Here’s an interesting reference to the story about the “tech surge” to fix The story is interesting from a tech perspective, of course. It highlights interesting themes in the tech world about a discernable power law in the performance of great, versus merely good, developers. 

But that’s not why I’m writing this. I’m hearkening back to a much earlier post about the 9 principles of war. One of those is Unity of Command. This quote says it all:

What Abbott could not find, however, was leadership. He says that to this day he cannot figure out who was supposed to have been in charge of the launch. Instead he saw multiple contractors bickering with one another and no one taking ownership for anything. Someone would have to be put in charge, he told Zients. Beyond that, Abbott recalls, “there was a total lack of urgency” despite the fact that the website was becoming a national joke and crippling the Obama presidency.

 Unity of Command: For every objective, ensure unity of effort under one responsible commander.

It’s more than just a “failure of leadership.” Leadership is a vague, fuzzy word that we use when we want to lay blame or don’t want to sort out what’s going on. 

But here, a specific failure can be identified. Unity of Command. This project had a pretty clear mission, an Objective. There were substantial resources available. Harry S had it right: the buck stops here.



My last point isn’t that it’s automatically the President’s “fault.” The government is, um, big. But someone should have been in charge of this project and those resources. If resources come from different groups with different bosses, a problem gets moved up the ladder and sorted out at that level. But some ONE has to be in charge. Or it just doesn’t work. That culture of assigning responsibility, or “seizing responsibility” if you’re a Wolfhound or a Ranger, isn’t automatic. It comes from the top, which is leadership by example.

I will be adding this to the book’s section on Unity of Command. It raises an interesting question of how this principle, Unity of Command, gets observed in crowdsourced efforts. Off the top of my head, I’d say first that many crowdsourcing contributions are tightly constrained so that not everyone is in charge — you add a rating on Yelp, sure, but Yelp decides what their information structure is, how to add pictures, and what you can and can’t contribute. Open source? Someone owns the project — Linus for the Linux kernel, and then him delegating down to committees and creating or approving rules that say how they’ll approve other changes. And the projects where anyone can contribute sort of anything, like Google Wave collaboratively written short stories, are art projects where the objective is to execute the process, not to build a bridge that won’t fall down or a website that hosts 50,000 concurrent users trying to buy health insurance.


We’re continually amazed by the plethora of articles in newspapers and financial magazines that trudge over old ground, or what we thought was old ground.

Short example, before we get to the article: why do otherwise wise-seeming publications continue to publish the historical results of mutual funds? Why do they ignore that whole efficient market thing? Why, if the SEC is so confident that past performance is no guarantee of future results that funds are *required* to disclose that, do these magazines feed the general public’s lack of understanding by talking about last quarter’s hot fund or booming stock? Apparently it’s time for us to revisit the issue with an economics professor friend. (Other times, non-financial papers carry articles that seem to be different, except that the message is a general “sometimes go with the old advice/sometimes don’t” — you’ll know afterwards which choice was right.)

In this article by Jonathan Clements, he explains to people why a diversified portfolio of stocks and bonds might be a wiser choice than a portfolio of pure stocks, even though stocks generally return more than bonds. We have to admit that we thought diversification was a long-settled issue and that people learned how to construct portfolios that gave them the desired blend of variance and expected return.

In any event, the more interesting piece of information in the article is a comparison of historical P/E ratios between the early 1980s and today. Clements: “…if stocks reverted to the modest price-earnings multiples and rich dividend yields we saw in the early 1980s, the S&P 500 would tumble 60% or 70% from current levels.” We love this stuff because this type of analysis is one that lends itself to dissecting the omnipresent share price and figuring out what it actually represents. Now, there are those who have argued that P/E ratios reasonably should have increased over the years because earnings are higher quality now, as a result of improvements in reporting, fraud detection, and accounting principles such as revenue recognition. We agree: those issues would make net income more reliable than previously (or at least, strictly speaking, not as likely subject to the same confounding factors).

We think that the more relevant factor, rather than earnings quality, is cash flow multiples. While the problem still remains of matching data exactly, the numbers can be revealing.

More to come, of course.


Substituting expert judgment for business judgment

May 1, 2013

I’ve been reading too much about some fundamentally misguided corporate governance notions from Cornell Law School professor Lynn Stout.  Maybe it’s the author of the piece trying to make something out of nothing, but the article reads as if Prof. Stout simply knows what’s best for corporations, individual shareholders, and institutional investors. While it’s not […]

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Spreadsheet errors aren’t the biggest problem

April 26, 2013

Following the recent hullabaloo about some seemingly simplistic spreadsheet errors in a recent study, many articles have decried the pervasive nature of spreadsheet errors.  What we’ve found though, is that just as typos are the not the biggest problem with written work, it is weak  or sloppy analysis that is the real problem in many more […]

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World Autism Awareness Day 2013

April 2, 2013

Today is World Autism Awareness day. My Facebook profile picture is my 8yo son Dylan, showing you, and me, what he thinks of autism. I imagine it’s something along the lines of “I just want to do what I want and have fun like every other boy. Sometimes it’s just hard.” Other times I imagine […]

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When you should stick to your knitting

January 17, 2013

How do you know when you should change your business or keep doing things the same way? Applying two principles, Security and Economy of Force, will help you determine what type of problem you’re facing before you decide how to analyze it. Here, we’re going to talk about making decisions that increase your business’s risk. […]

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Understanding alternative fees (ahead of our time)

July 12, 2012

A recent Forbes article describes the alternative fee problem, how to reasonably price legal fees using something other than an hourly basis, as a potential application of big data analysis. Conveniently, we said this over three years ago in describing the data needed to create alternative fee structures. Some corporate clients have enough legal liability […]

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NACD – Years late, Millions of $$$ short

June 26, 2012

The industry group for public company directors, the NACD, recently announced that they’re producing a guide to compensation structures to help connect pay to performance. The purpose is apparently to guide corporate directors, in part because  directors on compensation committees are under unprecedented pressure to define the strategy and rationale for their executive compensation decisions. […]

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Knowing how much money to raise

June 8, 2012

A founder recently asked about how much money to raise and when. Specifically, he asks about choosing between splitting a $1.4m, two-year round into $800k for year 1 and then $600k for year 2. The key issue in splitting rounds is raising enough money (including your cushion) to get you to the next major valuation-bumping […]

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Understanding Objective

May 28, 2012

We wrote a while ago about the nine principles of war. While our book is in progress, and reaching the next phase of development, we wanted to share a slightly different piece we did on the principle of Objective. This link leads you to an anthology-style ebook put together by us and other members of […]

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