Maximizing Shareholder Value is the worlds dumbest idea

James Montier tells it as it is, he is very outspoken about the financial world, the things that are very wrong in his view.

In this extremely interesting presentation he argues that Maximixing Shareholders Value (MVS) is arguably the worlds dumbest idea. The presentation starts at 5:30.

One of his main arguments is wrong incentives, a subject that is also close to people like Warren Buffett and Charlie Munger, who warned about it many times. Many of the problems in the financial world stem from incentives that are either too much focused on the short term, or are misaligned.

One slide contains a collection of more dumb financial ideas, according to Montier:

Fans of Milton Friedman might want to consider skipping a few minutes from 10:00 onwards, Montier doesn't mince his words, describing the damage that Friedman has caused.

An earlier post on Montier can be found here.

James Montier, the Flaws of Finance

James Montier (currently asset manager at GMO) is one of the good guys who calls it as it is. He has warned many times for wrong incentives (rewarding short term profits but not punishing long term losses), blindly following financial models, etc.

His latest presentation "The Flaws of Finance" about what went wrong in the GFC (Global Financial Crisis) can be found here and a resource page about his previous papers/presentations and books can be found here.