When we understand this slide...

THE MAN, THE MESSAGE, THE MEDIUM Earlier this week, I attended a presentation by a very senior manager in my company; the man by himself was inspiring, what he had to say was interesting and his body language was down-to-earth and honest... but his Power-point slides were a different matter altogether. Somebody had created a complex structure which weaved back & forth, interspersed with slides carrying 13 double-lined sentences or bullets with sub-bullets which had further nested text – whoa, what was happening here?!

Sure enough, as we progressed through the slides, (IMHO), the presenter found it increasingly difficult to explain each and every one of those points. In many cases, he skipped over some points, while in others he laboured his way through each and every one, trying very hard to fit all of them into the context of what he was explaining. It would be easy blame this on the creator of this specific deck or on the complexities of the business we operate in or maybe even label it as a cultural artefact of a tech-co… but I believe that something else ails us all – the medium of Powerpoint.

“When we understand that slide, we’ll have won the war”
Last week Elisabeth Bumiller wrote a great article in The NYT about the pervasive infiltration of Powerpoint in the US Army; when Gen Stanley A. McChrystal was shown the image above on a slide, he exclaimed “When we understand that slide, we’ll have won the war”. Bumiller quotes a legendary essay “Dumb Dumb Bullets” by Col. TX Hammes in The Armed Forces Journal which explains the logic of how MS PPT is a particularly bad decision-making aid. Ye gods, you say?

Well, here’s the gist of what he says:

• The predecessor of Powerpoint, the lowly common memo, required people to summarize complex issues into coherent arguments; but bullets aren’t sentences and they allow one to dump information on slide without bothering with prior analysis or constructing an argument.


• If and when a complex argument is unavoidable, the creator of the PPT dumps paragraphs of text on a slide – this forces the audience to read the slide while the presenter is talking about it – neither act is done effectively.


• Most powerpoint decks are created with an approximate time limited of 1 minute/ slide; consider the average slide with nifty animation, flow of events, waterfall diagrams and ‘a-ha’ boxes; how much time does the audience have to absorb this overload, leave alone synthesize the underlying implications and respond accordingly? If you had, 20 pieces of information per slide, that makes it 3 seconds per piece. Now you understand Col.Hammes barely suppressed urge to hammer the genius who came up with quad charts (divide a slide into 4 quadrants and fill them with info, voila!)


• The author agrees that Powerpoint has it’s uses as an information brief; it’s an excellent training aid and presents a rich variety of text, audio and video options. However if the objective is to stimulate thinking, impart a deep understanding of a subject or lay out the complex content for making an important decision, the ordinary text-filled 1 or 2 page memo may still be the best bet.

MY PERSONAL TAKE My take on this stems from personal experience at the University of Chicago; I worked with two outstanding professors, with Sanjay Dhar as a Teaching Assistant and with Mathew Bothner as a student. These professors insisted that for every assignment, all they wanted was a 1 page submission. This not only forced us to put content over gimmicky templates/animation but also helped us cut out the chaff and prioritize the most important arguments that would lead to a convincing conclusion. Some of these cases required sophisticated financial calculations, information from interviews with stakeholders and consideration of complex regulatory issues… but at the end of it, the final decision would be summarized in the famous 1 page memo.

What do you think? How have your experiences with Powerpoint been? I would be particularly interested in hearing from people who were used to memos and now handle PPT. Let me know.

Randy Kroszner On The Financial Crisis

I attended a lecture yesterday at the Chicago Booth London campus by Randall Kroszner, former member of the Board of Governors of the Fed Reserve. Randy is the Norman R. Bobins Professor of Economics at Chicago Booth and he spoke about his experiences during the financial crisis and his analysis of the causes and remedies. His talk will be up as a podcast/vidcast soon and I will share the link when it is up, but I found some of the Q&A (details below) especially fascinating:

Q. A Chicago alum now working with the FSA brought up the topic of issue of executive compensation in the financial services industry.

A. Kroszner's take was that the renewed attention to the issue is welcome but it might be a bit misfocused.

• To build his case, first he quoted the example of Bear Sterns - even though most BS employees had their compensation in the form of stock, this did not prevent excessive risk -taking; at the end, they lost 99% of the value of their shares. So just moving a component of compensation to stock (long term) instead of cash (short term) may be too simplistic and not necessarily avert insensible risk-taking.

• Secondly, he made the point that if you create a rule stating that "banks" cannot offer such compensation, it becomes a boundary issue - instead of a "bank", there will be some other body which will take up the risk for a suitable reward and so the boundaries (of which institutions take the risk) get redrawn but the systemic risk remains the same.

• And finally, Randy said that it is in the interest of the state and the public to see these quasi-state owned banks (RBS/ Citi etc) perform well and make a profit to the stakeholders (ie the taxpaying public). When you impose an artificial limit on the compensation of employees in such firms, it's shooting yourself in the foot... you will not be able to hire the best talent in the industry because the best talent will be picked up by privately owned competitors who can pay them more... (My personal take: unless you have altruistically motivated geniuses who are willing to pass on the cars and the yachts and work to save these banks while taking flak from the government and the public - does anyone see that happening?)

Randy's conclusion was that while there is definitely a problem in the risk-reward alignment and while it is a popular perception that bankers are overpaid, the issue is a lot more nuanced and interconnected with systemic issues it appears to be.

Q. Can the West spend its way out of the recession?

A. "If something cannot go on forever, it will stop" - Herbert Stein. Randy made the case for a difference between spending that becomes a multiplier and spending that's pointless. If the stimulus spending was to improve the state of infrastructure or to repair the high school education system in the US, then it makes sense to invest because the returns will be manifold. On the other hand, if stimulus investments are spent on "porkers", then you're probably digging yourself deeper into a hole... acc. to Randy, the %age of the current stimulus package being spent on what he called "useful long term investments" was not at all encouraging.

Q. How did you feel in the heat of the crises - how did you make decisions etc? Were you scared? (not my question!)

A. Yes, he said, there was a heightened awareness of the immense impact of each decision but rather than fear he said that this created a very acute focus on the issue at hand. He quoted a favorite book of mine, The Lords of Finance and how it opens with Montagu Norman, the then Governor of the Bank of England going on a long holiday because he was stressed out... almost in the middle of the Depression. Would Bernanke be able to do this today? ;-) He stated two issues that he thinks made the difference:

1. In the middle of a crisis when there are a hundred things flying all over the place, it is very important that you have an analytical framework in place... this framework helps you set aside emotional baggage and associated panic and points you in the right direction. It sets the context for what one needs to focus on and keeps you focused on that, or at least in his case
2. It helped tremendously that 3 of the 9(?) Fed governors had done academic research on the causes and effects of previous Depressions/ Recessions. For example, they knew that in the panic of 1907, JP Morgan had the choice of either bailing out the Knickerbocker Trust or letting it fail as punishment for screwing up. When Morgan let it fail, it signalled the end of the private clearing house system and ushered in the Fed Reserve system. It was an analytically easy decision to let Bear Sterns fail for its transgressions... but as they knew from history, this could have become the first step in letting the Fed Reserve System fail and no one wanted that to happen.

These points were fascinating - for me, they illuminated the importance of having an analytical framework or viewpoint when going into a crisis. At the same time, it also highlighted the importance of learning the right lessons from history and not missing the link between cause and effect.

Thoroughly fascinating descriptions but I was a bit disappointed that there were no specific prescriptive stances that Randy took... especially with regard to executive compensation or bank regulation. Yes, the issues are very complex and sophisticated but it would have been great to hear him a stake on the ground with rules or assumptions that could form the basis of any future decisions.

UPDATE (23.Feb.2010): Penka Bergmann from the London campus just mailed and shared the podcast link - happy listening!