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The McNamara fallacy: Measurement is not understanding

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Re: The McNamara fallacy: Measurement is not understanding

#151

Post by rob_c »

ren_engineer wrote: post #129
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

Not just America unfortunately.

People at the very top unfortunately now listen to the bean counters far too much.

This really does make social problems of an us vs them sort when all of the money manages to drift up with only the false promises of altruism at charity galas being the sign of any of the generated wealth making its way back down to the workers...

Re: The McNamara fallacy: Measurement is not understanding

#152

Post by apohn »

jscode wrote: post #94
apohn wrote: post #91

Earlier quoted context omitted.

I worked at a company that went through a private equity acquisition and I have a question you might be able to answer. If you exclude layoffs and incentivized retirement, it seemed to be that a greater percentage of individual contributors left as compared to managers. Lots of managers stuck around for 12+ months, and it seemed like the percentage of managers of managers (e.g. directors, VPs) who stuck around was ev…

> I just couldn't understand why the managers and other people in leadership positions stuck around. Money. Investors typically carve out equity to retain key personnel (i.e., management units/stock). The units are worthless unless the company appreciates in value, so management becomes laser-focused on doing whatever it takes to increase the company's valuation. Everything else becomes a secondary concern.

I had guessed something like this was going on, but reading this just really makes me wonder what's really going on in the minds of a private equity folks. The C-suite and senior leadership were the ones who drove the company to the point that they ended up in the hands of private equity, but they were incentivized to stay.

I get that they exiting leadership knows the company and it's hard to find new people. But it just seems so crazy to me.

We had teams that had 50%+ percent of people gone between layoffs and attrition. It was comical to see how much stuff fell between the newly formed cracks. I still can't comprehend how much they must have been incentivized to stay when the earth was crumbling around them.

Re: The McNamara fallacy: Measurement is not understanding

#153

Post by hackeraccount »

serverlessmom wrote: post #59

"In war, whichever side may call itself the victor, there are no winners, but all are losers,"- Neville Chamberlain. This is a really interesting look at this type of mindset. I have often wondered what it is to "win" a war, and the quote that came to mind was the one I posted above. Measurement is certainly not understanding in all situations.

I think Clausewitz'saying "War is a mere continuation of politics by other means" was pretty close to the mark. Does anyone ever "win" politics? You have upsides and down and some things get pretty well settled but genuine victories are vanishingly rare whereas bitter tasting compromises seem to come about even when one side seems to hold all the cards.

Re: The McNamara fallacy: Measurement is not understanding

#154

Post by hristov »

A. Please do not center justify paragraphs, this is really annoying and makes things very hard to read.

B. It is very tricky to make conclusions about life and business from US conquering military campaigns from within the US, because these campaigns have been shrouded with so many layers of lies self delusion and bullshit, that a lot of the generally accepted facts are just not true, and thus not able to teach us anything.

By the way, I do not think America is in any way unique about this. Every country's conquering wars are carefully explained with heaps of bullshit from that country. There are some very rare exception as in with Germany and Japan and WW2, but usually every country carefully shapes the official story to make it so that the conquering wars are not completely based on greed and lust for power, when they usually are.

So lets talk about McNamara and Vietnam. The problems there had little to do with some kind of duality between the quantitative and qualitative. In fact if McNamara honestly followed quantitative analysis, he would reach very different conclusions about Vietnam. If, for example, he commissioned a very simple very quantitative opinion poll among Vietnamese about whether they would prefer to be ruled by a puppet regime installed by a foreign country or by the independent patriotic leader that just defeated the French colonialists, he would see that the official reason for invading Vietnam was just not valid.

It is not clear whether such a poll has been commissioned but McNamara probably knew what the results would be, because the US never permitted a free election in South Vietnam. Thus, faced with a simple quantitative fact against the war, the quantitative managerial McNamara ignored it and suppressed it.

So no it is not about the quantitative vs the qualitative, it is the usual problem with wars of conquest by rich countries. People in positions that would benefit from the war carefully and persistently create a web of lies and delusions that is intended to drive the country to war.

Re: The McNamara fallacy: Measurement is not understanding

#155

Post by dundarious »

hristov wrote: post #154

A. Please do not center justify paragraphs, this is really annoying and makes things very hard to read. B. It is very tricky to make conclusions about life and business from US conquering military campaigns from within the US, because these campaigns have been shrouded with so many layers of lies self delusion and bullshit, that a lot of the generally accepted facts are just not true, and thus not able to teach us an…

I think the most HN-relevant elements of the fallacy are not about quantitative vs. qualitative.

> The McNamara Fallacy is to presume that (A) quantitative models of reality are always more accurate than other models; (B) the quantitative measurements that can be made most easily must be the most relevant; and (C) factors other than those currently being used in quantitative metrics must either not exist or not have a significant influence on success.

(A) is quant vs. qual, but (B) and (C) are about fooling yourself into thinking you're doing something useful just because you're quantitative.

And while I agree with pretty much all your commentary about the war, I think this would be a very qualitative (not quantitative) assessment on McNamara's part:

> It is not clear whether such a poll has been commissioned but McNamara probably knew what the results would be, because the US never permitted a free election in South Vietnam. Thus, faced with a simple quantitative fact against the war, the quantitative managerial McNamara ignored it and suppressed it.

Re: The McNamara fallacy: Measurement is not understanding

#156

Post by mcguire »

rossdavidh wrote: post #123
mcguire wrote: post #113

Earlier quoted context omitted.

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 doe…

The Malaysian Emergency (1948-1960) is pretty widely regarded as the successful counterinsurgency program. (It also featured little to no external support to the insurgents, who were massively outnumbered by the British. Did I mention that this wasn't an easy problem?) The second insurgency (1968-1989-ish) was largely handled by Malaysia itself, as I understand it, without outside forces.

I was debating the former Yugoslavia, but no one was really interested in rebuilding Yugoslavia; they wanted the region to be quiet and relatively stable. Which it seems to be today and wasn't without the continuing threat of military force from sometime during the Austro-Hungarian empire.

Before you draw lessons from the Philippine-American War, look at the timeline: it officially started when the US took over the management from Spain in ~1899 and ended in like 1913. The (new) Philippine government was created in 1902 (https://en.wikipedia.org/wiki/Philippine_Organic_Act_(1902)) with the cessation of the official war. The US kept a military presence as well as official control until WWII, with apparently a good bit of support from the Filipinos.

The US was very specific about the kind of government it set up in the Philippines and not only didn't leave but stayed and supported the government against the remnants of the insurgency.

If you're interested, I strongly recommend 21st Century Ellis, a (small) collection of articles by Pete Ellis, a Marine officer in the Philippines who went on to be part of WWI and to write the basis of the US Marines' part of the pre-WWII plans against the Japanese Empire. (He drank himself to death while spying on the Japanese and the guy sent to recover his ashes was himself killed in the Kyoto earthquake. It's all very Lovecraftian.) His "Bush Wars" (?) is roughly the basis of US counter insurgency strategy that the US couldn't bother to follow in Afghanistan.

Re: The McNamara fallacy: Measurement is not understanding

#157

Post by morelandjs »

I don’t really understand the narrow definition of quantitative analysis referenced here and elsewhere. If you know your metrics are failing you, then you implicitly have a more advanced model of success. Define this more advanced mental model so it can be invalidated.

If your mental model is not defined narrowly enough to be invalidated, then how can you improve upon it? I think the lesson here was that the measure of success was defined poorly, not that quantitative analysis is flawed a practice.

Re: The McNamara fallacy: Measurement is not understanding

#158

Post by chiefalchemist »

nickpeterson wrote: post #115
bb88 wrote: post #86

Earlier quoted context omitted.

Cash is still King. The more cash on hand, the easier it is for the business to survive in an economic downturn, and the more dividends and stock buybacks can happen for the investors. Software engineers from a CFO perspective aren't any really different than plumbers or carpenters. It's just labor. Getting a cheaper rate on labor is far more beneficial to the company than say making sure it's employees are happy. If…

This line of thinking is wrong though, because software developers are more like writers than plumbers. You can fire the writing staff at a sitcom and hire cheaper writers but good luck, it will probably fail.

The brain drain starts with the turds starts to smell. Those most able to go will be the first to go. Things decline. More leave and so one.

Re: The McNamara fallacy: Measurement is not understanding

#159

Post by guerrilla »

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…

Other can be fought just to cause destruction, or maybe that falls under your economic reasons.

Re: The McNamara fallacy: Measurement is not understanding

#160

Post by alecbz »

jancsika wrote: post #32
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…

> 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 think the key that leads to 3b is that costs are hard to measure. I.e., I think it's less that the PEG are coming into it with the idea that they want to cut and are cherry picking for that, it's that they will happily do whatever the easily available data tells them is right, ignoring or handwaving the harder to get data.
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