Chapter 4

Analyzing Mental Models

It's all about value.

We hesitate to call it shareholder value because that phrase has come in for some criticism lately.1 It also constitutes an incomplete idea. Value applies much more widely than being limited to shareholders, with share implying equity holders. Value is equally important to debt holders, analysts, brokers, and others in the investment business. It most certainly applies to the company management and employees.

It is our hope and intent to interest all these audiences in this book. We believe they should find insights in this book about the investment process and how to increase value. Policy makers as well may care about the implications of these insights as they apply to the structure of the capitalist system. That system certainly has prompted considerable comment and criticism lately.

In this book, we are proposing a simple, yet powerful continuing scientific process. Despite its simplicity, the process becomes most challenging to implement well. Also, the process is likely to be controversial. Investors, analysts, academics, and corporate executives are strong believers in practices that have been in use for quite some time now.

This book incorporates empirical research and the associated theoretical framework for the first time for many of the issues involved. To identify where managements and investors position themselves in this process, we have conducted an extensive set of interviews of companies and investment institutions. ...

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