ (which, on the European Citibank barometer, gained a rather low score.) Regarding my extended self, I agree it feels better saying ‘I’ve just come from Paris’. Other potentials sources of value that are made measurable are “the environment in your shopping basket” or ethical value, like Fairtrade. Things that were previously rendered external to the economy are now internal.

In conclusion, classic measures of productivity are superseded by forms of values that pose problems of valuation. There are new, entrepreneurial attempts to measure. This creates new markets of authorities and expertise in social life: standardization organizations, new representational spaces of value etc. This leads to an open-ended economy: It is never clear what measurement will prevail. Contemporary economy is about maintaining openness, not about stabilizing it.

Regarding these new sources of valuation, what then constitutes the economic value form? And does this mean that there is a complete anarchy in terms of the collective production of wealth? Is there a new substance of value? Adam Arvidsson suggests that the ability to valorise wealth might depend on the Machiavellian capacity to mobilize relations, in order to, effectively, determine what the values will be. Even though there might be a strategic aspect of it – at the same time – such value entrepreneurs are all believers, as Vito Laterza suggests. So who’s the pastor?

Even if not entirely anybody can say what is valuable (there are circular processes of ‘evaluating the evaluators’, ‘certifying the certifier’, ‘standardising standard setting’, etc.) the question emerges what are the rules for this market of authorities? Who can legitimately determine what the values will be?

Value, Debt and the performativity of abstract representations

The second session, introduced by Irene Peano (Social Anthropology, Cambridge) explored anthropological approaches to the questions of value. David Graeber (Anthropology, Goldsmiths) presented thoughts from his forthcoming book “Debt: The first five thousand years” (an overview I found here). What means value in the abstract? Reading Marx in an odd way as an elaborate theory of symbolism, value is the way of how our creative actions become meaningful to us by being integrating in meaning-giving totality. In this tradition, the realization of value relies on an imaginary totality, which provides an audience, arena, or sphere of recognition of value. How can this political economy tradition be squared with the influential approach of Marcel Mauss of conceiving of value in anthropology? This does not start not from the notion of value but from social interaction, and tends to explicitly or implicitly reduce transactions to reciprocity. But regarding exchange relationships in practice, it becomes evident that reciprocity has nothing to do with what actually happens in these relationships. Reciprocity is a rather abstract representations of what is just. Instead of reciprocity, Graeber proposes that the defining principle of exchange relationships is debt!

One starting point to understand the relation between value and debt might be through looking at the fetishization – or I guess what economic sociologists would call performativity– of symbols. Money is both the representation of one’s labour, but also the object of value. It hence becomes the very thing that it represents. Originally, money did not appear as gold coins, but as in Mesopotanian history, as virtual, abstract forms that symbolize a debt relationship, a dependency. In what are thought to be traditional barter systems, there is actually a sophisticated virtual systems of account keeping, interest rates and virtual money in place. What is going on is that the symbol for money becomes money. For example, both the Greek origin of our word “symbol” and the Chinese word for symbol (fu), are, historically and etymologically, directly derived from terms for a tally stick. That is a stick that is broken in half and notched to represent a relation of debt between human beings. Each side keeps one part, which either represents the debt or the stock. They put their parts together, creating totality, when the debt is settled.

Holographic thinking

Vito Laterza (Social Anthropology, Cambridge) suggested that holographic thinking can explain how three apparently unrelated stories happening around the Swaziland Pentecostal Christian business town named Bulembu came together in a seemingly ‘spontaneous’ wildcat strike. While the start of the strike was triggered by chance event, it is possible to trace, a posteriori, the connections between these three stories. But the outcome could not have been predicted. Too many layers of signification are overlapping. Beyond the logic of “straight-linear” thinking, there are holographic operations at work that connect the epistemologies of apparently disparate phenomenology, African traditionalism and Pentecostal Christianity.

I found particularly interesting of how the notion of ‘dogma’ and holographic thinking can tell us something about of value creation. The dogma of God is a basic ordering mechanism. We can never explain or discuss the dogma itself, but we can talk about how many angels there are and so on. All elements of this totality are interconnected (a totality, rather a fragmented postmodernist version), and this is what enables value creation. Transferred to the notion of the market, its dogma is to imagine a totality, a model, and assume certain things about it. We basically make up imaginary constructs and treat them like Gods. The cross-fertilization of disciplines became evident with a managerial applications: Spiritual leadership is the fantasy that the dogma can indeed be managed.

A new ‘politics of value’

The third session addressed the notion of value creation “in” in or “after” the new economy. Adam Arvidsson (Social and Political Studies, University of Milan) presented the key argument from his forthcoming book “The Ethical Economy. Business and Society in the 21st Century”: A new value logic is contained in capitalist economy, that has not yet become fully institutionalised: Ethics creates value. Particularly, Aristotelian ethics, which is kind of the organizing principles of virtuous social relations – i.e. the ability of free men to civilize their passions so as to enable peaceful forms of cohabitation. Value is then not a function of the quantity of productive time but related to the quality of social relations.

An indication of a new value logic is the puzzle that Fortune 500 companies are 3.5x valued their book value. Where does this ‘excess’ value come from? What creates values seems to be neither materials nor individual skills but the ability to organize a network of social relations and endow it with an ethos. The value of brand is based on creating particular types of relations with consumers that both attract value and are able to retain value. This mode of production through self-organized productive networks is a hyper-extension of productive chains of cooperation like the classical assembly line.

Brands play a fundamental role as the ethical value logic becomes institutionalised through a reputation economy: ethical value circulates in form of reputation. Open source, I think, would be the example par excellence of a collaborative community that epitomises such a possible new logic of value creation in an ‘economy of the commons’. But is the defining property of open source value creation not the absence of a “capitalist” appropriation of value?

Like in Celia Lury’s talk, one of the central aspects was the emergence of new ways of determining what the values will be. And the new ‘communitarian’ value logic seems to sugest that there are  openings for more democratic and participative forms of value creation. Does this new ‘politics of value’ then mean a democratization of determining what the values will be? Or the ultimate primitive accumulation of the commons?

And back to the raw material of what the immaterial economy is made of…

Chris Land (University of St Gallen / Essex Business School) and Steffen Böhm (Essex Business School) were more sceptical of such a reading. They questioned that the economy had undergone such a fundamental transformation towards immaterial production as a type of cooperation of networked brains. What if value production had not essentially moved away from the industrial and material points of production? Celebrated possibilities for more democratic and participative forms of production are still based on obligatory points of passage controlled by corporate power. For example, to participate in the semi-autonomous forms of production of the information economy you have to pay a token to, in most cases, a monopolistic software giant like Microsoft. Chris and Steffen argued for acknowledging the centrality of what Marx (1976) primitive accumulation as an on-going process at the heart of contemporary regimes of capitalist value production and accumulation. They reminded us that the electronic devices enabling our immaterial, collaborative networks are made of raw materials like the mineral coltan. This brought us back to the reality of extractive industries. Oil and mining remain among the most profitable industries, but they appropriate land, national resources and quite material human labour. Primitive accumulation remains hence central to the functioning of capitalist value creation. Branding, immaterial economy and the carbon economy represent three of the areas that are just another instances of how the value of the commons (communication, subsistence agriculture and the environment) has been appropriated through forms of primitive accumulation.

The Problem with Economics

January 26, 2010

Blog readers interested in an ANT-ish refreshment on the infamous topic of the “performativity of economics” may find this little contribution amusing (PDF here).

The January issue of Organization has published a special issue on science studies-inspired research on organization theory, marketing and strategy. The issue, titled “Does STS Mean Business?” and based on a workshop with the same name, reads like an authentic roadmap for future organizational research.

The initiative, which sprang from the STS group at Oxford’s Said Business School — the only one of this kind in any leading business school– is in many ways parallel to the development of the social studies of finance: take the core tenets of science studies/ actor-network theory, and offer a novel look at the capital markets.

But what exactly are those advantages and novelties? The issue was debated in this blog by Elena Simakova and Catelijne Coopmans… the “mutant science scholars.” In the leading article, Woolgar, Coopmans and Neyland add to that debate by suggesting that a science and technology perspective offers the following:

(1) A propensity to cause trouble, provoke, be awkward; (2) a tendency to work through difficult conceptual issues in relation to specific empirical cases, deflating grandiose theoretical concepts and claims (and even some ordinary ones); (3) an emphasis on the local, specific and contingent in relation to the genesis and use of science and technology; (4) caution about the unrefl exive adoption and deployment of standard social science lexicons (e.g. power, culture, meaning, value); (5) reflexive attention to the (frequently unexplicated) notions of our audiences, value and utility.

I particularly liked number two — “deflating grandiose concepts”.

recovery.gov

January 29, 2009

The house passed Obama’s $819 billion stimulus package without a single vote from a Republican (se NYTimes).  In the press conference following the President’s meeting with business executives at the White House (see video),  Obama reiterates that he is ushering in a new era of ‘responsibility’ in which ever person must make an effort to contribute to economic recovery.

The victory statement, which emphasized action, was an improvement over what Krugman called the “standard we’re-all-at-fault, let’s-get-tough-on-ourselves boilerplate” message at the heart of the inaugural speech. The success of the legislation is, however, as Krugman wryly points out on his blog, an ominous sign of the defeat of bipartisan efforts.

Obama also announced of a website, recovery.gov, designed to let taxpayers oversee the implementation of the recovery plan.  “I know that there are some who are skeptical of the size and scale of this recovery plan”, he said “and I understand that skepticism given what has happened in this town in the past. That’s why this recovery plan will include unprecedented measures that will allow the American people to keep my administration accountable.”

A direct information link between the government and citizens?  Something to keep in mind with regards to the role of technology and new media in the ‘Changing Dynamics of Public Controversy‘…

Just returned from an inspiring academic event. The First Workshop on Imagining Business just took place last week in Oxford, at the Said School of Business. Visualization, especially as applied to finance, is a true passion of mine: it is a crucial component of contemporary markets (see my work on merger arbitrage), it offers lucrative business opportunities for innovation (see previous blog post), and it has been used to great effect by artists to re-imagine Wall Street (see my article here). Given all this, I attended the Oxford event with at least the same enthusiasm that my fellow Spaniards showed at the European soccer final. What, I asked myself, does existing research say about business visualization?

The organizers — Paolo Quattrone, François-Régis Puyou and Chris Mclean – were aware of the importance of the visual in organizations, and offered a perspective based on Science and Technology Studies. According to them:

Organizations are saturated with images, pictures, and signs that impact on many different aspects of everyday organizational life (…) Over the past decades, Science and Technology Studies have largely contributed to clarifying the importance of “representation in scientific practice” (Lynch & Woolgar, 1990). Through their focus on the process of re-presentation they highlighted how specific practices of making things visible … were central to ‘doing’ science. We wish to extend this to a study of business.

In other words, science is first and foremost about visualizations. What about its more practical, mundane and prevalent cousin — business? What to make of, “budgets and accounting tools, advertising literature, design specifications?” What do we think is the visual power of “public relations leaflets, standard operating procedures, schedules, reports, graphs, charts, organizational hierarchies [and] maps?” These were the questions that the presenters set out to answer. As a very refreshing novelty, the conference was accompanied by an art exhibition curated by Nina Wakeford, Lucy Kimbell and Alex Hodby.

The approaches to visualization were numerous and varied. I could not attend to all the presentations. But according to my own taxonomy, the presentations fell into four different groups: one set of papers explored how images (mostly photographs) are used for public relations and communication. A fascinating piece by Sue Hrasky explored the use of visual cues and images in corporate annual reports. Whereas researchers in accounting and management tend to decry the use of smiling people as not constituting “information,” Hrasky shows how images complement, reframe and expand the meaning conveyed by the text. On a similar note, Charles Cho, Jillian Phillips and Amy Hageman explore the significance of images in corporate social responsibility.

Another line of presentations engaged with images from a semiotic perspective. Presenters offered their interpretation of the meaning of the images used by businesses. A interesting example from the finance industry was provided by Frandsen, Bunn and McGoun: the authors explore how the changing architecture of banks through the 20th C. –from the closed imagery of a safe to the alluring aesthetics of retail – has changed to fit evolving social views of money. As money changed from a “stock” that needs to be protected to a virtual flow that needs to be kept active, so has the architecture of banks adapted.

But my favorite piece was by Brigitte Biehl. She analyzed the cultural symbols at the trading floor of the Deustche Borse. The German stock market has recently upgraded its floor from a dark, low-tech space to an expensive and futuristic-looking market. The Borse also engages in publicity stunts a la Dick Grasso at the New York Stock Exchange: celebrating carnival on the floor, or inviting models in bikinis. All this performative drama gives rise to the obvious question: why such expenditure on the floor, just as electronic trading seems to be dominating the rest of world exchanges? Biehl has a cynical but interesting answer: because the investing public is ignorant of finance. Exchanges reduce the cognitive distance that retail investors experience vis-à-vis earnings, indexes, and other complications of the capital markets.

What to make of this argument? The problem with the “circus” approach to finance, of course, is that it sends a misleading signal. Even if they look serious and powerful on TV news, the clerks at the Borse are not actually responsible for the price movements. One of the attendees in the public offered an interesting solution: if the problem is the need to show people in the evening news, why not do it the way it’s done in London? Put a camera inside the trading rooms of the large investment banks, broadcast TV news from there.

Regardless of one’s view, Biehl needs to be congratulated for sparking a much-needed debate on this type of strategic semiotics of financial exchanges.

A third line of work engaged the imagining side of images: exploring how images can promote novel thinking on a certain issue. Here, the plenary presentation by Donald MacKenzie was one of the most talked about. MacKenzie asked, what would it take for a market to address current environmental problems? The existing European cap-and-trade system (so-called carbon trading) does not seem to be a success… but why? MacKenzie views cap-and-trade systems as a case of performativity: a practical instantiation of Ronald Coase’s theory of property rights. According to some, this performative move was too complex — an economist’s pet project, turned sour. MacKenzie’s presentation delved into accounting and regulatory details that have prevented vigorous trading in pollution permits, even suggesting some regulatory changes of his own. Fascinating work, and very different from the more distant historical perspective he took on Black-Scholes. As an SSF researcher, I can only salute this initiative and welcome the start of SSF research with real political impact (a topic of recent post by Yuval and Martha).

An enlightening “imagining” presentation was offered by Susan Scott and Wanda Orlikowski. Following a very broad review of the management literature on social media, the authors found that the choice of methodological tradition is very related to the way social media is imagined. Research that follows the strategy/ economics- inspired paradigm tends to view technology as a distinct entity, cut off from its users; whereas research in the ethnographic/ sociological tradition views technology in terms of community, with little focus on the unity of the phenomenon. I found this divide intriguing. The authors emphasized the need to overcome a dualistic image of social media, suggesting Pickering’s expression, “the mangle of practice.”

My own presentation engaged with images in a different manner – what I would call “calculative visualization.” In a nutshell, I talked about the spread plot (080623-distributed-calculation-at-imagining-business1). The spread plot allows merger arbitrageurs to calculate the “implicit probability” of merger completion: the probability that “the market” assigns to a successful completion of mergers that have been announced but remain to be solidified. It is special in that if you know how to use it (as professional hedge fund traders do) you can “see” the probabilities of merger between two companies. If you don’t – as is the case with retail investors – you are left guessing. Images like the spread plot, I argue, are responsible for part of the billions of profit made in these past decade by the hedge fund industry. And the more recent diffusion of these tools may well account for the limited returns experienced by these funds nowadays. (Two other examples of this were provided by presentations on SAP and the imaging system used by oil companies.)

To conclude — what did I learn about business visualization? That research in them falls on four very different types: corporate communications, semiotic analyses, re-imaginary approaches and calculative images. Perhaps predictably, I find this fourth type most persuasive. Beyond the natural allure of photographs, brochures or interfaces, I am particularly interested in visualizations that have color but also data, that let people imagine but also count, that inspire but are also practical. The capital markets are a terrific environment to explore these.

In any case… whether one subscribes or not to my view, the overall message from the conference is clear: visualizations are key to contemporary business. Researchers need to engage with them. The organizers of this workshop need to be congratulated for putting together a novel, daring and successful event.

Clozure tests. A new treat!

Here’s one on the sociology of scientific knowledge.

Now, stop working for an hour or two…

Michael Sauder, who’s guestblogging at orgtheory.net, is an expert on rankings and self-fulfilling prophecies. He wrote Rankings and Reactivity: How Public Measures Recreate Social Worlds with Wendy Espeland, published here. (Gated)

He has just posted a thoughtful piece on transparency, looking at the ability of rankings to distort organizational activity that they are purported to measure.

So, not only is the apparent transparency created by these measures actually a distortion, but this distortion also comes to play an important role in defining the field. This is very removed from simply gaining a view into organizational activity.

Go take a look. Leave him a kind and helpful comment.

I wonder how different are his perspective,  that of SSF thinkers, and that of Anthony Giddens, who uses the term “double hermeneutics” to explain the same phenomenon.

Enjoy!