Ancient wisdom and new thinking on integrity … how to avoid financial crises

Ancient wisdom and new thinking on integrity … how to avoid financial crises

An inability to see actions and their consequences in the context of a broader system led to the financial crisis. Being-centred leadership can address this blindness, writes Ram Nidumolu

Ram Nidumolu

Guardian Professional, Monday 11 November 2013 00.07 GMT

The likely $13 bn (£8.9bn) fine imposed on JP Morgan by the US government has created a lot of buzz recently. The company was accused of passing off loans underlying mortgage-backed securities as low risk to one set of investors, while simultaneously betting with other investors that they were highly risky. Many other banks are also likely to be implicated in a system so complex that individual actors could not comprehend the global impacts of their risky actions. As a recent Guardian Sustainable Business article points out, the resulting loss of credibility for banks is so severe that trust has now become a vital but scarce capital for modern banking.These kinds of practices are examples of what may be called “whole blindness” – the inability or unwillingness to see actions and their consequences in the larger context of the system they affect. Whole blindness shows itself in three key ways:

1. Lack of transparency

Lack of disclosure of the complete set of material information needed by others to make a decision.

2. Economic “rent seeking”

Lack of net wealth creation as a whole; instead, wealth is created for one set of people by taking it away from others.

3. Lack of cognitive bandwidth

Lack of cognitive ability to comprehend the systemic impacts of individual actions.

“Whole blindness” is a disease that makes business unsustainable. Integrated reporting and natural capital valuation are corporate responses to this disease.

“Whole blindness” manifests itself as a lack of integrity. .

Even as the public’s trust in the integrity of financial institutions has eroded over the years, financial economists have traditionally been hesitant to study integrity. After all, how does one quantify something commonly defined as “the quality or state of being of sound moral principle: uprightness, honesty, and sincerity”?

But more recently, the eminent financial economist Mike Jensen of the Harvard Business School has argued that integrity seen as wholeness or completeness is a more viable definition. It does not get into the troublesome normative judgments that a definition based on “sound moral principle” entails. I expect that this new work will rapidly gather momentum, since it offers researchers a positive way ahead.

Interestingly, integrity seen as the wholeness or completeness of an entity was a key feature of our ancient wisdom traditions. The word itself is derived from the Latin integritas, which means “wholeness, completeness, entirety.” When an entity was not whole or complete, it was unstable and would collapse because of a lack of integrity.

The lessons from our ancient traditions for the financial practices that caused the financial crisis are clear: a lack of wholeness in these practices led to a lack of integrity, which resulted in a breakdown of the system.

In ancient wisdom traditions, the search for wholeness was so important that it extended to the unifying principle behind the different forms of existence in the world. This quest for the Existence Principle was defined as a quest for Being, of which wholeness or completeness was a key feature. In fact, Being was often referred to as the Whole, because it could help us fully understand the nature of existence itself.

Like all other great quests, this search for Being was very difficult to fulfill. Nevertheless, the journey itself led to greater integrity, or completeness, within the seeker.

The concept of Being is relevant to modern society because it transcends religious, spiritual, agnostic, atheistic, and other beliefs through its focus on the irrefutable fact of existence itself. Because of it, we call ourselves human beings, not doings. As another recent Guardian Sustainable Business article described, global tech firms are turning to such wisdom to increase mindfulness, happiness and sustainability in their employees.

Being-centered leadership offers a way forward for addressing problems of integrity in modern financial institutions. It combines our wisdom traditions with modern financial research on integrity to describe how business leaders can lead from a place of seeking to realise Being in their work. Inspired by this quest, Being-centered leaders will naturally seek to address the disease of “whole blindness.”

Consider the example of Jeremy Grantham, the co-founder of the GMO Fund with around $150 billion in assets directed at sustainable investing. I consider him to be a Being-centered leader in the financial services industry because of his conscious efforts to address “whole blindness” in his investments. His message is that our modern economic system is unsustainable because human beings don’t understand the perils of compounded growth over long durations.

Grantham gives a fascinating example from a discussion he had had with experts who would presumably know the effects of year-after-year growth in material output:

To point to the ludicrous unsustainability of this compound growth I suggested that we imagine the Ancient Egyptians … whose gods, pharaohs, language, and general culture lasted for well over 3,000 years. Starting with only a cubic meter of physical possessions … I asked how much physical wealth they would have had 3,000 years later at 4.5% compounded growth. In fact, not one of these potential experts came within one billionth of 1% of the actual number … a number so vast that it could not be squeezed into a billion of our Solar Systems … If trained mathematicians get it so wrong, how can an ordinary specimen of Homo Sapiens have a clue?”

It is the problem of “whole blindness” that Grantham points to. If our ancient wisdom traditions are correct, Being-centered leadership could be its cure.

Ram Nidumolu is the CEO of InnovaStrat which provides strategic consulting services on sustainable business strategy and innovation to global companies. His new book (Two Birds in a Tree: Timeless Indian Wisdom for Business Leaders), , introduces Being-centered leadership as a way to integrate the wisdom traditions with sustainable business

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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