Tony K's Blog

I think the United Stated is a great country, but a great country with a serious problem. I think that problem begins with the way we elect our leaders. Never mind the electoral college. That has some issues, but I don't think that's the worst of the problems. I want to go to the problems with the principle of whoever has the most votes wins. On the surface it's not bad, especially because we have a bill of rights to protect us for the most part from Tyranny of the Majority. However in the case of the United States, I believe that it has led to increasing polarization of the people in this country. Our economy and society is extremely complex. To winnow our choices down to two people at the end of the day doesn't allow for full expression of views to carry forward. I can hear you thinking, "but there are more than two people. What is to stop one from voting for a Green candidate or libertarian?" Well nothing stops us except the system. Even though I may like a...

OK so I wrote a long screed against IRR and said that MIRR is a better metric, I consider that a fact. But does that really give the answer? It is a good start. Given that you have some system to prioritize opportunities, you can end up with the highest value. That is usually not the whole picture though. Within a single project, there are usually distinct alternatives to consider. For example, sometimes a project may be able to trade current capital expenditure for future operational expense. This may have the impact of ultimately reducing margins, but giving the company additional leverage in the short term. So how do you do it? There's really a continuum of methods ranging from simple standalone analysis to a more complete approach incorporating estimates of risk and uncertainty. I believe that most organizations can benefit from a portfolio analysis approach, which tends to the complete side of the spectrum. In a perfect world, here's what that looks like. You need an inv...

A McKinsey article on IRR (Internal Rate of Return) and why it is EVIL. (My words) Project and opportunity evaluation has two main types of indicative metrics: value and efficiency. Value is typically expressed as Net Present Value or NPV. There are to typical ways of expressing efficiency: as a percent return on investment or as a ratio. The most commonly used percent function is Internal Rate of Return. First a little background. Present value methods are based on the idea that most people and companies would rather receive one dollar today, than that same dollar one year from today. The preference is usually expressed as a cost of capital or discount factor (percentage) and should equal an indifference value. For example, if it is the same to you whether you receive $1 today, or $1.10 in a year, your discount factor is said to be 10%. In most cases, it represents either a cost or a lost opportunity. In project or investment analysis, typically an analyst will generate a set...

Ralph Waldo Emerson, in his essay “Self-Reliance” stated “A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines. With consistency a great soul has simply nothing to do. He may as well concern himself with his shadow on the wall.” This has such relevance in this election that I just felt the need to bring it up. His point is that establishing a position and sticking to that position regardless of circumstances is foolish and intellectually lazy. I contend that there are some great principles that are non-foolish consistencies (starting with “Thou shalt not kill”). What should not be consistent is your response to events. There is nothing wrong with giving a leader a strategic negotiating position that allows a diplomatic solution. When that leader then uses that position for reasons outside of the original intent and by the way bungles tactically, it is entirely appropriate to criticize the action. It would be unconscionable o...

One side of all the analysis I have not heard much about is a cost-benefit analysis of the war in Iraq. So first let's think about the goals of the action: 1. Get rid of a very bad man. 2. Make the world safer for America and Americans by a. removing weapons of mass destruction and b. removing Iraq's financing of terrorism. 3. Help secure a source of oil? 4. Send a message to the terrorists. So of those reasons, which of them would have a direct benefit to the US? Make the world safer and help secure a source of oil would certainly have a benefits. Knocking a bad guy out of office is less clear. Sending a message to the terrorists would also be a good thing. So, if those are in fact true, what would be the value of those? If in fact Iraq had had WMDs, what was the danger to the US? Saddam certainly did not have the means to deliver significant WMDs to the US, so that has very limited direct value. Iraq appears to have been a relatively minor player in world terrorism, so that d...

This year's political silly season is giving me heartburn. It seems that so many "analysts" are completely missing the point. I just feel compelled to write some of my thoughts. This argument about military service is such a side issue that it gives me hives. I want to put it to rest now. Everyone agrees that Kerry served in Viet Nam right? Everyone agrees that Bush was registered in the National Guard right. Best Case for Bush: Bush served admirably, attended at all times. The records are lost. Kerry went to Viet Nam served on the Swift Boats, but his medals were awarded erroneously. Result: Tie. Bush served well, but never put himself in harm's way; Kerry put himself in harm's way but didn't serve well. Best Case for Kerry: Kerry served on the Swift Boats, earned all his medals, and was in fact a war hero as the official record indicates. Bush evaded service and didn't even take mandatory drug tests because he knew he would not have ...

I have always been a big fan of Saturday Night Live. for some reason I thought about a few SNL things recently: Decabet and Gillette Trac 3 For some reason I thought of the Decabet today. The idea being that it's kind of a "metric system" alphabet with only 10 letters It's like this: (Dan Aykroyd) of the U.S. Council of Standards and Measurements explains the "Decabet" the new metric alphabet consisting of 10 letters. "A-B-C and D, our most popular letters, will remain the same. E and F, however, will be combined and graphically simplified to one character. The groupings G-H-I and L-M-N-O will be condensed to single letters. (Incidentally, a boon to those who always thought that L-M-N-O was one letter anyway.) And finally, the 'trash letters,' or P-Q-R-S-T-U-V-W-X-Y and Z, will be condense" to one "easily identifiable dark character." So then A B C D EF GHI J K LMNOP QR... I don't know why, but it just strikes me as funny toda...