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IBM Rational focuses on software quality







IBM Rational focuses on software quality

IBM Rational focuses on software quality 07/06/2004 12:07 PM

IBM Rational on Tuesday will announce plans to standardize its suite of automated software quality tools on the Hyades open source platform and is unveiling concurrently a software quality campaign dubbed ?Continuously Ensure Quality,? or CEQ.




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IBM Rational focuses on software quality

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Lago
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Academic life is ruining the internet for me. An example: Today I read Joi Ito’s wandering entry on money, economics, and physics, and the first thing I thought of doing was to post a bibliography of all of the reading that should have been done before that post was made. And then I realized that posting such a bibliography is the equivalent of shouting at the television. It doesn’t matter what I say about it. The TV (and the internet) can’t really hear me.

Lago reacts to an interesting point that I in fact pondered yesterday before posting my thoughts from my lunch with Seth. Is it better for me to post my superficial musings with Seth in the one hour that I had before I needed to move on to the next thing, or do I scribble them in my notebook and write a more rigorous treatment with references. I decided, as Cory often says, that my blog is my notebook and that even though many of my thoughts were half-baked, it was better to write early/write often than to back burner the thoughts and probably never get around to posting them.

If you read on in Lago's post, he does raise a very interesting way to look at the trade-offs of shallow vs rigorous. What is the cost of rigor and is it worth it?

I am not an academic. I am an extremely busy businessman who happens be lucky enough to meet quite a few smart people from a variety of fields. As one good friend has told me, my primary purpose is to connect people. It probably adds more value to society for me to spend one hour getting two people excited enough to talk to each other than to sit and ponder a notion by myself. My blog is not a rigorous treatment of the topics that I'm interested in, but rather a collection of links, questions, thoughts and points of view. A great variety of people read this blog and I'm sure that just about any professional thinker in on any topic I write about will find my treatment of the topic rather superficial. The question is to me is whether this is valuable or whether my lack of rigor could actually be a disservice to the discourse.

Getting back to my last post... I actually did think about spending the weekend dragging out my old notes from Hayek, Coase, Arrow, Chandler, Shannon, Mauss, Simon, etc. and digging into my memory and trying to tie all of this together. Instead, I posted a my rambling thoughts because I knew I'd never do it if I put it off. Also, I realize that I will never be able to compete directly with full-time academic and that it is not my position to answer these questions in a rigorous way. I suppose that if I can end up getting Seth, an economist and a rabbi to sit down and chat about world views over dinner at some point, I will have served my purpose.

I don't want to ignite a academic vs non-academic flame-war here. I'm just trying to point out, as Lago does, that we are all making decisions about how much to study in order for us to make the right decisions. I don't have the time or the ability to do "all of the reading that should have been done before that post was made." Having said that, I would encourage people to post "a bibliography of all of the reading" since I am interested and so are many other people.


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The Agency Costs of Overvalued Equity - Michael C. Jensen

Here are my notes. They are rough notes and may be a bit inaccurate or unclear.

Any time two or more people try to engage in cooperative activities, there is a cost because they never have the same preferences.

Stock options should be adjusted to dividends and cost of capital or their incentives are not aligned with shareholders.

If you as a manager find yourself in a situation where your stock is overvalued. It sets up pressures that cause people to destroy value. When an executive commits fraud to deliver market expectation, they know it's overvalued. 70bn peak but was worth 30bn for Enron. They had a choice of defending the 70bn or confess that it's really only worth 30bn. The board and the investors won't feel that it is value reseting, but rather value destruction and would fire the CEO and look for someone who could perform. No easy way to correct. Probably prevent from getting there. If you're there, you've probably lost your job.

Enron could have stopped the run-up, but they didn't see the downside of the run-up. "Charlie and I get just as uneasy when a company is selling for more than the intrinsic value than when it is trading at less." - Warren Buffet.

Overvaluation is managerial heroin. Feels good at the beginning, but turns out really bad at the end. The pressures of the market cause messing with the gray area of accounting. People raise money to buy companies and destroy more value. Funding of risky investment.

For every $1 in the purchase price, $2.31 is lost in the value of the firm for Nortel when investors realized that the acquisitions were not adding value. Companies destroy value with acquisitions. They con the market into believing that they can add value so it postpones the day of reckoning, but it eventually comes and comes bigger. Bad acquisitions were overwhelmingly with stock. Auctions with multiple irrational people increasing irrationality.

Throwing stock options in is like throwing gasoline on the fire. The solution is in the governance system. Can't solve all problems with incentive systems. You need honest and intelligent people who are monitoring. Unwinding constraints. Lockups after vesting.

Why did the shorts shut down shop at the beginning of the turn-around and didn't correct the problems.

95% of waste from stock options went to people lower than the top five officers. Some people think it is costless to issue options, but this isn't true.

DON'T LET YOUR STOCK GET OVERVALUED. If your stock is overvalued, YOU ARE GOING TO BE IN TROUBLE.

Solution for not having stock overvalued. Communicate your strategy. Don't forecast earnings in value. Publish audit-able metrics for strategy. Stop producing short term earnings forecasts. Would not even do rolling 12 month earnings forecast. Managers should not be in business of forecasting.

Comment - TrackBack

Rational calendar with 364 days, extra
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Cory Doctorow: An American physicist has developed a "rational" calendar of 364 days, in which each date falls on the same day of the week every year, thus saving profs the bother of drawing up new homework schedules every September.
His constraints meant eight months would have different lengths than they do now. March, June, September, and December would each contain 31 days, while the other months would each get 30. To keep the calendar in synchronisation with the seasons, Henry inserted an extra week - which is not part of any month - every five or six years. He named the addition "Newton Week" in honour of his favourite physicist, Isaac Newton.

"If I had my way, everyone would get Newton Week off as a paid vacation and could spend the time doing physics, or other activities of their choice," he says.

Despite this incentive, Henry says he has encountered resistance to his plan - mainly because people would be "stuck" with a birthday that always falls on a Wednesday, for example. Henry, who is among that group, is not moved by the argument. "You have my permission to celebrate your birthday the preceding or following Saturday," he says.

Link (via Wired News)

The Raw Story | A rational voice »
Exclusive: Print document of Republican
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Story


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Exclusive: Print document of Republican
Schiavo talking points leaked to Raw
Story
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that clumsy Republican talking points memo .. proper perspective .. Raw Story

rawstory.com/news/2005/index.php?p=202
track this site | 4 links


Ask Jeeves Focuses


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Motorola Spins, Focuses


Motorola Spins, Focuses 12/17/2003 06:10 PM
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Book focuses on SQL Server and XML


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Newsletter focuses on Final Cut Pro,
more


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more
11/14/2003 08:00 AM
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