Nebosuke
09-11-2006, 01:50 AM
I didn't want to hijack TDC's thread, so I figured I'd just continue here as a response to this post (http://www.outpostnine.com/forum/showthread.php?p=263070#post263070).
I posited the process encourages a punch ticket approach to activities.
In a way it does. However, regardless of your motivations for participating in any given activity, you have to be good at it for it to count. For your sports and activities, not only do they want to see breadth in variety, but also dedication and drive. Perhaps that drive is not for the particular activities in question, but if that drive causes you to excel in those activities anyway, then that is just as acceptable--indeed, that is the case with everyone whose goals and aspirations lie exclusively in the future beyond high school. They have long-term goals to accomplish, and realize that excelling in otherwise unrelated short-term activities is necessary to accomplish the intermediary steps towards those goals (one of the largest being acceptance to a good university). What they are really looking for here is the drive, ability, and discipline to plan for and work towards a long-term goal. They aren't looking for people whose goal is to get into their school. They're looking for people whose plan includes going to their school because they see it as a necessary stepping stone to their real objectives.
Longer term planning (3 and 5 year planning with annual budget processes) that does not generally take into account forced short term/ad hoc execution (quarter by quarter budget cuts). This line of discussion started me wondering, as a society, are we indoctrinating our nominally cream of the crop future leaders with the very attitudes that perpetuate these quantitative over qualitative/immediate results at all costs (even sacrificing a more significant future result) behaviors?
It depends. For instance, if you acquire a competitor (e.g., the way HP did with Compaq, or, more recently, the way my former employer, Pioneer Hi-Bred was acquired by DuPont), short-term profits at the expense of long-term viability is sometimes the 'best' strategy. I'll try to explain why this is the case.
If company A (e.g., HP) buys company B (e.g., Compaq), company A normally has to take on a load of debt. They now have to pay interest on the debt, pay off the principal, and still generate some positive cash flow. In order to do that, it is usually necessary to axe the long-term interests of the acquired company in order to maximize its immediate profitability. For many companies with a long product pipeline (e.g., 5 years research before a new product gets to market), this gives the acquiring company 5 years to work with before the product pipeline runs dry and the viability of the acquired company is destroyed. If they engineer the takeover correctly, they will have paid off the debt and made a sizeable profit at that point, and can sell off the remaining assets of the acquired company. In essence, the acquiring company is making a profit by selling off the long-term viability of the acquired company.
Could you still make money if you didn't take an axe to the acquired company? Yes, unless the cash flow of the acquired company is less than the interest on the principal of the loan. however, one of the principles of asset management is that you are 'losing' money if it is possible to have invested the same assets in a different way that would generate higher returns in a shorter period of time. Long-term investment in the acquired company is therefore only viable if it is the most attractive way to invest your assets.
So you can see, short-term management of this type is often deliberate, and not due to incompetence or short-sightedness. Large companies will sometimes 'eat' smaller, more profitable companies this way in order to finance their own operations. Stockholders will sometimes demand that similar actions be taken for much the same reasons. You can think of it as sort of like the corporate equivalent of slash-n-burn agriculture.
The perception that short-term management practices are 'bad' in any sense, moral or economic, is basically due to misunderstanding. The key point to remember here is that what is good for the business is not necessarily good for those who own the business. It's rather counterintuitive, but true nonetheless. Since those who own the business are the ones who call the shots, tough luck for the business itself.
Enron, WorldCom, etc., however, were not employing a short-term strategy. They were simply guilty of fraud, and were not successful by any metric. They only appeared to be successful for a while because they managed to successfully lie about their net value, cash flow, etc., for a time. No schools encourage Enron-esque behavior because Enron was basically just a pyramid scheme writ large, and that strategy is all but guaranteed to fail spectacularly, making no one any money at all.
The current situation with HP is not due to a business strategy so much as a frustrated individual making some bad decisions. Essentially, a board member was leaking information in order to try to swing shareholder opinions to favor his own positions, and Dunn blew her top and did some Really Stupid Shit(tm) to try to find and plug the leak. No school of business, much less the best, teaches aspiring CEOs the aim-at-foot-and-pull-trigger maneuver, but people will be people, especially when pissed off.
I posited the process encourages a punch ticket approach to activities.
In a way it does. However, regardless of your motivations for participating in any given activity, you have to be good at it for it to count. For your sports and activities, not only do they want to see breadth in variety, but also dedication and drive. Perhaps that drive is not for the particular activities in question, but if that drive causes you to excel in those activities anyway, then that is just as acceptable--indeed, that is the case with everyone whose goals and aspirations lie exclusively in the future beyond high school. They have long-term goals to accomplish, and realize that excelling in otherwise unrelated short-term activities is necessary to accomplish the intermediary steps towards those goals (one of the largest being acceptance to a good university). What they are really looking for here is the drive, ability, and discipline to plan for and work towards a long-term goal. They aren't looking for people whose goal is to get into their school. They're looking for people whose plan includes going to their school because they see it as a necessary stepping stone to their real objectives.
Longer term planning (3 and 5 year planning with annual budget processes) that does not generally take into account forced short term/ad hoc execution (quarter by quarter budget cuts). This line of discussion started me wondering, as a society, are we indoctrinating our nominally cream of the crop future leaders with the very attitudes that perpetuate these quantitative over qualitative/immediate results at all costs (even sacrificing a more significant future result) behaviors?
It depends. For instance, if you acquire a competitor (e.g., the way HP did with Compaq, or, more recently, the way my former employer, Pioneer Hi-Bred was acquired by DuPont), short-term profits at the expense of long-term viability is sometimes the 'best' strategy. I'll try to explain why this is the case.
If company A (e.g., HP) buys company B (e.g., Compaq), company A normally has to take on a load of debt. They now have to pay interest on the debt, pay off the principal, and still generate some positive cash flow. In order to do that, it is usually necessary to axe the long-term interests of the acquired company in order to maximize its immediate profitability. For many companies with a long product pipeline (e.g., 5 years research before a new product gets to market), this gives the acquiring company 5 years to work with before the product pipeline runs dry and the viability of the acquired company is destroyed. If they engineer the takeover correctly, they will have paid off the debt and made a sizeable profit at that point, and can sell off the remaining assets of the acquired company. In essence, the acquiring company is making a profit by selling off the long-term viability of the acquired company.
Could you still make money if you didn't take an axe to the acquired company? Yes, unless the cash flow of the acquired company is less than the interest on the principal of the loan. however, one of the principles of asset management is that you are 'losing' money if it is possible to have invested the same assets in a different way that would generate higher returns in a shorter period of time. Long-term investment in the acquired company is therefore only viable if it is the most attractive way to invest your assets.
So you can see, short-term management of this type is often deliberate, and not due to incompetence or short-sightedness. Large companies will sometimes 'eat' smaller, more profitable companies this way in order to finance their own operations. Stockholders will sometimes demand that similar actions be taken for much the same reasons. You can think of it as sort of like the corporate equivalent of slash-n-burn agriculture.
The perception that short-term management practices are 'bad' in any sense, moral or economic, is basically due to misunderstanding. The key point to remember here is that what is good for the business is not necessarily good for those who own the business. It's rather counterintuitive, but true nonetheless. Since those who own the business are the ones who call the shots, tough luck for the business itself.
Enron, WorldCom, etc., however, were not employing a short-term strategy. They were simply guilty of fraud, and were not successful by any metric. They only appeared to be successful for a while because they managed to successfully lie about their net value, cash flow, etc., for a time. No schools encourage Enron-esque behavior because Enron was basically just a pyramid scheme writ large, and that strategy is all but guaranteed to fail spectacularly, making no one any money at all.
The current situation with HP is not due to a business strategy so much as a frustrated individual making some bad decisions. Essentially, a board member was leaking information in order to try to swing shareholder opinions to favor his own positions, and Dunn blew her top and did some Really Stupid Shit(tm) to try to find and plug the leak. No school of business, much less the best, teaches aspiring CEOs the aim-at-foot-and-pull-trigger maneuver, but people will be people, especially when pissed off.