Random Thoughts on The City, Wall St & Capitalism

In real life double standards tend not to be a very attractive or a valuable personal characteristic. In the world of commerce they can be useful in running a business. In Management consultancy it seems to be the major product offering. Today's FT reports that a partner in the New York Office , in fact one of its " top corporate finance partners", has concluded in a research paper that the "provision of guidance on earnings with research that shows the quarterly ritual fails to reduce share price volatility but encourages short-termist management". REALLY, I did not know that. Oh wait it a minute, yes I did because it's obvious unless you're a fool.Here's a recent example, witness Wall Street's reaction to Google and it's share price when it refused to provide traditional earning guidance. You don't need a research paper to tell you which way the wind blows. If these are the types of valuable conclusions the egg heads at Mckinsey are 'finding' you ought to think twice about paying for their services.By all accounts they seem to be very academic people, but really not very practical or business savvy. They completely lack what the ancient Greeks used to call Metis http://www.shkaminski.com/Classes/Readings/metis.htm). It's a wonder they try and sell this as 'research' and an embarrassment that they actually put their name to it.I'm actually embarrassed reading it.


Now for the good bit, this is actually a very timely article given that the Enron trial is going on at the moment. Companies have always known that the quarterly earnings guidance dance causes stock price volatility, the best example of this was Enron. The current trial recently revealed that Ken Lay and Jeff Skilling are alleged to have raised quarterly earnings expectations from 32 cents to 34 cents in July 2000 in order to keep the analysts happy. Now here's coincidence number one, it's now universally agreed that Mckinsey was the chief architect in Enron's transformation from old world industrial pipe company into the new economy asset-lite energy investment bank cum dot com boom darling.Here's another fact Jeff Skilling is an ex- Mckinsey alumnus. I'm getting goose pimples, no really. Mckinsey prides itself on it's alumni contacts, in fact ex-alumni littered round the boardrooms of the Fortune 500 are a major source of it's revenue.Proud ex-Mckinsey-ites will tell you that the all important Mckinsey contact book is one of it's greatest assets. It's the ultimate contact book. So rather than waste his time researching this stuff from scratch, Tim Koller could have just called up Jeff Skilling and got the real deal from the horse's mouth. After all there is no point re-inventing the wheel.Work smarter not harder boys. You'll get there. Eventually.