Showing posts with label Starbucks. Show all posts
Showing posts with label Starbucks. Show all posts

Dec 11, 2010

Actuarial Thought Leadership: What is success?

What is success? Are you a successful actuary?

Simple questions, easy to answer you would think. Right?


To illustrate the deeper  meaning and the nuance of success, let's take a look at the next 'Best Practice of Success'. A real life story from Joshua Maggid.....

'Best Practice of Success'

That day, together with my new colleague James, I entered the Pension Board's holy board room. All eight pension board members welcomed us with a hopeful smile and a firm handshake.

After introducing James as our company's brand new super professional, an unbeatable actuary and a seasoned specialist in asset liability matters, all seemed set for a successful presentation by James. Todays subject: Board decision on the new - next year's - asset allocation.

As expected, in a more than splendid and fluently short presentation, James handled everything a pension fund board member could possible think of or ask for. From headlines to all the important details. In roughly half an hour James showed his outstanding technical skills and impressed all board members. They were flabbergasted. What a knowledge, this was what one would call real Thought Leadership!

After James finishes his presentation, silence fills the board room. A kind of holy silence... Every board member is overwhelmed by James' stunning presentation. The Pension Board President quietly  looks around and breaks the profound silence as he softly says: "Thank you James.... Gentleman... (a lack of ladies in pension fund board rooms still teases us)...., is there anyone who has a question?......  (silence continues..) .  If not..... Do we all agree on James' new asset allocation proposal? (silence continues, some board members nod their head..). Does anyone disagree with James' proposal?.....(no one replies verbal or non verbal)... If not... Thank you for your continuing support. As a pension board, we've just agreed to the new asset location for next year... Congratulations!.... Dear advisory actuaries - James in particular - thank you for your effective presentation and corresponding proposal."

As always after I visit a client with a colleague, we meet shortly after in a nearby coffee shop to evaluate the meeting as well as each other's performance, irrespective of any form of hierarchy.

When I meet James shortly after the successful pension fund board meeting in the local Starbucks, he comes in walking with a smile....

"Peace of cake ", he opens our conversation. "What do you mean?, I ask him. "Well, making a $ 0.2 million turnover in a 30 minutes presentation, without any questions or comments, seems like a dream. I couldn't have done any better. I surpassed myself. This was one of my most successful presentations ever", James replied.

I looked him in the eye as I dropped an uneasy silence..... "This was as bad as it could get", I answered James. "How do you mean, 'Bad'? It was great, everyone agreed on my proposal, no questions at all.", James responded agitated.  

"Well - in short - It was YOU that took the decision and not the board. That's whats wrong", I stated. James again: "That's not true, I only advised, the board took the decision, not I. Let's keep things clear here, please!".

"No", I answered, "It was actually you!.... You took the actual decision. And if things in practice turn out different from your proposal (as most likely will be the case), this pension board will blame you for a wrong advice two years from now.......  

By demonstrating your enormous technical power in a half hour monologue, you've overpowered the board in such a way that they could not raise any questions or give comments without the risk of showing a form of incompetence or loss of face.

As we discussed in our preparation, you should have presented at least three different scenarios. Each scenario with a a different risk appetite. You should interactively have helped the board with choosing a well understood risk-return scenario. Asking questions, wrapping up opinions, leading the discussion to a point where the board feels that they've clearly understood what's on the table and 'feels comfortable' with the common decision taken."

James replied with anger: "When I have to do it that way, my presentations would take two hours and my preparation as well.  Above all, I have to deal with ten similar clients next week. I simply don't have the time to pick it up the way you suggest."

Moral of the story
From the above example it's clear that 'short term success' is not the same as 'long term success'.

To prevent ending up only in the reality of our own believes, constructive peer reviewing each other's performances is key to keep delivering long term top quality.

So don't forget to discuss your 'actuarial eggs' with one of your actuarial colleagues.....

It takes 'new ethics' actuaries (and quants) to make pension fund business successful again.
Are you that actuary?

Related links:
- Making Decisions in the Pension Fund Board Room (PDF,2010)
- Investmentmentor:
   expectation, a force that will release either success or failure