Comment by jancsika | Hacker News Reader

Comment by jancsika | Hacker News Reader

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> The moral of the story is that people with analyst mindsets play an essential role in our economy, but sometimes giving those people power over large organizations can have disastrous consequences.

I'm gonna cosplay an "analyst mindset":

1. Need to measure costs and benefits of slashing benefits/pay.

2. A benefit-- slashing benefits/pay allows us to hit some obvious financial goal

3. A cost-- Uh oh, I don't yet know how to reliably measure any of the costs.

4. Good analysts don't take action without measuring.

5. I'm a good analyst.

Conclusion: I cannot take the action of slashing benefits/pay

The only way to make it work is to add a step "3b: cherry pick metrics for the costs of slashing benefits/pay such that the phony metrics justify the decision management already wants to make of slashing benefits/pay." But now we've shifted from "analyst mentality" to "the mindset of the little Beetle-like bureaucrats described by George Orwell in 1984."

Having dealt with 2 PE exists, rarely is the proposal something as upfront and silly as slash everyones pay. That probably does happen for a company being restructured in the red, but the more subtle actions tend to be things like:

* Comp bands for are now targeting p50 averages rather than p75 or top of market. So you can't close new hires that are going competitors. And you can't give raises to your top performers

* The health benefits are less generous when renegotiated for the following year

* T&E that would have been approved - granted some maybe that shouldn't - but importantly some that should have for top-sales people, are no longer approvable. So your top sales people leave. Or similarly the accelerators or other measures are changed, that might look good on paper but rub top sales people the wrong way.

* Head-count isn't replaced, so teams have to take on more work

* Perks like conference attendance or hardware upgrades, which arguable aren't perks but investments in your team's productivity, are cut/limited

>> Having dealt with 2 PE exists, rarely is the proposal something as upfront and silly as slash everyones pay.

Agreed, but a gradual erosion can occur over the course of several years. PEGs and the operating company's management team have massive incentives to hit their growth metrics. If decreasing 401K contributions helps management hit their EBITDA target, many would argue that they should do exactly that. However, the impact of these decisions accumulates over time and can eventually derail a company's performance.

The reality is that this kind of stupidity is built into accounting systems. It's not even the people with the spreadsheets. They're doing what they've been taught to do. It just happens to be completely wrong-headed - if you're interested in tangible long term growth and not quarterly plunder which moves money around without seeding genuine real value.

Which is why companies can "grow" in accounting terms while actually being hollowed out as going concerns with a future.

Likewise with the planetary economy, which appears to be growing financially while in ecological terms it's almost literally eating its own seed corn.

A better approach needs a revolution in accounting. Current accounting practices are built on so many false assumptions they cannot possibly produce lasting long term opportunity, except for a tiny minority of exceptionally and unhealthily privileged people.

Just look at Intel to see a company that was managed by the accounting people. Great numbers for a few years, large dividend, etc, but now they have to spend billions and billions to put the company back on track and give it a future.

Disagree. Intel has had continuous dividends for at least 30 years.

Few giant American companies have been as consistently successful as Intel. I can think of only Microsoft, one or two energy conglomerates like ExxonMobil, a telecom or two like Verizon, and maybe a bank like Goldman Sachs.

Abbott Labs, CR Bard, Deere & Co.

Something about staying in your lane while increasing opportunities in that lane seems to be a good long-term formula.

Yep, Bard is part of BD, which is a large beast. Abbott/Abbvie always has something going for them. UnitedHealth has done well for years and years as it has grown. There might also be a stable industrial I am forgetting like a chemical company or 3M.

But overall, giant companies with 30 year runs of knockout growth and/or dividends like Intel are Cinderella stories. Google will be the next one to qualify in a few years I suppose.

Sorry should have been more precise but I was also counting in the very large stock buyback that came to a end in early 2021.

It can be more insidious than that. For example, as time goes on more and more of the engineering might be shifted from product development to contracting. In this way you see revenue growth without realising that there is a hard limit and you're throwing away the company's future.

What were the longer term changes you saw and their outcomes for the health of the teams and companies?

Cash is still King. The more cash on hand, the easier it is for the business to survive in an economic downturn, and the more dividends and stock buybacks can happen for the investors.

Software engineers from a CFO perspective aren't any really different than plumbers or carpenters. It's just labor. Getting a cheaper rate on labor is far more beneficial to the company than say making sure it's employees are happy.

If the company could cut wages 50% across the board and then give the executives 20% raises for saving 50% in labor, they would do it in a heartbeat.

> Getting a cheaper rate on labor is far more beneficial to the company than say making sure it's employees are happy.

Whoa, citation needed. I’m fairly certain yhis isn’t true unless you are optimizing for just the next month.

Companies exist for the stockholders, not the employees or the public at large.

that's a myth. it's the opposite that is true.

It's hard to argue against it when I see companies becoming more and more consumer hostile (cheap products that break in a year or after warranty is up, slow buggy software, incomplete game releases, ads crammed into every open space, FANG cornering their markets, dark patterns, etc.)

This line of thinking is wrong though, because software developers are more like writers than plumbers. You can fire the writing staff at a sitcom and hire cheaper writers but good luck, it will probably fail.

The issue is that the bean counters count beans and not creativity.

Can we think of a way to connect and individual’s creativity to money flow?

As an engineer I am most productive when I solve a business need without writing code. How can I associate my contributions with measurable profit?

Code and documentation are debts, Features divided by lines of code is a good metric.

Dear god.

Once that metric becomes anything close to a target the monstrosities it would bring ae horrific!

When you write an api, add "dollars_saved", for the amount of dollars your api is currently saving the company. CFO's love that quantitative shit.

Y'all are looking for quantitative Quality measures. Good luck. If you aren't sitting on top of Spend informed by actual company history, you're hosed, and most places are hush hush af about that.

The brain drain starts with the turds starts to smell. Those most able to go will be the first to go. Things decline. More leave and so one.

If your primary output is software then maybe you're right. But in most companies software enables more efficient output usually in the form of products or services. A bank uses software, but it's profit is based upon banking... etc.

It's why most Fortune 500 companies run Java, so they can easily replace one person with another.

Software engineers from a CFO perspective aren't any really different than plumbers or carpenters

Plumbing systems are extensively documented and well-understood. The equivalent situation in plumbing would be that the entire layout of the city's sewage system (or similarly, the construction plans for the company's headquarters) is only kept inside the heads of two senior developers, likely because the Powers That Be have decided that keeping accurate documentation is not worth the cost. Preventative maintenance and quality control are impossible, because nobody knows which pipes have been laid first and are the most at-risk from leaking.

Point being: everything is just labour. That doesn't mean software "engineering" should be allowed to fall so far below the baseline we expect from other engineering professions.

If you are a good analyst with a bonus tied to quarterly profits increase, can you be still a good analyst?

Do you sacrifice your own monetary benefit to save a company? But then what about your family?

I don’t think analysts are not smart enough or not caring enough. But institutionalized greed corrupts the integrity of everyone.

Incentives matter and PEGs want companies to grow significantly over the life of their investment. The biggest reward comes from the future sale after you’ve increased the enterprise value 10x. I’m sure that people have made poor decisions for short-term gains, but the real issue is giving immense power to someone who has never actually had to build teams, ship products, or go the extra mile to make customers happy. Being “smart” doesn’t mean you always make good decisions. Some of the most successful entrepreneurs I know aren’t particularly book smart. In fact, much of their success could be attributed to the fact that they just didn’t quit when any other reasonable/normal person would have thrown in the towel.

Ehh some PEGs do not care about long-term. Often they want to do anything that can get them some lump sum dividends and bonus payouts. Cost cutting combined with a recapitalization cookbook, selling assets like real-estate, and then using the proceeds and borrowed cash for themselves. Terminal price won't matter much due to either the initial windfall or because someone else will be holding enough of the bag after recap.

I definitely agree with you. I would further argue that the "analyst mentality" has become so engrossed in the foundation of capitalism(and always has been, really) that we see companies across many industries closing down due to the "worker shortage". When in reality the CEO's of the companies complaining the loudest that "no one wants to work" have decided that paying living wages in a deeply competitive job market is less doable than letting the company totally stagnate and dissolve due to lack of people willing to work hard for pennies.

I've long joked that Excel will be the downfall of western civilization, but it's less funny every year.

You either like Paul Krugman or you hate him but there's no denying that excel bugs influenced economic policy.

https://www.nytimes.com/2013/04/19/opinion/krugman-the-excel...

The CEOs whose own compensation has been skyrocketing because that's just the market rate for talent, right?

I think the key that leads to 3b is that costs are hard to measure. I.e., I think it's less that the PEG are coming into it with the idea that they want to cut and are cherry picking for that, it's that they will happily do whatever the easily available data tells them is right, ignoring or handwaving the harder to get data.

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