Monthly Archives: April 2009

Rating agency regulation eludes criticism

There has been tremendous blame levied on the finance industry for buying up collateralized debt obligations.  And this makes intuitive sense since we ought to expect them to exercise better personal judgment.  The little known fact is that their personal judgment has been largely crowded out by the SEC and replaced by its own list of approved judges.

In 1975 the SEC began requiring the use of credit rating agencies that only the SEC could approve.  At the time, the requirements for using these agencies were limited in scope, but in the past 30 years this has grown in scope to the point where only a handful of companies are the de facto judge and jury for financial worthiness.  In effect the SEC has crowded out independent judgement by sanctioning these rating agencies.

You can learn more about this regulation at from the SEC itself, the rating agency article on Wikipedia and a recent Wall Street journal op-ed.

It is amazing the SEC has faced so little public criticism for its role in this debacle as well as the Bernie Madoff scandal where it completely failed to protect investors.  It is about time we stop pretending the SEC protects us and start reinstituting private credit rating agencies with full latitude to find and prevent such meltdowns.

To hell with constraints!

“God grant me the serenity to accept the things I cannot change; courage to change the things I can; and wisdom to know the difference.”  — Reinhold Niebuhr

I am an atheist, so I don’t pray to God.  But as an engineer it’s my job to apply technical knowledge and tools to create change, so Neibuhr’s prayer is valuable to me.  The leaders I admire the most are the ones that can break down some of the largest constraints to create powerful change.  We laud someone like Steve Jobs because we like our iPods, but they only exist because he and Apple could reshape the constraints of the music industry.

When I have taken it upon myself to challenge constraints, it has usually paid dividends and helped me grow.  So I stop to check premises when I hear or think to myself:

  • We don’t have enough time to do that
  • That’s not in our scope
  • This technology doesn’t work that way
  • We don’t have enough manpower to do that

All of these are flavors of the time/resources/scope project management triangle.  The interesting thing about each factor is that it’s largely self-imposed by you, your team or your company.  Do you really have to ship this month or would you rather have the feature that makes the product actually usable?  Why can’t we afford to hire a person if we’ll make another million in profit?

Of course you are already thinking ahead and wondering “some of these constraints are good.  We can’t wait forever to ship!”  And you’d be right.  So next time someone gives you the constraint in the first place, work to understand why it exists, who set it, and what purpose it serves.  Because tomorrow you may be the self-appointed leader that changes them.

When you find the time is right to break a constraint, here are some tips:

  • Understand who you have to convince: who set the constraint before?  Who are you allies in making the change?
  • Talk about the positive result you expect: ‘customer experience for first run is smooth.’
  • Contrast that with the result of status quo: ‘customers will likely fail and end up calling support; COGS goes up 50%, profit margin down 50%.
  • Demonstrate an understanding of the original constraint: ‘We have to reschedule our launch event; here’s how we could get started on that.’
  • Reframe the constraint: ‘the new deadline should by x month, and the only conditions for changing it should be y, we have higher confidence we can stick to it because of a,b and c.’

So what constraints are you fighting in your organization?  Which ones are the healthiest constraints that make you more productive?