Sunday, July 20, 2008

Parkinson's Law . The rise to the highest level of incompetence Book review

C. N. Parkinson got this little book first published in 1957. In it he describes how to
climb up the career ladder within an organisation. In order to achieve that it is
necessary to boost bureaucracy (the Wiki entry to Parkinson is a bit weak, there
is a bit to Parkinson) increase the size the size of the organisation whatever that is,
a business or government.

Boosting the bureaucracy increases the importance of the department, of the
manager, of the bureaucrat. The bigger that gets, the better. It's all getting ever
more inefficient, becoming a purpose just for its own sake. And hence, the
necessary conditions are set for the aspiring manager to rise to the highest level:
the highest level of incompetence.

That's the highest level achievable in life, in an organisation, in politics, the position
that enjoys the most prestige, the most admiration and is regarded as most
powerful.  It then also enjoys the morbidity of the half witted fascination of the fatal.

Not in the book, because it was a later development, is the large spending on
advertising and PR such managers initiate, with the organisations money of course,
in order to have a lot of media presence, lots of fuss made about them, praises
of all kinds by such lavishly sponsored media, journalists.

This goes on until the manager, the rising star, is becoming too successful in his
way, too expensive his policy and a real problem for which he is finally rewarded
with a big compensation for leaving the company, getting the golden handshake.

Parkinson for instance tells how important it is for someone making a career like this
to meet the right kind of people, for instance inviting crucial people as well as
supporters to diner. Forty or fifty years that meant usually the conspiracy of the now
old fashioned hypocrites, the busy bodies of the local church and the likes.

When such a manager or office holder eventually gets the golden hand shake he is a
rich man, made for life and can comfortably live the rest of his life from what he has
made and the usually high pensions coming with it.

Parkinson got to know this problem in the military after WW II. There he could
observe that kind of growing bureaucracy that, once established, became a factor of
itself, had to be maintained for it's own sake.

Otherwise this rise to the highest level of incompetence is also known as the
"Peter principle", named so after another author, Laurence J. Peter, who
took it all a step further and wrote competently about the highest level of
incompetence. The book was in any case really prophetic, everything he
pointed out as problematic was brought about, kind of created. For instance
the way the banking industry grew into dinosaurs and became a serious
problem for the economies.

When Parkinson wrote this book, the world was still a
sleepy place compared to today.
For instance he talks of the thickness of carpets in offices
to showt the importance of the manager.

Here an article in the UK Times, to compare to today:
April 15, 2007


"City high flyers are spending like there's no tomorrow"

An article written just in time before the credit crunch.
That's just one example if one follows up on Parkinson,
takes a look at real life after reading.
Parkinson's Law can also be observed in politics.

Contemporary examples of people achieving the highest level of
incompetence are the CEO's of banks. They were masters in
creating huge organisations with highly problematic purposes like
inventing the credit derivatives and dealing with them. And who,
when things blow up get their huge bonuses and pensions while
leaving behind torched earth.
They were also lavish spenders on advertising and PR, giving
the media a reason to make a issue out of them, dragging things
along and making matters worse.
A look into the blog CEO watch can be recommended.

Tuesday, July 15, 2008

Stock market predictions, forecasts and history. Our Booktip: Charles R. Geisst: Wall Street: A History

With good reason one of our bestsellers is Wall Street: A History
by Charles R. Geisst.

Looking back on how things worked out or didn't, one has
almost perfect knowledge. One can figure out to the cent or
penny what was going on, how and why, where all the money
went and so forth. Predictions and forecasts made yesterday
or longer ago read completely different afterwards, once
facts have established themselves and become common
It is almost needless to mention that history is a graveyard
of predictions, forecasts, crystall ball reading. If only one had
known, or the parents or grandparents had known how some
stock / company had worked out!

And sometime historians are good in identifying future
problems, in cases when history is repeated, or in explaining
how certain problems were brought about and the consequences
they create.

One of the current underlying problems concerning banks
and financial institutions is the deal-making in cases of

excerpt from an interview:
Charles R. Geisst:
"... Wall Street discovered -- probably in the 1960s and the
1970s in the more contemporary period -- that a fair amount
of money could be made through mergers, and it was actually
much more profitable in some respects than underwriting stock."

"In the 1990s, that just became a boomtown bonanza, if you
will, because the deals were upward of between $10 billion and
$40 billion. Even a couple percentage points off that for fees
could make a very good year for the average Wall Street firm."

And here a glimpse at actual company history, how some of them did.
Seeking Alpha recently came forward with a list of the best and the
worst performers at the US stock market, their market capitalization
Changes in Market Cap for Biggest U.S. Companies
July 29