Sure, but What’s the Spend-Out?

I’m a fan of listening to lectures in my car, so recently I listened to Wake Forest Professor Robert Whaples’ lectures on Modern Economic Issues from the Teaching Company.  Good stuff and I recommend the lectures to anyone wanting to get a great perspective on a number of everyday issues.

[As an aside, the lectures were produced just prior to the current economic challenges, so it’s downright humorous to hear the glowing discussion of our American economy.  I have no doubt it WAS and may still be a marvel, but I believe some revision to the mantra is in order — certainly the first lecture should be taken with a good dose of salt.]

Professor Whaples made reference to Harvard Professor Greg Mankiw’s blog, so I started reading it.  Also good stuff and it’s nice to see what another professor thinks about day-to-day issues.

His current post shows how the unemployment rate has actually played out since early 2009 as compared to Government predictions, and I just wanted to ask one more question about that graph.  In a previous post, Professor Mankiw references some discussions with a government source indicating that they would not only be interested in the multipliers used to predict the effect on the economy, but also in the spend-out rate, which I presume is the rate that stimulus funds were “actually” spent, not how they were planned to be spent in early 2009.  I’m hoping someone or Professor Mankiw can also get that information, since I would hypothesize that the spend-out rate will look significantly different from the projections, as well.

This stimulus has been an interesting experiment to test many of the basic assumptions that I’ve read about and learned about for years, and I’m sure many folks will be watching as we see whether reality matches our theories.


Slow Down

Note to self:  Situations are rarely simple.  Slow down and understand things before determining a solution or acting.

A Thought on Basic Laws

The book, Ishmael, which my son had to read over the summer for school, pointed out that there are certain laws that we are trying to avoid through our implementation of civilization, but that we are doomed to follow.  One of those laws is that life and death are natural events and that both provide the opportunity for growth through evolution.  HBR, in “Downsizing Lost Its Bad Rap”, October 2009, suggests the possible conclusion that layoffs this year, while large in scale, aren’t viewed as negatively as before.  Perhaps we’re learning that these events are more natural and that we can grow out of them.

Thoughts on Risk

Reading “The Six Mistakes Executives Make in Risk Management”, HBR, October 2009:

The risks of not succeeding in the mundane tasks that are part of our operating plan are far more significant than what might happen in some outlying situation.  Things happen and we need to do what we can to insure for the consequences, but we can’t insure against them.

I like the point about listening more to the “don’ts” than the “do’s”.  More of a balance seems worth the time.

There is a good, though well worn, reminder that HOW you phrase a risk influences how it’s perceived and whether it’s acted on appropriately.

I love the point on redundancy and, to take the metaphor in the article further, sometimes it’s healthy to divide a function between two or more structural elements to reduce the risk that a single thread might bring down the house.  Human’s are single-threaded in some ways, and not in others.  Organizations, because they can adapt, could also bring internal competition and experimentation if the potential for failure can be spread.  The loss of efficiency might be more than offset by the gain in creativity.

Thoughts on Performance Management

Reading “The Five Traps of Performance Management”, HBR, October 2009:

Great article.  Highly recommended.

1. Metrics should be derived from external sources whenever possible to avoid the bathwater and self-serving/self-replication problems.  When no external standard exists, ask your customer — and everyone has a customer.

2. Measure against your future, not your past.

3. Check back on your decisions.  You can’t learn unless you examine the results of past decisions, objectively, I presume, which is very difficult.  Be honest.

4. Use numerical metrics when the outcome is numerical and don’t shy from non-numeric metrics

5. Use multiple metrics to measure different aspects of the same goal and to reduce the potential for gaming the system.  There is probably a tree-structure of metrics.  It’s rarely one thing.

6. Keep your metrics a moving target.  They don’t need to be the same every year.  Add, subtract, multiply, and divide.

Timeless Stories for My Brain and Yours

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