Worth Reading: Stafford Beer-Brian Eno, M&A and R&D

Personal Research Program

The Stafford Beer-Brian Eno Connection: Alex Hough of Manchester Business School mentions how the cybernetics scientist Stafford Beer influenced musician and producer Brian Eno. Beer also influenced a generation of researchers and practitioners in modular organisational design, management, and systems thinking. Eno’s collaborator Robert Fripp was influenced by a precursor, John Godolphin Bennett‘s systematics.

START Bulletin Fall 2009: The US National Consortium for the Study of Terrorism and Responses to Terrorism (START) has just released its Fall 2009 bulletin
on its programs of research and major research reports. I’m always on
the lookout for ‘good practice’ examples of how to communicate the
research results to different audiences.

R&D Management
: Michel Bauwens tipped me off to a special issue on Henry Chesbrough‘s ‘open innovation’ and ‘open R&D’: looks very interesting. Journal article idea: Under what conditions might the innovation tournament be a more efficient allocative mechanism for R&D resources, human capital and commercialisation than other institutional structures, such as university-industry consortia and joint ventures?

SmartyGrants: An intriguing new package developed by the Australian Institute of Grants Management for grant-makers and grant-writers to manage the end-to-end grant cycle. SmartyGrants uses a subscription-based ‘software as a service’ delivery model, akin to Salesforce.com.

Mergers & Acquisitions

M&A Market Themes: NYT‘s Steven M. Davidoff on the US M&A market and Warren Buffett’s acquisition of the railway Burlington Northern Santa Fe. Davidoff’s new book Gods at War: Shotgun Takeovers, Government by Deal, and the Private Equity Implosion (New York: John Wiley & Sons, 2009) surveys the recent M&A market and deal trends.

‘Sell’ for Research Renegades
: Edward Robinson’s Bloomberg Markets cover-story showcases a group of ‘sell-side’ researchers who have gone solo. Robinson notes the good security analysts have gone to hedge funds whilst others have founded independent research firms. This is a model I suggested the Smart Services CRC look at during its initial planning stages for its lessons on commercially relevant research and human capital management.

The Myer IPO: Fairfax’s Michael West blames Myer for ruining the Australian IPO market for others. Three observations: (i) I agree with West that Myer’s private equity owners were driven by a macroeconomic/monetary policy timing window to cash out after their cost cutting and change management; (ii) Brokerages and commission-based sales provided an ‘echo chamber’ to talk up the Myer IPO so that the underwriter’s market-making activities are supported in the aftermarket; and (iii) always factor in market volatility into daily commentary — an 8% shift is normal in the current market conditions due to buyer-seller resistance, post-IPO speculation and different views of Myer’s fair market value — and the likelihood that the underwriter and other investment banks will attempt to stabilise the stock’s support level.

Noosphere Memes

Vale Claude Levi-Strauss: The anthropologist’s structuralist approach is credited with changing how we perceived primitive societies and their cultural and religious practices. He is probably best known in popular culture for naming the Fine Young Cannibals‘ most successful album.

Goldman Sachs’ Foresight Culture

Recently I posed two questions about Foresight in Organisations: What are are the intervention points?  After five or six years, who are the teachable case studies for successful implementation of the foresight function?

I’ve only read the Los Angeles Times and New York Times reviews but Charles D. Ellis’s The Partnership: The Making of Goldman Sachs (Penguin Press HC, New York, 2008) has some answers to both questions.

Ellis suggests Goldman Sachs has three intervention points to cultivate a foresight function: (1) a human resources function staffed by A+ people who recruit “A+++ people” usually in computational finance, financial engineering and statistical arbitrage; (2) an organisational culture tolerant of the “longer-term view” that is linked to the “[operational] details” necessary for strategic execution; and (3) a creative tension between past excellence and new frontiers.  Intriguingly, the “longer-term view” or “forward view” in Foresight parlance, emerges from people in a supportive culture who are faced with challenge at the boundary of the firm and the external competitive environment.

Two other biographies partially validate Ellis’s insights.

Perry Mehrling’s biography Fischer Black and the Revolutionary Idea of Finance (New York: John Wiley & Sons, 2005) and his working paper ‘Understanding Fischer Black‘ describe why Goldman Sachs recruited the economist Black: to tap his academic knowledge to design new financial instruments, and use his influence as coauthor of the Black-Scholes equation in finance to impress clients.

Emanuel Derman describes his Goldman Sachs collaboration with Black in My Life As A Quant: Reflections on Physics and Finance (New York: John Wiley & Sons, 2004) and how the firm benefited from the influx of PhD graduates in the 1980s.  Derman was bored at AT&T Bell Labs which had a reactive culture of research management.  He transitioned into Goldman Sachs’ fixed income division in 1985 and then moved to equities in 1990 where he thrived for the next decade in a culture that appreciated how conceptual expertise can underpin a firm’s competitive advantage in new growth markets.

The contrast was so different that I pointed Derman’s experience out in a private submission to Australia’s National Innovation System Review (aka Cutler Innovation Review) in comments about the institutional design and research management culture of Cooperative Research Centre consortia.  Maybe given the subprime fallout CRCs can also learn something from Goldman Sachs and Berkshire Hathaway‘s Warren Buffett who has now taken a $US5 billion equity stake in Sachs’ foresight culture.