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The McNamara fallacy: Measurement is not understanding

mcnamarafallacy.com

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Re: The McNamara fallacy: Measurement is not understanding

#51

Post by nickdothutton »

2OEH8eoCRo0 wrote: post #42
ProAm wrote: post #34

Earlier quoted context omitted.

Great documentary. I felt it was a person trying to come clean and ease his conscious on his death bed.

Agreed. Great documentary. The part where Castro said he urged Russia to launch their nukes from Cuba to the US knowing it would destroy Cuba was chilling. Humans are not always logical. Don't assume somebody wont drag an entire country or the world to total destruction for some deranged cause. I didn't get the death bed vibe from McNamara but I definitely felt that he was genuinely reflecting on the past. The docume…

Morris himself said something like he didnt really feel he got to know Rumsfeld and had no real idea what was in his mind compared to his previous interview with McNamara.

Re: The McNamara fallacy: Measurement is not understanding

#52

Post by jscode »

jacobr1 wrote: post #46
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…

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…

>> Having dealt with 2 PE exists, rarely is the proposal something as upfront and silly as slash everyones pay.

Agreed, but a gradual erosion can occur over the course of several years. PEGs and the operating company's management team have massive incentives to hit their growth metrics. If decreasing 401K contributions helps management hit their EBITDA target, many would argue that they should do exactly that. However, the impact of these decisions accumulates over time and can eventually derail a company's performance.

Re: The McNamara fallacy: Measurement is not understanding

#53

Post by beaconstudios »

> In another case of military metrics gone wrong, the US military reported success in undermining Taliban financing after it paid Afghan farmers to destroy their crops of opium poppies. What went unreported, however, was that the farmers planted larger fields of opium poppies in response, in the hopes that they might be paid by the US military to destroy the crops again. When US payments didn’t come through, the opium was harvested and entered the international drug trade. Much of the profit went to support the Taliban’s anti-American military operations.

That's pretty ironic because its a near perfect replication of the Cobra effect, the canonical example for bad incentives leading to unintended outcomes: https://en.m.wikipedia.org/wiki/Perverse_incentive

Re: The McNamara fallacy: Measurement is not understanding

#54

Post by andrei_says_ »

jacobr1 wrote: post #46
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…

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…

What were the longer term changes you saw and their outcomes for the health of the teams and companies?

Re: The McNamara fallacy: Measurement is not understanding

#55

Post by musicale »

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…

> private equity group

The goal of a private equity group can sometimes be be to extract as much money from the company as possible in a given time frame, rather than to ensure the long-term success or survival of the company.

Re: The McNamara fallacy: Measurement is not understanding

#56

Post by asdff »

0xdeadbeefbabe wrote: post #24
asdff wrote: post #14

Earlier quoted context omitted.

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.

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.

Re: The McNamara fallacy: Measurement is not understanding

#57

Post by scubbo »

musicale wrote: post #50
scubbo wrote: post #39

Surprised not to see Goodhart's Law[0] referenced here - "When a measure becomes a target, it ceases to be a good measure". Not the same concept, but a related one (as is the Cobra Effect[1], of which the poppy-field burning is an example) [0] https://en.wikipedia.org/wiki/Goodhart's_law [1] https://en.wikipedia.org/wiki/Perverse_incentive#The_origina...

From [1]: "It was discovered that, by providing company executives with bonuses for reporting higher earnings, executives at Fannie Mae and other large corporations were encouraged to artificially inflate earnings statements and make decisions targeting short-term gains at the expense of long-term profitability." What a shocking revelation! Could it possibly apply to other companies that report quarterly results? ;-)

I vividly remember a "small-hands" (smaller all-hands) very early in my career, where the VP basically said "we recognize that oncall is a burden, and we want to compensate you for it. At first we thought we should give you a bonus related to how many times you get paged - but then we realized that that's incentivizing you to build flaky systems. Then we considered giving a bonus in inverse relation to how often you're paged - but then we though, no, they're smart engineers, they'll just turn off the monitoring and collect the bonus. So we're giving you a flat rate".

In the absence of some untamperable objective way to measure service health (the concept of SLAs was a distant dream at that point), can't fault that reasoning, tbh!

Re: The McNamara fallacy: Measurement is not understanding

#58

Post by asdff »

thaumasiotes wrote: post #37
asdff wrote: post #14

Earlier quoted context omitted.

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.

It only takes one side to engage.

Look at the orders of magnitudes differences in casualties in desert storm, iraq, and afghanistan. When Americans battle they ensure they have a massive power advantage for every fight and this is abundantly clear just from the casualty data. Even if the other side engages first like in desert storm, Americans ensure that they don't land boots unless they have a tactical advantage which they had in Desert Storm thanks to technology that Saddam and his army, which was one of the largest and experienced land forces in the world at the time, could not begin to compete with.

Re: The McNamara fallacy: Measurement is not understanding

#59

Post by serverlessmom »

"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.

Re: The McNamara fallacy: Measurement is not understanding

#60

Post by sandworm101 »

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 engaging each other. The false thinking is the assumption that participants always want or even care about winning.
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