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10. Strategy
11. Vertical Integration
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RAP and infrastructure spending

“There is some incentive for forecasts to be high if they make [a project] more likely to get built” (WSJ, Sep 2021)

Facebook Tried to Make Its Platform a Healthier Place. It Got Angrier Instead.

I argue that the decision to maintain an algorithm that encourages divisive content is bad (WSJ Sep 2021). The bad decision raises three questions :

1. Who made the decision not to revise the algorithm?
2. What information did the decider have?
3. What incentives did the decider face?

Why is the information flow so bad?

The search for space beds in nearby hospitals when a hospital is overrun with COVID-19 patients is difficult because the information flow is poor (WSJ, Sept. 2020). The piece highlights the importance of good information flows. It also raises the question, "Why is the flow so bad?" I suspect that Rational Actor Paradigm illuminates. I suspect that decision rights to determine how the information is collected and disseminated are ambiguous and that the incentives facing the (potential) deciders are weak.

Jordon Peterson on how to negotiate a raise

He advises you to not to be too agreeable and to point out your options.

GE’s use of goodwill is puzzling

This piece discusses that GE’s puzzling use of goodwill. (WSJ, March 2019). The article reminds me of the case in the book where OVI inflated estimates of oil reserves. I think the decision was bad. “Increasing goodwill had the effect of enabling GE to avoid costs that would have reduced its earnings. Not writing it down delayed investors’ realization of how deep the conglomerate’s problems ran.” Three questions:

1. Who made the decision to inflate goodwill?
2. What information did they have?
3. What incentives did they face?

The process Boeing used to design 737 MAX

Here is a description of the The describes the process Boeing used to design 737 MAX (WSJ, March 2019).

1. What bad decisions did Boeing make?
2. Who make each decision?
3. What information did they have?
4. What incentives did they face?

Managers who apply the rational actor paradigm help their firms perform better

VoxDev reports that firms “that [set] sensible targets, [provide] proper incentives, and credibly [monitor]i performance”  and “boast rigorous performance monitoring, systems geared to optimize the flow of information across and within functions, motivational short- and long-run targets, and a performance system that rewards and promotes great employees while helping underperformers to turn around or move on” “are more productive, grow at a faster pace, and are less likely to die” (Vox, Jan. 2018).

How to ask for a raise or promotion

Here is a money quote: “Learning how to convince other people to give you what you want requires that you first figure out what scratches their itch. This means figuring out how to frame your raise as a win for your boss. The more closely your promotion is tied to fulfilling the boss’s needs, the more successful you will be” (WSJ, June 2020).

Bad information flows and its consequences

A psychologist
describes why people lie at work and the damage it does (WSJ, April 2020).

Moral Hazard in Organ Transplants

This essay describes a moral hazard problem in organ transplants. 

"Transplant programs are not evaluated by regulatory agencies to determine how well they use the organ donors available to them. Instead, they are judged primarily on how many of the patients they transplant are alive one year after surgery—an important but limited metric. The emphasis on one-year survival makes transplant programs overly cautious, letting viable organs go unused instead of using organs that they fear might harm their report card."

The essay includes an example. A surgery team turned down lungs that were good but not great matches for Patient A because another Patient B who had received a transplant had recently died. Patient A subsequently died while waiting for a match.

The emphasis on survival rates also reduces the propensity of doctors to transplant organs into patients who are likely to die within a year; e.g., patients who are old and weak and patients who suffer from other life-threatening diseases. 

The RAP and PG&E: The battle of initialisms

This commentary in the WSJ (Nov. 2019) describes how the incentives PG&E faces => rolling blackouts instead of investments designed to reduce the risk of fire. 

My reaction: Gut Instinct is Information

I stress the importance of gathering information to improve the information flow to deciders. This article in the WSJ (Oct. 2019) cautions against relying solely on data analytics when making decisions. 

Why are prices for prescription drugs so high?

ReadClear Policy (Oct. 2019) describes the role of and incentives facing pharmacy benefit managers, or PBMs. Spoiler alert: the incentives encourage the managers to negotiate for higher prices.

What Changed?

This WSJ article (Sept. 2019) reports that Boeing has changed its organizational chart in response to the crashes of its 737 MAX. Here are my questions.

1. Did the change move decision rights?
2. Did the change affect information flows?
3. Did the change affect incentives?
4. Did the change affect the extent to which the company is centralized?
5. Did the change alter the extent to which the firm is organized around functions or products?

LSE swats away $37 billion

Market watch reports (Sept, 2019) that the London Stock Exchange swats away $37 billion Hong Kong offer. I have several questions.

1. Who decided to sway away the offer?
2. Do the deciders benefit when they swat away the offer?
3. Do the shareholders benefit when the deciders swat away the offer valued at $37 billion when the company's current value is $31.4 billion?
1. Does your answer depend on the costs the firm incurs to accept the offer and the probability regulatory agencies stop it?
2. Does your answer depend on probability that the offer spurs additional offers for other suitors?
4. What is the best way to measure the value of the HKEX stock that makes up 3/4 of the offer: the price buyers and sellers strike in open competition or the opinion of the deciders.