Tag Archives: Decision Making

Your idea of success is completely wrong

August 22, 2017 By in Management, Analysis Tags: , ,

There is this idea that success is 100% correct decision making. For some people, they understand this to be 90% or even 80% correct decision making. This idea is completely wrong. A success rate of 56%, implying 44% incorrect decisions, is a great result. Here’s why.

Let’s simplify things. Assume that you are the chief executive of a company and that each decision you make has, on average, an equal impact on the company performance. Let’s say that if you make a good decision you increase profit by USD 1 million and if you make a bad decision you decrease profit by USD 1 million.

What does this mean in terms of the company performance? Continue reading →

Decision making and risk

June 6, 2017 By in Risk, 1feautred Tags: ,

My willingness and ability to take risks and manage them often comes up as a topic of conversation.

Let me explain how I got here. In 1989, after completing my first year at university, I spent the summer as an intern at the Abu Dhabi Investment Authority (Adia). I found the world of investments fascinating and as part of that education I was told to read the book Market Wizards by Jack Schwager, a compilation of stories about traders.

One story that stuck in my mind was about a new trader who could not get himself to start trading. He did not know how to make or take a decision. So his manager walked over to his desk, picked up the phone and executed a trade on behalf of the trader. The manager then informed the trader that if the trader sold the position and the price went up, then the trader would be held responsible but if he held the position and the price went down he would also be held responsible. The manager’s tactic was brilliant, he did what should happen to all of us – he took away the trader’s option to do nothing. Continue reading →

Improving statistical analysis improves decision-making

October 19, 2016 By in Economy Tags: ,

This article was originally published in The National.
This article is published in Arabic in Al Ittihad as نصائح دون طلب .

I often hear advice given by the likes of the IMF and other national economy research institutions that the UAE has too many Emiratis working in the Government, and that the Government should incentivise them to work in the private sector. Someone reading such conclusions from world-respected researchers might automatically think that this makes good sense. I, on the other hand, am automatically suspicious of foreign institutions giving unsolicited advice.

The trouble with looking at a single statistic is that it is like driving by looking only at your rear-view mirror. It is important but certainly not enough to drive safely.

The idea behind the advice to incentivise Emiratis to work in the private sector is that, first, it reduces the budget burden on the Government and, second, that private enterprise is more efficient at commercial activities than government institutions.

The first point only makes sense if the proportion of Emiratis employed by the Government is greater than the Government’s share of GDP. In our country, it is clear the Government has a much higher proportion of GDP than countries with less commodities, and which are not growing as fast. The idea of advising that there are too many Emiratis employed by the Government needs to at least be compared with the statistic of the Government’s share of GDP.

If such a statistic exists, it certainly isn’t in the IMF report.

Continue reading →

Company grief: when a company falls in the economy, does it make a sound?

June 21, 2016 By in Corporate Turnaround Tags: , ,

There is a well-known model on the stages of human grief called the Kubler-Ross model. I believe it can be the basis for a form of company grief, a grief that we are seeing in a growing number of companies during these difficult times. In this article I describe the seven stages of company grief – ignorance, shock, denial, anger, bargaining, depression and acceptance.

Continue reading →

Letting Go for Sustainable Growth

April 28, 2015 By in Management Tags: ,

Why do successful companies fail? One reason is an inability to let go of a successful product. Read that again – the issue is not about an inability to innovate but an inability to let go of successful products so as to allow newly developed superior ones to take their place.

An example of how to do it right is Apple and the iPhone. Apple’s turnaround at the turn of the century began with computers. The iPod was a hit and provided much-needed diversification for Apple. In late 2007, when the iPhone was launched, Apple faced a pivotal moment.

The iPod sold 50 million units worldwide in 2007. To use the language of the industry, it was a killer product. The problem was that the iPhone would cannibalise part of the iPod market. Indeed, the iPhone was basically an iPod with a GSM chip implanted.

Continue reading →

Adapt and progress: Learning from Germany’s Fifa World Cup 2014 success

April 14, 2015 By in Strategy Tags: ,

There is a saying: insight comes after action far more often than action comes after insight.

Decision-making under uncertainty is a normal part of business. One could argue that it is at the core of managing a business. It is simply impossible to assemble all the data relevant to a decision. Other barriers include some of the data being in the future as well as being generated continuously, which could lead the decision-maker to wait indefinitely.

This leads us to another saying: paralysis by analysis.

The uncertainty surrounding decision-making provides an excuse for the timid to avoid making any real decisions whatsoever. Only by raising the spectre of risk can decisions be made. For executives, since full information can never be acquired no decisions are made. Sound familiar?

Continue reading →

Crisis Response Strategies

March 10, 2015 By in Strategy Cornerstone, Strategy, 1feautred Tags: , ,
This entry is part 3 of 3 in the series Strategy

In a world of uncertainty management is constantly evaluating potential risks as they unfold and deciding how to respond.

At one end of the response spectrum is what might be called the Anglo-Saxon Fast & Furious model: ignore all risks until they become an existential threat of such dire proportions that there is only one available response and it is blatantly clear to all involved.

At the other end of the spectrum is what might be called the Asian Ancient Wisdom model: treat everything as an existential threat at all times and avoid taking any proactive decisions whatsoever lest it lead to greater danger.

Continue reading →

The Pirate Code is behind Pay Inequality

January 28, 2015 By in Game Theory Tags: , , , ,

In the fourth article of the game theory series, we build on the Saudis out-bluffing OPEC and The Joker forcing the good people of Gotham to choose between game theory and Batman. In this installment, you will learn how blood thirsty, treasure hunting pirates might just explain the ridiculously large wage gaps in modern day corporations. To set the stage, one must think like a pirate, indeed be the pirate. I do not mean the rum soaked debauchery of commercially suggestible women in a tavern named Hurricane. What I mean when I say ‘think like a pirate’ is think selfishly. That’s what successful senior executives do. Isn’t it?

Continue reading →

The Bluff: An Important Strategy Tool

January 25, 2015 By in Game Theory Tags: , ,
This entry is part 3 of 6 in the series Negotiation

There seems to be a strong belief that playing poker teaches people how to invest or run a business. This is of course nonsense. The mathematics behind poker is complex and needs years of formal study to understand the game. The more appropriate notion is that a strong understanding of game playing is extremely useful to investing and business.

The branch of mathematics relevant to game playing is not, as most believe, probability but is called, not surprisingly, game theory. Game theory was made famous by the film A Beautiful Mind, depicting the life of one of the main developers of this mathematical field.

In this article I’d like to address just one facet of a successful poker strategy and that is bluffing. Somehow bluffing has taken on the connotation of lying or otherwise being dishonest. Many of the proponents of “poker as a substitute for an education” believe that this gives them license to be dishonest in their business dealing, in particular in negotiations. Their interpretation is wrong both mathematically and ethically. They might not care about the ethics, but from a mathematical point of view, lying is extremely sub-optimal and completely misses the point.

Continue reading →

Producing Second Hand Cars, Managing Your Mortgage, Educating Your Children and Saving the Planet

January 16, 2015 By in Investments Tags: ,

The business performance of car rental agencies was historically volatile. Part of this was simply due to the inability of car rental agencies to predict client behaviour. However, this did not explain all of the variance in their business performance. It was only as the rental companies began to realise that their business was not just to provide a service, i.e. renting cars, but that they also were producing second-hand cars. It was the understandable misunderstanding by the rental companies of this facet of their business that was causing them so many problems. We can learn from this. Continue reading →