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The McNamara fallacy: Measurement is not understanding

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Re: The McNamara fallacy: Measurement is not understanding

#111
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…

I worked at a place with a lean 6 sigma certified specialist who towards the end of the companies doom effectively had the lead engineer cleaning out molding machines to track down every last tiny molded part that over the course of several years of continuous running had flung outside of its target. Same guy told me if the coke machine ever stole my change that he'd help me get it back from the vendor.

This is the kind of thinking that is wrecking a business I’ve just quit. Management consultant decides that we need more customers so instructs us to open the product up globally. We explain that this is likely to be both expensive (lots of testing needed due to the usual geographic differences), but more important, based on our collected data and the use case (geographically local content), this expensive change is statistically likely to result in only a single new customer (literally, one).

But “every customer counts” so other activities which are likely to result in more customers are put on hold to capture a single customer.

The problem in these cases is often that the management consultant doesn’t consider the resource limitations and opportunity costs of their decisions, particularly if they come from a much larger business. If you have only one lead engineer, then getting them to chase discarded parts (or, in my case, a single customer) makes no economic sense at all.

Quite often, the problem is not a focus on measurement per se, but rather the very human problem of focusing only on those metrics that support the analyst’s intuition.

Re: The McNamara fallacy: Measurement is not understanding

#112
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…

Your story is the story of most companies. I watched "my" company get sold to private equity, and leading up to our "soon" sale they have been slashing the one thing they can, employee benefits (it's been a quick 3 year decline). I've watched more than half our team leave, much to the chagrin of befuddled execs.

"Why are they leaving?" "Well, we used to have meaningful raises, bonuses, profit sharing, etc. but you have consistently cut those things." "Yes yes, but why they are leaving?" "...."

Re: The McNamara fallacy: Measurement is not understanding

#113

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 government and establish its credibility.

In Vietnam, this was made more difficult by the international situation and by the ease of outsiders intervening to support the Viet Cong (such as the NVA). Similarly in Afghanistan, with the additional problem that the US never realized that Afghan nationalism isn't a thing. (My interpretation; the US Army has a big, long analysis of what it thinks went wrong that I haven't read.)

The problem is that quantitative metrics hide the difficulties and provide a false sense that the situation can be resolved easily and cheaply. McNamara's body count idea makes a certain amount of sense, given that the strategy there was to cost the NVA so much that they could not continue to push troops into South Vietnam, which might have worked if that was the only major problem.

Re: The McNamara fallacy: Measurement is not understanding

#114
post #69
post #22

McNamara basically admits this himself in the documentary The Fog of War: https://en.wikipedia.org/wiki/The_Fog_of_War It's worth a watch but it's very soft on him and his role. Still a very good documentary.

Was looking for this comment. In McNamara's reflection, a tenant he called out was to understand the enemy. US didn't understand the Viet Congs motivation for fighting the war (freedom from colonizers) whereas the US viewed the war as a larger Cold War. This is the same as what happened in Afghanistan that we didn't learn.

[deleted]

Re: The McNamara fallacy: Measurement is not understanding

#115
post #86
post #46

Earlier quoted context omitted.

Having dealt with 2 PE exists, rarely is the proposal something as upfront and silly as slash everyones pay. That probably does happen for a company being restructured in the red, but the more subtle actions tend to be things like: * Comp bands for are now targeting p50 averages rather than p75 or top of market. So you can't close new hires that are going competitors. And you can't give raises to your top performers…

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.

Re: The McNamara fallacy: Measurement is not understanding

#116

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…

To quote C. Wright Mills, writing in 1960: > They know of no solutions to the paradoxes of the Middle East and Europe, the Far East and Africa except the landing of Marines. Being baffled, and also being very tired of being baffled, they have come to believe that there is no way out—except war—which would remove all the bewildering paradoxes of their tedious and now misguided attempts to construct peace. In place of…

From "The Causes of World War Three". Of course, America's also had a lot of trouble since WWII simply defining what 'winning' a war means.

Timely; I bought Mills' "The Power Elite" only yesterday.

Re: The McNamara fallacy: Measurement is not understanding

#117
post #16

Earlier quoted context omitted.

That's a fallacious line of reasoning on several fronts. A) The beneficiaries of a war need not be the ones who pay the cost. If you personally stand to benefit from the war itself, regardless of win or lose, you want the war. B) It's applying a rational economics approach when it's pretty clear that humans aren't rational. Japan kept fighting even when it was clear they would lose. Pride, image, your future after th…

(1) Externalities are handled in the game theory literature (2) Preference definitions are not in scope for most game theory lit; what you're describing are preferences and expected utility, which ARE in the literature and metamodel (3) This is not really true. It depends on how big you are and how big your coalition is. Consider that Saddam Hussain is no longer in charge of Iraq. (4) Yes, potential outcomes are cons…

You didn't work at Rand in the 1960s, did you? :-)

Anyway, the OP may be correct, but is also completely useless since it is impossible to know your own true strength, much less that of the other side.

Re: The McNamara fallacy: Measurement is not understanding

#118
post #56

Earlier quoted context omitted.

Yeah like in Black Hawk Down.

In real life the battle of mogadishu saw Americans with 10x fewer casualties. Most modern battles have numbers like this with an order of magnitude fewer casualties on the American side, because American logistic planners try to ensure a massive power advantage.

And yet...

Re: The McNamara fallacy: Measurement is not understanding

#119
post #14

Earlier quoted context omitted.

> If each side really knew the true strength of the other side, it would be clear which would win This is too simplistic. Often wars are heavily influenced by things other than just the strengths of both sides. For example - What if the ground hadn't been soaked from days of rain at Agincourt and Waterloo? What if the Germans hadn't held back their armor reinforcements for so long on D-Day?

They'd still lose. Wars are fought not from individual battles but from logistics. Modern military's don't even engage if there isn't a lopsided power imbalance favoring their success.

So the rational decision is, if you are attacked then you should surrender immediately?
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