Reinventing the Stock Exchange – M.S. Srinivasan

Stock Market is a great pillar of modern business.  But is this august institution contributing positively to the health of the economy and society?  The answer is obviously in the negative, because stock market promotes only the economic motive disregarding all other factors which lead to the social and ecological wellbeing of the community. But can it change?  Is it possible to redesign the stock exchange so that it helps in the sustainable development and wellbeing of business, economy and the society? This is the question which is explored extensively and comprehensively in this book under review.

 The author of this book, Pravir Malik, is a senior management consultant with extensive experience in the consultancy industry.  Malik is the founder of Aurosurya, a management cosultancy firm in USA.  He was a founding member of the Indian division of the well-known consultancy firm A.T.Kerney.

Stock market, Sustainability and Evolution

The core thesis of Malik is that the present system of stock-exchange, and its more or less exclusive economic motives, is destroying the eco-system of our planet and it has to be redesigned to nourish sustainable development.  As Malik states “Ecosystem and the invaluable and life-giving services they provide are being severely damaged or simply wiped out.  The under lying business-asset affect mentally has warped all perceptions and we have come to equate value by a surface and short-sighted mathematics.  Formidable problems such as climate change have arisen as a result”. And the remedy, according to Malik, lies in “redesigning the stock market . . . along a trajectory of sustainable development.  All the work that is currently being done in the field of sustainable development will come to naught unless this primary engine of business dynamism is redesigned based on deep and true principles of sustainability”.

Based on Sri Aurobindo’s thought and terminology, Malik uses the term physical, vital and mental as a basic framework for analysis.  All life and Nature is made of this fundamental pattern – physical, vital, mental – which Malik calls as “fractals”.  All changes, progress and evolution in Nature moves through these three stages.  Physical is a state of inertia and rigidity with no change and obeying fixed laws.  Vital is the state of energy, dynamism, change, interaction.  But in human life and in the present condition of human evolution, vital is driven by the self-assertive vital ego, individual and collective trying to conquer, dominate and subjugate other egos and the world as a whole.  As Malik puts it in this vital stage “the essential drive remains self-assertion and conquest”. The third stage, mental, is a state of knowledge and enquiry, “life as experienced by thought and idea” and “introspection, reflection and assimilation”. However, Malik could have elaborated a little more on this mental stage and the type of mind which can lead to this higher evolution from vital to mental. A predominantly logical or pragmatic mind can not bring about this evolution; it requires a greater mind or a higher intelligence which can discern the deeper, universal truths, laws and principles of life and sensitive of higher values like truth, beauty, goodness, harmony, unity, and using the logical and pragmatic mind to execute, implement and organize these higher values in the outer life.

According to Malik business is at present in the vital stage and for its higher evolution it has to make a conscious effort to progress towards the mental phase.  All investments must flow in a direction which helps in this higher evolution from vital and mental, and in general, towards progress of human life from physical, vital to mental phase of development.  “The overarching physical, vital and mental are and must be the context of financial understanding and decision making” says Malik, and we have to  “reinterpret value based on physical-vital-mental fractals for progress and use this to decide whether to invest in an area or not.  Where transition between one phase to another is being facilitated, invest there.  If frenzied activity within a phase, do not invest there”.

Malik supports his thesis with an incisive analysis of the present condition of business and the stock-trading system and the new thoughts and trends.  The first part of the book deals with the basic conceptual framework.  The next three parts of the book, Malik discusses extensively on the present status of the economic system, lessons from the history of stock market crashes, new trends towards incorporating the principles of sustainability into business and emerging concepts like Socially Responsible Investing (SRI), Global Reporting Initiative (GRI), Dow Jones Sustainability Index (DJSI), Principles of Responsible Investing (PRI).

The Central Message

We may briefly sum up the central message of the book in the following words.  We have to build a new financial and trading system where those companies which make a conscious effort to progress from the vital to mental level and as a result contribute positively to the sustainable development of human life must attract the maximum investment and other companies which destroy the ecosystem or remain at the vital level and try to expand and aggrandize their wealth, power, profitability, space and reach at the service of their corporate ego, disregarding the wellbeing of human life and the planet, must receive to help from or support from the financial system.  In this book, Malik provides a broad strategic blue-print for realizing this aim in the corporate life.  Malik’s manifesto for reinventing the stock market is an original contribution to management thought.

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