Investment Banking & The Defense Department’s Love-Hate Relationship With “Spaghetti”

NYT Article: We Have Met the Enemy and He Is PowerPoint

Yes, you read that correctly.  I’m talking about a love-hate relationship exhibited by both Investment Bankers (which I can attest to) and the Defenese Department (as revealed in this week’s New York Time’s article by Elisabth Bumiller.)

In my last role as an investment banker, I dealt with many requests from my VPs and Managing Directors, one of which, was to create a relationship diagram between car components makers and their distributors.  The end result?  Spaghetti.  Messy but colorful sphagetti…. much like the picture you see here. 

I remember walking shyly over to our Presentation Technology team and asking the head guy there to help me with this task.  He stared at me, mouth agape, and shook his head in disapproval.  “Look, kid.  You know that this is going to look messy, right?  You have 10+ auto-makers with different relationships with all these other distributors… It’s a waste of time for my team.”

Well, what was I supposed to do?  I had to get this done, even though everyone, and I mean, EVERYONE, knew it was going to be a giant mess.  So… after some pleading, begging, “I know… but what can you do?”s and apologies, the head guy agreed.  He later returned a beautiful rendition of our Sphaghetti map.  Of course we never used it.  Our MD took one look and said, “This looks too complex to use for our client.”  That was it.  One wave of the hand and all that work went to waste.

This was only one of many complex PowerPoint maps, slides, graphs, charts, etc. we created and then subsequently scrapped.  Don’t get me wrong.  I really believe simple and concise PowerPoint presentations can be a great story-telling tool.  However, the amount of work we put into making them and then simplifying them… well, that part’s just ridiculous!  I mean, I spent 85% of my presentation-making time prettying up the doc, reformatting text boxes, changing labels, re-color-coding, etc.  A waste of precious time.

Even if our leaders acknowledge the uselessness of some of these PowerPoint slides, Banking and Military leaders alike will still continue to ask their analysts to produce them because we are all about creating “value”… even if that “value” is useless at the end.  At least they can say they tried.

Oh well… what can you do… right?

Some funny quotes from the article:

• “PowerPoint makes us stupid,” Gen. James N. Mattis of the Marine Corps, the Joint Forces commander
• “It’s dangerous because it can create the illusion of understanding and the illusion of control,” General McMaster said in a telephone interview afterward. “Some problems in the world are not bullet-izable.”
• Last year when a military Web site, Company Command, asked an Army platoon leader in Iraq, Lt. Sam Nuxoll, how he spent most of his time, he responded, “Making PowerPoint slides.” When pressed, he said he was serious.
• The news media sessions often last 25 minutes, with 5 minutes left at the end for questions from anyone still awake. Those types of PowerPoint presentations, Dr. Hammes said, are known as “hypnotizing chickens.”

Reflection 3/26/10: Oh, How The Corporate World Can Suck…

—EDITED 3/27/10—

After publishing this post, I watched a few movies and rested a bit.  This morning, when I went back to my blog to start on another post, I realized that I might have been very harsh about the Corporate world.  So, not to scare off potential corporateers, I wanted to add this disclaimer:

The post below is purely based on my opinion on Friday, March 26, 2010.  Opinions may differ (including that of my own on a different day)… So please read with discretion.

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First of all, apologies to my avid readers who probably wondered what the hell could have happened to me since my last post… 10 days ago. Well, let me just say, I have been kept knee-deep in crap. Yes, that’s right. Crap, or in professional terms, “work”.

How could it be possible that moving from Banking, where crap gets doled out like a manure yard, to the Corporate world equaled MORE crap, you ask?

Let me reveal the deep, dark secret about this side I chose to overlook whilst in Banking…

Back in Investment Banking, I had to do a lot of modeling (no, not for magazines—a common misconception when I use that phrase—I mean, in excel). When we did any kind of merger or acquisition analysis, we had to put together an operating model of the acquisition target. Sometimes, if we didn’t get a model from our client’s finance team, we would make our own driver assumptions. However, when we did get those models, we typically looked at those corporate models and made alternate scenarios (because that’s where we could “add value”).

Now, when I received those models, they were all pasted-values and sometimes wrongly linked with random calculation errors or whatever. There were always errors. In the back of my head, I always wondered WHY and HOW. They built all those models in excel, so why not keep the linkages? And, why not build checks to make sure everything tied together?? And, why the funky rainbow colors???

Oh, how naïve I was! After months of working in the corporate world, I have realized the truth behind (almost) everything! From the awful color schemes, to the f-ed up models, to the slow turn around time, to the doling of crap…

TRUTH: Individualism, creativity and even productivity is oftentimes discouraged—of course, not openly, always stealthily. On top of that, like in other jobs, there are stringent definitions of Boss and Analyst, Superior and Inferior, crapMaker and crapTaker. Remember that little PowerPoint presentation with the crap rolling down hill and you’re at the bottom in a giant hole just taking the crap, chunks at a time? (See below.) That’s what being a Corporate analyst is like, except the processes you’ve simplified are considered “useless”.

For example, a Boss-Man asked a crapMaker and me to simplify a process where the entire excel file consisted of pasted values, wrong linkages, useless tabs, etc. As I was doing all the work, this crapMaker decided to “add value” by having me create four additional tabs that referenced the other 10+ tabs (aka, completely useless task). I tried suggesting to him that the other tabs already provided the info he wanted, but he wouldn’t listen (of course). Instead, he told me to “just do it”. I’m sure you can guess what happened next… We showed Boss-Man the new file (with crapMaker’s new tabs). Boss-Man was unhappy because he clearly stated he wanted the file “simplified” and asked (more like yelled) at crapMaker for creating additional tabs that were “useless”… and after that “discussion”, crap came raining down on me from crapMaker. What can you do though? That’s the way the Corporate world works.

You try to show some individualism, some efficiency, some innovation, some smartness, you get shut down.

What’s the goal in the Corporate world then? JOB RETENTION. Think about it, if you build an amazing automated process that any new person could do, then why should this company continue to pay you a high salary to do it? Thus, the crapMaker right above you and the Boss-Man, might say they want “efficiency” and “innovation”, but when you deliver those to them, they just ignore you and continue to use the same method they had used for the past [x] years.

So what did I learn from all this?

1. There are roles worse than being a Banking analyst.
2. Until you’re the crapMaker, you’ll always be the crapTaker. Always…
3. You have to look at everything as a “learning” experience, or else you’d burst from pent-up frustration.

Alright… that’s all I can write for today. Cheers everyone! (I know I definitely need a drink after this reflection…)

•Breakdown of Top 50 Venture-Backed Companies

WSJ recently published a list of the top 50 Venture-backed companies (out of 10,000).  Although the list is very comprehensive and you can play around with the different categories, I couldn’t help but want to know more… So I cut the data a few different ways to get a better understanding of the top 50 companies.  (Yes, I am a nerd.  I admit it.)

Based on these charts, it seems that California is the place to be (WOOOO!) and, no surprise there, Info tech, Healthcare and Consumer services are the top sectors for VC funding.  In case you don’t know what VC is, VC is a type of investment firm that provides capital for early stage, high growth, high potential companies, aka startups. Thus, many of the VC funding usually goes into technology, biotech, and consumer services type businesses.

Of the companies ranked by Equity, Board, Executive and Valuation, only 3 companies fall in more than one ranking: #44 Casabi (in Top 10 by Executive and Valuation Ranking), #28 GroundWork Open Source (Executive and Valuation) and #12 NeuroPace (Executive and Board).  All three are located in CA; Two are in Info Tech and 1 (NeuroPace) is in Healthcare.

I guess I should move back to Cali and get into Info Tech like my parents wanted me to, huh?!?!

Top 10 Companies by Equity Rank

Top 10 Companies by Board Rank

Top 10 Companies by Executive Rank

Top 10 Companies by Valuation Rank

•A Review of The Past Decade

I’m sure all of us have done the “what has happened in the past 10 years” dig through New York Times, Wall Street Journal, the New Yorker, [Your City Name] Chronicle, etc.  Although the collective memory of this past decade exist in those documented articles, everyone’s experience and history is different.  So, in order to contribute my part, I’ve selected to write about the key moments of each year…

2000: I bought into the whole Y2K bug, like many others, so I forced my parents to buy tons of canned foods, fill our bathtub with water, print out all the important documents stored on our PCs, and then ended up sleeping through the new year, only to wake up at 3am and realize that nothing had changed and our digitized world didn’t explode.

2001: Who can forget 9/11?  I was getting ready for school when the radios and TV stations blasted the fact that the Twin Towers had been hit by a plane.  Although we didn’t shut down school that day, everyone’s attention focused on the news.  I remember just feeling an unexplainable pain for the families of those who died.  For them, it was just another typical day where their loved ones went to school, work, store next door, etc… but on 9/11, they never returned…

2002: I made a list of all the places I wanted to visit/live in before I turned 35: LA, New York, Paris, Venice, Madrid, London, Tokyo, Seoul, Hong Kong, Buenos Aires, and more.

2003: Looking out the window, I saw the wings of the plane glide through the white cloud.  I was on my way to the East Coast… leaving everything I knew behind and starting on a new adventure.  I didn’t know what was ahead of me, but I was excited.

2004: On our drive down to LA, my friends and I encountered a large bee/wasp that flew in through the window.  It stung my friend and we had to use frozen pees from a local supermarket to stop the swelling but that didn’t stop our journey.  We continued and right outside of the city of LA, I had a leg cramp from gassing and breaking for over an hour due to traffic.  I hate LA traffic!

2005: My director stared at me and obstinately said “No” to my proposal.  I gave her a written proposal of changing the way the program had been run for the past several years.  My proposal meant a reversal of everything we did, but I knew that it was either make a change now or fail miserably in the future.  Finally, I convinced her that this change could be temporary and that if it didn’t work and we didn’t get the results I had promised, we would go back to the past… but we never had to because it was a success!  Determination, perseverance and good politicking goes a long way…

2006: Met some of the best friends I could ask for, who stood by my side through thick and thin.  You know who you are!  Thank you!  (Oh, and by “met” I mean not just 2006 but 2003-2007!)

2007: Like any other typical training day in Investment Banking, the analysts listened to the drum of the instructor’s voice as he tried to teach us about finance.  My colleagues snoozed in their seats, while I wrote down every single word.  I had no idea what anything was, but I knew I had to learn.  I promised myself that I would gain as much out of Banking as I possibly could.  The end result…?  I did.

2008: I watched with horror as our company stock dropped to single digits in a matter of hours.  We hovered above the $1 mark.  How did all this happen?  How did we go from boom times to the deep recession?  The first thing that came to my mind was my parents.  What about their 401k?  What about their retirement money?  I haven’t earned enough in my lifetime to be able to support them… at least, not yet.  I could do nothing, but just watch and hope for a recovery.

2009: My MD gave us his notice of resignation that Friday noon.  We were shocked.  He had been one of the best MDs in the bank… perhaps even on the Street.  He understood our need to be the best as well as our need to have a life of our own.  He was like a father to us analysts… and he just up and left us.  This moment made me realize something pivotal… that nothing is forever.  He did a cost-benefit analysis and saw there were other opportunities elsewhere.  I realized then and there that I had to stop and reevaluate what I truly wanted… what it meant for me to be happy and successful… and, like him, make a change in my life.

Although I am still exploring my options, I now know that fear is only 50% of the process… it’s my checks in life… it’s something that keeps me to grounded in reality, but the other 50% is to push aside those fears and push myself from the ground and into action.

•Oh Scam Me: 3 checks for “Social Security = Ponzi scheme”

You know, I’ve always been critical of the government because the theories and notions behind bills and laws are noble, but the executions and results of much legislation are disastrous and often ineffective.  That being said, I was speechless when my friend casually reminded me over a glass of 2005 Cabernet Sauvignon that the government—our government—has been operating the biggest Ponzi scheme in the history of Ponzi schemes!

That’s right.  I said it.  Social Security is a legalized form of a Ponzi scheme.

What irks me is the fact that supporters of Social Security admit the “structure” is set up like a Ponzi scheme, but they claim it isn’t.  Wait… WHAT?!

This is what they argue:

1. The government isn’t lying about the scheme.
   True, but we’re not given a choice to say no, either.  We are forced via law to pay the taxes… so how is that better than being lied to?
2. Social Security will work if the economy continues to grow so that future taxpayers will be able to afford to pay Social Security taxes (i.e. future income must exceed future benefit payments).
   Yet, how can anyone suggest that there could be continued growth?  If anything, a nation’s economy is cyclical.  It’ll boom and bust but never have constant growth.  So, how is this even logical?  Unless we hope that the problems will fall upon the heads of future generations, we will face a very real Social Security deficit in the coming years.
3. The $3+ trillion Social Security shortfall we face is over the next 75 years.  In addition, there is a “surplus” since the taxes collected exceed the benefits spent.
   However, this “surplus” is “borrowed” by the government for other spending.  Think about that for a minute.  We are currently in a debt of $11 trillion.  That includes the Social Security $$$ borrowed by the government.  Essentially, we don’t have any Social Security surplus left.  That giant Social Security deficit is very real, my friends.

So, how is it that we continue to allow for such a scheme to exist—and legally, too?