Modern Economics Doesn’t Work?

Perhaps it’s appropriate to start this blog with a recent speech from the famous investor George Soros. My research over the past few years has been about behavioral economics and finance and its role in leadership. The implication of my theory is that modern economics, no matter its elegant frameworks and ideas, just doesn’t work. That means that modern stock and valuation analysis doesn’t work either, and so modern economic education and MBAs aren’t giving useful education either. That’s why we know that index investing almost always beats managed investing

According to Soros a few weeks ago http://ineteconomics.org/george-soros-why-we-need-rethink-economics-0, “Economic theory has to be rethought from the ground up, because the prevailing paradigm of the efficient-market hypothesis, rational-choice theory, has actually run into bankruptcy very similar to the bankruptcy of the global financial system after Lehman Brothers.” So now I have company.

Think about how some of the ramifications. Research published by the Fed on the accuracy of its predication of recessions shows that it usually fails to predict them at all. So what about the need for a Fed, at least in its current form? How about the efficacy of modern economics and financial education at all of the world’s universities? The value of an MBA? The value of M&A advice (where we also know that most M&A transactions fail to achieve their objectives)?

The list goes on. But it includes how we identify, groom and develop modern leaders. That’s why Perth started and why its own framework and assessments are so revolutionary. And now, according to Soros, right on the mark.