5 ms·

It's sleight of hand. Imagine presenting all the data in one go, in every slice possible, and answering every question the Board might actually have. And if the

by crdb 11y ago

It's sleight of hand. Imagine presenting all the data in one go, in every slice possible, and answering every question the Board might actually have. And if they doubt your numbers, you give them a 500 page booklet in size 8 font and say "it's all here, you're welcome to double check!" knowing full well they don't have the time. I made several slides with over 300 PowerPoint "objects". I think it was a set of 20 things which were sliced by 10 metrics each of which had its own little circle with a text box inside and different formatting. Didn't know how to make that as a table so they insisted on the circles and text boxes approach. Took me about an hour a slide I think including all the aligns. The audience for the stuff you produce is the client. If it's the board of directors, they have an hour a week to check progress and hear recommendations. The more you bury them under noise, the more CYA you provide them to say you had all the data to back your recommendation. The best consultants actually manage to convince you that whatever decision they reach was the sound one. I found much of the same cognitive biases - particularly regarding significance, and saying "I don't know" - in management later. People simply don't care to learn basic stats or think about what they are doing as making a model of the world and then taking decisions based on it.

darkmighty 11y ago
So the question is, did it work? (the consulting that is). You make it sound like a huge waste of money.
- crdb 11y ago
  It was a huge waste of the shareholders' money. It saved management's careers and allowed them to transition nicely. Gave board members the confidence to pretend they did their job. So, it depends for whom.
  - darkmighty 11y ago
    Interesting. I don't see how a board could be convinced by arguments a consulting company hired by management; how could it work more than once? If you found they were doing stupid things you wouldn't report them, would you?
    - crdb 11y ago
      Well put it this way: you're 65, you've led a few companies but now sit on 10-15 corporate boards of multi-billion dollar companies in your spare time, flying around the world for the meetings, there's another 10 people like you in the room, you're meeting the consultants and management after a long lunch (possibly boozy), you have a hunch about why the company is losing sales, but then the consultants put forward this extraordinarily well documented case of why there's 6 other explanations which combined have led to the decline in sales. So you doubt yourself, a little bit. There ARE after all 400 slides in the deck. And all these numbers, and the immense effort the consultants put in, and the way they have convincing answers for everything. At the time, it looked like a cool bet and could have paid off well if it had worked out. Earnings were through the roof for over a year too, so it did pad the treasury. Can't go against fate, right? Oh well, there's still 14 board seats left. And the acquisition is better than nothing, looks like a good price. Even if your hunch is right, what's the point of punishing a team that's halfway out of the door anyway for a set of bad decisions that can't be reversed? Once you reach that conclusion, you switch off, let the German drone on in his thick accent, and think about what you'll get your granddaughter for her 5th birthday next week in Milwaukee - what is a good German souvenir that a 5 year old would enjoy? You're lost on the meeting from now on. As for bad management, well, is it their fault? Was it part of their "schooling"? (There's a saying in trading that losses are "tuition fees") Were there extenuating circumstances? I can name (but won't, because I'm a nobody and you never know when you might need connections) a series of well known political and business figures in California, for example, who have provably run large companies to the ground (as far as my humble, not-very-profitable, not-that-learned opinion is concerned) and now enjoy exceptional careers - it's amazing how far being born in the right place and with the right network can carry you. Since one is allowed to criticize one's own politicians, look at Sarkozy, who was voted out and replaced by what is probably the least attractive, least popular, least "presidential" candidate the left ever put up, as a protest vote more than anything, who somehow still clings to the leadership and has even managed to make himself favorite for 2017 on the right (he even had the balls to rename his party after the US Republicans). No-one, in his own party or its membership, has the balls to pull the trigger. People don't rock the boat. They make excuses, and things just decay slowly. Accountability is hard work and without help, usually leads to the loudmouth getting shot down. I remember someone once saying that one misgiving of youth is to think you have to be exceptional when really, just doing the job properly is often enough to make you exceptional compared to your peers. I do think that business performance is naturally high-dimensional with very sparse data (high-p, low-n, with non-linear behaviour) which makes it very difficult to understand, more than people expect. For example, a LOT of companies are just levered beta - they go up faster than the market, and go down faster than the market - which makes whoever is in charge look like a genius during any extended boom, and remain a genius if he retires before the bust (putting the blame on the new guy, naturally; I'm not at all thinking about a certain company with a blue logo and two initials, or a certain "American" insurance company with three). Experienced business people are at least instinctively aware of this and avoid making too harsh judgement calls based on simplistic evidence. Of course all I've said applies to my own conclusions. Maybe my team members and I were overworked and slightly paranoid or annoyed and saw what we wanted to see. But I'd say the probability on that one is pretty high on the side of "management screw up".

by crdb 11y ago

darkmighty 11y ago

So the question is, did it work? (the consulting that is). You make it sound like a huge waste of money.

crdb 11y ago
It was a huge waste of the shareholders' money. It saved management's careers and allowed them to transition nicely. Gave board members the confidence to pretend they did their job. So, it depends for whom.
- darkmighty 11y ago
  Interesting. I don't see how a board could be convinced by arguments a consulting company hired by management; how could it work more than once? If you found they were doing stupid things you wouldn't report them, would you?
  - crdb 11y ago
    Well put it this way: you're 65, you've led a few companies but now sit on 10-15 corporate boards of multi-billion dollar companies in your spare time, flying around the world for the meetings, there's another 10 people like you in the room, you're meeting the consultants and management after a long lunch (possibly boozy), you have a hunch about why the company is losing sales, but then the consultants put forward this extraordinarily well documented case of why there's 6 other explanations which combined have led to the decline in sales. So you doubt yourself, a little bit. There ARE after all 400 slides in the deck. And all these numbers, and the immense effort the consultants put in, and the way they have convincing answers for everything. At the time, it looked like a cool bet and could have paid off well if it had worked out. Earnings were through the roof for over a year too, so it did pad the treasury. Can't go against fate, right? Oh well, there's still 14 board seats left. And the acquisition is better than nothing, looks like a good price. Even if your hunch is right, what's the point of punishing a team that's halfway out of the door anyway for a set of bad decisions that can't be reversed? Once you reach that conclusion, you switch off, let the German drone on in his thick accent, and think about what you'll get your granddaughter for her 5th birthday next week in Milwaukee - what is a good German souvenir that a 5 year old would enjoy? You're lost on the meeting from now on. As for bad management, well, is it their fault? Was it part of their "schooling"? (There's a saying in trading that losses are "tuition fees") Were there extenuating circumstances? I can name (but won't, because I'm a nobody and you never know when you might need connections) a series of well known political and business figures in California, for example, who have provably run large companies to the ground (as far as my humble, not-very-profitable, not-that-learned opinion is concerned) and now enjoy exceptional careers - it's amazing how far being born in the right place and with the right network can carry you. Since one is allowed to criticize one's own politicians, look at Sarkozy, who was voted out and replaced by what is probably the least attractive, least popular, least "presidential" candidate the left ever put up, as a protest vote more than anything, who somehow still clings to the leadership and has even managed to make himself favorite for 2017 on the right (he even had the balls to rename his party after the US Republicans). No-one, in his own party or its membership, has the balls to pull the trigger. People don't rock the boat. They make excuses, and things just decay slowly. Accountability is hard work and without help, usually leads to the loudmouth getting shot down. I remember someone once saying that one misgiving of youth is to think you have to be exceptional when really, just doing the job properly is often enough to make you exceptional compared to your peers. I do think that business performance is naturally high-dimensional with very sparse data (high-p, low-n, with non-linear behaviour) which makes it very difficult to understand, more than people expect. For example, a LOT of companies are just levered beta - they go up faster than the market, and go down faster than the market - which makes whoever is in charge look like a genius during any extended boom, and remain a genius if he retires before the bust (putting the blame on the new guy, naturally; I'm not at all thinking about a certain company with a blue logo and two initials, or a certain "American" insurance company with three). Experienced business people are at least instinctively aware of this and avoid making too harsh judgement calls based on simplistic evidence. Of course all I've said applies to my own conclusions. Maybe my team members and I were overworked and slightly paranoid or annoyed and saw what we wanted to see. But I'd say the probability on that one is pretty high on the side of "management screw up".