I remember growing up and going to work with my Dad. There was like a 3 hour period where he had no work for me to do. He told me I'd only get half wages for the day (I was like 12) since the last few hours I did nothing. I felt betrayed. He empathized with me, saying 'It sometimes feels like more work to not have any work to do'. I completely agree.

In my current role, there is no real roadmap or trajectory for what I should be doing or how I should report on it, etc. I have felt at times that I was just collecting a check, and that felt really scary. I expected I would love to have a job where I could kind of just do whatever I wanted on my own time table. But I have learned it's actually very stressful, and at best very boring. Luckily I got a roadmap created and prioritized, so I feel better. But it is an odd experience.

Better yet, at an internship, create your own roadmap (complete with a timeline, too) and, with no external validation, so it.

so hard

One of my bosses was the recipient of one of these during a corporate merger, and I think it did a lot of damage to him. He has been mostly was coasting off of his reputation from before he slacked off for 3+ years in that role. But it doesn't look like he's able to last for more than a year anywhere. I suspect that he was one of those competent-but-lazy types whose skills rusted out to to just lazy.

Its stories (and personal experience) like this that make me laugh when people try and say that governments are inefficient and lacks accountability.

Big things are more likely to be inefficient and lack accountability. Governments are big, so are big corporations.

My experience working my way up from small companies didn't really bear this out. Budgets at my bigish company are strict and audited; having a contractor results in regular check-ins from managers to see if it can be cut off. The smallest companies I worked for were family slush funds.

Interestingly enough there is also evidence, that a government structure with much smaller parts (decentralization) is even more inefficent, and especially prone to corruption.

Yes, this. It's worth emphasizing whenever someone trots out the inefficient-government dogma.

Big corporations are inefficient and lack accountability. Governments are like big corporations in that manner, but also can't be held accountable by the market.

Corporate monstrosities can get away with being inefficient insofar as they can stay out of the red overall. Governments can get away with being inefficient insofar as we are forced to continue funding them via taxation. Note: giant, unaccountable, inefficient corporations usually became so large through monopolies created through government force (i.e. regulation).

Getting bigger any organization inevitably achieves a level of complexity where it becomes less, and less efficient by spending increasingly more resources on communication, and politics (in wider meaning of the word, not electoral). Do you think governments are small organizations? UPD: Apperently, I'm not the only one here who came to the same thought :-)

Right - the government is the world's largest employer, with all the inefficiencies that come with that title.

Which government? Which world?

I'd assume in almost every country, their federal government is the biggest employer, but that'd actually be interesting data to try and find.

The world's three largest employers are apparently the US DOD, the PLA of China, and ... Walmart.

Pretty much every government's budget is a significant fraction of a country's GDP. By significant I mean 30% or higher.

Governments lack accountability because there is no incentive to be sustainable. They just tax people more or run a higher deficit.

If Whole Foods wastes their money and goes out of business, I don’t care. I’m not being forced to pay them to make up for it.

At least private companies are losing their own earned money when they're inefficient, not someone else's.

Private companies are also dependent on a highly developed society to make everything they do possible.

There are many reasons that Google and Amazon didn't exist a thousand years ago, and it isn't solely due to the lack of computing technology.

And so it is entirely sensible that everyone should contribute towards keeping the highly developed society functioning as best as it can.

That has no relevance to whether google got money under the threat of violence (government taxation) or whether it’s money that was voluntarily given to them for goods/services.

Google wasting money is no different than my neighbor wasting money. The government wasting money is upsetting because it was taken from me supposedly to help the country.

Your perspective might be different if you pay very little in taxes.

How are dollars I have paid to the government any more mine than dollars I have paid to a company?

The government isn't supposed to run a profit. Therefore it becomes very difficult to know which part of it is wasteful and which isn't. Companies simply fail if they don't make a profit or have an outside funding source.

Not nearly quickly enough to be a curb on wasteful behaviour at large companies, and these are the ones that affect public policy.

Much faster than waste at a government is curbed, which is essentially not until the country’s currency collapses.

a company is accountable for the dollars you pay to it, and has to provide a commensurate value, or you take your business elsewhere. dollars paid to the government keep coming in no matter how wasteful their practices

That's not how people choose which health insurance policy is offered by their employer, or which private company won the contract to deliver their electricity.

You're right, at least in the case of highly regulated markets and when the state creates artificial monopolies (e.g. electricity).

I'll correct my original comment then:

At least private companies that compete in a relatively free market are losing their own earned money when they're inefficient, not someone else's.

That claim assumes a free market with perfect information, which is more than even Adam Smith was willing to do.

It’s still not right.

Private companies are losing money on behalf of their owners or shareholders.

You could say that the owners/shareholders are losing it themselves, because they voluntarily invested in the company, as opposed to the state, which takes your money even if you don't want it to.

I think most VCs would have some thoughts on the idea that a start up they just pumped millions into has lost "the start-ups money" in some stupid experiment and not theirs.

a key difference is that the largest shareholders are proportionally affected by the waste, and have a proportionately large amount of power to do something about it.

Those are some of the most regulated industries in existence. Those companies are "private" in the sense that private individuals reap profits, but their funding is secured by proxy through force (legislation/forceful-taxation).

Move to a location with multiple electricity providers. They exist all over.

If you don’t like your employer healthcare, quit and find another or buy it on your own. There is choice there and you just don’t like it.

I think you’ve confused a discussion about how individuals make choices about their purchases for a complaint about the results of my personal choices?

government has people with guns to force its income stream. corporations do not.

Corporations lobby the government to change laws to boost their profit. Those laws are enforced by guns.

It is a myth that corporations like free markets.

Which law forces me to pay google money?

There’s laws to make you buy insurance. (Not taking a side here pro or con)

yeah, more like any 'large organizations' without a dictator

One would think the use-it-or-lose-it problem would've been solved by now. It's so obviously dysfunctional. Is there really no better way to determine budget?

I think the issue is management unwilling to trust other levels of management to make the call when they need money / a strong desire some folks have to filter / make decisions for others.

I don't know what the fix is for that except to take a chance and trust folks but ... it doesn't seem to be a thing and instead they come up with easy systems to just make arbitrary decisions and there ya go.

It boggles my mind sometimes that "Like if you don't trust that guy to make decisions... why is he a director here?"

Sadly it filters down, I've been places where it was clear the director of my department couldn't do much at all... at that point why should I be there, it doesn't matter if he and I talk, agree, or anything then ....

Steve Jobs said something about it making no sense to hire people in decision making roles and not let them make decisions. Granted, Steve was also able to hire some fine people.

The problem is the further down you go the more narrow the focus. When I worked on MS Office I was always annoyed they were spending all the money on other products with few users and no revenue.

After all we were the ones taking in the dollars. Of course at an organizational level it was understood they need to invest in the next big thing even if it’s not making money right now.

I don't think that really addresses "use it or lose it" type policies though.

Use it or lose it is a blunt hammer to basically say "You get enough for subsistence but no more". Sure there are smarter ways but intelligence costs time and money too.

He also had some experience hiring terrible people.

Practice may not make perfect, but it sure damn helps. As long as we learn from our mistakes.

Some organization have this issue where you get a budget for your group, and if you don't use it then upper management will think you don't need more resources next year and will budget less or even cut from your department. If you don't use it, they reallocate it to a department that needs it and you never get it back.

Another part is where if you get a hiring budget they expect you to use it because if you aren't spending it on personnel then it means you aren't hiring the best available people at that time.

Non-profits usually spend out their budget.

Regulated utilities can charge a % + the cost of hiring you if it is a capitalized cost, i.e. hiring a contractor to implement a project.If a contractor works 100% on a capital project it's profits especially in a low inflation economy or when the profits are not going to be as good due to forecasting issues it can pump the books.

There are probably other reasons I can't think of.

You just restated the problem in more detail.

What I'm asking is, if the above system encourages managers to waste money, why hasn't anyone come up with a better system?

There are systems that encourage the opposite behavior, but they tend to be damaging in other ways. It all comes down to the metrics that you are responsible for as a manager.

I used to manage a grocery department at a well-regarded supermarket chain. In retail, one of the only inputs you can affect at the store level that impacts the bottom line is labor, so metrics are usually organized around labor optimization. Each week, you would be expected to exceed the previous year's Units Per Labor Hour (UPLH). This can only be accomplished two ways: increasing unit movement (which you really have no control over and is largely driven by consumer sentiment and population density) or cutting labor hours. In fact, even if volume is increasing, you can't even add hours even though labor needs scale with volume in a brick-and-mortar retail setting. To exacerbate things, the reductions in labor have already compounded yearly since the policy was put into place. They want you to squeeze water from a stone. "Well, So-and-So (who you've never met) was able to increase UPLH by 10% 5 years ago! Why can't you?"

I guess my point is that systems that discourage waste often lead to insane work environments rather than cleverness or innovation, whereas encouraging waste leads to bloat and inefficiency.

In my experience, it's rarely about flagrantly wasting money for the sake of running up expenses to a budget level. Rather, it's usually more about pulling in expenses, doing something you had wanted to do anyway but didn't think you had enough money for, etc.

Budgets are a pretty powerful and widely used tool for managing organizations. And there are other checks and balances. It's not like a manager can necessarily just decide to have a team off-site in Hawaii because there's room left in the budget.

Maybe I just put too much stock in that one episode of The Office.

I think the disconnect is that you are describing it as a system, when in reality it's just a bunch of misaligned incentives and plain old human nature. It's unfixable.

It might be both of those things at the same time. This book claims so https://en.wikipedia.org/wiki/Systemantics.

The money isn't wasted, it just goes somewhere else. Better that it go through you (and to the contractor), than through someone else at the company.

There is, but it’s hard—like, theoretically murky hard.

So the basic inefficiency is that you want to do top-down resource allocation, “I approve of this much budget going to that project.” We could call that bureaucracy, or The State, or whatever. There is a reason that every modern military in the world has this bureaucratic gene: you can track who is responsible for every dollar easily, which limits the scope of corruption. Corruption does not itself kill the other countries: it just places an upper bound on how much money, how many resources that military can effectively put to use. But the militaries who can inefficiently use unbelievable resources clobber the ones who efficiently use fewer, and you get a survival of the fittest thing.

So the basic problem is that bad actors exist within a sufficiently large organization, and the bureaucratic solution incurs the cost of making everybody into bad actors, but with the benefit of limiting the badness of their action by top-down accountability. It is also somewhat bounded in how much it wastes: non-bad-actors who really don’t need their big budgets do have a weak vested interest in allowing it to be cut, as it frees up resources for the organization as a whole and this can improve their job stability, year-end bonus, etc.; also business units that really are not pulling their weight can be reorganized over long time scales. That is bureaucracy in a nutshell, the natural top-down solution.

To solve the corruption problem with a bottom-up approach requires connecting individual interests to organization interests, so that in a game-theoretic sense there are no bad actors (albeit there may be irrational ones who want to hurt themselves in order to hurt society). This is a really hard problem in accounting. The basic thing that you want to do is to make sure that everyone gets paid some baseline amount, plus some proportion of “what they make for the company.” In cases where this is really easy to determine, nobody does it any other way. Salespeople get commissions, and they get them fairly universally. This solves any corruption problem bottom-up. [It is also 100% transparent: “Why did she earn more than you? Because she sold more than you”—top-down budgets are frequently confidential wherever possible due to the risk of one subunit (could be larger than an employee) discovering that another subunit which “does less” in whatever sense gets more of the pie.]

The problem is, we occupy complicated systems and it is not easy to determine how much the organization’s bottom line will be impacted by the loss of a particular individual. What is the “commission” that I should be paying to a janitor? Am I supposed to pay developers money for completing “story points?” And how do I do that without creating a toxic atmosphere where everybody wants to overestimate the number of story points in a task—how do I objectively measure those story points in terms of the hard cashy business value they create? What about managers or recruiters; how do I reward you for the business value of the people you managed/recruited?

Without solving this sort of hard problem, you can’t guarantee that when someone uses nepotism to the organization’s great loss, that they don’t feel the full brunt of that loss and therefore have a selfish incentive to be fair in the first place.

Budgeting is basically forecasting, and in most businesses it’s not much better than guesswork.

There are ways that are arguably better, like bottom-up budgeting, but they take a lot more work, and are arguably more subjective.

Internal information systems can be so poor that the best prediction of next years budget is last years budget.

In government (usa) it absolutely still exists. As the financial period ends each department spends hugely and really wastefully to ensure their full budget is spent. Its actually quite infuriating.

It’s the same in corporations.

There are, of course, better ways; the thing is that non-dysfunctional methodology is not evenly distributed.

This comes to mind:

https://en.wikipedia.org/wiki/Recurrent_laryngeal_nerve

I don't understand the relevance of that Wikipedia article

That nerve is a popular example of an optimization process that produced a local maximum which is highly sub-optimal.

For various evolutionary reasons, a nerve routing that was direct and sensible when the aorta passed to, say, the gills of a fish, now makes a silly, circuitous route in modern mammals from the brain, down under the aorta near the heart, and back up into the neck...close to the brain. Natural selection has proven incapable of fixing this tangle.

Similarly, organizational budgets that departments need to spend any way they can or suffer cuts next year seem silly. But they stem from reasonable policies, gradually changing and improving over time.

Just like an organism can't sever its aorta and have a better routing of the nerve, organizations are incapable of getting from the current budget situation to a better one.

Wow, that’s a great explanation, and I hadn’t even thought of it that way, myself.

My take was a much simpler “just because there is a better way that exists doesn’t make it practically relevant, because entrenched tradition is usually more popular/widespread than efficiency”... but your boiling the frog idea shows even better how the mess comes about in the first place.

Thanks for the context.

Unless you are getting taxed >100% I never understood why you'd want to throw away money for "tax reasons". Can someone please help me understand this, it always comes up and I feel dumb for not understanding.

They may have a tax rebate which requires them to "invest" $x each year and failure to do so will result in penalties, perhaps nullifying the agreement and requirement to reimburse previous rebates.

So the company hires a few contractors to help get them as close to $x as possible, but they don't really have any work for them to do.

Simple example:

My FSA card is pre-tax money to be used for healthcare expenses. Towards the end of the year, I ended up still having a balance that would go away if not used, so I bought things that I would not have otherwise purchased.

That's a bit different. You're effectively getting "taxed" 100% on whatever is left over so you might as well spend the money on anything that has non-zero value to you.

But if you, say, only lost 30% or 50% of the balance, it's not immediately obvious if you should spend the balance or not.

OT but this is such a weird aspect of FSAs. I can carry some amount over with my plan which makes things a lot easier.

From my experience, FSA's doing go away at the end of the year.

You have to spend X anyway, because the money is pre-tax or non-taxable, you can spend 1.5X-2X, so the extra money is 'free'.

I'm with peteradio, I also never understand this line of reasoning.

Let's say the company has earned 1,000$ and the tax rate is 50%. Your expenses X are 100$.

So 1,000$ - 100$ = 900$. Of which 50% (450$) are tax and 50% (450$) are profit.

Now double X to 200$:

Then 1,000$ - 200$ = 800$. Of which 50% (400$) are tax and 50% (400$) are profit.

That means your profit is 50$ lower (400$ instead of 450$) then if you hadn't increased your spending?

Clearly my thinking is wrong somehow, but where?

If you can "invest" the 1K into something that you don't get taxed, and, can give you some return then it is a win.

I remember being mentioned that the whole reason General Electrics bought a division of Alstom was to not bring the money back to US and get taxed, let's say it was 1 billion dollars and 50% tax.

Instead of getting net 500 million back to US they can keep that money abroad and invest 1 billion in another company that can net more than 500 million in the long term.

Above is likely the way of thinking for those sort of occasions.

It should be a choice between spending pre tax dollars or spending post tax dollars. I doubt many would argue in favor of “burning” money just for the sake of not paying some fraction tax on it.

Imagine that you must access $100 of labour/whatever somehow.

  $20000 - sales
  ($10000) - cost of sales
  ——————
  $10000 - gross profit
  ($100) - extra labour paid for with pre tax money
  ——————
  $9900 net
  ($4950) tax
  ——————
  $4950 ending sum (pay dividends or do whatever you feel like with this)

vs

  $20000 - sales
  $10000 - cost of sales
  —————
  $10000 - gross profit
  ($5000) - tax
  —————
  $5000 - after tax profit
  ($100) - extra labour, post tax money
  ————
  $4900 - ending sum

It’s a bit unrealistic because (1) labour should always be pre tax (2) there are rules about what goes where in an income statement and you can’t just decide to put stuff where you want but there is some flexibility.

In particular, the one easily controllable lever is how much interest you pay on debt (pre tax spending)

Think of it this way: the “cost” to realize a net profit of $450 is a tax expense of $450. What if you could reinvest that full $900 so that next year your revenue and income are higher? High-growth businesses will optimize for reinvesting because they expect the Return on investment to be higher than the return on realized profit going forward.

This is what Amazon has done for years - it generates a monstrous amount of cash (free cash flow) from retail and funnels it back into expanding current businesses and creating new ones such as AWS. AWS now generates its own surplus, so the cycle continues.

Edit to clarify: Amazon in the past has shown a relatively small net income vs large top line revenue because most cash is reinvested. It’s been a few years since I paid attention to their financials so things may be different now.

It doesn't make sense in terms of raw profit, I agree. But many expenses are paid pre-tax effectively making them cheaper than if you had paid for them with post-tax dollars.

aren't all expenses pre (income)tax, by definition?

Not really. A good example is business meals. You can only deduct 50% of a meal with a substantial business purpose.

What matters in your example is where that extra money is spent, you might try to invest it in the company by purchasing new machinery rather than just wasting it on a new luxury company car (or an overseas 'business meeting'). That way if you are making a 10% return on your company/investment each year it continues to grow.

I guess in some situations you can either pay $1 in taxes or burn $1. it's probably better to burn $1.

You paid $50 (the decrease in profit) to get $100 of value.

Under what situations does this happen? We use marginal tax rates...

In limited cicrumstances it can make sense. If you're investing in a multi-year project you may as well maximize your investment in one year and take the loss against other taxable income that year. Then, when the project is finished, you pay taxes on the income that year. Only you can take those funds and invest them into a new multi-year project...

Some companies get tax breaks for hiring X number of workers in certain locations. Which is why sometimes you get companies hiring a bunch of people at a data center who don't do anything related to the data center, but mostly exist as a way to get a tax break and good press.

Sometimes to get yourself in a lower bracket.

I was tempted to ask if you have any tips for finding such jobs ;) but actually the times when I’ve been most unfulfilled in my career have been when I’ve been bored at work. I’d much rather be working like crazy (within certain parameters), keeps things interesting!

That said I do know people who’ve been paid to turn up at an office and just work on their side projects. Could probably handle that!

Get going for a few of these simultaneously and you are set.