IVP - Andy Unedited - Business and Accounting Archives

November 14, 2017

Thinking, Fast and Slow

Consider this problem. A bat and ball cost $1.10. The ball costs $1 more than the bat. How much does the ball cost?

Obviously, Ball and Bat.jpgthe ball costs $0.10. Or does it? Our mind immediately jumps to this answer, as it did for more than half the Harvard, MIT, and Princeton students who were asked. But if we take a minute to work it out, we'll come up with something different.

If the ball costs $0.10 and the bat costs a dollar more than the ball, then the bat costs $1.10 and the two together cost $1.20. So that can't be right. No, the ball costs $0.05 and the bat costs $1.05 (a dollar more) and the two together cost $1.10.

In Thinking, Fast and Slow, Daniel Kahneman uses this (pp. 44-45) and dozens of other examples (and mounds of scientific research conducted over decades) to poke holes in the confidence we have in intuition--even the intuition of experts. Analysis of thousands of trades by fund managers showed they were as successful in picking stocks as dart-throwing monkeys would be. Despite the great confidence they have in their years of experience, they are merely as good as a random process for choosing stocks.

We use our intuition in voting for a president, in explaining why a golfer won (or lost) a tournament, in choosing a candidate for a job opening, in estimating the height of the tallest redwood, buying a car, estimating sales of our new product--and often we'd do just as well flipping a coin. Why is our fast analysis so often wrong? Why don't we use a slower, more logical approach more often?

IntuitionThinking, Fast and Slow 2.jpg is not always wrong. It is an important feature of our brains that allows us to interact with our world effectively. If we had to slow down and analyze everything we encountered before we knew how to respond (every chair, every facial expression, every moving object on the highway), we'd be paralyzed.

Intuition is also effective for experienced experts in very narrowly constrained realms--anesthesiologists in operating rooms, firefights in a burning building, chess masters in a tournament. But where there are many variables and many possibilities (such as financial advisors picking stocks or pundits predicting world events a year out), intuition is useless.

Too often, however, we rely on our hunches when we shouldn't. That was the whole point of Moneyball, the bestseller about how the Oakland Athletics (one of the least wealthy teams in baseball) consistently outperformed much richer teams. The Athletics didn't rely on how a player looked or talked or acted, as baseball scouts traditionally did. They looked at statistics--cold and hard. When they saw a player with good stats who was undervalued on the market, they snapped him up even if he was ugly, short, and fat.

Kahneman makes much the same point that Malcolm Gladwell does in Blink, which I reviewed here. But Kahneman does so with more clarity and care.

Thinking, Fast and Slow
is especially worthwhile for people in business. Sales forecasts are often far too optimistic. Hiring is often too impressionistic. Business strategies are promoted with supreme confidence in bestselling books that we should be far more skeptical about. In Built to Last eighteen pairs of competing companies (one more successful than the other) were compared. But in the period following the publication of the book, the average difference in profitability fell to near zero.

Kahneman clearly shows a better way, in business and in life.

Posted by Andy Le Peau at 10:35 AM | Comments

September 4, 2015

An Un-Business Book

Leadership and Self-Deception is one of the most unusual business books I've ever read. It's a parable or fictional story, but that's not what made it different. A number of business books have taken that approach in recent years.

What surprised me was that I found nothing in this book about strategy, tactics, mission statements, creativity, disintermediation, Hedgehogs, BHAGs or getting the right people on the bus. It didn't talk about innovation or being customer focused or how we live in a totally new normal.

Continue reading "An Un-Business Book"
Posted by Andy Le Peau at 9:13 AM

October 30, 2012

I Is an Other (5): Metaphors at Work

In business, psychology, science and politics, successful metaphors should be as common as one-liners at a comedy convention, as numerous as drunks at a tailgate party, as bountiful as bribes in Chicago politics.

In advertising, GEICO, the insurance company, has successfully grabbed attention with its use of metaphor (or it's close cousin, the analogy) in its "Happier Than" campaign.

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Posted by Andy Le Peau at 9:38 AM | Comments (2) are closed

December 15, 2010

Unpaid Critics

A friend, David Horton, once said, "Some get paid to be critics. Everyone else does it for free."

We, like any organization or business, get our share of criticisms and complaints. How do we deal with it? Here are my guidelines.

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Posted by Andy Le Peau at 7:31 AM

March 2, 2010

Not an Exact Science

Since I've been an editor all these years, many people assume I have a degree in English or journalism. They are wrong, of course. I have a degree in mathematics.

That may seem an odd thing, but studying mathematics has helped me tremendously as an editor in at least two ways. First, it trained me to think logically and rigorously. Second, it means I'm not totally lost when it comes to thinking about the numbers side of publishing. And there are a lot of numbers to think about: profit, loss, expenses, budgets, sales rates and projections, price calculations, spread sheets, and more.

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Posted by Andy Le Peau at 10:45 AM

June 24, 2009

Taking Stock

Next week IVP undertakes its annual ritual of taking stock. I don't mean we will evaluate how well we did or didn't hit our goals for the end of our fiscal year on June 30. Rather almost all office personnel are commandeered by those in our accounting department and our distribution center to "do inventory." I and my colleagues will don lightweight grubbies (the forecast is for the high eighties) and partner with our more warehouse-savvy comrades to count books.

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Posted by Andy Le Peau at 7:49 AM | Comments (2) are closed

July 28, 2008

The Outsource Question

Celebrate logistics, as I've said before, because logistics make the romance of publishing possible. A publisher can also outsource its logistics so it can focus on the sides of publishing it loves best and does best—probably editorial, sales and marketing. But just because you outsource doesn’t mean you can forget about operations, fulfillment and accounting. You just need to be involved in a different way at a different level.

Tom Woll has a number of suggestions for taking some (but not all) of the pain out of these functions.

* Outsourcing Accounts Receivable.
The pain of accounts receivable (AR) is that trade and other large accounts don’t pay in 30 days. “The average collection period in the book industry is between 90 and 120 days from the time of invoice. . . . The difficulty of collecting accounts receivable is, indeed, one of the primary reasons publishers use distributors . . . to cope with this job of collection.” (pp. 276-77) But you still have to monitor closely what the distributor owes you. And if the distributor goes bankrupt, you’ll likely see little if any of your money.

* Doing AR Yourself.
If you handle your own collections, it is vital to “monitor your accounts receivable every day” (p. 277), focusing on accounts that are more than 90 days overdue. As I’ve said before, it’s all about cash flow, baby.

* Outsourcing Warehousing and Fulfillment.
Customer expectations these days are that an item ordered will be shipped within twenty-four hours. Again, this is not an easy task, and many choose to outsource warehousing and shipping. But be careful.
    1. Don’t put your entire stock with one distributor. Again, if the distributor goes bankrupt, “your entire stock of books will be frozen (locked up) by the bankruptcy court and unavailable to you for some length of time” (p. 278). So you may want to handle some yourself or hire a second service to handle, for example, book clubs, premium sales and review copies.
    2. In any case, make sure the fulfillment service you use understands the fragility of books. A torn cover can make a book unsaleable.

Outsourcing was all the rage several years ago. And it can be very helpful for small or large publishers. But there are always drawbacks with every choice, and the industry is full of horror stories about outsourcing gone very wrong. Publishers should consider the pluses and minuses carefully when deciding how to handle logistics.

Posted by Andy Le Peau at 5:55 AM

March 27, 2008

Is There No Accounting for Editors?

Perhaps the least number-oriented species of human being is that of editors.* Figures, subtotals, net present value, gross margin are as nothing in their sight. So should we just consign editors to the outer darkness of a numberless eternity? Is there to be no accounting for editors?

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Posted by Andy Le Peau at 8:58 AM | Comments (4) are closed

February 25, 2008

Accounting Mysteries

The accountants I work with are some of my favorite colleagues. It's not their fault that accounting is backwards.

For example, "accounts receivable" is money other people owe you. And what does accounting consider this money to be that you do not have? An asset of course! And money you do have in the bank would seem like a good thing, right? Wrong. It is a liability if you have unpaid bills. No wonder eyes glaze over when accountants speak. (But as I say, it's not their fault.)

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Posted by Andy Le Peau at 8:52 AM

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book cover"Some publishers tell you what to believe. Other publishers tell you what you already believe. But InterVarsity Press helps you believe," says J. I. Packer. Andy Le Peau and Linda Doll describe how this came to be a hallmark of InterVarsity Press in Heart. Soul. Mind. Strength, an anecdotal history spanning the sixty years from the founding of IVP in 1947 to the present day.