Going Up? Governance in Crony Companies

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One much-discussed indication of a firm’s good governance is hiring and promotions free of nepotism[i], cronyism or any other form of favouritism. Yet, despite the growing importance stakeholders attach to the ‘G’ in ‘ESG’, many organisations, both public and private, struggle to change their ways. Evidence remains of advancement based on family, nationality, language, politics, religion, alma mater and, of course, gender and ethnicity.

The consequences of unfair patronage for the subsequent performance of the patron and their protégés are varied, and (annoyingly) not always negative. However, the impact on everyone else in the organisation, is unambiguously bad.

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Do you LIKE it, or do you WANT it?

“And do what you like. Yeah, and doowutchyalike. Everybody doowutchyalike” Digital Underground

In their 90’s hedonic anthem, Digital Underground invited party revellers to ‘doowutchyalike’. Yeah. Doing just what we like is probably the purest form of satisfaction. So, if our goal is to maximise the collective satisfaction of a population, we ought to distribute the limited resources so that as many as people as possible get as much of the things they like as possible.

The problem is that it is difficult to discover what people like without asking them individually. What people want, in contrast, is immediately revealed in their purchases. Continue reading

WannaCryDiversity

On a single day last May, a massive cyber-attack called WannaCry Ransomware blighted over 200,000 Windows computers in some 150 countries. It might have been more had it not been for the quick actions of Marcus Hutchins, a cyber-security expert, who discovered a kill-switch built into the ransomware’s code. Apparently, before infecting a system, locking its files, and demanding a ransom from its owner, the ransomware first checked for the non-existence of a gobbledygook web domain. Hutchins simply registered the domain for $10, brought it into existence by pointing URL requests to his own server, and thereby thwarted the attack. Hutchins became an overnight hero (sadly for him, the new status did not last much longer than overnight). However, you or I could have claimed some credit for halting WannaCry. All we would have needed was Hutchins in our team, and set him to work. Failing that, we would have to have had at least one person in our team capable of coming up with the idea of looking for a kill switch, another able to find it hidden in the code, and another with a credit card to put in a call to GoDaddy.

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Straight From the Gut

In the decision sciences, a clear distinction is made between risk and uncertainty. You take a risk when you know in advance all the potential outcomes of your choice, and their respective probabilities. This risk description covers things like coin tosses, lotteries and spins of a slot machine. In such circumstances, only cold logic, statistical thinking, and possibly a pocket calculator, should influence your decision about whether to run the risk or not. As soon as some of the outcomes, and/or some of the probabilities, are not known, we enter the realm of uncertainty. In this less ordered domain, reason and statistics become less useful because there is nothing to calculate. Instead, argue decision scientists, one should rely more on one’s intuition, gut feelings and rules-of-thumb. Examples of such judgements include living to be one hundred years old, falling in love, or being killed by a terrorist. Any decision to bet on them – or insure against them – involves dealing with uncertainty… Read more on TCAM’s website

Why some teams are effective and others are not

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Can you think of an example of an effective working group? I can: a disaster rescue and recovery team. These are groups of men and women who, in the aftermath of a catastrophe, work to rescue the victims and to prevent subsequent loss of life. They are composed of specialists, like engineers, medics, electricians, and dog handlers. In the case of major disasters, such teams are brought in from several different countries. Some of them might never have worked together before. Yet the operation runs effectively. If teamwork is possible in such a diverse group, under intense time and performance pressure, in inhospitable working conditions, and among people who might not even have met before, why can it sometimes seem so difficult in the typical corporate environment?

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Old-Age Benefits: Are Older Investors Better?

elephants-1081749_1280At least one asset is guaranteed to enrich your portfolio this year: your investing experience. Stick at it long enough and you will encounter practically everything from start-ups to meltdowns, flashes in the pan to flash crashes, slim pickings to fat fingers. You will also discover the financial impact of earthquakes and tsunamis, of both the political and geological varieties. The wisdom of the years, one might argue, ought to make you a better investor. [Read more on TCAM’s website]

The Twin Dimensions of Trust

To trust or not to trustYour ageing smartphone has just given up the ghost. Would you chance handing it over to a stranger for repairs?

First you would think about whether its memory holds any sensitive data, and wonder what the stranger might do with it. Once you’re satisfied there are no ill intentions, you would decide whether you believe the stranger has the ability to repair smartphones. Given the success of the entire transaction depends on the latter, it seems counter-intuitive that this judgment be made only as a second step, yet this precisely what we all do. Read more on TCAM’s website

Impossible Decisions Are The Easiest

mindThe difficult we do immediately. The impossible takes a little longer.”

This cheeky slogan, on postcards, mugs and screensavers, provides as much encouragement and motivation to modern office workers today as it did to the US Army Corps of Engineers during the Second World War. Whoever coined it, though, was certainly not talking about human decision-making, as the opposite might well be the case: tough decisions take a while, but impossible ones are easier.

. ..Read more on TCAM’s website

The Secret to Great Teamwork

TLost in forest.he first task given to the attendees of a recent team-building seminar was to go out into the nearby woods on a treasure hunt. I heard about it from one of the disgruntled ‘treasure hunters’. Suffice it to say he was not best pleased by the request to search through damp undergrowth on a frosty January morning. Nor was it clear to him how this would improve the performance of his team of auditors and analysts.

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