A fast search in Google for that reference found this first hit from a random site by Casparija:
The current interest in the concept apparently results from a trademarked version of EVA(TM) which has been suggested and promoted by Stern Stewart & Co.. (See "The Real Key to Creating Wealth," *FORTUNE*, September 20, 1993 pp. 38-40, 45, 48, 50. See also "America's Best Wealth Creators," *FORTUNE* December 27, 1993, for a list of the 200 largest non-financial organizations which shows that more than half had NEGATIVE EVA(TM).)That sounds about right and I haven't verified it. But I do recall I was working for Parke-Davis Pharmaceutical Research in Ann Arbor at the time, and the executives were getting all excited about this concept -- largely because the financial analysts were all excited by it.
This is also a modified version of what might be called "momentum investing", namely, invest in things that went up yesterday, regardless what they do, regardless why they went up. And as soon as they stop going up, ditch them.
I also recall that I went over to the administration building and tried to have a conversation that this strategy was absurd - that every single drug we had that was a blockbuster had been developed after a 12 year period of research where it lost money, and, if we had followed this strategy, we would never have had any of those drugs (like Lipitor). The argument fell on deaf ears. It seemed like such a nice concept, and was so much easier to understand than all that Net Present Value stuff.
So, sure enough, Warner Lambert quickly decided that drug research was a "loser" and sold Parke-Davis to Pfizer so they could concentrate on today's winners. Then investors put the pressure on all companies, and one after another the companies caved in and abandoned their long-term research programs. ATT demolished Bell Labs. Drug companies bailed on research. The Federal Government basically closed NASA and all the major federal research laboratories or told them to work only on things that made money this quarter.
Well, that was 14 years ago. Now, guess what. Nothing is coming out of the other end of those research pipelines. For some reason, scratch your head, everyone else also decided to bail on long-term investments, and did, and suddenly the old ones are running out and there is nothing new to replace it with.
Just amazing.
I read that the US is considering sending another manned mission to the moon. Last time Kennedy did this, in a crash program, it took 7 years from start to finish, and no one was sure we could do it. This time, knowing everything we know now, it is estimated that it will take 14-20 years to do the same thing. Or longer. (Or, I might add, forever.)
Ann Arbor also used to be the home to ERIM, which was very low profile but had what I think was the largest collection of signal processing and image processing people in the world under one roof. They did top secret stuff like designing the guidance systems for missiles and all sorts of "remote sensing" - learning how to read amazing details from satellite photos.. I tried to get them to help us at Parke Davis with an image processing problem we had, and met a few people.
It had taken 20 years to slowly collect those people into a self-sustaining critical mass. Then the government in infinite wisdom decided we didn't need this, and the company basically folded and disassembled, as NASA was doing, leaving a thin shell that was sold to someone else. I think they make money now designing systems to read license plates of passing cars or some such mundane task. Many or most of the good people left, and won't be coming back, and our schools don't seem to be making any more of them.
Maybe EVA was just a sign of the times, and the groundswell was already in motion of abandoning common sense and investment fundamentals, and going after what glittered most brightly in the sun. It seemed so clever. No more long weeks or months in the library or on-line trying to understand what a company did and what the industry did - now you could invest in 5 minutes without even knowing what line of business the company was in!
And, gosh-a-roo Mr. Peters, some companies were making 200% per year profit and those were the ones to leap on for sure.
The only problem there is that everyone wanted to do that, and there were very few companies doing that. Everyone wanted to bail out of solid, reliable, large companies that "just" made 5-10% per year, every year, solid as a rock. So those companies started to sink, to the extent they were held up by stock-market opinion. There mere fact that they employed 200,000 people and supported entire states was irrelevant - they were "losers".
So, the CEO's of those companies drank the same Kool-Aid, and started looking for glittering short-term winners that were almost all long-term losers, because that's what investors were rewarding. No one was looking forward. Everyone was steering by looking out the back window.
That got us where we are today. A dessert of has-been companies, with nothing new coming out the pipeline, wringing our hands about the "loss of innovation" in America, while all the exciting growth seems to be abroad.
This was a predictable outcome of that strategy.
Again, the core problem here has nothing to do with EVA - it has to do with the fact that, collectively, we have no capacity for long-term learning, or, for learning and then abiding by lessons that take a long-time to learn.
And that IS a problem.
Santayana, or someone, said that those who don't learn from history are doomed to repeat it. Yep.
After a while, you have to hope that the lesson sinks in that short-term thinking is not a good guide to managing our lives. Simply going with what looks attractive on a personal, corporate, or national level will get us into deep trouble every time.
We need, on every level, a larger structure, slowly changing, that persists and accumulates wisdom, AND THAT WE LISTEN TO. Academia also served that role once, as has every major religion. But it doesn't do any good if the knowledge is all over there and the decisions are being made over here.
Science didn't like religion's way of being normative, of demanding compliance, and thought in an experiment for the last few centuries that it would be totally "neutral" and "value free" and wouldn't that be better? Well, I don't know. Was it?
Now scientists are shocked to discover that politicians, and most of the public, either don't know anything about science, or don't care, and regardless, don't want to limit their behavior to things that scientists tell them are important. And with no history of authority and obedience, they got what they built. An abstract world that may be "right" that has no connectivity to the decisions being made out here.
On top of that, many scientists (not all) also seem to want to destroy religion entirely, thinking that the problem is that there is too little objective knowledge, evidence-based reasoning.
The last few posts and this one present a different scenario -- where it doesn't matter how much evidence-based reasoning you have, if the users of that process only look in the very short range world around them at that instant for the evidence. Now we'll use "evidence" to be SURE we're chasing the latest flash in the pan that we're now scientifically CERTAIN is the brightest flash around.
Doh.
Science does no one any good unless is has some grip, some power, some hold on people's behavior. "Having" it has no benefit, by itself. And Science, as an institution, spent the last 300 years ripping out all the "authority" worship, and toning down all the papers until the strongest language that is acceptable reads like "This evidence may suggest that ..."
Whoopie. That'll move the crowd, you betcha.
Not.
A pure-knowledge strategy that doesn't involve submission to a higher authority can't carry the social load that real life puts on it.
Admittedly, the authorities can become rigid and dogmatic and lose all connection to the real world, just as science, paradoxically, has done.
Which gets us back to my "vertical loop" model of the core building block of any adaptive, surviving company, or person, or nation. There has to be order coming down met with obedience, and surprising news from the front going up, met with receptivity and updating the mental model and map. Then you have a cybernetic flow, and adaptation can take place, along with learning.
But some of the learning has to be lessons that take a long time to learn, maybe generations to learn, and that involves some special attention as to how that will work in practice. And, over the last 5,000 years, what has worked and what hasn't?
None of this depends on technology, or is changed because now there is more technology than there used to be. These are properties of any system of intelligent, context-sensitive beings, at any scale.
We just need to get clear what has worked, and what cannot possibly work, and then compare that to what we're doing, and see where we're trying to do something that's impossible, and stop doing that.
Red flags go up on the field when the word "just" appears, as it did in that last sentence.
This task isn't trivial, although it is quite straight-forward and common sense does help a lot and gives us good insight and intuition.
We cannot operate very long without a larger structure around us that persists our best wisdom and feeds it back to us in authoritative ways that we agree to abide by, provided the authorities, in turn, listen to us about what's working and what isn't and update their maps as needed.
Without that, any amount of science and logic and math will still be captive to the amazing capacity of humans, or executives, or governments to be caught up in local fads and chase "easy solutions" to hard problems, knowing full well that this is an exercise in denial and that, going down this pretty path, things will only be worse tomorrow.
We know we're all prone to that behavioral flaw.
Now we need to compensate for it using each other as a buffer.
If we insist on freedom from all interfering authority as a life-style, it won't work. It can't work.
If we abide authority and the authority has no learning curve, that won't work.
Somewhere in-between is the sweet spot.
Finding it is the task.
Admitting it will be required before we can discuss it.
Discussing it will be necessary to solve it.
We should start.
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