Real Portfolio Managers Don’t Eat Gas Station Sushi

 

According to FOOD52, the Japanese cuisine item sushi made its American debut in Los Angeles, California, in the late 1960s[i]. By the 1990s its popularity had exploded to the point that it was not at all unusual for people in the Midwest to go out for sushi, and restaurants that served it were positively ubiquitous in the major cities. Another venue for serving sushi was gas stations, which might strike my overseas readers as strange, since sushi is made up of, basically, fresh, uncooked fish, seaweed, and rice, with a variety of additional ingredients typically available. Uncooked fish doesn’t stay fresh (or even edible) for long, not to mention seaweed. And gas stations aren’t known for their ability to produce, maintain, or sell items that have particularly short shelf-lives, historically opting for foodstuffs that could probably survive a nuclear attack. I don’t mean to disparage entire retail chains selling a particular item – but I would never eat sushi sold at such a venue.

Meanwhile, back in the Project Portfolio Management World…

Referring back to my personal adaptation of the Pareto Principle, that the 80^th percentile best managers with access to 20% of the information needed to obviate a given decision will be out-performed by the 20^th percentile worst managers with 80% of the information so needed, it goes without saying that successful Portfolio Managers either have to be extremely advanced (or consistently lucky), or simply appropriately informed of the issues surrounding and impacted by the decisions they make. Okay, but with various managers, analysts, and information specialists all vying for the Portfolio Manager’s attention in order to hawk their own preferred information streams (which demand a very specific type of expertise, held only by those pushing them, don’t you know), how is our nominal Portfolio Manager to differentiate between the valid ones, and those that are useless, or even detract from the targeted 80%? I mean, Chief Financial Officers have been known to insist that everything that the Portfolio Manager needs to know can be derived from the general ledger – surely our PortMan should listen to him!

Yeah, and if you believe that, then you may also be consoled by the fact that gas station sushi in Ohio looks a lot like authentic Japanese restaurant sushi from Honolulu.

Those proffered information streams come at you fast

The thing about the types of information that the PortMan needs to make better decisions that her competitors is that, like sushi, it has a very short shelf-life. How to arrive at the best strategy to leverage assets, project performance, and market share to attain the organization’s overarching goals is an elusive solution, which lives in a dynamic, fast-moving environment. As I asserted in last week’s blog, there are precious few usable formulaic approaches, and even among those none are effective across a wide range of industries or situations. But, if I can’t tell my readers what’s the consistently-right answer, I can jolly well warn them of the wrong ones.

One sure tell that the person pushing a certain type of analysis doesn’t have a valid basis is if they ask the question “Why wouldn’t you want to have this information?” Management Information Systems (MISs), like anything else of value, take time to set up, feed, and maintain. If a given MIS’s output does not provide timely, accurate, and relevant information, then all the energy that went into setting it up, collecting its data set, and maintaining it is wasted. Not only that, but the valid system that should have been set up in its stead doesn’t go on-line, and that 80% goal slips further and further away. So, when any of the MIS-pushers invoke this line of persuasion, as if management information just kind of exists out there, and it’s free for the taking, then something is definitely wrong with their grasp of efficacy.

Another sure-fire indicator of an invalid MIS has to do with its structure. All valid MISs have this (very general) structure in common: (1) data is gathered, based on some discipline (2) the data is processed into information, based on some methodology (like Earned Value or Critical Path) (3) the information is delivered to the decision-makers in a format they can readily understand. Conversely, invalid MISs are often structured like a poll. A central data repository is surrounded by input/output nodes, and the “information” is pulled from it as needed. The two problems with polls are that (1) someone always has better or more accurate data, and (2) the “data” they contain are usually hearsay or subjective perceptions, which are inherently unreliable from the get-go. Polls’ data goes bad faster than unrefrigerated, uncooked fish.

We know where we’ve been, can we know where we’re going?

One final sure-fire indicator that a proffered MIS is less usable than small units of seaweed-wrapped bait has to do with whether it’s a feedback or feed-forward system. Feedback systems are based on events that have already occurred, so that their data is verifiably accurate. Feed-forward systems, by contrast, are based on projections of what experts (both real and fake) believe will happen in the future, meaning that the data in these systems is highly subjective, and, therefore, highly unreliable. Unfortunately, this is the very type of system that modern-day risk managers use, as both decision-tree analysis and Monte Carlo simulations involve collecting experts’ opinions of how the future might unfold differently from the projects’ baselines, guess estimating the odds of the alternate outcome, and cost or schedule impact.

And larding over these guesses estimates with statistical jargon does not remedy this foundational error.

Ignoring any of these warning signs is analogous to purchasing fine Japanese cuisine from an establishment with a primary purpose of pumping petrol out of underground tanks for use in automobiles. It’s possible that both the information and sushi are ingestible, but you’d be better off with one of those hot dogs that’s been turning around and around on the steel-cylinder heating unit since the last Bush administration.

[i] Retrieved from https://food52.com/blog/9183-the-history-of-sushi-in-the-u-s on October 21, 2017, 13:27 MDT.