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The McNamara fallacy: Measurement is not understanding

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Re: The McNamara fallacy: Measurement is not understanding

#121

Post by pjmorris »

serverlessmom wrote: post #63
jancsika wrote: post #32

Earlier quoted context omitted.

> The moral of the story is that people with analyst mindsets play an essential role in our economy, but sometimes giving those people power over large organizations can have disastrous consequences. I'm gonna cosplay an "analyst mindset": 1. Need to measure costs and benefits of slashing benefits/pay. 2. A benefit-- slashing benefits/pay allows us to hit some obvious financial goal 3. A cost-- Uh oh, I don't yet kno…

I definitely agree with you. I would further argue that the "analyst mentality" has become so engrossed in the foundation of capitalism(and always has been, really) that we see companies across many industries closing down due to the "worker shortage". When in reality the CEO's of the companies complaining the loudest that "no one wants to work" have decided that paying living wages in a deeply competitive job market…

I've long joked that Excel will be the downfall of western civilization, but it's less funny every year.

Re: The McNamara fallacy: Measurement is not understanding

#122

Post by hutzlibu »

jscode wrote: post #23

Quick story: I was the CFO for a company that sold to a private equity group (PEG). I took over as the CEO as the founders retired, leaving me to deal with the PEG. It quickly became apparent that the PEG managers looked at everything through the lens of an Excel spreadsheet. These guys were brilliant attorneys and analysts but lacked experience building businesses and managing teams. Ultimately, they couldn’t add mu…

"and it was surprisingly difficult to quantify the impact that terminating an employee or cutting benefits would have on morale/culture/performance"

I think it is not surprising, when you consider that a precise weather forecast for more than 3 days is usually considered impossible.

When you deal with very complex systems, where small changes can have a big effect via self enforcing feedback loops - how can you expect to calculate all that?

And human social dynamics seem to be at least as complicated as the global weather.

Re: The McNamara fallacy: Measurement is not understanding

#123

Post by rossdavidh »

mcguire wrote: post #113
rossdavidh wrote: post #96

I believe the McNamara Fallacy is a real thing, although I would say Goodhart's Law expresses the more fundamental issue. But, the examples they give (Vietnam and Afghanistan wars) are bad examples, because in both cases the issue was primarily not that the U.S. military was relying too much on quantitative metrics, but rather that it was being asked to do a job which militaries are not good at. In neither case, desp…

Yes and no. It is a difficult problem, but it has been done before ( https://en.wikipedia.org/wiki/Philippine%E2%80%93American_Wa... , https://en.wikipedia.org/wiki/Malayan_Emergency , https://en.wikipedia.org/wiki/Yugoslav_Wars ). There is a rough roadmap about how to go about it, something along the lines of suppressing the rebels and providing security for the majority of the populace while you reform the governme…

While I grant you the Phillipines was somewhat of a success, I don't think either the Malay example (where the same combat flared up again within a few years https://en.wikipedia.org/wiki/Communist_insurgency_in_Malays...) or the Yugoslav wars (where it was a war between ethnicities, and it most decidedly did not result in Yugoslavia being put back together) would count as successes. But, the Phillipines example does seem like a plausible example. Even then, it essentially ended because the US decided to let the Phillipines elect their own assembly, clearly setting them on the path towards independence. Maybe the lesson is that if your military is involved in trying to suppress the rebels, declare victory and leave, without making too many demands of what kind of government is there once you are gone.

Re: The McNamara fallacy: Measurement is not understanding

#124

Post by fnord77 »

jscode wrote: post #23

Quick story: I was the CFO for a company that sold to a private equity group (PEG). I took over as the CEO as the founders retired, leaving me to deal with the PEG. It quickly became apparent that the PEG managers looked at everything through the lens of an Excel spreadsheet. These guys were brilliant attorneys and analysts but lacked experience building businesses and managing teams. Ultimately, they couldn’t add mu…

another example: Ford and GM accountants making engineering decisions in the 70s and 80s. Poor quality and deaths were the result.

Re: The McNamara fallacy: Measurement is not understanding

#125

Post by jscode »

hutzlibu wrote: post #122
jscode wrote: post #23

Quick story: I was the CFO for a company that sold to a private equity group (PEG). I took over as the CEO as the founders retired, leaving me to deal with the PEG. It quickly became apparent that the PEG managers looked at everything through the lens of an Excel spreadsheet. These guys were brilliant attorneys and analysts but lacked experience building businesses and managing teams. Ultimately, they couldn’t add mu…

"and it was surprisingly difficult to quantify the impact that terminating an employee or cutting benefits would have on morale/culture/performance" I think it is not surprising, when you consider that a precise weather forecast for more than 3 days is usually considered impossible. When you deal with very complex systems, where small changes can have a big effect via self enforcing feedback loops - how can you expec…

I agree. Considering the complexity within organizations, imagine pleading your case to a couple of Stanford MBAs that are 1) incredibly smart, 2) operate in a PE culture that rewards managers that provide others with "negative feedback" to get results, and 3) believe in their hearts that cutting benefits is "optimizing" the business to maximize shareholder value. They can make a compelling counter-argument for just about anything.

Re: The McNamara fallacy: Measurement is not understanding

#127

Post by nitwit005 »

These military positions require "not understanding" as a prerequisite. Do you think you'd be put in charge of something like the war in Vietnam, if you didn't tell the president you could win the war for them? You'd just have been sidelined or fired if you gave a realistic opinion.

Which is not unique to the military, of course. Have fun letting the CEO know their sales goals are unobtainable.

Re: The McNamara fallacy: Measurement is not understanding

#128

Post by hutzlibu »

jscode wrote: post #125
hutzlibu wrote: post #122

Earlier quoted context omitted.

"and it was surprisingly difficult to quantify the impact that terminating an employee or cutting benefits would have on morale/culture/performance" I think it is not surprising, when you consider that a precise weather forecast for more than 3 days is usually considered impossible. When you deal with very complex systems, where small changes can have a big effect via self enforcing feedback loops - how can you expec…

I agree. Considering the complexity within organizations, imagine pleading your case to a couple of Stanford MBAs that are 1) incredibly smart, 2) operate in a PE culture that rewards managers that provide others with "negative feedback" to get results, and 3) believe in their hearts that cutting benefits is "optimizing" the business to maximize shareholder value. They can make a compelling counter-argument for just…

I did not meant it as criticism. And I can imagine that situation, which is why I choose a different path, to not be in that position in the first place.

Not saying that my path is better, definitely not money wise, but I knew early, that I do not get along with a culture, that is focused on assigning oversimplificated numbers to people, which is what MBA's seems to be mainly about.

Re: The McNamara fallacy: Measurement is not understanding

#129

Post by ren_engineer »

jscode wrote: post #23

Quick story: I was the CFO for a company that sold to a private equity group (PEG). I took over as the CEO as the founders retired, leaving me to deal with the PEG. It quickly became apparent that the PEG managers looked at everything through the lens of an Excel spreadsheet. These guys were brilliant attorneys and analysts but lacked experience building businesses and managing teams. Ultimately, they couldn’t add mu…

this is basically the micro example behind the deindustrialization of the United States. Mitt Romney type corporate raider MBAs outsourcing everything to China for cost savings to maximize short term profit

expand this over 50 years by 1000s of similar groups of people doing the same thing and you go from the "Arsenal of Democracy" to begging China for masks and ventilators

Re: The McNamara fallacy: Measurement is not understanding

#130

Post by j_koreth »

sandworm101 wrote: post #60

What is the name for the fallacy of thinking that wars are always meant to be won? Throughout history wars have been fought without any intention of "winning". Sometimes a war can serve a religious or ceremonial purpose, one that doesn't require a clear winner. Other wars have been fought for completely economic reasons. Others are proxy contests whereby greater powers can demonstrate their abilities without directly…

I would assume the expectation came about after WW2 where losing meant devastating ramifications for the losing party.

On the other hand in a situation where warfare is considered with less weight and investment feels like it’ll embolden states to return to a state of frequent warfare.

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