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Tuesday, January 30, 2018

Comments on "Peopleware" by DeMarco and Lister

Today I completed reading the management / software classic "Peopleware: Productive Projects and Teams" by Tom DeMarco & Timothy Lister.

I loved reading this business/management book. It's a classic of the "people" side of managing software projects. Originally written in 1987, updated in 1999 (2nd edition) and 2013 (3rd edition), I found it very relevant, and it meshed well with experiences as a manager and consultant in the financial industry. It made me think about some of the practices I've seen and engaged in in my career--what works; what doesn't; what makes work satisfying; what destroys satisfaction. 

"Sociology matters more than technology or even money. It's supposed to be productive, satisfying fun to work. If it isn't, than there's nothing else worth concentrating on."

The most interesting section for me was Part IV: Growing Successful Teams.  A productive team, what they call a "jelled team", is a group of people who achieve a result that is greater than the sum of its parts, and tend to enjoy themselves doing so. Such a team cannot truly be built; it is "grown"like a farmer grows a crop. One never knows if a team will jell and begin pulling together with extraordinary results --its more of a natural function of humans working together, given the right circumstances.   About all that the authors can offer in the way of prescriptions is a list of things NOT to do, which will impede team formation (so called "teamicide"). 

More than anything, this made me think of the last book I read, "The Boys in the Boat" by Daniel James Brown. Brown talks about "swing", the ability of an 8-man crew to enter into a state of near selfless teamwork: "It only happens when all eight oarsmen are rowing in such perfect unison that no single action by any one is out of synch with those of all the others....Only then will it feel as if the boat is a part of each of them, moving as if on its own. Only then does pain entirely give way to exultation."

Some other notes from Peopleware:
  • The importance of the workspace environment for effective teamwork, and the necessity of wresting control from the "Furniture Police", who think they can reduce facility costs without regard to the much higher cost of lost productivity when the workspace is incorrectly configured.
  • The idea of having a job candidate lead an "audition", a 10-15 minute presentation about any relevant topic to the entire team, to let the team get to know the candidate and weigh in.
  • "Disney Fellow Alan Kay defines technology as whatever is around you today but was not there when you were growing up....One generation's technology is the next generation's environment"
  • "Employee turnover costs about 20 percent of all manpower expense.  But that's only the visible cost of turnover."  The invisible cost of turnover can be far worse; it is a tendency to short-termism.  Those who don't expect to be around a long time won't be concerned with making long term investments in the organization--they'll simply try to cut short term costs and may harm the organization.  The authors mention that high turnover is the sign of a dysfunctional organization, and often goes unmeasured.
  • "Extended overtime is a productivity-reduction technique, anyway.  The extra hours are almost always more than offset by the negative side effects."  I hardily agree, and wonder if this might be part of the reason why a Japanese worker is less productive than an American worker.
  • "Any action that rewards team members differentially is likely to foster competition.  Managers need to take steps to decrease or counteract this effect."  The authors are critical of very common American management tools like annual reviews, giving awards and prizes to individuals, etc, which lead to competition among team members.  This is one area where I think the Japanese may have it right--at least in traditional companies they treat everybody more or less equally.
  • "It's heady and a little frightening to know that the boss has put part of his or her reputation into the subordinates' hands.  It brings out the best in  everyone."  Of course, and it rings true that every good manager I've had has put his or her reputation in my hands to some extent.  But it makes me question my sometime timidity as a manager.  Have I been engaging in "defensive management"  and demotivating my subordinates?
  • From the "The Cult of Quality" in Chapter 28: "Extraordinary quality doesn't make good short-term economic sense.  When team members develop a cult of quality, they always turn out something that's better than what their market is asking for.  They can do this, but only when protected form short-term economics.  In the long run, this always pays off.  People get high on quality and outdo themselves to protect it."  This always reminded me of how the Japanese work (ideally), and I wonder if this came from the original 1987 version.
  • On Closure: "It may be news to some, but the human creature needs reassurance from time to time that he or she may be headed in the right direction....Such reassurance comes from what psychologists call closure.  Closure is the satisfying "thunk" of pieces of the whole falling into place." 
  • On "Methodology Madness".  "Of course, if your people aren't smart enough to think their way through their work, the work will fail.  No Methodology will help."  And, "Voluminous documentation is part of the problem, not part of the solution."  And, "You can't really declare something a standard until it has already become a de facto standard."  
  • "The ultimate management sin is wasting people's time."  I suspected that, but it's good to be reminded.

Wednesday, January 04, 2017

How Big was the Trump Rally?

After the U.S. election on November 8, the U.S. stock market began to rally.  Many called this the Trump rally, though it's not clear how much had to due with Trump's vague grand proclamations, and how much had to do with the fact that Republicans had also taken both branches of Congress.

How much value did the market gain after the elections?  According to the Wilshire 5000 index, which tracks the total value of the U.S. stock market, the market's value increased from 22,133 on November 8, to a peak of 23,756 on December 21 -- an increase of 7%, or about $1.6 trillion in market value.

To put that in perspective, that's somewhere around the 2016 GDP of Canada, about half of the 2016 budget deficit, or $5,000 for every man, woman and child in the U.S.

Which sectors in the market went up the most?  Financials, by far.  According to this article at, financials went up by 10.7%, with industrials a distant second at 5.7%.  Ostensibly, the financials went up because of talk of repealing some or all of the Dodd-Frank regulation--especially the Volcker rule that limits the amount of trading a bank can do for its own account-- as well as rate increases by the Fed that came in December.

Interesting that a market that we're told values "certainty" should go up on the election of an untested leader with no political experience, promoting fiscally irresponsible and protectionist policies.  But the post-crisis regulatory regime has been a huge burden on the banks, and the inertia of Congress has been a fiscal burden on the whole country.  If the Republicans can get through popular improvements like tax simplification and sensible infrastructure spending it will be an improvement.  Let's see what happens after January 20.

Monday, February 15, 2016

The Beauty of BCBS 239

BCBS 239 is the commonly-referenced name of a publication released in January 2013 by the Basel Committee on Banking Supervision (a committee of the BIS, or Bank for International Settlements). Its full title is "Principles for effective risk data aggregation and risk reporting".

The publication, which is 28 pages long is available here:

If you work in a large bank and are not familiar with BCBS 239, it may behoove you to read it.  If you work in risk management, data warehousing or compliance, you're probably already familiar with it.   But if you work in the back office, middle office, or a business line and are struggling with the challenge of unavailable, incomplete, or undocumented data, BCBS 239 can be an important tool in getting your requests taken seriously by your institution's executive management, or data management and IT bureaucracy.

Who wrote BCBS 239?
BCBS 239 was written by a committee of representatives from the financial regulators in 13 countries.  That includes the FRB and OCC in the US, the FSA in UK, and the JFSA and BOJ in Japan.  If you work in a large financial institution, you probably already know the influence these groups have over the project portfolio and purse-strings of your bank.

What does BCBS 239 say?
BCBS 239 lays out 14 principles about risk data, summarized in 4 groups, and further subdivided into 89 paragraphs.  There is a summary of the principles in annex 2 of the document.  But I found that some of the most interesting and useful language is in the detail itself.

BCBS 239 is surprisingly direct in saying what many line-level practitioners have been saying and thinking for years: it shouldn't be so damned hard to get the information I need from my bank's systems on a daily basis.  And I should be able to depend on the accuracy and completeness of that information.  Unfortunately, in today's world of split-second searches over billions of websites and self-driving cars, that is not the reality in most large financial institutions.

BCBS spells out principles that should be no-brainers.  But they are often not followed today.  It's good that the authorities have spelled them out, so that they can be used as ammunition by business users who actually need good data to get a job done.

Here are some of my favorite "no-brainers" that I'm glad to see confirmed by the committee:

  • "Controls surrounding risk data should be as robust as those applicable to accounting data."(Principle 3 Accuracy and Integrity, paragraph 36a).  
  • "Risk data should be reconciled with bank's sources, including accounting data where appropriate, to ensure that the risk data is accurate." (Principle 3 Accuracy and Integrity, paragraph 36c).
  • "Supervisors expect banks' data to be materially complete, with any exceptions identified and explained." (Principle 4 Completeness, paragraph 43).
To me this means a bank must allocate and hold accountable actual staff to make sure the data in the data warehouse is correct and reconciled.  Plenty of staff.  Think how many people are dedicated to making sure the accounting data is correct: Comptrollers, Sarbanes-Oxley compliance people, internal auditors, etc.  And the "risk data" is arguably more varied and complex than accounting data.
  • "A bank should establish integrated data taxonomies and architecture across the banking group...."  (Principle 2 Data architecture and IT infrastructure, paragraph 33)
  • "A bank should develop an inventory and classification of risk data items which includes a reference to the concepts used to elaborate the reports." (Principle 9 Clarity & Usefulness, paragraph 67)
In other words, the data in the warehouse needs to be well-organized and documented--not just a mish-mash of incompatible records from different source systems.
  • Principle 6 Adaptability – A bank should be able to generate aggregate risk data to meet a broad range of on-demand, ad hoc risk management reporting requests, including requests during stress/crisis situations, requests due to changing internal needs and requests to meet supervisory queries.
  • "A bank should routinely test its ability to produce accurate reports within established timeframes, particularly in a stress/crisis situation." (Principle 10, Frequency, paragraph 70)
  • "Some position / exposure information may be needed immediately (intraday)...." (Principle 10, Frequency, paragraph 70)

In other words, it's not acceptable for IT to demand a project and special budget just to produce some reports for the business.  The data must be available and usable in advance.

For years, those of us who work on the ground in financial institutions have heard statements from data practitioners about the strategic importance of data, and read vague statements of policy and principle from our data and IT organizations.  But at the same time the actual data we see is often incomplete, poorly organized, or inaccurate, and the day to day tasks needed to clean up the mess are never prioritized.

BCBS 239 is a clear and straightforward document that tells G-SIBs and other financial institutions to actually use 21st century technology to deliver practical results.  While it may be a challenge to implement at most banks, it is a challenge whose time has come.

Tuesday, October 02, 2012

Making it Look Easy: How Warren Buffett Did It

Article: The Economist, The Secrets of Buffett's Success

Interesting article in this week's Economist about a study of how Warren Buffett has managed to make such successful investments over a long period of time, and stock-picking has very little to do with it.  It comes down to two simple factors:

1) He concentrates on stocks with low betas (ie, low risk, low return stocks).  According to the article, these stocks perform better on a risk-adjusted basis than high flying stocks. (Possibly, I guess, because investors who are looking to get rich quick overlook them, so they are in less demand.)

2) He leverages his portfolio (ie, borrows money to buy more stock).  His source of funds is not loans or bonds, but insurance premiums, which gives him an extremely low funding cost.

This makes a lot of sense, especially if you read Buffett's annual shareholder letter, which always describes with glee the free float he gets from his insurance businesses.  (Letters are available here, and well worth reading).

Now that I know the secret, I just have to get hold of a massively successful insurance company.

Saturday, September 01, 2012

Obama's Economics Report Card

Article: The Economist, Barack Obama's Economic Record

Well worth reading.

Sunday, August 19, 2012

The Quandary of Air Conditioning

Article: New York Times, The Cost of Cool by Elisabeth Rosenthal

Here's another vicious circle for you: as the populations of tropical developing nations move into the middle class, they will demand air conditioned homes, offices and cars, just like Americans do.  This will  contribute to global warming, which will further increase the demand for air conditioning, until... What?

Elisabeth Rosenthal's article is informative and thought-provoking.  It does not simply bash our decadent comfort-seeking life-style, but notes that air conditioning brings benefits for our health and productivity, and seems to be a requirement for modern knowledge workers, especially in hot climates.  This is a quandary, for which there is no simple obvious solution.

One more thing to puzzle and worry about...

Sunday, July 29, 2012

World Jewish Population

Very interesting special special report in this week's Economist on Judaism and the Jews, including the graphic below.  The total Jewish world population of 13.6 million is similar to that of the country of Zambia, or the city of Karachi, Pakistan.

from The Economist magazine