From Across the Desk

Linear extrapolations are widely suspected of being unreliable, but maybe not widely enough. Stated differently, it’s a category error to engage in static, not dynamic, analysis. Stated yet differently, the interesting challenge is almost never to ask, “What can we do to solve this problem?” but instead, “What happens after we take this approach to solving the problem?”

Here’s an example. A long-running contributor to structural disequilibrium in the metropolitan New York traffic congestion pattern is that bridges across the East River are toll-free, whereas almost all other bridges and tunnels in the area carry tolls as high as $12 one-way. Not surprisingly, the East River bridges are chronically congested and “over capacity.” (The experts’ knowing diagnosis that they’re “over capacity” always amuses me; drivers are paying in time, not money: The “capacity” of the bridges is what it always has been.) So periodically proposals are floated to impose tolls on these bridges, with seemingly reliable projections of how much revenue would be collected based on today’s vehicle traffic multiplied by the average toll.

This is a linear extrapolation, a static analysis, and it’s wrong. It overlooks the question, “How will people alter their behavior in light of the tolls?” Obviously, the answer is that some will carpool, some will take mass transit, some will telecommute more often, some will use different combinations of bridges and tunnels. Whatever happens, toll revenue will fall short of {[today's traffic volume] x [proposed toll]}.

Now, in law school land, we have a stunning example of market dynamics at work….

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Ed. note: This is a new series from Bruce MacEwen and Janet Stanton of Adam Smith Esq. and JDMatch. “Across the Desk” will take a thoughtful look at recruiting, career paths, professional development, human capital, and related issues. Some of these pieces have previously appeared, in slightly different form, on AdamSmithEsq.com.

Adam Smith, Esq. isn’t in the business of covering — or typically even commenting on — late-breaking news, but there’s news and then there’s news.

And the Weil layoffs were reported above the fold on the front page of the Wall Street Journal and as the lead story for much of the day in The New York Times‘ estimable “DealBook.”

To the affected associates and staff: Nothing comforting or reassuring can be said — this is dreadful, awful, horrible, bad bad news for you — but if you can gain perspective after awhile, remember that in America it’s no sin to be knocked down; the sin is not getting right back up.

double red triangle arrows Continue reading “From Across the Desk: The Weil Layoffs”

Ed. note: This is a new series from Bruce MacEwen and Janet Stanton of Adam Smith Esq. and JDMatch. “Across the Desk” will take a thoughtful look at recruiting, career paths, professional development, human capital, and related issues. Some of these pieces have previously appeared, in slightly different form, on AdamSmithEsq.com.

A Wharton School professor has analyzed the performance, and pay levels, of external hires versus internal staff promotions. He used personnel data from a division of a major U.S. investment bank for 2003 to 2009, and the characteristics of that talent market are remarkably similar to our own.

Investment banking, Professor Matthew Bidwell writes, represents “an interesting context in which to study the effects of internal versus external mobility [because] organizational performance often depends on the skills of the workforce, [thereby] increasing the importance of personnel decisions.” In addition, workers in banking are “notoriously mobile, making this a context in which organizations regularly engage in external hiring at all levels.”

The genesis of his study was seeking an answer to this question: what has the increased mobility of workers over the past 30 or so years meant, as firms turn away from offering lifetime employment in favor of relying on the external labor market to find experienced workers at all levels of the organization?

double red triangle arrows Continue reading “From Across the Desk: Lateral Hires & Guarantees Deconstructed”