What an honor it is to get a chance to talk to the newest Tennessee Titan. First round pick taken at number 29 last night. He's a Georgia Bulldog, offensive tackle, Isaiah Wilson. Congratulations on last night and welcome to the family of Two Tone Blue. And you've got your Titan Blue on, I like it. Yeah, yes, I definitely am. Thank you and I'm happy to be a part of the family. When you got the call last night, can you describe the feelings, the emotions, the reaction? What can you remember? Pretty much when I kind of, when they were on the clock, something in my heart kind of just told me that it was time. I felt the tears already coming in and when I got that phone call, I already had the numbers saved from a few interviews before. So I was just ecstatic, man. I was really speechless and I was overcome with emotions for sure. It's been a really long time coming in to just have your dreams kind of come true like that and be blessed like that was a great thing for me. Through the whole interview process, you felt a connection with the Titans. Safe to say you weren't surprised that Tennessee selected you? Yeah, safe to say that, but it's been a blessing all the way through. I felt I was a first-rounder all the way and as we just got lower and lower, I mean, I felt I felt I had to go and there wasn't any explicit talk about me being taken by Tennessee, but I just felt like I got along well with the coaches. I got along well with the GM and I just feel great to be a part of the family. Okay, so I saw your likeness on Madden, I think already. Is that right? Is that what I saw? Okay, I saw you wearing 79. Are you going to wear you plan to wear 79 with the Titans? Is that the goal? Yes, sir. So what did you think when you see something like that, even though it hasn't been 24 hours, does that make this whole experience a little more real? Definitely. I kind of, last night we were recording the draft so we could just have it on DVR, but somebody accidentally cut off the recording when I got called and I still, like after the draft went off, I kind of like forgot about it for a second. I was like, wait a minute, I just get drafted. I need to watch it again. I was kind of, it was just, I was in shock and waking up the next day and seeing those things still going on kind of makes it a more real experience for sure. All right, so I'll get it. But in a moment, you're kind of dreaming. I remember your recruitment, big time five star for all the guys that Coach Smart has gotten at Georgia.  You're playing in New York, you had offers from every team in the country and you choose to come to Athens, Georgia and play in the SEC. Why choose to come so far from home and come choose to play in the Southeastern Conference? I just felt the SEC is a great place to play football. You have a lot of the best competition out there. Though if it's in the other schools, there's a ton of talent from every other school, but the SEC has a lot of talent every week and you have NFL level coaches that prepare you for the next level and have been in a league and been through those systems and understand what's required of you at the next level. And their success rate, just with their players and helping them succeed and get to the next level, not only us football players, but as men is definitely what I looked at and my decision to go down there and play for Georgia. Where did you improve the most from high school through college as an offensive tackle? I would definitely say technique. I had to relearn a lot of technique from high school to college simply because in high school we weren't taught certain kick sets or how to carry your hands a certain way or anything of that nature. It was very different to what I got at a big time SEC school. I came from a private school in Brooklyn, New York, a really small school and we had great coaches for that environment, but they didn't necessarily coach the technique I was learning in college. So I would say picking up that technique was probably the biggest transition for me. I thought you were going to say the heat. Man, it's hot out there for sure. It takes some getting used to, but the heat's not the worst part about it. I think it takes some getting used to for sure when you're from New York and that's 30 degrees, but the heat after a while gets very, it feels very nice every day. It's kind of like spring out there. So it's not going to be a problem coming to Nashville after being Athens, no doubt. But where do you think you have to improve the most quickly coming from college now to the NFL to be a starter for the Titans? I just want to do everything I can to do right by the team off the field and on the field and improving on technique. Once again, just hand usage, pad level just becoming more consistent, more polished in my technique. There's a lot of veteran guys on the line that I can learn a ton from and I plan on taking everything from them that I can to better my game and elevate my game to the next level. Another Georgia Bulldog and Ben Jones too, right? Yes, sir. Have you already been in touch with him? Yeah, he reached out and just gave me his number, made sure I had him locked in, extended his hand and pretty much told me welcome to the family and let's get to work and if I need anything, he's there. Okay, so in these unusual situations that we're in right now for all of us, obviously very unusual for you as well. What do the next few weeks look like as you ready yourself to officially become a Titan? I'm really not entirely sure. I plan on getting out there as fast as I possibly can with everything going on and settling down and figuring out where I plan on staying in Tennessee and how I'm going to do all of that stuff, dealing with whatever media I have. But I'm just looking forward to getting there and embracing the culture and being a part of the family in Tennessee. So do you have a handle on Nashville yet? Do you know much about it? I've been there a few times, but not enough. Not enough. I'm definitely going to learn a lot about it. I heard there's some good music out there. So I definitely want to come test that out. There's good food, good scenery and good weather. So this should be a lot of fun. All right, how'd you get the nickname Panda? Who gave you that? I'll run him back. I was in training at Exos, gave me the nickname Panda, named as DJ Dallas. He played at Miami. He's currently in the draft. And I was sitting down Indian style waiting for a drill. We were doing acceleration drills to work on our 40 pre-combat. And I was just sitting down Indian style because I'm a big guy. It stretches out my hips just when gravity pulls on it. You don't really have to do anything. And he was, he walked over. He was like, you're just a big Panda and it stuck. Everyone, everyone kind of went with it. So I adopted the moniker and that's fine. Let's wrap up with a little draft fund here. You've heard all the analysts. You've read the mock drafts. You've seen what they said about you at the combine and all these things.  I was able to read, if Isaiah Wilson was describing Isaiah Wilson to the Titans fans, to the 22nd element, what would your thumbnail to describe yourself as a player sound like to these people? How should they know you? Big physical guy that loves to have fun and wants to win, wants to win extremely bad. We'll do whatever it takes to win. That's good stuff.  It was fun watching you at Georgia and for, you know, a lot of people around here follow the SEC. And so when the Titans draft an SEC player, oftentimes fans, no matter which school they follow, know who that person is. And they're very excited because they know the level of competition. We're so glad you're part of the Tennessee Titans. And thank you so much for taking time with us this afternoon, Isaiah Wilson, first round NFL draft pick 2020 of the Titans. Yes, sir. Thank you for having me. Hey, tighten up. Yes, sir. Tight enough.


Our first keynote today aims to discuss why we need a scientific revolution on strategy execution. And to present this topic, nobody could be better than Professor Roger Martin. Professor Roger Martin is the former dean of Rockman School of Management. Last year, he was named the world number one management thinker by Thinkers 50. He's the leader of 11 books in the field. He's a trusted strategy advisor to CEOs of companies, including Protering Gabon, Lego and Verizon. Ladies and gentlemen, let's welcome Professor Roger Martin. Thank you, Roger. Thank you. Appreciate it. Thank you very much for the introduction. And first of all, thank you Brightline and PMI for doing this. I think this is very important work, and I'm pleased and thrilled to be here as part of it. I would also like to say a thank you and a shout out to my wife, Marie Louise over here, who's my wife and business partner. It's our anniversary. And so she thought it was important enough to be here and postpone our anniversary for one day for this purpose. So I'm all in on this. So to the task at hand, I am arguing that we need a scientific revolution in several management theories in order to accomplish what Ricardo and Brightline are trying to accomplish. Now, the paradigm shift notion has now become sort of trite. People will now use it to explain the Internet as a paradigm shift, AI as a paradigm shift. They are misusing, I would argue, what Thomas Kuhn talked about in 1962 when he talked about scientific revolution and paradigm shift. So just to review for a second, what Thomas Kuhn said is in the development of ideas, there becomes typically a focus on a set of assumptions that form an existing paradigm and science progresses with that paradigm by improving it, improving it, improving it, but not questioning the fundamental assumptions of the paradigm. So you get lots and lots of improvement. That's the nature of scientific work, scientific progress in the world. From time to time, what happens is you get a slowdown in the progress that you've been seeking under that paradigm, and you get the arising of anomalies, things that can't be well explained by the existing paradigm. And when you get enough of those anomalies, some people start looking at the anomalies and attempting to form an explanation for those that is different than the existing paradigm. They tend to get brutally suppressed because everybody is attempting to answer the questions and answer those anomalies only within the existing paradigm. But in due course, there are enough anomalies, and there's a compelling enough new paradigm that that new paradigm takes over and we have what he really called a paradigm shift, not just some new thing. It's a shift in the way we think about things. And just to give you just a quick example of a paradigm shift and kind of how compelling and important they are, think of the world. It's not a pleasant world of peptic ulcers. I don't know if anybody in the audience has had a peptic ulcer ever, but it's a very bad thing. It can be very damaging. In fact, it can be life-threatening. Doctors started to understand in the late 1800s the phenomenon. By the early 1900s, the medical world had converged on a paradigm which said the stomach lining of the stomach is very, very, very tender and fragile. And if there's too much acid in the stomach, that's what causes a peptic ulcer and the ulceration of your stomach. That was the theory. And it was sort of ensconced in 1910 when a doctor named Carl Schwartz, an important doctor, intoned the famous words, no acid, no ulcer. So if you didn't have excess acid in your stomach, you wouldn't have an ulcer. Now that continued along. And based on that paradigm, there were all sorts of scientific advances on how to reduce the amount of acid in your stomach.  And then later, drugs that did the same proton pump inhibitors. All of these things were actually quite damaging to you. So it was a bad thing to have a peptic ulcer because you had more damaging things done to you when you had a peptic ulcer to get rid of the peptic ulcer. But in due course, it became obvious that all of these advances were not actually curing all peptic ulcers and it took a hell of a long time for these things to work. So in due course, medical scientists and researchers started to ask the question, is this paradigm sensible? And two, a little bit wacky Australians, of course, decided that they had seen enough evidence to suggest that it was actually caused by bacteria, H. pylori. And they wrote medical papers on this notion. But since that offended entirely the existing paradigm, they couldn't get their papers published. Literally, the reviewers would say, well, this is dumb. This is not about acid, so this is really dumb. Intel, one of the crazy Australians, Barry Marshall, ingested H. pylori, grew himself an ulcer, cured it with antibiotics, and wrote a paper about that.  But, interestingly enough, that paper was published in 84. It took till 1997 until the Centers for Disease Control in Atlanta declared the cause of ulcers was H. pylori. It was a bacterial. And nicely, as a happy ending to the story, Marshall and Warren were awarded the Nobel Prize in medicine in 2005, so 21 years after the publication of the first paper. But that is a paradigm shift. Things were getting better. We learned how to do things better on the basis of the paradigm, but the paradigm kind of ran out of steam, and it needed to be replaced with another paradigm.  It was just not good enough. So it turns out that H. pylori grows more aggressively.  It just wasn't actually the answer, and so we needed a new paradigm. So I'm going to argue, reasonably quickly, I hope, that there are three business paradigms that are absolutely dominant that are getting in the way of having happened what Ricardo, PMI, Brightline, would like to have happen. And so I am suggesting that we revisit those and ask whether there's a paradigm shift that needs to happen. And I would argue we are seeing all sorts of anomalies in each of these of the sort that Thomas Kuhn referred to. So we're seeing anomalies that suggest that the theory isn't working as well as we hope it is, and I'm going to suggest in each case an alternative paradigm. So first, corporation is a machine. Our view of the corporation is that it is like a machine, like a car. You press the gas pedal, and it goes faster.  You can say, well, we're going to deal with the suspension system now and make that better and have the results we want. And then we'll think about the propulsion system, and then we'll think about the safety system, and then we'll think about the electronics and comfort features of it. It's just a big machine. It's fairly complicated, but it operates like a machine. Now what I would argue is that there are anomalies that are showing their faces on this. So one anomaly is incentive compensation, which we in machine-like fashion say if we give incentive monetary compensation, we'll get better firm performance. We've been doing incentive compensation for a long, long time. There are, I would argue, billions of person hours a year spent on designing compensation systems, managing compensation systems in companies. Yet there is no study. There's not yet been one rigorous study that shows there's a connection between incentive monetary compensation and firm performance. There's some to suggest that incentive compensation drives individual performance, but getting that to derive joint firm performance turns out not to be the case. But if the corporation was a machine, you should be able to do that. So that's an anomaly. In fact, I would argue that the only thing that there's a really positive correlation between incentive compensation and time negotiating targets, because the most important thing to your economic welfare in most modern corporations is to be a super negotiator on your targets. My friend Mike Jensen wrote a wonderful piece about this called Paying People to Lie, because the better you are at lying, the better your compensation will be. And the particular thing you have to be good at lying about is how hard it is to accomplish what you're trying to accomplish. Ooh, it's tough out there, boss. Even holding flat from last year, that would be awesome for the following 12 reasons. If you're really good at that, you get paid more. You don't get paid more for being better at serving customers. How's about another one? If you can drive labor rates down, you should become more profitable. Oh, sorry. That doesn't work either. How about pursuit of shareholder maximization? If it was a machine, attempted to do that would get you that. Well, it turns out it doesn't. How about you create risk-managing financial instruments while you accidentally create financial weapons of mass destruction? I would argue that a better paradigm for the corporation is a complex adaptive system like the Amazon. That if we thought of the corporation as a complex, always adapting system that adapts in ways that are hard to understand in advance, we'd be better off as a paradigm than the paradigm of the corporation as a machine. Or if you'd like, we could say the paradigm is a whack-a-mole game, push down one place and something will pop up that you didn't expect, another place. What would the implications be of that? Well, one implication of that is, when you press the gas pedal, the car might slow down, might stay the same, or might speed up. It is much harder to tell. And assuming that it is the last of those three is an error. If your paradigm was, this is a complex adaptive system, it would cause you to say, I've always got to think about the system, not about the piece parts. If it's a machine, you can break it into this piece parts and see how each piece works, and then reassemble the pieces, and it'll be fine. That is the practice of modern management. That is the curriculum of an MBA program. Think about it. For all of you who've done an MBA or wonderful critics of MBA programs like Henry, well, Henry Minnsburg here in the front, who you'll be hearing more later, that's what they do. They break the corporation machine into its piece parts, teach you the piece parts, and then assume that you will somehow be able to add them up, which, as it turns out, the vast, vast majority never master. This means you have things like Zane of Tom's wonderful work. And if you haven't read it, you've got to read The Good Jobs strategy, where she says, this complex array of pay your work in retail, pay your workers more, build in more slack, build in more training, and reduce assortment, that set of things, not pay your workers less, because labor is one of the biggest costs other than the cost of the purchase goods in retailing. No, pay more.  Zane up says, increase training, and I will increase profitability. Reduce assortment, and I will increase profitability. No, because it's a complex system. You've got to do all four of those things to get your results. It's not the piece parts. It's the whole that we have to be thinking about. And the other thing that's an implication, I would argue, is that you've got to prototype iteratively in everything you do. In a complex adaptive system, no matter how much you'd like to plan in advance, you cannot figure out all the implications. John Sturman, the great MIT professor of system dynamics, says quite wisely, I think, that in life there are no side effects. There are just effects that you didn't think about in advance. It's not as though some are categories as main and some are side. They're all effects, and it is hard for a human being to ever figure out, in a complex adaptive system, what all the effects are going to be. So prototyping, enhancing as you go, is smarter than trying to think in advance about everything, because there will be then what John dismisses as what you think of as side effects. And last one, and this may be simple, but it's important to make, is when dealing with human beings in the world of business, you've got to think about head, heart, and gut. Because what are human beings, if not little complex adaptive systems? And when we think somehow we're going to appeal to their head, and that'll take care of the other pieces of the complex adaptive system, or we're going to appeal to their heart, and that'll take care of our gut, and that'll take care of the rest is a fallacy and a fool's errand. We've got to think about all those three things simultaneously if we're going to deal with them as a complex adaptive system. So that's paradigm shift one, from corporation as a machine to corporation as a complex adaptive system that, interestingly enough, is existing within a big complex adaptive system called the world. So that's number one. Number two, and I did number one first because this relates to number two, even though number two is kind of most connected to what we're talking about here today, strategy versus execution. So this is the dominant paradigm, has been the dominant paradigm in business for time reasonably immemorial, or at least back to 1963, which I count as the foundation of strategy as a business discipline. We didn't talk about strategy in business much before that. That was the foundation of Boston Consulting Group and Bruce Henderson's view of strategy, boring strategy from the military and applying it to the world of business. So at least since then, there has been a paradigm that there are two things, one's called strategy and one's called execution. As with many things, metaphor does play a huge role. So in Pepticulter's, the metaphor of the stomach as this very, very delicate bag led to the view of it's about acid. Here, I would view that the metaphor of the human body is what's driven us to the paradigm that says there's a thing called strategy and a thing called execution. The metaphor, the human body, the brain makes choices. Roger, lift your arm, and then the body executes and lifts the arm. That's the metaphor. And it's sort of a sensible metaphor, because it's us, it's about us, it's about the human body, we're fairly familiar with it. Although brain science is telling us a hell of a lot more about how that actually works and it's not the way this notionally works. But what we've done is imported that metaphor to the world of business to say senior leaders formulate strategy and the rank and file executes that strategy. Am I right? This is the absolute dominant, utterly unquestioned paradigm in the world of business when it comes to strategy and execution. Any other theory that you've seen out there? That's it. It's the perfect exemplar of Thomas Kuhn's dominant paradigm. But it's throwing up, I would argue, anomalies. A rise in what we see of as execution difficulties, all the bright line work suggests that this is an obsession of senior managers. It's hard to get an execution. We've got lots and lots of it. So we have a theory that produces the opposite of what we wished. A theory should help us make sure there aren't execution problems, because we know exactly what it is and we know exactly that the brain should tell people what to do and they should go do it, just like we said. No, we are a rise in that. And we have a rise in unimplementable strategies. Again, Ricardo started with that. Well, the implementation, strategy implementation, the statistics are horrible on it. Well, if you've got a great theory, why would you have horrible results on both of these dimensions? And I would argue that this isn't particularly new, the attention on execution. The intention on execution has been, if anything, rising and rising quite dramatically. We're thinking more about how important it is to have better execution. And are we getting better execution? Not from what I can tell. The hue and cry about execution has risen, if anything. Hence, PI, hence Brightline, is to solve a problem. Here's my view, which is that we need a better paradigm. And for me, the better paradigm is the thing we refer to as strategy. And if you break down the activities that we engage in when we engage in this thing that we call strategy, is making choice under uncertainty and competition. Strategy is making choices. And there's always uncertainty and competition. That's why it's kind of hard to make them. And you sometimes make them badly. And that's the challenge. If you look and observe what we think of as execution, when we say, go execute that, this is my brilliant strategy. We're going to win on the basis of customer service. Go execute that. What are the people who are, quote, executing that going to have to go and do? I believe they're going to have to go and make choice under uncertainty and competition. Or it ain't going to happen. And when they do those things, they're going to hand off those choices to somebody else who is going to have to do what? Make choice under uncertainty and competition. So it does beg the question, for me at least, help me understand why it is we'd call one of those activities strategy and another execution. Last time I checked, generally speaking, in kind of language systems, when two things are exactly the same, we don't call them two different things. We tend to consolidate on one description of the thing. Not always, but it's sort of more efficient and effective to do that. So if it's the same thing, why do we think of it differently? Now, sometimes we say, oh, the people at the top who are making strategy are unconstrained. The people below making strategies are constrained, but I hang around with CEOs all the time. And if I told them, you know what people think? They think that you're unconstrained. They would heave me out of their office and say, please don't come visit me again. You don't think I'm constrained by the capital markets, by regulation, by my boards of directors, blah, blah, blah. Nope. Everybody's making choices under a whole bunch of constraints under uncertainty and competition. For me, for what it's worth, the way I think about an organization is it's just a multitude of cascades. And those of you who've read my stuff on strategy, I think of strategy as answering these five questions. And they cascade from the very top of the organization all the way to the bottom of the organization and the best companies that I deal with. In those companies, the people toward the bottom of the organization think they're making important choices. They do not think they're executing. And the reason it's so important is because the strategy versus execution paradigm puts those who are, quote, executing in such a bad box that it is bad for the heart of those people. It does not capture their hearts because they're not fools. When some CEO comes up with a esoteric strategy to say, oh, this is how we're going to win, now you just people go do it, they have a terrible choice. They can either obey and engage in mindless doing. Because if you're not choosing, you're engaging in mindless doing. You're just, quote, doing. So they can engage in mindless doing and not make any choices, in which case what will happen? Bad things. And what will the cause of those bad things be viewed as being after the fact? What? Bad execution. So it's going to be those people's fault that it's bad execution. What if instead they're completely insubordinate and rather than executing, they make a brilliant set of strategy choices that are consistent with the choices that have been made above them and then encourage the people below them to make yet another set of brilliant choices that are consistent with those choices so that you have a robust strategy that operates from the top to the bottom of the organization, then what will the diagnosis of the reason for that be? Brilliant strategy. Awesome strategy. So the strategy versus execution paradigm makes it an absolute no-win situation for 99.9% of the employees of any corporation. If they're insubordinate and do an awesome job, somebody else gets the credit. If they are subordinate and do what they're told, they get blamed. And you wonder why there's such crummy, quote, implementation. And you wonder why there's such low engagement in the world's modern corporations. Don't wonder. These are anomalies. You shouldn't have people going to work discouraged and feeling like a cog in some big machine. That's an anomaly. If you've got a good theory, a good paradigm, you wouldn't have that. We have it. It's an anomaly. We've got to ask ourselves the question, is trying to get better implementation, better implementation task forces, better implementation this, better implementation that, clearer implementation, all of that. Is that actually going to fix the problem? What I would argue is it's in the very, very latest stages of the eclipses, the Kunian eclipse of a paradigm. It's when the anomalies are so great, so invasive, so persistent, so huge, that we finally might ask the question, is that paradigm an actually useful paradigm? Because what's the paradigm for? It's for usefully organizing our way of thinking. It's a shortcut for thinking. Here's how to think about it. Don't start from square one. Just think about it this way. So there's a better paradigm. And the best companies, in my view, have people at the bottom who think they're making choices. I shouldn't say it in the Pierre, a fine hotel, sorry. But Four Seasons, number one luxury hotel chain in the world by all measures, literally. Not most measures, all measures. The bellhop, the busboy, the person at the bar all think they're making choices.  It's not an accident. That's the view in the company. And that's what makes them better. And interesting enough, since they adopted the strategy, their current strategy, which is now 50 years in the making, nobody's actually tried to replicate it. One of the reasons is the paradigm that the world operates under. OK, second one. Third one, flat jobs. OK, so the world has a paradigm that's been based on a history in manufacturing operations, in service operations, that jobs are flat. What do I mean by flat? It means they're the same every day, every week, every month. So you show up at the call center, or you show up at the factory for your shift, and you do the same thing from whatever it is, 7 to 3, or 8 to 4, or 9 to 5, whatever your 12 to 7, whatever your shift is. And then you come back the next day and do the same thing over and over again. So we've organized the world by way of flat jobs, the same jobs with the same intensity every day. Now, that has thrown up in an anomaly, which is that, interesting enough, plant productivity, and this is America. I'm not sure this is the world, but I bet it is. Plant productivity has been going up at 3% to 4% a year for time immemorial in America. But there's been this big drop over the last 30 years in overall productivity in America, productivity growth, not drop in productivity, productivity growth. It's growing at about 1%. How can this be? Well, it's because productivity in white collar jobs is increasing at exactly 0% a year. And what has happened to the mix between people working in factories and people working in office towers? There's been a dramatic shift over the last 50 years into office towers. Those are what I call decision factories. There's product and service factories and decision factories. And productivity isn't going up at all there. That's an anomaly. That shouldn't be happening. And what we see is another anomaly. In many corporations, this is what white collar headcount looks like. We binge and hire a whole bunch of people. Then we realize we've got too many of them, and we purge them out. Then we binge again, and then we purge, and then we binge. I've worked with some companies for a long time, and I've watched these go on, binge, purge, binge, purge. Is this what we would expect? And we've had the increase in something called a project management office. It's now replete in organizations, where you have the organization, and then it has important stuff to do. And it creates a PMO that puts focus on that important thing to do. Why would that be? That's an anomaly in my view. It's an adaptation. The reason that this is happening is that while product and service factory jobs tend to be flat, maybe are designed as flat, decision factory jobs are entirely project-based. All of you guys are in decision factories, is my bet, or at least 95% of you. And if you just think of your life, do you come to work and do the same thing every day, every week, every month, every year? Do you? I would say you don't. Yes, you might have one meeting. The all hands, all staff meeting from 9 to 10 every Monday. But the rest of your time is spent on projects. Making a decision, your decision factory, your output is decisions. For what it's worth, you should think about that. And you have processes, you have work in progress. That's research. You have finished inventory. You have everything that you have in the product factory. But projects come, and projects go. There'll be things that each of you can think about that consumed all of an entire week that you never do again in your career, or you don't do it again for another six months or nine months. It's a whole set of projects that leaf together. It operates differently. The white-collar world. A minute Peter Drucker noticed there were those things called knowledge workers. This phenomenon was happening, where the structure of work changed dramatically. And this is the problem for this, for productivity, for what it's worth, which is because it's a whole bunch of projects, they add up to different amounts of time necessary over the course of a week or a year or a career. But what do we staff do? What do you think we staff to? The peak. We're like a public utility. We're like electric utility. You figure out what's the hottest day or the coldest day, depending on where you are of the year, when the power demand is going to be great, and make sure you have generation capacity in place for that. And the rest of the year, it sits idle. This is why, by the way, you see gigantic layoffs, 10,000, 15,000, 20,000 white-collar jobs being cut by a big corporation. And you'd think that it would be disastrous. They'd be incapable of doing the things they were doing before. And guess what always happens? They figure out how to do everything. So I believe that we have a overcapacity in the decision factories of America of about 30%. And it's just because we draw the line across the top of the top thing. Why? It's because when your entire corporation is organized around flat jobs, everybody's tied down to a flat job. And so you can't find capacity for a hump. So you have to make sure the capacity is built in, which creates all sorts of excess capacity. And you can't figure out what's excess and not, because if you've got a flat job, and you're in this low period personally, if this is one person, what do you do?  What do you do? Make up tasks. That is what you do. You make up stuff to do that may have no actual productivity whatsoever associated with it, but makes you look what? Busy, busy, busy, busy. And so we can't find the blue part until there's a crisis. When there's a crisis, we lay off 10,000 people. Some of the blue part goes away. Then we rebuild it up. That's why you purge. And then you binge again until there's another crisis. And then you go, is this what the paradigm was intended to produce? Absolutely horrible productivity, binging and purging, ineffectiveness. What I think we need to change to is in the decision factories, which now are typically 60%, 70% of the wage bill of the modern corporation, the ones I've looked at, it's in that range. That entire decision factory, we should convert the paradigm from you have a job to you have a portfolio of projects. Now what kind of company in the modern era has that kind of actual fundamental structure? What kind of company? Consulting. Professional service rooms are all organized that way. And you could say, but they're just tiny, tiny little businesses. They're not these big businesses. They're not big like Accenture. Oops, it's one of those. 40 billion or Deloitte, 32 billion or McKinsey, 10 or 15 billion, whichever number you want to believe. What kind of company has grown the most prodigious leave other than tech giants who come up with something fantastic? I get that. It's companies that have organized around a portfolio of projects. That is your life in a professional service firm. Whether it's a law firm, an engineering consulting firm, strategy consulting firm, IT services firm, you're defined by a set of projects. And when those projects are done, you go on to the next project, and you're staffed accordingly. So that, I think, is the paradigm for the decision factory. We move from job to portfolio of projects. In the service and product factory, I think it's still flat jobs. That is probably the way to do it, but portfolio of projects. I think that means we've got to convert from the notion of we have a dominance of flat jobs in the decision factory, and then this new age thing called the PMO to get done all the important projects while everybody else tries to be as unproductive as humanly possible, stuck in a job that is not structured around reality, to a minority of flat jobs. I'm not saying you should wipe out all flat jobs in decision factories. There'll be a few flat jobs, and then a majority of jobs structured around projects. So you don't have a project management office. Most people think of their selves as running a project. And I'm trying to get companies to do this. It's hard, actually, because it's the paradigm shift problem. Everybody rejects the paradigm. But I do not think, for example, at Procter & Gamble, who I work with would be much better off if they had a pool of assistant brand managers and brand managers who could be assigned to projects in one of any of their 50 big brands, not a specific structure for each brand that's a flat job. I think the brand managers would be much happier and you'd be able to get a whole lot more done at a lot lower costs. So you'd have happier employees, more productivity, better outputs if you went that way, if you organized around projects, not around flat jobs. And in your life then, you wouldn't think the paradigm is I have to climb the hierarchy, which is what it is now. To have a good career, I've got to keep on climbing the hierarchy of flat jobs. Is instead, you know you're getting better and you're getting more valuable and you're going to get paid more and you're going to have more fun as you get to tackle trickier projects. When a really tricky project comes up, we need somebody who is really, really great. And you'll know that you've advanced because you're tackling trickier projects than you used to tackle as you get more experienced and better at it. So those are the three paradigms that I think we need to shift in order to make the kind of progress that I think Ricardo and Brightonine needs to make, wants to make and needs to make. We have to go from the corporation as a machine to the corporation as a complex adaptive system. We've got to go from strategy versus execution to it's all one thing. And the job is to coordinate the cascade of strategy making from the top of the organization to the bottom of the organization. That is the task. And we've got to go from flat jobs to project-based jobs. So those are my thoughts, and I am happy to answer any of your all questions until they drag me off the stage. Thank you very much. Ricardo, do you have a question for me? Thank you. No, I have a trickier project. OK. Brightonine is one of them. Yes, you do. You do. Thank you very much. Is there any question, anyone that wants to make a comment or ask a question? Please, we just need to use the mic for the people in the lecture. Right, yes. OK? I wanted you, if you wouldn't mind, to comment on something you brought up about employee disengagement in this system that's not working. And it's increasing. And we all see it, and the search for talent gets harder. Why are we so resistant in recognizing this area of disengagement? Well, I think it's because we have a paradigm that says, essentially, they shouldn't be disengaged. I'm setting the strategy, and I'm telling them what to do. And it's their job to do what I tell them to do. And because I'm paying them money that should appeal to their head that says, I need this much money, and you're paying me that, why they shouldn't be engaged. I honestly think that's the case. If instead we had a paradigm that says, it's everybody's doing a strategy. Everybody's making choices. They're all important in its projects. And we'd say to that not engaged person, here's the project I want you to be working on now. And it's super important. Here's how the answer to this fits into what we're doing at the corporate level. We're depending on you coming up with a great answer. I can just tell you the problem. I don't have the time to solve it, because I have many problems to solve. Please go solve that and go to the allocation manager and get him or her to get you a team to work on that project. And I'm waiting with bated breath to hear the answer, because it's important to the rest of the company. I think your disengagement would be almost zero. A quick follow up. Do you have one, a good example, that you would say, you see a company doing it really well in the new paradigm? I honestly think, even though they didn't think of it this way when it came to be, although it did to a certain extent, it's four seasons. It's my favorite example of this. Although at Procter & Gamble, I helped work to convince them when they set up GBS, the biggest shared services organization in the world at the time to make it project oriented. And it did fabulously, fabulously well. But Izzy Sharp had this, I think, complex adaptive system view of people. He said in the mid-70s, and literally, he lost most of his senior management team over it. He said there was a turnover of it. He said, the only way we are going to have our employees treat our guests the way we'd like them to be treated at a four season is to treat our employees the way we want them to treat our guests. This in an industry, by the way, that has 60% annual turnover. Despite that, we're going to treat our employees like we want them to treat a guest at the four seasons. So if you look at the four seasons where the employees eat, it would be a nice restaurant to eat. And where they change, their clothes, they have a certain number of days a year free at a four season to anywhere in the world. And when they go, they get checked into the highest category of room that's available, even if it's a presidential suite at 30,000 a night. And so I think that's a complex adaptive system view. They're these complicated people, and we can't make a set of rules about how you treat them. We'll treat you this way, and then you'll treat them that way. We'll give you all sorts of help. And so you know what the turnover at four seasons is? 5%. So the average person you meet in a hotel in the industry has been there for less than 18 months, or is likely to have an 18 month career at that hotel before going somewhere else at four seasons. They're on their way to 20 years, or have been there 20 years. So that would be the best example. Yes, ma'am. Hi, yes. The flat jobs to project-based completely see where that is one of the core problems that we're dealing with right now in my organization. One of the questions I have is, as this complex adaptive system evolves, the projects are very different, and it requires different types of skill sets and different people. How do you see that working with those ups and downs? Sure, I mean, it honestly feels to me as though an iterative prototyping kind of thing, which is that you just need people practiced at doing projects, they will be the most adaptive. So when the environment around you is adapting more quickly, there's no magic bullet to it to say, we'll just have massively adaptive people. I'd say the people who are used to tackling the world as a project, projects are always new and different, would be more likely to do it. If instead, you're tied into a job description that says this is your job description, these are the things you do, and now the world has adapted such that those things are all a bad idea, but it's your job description, you'll continue to do what? Your job description, because if you don't do your job description, what are you in subordinate? Now again, you want in subordination in the sense that this is my job description, but the world is changing, I'm gonna do different stuff, but if it's a project instead, then you know this is time bound because you wanna make projects time bound and things are gonna change, and I'm gonna do a different project next. So that's how I would say a project-oriented company is going to be more adaptable to an ongoing environment than one who's tied down to job descriptions defined in flat jobs. I think that hand was up first there and then here in the middle after that.  No, no, please. I have a lot of questions. Okay, okay. They take the problem. You can ask me later. Yes, ma'am. Thank you very much for walking us through those paradigm shifts. In your experience with the companies that you work with, which ones seem to be the most open to implementing these shifts? Like what are the most common characteristics that you're seeing among those companies for being more open to these things? I would say it literally is a a design-y sort of mind at the top, right? There are kind of CEOs who are more... I sort of break CEOs into two categories, main categories, CEOs who are set piece. These are CEOs who want their life to be like a Shakespearean play. I know my lines, I know your lines, we're gonna meet and then we're gonna say our lines and we're gonna have everything defined in advance and there's no surprises, no nothing. So those are set piece CEOs and then there's read and react CEOs who are more inclined to say, you just read the situation and you react accordingly and those are the CEOs who say, hey man, I see a problem, let's come talk about it and you have no idea. The CEO literally has no idea going into the meeting what the solution will be. So you've got these two kinds. It's the latter kind. The read and react ones that are more inclined to think about the world in a way that's more consistent with how I'm thinking about the world. But I would say there are more set piece CEOs by far than read and react CEOs and the set piece CEOs wanna say, no, these are our jobs, these are our processes, this is what we do.  So I would say that's the number one characteristic that I see as being most determinant of the question you asked. Yes, right here, right here, and then we'll go to there next, yeah. Oh, okay, well, I had her on the line next. So why don't we do there, we'll do there and then we'll come to you if that's okay with you. Thank you. Excellent presentation. Stella Lupushera, was it a framework? A lot of what you're describing is a joint responsibility of management structures as well as HR processes. So how do you see this evolving in light of performance management systems and the rewards and motivation as well as employment contracts and how that will evolve? You can do project as a regular employee or you can do it as an independent or as a crowd. So how do you see that and where do you think the opportunities for HR professionals are? Sure, well, I mean, I honestly think that the HR field is sadly stuck in some paradigms that are ill-suited in terms of Darwinian fitness, they are unfit and there's a challenge of rethinking a bunch of those. I can talk to you later if you want about that in more detail. That having been said, people do ask me this question, the immediate connotation of being project-oriented is the gig economy, et cetera. I don't believe that, right? I mean, there is the gig economy and lots of people are gonna do things on it as an independent. But what I really am talking about is the system that I would prefer so in my beloved Procter & Gamble, the system I'd prefer is to have each of the 10 category presidents, baby care, hair care, et cetera, laundry, et cetera. If it was me, I'd add up for each of them what their current decision factory HR bill is, all in including bonuses and everything and so say it's a billion dollars for hair care, I'm just making it up, it's not.  I believe that no president would spend more than 800 million, they literally wouldn't find stuff projects to do for more than that, but I'd have all those people employed, I'd have a pool of people just like McKinsey, it'd be like McKinsey, I'd have a pool of people who are ABMs, BMs, brand directors, whatever, all of those and the various functions and they'd get assigned. And the most important person in the organization after the CEO would be the head of allocation, because they'd have to be thinking about who can do a trickier project than they did last time, what's the professional development for a plan and timeline for everybody, oh that person has to go work in Asia to get around their experience, what Asian project can I put them on, et cetera. So that's how I would do it, but I would not say turn everybody into freelancers, absolutely not, you'd want as Procter and Gamble to say, just like, think of McKinsey, right? When McKinsey wanna say I wanna turn all of my great consultants into freelancers who may then go off and do something else that I don't have access to them, no, I wanna develop all these people to be awesome consultants or I'm just saying McKinsey is the biggest, but BCG, Bain would apply to all of them, they'd wanna keep them and have those people say, I'm gonna get better, more interesting projects with in McKinsey than if I did them on my own.  Do we still have time? Yeah, yeah, yeah. Yeah, we still have a couple of things. My name is Ricardo, too, by the way. Oh, really? Okay, well, it's a good name. My older brother's name is... So my question goes back to the way we are structured against those paradigms, and a lot of thoughts come to mind, one of them being, should there be a strategy or organization called strategy? Because the moment you assign that to a group, the rest of the group by definition is not doing strategy, right? So how do you think about titles? How do you think about ensuring that decision making is truly being cascading down when everybody who has the flat jobs is actually thinking that that's their job in the first place? Yeah. So I guess my question is, what mechanisms would you suggest us to consider in order to transition from one structure to another? It is a very, very good question. I would say, even though I'm a strategy person, I do not believe in there being kind of consequentially sized strategy departments. I think it's a line responsibility. However, what I would convert the strategy job to is you need somebody in the organization to be responsible for structuring those cascades, for helping the business to say, okay, you're gonna make these choices, now I'm gonna help you with the commissioning of the next set of choices. So for me, leadership in the kind of company I'm talking about means making only the choices that you are most qualified to make. Don't make more than those, just make the ones that you're most qualified to make, explain those choices to the next level, why you've made them, commission their choices, so now you've gotta make a bunch of choices that are consistent with my choices, commission them, offer to help. Say, I think you can make those choices, but if you struggle making them, that's fine, come back and I'll help you make those choices. And most importantly, if in making those choices, you cannot find a single decent choice to make. Come tell me, because it means what? I've made unimplementable choices, right? So that gets you that, in my diagram, that gets you the flow upward and downward between the two. I think the structuring of the choice cascade and the corporation is one of the most complex challenges and I'd have the strategy department, if you will, or one guy or gal, it's really clever, going through the organization, helping each person do exactly that. Okay, so who needs to make what choices now based on the choice you've made? I'll help you go commission those, I'll help you go organize so that they get done, but don't do the strategy for them. Like, I'm a little bit old fashioned and doctrinaire about this. If you're a strategy person needing to do the strategy for a line officer, that is prima facie evidence that the line officer should be fired, full stop. How can they possibly do their job? If they have to outsource strategy, the most important choices they make to them should be fired. We have time for one quick question. So you were, this gentleman back here was on the line for the next and I will try to answer it quickly, as opposed to what I'd normally do. I was gonna say, is this on? Yeah, it's on. I was gonna say two quick questions, but we'll collapse them into one. One is, when I think about project-based businesses and I think about financial services and investment banking, which is often a project-based kind of structure along with consulting, and I think they're, you see more binge and purge in investment banking than almost any industry, and so I'm sort of curious about that. And also, if we go to this project-based modality, which I really like and I think is really strong, and I look at your paradigm shift number two, which is you collapse strategy and execution because they're the same, then suddenly I imagine you have all these project-based teams that are making all of their strategy and execution decisions and I see a million arrows going in a million different directions and we lose maybe the sort of fundamental direction of an organization so that you have individually productive teams but collectively the organization's not moving forward. Okay, I'll answer the second one because of shortness of time, we can talk about the other one if you want later, but it's what happens now, think about it. Do you think people actually say, oh, I'm just gonna engage in mindless doing because my boss told me so? No, they don't. So it all happens now and you're right, it's a total mess, right? It's the product of massive disconnects, massive rework, massive, massive disasters. So the decision factories suck for a reason and so all I'm saying is acknowledge it in essence, acknowledge it so that you can actually then think about managing it more intensively and so it's at such a low level now that I have no fear of oh, this will make it more confusing, it's disastrous already. Disasterous, like one of the things to think about is the ways, and I'm sure Henry could talk about this at length, the ways we've chosen to manage companies have changed very little in the last 50 years. Business school has changed very little in the last 50 years. Corporations in that period have gotten gigantic General Motors was the largest corporation on the face of the planet by far in 1960. Sales of what do you think? 10 billion, a behemoth sitting astride the world, gigantic, of course it's 50 billion in real dollars but that doesn't get you in the Dow Jones 30. As companies have gotten gigantic, we have not improved the way we manage them hardly at all. And so we have a total mess, I'd acknowledge it and then we can make it better would be my answer. Thank you very much for all the great questions. Thank you, thank you, hey, pressure, pressure, thank you. Thank you.


money money money money money ladies and gentlemen we extended the promo to tonight tonight's Wednesday thanks to Nick Jaspy for doing that so and we got it all done so thanks very much everybody we made it happen in the end so those particular breaks plus all of the related fillers are involved in this top top four will win break credit top name will win that grand prize one thousand seven hundred and fifty dollars of break credit very big thanks everybody here who got into all this act so we have to do the platinum anniversary doubleheader plus fillers 2019 NT plus fillers the Jaspy hit parade break plus fillers the Panini one we did two fillers for the two number blocks plus the break itself the quick hit hockey mixer leaf memories plus the filler right there so there's gonna be a lot of names here so remember we've been keeping track of this on the on the break schedule tab so hopefully you've been keeping track of all that there's all the all the names here thanks everyone for making this happen I appreciate it those hanger boxes there's the NT we did the two optic hobby packs there's the number blocks then the people who bought their team straight up in Panini one and we got it done a lot of names on this list but a lot of break credit being given away so let's gather everybody's names from bottom to top copy those names new dice new list and we'll match you up with some break credit good luck everybody first off I appreciate everybody just joining these break thank you we try to we try to give back as much as we can so keep an eye out for more of these break credit promos in the future alright here we go so it's just the top four after five and a one six times so fingers cross everybody one 142 perfect so there's one two five and a one right six times two three four five and a one sixth and final time so after six it's gonna be a lot of sad faces really it's only the top four but I appreciate everybody like I said before I just appreciate everybody giving it a shot you can't win if you don't play I appreciate you playing thank you but ultimately a lot of sad faces here see who's in the top four that's gonna be Nico very close but not quite thank you though for getting in the next three though two hundred fifty dollars break credit each Jeremy Port Steve Birch Tyler Brenner and the grand prize $1,750 of break credit congrats to Ryan Heinz so there you have it after six times there's your top four Ryan congrats to you $1,750 break credit going your way we do have some NT basketball if that that interests you or you can what else is coming up oh Donner's optic football drops on Friday Tyler Steve Jeremy $250 break credit going your way as well thanks everybody I'm Joe for Jasper's case breaks calm I'll see you next time for the next break credit promo bye bye


dangling modifiers. Modifying words and phrases should be as close as possible to words they modify. I only have two dollars. I have only two dollars. Better. The man likes the woman from Florida. The woman is from Florida. The man from Florida likes the woman. The man is from Florida. The dog that bit my son belongs to Jerry. Correct. Looking out my window I saw a UFO. Correct. Be aware that introductory phrases imply that the main subject is the doer of the action. While taking a shower my aunt called. My aunt called from the shower. While I was taking a shower my aunt called. I was in the shower when she called.


Okay, cool. We are online. How's it guys? It's MJ the student's act tree and what I'm going to be doing in these videos is Just going through finance. I haven't prepared for these videos. This is me actually studying at the moment So what I'm doing is I'm going through subject F105 Which is also known as the specialist finance subject and I'm doing this in preparation for the fellowship in finance So what I need to do is I need to go through the entire syllabus and the very first thing that the syllabus asks is it says State what is meant by a risk-free rate of return? Now when you go into the notes, I mean you can get a very nice definition that the risk-free rate of return is Well can be defined at as the rate at which money can be borrowed or lent Lent at when there is no credit risk so that the money is certain to be repaid. So if we have to Just write this out the risk-free rate of return is the rate at which money can be borrowed or Lent when repayment is Certain i.e. No risk and I mean that should be no surprise to you because I mean the very name of the concept is risk-free rate of return Now it's a little bit problematic because this is the very first thing in the syllabus and I have a problem with it because I don't think that the risk-free rate of return is Something that actually exists. I think it's it's hypothetical and This is quite problematic because a lot of the course builds up on this risk-free rate of return It's one of the core concepts and it doesn't exist So what I mean by the fact that it doesn't exist is because of this word here certain repayment is certain and Also, what do we mean by saying that there is no risk? Traditionally we see government lending as risk-free because the government can always go and print more money so Government lends you you know you lend your money to the government's government spends it if they cannot repay it Then they can always either you know raise taxes Or they can just print more money the problem though is Raising taxes can cause a little bit of political unrest the people can get angry The people might refuse to pay or they might be frictional cost and taking up the taxes So it's not as easily said as done and also when it comes to say printing more money Well, there's two problems. What happens if you're using a shared currency such as the euro we've seen this with Greece or More importantly with even currencies that have their their own well countries that have their own currency What happens is if you print more then I mean it's kind of like supply and demand and the currency value decreases and That is a risk that that's a risk that you're the real value of your investment has gone down so for instance if you had to lend a hundred 100 rand to the South African government and the South African government cannot afford to pay it so what they go and do and they They print lots and lots of money and they're able to give you back your hundred rand back However, because there's so much more money that has been printed your hundred rand can no longer buy you as many goods And services as it could before so hold on.  There's more supply of money Which means that the price then comes down. So which means your hundred rands tomorrow can only buy you say four cooks and This is a little bit problematic because You can see that the purchasing power of the currency Decreases when the government prints more of it and that is a risk because if I'm lending a hundred rand I'm forgoing the five cooks and when I get my hundred rand back is only four cooks So there is that risk and this is why we have a while we charge interest rates We say to the government we will only give you a hundred rand if you give us back a hundred rand plus an amount Okay, this amount being interest this amount can be 10 rand This amount can be 20 rand and the higher the amount should correspond to the higher of the risk taken so If there's a chance that the government is just going to repay The amount using their own money and it will be five cooks You know if that's that's a high chance then the amount will be quite low But if there's a chance that they're going to print lots of money and then I can only buy four cooks Well, then I'm going to need a substantially more amount to compensate myself for that risk And that's the thing is that there is always risk and The problem is when we look at this risk-free rate of return The textbook or what the notes are referring to is a closed economy and Again, this is rubbish because the closed economy Doesn't really exist today, you know, we've got globalization We've got all these foreign investors who are you know pushing money into a country but then they can pull the money out of the country and you know, this can fluctuates the prices and Introduce a lot of volatility and when we have volatility we have risk Now so that that's my first point my first point is that the risk-free rates of return does not exist Okay, so point one it doesn't exist and Point two is If it did exist Its value should be well, yeah, what should its value be? Okay, should the value maybe be zero? Because think about it if there's no risk, why should you be getting a reward? You know that comes down to the whole One of the you know the things in finance is the greater the risk the greater the reward Well, if there's no risk Then how can there be a reward? So maybe the value should be zero Because This doesn't I guess very confusing. I mean like I said, I haven't prepared for this video So I'm still trying to think this whole thing through because then what what is the value of money? You know, it comes down to that very first subject. We study in actual science, you know the time value of money and We always saw that, you know, you'd rather have ten rent today Then ten rent tomorrow because of the uncertainty that maybe you don't get that ten rent tomorrow so The question though it comes down to is what what would you be in difference about so let's say let me maybe find some more space Today you could either have ten rent or tomorrow You know, what amount should you have? You know, if it was if it was ten rent, then you would choose today If it was a hundred rent tomorrow, you would choose tomorrow but what value in between ten and say a hundred grand do you become indifferent about it and I Think that is the only way to determine what this risk-free rate of return value should be The problem comes is that it's different for for everyone So for instance, if I had to go and I decided people You know, who would do the following deal and let's go 12 rent You know, who would do this following deal here? You go to a whole bunch of varsity students and you you asked them this question you might find that like almost They say 99% Choose today When it's ten rent versus ten rent when it's ten rent versus eleven rent you might find only 80% choose it when it's ten rent to twelve rent, you know, we might only find say 75% of people Choose that one over the other one and and this is the thing is that it's very much subjective For instance, if you're someone who has a lot of money then waiting tomorrow to get more money is The more logical thing to do But if you're somebody who desperately needs money now Well, then you're rather gonna choose the money today, even if the amount tomorrow is greater So it's all comes down to its subjective and it's the demand for money Now you might think oh everybody's got the same demand for money, you know, everybody likes money But I would disagree I would say some people want money more than others say for instance You've got rent to be paid the next day and you don't have any money Then your demand for money is going to be much higher Then say a multimillionaire who's got unlimited funds, you know And you're gonna be doing you're gonna be prepared to do a much more labor-intensive job Or a much uglier job in order to get that a thousand rent to pay your rent Then what the multimillionaire would do so one thing we can see with the demand of money is that the more money? We have the less we demand it although not always because you know, there's that thing known as greed and This gets a little bit shaky because now we're moving away from pure finance and we're entering the realm of behavioral finance and When we enter behavioral finance We get really really confused because in order to work up behavioral finance is you need data you need to do experiments you need to look at you know the various observations and The problem with that type of stuff is that there hasn't been enough done or the science of experiments are very very small You know the sample stats are you know you can't really draw significant results from it yet So it's still early days, but we're seeing behavioral finance is a big portion To to say the theoretical finance Which means that there definitely is gonna be I can never spell this word psychology Psycho, I know there's like a wire somewhere Psychological, I don't know that I spelled that correctly. There's you know, but there's definitely a psychological Logical element to finance when it comes to say the demand and stuff like that And that's why when we say the risk-free rate of return You know what what should it be? It very much is well, we don't know and This gets a little bit problematic. I mean, how can we we not know what the interest rate should be if there's no risk return? You know, what what do we do? Fortunately for us well, some people might say it fortunately other people might say this is a little bit scary But the central bank sets the interest rate so the central bank which is An in well a party that were or an organization that we're gonna look at maybe in some other later videos the central bank sets the interest rate Okay, and this interest rate that they set is supposed to have a bit of the risk-free Component and a risk component But the weird thing is is that the central bank Can set this interest rate to be anything that they want to be I mean we're seeing in in Europe and in Japan and some of those countries that the interest rate is becoming negative Okay, so they're setting the interest rate as negative and that's absolutely mind-boggling because it means that It's almost like saying to someone would you rather have say Nine rent. Oh, sorry. Would you rather have 11 ran today or 10 ran tomorrow? You know that that's almost that's almost one where we'd expect say a hundred percent of people to choose 11 ran today rather than 10 ran tomorrow But a negative interest rate kind of puts that situation on the table, which you'd think okay Nobody would then lend at a at a negative interest rate But and this is where we're gonna get later on also into finance is you have this thing called regulation and Regulation sets a bunch of rules for investing and you have to invest if you're a big organization like a pension scheme a certain Proportion say around 60% of your assets Into government bonds and government bonds might have a negative interest rate Which means you're investing and you're taking a loss up front So you're lending money to them. There's a chance that they may not pay it back There's a chance that the the currency might devalue and you're still on top of all of that getting hit With a negative interest rate. It's almost like taxing someone for having money. It's like almost like you're a capital a Capital tax and there's no way that you can not invest in this because of the regulations So this is where finance starts setting up these rules and all the regulators set up these things with really great intentions but they can have terrible consequences and And so yeah, this comes back to this whole interest rate. I mean the interest rate It's a really weird concept and I find it really strange that it is point number one on the syllabus is Explain what is meant by the risk-free rate? And I think I mean the notes have kind of just got one page on this You know, they do mention the printing more and the currency risk But I think what they just want you to understand for the exam is that it's a rate at which money can be borrowed or lent When the repayments is certain, you know, there's no risk There's no risk of default and all those type of stuff but it's really unfortunate because Like I've just shown is that it is very hypothetical and this risk-free rate of return does not exist and What's also a little bit scary is well Interest rates are kind of I guess I guess you could say this they're they're made up Okay, interest rates are made up. They're look they're made up with they're not just, you know Thumbs up the central bank does put a little bit of thought behind it They do think about how it's gonna affect inflation and you know What it can do for price stability in the economy and all that type of stuff, you know They want it growth to be controlled and all that type of stuff So they definitely there's a lot of thought that is put into what the interest rate should be but at the end of the day It's it's made up. It's not a a natural rate. Okay, it's not It's not natural in the sense that say the the speed of light or the force of mortality This you know where we can actually see it observe in nature, you know people dying at a certain rates type of thing like that You know mortality rates so mortality rates are are natural, but interest rates I mean the way I'm thinking now are kind of like they're made up But look, I'm still very much just starting out studying for the subject my opinion my change Like I said, I haven't prepared for this video. This is me just talking out loud Let me know what your thoughts are in the comment section below about this risk-free rate of return I definitely know that there's a lot more to be thought about around here And it's something I'm gonna touch on when I study some of the later courses, but there we go Thanks so much for watching. I'm just recording all of this on my tablet using a screen


Welcome to Redis and I'm Tim Melchart over with me Patrimonialy. We want to update the dollar index view here as we have now traded into that pivotal resistance zone at the 9380 area. As such I'm watching the bearish reversal heads out to set short positions initially targeting a move down into the pitch port support at 9250 and then as we hold 93 as resistance it will be an extension down into monthly range support just below the 92 handle. If sellers show up there then we can look from extension down into the trade channel support just below the 90 handle. As always trade as plan the trade, trade the plan and most importantly manage your risk. Until next time, thanks very much.