Chapter 026　What Is the VURA Future Index (VFI)?

Can Future Value be measured? In Vol. III, Ch. 023 we defined Future Value as the capability to create value that does not yet exist. Once a definition is set, the next question is measurement. A purpose that cannot be measured may be proclaimed, but it will not be operated. This chapter takes up the VURA Future Index (VFI). The VFI is an index that assesses an organization’s capacity to create future value rather than its current value. But the role of this chapter is not to complete the index. It is to decide what is measured and what is not. Designing an indicator is not a technique of measurement. It is a position in management.

1 The question — why it arises now

A definition alone does not move an enterprise. An enterprise moves through measurement. What moves people inside a company is not the stated principle but the indicator. What gets measured, what reaches the agenda, and what is evaluated — those decide daily judgment. So the claim that Future Value belongs at the center of management stays a slogan unless it reaches measurement. In Ch. 023 we shifted the object of definition by one step. Not the value that does not yet exist, but the side that produces it: capability. There was a reason. What does not exist cannot be measured as a quantity. Capability exists in the present. What exists can be observed, developed, and allocated. The VFI is possible in principle because its object is a capability. The problem is that today’s measurement institutions barely look at the capability side. As Ch. 023 sets out in §4.4, in the three nested layers of value, ease of measurement runs in the reverse order of encompassment. Financial Value can be measured daily. Enterprise Value is assessed by the market. The institutions for measuring Future Value are not yet in place. Left alone, managerial attention is always pulled downward. People look where they are being measured. First Principle 2 states that Future Value Precedes Enterprise Value. Future Value comes before enterprise value. In practice, though, the order appears reversed. The reason is simple. Only the thing that comes later has been turned into a number. In the Age of AI the problem deepens by a step. As AI is democratized, improvement in operational efficiency becomes achievable in any company. Efficiency gains show up quickly in the financial statements. On financial indicators, many companies come to look alike. As the thought experiment in Ch. 023 showed, a decisive difference takes years to reach the financials. Through those years, the statements do not distinguish the two companies. So what we need is a language that explains the difference between enterprises whose financials look the same. The VFI is a candidate for that language.

2 Conventional answers and their limits — why existing

indicators cannot measure Future Value Creation Capability The claim that we need an indicator for Future Value invites an obvious objection: are the existing indicators not enough? So we examine the main ones one at a time. Every one of them is a good indicator. The limit appears when it is used in place of Future Value Creation Capability. ROE and ROIC These are indicators of return on capital. They show how much profit deployed capital has generated. As instruments of managerial discipline their usefulness is beyond doubt. Look at the structure. The denominator is capital already deployed; the numerator is profit from the existing business. Both measure the operating efficiency of a settled business structure. Efficiency can be compared only where the structure holds still. A paradox follows. Investment that creates Future Value raises the denominator and cuts the numerator, because investment in new capability is, for now, a cost. The more an enterprise acts to raise its capability, the lower its return on capital. The better the indicator works, the further the enterprise moves from Future Value. PBR Price-to-book ratio shows the gap between book value and market valuation. The intuition that something intangible sits inside that gap points the right way. But PBR shows the level of the market’s expectation. Expectation is not set by capability alone. It moves with how information travels, how the sector is regarded, and what story is being told. And PBR does not decompose the gap. What is being expected sits outside the number. A display of expectation must not be mistaken for a measurement of capability. Expectation moves faster than capability, and disappears faster than capability. Market capitalization This is the outcome in its purest form. In the three layers of Ch. 023 it belongs to the first layer, Financial Value. It is the price the market has set with the information available at that moment. Why it cannot serve as a measure of Future Value is plain. Market capitalization moves after Future Value has been created. It looks at the effect, not the cause. Make an effect the target and the enterprise will choose actions that move the display. ESG scores In direction, these sit closest. In trying to assess what does not appear in the financial statements, they share the same concern. But the object measured differs. Most ESG assessment is built around the completeness of disclosure and the state of governance arrangements. Disclosure is a record of the past; arrangements are a static structure. Was a policy set? Was a committee established? Were figures published? These matter, but they are not capability. ESG is also a framework for the propriety of corporate conduct. Being proper and being able to create new value are different capabilities. Intangible asset valuation Brand valuation, intellectual property assessment, human capital disclosure. All of these have grown more refined. As conventional answer 3 in Ch. 023 states, they are all accumulations of past activity. A brand is a record that promises have been kept. A patent is a record of the point research reached. An accumulation is an asset, and an asset is held. Future Value is not something held. It is the capability to produce something from here. Intangible assets can be the material of Future Value. But material and capability are different. Counting what is in the warehouse tells you nothing about the cook. The limit the five share The five indicators share the same limit. First, all of them measure the outcome side. They are quantities observed after something has happened. Second, all of them take the existing business structure as given. The moment the structure is rewritten, the basis for comparison is lost. Third, none of them carries a rate of renewal. They show the level at a point in time, not how fast that level is changing. Measuring Future Value Creation Capability requires inverting all three. Look at the cause, not the outcome. Look at the rewriting of the structure itself. Look at the change in the level, not the level. “Cannot be measured” and “is not being measured” are different Here we answer a more fundamental objection: that something like Future Value cannot be measured at all. History shows the claim made repeatedly, and overturned repeatedly. Brand was once unmeasurable. Putting a price on a company’s name was not treated seriously. Today several valuation methods exist, and the subject appears in debates over accounting standards. Organizational culture was another standard example. Today it is surveyed as employee engagement and treated as a management indicator. Technological strength followed the same path, with approximations such as patent citations and research productivity. The relationship with customers was compressed into one question about willingness to recommend. We do not claim these approximations are complete. Every one carries error, and every one has critics. But one thing changed decisively once measurement began. They became items on the executive agenda. What should be read from this? The history of measurement is not a history of the unmeasurable becoming measurable. It is a history of approximations being granted to objects that someone decided were worth measuring. The order does not begin with technique. It begins with intent. The statement “Future Value cannot be measured” is therefore, in most cases, not a description of fact. It is a restatement of “no one has tried to measure it yet.” And as long as no one tries, no approximation will ever appear. One reservation, though. An approximation carries error. An indicator that hides its error is more harmful than no indicator at all. So whoever proposes an indicator has an obligation to state its limits at the same time. This chapter discharges that obligation in Section 5.

3 Redefinition — what the VFI is

3.1 What the canon supplies

Figure III-3　. What the VURA Future Index measures

Begin by quoting the source precisely. Future Value Theory (Kadowaki, 2026a) puts it as follows. The VURA Future Index assesses an organization’s capacity to create future value rather than its current value, making visible what conventional financial statements cannot. The canon supplies three things. Its object is Future Value Creation Capability. Its contrast is current value, which the VFI does not measure. Its role is to make visible. The name is the VURA Future Index, abbreviated VFI. That is the extent of what the canon states. No formula, no weighting, and no scoring scale exists in the source. This chapter therefore takes those three points as a starting position and gives the index its design here. The design principles and observation points set out below are newly proposed in this chapter. They must not be treated as an established definition. Later chapters may refer to this proposal.

3.2 Four design principles (proposed in this chapter)

First principle — measure capability, not track record. A track record belongs to the past. Capability belongs to the present. An enterprise with a strong past record does not necessarily hold capability now. If anything, capability is most likely to stall right after a large success. Recall Level 2 of the Enterprise Redefinition Maturity Model (ERMM), the Improvement Enterprise: organizations at that level become increasingly efficient while remaining fundamentally unchanged. That state is most likely to occur precisely when results are good. An indicator that measures results cannot detect it. Three notes travel with the ERMM. Progression is not linear; organizations display characteristics of several levels at once, and the model evaluates organizational coherence rather than isolated excellence. Maturity is assessed across all five dimensions in balance. And reaching Level 5 as rapidly as possible is not the objective, since different industries may require different levels of adaptability. Second principle — measure the rate of renewal, not only the level. Capability does not stand still. When assumptions grow obsolete faster, the speed at which a level is renewed matters more than the absolute level. An enterprise with high capability whose renewal has stopped and one renewing rapidly from a low level can trade places within five years. The VFI is therefore not designed as a photograph of a moment. It is read on two axes: current position and the speed of renewal. This corresponds to First Principle 5. Learning Is the Ultimate Competitive Advantage. Learning is the ultimate competitive advantage, because knowledge and technology depreciate. Third principle — do not build a single composite score. What the VFI makes visible is FVCC, Future Value Creation Capability. And the FVCC Formula is multiplication. A sum or an average cannot reproduce the property of a product. One term can sit at zero and the total will still come out high if the others are strong. That is an error in an indicator. So the VFI is displayed as a profile of seven items. It is not collapsed into a single figure. What we read is the lowest term and the shape of the distribution. Pressure to produce a composite score will always arise. It is to be refused. Fourth principle — state what is not measured. The credibility of an indicator is determined as much by what it does not measure as by what it does. An indicator that never draws its own boundary will eventually claim to measure everything.

3.3 What the VFI does not measure

This chapter states five explicit exclusions. It does not measure future profit; that is the job of future profit forecasting, and as Ch. 023 states, its scope differs from Future Value. It does not measure present value, share price, or market capitalization; those belong to the first layer, Financial Value. It does not measure the ethical propriety of an enterprise; that matters, but it is the work of another framework. It does not measure the personal qualities of individual executives; what the VFI looks at is the capability of the enterprise, not of a person. And it does not measure superiority across industries, because the appropriate level differs with the nature of the business and its environment. The last exclusion carries the same intent as the note attached to the Enterprise Redefinition Maturity Model. Reaching the highest level as fast as possible is not the objective. The VFI is not a tool for ranking companies against one another. It is a tool for knowing where your own enterprise stands.

3.4 Who measures, and when

The starting point is self-assessment. Before any external rating body measures, the executive team measures its own enterprise. Two reasons. First, for many of the seven items, information observable from outside is scarce. How fast bad news reaches management, or why a proposal was declined, does not appear in external documents. Second, the purpose is diagnosis. Diagnosis does not work without the patient’s own account. Once a year is enough. Capability does not move over a quarter. Measure something static too often and measurement error gets misread as change in capability. High-frequency measurement also invites short-termism. As Vol. II, Ch. 019 shows, the assessment is made by the executive team, each item on a five-point scale, and the total is not viewed. Only two things are viewed: the lowest item, and the item on which assessors disagree most. The first shows where to start. The second is evidence that the executives are not looking at the same company, and it is often the more serious of the two.

4 Structure — how to read the seven terms of FVCC

What the VFI makes visible is this formula. FVCC = Purpose × Learning × Redefinition × AI Integration × Ecosystem × Capital Allocation × Trust This is the FVCC Formula. It specifies Future Value Creation Capability. Note again that it is multiplication. If any one of the seven terms is zero, the capability as a whole is zero. The relationship is multiplicative: weakness in any single capability weakens the whole, so purpose, AI, and capital are each individually insufficient, and Future Value emerges only when all seven reinforce one another. The VFI corresponds one-to-one with these seven terms. For each, we set out what to look at in order to tell whether the capability is present. These observation points are proposed in this chapter. Purpose. What to look at is not the wording on display. It is the record of what was declined. How many proposals were turned down in the past year on the grounds that they did not fit the purpose? A purpose does not exist while it is being used as a reason to approve. It begins to exist when it works as a criterion for rejection. A second observation point is how often purpose appears in the minutes of capital allocation. If it appears only in the New Year address, it is not a variable of management. Learning. Not the volume of knowledge. The number of assumptions revised. Of last year’s decisions, how many were withdrawn or amended this year? An organization with zero withdrawals is either not learning or hiding its learning. Either way the problem lies at the same depth. In addition, look at whether records of failure are kept and referred back to later. A failure without a record is not learning. It is loss. Redefinition. Look at how many years ago the wording of your business definition was written. And whether there is anything you let go of in the past few years. Redefinition is not adding something new. It is deciding what to keep and what to release. A second observation point is whether redefinition is handled as a project or embedded as a permanent process. That difference separates Level 3 from Level 4 of the Enterprise Redefinition Maturity Model. AI Integration. Not the adoption rate, not the amount invested, not the number of users. What to look at is where the time AI returned has gone. If the hours freed by AI are going into producing more reporting material, Future Time has not increased. The second point is whether the operation checks AI’s output one item at a time, or whether there is a layer designing the system as a whole. The first breaks down as volume grows; the second gets stronger as volume grows. Human-on-the-Loop Management means designing the whole system, not supervising AI. Ecosystem. Not the number of partners. The number of relationships designed jointly. A transaction ends when the terms change. Joint design describes a state in which you are built into the other party’s decision-making. The judgment is best made from the other side. If you withdrew, could they easily find an equivalent substitute? If they could, it was a transaction. Capital Allocation. Not the total budget. The change in its composition from the prior year. As Ch. 023 states, a budget table is the record of which future an enterprise chose. If the composition is nearly identical to last year’s, the enterprise has chosen the same future as last year. A second observation point is how many proposals with no demonstrable payback period were approved in the past year. If not one was approved, the enterprise has a mechanism for excluding Future Value built into itself. Capital here includes people, time, knowledge, and trust. Financial capital is only one of the eight forms of capital. Trust. Not customer satisfaction, and not a reputation metric. The sharpest observation point is how long bad news takes to reach management. In a high-trust organization, bad news travels up fast. In a low-trust organization, bad news is processed and arrives late. The second is whether promises are kept. Trust increases each time a promise is honored. As First Principle 8 states, Trust Compounds Faster Than Capital — trust compounds faster than capital and becomes the last durable advantage. Its manner of accumulation differs from other capital. That is why it stands as an independent term. Reading on two axes Each of the seven items is read on two axes: level and rate of renewal. The level shows the current position. The rate of renewal shows in which direction, and how fast, that position is moving. The reason for two axes is that the managerial judgment differs between them. An item with a low level and no renewal is the first place to start. An item with a high level and no renewal is the most dangerous, because it is exactly where past success turns into future rigidity. An item with a low level and fast renewal is where capital should be added. A single number cannot make these distinctions. This is another reason the VFI is not composited.

5 What it looks like in practice — indicators distort

management We have designed an indicator. Now we describe the harm an indicator brings. If the designer does not say it, no one will. Goodhart’s law There is a statement attributed to the economist Charles Goodhart. When a measure becomes a target, it ceases to be a good measure. Measurement changes behavior, and the changed behavior breaks the correspondence between the measure and the reality behind it. The law applies to all seven terms of the VFI. Concretely. Measure Learning by the count of withdrawals and withdrawals get mass-produced. Policy changes with no substance start being submitted as evidence of learning. Measure Ecosystem by the number of jointly designed relationships and empty memoranda multiply. Measure Capital Allocation by the share going to new areas and existing proposals get reclassified as new. What matters is that none of this is fraud. Optimizing what is measured is a normal function of an organization. Countermeasures premised on bad faith will not prevent it. The only recourse is the design of the indicator itself. Four responses (proposed in this chapter) First, do not composite. A single score is the easiest target for optimization, because raising anything raises the total. A seven-item profile is expensive to manipulate. Faking seven observation points of different character at once can be harder than raising capability. Second, do not connect it to evaluation or reward. The moment it is wired into personnel evaluation, the lowest item stops being reported honestly. The greatest value of the VFI is in finding the lowest item. Connecting it destroys that value. A diagnostic instrument is used for diagnosis and nothing else. Third, redefine the indicator itself, periodically. Observation points inevitably grow obsolete. The time it takes for an observation point to become known, optimized, and detached from reality is finite. So we design on the assumption that the indicator will go stale. We include the indicator itself among the objects of enterprise redefinition. There is no reason the indicator alone should be exempt from redefinition. Fourth, always place a description beside the number. Each item’s assessment carries one event that grounds it. Which proposal was declined, and why. Which assumption was withdrawn, and when. A number without a description walks off on its own. A number with a description becomes the object of argument. The purpose of the VFI is not to produce a conclusion. It is to start an argument. What it looks like in the executive meeting Here is the operation that follows from all this. Once a year, each member of the executive team assesses the seven items independently. Results are collected, but no average is taken. On a single sheet, the distribution across the seven items is laid out as it is. The meeting handles two points. Which item is lowest? Which drew the widest disagreement? For the lowest item, confirm whether this year’s capital is going there. Since the formula is multiplication, the smallest term determines the whole. Raising the other terms barely moves the value. For the item with the widest spread, ask why it split. Executives looking at the same company can hold different assessments of the same capability. But the reason for the difference has to be spoken. In the course of speaking it, facts nobody knew often come out. The meeting finishes in two hours. Yet what it handles in those two hours is never handled once in the quarterly performance review. Reservations Finally, the limits. The VFI is an indicator under development. The attempt to put a number on Future Value Creation Capability is in progress, and has not reached the precision and comparability of financial indicators. Comparing enterprises would require tighter definitions of the observation points and trained assessors; neither is in place. What is reliably useful now is comparison over time within a single enterprise. The observation points for the seven items are also a proposal made by this chapter, not the only answer. If better observation points are found, they should replace these. The purpose of an indicator is not to protect the indicator. It is to reflect the enterprise’s current position accurately.

6 Questions for the executive

To summarize what this chapter has fixed. The VFI is an index that assesses an organization’s capacity to create future value rather than its current value, making visible what conventional financial statements cannot. That much is the canon. From there, this chapter designed. Measure capability, not track record. Measure the rate of renewal, not only the level. Build no single composite score. State what is not measured. Then give observation points corresponding to the seven terms of FVCC, and set out responses to the danger that an indicator distorts management. These are this chapter’s proposals. ROE, ROIC, PBR, and market capitalization are all good indicators. But every one of them measures the outcome side. What ESG scores and intangible asset valuation measure is disclosure and accumulation. Future Value Creation Capability sits somewhere other than all of these. Standing on that understanding, the executive faces three questions. Question 1 — Of the seven terms, which is lowest in your enterprise? Is this year’s capital going there? If you cannot answer, you have not measured it yet. And the item you have not measured is usually the lowest one. People do not place a scale where they would rather not look. Question 2 — Have you dropped from the agenda the thing your enterprise most needs to measure, on the grounds that it cannot be measured? “Cannot be measured” is often a polite expression of the absence of intent to measure. Brand, culture, and technological strength were all dropped from agendas with the same phrase. What comes first is not technique. It is intent. Question 3 — What is the indicator you are currently optimizing costing you? Every indicator makes something invisible. An enterprise optimizing quarterly profit is paying with the seeds of businesses ten years out. Management that cannot answer this question is being managed by its indicators. None of the three questions asks how to score well. All three ask who decides what should be looked at. An indicator is an instrument of management. But an instrument quietly governs the field of vision of whoever uses it. An enterprise that kept watching only financial indicators has been managing only what financial indicators show. That is not negligence. Managing what is visible is a rational posture. So what has to change is not the posture. It is the range of what is visible. The VFI is an attempt to widen that range by one step. Future Value does not appear in the financial statements. To place at the center of management something that does not appear there, we need a form in which it can be argued about while still not appearing. Giving it that form is the role of an indicator. There is no complete indicator yet, and there probably will not be one for some time. But management holding an imperfect approximation and management holding nothing are different. Only the enterprise that tried to measure the unmeasurable can manage the unmeasurable.

In brief

The VURA Future Index (VFI) is an indicator that assesses Future Value Creation Capability rather than current value.
It measures capability, not track record. It measures the rate of renewal, not only the level. It builds no single composite score.
It corresponds one-to-one with the seven terms of FVCC and is used as an instrument for reading the lowest term and the shape of the distribution.
The VFI must not be connected to personnel evaluation. A diagnostic instrument should be used for diagnosis alone.

Key concepts

VURA Future Index (VFI) / Future Value Creation Capability / Future Value / the Enterprise Redefinition Maturity Model (ERMM) / Human-on-the-Loop Management

The chain of ideas

Future Value Creation Capability → VURA Future Index → Capital Allocation → Future Value

Related first principles

Principle 2 — Future Value Precedes Enterprise Value. Principle 3 — Capital Exists to Create Possibility. Principle 5 — Learning Is the Ultimate Competitive Advantage. Principle 8 — Trust Compounds Faster Than Capital.

Related chapters

Vol. III, Ch. 023 “What Is Future Value?” — the definition of the Future Value this index seeks to measure is in that chapter
Vol. III, Ch. 027 “What Is Future Value Management?” — builds the VFI into a form of management
Vol. V, Ch. 044 “What Is the Enterprise Redefinition Maturity Model (ERMM)?” — usable alongside it as a second diagnostic axis
Vol. IV, Ch. 032 “How Do Investors Assess Future Value?” — handles the connection to assessment from outside

Papers and companion volumes

Kadowaki, N. (2026a). Future Value Theory: A Management Framework for Enterprise, Capital, and Society in the Age of AI. VURA Working Paper Series. SSRN: https://ssrn.com/abstract=7120980 / Zenodo: https://doi.org/10.5281/zenodo. 21255662
Kadowaki, N. (2026b). Enterprise Redefinition: Toward an Enterprise Evolution Theory for the Age of AI. VURA Working Paper Series. (Published on Zenodo; under review at SSRN)
100 Questions on Management in the Age of AI, #065 “Can Future Value Be Measured in the Age of AI?” / #062 “The Companies That Grow in the Age of AI Are Watching Different Numbers”

Chapter 026 What Is the VURA Future Index (VFI)?